Weekend Economists Make Their Marx, May 18-20, 2012

[Demeter]

As promised, a brief look at the Marx family...Groucho, Chico, Harpo, Zeppo, Gummo, and Karl....

I'm sure all the Marx were related, as all of us are related in some fashion to every other human---something amazing and appalling to contemplate. I swear, I'd pay good money to have no relationship whatsoever to W....but unless he's from another planet (a distinct possibility), we must claim him as estranged (and strange) kin....AnneD has first-hand knowledge of the vagaries of DNA, and she bears up. So must we all.

Anyway, about Karl:

Karl Heinrich Marx (5 May 1818 – 14 March 1883) was a German philosopher, economist, sociologist, historian, journalist, and revolutionary socialist. His ideas played a significant role in the development of social science and the socialist political movement. He published various books during his lifetime, with the most notable being The Communist Manifesto (1848) and Capital (1867–1894); some of his works were co-written with his friend and fellow German revolutionary socialist, Friedrich Engels.

Born into a wealthy middle class family in Trier, formerly in Prussian Rhineland now called Rhineland-Palatinate, Marx studied at both the University of Bonn and the University of Berlin, where he became interested in the philosophical ideas of the Young Hegelians. In 1836, he became engaged to Jenny von Westphalen, marrying her in 1843. After his studies, he wrote for a radical newspaper in Cologne, and began to work out his theory of dialectical materialism. Moving to Paris in 1843, he began writing for other radical newspapers. He met Engels in Paris, and the two men worked together on a series of books. Exiled to Brussels, he became a leading figure of the Communist League, before moving back to Cologne, where he founded his own newspaper. In 1849 he was exiled again and moved to London together with his wife and children. In London, where the family was reduced to poverty, Marx continued writing and formulating his theories about the nature of society and how he believed it could be improved, and also campaigned for socialism—he became a significant figure in the International Workingmen's Association.

Marx's theories about society, economics and politics—collectively known as Marxism—hold that all societies progress through the dialectic of class struggle: a conflict between an ownership class which controls production and a lower class which produces the labour for such goods. Heavily critical of the current socio-economic form of society, capitalism, he called it the "dictatorship of the bourgeoisie", believing it to be run by the wealthy classes purely for their own benefit, and predicted that, like previous socioeconomic systems, it would inevitably produce internal tensions which would lead to its self-destruction and replacement by a new system, socialism. He argued that under socialism society would be governed by the working class in what he called the "dictatorship of the proletariat", the "workers state" or "workers' democracy". He believed that socialism would, in its turn, eventually be replaced by a stateless, classless society called communism. Along with believing in the inevitability of socialism and communism, Marx actively fought for the former's implementation, arguing that both social theorists and underprivileged people should carry out organised revolutionary action to topple capitalism and bring about socio-economic change.

Revolutionary socialist governments espousing Marxist concepts took power in a variety of countries in the 20th century, leading to the formation of such socialist states as the Soviet Union in 1922 and the People's Republic of China in 1949. Many labor unions and worker's parties worldwide were also influenced by Marxist ideas. Various theoretical variants, such as Leninism, Stalinism, Trotskyism and Maoism, were developed. Marx is typically cited, with Émile Durkheim and Max Weber, as one of the three principal architects of modern social science. Marx has been described as one of the most influential figures in human history...

What did he say? As one who didn't study any of these fields, I will have to look it all up and get back to you over this weekend. And I shall.

But as to what people did with this man's ideas....well, we'll look into that, too.

But when the going gets too heavy, there's always the OTHER side of the family:

Duck Soup is a 1933 Marx Brothers anarchic comedy film written by Bert Kalmar and Harry Ruby, with additional dialogue by Arthur Sheekman and Nat Perrin, and directed by Leo McCarey. First released theatrically by Paramount Pictures on November 17, 1933, it starred what were then billed as the "Four Marx Brothers" (Groucho, Harpo, Chico, and Zeppo) and also featured Margaret Dumont, Raquel Torres, Louis Calhern and Edgar Kennedy. It was the last Marx Brothers film to feature Zeppo, and the last of five Marx Brothers movies released by Paramount.

Compared to the Marx Brothers' previous Paramount films, Duck Soup was a box-office disappointment, although it was not a "flop" as is sometimes reported. The film opened to mixed reviews, although this by itself did not end the group's business with Paramount. Bitter contract disputes, including a threatened walk-out by the Marxes, crippled relationships between them and Paramount just as Duck Soup went into production. After the film fulfilled their five-picture contract with the studio, the Marxes and Paramount agreed to part ways.

While critics of Duck Soup felt it did not quite meet the standards of its predecessors, critical opinion has evolved and the film has since achieved the status of a classic. Duck Soup is now widely considered to be a masterpiece, and the Marx Brothers' finest film.

In 1990 the United States Library of Congress deemed Duck Soup "culturally, historically, or aesthetically significant" and selected it for preservation in the National Film Registry.

Plot

The wealthy Mrs. Teasdale (Margaret Dumont) insists that Rufus T. Firefly (Groucho Marx) be appointed leader of the small, bankrupt country of Freedonia before she will continue to provide much-needed financial backing. Meanwhile, neighboring Sylvania is attempting to take over the country. Sylvanian ambassador Trentino (Louis Calhern) tries to foment a revolution, woos Mrs. Teasdale, and attempts to dig up dirt on Firefly by sending in spies Chicolini (Chico Marx) and Pinky (Harpo Marx).

After failing to collect worthwhile information about Firefly, Chicolini and Pinky infiltrate the government when Chicolini is appointed Secretary of War after Firefly sees him on the street selling peanuts. Meanwhile, Firefly's personal assistant, Bob Roland (Zeppo Marx) suspects Trentino's questionable motives, and counsels Firefly to "get rid of that man at once" by saying "something to make him mad, and he'll strike you, and we'll force him to leave the country." Firefly agrees to the plan, but after a series of personal insults exchanged between Firefly and Trentino, the plan backfires and Firefly slaps Trentino instead. As a result, the two countries reach the brink of war. Adding to the international friction is the fact that Firefly is also wooing Mrs. Teasdale, and likewise hoping to get his hands on her late husband's wealth.

Trentino learns that Freedonia's war plans are in Mrs. Teasdale's possession and orders Chicolini and Pinky to steal them. Chicolini is caught by Firefly and put on trial, during which war is officially declared, and everyone is overcome by war frenzy, breaking into song and dance. The trial put aside, Chicolini and Pinky join Firefly and Bob Roland in anarchic battle, resulting in general mayhem.

The end of the film finds Trentino caught in makeshift stocks, with the Brothers pelting him with fruit. Trentino surrenders, but Firefly tells him to wait until they run out of fruit. Mrs. Teasdale begins singing the Freedonia national anthem in her operatic voice and the Brothers begin hurling fruit at her instead.

So, let's contrast what either side of the Marx family has to say about government, while we catch up on the anarchy of the day.

[Demeter]

1. WE'VE GOT A BANK DOWN!

WELL, IT HAD TO BE THIS WEEKEND, THEY CAN'T AFFORD TO MESS UP MEMORIAL DAY...

Alabama Trust Bank, National Association, Sylacauga, Alabama, was closed today by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with Southern States Bank, Anniston, Alabama, to assume all of the deposits of Alabama Trust Bank, National Association.

The sole branch of Alabama Trust Bank, National Association will reopen during its normal business hours beginning Saturday as a branch of Southern States Bank...As of March 31, 2012, Alabama Trust Bank, National Association had approximately $51.6 million in total assets and $45.1 million in total deposits. In addition to assuming all of the deposits of the failed bank, Southern States Bank agreed to purchase essentially all of the assets...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $8.9 million. Compared to other alternatives, Southern States Bank's acquisition was the least costly resolution for the FDIC's DIF. Alabama Trust Bank, National Association is the 24th FDIC-insured institution to fail in the nation this year, and the first in Alabama. The last FDIC-insured institution closed in the state was Superior Bank, Birmingham, on April 15, 2011.

[Demeter]

2. The Busts Keep Getting Bigger: Why? Paul Krugman and Robin Wells BOOK REVIEW

NO, THEY MEAN ECONOMIC BUSTS....BANKRUPTCIES AND OOPSES....GET YOUR MINDS OUT OF THE GUTTER, NOW!

http://www.nybooks.com/articles/archives/2011/jul/14/busts-keep-getting-bigger-why/?pagination=false

Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present
by Jeff Madrick
Knopf, 464 pp., $30.00

Suppose we describe the following situation: major US financial institutions have badly overreached. They created and sold new financial instruments without understanding the risk. They poured money into dubious loans in pursuit of short-term profits, dismissing clear warnings that the borrowers might not be able to repay those loans. When things went bad, they turned to the government for help, relying on emergency aid and federal guarantees—thereby putting large amounts of taxpayer money at risk—in order to get by. And then, once the crisis was past, they went right back to denouncing big government, and resumed the very practices that created the crisis.

What year are we talking about?

We could, of course, be talking about 2008–2009, when Citigroup, Bank of America, and other institutions teetered on the brink of collapse, and were saved only by huge infusions of taxpayer cash. The bankers have repaid that support by declaring piously that it’s time to stop “banker-bashing,” and complaining that President Obama’s (very) occasional mentions of Wall Street’s role in the crisis are hurting their feelings. But we could also be talking about 1991, when the consequences of vast, loan-financed overbuilding of commercial real estate in the 1980s came home to roost, helping to cause the collapse of the junk-bond market and putting many banks—Citibank, in particular—at risk. Only the fact that bank deposits were federally insured averted a major crisis. Or we could be talking about 1982–1983, when reckless lending to Latin America ended in a severe debt crisis that put major banks such as, well, Citibank at risk, and only huge official lending to Mexico, Brazil, and other debtors held an even deeper crisis at bay. Or we could be talking about the near crisis caused by the bankruptcy of Penn Central in 1970, which put its lead banker, First National City—later renamed Citibank—on the edge; only emergency lending from the Federal Reserve averted disaster.

You get the picture. The great financial crisis of 2008–2009, whose consequences still blight our economy, is sometimes portrayed as a “black swan” or a “100-year flood”—that is, as an extraordinary event that nobody could have predicted. But it was, in fact, just the most recent installment in a recurrent pattern of financial overreach, taxpayer bailout, and subsequent Wall Street ingratitude. And all indications are that the pattern is set to continue.

Jeff Madrick’s Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present is an attempt to chronicle the emergence and persistence of this pattern. It’s not an analytical work, which, as we’ll explain later, sometimes makes the book frustrating reading. Instead, it’s a series of vignettes—and these vignettes are both fascinating and, taken as a group, deeply disturbing. For they suggest not just that we’re seeing a repeating cycle, but that the busts keep getting bigger. And since it seems that nothing was learned from the 2008 crisis, you have to wonder just how bad the next one will be.

I'M SURE KARL WOULD HAVE A BOOK OR TWO TO SAY ABOUT IT....

THIS REVIEW IS PROBABLY MORE INFORMATIVE THAN THE BOOK, IT'S DEFINITELY SHORTER--MUST READ!

[Roland99]

3. Longest weekly down streak of 2012 for Dow, S&P

http://www.marketwatch.com/story/longest-weekly-down-streak-of-2012-for-dow-sp-2012-05-18?dist=afterbell

U.S. stocks declined Friday, with the Dow and S&P falling for a third week, on concern about Europe's debt troubles and prospects for global growth. "The problems in Europe are not getting any better. We still have more downside to go here," said Randy Frederick, managing director of active trading and derivatives at Charles Schwab. The Dow Jones Industrial Average DJIA -0.59% fell 73.11 points, or 0.6%, to 12,369.38. The S&P 500 Index SPX -0.74% fell 9.64 points, or 0.7%, to 1,295.22. The Nasdaq Composite COMP -1.24% shed 34.9 points, or 1.2%, to 2,778.79.

[Roland99]

4. Oil extends losses, slips under $92 a barrel

Oil extends losses, slips under $92 a barrel
Crude futures at lowest since late October; natural gas rallies
http://www.marketwatch.com/story/oil-extends-losses-to-sixth-day-2012-05-18?dist=afterbell

Oil futures continued on a downward path Friday, on a sixth consecutive day of declines as investors remained concerned about global growth and lessened demand for oil amid plentiful U.S. supplies.

Investors also parsed out news that a U.S. pipeline reversal, seen as instrumental in alleviating the glut in oil hub Cushing, Okla., is to start this weekend.

...

Prices ended the week 4.8% lower, their third week on the red. The Friday‘s settlement was also the lowest since Oct. 26.

“We have not had any good news in two weeks; everything continues to erode” with investors looking at the euro zone problems casting a pall over global demand for oil, and concerned about the oversupply in the U.S., said Tom Bentz, managing director at BNP Paribas in New York.

[Demeter]

5. I Just Got Back From the EU... and It's Worse Than You Imagined

http://www.zerohedge.com/contributed/2012-20-18/i-just-got-back-eu-and-its-worse-you-imagined

A DOWN ON THE GROUND LOOK AROUND--MUST READ!

[bread_and_roses]

29. whew. that's pretty grim (n/t)

[Ghost Dog]

31. I doubt this US libertarian-type ever moved beyond central Paris,

and reckon he probably spent most of his time watching english-language TV in his hotel room.

Superficial, very.

[Demeter]

6. Merkel is Backed Into a Corner… Commit Political Suicide or Bail on the Euro?

http://gainspainscapital.com/?p=1738

As I’ve noted in previous articles, politics, not economics, rule Europe. What I mean by this is that most major decisions in Europe are determined by political agendas that ignore economic and financial realities.

This is at the core of the “welfare state” mentality that permeates Europe as a whole. The EU in general is comprised of an aging population that is more concerned about receiving the pensions/ health benefits/ social payouts that were promised to them by the system than anything else.

As a result of this, EU voters, who determine EU elections, don’t take action until what has promised to them comes under threat.

For this reason, EU political leaders will maintain their agendas regardless of whether said agendas go against financial or economic realities (or common sense for that matter) until these agendas begin to have real negative consequences for their political careers...

MORE

[Roland99]

7. Fed May Prefer Another Twist to Adding Assets

http://www.bloomberg.com/news/2012-05-18/fed-may-prefer-another-twist-to-adding-assets.html

Federal Reserve policy makers may find another round of Operation Twist is preferable to an outright asset-purchase program if the economy shows further signs of weakness or risks increase.

Chairman Ben S. Bernanke on April 25 said he was prepared to take further action to aid the economy if necessary, even as he signaled that he didn’t see an immediate need to add stimulus with inflation near the Fed’s goal and unemployment falling. The minutes from the Fed’s April meeting showed several policy makers said additional action could be necessary if the recovery slips.

“If there were scope to do another twist of some type it would be prudent to consider it, especially in the scenario where things are worse and the Fed feels like it needs to move,” said Nathan Sheets, Global Head of International Economics at Citigroup Inc. in New York. Until August, Sheets was the Fed’s top international economist.

Economists such as Sheets and Credit Suisse Securities’ Dana Saporta say the Fed’s $400 billion program to extend the maturity of bonds has been just as effective as earlier programs to expand its balance sheet, known as quantitative easing. That may make another version of the maturity extension, which is dubbed Operation Twist and is set to expire in June, preferable because it doesn’t risk the same political backlash.

[Demeter]

9. OOOH, YEAH!

[Demeter]

8. Will the FHA require a bailout? – 12,000,000 underwater mortgages; 3,000,000 are FHA insured loans

http://www.zerohedge.com/contributed/2012-20-18/will-fha-require-bailout-%E2%80%93-12000000-underwater-mortgages-3000000-are-fha-insu

FHA insured loans have been a big booster for the current market. Historically FHA insured loans made up roughly 8 to 12 percent of all mortgage originations but in 2009 they hit 30 percent. For first time home buyers it was a stunning 50 percent showing that most people can only purchase a home today with a very small down payment. Yet small down payments create instant negative equity positions if the market moves sideways or pops lower (aka our current market). For example, the 3.5 percent standard FHA down payment is wiped away by the 5 to 6 percent selling costs. What is interesting with this is that the FHA insured loan market is fully backed by the government (i.e., you) so any losses will be completely shouldered by the public. The move to increase premiums recently was no fluke. One piece of data that stood out to me was of the number of homes in negative equity, how large the FHA numbers grew.

FHA insured loans 1 out of 4 underwater mortgages

A very troubling point showing a morphing of the current market is the number of underwater mortgages backed by FHA insured loans. As stated before, many of these loans were originated after the bubble popped in 2006 and 1 million originated only in the last two years: GRAPHIC PORN AT LINK

[Demeter]

10. All Work and No Pay: The Great Speedup

http://www.motherjones.com/politics/2011/06/speed-up-american-workers-long-hours

You: doing more with less. Corporate profits: going strong. The dirty secret of the jobless recovery.

Editors' note, 4/17/2012: The big economic news of the past couple of weeks brought a study in contrasts: Hiring has slowed down dramatically, with few people coming off the unemployment rolls, while corporate profits keep climbing. How could this be? Here's how.

On a bright spring day in a wisteria-bedecked courtyard full of earnest, if half-drunk, conference attendees, we were commiserating with a fellow journalist about all the jobs we knew of that were going unfilled, being absorbed or handled "on the side." It was tough for all concerned, but necessary—you know, doing more with less.

"Ah," he said, "the speedup."

His old-school phrase gave form to something we'd been noticing with increasing apprehension—and it extended far beyond journalism. We'd hear from creative professionals in what seemed to be dream jobs who were crumbling under ever-expanding to-do lists; from bus drivers, hospital technicians, construction workers, doctors, and lawyers who shame-facedly whispered that no matter how hard they tried to keep up with the extra hours and extra tasks, they just couldn't hold it together. (And don't even ask about family time.)

