A Rocky (&Bullwinkle) Weekend for the US Constitution June 11-13, 2010

[Demeter]

As I mentioned on SMW, June 14 is Flag Day, but I couldn't see the point of venerating a piece of cloth while shredding the founding compact of our nation.

So we are commemorating the late great US Constitution in all its forms and features with some helpful humor from these guys:

http://www.youtube.com/watch?v=IZEfNYn-5fA

And one of the most off-the-wall yet enduring manifestations of the US Constitution:



This is of course the USS Constitution photograph taken around the time of the Civil War.

"USS Constitution is a wooden-hulled, three-masted heavy frigate of the United States Navy. Named by President George Washington after the Constitution of the United States of America, she is the world's oldest floating commissioned naval vessel. Launched in 1797, Constitution was one of six original frigates authorized for construction by the Naval Act of 1794. Joshua Humphreys designed the frigates to be the young Navy's capital ships, and so Constitution and her sisters were larger and more heavily armed and built than standard frigates of the period. Built in Boston, Massachusetts at Edmund Hartt's shipyard, her first duties with the newly formed United States Navy were to provide protection for American merchant shipping during the Quasi War with France and to defeat the Barbary pirates in the First Barbary War.

Constitution is most famous for her actions during the War of 1812 against Great Britain, when she captured numerous merchant ships and defeated five British warships: HMS Guerriere, Java, Pictou, Cyane and Levant. The battle with Guerriere earned her the nickname of "Old Ironsides" and public adoration that has repeatedly saved her from scrapping. She continued to actively serve the nation as flagship in the Mediterranean and African squadrons, and circled the world in the 1840s. During the American Civil War she served as a training ship for the United States Naval Academy and carried artwork and industrial displays to the Paris Exposition of 1878. Retired from active service in 1881, she served as a receiving ship until designated a museum ship in 1907. In 1931 she started a three year 90-port tour of the nation, and in 1997 she finally sailed again under her own power for her 200th birthday.

Constitution's mission today is to promote understanding of the Navy’s role in war and peace through educational outreach, historic demonstration, and active participation in public events. As a fully commissioned US Navy ship, her crew of 60 officers and sailors participate in ceremonies, educational programs and special events while keeping the ship open to visitors year-round and providing free tours. The officers and crew are all active-duty US Navy personnel and the assignment is considered special duty in the Navy. Traditionally, command of the vessel is assigned to a Navy Commander. She is berthed at Pier 1 of the former Charlestown Navy Yard, at one end of Boston's Freedom Trail."

http://en.wikipedia.org/wiki/USS_Constitution

One more time, guys!

http://www.youtube.com/watch?v=65t-OzhlmvE&feature=related

[Demeter]

1. Because Friday Was Even More Screwed Up than the Rest of the Week

I've started too early and no banks have been recorded as failed as of this moment (5:30 EDT). But check this space for updates! All you banking fans...

[Demeter]

2. "now it's time...."

http://www.youtube.com/watch?v=nKE1ttRTG1k&feature=related

[Demeter]

42. ONE BANK DOWN

Washington First International Bank, Seattle, Washington, was closed today by the Washington Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with East West Bank, Pasadena, California, to assume all of the deposits of Washington First International Bank.

The four branches of Washington First International Bank will reopen during normal business hours beginning Saturday as branches of East West Bank...

As of March 31, 2010, Washington First International Bank had approximately $520.9 million in total assets and $441.4 million in total deposits. East West Bank will pay the FDIC a premium of 0.5 percent to assume all of the deposits of Washington First International Bank. In addition to assuming all of the deposits of the failed bank, East West Bank agreed to purchase approximately $501.0 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and East West Bank entered into a loss-share transaction on $418.8 million of Washington First International Bank's assets. East West Bank will share in the losses on the asset pools covered under the loss-share agreement...
The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $158.4 million. East West Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to all alternatives. Washington First International Bank is the 82nd FDIC-insured institution to fail in the nation this year, and the seventh in Washington. The last FDIC-insured institution closed in the state was Frontier Bank, Everett, on April 30, 2010.

[Demeter]

49. And That's All, Folks

Next week might be a real bank-killer of a weekend.

[Demeter]

3. GETTING DOWN AND DIRTY IN THE OIL PATCH

If it oozes, it goes here.

[Demeter]

4. Investors fear no limit to BP damages

The reason investors have been panicking about BP over the past couple of days is that the US administration has apparently crossed a line in its determination to take action against the company
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/BMKWPN/VU/t

[Demeter]

5. The Spill, The Scandal and the President

http://www.rollingstone.com/politics/news/17390/111965?RS_show_page=0

The latest expose'.

[midnight]

84. Wow. Reading this, I have to strongly fear this is wear the stay behinds

could be doing some of their best work right now- MMS, this federal agency has not been gutted since President Obama took office.

[Demeter]

30. Cantor says Obama should stop ‘demonising’ BP

Barack Obama should stop “demonising” BP and focus on plugging the well, says Eric Cantor, the number two Republican in the House of Representatives.

“What we are seeing out of the administration has been utter outrage, blame, vilification, cursing on TV instead of focusing on stopping the gushing of the oil,” he told the FT in its View from DC video series.
Read more >>
http://link.ft.com/r/EB8122/265O59/PNGIU/BMSHNV/6VMMJ1/7V/t

[Dr.Phool]

45. Cantor needs to stick his whiney head back up his ass.

And be quiet. Or at least keep it down to a mumble.

[Demeter]

34. Bill Bonner: Oil Spill Leadership Crisis

http://dailyreckoning.com/oil-spill-leadership-crisis/

Everyone is looking for someone else to blame...and someone to follow.

America's chief executive is acting tough. He's talking about kicking someone's derriere. He says BP chairman Tony Hayward "wouldn't work for me," as if he knew what he was talking about. Obama is a former community activist and law professor. What does he know about running a multinational oil company? Or about employing someone?

The Obama team has taken to calling the company "British Petroleum." That hasn't been the company's name for 12 years...but it puts the blame on the other side of the Atlantic, where they want it.

The news out yesterday was that the leak was allowing 1 million gallons of oil to escape into the Gulf every day. Some commentators say Hayward will lose his job. Others say BP will declare bankruptcy when the full costs of the damage become known. Analyst Matt Simmons says "there's not enough money in the world," to pay the clean up costs.

Several commentators, including Simmons, suggest that the Gulf disaster be put entirely in the hands of the US military. We laughed when we first heard that suggestion. After all, the pentagon knows no more about deep water drilling than Obama.

But they've already put a military man in charge - tough-talking Adm. Thad Allen. He probably has no idea what he's doing either, but people take him seriously.

People want leadership - especially in a crisis. "The man on the white horse" always seems to come along, just when people need him. He sticks out his jaw. He takes charge. He leads. Only later do people realize that he was a jackass.

[Demeter]

38. MARK FIORE NOTES

http://www.markfiore.com/political-cartoons/watch-bp-oil-spill-banking-mining-voluntary-regulation-animated-video-mark-fiore-animation-political-cartoons

[Demeter]

58. BP Shows Belly, Says Willing to Cut Dividend, So What Will Obama Do?

http://www.nakedcapitalism.com/2010/06/bp-shows-belly-says-willing-to-cut-dividend-so-what-will-obama-do.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

BP has clearly decided that it needs to do what it takes to get the Administration to de-escalate its campaign against the oil producer, and is signaling that it is willing to cut its dividend, something it has fiercely resisted, as a peace offering. BP’s chairman, Carl-Henric Svanberg has been summoned to meet with Obama next week, and the oil company is clearly keen to be able to say afterwards that the meeting that the two sides had at least reduced their hostilities, and better yet had made some progress.

There has been quite a bit of consternation on the other side of the pond over the now-likely dividend cut. 40% of BP investors are in the US; they’ll presumably won’t fight the reduction too hard. But BP has no doubt had to sell the idea to shareowners outside the US, particularly in the UK, where the oil company pays 13% of FTSE dividends. But it’s hard to argue that investors did not see it coming; on Wednesday, Financial Crookery (hat tip Richard Smith) pointed out that the market was already expecting a reduction of 45%.

Presumably, BP is simultaneously negotiating with the Administration while trying to manage expectations. It would be foolish to do otherwise; it is almost never a good idea to have top executives negotiate with each other, especially in a situation which is already charged. Another approach which would be viable would be for the two sides merely to agree on the shape of the table, as in what issues need to be resolved in what timeframe, and who will be tasked from each side.

As far as the substance is concerned, BP appears to want the Administration to quit criticizing it in public (or at least to tone it down a lot) and to set some limits on what BP will be held responsible for. According to the Financial Times:

They will promise to retain sufficient cash to meet all legitimate claims, which analysts say could range from $5bn to $40bn. However, BP will reject the administration’s calls for the company to pay the wages of all rig workers laid off as a result of the government’s deep-water drilling ban.

Yves here. The key issue, which is going to be central in both the negotiations with the government and in court, is what constitutes a “legitimate claim.”

BP does not appear ready yet to say how much it will reduce dividends, and it does not need to make that decision until July 27. The oil producer is having a discussion with its board on Monday, it may make some preliminary decisions then. From Bloomberg:

The London-based company’s options include paying the dividend in a form of equity and placing the payment into an escrow account until the spill cleanup is complete, analysts said.

“They’re going to see what the political pressure looks like before they make the decision on the dividend,” Jason Gammel, an analyst at Macquarie Securities USA Inc., said in a Bloomberg Television interview. “The most likely thing is that they would suspend the dividend for one to three quarters.”

If press has an accurate reading of the state of play, BP has put some initial stakes in the ground, and appears to be looking for signals from the US before it decides what to offer in the way of dividend reductions.

The President and Congress are under pressure to take action against BP, and the letter below from the Administration throws down a gauntlet:

CONTIINUES AT LINK

[Demeter]

6. SUMMER RERUNS: THE BANKSTERS

Whether it's Goldman, Lehman, or even AIG, we've seen it all, heard it all, and now, we're going to do it all over again, it seems. It goes here, in any event.

[Demeter]

7. AIG bail-out ‘entanglements’ under scrutiny

AIG bail-out ‘entanglements’ under scrutiny
A congressional panel created to review the US government’s response to the financial crisis is raising questions about the multiple roles that lawyers and bankers played during the collapse of insurer AIG
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/8A4MF3/VU/t

[Demeter]

27. US Congress panel calls AIG rescue ‘poisonous’

A congressional panel attacked the government’s rescue of AIG in 2008 and said the $180bn-plus bail-out of the stricken insurer continued to have a “poisonous” effect on capital markets
Read more >>
http://link.ft.com/r/0QSDPP/JI3WLX/A5Q0X/HDPHWZ/JIJEYR/ZH/t

[Demeter]

19. JPMorgan faces South Korea probe

The country’s financial watchdog has asked local prosecutors to investigate the veteran head of JPMorgan Chase’s South Korea operations for possible violations of securities laws
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/D4YK1U/VU/t

[Demeter]

22. Santander to buy BofA’s Mexico stake

The eurozone’s biggest bank will pay $2.5bn for the 24.9 per cent of Santander Mexico it does not own, showing the Spanish bank’s expansion ambitions have not been damped by a raft of buys in the past 18 months
Read more >>
http://link.ft.com/r/P75VYY/A7ICQP/HI3M9/C5JP2D/QF1NRM/36/t

[Demeter]

28. Bernanke points to modest US recovery

The US economy is on a slow but sustainable path of recovery and has suffered little so far from the economic travails in the eurozone, Ben Bernanke, chairman of the Federal Reserve, said
Read more >>
http://link.ft.com/r/0QSDPP/JI3WLX/A5Q0X/HDPHWZ/S3TPN1/ZH/t


BERNANKE SHOULD GET HIS OWN THREAD, I KNOW. UNDER FRUITCAKES.

