The book continues to be well received. I have had launch events in Jamaica (Kingston), Canada (Brampton, Toronto, Ottawa, Kitchener) and the U.S. (Orlando, Florida; Washington D.C.; Bronx & Brooklyn, New York. I am including here one of the most recent and moving comments about the book, courtesy of Jamaican Dr. Angela Gallimore, practicing Barister and former College Professor:
Some books contain very interesting content but are poorly written. Other books are very well written but their content is not intrinsically interesting. Your book has been giving me the double pleasure of reading truly interesting content expressed in beautiful language. Better yet, you manage to be cerebral without being a bore. Well done!
If you have not yet read the book this latest review may just convince you to do so.
Future book events are planned for Fort Lauderdale & Miami in Florida later in the year and in the U.K. in 2012.
In the meantime I have e-published a book of poems titled Brackets. A number of the poems appears in Jamaican by Birth American by Choice. The book is available on Amazon at Kindle Books and Barnes & Noble at Pubit which allows download to the other eBook, the Nook. The hard copy will be available later in the year. I include below a summary of the main thrust of Brackets:
(Brackets) .........addresses a number of perplexing existential issues. These include questions surrounding patriotism and citizenship, the possibility of nuclear catastrophe and attempts to understand the self and our shared existence. In the end, and not surprisingly, there appears to be many more questions than answers. In some inexplicable way however, some questions are themselves clearly suggestive of the very answers they seek. The relationship between our questions and answers is as direct as the relationship between our choices and their consequences.
We may deny but cannot avoid the inescapability of choice and consequence. These are the brackets within which we all live our lives. We are presented with innumerable choices. These choices and their inevitable, attending consequences create numerous, often obscure, alternative personal futures for all of us. Absent choice and consequence, we become robots with no will of our own. On this basis, good and evil, morality, law, justice and salvation, without exception, become at best moot and at worst invalid.
Even if you are not a lover of poetry I hope that your natural curiosity about the subjects the poems address will pique your interest enough to make you want to wander through the pages of Brackets.
Thursday, May 5, 2011
Monday, August 16, 2010
New Book: "Jamaican by Birth American by Choice"
To see the book along with related publisher's comments, go to the internet to www.createspace.com/3445871. You may also go to amazon.com, select the book tab and type in the book title to get to the book and related details.
This book, while essentially autobiographical, takes a refreshingly unique approach in discussing business culture in corporate America as well as race and politics in America. It relies heavily on the writer's exposure and experience as a global citizen who worked and lived in the Caribbean, Canada, the United States and East and Southern Africa. The writer hopes that the book will help to facilitate a long awaited open and civil discussion on one of the most vexing issues of all in American - race. It has never been more urgent than it is at this time that Americans have this discussion.
This book, while essentially autobiographical, takes a refreshingly unique approach in discussing business culture in corporate America as well as race and politics in America. It relies heavily on the writer's exposure and experience as a global citizen who worked and lived in the Caribbean, Canada, the United States and East and Southern Africa. The writer hopes that the book will help to facilitate a long awaited open and civil discussion on one of the most vexing issues of all in American - race. It has never been more urgent than it is at this time that Americans have this discussion.
Friday, March 20, 2009
Israelis & Palestinians: There has to be a better way.
NY Times.com: Soldiers' Accounts of Gaza Killings Raise Furor in Israel
The article above provides some needed perspective to the killings in Gaza. The details coming as they do from a number of Israeli soldiers have to be significantly meaningful to any objective observer. I very strongly recommend that anyone with even cursory interest in the Middle East read the article.
While it is not at all surprising, it does aggravate my sense of hopelessness regarding the possibility of mutually beneficial outcomes from any type of engagement between Israelis and Palestinians. It is clearly true that the more we repeat a behavior, good or bad, the less inhibited we become in subsequent repetitions of such behavior. Unfortunately, it appears that the Israeli army is exemplary in this respect. It is regrettably true, as Dr. Martin Luther King Jr. said, that if we keep taking an eye for an eye eventually we all become blind.
Is there anyone in leadership in Israel who believes that there is the remotest possibility of some kind of peaceful co-existence with Palestinians? The indecisive outcome of recent elections in Israel clearly demonstrates a general sense of confusion among the general population. It certainly is indicative of a disturbing weakness in leadership among politicians. Weak leadership inevitably leads to despair given the existing circumstances in the region. This in turn makes fear the basis on which decisions regarding responsive behavior are made. Decisions made on this basis are almost always committed only to short term outcomes. This will not, in fact cannot, work in Gaza.
The article above provides some needed perspective to the killings in Gaza. The details coming as they do from a number of Israeli soldiers have to be significantly meaningful to any objective observer. I very strongly recommend that anyone with even cursory interest in the Middle East read the article.
While it is not at all surprising, it does aggravate my sense of hopelessness regarding the possibility of mutually beneficial outcomes from any type of engagement between Israelis and Palestinians. It is clearly true that the more we repeat a behavior, good or bad, the less inhibited we become in subsequent repetitions of such behavior. Unfortunately, it appears that the Israeli army is exemplary in this respect. It is regrettably true, as Dr. Martin Luther King Jr. said, that if we keep taking an eye for an eye eventually we all become blind.
Is there anyone in leadership in Israel who believes that there is the remotest possibility of some kind of peaceful co-existence with Palestinians? The indecisive outcome of recent elections in Israel clearly demonstrates a general sense of confusion among the general population. It certainly is indicative of a disturbing weakness in leadership among politicians. Weak leadership inevitably leads to despair given the existing circumstances in the region. This in turn makes fear the basis on which decisions regarding responsive behavior are made. Decisions made on this basis are almost always committed only to short term outcomes. This will not, in fact cannot, work in Gaza.
Tuesday, March 17, 2009
The Shameless, Criminal AIG Bonuses
I am sick to my stomach.
I thought I understood what was the cause of the slow death being endured by so many but I merely had a kind of foggy idea. This article makes me begin to feel that the "gut feeling" triggered reaction of the generally ignorant (those who know little or nothing of formal economics) among us is far more "reasonable" a response than all the "intelligent" responses from the intellectual elite.
I understand clearly now why AIG so quickly paid off its foreign partners in crime in France and Germany and why they refuse to reveal exactly where all the money they were given has gone. At this stage I do not give a damn that the AIG bonuses are based on "contractual" agreements. There are times when morality trumps even the best intentioned law let alone law that clearly has no redeeming virtue either in its intent or consequence. Let the bastards take the company to court. They should never be paid one red cent. I recall writing about greed some time ago. The AIG bonus scam is surely greed on steroids. This James Lieber article must be read by all who hope to even begin to understand the fecal matter in which we are sinking and how we got into such deep do-do. It could be that the GOP, now the GOPoN, the "Grand Old Party of No", is on the right track after all. Let the suckers go into bankruptcy! I seriously doubt that any subsequent pain can be worse than that being endured now and likely to be enured in a future that avoids bankruptcy.
These AIG bonuses certainly are causing a furor and for good reason. It is just such a clear demonstration of the indefatigable gall of these people. But the AIG story is very, very bad on many levels and this article from January's Village Voice on the dark arts of the world of derivatives may help explain what really happened.
Great article.
SUMMARY:
The bottom line in this scandal is that fantastically wealthy entities positioned themselves to make unfathomable fortunes by betting that average Americans--Joe Six-Packs and hockey moms--would fail.
What Cooked the World's Economy? It wasn't your overdue mortgage.
By James Lieber
January 28, 2009
James Lieber is a lawyer whose books on business and politics includeFriendly Takeover (Penguin) and Rats in the Grain (Basic Books). This is hisfifth article for the Voice.
It's 2009. You're laid off, furloughed, foreclosed on, or you know someonewho is. You wonder where you'll fit into the grim new semi-socialistic post-post-industrial economy colloquially known as "this mess."
You're astonished and possibly ashamed that mutant financial instrumentsdreamed up in your great country have spawned worldwide misery. You can'tcomprehend, much less trim, the amount of bailout money parachuting into thelaps of incompetents, hoarders, and miscreants. It's been a tough century sofar: 9/11, Iraq, and now this. At least we have a bright new president.He'll give you a job painting a bridge. You may need it to keep body andsoul together.
The basic story line so far is that we are all to blame, includinghomeowners who bit off more than they could chew, lenders who wrote absurdadjustable-rate mortgages, and greedy investment bankers.
Credit derivatives also figure heavily in the plot. Apologists say thatthese became so complicated that even Wall Street couldn't understand themand that they created "an unacceptable level of risk." Then these blowhardstell us that the bailout will pump hundreds of billions of dollars into thecredit arteries and save the patient, which is the world's financial system.It will take time-maybe a year or so--but if everyone hangs in there, we'llbe all right. No structural damage has been done, and all's well that endswell.
Sorry, but that's drivel. In fact, what we are living through is the worstfinancial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome,the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.
Credit derivatives--those securities that few have ever see--are one reasonwhy this crisis is so different from 1929.
Derivatives weren't initially evil. They began as insurance policies onlarge loans. A bank that wished to lend money to a big, but shaky, venture,like what Ford or GM have become, could hedge its bet by buying a creditderivative to cover losses if the debtor defaulted. Derivatives weren'tcheap, but in the era of globalization and declining Americancompetitiveness, they were prudent. Interestingly, the company that put thebasic hardware and software together for pricing and clearing derivativeswas Bloomberg. It was quite expensive for a financial institution-say, abank-to get a Bloomberg machine and receive the specialized trainingrequired to certify analysts who would figure out the terms of theinsurance. These Bloomberg terminals, originally called Market Masters, werefirst installed at Merrill Lynch in the late 1980s.
Subsequently, thousands of units have been placed in trading and financialinstitutions; they became the cornerstone of Michael Bloomberg's wealth,marrying his skills as a securities trader and an electrical engineer.