Webster's defines speedup as "an employer's demand for accelerated output without increased pay," and it used to be a household word. Bosses would speed up the line to fill a big order, to goose profits, or to punish a restive workforce. Workers recognized it, unions (remember those?) watched for and negotiated over it—and, if necessary, walked out over it....

MORE

[Demeter]

11. How Capitalist is America? (WWKS--WHAT WOULD KARL SAY?)

http://www.project-syndicate.org/commentary/how-capitalist-is-america-

Mark Roe, a professor at Harvard Law School and a renowned expert on securities law and financial markets, focuses on corporate bankruptcy and finance. He is the author of pioneering studies of the impact of politics on corporate organization and corporate governance around the world.

****************************************************************************************

If capitalism’s border is with socialism, we know why the world properly sees the United States as strongly capitalist. State ownership is low, and is viewed as aberrational when it occurs (such as the government takeovers of General Motors and Chrysler in recent years, from which officials are rushing to exit). The government intervenes in the economy less than in most advanced nations, and major social programs like universal health care are not as deeply embedded in the US as elsewhere. But these are not the only dimensions to consider in judging how capitalist the US really is. Consider the extent to which capital – that is, shareholders – rules in large businesses: if a conflict arises between capital’s goals and those of managers, who wins?

Looked at in this way, America’s capitalism becomes more ambiguous. American law gives more authority to managers and corporate directors than to shareholders. If shareholders want to tell directors what to do – say, borrow more money and expand the business, or close off the money-losing factory – well, they just can’t. The law is clear: the corporation’s board of directors, not its shareholders, runs the business. Someone naïve in the ways of US corporations might say that these rules are paper-thin, because shareholders can just elect new directors if the incumbents are recalcitrant. As long as they can elect the directors, one might think, shareholders rule the firm. That would be plausible if American corporate ownership were concentrated and powerful, with major shareholders owning, say, 25% of a company’s stock – a structure common in most other advanced countries, where families, foundations, or financial institutions more often have that kind of authority inside large firms.

But that is neither how US firms are owned, nor how US corporate elections work. Ownership in large American firms is diffuse, with block-holding shareholders scarce, even today. Hedge funds with big blocks of stock are news, not the norm.

Corporate elections for the directors who run American firms are expensive. Incumbent directors typically nominate themselves, and the company pays their election expenses (for soliciting votes from distant and dispersed shareholders, producing voting materials, submitting legal filings, and, when an election is contested, paying for high-priced US litigation). If a shareholder dislikes, say, how GM’s directors are running the company (and, in the 1980’s and 1990’s, they were running it into the ground), she is free to nominate new directors, but she must pay their hefty elections costs, and should expect that no one, particularly not GM, will ever reimburse her. If she owns 100 shares, or 1,000, or even 100,000, challenging the incumbents is just not worthwhile....

[Warpy]

24. I got to the point I was going to punch the next suit

who breezed in and told us we had to do more with less. It was a critical care unit! We were putting our licenses on the line every night we went in, while the hospital blithely said they'd budgeted for lawsuits. We hadn't been able to budget for them on our smaller paychecks, thanks, and would have been much happier with adequate help, adequate supplies, and fewer SUITS.

It was a good thing I had to leave when I did, or I'd still be in jail for killing one of them.

I think when people look back on Reaganism, the one thing that will strike them is the Great Speedup, with people working more hours and producing so much more for wages that remained flat or even declined in purchasing power, insurance care that wasn't worth the ink on the contracts, and pensions that were converted to bogus stock plans for ten cents on the dollar. They're going to wonder why we weren't burning corporate offices down to the steel I-beams and I keep wondering the same myself. I guess we were just too tired after being worked all those extra hours.

It's too late for me and most older Boomers, but I hope the pendulum starts to swing the other way and that safeguards at the constitutional level are instituted to keep future workers from getting the screw job we did.

[Demeter]

12. To the Last Drop

http://www.aljazeera.com/programmes/witness/2011/06/20116227153978324.html

Residents of one Canadian town are engaged in a David and Goliath-style battle over the dirtiest oil project ever known...The small town of Fort Chipewyan in northern Alberta is facing the consequences of being the first to witness the impact of the Tar Sands project, which may be the tipping point for oil development in Canada.

The local community has experienced a spike in cancer cases and dire studies have revealed the true consequences of "dirty oil".

Gripped in a Faustian pact with the American energy consumer, the Canadian government is doing everything it can to protect the dirtiest oil project ever known. In the following account, filmmaker Tom Radford describes witnessing a David and Goliath struggle....

[Demeter]

13. When it comes to the bailouts, the hard Left is dead right

http://blogs.telegraph.co.uk/news/danielhannan/100093630/when-it-comes-to-the-bailouts-the-hard-left-is-dead-right/?utm_source=twitterfeed&utm_medium=twitter

I got a faceful of teargas just now. There was a manif outside the European Parliament, with hundreds of angry young Lefties – one can’t properly call them anarchists since most of them depend on the state for their living – yowling and gibbering like stricken apes. The EU’s response to the Greek crisis was a disgrace, they screamed. The workers of Europe were being sacrificed appease to the speculators. And d’you know what? They’re right.

When the credit crunch hit in 2008, governments around the world turned to the one set of people who, by definition, couldn’t give them disinterested advice, namely bankers. Predictably enough, the bankers solemnly assured the ministers that, unless they received colossal sums, the entire economy would collapse. I’m sure that if governments contracted out their policy on subsidising bakeries to bakers, they would also be told that handouts were vital. The bakers might even half-believe it themselves. But they would be wrong, just as the bankers were wrong. Proof of just how wrong can be found in Iceland, which was in no position to assume private bank liabilities, and which consequently – despite being far worse hit by the collapse than any EU state – is now in healthier shape than many eurozone countries. Don’t take my word for it: even Paul Krugman, guru to statists and Keynesians everywhere, has noticed.

The 2008 bailout round failed spectacularly in its declared effect, namely to ward off recession. Britain, the United States and other Western countries gave unprecedented sums of money to their banks. We know where the money came from but, three years on, we have little notion of where it went, or who has it now. It is beginning to dawn on some of our political leaders that perhaps they were panicked into a bad decision. Yet, unbelievably, they now propose to repeat their mistake.

The eurozone bailouts are, in essence, another transfer of wealth from the poor to the rich. As this blog never tires of pointing out, the bailout money isn’t going to the people of Greece, Ireland or Portugal; it is going to bankers and bondholders who made bad investments. The repayment, however, will indeed come from the people of these unhappy lands. No wonder they are out on the streets....





**************************************************************************************

Daniel Hannan is a writer and journalist, and has been Conservative MEP for South East England since 1999. He speaks French and Spanish and loves Europe, but believes that the European Union is making its constituent nations poorer, less democratic and less free.

[Demeter]

14. America, land of the free to go hungry

http://www.guardian.co.uk/commentisfree/cifamerica/2011/jun/24/food-stamps-welfare-cuts

...Republicans in Congress have now proposed cutting and radically restructuring the Supplemental Nutrition Assistance Programme (Snap) – the programme more commonly known as food stamps – despite record numbers of people presently on the rolls. Without question, these cuts and changes would prove devastating for many of those to whom food stamps represent a last line of defence against hunger.

Food stamps were first instituted in 1939 at the tail end of the Great Depression, but were discontinued in 1943. It was more than two decades later that the programme was established on a permanent basis with the Food Stamp Act of 1964 – as a part of President Lyndon B Johnson's "Great Society". Since then, it has undergone some changes but remains essentially intact.

And it is a good thing it has.

In March 2011, a record 44.5 million Americans received food stamps, which was an 11.1% increase over the year before. Even more illustrative of the profound impact the economic recession has had on poor and working-class Americans is the fact that this represents a 64% increase over the number of recipients in March 2008.

Faced with this evidence of increased need, on 31 May, the House appropriations committee nevertheless approved the fiscal year 2012 agricultural appropriations bill, which includes $71bn for Snap – $2bn less than President Obama's recommendation. On 16 June, the bill was just barely approved with a 217-203 vote in the House...

[Po_d Mainiac]

15. Groacho Quotes

A child of five would understand this. Send someone to fetch a child of five.

Age is not a particularly interesting subject. Anyone can get old. All you have to do is live long enough.

Either this man is dead or my watch has stopped.

From the moment I picked up your book until I laid it down, I was convulsed with laughter. Some day I intend reading it.

Go, and never darken my towels again.

I could dance with you until the cows come home. On second thought I'd rather dance with the cows until you come home.

I find television very educating. Every time somebody turns on the set, I go into the other room and read a book.

I never forget a face, but in your case I'll be glad to make an exception.

I sent the club a wire stating, PLEASE ACCEPT MY RESIGNATION. I DON'T WANT TO BELONG TO ANY CLUB THAT WILL ACCEPT ME AS A MEMBER

I've had a perfectly wonderful evening. But this wasn't it.

It isn't necessary to have relatives in Kansas City in order to be unhappy.

Military intelligence is a contradiction in terms.

Military justice is to justice what military music is to music.

Money frees you from doing things you dislike. Since I dislike doing nearly everything, money is handy.

My mother loved children -- she would have given anything if I had been one.

Outside of a dog, a book is man's best friend. Inside of a dog it's too dark to read.

She got her looks from her father. He's a plastic surgeon.

Those are my principles, and if you don't like them... well, I have others.

Time flies like an arrow. Fruit flies like a banana.

Women should be obscene and not heard.

I don't have a photograph, but you can have my footprints. They're upstairs in my socks.

[Po_d Mainiac]

16. Harpo Quotes

[Demeter]

21. Harpo didn't need words

&feature=related

THE FAMOUS MIRROR SCENE FROM DUCK SOUP

In the "mirror scene," Pinky, dressed as Firefly, pretends to be Firefly's reflection in a missing mirror, matching his every move—including absurd ones that begin out of sight—to near perfection. In one particularly surreal moment, the two men swap positions, and thus the idea of which is a reflection of the other. Eventually, and to their misfortune, Chicolini, also disguised as Firefly, enters the frame and collides with both of them.

This scene has been recreated many times; for instance, in the Bugs Bunny cartoon Hare Tonic, the Mickey Mouse cartoon Lonesome Ghosts, in the 1944 The Three Stooges short subject Idle Roomers, in The Pink Panther, in the 1966 TV series Gilligan's Island ("Gilligan vs. Gilligan&quot , in the 1988 film Big Business, The X-Files ("Dreamland&quot Family Guy ("Road to Germany&quot , and Adventure Time ("Marceline's Closet&quot . Harpo himself did a reprise of this scene, dressed in his usual costume, with Lucille Ball also donning the fright wig and trench coat, in the I Love Lucy episode "Lucy and Harpo Marx".

Although its appearance in Duck Soup is the best known instance, the concept of the mirror scene did not originate in this film. Charlie Chaplin used it in The Floorwalker (1916) and Max Linder included it in his 1921 silent film Seven Years Bad Luck, where a man's servants have accidentally broken a mirror and attempt to hide the fact by imitating his actions in the mirror's frame.

[Demeter]

17. NY Fed Won't Say How Much Money Went to Iraq (FROM LAST YEAR)

http://www.cnbc.com/id/43487056

The New York Fed is refusing to tell investigators how many billions of dollars it shipped to Iraq during the early days of the US invasion there, the special inspector general for Iraq reconstruction told CNBC Tuesday. The Fed's lack of disclosure is making it difficult for the inspector general to follow the paper trail of billions of dollars that went missing in the chaotic rush to finance the Iraq occupation, and to determine how much of that money was stolen.

The New York Fed will not reveal details, the inspector general said, because the money initially came from an account at the Fed that was held on behalf of the people of Iraq and financed by cash from the Oil-for-Food program. Without authorization from the account holder, the Iraqi government itself, the inspector general's office was told it can't receive information about the account.

The problem is that critics of the Iraqi government believe highly placed officials there are among the people who may have made off with the money in the first place. And some think that will make it highly unlikely the Iraqis will sign off on revealing the total dollar amount.

“My frustration is not with the New York Fed, it is with the Iraqis,” said Stuart Bowen Jr., the Special Inspector General for Iraq reconstruction (SIGIR). “They haven’t been sufficiently responsive.”

As for the New York Fed’s position of secrecy about the total amount transferred to Iraq, Bowen said, “We understand it in the sense that it's a foreign account and the account holder, according to their own rules, must provide permission.”

MORE

[Demeter]

18. A ‘United States of Europe’ or Full Exit from the Euro? (Part 1) ( last june) By Marshall Auerback

This is the first in a two-part essay on the origins of the sovereign debt crisis. Here the emphasis is on Germany’s central role in the last century and a half of European history and in the formation of the euro.

Ozymandias, Percy Bysshe Shelley

I met a traveler from an antique land

Who said: Two vast and trunkless legs of stone

Stand in the desert. Near them, on the sand,

Half sunk, a shattered visage lies, whose frown,

And wrinkled lip, and sneer of cold command,

Tell that its sculptor well those passions read

Which yet survive, stamped on these lifeless things,

The hand that mocked them, and the heart that fed;

And on the pedestal these words appear:

“My name is Ozymandias, king of kings:

Look upon my works, ye Mighty, and despair!”

Nothing beside remains. Round the decay

Of that colossal wreck, boundless and bare

The lone and level sands stretch far away.

It is indeed ironic that at the time the euro faces its greatest existential crisis, the European Central Bank has broken ground on its new headquarters in Frankfurt. This is when the core design flaw at the heart of the European monetary union has become manifest to a number of leading market observers, practitioners, economists and journalists. What was once deemed the fantasy of a few extreme euro-skeptics has now become respectable mainstream opinion. A fiscal/monetary half-way house divided cannot stand. That seems to be clear, and the prophetic warnings of the great English Romantic poet, Percy Bysshe Shelley, are more relevant than ever.

So how does the European Economic and Monetary Union (EMU) avoid the fate of the great Ozymandias?

MORE

[Demeter]

38. Paul Krugman on Eurozone: "The Whole Thing Could Fall Apart in a Matter of Months"

http://www.democracynow.org/2012/5/17/paul_krugman_on_eurozone_the_whole

VIDEO AT LINK

[Demeter]

39. Europe is Falling Apart

http://www.nakedcapitalism.com/2012/05/europe-is-falling-apart.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

It feels as if Europe has rolled the clocks back to 2011 as the effects of the ECB’s LTRO have now well and truly warn off and the markets appear to have reconnected with idea that the fundamental issues of the Eurozone have never been addressed. Spain is 55% through its debt schedule for the year but, as the shadow of emergency operations passes over, yields are rising quickly:

Spain sold 372 million euros of a bond maturing January 31, 2015 at an average yield of 4.375 percent, after paying 2.89 percent April 4, with a bid-to-cover ratio of 4.45 after 2.4 in April.

The bond maturing July 30, 2015 sold 1.0 billion euros, had a yield of 4.876 percent compared to 4.037 percent May 3 and was 3 times subscribed following a bid-to-cover ratio of 2.9 percent at the last auction.

The bond maturing April 30, 2016 sold 1.1 billion euros with an average yield of 5.106 percent, higher than 3.374 percent March 15. Demand was lower than previously, with the bond 2.4 times subscribed after 4.1 times at the March auction.

But that wasn’t Spain’s only problem overnight:

The Spanish government moved Thursday to quell fears of massive deposit withdrawals in Bankia SA (BKIA.MC) as its shares were pummeled by an unconfirmed local media report that depositors were withdrawing savings after the government rescued the ailing lender last week.

“It is not true that there’s a deposit flight,” Deputy Finance Minister Fernando Jimenez Latorre told a news conference to discuss the country’s economic outlook. “Depositors are safer now than they were a couple of weeks ago.” He also dismissed the notion that Spanish banking sector could face massive deposit withdrawals.

Bankia’s stock fell as much as 29% early in the session, before recovering some of the ground and ending down 14% on the day.

And then this morning Moody’s took a blowtorch to the rest of the banking system:

Moody’s Investors Service has today downgraded by one to three notches the long-term debt and deposit ratings for 16 Spanish banks and Santander UK PLC, a UK-domiciled subsidiary of Banco Santander (Spain) SA. The rating downgrades primarily reflect the concurrent downgrades of most of these banks’ standalone credit assessments, and in five cases also Moody’s assessment that the Spanish government’s ability to provide support to the banks has reduced.

The debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.

The outlooks on the debt and deposit ratings for ten of the 17 banks downgraded today are now negative. For the remaining seven banks affected by today’s actions, their ratings remain on review for further downgrade, for reasons specific to each bank

It is now quite apparent that the sovereign and banking system in Spain are so intertwined that they are coming to be seen a one thing by the CRAs. The problem is this looks like a downwards spiral for both with no apparent solution to addressing the country’s underlying economic problems. Spain’s broader equities market was down another 1.1% overnight and 35% for the year, while yields continue to rise back towards their November 2011 peaks.

But it isn’t just Spain having trouble with banking deposits, and banking stability more generally. Greece is most certainly struggling from the same, but with the added issue that the ECB is refusing to work directly with a number of Greek banks:

Depending on who you talk to, anything from €700m ($892m; £560m) to €1.2bn was taken out of banks in the days after the election, out of total deposits of around €160bn. That total, in turn, is about a third lower than it was at the end of 2009.

At the same time, the ECB has apparently now said that it won’t directly lend to some Greek banks that it judges to be technically “insolvent”. These are banks that have holes in their balance sheets, because, thanks to the restructuring of Greek sovereign debt, they can’t now expect to get back all of the money that they lent to the government.

That sounds bad, but the banks that have lost access to direct ECB funding can almost certainly still get money from the Greek central bank, which, of course, is ultimately, getting its cash from the ECB (though unlike the more direct form of ECB liquidity support, all the risk implicit in this so-called ELA lending is, formally at least, borne by the Greeks alone)...

