Rising in Phoenix

Chris Hedges Talks About America

November 18, 2009 · Leave a Comment

Chris Hedges spoke in Binghamton, NY on October 24, 2009.
Video and transcript excerpts. The full video can be viewed at the blog Essential Dissent,
http://essentialdissent.blogspot.com/2009/10/chris-hedges-empire-of-illusion-part-1.html

…”In the past three years, nearly 1 in 5 workers was laid off. Among workers laid off from full-time work, nearly 1/4 was earning less than $40,000 per year. There are whole sections of the United States that now resemble the developing world. There has been a Wiemariization of the American working class and the assault on the middle class is underway. Anything that can be put on software from finance, to architecture to engineering is being outsourced to workers in countries such as India or China, who accept pay, a fraction of that of their Western counterparts, and work without benefits. And both the Democrat and Republic parties, beholden to corporations, for money and power, are responsible.

Washington has become our Versailles.

The media has evolved in to a class of courtiers. The Democrats like the Republicans are mostly courtiers. Our pundits, academics and economists, at least those with prominent public platforms are courtiers. We are captivated by the hollow stagecraft of political theater, as we are ruthlessly stripped of power.

The role of courtiers is to parrot official propaganda. Courtiers do not defy the elite or question the structure of the corporate state, The corporations, in return, employ them and promote them as celebrities or elected officials.

Courtiers in face powder deceive us, in the name of journalism. Courtiers in our political parties promise to look out for our interests, and then pass bill after bill, to further corporate fraud and abuse. But no class of courtiers from the eunuchs behind the Manchus in the 19th century to the Baghdad caliphs has ever transformed itself into a responsible and socially productive class.

Courtiers are hedonists of power. And being a courtier requires agility and eloquence, The most talented of them should be credited as persuasive actors. They entertain us, they make us feel good, they persuade us they are our friends. They are the smiley faces of the corporate state that has hijacked the government. And when the corporations make their iron demands, these courtiers drop to their knees. They placate the telecommunications companies that want to be protected from lawsuits. They permit oil and gas companies to rack in obscene profits and keep in place the vast subsidies of corporate welfare doled out by the state. They allow our profit-driven health care to leave the uninsured and under insured to suffer and die. And over twenty thousand Americans died last year because they could not get proper medical care. The health care industry, like the defense industry, profits from death. It is legally permitted to hold sick children hostage, while their families frantically bankrupt themselves, to save their sons or daughters.

Any discussion of health care should acknowledge the fact that our for profit health care system is the problem and must be destroyed. Only then can we have an honest debate about what comes next. But this will never happen. It will never happen because the industry’s money and lobbyists drive the discussion and the courtiers in Washington and the television screen dance to the tune they play.

America is devolving into a third world nation. And if we do not immediately halt the elites rapacious looting of the public treasury and our bizarre state socialism for corporations, we will be left with trillions in debts which can never be repaid, and widespread human misery which we will be helpless to ameliorate.

Our anemic democracy will be replaced with a national, robust police state. The elite will withdraw into heavily guarded, gated communities, where they will have access to security, goods and services, that cannot be afforded by the rest of us. Tens of millions of people, brutally controlled, will live in perpetual poverty, a state of neo feudalism. This is the inevitable result of unchecked corporate capitalism. And the stimulus and bailout plans are not about saving us, they are about saving them…

Chris Hedges spoke in Binghamton, NY on October 24, 2009. Empire of Illusion: The End of Literacy and the Triumph of Spectacle, http://www.amazon.com/Empire-Illusion-Literacy-Triumph-Spectacle/dp/1568584377/ref=sr_1_1?ie=UTF8&s=books&qid=1258455355&sr=8-1

The full video can be viewed at the blog Essential Dissent, http://essentialdissent.blogspot.com/2009/10/chris-hedges-empire-of-illusion-part-1.html

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December 2, 2009

December 2, 2009 · Leave a Comment

Credit Crisis Cassandra
Brooksley Born’s Unheeded Warning Is a Rueful Echo 10 Years On


From The Washington Post,
May, 2009
‘A little more than a decade ago, Born foresaw a financial cataclysm, accurately predicting that exotic investments known as over-the-counter derivatives could play a crucial role in a crisis much like the one now convulsing America. Her efforts to stop that from happening ran afoul of some of the most influential men in Washington, men with names like Greenspan and Levitt and Rubin and Summers — the same Larry Summers who is now a key economic adviser to President Obama. She was the head of a tiny government agency who wanted to regulate the derivatives. They were the men who stopped her.