It's an open question when or if he or his company knew how they would bemisused over time to devastate the world's economy.
_____
Fast-forward to the early years of the Clinton administration. After aninitial surge of regulatory behavior in favor of fair markets, especially inantitrust, that sort of behavior was abandoned, and free markets triumphed.The result was a morass of white-collar sociopathy at Archer DanielsMidland, Enron, and WorldCom, and in a host of markets ranging from oil tovitamins.
This was the beginning of the heyday of hedge funds. Unregulated investmenthouses were originally based on the questionable but legal practice ofshort-selling-selling a financial instrument you don't own in hopes ofbuying it back later at a lower price. That way, you hedge your bets: Youcover your investment in a company in case a company's stock price falls.
But hedge funds later diversified their practices beyond that easydefinition. These funds acquired a good deal of popular mystique. They madescads of money. Their notoriously high entry fees--up to 5 percent of theinvestment, plus as much as 36 percent of profits--served as barriers to allbut the richest investors, who gave fortunes to the funds to play with. Thefunds boasted of having genius analysts and fabulous proprietary algorithms.Few could discern what they really did, but the returns, for those who couldbuy in, often seemed magical.
But it wasn't magic. It amounted to the return of the age-old scam called"bucket shops." Also sometimes known as "boiler rooms," bucket shops emergedafter the Civil War. Usually, they were storefronts where people came to beton stocks without owning them. Unlike their customers, the shops actuallyowned blocks of stock. If customers were betting that a stock would go up,the shops would sell it and the price would plunge; if bettors were bearish,the shops would buy. In this way, they cleaned out their customers. Freneticbucket-shop activity caused the Panic of 1907. By 1909, New York had bannedbucket shops, and every other state soon followed.
In the mid-'90s, though, the credit-derivatives industry was hitting itsstride and argued vehemently for exclusion from all state and federalanti-bucket-shop regulations. On the side of the industry were FederalReserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and hisdeputy, Lawrence Summers. Holding the fort for the regulators was BrooksleyBorn, who headed the Commodity Futures Trading Commission (CFTC). The threefinancial titans ridiculed the virtually unknown and cloutless, butbrilliant and prophetic Born, who warned that unrestricted derivativestrading would "threaten our regulated markets, or indeed, our economy,without any federal agency knowing about it." Warren Buffett also weighed inagainst deregulation.
But Congress loved Greenspan-a/k/a "the Maestro" and "the Oracle"-andClinton loved Rubin. The sleepy hearings received almost no publicattention. The upshot was that Congress removed oversight of derivativesfrom the CFTC and preempted all state anti-bucket-shop laws. Born resignedshortly afterward.
Soon, something odd started to happen. Legitimate big investors, often withmillions of dollars to place, found that they couldn't get into certainhedge funds, despite the fact that they were willing to pay steep fees. Inretrospect, it seems as if these funds did not want fussy outsiders lookinginto what they were doing with derivatives.
_____
Imagine that a person is terminally ill. He or she would not be able to buya life insurance policy with a huge death benefit. Obviously, third partiescould not purchase policies on the soon-to-be-dead person's life. Yetsomething like that occurred in the financial world.
This was not caused by imprudent mortgage lending, though that was a pieceof the puzzle. Yes, Fannie Mae and Freddie Mac were put on steroids duringthe '90s, and some people got into mortgages who shouldn't have. But thevast majority of homeowners paid their mortgages. Only about 5 to 10 percentof these loans failed--not enough to cause systemic financial failure. (Thedollar amount of defaulted mortgages in the U.S. is about $1.2 trillion,which seems like a princely sum, but it's not nearly enough to drag down theentire civilized world.)
Much more dangerous was the notorious bundling of mortgages. Investmentbanks gathered these loans into batches and turned them into securitiescalled collateralized debt obligations (CDOs). Many included high-riskloans. These securities were then rated by Standard & Poor's, Fitch Ratings,or Moody's Investors Services, who were paid at premium rates and gaveinvestment grades. This was like putting lipstick on pigs with the plague.Banks like Wachovia, National City, Washington Mutual, and Lehman Brothersloaded up on this financial trash, which soon proved to be practicallyworthless. Today, those banks are extinct. But even that was not enough tocause a worldwide financial crisis.
What did cause the crisis was the writing of credit derivatives. In theory,they were insurance policies for investors; in practice, they became aguarantee of global financial collapse.
As insurance, they were poised to pay off fabulously when these weak bundledsecurities failed. And who was waiting to collect? Well, every gambler islooking for a sure bet. Most never find it. But the hedge funds and theirilk did.
_____
The mantra of entrepreneurial culture is that high risk goes with highreward. But unregulated and opaque derivatives trading was counterculturalin the sense that low or no risk led to quick, astronomically high rewards.By plunking down millions of dollars, a hedge fund could reap billions oncethese fatally constructed securities plunged. Again, the funds did not needto own the securities; they just needed to pay for the derivatives--theinsurance policies for the securities. And they could pay for them again andagain. This was known as replicating. It became an addiction.
About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in1994 and skyrocketed to $100 trillion in 2002. Last year, the Bank forInternational Settlements, a consortium of the world's central banks basedin Basel (the Fed chair, Ben Bernanke, sits on its board), reported thegross value of these commitments at $596 trillion. Some are due, and somewill mature soon. Typically, they involve contracts of five years or less.
Credit derivatives are breaking and will continue to break the world'sfinancial system and cause an unending crisis of liquidity and gummed-upcredit. Warren Buffett branded derivatives the "financial weapons of massdestruction." Felix Rohatyn, the investment banker who organized the bailoutof New York a generation ago, called them "financial hydrogen bombs."
Both are right. At almost $600 trillion, over-the-counter (OTC) derivativesdwarf the value of publicly traded equities on world exchanges, whichtotaled $62.5 trillion in the fall of 2007 and fell to $36.6 trillion a yearlater.
The nice thing about public markets is that they act as canaries that givewarnings as they did in 1929, 1987 (the program trading debacle), and 2001(the dot-com bubble), so we can scramble out with our economic lives. Butcompletely private and unregulated, the OTC derivatives trade is justlyknown as the "dark market."
_____
The heart of darkness was the AIG Financial Products (AIGFP) office inLondon, where a large proportion of the derivatives were written. AIG hadplaced this unit outside American borders, which meant that it would nothave to abide by American insurance reserve requirements. In other words,the derivatives clerks in London could sell as many products as they couldwrite-even if it would bankrupt the company.
The president of AIGFP, a tyrannical super-salesman named Joseph Cassano,certainly had the experience. In the 1980s, he was an executive at DrexelBurnham Lambert, the now-defunct brokerage that became the pivot of thejunk-bond scandal that led to the jailing of Michael Milken, David Levine,and Ivan Boesky.
During the peak years of derivatives trading, the 400 or so employees of theLondon unit reportedly averaged earnings in excess of a million dollars ayear. They sold "protection"--this Runyonesque term was favored-worth morethan three times the value of parent company AIG. How could they have notknown that they were putting at risk the largest insurer in the world andall the businesses and individuals that it covered?
This scheme that smacks of securities fraud facilitated the dreams of buyerscalled "counterparties" willing to ante up. Hedge fund offices sprouted inKensington and Mayfair like mushrooms after a summer shower. Revenue frompremiums for derivatives at AIGFP rose from $737 million in 1999 to $3.26billion in 2005. Cassano reportedly hectored ever-willing counterparties to"play the power game"--in other words, gobble up all the credit derivativesbacking CDOs that they could grab. As the bundled adjustable-rate mortgagesballooned, stretched home buyers defaulted, and the exciting power gamebecame about as risky as blasting sitting ducks with a Glock.
People still seem surprised to read that hedge principals have raked inbillions of dollars in a single year. They shouldn't be. These subprime-timeplayers knew how to score. The scam bled AIG white. In mid-September, whenit was on the ropes, AIG received an astonishing $85 billion emergency lineof credit from the Fed. Soon, that was supplemented by another $67 billion.Much of that money, to use the government's euphemism, has already been"drawn down." Shamefully, neither Washington nor AIG will explain where thebillions went. But the answer is increasingly clear: It went tocounterparties who bought derivatives from Cassano's shop in London.
_____
Imagine if a ring of cashiers at a local bank made thousands of bad loans,aware that they could break the bank. They would be prosecuted for fraud andracketeering under the anti-gangster RICO Act. If their counterparties-thedebtors-were in on the scam and understood that they didn't have to pay offthe loans, they could be charged, too. In fact, this scenario played out atsubprime-pushing outlets of a host of banks, including Washington Mutual(acquired last year by JP Morgan Chase, which itself received a $25 billionbailout); IndyMac (which was seized by FDIC regulators); and Lehman Brothers(which went belly-up). About 150 prosecutions of this type of fraud aregoing forward.
The top of the swamp's food chain, where the muck was derivatives ratherthan mortgages, must also be scrutinized. Apparently, that is the case.AIGFP's Cassano has hired top white-collar litigator and former prosecutorF. Joseph Warin (profiled in the 2004 Washingtonian piece, "Who to Call WhenYou're Under Investigation!"). Neither Cassano nor his attorney responded tointerview requests.
AIG's lavishly compensated counterparties were willing participants andlikewise could be considered for prosecution, depending on what they knew.Who were they?
At a 2007 conference, Cassano defined them as a "global swath" that included"banks and investment banks, pension funds, endowments, foundations,insurance companies, hedge funds, money managers, high-net-worthindividuals, municipalities, sovereigns, and supranationals." Abetting thescheme, ratings agencies like Standard & Poor's gave high grades to theshaky mortgage-backed securities bundled by investment banks such as GoldmanSachs and Lehman Brothers.
