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Demeter
Demeter's Journal
Demeter's Journal
October 1, 2013
...Obedience and disobedience are universal social experiences. All human beings know what it feels like to obey - with varying degrees of enthusiasm - and we all know what it feels like to disobey. Each of us has plenty of experience with both, and we are always capable of one or the other at any given moment. Every individual with the capacity for independent thinking and action makes multiple daily decisions about whether to obey or disobey various laws, rules, wishes and suggestions of others, whether we are aware of these decisions or not.
Modern societies are largely founded on the seductive idea that valuing obedience over disobedience will bring personal success and social cohesion. We are taught from an early age that even minor disobedience will sharply increase the likelihood of scary prospects like personal failure and social chaos. These emotionally powerful messages are drilled into us at home and at school, cultivating the necessary habits for powerful interests to function effectively, from parents and teachers to state institutions and large multinational corporations.
When it comes to the nature of obedience-disobedience, there is nothing we could accurately call normal. While obedience can be a particularly strong habit to break, humans (in contrast to other primates with more hard-wired social behavioral programming) are born neither obedient nor disobedient. We have strong tendencies to engage in both types of behavior across cultures and generations, in rational and irrational ways. Whether to obey or disobey in any given situation is a personal choice. Human social reality is extremely variable and complex. As long as we remain social creatures, we must deal with the obedience-disobedience question.
Acts of obedience have over the centuries been the cause of far more destruction and savagery than have acts of disobedience - maybe most dramatically during World War II. Humanity witnessed an eruption of systematized violence on a scale never before seen, an outcome fully dependent on the obedient behavior of ordinary people. The war ended with two extraordinarily destructive acts: a handful of men obediently followed orders over Hiroshima and Nagasaki, resulting in the instant incineration of several hundred thousand human beings. Soon afterward, as a result of the Nuremberg Tribunal, it became crystal clear for anyone touched by the war that personal considerations of conscience were simply unavoidable when making decisions in hierarchical contexts. The duty to obey authority could no longer justify inhumane actions, neither morally nor legally. Questions regarding obedience and disobedience were revealed to the world as intensely personal, deeply ethical and of supreme consequence. In a post-Nuremberg world, the ultimate responsibility for one's actions falls on the individual, not on powerful interests that persuade or coerce....
AND EVEN COMPLETE OBEDIENCE BRINGS NO PROTECTION
THOUGHTFUL, PROVOCATIVE PIECE
Obedience to Corporate-State Authority Makes Consumer Society Increasingly Dangerous
http://truth-out.org/opinion/item/19050-the-experiment-requires-that-you-continue-obedience-to-corporate-state-authority-in-an-increasingly-dangerous-consumer-society...Obedience and disobedience are universal social experiences. All human beings know what it feels like to obey - with varying degrees of enthusiasm - and we all know what it feels like to disobey. Each of us has plenty of experience with both, and we are always capable of one or the other at any given moment. Every individual with the capacity for independent thinking and action makes multiple daily decisions about whether to obey or disobey various laws, rules, wishes and suggestions of others, whether we are aware of these decisions or not.
Modern societies are largely founded on the seductive idea that valuing obedience over disobedience will bring personal success and social cohesion. We are taught from an early age that even minor disobedience will sharply increase the likelihood of scary prospects like personal failure and social chaos. These emotionally powerful messages are drilled into us at home and at school, cultivating the necessary habits for powerful interests to function effectively, from parents and teachers to state institutions and large multinational corporations.
When it comes to the nature of obedience-disobedience, there is nothing we could accurately call normal. While obedience can be a particularly strong habit to break, humans (in contrast to other primates with more hard-wired social behavioral programming) are born neither obedient nor disobedient. We have strong tendencies to engage in both types of behavior across cultures and generations, in rational and irrational ways. Whether to obey or disobey in any given situation is a personal choice. Human social reality is extremely variable and complex. As long as we remain social creatures, we must deal with the obedience-disobedience question.