[Po_d Mainiac]

50. A thread? How bout a noose. n/t

[Demeter]

31. SEC probes second Goldman security

The US Securities and Exchange Commission has stepped up its inquiries into a complex mortgage-backed deal by Goldman Sachs that was not part of the civil fraud charges filed against the bank in April, according to people close to the matter.
Read more >>
http://link.ft.com/r/M2ZOXX/5CWBM8/B49CK/3OXEN3/QF1FMB/AZ/t

[DemReadingDU]

35. The problem is 'contained'

6/11/10 From Michael Panzner's blog:


Today, however, I came across a post at Calculated Risk, "Debt Problem Contained' in Europe, Market and Short Sale Fraud," that I just couldn't resist highlighting here:

Quote of the day via Bloomberg (ht Bob_in_MA):

We do believe the recovery is strong,” Dominique Strauss-Kahn said in an interview with Bloomberg HT television in Istanbul. While rising debt levels are a risk to growth, mainly in Europe, authorities in the region “are now really committed to solve it” and “the problem has been contained,” he said.


And this reminds us of Fed Chairman Bernanke's testimony on March 28, 2007:

"he impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained."


Uh oh, not another problem "contained"!



You would have thought these "experts" would have learned by now?

http://www.financialarmageddon.com/2010/06/i-couldnt-resist.html

[Demeter]

37. OLIPHANT TRUMPETS

http://imgsrv.gocomics.com/dim/?fh=2119b342e336448b40be58dee5364d9d&w=750.0

[Demeter]

41. Key Indicators of a New Depression By Neeraj Chaudhary

http://www.informationclearinghouse.info/article25646.htm

June 07, 2010 "Euro Pacific Capital" -- With the mainstream media focusing on the country's leveling unemployment rate, improving retail sales, and nascent housing recovery, one might think that the US government has successfully navigated the economy through recession and growth has returned. But I will argue that a look under the proverbial hood reveals a very different picture. I believe the data shows that the US economy is badly damaged, and a modern-day depression has begun. In fact, just as World War I was originally called The Great War (and was retroactively renamed after World War II), Peter Schiff has said that one day the world will refer to the 1929-41 era as Great Depression I, and the current period as Great Depression II.

For starters, look at unemployment. During Great Depression I, unemployment broke 25%. If government statistics are taken at face value, the current unemployment rate is 9.9%, but a closer look reveals that the broadest measure of unemployment is currently at 20% - and rising. So, today's numbers are in the same ballpark as the '30s even though the federal government is using unprecedented measures to keep the economy afloat. Remember, in Great Depression I, FDR never ran a deficit nearly as large as President Obama's. Moreover, the Federal Reserve of the 1930s still had a gold standard with which to contend, while today's Fed has increased the monetary base with impunity. Yet even with all that intervention, unemployment figures still indicate that we have entered depression territory.

What is demoralizing to an unemployed person is not simply being let go, it is being unable to find a new job for an extended period of time. And this is where Great Depression II really rears its ugly head. According to the US federal government's own data, the median duration of unemployment is now over five months - and rising. This is the highest it's been since the BLS started compiling this statistic in 1965. As workers start to go this long without jobs, they eat into their savings. Eventually - and especially in a country with a savings rate as low as ours and debt as high as ours - they run out of cushion and hit the street. Formerly middle-class people have to make decisions never thought possible: do I eat in a shelter or go hungry in my home?

It's no surprise, then, that about 40 million people - or one out of every eight Americans - are receiving food stamps in Great Depression II. During the height of Great Depression I, the rate was just one out of thirty-five Americans. Even with the stimulus programs, Great Depression II is actually worse on this measure than Great Depression I - and the USDA estimates that the program could grow by another 50%. Who will pay for this growing program if everyone is out of work?

Despite tax credits that have created a rush of purchases this spring, housing is in just as bad shape. During Great Depression I, home prices dropped some 15% from their pre-depression peak (achieved in 1925). In Great Depression II, housing is down at least 30% from the pre-depression peak (achieved in 2005), with some markets down more than 50%.

So, many of the people expected to keep making mortgage payments as they eat tuna fish to stay alive will be paying double their home's resale value. This is a tremendous incentive to walk away, with disastrous consequences for the country's social fabric in these trying times. Empty homes breed crime and vandalism, encouraging more to flee in a negative feedback loop. Moreover, the many 'walkaways' may create a class of Americans with ruined credit - right when many employers have started checking credit scores before hiring.

Even more worrisome, the present drop in home prices is against a backdrop of price inflation. In Great Depression I, our grandparents may have lost value in their home, but everyday goods (milk, diapers, automobiles, etc.) got cheaper at the same time. That made their savings 'cushion' deeper when they needed it most. Today, as home equity (now our main store of savings) declines, prices for consumer goods are rising. It's a tight squeeze indeed.

From jobs to food to the roofs over our heads, the current period of economic turmoil is at least as bad as the First Great Depression, whether or not the financial media wishes to acknowledge it. The main difference is that unlike in the '30s, the US dollar is now the world's fiat reserve currency, so we are able to push our problems overseas for awhile. The plight of the rural Chinese is really our plight - we are living lavishly on the wealth they create. Were they to quit this dastardly arrangement, the full effects of Great Depression II would be felt in America.

By contrast, in Great Depression I, the US was on the gold standard like everyone else, which forced us to live within our means. This, in turn, made it easier to recognize that the economy was in decline and changes had to be made.

Unfortunately, because of the responses of the Administration and the Federal Reserve, which I believe to be deeply misguided, I remain concerned that Great Depression II could develop into something far more devastating than its predecessor, something that other countries in the world have experienced but was thought impossible in the United States: a hyperinflationary depression. As bad as the current downturn has been, inflation would make it immeasurably worse. It would require an honest accounting of the problems we face today to avert the disaster we see coming tomorrow.

Neeraj Chaudhary is an Investment Consultant in the Los Angeles branch of Euro Pacific Capital. He shares Peter Schiff's views on the US dollar, the importance of the gold standard, and the rise of Asia as an economic power. He holds a B.A. in Economics from the University of California at Berkeley.

[bread_and_roses]

47. "Talk of the Nation" had show on Food Stamps - I swear they had plants calling in and commenting

on the website: featured speaker a former restaurant critic and cook talking about how well he could eat on his $200 a month food stamps - brie cheese and artisan bread, if you please! Almost all the callers - if not all - agreed: shopping at Whole Foods! Eating steak! Now, I agree that in the best of all possible worlds processed foods are poor choices, but the food snobbery on the show was revolting. One poor woman didn't get it and called in about how she does use a lot of hamburger and tuna helper - the pained, "don't know what to say to that" strain on the studio end was absolutely PALPABLE.

CONAN: And on $200 a month, provided by food stamps, how do you eat?

Mr. MURRIETA: Pretty well. This month I had $35 left over and I didn't deprive myself of anything I wanted to eat: triple cream brie cheese and salami and artisan bread are, you know, fairly regular purchases for me. I think the key to shopping on a $200 budget - as a single person that's what I receive, families receive more.

CONAN: Mm-hmm.

Mr. MURRIETA: It's just a matter of shopping wisely: being smart about what you want to eat, not buying processed, packaged foods, which, you know, have an incredible markup and a huge footprint, you know, in the ecology. And I buy oysters from the farmers' market. I buy artisan cheeses from the farmers' market. I buy rib eye steaks when they're at their wholesale prices at supermarkets. I buy big pieces of pork shoulder to roast and make taco meat or, you know, pork roast dinner or grind into chorizo. I basically have been looking at my food budget and my food living as my own personal private restaurant.

Well. All I can say is that I worked for twenty years with people on Food Stamps and have family members trying to manage with them now. All of them have children. For all, it is a huge struggle. And for people who have kids in a growth spurt, craving food all the time, especially teenage boys, it is a hopeless cause. They eat you out of the house and home, as we used to say.

I asked my mother - one of the best low low budget "food stretchers" I know - someone who managed to feed nine on a very low budget - we occasionally had fried mush for supper but were only at risk of actually going hungry a few times, due to her skills. But no, we didn't get a lot of fresh food or vegetables, although virtually no processed foods or chips or sweets either. (this was in 50's and early 60's of course - once, when Hamburger Helper first came out she bought it for us as real treat. None of us were used to the fantastic amounts of salt and preservatives in this so-called "food" and we all got sick). Anyway, I gave my mother a typical food stamp allotment for four and asked her to compose a month's healthy menu, breakfast lunch and dinner for two adults, a toddler, and a pre-teen. She took it seriously and went to the supermarket with her lists. She could NOT meet the minimum daily requirements for nutrition for those children on that budget. And if she couldn't do it, I doubt many could.

I don't know if it's still there, but USDA used to have a food stamp cookbook available on its site. Take a look at the serving sizes.

I don't know - maybe food elsewhere is cheaper than in upstate NY and SW PA. Maybe there are lots of farmer's markets in walking distance of poor neighborhoods. Maybe there are farmer's markets all year in CA, not just in the summer, as here. I can tell you for sure the families I've known could not afford to eat brie. Or steak. Whether they bought chips or not.

Nor did the show even consider some of the other constraints - many on FS do work, for instance, and trying to cook everything from scratch when you work is damned hard, and poverty sucks your energy like nothing else. Many of the families I worked with had poor stoves, poor quality and not enough cooking equipment, and some, yes, few skills in cooking. Also, I am convinced that the stress of poverty increases the craving for salts and sweets - the exhausted adrenal system, I think, on overload from constant anxiety trying to compensate, jump start, something like that. Besides, when you can't afford anything else - the class trips, the summer vacation, even a trip to the State Park (no gas money) - it's damned hard to deny your kid that candy, or bag of chips - it costs so little, in comparison to all the other things you can't do for them. You get so tired of saying no.

And, a minor note: the FS budget was NEVER intended to purchase a whole month's food - even on welfare, the laughable "cash" grant used to be called "FCI" for food, clothing, incidentals - you were supposed to use part of it to buy some food. An impossible expectation of course, when your rent is more than all the cash you have for the month, as is often the case. So you try to manage on FS and plan out your food bank visits to make up the deficit.

I could go on and on - already have, for that matter. Why I should expect anything else from NPR is a mystery to me too - I should know better. Much less that they should take a good look at WHY so many of us - including so many working people - are on food stamps at all.

[Demeter]

48. There IS NO TRUTH and No Respect for Truth These Days

From the Supreme Court to the White House on down. It's spin, lies, malicious lies, and phony statistics.

If some truth doesn't start coming out of official mouths, there won't be official mouths anymore. Why don't they see that?

[proudohioan]

51. Wow!!!! Powerful article.

My SO and I were having just this conversation earlier this morning. We related this economy to having a new band-aid being continually slapped on an increasingly festering wound. By the time the doctor begins contemplating the direness of the situation, the patient might not even be able to survive a surgery.

Neither one of us are economists, but damn, how most folks can't see the obvious is beyond us!

Thank you for posting this one!

[Demeter]

55. "Frugality Fatigue"?

http://economistsview.typepad.com/economistsview/2010/06/frugality-fatigue.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+EconomistsView+%28Economist%27s+View+%28EconomistsView%29%29

What does this tell you?:

http://blogs.wsj.com/economics/2010/06/10/wealthy-are-the-only-ones-spending/

Wealthy Are the Only Ones Spending, by Phil Izzo: Retail sales are expected to have increased a bit in May, but a new poll indicates that the spending is primarily coming from wealthier and older consumers.

The government releases its report on retail sales for May tomorrow, and economists predict total sales increasing 0.2% from April. ... But a new poll from Gallup indicates that consumers who make more than $90,000 account for the bulk of that spending increase. ...

Higher-income “consumers seemed to be holding back on spending prior to May in response to the length and depth of the recession, the financial crisis, and a general feeling of economic uncertainty,” wrote Dennis Jacobe, Gallup chief economist. “In May, this seemed to change. It could be that many upper-income consumers are experiencing ‘frugality fatigue.’”

The result is consistent with the picture in the U.S. labor market. In May, the headline U.S. unemployment rate declined to 9.7% from 9.9%, but all of the gains came from workers with a bachelor’s degree or higher, which tend to include the highest paid workers. ... The unemployment rate jumped to 15% for those with less than a high school diploma and climbed to 10.9% for high school graduates. ...