After the relative worthlessness of these CDOs became clear, the ratersrushed to downgrade them to junk status. This occurred suddenly with morethan 4,000 CDOs in the first quarter of 2008--the financial community nowregards them as "toxic waste." Of course, the sudden massive downgradingraises the question: Why had CDOs been artificially elevated in the firstplace, leading banks to buy them and giving them protective coloring justbecause the derivatives writers "insured" them?
After the raters got real (i.e., got scared), the gig was up. Hedge fundsfled in droves from their luxe digs in London. The industry remains murky,but some observers feel that more than half of all hedges will fold thisyear. Not necessarily a good sign, it seems to show that the funds wereone-trick ponies living mainly off the derivatives play.
We know that AIG was not the only firm that sold derivatives: Lehman andBear Stearns both dealt them and died. About 20 years ago, JP Morgan, thenow-defunct investment bank, had brought the idea to AIGFP in London, whichran with it. Seeing the Cassano group's success, Morgan jumped in with bothfeet. Specializing in credit default swaps--a type of derivative triggered topay off by negative events in the lives of loans, like defaults,foreclosures, and restructurings--Morgan had a distinctive marketing spin.Its "quants" were classy young dealers who could really do the math, whichof course gave them credibility with those who couldn't. They abjured streetslang like "protection." They pitched their sophisticated swaps as"technologies." The market adored them. They, in turn, oversold the product,made huge commissions, and wounded Morgan, which had to sell itself toChase, becoming JP Morgan Chase-now the country's biggest bank.
Today, the real question is whether the Morgan quants knew the swaps didn'twork and actually were grenades with pulled pins. Like Joseph Cassano, suchpeople should consult attorneys.
_____
Secrecy shrouds the bailout. The 21 banks that each received more than $1billion from the Fed won't disclose how, or even if, they're lending it,which hardly quells fears of hoarding. The Treasury says it can't forcedisclosure because it took only preferred (non-voting) stock in exchange forthe money.
If anything, the Fed had been less candid. It stonewalls requests to revealthe winners (mainly banks and corporations) of $1.5 trillion in loans, aswell as the securities it received as collateral. A Freedom of InformationAct (FOIA) suit to obtain this information by Bloomberg News has beenrebuffed by the Fed, which insists that a loophole in FOIA exempts it.Bloomberg will probably lose the case, but at least it's trying to probe theblack hole of bailout money. Of course, Barack Obama could tell the Fed torelease the information, plus generally open the bailout to public eyes.That would be change that we could believe in.
As for Bloomberg, its business side, Bloomberg L.P., has been less thanforthcoming. Requests to interview someone from the company--and MichaelBloomberg, who retains a controlling interest--about the derivatives tradewent unanswered.
In his economic address at Cooper Union last spring, Obama argued for newregulations, which he called "the rules of the road," and for a $30 billionstimulus package, that now seems quaint. In the OTC swaps trade, theBloomberg L.P.'s computer terminals are the road, bridges, and tunnels for"real-time" transactions. The L.P.'s promotional materials declare: "You'reeither in front of a Bloomberg or behind it." In terms of electronic tradingof certain securities, including credit default swaps: "Access to a dealer'sinventory is based upon client relationships with Bloomberg as the onlyconduit." In short, the L.P. looks like a dominant player--possibly, amonopoly. If it has a true competitor, I can't find it. But then, this is avery dark market.
Did Bloomberg L.P. do anything illegal? Absolutely not. We prosecutehit-and-run drivers, not roads. But there are many questions--about the sizeof the derivatives market, the names of the counterparties, the amount ofreplication of derivatives, the role of securities ratings in Bloombergcalculations (in other words, could puffing up be detected and potentiallystop a swap?), and how the OTC industry should be reported and regulated inorder to prevent future catastrophes. Bloomberg is a privately heldcompany--to the chagrin of would-be investors--and quite private about itsbusiness, so this information probably won't surface without subpoenas.
_____
So what do we do now? In 2000, the 106th Congress as its final effort passedthe Commodity Futures Modernization Act (CFMA), and, disgracefully,President Clinton signed it. It opened up the bucket-shop loophole thatcapsized the world's economic system. With the stroke of a presidential pen,a century of valuable protection was lost.
Even with that, the dangerous swaps still almost found themselves subjectedto state oversight. In 2000, AIG asked the New York State InsuranceDepartment to decide if it wanted to regulate them, but the department'ssuperintendent, Neil Levin, said no. The question was not posed by AIGFP,but by the company's main office through its general counsel, a reminderthat not long ago, AIG was a blue chip with a triple-A rating that toutedits integrity.
We can't know why Levin rejected the chance to regulate the tricky trade. Hedied in the restaurant at the top of the World Trade Center on the morningof 9/11. A Pataki-appointed former Goldman Sachs vice president, Levin mayhave shared other Wall Streeters' love of derivatives as the last big-moneysure thing as the IPO craze wound down. Or maybe he saw swaps as gamblingrather than insurance, hence beyond his jurisdiction. Regardless, currentInsurance Superintendent Eric Dinallo told me, "I don't agree with hisanswer." Maybe the economic crisis could have been averted if Levin hadanswered otherwise. "How close we came . . ." Dinallo mused.
Deeply occupied with keeping AIG, the parent company, afloat since thebailout, Dinallo saw the carnage that the swaps caused and, with the supportof Governor Paterson, pushed anew for regulatory oversight, a position alsoadopted by the President's Working Group (PWG), which includes the Treasury,Fed, SEC, and CFTC.
But regulation isn't enough to stop a phenomenon called "de-supervision"that occurs when officials can't, or won't, oversee a market. For instance,the Fed under Greenspan had authority to regulate mortgage bankers andbrokers, the industry's cowboys who kicked off this fiasco. BecauseGreenspan's libertarian sensibilities prevented him from invoking the Fed'scontrol, the mortgage market careened corruptly until the wheels came off.Notoriously lax and understaffed, the SEC did nothing to limit investmentbanks that bundled, pitched, and puffed non-prime mortgages as the raterscheered. It's doubtful that any agency can be relied on to control lucrativedefault swaps, which should be made illegal again. The bucket-shop loopholemust be closed. The evil genie should go back in the bottle.
Will Obama re-criminalize these financial weapons by pushing for repeal ofthe CFMA? This should be a no-brainer for Obama, who, before becoming acommunity organizer in Chicago, worked on Wall Street, studied derivatives,and by now undoubtedly knows their destructive power.
What about the $600 trillion in credit derivatives that are still out there,sucking vital liquidity and credit out of the system? It's the tyrannosaurusin the mall, the one that made Henry Paulson, the former Treasury Secretarywho looks like Daddy Warbucks, get down on his knees and beg Nancy Pelosifor a bailout.
Even with the bailout, no one can get their arms around this monster.Obviously, the $600 trillion includes not only many unseemly replicateddeath bets, but also some benign derivatives that creditors bought to hedgerisky loans. Instead of sorting them out, the Bush administration tried toprotect them all, while keeping the counterparties happy and anonymous.
Paulson has taken flack for spending little to bring mortgages in line withfalling home values. Sheila Bair, the FDIC chief who often scrapped withPaulson, said this would cost a measly $25 billion and that without it, 10million Americans could lose their homes over the next five years. Paulsonthought it would take three times as much and balked. Congress is bristlingbecause the Emergency Economic Stabilization Act (EESA) could providemortgage relief-and some derivatives won't detonate if homeowners don'tdefault. Obama's nominee for Treasury Secretary, Timothy Geithner, couldback such relief at his hearings.
The other key appointment is Attorney General. A century ago, when powerfultrusts distorted the market system, we had AGs who relentlessly tracked andbusted them. Today's crisis is missing, so far, an advocate as dynamic andenergetic as the mortgage bankers, brokers, bundlers, raters, and quantswho, in a few short years, littered the world with rotten loans, diseasedCDOs, and lethal derivatives. During the Bush years, white-collar lawenforcement actually dropped as FBI agents were transferred toantiterrorism. Even so, according to William Black, an effective federallitigator and regulator during the 1980s savings-and-loan scandal, by 2004,the FBI perceived an epidemic of fraud. Now a professor of law and financeat the University of Missouri-Kansas City, Black has testified to Congressabout the current crisis and paints it as "control fraud" at every level.Such fraud flows from the top tiers of corporations-typically CEOs and CFOs,who control perverse compensation systems that reward cheating and volumerather than quality, and circumvent standard due diligence such asunderwriting and accounting. For instance, AIGFP's Cassano reportedlyrebuffed AIG's internal auditor.
The environment from the top of the chain--derivatives gang leaders--to thebottom of the chain-subprime, no-doc loan officers-became "criminogenic,"Black says. The only real response? Aggressive prosecution of "elites" atall stages in this twisted mess. Black says sentences should not be thelight, six-month slaps that white-collar criminals usually get, or theMadoff-style penthouse arrest.
As staggering as the Madoff meltdown was, it had a refreshing side--the fundswere frozen. In the bailout, on the other hand, the government often seemsto be completing the scam by quietly passing the proceeds to counterparties.
The advantage of treating these players like racketeers under federal law isthat their ill-gotten gains could be forfeited. The government could recoupthese odious gambling debts instead of simply paying them off. In finance,the bottom line is the bottom line. The bottom line in this scandal is thatfantastically wealthy entities positioned themselves to make unfathomablefortunes by betting that average Americans-Joe Six-Packs and hockeymoms-would fail.
Black suggests that derivatives should be "unwound" and that the payoutscease: "Close out the positions--most of them have no social utility." Andwhere there has been fraud, he adds, "clawback makes perfect sense." Thatwould include taking back the ludicrously large bonuses and other forms ofcompensation given to CEOs at bailed-out companies.