Acts of obedience have over the centuries been the cause of far more destruction and savagery than have acts of disobedience - maybe most dramatically during World War II. Humanity witnessed an eruption of systematized violence on a scale never before seen, an outcome fully dependent on the obedient behavior of ordinary people. The war ended with two extraordinarily destructive acts: a handful of men obediently followed orders over Hiroshima and Nagasaki, resulting in the instant incineration of several hundred thousand human beings. Soon afterward, as a result of the Nuremberg Tribunal, it became crystal clear for anyone touched by the war that personal considerations of conscience were simply unavoidable when making decisions in hierarchical contexts. The duty to obey authority could no longer justify inhumane actions, neither morally nor legally. Questions regarding obedience and disobedience were revealed to the world as intensely personal, deeply ethical and of supreme consequence. In a post-Nuremberg world, the ultimate responsibility for one's actions falls on the individual, not on powerful interests that persuade or coerce....
AND EVEN COMPLETE OBEDIENCE BRINGS NO PROTECTION
THOUGHTFUL, PROVOCATIVE PIECE
September 30, 2013
By The Daily Take, The Thom Hartmann Program
The president of Brazil, Dilma Rousseff, spoke this morning at the United Nations and delivered a powerful indictment of spying by the NSA on behalf of the United States. She said, "Without respect for a nation's sovereignty, there is no basis for proper relations among nations," adding that "Brazil knows how to protect itself. Brazil ... does not provide shelter to terrorist groups. We are a democratic country."
The Brazilian president is so outraged at American spying, both on her country and on her personal emails and her personal life, that she canceled a state dinner with President Obama.
While most Americans see this as a rift between Brazil in the United States over the issue of our spying on them, President Rousseff highlighted the most important point of all elsewhere in her speech this morning.
She said, "Without the right of privacy, there is no real freedom of speech or freedom of opinion, and so there is no actual democracy."
This is not just true of international relations. It's also true here within the United States.
Back before the Kennedy administration largely put an end to it, J Edgar Hoover was infamous in political circles in Washington DC for his spying on and blackmailing of both American politicians and activists like Martin Luther King. He even sent King tapes of an extramarital affair and suggested that King should consider committing suicide.
That was a shameful period in American history, and most Americans think it is behind us. But the NSA, other intelligence agencies, and even local police departments have put the practice of spying on average citizens in America on steroids.
As Brazil's President points out, without privacy there can be no democracy.
Democracy requires opposing voices; it requires a certain level of reasonable political conflict. And it requires that government misdeeds be exposed. That can only be done when whistleblowers and people committing acts of journalism can do so without being spied upon.
Perhaps a larger problem is that well over half – some estimates run as high as 70% – of the NSA's budget has been outsourced to private corporations. These private corporations maintain an army of lobbyists in Washington DC who constantly push for more spying and, thus, more money for their clients.
With the privatization of intelligence operations, the normal system of checks and balances that would keep government snooping under control has broken down.
We need a new Church Commission to investigate the nature and scope of our government spying both on our citizens and on our allies.
But even more than that we need to go back to the advice that President Dwight Eisenhower gave us as he left the presidency in 1961. Eisenhower warned about the rise of a military-industrial complex, suggesting that private forces might, in their search for profits, override the protective mechanisms that keep government answerable to its people.
That military-industrial complex has become the military-industrial-spying-private-prison complex, and it is far greater a threat to democracy then probably was envisioned by Eisenhower.
Government is the protector of the commons. Government is of by and for we the people. Government must be answerable to the people.
When the functions of government are privatized, all of that breaks down and Government becomes answerable to profit.
It's time to reestablish the clear dividing lines between government functions and corporate functions, between the public space and the private space.
A critically important place to start that is by ending the privatization within our national investigative and spying agencies.
This article was first published on Truthout and any reprint or reproduction on any other website must acknowledge Truthout as the original site of publication.