MORE

[Demeter]

19. SOLAR ECLIPSE THIS WEEKEND (PORTENT OF GREAT EVENTS?)

http://spaceweather.com/

On Sunday, May 20th, the Moon will pass in front of the Sun, producing an annular solar eclipse visible across the Pacific side of Earth. The path of annularity, where the sun will appear to be a "ring of fire," stretches from China and Japan to the middle of North America:



An animated eclipse map prepared by Larry Koehn of ShadowandSubstance.com shows the best times to look. In the United States, the eclipse begins at 5:30 pm PDT and lasts for two hours. Around 6:30 pm PDT, the afternoon sun will become a luminous ring in places such as Medford, Oregon; Chico, California; Reno, Nevada; St. George, Utah; Albuquerque, New Mexico, and Lubbock, Texas. Outside the narrow center line, the eclipse will be partial. Observers almost everywhere west of the Mississippi will see a crescent-shaped sun as the Moon passes by off-center.

http://shadowandsubstance.com/

Because this is not a total eclipse, some portion of the sun will always be exposed. To prevent eye damage, use eclipse glasses, a safely-filtered telescope, or a solar projector to observe the eclipse. You can make a handy solar projector by criss-crossing your fingers waffle-style. Rays of light beaming through the gaps will have the same shape as the eclipsed sun. Or look on the ground beneath leafy trees for crescent-shaped sunbeams and rings of light.

[Hugin]

41. Time to dust off the ol' Pinhole Projector!!!

Also, time for a little reminder: DO NOT LOOK DIRECTLY AT THE SUN!!!!

It will cause permanent eye damage and blindness. EVEN WITH REGULAR SUNGLASSES!!!

So, if you're like me and you don't have an Arc Welding helmet handy.

Make yourself a Pinhole Projector...

All it takes is two sheets of paper and a pinhole. Simply poke a very small hole on one sheet of the paper. (Yes, you may use stiff paper or a lightweight cardboard.) Turn your back to the Sun and hold the Holed Paper so that the light of the Sun shines through the hole onto the second sheet of paper as a screen. You may have to move the two sheets back and forth a bit to acheive the best focus. I've viewed several Eclipses through this device and not only does it please the cheapskate in me, but, it does a great job of letting you see the event without eye damage.

One more time... DO NOT LOOK DIRECTLY AT THE SUN!!!!

[DemReadingDU]

42. We live in SW Ohio

My 30-something daughter had her dad send her the glass from his welding helmet so she could view the eclipse. It will be interesting to find out how much we will be able to see here in Ohio compared to western U.S. where the eclipse is reported will be very good.

I remember the last eclipse that we saw, appx 18 years ago, during the mid-day. I was working then, but if I recall, the day grew darker as if dusk was approaching. And then the day got brighter again.


5/17/12 Solar Eclipse 2012
Click to see map of U.S. for best states for viewing
http://www.wjla.com/blogs/weather/2012/05/solar-eclipse-2012-15528.html

[Hugin]

54. I remember that eclipse as well...

At the peak, all of the tree leaves were working like pinhole projectors and casting odd crescent shaped shadows on the ground.

Amazing!

If I recall that eclipse happened around noon where I was living. I was at work when it occurred.

[hamerfan]

20. Musical Interlude

Groucho. Lydia The Tattooed Lady:

Love it...

[Fuddnik]

22. All Hail Marx-Lennon

[Po_d Mainiac]

23. Dire Straits..Industrial Disease

&feature=BFa&list=AL94UKMTqg-9B4TdDpnMIG2L1H_oyIo3Z4


Now warning lights are flashing down at Quality Control
Somebody threw a spanner, they threw him in the hole
There's rumors in the loading bay and anger in the town
Somebody blew the whistle and the walls came down

There's a meeting in the boardroom, they're trying to trace the smell
There's a leakin' in the washroom, there's a sneakin' personnel
Somewhere in the corridors someone was heard to sneeze
Goodness me, could this be industrial disease ?'

Caretaker was crucified for sleeping at his post
Refusing to be pacified, it's him they blame the most
Watchdog's got rabies, the foreman got the fleas
Everyone's concerned about industrial disease

There's panic on the switchboard, tongue is in knots
Some come out in sympathy, some come out in spots
Some blame the management, some the employees
Everybody knows it's the industrial disease

Yeah, now the work force is disgusted down tools and walks
Innocence is injured, experience just talks
Everyone seeks damages and everyone agrees
That these are classic symptoms of a monetary squeeze

On ITV and BBC they talk about the curse
Philosophy is useless, theology is worse
History boils over, there's an Economics freeze
Sociologists invent words that mean industrial disease

Doctor Parkinson declared, "I'm not surprised to see you here
You've got smokers cough from smoking
Brewer's droop from drinking beer
I don't know how you came to get the Bette Davis wheeze
But worst of all young man you've got industrial disease"

He wrote me a prescription he said, "You are depressed
I'm glad you came to see me to get this off your chest
Come back and see me later, next patient please
Send in another victim of industrial disease"

And I go down to speaker's corner, I'm a thunderstruck
They got free speech, tourists, police in trucks
Two men say they're Jesus, one of them must be wrong
There's a protest singer, he's singing a protest song, he says

They wanna have a war to keep their factories
They wanna have a war to keep us on our knees
They wanna have a war to stop us buying Japanese
They wanna have a war to stop industrial disease

They're pointing out the enemy to keep you deaf and blind
They wanna sap your energy, incarcerate your mind
Give you Rule Brittania, gassy beer, page three
Two weeks in Espania and Sunday striptease

Meanwhile the first Jesus says, "I'll cure it soon
Abolish Monday mornings and Friday afternoons"
The other one's out on hunger strike, he's dying by degrees
How come Jesus gets industrial disease?

[Demeter]

25. KARL'S Early life: 1818–1835

Marx's birthplace in Trier, Rhineland-Palatinate, which is now a museum devoted to him.

Karl Heinrich Marx was born on 5 May 1818 at 664 Brückergasse in Trier, a town located in the Kingdom of Prussia's Province of the Lower Rhine.

His ancestry was Ashkenazi Jewish, with his paternal line having supplied the rabbis of Trier since 1723, a role that had been taken up by his own grandfather, Meier Halevi Marx; Meier's son and Karl's father would be the first in the line to receive a secular education.

His maternal grandfather was a Dutch rabbi.

Karl's father, Herschel Marx, was middle-class and relatively wealthy: the family owned a number of Moselle vineyards; he converted from Judaism to the Protestant Christian denomination of Lutheranism prior to his son's birth, taking on the German forename of Heinrich over Herschel. In 1815, he began working as an attorney and in 1819 moved his family from a five-room rented apartment into a ten-room property near the Porta Nigra.

A man of the Enlightenment, Heinrich Marx was interested in the ideas of the philosophers Immanuel Kant and Voltaire, and took part in agitation for a constitution and reforms in Prussia, which was then governed by an absolute monarchy.

Karl's mother, born Henrietta Pressburg (20 July 1788-30 November 1863), was a Dutch Jew who, unlike her husband, was only semi-literate. She claimed to suffer from "excessive mother love", devoting much time to her family, and insisting on cleanliness within her home. She was from a prosperous business family. Her family later founded the company Philips Electronics: she was great-aunt to Anton and Gerard Philips, and great-great-aunt to Frits Philips. Her brother, Marx's uncle Benjamin Philips (1830-1900), was a wealthy banker and industrialist, who Karl and Jenny Marx would later often come rely upon for loans, while they were exiled in London.

Heinrich Marx converted to Lutheran Protestantism in 1816 or 1817 in order to continue practicing law after the Prussian edict denying Jews to the bar. Karl was born in 1818 and baptized in 1824, but his mother, Henriette, did not convert until 1825, when Karl was 7. There is no evidence that the Marx family actually embraced Lutheranism, although there is no evidence they were practicing Jews. Marx identified himself as an atheist.

Little is known about Karl Marx's childhood. He was privately educated until 1830, when he entered Trier High School, whose headmaster Hugo Wyttenbach was a friend of his father. Wyttenbach had employed many liberal humanists as teachers; this angered the government so that the police raided the school in 1832, discovering what they labelled seditious literature espousing political liberalism being distributed amongst the students. In 1835, Karl, then aged seventeen, began attending the University of Bonn, where he wished to study philosophy and literature, but his father insisted on law as a more practical field of study. He was able to avoid military service when he turned eighteen because he suffered from a weak chest. Being fond of alcoholic beverages, at Bonn he joined the Trier Tavern Club drinking society (Landsmannschaft der Treveraner) and at one point served as its co-president. Marx was more interested in drinking and socialising than studying law, and because of his poor grades, his father forced him to transfer to the far more serious and academically oriented University of Berlin, where his legal studies became less significant than excursions into philosophy and history.

Hegelianism and early activism: 1836–1843

In 1836, Marx became engaged to Jenny von Westphalen, a beautiful baroness of the Prussian ruling class—"the most desirable young woman in Trier" —who broke off her engagement with a young aristocratic second lieutenant to be with him. Their eventual marriage was controversial for breaking two social taboos of the period: it was a marriage between a woman of a noble background and a man of Jewish origin, as well as being between a member of the upper class (aristocracy) and a member of the middle class, respectively. Such issues were lessened by Marx's friendship with Jenny's father, Baron Ludwig von Westphalen, a liberal thinking aristocrat. Marx dedicated his doctoral thesis to him. The couple married seven years later, on 19 June 1843, at the Pauluskirche in Bad Kreuznach.

Marx became interested in, but critical of, the work of the German philosopher G.W.F Hegel (1770–1831), whose ideas were widely debated amongst European philosophical circles at the time. Marx wrote about falling ill "from intense vexation at having to make an idol of a view I detested." He became involved with a group of radical thinkers known as the Young Hegelians, who gathered around Ludwig Feuerbach and Bruno Bauer. Like Marx, the Young Hegelians were critical of Hegel's metaphysical assumptions, but still adopted his dialectical method in order to criticise established society, politics and religion. Marx befriended Bauer, and in July 1841 the two scandalised their class in Bonn by getting drunk, laughing in church, and galloping through the streets on donkeys. During that period, Marx concentrated on his criticism of Hegel and certain other Young Hegelians.


A contemporary drawing of Karl Marx as a young man.

Marx also wrote for his own enjoyment, writing both non-fiction and fiction. In 1837, he completed a short novel, Scorpion and Felix; a drama, Oulanem and some poems, none of which were published. In 1971, Marx's one act play Oulanem was made available in English by author Robert Payne. According to Payne, the title Oulanem is an anagram for "Manuelo" which is a variant of "Emmanuel" meaning "God is with us". He soon gave up writing fiction for other pursuits, including learning English and Italian.

He was deeply engaged in writing his doctoral thesis, The Difference Between the Democritean and Epicurean Philosophy of Nature, which he finished in 1841. The essay has been described as "a daring and original piece of work in which he set out to show that theology must yield to the superior wisdom of philosophy", and as such was controversial, particularly among the conservative professors at the University of Berlin. Marx decided to submit it instead to the more liberal University of Jena, whose faculty awarded him his PhD based on it.

From considering an academic career, Marx turned to journalism. He moved to the city of Cologne in 1842, where he began writing for the radical newspaper Rheinische Zeitung, where he expressed his increasingly socialist views on politics. He criticised the governments of Europe and their policies, but also liberals and other members of the socialist movement whose ideas he thought were ineffective or outright anti-socialist. The paper eventually attracted the attention of the Prussian government censors, who checked every issue for potentially seditious material before it could be printed. Marx said, "Our newspaper has to be presented to the police to be sniffed at, and if the police nose smells anything un-Christian or un-Prussian, the newspaper is not allowed to appear." After the paper published an article strongly criticising the monarchy in Russia, the Russian Tsar Nicholas I, an ally of the Prussian monarchy, requested that the Rheinische Zeitung be banned. The Prussian government shut down the paper in 1843. Marx wrote for the Young Hegelian journal, the Deutsche-Französische Jahrbücher, in which he criticised the censorship instructions issued by Prussian King Friedrich Wilhelm IV. His article was censored and the newspaper closed down by the authorities shortly after.

In 1843, Marx published On the Jewish Question, in which he distinguished between political and human emancipation. He also examined the role of religious practice in society. That same year he published Contribution to Critique of Hegel's Philosophy of Right, in which he dealt more substantively with religion, describing it as "the opiate of the people". He completed both works shortly before leaving Cologne.

[Demeter]

26. Recovery Begins When Addiction Ends: An Open Letter to Jamie Dimon

http://www.nakedcapitalism.com/2012/05/recovery-begins-when-addiction-ends-an-open-letter-to-jamie-dimon.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

By the Alternative Banking Working Group of Occupy Wall Street

Dear Jamie Dimon:

We, the Alternative Banking Working Group of Occupy Wall Street, are staging an intervention on your behalf. Unlike many in the financial industry and press, we will not be deceived by attempts at misdirection and we are not intimidated by complexity. Your days of gambling with taxpayers’ money and pressuring the regulators to let business go on as usual are over. It’s not good for you, it’s not good for us, and it’s not good for our country.

It’s been a good ride, and we’ve been impressed with how long you have managed to keep it up. The incredible complexity of the financial system helped, of course, just as it helped obscure countless other crimes and frauds.

It’s truly a work of art how you and your enablers have created a system that nobody fully understands. It’s the perfect cover for your continuing addiction to risk, power, and money, and it keeps everyone confused just long enough, well past any statute of limitation for criminal prosecution.

Now your addiction is out of control. Rather than quitting while you and JPMorgan Chase were ahead (if you ever were), you’ve been driven to inhale every last dollar, no matter the risks involved for you and for all of us. What has really worked for you personally, and has allowed you to remain credible for so long, is your intense denial as to the underlying question of what year it is.

You seem to live in a time warp where it is still 2004, the housing market is booming, along with the associated securities market, and you and your friends are printing money with no downside in sight. But it turns out that ’04 model was a bit of a lemon — or, to borrow your words, “poorly conceived, poorly vetted, and poorly executed.”

Here is some sobering news: You are, in fact, living in 2012, leading an enormous, too-big-to-fail bank, which is being continuously bailed out by the Fed’s unlimited loans at 0% interest, on the taxpayers’ dime. In a reasonable world, under these conditions, JPMorgan Chase would be a utility bank focused on the public good, and you would be merely its custodian. You would not be incentivized to take crazy risks to chase yield. Your job would be incredibly boring and your bank only very mildly profitable.

But, sadly, the addiction is still doing the talking. So we’re here to say “no more.” It’s time to put down that fifth drink and walk away from the baccarat table, because no matter how many martinis you have and no matter how much money you lose, you’re still a glorified accountant, not a secret agent. And that’s fine. There’s nothing that JPMorgan Chase, and the world economy for that matter, needs more than a very good accountant.

Perhaps you will protest that you don’t need this intervention. In fact, over the past few days you have repeatedly acknowledged your sloppiness, stupidity, and bad judgment. And though that sounds compelling and humble, as we know you expect it to, you haven’t gone far enough to demonstrate that you understand just how deeply in trouble you are. And don’t claim stupidity – “stupid” isn’t a word associated with Jamie Dimon. You need to admit that you are powerless over your addiction and that your bank has become unmanageable.

Here is what we ask of you:

First, stop gambling with our money and our futures. Stop lobbying for deregulation — we are way past that now. Stop lying to us all by doing silly things like pushing proprietary trading into the treasury office and renaming it, or by pretending that there are no losses when there very clearly are, to the tune of $2,000,000,000 and growing. And, please, stop trying to convince us that nobody at JPMorgan Chase saw this coming. Ina Drew was offering to resign in April but you kept telling the world that nothing serious was amiss, a lie which could get you serious jail time.

Second, admit that your bank is too big to take risks that neither you nor anyone in your bank understands or is able to handle, and that the only thing that will stop you from misbehaving is strong, enforced, and uncompromised regulation.

Third, resign as Director of the Federal Reserve Bank of New York. It is inappropriate, and dangerous to us, for you to oversee the banking system or the economy when you have proven incompetent at overseeing your own bank — particularly since the Federal Reserve is investigating your bank and your behavior.

Because this in an intervention, you’re going to need to get used to a lot of new folks who will challenge the bad decisions that have become habit for you. The SEC should be facilitating the first step by getting you into a full in-patient rehab program, where the Fed, the FDIC, and every other regulator who has an interest in your bank’s good health can help you make a searching and fearless moral inventory of your bank and its choices. Although the “revolving door” connecting Wall Street to the Beltway has turned our regulatory agencies into the Keystone Kops of the 21st century, your crisis should serve as a wake-up call and put an end to their denial as well.

When you reach your twelfth step, you can help the regulators write tougher regulations based on the knowledge you acquired during your efforts to undermine them.

After all, if you can’t manage the risk, then nobody can. And you’ve taken the first step by admitting that you can’t. Now take the other eleven.

Best regards,
The Alternative Banking Working Group

[Demeter]

28. More Evidence of Lax Oversight of JP Morgan Chief Investment Office

http://www.nakedcapitalism.com/2012/05/more-evidence-of-lax-oversight-of-jp-morgan-chief-investment-office.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

As reporters keep digging into the “London Whale” story, the picture that emerges about the caliber of risk controls and management supervision at JP Morgan only look worse and worse.

The latest revelations comes via the Wall Street Journal. First, that there was no treasurer during the period when the CIO entered into the loss-making trades. The idea that a bank of any size, let alone one as big as JP Morgan, would go for months (five in this case) without a treasurer in place is stunning. JP Morgan contends this is not germane, since (allegedly) the CIO did not report to the treasurer. Then pray tell, why was it housed in the treasury at all? And the bank’s efforts to make this all sound normal are undermined by this part of the story:

Joseph Bonocore, who left the treasurer’s post last October before the trading losses ballooned, reviewed weekly the positions being taken by the office and had raised general concerns about risks being taken by the London office that placed many of the questionable trades, according to a person familiar with the situation. Mr. Bonocore knew the investment unit well; he previously was its chief financial officer for roughly 11 years.

