...until next time because we're so shortsighted regarding the economy, we haven't recognized the credit and commercial real estate crashes, both of which are imminent. Sorry, I don't buy it.
Obama: Wall St. reform will ‘end’ taxpayer bailouts
Saturday, April 24th, 2010
President Barack Obama renewed his push for Wall Street reform Saturday, saying the country needed to tackle the underlying problems that caused the economic crisis and promising new regulations would "put an end, once and for all, to taxpayer bailouts."
"The economy is on a better footing. But people are still hurting," Obama said in his weekly radio address. "No matter what the economic statistics say, I won't be satisfied until folks who need work can find good jobs."
The president noted that the main causes of the economic downturn were problems in the US financial sector, and Wall Street firms had taken "enormous, irresponsible risks" that hurt practically every sector of the economy.
Obama is promising the most sweeping regulatory reform drive since the 1930s Great Depression, and is seeking to build momentum for efforts by Democrats in Congress to overcome Republican opposition and pass a new Wall Street reform law.
That effort got a boost on Wednesday, when a Senate panel approved new restrictions on derivatives, the shadowy financial instruments blamed in part for igniting the financial meltdown from which America is just emerging.
The Senate Agriculture Committee voted 13-8 to impose new rules on trading in derivatives, with just one Republican joining Democrats.
Republican leaders have so far united in opposition to the bill to impose tougher regulations on banks and finance firms and to frame a new consumer financial protection agency.
They say Obama's reforms would introduce the heavy hand of government deeper into the US free enterprise system and would lead to a culture of financial bailouts, an accusation Democrats say is false.
But Obama said the reforms would put an end to taxpayer bailouts of big financial institutions and bring greater transparency to complex financial dealings.
"Folks will get clearer and more concise information when they make financial decisions - instead of having to worry about deceptive fine print," he pointed out. "And shareholders and pension holders will have a stronger voice in the boardrooms of companies in which they invest their savings."
The president noted that the proposed reform will help "to put an end to the cycle of boom and bust that we've seen" and not only revive the economy, but help to rebuild it stronger than ever before.
This video was published by the White House on Saturday, April 24, 2010.
Saturday, April 24, 2010
U.S. Nuclear Option on Iran Linked to Israeli Attack Threat
(Dude! Obama! Chill on the threats, Nobel "Peace" Prize guy! Nobel Peace Prize to the guy who threatens to use nukes on Iran after just having signed a nuclear arms reduction treaty? I know it's a contingency plan, but no contingency should EVER contain an option which includes nuking another country. This is insane! It stinks of corruption, too. We need to bail on our "ally" Israel. Their agenda is not peaceful, not anything to do with being recognized as a state, but as being the dominant Middle East Super Power. And Iran is their only competition. Oh, and Pakistan...oh, and India...--jef)
U.S. Nuclear Option on Iran Linked to Israeli Attack Threat
by Gareth Porter
WASHINGTON - The Barack Obama administration's declaration in its Nuclear Posture Review (NPR) that it is reserving the right to use nuclear weapons against Iran represents a new element in a strategy of persuading Tehran that an Israeli attack on Iranian nuclear sites is a serious possibility if Iran does not bow to the demand that it cease uranium enrichment.
Although administration officials have carefully refrained from drawing any direct connection between the new nuclear option and the Israeli threat, the NPR broadens the range of contingencies in which nuclear weapons might play a role so as to include an Iranian military response to an Israeli attack.
A war involving Iran that begins with an Israeli attack is the only plausible scenario that would fit the category of contingencies in the document.
The NPR describes the role of U.S. nuclear weapons in those contingencies as a "deterrent". A strategy of exploiting the Israeli threat to attack Iran would seek to deter an Iranian response to such an attack and thus make it more plausible.
The new nuclear option on Iran has emerged after a series of public statements over the past year by senior officials, including Secretary of State Hillary Clinton and Vice-President Joe Biden, suggesting the administration would tolerate an Israeli option.
Both the Bill Clinton and George W. Bush administrations had said the United States "reserves the right" to respond with nuclear weapons to the use of chemical and biological weapons in an attack on U.S. forces or its "friends" or "allies".
A contingency plan called CONPLAN 8022-02, adopted in November 2003, aimed at destroying an adversary's nuclear weapons or nuclear facilities, included the option of using earth-penetrating nuclear weapons to destroy deeply buried facilities.
But the new NPR refers to "a narrow range of contingencies in which U.S. nuclear weapons may still play a role in deterring a conventional or CBW attack against the U.S. or its allies or partners".
That language appears to suggest that the nuclear option would deter an Iranian conventional retaliation against Israel or U.S. military targets in the region in the event of an Israeli air attack on Iran.
Both Obama and Defense Secretary Robert Gates made statements implicitly linking the new nuclear declaration to the broader problem of trying to force Iran to bow international demands on the nuclear issue.
Interviewed by CBS News Apr. 1, Obama was asked what made him think sanctions would work this time. After referring to Iran's isolation, which he said would eventually "have an effect on their economy", Obama made an obvious allusion to military options. "Now, you know, I have said before that we don't take any options off the table," said Obama, "and we're gonna continue to ratchet up the pressure and examine how they respond."
In the past, references to options being on or off the table had been used to refer to the option of a conventional U.S. air attack. In this case, however, Obama was clearly referring to the announcement of the nuclear option in the NPR that he knew was coming on Apr. 6 as a way to "ratchet up the pressure" on Iran.
Asked in an interview with the New York Times Apr. 5 whether he believed Israel would decide to attack Iran if it "stays on the current course", Obama refused to "speculate on Israeli decision-making".
But he said,"[W]e want to send a very strong message both through sanctions, through the articulation of the Nuclear Posture Review, through the nuclear summit that I'm going to be hosting, and through the NPT review conference that's going to be coming up, that the international community is serious about Iran facing consequences if it doesn't change its behavior."
Gates was even more pointed in highlighting what he called the "message for Iran" in his Apr. 6 news briefing on the NPR, saying that "all options are on the table in terms of how we deal with you".
It was not the intention of the original drafters of the NPR within the State Department to issue a new threat to Iran, according to a source who was briefed on the NPR earlier this month. But the official involved in the drafting acknowledged that Gates and Obama had seized on the language to suggest that the United States now had a stronger hand in dealing with Iran, according to the source.
The White House Coordinator for WMD, Counter Terrorism and Arms Control is Gary Samore, who had had publicly discussed the need to exploit Iranian fear of an Israeli attack to gain diplomatic leverage over Tehran before joining the Obama administration.
At a forum at Harvard's Kennedy Institute in September 2008, Samore had said that the next administration would not want to "act in a way that precludes" an Israeli attack on Iran, "because we're using the threat as a political instrument".
Samore was asked during the question and answer session after a speech at the Carnegie Endowment for International Peace in Washington Wednesday whether he expected Iran to believe that the United States would use nuclear weapons against Iran if it retaliated with conventional weapons against an Israeli attack on Iran. Samore ignored the question in answering.
As part of an apparent effort to make Iran uncertain about an Israeli attack, a series of public statements by U.S. senior officials over the past year have suggested that the would do nothing to prevent such an Israeli attack. However, the Obama administration has conveyed to the Israeli government privately that it strongly opposes any Israeli attack on Iran, according to reports in the Israeli press.
A former senior U.S. intelligence officer on Iran believes the nuclear option is likely to cause Iran to go farther in the direction of nuclear weapons rather than to give in. In an e-mail to IPS, Paul Pillar, who was the national intelligence officer for Near East and South Asia from 2000 to 2005, said Iranian officials probably see the new nuclear option as "another manifestation of U.S. hostility toward Iran".
The perception of a U.S. threat to Iran "provides one of the principal incentives for Iranians to develop their own nuclear weapons", said Pillar.
Pillar said Iranians "may also see the doctrine as providing cover for an Israeli strike by serving as a deterrent against Iranian retaliation for such a strike".
Other political-military analysts cast doubt on the credibility of the announced nuclear option against Iran.
Morton Halperin, who was director of Policy Planning in the State Department in the Clinton administration, told IPS, "I don't think it's credible at all. I don't think the administration thinks it's credible. But I think as a political matter, to have taken it off the table would have been politically untenable."
Jim Walsh of the MIT Security Studies Program, who has had many contacts with Iranian leaders and national security officials in recent years, told IPS the United States "is not going to use nuclear weapons against Iran" and that it is "foolish" to suggest that "all options are on the table".
~~//o0o\\~~
by Gareth Porter
WASHINGTON - The Barack Obama administration's declaration in its Nuclear Posture Review (NPR) that it is reserving the right to use nuclear weapons against Iran represents a new element in a strategy of persuading Tehran that an Israeli attack on Iranian nuclear sites is a serious possibility if Iran does not bow to the demand that it cease uranium enrichment.
Although administration officials have carefully refrained from drawing any direct connection between the new nuclear option and the Israeli threat, the NPR broadens the range of contingencies in which nuclear weapons might play a role so as to include an Iranian military response to an Israeli attack.
A war involving Iran that begins with an Israeli attack is the only plausible scenario that would fit the category of contingencies in the document.
The NPR describes the role of U.S. nuclear weapons in those contingencies as a "deterrent". A strategy of exploiting the Israeli threat to attack Iran would seek to deter an Iranian response to such an attack and thus make it more plausible.
The new nuclear option on Iran has emerged after a series of public statements over the past year by senior officials, including Secretary of State Hillary Clinton and Vice-President Joe Biden, suggesting the administration would tolerate an Israeli option.
Both the Bill Clinton and George W. Bush administrations had said the United States "reserves the right" to respond with nuclear weapons to the use of chemical and biological weapons in an attack on U.S. forces or its "friends" or "allies".
A contingency plan called CONPLAN 8022-02, adopted in November 2003, aimed at destroying an adversary's nuclear weapons or nuclear facilities, included the option of using earth-penetrating nuclear weapons to destroy deeply buried facilities.
But the new NPR refers to "a narrow range of contingencies in which U.S. nuclear weapons may still play a role in deterring a conventional or CBW attack against the U.S. or its allies or partners".
That language appears to suggest that the nuclear option would deter an Iranian conventional retaliation against Israel or U.S. military targets in the region in the event of an Israeli air attack on Iran.
Both Obama and Defense Secretary Robert Gates made statements implicitly linking the new nuclear declaration to the broader problem of trying to force Iran to bow international demands on the nuclear issue.
Interviewed by CBS News Apr. 1, Obama was asked what made him think sanctions would work this time. After referring to Iran's isolation, which he said would eventually "have an effect on their economy", Obama made an obvious allusion to military options. "Now, you know, I have said before that we don't take any options off the table," said Obama, "and we're gonna continue to ratchet up the pressure and examine how they respond."
In the past, references to options being on or off the table had been used to refer to the option of a conventional U.S. air attack. In this case, however, Obama was clearly referring to the announcement of the nuclear option in the NPR that he knew was coming on Apr. 6 as a way to "ratchet up the pressure" on Iran.
Asked in an interview with the New York Times Apr. 5 whether he believed Israel would decide to attack Iran if it "stays on the current course", Obama refused to "speculate on Israeli decision-making".
But he said,"[W]e want to send a very strong message both through sanctions, through the articulation of the Nuclear Posture Review, through the nuclear summit that I'm going to be hosting, and through the NPT review conference that's going to be coming up, that the international community is serious about Iran facing consequences if it doesn't change its behavior."
Gates was even more pointed in highlighting what he called the "message for Iran" in his Apr. 6 news briefing on the NPR, saying that "all options are on the table in terms of how we deal with you".
It was not the intention of the original drafters of the NPR within the State Department to issue a new threat to Iran, according to a source who was briefed on the NPR earlier this month. But the official involved in the drafting acknowledged that Gates and Obama had seized on the language to suggest that the United States now had a stronger hand in dealing with Iran, according to the source.
The White House Coordinator for WMD, Counter Terrorism and Arms Control is Gary Samore, who had had publicly discussed the need to exploit Iranian fear of an Israeli attack to gain diplomatic leverage over Tehran before joining the Obama administration.
At a forum at Harvard's Kennedy Institute in September 2008, Samore had said that the next administration would not want to "act in a way that precludes" an Israeli attack on Iran, "because we're using the threat as a political instrument".
Samore was asked during the question and answer session after a speech at the Carnegie Endowment for International Peace in Washington Wednesday whether he expected Iran to believe that the United States would use nuclear weapons against Iran if it retaliated with conventional weapons against an Israeli attack on Iran. Samore ignored the question in answering.
As part of an apparent effort to make Iran uncertain about an Israeli attack, a series of public statements by U.S. senior officials over the past year have suggested that the would do nothing to prevent such an Israeli attack. However, the Obama administration has conveyed to the Israeli government privately that it strongly opposes any Israeli attack on Iran, according to reports in the Israeli press.
A former senior U.S. intelligence officer on Iran believes the nuclear option is likely to cause Iran to go farther in the direction of nuclear weapons rather than to give in. In an e-mail to IPS, Paul Pillar, who was the national intelligence officer for Near East and South Asia from 2000 to 2005, said Iranian officials probably see the new nuclear option as "another manifestation of U.S. hostility toward Iran".
The perception of a U.S. threat to Iran "provides one of the principal incentives for Iranians to develop their own nuclear weapons", said Pillar.
Pillar said Iranians "may also see the doctrine as providing cover for an Israeli strike by serving as a deterrent against Iranian retaliation for such a strike".