Without Privacy There Can Be No Democracy
http://truth-out.org/opinion/item/19039-without-privacy-there-can-be-no-democracyBy The Daily Take, The Thom Hartmann Program
The president of Brazil, Dilma Rousseff, spoke this morning at the United Nations and delivered a powerful indictment of spying by the NSA on behalf of the United States. She said, "Without respect for a nation's sovereignty, there is no basis for proper relations among nations," adding that "Brazil knows how to protect itself. Brazil ... does not provide shelter to terrorist groups. We are a democratic country."
The Brazilian president is so outraged at American spying, both on her country and on her personal emails and her personal life, that she canceled a state dinner with President Obama.
While most Americans see this as a rift between Brazil in the United States over the issue of our spying on them, President Rousseff highlighted the most important point of all elsewhere in her speech this morning.
She said, "Without the right of privacy, there is no real freedom of speech or freedom of opinion, and so there is no actual democracy."
This is not just true of international relations. It's also true here within the United States.
Back before the Kennedy administration largely put an end to it, J Edgar Hoover was infamous in political circles in Washington DC for his spying on and blackmailing of both American politicians and activists like Martin Luther King. He even sent King tapes of an extramarital affair and suggested that King should consider committing suicide.
That was a shameful period in American history, and most Americans think it is behind us. But the NSA, other intelligence agencies, and even local police departments have put the practice of spying on average citizens in America on steroids.
As Brazil's President points out, without privacy there can be no democracy.
Democracy requires opposing voices; it requires a certain level of reasonable political conflict. And it requires that government misdeeds be exposed. That can only be done when whistleblowers and people committing acts of journalism can do so without being spied upon.
Perhaps a larger problem is that well over half – some estimates run as high as 70% – of the NSA's budget has been outsourced to private corporations. These private corporations maintain an army of lobbyists in Washington DC who constantly push for more spying and, thus, more money for their clients.
With the privatization of intelligence operations, the normal system of checks and balances that would keep government snooping under control has broken down.
We need a new Church Commission to investigate the nature and scope of our government spying both on our citizens and on our allies.
But even more than that we need to go back to the advice that President Dwight Eisenhower gave us as he left the presidency in 1961. Eisenhower warned about the rise of a military-industrial complex, suggesting that private forces might, in their search for profits, override the protective mechanisms that keep government answerable to its people.
That military-industrial complex has become the military-industrial-spying-private-prison complex, and it is far greater a threat to democracy then probably was envisioned by Eisenhower.
Government is the protector of the commons. Government is of by and for we the people. Government must be answerable to the people.
When the functions of government are privatized, all of that breaks down and Government becomes answerable to profit.
It's time to reestablish the clear dividing lines between government functions and corporate functions, between the public space and the private space.
A critically important place to start that is by ending the privatization within our national investigative and spying agencies.
This article was first published on Truthout and any reprint or reproduction on any other website must acknowledge Truthout as the original site of publication.
September 27, 2013
Weekend Economists Traverse the Silk Road September 27-29, 2013
With this Weekend, we say goodbye to one of the nicest Septembers I can remember. The weather was delightful, politics was entertaining, and nothing really awful happened (that I can remember).
Our new hero, Edward Snowden provided the focus of a new paradigm in political thought, and everyone is mad at Obama.
October will be different. With the debt ceiling crashing down on our heads, the budget debacle still boiling away, Syria and Iran still unsettled and Europe lying its head off. Jamie Dimon isn't going anywhere fast.
So what do you say to a late vacation? Let's take a trip down the Silk Road...and tour China! The Mystery of the Orient beckons....
September 20, 2013
Weekend Economists Tickle the Ivories September 20-22, 2013
By request, we are taking a couple steps back from the edge of the cliff we've all been dancing on, and chilling with Mary McPartland, late of this planet.
Margaret Marian McPartland, OBE (née Turner; 20 March 1918 – 20 August 2013), was an English-born American jazz pianist, composer and writer. She was the host of Marian McPartland's Piano Jazz on National Public Radio from 1978 until 2011.