The same class of derivatives that preoccupied Born — including the now-infamous “credit-default swaps” — have been blamed for accelerating last fall’s financial implosion. But from 1996 to 1999, when Born was the chairman of the Commodity Futures Trading Commission, the U.S. economy was roaring and she was getting nowhere with predictions of doom.

So, upstairs in the big house in Kalorama, Born tossed and turned. She woke repeatedly “in a cold sweat,” agonizing that a financial calamity was coming, she recalled one recent afternoon.

“I was really terribly worried,” she said.

Before taking office, Born had been a high-octane attorney, an American Bar Association power player, a noted advocate of feminist causes and co-founder of the National Women’s Law Center. But none of that carried much weight when she crossed over into government; for all her legal experience, she was a woman who wasn’t adept at playing the game. She could be unyielding and coldly analytical, with a litigator’s absolute assertions of right and wrong. And she was taking on Beltway pros, masters of nuance and palace politics. She marched into congressional hearing after congressional hearing — pin neat, always with a handbag — but no one really wanted to listen.

The Wall Street Journal declared that “the nation’s top financial regulators wish Brooksley Born would just shut up.” The Bond Buyer newspaper compared her to a salmon “swimming against raging currents.”

That last one cracks her up.

“Maybe not an inappropriate analogy!” she says.

Now that she is retired and far from a position of influence, Born, 68, may be closer than ever to vindication. No longer an outlier, she attended a small, private dinner at the Treasury Department last week with current and former regulators at the invitation of Secretary Tim Geithner, according to two sources. And the Obama administration has unveiled a plan to regulate some of the derivatives she warned about, though the proposal must still get through Congress and falls short of regulating the entire over-the-counter market that kept her awake all those years ago.

Still, maybe — just maybe — her old friends say, the people in charge are beginning to realize what they thought all along: “the lady with the handbag was right.”

The Maestro Balks
Born’s baptism as a new agency head in 1996 came in the form of an invitation. Federal Reserve Chairman Alan Greenspan — routinely hailed as a “genius,” the “maestro,” the “Oracle” — wanted her to come over for lunch.

Greenspan had an unusual take on market fraud, Born recounted: “He explained there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him.”

This made no sense to her. She’d spent much of the 1980s defending clients caught up in a vast conspiracy by two wealthy brothers, Nelson and William Hunt, who duped investors while trying to corner the world silver market.

“After all,” Born said, looking back, “I’m a lawyer, and I think the existence of fraud prohibitions is critically important.” But Greenspan was insistent, she said.

Finally, he said, “Well, Brooksley, I guess you and I will never agree about fraud.” (Greenspan did not respond to requests for comment. Daniel Waldman and Michael Greenberger, both top aides of Born’s, were briefed on the lunch at the time and independently confirmed Born’s recollection of the conversation.)

That was just the beginning. By early 1998, Born had also tangled with Treasury Secretary Robert Rubin, his deputy, Summers, and Securities and Exchange Commission head Arthur Levitt, not to mention members of Congress, financial industry heavyweights and business columnists. She wanted to release a “concept paper” — essentially a set of questions — that explored whether there should be regulation of over-the-counter derivatives. (Derivatives are so-named because they derive their value from something else, such as currency or bond rates.)

They warned that if she did so, the market would implode and predicted tidal waves of lawsuits. On top of that, Rubin told her, she didn’t have legal authority to regulate the derivatives anyway. She wasn’t buying any of it, and she wasn’t backing down…

The CFTC had been created in the 1970s, primarily to regulate futures contracts purchased by farmers to hedge against price fluctuations. But by the time Born took office in 1996, futures were a much more sophisticated game.

Four years earlier, the CFTC had created a giant opening for sharp market players, exempting most privately negotiated over-the-counter derivatives contracts from regulation. Waldman calls the decision “the seed” of the current financial crisis because bad bets on unregulated derivatives crippled large firms such as Bear Stearns and AIG last fall.