Other political-military analysts cast doubt on the credibility of the announced nuclear option against Iran.
Morton Halperin, who was director of Policy Planning in the State Department in the Clinton administration, told IPS, "I don't think it's credible at all. I don't think the administration thinks it's credible. But I think as a political matter, to have taken it off the table would have been politically untenable."
Jim Walsh of the MIT Security Studies Program, who has had many contacts with Iranian leaders and national security officials in recent years, told IPS the United States "is not going to use nuclear weapons against Iran" and that it is "foolish" to suggest that "all options are on the table".
e-Mails Show Goldman Sachs Sought Profit from Housing Downturn
Goldman Sachs e-Mails Show Bank Sought to Profit from Housing Downturn
by Zachary Goldfarb
A Senate investigation into the financial crisis has found that Goldman Sachs, the storied Wall Street investment bank, sought to profit from the historic decline in housing prices by betting against the U.S. mortgage market.
Goldman Sachs "made more than we lost because of shorts," Chief Executive Lloyd Blankfein said in a November 2007 e-mail. The documents show that Goldman, at times, made big, profitable bets against the housing market -- sometimes betting against mortgage investments that it had sold to investors.
Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, said four internal e-mails released Saturday contradict Goldman's assertion that it didn't seek to profit from the housing downturn. "Goldman made a lot of money by betting against the mortgage market," Levin said.
In a November 2007 e-mail, Goldman chief executive Lloyd Blankfein wrote that the firm "lost money" on the housing market, "then made more than we lost because of shorts."
The release of the documents comes as Goldman Sachs is preparing its most detailed defense yet to allegations that it misled clients in its mortgage securities business, arguing that the firm was unsure whether housing prices would rise or fall and did not take any action at odds with the interests of its clients.
An internal Goldman document, prepared for senior executives and obtained by The Washington Post, describes debates among top executives in 2006 and 2007 over whether the firm should make investment decisions based on the belief that the mortgage market would continue to prosper.
The document details meetings and e-mails that ultimately resulted in a decision to reduce the company's exposure to the mortgage market, especially subprime loans, by making new investments that would pay off if housing prices fell.
Goldman has been widely criticized for investing its own money to bet against the housing market while simultaneously urging clients to invest in securities that would increase in value only if the housing market did.
Those concerns over possible double-dealing spiked a week ago as the Securities and Exchange Commission filed a fraud suit against Goldman, alleging that it misled clients by selling them mortgage-related securities secretly designed to fail.
The Senate panel will hold a hearing on investment banks and the financial crisis Tuesday. Blankfein and other executives are scheduled to testify.
In one of the e-mails obtained by the committee, Goldman chief financial officer David Viniar responded to a report that the firm earned $50 million in one day with bets that the housing market would decline.
"Tells you what might be happening to people who don't have the big short," Viniar wrote to his colleagues.
In another e-mail, Goldman executives discussed how one subprime mortgage lender the company worked with was facing "wipeout" and another's collapse was "imminent." Goldman helped these lenders bundle and sell their loans to investors.
But one executive, Deeb Salem, wrote, the "good news" was that Goldman would profit $5 million from a bet against the very same bundles of loans it had helped create.
In an October 2007 e-mail, Goldman Sachs mortgage trader Michael Swenson was gleeful at news that credit-rating companies downgraded mortgage-related investments, which caused losses for investors.
"Sounds like we will make some serious money," the executive wrote.
"Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis," Levin said. "They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients."
The e-mails released Saturday portray a different narrative than the one Goldman has given about its role in the mortgage market.
According to Goldman's 11-page defense, while the firm moved to significantly reduce its losses when the housing market cratered, the bank was confused, like many other financial firms, over how bad the collapse would be and suffered losses as a result.
The document also reprises Goldman's frequent explanation that it was not investing its own money in financial transactions to make a trading profit but to help investors who wanted to do a deal and could not easily find someone to trade with. That role, commonly played by investment banks, is known as being a market maker.
In the paper, Goldman argues that it was a relatively small player in the mortgage market, bringing in only $500 million from its residential mortgage business in 2007, less than 1 percent of the firm's overall revenue.
Still, the bank's mortgage investments were large enough that executives began to worry in 2006 that it was betting too heavily on the health of the housing market.
According to the document, the concerns arose in late 2006, when Dan Sparks, the head of the mortgage unit, wrote to top executives that the "subprime market [was] getting hit hard," with the firm losing $20 million in one day.
On Dec. 14, 2006, chief financial officer Viniar called Goldman's mortgage traders and risk managers into a meeting to discuss investing strategy. They concluded that they would reduce the firm's overall exposure to the subprime mortgage market.
But the prevailing view of executives, as described in the paper, was not that the housing market was headed into a prolonged decline. They were not looking to short the market overall. That would have entailed making such large bets against mortgage securities that the firm would turn a profit if the market as a whole collapsed, which in fact it did.
The document acknowledges that Goldman at times shorted the overall market but describes those periods as temporary while the firm was rebalancing its portfolio to limit losses if mortgage securities were to lose more value.
At some moments, executives were actually considering making new bets, buying potentially undervalued securities that could pay off when the mortgage market turned around. A day after Viniar met with traders and risk managers, he wrote to Tom Montan, co-head of the securities division, saying, "There will be very good opportunities as the markets goes into what is likely to be even greater distress and we want to be in position to take advantage of them."
The back-and-forth over which way the market would go, and how to invest in it, continued into 2007.
On March 14, Goldman co-president Jon Winkelried e-mailed Sparks and others asking what the bank was doing to protect itself from a decline in prices of not just subprime loans, but also other loans traditionally considered less risky. Sparks replied that the firm was trying to have "smaller" exposure to those loans also.
But managing director Richard Ruzika took issue with that answer a few days later, saying that Goldman might be overestimating the decline in housing. "It does feel to me like the market in general underestimated how bad it could get. And now could be overestimating where we are heading," he wrote in an e-mail. "While undoubtedly there will be some continued spillover, I'm not so convinced this is a total death spiral. In fact, we may have terrific opportunities."
Sparks later endorsed that optimistic view, suggesting as late as August 2007 that Goldman begin buying more mortgage securities.
The bank did not immediately follow that path, and by Nov. 30, 2007, Goldman had largely canceled out its exposure to subprime mortgages by increasing its bets that the market would continue to slide, according to the document.
But by that account, Goldman also continued to have $13.5 billion in exposure to safer, prime mortgages. That cost the bank. In 2008, the firm lost $1.7 billion on investments in residential mortgages.
by Zachary Goldfarb
Goldman Sachs "made more than we lost because of shorts," Chief Executive Lloyd Blankfein said in a November 2007 e-mail. The documents show that Goldman, at times, made big, profitable bets against the housing market -- sometimes betting against mortgage investments that it had sold to investors.
Sen. Carl Levin (D-Mich.), chairman of the Permanent Subcommittee on Investigations, said four internal e-mails released Saturday contradict Goldman's assertion that it didn't seek to profit from the housing downturn. "Goldman made a lot of money by betting against the mortgage market," Levin said.
In a November 2007 e-mail, Goldman chief executive Lloyd Blankfein wrote that the firm "lost money" on the housing market, "then made more than we lost because of shorts."
The release of the documents comes as Goldman Sachs is preparing its most detailed defense yet to allegations that it misled clients in its mortgage securities business, arguing that the firm was unsure whether housing prices would rise or fall and did not take any action at odds with the interests of its clients.
An internal Goldman document, prepared for senior executives and obtained by The Washington Post, describes debates among top executives in 2006 and 2007 over whether the firm should make investment decisions based on the belief that the mortgage market would continue to prosper.
The document details meetings and e-mails that ultimately resulted in a decision to reduce the company's exposure to the mortgage market, especially subprime loans, by making new investments that would pay off if housing prices fell.
Goldman has been widely criticized for investing its own money to bet against the housing market while simultaneously urging clients to invest in securities that would increase in value only if the housing market did.
Those concerns over possible double-dealing spiked a week ago as the Securities and Exchange Commission filed a fraud suit against Goldman, alleging that it misled clients by selling them mortgage-related securities secretly designed to fail.
The Senate panel will hold a hearing on investment banks and the financial crisis Tuesday. Blankfein and other executives are scheduled to testify.
In one of the e-mails obtained by the committee, Goldman chief financial officer David Viniar responded to a report that the firm earned $50 million in one day with bets that the housing market would decline.
"Tells you what might be happening to people who don't have the big short," Viniar wrote to his colleagues.
In another e-mail, Goldman executives discussed how one subprime mortgage lender the company worked with was facing "wipeout" and another's collapse was "imminent." Goldman helped these lenders bundle and sell their loans to investors.
But one executive, Deeb Salem, wrote, the "good news" was that Goldman would profit $5 million from a bet against the very same bundles of loans it had helped create.
In an October 2007 e-mail, Goldman Sachs mortgage trader Michael Swenson was gleeful at news that credit-rating companies downgraded mortgage-related investments, which caused losses for investors.
"Sounds like we will make some serious money," the executive wrote.
"Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis," Levin said. "They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients."
The e-mails released Saturday portray a different narrative than the one Goldman has given about its role in the mortgage market.
According to Goldman's 11-page defense, while the firm moved to significantly reduce its losses when the housing market cratered, the bank was confused, like many other financial firms, over how bad the collapse would be and suffered losses as a result.
The document also reprises Goldman's frequent explanation that it was not investing its own money in financial transactions to make a trading profit but to help investors who wanted to do a deal and could not easily find someone to trade with. That role, commonly played by investment banks, is known as being a market maker.
In the paper, Goldman argues that it was a relatively small player in the mortgage market, bringing in only $500 million from its residential mortgage business in 2007, less than 1 percent of the firm's overall revenue.
Still, the bank's mortgage investments were large enough that executives began to worry in 2006 that it was betting too heavily on the health of the housing market.
According to the document, the concerns arose in late 2006, when Dan Sparks, the head of the mortgage unit, wrote to top executives that the "subprime market [was] getting hit hard," with the firm losing $20 million in one day.
On Dec. 14, 2006, chief financial officer Viniar called Goldman's mortgage traders and risk managers into a meeting to discuss investing strategy. They concluded that they would reduce the firm's overall exposure to the subprime mortgage market.
But the prevailing view of executives, as described in the paper, was not that the housing market was headed into a prolonged decline. They were not looking to short the market overall. That would have entailed making such large bets against mortgage securities that the firm would turn a profit if the market as a whole collapsed, which in fact it did.
The document acknowledges that Goldman at times shorted the overall market but describes those periods as temporary while the firm was rebalancing its portfolio to limit losses if mortgage securities were to lose more value.
At some moments, executives were actually considering making new bets, buying potentially undervalued securities that could pay off when the mortgage market turned around. A day after Viniar met with traders and risk managers, he wrote to Tom Montan, co-head of the securities division, saying, "There will be very good opportunities as the markets goes into what is likely to be even greater distress and we want to be in position to take advantage of them."
The back-and-forth over which way the market would go, and how to invest in it, continued into 2007.
On March 14, Goldman co-president Jon Winkelried e-mailed Sparks and others asking what the bank was doing to protect itself from a decline in prices of not just subprime loans, but also other loans traditionally considered less risky. Sparks replied that the firm was trying to have "smaller" exposure to those loans also.
But managing director Richard Ruzika took issue with that answer a few days later, saying that Goldman might be overestimating the decline in housing. "It does feel to me like the market in general underestimated how bad it could get. And now could be overestimating where we are heading," he wrote in an e-mail. "While undoubtedly there will be some continued spillover, I'm not so convinced this is a total death spiral. In fact, we may have terrific opportunities."
Sparks later endorsed that optimistic view, suggesting as late as August 2007 that Goldman begin buying more mortgage securities.
The bank did not immediately follow that path, and by Nov. 30, 2007, Goldman had largely canceled out its exposure to subprime mortgages by increasing its bets that the market would continue to slide, according to the document.
But by that account, Goldman also continued to have $13.5 billion in exposure to safer, prime mortgages. That cost the bank. In 2008, the firm lost $1.7 billion on investments in residential mortgages.
Boom and Bust
Marijuana
By ALEXANDER COCKBURN
Marijuana was by no means the first boom crop to delight my home county of Humboldt, here, in Northern California, five hours drive from San Francisco up Route 101. Leaving aside the boom of appropriating land from the Indians, there was the timber boom, which crested in the 1950s, when Douglas fir in the Mattole Valley went south to frame the housing tracts of Los Angeles.
In the early 1970s new settlers – fugitives from the 1960s and city life – would tell visiting friends, “Bring marijuana,” and then disconsolately try to get high from the male leaves. Growers here would spend nine months coaxing their plants, only to watch, amid the mists and rains of fall, hated mold destroy the flowers.
By the end of the decade, the cultivators were learning how to grow. There was an enormous variety of seeds – Afghan, Thai, Burmese. The price crept up to $400 a pound, and the grateful settlers, mostly dirt poor, rushed out to buy a washing machine, a propane fridge, a used VW, a solar panel, a 12-volt battery. Even a three-pound sale was a relatively big deal.
There was a side benefit, in the form of decent organic vegetables. The back-to-the-land folk of 1974-79 were learning to grow pot at same time as all other vegetables. Just as the early pot was puny and weak, so were the vegetables. The organic/natural food store in Eureka typically stocked baskets with five withered carrots, some sad looking turnips. A potato farmer once told me that in that era he took the ugliest, most knobbly and pitted potatoes and threw them in the “organic” bin. But, just as the pot boomed in quality, so did the vegetables. The local coop in Arcata became a vast enterprise – and the present “Whole Earth” emporia, with their piles of vegetables more lush than anything in Renoir, parallel the astounding transformation of the pot flower.
