The Weekend Economists" "Fire and Brimstone" Weekend August 21-23, 2009

We going to get all Old Testament this weekend.

And why not? Everyone is doing it. From the Right to the Whacko, biblical is IN. So what are all those heathens screaming about, anyway? Why do I call them heathens?



If the shoe fits...




Several hundred years ago, intimate knowledge and competent analysis of the Bible was a sign of education and culture, and did not preclude depth of knowledge of competing value systems and cultures, nor indicate the complete lack of an ethical value system. Those days are long past. I'm not even sure the Catholic Church is trying to maintain any such level of scholarship or ethics anymore, and they owned the franchise for centuries!

So what does the modern economist get out of verses written long before the concept of an economy dazzled the mind? A lot of wordplay, for one thing. Perhaps a spark of divine wisdom, if we are lucky. In any event, it's all my brain, enfeebled by the dizzying succession of "black swan" events, could come up with for a theme. We may be reduced to herding sheep and goats, enduring famines and plagues, and cowering in walled cities within the decade; might as well refresh our primitive minds and sharpen up our survival skills. And we can all sing or parodize the hymns! In the spirit of the band upon the doomed Titanic, playing "Nearer My God to Thee", go for the irony.

For those on less than familiar ground, consider it for entertainment purposes only. Atheists are welcome to play along and amuse and astound their friends by their knowledge and/or the power of Google.

Any "lightening" strikes are coincidental, and not the responsibility of Management.

I'm reading Jeff Sharlet's "The Family" right now, and I highly recommend it to everyone on teh WEE and SMW threads, readers, posters, and lurkers alike. Because what Sharlet says -- and to a certain extent Kevin Phillips before him -- is that right-wing conservative "christianity" is subtly woven into the american economic culture and through the economy into the political culture. They are invisibly and perhaps inextricably intertwined.

I dunno if there's a way out, but I'm just your average heathen/pagan/atheist of mixed jewish and presbyterian background.

In other words, I'm just


Tansy Gold

I didn't even get the bank failure up yet! Do please illuminate this dry and dusty thread with the scandal-soaked tidbits from your reading that aren't TOO risque for the readers....oh, what the hell, do your best to drop our jaws!

I'm reading "The Family," not one of my own romance novels. . . . . .

Then again, there are a lot of "juicy bits" in the OT. . . .



Tansy Gold, who also has juicy bits. . . . .

rather than the seminal liquids of Romance (you may hit me now).

That's the good part.

In economic events, panic is neither useful nor satisfying. It is in moments of physical danger that panic can save a situation--fight or flight!

In economics, it's hard work, unceasing study and observation, glaring honesty with oneself, and keeping something in reserve, that gets one through the rough spots. Also politics and community relations.

Actually, the surprise is that only one bank is listed; perhaps additional banks will close after 5 PM their local time, as happened last weekend....
I guess it is no surprise that the failed bank is in Georgia. What is it with Georgia?


ebank of Atlanta, Georgia was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Stearns Bank, National Association, St. Cloud, Minnesota, to assume all of the deposits of ebank...

As of July 10, 2009, ebank had total assets of $143 million and total deposits of approximately $130 million. In addition to assuming all of the deposits of the failed bank, Stearns Bank, N.A. agreed to purchase essentially all of the failed bank's assets.

The FDIC and Stearns Bank, N.A. entered into a loss-share transaction on approximately $111 million of ebank's assets. Stearns Bank, N.A. will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $63 million. Stearns Bank, N.A.'s acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. ebank is the 78th FDIC-insured institution to fail in the nation this year, and the seventeenth in Georgia. The last FDIC-insured institution closed in the state was Security Bank of Jones County, Gray, on July 24, 2009.

CapitalSouth Bank, Birmingham, Alabama, was closed today by the Alabama State Banking Department, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with IBERIABANK, Lafayette, Louisiana, to assume all of the deposits of CapitalSouth Bank, excluding those from brokers...

As of June 30, 2009, CapitalSouth Bank had total assets of $617 million and total deposits of approximately $546 million. In addition to assuming all of the deposits of the failed bank, IBERIABANK agreed to purchase $589 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and IBERIABANK entered into a loss-share transaction on approximately $499 million of CapitalSouth Bank's assets. IBERIABANK will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

IBERIABANK will purchase all deposits, except about $3.6 million in brokered deposits, held by CapitalSouth Bank. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $151 million. IBERIABANK's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. CapitalSouth Bank is the 80th FDIC-insured institution to fail in the nation this year, and the second in Alabama. The last FDIC-insured institution closed in the state was Colonial Bank, Montgomery, on August 14, 2009.

First Coweta, Newnan, Georgia was closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with United Bank, Zebulon, Georgia, to assume all of the deposits of First Coweta, excluding those from brokers...

As of July 31, 2009, First Coweta had total assets of $167 million and total deposits of approximately $155 million. United Bank will pay the FDIC a premium of 1.01 percent to assume all of the deposits of First Coweta. In addition to assuming all of the deposits of the failed bank, United Bank agreed to purchase $155 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and United Bank entered into a loss-share transaction on approximately $124 million of First Coweta's assets. United Bank will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

United Bank will purchase all deposits, except about $11 million in brokered deposits, held by First Coweta. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $48 million. United Bank's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. First Coweta is the 79th FDIC-insured institution to fail in the nation this year, and the eighteenth in Georgia. The last FDIC-insured institution closed in the state was ebank, Atlanta, earlier today.

Guaranty Bank of Austin, Tex. became the 81st bank failure of 2009 after it was closed by Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corp. as receiver, the federal agency said late Friday. The FDIC said it has entered into a "purchase and assumption agreement" with BBVA Compass of Birmingham, Ala. As of June 30, Guaranty Bank had total assets about $13 billion and total deposits of about $12 billion. Link: http://www.marketwatch.com/story/guaranty-bank-of-austin-81st-bank-failure-of-09-2009-08-21

Good evening Demeter, Tansy Gold and all! It is nice to be back and computing with a machine where the hard drive doesn't make ka-chunka noises! Maybe I'll save the old one for the possibility of a cash for ca-chunka computer program. Or maybe I can modify it into a toaster oven or some such thing.

I was just coming up the thread to add Guaranty to the list!

From the FDIC press release:

Guaranty Bank, Austin, TX was closed today by the Office of Thrift Supervision, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with BBVA Compass, Birmingham, Alabama, to assume all of the deposits of Guaranty Bank, excluding those from brokers.

Guaranty Bank had 103 branches in Texas and 59 branches in California...

As of June 30, 2009, Guaranty Bank had total assets of approximately $13 billion and total deposits of approximately $12 billion. In addition to assuming all of the deposits of the failed bank, BBVA Compass agreed to purchase $12 billion of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and BBVA Compass entered into a loss-share transaction on approximately $11 billion of Guaranty Bank's assets. BBVA Compass will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

BBVA Compass will purchase all deposits, except about $344 million in brokered deposits, held by Guaranty Bank. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $3 billion.! BBVA Compass's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. Guaranty Bank is the 81st FDIC-insured institution to fail in the nation this year, and the second in Texas. The last FDIC-insured institution closed in the state was Millennium State Bank of Texas, Dallas, July 2, 2009.

I guess it shows that banks are run better up here, that money will travel a distance.

It's unclear how they choose the takeover bank. Sometimes they talk like they shop the failed bank around (how does the secrecy hold up?), and sometimes they can't find any sucker for it and liquidate it.

It's a great mystery.

Maybe there's a signup sheet?

The FDIC does cut deals very profitable for the takeover, although there's talk that it's too profitable, and clawback clauses are being added. See various posts this week's SMW threads....

http://dailyreckoning.com/no-recovery-not-now-not-ever/

That we live in an age of miracles has become common knowledge. A man may sit on a beach near Sydney, with nothing but the bucket bottom of the universe over his head, and still carry on a casual conversation with an Eskimo near the North Pole. Using an Internet-based phone service, he may do so at negligible cost. If this were not miracle enough, he may now grow himself a new nose, if he needs one, on his own arm.

In this age of miracles, people seem ready to believe that anything is possible. Recklessly crossing the street at the end of the Late Bubble Epoque, the world economy got hit by a cross-town bus. Now, the feds propose to reverse and run over the poor fellow again. It will be as if they had reversed the film; the economy will be as good as new, they say.

But we are suspicious. And we begin today’s rumination by examining the bus driver’s motives.

In its naked form, government is not evil; it is merely a self-interested parasite, like a bank lobbyist. Its main value comes from its ability to elbow out other parasites. Of course, the typical citizen is no saint either. Instead, he is merely a parasite in the larval stage. If he is lucky enough or cunning enough, he could grow into a parasite himself. The citizen, generally, doesn’t mind being lied to and robbed – just so long it is by someone he elected. Or at least by someone whom tradition or local connivance put in place. He does not usually resent his homegrown government, even though it routinely costs him a substantial part of his output. On the contrary, he grows so fond of it he even dons his helmet from time to time to protect it. Naturally, the feds return the favor.

The basic business model of government is to keep order, protect campaign contributors and lure supporters with the promise of other peoples’ money. The game plan of the typical citizen is even simpler: to be on the receiving end, not the paying end. Over time, more and more of them get into position. And the whole society becomes more costly, and more corrupt.

In the United States, entire industries now operate as wards of the state. They may have too little capital. Or, their operations may be too costly. Or, their products may be simply out-of-date and unattractive. Still, government keeps them going – even at the cost of at the expense of competitors. And the money doesn’t only go to business. Cities stay solvent only by the grace of federal government grants. Whole sections of the population depend on government – including 34 million who draw their rations directly from the federal food stamp program. The spectacle is breathtaking and alarming at the same time – like a Pakistani bus on a mountain road, freighted with passengers clinging to the roof. The old rust bucket could tip over at any time, but what politician would tell a voter to get off?

That preface on the state out of the way, we turn to the state of the economy. The key to understanding the great credit bubble of 1945-2007 is to capture the codependent relationship between China and the United States of America. It seemed to serve both parties well. Each enabled each other’s excess. China added mightily to the world’s supply – far more than was actually needed. America, meanwhile, did heroic work on the demand side. While the growth in the United States was led by consumer spending, the growth in China was led by capital investment; factories expanded, towns were built, and output was revved up. But there was a flaw. Americans ran out of money. After the ’70s, they could only increase their buying by going into debt. This they did with insouciance bordering on insanity. Total debt rose 370% of GDP and then blew up in 2007, with major lenders forced into bankruptcy and mergers, while GDP sank at its fastest pace since the end of WWII.

Now, the old formula no longer works – neither for Americans nor for the Chinese. Despite the urging of their government, Americans cannot be expected to take on more debt in order to consume more stuff from China. As savings rates grow toward 10%, demand from the United States will collapse by an estimated $1 trillion per year. With the China trade now accounting for 83% of America’s non-oil trade deficit, you’d think the Chinese would panic. They already have as much as two times the output capacity needed to meet real demand. They should trim their manufacturing sector, not expand it.

We draw out that relationship only to show how hopeless it would be to draw it out further. Borrowing to consume is merely tricking stuff from the future to enjoy in the present. By 2007, some $30 trillion worth of spending that would have occurred ‘in the future’ had already occurred in the past. Factories that would have produced consumer items for 2009 discovered that they had already produced more than enough of them in 2005 and 2006.

It would be better to invite the future in…let her collect her debts…and then get on with things. Yet government officials on both sides of the Pacific continue their numbskull efforts to revive the bubble economy. On the US side, the feds are trying to stimulate demand for more stuff. On the far side, Chinese stimulation is going into producing more stuff. As if the world didn’t have too much stuff already.

But the role of government is neither prosperity nor plausibility…but protection of the pests and parasites. They will keep paying them off and carrying them along…until the bus runs off the road.

But it’s not prosperity that government really cares about. The big bus keeps trundling along – picking up pests and parasites along the way. It will keep going until it runs off the road.

Enjoy your weekend!

The dollar fell to $1.42 per euro yesterday. Many believe it is the Achilles' heel of the entire world financial system - and Warren Buffett is among them.

The story goes, Achilles was dipped in the river Styx and made invulnerable. But his mother held him by his heel, leaving that part untouched by the magic waters. Naturally, that is where a poison arrow got him.

The moral of this story is that you have to go all the way. If you want your baby to be invulnerable, put him all the way under the water...even the heels. Or, maybe there's another point: that there's always some place where you're vulnerable.

For the purpose of today's tale, we'll take the second possibility. Try as you may, you can never escape all risks.

All over the world, consumer prices are falling. The world has too much capacity...too many factories...and too many workers. Too many, that is, for current demand. The 'world's mouth' - the USA - has gone on a diet. And if the United States reduces its intake, that means the rest of the world - especially China - must reduce its output. Otherwise, the whole thing will become unbalanced.

Yesterday's news tells us that despite press reports of a recovery, the key indicators of real economic growth are still falling. Almost one out of ten mortgages are now delinquent. And the rate of foreclosures is increasing faster than any time in the last 30 years. Housing prices, meanwhile, fell 16% in the 2nd quarter, from a year earlier, according to the National Association of Realtors.

Unemployment claims went up last week. The sharp eyes of The Financial Times see the link: "Mounting joblessness fuels US housing crisis," says its headline.

In the real economy, people are cutting back...with the inevitable results we discuss every day here in The Daily Reckoning. One major consequence of reduced demand is too much supply. The factories built in China to supply products to America during the bubble years now find they have no market.

Currently, overcapacity and oversupply are causing prices to fall. Falling prices mean rising currency values. Each unit of 'money' buys more stuff. But there are many competing currencies, and they don't all rise and fall together. Even in a world of deflation, some currencies will deflate more than others.

The dollar is, of course, the world's main money. In a sense, the whole world economy is under its heel. But it is a heel that has never been dipped in the river Styx. It is now a heel that waits for an arrow.

PIMCO is the biggest manager of bond funds in the world. It says the greenback is going to lose its status and lose its value.

"Investors should consider whether it makes sense to take advantage of any periods of US dollar strength to diversify their currency exposure," says its Emerging Markets Watch report. "The massive amounts of US dollar liquidity produced in response to the crisis" doom the currency.

Both China and Russia are calling for a new global currency to replace the dollar.

"While we have not yet reached the point where a new global reserve currency will arise, we are clearly seeing a loss of status for the US dollar as a store of value even in the absence of a single viable alternative," continues the PIMCO report.

Meanwhile, our old friend Jim Rogers says he is moving all his assets out of dollars and buying Chinese yuan. And Warren Buffett warned this week - writing in The New York Times - that "greenback emissions" threaten the whole world econo-system.

But what does it mean? What are the threats to you? What are the opportunities? If you pay your bills and keep score in dollars, what does it matter if the dollar loses value against the yuan? If prices are generally falling, the dollar is actually getting stronger, isn't it? So what if some other currencies are getting even stronger still?

Colleague Bill Jenkins, at Master FX Options Trader puts in his two cents:

"We lived through a financial earthquake in 2008. The effects of it are still being felt. Aftershocks may still be ahead. But predicting when they'll strike is just as hard as predicting natural earthquakes. We had a number of prognosticators for years telling us about what would happen last year; it's just that they didn't know when. And that is the hard part of the life of a prophet.

"And while it is equally difficult to tell when the next economic tremors will hit, we can look at the numbers and make some predictions as to their cataclysmic effect."

Bill goes on to say that he thinks the US is headed for another shockwave ...which will include another round of dollar buying - even while the 'experts' are touting 'green shoots' and a return to normalization.

The trouble with the Achilles' heel is that it is connected to the Achilles' tendon...which is connected to the leg muscles...which is what keeps the whole thing moving forward. Cut the tendons and the feet go flippety, floppety and you get nowhere.

Yesterday came word that the US deficit for 2009 might come in lower than expected. Instead of borrowing $1.8 trillion as anticipated, the feds might only borrow $1.58 trillion. Well, that still leaves them about $680 billion short - even if every dollar of trade deficit and every dollar of domestic savings is applied to it. But definitely a step in the right direction! This gap must be closed by quantitative easing, or, in other words, by printing press money. So, holders of old dollars are bound to wonder how much their savings will be weakened by the addition of so many new ones.

They're likely to wonder, too, how much those US Treasury notes will be worth after this monetary inflation catches up to them. At some point, they are likely to think twice about buying more of them...and possibly even want to sell the ones they have already. Either way, it could create a nasty financial whirlpool that sucks down the entire world economy. As private investors reject US dollar credits, the Fed would be forced to print up more money to buy them itself. As the Fed buys more, private investors become more fearful that this monetary inflation will lead to consumer price inflation; they may panic and dump all dollar-denominated assets.

But if investors drop the dollar, what do they take up in its place? Oil...maybe. Oil is selling for $72 a barrel, even while the world is in a major downturn. What makes it so expensive, if not the fear that the currency in which it is quoted is more slippery than the black goo itself?

And gold? Yesterday, gold lost $3. But is still trading in the mid- $900s - not far from its all-time high. And this at a time when consumer price inflation is going down! In the US non-oil export prices are falling at a 5% rate. If people are buying gold as a hedge against inflation, they must know something we don't. Consumer prices are falling...actual CPI rates are negative in many countries already. Take out the effect of speculation on oil and commodities, and deflation is probably a fact of life almost everywhere. Gold buyers are not hedging against an increase in the price of bread, in other words; they're hedging against a poison arrow directed at the dollar itself.

Its amazing how many of these articles will be written yet no one will mention them as the beginning of the end for consumerism.

http://dilbert.com/dyn_file/str_strip/64749/gif/strip.print/


Time out while I feed the Kid--playing Christian to her Lion, as it were...

Do post your own little nuggets, with or without sauce!

Why the Austrian, Keynesian, Marxist, Monetarist, and Neo-Liberal Economists Are All Wrong

http://www.nakedcapitalism.com/2009/08/why-austrian-keynesian-monetarist-and.html


US Personal Income has taken its worst annual decline since 1950.

This is why it is an improbable fantasy to think that the consumer will be able to pull this economy out of recession using the normal 'print and trickle down' approach. In the 1950's the solution was huge public works projects like the Interstate Highway System and of course the Korean War.

Until the median wage improves relative to the cost of living, there will be no recovery. And by cost of living we do not mean the chimerical US Consumer Price Index.

The classic Austrian prescription is to allow prices to decline until the median wage becomes adequate. Given the risk of a deflationary wage-price spiral, which is desired by no one except for the cash rich, the political risks of such an approach are enormous.

On paper it is obvious that a market can 'clear' at a variety of levels, if wages and prices are allowed to move freely. After all, if profits are diminished, income can obviously be diminished by a proportional amount, and nothing has really changed in terms of viable consumption.

The Supply side idealists (cash rich bosses, Austrians, neo-liberal, monetarist, and deflationist theorists) would like to see this happen at a lower level through a deflationary spiral. The Keynesians and neo-classicals wish to see it driven through the Demand side, with higher wages rising to meet the demands of profit in an inflationary expansion. Both believe that market forces alone can achieve this equilibrium. Across both groups runs a sub-category of statism vs. individualism.

Unfortunately both groups are wrong.

Both approaches require an ideal, almost frictionless, objectively rational, and honest economy in order to succeed. The Keynesians have a bit of an edge in this, because it is easier to control inflation than deflation in a fiat regime, and the natural growth of inflation tends to satiate the impulse to greed. They don't care if they can buy more as long as they can say they HAVE more. People tend to be irrational, and there is a percentage of the population that is irrationally greedy and obsessively rapacious. People are not naturally 'good.'