In the late 1990s, the seed had sprouted into a $25 trillion derivatives market and Born saw trouble coming. The mostly unregulated “dark markets” had shown signs of danger in the preceding years, such as the bankruptcy of Orange County, Calif., which lost heavily investing in derivatives. Born’s agency set its sights on a highly caffeinated market.

“I was very concerned about the dark nature of these markets,” Born said. “I didn’t think we knew enough about them. I was concerned about the lack of transparency and the lack of any tools for enforcement and the lack of prohibitions against fraud and manipulation.”

Based on her lunch with Greenspan, Born knew she would run into heavy resistance.
“Brooksley’s view was that he didn’t believe in regulation,” Waldman recounted. But Born did, and she was about to demonstrate it.

Deaf Ears
In early 1998, Born’s plan to release her concept paper was turning into a showdown. Financial industry executives howled, streaming into her office to try to talk her out of it. Summers, then the deputy Treasury secretary, mounted a campaign against it, CFTC officials recalled.

“Larry Summers expressed himself several times, very strongly, that this was something we should back down from,” Waldman recalled.

In one call, Summers said, “I have 13 bankers in my office and they say if you go forward with this you will cause the worst financial crisis since World War II,” recounted Greenberger, a University of Maryland law school professor who was Born’s director of the Division of Trading and Markets. Summers declined to comment for this article.

The discordant notes crescendoed in April 1998 during a tension-filled meeting of the President’s Working Group, a gathering of top financial regulators that periodically met behind closed doors at the Treasury Department. At that meeting, Greenspan and Rubin forcefully opposed Born’s plans, Waldman said.

“Greenspan was saying we shouldn’t do it,” Waldman recalled. “Rubin was saying we couldn’t do it.”

The next month, Born released her concept paper anyway.

Within weeks, she was under attack. Lauch Faircloth, then a Republican senator from North Carolina, took to the Senate floor to call her “a rogue regulator.” A Boston Herald column accused her of a “power grab. . . . She reached for that brass ring and in doing so cast a pall of legal uncertainty.” Greenspan, Rubin and Levitt jointly urged Congress to pass a moratorium on the CFTC regulating over-the-counter derivatives.

With emotions running high, Born was summoned to the office of House Banking Chairman Jim Leach, a Republican from Iowa, to meet with top officials from the Fed and the Treasury. Born raced to Capitol Hill from the bedside of her daughter, Ariel Landau, then 27, who was about to undergo knee surgery.

“The feelings in the room were very tense,” recalled Leach, who said he felt the CFTC was too small to govern over-the-counter derivatives and wanted derivatives moved to clearinghouses regulated by the Fed or the Treasury. “In my time in public life, I have never seen the executive branch so bifurcated. You had a feeling that the Fed and the Treasury didn’t have a great deal of respect for what the CFTC was made of.” …Last week, with her hair colored and the gray gone, she traveled to Boston to receive the John F. Kennedy Profiles in Courage award. Finally, though perhaps too late, everyone wanted to listen to Brooksley Born. She once again warned about the danger of Dark Markets, now grown to $680 trillion of notional value, according to the Bank for International Settlements — “more than 10 times the amount of the gross national product of all the countries in the world.

“If we fail now to take the remedial steps needed to close the regulatory gap,” Born said, “we will be haunted by our failure for years to come.”
All during her spotlight turn at the John F. Kennedy Library, of course, she clutched a handbag. http://www.washingtonpost.com/wp-dyn/content/article/2009/05/25/AR2009052502108_pf.html

What is Good for Goldman Sachs is Good for America The Origins of the Present Crisis
Author: Brenner, Robert
Publication Date: 10-02-2009
Publication Info: UC Los Angeles, Institute for Social Science Research, Center for Social Theory and Comparative History
Permalink: http://escholarship.org/uc/item/0sg0782h

Robert Brenner outlines the long-term causes of the of the present economic crisis. Rather than understanding the current downturn as merely a function of financial incompetence and miscalculation, he demonstrates that the US economy and that of the G7 has been slower growth in most of the major indices with each passing business cycle since the 1970s. In the last two cycles, asset bubbles inclined US consumers to take on more debt in order to spend and achieve limited GDP growth. Brenner outlines in detail how and why the financial sector played a key role in the creation and inflation of debt bubbles with new financial instruments. The implications for the US and the global economy are also outlined including the US current account deficit, trade
imbalances, the rise of China and the East Asian economies as well as declining investment in the real economy and overcapacity in manufacturing worldwide.