So the former treasurer was looking over the positions, even if he was not part of the reporting line (or was he?).

But worse, the risk manager tasked to the oversight of the unit appears underqualified for the job, and that might not be unrelated to the fact that he is the brother-in-law of a JP Morgan executive. The Key extracts:

J.P. Morgan Chase JPM -4.31% & Co. didn’t have a treasurer in place during a five-month period when the bank’s Chief Investment Office placed trades that led to more than $2 billion in losses.

In addition, the executive put in charge of risk management for the Chief Investment Office in February, Irvin Goldman, was a former trader, not a risk manager. He is also the brother-in-law of another top J.P. Morgan executive, Barry Zubrow. JP Morgan argued that many risk professionals come from trading (true) but his background does not look logical for oversight of a business dealing in complex “hedges”:

Mr. Goldman had little risk-management experience before taking the chief risk officer post at the Chief Investment Office. He spent most of his career as a trader, starting at Salomon Brothers in the 1980s. He oversaw interest-rate product sales and trading at Credit Suisse First Boston and in 2003 joined Cantor Fitzgerald, where he was president of its debt capital markets and asset management divisions. Mr. Goldman ultimately left Cantor in October 2007 after his unit piled on trading losses during the previous summer.

MORE

[hamerfan]

27. Musical Interlude

Chico and Harpo. Piano duet. Killer:

&feature=related

[bread_and_roses]

30. great title and intro, Demeter

I'll be in and out - lots on the agenda this weekend - including the Preakness tomorrow

[Demeter]

32. Desperation is the Mother of Invention

And I was exceedingly desperate.

Good luck! I assume you have a bet?

[Demeter]

33. I like to consider myself a wit

and I'm at least half right.

[bread_and_roses]

46. I don't bet

have never had any interest in wagering. On the few occasions I make it to the track I'll put $2 on a name I like for the fun of it. But I really just love to watch the horses.

[DemReadingDU]

74. I'll Have Another!

5/19/12 I'll Have Another Wins Preakness

http://abcnews.go.com/Sports/wireStory/wins-preakness-16386944#.T7hKKlI5v84

[Demeter]

34. Court to Texas: Pay $2 million to man imprisoned for 26 years

THINK IT WILL HAPPEN? IT'S BETTER THAN $2000 FOR A FAULTY FORECLOSURE

http://www.latimes.com/news/nation/nationnow/la-na-nn-texas-court-inmate-20120518,0,5439511.story

The Texas Supreme Court has ordered the Lone Star State to pay more than $2 million to a former inmate who spent 26 years in prison for murder, a ruling that could set a precedent for compensating other prisoners whose convictions are overturned.

Billy Frederick Allen, now in his 60s, was convicted of two 1983 Dallas-area murders. Unlike other inmates freed after DNA evidence proved their innocence, Allen was freed in 2009 after a court found problems with witness testimony and his trial attorneys' representation. Allen sued the state for compensation for wrongful imprisonment. Allen's attorney said the Supreme Court ruling may prove key to developing standards for when the state must compensate former prisoners.

"There are many cases where people are struggling and they don't have DNA, but they now have hope," Allen's attorney, Kris Moore of McKinney, Texas, told The Times. "The implications of this for the Texas justice system are probably larger than people realize."

He said the ruling may make it easier for inmates such as Richard Miles of Dallas -- who served 14 years for crimes he didn't commit, then spent two years awaiting a court ruling that finally came in February -- to be compensated more quickly. But he said it's not clear what bearing Allen's case may have on other ongoing high-profile exoneration battles. In one such case, Kerry Max Cook has written a book and attracted celebrity supporters in his fight to prove his innocence and receive compensation for serving 22 years on Texas' death row for an East Texas murder he says he never committed.

Texas' compensation law is the most generous in the U.S., according to officials at the New York-based Innocence Project. Freed inmates declared innocent by a judge, prosecutor or a governor's pardon can collect $80,000 for every year of imprisonment, along with an annuity and medical and education benefits.

MORE

[Demeter]

35. Justice Dept. defends public’s constitutional ‘right to record’ cops

http://arstechnica.com/tech-policy/2012/05/justice-dept-defends-publics-constitutional-right-to-record-cops/

MUST READ! OBAMA AND HOLDER ACTUALLY DO SOMETHING!

[Demeter]

36. U.S. orders tariffs on Chinese solar panels

http://www.latimes.com/business/la-fi-china-solar-dumping-20120518,0,7419466.story

Commerce Department announces the duties after a finding that Chinese solar panel makers 'dumped' their goods. If approved, the tariffs are expected to have a significant effect on the industry...In just a few years, China has grabbed about half the U.S. market for solar panels...The Obama administration ordered tariffs of 31% and higher on solar panels imported from China, escalating a simmering trade dispute with China over a case that has sharply divided American interests in the growing clean-energy industry.

The Commerce Department announced the stiff duties Thursday after making a preliminary finding that Chinese solar panel manufacturers "dumped" their goods — that is, sold them at below fair-market value. The widely anticipated ruling, if affirmed by U.S. trade officials this fall, is expected to have significant implications for both the global production of solar cells, now largely in China, and the growth of the solar energy industry in the U.S., which employs about 100,000 people in manufacturing, installation and services.

More than 60 Chinese firms, includingSuntech Power Holdings Co., the world's largest solar panel maker, and Trina Solar Ltd., face a 31% duty on their exports to the U.S., retroactive to shipments made in February. All other Chinese exporters of solar cells will be hit with a tariff of 250%. In just a few years, China has grabbed about half the U.S. market for solar panels. U.S. imports of Chinese solar cells — the primary component in solar panels — were valued at about $3.1 billion last year, up from $640 million in 2009, according to the Commerce Department.

The tariffs are more than what many industry executives and analysts were expecting. They are on top of the Commerce Department's duties of 2.9% to 4.7% imposed in March on Chinese solar panel imports for illegal subsidies. The anti-subsidy tariffs were seen as modest and unlikely to have much of an effect on the U.S. solar energy market. Chinese companies and government officials largely took that decision in stride.

[Demeter]

37. Australasia has hottest 60 years in a millennium, scientists find

http://www.guardian.co.uk/science/2012/may/17/australasia-hottest-60-years-study

The last 60 years have been the hottest in Australasia for a millennium and cannot be explained by natural causes, according to a new report by scientists that supports the case for a reduction in manmade carbon emissions.

In the first major study of its kind in the region, scientists at the University of Melbourne used natural data from 27 climate indicators, including tree rings, corals and ice cores to map temperature trends over the past 1,000 years.

"Our study revealed that recent warming in a 1,000-year context is highly unusual and cannot be explained by natural factors alone, suggesting a strong influence of human-caused climate change in the Australasian region," said the study's lead researcher, Dr Joelle Gergis.

The climate reconstruction was done in 3,000 different ways and concluded with 95% accuracy that no other period in the past 1,000 years match or exceeded post-1950 warming in Australia...

[Demeter]

40. I'D RATHER GO TO A COLD AND LONELY BED

than post another word about JPMorgan....goodnight, and sweet dreams, all!

[xchrom]

43. hola!

[westerebus]

47. One of my Favs.

Saw them at Wolf Trap in 2000. Thanks X.

[xchrom]

48. oooh -- i'm jealous -- i adore them.

i hope they were really good?

[westerebus]

49. Ever been to Wolf Trap?

If not, put it on your bucket list. We were eye level three rows back from the stage. They were excellent!

[xchrom]

51. it's been on my bucket list for a long time -- and now that i'm in NC -- hopefully i'll get there.

i'm so glad they were good -- i love their recordings -- and imagined the live experience would be excellent.

[westerebus]

50. Find the group Novalima.

Karimba is a great cd, you will rumba through the kitchen. A different sound, but you'd like it.

[xchrom]

52. ...

[westerebus]

53. See ya later. Thanks!! n/t

[Roland99]

65. Haven't heard Gypsy Kings in a few years...

I'm a little jealous, too!

[xchrom]

44. Fears of Bank Runs Mount in Southern Europe

http://www.spiegel.de/international/europe/fears-of-bank-runs-increase-in-europe-a-833879.html

The final wake-up call came from Moody's. On Thursday evening, the US rating agency downgraded 16 Spanish banks in one fell swoop, some of them by three notches. On Monday, the agency had already downgraded 26 Italian banks -- including major institutions such as UniCredit and Intesa Sanpaolo. The outlook for all the institutions involved is negative, Moody's said.

These are drastic steps, but they are hardly excessive. The European sovereign debt crisis long ago also became a banking crisis. The fate of the affected countries can not be separated from that of their financial institutions: If a state goes bankrupt, its banks too will struggle to survive. On the other hand, the examples of Ireland and Spain show that a shaky banking system can quickly overwhelm national budgets.
Moody's justified its downgrades of Spanish banks with the argument that the ability of the government to support individual banks has worsened. On Friday, the Spanish central bank was also forced to admit that the proportion of bad loans on the books of Spanish banks has risen to an 18-year high. According to the central bank, the share of bad loans rose in March to 8.36 percent, compared to 8.15 percent in the previous month.

Clearing Out Accounts

Reports began trickling in earlier this week that savers in Greece were withdrawing hundreds of millions of euros from their bank accounts -- the German news agency DPA reported that almost €900 million was withdrawn just on Monday alone. Since then Europe has been seized by the fear of a worst-case scenario in Greek's banking system: a so-called bank run, as customers who have lost confidence in their banks rush to take out their savings.

[xchrom]

45. Beijing Sets its Sights on Central Europe

http://www.spiegel.de/international/europe/with-10-billion-dollar-credit-line-china-deepens-presence-in-central-europe-a-833811.html


With much of Western Europe distracted by the euro crisis, China has begun in recent months to intensify its role as an investor in Central and Eastern Europe -- both through loans and the acquisitions of firms. Beijing has estimated foreign currency reserves of $3.2 trillion (€2.52 trillion), and some say the investment spree could be the start of something bigger.

Last month, at the April 26 China-Central Europe-Poland Economic Forum in Warsaw, Chinese Prime Minister Wen Jiabao announced the creation of a $10 billion credit line to support Chinese investments in Central European infrastructure, new technology, and renewable energy. Wen's goal is to reach a volume of $100 billion in trade with Central Europe by 2015, an astounding turnaround for a country that was regarded with deep suspicion by the post-communist countries of Central Europe only a decade ago. And for China, the political benefits of offering such a credit line may be just as important as the economic ones. Indeed, the leaders of 16 countries in the region all traveled to the Polish capital to meet with Wen.
"There is a big economic benefit to China for making a deal like this, because it wants to move out of lower-cost manufacturing eventually, and this is a way of getting a foothold in European markets," said Jonas Parello-Plesner, a senior policy fellow at the European Council on Foreign Relations.

The credit line is only one of a number of major China-related developments in Central and Eastern Europe in recent months. Shortly after Wen's trip, Chinese Deputy Prime Minister Li Kequiang also traveled to the region, announcing a string of deals, including a $1 billion credit line to Hungary for the construction of a Chinese-built rail line to the Budapest airport. Chinese shipping giant Cosco has also said it is considering investing $1 billion to develop the port of Rijeka, Croatia.

[xchrom]

55. Rising level of bad loans adds to Spain's economic crisis

http://www.irishtimes.com/newspaper/finance/2012/0519/1224316358056.html

SPANISH BANKS’ bad loans rose in March to their highest in 18 years, underscoring the problems facing the government as it drafts in independent auditors in an attempt to reassure investors it can clean up the sector.

The Bank of Spain said bad loans rose to 8.37 per cent of banks’ outstanding loans, the highest since August 1994 and up from 8.3 per cent in February, which was also revised higher.

The data was released before Spain names auditors on Monday to assess how bad the losses are likely to get, and how much cash banks will need to rebuild their balance sheets.

The audit will start with a one-month stress test followed by a deeper analysis of assets in the financial sector, deputy prime minister Soraya Saenz de Santamaria said.

[Fuddnik]

56. Musical interlude. Watch out where the huskies go!

Five days without a cigarette, and bloody mary's for breakfast, I'm in this state of mind. SICK!!!!!!

&feature=related

[Demeter]

57. Be Brave, Fuddnik!

We are all rooting for you to kick the evil weed.

[westerebus]

58. You're doing good.

Once you get past the first three days, provided there are no body parts located nearby, assuming the psychotic episodes have passed, you're good.

You can tell when your taste buds kick back in, then your sense of smell returns and your blood pressure levels out.

[Tansy_Gold]

113. One day at a time.

And you got us backin' you up.

[Demeter]

59. There's education, and then, there's smarts

[Demeter]

60. Caretaker government takes oath of office in Greece

http://online.wsj.com/article/SB10001424052702303360504577409703576389634.html?mod=dist_smartbrief

Greece installed a government to act as caretaker until an election in mid-June. The Cabinet consists of technocrats, including George Zannias, who has been the Finance Ministry's chief economist throughout the crisis and is now finance minister. Concerns about Greece exiting the eurozone persist. If election results signal a rejection of austerity, the country could be headed for an exit. Citizens also could launch a bank run. Officials have already noted a significant withdrawal of funds from Greek banks.

http://www.bloomberg.com/news/2012-05-17/greece-s-rating-downgraded-one-level-to-ccc-from-b-by-fitch.html

Fitch Ratings further cut credit ratings for Greece, citing an increased risk that the nation will exit the eurozone. "In the event that the new general elections scheduled for 17 June fail to produce a government with a mandate to continue with the EU-[International Monetary Fund] programme of fiscal austerity and structural reform, an exit of Greece from [the Economic and Monetary Union] would be probable," according to Fitch.

[Demeter]

61. Fitch says top 29 banks may need $556 billion

http://uk.reuters.com/article/2012/05/17/uk-banks-regulation-idUKBRE84G0KU20120517

The world's top 29 banks may need a total $556 billion (351 billion pounds) to meet tougher new capital rules, cutting returns by a fifth and forcing them to curb investor payouts and raise customer charges, Fitch Ratings said on Thursday.

The credit rating agency studied 29 banks named by world leaders (G20) as being globally systemically important financial institutions (G-SIFI) and required to hold core capital buffers of up to 9.5 percent by the start of 2019.

The list includes Barclays (BARC.L), Deutsche Bank (DBKGn.DE), Goldman Sachs (GS.N), HSBC (HSBA.L), JPMorgan Chase (JPM.N), and UBS (UBSN.VX).

Fitch said the banks represented $47 trillion in assets and may need to raise $566 billion common equity to hit core ratios of around 10 percent to satisfy new global Basel III requirements being phased in over several years from January....

[Demeter]

62. Senate votes put Fed board at full strength (IT ONLY TOOK THEM 6 YEARS)

http://www.reuters.com/article/2012/05/17/us-usa-fed-nominees-idUSBRE84G0ZC20120517

The Senate on Thursday confirmed two nominees to the Federal Reserve, bringing its short-handed board up to full strength for the first time in six years as it wrestles with a tepid economic recovery and a revamp of financial rules.

The Senate voted 70-24 to confirm Harvard economist Jeremy Stein and 74-21 to confirm investment banker Jerome Powell... Stein, who holds a doctorate in economics from the Massachusetts Institute of Technology, is a Harvard economist who served briefly as a senior adviser to Treasury Secretary Timothy Geithner. He also was a staff member for President Barack Obama's National Economic Council. Stein specializes in stock price behavior, corporate investment and financing decisions. Powell is a visiting scholar at the Bipartisan Policy Center in Washington. He is a lawyer who also brings Wall Street experience to the board. He worked at Bankers Trust, the Carlyle Group and Dillon Read after serving as a Treasury undersecretary in the administration of former U.S. President George H. W. Bush...

The two nominees were approved over the opposition of some conservative Republicans who worried the pair would rubber stamp Chairman Ben Bernanke's policies at the central bank...Vitter, who led the opposition to the nominees, argued that the two could strengthen Bernanke's hand in issuing new regulations under the Dodd-Frank financial reform law that many Republicans oppose. "These two new members change the map," he said. "I think that will significantly push these regulations to the left."

WOULD THAT IT WERE SO...

[Demeter]

63. Venezuelan economy grows briskly as election nears

http://www.reuters.com/article/2012/05/17/venezuela-economy-idUSL1E8GH6CB20120517

Hefty state spending helped Venezuela's economy grow a brisker-than-expected 5.6 percent during the first quarter, boosting President Hugo Chavez's campaign for re-election in October.

Economists had expected robust growth in the first quarter as the socialist government pumped money into infrastructure and welfare programs in the hopes of bolstering voter support in the South American OPEC member.

The quarterly result - the highest in nearly four years - was better than most analysts expected and topped the fourth-quarter's 4.9 percent expansion, partly reflecting robust construction activity, Finance Minister Jorge Giordani said.

But strong domestic demand and growing public spending risks fueling stubborn double-digit inflation, which hit 27.6 percent last year. Giordani, however, said prices were showing signs of cooling...

[Demeter]

64. CFTC Considers Loosening Dodd-Frank Speculation Limits

http://www.bloomberg.com/news/2012-05-17/cftc-said-to-consider-change-to-dodd-frank-speculation-limits.html

The U.S. Commodity Futures Trading Commission may propose easing Dodd-Frank Act regulations limiting speculation in oil, natural gas, wheat and other commodities, according to four people briefed on the matter.

The CFTC’s five commissioners are considering a private vote to change how companies aggregate their trading positions when they have ownership stakes in other firms, according to the people, who spoke on condition of anonymity. The agency may propose raising to 50 percent from 10 percent the threshold for when a company is considered to have an ownership stake and must add the trading positions, the people said.

Steven Adamske, a CFTC spokesman, declined to comment.