The 1980s brought further advances in productivity through the old Hispanic/Mexican technique of ensuring that female buds are not pollinated, hence the name sin semilla – without seeds. By 1981, the price for the grower was up, around $1,600 a pound. The $100 bill was becoming a familiar local unit of cash transactions. In 1982, a celebrated grow here, in the Mattole Valley, yielded its organizer, an Ivy League grad, a harvest of a thousand pounds of processed marijuana, an amazing logistical triumph. Fifteen miles up the valley from where I write, tiny Honeydew became fabled as the marijuana capital of California, if not America.
That same year, the “war on drugs” rolled into action, executed in Humboldt County by platoons of sheriff’s deputies, DEA agents, roadblocks by the California Highway Patrol. The National Guard combed the King Range. Schoolchildren gazed up at helicopters hovering over the valley scanning for marijuana gardens. War, in this case, brought relatively few casualties and many beneficiaries into the local economy: federal and state assistance for local law enforcement; more prosecutors in the DA’s office; a commensurately expanding phalanx of defense lawyers; a buoyant housing market for growers washing their money into legality; $200 a day and more for women trimming the dried plants.
A bust meant at least a year of angst for the defendant and at least $25,000 in legal fees, though rarely any significant jail time. All the same, it did usually produce a felony conviction, several years of probation, and all the restrictions of being an ex-felon. Checking that little box, “have you ever been charged or convicted of a felony,” eliminates many government jobs, like teaching school or government loans. There are 32 people serving life sentences in California on a third-strike marijuana conviction. In 2008, 1,499 were in prison on marijuana convictions; in 2007, 4,925 in county jails. (Nationally, between 1990 to 2005, there were 7,200,000 marijuana related arrests – 1 out of every 18 felony convictions.)
By now, the cattle ranchers were growing too. Along the little county road in front of my house, where once you’d see battered old pickups rattling along, now late model stretch-cab Fords, Chevys and Dodges thundered by. Ranch yards sported new dump trucks and backhoes. Dealerships were selling big trucks and Toyota 4Runners, purchased with cash. By the mid-1990s, the price of bud was up around $2,400 a pound.
Best of all, the war on drugs was a sturdy price support in our thinly populated, remote Emerald Triangle of Humboldt, Mendocino and Trinity counties. Marijuana remained an outlaw crop. Then, in 1996, came California’s Compassionate Use Act, the brainchild of Dennis Peron, who returned from Vietnam in 1969 with two pounds of marijuana in his duffel bag and became a dealer in San Francisco. In 1990, when his companion was dying of AIDS, Peron began his drive for legal medical use of marijuana.
It was the launch point for greenhouses, big enough to spot on Google Earth, plus diesel generators in the hills cycling 24/7, and lists of customers in the clubs down south in San Francisco and LA. By 2005, with increasingly skilled production, the price was cresting between $2,500 and even $3,500 a pound for the grower. These days, in San Francisco and LA (the latter still fractious legal terrain), perfectly grown and nicely packaged indoor pot – four grams for $60, i.e., $6,700 a pound at the retail level – can be inspected with magnifying glasses in tastefully appointed salesrooms.
The age of Obama saw Attorney General Eric Holder tell the federal DEA to give low priority to harassment of valid medical marijuana clubs in states – fourteen so far, plus Washington, D.C. – that give marijuana some form of legality. Remember, in the U.S.A., there is federal law and there are state laws. Federal law trumps state law, but it’s still up to the U.S. attorney general to decide on priorities in enforcement. On March 25, 2010, California officials announced that 523,531 signatures – almost 100,000 more than required – had been validated in support of a state initiative to legalize marijuana and allow it to be sold and taxed, no small fiscal allurement in budget-stricken California. (Many growers, zealous not to get on the wrong side of the IRS and the state tax board, declare “agricultural” revenues in some form dependant on the creativity of their accountant or lawyer. After all, to get a bank loan, a college loan, you need a healthy looking returnh. The feds and the state are happy to take the money and, as a rule, not to ask questions. The state utility, PG&E, is similarly happy to rake in large sums from growers using huge amounts of power to run their indoor grow lights and electric fans.
The California initiative will be on the November ballot. Various polls last year indicated such a measure enjoyed a 55 percent approval rating. It will certainly be a close run thing, though old people, unable to afford prescription painkillers, are turning with increasing enthusiasm to marijuana. Call the California ballot the second shoe dropping in the “health reform” drama.
People here, in Humboldt County, reckon legalization is not far off and that it spells the end of the 30-year marijuana boom, which was under stress anyway because of one of the oldest problems in agriculture – oversupply. The local weekly, the North Coast Journal, has made a somewhat comic effort to construct a silver lining for the county. It talks hopefully of branding the Humboldt “terroir,” of tours of “marijuanaries.” Dream on. Down south there’s more sun, more water, and very capable Mexicans ready to tend and trim for $15 an hour. The smarter growers reckon they have two years at most. Here, on the North Coast, the price of marijuana will drop, the price of land will drop, the trucks will stop being late model. There’ll be less money floating around.
The New Deal began with an end to prohibition of the sale of alcohol across the United States. The individual small producers of bourbon – some good, a lot awful, or downright poison – shut down, and the big liquor producers took over, successfully pushing for illegalization of marijuana in 1937. How long will the small producers of gourmet marijuana last before the big companies run them off, pushing through the sort of regulatory “standards” that are now punishing small organic farmers?
Mongrel Politics and an American Mind
Tax day found CounterPuncher JoAnn Wypijewski stranded in Columbia, South Carolina. “I went up to the state capitol to check out the local Tea Party. It – the Tea Party, that is -- was of moderate size, blazingly white. On the capitol steps, facing the Confederate flag on the grounds below, some anarchists sat with a prominent sign, “End the welfare-warfare state.” In the shade at the edge of the proceedings, I fell into conversation with a bandy, blue-eyed man who wore a cap that said, “Gun Owners for Paul.” He had terrible teeth and a long white beard reminiscent of O, Brother, Where Art Thou? and said he was 65. He spoke in a high-pitched country drawl, a matter-of-fact style with a wild fringe of humor.”
In our latest newsletter we feature JoAnn’s riveting and highly entertaining interview. Some samples of grassroots political philosophy outside the Beltway in the year 2010:
Also in this latest terrific, subscriber-only newsletter, we print “Hu Jia’s Imprisonment and the Mockery of Citizens’ Rights in the Chinese People’s Republic”, a savage indictment of recent developments in the CPR by Chaohua Wang, who has been in political exile from China ever she escaped in 1989, having been a leader of the left student faction during the Tienanmen demonstrations. Beginning with the fate of human rights activist Hu Jia, Chaohua excavates recent alarming trends in China and describes what she calls “a qualitative shift”:
By ALEXANDER COCKBURN
Marijuana was by no means the first boom crop to delight my home county of Humboldt, here, in Northern California, five hours drive from San Francisco up Route 101. Leaving aside the boom of appropriating land from the Indians, there was the timber boom, which crested in the 1950s, when Douglas fir in the Mattole Valley went south to frame the housing tracts of Los Angeles.
In the early 1970s new settlers – fugitives from the 1960s and city life – would tell visiting friends, “Bring marijuana,” and then disconsolately try to get high from the male leaves. Growers here would spend nine months coaxing their plants, only to watch, amid the mists and rains of fall, hated mold destroy the flowers.
By the end of the decade, the cultivators were learning how to grow. There was an enormous variety of seeds – Afghan, Thai, Burmese. The price crept up to $400 a pound, and the grateful settlers, mostly dirt poor, rushed out to buy a washing machine, a propane fridge, a used VW, a solar panel, a 12-volt battery. Even a three-pound sale was a relatively big deal.
There was a side benefit, in the form of decent organic vegetables. The back-to-the-land folk of 1974-79 were learning to grow pot at same time as all other vegetables. Just as the early pot was puny and weak, so were the vegetables. The organic/natural food store in Eureka typically stocked baskets with five withered carrots, some sad looking turnips. A potato farmer once told me that in that era he took the ugliest, most knobbly and pitted potatoes and threw them in the “organic” bin. But, just as the pot boomed in quality, so did the vegetables. The local coop in Arcata became a vast enterprise – and the present “Whole Earth” emporia, with their piles of vegetables more lush than anything in Renoir, parallel the astounding transformation of the pot flower.
The 1980s brought further advances in productivity through the old Hispanic/Mexican technique of ensuring that female buds are not pollinated, hence the name sin semilla – without seeds. By 1981, the price for the grower was up, around $1,600 a pound. The $100 bill was becoming a familiar local unit of cash transactions. In 1982, a celebrated grow here, in the Mattole Valley, yielded its organizer, an Ivy League grad, a harvest of a thousand pounds of processed marijuana, an amazing logistical triumph. Fifteen miles up the valley from where I write, tiny Honeydew became fabled as the marijuana capital of California, if not America.
That same year, the “war on drugs” rolled into action, executed in Humboldt County by platoons of sheriff’s deputies, DEA agents, roadblocks by the California Highway Patrol. The National Guard combed the King Range. Schoolchildren gazed up at helicopters hovering over the valley scanning for marijuana gardens. War, in this case, brought relatively few casualties and many beneficiaries into the local economy: federal and state assistance for local law enforcement; more prosecutors in the DA’s office; a commensurately expanding phalanx of defense lawyers; a buoyant housing market for growers washing their money into legality; $200 a day and more for women trimming the dried plants.
A bust meant at least a year of angst for the defendant and at least $25,000 in legal fees, though rarely any significant jail time. All the same, it did usually produce a felony conviction, several years of probation, and all the restrictions of being an ex-felon. Checking that little box, “have you ever been charged or convicted of a felony,” eliminates many government jobs, like teaching school or government loans. There are 32 people serving life sentences in California on a third-strike marijuana conviction. In 2008, 1,499 were in prison on marijuana convictions; in 2007, 4,925 in county jails. (Nationally, between 1990 to 2005, there were 7,200,000 marijuana related arrests – 1 out of every 18 felony convictions.)
By now, the cattle ranchers were growing too. Along the little county road in front of my house, where once you’d see battered old pickups rattling along, now late model stretch-cab Fords, Chevys and Dodges thundered by. Ranch yards sported new dump trucks and backhoes. Dealerships were selling big trucks and Toyota 4Runners, purchased with cash. By the mid-1990s, the price of bud was up around $2,400 a pound.
Best of all, the war on drugs was a sturdy price support in our thinly populated, remote Emerald Triangle of Humboldt, Mendocino and Trinity counties. Marijuana remained an outlaw crop. Then, in 1996, came California’s Compassionate Use Act, the brainchild of Dennis Peron, who returned from Vietnam in 1969 with two pounds of marijuana in his duffel bag and became a dealer in San Francisco. In 1990, when his companion was dying of AIDS, Peron began his drive for legal medical use of marijuana.
It was the launch point for greenhouses, big enough to spot on Google Earth, plus diesel generators in the hills cycling 24/7, and lists of customers in the clubs down south in San Francisco and LA. By 2005, with increasingly skilled production, the price was cresting between $2,500 and even $3,500 a pound for the grower. These days, in San Francisco and LA (the latter still fractious legal terrain), perfectly grown and nicely packaged indoor pot – four grams for $60, i.e., $6,700 a pound at the retail level – can be inspected with magnifying glasses in tastefully appointed salesrooms.
The age of Obama saw Attorney General Eric Holder tell the federal DEA to give low priority to harassment of valid medical marijuana clubs in states – fourteen so far, plus Washington, D.C. – that give marijuana some form of legality. Remember, in the U.S.A., there is federal law and there are state laws. Federal law trumps state law, but it’s still up to the U.S. attorney general to decide on priorities in enforcement. On March 25, 2010, California officials announced that 523,531 signatures – almost 100,000 more than required – had been validated in support of a state initiative to legalize marijuana and allow it to be sold and taxed, no small fiscal allurement in budget-stricken California. (Many growers, zealous not to get on the wrong side of the IRS and the state tax board, declare “agricultural” revenues in some form dependant on the creativity of their accountant or lawyer. After all, to get a bank loan, a college loan, you need a healthy looking returnh. The feds and the state are happy to take the money and, as a rule, not to ask questions. The state utility, PG&E, is similarly happy to rake in large sums from growers using huge amounts of power to run their indoor grow lights and electric fans.
The California initiative will be on the November ballot. Various polls last year indicated such a measure enjoyed a 55 percent approval rating. It will certainly be a close run thing, though old people, unable to afford prescription painkillers, are turning with increasing enthusiasm to marijuana. Call the California ballot the second shoe dropping in the “health reform” drama.
People here, in Humboldt County, reckon legalization is not far off and that it spells the end of the 30-year marijuana boom, which was under stress anyway because of one of the oldest problems in agriculture – oversupply. The local weekly, the North Coast Journal, has made a somewhat comic effort to construct a silver lining for the county. It talks hopefully of branding the Humboldt “terroir,” of tours of “marijuanaries.” Dream on. Down south there’s more sun, more water, and very capable Mexicans ready to tend and trim for $15 an hour. The smarter growers reckon they have two years at most. Here, on the North Coast, the price of marijuana will drop, the price of land will drop, the trucks will stop being late model. There’ll be less money floating around.