The greatest flaw in the many studies that come from each of the schools to prove their point is the brutal way in which they flatten the reality of the markets and make assumptions to allow their equations and analysis to 'work.' They spend most of their energy showing while the 'other school' is a group of ignorant fools, doomed to ignominious failure, in an atmosphere reminiscent of a university departmental meeting.

This has quietly scandalized those from other scientific disciplines who review the work of many of the leading economists. Benoit Mandelbrot was poking enormous holes in the work of the leading economists long before Nassim Taleb made it more widely known. The ugly truth is that economics is a science in the way that medicine was a profession while it still used leeches to balance a person's vapours. Yes, some are always better than others, and certainly more entertaining, but they all tended to kill their patients.

The most intractable part of the current financial crisis, and the ongoing problem of the US economy is the huge tax which is levied on the American public by its corporations, primarily in the financial and health care sectors, and a political system based on lobbyists and their campaign contributions.

There are hidden taxes and impediments to 'free trade' at every turn. The ugly truth is that capitalism-in-practice hates free markets, always seeking to overturn the rules and impose oligopoly if not outright monopoly through barriers to entry, manipulation of the political process, distortion of regulation, predatory pricing, brute force, and the usual slate of anti-trust practices.

Some of these 'hidden taxes' are the bonuses on Wall Street which require an increasing percentage of the financial 'action.' The credit cards fees and penalties levied by banks to support profits in a contracting economy. The Sales General & Administrative portion of the Income Statements of the pharmaceutical industry which only American consumers seem willing to pay. A health care system which is a monument to overspending, outrageous pricing, and greed.

The notion that "if only government would not regulate markets at all everything would be fine" is a variation of Rousseau's romantic notion of the noble savage which no one believes except those who wish to continue to act like savages, and those who get no closer to the real work of an economy than their textbooks. Economic Darwinism works primarily to the advantage of the sharks. Anyone who believes that 'no regulations' works well has never driven on a modern highway at peak periods.

Yes, a certain portion of the population are adult, and generally good and fair. But there is a percentage of the population that is not. And since the 1980's they have been encouraged by the culture of relativism and greed to 'express themselves' and so they have, with a vengeance.

Discussion rarely proceeds very far because of the dialectical nature of American thought. Both extremes are wrong, but they seem to content to merely bash each other, pointing out their errors, while repeating the same mistakes over and again.

The engineering of the economy has become married to the engineering of the political dialogue by the corporate media and their political parties. "The engineering of consent is the very essence of the democratic process, the freedom to persuade and suggest." Edward L. Bernays 1947

The condition of the American economy is strikingly similar to the Soviet state economy of the last two decades of the 20th century. People are trying to sustain a system "as is" that is based on bad assumptions, unworkable constructions, conflicting objectives, and a flagging empire laced heavily with elitist fraud and corruption. The primary difference is that the US has a bigger gun and its hand is in more people's pockets with the dollar as the world's reserve currency. But the comparison seems to indicate that the economy must indeed fail first, before genuine change can begin, because the familiar ideology and practices must clearly fail before they can recede sufficiently to make room for new ways and reforms.

A new school of Economics will rise out of the ashes of the failure of the American economy as happened after the Great Depression. Let us hope that it is better than what we have today.

In the short term, what does all this mean?

There is NO system that will work without substantial, continuing effort, and continual adaptation and commitment to a certain set of goals that are more about 'ends' than ideological process.

Because our system has been abused for so long, and is so distorted and imbalanced and dominated by a relatively few organizations beholden to a self-serving status quo, reform is not an afterthought, it is the sine qua non.

It means that until the banks are restrained, and the financial system is reformed, and balance is restored, there can be no sustained recovery.

Jesse or Yishay (Hebrew: יִשַׁי, Modern Yishai Tiberian Yīšạy, meaning "God Exists" or "God's gift") is the father of the Biblical David, who became the king of the nation of Israel. His son David is sometimes called simply "Son of Jesse" (ben yishay).

Jesse was the son of Obed and the grandson of Ruth. He was a Bethlehemite. <1>

Jesse lived in Bethlehem, in Judah, and was a farmer and breeder of sheep.

Jesse is important in Judaism because he was the father of one of the most famous kings of Israel. Jesse is important in Christianity because, in part, he is mentioned in the genealogy of Jesus Christ.


Jesse as a given name

The name, a Hebrew name, is used widely, but sparingly. The name Jessica is a European female derivative of the Hebrew original.

The Tree of Jesse

From the eleventh century the Tree of Jesse has been portrayed in religious illuminations, manuscripts, wall paintings, wood carvings and stone including a tomb stone; stained glass windows, floor tiles and embroidery. In the representation of the Tree, it is usual for Jesse to be portrayed recumbent with a tree rising from his body, and the ancestors of Christ portrayed in its branches with Prophets and Christ at the summit. The earliest illustrated manuscripts did not always depict Jesse or Christ. Not all illustrations include the same number of characters; this depends upon the size of the area provided, such as seven light windows or three light windows.

The name Jesse is referenced in the Old Testament, and in particular the passage in Isaiah, Chapter 11, verses 1-3:
“ And there shall come forth a shoot from the stump of Jesse, and a branch shall grow out of his roots...<2> ”

This is regarded by Christians as a prophecy of Jesus, who Christians consider to be the Messiah.

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

Musical Note:

http://www.youtube.com/watch?v=jyuOIYCERc4

regarded as a yahoo. A pre-eminent Roman Catholic, Christian(?) biblical scholar in the seventies actually described him in a biblical encyclopedia he compiled, as "little better than a bandit". Despite the fact that he could have killed Saul (who sought hs life) and taken the throne, but forbore from doing so in deference to God's wishes.

On the other hand, the ordinary people of Christ's day, who worshipped David's memory, called him by the patronymic, Son of David. As well as being a great ruler, David had cared about the poor people.

We all know that, as a man like us, David could act in an evil way - having Uriah* murdered on the battlefield, to take his wife, being presumably his worst sin. Although, it is difficult to imagine the bestowal of a greater honour on David than for the man Christians believe was also God the Son and, thus, one of the persons of the Holy Trinity, to have that title, Son of David, bestowed on him.

But how about these quotations from the Old Testament:

"I have found David son of Jesse a man after
my own heart;"

and from Psalm 89:

"his line will continue forever and his throne endure before me like the sun;..."

He was some geezer. I loved the story about three of David's thirty captains with him in the cave at Odollam, risking death at the hands of the Philistines to get him a drink of his favourite water, from the well in Bethlehem;

"But he refused to drink it; instead, he poured it out before the Lord. God forbid that I should do this!" he said. "Should I drink the blood of these men who went at the risk of their lives?" Because they risked their lives to bring it back, David would not drink it. Such were the exploits of the three mighty men".

*It seems extraordinary that at other times, David showed the kind of extraordinary magnanimity and loyalty as Uriah did towards his men, when he was at home and they were in the field of battle, and cose to sleep outside his house, refusing to go in and sleep with his wife, on that account.

I don't know if you care to read that, Demeter, but thought you might.

http://www.nakedcapitalism.com/2009/08/is-finance-inefficient-or-too-efficient.html

A decade ago, it was fashionable for Western consultants, bankers and business people to decry Japan’s domestic service industry. For Japanese business sectors, ranging from milk production to financial broking, have long been plagued by complex distribution chains and numerous middlemen.

So, Anglo-Saxon consultants – such as McKinsey – would regularly urge the Japanese to reform their distribution chains, and flourish data showing how much more “efficient” the US was than Japan in sectors such as retailing.

Back then, I was working in Tokyo as a reporter. So I dutifully reported those studies-cum-sermons on the evils of middlemen.

However, amid all that debate about American efficiency, one point that Western commentators almost never discussed was the proliferation of middlemen in America’s financial world.

If you were to sketch a map of how credit has been sliced and diced in 21st century banking, for example, there would be so many stages – and commission-hungry middlemen – in that process, the Japanese dairy industry might seem positively rational. Yet, for many years the apparent contradiction went almost entirely unnoticed, by Western politicians, bankers, and consultants alike. Middlemen were regarded as bad in Japan; but they were somehow overlooked in America’s financial world.


As incredible and counterintuitive as it may sound, Tett has the basic premise wrong. I worked for the aforementioned McKinsey in the 1980s and the firm had tons of analyses showing how securitization was fundamentally cheaper than on-balance sheet lending. The reason was the cost of bank equity and FDIC insurance.

Let us put it another way: if old fashioned banking was cheaper, there would be no obstacle to going back to that system. The economics would be obviously superior and the banks would be able to raise equity to reclaim the securitization business they ceded.

The problem is that this more efficient system entailed information loss. There was no free lunch. By reducing the role of the bank, you eroded credit screening, had no ability to monitor the borrower, and wound up losing the ability to do workouts (that was not inherent to the securitization model, you could in theory have servicers do workouts, but the focus was on streamlining processes as much as possible. The servicers became factories with standardized processes, and successful mods require work and tailored solutions. That is an underappreciated reason why so many mortgage mods are failing. We are using a vastly different template than the traditional one).

Another symptom of too much rather than too little efficiency is that the system is tightly coupled, meaning processes move so quickly that they cannot be interrupted. As Richard Bookstaber pointed out in his Demon of Our Own Design, tightly coupled systems are unstable...

http://www.thedailybeast.com/blogs-and-stories/2009-08-19/robert-rubin-in-hell/

What keeps the former Clinton economic star up at night? Friends blame him for the Citigroup fiasco. And Rubin can't figure out how he didn't see it coming.

People who know Robert Rubin say he never thought that it would end this way. In a span of about 10 years, the former Treasury secretary under President Bill Clinton pulled off an amazing feat—going from the man who saved the economy to one of those responsible for its demise as a senior executive and board member of the hopelessly troubled banking giant Citigroup.

It is an amazing about-face for someone who has wielded so much influence and achieved so much success in the power centers of New York and Washington over the past four decades. Before becoming Treasury secretary during the economic boom of the Clinton presidency, Rubin served as CEO of Goldman Sachs. Since leaving Washington, he spent the last 10 years as a board member and senior executive at Citigroup, which for a time was the prototype of the modern Wall Street firm, with its financial “supermarket” business model that offered every banking and brokerage service imaginable. In time, however, Citi became the poster child for the financial crisis that has plunged the country into one of history’s steepest recessions after its massive and costly bet on toxic real-estate debt.

“Bob feels pretty strongly that what happened at Citi wasn’t his fault,” says one associate. “He also knows that he faces an uphill battle changing people’s opinion about the matter.”

It is his role at Citigroup during this time that has damaged Rubin’s legacy, possibly beyond repair. He has been ridiculed in the press. He found his picture prominently displayed with other board members on the front page of the New York Post under the headline “Bounce These Bozo Bankers,” which pointed out that Rubin made close to $110 million during his time at Citigroup, while shares fell from above $50 to below $5, wiping out billions of dollars of shareholder wealth in the process, as he became richer.

Even among his peers on Wall Street, who revered him for so long, there is a general belief that Rubin is fairly culpable for the Citigroup implosion that led to a massive government bailout. This general belief, even among people who consider themselves friends, is what keeps Rubin up at night, according to people who know him. “Bob feels pretty strongly that what happened at Citi wasn’t his fault,” says one associate. “He also knows that he faces an uphill battle changing people’s opinion about the matter.”

One reason Rubin is so concerned about his reputation is that even now, eight months “retired” from Citigroup, he commands respect and influence. He keeps an office on Park Avenue at the Council on Foreign Relations and has a regular business schedule. He often travels to Washington to speak with his good friend and protégé, former Treasury Secretary Larry Summers, now the president’s chief economic adviser, to discuss what he likes to talk about most: economic policy. Recently, Rubin even had a sit-down with President Obama on the subject.

People who know Rubin say what keeps him going at age 70 is that he is still very much part of the public-policy debate, albeit in a behind-the-scenes way, and he would like to keep it that way. (It is one reason he won’t talk publicly with me about these issues.) Unfortunately, Rubin is also still very much part of the debate surrounding the disaster known as Citigroup, including the questions over whether the troubled company should be broken up, whether its CEO, Vikram Pandit (a man Rubin helped hire), has the chops to remain in that position, and most importantly, who’s to blame for the bank’s tragic downfall—one of the key events in the great financial crisis of 2008.

It’s that blame that Rubin can’t seem to shake; in fact it’s becoming more intense as the one year anniversary of the financial crisis’s most turbulent period approaches. And as the debate about Rubin’s culpability grows among the chattering classes, people who know Rubin say this debate is also growing inside his head. Rubin has been privately wrestling with his role as senior adviser to former Citi CEOs Sandy Weill and Chuck Prince when the risk taking began (and reached immense proportions), and falling back on the fact that he didn’t have “operating responsibilities,” meaning he had authority but no direct responsibility to manage those risk takers.

He concedes that he advocated more risk taking, but he says he wanted Citi to do it smartly, “like we did it at Goldman,” he has said. (What makes him feel bad is that he knows that even his old friends on Wall Street say he needs to own up to the damage caused by that wild risk taking.)

Recently, he has been speaking to former government officials, regulators and friends on Wall Street to determine if they saw the financial crisis coming because he sure didn’t until it was too late. Most admit they didn’t either, and that makes Rubin feel better.

One thing that Rubin can’t seem to rationalize, however, is that while Citigroup burned, he was one of the people who had no idea the house was on fire until it was too late.

“I’ve thought about this a lot,” he told one person about Citigroup, “But I don’t know what I could have done without operating responsibilities.” When pressed if he could have done more, however, Rubin confessed, “In hindsight, there is no question. Everyone should have.”

“I’ve thought about this a lot,” he told one person, “But I don’t know what I could have done without operating responsibilities.” When pressed if he could have done more, however, Rubin confessed, “In hindsight, there is no question. Everyone should have.”

To understand Rubin’s dilemma, you have to understand his role at Citigroup. During his 10 years at the big bank, Rubin had possibly the most unusual job on Wall Street. He was a senior executive with the title “chairman of the executive committee” that bestowed no real duties other than to travel and schmooze with clients and provide advice. Rubin designed his job that way and Sandy Weill agreed.

“I had no desire to return to running a firm,” he has said. “And I had other offers.”

Even so, aside from the chief executive, no other executive at the firm over the past decade wielded more clout. One reason for that was that Rubin wasn’t just a top executive. He was also a board member, the most influential member of the Citigroup board, according to people at the firm. And no major decision was made without his input.

Bob Rubin is at bottom a proud man and I believe a very decent person who has served this country well while in government. He still believes that within the narrow parameters of his job at Citi—to provide advice and serve on the firm’s board—he did a good job. He worked well with clients. He will tell anyone who will listen that he tried to get the bank’s CEO, particularly the hyper-short-term-oriented Sandy Weill, to focus on long-term results, rather than the daily fluctuations in the bank’s stock price and results over the next quarter.

But if there’s one certainty of the past decade of Wall Street greed and government mismanagement of the economy, it’s that Citigroup was a grossly mismanaged institution. Eventually, the federal government was forced to prevent what would have been the largest bank failure in U.S. history by pumping some $50 billion in capital into the bank, and guaranteeing hundreds of millions in toxic assets.

The U.S. government is now Citigroup’s largest single shareholder. The firm is currently on its third CEO (and some regulators are pressing for yet another change at the top); it has gone through almost a half dozen CFOs, numerous management changes during its sordid history, and endless regulatory turmoil.

Throughout the good times and bad, there’s been one constant—Bob Rubin. And consider the following: Citigroup was technically illegal when it was founded by Sandy Weill and John Reed back in 1998 because it combined both commercial and investment banking, but with the help of Rubin as Treasury secretary, the law that would have prevented the supermarket model from working—The Glass-Steagall Act— was dismantled. Citigroup survived, and Rubin was rewarded with his dream job: Lots of money and little if any management responsibility.

Now you know why Bob Rubin’s reputation won’t be repaired anytime soon.

Charles Gasparino is CNBC's On-Air Editor and appears as a daily member of CNBC's ensemble. He is a columnist for The Daily Beast and a frequent contributor to the New York Post, Forbes, and other publications. His book about the financial crisis, The Sellout, is scheduled to be published later in 2009.

what happened, and then determine who did what happened?

Maybe I missed something in the article, but it seems to me things happened in this sequence.

Rubin entered the Citigroup picture.

With Sandy Weill he took Citigroup into territory prohibited by Glass-Steagall.

To protect Citigroup he maneuvered the repeal of Glass-Steagall.

The new Citigroup took risks, meaning they made bets.

They made those bets with Rubin's "authority," but he had no "responsibility" for them

They lost a lot of those bets.

They were too big to fail.

They got bailed out by the taxpayers.

Rubin lost nothing.

Okay, so what were the "risks" Rubin authorized? Which deals went bad? Why did they go bad? Why did Rubin not see ahead of time that they would go bad? Did anyone else think they would go bad? Did Rubin listen to any of those people?

Quants aside, this all boils down to simple arithmetic, simple accounting. There's a man behind the curtain, but instead of pulling levers and pushing buttons, he's adding and subtracting numbers. Debits and credits. Assets minus liabilities equals equity. Material plus labor plus overhead equals cost of product.

The answers are out there. I suspect Bob Rubin doesn't really want anyone to find them. He might find out Citigroup's collapse -- and others -- really were his fault after all.


Tansy Gold

And Larry Summers claims women can't do math. He must not be married to one.

Tansy Gold can do math.
Tansy Gold is a woman.

Ergo, women can do math.


Go fuck yourself, Summers, 'cause no real woman would want to.



Tansy Gold, who is also a potty mouth.

ears.


:hi:



Tansy Gold

I don't know of a SINGLE family in MY circle of friends and family where the woman was not THE person responsible for MAINTAINING and IMPROVING the family's financial status...

Men may EARN more or be the sole earner, but usually the men then give the money/accounts for the WOMEN to manage and control - to the benefit of the family...it was amazing how she could do MUCH with almost NOTHING!!!

I was always amazed that after my grandfather KILLED himself during the Great Depression, leaving my PREGNANT Grandmother with TWELVE children to raise HERSELF, that she not only did so - SUCCESSFULLY - but managed to find SUSTENANCE for her family under DIRE circumstances, especially when the MAN in her life and RESPONSIBLE for the earnings up to that point, thought it was all just too OVERWHELMING to continue to LIVE and could only think of himself and his worries, not thinking what his death meant to HIS FAMILY!!!

My other grandfather/grandmother did what they had to, as a COUPLE, and my grandfather was at various times, a coal miner (injured his back), shoe maker, carpenter, (maybe a bootlegger making moonshine in the basement), machinist, and a few other things I don't remember now...they also survived and thrived, altho he died young (at 65) of a heart attack.

Never, ever underestimate the financial prowess of WOMEN!!!

That in those families I know about where the man maintained control of the finances, the result was not good.

First of all, in virtually all those cases I can think of, he had absolute control. My late husband's cousin, for example, handed her paycheck to her husband and never saw the money again. When he divorced her, she admitted she did not know how to write out checks to pay her bills. She had never learned how to reconcile a bank statement. After nearly 20 years of marriage, she was left destitute: he had squandered everything.

Second, the men who have had control of the finances generally tended to put their personal wants/needs ahead of the family's; the women tend to put the family first.

Third, the women who have control of the money generally have a very good idea of what things cost. The men tend to see only the bottom line, sometimes to the point that "as long as the check doesn't bounce, it's okay."