…”What suddenly turned the specter of a severe cyclical downturn or worse into the
reality of catastrophic systemic crisis was a development in the financial sector of which
few were aware, even among insiders—the rise of the “shadow banking system.”.

According to Wall Street mantra, the frenzy in the credit markets actually entailed little
systemic danger, for the great banks upon which the economy depended for credit were
ostensibly securitizing the mortgages that they had originated or purchased and selling
them far and wide, dispersing risk among thousands if not millions of separated investors.

But when the dust cleared in the aftermath of the initial credit crunch of early August
2007, it quickly became evident that the reality was just the opposite. In response to the intensifying competition and falling (risk adjusted) returns that were gripping the
financial sector—and manifesting levels of greed and over-confidence amazing even for
Wall Street–the country’s greatest financial houses had managed to hold on to a
stunningly large portion of the mortgage-backed instruments that they had issued, either
on or off balance sheet, and were, astoundingly, funding these same assets by way of the short-term credit markets.

So when the dizzying fall in housing prices had worked its way through the originate-and-securitize daisy chain, a large number of these institutions found themselves effectively deprived of their capital and without access to credit, de facto in bankruptcy. This would have been poetic justice, except for the fact that, as usual, the leading executives of these corporations managed to insulate themselves personally from the fate of their own corporations, and the horrific losses redounded primarily upon the heavily working class and minority purchasers of subprime
mortgages.

The financial market meltdown undermined banks’ capacity to advance funds to
corporations and households at a time when they had already been radically tightening
their lending standards in the face of the weakening of the economy set off by the
housing bust. In this way, it very much sped up the unfolding of the crisis of
consumption, employment, and profits in the real economy, which, by exacerbating the
fall in the prices of residential real estate and thus of securities backed by residential
mortgages, rendered the crash of the financial sector even more disastrous and less
containable. But, in the end, the cutback in the supply of credit was only part of the
story. The fundamental problem was not so much that corporations and households could not secure the credit that they needed, but that they would not or could not demand it.

Corporations had done hardly any investing or employing and therefore hardly any
borrowing for purposes of expansion throughout the entire business cycle. How could
they be expected to start now, in the face of collapsing demand and plunging profits?
Households had rescued the economy over the previous seven years with their historic
burst of borrowing, consumption, and residential investment. But, confronted by
plummeting home prices and the mountain of debt that they had accumulated, as well as a sinking labor market, how could they be expected to do anything but pull back on
borrowing and spending and, by choice or necessity, to start once again to save?. The
economy faced a self-reinforcing downward spiral of extraordinary ferocity, in which the
signals of the market told private businesses and households alike to pull back as sharply
as possible. Not just the will, but the capacity, of governments to stop the plunge would
be put to the test….

Yet if the sort of manufacturing revival that had taken place between the mid-
1980s and mid 1990s was off the agenda, what then would propel the economy forward?
This, of course, had been the question of the day, since 1995-1997, when the
manufacturing-based US economic recovery had run out of steam following the Reverse
Plaza Accord. Could the ostensible high tech miracle, in which Alan Greenspan had
placed so much faith, finally save the day by promoting a new expansion of capital
investment making for ever high levels of productivity growth and in turn profitability?
The Fed chair unquestionably continued to believe that it could. But things turned out
otherwise. The information-communication-technology producing sector itself–which
had seen its aggregate rate of return plunge by some 23 percentage points and actually go negative between 1997 and 2001–struggled to revive its profitability, and, even by 2006, it had had barely brought it back to half its level of 1997. The sector was, in any case, far
too small to have much effect by itself on the economy-wide rate of profit. As to inciting
a new wave of capital accumulation in the economy beyond the informationcommunication- technology sector, neither the promise of information technology, nor indeed any other factor, could overcome the continuing stagnation of business investment that plagued the economy as a whole for the length of the business cycle. It is true that the performance of that huge sector of the economy that was shielded from the world market and international competition did diverge significantly
from that of manufacturing.