The New Deal began with an end to prohibition of the sale of alcohol across the United States. The individual small producers of bourbon – some good, a lot awful, or downright poison – shut down, and the big liquor producers took over, successfully pushing for illegalization of marijuana in 1937. How long will the small producers of gourmet marijuana last before the big companies run them off, pushing through the sort of regulatory “standards” that are now punishing small organic farmers?
Mongrel Politics and an American Mind
Tax day found CounterPuncher JoAnn Wypijewski stranded in Columbia, South Carolina. “I went up to the state capitol to check out the local Tea Party. It – the Tea Party, that is -- was of moderate size, blazingly white. On the capitol steps, facing the Confederate flag on the grounds below, some anarchists sat with a prominent sign, “End the welfare-warfare state.” In the shade at the edge of the proceedings, I fell into conversation with a bandy, blue-eyed man who wore a cap that said, “Gun Owners for Paul.” He had terrible teeth and a long white beard reminiscent of O, Brother, Where Art Thou? and said he was 65. He spoke in a high-pitched country drawl, a matter-of-fact style with a wild fringe of humor.”
In our latest newsletter we feature JoAnn’s riveting and highly entertaining interview. Some samples of grassroots political philosophy outside the Beltway in the year 2010:
Stewart: Now, Ron Paul: I voted for him in the primaries because he stood for peace, which is what Americans wanted and why they voted for Obama. They did not want to redistribute the wealth. All they wanted was No War!
JW: So you’re against the wars in Iraq and Afghanistan.
S: All right, now let me tell you somethin’ that’ll really blow the minds of whoever listens to this. We do not live in a democracy, even a representative democracy called a republic. We live in a mediacracy.
JW: Meaning M-E-D-I-A?
S: Right. Most people vote according to how they are influenced by the media. Ever since back in the Fifties I could read the newspapers, I didn’t care who won the elections, I was not political, I never voted for 30 or 40 years, but I could tell who was gonna win the elections. All I had to do was open the newspaper, The New York Times, and I’d say, well, look, they favor Johnson more than they do Goldwater; Johnson’s gotta win. I didn’t know why, but ever since then I have been thinkin’ about it. Finally, I figured it out.The people that own the media determine who’s gonna get elected because most of the idiots out here are just gonna turn on that TV; they don’t have the sense to turn on the Internet and find a different viewpoint. And the people that own the seven or eight big media conglomerates, they start at the primary level, so, by the time you get to the national level – like Obama against McCain – they’ve already been vetted on both sides. It doesn’t matter which one wins, so, in the end, if we had voted for McCain, we’d have gotten the same war that we got from Obama. I called up a radio station before Obama got elected, I said, “He’s not gonna end the war. I know who owns the media, and I know why they put him in there, and they want us in Iraq.”
I have ancestors that’ve been rabid Christians, crazy Christians, ’cause there’s no other kind, ’cause they been lied to, and you can’t be lied to all your life without bein’ insane. It’s just garbage in, garbage out.
So, we are a lied-to people. We are an insane people that believe in all kind of things that aren’t supported by evidence, by facts, by anything, because the Jews had the wisdom – you know, Paul nearly fell off his horse when he was ridin’ around tryin’ to kill the Christian Jews; he said, my god, they will send money to Jerusalem if we can just convert these people! Big stroke of genius, and they’ve been doin’ it ever since!
Yeah, I understand why we’re fightin’ in Iraq, ’cause Israel wants to bomb all those people back to the Stone Age. The reason terrorists are over here is because they are being colonized, the same way that the American Indians fought my ancestors ’cause they were takin’ their land. It makes sense. But the Jewish media talks about terrorism, says it ain’t got nothin’ to do with Palestine. It’s ’cause they hate our freedom, all kind of lies, and the American people: yuh, yuh, the Jews are right. Yuh, gotta protect Israel, preacher said so, God’s chosen people, hallelujah Israel. I wanna go to heaven, and when the Messiah comes along, I gonna be his man.
JW: So, are you a pagan?
S: I worship god, the same god that my ancestors worshiped for 40,000-50,000 years, and my god is life.
Also in this latest terrific, subscriber-only newsletter, we print “Hu Jia’s Imprisonment and the Mockery of Citizens’ Rights in the Chinese People’s Republic”, a savage indictment of recent developments in the CPR by Chaohua Wang, who has been in political exile from China ever she escaped in 1989, having been a leader of the left student faction during the Tienanmen demonstrations. Beginning with the fate of human rights activist Hu Jia, Chaohua excavates recent alarming trends in China and describes what she calls “a qualitative shift”:
“Nowadays, talk of Chinese characteristics serves the authorities not only to pacify a restless society but, in a much more aggressive fashion, to serve profiteering purposes for the rich and powerful. A telling aspect of the shift is in the government’s dealing with both social unrest and political dissent. That is to say, in the government’s determination to usurp the civil rights of the Chinese people. Social unrest and political dissent are not, of course, the same, as Beijing is well aware. But the Party’s attitude toward both hardened at about the same time. The key events behind this toughening were the Beijing Olympics of August 2008 and the world financial crisis, triggered by the Lehman Brothers’ collapse a month later….
“…The global importance of China’s economy seems to be depriving its leaders of any capacity for self-reflection, often to the point of caricature in dictatorial displays without the slightest sense of humor. …
“…What has changed from bad to worse is the growing indifference of the Party even to keeping up appearances. Recent cases combine the outrageous with the absurd. For example, socially and politically abused people in China tend to seek redress by petitioning higher levels of government against their immediate abusers. At the annual session of the National People’s Congress and the National Political Consultancy Conference last month, proposals were circulated among the organizers, to the effect that petitioners should be arrested if they shouted slogans or staged sit-ins outside government offices. The reason? Respectable officials need proper rest and shouldn’t be disturbed by such unruly elements….
“…Last year, a woman in Chengdu, provincial capital of Sichuan, started to burn herself to death in protest, when demolition crews surrounded her three-storey home and began to level it with their bulldozers. Her extreme action did not stop them. When she was rushed to hospital, her family members were forbidden to see her in the last days of her life and news media were blocked from covering the case…
“…This is one of the most startling new developments in Chinese society: victims are turned into enemies of the state and enemies of the law.”
Potential for major spill after oil rig sinks
Drill, baby, drill!
11 workers still missing after explosion, fire off La.
msnbc.com staff and news service reports
updated 3:58 p.m. CT, Thurs., April 22, 2010
NEW ORLEANS - The oil rig that exploded, caught fire and then sank 36 hours later could lead to a major oil spill, officials said Thursday, and as a result a remotely operated vehicle is surveying the seas and assets ranging from aircraft to containment booms are ready to be deployed.
At a press conference, the officials also said hope was running out for 11 workers still missing after the blast Tuesday night off the coast of Louisiana. The Coast Guard said its search would probably continue into early Friday.
Crews searching for the workers have covered the 1,940-square-mile search area by air 12 times and by boat five times. The boats searched all night.
Carolyn Kemp said Thursday that her grandson, Roy Wyatt Kemp, 27, was among the missing. She said he would have been on the drilling platform when it exploded.
"They're assuming all those men who were on the platform are dead," Kemp said. "That's the last we've heard."
Officials had previously said the environmental damage appeared minimal, but new challenges have arisen now that the platform has sunk.
The well could be spilling up to 336,000 gallons of crude oil a day, the Coast Guard said, and the rig carried 700,000 gallons of diesel fuel.
Crude from the well had been burning off but when the rig sank earlier Thursday the fire was extinguished. What's not clear is if the crude is still spewing below the surface.
Coast Guard Rear Adm. Mary Landry said crews saw a one mile by five mile sheen of what appeared to be a crude oil mix on the surface of the water.
Boats that skim oil from the top of water are working in the area, she said.
Landry did not have an estimate for when videotape from the remotely operated vehicle would be available to show if crude was spilling from the wellhead.
But the National Ocean Service's Office of Response and Restoration, which deals with oil spills, said it believes "crude oil and natural gas are being released uncontrolled from the riser pipe of the well," adding that "three attempts to shut-in the well have been unsuccessful."
Doug Helton, incident operations coordinator at the office, said any spill is not expected to come onshore for three to four days. "But if the winds were to change, it could come ashore more rapidly," he said.
The oil will do much less damage at sea than it would if it hits the shore, said Cynthia Sarthou, executive director of the Gulf Restoration Network. "If it gets landward, it could be a disaster in the making," Sarthou said.
At the worst-case figure of 336,000 gallons a day, it would take more than a month for the amount of crude oil spilled to equal the 11 million gallons spilled from the Exxon Valdez in Prince William Sound.
Oil giant BP, which was finishing an exploration well when the explosion happened, said it has mobilized four aircraft that can spread chemicals to break up the oil as well as 32 vessels, including a big storage barge, that can suck more than 171,000 barrels of oil a day from the surface.
Families reunite
Seventeen workers brought to shore Wednesday suffered burns, broken legs and smoke inhalation. Four were critically injured.
About 100 others who were not hurt had made it to a supply boat after Tuesday night's explosion, then were plucked from the Gulf of Mexico by Coast Guard rescuers.
After a slow-moving trek across the waters, the workers finally made it ashore at Port Fourchon earlier Thursday where they were checked by doctors and brought to a hotel in suburban New Orleans to awaiting relatives.
"I've seen a lot of things, but I've never seen anything like that," said a visibly tired worker, who declined to give his name as he got in a car to leave.
The rig, where exploratory drilling was being done about 50 miles off the coast of Louisiana, exploded late Tuesday, sending workers scurrying for safety.
The rig is owned by Transocean Ltd. and was under contract to BP.
The 400-by-250-foot rig is roughly twice the size of a football field, according the Transocean's website.
A column of boiling black smoke rose hundreds of feet over the Gulf of Mexico on Wednesday as fireboats shot streams of water at the blaze.
Adrian Rose, vice president of Transocean, said the explosion appeared to be a blowout, in which natural gas or oil forces its way up a well pipe and smashes the equipment. But precisely what went wrong was under investigation.
Lawsuit filed
A total of 126 workers were aboard. Seventy-nine were Transocean workers, six were BP employees and 41 were contracted.
A lawsuit filed Thursday, claimed the companies involved in the blast were negligent.
The lawsuit was filed in New Orleans on behalf of a Mississippi man who worked on the rig and is one of 11 people still missing.
The lawsuit claims Shane Roshto, of Amite County, Miss., was thrown overboard in the explosion and is feared dead.
A Transocean spokesman did not immediately respond to a request for comment and BP wouldn't discuss the suit.
Since 2001, there have been 69 offshore deaths, 1,349 injuries and 858 fires and explosions in the Gulf, according to the federal Minerals Management Service.
One of the deadliest U.S. offshore drilling accidents was in 1964, when a catamaran-type drilling barge operated by Pan American Petroleum Corp. near Eugene Island, about 80 miles off Louisiana, suffered a blowout and explosion while drilling a well. Twenty-one crew members died.
The deadliest offshore drilling explosion was in 1988 about 120 miles off Aberdeen, Scotland, in which 167 men were killed.
Rose said the Deepwater Horizon crew had drilled the well to its final depth, more than 18,000 feet, and was cementing the steel casing at the time of the explosion.
"They did not have a lot of time to evacuate. This would have happened very rapidly," he said.
According to Transocean's website, the rig was built in 2001 in South Korea and is designed to operate in water up to 8,000 feet deep, drill 5½ miles down, and accommodate a crew of 130. It floats on pontoons and is moored to the sea floor by several large anchors.
Workers typically spend two weeks on the rig at a time, followed by two weeks off. Offshore oil workers typically earn $40,000 to $60,000 a year — more if they have special skills.
Working on offshore oil rigs is a dangerous job but has become safer in recent years thanks to improved training, safety systems and maintenance, said Joe Hurt, regional vice president for the International Association of Drilling Contractors.
Stanley Murray of Monterey, La., was reunited with his son, Chad, early Thursday morning. His son, an electrician aboard the rig, had ended his shift just before the explosion.
"If he had been there five minutes later, he would have been burned up," a relieved Stanley Murray said.
11 workers still missing after explosion, fire off La.
msnbc.com staff and news service reports
updated 3:58 p.m. CT, Thurs., April 22, 2010
NEW ORLEANS - The oil rig that exploded, caught fire and then sank 36 hours later could lead to a major oil spill, officials said Thursday, and as a result a remotely operated vehicle is surveying the seas and assets ranging from aircraft to containment booms are ready to be deployed.
At a press conference, the officials also said hope was running out for 11 workers still missing after the blast Tuesday night off the coast of Louisiana. The Coast Guard said its search would probably continue into early Friday.
Crews searching for the workers have covered the 1,940-square-mile search area by air 12 times and by boat five times. The boats searched all night.
Carolyn Kemp said Thursday that her grandson, Roy Wyatt Kemp, 27, was among the missing. She said he would have been on the drilling platform when it exploded.
"They're assuming all those men who were on the platform are dead," Kemp said. "That's the last we've heard."
Officials had previously said the environmental damage appeared minimal, but new challenges have arisen now that the platform has sunk.
The well could be spilling up to 336,000 gallons of crude oil a day, the Coast Guard said, and the rig carried 700,000 gallons of diesel fuel.
Crude from the well had been burning off but when the rig sank earlier Thursday the fire was extinguished. What's not clear is if the crude is still spewing below the surface.