The change would affect rules on so-called position limits that were completed by the CFTC in October. The limits, which cap the number of contracts a trader can have, prompted a lawsuit by the International Swaps and Derivatives Association Inc. and the Securities Industry and Financial Markets Association seeking to overturn the regulation.

The agency is considering revising its rules in response to requests from lobbying groups representing agriculture and energy firms including Cargill Inc., ConocoPhillips (COP) and Archers- Daniels-Midland Co. The proposal may still change and the meeting could also be held in public.

[Demeter]

66. G8 splits over stimulus versus austerity

G8 leaders on Saturday vowed to “strengthen and reinvigorate” their economies while pointedly “recognising” that each country might pursue different policy paths in a statement that reflected the enduring split between proponents of greater stimulus or austerity.

Read more >>
http://link.ft.com/r/3JFELL/62P0DP/4VXHZ/5VIADC/5VUQTK/OS/t?a1=2012&a2=5&a3=19

[Demeter]

67. Dimon in the rough By Sean McMahon

http://smartblogs.com/finance/2012/05/15/dimon-in-the-rough/

So Jamie Dimon is human after all. His firm has finally missed the fairway and found itself in the rough. His shareholders, employees and probably the White House are desperately hoping he can reach into his bag, grab his favorite club and pull off a Bubba Watson or a Phil Mickelson. Meanwhile, some rivals on Wall Street and antagonists in Washington are likely hoping he pulls a Jean van de Velde.

With Dimon facing some serious challenges in the coming days and weeks, a wise caddy would tell him to focus on these five key things.

1. Keep your focus today.
   
   
2. $3 billion is still a lot of money to some people.
   
   
3. Optics matter.
   
   
4. Don’t worry about the SEC. (NOBODY ELSE DOES, WHY SHOULD YOU?)
   
   
5. They still love you in the clubhouse. (AFTER ALL, OBAMA IS NOT LIKELY TO MOVE HIS MONEY...)
   
   ELABORATIONS ON POINTS AT LINK

[Demeter]

68. FBI probes JPMorgan, shareholders back Dimon

http://www.reuters.com/article/2012/05/16/us-jpmorgan-departures-idUSBRE84C0EP20120516

The FBI has opened an inquiry into the multibillion-dollar trading losses at JPMorgan Chase, stepping up pressure on the bank after key U.S. agencies said they were looking into high-risk trades that first drew regulators' attention last month.

The news did little to spook investors, who sent the stock higher Tuesday, or shareholders, who backed embattled Chief Executive Jamie Dimon at the bank's annual shareholders meeting, with a vote rejecting a proposal to split the jobs of CEO and chairman.

Though investors mostly gave Dimon a pass, pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the trades. Dimon said JPMorgan would pursue more disciplinary action against those responsible.

"We will do the right thing. That may well include clawbacks," he told reporters after the annual meeting.

AND HERE I THOUGHT THE FBI INVESTIGATED CRIMES....NOT STUPIDITY!

[Demeter]

70. In Wake of JP Morgan Trading Debacle, House Republicans Slow Efforts to Repeal Financial Reform

http://www.nationofchange.org/wake-jp-morgan-trading-debacle-house-republicans-slow-efforts-repeal-financial-reform-1337437762

JP Morgan’s $2 billion trading loss has renewed interest in the Volcker Rule, part of the Dodd-Frank financial reform law meant to prevent banks from engaging in risky trading with federally backed dollars. Wall Street banks have been lobbying to water down the rule. In fact, JP Morgan CEO Jamie Dimon helped open up a loophole that would allow the sort of trading that cost the bank billions.

House Republicans, of course, have been following Financial Service Committee Chairman Spencer Bachus’ (R-AL) directive to “serve the banks” by helping them in their efforts to water down and dismantle Dodd-Frank. In addition to preventing financial regulators from having the budgets necessary to do their jobs, the House GOP has been chipping away at Dodd-Frank, voting to repeal several important provisions.

But in the wake of JP Morgan’s mess, that effort has stopped, at least temporarily:

House Agriculture Committee Chairman Frank Lucas (R-Okla.) announced Tuesday that his panel would be postponing a Thursday markup of the bills, which would have repealed or altered provisions of the financial overhaul.

Lucas directly cited the high-profile losses of the nation’s largest bank as the reason for the delay, saying he wanted to make sure the bills would not inadvertently encourage Wall Street to take on risk haphazardly.

“As always, Washington has a tendency to overreact,” he said in a statement. “While the news of JP Morgan’s trading loss is unfortunate, the bipartisan legislation the Committee was scheduled to consider is unrelated to the cause of the trading loss. However, this Committee will take the time to gather all relevant information before we proceed to ensure there are no unintended consequences of the legislation that would encourage recklessness in our financial institutions.“

House Republicans have aimed to water down the derivatives section of Dodd-Frank, which would bring transparency to the opaque market that helped blow up the economy in 2008. However, JP Morgan’s woes have evidently made them think twice. Today, President Obama explained how JP Morgan’s trading loss shows “exactly why Wall Street reform’s so important.”

[Demeter]

73. The Truth About JP Morgan’s $2 Billion Loss

http://www.washingtonsblog.com/2012/05/the-truth-about-jp-morgans-2-billion-loss.html

Before we can understand what’s really going on with JP Morgan’s loss (which will probably end up being a lot more than $2 billion), we need a little background.

JP Morgan:

Is the world’s largest publicly-traded company

Is the largest bank in the U.S. … the biggest of the too big to fail banks which are killing the American economy

Is the largest derivatives dealer in the world (and see this), and derivatives are inherently destabilizing for the economy

Essentially wrote the faux “reform” legislation for derivatives, which did nothing to decrease risk, and killed any chance of real reform

Is the creator of credit default swaps – which caused the 2008 financial crisis, and is the asset class which blew up and caused the loss

Has had large potential exposures to credit default swap losses for years

Has replaced the chief investment officer who made the risky bets with a trader who worked at Long Term Capital Management … which committed suicide by making risky bets

Went completely insolvent in the 1980s

… and again in 2007 (and was saved both times by the government at taxpayer expense)

Heads – with Goldman Sachs – the Treasury Borrowing Advisory Committee, which helps set government financial policy

Has a reputation of being the most risk-averse of the big Wall Street players

Was kept alive by a huge government bailout … but used the money to invest in India and other projects which won’t really help Americans

Has made a killing by kicking companies (and see this) and governments (and here) when they are down, engaging in various types of fraud (update), allegedly manipulating the silver market, and profiting on misery by acting as the largest processor of food stamps in America

In addition, JPM’s CEO Jamie Dimon:

Is a Class A Director of the Federal Reserve Bank of New York, which is the chief bank regulator for Wall Street (including JPM). Indeed, Dimon served on the board of the Federal Reserve Bank of New York at the same time that his bank received emergency loans from the Fed and was used by the Fed as a clearing bank for the Fed’s emergency lending programs. In 2008, the Fed provided JP Morgan Chase with $29 billion in financing to acquire Bear Stearns. At the time, Dimon persuaded the Fed to provide JP Morgan Chase with an 18-month exemption from risk-based leverage and capital requirements. He also convinced the Fed to take risky mortgage-related assets off of Bear Stearns balance sheet before JP Morgan Chase acquired this troubled investment bank

Has a reputation of being the “golden boy” and smartest guy on Wall Street

Has been the chief spokesman and advocate for deregulation of banks, and has lectured, scolded and cajoled everyone who has questioned his banking practices

Jokes about a new financial crisis happening “every five to seven years”

What Does It Mean?

Pundits and consumers alike are reacting to JP Morgan’s loss like a startled herd of sheep. They somehow believed that the “best of the breed” bank and CEO – the biggest boy on the block – was immune from losses. Especially since JPM has been so favored by the Feds, and the government likes Dimon so much that he was being groomed for Secretary of Treasury. And the fact that the head cheerleader for letting banks police themselves has egg on his face is making a lot of people nervous. And that the biggest of the too big to fails could conceivably fail.

The government says it is launching a criminal probe into JPM’s trades.

Ratings services have downgraded JPM’s credit, and many commentators have noted that other banks may be downgraded as well.


Even CNBC is now calling for Glass-Steagall to be put back in place.

MORE

[Demeter]

75. Deja Vu: JP Morgan Credit Default Swaps Put Markets on Brink

http://silvervigilante.com/deja-vu-j-p-morgan-credit-default-swaps-put-markets-on-brink/

The element of Occupy Wall Street that supports the establishment left-wing might find themselves today dumbfounded to explain how their candidate of choice, Barack Obama, has allowed JPMorgan to accrue derivatives positions which have proven hazardous to the global economy. But, nonetheless, this reality has come to pass.

Not much has changed since 2008, and this is no surprise to anybody paying attention. It has hitherto been reported, in fact, that the derivatives market – post 2008 – has only grown as the socialized-loss and privatized-profit model has been reaffirmed by a psychologically tortured and confused population.

The mainstream portrayals of the JPMorgan Chase & Co $2 billion dollar losses have touched on a number of common themes, such as too-big-to-fail and stricter regulations by the state over the economy, but this is merely propaganda because the truth plainly shows that the state and keystone transnational corporations have merged to become one. At the top, basically, the government and demise-of-the-state psychopaths are all one: the separation by brand-logos from one international corporation to the next is an illusion.

And so, it is wrongheaded to see these losses as solely JPMorgan’s, as the severity of the losses have implications for the innumerable institutions who have been tied up with investments and hedging accounts at the investment bank. JPMorgan has sent shockwaves throughout the global economic system, and there surely will be repercussions as panicky investors follows the leaders into selloff oblivion...

[Demeter]

69. The Commencement Address That Won’t Be Given By Robert Reich

http://www.nationofchange.org/commencement-address-won-t-be-given-1337443678

Members of the Class of 2012,

As a former secretary of labor and current professor, I feel I owe it to you to tell you the truth about the pieces of parchment you’re picking up today.

You’re f*cked. Well, not exactly. But you won’t have it easy.

First, you’re going to have a hell of a hard time finding a job. The job market you’re heading into is still bad. Fewer than half of the graduates from last year’s class have as yet found full-time jobs. Most are still looking. That’s been the pattern over the last three graduating classes: It’s been taking them more than a year to land the first job. And those who still haven’t found a job will be competing with you, making your job search even harder. Contrast this with the class of 2008, whose members were lucky enough to get out of here and into the job market before the Great Recession really hit. Almost three-quarters of them found jobs within the year.

You’re still better off than your friends who didn’t graduate. Overall, the unemployment rate among young people (21 to 24 years old) with four-year college degrees is now 6.4 percent. With just a high school degree, the rate is double that.

But even when you get a job, it’s likely to pay peanuts.

Last year’s young college graduates lucky enough to land jobs had an average hourly wage of only $16.81, according to a new study by the Economic Policy Institute. That’s about $35,000 a year – lower than the yearly earnings of young college graduates in 2007, before the Great Recession. The typical wage of young college graduates dropped 4.6 percent between 2007 and 2011, adjusted for inflation. Presumably this means that when we come out of the gravitational pull of the recession your wages will improve. But there’s a longer-term trend that should concern you....

MORE JOYOUS NEWS AT LINK...

[Demeter]

71. Greek leftist leader Alexis Tsipras: 'It's a war between people and capitalism'

http://www.guardian.co.uk/world/2012/may/18/greek-leftist-leader-alexis-tsipras

Greece's eurozone fate may now be in the hands of the 37-year-old political firebrand and his Syriza party

"I don't believe in heroes or saviours," says Alexis Tsipras, "but I do believe in fighting for rights … no one has the right to reduce a proud people to such a state of wretchedness and indignity."

The man who holds the fate of the euro in his hands – as the leader of the Greek party willing to tear up the country's €130bn (£100bn) bailout agreement – says Greece is on the frontline of a war that is engulfing Europe.

A long bombardment of "neo-liberal shock" – draconian tax rises and remorseless spending cuts – has left immense collateral damage. "We have never been in such a bad place," he says, sleeves rolled up, staring hard into the middle distance, from behind the desk that he shares in his small parliamentary office. "After two and a half years of catastrophe, Greeks are on their knees. The social state has collapsed, one in two youngsters is out of work, there are people leaving en masse, the climate psychologically is one of pessimism, depression, mass suicides."

But while exhausted and battle weary, the nation at the forefront of Europe's escalating debt crisis and teetering on the edge of bankruptcy is also hardened. And, increasingly, they are looking towards Tsipras to lead their fight...

MORE

[Demeter]

72. The Plan to Kick Greece Out of the Eurozone By Mike Whitney

http://www.informationclearinghouse.info/article31358.htm

“Men and women of Greece, it is with a sense of dignity and patriotic duty, that we made the decision not to betray your hopes and aspirations…The pro-bailout parties did not simply want us to support a government that would impose more austerity, they wanted us to agree to measures that would increase poverty and desperation. We didn’t do them the favor.”

– Alexis Tsipras, Chairman of the Radical Left Coalition (Syriza)

....The endgame for Greece is now in sight. Attempts to form a unity government have failed and public opposition to austerity is growing. The uncertain political situation has triggered a bank run which drained nearly $900 million in deposits from Greek banks on Monday alone. Panicky Greeks are moving their money out of the country fearing that a default will collapse the banking system or that an unexpected return to the the Drachma will slash their life savings in half. Withdrawals are pushing yields on German bund to historic lows, signalling rising anxiety. Absent the European Central Bank’s Emergency Liquidity Assistance (ELA) program, the Greek banking system would have imploded already taking down creditors in Germany, England and France. But the ECB’s aid will not last forever nor is it unconditional. If the anti-austerity parties take power in Athens, the bailouts will stop, capital flight will accelerate, and the banking system will crash.

No one can say with certainty what the impact of a Greek default will be, but analysts estimate that the losses for financial institutions could be as high as 400 billion euros. That means the ECB may need to deploy emergency funds to backstop teetering banks that could be overwhelmed by the flood of red ink. If the central bank refuses to act as lender of last resort or to intervene with another round of bond purchases, matters will deteriorate quickly as debt-stricken countries slip deeper into crisis. What worries economists is that the Greek virus will spread to other countries that are already battered by high unemployment, negative growth, and rising yields on government debt. A default in Greece would send a message to investors that EZ policymakers are no longer committed to the euro-project. If that belief takes root, a euro-wide (capital) exodus will ensue increasing the chances of a breakup of the 17-member union. There are already signs that this process is underway as banks in both Spain and Italy have seen a steady uptick in withdrawals....

On Tuesday, the ECB stopped lending to 4 Greek banks saying that it wanted to “limit its risk” and preserve “the integrity of our balance sheet.” The move came after ECB president Mario Draghi admitted for the first time that Greece could leave the monetary union. Some analysts think that Draghi is using his power to coerce the political result he wants, which is more support for austerity and bailouts. Increasing opposition to austerity in Greece, particularly the rise of the The Radical Left Coalition (Syriza), have put the policy at risk. This may be the ECB’s way of firing a shot over Syriza’s bow and reminding them of the price they will pay for their resistance.

A recently-released paper by Goldman Sachs lays out what will happen if the troika (The ECB, the European Commission and the IMF) suspends its loans to Greece and the government can no longer fund operations or pay salaries. Here’s an excerpt from the document:

“This “stop” in payments would precipitate an immediate fall in economic activity, given the need to abruptly close the primary fiscal deficit …As government arrears fail to get paid, supplies to public sector companies … and hospitals would be disrupted and their output and activities curtailed. In this context, the inflexibility of Greek wages will result in higher unemployment…Whether the banking system remains functional will largely depend on the ECB’s reaction to any troika decision to stop payments to Greece.” (zero hedge)

So, the banks will close, activity will grind to a standstill, and the country will slip further into depression. And yet, this seems to be the direction that Greece is already headed, austerity measures have only deepened the slump.

According to der Speigel:

“Economic output has shrunk by a fifth, unemployment is at almost 22 percent and youth unemployment is at more than 53 percent. The ranks of the unemployed grew by 95 percent between March 2008 and March 2011.”

Even after Greece’s unprecedented “debt haircut” which slashed claims on Greek bonds by 75 percent, the nation’s debt is still an unsustainable 160 percent of GDP. The hopelessness of the situation has not been lost on policymakers in Frankfurt, Brussels and Berlin, all of who now appear to be preparing for a Greek exit from the eurozone.

[Demeter]

76. Greece will run out of money soon, warns deputy prime minister

http://www.telegraph.co.uk/finance/financialcrisis/9262068/Greece-will-run-out-of-money-soon-warns-deputy-prime-minister.html

Greece's deputy prime minister has said the country will run out of money in six weeks unless it honours its bitterly-disputed EU bailout deal...Speaking exclusively to The Sunday Telegraph, Theodoros Pangalos said he was "very much afraid of what is going to happen" after Greek voters rejected the deal in elections last Sunday.

"The majority of the people voted for a very strange mental construction," he said. "We want to be in the EU and the euro, but we don't want to pay anything for the past."

...Mr Pangalos warned: "There is a school of thought that says the Germans are bluffing. They need Greece and will never throw us out of the eurozone. But what will happen, which is almost certain, is they will not give us the money to pay our debts.

"We will be in wild bankruptcy, out-of-control bankruptcy. The state will not be able to pay salaries and pensions. This is not recognised by the citizens. We have got until June before we run out of money.

[Demeter]

89. Greece Must Exit Nouriel Roubini TODAY'S MUST READ

http://www.project-syndicate.org/commentary/greece-must-exit

The Greek euro tragedy is reaching its final act: it is clear that either this year or next, Greece is highly likely to default on its debt and exit the eurozone.

Postponing the exit after the June election with a new government committed to a variant of the same failed policies (recessionary austerity and structural reforms) will not restore growth and competitiveness. Greece is stuck in a vicious cycle of insolvency, lost competitiveness, external deficits, and ever-deepening depression. The only way to stop it is to begin an orderly default and exit, coordinated and financed by the European Central Bank, the European Commission, and the International Monetary Fund (the “Troika”), that minimizes collateral damage to Greece and the rest of the eurozone.