Industries that could take advantage of the high dollar, easy
credit, or the debt-driven consumer spending made possible by the run-up in housing
values once again prospered, as the economy continued to follow the bifurcated path that had its origins in the first half of the 1980s and come into its own during the second half of the1990s. Benefiting from the unprecedented ascent in the demand for homes, the construction industry enjoyed an historic boom that found its origins before 1995. The long standing dependence of retail trade for its own expansion on the growth of domestic manufacturing had been broken by the rocketing currency and rise of East Asia during the second half of the 1990s.

Thanks to the continuing rise of private consumption expenditures, as well as the record breaking increase of imports, especially from China, it continued to do very well in the new millennium. Hotels and restaurants, too, enjoyed ongoing prosperity. These industries were disproportionately responsible for the (all too modest) increase of employment, output, and profits in the real economy throughout the
recovery that began in 2001.

But for the economy to look to them for its growth was plainly problematic, in view of the fact that they were so heavily reliant for their expansion on a housing bubble capable of delivering declining bang for the buck and with a minimal half-life. Like manufacturers, if not to the same extent, firms in the nonmanufacturing sector had experienced a sharp fall in profitability in the last years of the 1990s, and were obliged, in order to restore their rates of return, to hold back on capital accumulation and focus on cutting costs. As a consequence, over the course of the business cycle, the non-manufacturing sector sustained slower growth of GDP, employment, and plant, equipment and software than in any other comparable period since 1945, and this despite the record stimulus. As the housing price run up grew shakier with each passing year, the prospects of this huge sector of the economy for sustaining its expansion grew ever bleaker.

With the economic pie growing so slowly throughout the length of the cycle, nonfinancial businesses, including both manufacturers and non-manufacturers, were thus
compelled to attempt to revive their profit rates to an extraordinary degree by means of
redistributing income from workers to themselves. This they accomplished perhaps as
effectively as at any other time in the history of American capitalism, not simply by
holding wages down, but by imposing a brutal speed up so as to raise measured
productivity growth, if not actual economic efficiency
.

In the non-financial corporate sector as a whole, from the last quarter of 2001, when the cyclical expansion began, through the third quarter of 2006, when earnings peaked, profits rose by 83.5 per cent, compensation by just 20.5 per cent. Put another way, out of the total increase in nonfinancial corporate net value added (GDP minus depreciation) that took place in this interval, profits composed an astounding 40 per cent. As a consequence, non-financial corporations were able to increase their profit share by about one-third in that brief period.


Equity Research from the Zombie Bank
, Plutonomy was described by Michael Moore’s “Capitalism: A Love Story” with reference to the in-famous, and leaked, internal Citigroup memo of October 2005 (revisited in March 2006).http://jdeanicite.typepad.com/files/6674234-citigroup-oct-16-2005-plutonomy-report-part-1.pdf

Excerpt: Citigroup Memo Equity Strategy
October 16, 2005

SUMMARY
➤ The World is dividing into two blocs – the Plutonomy and the rest. The U.S.,
UK, and Canada are the key Plutonomies – economies powered by the wealthy.
Continental Europe (ex-Italy) and Japan are in the egalitarian bloc.

➤ Equity risk premium embedded in “global imbalances” are unwarranted. In
plutonomies the rich absorb a disproportionate chunk of the economy and have
a massive impact on reported aggregate numbers like savings rates, current
account deficits, consumption levels, etc. This imbalance in inequality
expresses itself in the standard scary “ global imbalances”. We worry less.

➤ There is no “average consumer” in a Plutonomy. Consensus analyses focusing
on the “average” consumer are flawed from the start. The Plutonomy Stock
Basket outperformed MSCI AC World by 6.8% per year since 1985. Does
even better if equities beat housing.