Again, this is a "tends" situation, not an absolute, and only based on the limited experiences of




Tansy Gold

When I first met my wife, she never paid anything on time. Bounced checks everywhere.

We have separate checking accounts, and all the bills get paid, the day they are received, out of my account, including her car payments, credit cards, and insurance. If I run a little short at the end of the month (beer money), she'll give me money. And she takes care of the shopping.

Only kidding.

There is actually one example in my family -- my son-in-law's ex-wife thinks pretty much like an investment banker: if she has a dime, she spends a dollar; if she has a dollar, she spends $100. He put her finances in order before the divorce to protect their son, but she blew everything in less than two years and filed for bankruptcy.

Ironically, after he married my daughter he turned all the household finances over to her. "I feel safer that way," he said.

:shrug:


Tansy Gold

seek out nerds. It's nature's way to balance things.

it was thought that women did not have the skills necessary for managing a bank." Nothing could be further from the truth. Biology and history suggest a different narrative, all together.

I knew an amazing, elderly Jewish lady, slightly-built and quiet in her ways, who I believe had been mourning the death of her daughter from a brain cancer, while still in her early twenties, for the last 40 years or so. I believe Josie, as she was called, regularly drove her car from West London to her grave-side in Brighton, and was often seen driving on the wrong side of the road!!! Definitely had a particularly wilful and intransigent guardian angel looking after her and those whose paths she crossed. Anyway, her second husband, it was discovered after he died, had been putting £200 on a dog in the evenings from her bank account.

During this time, I believe Josie was a tartar for scouring the supermarkets for soap coupons and special offers of a few pennies or shilling off the normal price. But when she fond out His Nibs had virtually emptied her bank account, as far as I know she expressed no bitterness or reproach in any way. She managed to buy a small terraced house, which needed major renovation - which she arranged -and before long was taking paying guests, trainees at the local police college, and in particular a young woman, and an elderly guy she told us was a retired comedian who had sometimes been on TV.

I didn't have any difficulty believing that. An armchair by the fireside which Josie and the girl never sat in, they told me the comedian had more or less appropriated, and he used to get them to go to the fridge and get him his cans of beer. They sounded a little incredulous themselves but that made it all the more comical.

I also loved the newspaper account of the row in the NZ parliament over a woman MP who was knitting during the reading of an important bill (or some such), and retorted to her male accusers that they were just jealous because they couldn't multi-task.

First of all, my Mother and Father generally shared the financial management obligations (and benefits) when I was growing up.

One event stands out in my mind, however. Once when I was fairly young, but, old enough to travel on a long road trip alone with my Mom and Brother. Dad had to stay home and work, iirc and it was a visit to relatives and not really a 'vacation'.

We were passing through a mid-western State and my Mom decided to use a new thing they had to see if it would work. Y'know, try it out before we had to use it due to an emergency. (Which, was what it was for in those days, before they BECAME the emergency.)

A Credit Card.

So, she went to a local branch of a Bank where we were and tried to charge $100.00. The Teller refused! He said, "I'll have to get an approval on the charge from your Husband." She was appalled! She then pointed out is was her name on the card and what would they do if she wasn't married.

The events kept getting escalated up the chain of management until she was talking to the President of the bank. (I think his name was Drysdale. ;) ) He insisted on calling my Dad at work to get approval.

Somehow, they were able to get through to him on the phone as my Mom sat there fuming. (She wouldn't leave without the money... It was after-all, a fiscal social experiment.)

Dad was livid! Always having been a progressive sort... It had never occurred to him that anyone in the (then) 20th century would deny a Wife access to shared household assets.

I was never really sure what he said on the phone. It's hard to imagine, because he's generally a quiet mannered person. It must have been something with an impact. Because, they immediately gave my Mom the cash. In a most subdued and almost supplicating way... Seeing it, it was almost like when Hank was on bended knee to Pelosi.

Nazi regime, and Western corporatism.

I remember reading an account by a Jewish author of the 3 days the Nazis spent interrogating him as a nine-year old child to try and establish if he was Jewish. Perhaps for practical reasons in view of the regime, but for whatever reason, he had not been circumcised. Anyway, he said that towards the end of this futile and pathetic investigation, it occurred to him that the Nazi regime could not but be doomed in short order. It was just too stupid.

That account of your mother's experience throws a lot of light on the seamless relationship between the intrinsic evil of the corporate culture of the West, particularly Anglo-Saxon, with its prioritising of financial profits to the total exclusion of any moral consideration, whatsoever, and the blindest, most risible stupidity.

No consideration of morality was concerned in that little saga you related which wasn't well-trumped by simple common-sense. And of course any tenuous element of morality lay with your mother, in any case. No, it was just a re-enactment, in a different guise, of the Nazis' investigation into the young lad's ethnic origin. An exquisitely, surreally lunatic waste of time and money. Not to speak of goodwill in the case you relate, notably that of half of the country's population, in principle at least.

And I had been stunned to hear from my mother that she had not been permitted to possess a bank account, cheque book, etc, after WWII. It might even have lasted into the fifties. Yet, she was the business brain in the family, and that by a very long chalk. She'd had to leave school at thirteen, to bring up her two brothers and two sisters, yet, in the early seventies, she was offered the job as an international trouble-shooter by the country's largest "temping" agency. Being warned by the CEO's husband, when interviewed by him, that his wife would expect her "pound of flesh", and it would be very stressful, even for a much younger person, she declined the position for a much less stressful, managerial position with a charity. My step-father had a very modest business as a landscape-garden contractor, and would have regularly, substantially undercharged for his work, were it not for my mother routinely altering the invoice amounts (rather like the dishonest steward in the parable!). She had run and sold a successful nursing agency in West Australia, a few years earlier.

http://mpettis.com/2009/08/yet-another-discussion-on-the-asian-savings-glut-hypothesis-and-why-it-matters/

I SUPPOSE THE ONLY THING THAT REALLY MATTERS IS THAT CHINA'S SAVINGS (OR RETAINED EARNINGS, IF YOU WILL) ARE ALL IN DOLLARS (OR MOSTLY) AND THE DOLLAR IS IN THE TANK AND BEING FLUSHED AWAY BY BERNANKE.



The topic is whether or not the global imbalances that have led to the current crisis were in any way “caused” by the Asian savings glut, and besides arguing why I think this may be the case, I want also to argue that getting this argument right is far more important than many seem to realize. Mohamed Ariff, executive director of the Malaysian Institute of Economic Research, indirectly suggests why in a good OpEd article in today’s New Strait Times:





But our definition of a “recovery” in the US, and whether it will indeed happen in the way that Ariff requires for Asian growth to return, depends in an important way on whether or not the current imbalances were caused primarily by an original distortion in US consumption or in Asian savings...

The whole “savings glut” debate is a controversial one because almost from the start it has degenerated into a fairly silly argument about who to blame for the global imbalances and the subsequent crisis – or more specifically and more excitingly, whether the predator was wholly the foolish American consumer or the beetling Chinese saver. Three months ago Brad Setser discussed all this in one of his blog entries that (inevitably) drew more comments than most, and as usual he provides a concise and enlightening discussion on the subject which you might want to read. He is a proponent of the hypothesis, but nonetheless pretty fair-minded.

Professor Quah weighs in on the other side of the savings glut debate although, unlike most others in the debate, he seems not terribly concerned about assigning full blame to any of the major parties. It is neither excess US consumption nor excess US savings that solely “caused” the imbalance, in other words, because necessarily both sides are required for it to exist.

Except for the possibility of trade with outer space, the US deficit has to be matched dollar-for-dollar by trade surpluses in the rest of the world. Correspondingly, therefore, the rest of the world has been saving—consuming less than it has been producing—and accumulating dollar claims against the US as a result.

In this description, however large the global imbalance, a savings glut—wherever or however it might arise on Earth—has no independent existence. It makes as much sense to say the world’s excess savings caused enthusiastic US consumers to flood into Walmart to buy $12 DVD players, as to say US consumer profligacy made hungry Chinese peasants abstain even more and instead plow their incomes into holdings of US Treasury bills.

When two variables have always-identical magnitudes, obviously neither can usefully be said to cause the other...

(THIS ARTICLE GOES ON FOREVER--IT MIGHT BE WORTH READING...)

........................
Perhaps what we need is a real return to Confucian roots. I recently read this quote from Lao-Tzu: “The sage does not hoard. Having bestowed all he has on others, he has yet more. Having given all he has to others, he is richer still.”

I'M SURE ANY OF US COULD COME UP WITH THE NEW TESTAMENT EQUIVALENTS....

http://blogs.reuters.com/rolfe-winkler/

Some breaking news from Reuters about an updated deficit projection:

The Obama administration will raise its 10-year budget deficit projection to approximately $9 trillion from $7.108 trillion in a report next week, a senior administration official told Reuters on Friday.

The higher deficit figure, based on updated economic data, brings the White House budget office into line with outside estimates and gives further fuel to President Barack Obama’s opponents, who say his spending plans are too expensive in light of budget shortfalls.

Some might be inclined to give Obama credit for this, for updating his deficit forecasts at a politically inconvenient time. He’s pushing his health care plan pretty hard and this news gives a HUGE talking point to critics who say we just can’t afford it.

But the way the news was announced is suspect. There were two deficit projections released this week. The good news — about this year’s deficit projection falling from $1.84 billion to $1.58 billion — was released mid-week. The bad news — about the 10-yr deficit projection — was dumped late on a Friday evening.

..............

And now for tonight’s tidbit: I have been critical of FDIC in the past for not collecting deposit insurance premiums from most banks between 1996 and 2006. I wasn’t aware that FDIC was prevented by law from doing so during that period because the DIF was above 1.25% of insured deposits.

I was wrong to be critical of FDIC on this point. It was Congress’ fault, not theirs.

They changed the law back in 2006, by the way, right before Sheila Bair was installed as Chairwoman. For those interested, it’s 12 USC Section 1817 (b).

.......................


Big banks still hold FDIC captive


Sheila Bair has moved with impressive alacrity to shutter failed small and medium-sized banks. But she is still held hostage by the too-big-to-fail four.

Over the last eight days, her agency has been particularly busy, handling the two largest bank failures of the year. Last Friday it was Colonial Bank, today it will be Guaranty Bank. (THIS IS SPECULATION--REPORT NOT YET IN--D OOPS! THERE IT IS NOW! I'LL ADD IT ABOVE)

With $25 billion and $14 billion of assets respectively, Colonial and Guaranty are the sixth- and 10th-largest failures in the history of the FDIC. Still, they pale in size compared to the biggest banks.

Bank of America Merrill Lynch, which had $2.3 trillion of assets at the end of the second quarter, is nearly 100 times larger than Colonial. JPMorgan Chase, with $2.1 trillion, and Citigroup, with $1.8 trillion, are nearly as big. Wells Fargo had $1.3 trillion, 100 times more than Guaranty. These amounts don’t include hundreds of billions of dollars of off-balance sheet assets.

Yet even Colonial and Guaranty are large enough to give the FDIC indigestion. Its deposit insurance fund had just $13 billion as of March 31. The 56 failures since then will cost it an estimated $16 billion, including nearly $3 billion for Colonial. (That amount excludes Guaranty – the FDIC should provide an estimate for those losses later today.)

It’s an unsettling thought if you have money in a bank. Officially, FDIC backs $4.8 trillion worth of deposits. If you include “temporarily” insured deposits, the total is $6.3 trillion. Yet the insurance fund protecting these deposits is going broke. Soon, the FDIC may have to draw on its credit line at Treasury.

It’s not surprising, given the sorry state of the Deposit Insurance Fund and the gargantuan heft of the big four, that FDIC is taking a bifurcated approach to bank resolutions.

Bair has moved decisively to close small and medium-sized banks. With the monsters, she not only assisted in their bailouts — providing federal insurance for their debt even as she already insures their deposits — she also sponsored their continued growth — putting WaMu in the hands of JPMorgan and pushing Wachovia into the arms of Wells Fargo.

Not that she had much choice. The biggest banks are far too big for her to resolve. One way to measure this is deposits in failed banks as a percentage of GDP.

(Click chart to enlarge in new window)deposits-in-failed-banks SEE LINK

In 1934, the worst year for bank failures during the Depression, the total was 6.4 percent. In 1989, the most expensive year for the FDIC during the S&L scandal, it was 2.5 percent. Last year, the figure was 1.6 percent.

But the 2008 figure excludes Citi, BofA and Wachovia, which properly should be dumped in the failure bucket. Citi and BofA were goners without bailouts while Wachovia failed and fell into the arms of bailout recipient Wells Fargo. When you include those three, deposits in failed banks jump to 15.7 percent of GDP for 2008.

The FDIC, which was created to protect society from deposit runs, is no longer able to fulfill its mission because the biggest banks have grown far beyond its grasp.

That’s why these banks need to be downsized dramatically. A tax on assets is a good idea, but not enough. To break them up, Washington should limit the deposits in any single bank to a threshold far below what the big four currently hold.
.....................

Warren Buffett is back as the nation’s financial conscience, publishing an op-ed in yesterday’s NYT lamenting the dangers of too much monetary and fiscal stimulus. As regular readers of this blog are aware, that’s a message with which I wholeheartedly agree. My problem with Buffett’s piece is that he makes a good argument and then totally undercuts it in his conclusion:

Our immediate problem is to get our country back on its feet and flourishing — “whatever it takes” still makes sense. Once recovery is gained, however, Congress must end the rise in the debt-to-G.D.P. ratio and keep our growth in obligations in line with our growth in resources.

This have-your-cake-and-eat-it-too approach is typically what we get from Paul Krugman: Yeah, debt is a problem and has to be dealt with long-term, but in the meantime we should jack up deficit spending in order to boost growth. To paraphrase St. Augustine, make us fiscally and monetarily prudent, just not yet. Ben Bernanke said something of that sort in a speech. He was trying to be funny.

The problem, it seems to me, is that rising GDP and employment—i.e. “recovery”—is not compatible with de-leveraging, which is what Buffett is talking about.

When consumers try to cut debt and boost savings, the economy goes into a deflationary spiral that Keynesians argue must be counteracted with fiscal and monetary stimulus.*

Consumers de-lever, government re-levers.

Private consumption and government spending now drive something like 80% of GDP. It can’t keep rising unless consumers, the government or both continue borrowing huge sums.

The goldilocks economy Buffett describes, in which we can have “recovery” without increasing debt, is a fantasy.

My point is that in order to reduce debt we have to endure some sort of deflationary recession. The alternative is to spend and print perpetually, which Buffett points out is the worse option.

What Buffett should have said? Suck it up folks, we’ve no choice but to learn to live with less.

——

P.s.: I think Buffett actually knows this, but being asset-rich, he’s boxed in. Deflation hammers the value of all non-cash assets, so he has to support monetary/fiscal stimulus in order to preserve his own and his shareholders’ wealth. Hence the opening of the piece, which lauds the “wisdom, courage and decisiveness” of the Bush and Obama administrations in the face of collapse, and the end of the piece, which says their emergency measures continue to be necessary. He maligns the effects of stimulus, but he’s stuck supporting it.

*The “Paradox of Thrift” this is called, a particularly problematic economic theory used to justify heavy government borrowing.

Probably not a hell of a lot. Phil never struck me as being one for details...
Doesn't mean he shouldn't be prosecuted to the fullest extent of the law, and then some!

http://www.thenation.com/doc/20090831/scheer

Robert Scheer is the editor of Truthdig, where this article originally appeared. His latest book is The Pornography of Power: How Defense Hawks Hijacked 9/11 and Weakened America(Twelve).

In recent days yet another wealthy private customer of the Swiss-based banking conglomerate UBS admitted to criminal fraud in a growing parade of perp walks that could extend into the thousands. It is a case that threatens to ensnare former Sen. Phil Gramm, the Texas Republican who is vice chairman of UBS' investment banking business. Given the widespread involvement of UBS in what the Justice Department alleges were systematic efforts to violate US tax laws, it must be asked: Did Gramm as a top executive have no inkling about what was going on?

SEE FULL ARTICLE AT LINK!

http://www.huffingtonpost.com/larry-flynt/common-sense-2009_b_264706.html


...Journalist Matt Taibbi, writing in Rolling Stone, notes that esteemed economist John Kenneth Galbraith laid the 1929 crash at the feet of banking giant Goldman Sachs. Taibbi goes on to say that Goldman Sachs has been behind every other economic downturn as well, including the most recent one. As if that wasn't enough, Goldman Sachs even had a hand in pushing gas prices up to $4 a gallon....

It takes more than one night's unbroken sleep to recover from a month's deficit!

Country Currency Aug. 21 Aug. 14 YTD% chg

Euro Zone euro 0.6975 0.7048 -2.6

http://online.wsj.com/mdc/public/page/2_3020-worlddollar.html

It was only to be expected.

(or is it? :shrug: )


This week I happened to be at the Gutenburg Project reading (for free) one of the works of that well known Socialist...


H. G. Wells.


His work; "The Days of the Comet".

When I ran across the following quote:

"There on the one hand in a crowded darkness, about the ugly factories
and work-places, the workers herded together, ill clothed, ill
nourished, ill taught, badly and expensively served at every occasion
in life, uncertain even of their insufficient livelihood from day
to day, the chapels and churches and public-houses swelling up amidst
their wretched homes like saprophytes amidst a general corruption,
and on the other, in space, freedom, and dignity, scarce heeding
the few cottages, as overcrowded as they were picturesque, in which
the laborers festered, lived the landlords and masters who owned
pot-banks and forge and farm and mine. Far away, distant, beautiful,
irrelevant, from out of a little cluster of secondhand bookshops,
ecclesiastical residences, and the inns and incidentals of a decaying
market town, the cathedral of Lowchester pointed a beautiful,
unemphatic spire to vague incredible skies. So it seemed to us that
the whole world was planned in those youthful first impressions."

(Check it out yourself @ http://www.gutenberg.org/files/3797/3797.txt )

Well, that quote leaped out at me... The portion in bold actually smacking me around the head and neck with a lead shot filled rubber hose.

I realized that, THIS... The whole quote, but, especially the portion in bold... Was the best, most exact description of the current profit-by-denial American Health Care System, I had ever read. (and this was written almost 100 years ago)

"badly and expensively served at every occasion in life"... Roll that to and fro in the thinking part of your mind for a minute...

Do you agree with me?

Could it be true?

Well, I ask you... Isn't it time we did something about it?

And sometimes it's hard to believe or remember that this country was founded to eliminate such grotesque disparities.

As for doing something, we keep trying.

I'll bet that if you sent that quote to Dennis Kucinich, he'll read it on the house floor.

http://www.nakedcapitalism.com/2009/08/copper-stockpiled-by-chinese-pig.html

This story on Bloomberg,
http://www.bloomberg.com/apps/news?pid=newsarchive&sid=ae8qY8FcYJa4
about stockpiling of base metals by Chinese farmers and housewives, highlights a type of speculation that observers in the West haven't considered deeply. Since these were purchases by individuals, sometimes in the form of scrap, it's hard to ascertain how significant a factor this activity has been. If nothing else, the expectation they will reduce holdings is a sign of a change in sentiment.

From Bloomberg hat tip reader Michael)::

Copper, nickel and other base metals stockpiled by speculative Chinese investors including pig farmers may be sold when “market sentiment turns,” said Scotia Capital Inc.