No one knows how much could be clawed back from the soiled derivatives reap.Clearly, it's not $600 trillion. William Bergman, formerly a market analystat the Chicago Fed in "netting"--what's left after financial institutions payeach other off for ongoing deals and debts--makes a "guess" that perhaps only5 percent could be recouped, which he concedes is unfortunately low. Still,that's $30 trillion, a huge number, more than 10 times what the Fed candeploy and over twice the U.S. gross domestic product. Such a sum, ifrecovered through the criminal justice process, could ease the liquiditycrisis and actually get the credit arteries flowing. Not everyone would likeit. What's left of Wall Street and hedge funds want their derivatives gains;so do foreign banks.
_____
A tangle of secrecy, conflicts of interest, and favoritism plagues theprocess of recovery.
Lehman drowned, but Goldman Sachs, where Paulson was formerly CEO, wassaved. The day before AIG reaped its initial $85 billion bonanza, Paulsonmet with his successor, Lloyd Blankfein, who reportedly argued that Goldmanwould lose $20 billion and fail unless AIG was rescued. AIG got the money.
Had Goldman bought from AIG credit derivatives that it needed to redeem?Like most other huge financial traders, Goldman has a secretive hedge fund,Global Alpha, that refuses to reveal its transactions. Regardless, Paulson'smeeting with Blankfein was a low point. If Dick Cheney had met with hissuccessor at Halliburton and, the very next day, written a check forbillions that guaranteed its survival, the press would have screamed for hishead.
The second most shifty bailout went to Citigroup, a money sewer that wonlast year's layoff super bowl with 73,000. Instead of being parceled toefficient operators, Citi received a $45 billion bailout and $300 billionloan package, at least in part because of Robert Rubin's juice. WhileTreasury Secretary under Clinton, Rubin led us into the derivativesmaelstrom, deported jobs with NAFTA, and championed bank deregulation sothat companies like Citi could mimic Wall Street speculators. After hejoined Citi's leadership in 1999, the bank went long on mortgages and otherrisks du jour, enmeshed itself in Enron's web, tanked in value, and sufferedhaphazard management, while Rubin made more than $100 million.
Rubin remained a director and "senior counselor" at Citi until January 9,2009, and is an economic adviser to Obama. In truth, he probably shouldn'tbe a senior counselor anywhere except possibly at Camp Granada. LikeGreenspan, he should retire before he breaks something again, and we have topay for it. (Incidentally, the British bailout, which is more open than oursand mandates mortgage relief, makes corporate welfare contingent on theremoval of bad management.)
The third strangest rescue involved the Fed's announcement just beforeChristmas that hedge funds for the first time could borrow from it.Apparently, the new $200 billion credit line relates to recently revealedsecuritized debts including bundled credit card bills, student loans, andauto loans. Obviously, it's worrisome that the crisis may be morphing beyondits real estate roots.
_____
To say the bailout hasn't worked so far is putting it mildly. Since thecrisis broke, Washington's reaction has been chaotic, lenient to favorites,secretive, and staggeringly expensive. An estimated $7.36 trillion, morethan double the total American outlay for World War II (even correcting forinflation), has been thrown at the problem, according to press reports.Along the way, banking, insurance, and car companies have been nationalized,and no one has been brought to justice.
Combined unemployment and underemployment (those who have stopped looking,and part-timers) runs at nearly 20 percent, the highest since 1945. Housingprices continue to hemorrhage--last fall's 18 percent drop could double.Holiday shopping fizzled: 160,000 stores closed last year, and 200,000 moreare expected to shutter in '09. Some forecasts place eventual retaildarkness at 25 percent. In 2008, the Dow dropped further--34 percent--than atany time since 1931. There is no sound sector in the economy; the onlymembers of the 30 Dow Jones Industrials posting gains last year wereWal-Mart and McDonald's.
Does Obama's choice for Attorney General, Eric Holder, have the tenacity andwill to tackle the widest fraud in American history? Parts of his backgrounddon't necessarily augur well: He worked on a pardon for Marc Rich, thefugitive billionaire tax evader once on the FBI's Most Wanted List whomClinton cleared. After leaving the Clinton era's Justice Department, Holderwent to work for Covington & Burling, a D.C. firm that represents corporateheavies including Big Tobacco. He defended Chiquita Brands in a notoriouscase, in which it paid a $25 million fine for using terrorists in Columbiaas security. Holder fits well within the gaggle of elite D.C. lawyers whomove back and forth between government and defending corporate criminals. Hedoesn't exactly have the sort of résumé that startles robber barons.
Can Holder design and orchestrate a muscular legal response, includingprosecution and stern punishment of top executives, plus aggressiveclawbacks of money? There seems little question that he has the skill, sothe decision on how aggressive the Justice Department will be is up toObama.
Holder could ask for and get well-organized FBI white-collar teams. Thepersonnel hole caused by shifts to antiterrorism would have to be more thanfilled to their pre-9/ll staffing if the incoming administration decides tobreak this criminogenic cycle rather than merely address it symbolically.
Black contends that aggressive prosecution would be good for the economybecause it may help prevent cheating and fraud that inevitably cause bubblesand destroy wealth. The Sarbanes-Oxley law passed in Enron's wake, forinstance, is supposed to make corporations now keep the kinds of documentsnecessary to assess criminality. Whether the CEOs, CFOs, and others whocontrolled the current frauds will do so is another matter.
"Don't count on them keeping records for long," Black warns. "It's time toget out the subpoenas."
I thought I understood what was the cause of the slow death being endured by so many but I merely had a kind of foggy idea. This article makes me begin to feel that the "gut feeling" triggered reaction of the generally ignorant (those who know little or nothing of formal economics) among us is far more "reasonable" a response than all the "intelligent" responses from the intellectual elite.
I understand clearly now why AIG so quickly paid off its foreign partners in crime in France and Germany and why they refuse to reveal exactly where all the money they were given has gone. At this stage I do not give a damn that the AIG bonuses are based on "contractual" agreements. There are times when morality trumps even the best intentioned law let alone law that clearly has no redeeming virtue either in its intent or consequence. Let the bastards take the company to court. They should never be paid one red cent. I recall writing about greed some time ago. The AIG bonus scam is surely greed on steroids. This James Lieber article must be read by all who hope to even begin to understand the fecal matter in which we are sinking and how we got into such deep do-do. It could be that the GOP, now the GOPoN, the "Grand Old Party of No", is on the right track after all. Let the suckers go into bankruptcy! I seriously doubt that any subsequent pain can be worse than that being endured now and likely to be enured in a future that avoids bankruptcy.
These AIG bonuses certainly are causing a furor and for good reason. It is just such a clear demonstration of the indefatigable gall of these people. But the AIG story is very, very bad on many levels and this article from January's Village Voice on the dark arts of the world of derivatives may help explain what really happened.
Great article.
SUMMARY:
The bottom line in this scandal is that fantastically wealthy entities positioned themselves to make unfathomable fortunes by betting that average Americans--Joe Six-Packs and hockey moms--would fail.
What Cooked the World's Economy? It wasn't your overdue mortgage.
By James Lieber
January 28, 2009
James Lieber is a lawyer whose books on business and politics includeFriendly Takeover (Penguin) and Rats in the Grain (Basic Books). This is hisfifth article for the Voice.
It's 2009. You're laid off, furloughed, foreclosed on, or you know someonewho is. You wonder where you'll fit into the grim new semi-socialistic post-post-industrial economy colloquially known as "this mess."
You're astonished and possibly ashamed that mutant financial instrumentsdreamed up in your great country have spawned worldwide misery. You can'tcomprehend, much less trim, the amount of bailout money parachuting into thelaps of incompetents, hoarders, and miscreants. It's been a tough century sofar: 9/11, Iraq, and now this. At least we have a bright new president.He'll give you a job painting a bridge. You may need it to keep body andsoul together.
The basic story line so far is that we are all to blame, includinghomeowners who bit off more than they could chew, lenders who wrote absurdadjustable-rate mortgages, and greedy investment bankers.
Credit derivatives also figure heavily in the plot. Apologists say thatthese became so complicated that even Wall Street couldn't understand themand that they created "an unacceptable level of risk." Then these blowhardstell us that the bailout will pump hundreds of billions of dollars into thecredit arteries and save the patient, which is the world's financial system.It will take time-maybe a year or so--but if everyone hangs in there, we'llbe all right. No structural damage has been done, and all's well that endswell.
Sorry, but that's drivel. In fact, what we are living through is the worstfinancial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome,the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.
Credit derivatives--those securities that few have ever see--are one reasonwhy this crisis is so different from 1929.
Derivatives weren't initially evil. They began as insurance policies onlarge loans. A bank that wished to lend money to a big, but shaky, venture,like what Ford or GM have become, could hedge its bet by buying a creditderivative to cover losses if the debtor defaulted. Derivatives weren'tcheap, but in the era of globalization and declining Americancompetitiveness, they were prudent. Interestingly, the company that put thebasic hardware and software together for pricing and clearing derivativeswas Bloomberg. It was quite expensive for a financial institution-say, abank-to get a Bloomberg machine and receive the specialized trainingrequired to certify analysts who would figure out the terms of theinsurance. These Bloomberg terminals, originally called Market Masters, werefirst installed at Merrill Lynch in the late 1980s.
Subsequently, thousands of units have been placed in trading and financialinstitutions; they became the cornerstone of Michael Bloomberg's wealth,marrying his skills as a securities trader and an electrical engineer.
It's an open question when or if he or his company knew how they would bemisused over time to devastate the world's economy.
_____
Fast-forward to the early years of the Clinton administration. After aninitial surge of regulatory behavior in favor of fair markets, especially inantitrust, that sort of behavior was abandoned, and free markets triumphed.The result was a morass of white-collar sociopathy at Archer DanielsMidland, Enron, and WorldCom, and in a host of markets ranging from oil tovitamins.