Coast Guard Rear Adm. Mary Landry said crews saw a one mile by five mile sheen of what appeared to be a crude oil mix on the surface of the water.
Boats that skim oil from the top of water are working in the area, she said.
Landry did not have an estimate for when videotape from the remotely operated vehicle would be available to show if crude was spilling from the wellhead.
But the National Ocean Service's Office of Response and Restoration, which deals with oil spills, said it believes "crude oil and natural gas are being released uncontrolled from the riser pipe of the well," adding that "three attempts to shut-in the well have been unsuccessful."
Doug Helton, incident operations coordinator at the office, said any spill is not expected to come onshore for three to four days. "But if the winds were to change, it could come ashore more rapidly," he said.
The oil will do much less damage at sea than it would if it hits the shore, said Cynthia Sarthou, executive director of the Gulf Restoration Network. "If it gets landward, it could be a disaster in the making," Sarthou said.
At the worst-case figure of 336,000 gallons a day, it would take more than a month for the amount of crude oil spilled to equal the 11 million gallons spilled from the Exxon Valdez in Prince William Sound.
Oil giant BP, which was finishing an exploration well when the explosion happened, said it has mobilized four aircraft that can spread chemicals to break up the oil as well as 32 vessels, including a big storage barge, that can suck more than 171,000 barrels of oil a day from the surface.
Families reunite
Seventeen workers brought to shore Wednesday suffered burns, broken legs and smoke inhalation. Four were critically injured.
About 100 others who were not hurt had made it to a supply boat after Tuesday night's explosion, then were plucked from the Gulf of Mexico by Coast Guard rescuers.
After a slow-moving trek across the waters, the workers finally made it ashore at Port Fourchon earlier Thursday where they were checked by doctors and brought to a hotel in suburban New Orleans to awaiting relatives.
"I've seen a lot of things, but I've never seen anything like that," said a visibly tired worker, who declined to give his name as he got in a car to leave.
The rig, where exploratory drilling was being done about 50 miles off the coast of Louisiana, exploded late Tuesday, sending workers scurrying for safety.
The rig is owned by Transocean Ltd. and was under contract to BP.
The 400-by-250-foot rig is roughly twice the size of a football field, according the Transocean's website.
A column of boiling black smoke rose hundreds of feet over the Gulf of Mexico on Wednesday as fireboats shot streams of water at the blaze.
Adrian Rose, vice president of Transocean, said the explosion appeared to be a blowout, in which natural gas or oil forces its way up a well pipe and smashes the equipment. But precisely what went wrong was under investigation.
Lawsuit filed
A total of 126 workers were aboard. Seventy-nine were Transocean workers, six were BP employees and 41 were contracted.
A lawsuit filed Thursday, claimed the companies involved in the blast were negligent.
The lawsuit was filed in New Orleans on behalf of a Mississippi man who worked on the rig and is one of 11 people still missing.
The lawsuit claims Shane Roshto, of Amite County, Miss., was thrown overboard in the explosion and is feared dead.
A Transocean spokesman did not immediately respond to a request for comment and BP wouldn't discuss the suit.
Since 2001, there have been 69 offshore deaths, 1,349 injuries and 858 fires and explosions in the Gulf, according to the federal Minerals Management Service.
One of the deadliest U.S. offshore drilling accidents was in 1964, when a catamaran-type drilling barge operated by Pan American Petroleum Corp. near Eugene Island, about 80 miles off Louisiana, suffered a blowout and explosion while drilling a well. Twenty-one crew members died.
The deadliest offshore drilling explosion was in 1988 about 120 miles off Aberdeen, Scotland, in which 167 men were killed.
Rose said the Deepwater Horizon crew had drilled the well to its final depth, more than 18,000 feet, and was cementing the steel casing at the time of the explosion.
"They did not have a lot of time to evacuate. This would have happened very rapidly," he said.
According to Transocean's website, the rig was built in 2001 in South Korea and is designed to operate in water up to 8,000 feet deep, drill 5½ miles down, and accommodate a crew of 130. It floats on pontoons and is moored to the sea floor by several large anchors.
Workers typically spend two weeks on the rig at a time, followed by two weeks off. Offshore oil workers typically earn $40,000 to $60,000 a year — more if they have special skills.
Working on offshore oil rigs is a dangerous job but has become safer in recent years thanks to improved training, safety systems and maintenance, said Joe Hurt, regional vice president for the International Association of Drilling Contractors.
Stanley Murray of Monterey, La., was reunited with his son, Chad, early Thursday morning. His son, an electrician aboard the rig, had ended his shift just before the explosion.
"If he had been there five minutes later, he would have been burned up," a relieved Stanley Murray said.
Iranian cleric blames earthquakes on women's immodest dress, promiscuity
Tectonic plates...pshaw! Here's the real reason!
Iranian cleric blames women's immodest dress, promiscuity for earthquakes, urges repentance
SCHEHEREZADE FARAMARZI
Associated Press Writer
12:35 PM CDT, April 19, 2010
BEIRUT (AP) — A senior Iranian cleric says women who wear immodest clothing and behave promiscuously are to blame for earthquakes.
Iran is one of the world's most earthquake-prone countries, and the cleric's unusual explanation for why the earth shakes follows a prediction by President Mahmoud Ahmadinejad that a quake is certain to hit Tehran and that many of its 12 million inhabitants should relocate.
"Many women who do not dress modestly ... lead young men astray, corrupt their chastity and spread adultery in society, which (consequently) increases earthquakes," Hojatoleslam Kazem Sedighi was quoted as saying by Iranian media. Sedighi is Tehran's acting Friday prayer leader.
Women in the Islamic Republic are required by law to cover from head to toe, but many, especially the young, ignore some of the more strict codes and wear tight coats and scarves pulled back that show much of the hair.
"What can we do to avoid being buried under the rubble?" Sedighi asked during a prayer sermon Friday. "There is no other solution but to take refuge in religion and to adapt our lives to Islam's moral codes."
Seismologists have warned for at least two decades that it is likely the sprawling capital will be struck by a catastrophic quake in the near future.
Some experts have even suggested Iran should move its capital to a less seismically active location. Tehran straddles scores of fault lines, including one more than 50 miles (80 kilometers) long, though it has not suffered a major quake since 1830.
In 2003, a powerful earthquake hit the southern city of Bam, killing 31,000 people — about a quarter of that city's population — and destroying its ancient mud-built citadel.
"A divine authority told me to tell the people to make a general repentance. Why? Because calamities threaten us," Sedighi said.
Referring to the violence that followed last June's disputed presidential election, he said, "The political earthquake that occurred was a reaction to some of the actions (that took place). And now, if a natural earthquake hits Tehran, no one will be able to confront such a calamity but God's power, only God's power. ... So let's not disappoint God."
The Iranian government and its security forces have been locked in a bloody battle with a large opposition movement that accuses Ahmadinejad of winning last year's vote by fraud.
Ahmadinejad made his quake prediction two weeks ago but said he could not give an exact date. He acknowledged that he could not order all of Tehran's 12 million people to evacuate. "But provisions have to be made. ... At least 5 million should leave Tehran so it is less crowded," the president said.
Minister of Welfare and Social Security Sadeq Mahsooli said prayers and pleas for forgiveness were the best "formulas to repel earthquakes."
"We cannot invent a system that prevents earthquakes, but God has created this system and that is to avoid sins, to pray, to seek forgiveness, pay alms and self-sacrifice," Mahsooli said.
Iranian cleric blames women's immodest dress, promiscuity for earthquakes, urges repentance
SCHEHEREZADE FARAMARZI
Associated Press Writer
12:35 PM CDT, April 19, 2010
BEIRUT (AP) — A senior Iranian cleric says women who wear immodest clothing and behave promiscuously are to blame for earthquakes.
Iran is one of the world's most earthquake-prone countries, and the cleric's unusual explanation for why the earth shakes follows a prediction by President Mahmoud Ahmadinejad that a quake is certain to hit Tehran and that many of its 12 million inhabitants should relocate.
"Many women who do not dress modestly ... lead young men astray, corrupt their chastity and spread adultery in society, which (consequently) increases earthquakes," Hojatoleslam Kazem Sedighi was quoted as saying by Iranian media. Sedighi is Tehran's acting Friday prayer leader.
Women in the Islamic Republic are required by law to cover from head to toe, but many, especially the young, ignore some of the more strict codes and wear tight coats and scarves pulled back that show much of the hair.
"What can we do to avoid being buried under the rubble?" Sedighi asked during a prayer sermon Friday. "There is no other solution but to take refuge in religion and to adapt our lives to Islam's moral codes."
Seismologists have warned for at least two decades that it is likely the sprawling capital will be struck by a catastrophic quake in the near future.
Some experts have even suggested Iran should move its capital to a less seismically active location. Tehran straddles scores of fault lines, including one more than 50 miles (80 kilometers) long, though it has not suffered a major quake since 1830.
In 2003, a powerful earthquake hit the southern city of Bam, killing 31,000 people — about a quarter of that city's population — and destroying its ancient mud-built citadel.
"A divine authority told me to tell the people to make a general repentance. Why? Because calamities threaten us," Sedighi said.
Referring to the violence that followed last June's disputed presidential election, he said, "The political earthquake that occurred was a reaction to some of the actions (that took place). And now, if a natural earthquake hits Tehran, no one will be able to confront such a calamity but God's power, only God's power. ... So let's not disappoint God."
The Iranian government and its security forces have been locked in a bloody battle with a large opposition movement that accuses Ahmadinejad of winning last year's vote by fraud.
Ahmadinejad made his quake prediction two weeks ago but said he could not give an exact date. He acknowledged that he could not order all of Tehran's 12 million people to evacuate. "But provisions have to be made. ... At least 5 million should leave Tehran so it is less crowded," the president said.
Minister of Welfare and Social Security Sadeq Mahsooli said prayers and pleas for forgiveness were the best "formulas to repel earthquakes."
"We cannot invent a system that prevents earthquakes, but God has created this system and that is to avoid sins, to pray, to seek forgiveness, pay alms and self-sacrifice," Mahsooli said.
YouTube to allow fair use defense
I was banned from YouTube for posting news videos that were copyrighted, even though the copyright holders never complained. This is interesting...
Content ID and Fair Use
(Cross-posted from the Official YouTube Blog)
Over the past decade, the evolution of the Internet has altered the landscape for both traditional media companies and the doctrine of fair use, and the media industry has tried to keep up. The new ways that consumers create and distribute content are not a niche phenomenon. Hundreds of millions of people around the world now use the Web to connect and interact with content online, and a huge percentage of them go even further: they express themselves via parodies, celebrate their favorite videos with mashups, and use music ineducational presentations. The people that upload these videos are typically the biggest fans, and are exactly the kinds of consumers rights holders should be embracing.
We listen closely to our partners and we're constantly improving our content identification and management tools ("Content ID") to make sure they have choices in dealing with these different uses of their content on YouTube. Over 1,000 content owners use Content ID, and we've built it in a way that lets them account for fair uses of their content: they can easily create policies depending on the proportion of a claimed video that contains their work, or the absolute length of the clip used. For example, a record label might decide to block videos that contain over one minute of a given song, but leave up videos that contain less than one minute.
Since Content ID can't identify context (like "educational use" or "parody"), we give partners the tools to use length and match proportion as a proxy. Of course, it's not a perfect system. That's why two videos -- one of a baby dancing to one minute of a pop song, and another using the exact same audio clip in a videotaped University lecture about copyright law -- might be treated identically by Content ID and taken down by the rights holder, even though one may be fair use and the other may not. Rights holders are the only ones in a position to know what is and is not an authorized use of their content, and we require them to enforce their policies in a manner that complies with the law.
Still, to make sure that users also have choices when dealing with the content they upload to YouTube, Content ID makes it easy for users to dispute inappropriate claims.
UPDATE (4:45 PM ET): To clear up confusion, this is not a new feature. The dispute process has been in place since Content ID first launched in October 2007. We've changed some text to make that clear.
Content ID and Fair Use
Friday, April 23, 2010 at 11:58 AM ET
(Cross-posted from the Official YouTube Blog)
Over the past decade, the evolution of the Internet has altered the landscape for both traditional media companies and the doctrine of fair use, and the media industry has tried to keep up. The new ways that consumers create and distribute content are not a niche phenomenon. Hundreds of millions of people around the world now use the Web to connect and interact with content online, and a huge percentage of them go even further: they express themselves via parodies, celebrate their favorite videos with mashups, and use music ineducational presentations. The people that upload these videos are typically the biggest fans, and are exactly the kinds of consumers rights holders should be embracing.
We listen closely to our partners and we're constantly improving our content identification and management tools ("Content ID") to make sure they have choices in dealing with these different uses of their content on YouTube. Over 1,000 content owners use Content ID, and we've built it in a way that lets them account for fair uses of their content: they can easily create policies depending on the proportion of a claimed video that contains their work, or the absolute length of the clip used. For example, a record label might decide to block videos that contain over one minute of a given song, but leave up videos that contain less than one minute.Since Content ID can't identify context (like "educational use" or "parody"), we give partners the tools to use length and match proportion as a proxy. Of course, it's not a perfect system. That's why two videos -- one of a baby dancing to one minute of a pop song, and another using the exact same audio clip in a videotaped University lecture about copyright law -- might be treated identically by Content ID and taken down by the rights holder, even though one may be fair use and the other may not. Rights holders are the only ones in a position to know what is and is not an authorized use of their content, and we require them to enforce their policies in a manner that complies with the law.