,

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December 1, 2009

December 1, 2009 · Leave a Comment

Rabbit Rabbit

From Lee Seigel at The Daily Beast
…”Like Bush, Obama wants to wage an escalating war without worrying about how to pay for it—though no doubt, on Tuesday, we will be subjected to the same ludicrous vows not to increase the deficit. And it is almost uncanny to hear, this time from the liberal Obama, the same bloodcurdling rhetoric about nation-building and creating democratic institutions, and so on, that led us into implacably undemocratic Iraq. Warlord-run Afghanistan is nothing like Iraq. It is more like Somalia. Remember Somalia?

You want to rub your eyes in disbelief. Six years since the distastrous invasion of Iraq, six years of media deconstructing, unmasking, eviscerating, ironizing the Bush regime’s justification of that foolish war, six years of the Daily Show—six years later, and the weasel-ish, evasive, dishonest patter remains the same.
The media still use the word “surge,” which brings to mind heartening images of a positive rise in electric power, when the truth is that what the administration calls a “surge” is just another name for “reinforcements,” which brings to mind less heartening images of a losing battle. Indeed, just as Obama’s people speak of providing “exit ramps” for our deepening entanglement in Afghanistan—as if it were all a rational question of simple engineering; of road-building—the media have totally bought into talking about the war as if it were all a rational question of simple electrical contracting, what with an “insurgency” here, and a “surge” there, and a “counterinsurgency” everywhere. But war is notoriously foggy. It is impervious to sudden illumination, let alone to the impressive timetables of armchair strategists who think they can control the future with a “plan.”

Obama will lead us deeper into yet another pointless conflict, in yet another unremittingly hostile and unassimilable place, but we will be asked to give him time. For the political writer Jacob Weisberg, opining in Slate, one of Obama’s great accomplishments this past year has actually been that “Next week, after a much-disparaged period of review, he will announce a new strategy in Afghanistan.” Winston Churchill, move over….

No, Obama is not Bush. More and more, he seems like a continuation of Bush by other means. If anything, he is even more convinced than his divinely guided predecessor that he holds the truth in his hands. Unlike Bush, however, Obama seems to withdraw into a passive funk when he cannot convince his fellow Americans that his truth is also theirs.

At the same time, he seems unsure of his bona fides as commander in chief. He seems to have chosen West Point as the backdrop for his speech in order to demonstrate his devotion to the military side of patriotism. That might speak to the military, but it won’t be of much reassurance to us civilians. Bush was also insecure about his warrior’s image.

Fasten your seatbelts, everybody. Starting tomorrow night, President George W. Obama and his generals will be building an exit ramp to nowhere. The war will eat up economic relief and recovery, health-care reform, and just about every other initiative Obama was elected to begin and bring to fruition—just as Johnson’s attempt to build the Great Society and wage war in Vietnam at the same time eventually crushed the economy and gave us nearly 25 years of almost continuous Republican rule.” http://www.thedailybeast.com/blogs-and-stories/2009-11-30/bush-lite

So, President Obama will explain tonight why and how we will increase American troops to Afghanistan so we can ‘finish the job’. While we continue to rack up debt to pay for our military forays while here in the US while jobs and the infrastructure continue to collapse. Mr. President, On what planet do you spend most of your time?

From Allison Kilkenny at The Huffington Post,

(Disclaimer: I always find it hilarious when Olbermann crows about the military-industrial complex on a daughter network of GE, one of the largest weapons manufacturers in the world. Also, I think America lost its moral compass way before the start of the Afghanistan war, but aside from those hiccups, good speech.)

‘After going through an extended period of highly ritualized consultations and deliberations, the president has arrived at a decision that never was much in doubt, and that will prove to be a tragic mistake. It was also, for the president, the easier option.

It would have been much more difficult for Mr. Obama to look this troubled nation in the eye and explain why it is in our best interest to begin winding down the permanent state of warfare left to us by the Bush and Cheney regime. It would have taken real courage for the commander in chief to stop feeding our young troops into the relentless meat grinder of Afghanistan, to face up to the terrible toll the war is taking — on the troops themselves and in very insidious ways on the nation as a whole.’

“President Obama has issued orders for the implementation of his Afghanistan strategy to military officials and cabinet members. The plans include sending 55,000 additional US troops to Afghanistan (when counting the 21,000 he dispatched last winter shortly after his inauguration) as part of Obama’s grand scheme to “finish the job.” After this new escalation, more than half of the 100,000 U.S. troops in Afghanistan will have been sent by Obama.