This was the beginning of the heyday of hedge funds. Unregulated investmenthouses were originally based on the questionable but legal practice ofshort-selling-selling a financial instrument you don't own in hopes ofbuying it back later at a lower price. That way, you hedge your bets: Youcover your investment in a company in case a company's stock price falls.
But hedge funds later diversified their practices beyond that easydefinition. These funds acquired a good deal of popular mystique. They madescads of money. Their notoriously high entry fees--up to 5 percent of theinvestment, plus as much as 36 percent of profits--served as barriers to allbut the richest investors, who gave fortunes to the funds to play with. Thefunds boasted of having genius analysts and fabulous proprietary algorithms.Few could discern what they really did, but the returns, for those who couldbuy in, often seemed magical.
But it wasn't magic. It amounted to the return of the age-old scam called"bucket shops." Also sometimes known as "boiler rooms," bucket shops emergedafter the Civil War. Usually, they were storefronts where people came to beton stocks without owning them. Unlike their customers, the shops actuallyowned blocks of stock. If customers were betting that a stock would go up,the shops would sell it and the price would plunge; if bettors were bearish,the shops would buy. In this way, they cleaned out their customers. Freneticbucket-shop activity caused the Panic of 1907. By 1909, New York had bannedbucket shops, and every other state soon followed.
In the mid-'90s, though, the credit-derivatives industry was hitting itsstride and argued vehemently for exclusion from all state and federalanti-bucket-shop regulations. On the side of the industry were FederalReserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and hisdeputy, Lawrence Summers. Holding the fort for the regulators was BrooksleyBorn, who headed the Commodity Futures Trading Commission (CFTC). The threefinancial titans ridiculed the virtually unknown and cloutless, butbrilliant and prophetic Born, who warned that unrestricted derivativestrading would "threaten our regulated markets, or indeed, our economy,without any federal agency knowing about it." Warren Buffett also weighed inagainst deregulation.
But Congress loved Greenspan-a/k/a "the Maestro" and "the Oracle"-andClinton loved Rubin. The sleepy hearings received almost no publicattention. The upshot was that Congress removed oversight of derivativesfrom the CFTC and preempted all state anti-bucket-shop laws. Born resignedshortly afterward.
Soon, something odd started to happen. Legitimate big investors, often withmillions of dollars to place, found that they couldn't get into certainhedge funds, despite the fact that they were willing to pay steep fees. Inretrospect, it seems as if these funds did not want fussy outsiders lookinginto what they were doing with derivatives.
_____
Imagine that a person is terminally ill. He or she would not be able to buya life insurance policy with a huge death benefit. Obviously, third partiescould not purchase policies on the soon-to-be-dead person's life. Yetsomething like that occurred in the financial world.
This was not caused by imprudent mortgage lending, though that was a pieceof the puzzle. Yes, Fannie Mae and Freddie Mac were put on steroids duringthe '90s, and some people got into mortgages who shouldn't have. But thevast majority of homeowners paid their mortgages. Only about 5 to 10 percentof these loans failed--not enough to cause systemic financial failure. (Thedollar amount of defaulted mortgages in the U.S. is about $1.2 trillion,which seems like a princely sum, but it's not nearly enough to drag down theentire civilized world.)
Much more dangerous was the notorious bundling of mortgages. Investmentbanks gathered these loans into batches and turned them into securitiescalled collateralized debt obligations (CDOs). Many included high-riskloans. These securities were then rated by Standard & Poor's, Fitch Ratings,or Moody's Investors Services, who were paid at premium rates and gaveinvestment grades. This was like putting lipstick on pigs with the plague.Banks like Wachovia, National City, Washington Mutual, and Lehman Brothersloaded up on this financial trash, which soon proved to be practicallyworthless. Today, those banks are extinct. But even that was not enough tocause a worldwide financial crisis.
What did cause the crisis was the writing of credit derivatives. In theory,they were insurance policies for investors; in practice, they became aguarantee of global financial collapse.
As insurance, they were poised to pay off fabulously when these weak bundledsecurities failed. And who was waiting to collect? Well, every gambler islooking for a sure bet. Most never find it. But the hedge funds and theirilk did.
_____
The mantra of entrepreneurial culture is that high risk goes with highreward. But unregulated and opaque derivatives trading was counterculturalin the sense that low or no risk led to quick, astronomically high rewards.By plunking down millions of dollars, a hedge fund could reap billions oncethese fatally constructed securities plunged. Again, the funds did not needto own the securities; they just needed to pay for the derivatives--theinsurance policies for the securities. And they could pay for them again andagain. This was known as replicating. It became an addiction.
About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in1994 and skyrocketed to $100 trillion in 2002. Last year, the Bank forInternational Settlements, a consortium of the world's central banks basedin Basel (the Fed chair, Ben Bernanke, sits on its board), reported thegross value of these commitments at $596 trillion. Some are due, and somewill mature soon. Typically, they involve contracts of five years or less.
Credit derivatives are breaking and will continue to break the world'sfinancial system and cause an unending crisis of liquidity and gummed-upcredit. Warren Buffett branded derivatives the "financial weapons of massdestruction." Felix Rohatyn, the investment banker who organized the bailoutof New York a generation ago, called them "financial hydrogen bombs."
Both are right. At almost $600 trillion, over-the-counter (OTC) derivativesdwarf the value of publicly traded equities on world exchanges, whichtotaled $62.5 trillion in the fall of 2007 and fell to $36.6 trillion a yearlater.
The nice thing about public markets is that they act as canaries that givewarnings as they did in 1929, 1987 (the program trading debacle), and 2001(the dot-com bubble), so we can scramble out with our economic lives. Butcompletely private and unregulated, the OTC derivatives trade is justlyknown as the "dark market."
_____
The heart of darkness was the AIG Financial Products (AIGFP) office inLondon, where a large proportion of the derivatives were written. AIG hadplaced this unit outside American borders, which meant that it would nothave to abide by American insurance reserve requirements. In other words,the derivatives clerks in London could sell as many products as they couldwrite-even if it would bankrupt the company.
The president of AIGFP, a tyrannical super-salesman named Joseph Cassano,certainly had the experience. In the 1980s, he was an executive at DrexelBurnham Lambert, the now-defunct brokerage that became the pivot of thejunk-bond scandal that led to the jailing of Michael Milken, David Levine,and Ivan Boesky.
During the peak years of derivatives trading, the 400 or so employees of theLondon unit reportedly averaged earnings in excess of a million dollars ayear. They sold "protection"--this Runyonesque term was favored-worth morethan three times the value of parent company AIG. How could they have notknown that they were putting at risk the largest insurer in the world andall the businesses and individuals that it covered?
This scheme that smacks of securities fraud facilitated the dreams of buyerscalled "counterparties" willing to ante up. Hedge fund offices sprouted inKensington and Mayfair like mushrooms after a summer shower. Revenue frompremiums for derivatives at AIGFP rose from $737 million in 1999 to $3.26billion in 2005. Cassano reportedly hectored ever-willing counterparties to"play the power game"--in other words, gobble up all the credit derivativesbacking CDOs that they could grab. As the bundled adjustable-rate mortgagesballooned, stretched home buyers defaulted, and the exciting power gamebecame about as risky as blasting sitting ducks with a Glock.
People still seem surprised to read that hedge principals have raked inbillions of dollars in a single year. They shouldn't be. These subprime-timeplayers knew how to score. The scam bled AIG white. In mid-September, whenit was on the ropes, AIG received an astonishing $85 billion emergency lineof credit from the Fed. Soon, that was supplemented by another $67 billion.Much of that money, to use the government's euphemism, has already been"drawn down." Shamefully, neither Washington nor AIG will explain where thebillions went. But the answer is increasingly clear: It went tocounterparties who bought derivatives from Cassano's shop in London.
_____
Imagine if a ring of cashiers at a local bank made thousands of bad loans,aware that they could break the bank. They would be prosecuted for fraud andracketeering under the anti-gangster RICO Act. If their counterparties-thedebtors-were in on the scam and understood that they didn't have to pay offthe loans, they could be charged, too. In fact, this scenario played out atsubprime-pushing outlets of a host of banks, including Washington Mutual(acquired last year by JP Morgan Chase, which itself received a $25 billionbailout); IndyMac (which was seized by FDIC regulators); and Lehman Brothers(which went belly-up). About 150 prosecutions of this type of fraud aregoing forward.
The top of the swamp's food chain, where the muck was derivatives ratherthan mortgages, must also be scrutinized. Apparently, that is the case.AIGFP's Cassano has hired top white-collar litigator and former prosecutorF. Joseph Warin (profiled in the 2004 Washingtonian piece, "Who to Call WhenYou're Under Investigation!"). Neither Cassano nor his attorney responded tointerview requests.
AIG's lavishly compensated counterparties were willing participants andlikewise could be considered for prosecution, depending on what they knew.Who were they?
At a 2007 conference, Cassano defined them as a "global swath" that included"banks and investment banks, pension funds, endowments, foundations,insurance companies, hedge funds, money managers, high-net-worthindividuals, municipalities, sovereigns, and supranationals." Abetting thescheme, ratings agencies like Standard & Poor's gave high grades to theshaky mortgage-backed securities bundled by investment banks such as GoldmanSachs and Lehman Brothers.
After the relative worthlessness of these CDOs became clear, the ratersrushed to downgrade them to junk status. This occurred suddenly with morethan 4,000 CDOs in the first quarter of 2008--the financial community nowregards them as "toxic waste." Of course, the sudden massive downgradingraises the question: Why had CDOs been artificially elevated in the firstplace, leading banks to buy them and giving them protective coloring justbecause the derivatives writers "insured" them?