Still, to make sure that users also have choices when dealing with the content they upload to YouTube, Content ID makes it easy for users to dispute inappropriate claims.
- When you receive a notice in your account via Content ID, we tell you who claimed the content, and direct you to a form that lets you dispute the claim if you so choose.
- If you believe your video is fair use, check the box that reads "This video uses copyrighted material in a manner that does not require approval of the copyright holder." If you're not sure if your video qualifies, you can learn more about fair use here.
- Once you've filed your dispute, your video immediately goes back up on YouTube.
- From this point, the claimant then makes a decision about whether to file a formal DMCA notification, and remove the content from the site according to the process set forth in the DMCA.
UPDATE (4:45 PM ET): To clear up confusion, this is not a new feature. The dispute process has been in place since Content ID first launched in October 2007. We've changed some text to make that clear.
Community Structure in Multi-Scale Transportation Networks
Community Structure in Multi-Scale Transportation Networks
Large-scale communities and their geographical boundaries are key determinants of various human-mediated, spatially-extended, dynamical phenomena. The geographic spread of emergent human infectious diseases such as SARS (severe acute respiratory system) and human influenza A are prime examples. However, the quantitative impact of large scale community structures and their boundaries is difficult to assess. In this project we investigate the network of human traffic between the counties in the US. The aim of this study is to investigate the structure of large-scale communities in the United States. As part of the research we employ data from the online bill-tracking game www.wheresgeorge.com measuring the amount of currency that passes between counties. This database contains information for over 11 millions bills, and allows us to estimate the amount of human travel between the 3109 counties in the continental United States. We develop two new methods for detecting community structure in networks, and we develop a new method for measuring the correlation between two sets of weighted boundaries. Our methods and findings are discussed in detail in a forthcoming paper; one of the methods we employ is also described in our video Follow the Money.Although geographic proximity still dominates human activities, they can no longer be characterized by local interactions only. For example, on the US air transportation network, more than 17 million passengers travel each week across long distances. However, including all means of transportation, 80% of all traffic occurs across distances less than 50 km. The interplay of strong connections on both local and long-distance scales makes the definition and quantification of meaningful geographic borders particularly difficult.
We apply an approximate, stochastic Monte-Carlo method to find high-modularity partitions of the multi-scale mobility network (see visualization). In an ensemble of
Note that these borders can effectively split states into independent patches, as with Pennsylvania, where the most significant border separates the state into regions revolved around Pittsburgh and Philadelphia. Other examples are Missouri, which is split into two halves, the eastern part dominated by St. Louis (also taking a pieces of Illinois) and the western by Kansas City, and the southern part of Georgia, which is effectively allocated to Florida. Also of note are the Appalachian Mountains. Representing a real geological barrier to most means of transportation, this mountain range only partially coincides with state borders, but the effective mobility border is clearly correlated with it. Finally, note that effective patches are often centered on large metropolitan areas that represent hubs in the transportation network, for instance Atlanta, Minneapolis and Salt Lake City.
Although we find that the borders revealed by our technique of superposing are quite robust, the stochastic algorithm we use does not indicate anything about the particular substructures in the network that cause these borders to be so robust. We developed an alternative technique, based on comparing the similarity of shortest-path trees, to investigate this further, and find another set of borders that correlates strongly with the first, and which surround edges in the network that appear frequently in shortest-path trees.
The borders that our methods reveal have a significantly strong correlation with state borders and the borders of Economic Areas defined by the Bureau of Economic Analysis.
American Kleptocracy
Oh no! He's talking about ME!
Kleptocracy -- now, there's a word I was taught to associate with corrupt and exploitative governments that steal ruthlessly and relentlessly from the people. It's a word, in fact, that's usually applied to flawed or failed governments in Africa, Latin America, or the nether regions of Asia. Such governments are typically led by autocratic strong men who shower themselves and their cronies with all the fruits of extracted wealth, whether stolen from the people or squeezed from their country's natural resources. It's not a word you're likely to see associated with a mature republic like the United States led by disinterested public servants and regulated by more-or-less transparent principles and processes.
In fact, when Americans today wish to critique or condemn their government, the typical epithets used are "socialism" or "fascism." When my conservative friends are upset, they send me emails with links to material about "ObamaCare" and the like. These generally warn of a future socialist takeover of the private realm by an intrusive, power-hungry government. When my progressive friends are upset, they send me emails with links pointing to an incipient fascist takeover of our public and private realms, led by that same intrusive, power-hungry government (and, I admit it, I'm hardly innocent when it comes to such "what if" scenarios).
What if, however, instead of looking at where our government might be headed, we took a closer look at where we are -- at the power-brokers who run or influence our government, at those who are profiting and prospering from it? These are, after all, the "winners" in our American world in terms of the power they wield and the wealth they acquire. And shouldn't we be looking as well at those Americans who are losing -- their jobs, their money, their homes, their healthcare, their access to a better way of life -- and asking why?
If we were to take an honest look at America's blasted landscape of "losers" and the far shinier, spiffier world of "winners," we'd have to admit that it wasn't signs of onrushing socialism or fascism that stood out, but of staggeringly self-aggrandizing greed and theft right in the here and now. We'd notice our public coffers being emptied to benefit major corporations and financial institutions working in close alliance with, and passing onremarkable sums of money to, the representatives of "the people." We'd see, in a word, kleptocracy on a scale to dazzle. We would suddenly see an almost magical disappearing act being performed, largely without comment, right before our eyes.
Of Red Herrings and Missing Pallets of Money
Think of socialism and fascism as the red herrings of this moment or, if you're an old time movie fan, as Hitchcockian MacGuffins -- in other words, riveting distractions. Conservatives and tea partiers fear invasive government regulation and excessive taxation, while railing against government takeovers -- even as corporate lobbyists write our public healthcare bills to favor private interests. Similarly, progressives rail against an emergent proto-fascist corps of private guns-for-hire, warrantless wiretapping, and the potential government-approved assassination of U.S. citizens, all sanctioned by a perpetual, and apparently open-ended, state of war.
Yet, if this is socialism, why are private health insurers the government's go-to guys for healthcare coverage? If this is fascism, why haven't the secret police rounded up tea partiers and progressive critics as well and sent them to the lager or the gulag?
Consider this: America is not now, nor has it often been, a hotbed of political radicalism. We have no substantial socialist or workers' party. (Unless you're deluded, please don't count the corporate-friendly "Democrat" party here.) We have no substantial fascist party. (Unless you're deluded, please don't count the cartoonish "tea partiers" here; these predominantly white, graying, and fairly affluent Americans seem most worried that the jackbooted thugs will be coming for them.)
What drives America today is, in fact, business -- just as was true in the days of Calvin Coolidge. But it's not the fair-minded "free enterprise" system touted in those freshly revised Texas guidelines for American history textbooks; rather, it's a rigged system of crony capitalism that increasingly ends in what, if we were looking at some other country, we would recognize as an unabashed kleptocracy.
Recall, if you care to, those pallets stacked with hundreds of millions of dollars that the Bush administration sent to Iraq and which, Houdini-like, simply disappeared. Think of the ever-rising cost of our wars in Iraq and Afghanistan, now in excess of a trillion dollars, and just whose pockets are full, thanks to them.
If you want to know the true state of our government and where it's heading, follow the money (if you can) and remain vigilant: our kleptocratic Houdinis are hard at work, seeking to make yet more money vanish from your pockets -- and reappear in theirs.
From Each According to His Gullibility -- To Each According to His Greed
Never has the old adage my father used to repeat to me -- "the rich get richer and the poor poorer" -- seemed fresher or truer. If you want confirmation of just where we are today, for instance, consider this passage from a recent piece by Tony Judt:
Based on such stories, now legion, perhaps we should rewrite George Orwell's famous tagline from Animal Farm as: All animals are equal, but a few are so much more equal than others.
And who are those "more equal" citizens? Certainly, major corporations, which now enjoy a kind of political citizenship and the largesse of a federal government eager to rescue them from their financial mistakes, especially when they're judged "too big to fail." In raiding the U.S. Treasury, big banks and investment firms, shamelessly ready tojack up executive pay and bonuses even after accepting billions in taxpayer-funded bailouts, arguably outgun militarized multinationals in the conquest of the public realm and the extraction of our wealth for their benefit.
Such kleptocratic outfits are, of course, abetted by thousands of lobbyists and by politicians who thrive off corporate campaign contributions. Indeed, many of our more prominent public servants have proved expert at spinning through the revolving door into the private sector. Even ex-politicians who prefer to be seen as sympathetic to the little guy like former House Majority Leader Dick Gephardt eagerly cash in.
I'm Shocked, Shocked, to Find Profiteering Going on Here
An old Roman maxim enjoins us to "let justice be done, though the heavens fall." Within our kleptocracy, the prevailing attitude is an insouciant "We'll get ours, though the heavens fall." This mindset marks the decline of our polity. A spirit of shared sacrifice, dismissed as hopelessly naïve, has been replaced by a form of tribalized privatization in which insiders find ways to profit no matter what.
Is it any surprise then that, in seeking to export our form of government to Iraq and Afghanistan, we've produced not two model democracies, but two emerging kleptocracies, fueled respectively by oil and opium?
When we confront corruption in Iraq or Afghanistan, are we not like the police chief in the classic movie Casablanca who is shocked, shocked to find gambling going on at Rick's Café, even as he accepts his winnings?
Why then do we bother to feign shock when Iraqi and Afghan elites, a tiny minority, seek to enrich themselves at the expense of the majority?
Shouldn't we be flattered? Imitation, after all, is the sincerest form of flattery. Isn't it?
In fact, when Americans today wish to critique or condemn their government, the typical epithets used are "socialism" or "fascism." When my conservative friends are upset, they send me emails with links to material about "ObamaCare" and the like. These generally warn of a future socialist takeover of the private realm by an intrusive, power-hungry government. When my progressive friends are upset, they send me emails with links pointing to an incipient fascist takeover of our public and private realms, led by that same intrusive, power-hungry government (and, I admit it, I'm hardly innocent when it comes to such "what if" scenarios).
What if, however, instead of looking at where our government might be headed, we took a closer look at where we are -- at the power-brokers who run or influence our government, at those who are profiting and prospering from it? These are, after all, the "winners" in our American world in terms of the power they wield and the wealth they acquire. And shouldn't we be looking as well at those Americans who are losing -- their jobs, their money, their homes, their healthcare, their access to a better way of life -- and asking why?
If we were to take an honest look at America's blasted landscape of "losers" and the far shinier, spiffier world of "winners," we'd have to admit that it wasn't signs of onrushing socialism or fascism that stood out, but of staggeringly self-aggrandizing greed and theft right in the here and now. We'd notice our public coffers being emptied to benefit major corporations and financial institutions working in close alliance with, and passing onremarkable sums of money to, the representatives of "the people." We'd see, in a word, kleptocracy on a scale to dazzle. We would suddenly see an almost magical disappearing act being performed, largely without comment, right before our eyes.
Of Red Herrings and Missing Pallets of Money
Think of socialism and fascism as the red herrings of this moment or, if you're an old time movie fan, as Hitchcockian MacGuffins -- in other words, riveting distractions. Conservatives and tea partiers fear invasive government regulation and excessive taxation, while railing against government takeovers -- even as corporate lobbyists write our public healthcare bills to favor private interests. Similarly, progressives rail against an emergent proto-fascist corps of private guns-for-hire, warrantless wiretapping, and the potential government-approved assassination of U.S. citizens, all sanctioned by a perpetual, and apparently open-ended, state of war.
Yet, if this is socialism, why are private health insurers the government's go-to guys for healthcare coverage? If this is fascism, why haven't the secret police rounded up tea partiers and progressive critics as well and sent them to the lager or the gulag?
Consider this: America is not now, nor has it often been, a hotbed of political radicalism. We have no substantial socialist or workers' party. (Unless you're deluded, please don't count the corporate-friendly "Democrat" party here.) We have no substantial fascist party. (Unless you're deluded, please don't count the cartoonish "tea partiers" here; these predominantly white, graying, and fairly affluent Americans seem most worried that the jackbooted thugs will be coming for them.)
What drives America today is, in fact, business -- just as was true in the days of Calvin Coolidge. But it's not the fair-minded "free enterprise" system touted in those freshly revised Texas guidelines for American history textbooks; rather, it's a rigged system of crony capitalism that increasingly ends in what, if we were looking at some other country, we would recognize as an unabashed kleptocracy.
Recall, if you care to, those pallets stacked with hundreds of millions of dollars that the Bush administration sent to Iraq and which, Houdini-like, simply disappeared. Think of the ever-rising cost of our wars in Iraq and Afghanistan, now in excess of a trillion dollars, and just whose pockets are full, thanks to them.
If you want to know the true state of our government and where it's heading, follow the money (if you can) and remain vigilant: our kleptocratic Houdinis are hard at work, seeking to make yet more money vanish from your pockets -- and reappear in theirs.