[Demeter]

62. Taleb: Debt Problems Are Worse Now Than in 2008

Nassim Taleb speaks to the issue I have been addressing here for two years, namely that the problem with our financial system is debt. There is too much of it. And all the stimulus in the world won’t solve that problem. The debtors either have to pay the debt off or default. Until they do, systemic risk heightens economic fragility.

You can use stimulus as a way to control the deflationary impacts of the inevitable defaults, but the stimulus we have seen to date is not designed for that purpose. Rather, we have witnessed a transfer of private sector debts onto the public sector in an attempt to prevent recession and make the debt problem go away. Instead, what has happened is the debt problem has moved from the private to the public sector.

Despite what Taleb suggests when talking about sovereign debt auctions, surely being the creator of a fiat currency means government cannot involuntarily face insolvency in its own debt instrument – even in Japan where government debt to GDP is around 200%. As the second guest notes, sovereign government can and will print money. However, a private sector debt jubilee or private sector defaults would have made recovery in Japan much quicker, reduced fragility, reduced the misallocation of resources and increased economic growth.

Lee Quaintance of QB Partners who is an Austrian School proponent recently wrote me that he is arguing for a coordinated and global devaluation. He says:

Total nominal debt will contract shrinking the bounty of the rentiers while a flood of newly-digitized Federal Reserve Notes will enter the economy to boost hiring.

No hyperinflation there since it is global and co-ordinated. You will notice that Taleb inserts the hyperinflation canard into the conversation despite widespread signals of debt deflation and a gaping output gap. I’m not saying hyperinflation can’t happen. I’m saying it is unlikely, especially when we have everyone looking to depreciate their currency at the same time. At a minimum, you need to eliminate the excess labour and capital supply. And were it to occur, deflation would surely come first. That’s why the talk about Treasuries seems misguided.

The video below of Taleb and James Suriowiecki is also interesting. Taleb is right when he says volatility is a contrary indicator; low volatility means higher risk.

VIDEOS AT LINK

Read more: http://www.creditwritedowns.com/2010/06/taleb-debt-problems-are-worse-now-than-in-2008.html#ixzz0qeupyDtC

[Demeter]

56. BP’s Mess, and Wall Street’s By WILLIAM D. COHAN

http://opinionator.blogs.nytimes.com/2010/06/10/bps-mess-and-wall-streets/?emc=eta1

Just because you can do something, does that mean you should? It’s a question that might have saved us a lot of pain in recent months if both Goldman Sachs and British Petroleum had asked it of themselves during the last decade.

Sure, Goldman, and other Wall Street firms, could — and did — create “synthetic C.D.O.s” to allow consenting investors, including Goldman itself, to gamble on the risk in the U.S. housing market. Sure, Goldman and others could — and did — package up mortgages that should never have been issued into mortgage-backed securities and sold them to investors around the world who, in turn, abdicated their responsibility to investigate the soundness of the investment because some rating agency — paid by the underwriters — had slapped a AAA-rating on them. That technology existed, and Goldman and others just availed themselves of it, right? Besides, they were simply supplying the demands of the marketplace, right?

The Gulf of Mexico spill, like the financial implosion, was largely the product of people taking risks and knowing they wouldn’t be held accountable if things went wrong.

Few people on Wall Street — let alone on Main Street, or regulators in Washington — had any idea what a “synthetic C.D.O.” was or what a “mortgage-backed security” was, or what they were designed to do, or the risks they were injecting into the global financial system. One thing bankers and traders — and their high-powered bosses — knew for sure was that they could make billions of dollars for their firms manufacturing and selling these toxic securities to investors around the world, and pocket millions of dollars in annual bonuses for doing it. And that’s what mattered most, right? Everything seemed fine, until one day it wasn’t — and fear overwhelmed us, credit markets froze, unemployment ratcheted up to 10 percent, a deep recession took hold and the American taxpayer got left holding the bag to the tune of around $12 trillion. We’re still digging out.

A similar story, as we now know, with similarly devastating consequences, occurred 51 days ago a mile below the surface of the Gulf of Mexico. BP — and other oil companies — simply took advantage of the prevailing technology to drill for oil at unheard-of depths of seawater. The risks inherent in such a dangerous enterprise seemed minimal, right? And BP was simply meeting customer demand for oil, right? And oil companies were raking in the profits doing so — last year, BP made $16.7 billion; ExxonMobil made $19.3 billion (Goldman made $13.4 billion). And that’s what mattered most, right? But thanks to BP’s extraordinary level of incompetence — and an apparent failure to anticipate or plan for a well blowout — the American people now have been handed not only the senseless deaths of 11 men working on the BP rig but also the worst environmental disaster in our nation’s history. It is both heartbreaking and sickening.

What these two disasters — one financial, the other environmental — prove beyond a shadow of a doubt is that the right incentives no longer exist to get corporate executives to do what they should want to do, and what they must do, to prevent such calamities from happening. The “corporation,” as a legal entity, is very good at attracting capital, providing jobs, maintaining a focus on profitability, creating wealth for the people who work there (especially at the top). It is also very good at shielding executives and boards of directors from liability for their poor own decision-making.

What these two crises reveal is that some corporations and their leaders aren’t very good at making decisions that take full account of the risks they and their companies are taking. It is a truism that human beings do what they are rewarded to do. But the corporate structure these days rewards bad behavior. The problem is that the corporate veil protects the decision makers from the consequences of their decisions and, accordingly, they are encouraged to take asymmetrical risks — huge paydays for them if everything works out; huge consequences for us if they don’t. As Senator Christopher Dodd correctly said in April 2008, during the first Senate hearing about the unfolding financial crisis, “We’ve socialized risk and we’ve privatized reward.”

Unfortunately, the financial reform legislation that Senator Dodd and his colleagues are working so hard on to make law does nothing to change that dynamic. Nowhere in the approximately 1,500 pages of the proposed bill is there anything about making Wall Street executives financially and legally liable for their decisions, as they once were when Wall Street was a series of private partnerships and a partner’s entire net worth was on the line every day. Talk about accountability! But that ethic was lost 40 years ago when Donaldson, Lufkin & Jenrette went public and the rest of Wall Street followed soon thereafter.

As a result, our financial crises come fast and furious these days, since Wall Street bankers and traders get rewarded for selling, and generating revenue, not for worrying about what they create. The time has come for actions to have consequences. You can be sure that if Jimmy Cayne, the former C.E.O. of Bear Stearns, or Dick Fuld, the former C.E.O. of Lehman Brothers, had their entire net-worth on the line every day instead of being able to gamble with the house’s money, they would have been much more focused on the risks their firms were taking.

Americans are angry, and rightly so. One measure of how far in the public’s estimation Goldman has fallen off its once lofty perch came from an NBC/Wall Street Journal poll of 1,000 adults last month. Goldman’s positive approval rating stood at just 4 percent, below that of BP, at 11 percent, and that of Toyota, the Japanese car manufacturer experiencing acute quality problems, at 31 percent. Goldman’s negative ratings clocked in at 50 percent, fairly dreadful for a firm that was No. 8 on Fortune’s 2010 list of the world’s most admired companies, up seven spots from 2009. (Toyota was number seven on the list.)

Although there is no equivalent (yet) of the “spill-cam” in front 200 West Street — the site of Goldman’s sparkling $2.1 billion headquarters building across from Ground Zero — perhaps there should be, because it sure seems that what Goldman and other Wall Street firms are manufacturing every day has proved every bit as toxic as what’s spewing from a pipe at the bottom of the Gulf of Mexico. High-def, please.

[Demeter]

57. Billionaire Pete Peterson's Lackey, Dave Walker Speaks About Strategic Default

Peterson is all for slashing Social Security so he doesn't have to pay taxes to cover all the Social Security tax income already collected but spent on corporate oil wars...and tax cuts to people like Peterson.

http://www.youtube.com/watch?v=Zj2jcSABmdI&feature=player_em

[Demeter]

60. Pete Peterson Has Won: Americans Rate Federal Debt as Top Threat

http://www.nakedcapitalism.com/2010/06/pete-peterson-has-won-americans-rate-federal-debt-as-top-threat.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

...It would appear the ground has been laid rather effectively for (among other things) an assault on Social Security and Medicare. As we have pointed out before, Social Security is not under any immediate stress, and it would take only some minor tweaks to alleviate the (well off in the future) strains. And contrary to popular perception, the reason Medicare spending will get out of hand is due to projected medical cost escalation, not demographics. In other words, the “crisis” in Medicare is a symptom of our broken health care system, and not an entitlements problem per se. But in addition to the continued ability of Big Pharma and the health insurance industry’s ability to make a bad situation worse, as witness our healthcare “reform,” consumers have also been deeply conditioned to see more treatment as better. From both a cost and side effects perspective, this is simply not often the case...

[Demeter]

61. U.S. retirement benefits to be cut?

http://www.youtube.com/watch?v=aopOQFLk1fY&feature=player_embedded#!

[Demeter]

59. Goldman: No SEC Settlement Imminent

http://www.nakedcapitalism.com/2010/06/goldman-no-sec-settlement-imminent.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Bloomberg notes that Goldman’s president Gary Cohn has stated that the firm is not close to a settlement of the SEC’s fraud case against it for one of its Abacus CDOs. Note that this is contrary to rumor and speculation as recent as last week and suggests talks are pretty close to dead. The SEC has widened its investigation against the firm to include additional CDOs, the most recent a 2006 synthetic CDO called Hudson, but it is not yet apparent whether the SEC will file additional charges.

The Goldman announcement is significant because not only is there good business reason for the firm to settle the case, but even the White House is pushing for a resolution. While many continue to assert that the firm’s franchise will be undamaged, that it already no longer true. The case and related scrutiny continues to take considerable management attention and the firm’s once stellar brand is tarnished. Even more important, the firm’s staff are reported to feel beleagured and have fallen into siege mentality. Finally, I am hearing much more discussion of by investors of how the firm front runs them. It appears that persistent and warranted unhappiness over the firm’s persistent business practices is coming to the surface.

It is entirely possible that the two sides have serious outtrades on all the major issues. The SEC reportedly wants a billion dollar fine; that’s outside precedents for the losses investors took on this deal, but the continuing investigations may change that. The SEC also reportedly wants an admission of guilt of some sort, something that Goldman resists, both culturally and from a practical standpoint (it would make private lawsuits easier).

The officialdom has allegedly pushed both sides for a resolution, but Goldman does not appear to be getting the message from the SEC: it needs to do something that is reasonably painful. Given the continued loss of morale, rumors, high potential for more unflattering disclosures (which could have a more serious impact on market and customer perceptions), the firm’s refusal to put this chapter behind it is looking more and more misguided.

[Demeter]

69. Finally, Borrowers Score Points By GRETCHEN MORGENSON

http://www.nytimes.com/2010/06/13/business/13gret.html?ref=business


WHILE the wheels of justice have turned very slowly in the years since our nation’s financiers and regulators nearly cratered our economy, the Federal Trade Commission’s settlement last Monday with Countrywide Home Loans suggests that they haven’t entirely ground to a halt.

Countrywide, now a unit of Bank of America, was once led by Angelo Mozilo and was the nation’s largest mortgage lender in the glorious, pre-crisis days of the housing boom. But it was also a predatory institution, and the F.T.C., citing Countrywide’s serial abuse of troubled borrowers, extracted a $108 million fine from Bank of America last week.

That money will go back to some 200,000 customers whom Countrywide forced to pay outsized fees for foreclosure services. These included billing a borrower $300 to have a property’s lawn mowed and levying $2,500 in trustees’ fees on another borrower, when the going rate for that service was about $600.

Though Countrywide’s mortgage contracts specifically barred such practices, they served the company well by generating income during downturns when it was harder to keep making money off new mortgages. This “counter-cyclical diversification strategy,” as Countrywide called it, was designed to “extract the last dollar out of the pockets of the most desperate consumers,” said Jon Leibowitz, the F.T.C. chairman.

Mr. Leibowitz also said Countrywide made bogus claims about what homeowners owed during the resolution of bankruptcy cases and added fees to borrowers’ obligations without notice. His office’s investigation turned up cases in which Countrywide tried to collect improper fees years after a bankruptcy case was over.