Greece’s recent financing package, overseen by the Troika, gave the country much less debt relief than it needed. But, even with significantly more public-debt relief, Greece could not return to growth without rapidly restoring competitiveness. And, without a return to growth, its debt burden will remain unsustainable. But all of the options that might restore competitiveness require real currency depreciation...

ROUBINI OUTLINES POSSIBLE FUTURES AND SCENARIOS--A GLIMPSE INTO THE CRYSTAL BALL

[Demeter]

100. Cost of Greek exit from euro put at $1tn (FOR THE EUROZONE)

http://www.guardian.co.uk/global/2012/may/16/cost-greek-exit-euro-emerges

UK government making urgent preparations to cope with the fallout of a possible Greek exit from the single currency...The British government is making urgent preparations to cope with the fallout of a possible Greek exit from the single currency, after the governor of the Bank of England, Sir Mervyn King, warned that Europe was "tearing itself apart".

Reports from Athens that massive sums of money were being spirited out of the country intensified concern in London about the impact of a splintering of the eurozone on a UK economy that is stuck in double-dip recession. One estimate put the cost to the eurozone of Greece making a disorderly exit from the currency at $1tn, 5% of output.

...second election in Greece called for 17 June...

[Demeter]

101. Problem with the Eurozone’s Throw-Greece-from-the-Train Plan Is that its Timing Can’t Be Controled

http://econospeak.blogspot.com/2012/05/problem-with-eurozones-throw-greece.html?utm_source=feedburner&utm_medium=feed&utm_campaign=Feed:+espeak+%28EconoSpeak%29&utm_content=Google+Reader

There is no democratic deficit in Greece: its people have clearly indicated they want to do two things, clean the slate by defaulting on their debts and staying within the Eurozone. This is seen as unacceptable in Brussels and Frankfurt, and Greeks are supposed to understand that if they choose the first they will lose the second.

Alas, there is no legal procedure by which Greece can be expelled from the EZ; therefore the strategy has to be one of making retention of the euro so ruinous for Greeks that they will exit on their own volition. The mechanism is the Target system through which euros are transferred from one national central bank to another.

The idea is this: when funding from the troika is cut off after a default, the Greek government will lack the resources to backstop its banking system. Moreover, euro transfers via Target will be cut off. Greek depositors who try to withdraw their funds will be told, sorry, but the cupboard is quite bare. This will ignite a banking meltdown, and the only way out for Athens will be to redenominate financial liabilities in a new currency they can supply. Whether they call it a drachma is up to them.

Clever, huh? The only hitch is that, now that the game plan is becoming clear, rational Greeks are not choosing to wait for an EZ attack before withdrawing their funds from Greek banks and transferring them somewhere, anywhere, else. There is a gradually accelerating bank run taking place which is likely to reach criticality before a Greek-EZ policy showdown can take place. There is a broader lesson here. By threatening to choke the Greek banking system, the EZ implicitly threatens to do the same for Spain or even Italy. They can say otherwise, but why should depositors in shaky peripheral banks believe them? Withholding euros from peripheral banking systems is a gun that goes off before it is fired. Simply brandishing this weapon is causing havoc and speeding the demise of the entire zone. Better to put the gun away and do what should have been done all along: have the ECB assume the lender of last resort function for all EZ banks, with centralized financing of deposit insurance in particular. Don’t use the threat of a financial panic as a policy tool.

[Demeter]

102. Debt crisis: Greek euro exit looms closer as banks crumble By Ambrose Evans-Pritchard

http://www.telegraph.co.uk/finance/financialcrisis/9270884/Debt-crisis-Greek-euro-exit-looms-closer-as-banks-crumble.html

A tsunami of capital flight from Greece threatens to overwhelm the authorities, forcing the country out of the euro before fresh elections in June. Economists warned that the Greek financial system could crumble within weeks or days unless the European Central Bank steps up support. President Karolos Papoulias told party leaders that banks had lost €700m in withdrawals on Monday alone as citizens rush to pre-empt capital controls and a much-feared return to the Drachma. He cited central bank warnings that "great fear" might soon escalate to panic. The leaked details lend credence to claims that capital flight by both savers and firms have reached €4bn a week since the triumph of anti-bailout parties on May 6.

Steen Jakobsen from Saxo Bank said outflows are becoming unstoppable, not helped by open talk in EU circles of `technical’ plans for Greek withdrawal.

"This has a self-fulfilling prophecy built into it and I don’t think we can get to June. The fuse is burning and the only two options now are a controlled explosion where Germany steps in to ensure an orderly exit, or an uncontrolled explosion," he said.

The crisis is replicating the pattern of fixed-exchange ruptures through history. Britain was forced off the Gold Standard in 1931 after pay-cut protests in the navy triggered capital flight...Greek banks have lost 30pc of their deposits since late 2009. The total fell to €171bn in March. "The surprise is that there is still so much left. I can’t believe it will stay much longer," said Simon Ward from Henderson Global Investors. The ECB is holding the line with an estimated €100bn of Emergency Liquidity Assistance (ELA) for lenders, channeled through Greece’s central bank. Supplicants must pawn their loan book in exchange. "The risk is that banks will run out of collateral since these are low quality assets with haircuts of 50pc or more. The ECB could relax the rules but they would have to take an active decision to do so," said Mr Ward.

JP Morgan said Greek banks have already exhausted their collateral. A refusal by the ECB to ease rules would amount to expulsion, forcing Greece "to issue its own money."

[Demeter]

103. ECB Stops Loans to Some Greek Banks as Draghi Talks Exit

http://www.bloomberg.com/news/2012-05-16/ecb-stops-lending-to-some-banks-as-draghi-talks-exit-correct-.html

The European Central Bank said it will temporarily stop lending to some Greek banks to limit its risk as President Mario Draghi signaled the ECB won’t compromise on key principles to keep Greece in the euro area.

The Frankfurt-based ECB said yesterday it will push the responsibility for lending to some Greek financial institutions onto the Greek central bank until they have sufficiently boosted their capital. “Once the recapitalization process is finalized, and we expect this to be finalized soon, the banks will regain access to standard Eurosystem refinancing operations,” the ECB said in an emailed statement.

The move comes after Draghi acknowledged for the first time that Greece could leave the monetary union. While the bank’s “strong preference” is that Greece stays in the 17-nation euro area, the ECB will continue to preserve “the integrity of our balance sheet,” he said in a speech in Frankfurt yesterday.

“A Greek exit was seen as an absurdity up to now,” said Thomas Costerg, an economist at Standard Chartered Bank in London. “It is gradually becoming the main scenario. The ECB is prioritizing its balance sheet over monetary-union geography.”

YOU KNOW, I THINK THEY ARE ALL NUTS. NOTHING ELSE WOULD EXPLAIN THIS MESS.

[Demeter]

104. 'If We Leave the Euro, Everything Will Be Worse'

NOW WHAT KIND OF DEFEATIST BULLSHIT IS THAT? DO THEY THINK "STAYING IN THE EURO" WILL BE A BED OF ROSES FOR GREEKS? DIVORCE COUNSELING NEEDED.

http://www.spiegel.de/international/europe/greek-politicians-debate-the-debt-crisis-and-election-issues-a-833577.html

INTERVIEW OF GREEKS BY GERMAN NEWSPAPER...EXPECT MASSIVE DISSONANCE!

[Demeter]

77. Goldman Said to Plan Trading System for Corporate Bonds

http://www.bloomberg.com/news/2012-05-04/goldman-sachs-said-to-prepare-trading-system-for-corporate-bonds.html

Goldman Sachs Group Inc. (GS) will start an electronic trading system for corporate bonds this month as the fifth-biggest U.S. bank adapts to regulatory changes and competition, according to a person familiar with the plans.

The platform, called GSessions, has been under development for a year, said the person, who declined to be identified because the New York-based firm isn’t making details public yet. The Wall Street Journal reported the initiative late yesterday on its website.

The move comes three weeks after BlackRock Inc. (BLK), the world’s largest money manager, said it was planning its own bond-trading platform called Aladdin Trading Network that would allow clients to bypass Wall Street firms such as Goldman Sachs. Last year, Goldman Sachs’s revenue from market making and principal investments in credit, including corporate debt and derivatives, fell to $2.72 billion from $8.68 billion in 2010, according to a regulatory filing.

The profitability of Wall Street firms is being challenged by regulations requiring that they hold more capital as a buffer against potential losses from assets such as corporate debt. A U.S. law that seeks to prohibit federally insured banks from making bets with their own money may also hinder lenders’ ability to commit money to buy securities from clients, according to analysts including Brad Hintz at Sanford C. Bernstein & Co...In presentations over the past two years, Goldman Sachs executives have said the firm succeeded in developing electronic trading capabilities in the stock and currency markets and were also preparing for a higher percentage of fixed-income trading becoming computerized....Rather than matching trades between clients, Goldman Sachs will act as the counterparty to all trades and collect the spread, or difference, between the bid and offer prices, the person said. That gap will be lower than what Goldman Sachs earns on non-computerized trades, the person said.

[Demeter]

78. U.S. abandons consulate site in Afghanistan, citing security risks

http://www.washingtonpost.com/world/asia_pacific/citing-security-us-abandons-consulate-site-in-afghanistan/2012/05/05/gIQA9ZkD4T_story.html?wprss=rss_world

SO MUCH FOR EMPIRE

After signing a 10-year lease and spending more than $80 million on a site envisioned as the United States’ diplomatic hub in northern Afghanistan, American officials say they have abandoned their plans, deeming the location for the proposed compound too dangerous.

Eager to raise an American flag and open a consulate in a bustling downtown district of the northern Afghan city of Mazar-e Sharif, officials in 2009 sought waivers to stringent State Department building rules and overlooked significant security problems at the site, documents show. The problems included relying on local building techniques that made the compound vulnerable to a car bombing, according to an assessment by the U.S. Embassy in Kabul that was obtained by The Washington Post.

The decision to give up on the site is the clearest sign to date that, as the U.S.-led military coalition starts to draw down troops amid mounting security concerns, American diplomats are being forced to reassess how to safely keep a viable presence in Afghanistan. The plan for the Mazar-e Sharif consulate, as laid out in a previously undisclosed diplomatic memorandum, is a cautionary tale of wishful thinking, poor planning and the type of stark choices the U.S. government will have to make in coming years as it tries to wind down its role in the war...

[Demeter]

79. GAO: Taxpayers could turn $15.1 billion profit on AIG bailout (NOT THAT OLD LIE AGAIN!)

http://www.washingtonpost.com/business/economy/gao-taxpayers-could-turn-151-billion-profit-on-aig-bailout/2012/05/07/gIQAC9eA9T_story.html?hpid=z4

...The Federal Reserve and the Treasury made available more than $180 billion in aid to the struggling financial giant in 2008 through a variety of mechanisms, including cash infusions. Since then, the Fed and Treasury have recouped all but $46.3 billion.

The gains have come as a result of Treasury selling stock it owns in AIG, which has once again become profitable, and the Fed selling distressed mortgage securities it had obtained from the company during the crisis.

“Based on the composition of the remaining federal assistance to AIG [and] the repayment and recovery progress thus far on all assistance .?.?. the government could receive total returns of approximately $15.1 billion in excess of the assistance provided, including interest, dividends, and fees,” the GAO said in its report.

The GAO report noted, however, that those gains do not reflect the “subsidy costs associated with the assistance.” The GAO did not calculate such costs, which relate to the compensation the government received in exchange for taking on great risks in 2008....

[xchrom]

80. hola! it's sunday

[Demeter]

87. Hola, Yourself!

You must have a hollow leg, X. You are always posting food pictures.

[xchrom]

88. LOL! -- it's true i love food.

if i'm not preparing food -- i'm thinking about what to fix or prepare for the next meal.

[DemReadingDU]

95. Yum, time for breakast!

[Demeter]

81. JPMorgan Returned $168M to MF Global, Trustee Says

http://www.bloomberg.com/news/2012-05-18/mf-global-trustee-seeks-to-get-700-million-in-u-k-suit.html

A trustee for brokerage MF Global Inc. said JPMorgan Chase & Co. (JPM) returned $168 million in cash and that he’s still discussing his other claims with the bank.

The $168 million is the proceeds of excess collateral that JPMorgan held at the beginning of the brokerage’s liquidation, said the trustee, James Giddens, in a statement today. The bank has kept an interest in the sum, so that if any of its allegedly secured claims against MF Global become unsecured, it can make a claim to recover the $168 million, Giddens said. “The Trustee believes that this recovery will assist him in his primary duty of recovering property for the benefit of MFGI customers,” Giddens said in the statement.

Giddens, appointed under the Securities Investor Protection Act to return funds to former customers of the failed brokerage, has estimated a $1.6 billion shortfall to what they are owed.

While Giddens is overseeing distributions to customers at MF Global Inc., its parent, MF Global Holdings Inc., once run by former New Jersey Governor and Goldman Sachs Group Inc. co- chairman Jon Corzine, filed for bankruptcy separately to apportion returns to creditors, including bondholders and lenders such as JPMorgan.

[Demeter]

83. DID YOU KNOW PEACOCKS COULD FLY?

[DemReadingDU]

98. and here's a short video

[xchrom]

82. INTRODUCING THE 'GEURO': A Radical New Currency Idea To Solve All Of Greece's Problems

http://www.businessinsider.com/introducing-the-geuro-a-new-parallel-currency-to-solve-all-of-greeces-problems-2012-5



***SNIP

Thus, the "Geuro" is born:
Assuming that the Greek government is unable to quickly balance its primary budget, a plausible response of the government to the shortage of euro cash as a result of the end of financial transfers would be to issue debtor notes (IoUs) to its creditors, promising payment as soon as fresh euro cash would become available. As creditors lacking euro cash would have to use the IoUs to settle their own bills, these instruments would assume the role of a parallel currency (let’s call it Geuro).
The Geuro would probably quickly be used in most domestic transactions. For the purchase of essential imports, Geuros would have to be exchanged against euros, most likely at a hefty discount of 50% or more. Since an increasing number of domestic goods, services and wages would be paid in devalued Geuros, the export sector could reduce its prices in euro and regain competitiveness against foreign suppliers. The exchange rate of the Geuro relative to the euro would be determined by the primary budget gap of the government that is being filled by Geuro issuance. Political pressure could build for more prudent policies as Greek residents saw their terms of trade decline.
This plan comes with strings attached: Europe would have to completely take over the Greek banks to avoid even greater capital shortfalls. However, Hooper points out that consensus is quickly building around this idea as necessary for any reasonable stability plan going forward anyways.
So, Greece gets what they need under the "Geuro" plan: a recapitalized banking system and internal devaluation to increase competitiveness and hopefully spur growth.
The icing on the cake is the exit strategy. Mayer:
Greece could formally remain in EMU, execute the exchange rate devaluation necessary to regain international competitiveness, and in the future decide for itself through issuance of Geuros, whether and over what time span it would want to return to a hard currency that is stable against the euro. It could eventually even return completely to the euro by repurchasing Geuros against euros.
Is the Geuro the elegant solution Europe has been waiting for? Troika, are you listening?


Read more: http://www.businessinsider.com/introducing-the-geuro-a-new-parallel-currency-to-solve-all-of-greeces-problems-2012-5#ixzz1vPJK5ZzC



*** oy, they're getting 'creative'.

[Demeter]

92. It should be spelled and pronounced "Gyro"

[xchrom]

94. and then they'd have something of real value -- a sandwich -- a good sandwich

[Demeter]

84. NIFA rejects Nassau, Morgan Stanley sewer deal

http://libn.com/2012/05/17/nifa-rejects-nassau-morgan-stanley-sewer-deal/

The Nassau Interim Finance Authority on Thursday rejected the county’s contract with Morgan Stanley & Co. that would have preceded a deal to privatize the county’s sewer system. The contract, approved by the Nassau Legislature April 16, would have retained Morgan Stanley to find an investor that would lend the county upward of $750 million in exchange for making a profit from running the county’s failing sewer system. If a deal was consummated, Morgan Stanley would receive a minimum of $5 million.

Nassau County Executive Ed Mangano proposed the sewer privatization plan earlier this year, choosing United Water on May 3 to operate and upgrade the system. An investor would first be needed to provide the county with the upfront costs of selling the system, profiting from revenue generated from United Water. Mangano stated at the time that such revenue would remain flat for the first year and not increase above the rate of inflation for all subsequent years.

But NIFA members disputed that claim.

“Potential financial investors who invest money to a public-private partnership expect annual returns of 10 to 15 percent,” NIFA Board Member George Marlin said. “To suggest that a private operator will achieve enough efficiencies to cover most of that cost, and that assessment or user fees will increase no more than the rate of inflation – well, anyone who believes that, I have a coliseum in Hempstead I would like to sell them.”

Obviously irked by another attempt by NIFA to thwart his plans, Mangano issued a lengthy statement about the board’s decision.

“The NIFA board is clearly confused about the potential public-private partnership for Nassau’s sewage treatment plants – which are in a state of disrepair and face fiscal crisis,” Mangano said. “The public-private partnership is not a loan or borrowing. Comments made by NIFA board members demonstrate their lack of understanding of public-private partnerships. The county has a legal opinion that the transaction is not a borrowing. Moreover, the proposed plan reduces Nassau’s debt by 25 percent, from $3 billion to $2.25 billion.”

But NIFA Board Member Christopher Wright said he understood the proposal all too well.

“It has been suggested that the problem we have with the project is we don’t understand it. Our problem with it is that we do understand it,” Wright said. “It’s a one-shot. One shots are bad. It’s a very expensive loan.”

DON'T EXPECT ALABAMA RUBES ON LONG ISLAND, BANKSTERS.