From Each According to His Gullibility -- To Each According to His Greed
Never has the old adage my father used to repeat to me -- "the rich get richer and the poor poorer" -- seemed fresher or truer. If you want confirmation of just where we are today, for instance, consider this passage from a recent piece by Tony Judt:
In 2005, 21.2 percent of U.S. national income accrued to just 1 percent of earners. Contrast 1968, when the CEO of General Motors took home, in pay and benefits, about sixty-six times the amount paid to a typical GM worker. Today the CEO of Wal-Mart earns nine hundred times the wages of his average employee. Indeed, the wealth of the Wal-Mart founder's family in 2005 was estimated at about the same ($90 billion) as that of the bottom 40 percent of the U.S. population: 120 million people.Wealth concentration is only one aspect of our increasingly kleptocratic system. War profiteering by corporations (however well disguised as heartfelt support for our heroic warfighters) is another. Meanwhile, retired senior military officers typically line up to cash in on the kleptocratic equivalent of welfare, peddling their "expertise" in return forimpressive corporate and Pentagon payouts that supplement their six-figure pensions. Even that putative champion of the Carhartt-wearing common folk, Sarah Palin, pocketed a cool $12 million last year without putting the slightest dent in her populist bona fides.
Based on such stories, now legion, perhaps we should rewrite George Orwell's famous tagline from Animal Farm as: All animals are equal, but a few are so much more equal than others.
And who are those "more equal" citizens? Certainly, major corporations, which now enjoy a kind of political citizenship and the largesse of a federal government eager to rescue them from their financial mistakes, especially when they're judged "too big to fail." In raiding the U.S. Treasury, big banks and investment firms, shamelessly ready tojack up executive pay and bonuses even after accepting billions in taxpayer-funded bailouts, arguably outgun militarized multinationals in the conquest of the public realm and the extraction of our wealth for their benefit.
Such kleptocratic outfits are, of course, abetted by thousands of lobbyists and by politicians who thrive off corporate campaign contributions. Indeed, many of our more prominent public servants have proved expert at spinning through the revolving door into the private sector. Even ex-politicians who prefer to be seen as sympathetic to the little guy like former House Majority Leader Dick Gephardt eagerly cash in.
I'm Shocked, Shocked, to Find Profiteering Going on Here
An old Roman maxim enjoins us to "let justice be done, though the heavens fall." Within our kleptocracy, the prevailing attitude is an insouciant "We'll get ours, though the heavens fall." This mindset marks the decline of our polity. A spirit of shared sacrifice, dismissed as hopelessly naïve, has been replaced by a form of tribalized privatization in which insiders find ways to profit no matter what.
Is it any surprise then that, in seeking to export our form of government to Iraq and Afghanistan, we've produced not two model democracies, but two emerging kleptocracies, fueled respectively by oil and opium?
When we confront corruption in Iraq or Afghanistan, are we not like the police chief in the classic movie Casablanca who is shocked, shocked to find gambling going on at Rick's Café, even as he accepts his winnings?
Why then do we bother to feign shock when Iraqi and Afghan elites, a tiny minority, seek to enrich themselves at the expense of the majority?
Shouldn't we be flattered? Imitation, after all, is the sincerest form of flattery. Isn't it?
Ratings Agencies Rolled Over for Wall Street
Senate panel: Ratings Agencies Rolled Over for Wall Street
by Kevin G. Hall and Chris Adams
WASHINGTON — A Senate panel investigating the causes of the nation's financial crisis on Thursday unveiled evidence that credit-ratings agencies knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages in exchange for lucrative fees.
The Senate Permanent Subcommittee on Investigations will hold a detailed hearing on Friday, where its chairman, Sen. Carl Levin, D-Mich., will introduce e-mail records in which executives from Standard & Poor's and Moody's Investors Service acknowledge compromising the integrity of ratings to win business from big Wall Street firms.
"They did it for the big fees they got," Levin told reporters on Thursday after outlining the broad strokes of what he'd pursue Friday when he puts current and former ratings agency officials on the hot seat.
The documents to be released Friday confirm what a McClatchy investigation revealed in October _ that pressure from top ratings-agency executives to retain market share and the fees that it brought meant that ratings on complex deals were malleable. Some fees were as high as $1.4 million.
Investors trusted ratings to give them guides to the quality of financial products such as bonds, but many of the bonds rated as top-quality in the recent crisis turned out to be junk. The fallout was a housing collapse that triggered a global financial crisis.
In one example obtained by the committee, Yvonne Fu, a Moody's employee, sent an e-mail to a banker at Merrill Lynch in June 2007, pressuring the investment bank to lock down a big fee in exchange for a positive rating.
"We have spent significant amount of resource on this deal and it will be difficult for us to continue with this process if we do not have an agreement on the fee issue," Fu wrote.
Merrill Lynch acquiesced, but not without conditions.
"We are okay with the revised fee schedule for this transaction. We are agreeing to this under the assumption that this will not be a precedent for any future deals and that you will work with us further on this transaction to try to get to some middle ground with respect to the ratings," the Merrill Lynch employee said, leaning on Moody's.
Late Thursday, Moody's provided McClatchy with what it said was a complete e-mail string in which Fu concluded the conversation by noting that "analytical discussions/outcomes should be independent of any fee discussions."
In another e-mail obtained from Standard & Poor's, an employee, who wasn't identified Thursday, complains of the shifting criteria used in models for rating complex deals.
"Screwing with (the model's) criteria to 'get the deal' is putting the entire S&P franchise at risk _ it's a bad idea," the employee said.
Last year's McClatchy investigation revealed how top management at Moody's pressured analysts to find ways to get deals done to prevent the business from going to a competitor. The practice wasn't exclusive to Moody's.
Another e-mail to be unveiled at Friday's hearing features a Standard & Poor's employee angrily complaining to a Morgan Stanley banker about ratings agencies being played off of each other.
"How many millions does Morgan Stanley pay us in the greater scheme of things? How many times have I accommodated you on tight deals? Neer, Hill, Yoo, Garzia, Nager, May, Miteva, Benson, Erdman all think I am helpful, no?" the employee said, naming all the Morgan executives who'd received accommodative ratings.
Friday's hearing will feature current and former executives from both major ratings agencies who worked on the complex deals called collateralized debt obligations. CDOs involve giant pools of U.S. mortgages packaged together for sale to investors as a complex security with high risks and high reward.
"Moody's is committed to delivering the highest quality opinions about the securities we rate," said Michael Adler, a Moody's spokesman. "We have rigorous and transparent methodologies, policies and processes for determining our ratings."
"S&P has a long tradition of analytical excellence and integrity," said spokesman Chris Atkins, "We have also learned some important lessons from the recent crisis and have made a number of significant enhancements to increase the transparency, governance and quality of our ratings."
Wall Street's pooling and packaging loans didn't involve due diligence on the underlying quality of the loans. Since underwriting standards by mortgage lenders had dropped precipitously, many of these complex deals given top ratings went bust within months in 2007.
That alone is evidence of the industry's falling standards. Prior to these problems, the mathematical chances of a default on a top investment grade rating were less than 1 percent. What changed is that structured finance became popular _ the practice of pooling together loans and offering slices to investors at different risk levels.
"What we ended up with was high-risk securities in bottles with low-risk labels," Levin said.
The hearing will spotlight three particular deals involving CDOs. One, a $1.5 billion issuance underwritten by Swiss bank UBS, involves a company with close ties to Bank of America, Vertical Capital.
This massive deal received an investment grade rating from Standard & Poor's on April 10, 2007, and from Moody's on April 26. By October, however, the deal had been downgraded by Moody's, and a month later by Standard & Poor's.
Bret Graham, Vertical's chief investment officer, told the Charlotte Observer that the firm is independent and has "never been involved in a transaction that was in any way designed to remove risk from the balance sheet of the bank." Bank of America spokesman Bill Haldin declined comment.
A similar $1 billion deal to be spotlighted by the committee was arranged by Goldman Sachs and was downgraded within eight months.
In another bit of explosive evidence, the panel on Friday will release an e-mail from a Standard & Poor's employee acknowledging complicity in building up a doomed market.
"Rating agencies continue to create an even bigger monster _ the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters," the employee wrote on Dec. 15, 2006.
That was about half a year before both big ratings agencies began massive write-downs on mortgage-backed deals, the prelude to the deepest financial crisis since the Great Depression.
The e-mails will show how leaders of both ratings agencies saw big trouble on the horizon. An e-mail from a Standard & Poor's managing director on March 18, 2007, told of a pending meeting with Terry McGraw, the chief executive of publishing giant McGraw-Hill Companies, the parent company to Standard & Poor's. The meeting was to cover "how we rated the deals and are preparing to deal with the fallout (downgrades.)"
Another Standard & Poor's e-mail on March 20, 2007, tells of a meeting with the company's president, Kathleen Corbet, in which "she requested that we put together a marketing campaign around the events in the subprime market, the sooner the better. … (S)he didn't feel that we are being proactive enough in communicating our thinking to the market as well as proactively protecting ourselves against bad press."
Corbet stepped down as ratings downgrades caused the sophisticated deals to crater. She'll appear before the panel on Friday, joined by Moody's chief Ray McDaniel. Unlike most captains of Wall Street firms implicated in the meltdown, he still has his job.
Asked whether he thought McDaniel still belongs at the helm of Moody's, Levin was circumspect.
"I don't think either of these companies has served their shareholders or the nation well," Levin said.
by Kevin G. Hall and Chris Adams
WASHINGTON — A Senate panel investigating the causes of the nation's financial crisis on Thursday unveiled evidence that credit-ratings agencies knowingly gave inflated ratings to complex deals backed by shaky U.S. mortgages in exchange for lucrative fees.
The Senate Permanent Subcommittee on Investigations will hold a detailed hearing on Friday, where its chairman, Sen. Carl Levin, D-Mich., will introduce e-mail records in which executives from Standard & Poor's and Moody's Investors Service acknowledge compromising the integrity of ratings to win business from big Wall Street firms.
"They did it for the big fees they got," Levin told reporters on Thursday after outlining the broad strokes of what he'd pursue Friday when he puts current and former ratings agency officials on the hot seat.
The documents to be released Friday confirm what a McClatchy investigation revealed in October _ that pressure from top ratings-agency executives to retain market share and the fees that it brought meant that ratings on complex deals were malleable. Some fees were as high as $1.4 million.
Investors trusted ratings to give them guides to the quality of financial products such as bonds, but many of the bonds rated as top-quality in the recent crisis turned out to be junk. The fallout was a housing collapse that triggered a global financial crisis.
In one example obtained by the committee, Yvonne Fu, a Moody's employee, sent an e-mail to a banker at Merrill Lynch in June 2007, pressuring the investment bank to lock down a big fee in exchange for a positive rating.
"We have spent significant amount of resource on this deal and it will be difficult for us to continue with this process if we do not have an agreement on the fee issue," Fu wrote.
Merrill Lynch acquiesced, but not without conditions.
"We are okay with the revised fee schedule for this transaction. We are agreeing to this under the assumption that this will not be a precedent for any future deals and that you will work with us further on this transaction to try to get to some middle ground with respect to the ratings," the Merrill Lynch employee said, leaning on Moody's.
Late Thursday, Moody's provided McClatchy with what it said was a complete e-mail string in which Fu concluded the conversation by noting that "analytical discussions/outcomes should be independent of any fee discussions."
In another e-mail obtained from Standard & Poor's, an employee, who wasn't identified Thursday, complains of the shifting criteria used in models for rating complex deals.
"Screwing with (the model's) criteria to 'get the deal' is putting the entire S&P franchise at risk _ it's a bad idea," the employee said.
Last year's McClatchy investigation revealed how top management at Moody's pressured analysts to find ways to get deals done to prevent the business from going to a competitor. The practice wasn't exclusive to Moody's.
Another e-mail to be unveiled at Friday's hearing features a Standard & Poor's employee angrily complaining to a Morgan Stanley banker about ratings agencies being played off of each other.
"How many millions does Morgan Stanley pay us in the greater scheme of things? How many times have I accommodated you on tight deals? Neer, Hill, Yoo, Garzia, Nager, May, Miteva, Benson, Erdman all think I am helpful, no?" the employee said, naming all the Morgan executives who'd received accommodative ratings.
Friday's hearing will feature current and former executives from both major ratings agencies who worked on the complex deals called collateralized debt obligations. CDOs involve giant pools of U.S. mortgages packaged together for sale to investors as a complex security with high risks and high reward.
"Moody's is committed to delivering the highest quality opinions about the securities we rate," said Michael Adler, a Moody's spokesman. "We have rigorous and transparent methodologies, policies and processes for determining our ratings."
"S&P has a long tradition of analytical excellence and integrity," said spokesman Chris Atkins, "We have also learned some important lessons from the recent crisis and have made a number of significant enhancements to increase the transparency, governance and quality of our ratings."
Wall Street's pooling and packaging loans didn't involve due diligence on the underlying quality of the loans. Since underwriting standards by mortgage lenders had dropped precipitously, many of these complex deals given top ratings went bust within months in 2007.
That alone is evidence of the industry's falling standards. Prior to these problems, the mathematical chances of a default on a top investment grade rating were less than 1 percent. What changed is that structured finance became popular _ the practice of pooling together loans and offering slices to investors at different risk levels.
"What we ended up with was high-risk securities in bottles with low-risk labels," Levin said.
The hearing will spotlight three particular deals involving CDOs. One, a $1.5 billion issuance underwritten by Swiss bank UBS, involves a company with close ties to Bank of America, Vertical Capital.
This massive deal received an investment grade rating from Standard & Poor's on April 10, 2007, and from Moody's on April 26. By October, however, the deal had been downgraded by Moody's, and a month later by Standard & Poor's.
Bret Graham, Vertical's chief investment officer, told the Charlotte Observer that the firm is independent and has "never been involved in a transaction that was in any way designed to remove risk from the balance sheet of the bank." Bank of America spokesman Bill Haldin declined comment.