In some cases, Mr. Leibowitz said, even after a distressed homeowner became up-to-date on all of his or her payments, Countrywide would start another foreclosure proceeding against the same borrower.

PRETTY shameful, all in all. But nothing new to lawyers who represent troubled borrowers. They say these kinds of abuses still occur.

“We’ve been screaming about these practices for I don’t know how many years now,” said David B. Shaev, a lawyer in New York City who represents consumers. “A lot of the fees seem like nickel-and-dime charges, but they add up to big money. The $108 million in the Countrywide case is the tip of the iceberg.”

The other dubious Countrywide actions identified by the F.T.C. — pursuing foreclosure improperly, adding fees without notice — also sound familiar to consumer lawyers across the country.

Consider a recent federal bankruptcy case in Houston involving Wells Fargo. The facts of the case were outlined last month in a harsh contempt ruling against the bank by Judge Jeff Bohm.

Back in 2003, Antoinette and Lenord De La Fuente filed for bankruptcy protection after they fell behind on their Washington Mutual mortgage. Court filings show they proposed a restructuring plan that called for 60 monthly payments to the bankruptcy trustee, who would in turn distribute the money to their creditors. The bankruptcy court agreed to the couple’s plan in June 2004.

The couple dutifully made their payments. Wells Fargo took over their loan in June 2007 and the next January sent the couple a letter accusing them of being delinquent by $8,400. Wells told them that they had until mid-February to come up with the money or the bank would start foreclosure proceedings.

The court documents show that the borrowers tried unsuccessfully to argue that Wells was wrong. But Wells refused to back down; afraid they would lose their home, the couple struck a forbearance agreement and received a loan modification in April 2008.

This loan modification violated the borrowers’ repayment plan. “Wells Fargo frightened the De La Fuentes into making payments to Wells Fargo in violation of the confirmation order,” Judge Bohm wrote.

In June 2008, the couple hired a lawyer to investigate the dispute with Wells; they filed a lawsuit against the bank that August. About a year later, Wells offered to settle with the couple. In a court-approved settlement, Wells stated that the couple were indeed current on their $66,572 mortgage and owed no outstanding fees or charges. Wells agreed to pay the couple about $30,000 for their legal fees.

With that, the couple thought their problem with Wells had been solved.

But in November 2009, Wells told them their mortgage balance had mysteriously increased to almost $71,000, even though they had made all of their payments. Two months later, Mrs. De La Fuente noticed that Wells had reversed several of the mortgage payments she and her husband had made. When she asked Wells why, she was told her loan was in bankruptcy status; if she wanted to resolve the problem, she would have to pay almost $9,000. Late fees were also accruing.

The couple and their lawyer went back to court and accused Wells of violating the settlement agreement. After hearing testimony, the court agreed. It also didn’t buy the argument of Wells that errors, including a computer glitch, caused the couple’s problems.

“The court certainly agrees that ‘mistakes happen,’ ” Judge Bohm wrote. “However, when mistakes happen not once, not twice, but repeatedly, and when actions are not taken to correct these mistakes within a reasonable period of time, the failure to right the wrong — particularly when the basis for the problem is a months-long violation of an agreed judgment — the excuse of ‘mistakes happen’ has no credence.”

Judge Bohm also punted Wells’s claim that its problems with the couple were anomalies. He cited three other federal cases — one in Florida and two in Louisiana — in which Wells improperly collected money from borrowers, applied payments inappropriately, overcharged borrowers or failed to keep accurate records. The judge imposed $11,825 in fines on Wells and required it to pay $4,544 in lawyer’s fees to the De La Fuentes.

Teri Schrettenbrunner, a Wells Fargo spokeswoman, said, “There is no doubt here that we didn’t handle this case well, but it is rare that you see a confluence of this many errors coming together as you did on this case.”

She contended that a vast majority of Wells’s mortgage customers are satisfied with it and that its operations are nothing like Countrywide’s. “There are significant contrasts between the way Countrywide did business and the way we do business,” she said.

NEVERTHELESS, for imperiled borrowers, the new scrutiny on foreclosure practices is long overdue. Thankfully, the United States Trustee, the Department of Justice unit that oversees the nation’s bankruptcy courts, is also investigating possible improprieties among lenders, mortgage servicers and the law firms that represent them in bankruptcy cases against homeowners. The trustee’s office assisted the F.T.C. in the Countrywide matter.

It’s a slow process, to be sure. But at least it is proceeding.

[Demeter]

81. RealtyTrac: Most Foreclosures Have Positive Equity

http://www.nakedcapitalism.com/2010/06/realtytrac-most-foreclosures-have-positive-equity.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

http://www.housingwire.com/2010/06/09/realtytrac-most-foreclosure-properties-not-underwater?utm_source=rss&utm_medium=rss&utm_campaign=realtytrac-most-foreclosure-properties-not-underwater

Of all of the foreclosures in the RealtyTrac online database, less than 50% have mortgages worth less than what is owed, said Rick Sharga, senior vice president at RealtyTrac, during a session at REO Expo, which concludes in Dallas Wednesday….

The overall unemployment rate dropped slightly to 9.7% in May, from 9.9% in April, mainly due to the labor force shrinking by 322,000, according to the US Department of Labor Bureau of Labor Statistics. This has caused foreclosures to increase in places previously thought safe from the crisis, including Provo, Utah and Portland, Ore….

The overall unemployment rate dropped slightly to 9.7% in May, from 9.9% in April, mainly due to the labor force shrinking by 322,000, according to the US Department of Labor Bureau of Labor Statistics. This has caused foreclosures to increase in places previously thought safe from the crisis, including Provo, Utah and Portland, Ore.

Yves here. Note that this may not mean what it seems to mean. The hidden assumption is that the houses being foreclosed upon are representative of the pool of hopeless delinquencies. But we may have selection bias. One possibility is that banks are moving faster to foreclosure in homes that have positive equity. That could be a function of bank reluctance to take further writedowns (which might call their marks on mortgage assets in question) plus the fact that the markets with the steepest real estate price declines (such as the most stresses areas of Florida, California, and Arizona) may also have the most clogged court and bank processing pipelines. From a recent article in the New York Times:

The average borrower in foreclosure has been delinquent for 438 days before actually being evicted, up from 251 days in January 2008, according to LPS Applied Analytics….

More than 650,000 households had not paid in 18 months, LPS calculated earlier this year. With 19 percent of those homes, the lender had not even begun to take action to repossess the property — double the rate of a year earlier.

Yves again. There is another reason this pattern is not a positive development from a bank/investor perspective. Servicers advance interest payments and real estate taxes while a property is in default, and recoup it when the property is sold. So longer time to foreclosure means greater eventual losses. Moreover, as more homeowners are fighting foreclosures, it increases loss severities. For instance, one case I am familiar with will show at least a 400% loss severity.

[Demeter]

82. SEC Investigation of Goldman Trading Against Its Clients Widens

http://www.nakedcapitalism.com/2010/06/more-sec-investigation-of-goldman-trading-against-its-clients.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

The latest shoe to drop on the Goldman front is the report on Wednesday that the SEC was investigating yet another one of its synthetic CDOs, this one a $2 billion confection called Hudson. It isn’t clear whether the SEC will file charges, but this one has the potential to be particularly damaging in the court of public opinion, since this CDO was created solely as a proprietary trading position to help the firm get short subprime risk in late 2006, when the market was clearly on its last legs.

By way of background, the assets in a synthetic CDOs are credit default swaps. In the case of Hudson, they referenced $800 million of BBB subprime bonds, 2005 and 2006 vintage, and $1.2 billion of the ABX. The deal was a wipeout.

What makes Hudson different from the Abacus CDO that is the subject of an SEC lawsuit is that it was not even arguably intermediated between customers. Goldman was not only the initial short counterparty (as was indicated in the contract as standard verbiage), it was every and always intended to be the ultimate short counterparty. Why does this matter?

Synthetic CDOs were sold to investors as the economic equivalent of cash CDOs, ones whose assets were subprime bonds rather than credit default swaps. That was always more than a bit disingenuous. Cash CDOs had for some time been the way that underwriters would dispose of the pieces of subprime bonds they were unable to sell, namely the riskier tranches. Conceptually, it was like taking unwanted parts from (presumably) healthy pigs, grinding it up with a little bit of better meat plus some spices and turning it into sausage.

But the short players like Goldman set out to create sausage from pigs known to be sick because that would be more profitable for them, and this was a zero sum game: their profit came at the expense of their customers. Note that this is NOT inherent to investing, that the dealer’s gain is necessarily the customer’s loss. A dealer might exit a trade that he sees as unprofitable because he expect the price to fall in the next few days. The customer may have a completely different time horizon, and the success of his investment will not be affected much by what would be for him trading “noise” over the next few days.

Let’s put it more simply: how many of you would knowingly choose to be on the other side of a Goldman prop trade, particularly if you knew Goldman had designed the instrument to enable it to go short? Answer: probably zero.

There is an (in theory) less culpable scenario, but it does not get Goldman out of the SEC’s crosshairs. The initial motivation for its Abacus program (25 synthetic CDOs in total) was to lay off long CDS positions it took. Let us say a hedger like a bank wanted to reduce its subprime exposure. It could sell the loans or bonds, or simply hedge it by entering into a CDS with Goldman. From time to time, Goldman would flatten its position by bundling these exposures into a synthetic CDO. This was hardly unusual; a similar process was well established in the corporate CDS market.

So if that is the case (big if, one will have to look at Goldman’s intent, as revealed by internal messages, as to whether it was merely laying off exposures in a routine manner or cherry picking particularly drecky exposures to establish a profitable short), Goldman’s “we’re just acting as a market maker” argument is not a complete fabrication. But it still appears to have a legal problem. See this statement in its marketing documents (p. 346 of the Goldman documents released by the Senate):

Goldman Sachs has aligned incentives with the Hudson program by investing in a portion of equity and playing the ongoing role of Liquidation Agent.

Yves here. This is a flat out misrepresentation. The equity position is a Trojan horse for the much larger short position. The equity was at most 5% of an ABS CDO; the e-mails on preliminary deal structure show this one at 1% to 1.5%.; Goldman would be at least 98.5% net short this deal (if p. 401, which shows Goldman had a $8 million equity position, is correct, it was 99.6% short! And since per p. 402, it reported $17 million in P&L on the deal, so it took more out in fees than its equity stake. Nice work). It most certainly did NOT have incentives aligned with its investors

Goldman may argue that the disclaimer language in itty bitty print on the next page gets it off the hook, but I have my doubts that that will be viewed with much sympathy. There is a notion of good faith and fair dealing that underlies all contracts. It is such a bedrock concept that it is not clear that Goldman can try to disclaim its way out of it.

Goldman has more language that is misleading (p. 357):

Goldman Sachs’ objective is to develop a long term association with selected partners that can adapt to and take advantage of market opportunities

• The goal is to create attractive proprietary investments by leveraging expertise of both Goldman Sachs COO and Mortgage Desks while maintaining a consistent approach and creating a unified issuance program across multiple transactions

Yves here: Translation. We want to sell you more deals like this, so trust us, we won’t fleece you.

Note that Goldman explicitly says it is NOT laying off its own exposures, and by implication based on the body language thus far, it is pickin’ good stuff for this deal (p. 358):

• Goldman Sachs’ portfolio selection process:

• Assets sourced from the Street. Hudson Mezzanine Funding is not a Balance Sheet COO
• Goldman Sachs COO desk pre-screens and evaluates assets for portfolio suitability
• Goldman Sachs COO desk reviews individual assets in conjunction with respective mortgage trading
desks (Subprime , Midprime, Prime, etc.) and makes decision to add or decline
• All CDS use rating agency approved confirms (pay as you go)

It appears this deal was not an easy sale (p. 803, from an October 2006 e-mail by Michael Resnick):

do we have anything talking about how great the BBB sector of RMBS is at this point in time … a common response I am hearing on both Hudson’ HGSl 1s a concern about the housing market and BBB in particular!