A price surge and easy bank credit this year encouraged pig farmers, stock brokers and businessmen to buy copper and nickel for speculation, Liu Na, an analyst with Scotia Capital, wrote in a note dated Aug. 17,....

“These stockpiles are in ‘weak hands’ as speculators have no real use for base metals,” Liu wrote. “When the market sentiment turns, they are very likely to turn into quick sellers, especially when the bank’s money is involved.”...

China, the world’s largest metal consumer, uses around 5 million tons of copper and 400,000 tons of nickel a year. Shanghai exchange-monitored copper stockpiles expanded to 76,107 tons last week, the highest in two years.

“The scale of the speculative investment is hard to quantify, although some local observers put the number at some 200,000 tons for copper, and at 50,000 tons for nickel,” Scotia’s Liu wrote. “We regard these speculative behaviors as natural, and they will inevitably occur in a bull market, so we do not want to exaggerate the impact they have.”

Pig farmers in Guangzhou province were buying copper or nickel, Liu wrote, citing CCTV. Residents in Wenzhou city of Zhejiang province, “famously investment savvy,” are reportedly using bank loans to stockpile copper scrap, with one merchant saying he has stored 20,000 tons, Liu wrote.

Housewives in Wenzhou may have stockpiled metals as “they just have too much cash on hand,” Eramet’s Deng said...

Metal traders have reported incidents when “a rich man walked into our office and asked us what had been the lowest and highest prices of nickel,” Scotia’s Liu wrote. “After telling him those prices, he said the current price was low and he placed an order.”

http://www.nakedcapitalism.com/2009/08/what-real-comprehensive-healthcare.html


...The wrong tactics

If you recall, Hillary Clinton outlined her early 1990s health care initiative in excruciating wonkish detail only to have her political enemies use this detail to pick her plan apart. Hillarycare was torpedoed because opponents of her initiative had a lot of ammunition with which to work. Team Obama seems to be fighting this same battle. They are employing a strategy in which cost reduction was the initial selling point of his reform platform. Moreover, Obama and his administration offer little in upfront detail about actual healthcare goals in order to prevent a recurrence of 1994.

But, this is not 1994. And reducing system-wide costs that trickle down to individuals is not a selling point that engenders any visceral or emotional response from voters. Furthermore, I have been dismayed, as have many in America, that Congress and the President seem to have concocted plans for reform before taking the debate over healthcare to the public to inform themselves as to what we want. The draft legislation came first and then the town hall debates. In fact, these debates never would have occurred had the President had his way with a vote before Congress’ summer recess. This seems very high-handed. Why didn’t we have town hall meetings followed by drafted legislation?

The social psychology of economic depression

We are in a deep economic contraction and people are afraid. What Americans want is economic security, not cost reduction. Obama must offer a healthcare plan that provides increased economic security to the majority of Americans if he wants greater public support.

Most people in America are satisfied with their health insurance and their health care. As they see it, no change is necessary there. Telling people the healthcare system in France, Britain or Canada is just as good as ours and we should switch to their model is a losing proposition.

On the other hand, Americans do feel a general sense of economic insecurity. The unemployment rate and foreclosure rates have risen astronomically. Meanwhile, houses, the main asset for most Americans, have declined in value tremendously, as have stocks. Americans are poorer both in terms of income coming in the door and wealth on their balance sheet. No wonder, the word depression is used to describe a major economic downturn.

And there is an increasing sense of anxiety about paying large out-of-pocket expenses despite having insurance. Here, I am talking about money for specific visits and procedures that one has to reach into one’s pocket and pay out here and now. That’s the kind of ‘cost’ that gets people’s attention – abstract system-wide costs, not so much.

Getting people onboard for reform

Given this array of forces bearing down on average Americans, healthcare reform must have increasing economic security for the insured as as the principal rallying call. We need to allay people’s sense of fear and anxiety by demonstrating that change will make them more secure economically. This is what insurance is all about: reducing economic risk. And right now, given other money problems, most people feel the risk reduction they are receiving is not adequate.

So, reduction of out-of-pocket expenses for those already insured must be the principal selling point of any reform. Mind you, I believe universal coverage is the most pressing need. But, quite frankly, telling people we need to give something to other people in a time of economic distress is not the sort of thing that makes one want to jump up and shout.

Beyond just reducing the risk associated with out-of-pocket expenses, there are other issues of insecurity – the risk of losing coverage or paying more money when losing or changing a job, the risk of dropped coverage due to pre-existing health conditions, and the risk of exceeding yearly or lifetime caps. If the healthcare plan that the President and Congress present to the American people can credibly claim to reduce these risks to those already insured, we would be more likely to accept reform on other issues which I am about to address.

To recap, most Americans like their health care, but feel there are significant gaps in their health insurance. Obama has made a savvy move in switching the debate of late from care to insurance. In reforming American health insurance, four issues will gain widespread support:

1. Capping per visit and yearly co-payments fees.
2. Allowing every worker to remain with the same health insurance provider and paying largely the same premium had they remained with the same employer regardless of employment situation.
3. Preventing health insurance companies from dropping coverage for pre-existing conditions.
4. Providing all employees with a health insurance policy option without annual or lifetime caps and making the caps explicit for other options.

Two other reform issues to be addressed

With the issues established that will get most Americans onboard, reform can turn to other agenda items. The first issue is clearly the lack of insurance for tens of millions. This is an issue which is easy to demagogue due to stereotypes about just who has no insurance in the United States (illegals, Blacks, Latinos, the extraordinarily sick, or the young and healthy). But the true purpose of health care reform has to be insuring all those working in America and their families against large and unexpected healthcare expenses and to promote universal basic preventive care. If we pass a health care bill without substantially all Americans being covered against catastrophic healthcare loss, you can deem the legislation a failure.

However, there is one other issue of importance as well. James Pethokoukis had a good blog post yesterday “A healthcare plan to save Obama’s presidency” which encapsulated this idea. First he agrees that universal coverage is necessary. But, he also adds an important bit regarding our employer-based system.

Make health insurance mandatory and subsidize those who can't afford it. (That's the blue part.) But at the same time dismantle employer-based health plans, which prevent consumers from understanding the true costs of their healthcare decisions. In any case, employer plans are just an accident of history. (That's the red part.)

The simplest way of dismantling them, according to an analysis by McKinsey, would be to make the money spent on health insurance by employers available as cash, tax free, to employees. "Insurers would then compete for customers with policies that offer better value for the money," according to McKinsey. "The combination of invigorated supply and demand is the only healthcare reform plan that will avert the economic disaster that otherwise awaits us."

A Purple Plan for the centrist - or purple -- president many Americans thought they were voting for. It would bolster the president's popularity, lift American spirits and help restore the economy.

If I run a business in the United States in competition globally, why should I be forced to provide healthcare to my employees unlike businesses in no other country. This clearly puts American businesses at a disadvantage and is a legacy of a system that needs to end.

What’s more is dismantling the employer-based health insurance system would have a huge stimulative effect on the economy and financial assets. Every listed company in the United States would instantly be worth more and have more money available to provide for investment. But, of course, the devil is in the details because this measure would effective be a tax cut for business. Where is the revenue to support this cut? If the President and Congress could find a legitimate way to recoup this revenue that makes the health care initiative relatively deficit neutral, there would be bipartisan support for such a provision.

Recap

The healthcare debate has been a fiasco. It was begun without any input from the American people. Obama and many in Congress even attempted to pass legislation before the summer recess when serious debate could happen. We saw this tactic under Bush when Hank Paulson tried to fast track the TARP legislation.

As a result, the debates have often not been very substantive and have degenerated into an emotional demagoguing of this key issue. Better messaging would be nice as well. What’s in it for me? And what are your goals in passing this legislation? These are two questions neither Obama or many in Congress can answer...

http://www.ft.com/cms/s/0/4049dac4-8d05-11de-a540-00144feabdc0.html

It's a piece of work, too.

The only "health care decisions" people I know make is whether to skip the housing/utility/kids shoes or grocery bill to pay for the Doctor. While we will always have the few Munchausen's(sp?)Syndrome and lesser attention seekers who love to go to the Dr., most people don't make "health care decisions." They go to the Doctor because they are sick, or need eye-glasses, or have a cavity.

Then, there's giving individuals cash, presumably so they can buy health insurance in the "competitive" market, which spends millions to make sure that A., people are confused about what they are buying, and B., every claim is fought tooth and nail.

As well as the minor fact that with the jobs situation in this country, including wages being depressed/stagnant for lo these many years, why does he think that the first thing people will do with "free money" is run out and buy health insurance?

However, he is right about the unbelievably terrible mess the Administration has made of its message. (Lakoff, I think - with whom I sometimes agree and sometimes don't, like everyone else) has a long article floating around right now about this - I only had time/energy to read the first page last night). Once again, I think that this can be laid at the feet of their stupid desire to appease the Rs - focusing on cost containment, etc. The writer above is right that most people are most frightened right now by lack of economic security, and that should have been a main message.
edit: typo

http://www.latimes.com/business/la-fi-ubs-complaint20-2009aug20,0,2786129,print.story

Bradley Birkenfeld told U.S. authorities in 2007 that he helped Americans set up secret bank accounts in Switzerland. Thousands are soon expected to be exposed for dodging U.S. taxes.

By David S. Hilzenrath

4:13 PM PDT, August 19, 2009

In March 2006, an American employee of UBS, Switzerland's largest bank, sent a confidential letter to a top executive.

"I wish to invoke my rights listed under the UBS Whistleblowing Protection for Employees" policy, he wrote.

With that, Bradley Birkenfeld fired the first shot in the historic and devastating assault on Swiss bank secrecy that is soon expected to culminate in the exposure of thousands of Americans who used secret accounts to dodge taxes.

The high-living Birkenfeld's tale reads like a pulp thriller, complete with the international smuggling of diamonds stashed in toothpaste tubes.

U.S. and Swiss officials Wednesday revealed the terms of an international agreement paving the way for the disclosure of UBS client secrets. Long-running federal probes of UBS have already driven the bank to agree to pay a $780-million fine, admit that it helped Americans hide money from the Internal Revenue Service and, under orders from a Swiss regulator, turn over the names of 200 to 300 American depositors, many of whom are now under criminal investigation.

In Switzerland, where secrecy is the bedrock of a lucrative global banking industry, there are widespread fears that business will never be the same.

All of that is attributable in large part to Birkenfeld, the 44-year-old son of a Massachusetts neurosurgeon, who approached U.S. authorities in 2007 and provided an extraordinary inside account of the bank's conduct, according to court papers filed Tuesday.

One of the biggest blows to bank secrecy everywhere might be the example Birkenfeld set. If a single employee could expose bank secrets, anyone thinking of using secret accounts for illicit purposes has a compelling new reason to think twice.

Birkenfeld, who pleaded guilty to a criminal charge last year for participating in UBS' illicit cross-border business, is to be sentenced Friday in Fort Lauderdale. Although he faces a maximum of five years in prison, the Justice Department asked the court to cut that in half in a filing Tuesday.

Citing his assistance to the government, and arguing that imprisonment could discourage other informants from coming forward, Birkenfeld's attorneys asked for probation and home detention.

Birkenfeld's decision to contact U.S. authorities could pay off for him in another way. Under IRS regulations, people who blow the whistle on tax cheaters could be eligible for rewards of up to 30% of any money the IRS recoups.

It is unclear whether Birkenfeld would qualify. An IRS notice says the agency will refuse to pay a reward if the whistle-blower "is convicted of criminal conduct arising from his or her role in planning and initiating" the tax evasion.

Birkenfeld's largest American client, a California real estate mogul, admitted to tax fraud in October 2007 and agreed to pay $52 million in back taxes, according to a court document, hinting at the possible stakes. It is unclear whether Birkenfeld had anything to do with that prosecution.

Birkenfeld has been living with a family member since his guilty plea, his movements restricted and monitored with an ankle bracelet.

He attended Norwich Military Academy in Vermont and later studied business in Switzerland. He went on to join a team of UBS private bankers who entered the United States with encrypted computers, stealthily marketed Swiss accounts to wealthy Americans, and then helped them disguise their ownership of the accounts through the use of offshore shell corporations. According to a court document, he once smuggled diamonds into the United States for a client by hiding them in a toothpaste tube.

He had two residences in Switzerland -- an apartment in Geneva and a million-dollar home in Zermatt -- and drove a BMW, according to court records.

I'M SURE SOME BIBLICAL PARALLEL TO THIS EXISTS, I'M JUST NOT SUFFICIENTLY WELL-VERSED TO DREDGE IT UP....REMEMBER, JUDAS IS NEW TESTAMENT, NOT OLD!

I had a little too much communion last night. My strange little religion uses vodka and pizza instead of wine and wafers.

As for lightning strikes, let's just say that Yahweh is not amused. We've had one hell of a light show the last couple of nights. Today, we celebrate the feast of the rock star relatives return, and the feast of the unlucky chicken, with the blood of the habanero. And we receive the blessings of the Holy Mojito.

http://www.businessinsider.com/jp-morgan-bails-out-california-2009-8

Remember when the US government had to bail out investment banks? Now a bank is bailing out the state of California.

California had been covering its budget shortfalls by issuing IOUs to pay for services, making it the first state to issue its own fiat currency since the Civil War. The program ran into trouble when banks announced they wouldn't keep cashing the IOUs.

Eventually California reached a budget deal and kicked the can down the road, but there's still the issue of the outstanding IOUs.

Yesterday JP Morgan agreed to lend California $1.5 billion to fund the program to redeem the IOUs. State controller John Chiang has announced the redemptions will begin on September 4th.

A plausible case can be made that this is an indirect bailout by the US government of California. JP Morgan is deemed to big to fail, and can borrow both from the Fed and at reduced costs in the market because of its status. This makes it far easier for the bank to lend confidently to California. What's more, JP Morgan can assume that if California were to come close to defaulting on the loan, the US government would bail out California.

From the LA Times:

Just what JPMorgan will earn on the loan hasn't been determined, Dresslar said. The terms are still being worked out, he said. Lockyer will have to be able to make the case that the private placement of the debt with JPMorgan is as good as or better than any deal the state could get with other banks.

The risk to JPMorgan is virtually nil: The loan will be repaid by late September, when the state plans to sell $10.5 billion of so-called revenue anticipation notes, or RANs -- securities that will mature next spring. Individual investors are expected to flock to the RAN offering as a place to stash cash, because the notes should offer much more lucrative returns than money market funds and other short-term accounts paying next to nothing.

http://paul.kedrosky.com/archives/2009/08/destroying_mark.html

There is another side to my recent post about VLCCs floating around as contango oil storage units. With demand for containerships declining given shrinking world trade, the number chittagong needed worldwide is falling. The result? Dormant ships, which represent an expensive carrying cost for their owners.

What is a struggling containership company to do? Easy: Destroy capacity. You can take oversupply straight out of the market without the carrying costs of idle ships.

So far in 2009 we have seen record numbers of containerships being sent off to scrap yards in India, Bangladesh, Pakistan and China. Such yards are seeing boffo business in tearing apart ships as large as 4,000 teus, as the following figure shows. To put in context, so far in 2009 we have destroyed as much containership capacity as transited through Oakland annually back in the 1960s when it was among the largest ports in the world.

The following figure (from Alphaliner) shows the record pace of containership demolition in 2009:

Good Morning!

I know Michael Moore's trailer to his Capitalism movie is elsewhere, but my family's Congressman, Baron Hill is in it.


'CAPITALISM: A LOVE STORY' - In Theaters October 2nd

"It's a crime story. But it's also a war story about class warfare. And a vampire movie, with the upper 1 percent feeding off the rest of us. And, of course, it's also a love story. Only it's about an abusive relationship.

"It's not about an individual, like Roger Smith, or a corporation, or even an issue, like health care. This is the big enchilada. This is about the thing that dominates all our lives — the economy. I made this movie as if it was going to be the last movie I was allowed to make.

"It's a comedy." — Michael Moore

http://www.youtube.com/watch?v=IhydyxRjujU

I haven't ever seen a Michael Moore film--I did try to watch Roger and Me, but it hurt too much. I've seen Flint, I knew people that lived there and worked for GM.

But maybe I can go the length on this one.

I've seen Sicko and Fahrenheit. Can't wait for Capitalism! I wonder if the stock market meltdown will coincide with the theater presentations.

:eyes:

http://www.reuters.com/article/ousiv/idUSTRE57I68F20090819

NEW YORK/WASHINGTON (Reuters) - Wall Street is warily watching the Obama administration's pay czar and wondering if he will flex his muscle to "claw back" past bonuses paid to some of the biggest players in high finance.

Such a move, which Kenneth Feinberg first publicly hinted at this past weekend, could roil the industry, which lately seemed to have successfully toned down congressional efforts to curb outsized pay packages.

"There are some real concerns about the scope of 'clawbacks' and the people and payments that they may reach," said Linda Rappaport, who leads the executive compensation practice at Shearman & Sterling, a New York Law firm.

Rappaport, who has advised banks including Citigroup Inc (C.N) and Morgan Stanley (MS.N), both of which received loans from the U.S. Treasury's Troubled Asset Relief Program (TARP), said the concerns about clawbacks "can influence the perceived value of incentive awards going forward."

Morgan Stanley has repaid all $10 billion in TARP money it received last fall. Citigroup has received a series of bailouts, including $45 billion from the Troubled Asset Relief Program, that have left the government owning a roughly 34 percent stake.

Feinberg heightened speculation he could use his powers when he told a crowd on Martha's Vineyard on Sunday that Congress gave him broad discretion to recover compensation paid to bailout recipients.

"It is a very difficult issue," Feinberg said during his remarks at the island off the Massachusetts coast. "I'm not sure it is a good idea for the U.S. Treasury to be a bill collector or try to get money back as an institution."

Still, he said: "There may be some egregious cases where it is in the law, I've got the discretion, and I may exercise it."

Some the financial industry's critics on the left have ideas aplenty about how Feinberg can start using his authority.

"I would love for him to go after all the characters, but whether that includes some of the Merrill Lynch folks, the AIG people, it is hard to guess," said Richard Ferlauto, the director of corporate governance and pension investments for the American Federation of State, County and Municipal Employees, one of the largest U.S. labor unions.

"ROOT OF THE CRISIS"

While some have singled out Andrew Hall, Citigroup's energy trader who is expected to make a reported $100 million this year, Ferlauto said he would put Joseph Cassano, the former head of American International Group Inc's Financial Products subsidiary at the head of the list for a clawback.

Cassano, who headed the unit that underwrote credit default swaps that triggered more than $25 billion in write-downs, received $34 million in bonuses and $1 million a month as a retainer after he was terminated in 2008.

"He is somebody who is at the root of the crisis and he was essentially untouched," Ferlauto said.

Feinberg's ability to claw back compensation -- even at firms that have paid back TARP money -- was tucked into a rule the U.S. Treasury implemented in June.

It gives Feinberg sweeping power to recover money paid out to employees while the firm was in the TARP, if those payments "were based on materially inaccurate financial statements or any other materially inaccurate performance metric criteria."

But the rules are unclear about what would constitute an "inaccurate" pay formula, leaving that judgment to Feinberg.

Actually trying to use that power could be problematic and run into a thicket of legal challenges, some experts say.

Peter Cappelli, management professor at Wharton business school, said government-instituted clawbacks could be viewed as "egregious" because the power was granted after many institutions were already in the TARP.

"I think that's seen as quite a sharp departure," he said.