A similar $1 billion deal to be spotlighted by the committee was arranged by Goldman Sachs and was downgraded within eight months.
In another bit of explosive evidence, the panel on Friday will release an e-mail from a Standard & Poor's employee acknowledging complicity in building up a doomed market.
"Rating agencies continue to create an even bigger monster _ the CDO market. Let's hope we are all wealthy and retired by the time this house of cards falters," the employee wrote on Dec. 15, 2006.
That was about half a year before both big ratings agencies began massive write-downs on mortgage-backed deals, the prelude to the deepest financial crisis since the Great Depression.
The e-mails will show how leaders of both ratings agencies saw big trouble on the horizon. An e-mail from a Standard & Poor's managing director on March 18, 2007, told of a pending meeting with Terry McGraw, the chief executive of publishing giant McGraw-Hill Companies, the parent company to Standard & Poor's. The meeting was to cover "how we rated the deals and are preparing to deal with the fallout (downgrades.)"
Another Standard & Poor's e-mail on March 20, 2007, tells of a meeting with the company's president, Kathleen Corbet, in which "she requested that we put together a marketing campaign around the events in the subprime market, the sooner the better. … (S)he didn't feel that we are being proactive enough in communicating our thinking to the market as well as proactively protecting ourselves against bad press."
Corbet stepped down as ratings downgrades caused the sophisticated deals to crater. She'll appear before the panel on Friday, joined by Moody's chief Ray McDaniel. Unlike most captains of Wall Street firms implicated in the meltdown, he still has his job.
Asked whether he thought McDaniel still belongs at the helm of Moody's, Levin was circumspect.
"I don't think either of these companies has served their shareholders or the nation well," Levin said.
To End Too Big to Fail
Amend to End Too Big to Fail
by John Nichols
"In the midst of a Wall Street fight, when fear supersedes reason, it is difficult for those who are in it, but not directing it, to determine how much is real, how much is sham."
So declared Wisconsin Senator Robert M. La Follette during the great battle of a century ago over regulating the banks that had very nearly crashed the U.S. economy with the panic of 1907.
Little has changed.
As the U.S. Senate again approaches the question of regulating toxic-asset banks and a financial services industry that is defined by speculation and profiteering rather than service to the real economy of the United States, there are plenty of shams.
President Obama and Senate Banking Committee chairman Chris Dodd, D-Connecticut, claim that the reform legislation they are promoting will address the worst excesses of bad bankers and brokers. But the legislation as constructed by Dodd and backed by Obama is so weak that it does not break up "too-big-to-fail-banks," let alone end the boom-and-bust patterns of false growth and real pain that have so undermined the financial stability of working families.
Even worse are Republican critics of reform, led by Senate Minority Leader Mitch McConnell, the Kentucky Republican who was one of the chief backers of the massive Wall Street bailout of 2008. With talking points assembled in closed-door meetings with Wall Street insiders, he has emerged as the loudest defender of a status quo that rewards speculators while denying credit to small businesses and foreclosing on family homes and farms.
The Senate could use a La Follette.
And it may just have one.
Ohio Senator Sherrod Brown, a populist Democrat who has frequently broken with his own party's leadership on international trade and domestic economic issues, is proposing an essential amendment to the Dodd bill.
Brown and his allies -- including Oregon Democrat Jeff Merkley and Delaware Democrat Ted Kaufman -- want to force the biggest banks and bank holding companies to downsize so that they no longer will be able to control so much of the nation's wealth and financial activity that they are "too big to fail."
Big banks would not disappear under Brown's plan. But they could not control more than ten percent of all total deposits, as three now do, and accumulate liabilities so substantial that -- in the event of a bust -- they could threaten the entire U.S. economy. It is just such a threat that led to the 2008 bailouts and the continued coddling of bad banks by federal regulators.
"The major issue is to keep the banks from getting too large to begin with," explains Brown. "Too big to fail is too big. That's where we need to be much more aggressive."
Without Brown's amendment, Dodd's bill amounts to little more than tinkering around the edges of the real problem. In other words, it is the sort of sham that La Follette bemoaned a century ago, when he warned that -- despite talk of trust busting and reform by the likes of Teddy Roosevelt and Woodrow Wilson -- "the greatest banks of the financial center (Wall Street) have become primarily agencies of promotion and speculation."
Real reform requires real controls on the biggest banks.
"This is about holding Wall Street accountable to ensure that American taxpayers never have to bail out the big banks again," says Sherrod Brown. "While taxpayers helped Wall Street banks get back on their feet, Main Street Americans were not so lucky. Their homes, their jobs, and their retirement accounts were lost or put at risk due to big banks that gambled with their money."
Brown's right.
The Senate should reject sham reform and go for the real thing.
by John Nichols
"In the midst of a Wall Street fight, when fear supersedes reason, it is difficult for those who are in it, but not directing it, to determine how much is real, how much is sham."
So declared Wisconsin Senator Robert M. La Follette during the great battle of a century ago over regulating the banks that had very nearly crashed the U.S. economy with the panic of 1907.
Little has changed.
As the U.S. Senate again approaches the question of regulating toxic-asset banks and a financial services industry that is defined by speculation and profiteering rather than service to the real economy of the United States, there are plenty of shams.
President Obama and Senate Banking Committee chairman Chris Dodd, D-Connecticut, claim that the reform legislation they are promoting will address the worst excesses of bad bankers and brokers. But the legislation as constructed by Dodd and backed by Obama is so weak that it does not break up "too-big-to-fail-banks," let alone end the boom-and-bust patterns of false growth and real pain that have so undermined the financial stability of working families.
Even worse are Republican critics of reform, led by Senate Minority Leader Mitch McConnell, the Kentucky Republican who was one of the chief backers of the massive Wall Street bailout of 2008. With talking points assembled in closed-door meetings with Wall Street insiders, he has emerged as the loudest defender of a status quo that rewards speculators while denying credit to small businesses and foreclosing on family homes and farms.
The Senate could use a La Follette.
And it may just have one.
Ohio Senator Sherrod Brown, a populist Democrat who has frequently broken with his own party's leadership on international trade and domestic economic issues, is proposing an essential amendment to the Dodd bill.
Brown and his allies -- including Oregon Democrat Jeff Merkley and Delaware Democrat Ted Kaufman -- want to force the biggest banks and bank holding companies to downsize so that they no longer will be able to control so much of the nation's wealth and financial activity that they are "too big to fail."
Big banks would not disappear under Brown's plan. But they could not control more than ten percent of all total deposits, as three now do, and accumulate liabilities so substantial that -- in the event of a bust -- they could threaten the entire U.S. economy. It is just such a threat that led to the 2008 bailouts and the continued coddling of bad banks by federal regulators.
"The major issue is to keep the banks from getting too large to begin with," explains Brown. "Too big to fail is too big. That's where we need to be much more aggressive."
Without Brown's amendment, Dodd's bill amounts to little more than tinkering around the edges of the real problem. In other words, it is the sort of sham that La Follette bemoaned a century ago, when he warned that -- despite talk of trust busting and reform by the likes of Teddy Roosevelt and Woodrow Wilson -- "the greatest banks of the financial center (Wall Street) have become primarily agencies of promotion and speculation."
Real reform requires real controls on the biggest banks.
"This is about holding Wall Street accountable to ensure that American taxpayers never have to bail out the big banks again," says Sherrod Brown. "While taxpayers helped Wall Street banks get back on their feet, Main Street Americans were not so lucky. Their homes, their jobs, and their retirement accounts were lost or put at risk due to big banks that gambled with their money."
Brown's right.
The Senate should reject sham reform and go for the real thing.
The Federal Reserve: No exit
I disagree with this article's rosey outcome but it's opinion on the Fed is interesting.
Despite internal dissent, the Fed plans to maintain ultra-easy monetary policy
Apr 22nd 2010 | WASHINGTON, DC | From The Economist
AMERICA’S GDP is growing, the stockmarket is buoyant. Yet one thing has not changed: the Federal Reserve’s monetary pedal remains firmly pressed to the floor. For more than a year it has kept its short-term interest-rate target near zero while pledging to keep it there for an “extended period”. It has also bought $1.7 trillion of long-term bonds, primarily mortgage-backed securities (MBS), to keep long-term interest rates down.
That is unsettling some inside the Fed, fuelling speculation it will soon signal an exit from that ultra-easy monetary policy, perhaps even by altering its “extended period” commitment when its next two-day policy meeting wraps up on April 28th.
The most vocal dissident is Thomas Hoenig, president of the Federal Reserve Bank of Kansas City and the Fed’s longest-serving policymaker, who has twice formally objected to the Fed’s “extended period” language. That commitment plus zero rates, he explained on April 7th, lead “banks and investors to search for yield… take on additional risk [and] increase leverage”. He argued the Fed should soon raise rates to 1% to “end the borrowing subsidy”.
The next day Narayana Kocherlakota, president of the Minneapolis Fed, voiced a different concern: that the excess bank reserves created by the Fed’s MBS purchases create the potential for high inflation. He advocated selling $15 billion-25 billion of MBS a month, which would clear the Fed’s inventory in five years instead of the 30 it would take for the bonds to mature.
The rest of the Fed and its chairman, Ben Bernanke, have listened politely but are not ready to drop or even water down the “extended period” language, much less raise rates. Dropping the commitment would be tantamount to a tightening of monetary policy as bond yields rise in anticipation of short-term rate hikes. Mr Bernanke has already said the Fed would eventually sell some MBS, but not now. By pushing up long-term rates that too would be a tightening of monetary policy.
Bank credit is contracting and getting more expensive. Excess bank reserves will not lead to inflation so long as the Fed can still raise interest rates, which it can. Indeed, the Fed has an embarrassment of ways to tamp down inflationary pressure when the time comes, from raising interest rates on excess reserves to selling bonds to telling banks to tighten lending standards. It has far fewer tools at its disposal for battling deflation, not a remote risk.
Still, as long as the recovery proceeds, the debate cannot be put off forever. The Fed will spend a lot of its policy meeting talking about how to talk about its exit. The Bank of Canada has helpfully provided a tutorial. On April 20th it dropped its own commitment to keeping its short-term rate at 0.25% until the second half of this year, citing stronger growth and firmer inflation than expected. “The need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus,” it said. Bond yields and the Canadian dollar rose in response.
The Fed also sees its “extended period” commitment as conditional. It does not mean six months, as many seem to think, but only as long as unemployment remains high and inflation (both actual and expected) stays low. If those things change, so will interest rates.
Despite internal dissent, the Fed plans to maintain ultra-easy monetary policy
Apr 22nd 2010 | WASHINGTON, DC | From The Economist
AMERICA’S GDP is growing, the stockmarket is buoyant. Yet one thing has not changed: the Federal Reserve’s monetary pedal remains firmly pressed to the floor. For more than a year it has kept its short-term interest-rate target near zero while pledging to keep it there for an “extended period”. It has also bought $1.7 trillion of long-term bonds, primarily mortgage-backed securities (MBS), to keep long-term interest rates down.
That is unsettling some inside the Fed, fuelling speculation it will soon signal an exit from that ultra-easy monetary policy, perhaps even by altering its “extended period” commitment when its next two-day policy meeting wraps up on April 28th.
The most vocal dissident is Thomas Hoenig, president of the Federal Reserve Bank of Kansas City and the Fed’s longest-serving policymaker, who has twice formally objected to the Fed’s “extended period” language. That commitment plus zero rates, he explained on April 7th, lead “banks and investors to search for yield… take on additional risk [and] increase leverage”. He argued the Fed should soon raise rates to 1% to “end the borrowing subsidy”.
The next day Narayana Kocherlakota, president of the Minneapolis Fed, voiced a different concern: that the excess bank reserves created by the Fed’s MBS purchases create the potential for high inflation. He advocated selling $15 billion-25 billion of MBS a month, which would clear the Fed’s inventory in five years instead of the 30 it would take for the bonds to mature.
The rest of the Fed and its chairman, Ben Bernanke, have listened politely but are not ready to drop or even water down the “extended period” language, much less raise rates. Dropping the commitment would be tantamount to a tightening of monetary policy as bond yields rise in anticipation of short-term rate hikes. Mr Bernanke has already said the Fed would eventually sell some MBS, but not now. By pushing up long-term rates that too would be a tightening of monetary policy.
Bank credit is contracting and getting more expensive. Excess bank reserves will not lead to inflation so long as the Fed can still raise interest rates, which it can. Indeed, the Fed has an embarrassment of ways to tamp down inflationary pressure when the time comes, from raising interest rates on excess reserves to selling bonds to telling banks to tighten lending standards. It has far fewer tools at its disposal for battling deflation, not a remote risk.
Still, as long as the recovery proceeds, the debate cannot be put off forever. The Fed will spend a lot of its policy meeting talking about how to talk about its exit. The Bank of Canada has helpfully provided a tutorial. On April 20th it dropped its own commitment to keeping its short-term rate at 0.25% until the second half of this year, citing stronger growth and firmer inflation than expected. “The need for such extraordinary policy is now passing, and it is appropriate to begin to lessen the degree of monetary stimulus,” it said. Bond yields and the Canadian dollar rose in response.
The Fed also sees its “extended period” commitment as conditional. It does not mean six months, as many seem to think, but only as long as unemployment remains high and inflation (both actual and expected) stays low. If those things change, so will interest rates.
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