We need to arm sales with a bit more – do we have anything?

Now Goldman defenders may argue that the investment bank is being unfairly singled out. However, that is hard to take seriously. There were very few banks in the business of synthetic CDO programs for their own account : Goldman, who is being investigated, Morgan Stanley, ditto, and Deutsche Bank….not. One industry source has also told us that Citigroup did deals along similar lines, but we have not gotten independent confirmation (update: aha, some new G2 in a very good article at the Financial Times tonight).

Some cynics may contend that the failure to go after Deutsche Bank is due to the fact that the head of SEC enforcement, Robert Khuzami, not only comes from Deutsche, but was involved in its CDO business. But the reality is more complicated. Getting someone like Khuzami, who is also a former prosecutor, was a coup for the SEC. He would clearly have to recuse himself from any cases involving his former employer. Insiders can correct me if I am wrong, but not only does the SEC not appear to have anyone who could step into Khuzami’s shoes (in terms of having both the product knowledge and the litigation experience), but it would be difficult to hire someone with a similar profile. Thus the fallback may be to perfect the litigation strategy on Goldman and Morgan so it then can then be deployed against Deutsche and not require someone as high powered to lead the effort.

Just because the wheels of justice seem to be grinding a bit slowly does not mean that in the end, they will not grind exceedingly fine.

AS LONG AS SOMEBODY WITH THE POWER DOESN'T PUT A STOP TO THEM--LIKE THE DANCING SUPREMES

[Demeter]

8. TECH WARS---TEK WARS

With apologies to Shatner...

If it's technology, it's here.

[Demeter]

9. Microsoft Office set to go free online

In a watershed moment, the software group is to launch a free online version of its widely used software, as it seeks to counter the rise of Google Docs and other online services
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/JIJ982/VU/t

[Demeter]

10. Dell board says chief will not be barred

The computer company is revising its results for the previous quarter and recording a $100m liability to establish a reserve for a potential settlement with the SEC
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/LQFJO2/VU/t

[Demeter]

15. Apple likely to avoid antitrust battles

Although regulators have begun paying more attention to the computer group’s vertical integration, experts believe brutal legal confrontations might not be forthcoming
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/FXEYT6/VU/t

[Demeter]

32. Google says ads may be blocked by Apple

A rare public row broke out between Google and Apple on Wednesday as the internet group claimed its market-leading mobile advertising network was about to be unfairly excluded from the iPhone and the iPad.
Read more >>
http://link.ft.com/r/BLH300/6VXGZ2/NRHD3/40KQ3N/RNLN5H/PJ/t

[Demeter]

40. I'm Dave. Fly me. Dave Barry

http://www.miamiherald.com/2010/06/06/1649644/im-dave-fly-me.html

[Tansy_Gold]

11. First Rec! First Rec!

(simple pleasures for simple minds)



Tansy Gold

[Demeter]

13. Just for Our Winner, the Grand Prize!

http://www.webtvwire.com/watch-the-rocky-and-bullwinkle-show-online-full-episodes-whole-seasons-1-2-3-streaming-video-torrent-search/

http://www.tvduck.com/The-Rocky-and-Bullwinkle-Show.html

TWO sites that promise full seasons of free frivolity with Moose and Squirrel.

[ozymandius]

44. Sorry I'm late. But being first - you get a moose

and squirrel

[Tansy_Gold]

17. from 1999

A paper I wrote for a class "Women in Popular Culture" at ASU-West.





24 April 1999



She Was a Long, Cool Woman in a Black Dress
or
Hang On, Stupid


Every artistic movement has its precursors, its advance guard. Someone is always ahead of her or his time. Postmodernism, with an ambiguous birthdate in the late 1960s, is no exception.

If Madonna reproduces Monroe, there must be a link. The icons of postmodernist popular culture did not spring full-grown from the head of Zeus or Frank Zappa. One of the current icons, The Simpsons, had its genesis in a very iconoclastic animated series from the late 1950s and early 1960s. Simpsons’ creator Matt Groening acknowledges his debt to the often bizarre and still very popular Rocky and Bullwinkle Show.

According to an interview recorded in Louis Chunovic’s The Rocky and Bullwinkle Book (Bantam, 1996) Groening admits playing, in perfect postmodern form, an in-joke on his audience by naming his characters Homer J. and Bartholomew J. Simpson in winking honor of Rocket J. Squirrel and Bullwinkle J. Moose.

The creative genius of Jay Ward, the father of Rocky, Bullwinkle, and friends, would probably have laughed at any academic analysis of his product. But in fact that analysis would show that Ward was indeed ahead of his time.

Was he a feminist? Probably not. But I think it’s worth noting that voice actress June Foray provides the voice of “hero” Rocky, the Flying Squirrel. And if Jay Ward wasn’t a feminist or a conscious, intentional postmodernist, he employed many of the elements of these theories in creating the show.

The mixture of unexpected and unusual forms is one indication. The main heroes are all males, but many of them are non-human -- Rocky, Bullwinkle, and Mr. Peabody, the dog who deconstructs and reassembles history -- while the villains tended to be human. In the context of the Cold War, when “enemies” were “animals,” this may have contained a message of subtle irony. In fact, the show’s tweaking of the Cold War, making fun of the doomsday threat, is also a kind of nihilistic satire.

When Ward does portray women, he plays more games with the audience, mixing the expected with the unexpected.

The most visible example is villainess Natasha Fatale, teamed with the equally nefarious Boris Badenov. Although Natasha’s dress is, despite the title of this paper, purple, she parodies several icons. Not only does she poke fun at the sexy European actresses like Marlene Dietrich, Greta Garbo, and Hedy Lamar, among others, but she also affords a comedic contrast to the “typical” Soviet women -- big, beefy, “unfeminine” -- often presented to the American public. Natasha is undeniably a sex symbol, with her long dark hair, exotic eyes, strapless gown, and unequivocal cleavage. She is also a spy, albeit a relatively incompetent one, but with a couple of twists. In true 1950s fashion, she follows orders passed down from Fearless Leader and bungled by Boris. However, Natasha knows Boris is a bungler. She’s smarter than he is.

Rocky, Bullwinkle, Boris and Natasha provide the continuing -- and therefore fragmented -- stories that book-ended the show with two-minute episodes, usually titled with outrageous puns (“Rain of Terror, or, The Desperate Showers”). Between episodes, Ward and Co. inserted various single-episode features, such as “Fractured Fairy Tales,” “Peabody’s Improbable History,” and “Aesop’s Fables.” All were parodies, loaded with the kind of surface visual humor that would appeal to children but heavily laden with puns and other satire only adults could fully appreciate.

In “Fractured Fairy Tales,” Ward played fast and loose with tradition, rewriting some familiar stories more than once. Since many classic fairy tales feature female characters, this was fertile ground for protofeminist follies. In one version, Snow White is not the fragile royal heroine but the CEO of Snow White, Inc., an enterprise contracting the services of a fleet of various dwarves. The evil stepmother’s fiendish plot is foiled by a foppish capitalist of a prince, who wakens Snow White from the spell of the poisoned apple but then proceeds to blow the proceeds of the venture on the company the evil step-mother had just inadvertently destroyed. Snow comes across as the only competent one in the bunch.

The animation Ward employed is extremely simple, a marked contrast to the lavish and detailed work done by the Disney studio, and amateurish even by the less-elaborate standards of Hanna-Barbera. The cleverness of Rocky and Bullwinkle is in the writing, not the artwork. The simple silliness of the show, including the “Fractured Fairy Tales” segments, appeals to children, but the subtleties, especially the puns that generate plot lines (“The Ruby Yacht of Omar Khayyam,” which can be found in Moosylvania on the waters of Veronica Lake, near the Isle of Lucy, not far from Whynchataka Peak. . . .) can best be appreciated by adults. Forty Fifty* years after its inception, it still is.




"Rocky and his Friends" debuted on network television November 1959.
http://en.wikipedia.org/wiki/The_Rocky_and_Bullwinkle_Show





Tansy Gold

[Demeter]

12. THE GOLD BUG

I spent the better part of two summers trying to read that blasted book by Poe.
IMO, he died too late.

If you must, it's here:

http://www.enotes.com/gold-bug-edgar-allan-poe-text/

I much prefer the current gold bug...

[Demeter]

14. Gold share classes boost returns for Paulson

Gold-denominated investments in the $34bn hedge fund manager run by John Paulson have more than doubled underlying returns in the group’s funds for clients
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/ZB06DW/VU/t

[Demeter]

36. Gold to Fight Fiat Currencies for Useless Title: Why gold is still better than faith-based money

http://dailyreckoning.com/gold-to-fight-fiat-currencies-for-useless-title/

"In the land of the blind," the old saying goes, "the one-eyed man is king." In the world of untrustworthy investment assets, therefore, which asset deserves to be supreme global ruler?

US Treasuries? Picassos? Shares of Apple Computer? Vintage Corvettes? Beachfront Real Estate?

It's a tough call, made even tougher by the volatility of the foreign exchange markets and the capriciousness of national tax authorities. Truth be told, there is probably not just one supreme asset that merits trust above all others. But if there were just one, that asset would be gold...simply because it has the longest and most impressive resume.

Nevertheless, this trustworthy asset commands surprisingly little respect from most American investors. They remember gold as the asset that slumbered for two decades while stocks jumped 10-fold. And despite gold's strong performance during the decade just passed, most investors are still quick to point out that gold has delivered a negative inflation-adjusted return since 1980. That's 30 years and counting.

"At some levels," reasons Brett Arends of The Wall Street Journal, "gold, as an investment, is absolutely ridiculous. Warren Buffett put it well: 'Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head.'

"And that's not the half of it," Arends continues. "Gold is volatile. It's hard to value. It generates no income... It's a currency 'substitute,' but it's useless."

Arends offers a familiar and relatively coherent critique of gold's stature in the world. And yet, if gold is as 'ridiculous' and 'useless' as he contends, the dollar must be doubly ridiculous...and the euro triply useless. What intrinsic "value" or utility do these sovereign IOUs possess?

A dollar possesses value only because enough people agree that it does. But if a large body of dollar-holders rebelled against this notion, the dollar's value would decline, if not disappear altogether. Faith and habit support the dollar's value. Nothing more. Isn't that a bit ridiculous too?

And yet, the world's ridiculous "faith-based" monetary system underpins the entire network of global commerce. Without dollars and yen and euros, global commerce would function very poorly. So the system persists, despite its obvious shortcomings. Oil producers, for example, continue to spend decades developing new projects, building pipelines and expanding refineries so that they can continue to exchange one gallon of gasoline for three pieces of green paper.

The whole thing is kind of insane...when you really think about it. But this form of insanity is benign in most economic settings. Everyone knows that a piece of green paper possesses zero intrinsic value. But no one cares, as long as four pieces of green paper buys a breakfast at Denny's, five pieces of paper buys a lunch at McDonald's and six pieces of paper buys a coffee at Starbucks.

Unfortunately, here in A.D. 2010, currencies are coming under suspicion. No one knows which currency is good or which is bad...or if any currency at all can be trusted. The global monetary system is creaking under the weight of excessive government debts. In such an environment, what asset is truly safe?

If money itself is not trustworthy, what is? What asset evokes confidence? What national treasury, government agency, financial institution or pension system inspires complete trust?

The time has come to ask ridiculous questions...and to continue asking ridiculous questions until some of the ridiculous answers begin to make perfect sense.

Gold might be as "useless" as the Journal's Arends contends, but an ounce of it buys about 1,200 dollar bills. In a few years time, this same useless ounce of metal might buy 5,000 dollar bills.

The question then would be, "What do I do with all these green pieces of paper?"

[Demeter]

16. CHINA TOWN

The biggest story these days is the biggest country...