"ANYTHING IS POSSIBLE"

James Reda, a New York-based compensation consultant, said he doubts Feinberg would use his power because it would be met with heavy resistance and lawsuits.

"The best clawback is to pay a large part of the compensation in stock and subject it to stock price risk over five years," Reda said. "If the company turns out not to be so profitable overall, the payout will be a lot less."

For now, Feinberg is focused on reviewing lists of the 25 highest paid employees of seven major firms who are still locked in TARP, including Citigroup, American International Group Inc (AIG.N) and Bank of America Corp (BAC.N).

Feinberg, a Washington lawyer and unpaid appointee, now has 60 days to review the proposals.

Ferlauto, the union leader, is hopeful that Obama's point man on pay will take full advantage of his authority.

"He has to make some statement for the Obama administration," Ferlauto said."I think he would do a disservice to taxpayers if he didn't use those powers."

(Reporting by Steve Eder in New York and Karey Wutkowski in Washington, editing by Leslie Gevirtz)

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aiWZXE5RKSCc

Aug. 19 (Bloomberg) -- Citigroup Inc.’s $301 billion of federal asset guarantees, extended by the U.S. last year to help save the bank from collapse, will be audited to calculate losses and determine whether taxpayers got a fair deal.

Neil Barofsky, inspector general of the U.S. Treasury Department’s $700 billion Troubled Asset Relief Program, agreed in an Aug. 3 letter to audit the program after a request by U.S. Representative Alan Grayson. Barofsky will examine why the guarantees were given, how they were structured and whether the bank’s risk controls are adequate to prevent government losses.

The Treasury, Federal Deposit Insurance Corp. and Federal Reserve provided the guarantees last November, when a plunge in Citigroup’s stock below $5 sparked concern that a run on the bank might rock global markets and impede an economic recovery. New York-based Citigroup paid the government $7.3 billion in preferred stock in return for the guarantees.

“What kind of toxic assets did the Federal Reserve guarantee, and what off-balance-sheet liabilities have been pinned on us?” Grayson, a Florida Democrat who sits on the House Financial Services Committee, wrote yesterday in an e- mailed response to questions on the audit. “How much money have the taxpayers already lost? We need to know.”

Citigroup’s guarantees are among $23.7 trillion of total potential government support stemming from programs set up since 2007 to ease the financial crisis, according to a report last month by Barofsky’s office. The “total downside risk” from Citigroup’s asset guarantees is about $230 billion to the Federal Reserve alone, Grayson said in a June 24 letter to Barofsky requesting the audit.

TARP Money

Citigroup’s guarantees came on top of $45 billion of bailout funds obtained last year through the TARP program. Bank of America Corp., which also got $45 billion of TARP funds, initially agreed to take guarantees on $118 billion and later decided not to sign the accord.

The pool of Citigroup assets included $154.1 billion of mortgages, $16.2 billion of auto loans, $21.3 billion of “other consumer loans,” $12.4 billion of commercial-real-estate loans and $13.4 billion of corporate loans, Citigroup Chief Executive Officer Vikram Pandit said in a Jan. 27 presentation. The assets also included $31.9 billion of distressed securities and $51.5 billion of off-balance-sheet lending commitments.

Under the terms of the guarantees, Citigroup must absorb the first $39.5 billion of losses on the assets, plus 10 percent of the remaining losses. Through June 30, losses on the pool totaled $5.3 billion, Citigroup said in its second-quarter earnings report.

Citigroup’s Cooperation

“We are working closely with the government on the implementation of the loss-sharing agreement, and of course, we will cooperate with the special inspector general for TARP in any review,” Citigroup spokesman Stephen Cohen said.

The bank’s share price fell 1 cent to $4.13 as of 4 p.m. in New York Stock Exchange composite trading. At that price, the shares are almost 10 percent above the $3.77 level they reached last November, when the guarantees were announced.

One question is whether Citigroup’s loans and securities were adequately written down before being put into the covered pool, Joseph Stiglitz, a Columbia University economist who won the Nobel Prize in 2001, said in an interview today.

“If they picked a high price, the losses could be a major exposure for the taxpayer,” Stiglitz said.

In his letter, Barofsky said he “will begin to assemble a team to audit the Citigroup guarantees.”

“We anticipate finalizing the audit plan and issuing a formal audit announcement shortly,” he wrote.

Selecting Loans

The audit will address “the basis on which the decision was made” as well as the “process for selecting loans to be guaranteed,” according to Barofsky’s letter. The inspector general also will assess “the risk-management and internal controls and related oversight processes and procedures to mitigate risks to the government.”

The audit will take several months and a deadline hasn’t been set, said Kris Belisle, a spokeswoman for Barofsky.

The Treasury, FDIC and Fed said in a joint statement on Nov. 23 that they agreed to the plan to support “financial market stability, which is a prerequisite to restoring vigorous economic growth.” They promised to “exercise prudent stewardship of taxpayer resources.”

The following month, the Federal Reserve Bank of New York hired New York-based money manager BlackRock Inc. under a $12 million contract to spend two months providing an independent valuation of Citigroup’s guaranteed assets. The New York Fed paid another $5 million to $10 million to PricewaterhouseCoopers LLP to assess Citigroup’s own methods of valuing the assets, according to a copy of the contract posted on the Federal Reserve Bank’s Web site.

To contact the reporters on this story: Bradley Keoun in New York at bkeoun@bloomberg.net; Mark Pittman in New York at mpittman@bloomberg.net.

Shiticorp was underwriting their own crap well after AIG quit writing CDS's. Eating their own cooking per se. This was the stuff that GS wouldn't go near without a third party willing to take the loss.

Overvaluing the toxics that was passed on to taxpayers balance sheet should be prosecuted for the fraud that it was.

If this is a true "mark to market" valuation, Sheila should end up in their lobby on a Wednesday, not a Friday. Albeit her purse will be pretty much empty.

Will this be window dressing by the GOB's or an honest audit. If so, will this be a run-up to what should be future neutering of GS?

Sorry, I just realized that I've been sound asleep and dreaming with a keyboard in my lap. There is no tooth fairy.

YMMV

http://www.nakedcapitalism.com/2009/08/guest-post-pensioners-taking-back-seat.html

At long last, there is a ray of hope for workers whose employers have filed for bankruptcy. Currently pensioners, the disabled, and employees owed severance pay are treated the same way as banks and other sophisticated creditors: when a company goes under, they have to get in line to fight for a piece of what’s left with everyone else. THIS IS IN CANADA, FOLKS, ALTHOUGH NORTEL DID HAVE US SUBSIDIARIES AT ONE TIME...

But a group of former Nortel employees is looking to change that. They have asked the federal government to make an emergency amendment to the Bankruptcy and Insolvency Act to give preferred status to the claims of pensioners, the disabled and severed employees—essentially putting workers at the front of the line.

In principle, there is already agreement to consider the amendment amongst all the federal political parties. Driven by concern that Nortel pensioners could lose 30 to 40 per cent of their pension income, on June 16 NDP MP Wayne Marston (Hamilton East- Stoney Creek) introduced a motion in the House of Commons to look into putting pension fund claimants ahead of other creditors in the event of bankruptcy proceedings. It was passed with unanimous support.

“I am optimistic that politicians could consider making the emergency change when they come back to the legislature in the fall,” says Diane Urquhart, a financial analyst and adviser to the Nortel Pensioners and Severed Employees. “Our bankruptcy law is way out of date with respect to new developments in the marketplace.”

Still, the amendment protecting pensioners is only the first step. According to lawyer Philip Slayton, disability plan members and severed employees need more protection too. The amount of money remaining for them is “grossly inadequate,” he says.

In fact, says Urquhart, if things don’t change, many disabled Nortel employees and employees owed severance pay will likely lose 90 per cent of the money they’re owed—income that is “otherwise obligatory under employment standards set by provincial laws and common law precedents.”

Diane Urquhart wrote an excellent analysis on the Nortel bankruptcy, Bond Owners Use Credit Default Swaps to Gain, While Pensioners, Disabled and Terminated Employees Told to Share the Pain (click here to download the PDF file).

I urge you to take the time to read Diane's entire analysis. I quote the following:

The old premise of balance or equal compromise in Canada's bankruptcy laws between employment related claims and bond claims is as obsolete as the horse and buggy.

The Federal Bankruptcy and Insolvency Act (BIA) is based on the goal of balance or equal compromise amongst employment related claims and bond holder claims, but the metrics used no longer make sense due to the evolution of the credit default swap (CDS) market. Under the BIA, pension, health and long term disability plan deficits and unpaid severance are creditor claims treated the same as bond owners' claims. If there is inadequate assets for disbursement, under the current BIA, balance or equal compromise means, for example as shown in Figure 1, that for every $1.00 of employment related claims and every $1.00 of face amount of bonds outstanding, the loss ratio of say -$0.60 per $1.00 of claim is the same for the two types of claims.

However, since the credit default swap market was invented in 1997, bond owners are able to insure their loss from possible future bankruptcy, by buying CDS contracts. The CDS hedge contracts are not part of the compromise calculation in the bankruptcy courts. The hedged bond owners, who get assigned a loss of -$0.60 in the bankruptcy court, would have an equal offsetting gain of $0.60 from the cash settlement of their CDS hedge contracts outside of the bankruptcy court. The hedged bond owners actually suffer no loss in the bankruptcy process as shown in Figure 1.

(click figure to enlarge)SEE LINK FOR ALL GRAPHS

Prior to the invention of credit default swaps, there was no vehicle for bond owners to transfer the risk of a credit default or other credit event to third parties. In a CDS, the bond owner "sells" his credit risk to a counterparty who "buys" this risk. The "buyer" of the CDS pays fees in the form of upfront and regular annual payments to the "seller" of the CDS, similar to how you pay premiums for car insurance. In return, the seller agrees to pay the buyer of the CDS a set amount when there is a credit default (technically, a credit event). CDSs are designed to cover many credit risks, including: credit default, corporate debt restructuring and credit rating downgrades. The "seller" of the CDS is effectively acting as an insurance company, just like your car insurance company reimburses you for your car accident damages. But the sellers of CDS are public investors and not large insurance companies.

In fact, many hedged bond owners can make a profit from the bankruptcy process, either because: (1) they have bought more CDS contracts than the amount of bonds they own and as such are "short the bonds"; or, (2) their CDS hedge contracts are settled within days of the bankruptcy protection announcement, when the bond price is usually at its lowest point, so that the CDS hedge gain is greater than the actual bond loss when the liquidation occurs at a higher recovery amount calculated at a later date in the bankruptcy process. (See Figures 5 and 6 below)

(click figures to enlarge)

Canadian pension, health and long term disability plan deficits and unpaid severance have no private sector insurance coverage. Canadians must rely upon the nominal amount of protection under the Ontario Pension Benefit Guaranteed Fund for Ontario residents only, the Canada Pension Plan disability benefit and provincial welfare programs, and the Federal Employment Insurance Fund. The negative situation for Nortel's Canadian pensioners, long term disabled and terminated employees is made worse by the depletion of the Nortel Canada estate by Nortel's foreign subsidiaries, such that their loss could be $-0.90 per dollar of claim.

Again, please read the entire report (click here to download the PDF file). At the end of the report, Diane makes a few key recommendations and she lists Nortel's bondholders. The list includes several prominent hedge funds, investment banks, a few Canadian pension funds (Hospitals of Ontario Pension Plan and the Caisse) and a US pension fund (Florida SBA).



Is there a precedent for pensioners to come ahead of bondholders? Not exactly, but if you look at what happened in the GM and Chrysler bankruptcies, where politics trumped the seniority of bondholders, then I think there is a case to pay these pensioners, disabled workers and employees owed severance. The question is whether there is enough political will in Ottawa to press their case.

Finally, the NYT reports that the Securities and Exchange Commission, after months of considering what to do about short-selling, came up with a new idea on Monday that could make it virtually impossible to place an order to sell stock short and be sure it would be executed quickly:

The proposal would require that short sales be made only at a price higher than the current best price being offered by would-be buyers of the stock. It is similar to the so-called tick-test, which was effective on many stock markets before 2007, but would be more restrictive and could be easier to apply given the current structure of markets. There is now no limit on short-selling, so long as the seller can locate shares to borrow.

The article ended by stating:

For some, the issue of short-selling has been tied up with the issue of “naked short-selling,” a practice that involves selling stocks short without borrowing them. It appears that other S.E.C. rules have virtually eliminated such selling, particularly for stocks listed on Nasdaq or major stock exchanges. But it remains an emotional issue, and some believe naked short-selling is still a major problem.

SEC rules have virtually eliminated naked short-selling? Yeah right! If you believe that, I got a couple of igloos to sell you in Southern Crete. The SEC should also crack down on other manipulative short-selling practices using credit-default swaps:

Any action the Commission attempts to take against manipulative short selling will not be completely effective without parallel, reinforcing reforms applied to the derivatives market, particularly with respect to credit default swaps (“CDS”). The responsiveness of equity prices to changes in CDS spreads makes the purchase of CDS a powerful device for bear raids, particularly when used in connection with short sales. Combining a short sale with the purchase of CDS sends a false signal into the marketplace about a company’s credit and, accordingly, causes a drop in the stock price that makes the short position profitable. Such manipulation is dangerously cost-effective, as a relatively small investment in an institution’s CDS is sufficient to spark rumors of default or a ratings downgrade and immediately sink stock prices.

To prevent this and other abuses of the CDS market, we believe that only those who are economically exposed to the underlying credit risk of a company should be allowed to buy CDS protection on the company. The purchase of a “naked” CDS, made by a purchaser with no exposure to the reference company, is more akin to gambling than obtaining insurance, and such instruments are capable of causing serious distortions in the market. A prohibition on naked CDS would allow the appropriate use of these instruments while restraining those using the CDS market in a manipulative and abusive way. As an intermediate step, the Commission should use its ability to regulate short sales to require a waiting period between any purchase of a CDS and short sale involving the same reference company.

In addition, to alert the marketplace to situations when CDS are being used to manipulate share prices in conjunction with short selling, the Commission should require disclosure when an actual or synthetic short position in a company’s equity securities is accompanied by a long position in the company’s CDS.

To recap, CDS are used by bondholders to protect their investments and gain in case of a bankruptcy, placing them ahead of pensioners and other employees with more legitimate claims. Purchases of CDS are also used in connection with short sales, to send a false signal into the marketplace about a company’s credit and, accordingly, cause a drop in the stock price that makes the short position profitable.

Don't you just love these "free markets"?

http://baselinescenario.com/2009/08/20/has-mortgage-modification-failed/

Obama’s mortgage modification plan, HAMP (Home Afforable Modification Program), isn’t working very well. Designed to help prevent foreclosures by incentivizing and giving legal protection to previously indifferent middle-men servicers, it isn’t producing anywhere near the number of modifications that were anticipated. Is it likely to work in the future? My guess is no. Let’s discuss some reasons why.

Servicers Gaming the System

Over the past few months, more and more stories have come out about servicers finding ways to line their pockets while consumers and investors are getting shortchanged. The one that brought the gaming issue to everyone’s attention is Peter Goodman’s article in the New York Times. Here are my favorite three since then:

Story One, Financial Times:

JPMorgan Chase, one of the first mega banks to champion the national home loan modification effort, has struck a sour chord with some investors over the risk of moral hazard posed by certain loan modifications.

Chase Mortgage, as servicer of several Washington Mutual option ARM securitizations it inherited last year in acquiring WAMU, has in several cases modified borrower loan payments to a rate that essentially equals its unusually high servicing fee, according to an analysis by Debtwire ABS. Simultaneously, Chase is cutting off the cash flow to the trust that owns the mortgage. In some cases, Chase is collecting more than half of a borrower’s monthly payment as its fee.

Story Two, Credit Slips

Countrywide Home Loans (which is now part of Bank of America) has been the subject of proceedings in several bankruptcy courts because of the shoddy recordkeeping behind their claims in bankruptcy cases. Judge Marilyn Shea-Stonum of the U.S. Bankruptcy Court for the Northern District of Ohio recently sanctioned Countrywide for its conduct in these cases…The resulting opinion makes extensive reference to Credit Slips regular blogger Katie Porter and guest blogger Tara Twomey’s excellent Mortgage Study that documented the extent to which bankruptcy claims by mortgage servicers were often erroneous and not supported by evidence. Specifically, the court adopted Porter’s recommendation from a Texas Law Review article that mortgage servicers should disclose the amounts they are owed based on a standard form. Judge Shea-Stonum found that such a requirement would prevent future misconduct by Countrywide.

Mary Kane, Washington Independent

Even as the Obama administration presses the lending industry to get more mortgage loans modified, the practice of forcing borrowers to sign away their legal rights in order to get their loans reworked is a tactic that some servicers just won’t give up on…

In a dramatic confrontation last July, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, told representatives of Bank of America to get rid of waivers in their agreements. His pronouncement came after Bank of America representatives denied they were using the waivers – and Julia Gordon, senior policy counsel at the Center for Responsible Lending, produced one from her briefcase.

Check out those stories. The first has the servicers set the payment to maximize their fees, and not anything beyond (to make sure very poor and desperate mortgage holders are able to pay each month), making sure their interests are above the lender’s ones. The second one shows that it is very difficult to determine incompetence from maliciousness with the way that servicers are handling their documents on the borrowers end. And the third would be a great piece of classic comedy if it wasn’t so terrible. I bet these guys sleep like babies at night too.

The servicer’s interests are their own – and if they can rent-seek at the expense of the parties at either end, ‘nudging’ them with $1,000 isn’t going to make a big difference.

Redefault Risk

There’s another story where the servicers aren’t modifying loans because it isn’t profitable for the lenders. There’s a very influencial Boston Federal Reserve paper by Manuel Adelino, Kristopher Gerardi, and Paul S. Willen titled “Why Don’t Lenders Renegotiate More Home Mortgages? Redefaults, Self-Cures, and Securitization.” They point out that, according to their regressions, redefault risk is very high – the chances that even under a modification there will still be a foreclosures, so why not foreclose immediately?

I’d recommend Levitin’s critique (Part 1, Part 2), notably that the securitization regression doesn’t control for type of modification, specifically they don’t variable whether or not the modification involved principal reduction, which is probably does for the on-book loans and not for the off-book loans.

But regardless, this is a valid argument as U3 unemployment starts its final march to 10% we are going to see consumers become riskier and riskier, and that will be a problem for modification that will get worse before it gets better.

General Inexperience

Servicers were never designed to do this kind of work; they don’t underwrite, and paying them $1,000 isn’t going to give them the experience needed for underwriting. It’s hard work that requires experience and dedication, skills that we don’t have currently. (Isn’t it amazing with the amount of money we’ve put into the real estate finance sector over the past decade we have a giant labor surplus of people who can bundle mortgages into bonds but nobody who can actually underwrite a mortgages well?)

But isn’t it at least possible that as the sophistication of the servicers increase, they’ll become equally good at learning how to game the system? I don’t mean this as a gotcha point, because I think it is the fundamental problem here, and there isn’t any way to break it. The servicers get paid when they have to get involved, and learning the contracts better will give them more reasons to get involved.

It’s been know for several years now that this was a weak spot in the mortgage backed security instruments. In the words of the creator of this instrument, Lewis Ranieri in 2008: ” The problem now with the size of securitization and so many loans are not in the hands of a portfolio lender but in a security where structurally nobody is acting as the fiduciary. And part of our dilemma here is ‘who is going to make the decision on how to restructure around a credible borrower and is anybody paying that person to make that decision?’ … have to cut the gordian knot of the securitization of these loans because otherwise if we keep letting these things go into foreclosure it’s a feedback loop where it will ultimately crush the consumer economy.”