[Demeter]

85. Morgan Stanley made big bet on Facebook

http://www.reuters.com/article/2012/05/19/us-facebook-morgan-stanley-idUSBRE84I01620120519

Lead Facebook Inc (FB.O) underwriter Morgan Stanley (MS.N) took a bet earlier this week when it increased the size of the social networking firm's $16 billion initial public offering and it boosted the price.

Thanks to massive hype surrounding Facebook's historic public offering, the wager looked safe. But a rocky first day of trading has raised questions about whether it paid off. After a delayed start to trading, Facebook's shares spent much of the day struggling to stay above the $38 IPO price - and ended with just a 23-cent gain. As a result, Morgan Stanley may have spent billions of dollars to support the stock price by buying shares in the market. Some market participants said that the underwriters had to absorb mountains of stock to defend the $38 level and keep the market from dipping below it. The firm did this by tapping into a 63 million share over-allotment option, or greenshoe, according to sources familiar with the deal.

As an indication of the cost, had Morgan Stanley bought all of the shares traded around $38 in the final 20 minutes of the day, it would have spent nearly $2 billion. Underwriters are not obligated to prop up a stock on debut, but typically do...

Facebook is the only recent U.S. internet listing not to enjoy a large price jump on its first day of trading. LinkedIn (LNKD.N), Groupon (GRPN.O) and Pandora Media (P.N) all saw significant gains at their public debuts...the fact that the stock didn't soar on its first day means they (MORGAN STANLEY) achieved full value for their client...the bank led a highly secretive, tightly controlled process in which other institutions -- including top underwriters JPMorgan Chase & Co (JPM.N) and Goldman -- were effectively shut out. "There was some frustration by JPMorgan and Goldman, as they were getting limited information. They thought they would be more inside the process," one source close to the matter said...For its efforts, Morgan Stanley will receive 38 percent of the overall IPO fees, about $67 million, which is more than JPMorgan and Goldman combined, according to regulatory filings.

MORE

[Demeter]

86. Much ado about nothing By Felix Salmon

http://blogs.reuters.com/felix-salmon/2012/05/18/much-ado-about-nothing/

567 million shares of Facebook changed hands today — that’s more than the total number of shares issued — at a volume-weighted average price of just over $40 per share. To put it another way, the whopping move from the IPO price of $38.00 to the closing price of $38.23 came with more than $22 billion of trading activity, and undoubtedly left the underwriting banks with rather more Facebook stock on their books than they had been hoping for. But that’s what it means to be an underwriter.

For anybody disappointed that they didn’t get their full initial allocation of stock, or who thinks that small retail investors can’t buy into IPOs at the same price that large institutional investors can, this is great news: Monday’s going to be a do-over, with everybody being able to buy Facebook stock at the IPO price.

This of course helps to point up just how silly all the Facebook IPO hype really was. Yes, Facebook is now a public company, but it’s still controlled by Mark Zuckerberg, and the IPO itself was a bit of a farce: delayed at the open, artificially supported by the underwriters at the close, and mainly serving to demonstrate that a brand-new company, which no one knows how to value, trading at a stratospheric valuation, can still somehow end up trading within an incredibly narrow range on enormous daily volume.

For that, you can probably thank the surprisingly old-fashioned book-building process, where a team of investment bankers took Facebook on a classic roadshow, complete with a slick and rather embarrassing video, all for a record-low fee of 1.1% of the proceeds. Still, never mind the low fee: the bankers were paid to do a job, and they did it, providing a rock-solid bid at exactly $38 per share and thereby sending a clear signal to any potential future client: we’re never going to let investors lose money on the first day. Frankly, there are worse ways of spending money to try to bolster your reputation...

[xchrom]

90. The Lousy Anti-Virus Market Is Proof The Deregulation Doesn't Work

http://www.businessinsider.com/when-competition-easy-entry-and-no-government-produces-lousy-results-a-quick-look-at-the-anti-virus-and-anti-malware-market-2012-5

***SNIP

Which leads me to believe that in a couple of years, I should go through the process of investigating anti-virus and anti-malware software again. It seems, in fact, one's choices with computers come to this:

1. Live with a machine that gets slower and slower and slower...
2. Periodically go through the effort of investigating anti-virus and anti-malware software, making sure that the stuff you use continues to be highly rated and effective.
3. Pay someone else to engage in number 2 for you.
4. Pick an operating system that is unpopular enough that it isn't targeted by malicious software and deal with its foibles. Also, switch to another unpopular OS if the one you're using starts becoming popular enough to attract the attention of malicious individuals.

That's a lot of time and attention one has to go through simply to use a piece of equipment that is now required to do business in much of the world, and even after going through the time and effort, there is no way to know whether the product you are purchasing (or not) is the best one available for the price. Put another way - the outcome of this market is not one most of us would consider efficient.

And yet, the market seems to be characterized by most of the factors that a libertarian or conservative economist look for to produce an optimal outcome. It is relatively easy and inexpensive to enter and exit the market for anti-bad things software, the market is literally global (you can buy software made anywhere and download it from your desk in minutes), the cost of such products is low (many are given away free), there's a heck of a lot of information out there, and there's virtually no government involvement in the process.

So why are the outcomes of this market so poor?

Read more: http://feedproxy.google.com/~r/blogspot/Hzoh/~3/lO7KAMThY5o/when-competition-easy-entry-and-no.html#ixzz1vPPhvaB2

[Tansy_Gold]

109. The Lousy Anti-virus Market indeed!!!!!!!!!!!!!! !!!!!!!!!!!! !!

This is a perfect opportunity for me to tell you all about my experience with McAfee VirusPlus and the invisible trojan on my laptop.

Prologue: When I purchased a new desktop computer last August, I attempted to remove the installed free trial version of McAfee and replace it with the regular version that I had subscribed to on my old computer. I had been a McAfee subscriber for 5 years at that point. It took two or three hours on the phone to accomplish this, because their technicians could not seem to understand that I had a different phone number and that my email address had changed from TansyGold at AOL dot com to TansyGold at Yahoo dot com. After much frustration and yelling, the change to the new computer was effected and all proceeded. Until...

1. A week ago Thursday, MVP (ha, that's a joke) alerted me to the presence of the intruder, but sending a pop-up every 10 minutes. These pop-ups said the trojan ZeroAccess had been detected and quarantined. I felt safe.

2. Friday morning, I was unable to connect to the internet, and sound had been disabled on the laptop.

3. The BF, who is pretty darn computer savvy, effected a fix by doing a system restore and going back more than a week. MVP's full scan showed no infection.

4. The system restore resolved the problem for about five days, until the trojan's effects returned on Wednesday afternoon. First came the warning pop-up, then another pop-up from a phony Adobe Flash Player update.

5. I called McAfee. I spent four hours on the phone with 7 different customer service individuals, all in India. Although they all spoke English, some had accents that made my understanding of their technical explanations difficult, not to mention that they were asking me to do things with the computer while I was on a cell phone. Their constant refrain was that they could resolve the problem with their "free" virus removal service which only costs $89.95.

6. At the end of four hours on the phone, Technician #7 said he would send me an email with a link to the fix, and a second email with instructions. This was at 5:50 AZ time, 7:50 Central time.

7. The first email arrived, the second didn't. The link was to a McAfee virus removal tool but it was not intended to remove the ZeroAccess trojan that had infected my machine. At 6:05 I attempted to call McAfee to get the instructions and spent 20 minutes on hold calling three different numbers before I finally got a message that said to call back during normal business hours.

8. On Thursday, the BF effected another system restore which was again successful to the point that the machine was now capable of connecting with the Internet. Downloading Microsoft Security Essentials and running a full scan, we identified more information about the ZeroAccess trojan. MSE identified that the trojan was on the computer but could not effectively quarantine or remove it. MVP's scan showed the computer was clean.

9. Three more hours on the phone with McAfee ensued, during which I discovered my laptop did not show as "activated" on my account page. Even though I had paid for the service and routinely received automatic updates from McAfee to that computer, for some reason or other they still showed my old, dead, long discarded desk top computer as on the account and the laptop, which had been on the account for almost three years and had been put on the account the day I bought it, was "inactive."

10. I finally reached a supervisor who investigated further. Each of these calls -- I'm pretty sure I ended up speaking with at least 12 different individuals and it may have been more -- required me to begin by stating my name, my email address, my phone number (which half the time showed on their records as still the one I had told them was no longer in service NINE MONTHS AGO), the reference number of the case, and various other information. And of course I had to repeat the entire history of what happened, listen to excuses ranging from I must have downloaded unsafe games (I have never downloaded any games, do not play any games on that computer not even the ones that came with it!), I must have ignored MVP warnings when I went to unsafe websites (never), or someone else had been using my computer (never, except when the BF did the system restore. And I mean never.) And of course the sales pitch for the "free" $89.95 virus removal service. When I told the supervisor about discovering that my computer had been "deactivated" from their service, that they couldn't get my phone number straight, etc., etc., etc., not to mention that their product was so faulty it was able to detect the intrusion but not able to remove it, and that I was sick and tired of being shuffled from one incompetent person to another, AND that it would have been nice not to sit on hold for 20 minutes only to find out their operation is closed after 6:00 P.M. California time. . . .

11. That's when she said, "Oh we have a 24/7 service number." But it's not readily accessible from the standard phone menu.

11a. I spent an hour writing a report to Rip-off Report dot com detailing my experience up to that point.

12. Eventually, I was connected with someone who understood that my concerns were not made up out of thin air, and who admitted McAfee had screwed up, and that there were justifications for my not trusting them and for believing they had created a product that intentionally allowed a devastating trojan to infect my computer for the purposes of forcing me to buy their "free" $89.95 virus removal service. They agreed to give me the "free" $89.95 virus removal service . . . . . for free.

13. Two more hours on the phone with the virus removal team (I had to go through the whole identification routine, and about half the history of the problem AGAIN) and they were able finally to isolate and quarantine the trojan. THEN they asked me if I had all my personal files backed up, because there was a possibility that the actual removal process could destroy those files or even crash the entire computer. I said some were backed up but not all, and as long as the trojan was still on the computer I didn't want to connect it to my back-up hard drive. I would have to burn the files to DVDs.

14. I had already lost one day of work on my day job because of the hassle with this MVP crap, so I had to work on Friday. I burned all my personal files on the laptop to DVDs -- that computer is far better organized that the desktop and so it was actually a very quick process -- and intended to resume the virus removal process on Friday. A few things interfered however, and I wasn't able to complete the process until Saturday morning.

15. Yesterday morning, I was up at 4:00 and began the virus removal process with the McAfee technician at 6:00. The process took another 50 minutes, during which I could barely understand half of what he said. I had to ask him to repeat instructions and questions frequently. His accent was not difficult, but he had a bad habit of not speaking directly into the phone, which muffled his voice and exacerbated his accent. He kept giving me warnings about how to use the computer, but I really have no idea what he was talking about.

16. By 6:55 the procedure was finished, no files were lost and no systems crashed.

17. Yesterday afternoon I completed the customer (dis)satisfaction survey and gave virtually every aspect of the situation a "poor" or "very poor" rating.


Since then, I have spoken with a number of people who have dealt with McAfee and all have said it's not a good product. I am required to have some kind of anti-virus protection on the computer I use for work, which is reasonable, but I want both machines protected. So far, the consensus is that Microsoft Security Essentials -- which is free -- offers the best protection AND I have been advised not to have MSE operating along with a commercial anti-virus product, as they can essentially (pun intended) cancel each other out. At this point, I'm not sure what I'm going to do, other than make sure I let anyone and everyone know that I cannot ever recommend McAfee to anyone, because I believe it is an inferior product serviced by undertrained people and that it is intentionally flawed so as to generate more income. In other words, McAfee is as bad as the hackers who make the trojans.

YMMV, of course.

[xchrom]

111. Stuff like that makes me wanna hire a Hit Man.

With the message: ' I gotchyer virus protection right here.'

[DemReadingDU]

115. that was a horrible experience

We have always used Norton Internet Security with no problems. But 3 years ago, spouse had something on his laptop computer that was some kind of advertisement that talked to him. Something about sports, thankfully not porn.

I researched the net, and found that Malwarebytes got rid of these kind of rootkit torjans. But in order for it to run, I first had to find the Malwarebytes folder to re-name the executable file from MBAM.exe to 'fluffy.exe' or something unrecognizable to the trojan. Then I ran fluffy.exe, and that worked great!

I ran Malwarebytes on my desktop just to ensure the safety of this computer, and it was fine. Every month I back up the documents to a portable harddrive, just in case something happens to this computer. I really need to backup more often. One never knows when they will get bit by a virus, or harddrive failure. And this computer is 8 years old. wow


edit for typos

[westerebus]

116. I hate it when a bad trojan happens.

[Fuddnik]

118. The current issue of Consumer Reports rates the AV and Security software.

McAfee rates 13th out of 14 tested for a pay Suite. All four free programs also tested higher.

Avira, G Data and Kaspersky rate the highest for pay.

I used to run Norton or Kaspersky. Didn't like Norton at all. Now, I just run MSE.

[Tansy_Gold]

119. 13th out of 14, huh? Well, that's no surprise to me!

They'll be off both of my computers tomorrow.

THANK YOU!!!

[hamerfan]

120. Wow.

Just wow.
Sorry to hear of these troubles, TG.
I've heard/read lots of good things about Clam AV:

http://www.clamwin.com/content/view/18/46/

I know enough to avoid Norton and McAfee. Kaspersky would probably get my money if I needed a paid AV service.

Best of luck in the future. FWIW, I'm half deaf and trying to understand people from India (high-pitched voices and my high frequencies are shot) is a lesson in futility.

[Ghost Dog]

121. All that and at no time have you suggested that McAfee

might have planted the trojan themselves (hey, would make great business sense, for a while...).

Admire your savoir faire and great patience.

Apocalypse now.

[Tansy_Gold]

129. No, I didn't go that far

But I made it quite clear that I strongly suspected they deliberately allowed it in.

However, I never lost my temper -- lost my patience MANY times -- and I never used foul language or hung up on anyone.

[Demeter]

91. Geithner to Dimon: Resign From The Board Of the New York Fed

I THINK TIMMY FEELS THREATENED BY THE BFF BETWEEN DIMON AND OBAMA...

http://baselinescenario.com/2012/05/17/geithner-to-dimon-resign-from-the-board-of-the-new-york-fed/

...Mr. Geithner’s call is a major and perhaps unprecedented development which can go in one of two ways.

If Mr. Dimon resigns, that is a major humiliation and recognition – at the highest levels of government – that even the country’s best connected banker has overstepped his limits. This would be a major victory for democracy and a step towards reopening the debate on financial reform, including introducing more restrictions on what global megabanks can do.

In modern American politics, symbols and substance are hard to disentangle. The big banks have won many rounds, so many times in recent years – including with the help of Mr. Geithner at key moments during the Dodd-Frank debate, in subsequent discussions over capital requirements, and with regard to design and potential implementation of the Volcker Rule (which would limit proprietary trading and other forms of excessive risk taking by big banks). If Mr. Dimon resigns, this could help open the doors to a broader reevaluation of power in the hands of Too Big To Fail banks – and how they undermine the rest of our economy.

If, as seems more likely, Mr. Dimon stays in place, that would be a great victory for the big banks – and a reminder of who is really in charge of the country. Mr. Geithner will be forced to walk back from his statement; that would not exactly inspire confidence in our officials – or help President Obama get re-elected....

[Demeter]

93. How JPMorgan Is Like Enron

http://www.bloomberg.com/news/2012-05-17/how-jpmorgan-is-like-enron.html

...Initially, in its first-quarter earnings press release on April 13, JPMorgan said the average value-at-risk figure for its chief investment office was $67 million during the three months ended March 31. JPMorgan revised that to $129 million when it filed its quarterly report with regulators last week.

The figure is an estimate of the maximum "potential loss from adverse market moves in an ordinary market environment" for a single trading day "using a 95 percent confidence level," as the company describes it. JPMorgan Chief Executive Officer Jamie Dimon explained that the company had implemented a new value-at-risk model last quarter that it later realized was "inadequate." It then switched back to an older version that it had been using for several years, which showed the bigger number.

Value-at-risk measurements, which JPMorgan pioneered during the 1990s, have many shortcomings -- and critics. For example, if an airline told you it was 95 percent confident your plane wouldn't crash, you wouldn't want to get on board. (You can read more about the metric's history in this lengthy story by Joe Nocera in the New York Times magazine.)

All this reminded me of a disclosure in Enron Corp.'s 2000 annual report, when the Houston-based energy trader was still a stock-market darling. Back then, Enron reported a $59 million value-at-risk figure for its equity investments, which proved to be just a weeeee bit unreliable. Enron filed for bankruptcy in late 2001. Note the reference to JPMorgan and its trademark toward the end of the disclosure:

Enron has performed an entity-wide value at risk analysis of virtually all of Enron's financial instruments, including price risk management activities and merchant investments. Value at risk incorporates numerous variables that could impact the fair value of Enron's investments, including commodity prices, interest rates, foreign exchange rates, equity prices and associated volatilities, as well as correlation within and across these variables. Enron estimates value at risk for commodity, interest rate and foreign exchange exposures using a model based on Monte Carlo simulation of delta/gamma positions which captures a significant portion of the exposure related to option positions. The value at risk for equity exposure discussed above is based on J.P. Morgan's RiskMetrics(TM) approach. Both value at risk methods utilize a one-day holding period and a 95% confidence level. Cross-commodity correlations are used as appropriate.

All these years later, the art of expressing risk as a single, easy-to-use number is still a work in progress.

[DemReadingDU]

99. The U.S. is a giant Enron

Actually, the whole global world is a humongous Enron.

[Demeter]

110. IT's too early for drinking...

not that it would help for more than a few minutes...