[Demeter]

18. Signs of widespread worker action in China

Reports are emerging that the labour protests in the Communist country are far more widespread and co-ordinated than previously thought
Read more >>
http://link.ft.com/r/VKY5JJ/8AY25N/4VXHZ/FXNGIO/PRU327/VU/t

[Demeter]

71. Foxconn to close factories in China / Apple device manufacturer ends suicide payments

http://news.techworld.com/applications/3226487/reports-foxconn-to-close-factories-in-china&cmpid=sbslashdotschapman

Foxconn – the electronics manufacturer whose clients include Apple, Dell and HP – is on the verge of closing its mainland China operations in a massive restructuring effort that could see 800,000 workers lose their jobs.

The Register first reported the news, citing a Chinese-language news site ON.CC as its source. The report has not been verified at time of writing.

The iPad manufacturer has come under media scrutiny in recent months after a wave of suicides at its huge Shenzhen plant. Now the electronics maker Foxconn says it is considering moving some of its production back to Taiwan, the island where it has its headquarters.

The iPad manufacturer also made headlines yesterday after it announced it will no longer pay extra compensation to families of employees who kill themselves. The announcement follows a spate of suicides at its sprawling south China factory.

According to a report on MIC Gadget, Foxconn CEO Guo Tai-ming has said workers commit suicide for the money, and the company will no longer compensate the families of Foxconn workers who take their own lives.

As evidence, the CEO brandished what he said was a suicide note written by an employee. The letter, written in Chinese, translates as follows, according to MIC Gadget: "Mom, you always tell me to die, and now I will jump down from Foxconn. I really have to go. You don't have to feel sad: Foxconn will pay some money, and as your son, this is the only way to return you." This particular employee was rescued, according to Guo.

Gou also said a "Suicide Association" has carried out an investigation on Foxconn, and 12 suicide victims. The survey concluded that three of them had a mental illness, and another eight had other emotional disorders.

Beyond putting an end to the suicide compensation program, Tai-ming said Foxconn is considering moving its main production lines back to Taiwan and using more automated production - as well as selling the company's dormitories to the local government so that authorities could take responsibility for the living conditions.

Apple, Intel and HP are among the IT giants to outsource their manufacturing to Foxconn in China.

[Demeter]

23. JPMorgan forms China IPO joint venture

The US bank unveils a new securities joint venture in the latest move by a global investment bank to tap the mainland’s lucrative capital markets
Read more >>
http://link.ft.com/r/P75VYY/A7ICQP/HI3M9/C5JP2D/40ZCOD/36/t

[Demeter]

33. Recovery Flops! Bill Bonner

http://dailyreckoning.com/recovery-flops/


In the reign of Emperor Zhao, in 81 BC, 60 Confucian scholars were asked to consider the effect of government meddling in the economy. The Middle Kingdom was in a fix. Mongol raiders were pressing it from the East; the government was going broke. Taking the advice of Sang Hongyang, the feds of that era had put in place various state monopolies and price controls. The result?

"People live in houses with badly-made beams and shoddy thatched roofs. They wear clothes of rough fabric and eat out of bowls made of dirt," the sages explained. "We waste our time on vain efforts...and lack the essentials, food and clothing."

The scholars gave their advice in moral terms: "Above all, emphasize virtue and suppress get-rich-quick speculations." Too bad they didn't have The Financial Times or The New York Times to guide them! These journals offer a world without wickedness or moral lessons. Economy in a funk? Forget the real cause. Stimulate it! We can worry about the real problem "after the economy has recovered," writes Paul Krugman in The New York Times. "Only those who believe the economy is a morality play," would want to suffer the pain of a correction, adds Martin Wolf at the FT.

Readers are urged to focus on the hilarity of the scene rather than on its gravity. It is as if a fat man were bending over. The further over he goes, the more his seams split. First to go was the subprime seam in the back...then the Greek seam on the side. But no one wants to say the obvious thing: that he should stand up straight and lose weight. Instead, the FT and the NYT want the government to buy him a larger pair of pants.

[Demeter]

54. China's "Other" Export‏

http://dailyreckoning.com/chinas-other-export/

"I want a big car and a big house," a fellow diner told us over sushi in Taipei's trendy Bellavita complex recently. "And property is so cheap there, I'm sure I'll have enough left over for one of those giant SUVs the Americans love so much."

The gentleman was sitting a few places down from us at the restaurant counter. He and his daughter were here in "Isla Formosa" to visit her grandmother. A successful chef (he mentioned that he'd catered more than one Oscar Night after party - "Russell Crowe is a nice guy...countryman of yours, right?"), our new mate has restaurants in LA and around his current hometown, just outside of Shanghai. Born here in Taiwan, he speaks fluent Mandarin, English and "kitchen Spanish." His daughter, at the tender age of 5, is impressively well versed in all three languages.

"¿necesitas ir al baño?" asked father, proudly. The young girl looked sheepishly at her dad's strange new friends. "Si."

Returning from the bathroom a few moments later, he took up again with his plans for the future.

"I had a look at a few places last time I was there, earlier this year. We travel quite a lot and I'm always searching for a bargain."

The gentleman wasn't talking about buying a house here in Taiwan, where prices have been on the march higher for 21 consecutive months to May. Nor was he hunting for bargains over on the mainland, where fear of a property bubble has prompted the government to introduce a range of measures aimed at cracking down on rampant speculation. Rather, he has his eye on "a block or two" just outside of Houston, Texas.

"There's just so much space available there...big, wide roads...plenty of parks. Prices have really been whacked in the last few years. I get more house for my yuan, and the area I'm looking at has a growing Chinese community, so this one can continue to practice her Mandarin."

Our sushi buddy's story is not a unique one. For a growing number of well-to-do, geographically mobile Chinese citizens, property investments abroad are becoming a popular store of wealth, and a hedge against an increasingly precarious market back home. The Middle Kingdom's emerging middle class has relatively few options when it comes to protecting their savings. (The National Bureau of Statistics announced yesterday the annual rate of inflation rose to 3.1% in May - up from April's figure of 2.8%.) Many are wary about investing in stocks after recent, violent selloffs in the markets (the Shanghai Composite Index "officially" entered a bear market last month after declining more than 20% from its 2009 high). And again, fears over government efforts to cool the housing markets in major cities are further encouraging them to look farther afield.

Seen by some as "the new Russians," wealthy Chinese businessmen and women are snapping up top-end properties from London to Sydney, Vancouver to New York. According to a world wealth report published last year by Merrill Lynch and Capgemini, the number of dollar millionaires in China outstripped the number in the UK for the first time in 2008. Only the US, Germany and Japan now have more millionaires...although the rate at which China is promoting new super rich is by far outstripping the west (the US, for example, is actually demoting millionaires at the fastest pace globally.)

It's hardly surprising then that these hard-working, well-educated individuals are pouncing on depressed real estate markets abroad. Last year, Soufun Holdings, one of China's largest real estate companies, arranged a series of "property investment tours" around the US. For $3,600, Chinese buyers were given a whirlwind tour beginning in Boston and continuing on to San Francisco, Los Angeles and finally on to New York. Typically, buyers were looking for homes in the $500,000-$1 million range. The tours were so popular, the company had to put 400 people on the initial waiting list.

"We never thought these tours would garner such interest, but we've had an overwhelming response," SouFun CEO Richard Dai, told newswire AP at the time. "Before, we heard of Chinese or Hong Kong movie stars buying homes in the US, and now more and more Chinese can afford to have the same."

It's not only distressed sales in the US that have piqued the interest of cashed up Chinese buyers. A notable portion of that mobile cash is flowing into Vancouver, Canada.

"Out of the nearly $200-million we've sold so far this year, I'd say 50 per cent was sold to Mainland Chinese," George Wong of Magnum Projects recently told Vancouver's The Globe and Mail. "There's a growing middle class and a growing wealthy class. And they have become the fuel to our real estate."

According to Mr. Wong, who travels to Beijing and Shanghai to showcase Vancouver properties, Chinese investors accounted for around half of the units purchased at the spiffy, downtown condo development, Harbor Green. The average unit cost there is a cool $5.5 million.

Earlier this year, Hong Kong-based billionaire, Joseph Lau, treated himself to a £33 million six-floor mansion in London's exclusive Eaton Square, in Belgravia. Super rich Chinese buyers are also loading up on high-end luxury apartments in Australia. Ewan Morton, managing director of Sydney-based Morton and Morton, said Chinese investments in the capital's real estate market more than tripled during the past year, accounting for 16% of the agency's $21 million turnover.

Whether or not this is a sustainable trend remains to be seen, of course. A sudden snapback in property prices in Mainland China - as many are forecasting - could put a kind of "margin call" squeeze on some international speculators. Home prices in China rose at the second-fastest pace on record in May, up 12.4%, despite Beijing's continued efforts at cooling the market. Sales volumes are already beginning to peal back, however, with deals in Beijing, Shanghai and Shenzhen, the country's wealthiest cities, down as much as 70% in May from the previous month, according to the official Shanghai Securities News. Land sales for residential development projects in 70 Chinese cities fell 14%, the report showed.

That said, most Chinese buyers front around 80% of the initial cost when they purchase property in their homeland, a far cry from the "no doc., interest only" teaser loans that led to the meltdown in the US market. Nevertheless, there is growing concern among experts that the China property bubble is waiting to burst, perhaps in spectacular fashion. Smart Chinese investors, therefore, are looking to diversify their holdings. For some, that means buying gold. For others, it means buying the houses westerners could never really afford...at prices they really can.

[Demeter]

70. Dismantling Factories in a Dreamweaver Nation

http://english.caing.com/2010-06-07/100150460.html

A new generation is challenging China's labor-squeezing business model and an older generation that apparently doesn't get it

A decade ago, I took a group of fund managers to an assembly line at an electronics manufacturing contractor in China. We saw rows and rows of young women hunkered down, concentrating on putting together tiny parts. They had few toilet breaks, and during rest periods they had to sit at their benches.

"They're all 18," the line manager told me. "We need nimble fingers. In a few years, we will replace them with another batch of 18-year-olds."

I wrote a story after that visit. I didn't judge the situation but stated that a compliant labor force willing to be pushed to the extreme was the fuel for China's economic miracle. The engine was the mutually beneficial relationship between western companies with technologies, brands and distribution channels, and China-based manufacturing outsourcing companies that specialized in taking advantage of China's vast, cheap labor force. These included Taiwanese companies, which have been by far the most successful in the original equipment manufacturer (OEM) business.

The fund managers with me on the visit wanted to determine sustainability and profitability before deciding whether to buy the company's shares. They thought an endless supply of labor would ensure the model's profitability, and they were bullish about the company. What's happened in the years since has proven them right.

But will they be right indefinitely? To answer that question, we can glance back to the days of silent film star Charlie Chaplin. In his movies, Chaplin parodied the inhumane nature of the modern factory system, especially monotonous human movement on assembly lines. What he portrayed vanished a long time ago in developed countries, driven out by rising labor costs. Factory owners invested in automation, such as robots that now dominate modern auto assembly plants.

When multinational companies outsourced production to China, though, their business became less capital intensive. They took advantage of low labor costs and abundant supply. Some businesses, such as battery makers, started substituting machines with people. But no one could have predicted how far the outsourcing model, particularly in the electronics sector, would go while companies scaled up and maximized economies of scale by using cheap labor...

MUCH MORE AT LINK

[Demeter]

20. CAR TALK

This is for the nostalgic among us...

[Demeter]

21. Berlin rejects GM request for aid

German economics minister Rainer Brüderle on Wednesday rejected a request by US carmaker GM for federal government assistance for its European unit Opel
Read more >>
http://link.ft.com/r/P75VYY/A7ICQP/HI3M9/C5JP2D/ZB0GHM/36/t

[Demeter]

24. EUROTRASH--PIIGS IN WIGS, JOHN BULL, ETC.

Poor Europa. Legendary Pre-History repeating itself...

Europa (Greek Εὐρώπη) was a Phoenician woman of high lineage in Greek mythology, from whom the name of the continent Europe has ultimately been taken. The story of her abduction by Zeus in the form of a white bull was a Cretan story, as Kerényi points out "most of the love-stories concerning Zeus originated from more ancient tales describing his marriages with goddesses. This can especially be said of the story of Europa". The name Europa occurs in the list of daughters of primordial Oceanus and Tethys. The daughter of the earth-giant Tityas and mother of Euphemus by Poseidon was also named Europa.