He’s right of course; the people we are trying to ‘nudge’ into acting as the fiduciary are going to be more than happy to rent-seek these instruments while they crush the consumer economy. This ‘gordian knot’ has to be broken, but it’ll need to be done outside the instruments – in the bankruptcy court.

8/7/09 Deep Thoughts from Richard Russell (Dow Theory Letters)

It’s one thing to read this sort of stuff on various blogs and financial websites, but it hits home when the market veteran of all market veterans begins pondering the same things that many of us have been thinking about as we watch the stock market in near disbelief during this crazy time. Richard Russell, as always, has some great thoughts:

I guess I should come clean and admit it. After reading all about Goldman Sachs and studying Paulson and Geithner and former NY Fed Chairman Friedman, I have become almost hopelessly cynical about the markets. Is anyone ethical? Is anyone honest? I’m starting to wonder. Where money is concerned, is there anything Wall Street or the bankers won’t try?

Rumors of manipulation have been around ever since I started writing Dow Theory Letters in 1958. I always pooh-poohed those rumors, believing that it was the losers who always blamed their losses on manipulation. But now I’m not so sure.

For instance, I watched yesterday’s close on the NYSE minute by minute. The Dow was fluctuating back and forth — up 5 points one minute, down 3 points the next minute. But with one minute to go, the Dow suddenly spurted 33 points higher. I stared at my computer screen in surprise, and I asked myself, “What the hell was that?” It seemed apparent that “somebody” wanted a noticeable higher Dow at the close.

The market can be manipulated on a daily basis or maybe for a week. But in the big picture, as to the primary trend, I don’t believe the stock market or the economy can be manipulated. Although heaven knows that Washington is trying — throwing unprecedented trillions of dollars at the US economy. It’s never been tried before, but won’t trillions of dollars be enough to manipulate the great tide or the primary trend of the market? Maybe for a few weeks or even a few months, but I still don’t believe that the primary trend can be halted or reversed, no matter who tries and no matter with how many Federal Reserve dollars.

more...
http://pragcap.com/deep-thoughts-from-richard-russell-4

and has been for years.

Hello
Long time lurker first time poster.
I may be inheriting six figures soon, within a year or a tad longer. I wish to move from Pa to Wa. I need a safe healthy national bank to park my money while I house hunt.
I've never had this much money before, so it is a bit daunting.
I feel it is better to find a national bank with offices in both states. It should make it easier to purchase, not get a loan but outright buy, a house.
The problem is what bank is 'safe" now. Now being a year or two.
Any suggestions?
Any investing/saving I will work out later. All I'm interested in is national banks that should remain solvent for six months to a year.

I would like to suggest some theme ideas.
Frank Zappa, the man was way ahead of his time on social issues. A number of his songs contain relevant lyrics.
http://www.youtube.com/watch?v=8ISil7IHzxc
http://www.youtube.com/watch?v=yUtmrS15o9I&feature=related
http://www.youtube.com/watch?v=mDDIiIOFE_Q&feature=related
http://www.youtube.com/watch?v=H28SNdvBstA&feature=related

The Hollowmen. An Australian tv show about the inner workings of government. Possibly the best modern vehicle illustrating how government compromises unto nothing and focuses on the completely wrong issues. Not sure if it can be found on Youtube, but cough cough filesharing sites cough cough have it.
http://www.youtube.com/watch?v=ivDr2auJUPQ
http://www.youtube.com/watch?v=wcwTSjxWemA
http://www.youtube.com/watch?v=0EqqSilnn7s&feature=related
http://www.youtube.com/watch?v=40mUjEq5chs&feature=related
The It crowd. Big business at it's most interesting.Denholm Reynholm and his son Douglas Reynholm ( Matt Berry) are typical modern corporate types, except Denholm had the grace to do the right thing in season two.
http://www.youtube.com/watch?v=Ww4wuQSLimA&feature=related
http://www.youtube.com/watch?v=rsriu6a_ukw
http://www.youtube.com/watch?v=WOTW6gFQUlg&feature=PlayList&p=9DEDE09A2B9AE697&playnext=1&playnext_from=PL&index=20
http://www.youtube.com/watch?v=d82Lq2rVB_4&feature=related
http://www.youtube.com/watch?v=5oCHxB8d20s

Thank you all
Eddie

Welcome,

With that amount at stake I would ask a professional but you can do some research on your own first. Here are some links for research on banks and credit unions. What they cannot tell you is what will happen in the next 12 months. My Credit Union was healthy a year ago, not as much today. FDIC insurance limits are temporarily high and are scheduled to drop at the end of the year. Large amounts of money need to be under the FDIC limit in different institutions in order to be safe. Even then in the past it has taken up to 2 years to recover money from a failed bank but I have not heard that happening yet this time.

Unofficial Problem Bank List
http://www.calculatedriskblog.com/2009/08/problem-bank-list-unofficial-aug-14.html

Banktracker-Banks
http://banktracker.investigativereportingworkshop.org/banks/

Banktracker-Credit Unions
http://banktracker.investigativereportingworkshop.org/credit-unions/

PS TMI for a public board

Thank you
But I'm only interested in the main national (international?) banks. Primarily for ease of access. ("One of the greatest benefits is the benefit of convenience. Wherever you go in the United States, and often outside it, you will be able to find a banking location with a national bank")
http://www.ehow.com/about_4740863_bank-has-branches-all-states.html
"There are three main national banks that have locations throughout the entire United States. These three banks are Bank of America, Citi and Chase bank. They each have thousands of locations and several sub-groups such as mortgage and loan companies, credit-card companies and investment firms."

Are those the only ones to choose from?
Which seems best able to not succumb. Better yet which will the government continue to prop up. Or will all three be kept on their feet.

I'm not sure I trust the "professionals". But I read SMW daily and trust the opinions of the posters.
Isn't trusting the pros what got us to where we are today?

You can buy your own Treasury Bills, 4-week, 3 month, 6-month, etc. You can cycle them via a process in TreasuryDirect.gov on a rotating schedule, using 'holding area' called 'C of I'. They only pay a few cents, but Treasury Bills are a method to keep your principal. They are issued by the government, so are backed by the full faith and credit of the government. First, you need a bank to connect TreasuryDirect so you can purchase and redeem the Treasury Bills. You can setup everything online.

Read more here...
http://treasurydirect.gov/indiv/products/prod_tbills_glance.htm

If you are familiar with Karl Denninger, his forum has discussed short term Treasury bills, just do a search...
http://www.tickerforum.org/cgi-ticker/akcs-www


Both Fidelity and Vanguard (VUSXX) have mutual funds consisting only of short term Treasury Bills, but unfortunately are closed to new investors. Perhaps other brokerages have a similar mutual fund consisting only of short term Treasury Bills.


I know you prefer a big national bank, but I have no idea which is least toxic. Every bank seems to have issues, and if they don't now, they will when commercial real estate goes bankrupt.

You might want to get a credit union in the area where you live. They seem to be more stable. Or in my family, we have 2 banks, a credit union, and some cash for emergencies at home. Spread the wealth around. Be sure to check out their worthiness via http://banktracker.investigativereportingworkshop.org/

Disclaimer...
Please understand this is not meant to be advice, but only ideas for you to research to find what will be best for you.

Let me clarify.
I have some money coming. I wish to place it in a large national bank to make it easier to access when I buy a house in another state. I am interested in which large national bank would be safest.
I'm not interested in investing the money right now. I'm interested in spending it buying a house. Obviously not all of it, but enough that I don't wind up with something crappy and high maintenance.
Because my future house purchase will be in a state on the other side of the continent I would prefer a national bank with offices in both my home state and the state I'm intending to move to. Because I'm buying outright not getting a mortgage it would be simpler just to withdraw from the same bank my account is in in the same city or state. The large national bank.
It seems there are only three large national banks which may have offices in most states.
All of that is covered in my two previous posts.
Basically I'm wondering which of the three have the potential not to fail. Or if one is more "trustworthy" than the others. Essentially the merits or flaws of each, so when I do receive my money I am informed as to which to choose.
Not only do I lurk here I also daily read Automatic Earth, Zero Hedge,Market Ticker,Calculated Risk,Naked Capitalism,Daily Reckoning,My Budget 360,Jesse's Cafe Americain, Economic Disconnect and Boing Boing;].
I try to watch the numbers.
I posted here because you all seem to have insight and knowledge.
So, what are the positives or negatives of BOA, CITI and CHASE? Are there other national, or international, banks with offices in Pa and Wa which would be safer. Remember a goodly portion of that money will be spent as soon as possible not only in buying a house but travel and moving expenses. After that I'll worry about investing and saving.
I don't even care about the interest rate as long as I have easy access to my money when I need it. And I need the bank to remain stable from the time I deposit my money to the time I decide to invest it sometime after moving. A relatively short while after settling in.

Personally I consider buying some rental property. Real estate prices are dropping and there never is a shortage of renters.
After that maybe Ecuadorian Lithium.

Being able to predict what shape a bank will be in, a year down the road is impossible. BOA and Citi have been rumored to be insolvent already. And through personal experience, Chase can fuck up a wet dream. And I wouldn't have a clue as to what banks have branches in PA or WA. And a checking account or a wire transfer work anywhere.

If I had anything over the FDIC limit, I'd park it in short term t-bills, for safety and quick access.

I thought you need a bank draft to purchase a house? You can't really pull out the old out of state check book and write a check for say 100k for a home purchase can you?
If it weren't so much money I'd put in travelers checks and carry them in a money belt.

After the house and sundry purchases we did intend to divide the money between banks and various saving schemes.
We both have previous settlement incomes, so with no mortgages that leaves taxes/utilities/food/insurance and maybe a new car. We should be better than safe financially.
I know a lot of local farmers have gone under and web surfing Wa I've seen the same there.
If it weren't for the variety of pets I would head to Canada. But Bellingham Wa is close enough to Vancouver. Plus Seattle/Tacoma is interesting.
Little bit of gardening some minor money management and we should be golden for quite a while, knock on wood.
we want acreage, at least 10. I would like to set up a forge and try my hand with metal work. Maybe ease into knife making, and if that works out sword making.
But the whole problem lies of where to park the money until stable.

DemReadingDU
Outright buy not get a mortgage. No bank loan, just straight cash.
I see the Fed has a big problem coming 8/25 also.
Interesting times.
My other fear is just when the money comes in the dollar tanks.
I'm hoping the timing is right and we can slide through without any financial damage to us.

And thanks to advice from here and those other sites we became virtually debt free. We got rid of the credit cards. We have a paid off car. We live close enough to walk to everything if the car does break down. We have excess in our budget without starving either ourselves or the pets.
I started applying what I read a couple of years ago.
Oddly big money kind of comes as the next challenge. Kind of some strange karmic thing. Maybe a test. How to survive monetary gain without going mad and spending like a CEO.
Interesting just how that works out.

Unless you plan to go househunting and close on the same day, you'll probably have sufficient time to arrange the transfer of funds. You don't need a bank draft; it's all done electronically.

It's easy enough to pick up a phone and call a real estate agent in the purchase location and ask them for the details. They probably know more than us wackos here on SMW! (But we're lovable liberal wackos! :evilgrin:)

I live in an area (AZ) where a lot of the home buyers have traditionally been out of staters and it hasn't seemed to have stopped them. One of the couples I routinely have coffee with moved here 15 years ago from a northern state and has never changed their banking. Wells Fargo, until a couple months ago, honored their credit union debit card and that's all they needed. SS and pension funds were automatically deposited into the CU in MI and they continued to live in AZ.

It's the wonders of technology.



TG

When I lived in Ohio, and bought a house in Florida, I wired the money to the title agency into their escrow account. I even had left over money, for which they wrote me a draft on the spot. I used that to open up my checking at Wachovia.

I don't have accounts at any of those 3 national banks, so I don't know the advantages and disadvantages. However, since none of us know the toxic state of any of the banks, divide the money amongst the 3 national banks, be safe.

It's possible, because of the banking crisis, that there may come a time that you might not be able to get out all of your money at one bank. So by having it at all three national banks, you will triple the amount that you can withdraw. I think during the Savings&Loan scandal, a person was only allowed to withdraw $1000 per month from the S&L.

Since you named many other financial forums, you have come across that FDIC is out of money, unless they tap a loan from the Treasury. And it may turn out that you are not able to purchase a house soon where you are moving, maybe not till next year. Maybe find a place to rent in the meantime?

Good luck. Actually, we may be coming into some money at our house, and this helps me to think thru what we might do with the money.

Always remember, a Phool with your money is soon parted!

:evilgrin:

making sure any purchase contract you sign contains an express provision allowing you to delay the closing (and still requiring the seller to honor its obligation to close) so long as any of your funds are tied up as a result of any depositary insolvency or similar situation.

I have no idea if that would go over, but I suspect there are some desperate sellers out there.

I don't really have any feel for the relative safety of the Big Boy Banks in order to discuss your dilemma with you... As, all things being equal, I thought they'd all be sleeping with the fishes by now. :shrug:

I doubt any of the zombies are going to fall in the near term. (A year)

But, based on past banking behavior... Settled fraud charges, underhanded tricks, risk exposure... etc. I would say maybe you should eliminate Citi from your list of potential fiscal parking spots.

After-all, Citi was recently thrown bodily out of the DOW. If they don't like them, maybe you shouldn't either.


Most regional Banks and CU offer online services... Have you considered that? I know for a fact, if a CU is a member of the "Pulse" ATM network you can do transactions on a National basis at any machine... For free... (Take that Wells-Fargo you $3/transaction money grubbing masked bandits.)

I particularly enjoyed Denholm doing the right thing in the first IT Crowd clip.
Hollowmen is worth the effort to track down and download.
I think the first two or three episodes of season 1 coincided with something government related happening in the US. One was an ARMY recruitment commercial. They pretty much nailed the governmental process no matter what country.
Or the episode where they need a crackdown but have no idea as to what should be the focus. But they need it to look strong.

I'm starting to think CITI will be killed off. I think it eventually filter down to a single national banking entity. Right now I can't tell which is the Goldman Sachs favorite to be handed the big bucks.
So yeah I'll avoid CITI.
The whole problem is the certified check or cashiers check necessary to buy the house. I suppose a smaller safer bank could FEDEX a cashiers check overnight. Or maybe open a new account with a bank there then internet transfer the amount and have the new bank issue the cashiers check.I just don't feel comfortable accessing my potentially large bank account from the net. A couple of hundred bucks is one thing, a couple hundred k tends to make one paranoid about safety.
My intent is to work this as swiftly as possible.
Money-trip-buy house-move-safely store left over money. Speed is necessary because everything moves so fast. Luckily we know Fridays are usually dead bank days. That is about six safe days.So every Friday afternoon the sweating will start.
If I knew what I was doing I'd deposit the money in a Canadian bank in Toronto. Then withdraw in Vancouver.

Riddle me this, which bank has a fixer in either the government or the FED? BOA or CHASE? Which has ties to Goldman Sachs? Each link increases the chance that will be the last bank standing.

You could divide your funds between enough banks so no account exceeds the FDIC insured limit, and STILL the bank could fold, and the FDIC may or may not pay out in a timely fashion. So far, the system has functioned, but it is strained to the limit. Someday someone will lose. It may be you. It may be I. It may be all of us, and probably will be.

Yes, everyone in power says Citi, B of A, and the like are "too big to fail", but when the limits of possibility are reached, believe me, the Big Banks will fail. Where is that limit? We don't really know. How long will it take to reach that limit? Do you really think they would tell us?

I can see no sure way of preserving both the value of your funds and the liquidity. We've seen money market schemes go belly up. We've seen behemoths brought down by 10,000 wooden spears. We've seen crime and corruption on a scale that couldn't be imagined by minds stuck in the 1950's. And we are going to see more. Even holding it in cash has risks: beyond the loss due to theft, there is inflation.

Safety is a relative thing. Right now, in the stresses of global collapse, there is no safety, save in whatever social networks one belongs to, and what provisions one can make to protect your assets from the State and the Neighbors.

I know this is not what you want to hear, but it is what you need to know. Think about it.

and everyone was wondering why I thought "Logan's Run" should be our theme movie a couple of weeks ago.

I have wondered if in the probably not too far distant "end" of all this, when the breaking point is actually reached, there will be any way at all to protect one's "funds." One's concrete assets, maybe - through those very social networks. But "funds" are just paper of one sort or another.

http://stopmebeforeivoteagain.org/

Infantilism
By Al Schumann on Saturday August 22 12:04 AM

"There is something about August going into September where everybody in Washington gets all wee-weed up," said President Obama. "Senate go oopsie go ouchy," he further explicated. When pressed for an explanation by the embedded reporters at the White House, spokesman Bill Gibbs scolded the giggling, tittering gaggle for the frivolity of their "caca doodoo" questions. After a potty break and a quiet time, the semblance of decorum was restored.

That's not entirely factual, but I can't for the life of me swear it's not true.

http://www.alternet.org/media/141986/lou_dobbs_tours_single-payer_systems_abroad_and_realizes%2C_holy_crap_they%27re_good/
Lou Dobbs Tours Single-Payer Systems Abroad and Realizes, Holy Crap They're Good

Lou Dobbs is a strange man. One day he's railing against "Obamacare," stoking the birther and deather paranoia that an illegitimate president's health care plan will mandate euthanasia. Next day he's practically singing the praises of single-payer healthcare systems 'round the world.

It's kind of French of him, but last week, CNN's government-out-of-my-face bloviator began a monthlong, nation-a-night series to "learn from other countries' health care plans." He's already toured the single-payer systems of Denmark, Canada, and England, and the heavily regulated, public/private plans of Germany, France, Holland, and Switzerland. And, as if he were channeling Michael Moore or something, he's been rattling off stats showing that most of these universally covered foreigners are spending less on healthcare but living longer than we do.

Oh, sure, he'll occasionally exaggerate any weakness he can find--Lou's particularly eager to tsk-tsk over England's long lines. But overall, the series (reported mostly by CNN's Kitty Pilgrim), has been straightforward, like this look at Denmark, which could almost inspire a townhall mob to chant "Mandate, baby, mandate!"

Or

http://www.theonion.com/content/news/congress_deadlocked_over_how_to?
Congress Deadlocked Over How To Not Provide Health Care
WASHINGTON—After months of committee meetings and hundreds of hours of heated debate, the United States Congress remained deadlocked this week over the best possible way to deny Americans health care.

"Both parties understand that the current system is broken," House Speaker Nancy Pelosi told reporters Monday. "But what we can't seem to agree upon is how to best keep it broken, while still ensuring that no elected official takes any political risk whatsoever. It’s a very complicated issue."

"Ultimately, though, it's our responsibility as lawmakers to put these differences aside and focus on refusing Americans the health care they deserve," Pelosi added.

The legislative stalemate largely stems from competing ideologies deeply rooted along party lines. Democrats want to create a government-run system for not providing health care, while Republicans say coverage is best denied by allowing private insurers to make it unaffordable for as many citizens as possible.


Straight out of Hollowmen.