What does “finish” and “the job” mean? Perhaps the president will enlighten us tonight during his speech at West Point, but for now, one has to assume the declaration in part means to build up the Afghanistan government and the military. It’s time for those Afghans to start taking some personal responsibility! ABC News (11/30/09):

While tomorrow night’s speech will have many audiences … a senior administration official tells ABC News one key message will resonate with all of them: ‘The era of the blank check for President Karzai is over… The president will talk about, this not being ‘an open ended commitment’…

As Greenwald points out, this chatter is all very familiar. President Bush said of those freeloading Iraqis:
I have made it clear to the Prime Minister and Iraq’s other leaders that America’s commitment is not open-ended. If the Iraqi government does not follow through on its promises, it will lose the support of the American people — and it will lose the support of the Iraqi people. Now is the time to act.

And that’s not the only similarity. Obama’s Afghanistan goals and promises are virtually identical to Bush’s Iraq plans:

A demand by the Occupier for the Occupied to take personal responsibility for the chaotic aftermath of their society, which was destroyed by the Occupier…http://www.huffingtonpost.com/allison-kilkenny/obamas-afghanistan-strate_b_375142.html

According to Bloomberg News, Goldman Sachs Bankers are now applying for gun permits to buy guns to protect themselves from angry protelariats.
“Dec. 1 (Bloomberg) — “I just wrote my first reference for a gun permit,” said a friend, who told me of swearing to the good character of a Goldman Sachs Group Inc. banker who applied to the local police for a permit to buy a pistol. The banker had told this friend of mine that senior Goldman people have loaded up on firearms and are now equipped to defend themselves if there is a populist uprising against the bank.

I called Goldman Sachs spokesman Lucas van Praag to ask whether it’s true that Goldman partners feel they need handguns to protect themselves from the angry proletariat. He didn’t call me back. The New York Police Department has told me that “as a preliminary matter” it believes some of the bankers I inquired about do have pistol permits. The NYPD also said it will be a while before it can name names. ” http://www.bloomberg.com/apps/news?pid=20601039&sid=ahD2WoDAL9h0

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Monday, November 30, 2009

November 30, 2009 · 1 Comment

What are derivatives? http://topics.nytimes.com/top/reference/timestopics/subjects/d/derivatives/index.html?inline=nyt-classifier “Derivatives are financial instruments that were created to reduce risk, and their use on Wall Street is known as hedging. In recent years, however, as their prevalence and complexity ballooned, they have created new kinds of risk and have played a major role in the meltdown of the world’s financial system….In recent years, a bewildering variety of derivatives have been developed. Two types that have played a central role in the financial crisis are mortgage-backed securities, whose value depends on the value of the mortgages, and which depend on how many of them are being paid off, and credit default swaps, which are in essence a form of insurance policy, and whose value swings with the fiscal health of the transaction or asset it is written to cover.

At the end of 2008, the Bank for International Settlements in Switzerland estimated the face value of all derivative contracts across the world to be $680 trillion, up from $106 trillion in 2002 and a relative pittance just two decades ago. Theoretically intended to limit risk and ward off financial problems, the contracts instead have stoked uncertainty and actually spread risk amid doubts about how companies value them.

Derivatives are hard to value. They are virtually hidden from investors, analysts and regulators, even though they are one of Wall Street’s biggest profit engines. They do not trade openly on public exchanges, and financial services firms disclose few details about them.”

$600 Trillion is now estimated to be the size of the worldwide over the counter derivatives market. The US GDP is estimated to be $14 Trillion.

“Unregulated derivatives are a cash cow hidden from public view and run with less oversight even than actual casinos. The five largest U.S. commercial banks are on track to earn more than $35 billion this year trading unregulated derivatives. According to the Office of the Comptroller of the Currency, the nation’s five largest commercial banks held 95 percent of the $291 trillion derivatives portfolio of the country’s 25 largest bank holding companies at the end of the first quarter. More than 90 percent of those derivatives were in unregulated trading.