Europa's earliest literary reference is in the Iliad, which is commonly dated to the late 9th or to the 8th century BCE. Another early reference to her is in a fragment of the Hesiodic Catalogue of Women, discovered at Oxyrhyncus. The earliest vase-painting securely identifiable as Europa, dates from mid-7th century BCE.

[Demeter]

25. European banks struggle to sell corporate bonds

Financial groups raised less from the mainstream capital markets in the past six weeks than in any year since 1995 as turmoil has pushed borrowing costs sharply higher
Read more >>
http://link.ft.com/r/P75VYY/A7ICQP/HI3M9/C5JP2D/PRUFJO/36/t

[Demeter]

26. US blames Europe as Turkey opposes Iran sanctions

Robert Gates suggested EU reluctance to admit Turkey as a member could be pushing it away from the west as the country voted against stepping up sanctions on Iran
Read more >>
http://link.ft.com/r/0QSDPP/JI3WLX/A5Q0X/HDPHWZ/TPHU33/ZH/t

IT COULDN'T BE THAT THE TURKS ARE NOBODY'S FOOLS, AND HAVEN'T BEEN BRIBED INSENSIBLE, COULD IT?

[Demeter]

29. EU urged to speed up financial regulation

France and Germany have urged the European Union to speed up its efforts to tighten financial regulation, calling for EU-wide powers to ban naked short-selling and the harmonisation of settlement delays
Read more >>
http://link.ft.com/r/0QSDPP/JI3WLX/A5Q0X/HDPHWZ/D4Y4MZ/ZH/t

[Demeter]

39. Europe Chooses Depression By Mike Whitney

http://www.informationclearinghouse.info/article25643.htm

Forget about a smooth recovery. Finance ministers and central bank governors of the G-20, met this weekend in Busan, South Korea and decided to abandon "tried and true" expansionary fiscal policies for their own strange brew of belt-tightening policies and austerity measures. The EU members are eager to restore the illusory "confidence of the markets", something that will surely be lost when the eurozone slides back into recession and the hobbled banking sector begins hemorrhaging red ink. Trimming deficits while the economy is still on the mend will weaken demand and force businesses to lay off more workers. That will decrease economic activity and slow growth. It's a prescription for disaster.

Here's an excerpt from Paul Krugman's blog: "Slashing spending while the economy is still deeply depressed is both an extremely costly and quite ineffective way to reduce future debt. Costly, because it depresses the economy further; ineffective, because by depressing the economy, fiscal contraction now reduces tax receipts....

The right thing, overwhelmingly, is to do things that will reduce spending and/or raise revenue after the economy has recovered — specifically, wait until after the economy is strong enough that monetary policy can offset the contractionary effects of fiscal austerity. But no: the deficit hawks want their cuts while unemployment rates are still at near-record highs and monetary policy is still hard up against the zero bound." ("lost Decade, Here We Come", Paul Krugman, New York Times)


Europe is marching headlong into a depression. The attachment to stone age economics is shocking. It is as if John Maynard Keynes never lived. When GDP shrinks--as it inevitably will--the deficits will grow and bond yields will widen making it more expensive to fund business. Public confidence will wane, relations between member states will sour, and cities will fill with angry demonstrators. Fiscal consolidation will rip the 16-state EU apart and trigger a crisis bigger than Lehman Bros. The ECB needs to support demand by encouraging government spending while households patch their tattered balance sheets and regulators take over underwater banks. Any deviation from this plan will only exacerbate the problems.

How sick is the EU banking system? Here's an excerpt from the New York Times:

"It's a $2.6 trillion mystery. That’s the amount that foreign banks and other financial companies have lent to public and private institutions in Greece, Spain and Portugal, three countries so mired in economic troubles that analysts and investors assume that a significant portion of that mountain of debt may never be repaid.

The problem is, alas, that no one — not investors, not regulators, not even bankers themselves — knows exactly which banks are sitting on the biggest stockpiles of rotting loans within that pile. And doubt, as it always does during economic crises, has made Europe’s already vulnerable financial system occasionally appear to seize up. Early last month, in an indication of just how dangerous the situation had become, European banks — which appear to hold more than half of that $2.6 trillion in debt — nearly stopped lending money to one another...."

Analysts at the Royal Bank of Scotland estimate that of the 2.2 trillion euros that European banks and other institutions outside Greece, Spain and Portugal may have lent to those countries, about 567 billion euros is government debt, about 534 billion euros are loans to nonbanking companies in the private sector, and about 1 trillion euros are loans to other banks. While the crisis originated in Greece, much more was borrowed by Spain and its private sector — 1.5 trillion euros, compared with Greece’s 338 billion. ("Debtors’ Prism: Who Has Europe’s Loans?", Jack Ewing, New York Times)

This proves that the real problem is the banks, not "sovereign debt". (which is only 567 billion of the 2.2 trillion euros total) The EU is faced with the same problem as the US; either take over insolvent banks and restructure their debt--making bondholders and equity holders take a haircut--or endure years of hellish subpar economic performance with high unemployment, dwindling investment, grinding deflation and social unrest. The EU has chosen the latter, and for reasons which may not be that clear at first glance. A cheaper euro makes EU exports more competitive, which will keep the EU's most powerful member (Germany) happy. Also, deflationary policies protect the interests of bondholders who are heavily invested in financial institutions whose asset values are grossly inflated by cheap money and massive leverage. Finally, austerity measures transfer the losses from banks and shadow banks onto the backs of workers, consumers and retirees. Screwing workers to enrich bondholders and bankers is a political calculation. It makes no economic sense.

Belt-tightening in the EU means that the world will (again) have to rely on the US consumer to bounce back, shrug off his historic burden of personal debt, and resume spending like a madman. With unemployment hovering at 10%, credit lines being slashed by the day, and retirement just around the corner (for many baby boomers); that looks like an unlikely prospect.

[Demeter]

43. WE'LL BE BACK AFTER A SHORT INTERMISSION

BUT MEANWHILE, YOU CAN REFRESH YOUR MEMORY ON THIS:

http://www.earlyamerica.com/earlyamerica/freedom/constitution/text.html

[Dr.Phool]

46. Watch me pull a rabbit out of my hat!

Ooops! Campaign contribution, wrong hat.

[ozymandius]

52. Looks like you're gonna need a new hat!

Sorry. That line just flew right out of my head.

Maybe Mr. Know-It-All can help.

Here's a lovely video featuring a dog named "Spot".

[Dr.Phool]

53. LOL

[ozymandius]

63. posting from my phone while watching World Cup

Sitting in a trad Dem hangout. Good company. :hi:

[Demeter]

64. Posting after working 4 hours in 60% HUMIDITY AND 90F

ON MY WAY TO THE POOL. SEE YOU LATER, ALLIGATOR.

[Demeter]

65. And at 10 PM it's still 80F and 67% Humidity.

Maybe a thunderstorm tonight--either cool it off, or bring humidity up to 99+.

Sleep if you can--there's more impossible news tomorrow.

[Dr.Phool]

66. Gulf of Texaco is 89 degrees at Clearwater Beach!

That's insane! It hit 90 degees for the first time in history a couple of years ago, during our huge hurricane season. And that was in mid-August.

We're in for a really bad one this year.

[Dr.Phool]

67. Catch Lewis Black's Comedy Central special if you get a chance.

The second half of the show sounds like us discussing the economy and the housing bubble.

[Demeter]

68. The WEE Funny Papers

[Demeter]

72. POLITICS AND OBAMAMANIA

The enigmatic man in the White House is worthy of our study...and one is not necessarily the other.

[Demeter]

73. Isn’t It Ironic? By MAUREEN DOWD

A CHARACTER STUDY, RATHER THAN A HAGIOGRAPHY, AND INSIGHTFUL. IT HAS THE RING OF TRUTH, WHICH IS VERY TROUBLESOME (THE TRUTH, NOT THE RING).

http://www.nytimes.com/2010/06/13/opinion/13dowd.html?ref=opinion

It’s funny how things work out sometimes.

The two men running the White House have very different relationships with the press; one is warm and one is frosty.

One’s relationship is more JFK, and one’s has self-pitying echoes of Nixon.

By all rights, you’d think it would be Joe Biden who would resent journalists for kicking him around for years. It was the press, me included, who reported on the problems that led him to drop out of the 1988 presidential race.

It was the press that delighted in Biden’s foot-in-mouth syndrome in 2008 and played up the exacting Barack Obama’s occasional chagrin at the über-exuberant Joe as they began their odd-couple partnership.

Yet the vice president is so lacking in any vengeful feelings for past reporting that left him for dead, I sometimes wonder if he’s really Irish.

Biden gave a press party at his house recently with a beach theme — complete with Uzi-size squirt guns and water slides. Journalists came with their families, schmoozed with top White House officials like David Axelrod and Rahm Emanuel, and watched a dripping wet vice president walk around with his little grandson. One Obama aide remarked that Biden is “the most beloved person in the White House.”

Jon Stewart and bloggers mocked the journalists, suggesting they were too chummy with power. But the picnic was on the record, and good reporters can’t be co-opted by some cold French fries. Whenever you see politicians in a relaxed or stressful situation, beyond the usual teleprompter speeches and scripted photo ops, you learn something about those charged with making life and death decisions. You may even pick up some news.

We learned there that Joe Biden has been assigned the press portfolio. This is remarkable, given that it was Obama who was hailed as the charming new JFK, the mesmerizing leader who beguiled an infatuated press, as the “Saturday Night Live” skit went, to plump his pillows.

But that skit was more of a caricature of some ideological cable guys and besotted columnists — including some conservatives — than a realistic portrayal of his relationship with the “working” press.

The press traveling with Obama on the campaign never had a lovey-dovey relationship with him. He treated us with aloof correctness, and occasional spurts of irritation. Like many Democrats, he thinks the press is supposed to be on his side.

The patrician George Bush senior was always gracious with reporters while conveying the sense that what we do for a living was rude.

The former constitutional lawyer now in the White House understands that the press has a role in the democracy. But he is an elitist, too, as well as thin-skinned and controlling. So he ends up regarding scribes as intrusive, conveying a distaste for what he sees as the fundamental unseriousness of a press driven by blog-around-the-clock deadlines.

The 21st-century press beast is a scary multimedia monster, caught up in the trite as well as the vital, and reporters rarely can be as contemplative as the cerebral Obama would like.

Sometimes on the campaign plane, I would watch Obama venture back to make small talk with the press, discussing food at an event or something light. Then I would see him literally back away a few moments later as a blast of questions and flipcams hit him.

But that’s the world we live in. It hurts Obama to be a crybaby about it, and to blame the press and the “old Washington game” for his own communication failures.

“On health care, Obama told single-payer liberals that they had to deal with the world as it is, not as they wanted it to be,” said Jonathan Alter, the author of “The Promise,” about Obama’s first year in office. “But he doesn’t take his own advice when it comes to the media. Obama refuses to deal with the media world as it is. He’s holding out for the media world that he wants. But that will never be. That disdainful attitude toward 24-hour cable culture is slowing his political reflexes. We’re seeing that in the oil spill. I don’t think it’s personal with him. It’s not that he despises reporters as human beings, like Nixon. He does scores of interviews and he doesn’t rage behind closed doors. But if he doesn’t make more concessions to Washington as it is, he’s going to hurt his presidency.”

Now that Obama has been hit with negative press, he’s even more contemptuous. “He’s never needed to woo the press,” says the NBC White House reporter Chuck Todd. “He’s never really needed us.”

So, as The Washington Post’s Howard Kurtz writes, the more press-friendly, emotionally accessible, if gaffe-prone Biden has become “the administration’s top on-air spokesman.”

How ironic. Instead of The One, they’re sending out The Two.