After the raters got real (i.e., got scared), the gig was up. Hedge fundsfled in droves from their luxe digs in London. The industry remains murky,but some observers feel that more than half of all hedges will fold thisyear. Not necessarily a good sign, it seems to show that the funds wereone-trick ponies living mainly off the derivatives play.
We know that AIG was not the only firm that sold derivatives: Lehman andBear Stearns both dealt them and died. About 20 years ago, JP Morgan, thenow-defunct investment bank, had brought the idea to AIGFP in London, whichran with it. Seeing the Cassano group's success, Morgan jumped in with bothfeet. Specializing in credit default swaps--a type of derivative triggered topay off by negative events in the lives of loans, like defaults,foreclosures, and restructurings--Morgan had a distinctive marketing spin.Its "quants" were classy young dealers who could really do the math, whichof course gave them credibility with those who couldn't. They abjured streetslang like "protection." They pitched their sophisticated swaps as"technologies." The market adored them. They, in turn, oversold the product,made huge commissions, and wounded Morgan, which had to sell itself toChase, becoming JP Morgan Chase-now the country's biggest bank.
Today, the real question is whether the Morgan quants knew the swaps didn'twork and actually were grenades with pulled pins. Like Joseph Cassano, suchpeople should consult attorneys.
_____
Secrecy shrouds the bailout. The 21 banks that each received more than $1billion from the Fed won't disclose how, or even if, they're lending it,which hardly quells fears of hoarding. The Treasury says it can't forcedisclosure because it took only preferred (non-voting) stock in exchange forthe money.
If anything, the Fed had been less candid. It stonewalls requests to revealthe winners (mainly banks and corporations) of $1.5 trillion in loans, aswell as the securities it received as collateral. A Freedom of InformationAct (FOIA) suit to obtain this information by Bloomberg News has beenrebuffed by the Fed, which insists that a loophole in FOIA exempts it.Bloomberg will probably lose the case, but at least it's trying to probe theblack hole of bailout money. Of course, Barack Obama could tell the Fed torelease the information, plus generally open the bailout to public eyes.That would be change that we could believe in.
As for Bloomberg, its business side, Bloomberg L.P., has been less thanforthcoming. Requests to interview someone from the company--and MichaelBloomberg, who retains a controlling interest--about the derivatives tradewent unanswered.
In his economic address at Cooper Union last spring, Obama argued for newregulations, which he called "the rules of the road," and for a $30 billionstimulus package, that now seems quaint. In the OTC swaps trade, theBloomberg L.P.'s computer terminals are the road, bridges, and tunnels for"real-time" transactions. The L.P.'s promotional materials declare: "You'reeither in front of a Bloomberg or behind it." In terms of electronic tradingof certain securities, including credit default swaps: "Access to a dealer'sinventory is based upon client relationships with Bloomberg as the onlyconduit." In short, the L.P. looks like a dominant player--possibly, amonopoly. If it has a true competitor, I can't find it. But then, this is avery dark market.
Did Bloomberg L.P. do anything illegal? Absolutely not. We prosecutehit-and-run drivers, not roads. But there are many questions--about the sizeof the derivatives market, the names of the counterparties, the amount ofreplication of derivatives, the role of securities ratings in Bloombergcalculations (in other words, could puffing up be detected and potentiallystop a swap?), and how the OTC industry should be reported and regulated inorder to prevent future catastrophes. Bloomberg is a privately heldcompany--to the chagrin of would-be investors--and quite private about itsbusiness, so this information probably won't surface without subpoenas.
_____
So what do we do now? In 2000, the 106th Congress as its final effort passedthe Commodity Futures Modernization Act (CFMA), and, disgracefully,President Clinton signed it. It opened up the bucket-shop loophole thatcapsized the world's economic system. With the stroke of a presidential pen,a century of valuable protection was lost.
Even with that, the dangerous swaps still almost found themselves subjectedto state oversight. In 2000, AIG asked the New York State InsuranceDepartment to decide if it wanted to regulate them, but the department'ssuperintendent, Neil Levin, said no. The question was not posed by AIGFP,but by the company's main office through its general counsel, a reminderthat not long ago, AIG was a blue chip with a triple-A rating that toutedits integrity.
We can't know why Levin rejected the chance to regulate the tricky trade. Hedied in the restaurant at the top of the World Trade Center on the morningof 9/11. A Pataki-appointed former Goldman Sachs vice president, Levin mayhave shared other Wall Streeters' love of derivatives as the last big-moneysure thing as the IPO craze wound down. Or maybe he saw swaps as gamblingrather than insurance, hence beyond his jurisdiction. Regardless, currentInsurance Superintendent Eric Dinallo told me, "I don't agree with hisanswer." Maybe the economic crisis could have been averted if Levin hadanswered otherwise. "How close we came . . ." Dinallo mused.
Deeply occupied with keeping AIG, the parent company, afloat since thebailout, Dinallo saw the carnage that the swaps caused and, with the supportof Governor Paterson, pushed anew for regulatory oversight, a position alsoadopted by the President's Working Group (PWG), which includes the Treasury,Fed, SEC, and CFTC.
But regulation isn't enough to stop a phenomenon called "de-supervision"that occurs when officials can't, or won't, oversee a market. For instance,the Fed under Greenspan had authority to regulate mortgage bankers andbrokers, the industry's cowboys who kicked off this fiasco. BecauseGreenspan's libertarian sensibilities prevented him from invoking the Fed'scontrol, the mortgage market careened corruptly until the wheels came off.Notoriously lax and understaffed, the SEC did nothing to limit investmentbanks that bundled, pitched, and puffed non-prime mortgages as the raterscheered. It's doubtful that any agency can be relied on to control lucrativedefault swaps, which should be made illegal again. The bucket-shop loopholemust be closed. The evil genie should go back in the bottle.
Will Obama re-criminalize these financial weapons by pushing for repeal ofthe CFMA? This should be a no-brainer for Obama, who, before becoming acommunity organizer in Chicago, worked on Wall Street, studied derivatives,and by now undoubtedly knows their destructive power.
What about the $600 trillion in credit derivatives that are still out there,sucking vital liquidity and credit out of the system? It's the tyrannosaurusin the mall, the one that made Henry Paulson, the former Treasury Secretarywho looks like Daddy Warbucks, get down on his knees and beg Nancy Pelosifor a bailout.
Even with the bailout, no one can get their arms around this monster.Obviously, the $600 trillion includes not only many unseemly replicateddeath bets, but also some benign derivatives that creditors bought to hedgerisky loans. Instead of sorting them out, the Bush administration tried toprotect them all, while keeping the counterparties happy and anonymous.
Paulson has taken flack for spending little to bring mortgages in line withfalling home values. Sheila Bair, the FDIC chief who often scrapped withPaulson, said this would cost a measly $25 billion and that without it, 10million Americans could lose their homes over the next five years. Paulsonthought it would take three times as much and balked. Congress is bristlingbecause the Emergency Economic Stabilization Act (EESA) could providemortgage relief-and some derivatives won't detonate if homeowners don'tdefault. Obama's nominee for Treasury Secretary, Timothy Geithner, couldback such relief at his hearings.
The other key appointment is Attorney General. A century ago, when powerfultrusts distorted the market system, we had AGs who relentlessly tracked andbusted them. Today's crisis is missing, so far, an advocate as dynamic andenergetic as the mortgage bankers, brokers, bundlers, raters, and quantswho, in a few short years, littered the world with rotten loans, diseasedCDOs, and lethal derivatives. During the Bush years, white-collar lawenforcement actually dropped as FBI agents were transferred toantiterrorism. Even so, according to William Black, an effective federallitigator and regulator during the 1980s savings-and-loan scandal, by 2004,the FBI perceived an epidemic of fraud. Now a professor of law and financeat the University of Missouri-Kansas City, Black has testified to Congressabout the current crisis and paints it as "control fraud" at every level.Such fraud flows from the top tiers of corporations-typically CEOs and CFOs,who control perverse compensation systems that reward cheating and volumerather than quality, and circumvent standard due diligence such asunderwriting and accounting. For instance, AIGFP's Cassano reportedlyrebuffed AIG's internal auditor.
The environment from the top of the chain--derivatives gang leaders--to thebottom of the chain-subprime, no-doc loan officers-became "criminogenic,"Black says. The only real response? Aggressive prosecution of "elites" atall stages in this twisted mess. Black says sentences should not be thelight, six-month slaps that white-collar criminals usually get, or theMadoff-style penthouse arrest.
As staggering as the Madoff meltdown was, it had a refreshing side--the fundswere frozen. In the bailout, on the other hand, the government often seemsto be completing the scam by quietly passing the proceeds to counterparties.
The advantage of treating these players like racketeers under federal law isthat their ill-gotten gains could be forfeited. The government could recoupthese odious gambling debts instead of simply paying them off. In finance,the bottom line is the bottom line. The bottom line in this scandal is thatfantastically wealthy entities positioned themselves to make unfathomablefortunes by betting that average Americans-Joe Six-Packs and hockeymoms-would fail.
Black suggests that derivatives should be "unwound" and that the payoutscease: "Close out the positions--most of them have no social utility." Andwhere there has been fraud, he adds, "clawback makes perfect sense." Thatwould include taking back the ludicrously large bonuses and other forms ofcompensation given to CEOs at bailed-out companies.
No one knows how much could be clawed back from the soiled derivatives reap.Clearly, it's not $600 trillion. William Bergman, formerly a market analystat the Chicago Fed in "netting"--what's left after financial institutions payeach other off for ongoing deals and debts--makes a "guess" that perhaps only5 percent could be recouped, which he concedes is unfortunately low. Still,that's $30 trillion, a huge number, more than 10 times what the Fed candeploy and over twice the U.S. gross domestic product. Such a sum, ifrecovered through the criminal justice process, could ease the liquiditycrisis and actually get the credit arteries flowing. Not everyone would likeit. What's left of Wall Street and hedge funds want their derivatives gains;so do foreign banks.