[Demeter]

96. Money is fleeing China

TAKING ADVANTAGE OF GLOBAL CHAOS

http://www.macrobusiness.com.au/2012/05/money-is-fleeing-china/

...in April, this indicates that capital flow turned hugely negative. I estimate that excluding the trade surplus, capital outflow would be RMB177 billion (I don’t distinguish the type of flow). As explained in the past, under the current arrangements, a capital outflow will contribute to a tightening of monetary conditions within China. Thus we now know, more or less, the reason for last weekend’s decision to reduce Reserve Requirement Ratio. Indeed, while the 50bps cut of RRR would have made RMB421.14 billion available for banks to lend, almost half of that would have been offset by the April’s capital outflow



On top the the negative shift in the forex position, more evidence emerged yesterday that Chinese banks are struggling with weak credit demand and deposit outflow.

We already know that last month’s figure for new loans was very mediocre. That appears to be continuing in May. Sina reports that the big 4 bank’s (ICBC, China Construction Bank, Agricultural Bank of China, Bank of China) net new loans for May is bascially zero for the first two weeks. According to sources, two of the big 4 banks have had new loans of RMB10 billion and a few billion, while another banks have net new loans in negative territory This suggests that demand for credit is extremely weak, perhaps much weaker than anyone is yet contemplating.

The big 4 banks have also lost RMB200 billion of deposits, according to the report. One of these banks lost RMB90 billion of deposits alone...

[Demeter]

97. Hume on hold? Michael Burda (AUTOPSY ON THE EURO)

http://www.voxeu.org/index.php?q=node/8005

The EZ crisis reveals critical flaws in the Eurozone’s design. This column argues that failing to abolish national central banks left the door open for national interests to interfere with the natural workings of the financial system and Hume’s adjustment mechanism. This flaw – and the omission of a European Banking Authority with real teeth – will come back to haunt Europe in the months and years to come...

[Demeter]

105. Dental Abuse Seen Driven by Private Equity Investments

http://www.bloomberg.com/news/2012-05-17/dental-abuse-seen-driven-by-private-equity-investments.html

DENTAL HORROR SHOWS ARE THE WORST...AND THIS ONE INVOLVES BANKSTERS, TOO.

[Demeter]

106. Michael Crimmins: Why the Cops Should be Knocking on Jamie Dimon’s Door Soon

http://www.nakedcapitalism.com/2012/05/michael-crimmins-why-the-cops-should-be-knocking-on-jamie-dimons-door-soon.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+NakedCapitalism+%28naked+capitalism%29

By Michael Crimmins, who has worked on risk management and Sarbanes Oxley compliance for major banks

**************************************************************************************

The scandal surrounding JP Morgan’s losses in its Chief Investment Office is not going away, and for good reason. Its trading book continues to lose money at an astounding rate. The most recent report estimates that the losses have increased by at least 50% more than the bank’s original loss estimates. The total damage is anyone’s guess at this point. This fiasco is beginning to look a lot like accounting control fraud. The Justice Department and the FBI have begun criminal probes. The SEC is also investigating. So far, the objectives of these investigations are under wraps, but if I were an SEC or DOJ enforcement official I’d be laser-focused on bringing a Sarbanes-Oxley case against Jamie Dimon.

Sarbanes-Oxley emerged out of the Enron frauds. This law requires the CEO to certify that internal controls are operating effectively to give comfort to readers of the financial statements that the disclosures contained in the reporting are reliable. There are civil penalties for filing a false certification and criminal penalties, including jail time, for false filings found to be fraudulent. So far none of the obvious candidates like Dick Fuld at Lehman or Jon Corzine at MF Global have been prosecuted under the law. Jamie Dimon looks like a very attractive candidate to investigate for SOX violations. For starters, Dimon’s description of what happened rings SOX alarm bells:

First of all, there was one warning signal — if you look back from today, there were other red flags. That particular red flag — you know, we made a mistake, we got very defensive and people started justifying everything we did. You know, the benefit in life is to say, ‘Maybe you made a mistake, let’s dig deep.’ And the mistake had been brewing for a while, so it wasn’t just any one thing.

- Meet the Press, May 13, 2012

Warning signs and red flags were ignored. And they’ve apparently been ignored since 2007. Once again, echoing what happened at MF Global, risk managers who raised alarms about the riskiness of the positions in 2009 were replaced with more cooperative risk managers:

Several bankers said that risk controls were not sufficiently strengthened by Doug Braunstein, who took over as chief financial officer in 2010, another reason the bolder trades continued.

This indicates the firm was aware of deficiencies in the controls if other executives knew Braunstein had a mandate to improve them. These concerns are probably documented in the meeting minutes of the management committees responsible for risk, financial reporting and SOX compliance. It shouldn’t be difficult for the SEC to review these sources to determine who knew what and when about the state of the internal control environment...JPM has issued quite a few financial statements since 2007 and 2009. If the controls and riskiness of the trades were as alarming and deficient as the managers indicate, then the reliability of the financial statements for the last 5 years are questionable. For a portfolio of this size and importance it’s inconceivable that the controls and risk issues were not reported up the management chain. More damning is Dimon’s tacit admission that the controls designed to protect the firm from these sorts of blowups were ineffective, due to lack of intervention. Ignoring internal controls, or red flags as Dimon characterizes them, is a failure in the control environment. The failure to disclose inoperative key controls in the CEO certification is a violation the law.

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

If It’s Not a Hedge Then What is It?

To recap, JPM owns a portfolio of securities it is ‘economically hedging” with a portfolio of credit default swaps. The purpose of a hedge is to reduce the risk of adverse price moves on the underlying portfolio. The CDS portfolio consists of CDS purchased and CDS sold. CDS purchased for the portfolio may have been put on as a hedge against the “available for sale” portfolio. But the CDS sold as a hedge doesn’t seem to make any sense. Selling CDS is equivalent to increasing the exposure to the underlying credits. The CDS sold don’t seem to have a risk mitigating role as part of a hedge, but to date JPM hasn’t provided the information to evaluate the overall portfolio. It’s possible JPM was funding the CDS purchases by selling longer dated CDS and justifying the inclusion of the CDS sales as funding of the hedging purchases, but that would seem to be pretty expansive definition of a hedge. Perhaps ‘economic hedging’ as JPM defines it includes the funding sources of the combined ‘economic hedge’. That seems ridiculous but the term is open to any interpretation. Since the combined CDS portfolio is accounted for on a mark to market basis, the position may not have raised any red flags with readers of the financial statements as long as it was in the money. That appears to have been the case for an extended period, as evidenced by the enormous pay packages (over $100 million for the chief trader, the infamous Whale, if reports are to be believed) for the CIO desk. You don’t pay that kind of money to hedgers.

But the position has cratered this year and JPM was forced to disclose the losses on the CDS portfolio. To offset those losses JPM sold off some of its AFS portfolio. We’re still waiting for a precise definition of economic hedge from JPM. This characterization raises additional alarms, since it appears that JPM effectively viewed the AFS/CDS portfolio combination as a net trading position. Normally, you wouldn’t sell your AFS portfolio (or enjoy the beneficial accounting treatment) unless there was an extraordinary exogenous event that caused you to liquidate the portfolio. Trading losses on a portfolio jointly managed as part of the AFS portfolio wouldn’t qualify. This raises the question of whether JPM has correctly classified the available for sale assets since they acquired them. That’s a serious issue. If JPM misclassified a $200B position for years, it should be investigated for a host of regulatory violations and fraud. For all intents and purposes the hedge portfolio is a separate trading book, and the financial reporting reflects that fact. There should be no way JPM should be able to spin this as a hedge of anything and deny the proprietary trading characterization the accounting treatment signifies.

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

It doesn’t look like JP Morgan made a bunch of egregious mistakes. It looks like they broke the law, at least the Sarbanes-Oxley law.

[Demeter]

107. ‘London Whale’ Said to Be Leaving JPMorgan

http://dealbook.nytimes.com/2012/05/16/london-whale-said-to-leave-jpmorgan/?ref=business

...Although a spokeswoman for the bank said Mr. Iksil is still employed, he is no longer trading on behalf on the bank and is expected to be gone by the end of the year, according to people with knowledge of the situation....

[Tansy_Gold]

112. Gone, perhaps, but

with a suitable parting gift, I'm sure.


WANKERS!!!!!!!!!!!!!!!!!

[westerebus]

117. MF Global

The tail wagging the dog.

Q: On what investment did MFG go bust?

Q: Was MFG leading (moving the market) or following (saw an opportunity) [to short] a market maker?

The results of which collapsed MFG when their liquidity was cut by who?

It may just be fleas?

[DemReadingDU]

108. Argentina turns to dogs to hunt disappearing dollars

5/19/12 Argentina turns to dogs to hunt disappearing dollars
In Argentina, the government is using dogs to sniff out US dollars. As part of a crack down on tax evasion, money laundering and cash being sent overseas, restrictions are being imposed on foreign currency. Those restrictions have made the dollar, seen as a refuge from double-digit inflation, increasing difficult to find on the streets of the Argentine capital. In an effort to curb the smuggling of millions in US dollars to neighbouring Uruguay, the government of Cristina Kirchner, the Argentinian president, has employed dogs to snif out the currency. Al Jazeera's Lucia Newman reports from Buenos Aires.

&feature=player_embedded

[Demeter]

114. I'm going to call it a wrap

As delightful as it has been to report on the demise of civilization, I am going to do some Reality-based stuff now.

All I can say is, Karl Marx is laughing in whatever Afterlife he believes in, while the Marx brothers are enjoying the inevitable and anticipated demise of banksters...especially Groucho, who lost everything in 1929 margin calls....

There's still TONS of reports to sift through...I'm not quite caught up with my vacation from aggregating, but I'm getting there, presuming nothing else blows up next week....

sometimes, I crack myself up.

[Ghost Dog]

122. Germany is in the wrong, very wrong, in Europe, and must be corrected. Further information:

Video discussion: http://rt.com/programs/crosstalk/das-europa-germany-europe/

Separate well-informed commentary, eg:

http://www.guardian.co.uk/business/2012/may/20/saving-eurozone-wont-solve-crisis

... What we are witnessing is a potentially cataclysmic conjuncture of the continuing crisis of modern finance capitalism and the inherent defects of the eurozone as originally conceived.

There are many paradoxes and ironies about this crisis. The whole idea behind the European Union was to ensure that there were no more wars in Europe. Closely associated with this aim was the desire to avoid the levels of unemployment and social unrest that caused the rise of extremist rightwing political parties. (Does a day go by without a reference to Hitler in the press or on the radio?)

In championing the exchange rate mechanism and then the eurozone, the French wanted to ensure that economic policy in Europe was not dominated by the Germans. Yet the latter continue to be more obsessed by folk memories of Weimar inflation than by the unemployment that led to extremism.

This is a battle that has certainly not been won by the French – indeed, when my friend Jean-Claude Trichet became president of the European Central Bank, he was widely accused of having "gone native".

The result of the French election shows that François Hollande is now being expected to take up the cudgels. Optimists – there are still some around – point to some apparent concessions by German policymakers on the subject of the asymmetry of eurozone economic policy. For instance, if southern members of the eurozone are ever going to narrow the gap in their price competitiveness with Germany, then the Germans should actively aim at a higher inflation rate. There is also wider recognition of the need for major infrastructure projects...

http://www.guardian.co.uk/commentisfree/2012/may/20/andrew-rawnsley-dont-blame-the-germans

... The jabbing fingers are furiously angry ones on the streets of Athens where German flags are burnt and the newspapers dress Ms Merkel in Nazi uniform. The jabbing continues in editorials in the American press, which charges Berlin with being single-handedly responsible for taking the world economy to the brink of the abyss. The jabbing is dressed in the language of diplomacy at this weekend's G8 summit where Barack Obama, François Hollande and David Cameron have ganged up on the German chancellor.

The American Democrat, British Conservative and French Socialist may not agree on much else, but on this, at least, they are together. It is one second to midnight in the eurozone because a recalcitrant and miserly Germany has refused to step up to its historic responsibility to do what is necessary to save the single currency. If the eurozone implodes, and carries away the global economy with it, the buck will stop in Berlin.

Let us begin by acknowledging that Germany does deserve a big helping of blame for the very scary state of the eurozone. Berlin shares, principally with Paris, responsibility for the original sin. That was to construct a badly designed and over-stretched single currency area containing contradictions that would explode under stress. In the pursuit of a European ideal, Germany forgot its usual prudence when Berlin nodded and winked at the admission of countries – Greece being the most extreme example – for whom euro membership was not only inappropriate but very dangerous.

It is fair enough also to observe that Germany has repeatedly failed to offer leadership that rises to the scale of the present crisis. When Germany has led, it has not always been in a well-judged direction. The austerity programme imposed on the Greeks as the price for continued membership of the euro was too draconian to be implemented in a democracy. The voters would surely revolt and they duly have.

The European Central Bank has been denied the necessary firepower to get ahead of events because the Germans wouldn't allow it. Ms Merkel has never been a very easy partner for her peer group. One of Gordon Brown's officials who had a ringside seat during the negotiations at the London G20 describes her thus: "Incredibly stubborn. Immovable. She simply digs in." One of David Cameron's team says dealing with the German chancellor is "like trying to squeeze blood from the proverbial stone"...

http://www.deccanherald.com/content/250908/apocalypse-fairly-soon.html

... Yet financing isn’t enough. Italy and, in particular, Spain must be offered hope - an economic environment in which they have some reasonable prospect of emerging from austerity and depression. Realistically, the only way to provide such an environment would be for the central bank to drop its obsession with price stability, to accept and indeed encourage several years of 3 per cent or 4 per cent inflation in Europe (and more than that in Germany).

Both the central bankers and the Germans hate this idea, but it’s the only plausible way the euro might be saved. For the past two-and-a-half years, European leaders have responded to crisis with half-measures that buy time, yet they have made no use of that time. Now time has run out...

... And here I offer only a few (moderately phrased) English-language sources for your consideration.

Germany, like the mythical "1%" is growing richer and more powerful out of this situation, at the expense of the rest of us.

This is not what European Community and/or Union was intended to achieve.

BTW, and for the record, there is no sign here in Spain of anything like any "bank runs" happening now, in spite of what the very dishonest anglo-american media is psy-opping, and/or attempting to provoke/achieve.

Fuck you.

... Posted a version of this in own thread, incidentally.

Chanelling the anger, you understand.

Here: http://www.democraticunderground.com/1002708777#post2

[Demeter]

123. Germany got ahold of the wrong end of the stick

and then decided to beat everyone else over the head with it.

[Ghost Dog]

125. This means war.

Get some good sleep, Demeter, love.

[Demeter]

126. You, too, GD!

There are roses bursting into bloom all over here....it's summer. Even the mosquitoes are out.

[Ghost Dog]

127. Here: (Erick Satie):

[Demeter]

128. My favorite! Perfect for sultry weather!

Thanks!

[Ghost Dog]

130. Happy you're, um, ok. Kid too.

Please don't burn out too soon.

I need to remember how to spell: Channel, channeling.

French/Catalan/Spaniish/Arabic language (culture, history) can blow the mind, nicely.

For us poor Berber/Celts.

http://www.youtube.com/watch?gl=BE&v=Czo2RHlNkrM

( http://www.google.com/search?q=youtube+atroj&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:es-ES fficial&client=firefox-a )

[Ghost Dog]

131. But, for sure:

[Demeter]

124. PARTING SHOT: Capitalism Is Taboo in America

http://truth-out.org/opinion/item/9139-capitalism-is-taboo-in-america

For the last half-century, capitalism has been a taboo subject in the United States. Among politicians, journalists, and academics—and in public conversation generally—the word has been avoided or else exclusively praised in over-the-top prose. Professional economists have used words like "perfect competition" and "optimal allocation of resources" and "efficiency" to teach their students and assure one another how absolutely wonderful capitalism was for everyone. Politicians repeated, robot-style, that the "U.S. is the greatest country in the world" and that "capitalism is the greatest economic system in the world." Those few who have dared to raise questions or criticisms about capitalism have been either ignored or told to go live in North Korea, China or Cuba as if that were the only alternative to pro-capitalism cheerleading.

Americans have criticized and debated their educational, medical, welfare, transportation, mass media, political, and many other institutions and systems. They have questioned and at least partly transformed such traditional institutions as racism, sexism, the heterosexual family and the state. They have even sometimes challenged this or that aspect of the economy such as prices, Federal Reserve actions, and so on, but almost never the particular economic system.

Questioning and criticizing capitalism have been taboo, treated by federal authorities, immigration officials, police and most of the public alike as akin to treason. Fear-driven silence has substituted for the necessary, healthy criticism without which all institutions, systems, and traditions harden into dogmas, deteriorate into social rigidities, or worse. Protected from criticism and debate, capitalism in the United States could and has indulged all its darker impulses and tendencies. No public exposure, criticism and movement for change could arise or stand in its way as the system and its effects became ever more unequal, unjust, inefficient and oppressive. Long before the Occupy movement arose to reveal and oppose what U.S. capitalism had become, that capitalism had divided the 1 percent from the 99 percent.

The importance of the Occupy movement was and is positioning its challenge to capitalism front and center among its concerns and passions. No oppositional mass movement of the last fifty years—one drawing broadly inclusive participation—has been similarly daring in going beyond single-issue focus to make economic injustice for the 99 percent and the ruling economic system central, defining issues. Despite the power of pro-capitalism ideology, Occupy has been able to contest it in amazingly profound ways in an amazingly short time and for an amazing number of Americans. Of course Occupy is a first step. Nothing of comparably broad scope and with such transformative social objectives has ever moved forward in a straight line. It's rather two steps forward, one step backward. However a major barrier has been broken, a major line crossed, and a new stage of U.S. politics has begun. The issue of our economic system and whether it is adequate to our needs as a people has now been returned to the center of national discussion, criticism, and debate....