[Demeter]

74. Liberals and Libertarians Need Each Other By Bob Goodwin

http://www.nakedcapitalism.com/2010/06/guest-post-liberals-and-libertarians-need-each-other.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

SOME EXCERPTS TO TEMPT YOU TO READ IT ALL:

It can be very difficult to debate with someone of a different ideology, when your premise starts with a presumption not shared by your opponent. And due to human nature when the debate devolves into a disagreement on the fundamentals of an ideology it will quickly move to an accusation that there must be a flaw in the messenger. Every decent person I know agrees with my proof, so you must not be a decent person. So let me (tongue-in-cheek) lay out a series of typical debates between Libertarians and Liberals. I am taking pains to skewer both sides equally:
On Global Warming:

Libertarian: Man Made Global Warming is a farce and a conspiracy
Liberal: Your ideology is blinding you, you deny established science.
Libertarian: Fuck you.

On BP

Liberal: BP manipulated government, exploited our natural resources, and polluted our beaches.
Libertarian: We need oil, and the government encouraged deep-water drilling and became captured
Liberal: Fuck you.

On Health Care

Liberal: There are 30 million people without healthcare in the richest country in the world
Libertarian: Health care is rigged to overcharge and regulated beyond redemption
Liberal: There are 30 million people without healthcare in the richest country in the world

I pick these three examples, because I believe Libertarians and Liberals largely agree on each of these issues. But the choice of language stokes the ideology. I think the following three statements are safe for both ideologies:

Dependence on fossil fuels has come at a high cost, and we can do much better at creating energy that is causes less environmental damage. The environment is a common asset where government has a role.

Cap-and-trade may be another scheme that will enrich the elite, and not benefit the environment. But we need to reduce emissions into our atmosphere.

We need to drive down the cost of health care while broadening access and improving outcomes. ObamaCare was a sop to corporate interests.

There are natural turning points in history. American Liberalism came to prominence during the Great Depression and American Libertarianism out of the collapse of Calvinism during the industrial revolution. We are at another turning point now, with the aging of the Baby Boomers, and the collapse of the permanent American wealth machine. Let me list issues that are less important than they were 10-20 years ago: Guns, Gays, God, Abortion, State Security, Crime, Drug enforcement, Labor Unions. I did not say they are unimportant – just overtaken by other issues.

But most importantly the role of the government and markets has evolved in both liberals and libertarian minds. Not changed, evolved. We now have a common enemy: the Corporatist elite, who have corrupted both the free market and captured the regulatory apparatus of our government. Corporatists have power in *both* political parties, and this is where our common interests lie. The Tea party is disrupting the Republican Party (with some success) and the progressive movement has been successful in elections but unsuccessful in policy at undermining the entrenched corporate influence on the democratic side. The Corporatists have an interest to see their enemies divided and marginalized. But the combined power of these two movements is close enough to 50% of the population to overpower the Corporatist movement which has power far beyond its numbers.

[ozymandius]

78. A libertarian friendly acquaintance and I agree on this.

He hates unions. He loves Ayn Rand. But he absolutely loathes what the corporate aristocracy has wrought upon this country. He is even critical of Reagan. This acquaintance is very well read and scolds Reaganites for their semantic games (i.e. tax adjustment = tax hike (on the middle class)) and for the injection of radical religious ideology into public policy.

I think much could be accomplished in stemming the hardcore conservative, neo-con horde by creating alliances with those who abhor similar political and societal malignancies. It is practice, as the saying goes, of politics creating strange bedfellows.

[Demeter]

75. Too Big to Fail? The BP Bailout as Corporatism BY DOUGLAS RUSHKOFF

http://rushkoff.com/2010/06/11/too-big-to-fail-the-bp-bailout-as-corporatism/

Nowhere have I seen a clearer example of the perils of corporatism playing out than in the current handling of the BP oil spill. If only Obama understood the context of the decisions he’s about to make, he might be able to use this as an opportunity to turn all this around, and put people and the planet before profits. (Will someone please tell him to read my book Life Inc?)

Like so many presidents before him, Obama is being given an opportunity to choose between corporatism and commerce, between banking and the environment, between investment capital and small business, between passive extraction of value and active creation of value. And, like almost all of them, he’s going the wrong way.

Today, Obama will be discussing the leak – already the greatest environmental disaster in US history even if it were patched right now – with his counterpart in Great Britain, newly elected Prime Minister David Cameron. Why are the two talking? Because if the US actually were to force UK-based BP to pay for damage it’s causing, the company would lose a lot of money – and so would its shareholders.

In the latest round of empty fist waving by Obama and apologetic posturing by BP, the President raised the issue that while BP has spent a few tens of millions on the cleanup effort and damages so far, the company’s annual dividend to shareholders is about $10.5 billion. The company is acting as if all its resources are being diverted to address this spill, when – financially anyway – this is clearly not the case. So as a way of changing the widespread perception that it is underspending on the crisis, BP suggested it might “suspend” – meaning pay later, not never – its quarterly dividend. A gesture of goodwill.

What a brilliant move. By suggesting they might suspend their dividend, BP initiated widespread panic about what would happen if that dividend were compromised in any real way. All of a sudden, business newspapers and cable channels begin calculating just what this means for shareholders – those people and institutions who park their money in an oil company and expect returns. How many pension funds have invested in BP? And how many retirees in England have made the oil a company a central part of their retirement portfolios, and are depending on these dividends to maintain their quality of life?

So now, instead of an transnational oil company against the American gulf fishermen, beach workers, and ocean itself, it’s the interests of presumably innocent British pensioners against American workers. We’re supposed to limit BP’s liability for wrecking our lives and our planet, because of the impact that appropriate penalties will have on those collecting dividends off the oil company’s crimes against us. This means bailing out the company by using government funds to pay for its spill.

Sorry, but the too-big-to-fail argument just doesn’t play. Investors: This is what you get when you decide to bet your retirement on an oil company in the 21st century. Why did you think the dividend was ten times what you’d get from a government bond? Because of the risk. This is the post-Valdez universe, after all. While many of the readers of this blog might be too young to remember that oil disaster, septuagenarian pensioners should be able to remember...

[Demeter]

80. Predatory Pharma – An End to Too Big to Nail? By retired physician "FT"

http://www.nakedcapitalism.com/2010/06/guest-post-predatory-pharma-%E2%80%93-an-end-to-too-big-to-nail.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

Is the federal government really ready to punish those responsible of corporate malfeasance in the pharmaceutical industry?

Push hard enough and you are bound to get a push back, even from a slow, at times dimwitted, sluggish, but mighty juggernaut like the federal government.

According to Fortune,

http://money.cnn.com/2010/06/04/news/companies/astrazeneca_pharmaceutical_fines.fortune/index.htm

this is the plight that could await executives at pharmaceutical companies. The Feds are, ahem, fed up, and ready to strike back.

The federal government is fed up with the amount of fraud, especially recurring fraud from the same companies, happening in the pharmaceutical industry. Therefore, regulators have decided that when it comes to punishments, it is time to get personal.

From now on, individual executives risk being ejected from their jobs — and perhaps even barred from the industry — for fraud their companies commit, even if they did not participate or even know about the crimes.

All that’s required for the government to flex this remarkably broad authority — embedded in the Responsible Corporate Officers Doctrine — is that the executives were in a position to have stopped the fraud that resulted in a criminal conviction or plea.

The new approach, emerging from the unusually powerful Inspector General’s office in the Department of Health and Human Services, reflects frustration with corporate recidivism even in the face of ramped-up fines, penalties and disgorgements.

FT here: Corporate recidivism? If this sounds bad, it is, and then some. Scroll through this extensive series of cases to get an idea of the magnitude of the problem, as well as some rather juicy details:

http://hcrenewal.blogspot.com/search/label/legal%20settlements

One could reasonably ask why wouldn’t federal prosecutors sue and get a conviction of the corporation in court. Alas, there are rather thorny legal and practical problems involving a serial recidivist:

http://www.cnn.com/2010/HEALTH/04/02/pfizer.bextra/?hpt=Sbin

[DemReadingDU]

76. Soros Sees ‘Act II’ of Financial Crisis

6/10/10 Soros Sees ‘Act II’ of Financial Crisis
“The collapse of the financial system as we know it is real, and the crisis is far from over,” Soros said today at a conference in Vienna. “Indeed, we have just entered Act II of the drama.”

Credit default swaps, which aim to protect bondholders against the risk of a default, are dangerous and a “license to kill,” Soros said today. CDSs should only be allowed if there is an insurable interest, he said.
more...
http://www.bloomberg.com/apps/news?pid=20601087&sid=aY_SHqr1LQhk&pos=4

A snippet from Soros's Full Speech
Typically bubbles have an asymmetric shape. The boom is long and slow to start. It accelerates gradually until it flattens out again during the twilight period. The bust is short and steep because it involves the forced liquidation of unsound positions. Disillusionment turns into panic, reaching its climax in a financial crisis.

The bubble that led to the current financial crisis is...composed of a number of simpler bubbles. I call it a superbubble.

The prevailing trend in the superbubble was the ever-increasing use of credit and leverage. The prevailing misconception was the belief that financial markets are self-correcting and should be left to their own devices. President Reagan called it the “magic of the marketplace,” and I call it market fundamentalism. It became the dominant creed in the 1980s. Since market fundamentalism was based on false premises, its adoption led to a series of financial crises. Each time, the authorities intervened, merged away, or otherwise took care of the failing financial institutions, and applied monetary and fiscal stimuli to protect the economy. These measures reinforced the prevailing trend of ever-increasing credit and leverage, and as long as they worked, they also reinforced the prevailing misconception that markets can be safely left to their own devices. The intervention of the authorities is generally recognized as creating amoral hazard; more accurately it served as a successful test of a false belief, thereby inflating the superbubble even further.

Click to read the full text of speech
http://dealbook.blogs.nytimes.com/2010/06/10/the-full-soros-speech-on-act-ii-of-the-crisis/?scp=4&sq=george%20soros&st=cse

6/10/10 Video of Soros
http://www.bloomberg.com/avp/avp.htm?N=av&T=Soros%20Says%20%E2%80%98We%20Have%20Just%20Entered%20Act%20Two%E2%80%99%20of%20Crisis&clipSRC=mms://media2.bloomberg.com/cache/vyOJ9PHQw_Cs.asf

[Roland99]

77. New York Money Manager Chimay Charged With Larceny, Forgery

http://www.bloomberg.com/apps/news?pid=20601087&sid=aj4evMXRSb2E&pos=4

une 12 (Bloomberg) -- New York money manager Guy Albert de Chimay was indicted in New York on grand larceny and forgery charges, according to the Manhattan District Attorney’s office.

Chimay, 47, chairman and chief investment officer of Chimay Capital Management Inc., was arrested yesterday in Wrightsville Beach, North Carolina, on a New York state warrant, said Adam Kaufmann, chief of the investigation division of the Manhattan District Attorney’s office.

The U.S. Securities and Exchange Commission sued Chimay yesterday, accusing him and his firm of fraud for touting investments he claimed were tied to the Chimay royal family of Belgium, and then stealing millions of dollars to pay his divorce lawyers and the mortgage on his house in the Hamptons on Long Island east of New York City.

...

The SEC obtained an emergency court order to freeze the assets of Chimay and his firm.

[Demeter]

79. Good for Them!

How many of these were out there, anyway? Not counting the legitimate ones, like the GOP....

[Demeter]

83. IT'S NOW 70F AND 74%

I'm going to have to get a cabin up north in the UP...

If I ever marry again, you'll know why.

PERSONALS:

YOUR FUTURE WIFE is looking for a gentleman over 50 with cabin in the UP. Neat dresser, financially secure, intellectual, lusty. Reply box XXX, include picture of cabin.

[Demeter]

85. There Is So Much More, But Humidity Fatigue Set In--That's a Wrap, Folks

And it's board meeting on Tuesday. I must gather as much strength and endurance as possible...you wouldn't believe the disasters we've been uncovering since evicting the pres.

[ozymandius]

86. Have a restful evening and thanks!

Thank you for the information and the laughs. :hi:

[bread_and_roses]

87. LOL,, may I copy that verbatim?

minor problem - I have a current spouse....ah well.

Good articles, as always, thanks.

[Po_d Mainiac]

88. My FRSP didn't count huh?

Ow yeah got a problem with that neat dresser thing...Gotta go, the bride is calling.