Prior to 2000, as a matter of federal law, all derivatives were required to be traded on regulated central exchanges overseen by the Commodity Futures Trading Commission, unless specifically exempted by the Commission. The oversight protected the public from the inherent risk posed by derivatives and from the chaos that could result from unscrupulous or reckless trading.

After 2000, the field was cleared of referees and market players were left to run wild with unregulated derivatives. The change occurred when Wall Street asked for — and received from Congress — an exemption from all regulation of a massive class of derivatives, including a preemption of state gambling laws. Literally, gambling laws had to be overridden. Derivatives dealers acknowledged the gambling inherent in derivatives trading and the business they stood to gain from this exemption.

Deal-making became so opaque that it was impossible to follow. The true values of exotic instruments were impossible to determine.

Imposing full transparency and true competition will require moving derivative trades onto regulated exchanges. That would mean full transparency of trading prices and volumes, reporting requirements for large trader positions, and adequate capital reserves to protect against a default. The government needs full anti-fraud and anti-manipulation authority. Giving regulators this power will ensure a transparent and competitive marketplace and will ensure that violators will go to jail. http://www.huffingtonpost.com/sen-maria-cantwell/wall-street-has-a-gamblin_b_340252.html

Floyd Norris, NY Times, “Opaque markets breed insider profits and abuse of investors. Sunshine can bring competition and lower costs even if regulators do little beyond letting the sunlight shine.

You might think that as Congress considers just how much regulation is needed for the shadow financial system — the one that largely escaped regulation in the past — letting in such light would be an easy and uncontroversial move.

But it is not proving to be easy at all, and is one part of the Obama administration’s financial reform package that is most in jeopardy.

Timothy Geithner, the secretary of the Treasury, will testify before the Senate Agriculture Committee next week in an effort to hold on to important provisions of the proposal that have come under attack by banks fearful of losing one of their most profitable franchises — the selling of customized derivatives to corporate customers. Remarkably, the banks have persuaded customers that keeping the market for those products secret is in their interest.” http://www.nytimes.com/2009/11/27/business/27norris.html

Wall Street’s Naked Swindle – interview with Matt Taibbi with Robert Kennedy, Ring of Fire program.

Matt Taibbi’s article in Rolling Stone magazine,Wall Street’s Naked Swindle
http://www.rollingstone.com/politics/story/30481512/wall_streets_naked_swindle

Taibbi ends with:
There’s no other way to say it: Barack Obama, a once-in-a-generation political talent whose graceful conquest of America’s racial dragons en route to the White House inspired the entire world, has for some reason allowed his presidency to be hijacked by sniveling, low-rent shithead. Instead of reining in Wall Street, Obama has allowed himself to be seduced by it, leaving even his erstwhile campaign adviser, ex-Fed chief Paul Volcker, concerned about a “moral hazard” creeping over the administration.

“The obvious danger is that with the passage of time, risk-taking will be encouraged and efforts at prudential restraint will be resisted,” Volcker told Congress in September, expressing concerns about all the regulatory loopholes in [Barney] Frank’s bill. “Ultimately, the possibility of further crises – even greater crises – will increase.”

What’s troubling is that we don’t know if Obama has changed, or if the influence of Wall Street is simply a fundamental and ineradicable element of our electoral system. What we do know is that Barack Obama pulled a bait-and-switch on us. If it was any other politician, we wouldn’t be surprised. Maybe’s it’s our fault for thinking he was different.


These derivatives have severely impacted many local cities and governments who were encouraged by financial services firms to invest and ’save’ money.
“Lewisburg is one of hundreds of small cities and counties across America reeling from their reliance in recent years on risky municipal bond derivatives that went bad. Municipalities that bought the derivatives were like homeowners with fixed-rate mortgages who refinanced by taking out lower-interest, variable-rate mortgages. But some local officials say they were not told, or did not understand, that interest rates could go much higher if economic conditions worsened — which, of course, they did.

The municipal bond marketplace was so lightly regulated that in Tennessee Morgan Keegan was able to dominate almost every phase of the business. The firm, which is based in Memphis, sold $2 billion worth of municipal bond derivatives to 38 cities and counties since 2001, according to data compiled by the state comptroller’s office. http://www.nytimes.com/2009/04/08/us/08bond.html

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