And a quick trip to REDDIT gets this
http://blogs.suntimes.com/ebert/2009/08/im_safe_on_board_you_can_pull.html
I'm safe on board. Pull up the life rope
By
Roger Ebert
on August 20, 2009 4:44 PM
Having read through some 600 comments about universal health care, I now realize I took the wrong approach in my previous blog entry. I discussed the Obama health plan in political, literal, logical terms. Most of my readers replied in the same vein. The comments, as always, have been helpful, informative and for the most part civil. My mistake was writing from the pragmatic side. I should have followed my heart and gone with a more emotional approach. I believe universal health care is, quite simply, right.

It is a moral imperative. I cannot enjoy health coverage and turn to my neighbor and tell him he doesn't deserve it. A nation is a mutual undertaking. In a democracy, we set out together to do what we believe is good for the commonwealth. That means voluntarily subjecting ourselves to the rule of law, taxation, military service, the guaranteeing of rights to minorities, and so on. That is a cheap price to pay.

As I've read through of those comments (and I've posted all but two I received), one thing jumped from the page at me: The unusually high number of comments from other countries. Canadians were particularly well-represented. Although we're assured by opponents of the Obama legislation that Canada's system of universal care is a failure, all of these Canadians, without exception, reported their enthusiasm for their nation's system. One reader said her mother choose to fly to California to get a knee replacement more quickly, but even she praised the Canadian system.

They said reports of waiting times may be true with semi-elective surgeries, like hip or knee replacement, especially in more populous areas. But they're able to see a physician with a minimal wait in cases of need. They are treated quickly and competently, at very little cost other than personal expenses and the graduated scale of quarterly premium payments. Similar messages came from the UK, Ireland, the Netherlands, Sweden, Holland, Brazil, Argentina, Australia, South Korea, Japan, Greece and Germany. Everyone is pleased.

Arrest threat for Nigeria debtors
http://news.bbc.co.uk/2/hi/business/8208932.stm

People who owe billions of dollars to troubled Nigerian banks have been told they have five days to pay the money, or face arrest.

Anti-corruption police say the debtors, who include Nigeria's wealthiest men, had almost ruined the banking industry.

Five banks were rescued in a $2.6bn (£1.58bn) bailout last week, which saw all five chief executives sacked. The country's Economic and Financial Crimes Commission has said it is working with other law enforcement agencies to secure the borders and prevent anyone escaping. Nigerian police have arrested three of the banks' chief executives plus one other high-ranking official.


<snip>

The BBC's Ahmed Idris in Abuja says the list includes some of Nigeria's most well-connected and richest men who have loans "that are looking increasingly toxic".


Billionaire tycoon Aliko Dangote, who was listed at the world's richest African by Forbes magazine last year, has a loan worth $15m with Oceanic Bank, the central bank said. Mr Dangote was recently unanimously elected president of the Nigeria Stock Exchange. His companies control trade in many of Nigeria's commodities, including rice, salt and sugar, textiles and vegetable oil.

"It has become necessary to use this medium to request the following defaulting customers of the affected banks to pay without further delay their indebtedness, failing which the banks will take all appropriate legal actions to ensure repayment," the central bank said in a statement.


An Analysis attached to the same article:

ANALYSIS
Caroline Duffield, Lagos

The implication from the anti-fraud police is that these millionaires and billionaires could easily have cleared their debts by now. That may be true, but will they be able to reach into their pockets by next week?

In some cases, the sums owed are well within immediate grasp of the individuals and organisations listed. The managing director of Access Bank, Aigboje Aig-Imoukhuede, for example, owes $107m.

Some economists think the demand for immediate payment could actually make matters worse.

''Imagine a few billionaires suddenly deciding to raise capital by off-loading a lot of property in Lagos,'' one economist told the BBC. ''It would send the property market into a tailspin. That would be disastrous. There could be a serious knock-on impact for the economy.

The authorities need to stop, take a deep breath and intervene in an organised, orderly manner.''


--------

or in other words, leave the poor little billionaires alone. Quit picking on them. One shouldn't expect billionaires to repay their loans. Have the taxpayers bail them out as it is done in the rest of the civilized world.

especially the audio portion.

On October 21, 2003, Corn Products International submitted, on its own behalf and on behalf of its Mexican affiliate, CPIngredientes, S.A. de C.V., a Request for Institution of Arbitration Proceedings against Mexico pursuant to Chapter 11 of the North American Free Trade Agreement.

In the Request, the Company asserted that the imposition by Mexico of a discriminatory tax on beverages containing HFCS breached various obligations of Mexico under the investment protection provisions of NAFTA.

. . .

In an award rendered August 18, the Tribunal awarded damages to the Company in the amount of $58.386 million, representing lost profits in Mexico as a result of the tax and certain out-of-pocket expenses incurred by CPIngredientes, together with accrued interest. It is not known at this time whether any of the parties will seek to set aside the award or pursue other available rights under applicable law.

Corn Products International is a corn refiner and a]supplier of food ingredients and industrial products derived from the wet milling and processing of corn and other starch-based materials.

The Company, headquartered in Westchester, Ill., is a worldwide producer of dextrose and a regional producer of starch, high fructose corn syrup and glucose. In 2008, Corn Products International reported record net sales and diluted earnings per share of $3.94 billion and $3.52, respectively, with operations in 15 countries at 33 plants, including businesses, affiliates and alliances.

http://www.tradingmarkets.com/.site/news/Stock%20News/2491569/

Mexico knows hfcs is bad for you but has to allow it under NAFTA. This sucks.

They are now adding HFCS to Corn Syrup?

It's TRUE!

We were making some candy recently and had to buy a new container because we didn't have enough. The new container listed HFCS!

Oh, and the candy it made tasted very different than the candy made with the original corn syrup... Which, is why we looked at the ingredient label in the first place. It never hardened correctly and tasted bad. So, we looked high and low and found a different brand which was trustworthy at saying on it's ingredients that it contained no HFCS. (NOT.AN.EASY.TASK) Much better! It was the same as the batch made from the original Corn Syrup without the HFCS.

(Next up... Why are they throwing MSG in EVERY SINGLE SOUP?)

it being in corn syrup is not surprising. It is in everything.

It is almost impossible finding food without it. Forget store bought bread, all of them at the store I frequent has HFCS in them so I've been baking my own. I wouldn't be surprised if they started putting HFCS in bags of sugar. It's insidious.

"In the Request, the Company asserted that the imposition by Mexico of a discriminatory tax on beverages containing HFCS breached various obligations of Mexico under the investment protection provisions of NAFTA."

No Mexico taxed HFCS beverages more than, I'm assuming, their native cane sugar based products.
I'm guessing if it were taxed at the same rate there never would have been a problem.
This reminds me of the junk food tax. Why focus on junk food, why not white bread? or sugar coated breakfast cereal?

My opinion, and I'm prepared for the attacks, is that a successful species gets fat. Less active pursuits like shopping instead of hunting gathering causes you to burn fewer calories. Even then body type designates how much weight one will carry not slim lipoed white people.
Historically fat people were successful people. Pacific islander women were fattened for marriage. Jeans and tans meant you were poor working stiffs and pale white people were rich successful toffs. No callouses another signifier of success.
Now everyone is expected to look like an anorexic Bangladeshi.
All designed to prey on our guilt and vanity.

One CAN be too thin--also too fat!

I've seen articles about how weight unjustly defines Blacks and Hispanics as fat. Essentially saying that those standards are racist.
In my opinion it isn't weight but health. Anyone remember the BBW who wanted to teach Aerobics? The health club would not hire her because she was big. She sent the wrong image.
http://www.webmd.com/diet/news/20090625/study-overweight-people-live-longer
CDC researchers found the same thing in a widely reported study published in 2005, and last month a separate group of investigators reported that overweight heart patients live longer than lean ones.
The Obesity Paradox

It is becoming known as the " obesity paradox," but this is something of a misnomer. That's because few studies have linked obesity with longer life.


In the newly published study, researchers used data from an ongoing Canadian national health survey to follow more than 11,000 adults from the mid-1990s to 2007.

Compared to people who fell into the normal-weight category:

* Those classified as underweight were 73% more likely to die.
* Those classified as extremely obese with BMI of 35 or greater were 36% more likely to die.
* Those classified as obese with BMI 30-34.9 had about the same risk of death.
* Those classified as overweight with BMI 25-29.9 were 17% less likely to die.

The study appears online this week in the journal Obesity.

Obese people live longer than underweight people. I bet that will never make the news.


http://www.timesonline.co.uk/tol/news/uk/article537571.ece
Stay fat and live longer – survey casts doubt on dieting
RESEARCHERS have found that moderately overweight people who diet in the hope of improving their health die slightly younger than people who stay fat.

If confirmed, the study could raise serious doubts about the prevailing medical advice to overweight people that they should diet until their weight reduces.

It suggests that the physiological and metabolic stresses associated with weight loss could be so great as to outweigh the benefits of being thinner.

The research, carried out in Finland, followed nearly 20,000 twins over a period of 24 years. Twins are favoured for such studies because the genetic similarities mean the effects of variations in environment or lifestyle can be picked out more easily.

In 1975 they were questioned about their weight and desire to lose weight. The same group was then questioned again in 1981, after which they were monitored for 18 years to see which of them died and from what causes.

Once, my Doctor decided I was obese and mentioned I should go on a diet. I replied that I rarely ate recreationally and that I was more physically active than average. I was just a 'Big Guy'.

She would hear none of that... I know she was concerned and only looking out for my health. (That's precisely... Why, I had chosen her to be my Doctor.) But, this issue would not resolve itself.

So, finally, I relented to the tests... Which consisted of a day of being dunked in pools, pinched with measuring devices, and measured by all means known to humanity. (and even some, I suspect they had picked up from the Alien Abduction stories. :D )

About a week later we reviewed the numbers at an appointment. She opened up the file expecting to see a confirmation of her thoughts on my size.

But, what she read (and you could see it in her eyes) was... "Slightly above weight, BMI 25-29.9... He's just a big guy."

I never heard a word about it again.

So, those BMIs and other averages are useful to a point, but, patients should be treated on an individual basis conforming to their unique circumstances. I've read many warnings about this in medical journals... Especially, when discussing diagnostic equipment.

I was glad they did the tests, tho. If they had discovered something, I would certainly have wanted to know about it.

in fact there are studies that HFCS is more harmful than safe. If it is not safe for honeybees, how safe is it for every other animal including humans:

http://eatdrinkbetter.com/2009/08/20/the-bee-problem-is-hfcs-to-blame/ :
There is new evidence that high fructose corn syrup (HFCS) may be a culprit in what is known as Colony Collapse Disorder (CCD), or the disappearance of honeybees.

Colony Collapse Disorder has killed off more than one-third of the bees in the United States.

Beekeepers know that when there isn’t nectar readily available to their hives, as in the winter months, some turn to supplements. Traditionally it was (guess what) honey. But that’s what you want to harvest, so many turn to cheaper substitutions. Cane or beet sugar, mixed with water, was seen as acceptable as long as you removed the part of the comb containing the sugar once bees started producing again. It was important to keep the bees fed so they’d keep brooding and ready to produce honey.

Except it hasn’t only been the occasional sugar-water substitution. We’ve substituted the substitute. People have also turned to high fructose corn syrup.

And once again, it seems our need for convenience and affordability has cost us: a new study shows that a contaminant from heat-exposed HFCS may be killing off the bees.

http://www.ncbi.nlm.nih.gov/pubmed/19645504?ordinalpos=1&itool=EntrezSystem2.PEntrez.Pubmed.Pubmed_ResultsPanel.Pubmed_DefaultReportPanel.Pubmed_RVDocSum

Formation of Hydroxymethylfurfural in Domestic High-Fructose Corn Syrup and Its Toxicity to the Honey Bee ( Apis mellifera ).

In the United States, high-fructose corn syrup (HFCS) has become a sucrose replacement for honey bees and has widespread use as a sweetener in many processed foods and beverages for human consumption. It is utilized by commercial beekeepers as a food for honey bees for several reasons: to promote brood production, after bees have been moved for commercial pollination, and when field-gathered nectar sources are scarce. Hydroxymethylfurfural (HMF) is a heat-formed contaminant and is the most noted toxin to honey bees. Currently, there are no rapid field tests that would alert beekeepers of dangerous levels of HMF in HFCS or honey. In this study, the initial levels and the rates of formation of HMF at four temperatures were evaluated in U.S.-available HFCS samples. Different HFCS brands were analyzed and compared for acidity and metal ions by inductively coupled plasma mass spectroscopy. Levels of HMF in eight HFCS products were evaluated over 35 days, and the data were fit to polynomial and exponential equations, with excellent correlations. The data can be used by beekeepers to predict HMF formation on storage. Caged bee studies were conducted to evaluate the HMF dose-response effect on bee mortality. Finally, commercial bases such as lime, potash, and caustic soda were added to neutralize hydronium ion in HMF samples, and the rates of HMF formation were compared at 45 degrees C.

----------

Mexico doesn't want its citizens to be using the stuff thus the tax. US corporates shouldn't be allowed to force them to do so. Profit shouldn't rule everything.

:toast:

Happy Sunday, everyone!

Yesterday I was sanding, and painting, and moving large bulky objects--today I am in pain. But I won't have to do any of that again! At least, not those particular large bulky objects.

No, next it's "clean the garage so you can park in it again before the snow flies!"

In the torrent of bad news coming out in this particular field of our mutual obsession, it's hard to stop and grab a breath of air untainted by the madness that was capitalism, and then willingly plunge back in. but here goes:

Somehow, somewhere... My lovely little doggy got it into her micron sized brain that... Carpet = Toilet.

Especially, when the weather is even slightly uncomfortable outside.

Now, sitting in this room typing is very much like sitting in a well-used aged sun-ripened roadside 'Johnny-on-the-spot'.

:gak: :choke:

I spent the day yesterday with a borrowed carpet steamer trying my best to no avail. The stench keeps coming back.

So, I'm now scanning the Internet pipes for carpet sales. (I might try the white vinegar trick here in awhile. But, with low expectations.)

Anybody want a dog?

For scent removal Google up Vinegar and Baking soda. Lot's of Cat owners use it.
http://www.cat-world.com.au/CatUrineOdour.htm

Surprisingly Vinegar, Baking Soda and WD40 are multi purpose products.

Some WD40 examples
1. Protects silver from tarnishing.

2. Removes road tar and grime from cars.

3. Cleans and lubricates guitar strings.

4. Gives floors that 'just-waxed' sheen without making them slippery.

5. Keeps flies off cows.

6. Restores and cleans chalkboards.

7. Removes lipstick stains.

8. Loosens stubborn zippers.

9. Untangles jewelry chains.

10. Removes stains from stainless steel sinks.

11. Removes dirt and grime from the barbecue grill.

12. Keeps ceramic/terra cotta garden pots from oxidizing.

13. Removes tomato stains from clothing.

14. Keeps glass shower doors free of water spots.

15. Camouflages scratches in ceramic and marble floors.

She has a very shy bladder. (I know, unusual in a dog.) She's also very sneaky, entitled, and (I guess) has a sensitive rear end.

That makes it very difficult to train her against it... Because, I can't be there 24/7 to attend to her needs and keep vigilance.

I have tried rewarding her when she proceeds to go in an acceptable manner. However, due to my time constraints... The regimen is somewhat spotty. Have I mentioned she has a shy bladder?

I don't have a dog at present, but other family members do, and that's how they cope.

God made cats so busy people wouldn't have this problem! Of course, the hairball treatment (which I must inflict on both cats and myself shortly) probably makes up for it.

But, as I said.

She's sneaky.

and

Spoiled. (Not my fault, as she came as part of a packaged deal.)

It's called "Kil-Oder" concentrated deodorizer with Prozyme (enzyme-producing bacteria).

It eats the odors. I've used it regularly for such occasions, as have my friends who have borrowed it for their pet indiscretions.

Call 1-800-240-6373 and order product # 51509.

It's relatively safe, extremely effective, and not horribly expensive.
For stains in carpet, my sister swears by Shout.

Here endeth the household tips.

Thanks for these weekend threads. I seem to be spending most weekends either with my family in Indiana, or with my little grandbabies. And neither leaves any time for posting. So time for catching up, maybe I'll find something interesting to share.

http://www.informationclearinghouse.info/article23316.htm

http://aud1.kpfa.org/data/20090819-Wed1300.mp3
for interview with Michael Hudson

Can Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings.

Resentment is growing not only towards those who ran up the debts - Iceland's bankrupt Kaupthing and Landsbanki, with its Icesave accounts, and heavily geared property owners in the Baltics and central Europe - but also towards the foreign advisers and creditors who put pressure on these governments to sell off the banks and public companies to insiders. Support in Iceland for joining the EU has fallen to just over a third of the population, while Latvia's Harmony Centre party, the first since independence to include a large segment of the Russian-speaking population, has gained a majority in Riga and is becoming the most popular national party. Popular protests in both countries have triggered rising political pressure to limit the debt burden to a reasonable ability to pay.

This political pressure came to a head over the weekend in Reykjavik's parliament. The Althing agreed a deal, expected to be formalised today, which would severely restrict payments to the UK and Netherlands in compensation for the cost of bailing out their Icesave depositors.

This agreement is, so far as I am aware, the first since the 1920s to subordinate foreign debt to the country's ability to pay. Iceland's payments will be limited to 6 per cent of growth above 2008's gross domestic product. If creditors thrust austerity on the Icelandic economy there will be no growth and they will not get paid.

A similar problem was debated 80 years ago over Germany's first world war reparations. But many policymakers remain confused over the distinction between squeezing out a domestic fiscal surplus and the ability to pay foreign debts. No matter how much a government may tax its economy, there is a problem turning the money into foreign currency. As John Maynard Keynes explained, unless debtor countries can export more, they must pay either by borrowing or by selling off domestic assets. Iceland today has rejected these self-destructive policies.

There is a limit to how much foreign payment an economy can make. Higher domestic taxes do not mean a government can translate this revenue into foreign exchange. This reality is reflected in Iceland's position on its Icesave debt - estimated to amount to half its entire GDP.

In taking this stand, Iceland promises to lead the pendulum swing away from the ideology that debt repayments are sacred.

In the post-Soviet economies the problem is that independence in 1991 did not bring the hoped-for western living standards. Like Iceland, they remain dependent on imports. Their trade deficits have been financed by the global property bubble - borrowing in foreign currency against property that was free of debt at independence. Now the bubble has burst and it is payback time. No more credit is flowing to the Baltics from Swedish banks, to Hungary from Austrian banks or to Iceland from Britain and the Netherlands. Unemployment is rising and governments are slashing healthcare and education budgets. The resulting economic shrinkage is leaving large swathes of property in negative equity.

Austerity programmes were common in developing countries from the 1970s to the 1990s, but European democracies have little tolerance for such an approach. As matters stand, families are losing their homes and emigration is accelerating. This is not what capitalism promised.

Populations are asking not only whether debts should be paid, but - as in Iceland - whether they can be paid. If they cannot be, then trying to pay will only shrink economies further, stopping them becoming viable.

Will Britain and the Netherlands accept Iceland's condition? Trying to squeeze out more debt service than a country could pay requires an oppressive and extractive fiscal and financial regime, Keynes warned, which in turn would inspire a nationalistic political reaction to break free of creditor-nation demands. This is what happened in the 1920s when Germany's economy was wrecked by the rigid ideology of the sanctity of debt.

A pragmatic economic principle is at work: a debt that cannot be paid, will not be. What remains an open question is just how these debts will not be paid. Will many be written off? Or will Iceland, Latvia and other debtors be plunged into austerity in an attempt to squeeze out an economic surplus to avoid default?