_____
A tangle of secrecy, conflicts of interest, and favoritism plagues theprocess of recovery.
Lehman drowned, but Goldman Sachs, where Paulson was formerly CEO, wassaved. The day before AIG reaped its initial $85 billion bonanza, Paulsonmet with his successor, Lloyd Blankfein, who reportedly argued that Goldmanwould lose $20 billion and fail unless AIG was rescued. AIG got the money.
Had Goldman bought from AIG credit derivatives that it needed to redeem?Like most other huge financial traders, Goldman has a secretive hedge fund,Global Alpha, that refuses to reveal its transactions. Regardless, Paulson'smeeting with Blankfein was a low point. If Dick Cheney had met with hissuccessor at Halliburton and, the very next day, written a check forbillions that guaranteed its survival, the press would have screamed for hishead.
The second most shifty bailout went to Citigroup, a money sewer that wonlast year's layoff super bowl with 73,000. Instead of being parceled toefficient operators, Citi received a $45 billion bailout and $300 billionloan package, at least in part because of Robert Rubin's juice. WhileTreasury Secretary under Clinton, Rubin led us into the derivativesmaelstrom, deported jobs with NAFTA, and championed bank deregulation sothat companies like Citi could mimic Wall Street speculators. After hejoined Citi's leadership in 1999, the bank went long on mortgages and otherrisks du jour, enmeshed itself in Enron's web, tanked in value, and sufferedhaphazard management, while Rubin made more than $100 million.
Rubin remained a director and "senior counselor" at Citi until January 9,2009, and is an economic adviser to Obama. In truth, he probably shouldn'tbe a senior counselor anywhere except possibly at Camp Granada. LikeGreenspan, he should retire before he breaks something again, and we have topay for it. (Incidentally, the British bailout, which is more open than oursand mandates mortgage relief, makes corporate welfare contingent on theremoval of bad management.)
The third strangest rescue involved the Fed's announcement just beforeChristmas that hedge funds for the first time could borrow from it.Apparently, the new $200 billion credit line relates to recently revealedsecuritized debts including bundled credit card bills, student loans, andauto loans. Obviously, it's worrisome that the crisis may be morphing beyondits real estate roots.
_____
To say the bailout hasn't worked so far is putting it mildly. Since thecrisis broke, Washington's reaction has been chaotic, lenient to favorites,secretive, and staggeringly expensive. An estimated $7.36 trillion, morethan double the total American outlay for World War II (even correcting forinflation), has been thrown at the problem, according to press reports.Along the way, banking, insurance, and car companies have been nationalized,and no one has been brought to justice.
Combined unemployment and underemployment (those who have stopped looking,and part-timers) runs at nearly 20 percent, the highest since 1945. Housingprices continue to hemorrhage--last fall's 18 percent drop could double.Holiday shopping fizzled: 160,000 stores closed last year, and 200,000 moreare expected to shutter in '09. Some forecasts place eventual retaildarkness at 25 percent. In 2008, the Dow dropped further--34 percent--than atany time since 1931. There is no sound sector in the economy; the onlymembers of the 30 Dow Jones Industrials posting gains last year wereWal-Mart and McDonald's.
Does Obama's choice for Attorney General, Eric Holder, have the tenacity andwill to tackle the widest fraud in American history? Parts of his backgrounddon't necessarily augur well: He worked on a pardon for Marc Rich, thefugitive billionaire tax evader once on the FBI's Most Wanted List whomClinton cleared. After leaving the Clinton era's Justice Department, Holderwent to work for Covington & Burling, a D.C. firm that represents corporateheavies including Big Tobacco. He defended Chiquita Brands in a notoriouscase, in which it paid a $25 million fine for using terrorists in Columbiaas security. Holder fits well within the gaggle of elite D.C. lawyers whomove back and forth between government and defending corporate criminals. Hedoesn't exactly have the sort of résumé that startles robber barons.
Can Holder design and orchestrate a muscular legal response, includingprosecution and stern punishment of top executives, plus aggressiveclawbacks of money? There seems little question that he has the skill, sothe decision on how aggressive the Justice Department will be is up toObama.
Holder could ask for and get well-organized FBI white-collar teams. Thepersonnel hole caused by shifts to antiterrorism would have to be more thanfilled to their pre-9/ll staffing if the incoming administration decides tobreak this criminogenic cycle rather than merely address it symbolically.
Black contends that aggressive prosecution would be good for the economybecause it may help prevent cheating and fraud that inevitably cause bubblesand destroy wealth. The Sarbanes-Oxley law passed in Enron's wake, forinstance, is supposed to make corporations now keep the kinds of documentsnecessary to assess criminality. Whether the CEOs, CFOs, and others whocontrolled the current frauds will do so is another matter.
"Don't count on them keeping records for long," Black warns. "It's time toget out the subpoenas."
Friday, March 13, 2009
MUSLIM BACKLASH
Finally, someone speaks out unequivocally! Generally, I believe western nations have responded to the harsh, irrational rants, confrontational tactics and atrocities of radical Muslims living in western societies with excessively accommodating rhetoric. I suspect that the Prime Minister of Australia has finally stated what many western leaders are now wishing they had said long ago.
This is not to say that I support intolerance. On the contrary, I do believe very strongly that tolerance certainly has its undeniable virtues. Yet it is necessary that tolerance exhibit a healthy balance between accommodation and self preservation. Sadly this has not been the case and the radical Muslim community has steadily gotten the better of the bargain. Rudd, to his credit, has stopped the rot and I gather that the majority of Australians supports his position. This is clearly understandable given the steep price innocent Australians have paid in atrocities committed by radical Muslims.
But there is a haunting paradox of which we must never lose sight. On the opposing, mainly Christian, side of the fence we also have very many outspoken, self righteous believers whose behavior and positions basically mirror those of the radical Muslim supporters. The dutch M.P. who now preaches benign ethnic cleansing for his country is a case in point. This kind of mirrored behavior is as likely to favorably influence the behavior of radical Muslims as a shadow is likely to influence the movement of the body that casts the shadow. Harmful radical positions and behavior must recognize the right of accommodating societies and cultures to establish acceptable thresholds against positions and behavior which threaten the common good and the very survival of a society's culture. Generally, Muslims have consistently and effectively forced the acceptance of their own cultural thresholds. It is time they understand that what is good for the goose is also good for the gander. This is not only fair but necessary and just.
Subject: A leader with guts
The Whole world needs a Leader like this!
Prime Minister Kevin Rudd - Australia
Muslims who want to live under Islamic Sharia law were told on Wednesday to get out of Australia, as the government targeted radicals in a bid to head off potential terror attacks.
Separately, Rudd angered some Australian Muslims on Wednesday by saying he supported spy agencies monitoring the nation's mosques.
Quote:
" 'IMMIGRANTS, NOT AUSTRALIANS, MUST ADAPT’.
Take It Or Leave It.
I am tired of this nation worrying about whether we are offending some individual or their culture. Since the terrorist attacks on Bali, we have experienced a surge in patriotism by the majority of Australians. This culture has been developed over two centuries of struggles, trials and victories by millions of men and women who have sought freedom. We speak mainly ENGLISH, not Spanish, Lebanese, Arabic, Chinese, Japanese, Russian, or any other language. Therefore, if you wish to become part of our society, learn the language!
Most Australians believe in God. This is not some Christian, right wing, political push, but a fact, because Christian men and women, on Christian principles, founded this nation, and this is clearly documented. It is certainly appropriate to display it on the walls of our schools. If God offends you, then I suggest you consider another part of the world as your new home, because God is part of our culture.
We will accept your beliefs, and will not question why. All we ask is that you accept ours, and live in harmony and peaceful enjoyment with us. This is OUR COUNTRY, OUR LAND, and OUR LIFESTYLE, and we will allow you every opportunity to enjoy all this. But once you are done complaining, whining, and griping about Our Flag, Our Pledge, Our Christian beliefs, or Our Way of Life, I highly encourage you take advantage of one other great Australian freedom, 'THE RIGHT TO LEAVE'.'
If you aren't happy here then LEAVE. We didn't force you to come here. You asked to be here. So accept the country YOU accepted."
This is not to say that I support intolerance. On the contrary, I do believe very strongly that tolerance certainly has its undeniable virtues. Yet it is necessary that tolerance exhibit a healthy balance between accommodation and self preservation. Sadly this has not been the case and the radical Muslim community has steadily gotten the better of the bargain. Rudd, to his credit, has stopped the rot and I gather that the majority of Australians supports his position. This is clearly understandable given the steep price innocent Australians have paid in atrocities committed by radical Muslims.
But there is a haunting paradox of which we must never lose sight. On the opposing, mainly Christian, side of the fence we also have very many outspoken, self righteous believers whose behavior and positions basically mirror those of the radical Muslim supporters. The dutch M.P. who now preaches benign ethnic cleansing for his country is a case in point. This kind of mirrored behavior is as likely to favorably influence the behavior of radical Muslims as a shadow is likely to influence the movement of the body that casts the shadow. Harmful radical positions and behavior must recognize the right of accommodating societies and cultures to establish acceptable thresholds against positions and behavior which threaten the common good and the very survival of a society's culture. Generally, Muslims have consistently and effectively forced the acceptance of their own cultural thresholds. It is time they understand that what is good for the goose is also good for the gander. This is not only fair but necessary and just.
Subject: A leader with guts
The Whole world needs a Leader like this!