The latter option may drive debt-laden countries in a new direction. Eva Joly, the French prosecutor brought in to sort out Iceland's banking crisis, warned this month that Iceland would have little left but its natural resources and strategic position: "Russia, for example, might well find it attractive." The post-Soviet countries are already seeing voters shift away from Europe in reaction to the destructive policies the EU supported.

Something has to give. Will rigid ideology give way to economic reality, or the other way round?

The writer is professor of economics at the University of Missouri

LISTEN TO THE INTERVIEW--IT'S EVEN MORE DAMNING!

will we (?) have to learn to live within our means?

Horrors!

Because, to date, they've managed to rip everything I've managed to save by doing so out of my cold dead hands... (Along with some enabling by Congress and the Fed.)

Now, they're starting to tear into my very fleshy parts looking for more... So, that they can avoid living a fiscally responsible life and maintain the largess of lifestyle to which they've become accustomed.

Y'know that's why they do it... Keeping down the little guy? It makes them feel so much more rich when the system runs out of assets for them to take over ownership.


I heard something the other day on Mike Malloy which went sort of in this direction.

Heinlein, I think it was... Said that you could gauge when a civilization was collapsing by how rude the wealthy tiers of that society had become... Honestly, we're already there, if not over due.

I think the ketchup as vegetable was the equivalent of let them eat cake.

My comment was directed at "western" society in general, and of course the first victims of "austerity" should be the 1%ers, or even the 5%ers.


Tansy Gold, who's been living the austerity plan since 1948. . . . . .

and perhaps that is the only poverty I really feel. Moving back to Michigan fixed a lot of that longing, and it wasn't as costly as all that, because I'd already failed to attain everything I tried for elsewhere.

I'm probably not making much sense, it's rather late after a busy day...

but if money could buy a decent man, I'd be a much happier woman. Because love, loyalty, and all those other character thingys didn't seem to do it, either.

A former Russian Billionaire who once said “those who don’t have a billion can go to hell” has had an ironic twist of comeuppance after having to declare bankruptcy.

Sergei Polonsky, who was worth a paltry $1.2bn, failed to repay a $242 loan because his construction company Mirax Group hasn’t “sold a single square metre of housing or collected any instalement payments” for any real estate they have sold.

During his 2008 rant, where he called all those who hadn’t made a billion in Russia a ‘loser’, he asked reporters not to blow the economic downturn out of proportion, but now acknowledges things have changed.

He still remains optimistic, in the bankruptcy announcement he said: “If we are destined to perish, we’ll do it with our heads up.”

http://bdaily.info/news/any-other-business/24-08-2009/loaded-russian-who-said-those-who-dont-have-a-billion-can-go-to-hell-is-bankrupt/


The one percenters have lost one of their biggest asswipes. This guy has caused a lot of grief for many in the masses in Russia.

http://www.expatica.com/be/news/belgian-news/New-quality-label-for-clowns_55191.html
"“They are charlatans that started their career at family party, half-cut.”

Clowns wishing to be considered for the quality label will be required to uphold a number of basic rules. They should not smoke in the presence of children, should not drink alcohol, swear or hurt anyone with their jokes. "


Anyone ever watch the Alan Arkin movie SIMON?
He forced all politicians to wear red rubber noses that squeaked.
http://www.youtube.com/watch?v=Iv65svMzG0A

http://www.informationclearinghouse.info/article23323.htm

August 20, 2009 "CommonDreams" -- The corporation is no more than an aggregation of capital managed for the proportional benefit of those who supply it. It is a system controlled by managers, administrators and clerks largely for the benefit of passive investors looking for a higher return than they can earn elsewhere.

It makes no sense that government should provide the very wealthy with a tool that poses a continuous threat to the public interest. Government's job is to protect the public interest, not sponsor those that destroy it.

Doing nothing

In Common Sense Thomas Paine from argued for a change of government, but what he said 232 years ago has application today.

The current situation has become intolerable. Governments now stand by while modern corporations destroy. Governments are responsible for creating the modern corporation. Citizens are responsible for creating government. We have furnished the means through which the destruction is conducted. In the words of Paine, "our calamities heightened."

This problem is not getting fixed. Indeed it is getting worse. As each year passes, more communities are destroyed, human rights are violated and millions die. Corporate induced climate change now threatens all six and one-half billion inhabitants on this planet.

If nothing is done, the catastrophic effects predicted of global warming will become a reality. Pollution and human rights abuse will continue to move around the globe as governments in one jurisdiction pass laws and governments in others do not. Employees and our communities will continue to be threatened by globalization. New problems will take their place among those left unsolved as even newer technologies are developed and government finds it impossible to keep up.

The most serious part of this problem, however, is not the physical damage that is being done. It is the damage being done to the civic spirit of the people. They have begun to feel that it doesn't pay to be a good citizen. They have begun to lose hope.

Each year they see governments of their elected representatives acting to prefer corporate interests over their interests. They know this is wrong, but they see no way of correcting it.

Not understanding the true source of this problem results in the blaming of government and corporate personnel. When successive changes in personnel do not solve the problem, despair sets in and people begin to withdraw their support for government and their involvement in politics. They reason that government is ineffective and their involvement will have no effect. They conclude they should not waste their time. Their withdrawal increases the power of the modern corporation to set the agenda. As a result, government loses its focus on solving human problems. This makes it more irrelevant to the average citizen and corporate abuse of the public interest becomes even harder to eliminate.

Each year more give up on government ever solving the problems caused by corporations. They come to believe that big companies will always control government. They no longer worry about what kind of world they will leave to their children and future generations. They believe instead their lot in life is simply to find a way to make a living in this madness.

As they give up on government, they give up any hope of influencing the world we live in and will leave for the generations to come. Corporations then fill the vacuum. Their political power gets stronger. This, in turn, makes it harder for government to pass new laws protecting the commons from corporate abuse. It is a vicious cycle. Abuse begets loss of hope begets more corporate political influence begets more abuse.

Abuse of the commons by the modern corporation will not go away if it is simply ignored. If nothing is done, humanity's suffering at the hands of the modern corporation will continue to multiply. Each generation will suffer more than the one that precedes it. The question is what to do.

Treating the symptoms

Humanity's future is and always has been dependent on it recognizing and solving the world's problems as they arise. The inability of government to rein in the damage caused by modern corporations is such a problem.

Whenever great change is needed, there are always those who will argue that it is not or that change is impossible. Those that argue change is impossible are the most disturbing. They have given up hope thereby consigning humanity to a future where corporations make the rules and people obey them. This is a form of corporate slavery that no human being should suffer or accept.

Those that will argue change is not needed will almost always come from the classes which are benefiting most under the current system. Their fear of losing the benefits they have earned, won or inherited keep them from taking the next step forward.

They will suggest that the community's afflictions are not that bad and point out that corporations have done much to benefit the community in the past. In making this argument, they give no credit to mankind's ingenuity. They forget that corporations are not the reason for progress—people are. Companies only act through people. Every new piece of corporate invented technology was really invented by a human being or group of them working together.

The company was just the employer. It provided the capital. Essentially, they argue that without the aggregation of capital there would be no progress. In this respect they are probably right. It is desirable for society to have a means to put capital together. Capital funds research and development of new technologies.

However, a corporation with no responsibility to the public interest is not the only possible means for capital to come together. There are other ways to fund the development of new ideas. Capital should be able to come together in ways that are less destructive.

Sometimes those who argue that change is not needed will claim that the market will sort it all out. Those companies that are bad citizens will lose customers and go out of business. The problem with this argument is all the harm that is caused before they do go out of business.

General Motors is a good recent example. Here was a company that dragged its feet every step of the way. Only when the US government saved them from oblivion did they change their mind about designing more fuel efficient cars. In the meantime, billions of tons of carbon dioxide from vehicles they manufactured were emitted into our atmosphere that need not have been.

The idea that the market will demand corporate citizenship is a myth. All we have to do is look around us at the dozens of companies that are destroying the commons to see that the market is not delivering on this idea.

Fundamentally, there are only two answers to the problem of intentional corporate abuse of the commons. Either governments must be strengthened to give them more power to rein in corporate abuse of the commons or the corporation's inclination (and, in certain cases, compulsion) to wantonly harm the public interest must be eliminated.

Strengthening governments

The conventional wisdom is to answer that weak government is the problem. This conclusion is supported by the corporate sector which is forever pointing the finger at government for being the ineffective and incompetent. In doing this, business seems to lose sight of the fact the fact that they have controlled government for more than a generation.

One must wonder if the current financial crisis will change the way business looks at government. The world's financial experts have managed to ruin their businesses losing more than two trillion dollars of other people's money. Who have they called upon to ride to their rescue? Government.

The obvious response to the charge that government is the problem (though not one usually put forth by business) is to try to strengthen government so that when corporate abuse arises, the government can quickly contain it. This has already been tried thousands of times. For the most part, it hasn't worked.

Volumes and volumes of ineffective business regulation are testimony to the fact that making government tougher on business does not work. Since Rachel Carson wrote Silent Spring in 1961 tens of thousands of environmental laws and regulations have been enacted around the world. These laws undoubtedly have made the world a better place to live today than it would have been otherwise, but is the Earth's environment in better shape today than it was then? Definitely not.

With the rise of the union movement in the US and elsewhere, working conditions in big companies improved. Child labor and working hours were reduced. Workplace safety improved. Yet, these problems were not eliminated. Most of them just moved from one jurisdiction where they would no longer be tolerated to another one where they would. Companies did not stop taking advantage of workers. They simply moved their operations where the lack of regulation allowed them to continue violating the human rights and dignity of those they employed.

I once lived in Manchester, New Hampshire, home of what was once the biggest textile manufacturing complex (also the biggest sweatshop) in the world. When these facilities unionized in the early 20th century, what did the modern companies that owned them do? They moved to the South where the union movement was not as strong and they could continue to pay low wages and impose lousy working conditions. Then, when the union movement caught on there, they moved their operations overseas to Southeast Asia, China and elsewhere. This saga continues today.

When tobacco was found to cause cancer, new regulations were passed in America and the developed world limiting where and how these products could be advertised. Did this halt the steady growth of people dying every year from tobacco related illnesses? No, the industry simply found other ways to make their products attractive to undiscerning consumers and other markets (specifically China and countries in the third world) in which to advertise them.

The problem of corporate abuse of the public interest cannot be solved by imposing more laws and regulations that try to restrain the corporation one abuse one jurisdiction at a time. The best that can be said about this strategy is that it moves the abuse around from one jurisdiction to another. It doesn't solve the problem; it just moves it elsewhere, to places where local governments are willing to accept it for a while.

Another shortcoming of this strategy is that it actually makes some corporate abuse of the commons legal. That which before was wrong but not illegal becomes legitimatized. Environmental laws don't eliminate pollution. They permit amounts of it up to a level which the government determines for a while to be safe.

Confronting corporate abuse in this manner is like treating the symptoms of a disease. It may reduce the adverse effect of the symptoms, but because the underlying cause has not been dealt with, the problem keeps coming back. Sometimes it comes back in a strain that is even more difficult to cure.

Personhood

Seeing that eliminating corporate abuse of the public interest one abuse one jurisdiction at a time will not work, some have suggested the solution lies in strengthening government by eliminating the constitutional rights of corporations. As Benjamin Franklin did more than 200 years ago, they correctly recognize that the liberal democracy is ill equipped to protect the public interest when the rich and powerful are bent on harming it.

In order to reduce the exposure of the commons to this problem they would change the US Constitution so that corporations no longer be entitled to the protections it affords citizens (e.g. the right to free speech, due process, equal protection and to be free from unreasonable searches and seizures). Corporations would remain dedicated to the pursuit of self-interest, but government would be under no restriction in making or prosecuting new laws against them.

It's easy to see why this idea is appealing to some. It takes a "strict construction" approach to the Constitution. "Corporations are not even mentioned in the Constitution. How then can they have rights under it?" Also, "corporations are not people. Why are they afforded the protections provided for people in the Constitution?"

Proponents of the "eliminate corporate personhood" idea believe fundamentally that the key to eliminating corporate abuse is to turn off corporation's right to free speech. They presume that this will eliminate corporations' ability manipulate government through the use of that right. This, in turn, will allow government to more stringently regulate business and, through this rather indirect route, corporate behavior will be improved.

Is this realistic? Money always seems to find its way into politics. If corporations remain dedicated by law to the pursuit of profit, will they not still find ways to bend government to their own purposes? Shouldn't we first try changing the purposes before we start messing with the Constitution?

Corporate constitutional rights also encompass much more than just freedom of speech. When corporate personhood is eliminated does this mean corporations will no longer be entitled to a fair trial? Does it mean legislators will be able to pass laws in favor of one company and against its competitors? Does it mean an individual loses her property rights once she puts her property into the hands of her wholly-owned corporation? Have the proponents of this idea considered the effects of creating two judicial systems: one for corporations that would have no constitutional rights and one for individuals who do? Under which rules would corporate directors and officers be prosecuted? Under existing rules where, as individuals, they are entitled to their constitutional rights or under new rules where, as personnel of (and somehow tainted by) the corporation they serve, no constitutional rights would be recognized?

Finally, this idea also ignores that abuse of the commons by the modern corporation is not exclusively an American problem. It occurs all over the world and is caused by hundreds of companies formed and operating outside the U.S. Judicial decisions by US courts giving companies the rights of citizens under the US Constitution cannot be the source of the problem when companies operating outside the US damage the commons just as much.

Taking away the constitutional rights of corporations is not the answer. There is a conflict between the way our government is supposed to work and the goal of the modern corporation. The way to remedy this conflict is not to make it acceptable for government to treat corporations unfairly. !!

Changing the corporation

We shouldn't need to change government to allow it to be able to govern its own creation (corporations). Instead, we should modify the corporation into something that is more capable of being governed.

The corporation is an artificial entity created by the corporate law. This law gives the corporation its purpose and dictates in broad terms how it is to be achieved. These terms were changed in the last half of the 19th century to eliminate provisions designed to protect the public interest. That has proven to be a mistake. Doesn't it make more sense to admit that mistake and put respect for the commons back in the corporate law and back in corporations?

© 2009 Robert C. Hinkley

Robert C. Hinkley is a corporate lawyer and former partner in one of America's largest law firms. He now lives in Sydney, Australia. "Changing the Corporation" is the third and final excerpt from his new book, "Corporate Citizenship: A Path Towards Eliminating Corporate Abuse of the Public Interest", which have appeared on www.commondreams.org. this week. Those interested in obtaining a copy of Corporate Citizenship can contact him on rbrthinkley@gmail.com.

wondering what the real story is?

http://news.yahoo.com/s/ap/20090823/ap_on_go_ot/us_social_security_smaller_checks_2

Millions of older people face shrinking Social Security checks next year, the first time in a generation that payments would not rise.

The trustees who oversee Social Security are projecting there won't be a cost of living adjustment (COLA) for the next two years. That hasn't happened since automatic increases were adopted in 1975.

By law, Social Security benefits cannot go down. Nevertheless, monthly payments would drop for millions of people in the Medicare prescription drug program because the premiums, which often are deducted from Social Security payments, are scheduled to go up slightly.

"I will promise you, they count on that COLA," said Barbara Kennelly, a former Democratic congresswoman from Connecticut who now heads the National Committee to Preserve Social Security and Medicare. "To some people, it might not be a big deal. But to seniors, especially with their health care costs, it is a big deal."

Cost of living adjustments are pegged to inflation, which has been negative this year, largely because energy prices are below 2008 levels.

Advocates say older people still face higher prices because they spend a disproportionate amount of their income on health care, where costs rise faster than inflation. Many also have suffered from declining home values and shrinking stock portfolios just as they are relying on those assets for income.

"For many elderly, they don't feel that inflation is low because their expenses are still going up," said David Certner, legislative policy director for AARP. "Anyone who has savings and investments has seen some serious losses."

About 50 million retired and disabled Americans receive Social Security benefits. The average monthly benefit for retirees is $1,153 this year. All beneficiaries received a 5.8 percent increase in January, the largest since 1982.

More than 32 million people are in the Medicare prescription drug program. Average monthly premiums are set to go from $28 this year to $30 next year, though they vary by plan. About 6 million people in the program have premiums deducted from their monthly Social Security payments, according to the Social Security Administration.

Millions of people with Medicare Part B coverage for doctors' visits also have their premiums deducted from Social Security payments. Part B premiums are expected to rise as well. But under the law, the increase cannot be larger than the increase in Social Security benefits for most recipients.

There is no such hold-harmless provision for drug premiums.

Kennelly's group wants Congress to increase Social Security benefits next year, even though the formula doesn't call for it. She would like to see either a 1 percent increase in monthly payments or a one-time payment of $150.

The cost of a one-time payment, a little less than $8 billion, could be covered by increasing the amount of income subjected to Social Security taxes, Kennelly said. Workers only pay Social Security taxes on the first $106,800 of income, a limit that rises each year with the average national wage.

But the limit only increases if monthly benefits increase.

Critics argue that Social Security recipients shouldn't get an increase when inflation is negative. They note that recipients got a big increase in January — after energy prices had started to fall. They also note that Social Security recipients received one-time $250 payments in the spring as part of the government's economic stimulus package.

"Seniors may perceive that they are being hurt because there is no COLA, but they are in fact not getting hurt," said Andrew G. Biggs, a resident scholar at the American Enterprise Institute, a Washington think tank. "Congress has to be able to tell people they are not getting everything they want."

SOMEBODY CALL GOLDMAN SACHS!

Social Security is also facing long-term financial problems. The retirement program is projected to start paying out more money than it receives in 2016. Without changes, the retirement fund will be depleted in 2037, according to the Social Security trustees' annual report this year.

President Barack Obama has said he would like tackle Social Security next year, after Congress finishes work on health care, climate change and new financial regulations.

Lawmakers are preoccupied by health care, making it difficult to address other tough issues. Advocates for older people hope their efforts will get a boost in October, when the Social Security Administration officially announces that there will not be an increase in benefits next year.

"I think a lot of seniors do not know what's coming down the pike, and I believe that when they hear that, they're going to be upset," said Sen. Bernie Sanders, an independent from Vermont who is working on a proposal for one-time payments for Social Security recipients.

"It is my view that seniors are going to need help this year, and it would not be acceptable for Congress to simply turn its back," he said.


RIDDLE ME THIS:IF THERE'S NO INFLATION, WHY DO THE MEDICARE PREMIUMS RISE?

THIS IS A DUMP OF DECEIT.

GENEVA (AFP) - UBS (Virt-X: UBSN.VX - news) chairman Kaspar Villiger said in a newspaper interview on Sunday that he could not entirely rule out that some staff at the Swiss bank might have assisted tax fraud in other countries.

"With 70,000 employees I cannot put my hand in the fire and say there will be no more problems," he told the Swiss newspaper NZZ am Sonntag after being asked about the possibility.

"I do believe that this systematic act only occurred in the case of the United States," added Villiger, who joined the bank in April.

. . .

"For the future it is really very important that we build a culture in which such lone ventures are no longer possible," Villiger added.


http://uk.biz.yahoo.com/23082009/323/ubs-rule-tax-probes-other-countries.html


Just one bad apple.

Especially considering that Americans are severely undertaxed, compared to the rest of the world? I doubt that they invented these nifty dodges just for doctors and developers in the US.