Prime Minister Kevin Rudd - Australia
Muslims who want to live under Islamic Sharia law were told on Wednesday to get out of Australia, as the government targeted radicals in a bid to head off potential terror attacks.
Separately, Rudd angered some Australian Muslims on Wednesday by saying he supported spy agencies monitoring the nation's mosques.
Quote:
" 'IMMIGRANTS, NOT AUSTRALIANS, MUST ADAPT’.
Take It Or Leave It.
I am tired of this nation worrying about whether we are offending some individual or their culture. Since the terrorist attacks on Bali, we have experienced a surge in patriotism by the majority of Australians. This culture has been developed over two centuries of struggles, trials and victories by millions of men and women who have sought freedom. We speak mainly ENGLISH, not Spanish, Lebanese, Arabic, Chinese, Japanese, Russian, or any other language. Therefore, if you wish to become part of our society, learn the language!
Most Australians believe in God. This is not some Christian, right wing, political push, but a fact, because Christian men and women, on Christian principles, founded this nation, and this is clearly documented. It is certainly appropriate to display it on the walls of our schools. If God offends you, then I suggest you consider another part of the world as your new home, because God is part of our culture.
We will accept your beliefs, and will not question why. All we ask is that you accept ours, and live in harmony and peaceful enjoyment with us. This is OUR COUNTRY, OUR LAND, and OUR LIFESTYLE, and we will allow you every opportunity to enjoy all this. But once you are done complaining, whining, and griping about Our Flag, Our Pledge, Our Christian beliefs, or Our Way of Life, I highly encourage you take advantage of one other great Australian freedom, 'THE RIGHT TO LEAVE'.'
If you aren't happy here then LEAVE. We didn't force you to come here. You asked to be here. So accept the country YOU accepted."
Sunday, March 8, 2009
STEM CELL RESEARCH
I hope that the information below, especially the details demonstrated via the embedded link, will stimulate the review, discussion and debate it obviously deserves. While it is clearly unfortunate that the accompanying commentary focuses more on ideology and political posturing rather than on the very crucial issue that it purports to support, no one can reasonably deny the seminal issues raised and the legitimate concerns those on either side of the argument will inevitably have.
Please go to the embedded link and let's have an intelligent discussion on the substance of the issue. I for one will not respond to any contribution which seeks to assign responsibility or blame based on political allegiance or the demonizing of individuals. There is no doubt that there is indeed a moral as well as scientific aspect to the matter. I certainly appreciate and understand this but I also believe that it is possible for the debate or discussion of the subject in question to be conducted rationally from both perspectives. This may even be necessary if we are to gain any value from the examination of the remarkable developments revealed here.
I have attempted to verify the authenticity of the information but am unable to do so. This leaves me in the unenviable position of having to trust the source of the mail. Hopefully some subscriber to this blog will be more successful at this than I. In any event the subject is obviously worthy of discussion and debate. The mail along with its embedded link follows.
Amazing information. Someone asked me, "If this is so developed, why aren't we hearing more about this in the medical circles?" You may ask the same question after seeing the video. Click on the link below. http://www.youtube.com/watch?v=qxhi4Q8EDTU This begs the question, why do we need embryonic stem cell research? Why "create" little human beings solely for the purpose of harvesting their stem cells and then killing them? People like President Obama and our left leaning politicians are so determined to create baby embryos to be used for harvesting embryonic stem cells and later destroyed, that they do not want the public to know about the tremendous advances being made in adult stem cell research. Their philosophy, based on Darwinian evolution and practiced by Marx and Stalin, is that people are nothing more than cells in the body politic and that the government can use or excise them as it see fit for the good of society in general. Their goal is to eventually clone human beings. That is why President Obama has reversed President George W. Bush's ban on embryonic stem cell research. That is why they lie to the uninformed public stating that we are against stem cell research when what we are against is embryonic stem cell research. These people have no moral values whatsoever. They reject God and His creation and worship a god of their own creation which they call "science". They talk about "Mother Nature" but deny "Father God" because they think that science can control, or at least manipulate, Mother Nature.
Please go to the embedded link and let's have an intelligent discussion on the substance of the issue. I for one will not respond to any contribution which seeks to assign responsibility or blame based on political allegiance or the demonizing of individuals. There is no doubt that there is indeed a moral as well as scientific aspect to the matter. I certainly appreciate and understand this but I also believe that it is possible for the debate or discussion of the subject in question to be conducted rationally from both perspectives. This may even be necessary if we are to gain any value from the examination of the remarkable developments revealed here.
I have attempted to verify the authenticity of the information but am unable to do so. This leaves me in the unenviable position of having to trust the source of the mail. Hopefully some subscriber to this blog will be more successful at this than I. In any event the subject is obviously worthy of discussion and debate. The mail along with its embedded link follows.
Amazing information. Someone asked me, "If this is so developed, why aren't we hearing more about this in the medical circles?" You may ask the same question after seeing the video. Click on the link below. http://www.youtube.com/watch?v=qxhi4Q8EDTU This begs the question, why do we need embryonic stem cell research? Why "create" little human beings solely for the purpose of harvesting their stem cells and then killing them? People like President Obama and our left leaning politicians are so determined to create baby embryos to be used for harvesting embryonic stem cells and later destroyed, that they do not want the public to know about the tremendous advances being made in adult stem cell research. Their philosophy, based on Darwinian evolution and practiced by Marx and Stalin, is that people are nothing more than cells in the body politic and that the government can use or excise them as it see fit for the good of society in general. Their goal is to eventually clone human beings. That is why President Obama has reversed President George W. Bush's ban on embryonic stem cell research. That is why they lie to the uninformed public stating that we are against stem cell research when what we are against is embryonic stem cell research. These people have no moral values whatsoever. They reject God and His creation and worship a god of their own creation which they call "science". They talk about "Mother Nature" but deny "Father God" because they think that science can control, or at least manipulate, Mother Nature.
Thursday, March 5, 2009
China Stimulus Package:
Below is an excerpt from a NYT article on the Chinese govt.'s stimulus package. It is in the main true that just about all the pundits in the U.S. see China as the holder of one of the trump cards for rescuing the world's economy in general and that of the U.S. in particular. It is interesting to observe how China is shaping its stimulus package. It is obvious that it is full of "pork" according to the definition of the very outspoken critics of the Obama plan. Maybe China knows something our knee jerk right wing ideologues don't.
Think about this for a minute. The free market mantra of the far right obviously works for the rich all the time. This is why they are unwilling to even consider alternatives. They cry foul if asked to pay even the smallest incremental tax and are completely oblivious to the fact that taxes on the poor increases daily because of the very nature of poverty. Observe the Chinese plan through the prism of the right.
Mr. Wen said that the central government would significantly increase spending on schools, hospitals and clinics, low-income housing, environmental programs and other projects aimed at improving people’s lives.
He also reaffirmed plans to raise subsidies to farmers, old-age pensions and income grants to China’s poorest citizens, and said spending on “social safety net” programs would jump 17.6 percent, or about $6.4 billion.
If such a thing as sin exists there is but one sin: Greed. In America more than anywhere else on earth greed is enshrined in the pantheon of success as the single most necessary quality for achieving success. Typically it is never called by its real name but by covers like "smarts", "balls", "chutzpah", even "genius". But under any cover it is still what it clearly is: greed. As our current economic crisis clearly proves it is the root of all our evils and the de facto cause of our ongoing seemingly intractable dilemma. And truth be told it is even now being displayed by the same callous people who brought the "free market" to its very knees. Of course the venerable "free marketeers" disagree whole heartedly and in the most crass inanity of my life they now are trying to blame the new president for the disaster he inherited and is trying with all his might to address intelligently.
Ironically the Chinese govt. is now prodding its citizens to moderate their penchant for saving as under current conditions the intensive saving habits of the Chinese population is hazardous to any plan to effectively address the current economic crisis.
Below is an excerpt from a NYT article on the Chinese govt.'s stimulus package. It is in the main true that just about all the pundits in the U.S. see China as the holder of one of the trump cards for rescuing the world's economy in general and that of the U.S. in particular. It is interesting to observe how China is shaping its stimulus package. It is obvious that it is full of "pork" according to the definition of the very outspoken critics of the Obama plan. Maybe China knows something our knee jerk right wing ideologues don't.
Think about this for a minute. The free market mantra of the far right obviously works for the rich all the time. This is why they are unwilling to even consider alternatives. They cry foul if asked to pay even the smallest incremental tax and are completely oblivious to the fact that taxes on the poor increases daily because of the very nature of poverty. Observe the Chinese plan through the prism of the right.
Mr. Wen said that the central government would significantly increase spending on schools, hospitals and clinics, low-income housing, environmental programs and other projects aimed at improving people’s lives.
He also reaffirmed plans to raise subsidies to farmers, old-age pensions and income grants to China’s poorest citizens, and said spending on “social safety net” programs would jump 17.6 percent, or about $6.4 billion.
If such a thing as sin exists there is but one sin: Greed. In America more than anywhere else on earth greed is enshrined in the pantheon of success as the single most necessary quality for achieving success. Typically it is never called by its real name but by covers like "smarts", "balls", "chutzpah", even "genius". But under any cover it is still what it clearly is: greed. As our current economic crisis clearly proves it is the root of all our evils and the de facto cause of our ongoing seemingly intractable dilemma. And truth be told it is even now being displayed by the same callous people who brought the "free market" to its very knees. Of course the venerable "free marketeers" disagree whole heartedly and in the most crass inanity of my life they now are trying to blame the new president for the disaster he inherited and is trying with all his might to address intelligently.
Ironically the Chinese govt. is now prodding its citizens to moderate their penchant for saving as under current conditions the intensive saving habits of the Chinese population is hazardous to any plan to effectively address the current economic crisis.
Subscribe to:
Posts (Atom)