After her marriage to Jimmy McPartland in February 1945, she resided in the United States when not traveling throughout the world to perform. In 1969 she founded Halcyon Records, a recording company that produced albums for ten years. In 2000 she was named a National Endowment for the Arts Jazz Master. In 2004 she was given a Grammy Award for lifetime achievement. In 2007 she was inducted into the National Radio Hall of Fame. Known mostly for jazz, nonetheless, she composed other types of music as well, performing her own symphonic work "A Portrait of Rachel Carson" with the University of South Carolina Symphony Orchestra in 2007. In 2010 she was named a member of the Order of the British Empire...
wikipedia
After her marriage to Jimmy McPartland in February 1945, she resided in the United States when not traveling throughout the world to perform. In 1969 she founded Halcyon Records, a recording company that produced albums for ten years. In 2000 she was named a National Endowment for the Arts Jazz Master. In 2004 she was given a Grammy Award for lifetime achievement. In 2007 she was inducted into the National Radio Hall of Fame. Known mostly for jazz, nonetheless, she composed other types of music as well, performing her own symphonic work "A Portrait of Rachel Carson" with the University of South Carolina Symphony Orchestra in 2007. In 2010 she was named a member of the Order of the British Empire...
wikipedia
September 17, 2013
There has never been and never will be a "free" market. All markets have rules.
One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the "free market" is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity -- to make the economy work for us -- are unwarranted constraints on the market's freedom, and will inevitably go wrong. By this view, if some people aren't paid enough to live on, the market has determined they aren't worth enough. If others rake in billions, they must be worth it. If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they'll earn next month or next week, that's too bad; it's just the outcome of the market. According to this logic, government shouldn't intrude through minimum wages, high taxes on top earners, public spending to get people back to work, regulations on business, or anything else, because the "free market" knows best.
In reality, the "free market" is a bunch of rules about (1) what can be owned and traded (the genome? slaves? nuclear materials? babies? votes?); (2) on what terms (equal access to the internet? the right to organize unions? corporate monopolies? the length of patent protections? ); (3) under what conditions (poisonous drugs? unsafe foods? deceptive Ponzi schemes? uninsured derivatives? dangerous workplaces?) (4) what's private and what's public (police? roads? clean air and clean water? healthcare? good schools? parks and playgrounds?); (5) how to pay for what (taxes, user fees, individual pricing?). And so on.
These rules don't exist in nature; they are human creations. Governments don't "intrude" on free markets; governments organize and maintain them. Markets aren't "free" of rules; the rules define them.
The interesting question is what the rules should seek to achieve. They can be designed to maximize efficiency (given the current distribution of resources), or growth (depending on what we're willing to sacrifice to obtain that growth), or fairness (depending on our ideas about a decent society). Or some combination of all three -- which aren't necessarily in competition with one another. Evidence suggests, for example, that if prosperity were more widely shared, we'd have faster growth. The rules can even be designed to entrench and enhance the wealth of a few at the top, and keep almost everyone else comparatively poor and economically insecure. Which brings us to the central political question: Who should decide on the rules, and their major purpose? If our democracy was working as it should, presumably our elected representatives, agency heads, and courts would be making the rules roughly according to what most of us want the rules to be. The economy would be working for us; we wouldn't be working for the economy. Instead, the rules are being made mainly by those with the power and resources to buy the politicians, regulatory heads, and even the courts (and the lawyers who appear before them). As income and wealth have concentrated at the top, so has political clout. And the most important clout is determining the rules of the game. Not incidentally, these are the same people who want you and most others to believe in the fiction of an immutable "free market."
If we want to reduce the savage inequalities and insecurities that are now undermining our economy and democracy, we shouldn't be deterred by the myth of the "free market." We can make the economy work for us, rather than the other way around. But in order to change the rules, we must exert the power that is supposed to be ours.
Why the Idea of a "Free Market" Is Total BS Robert Reich
http://www.alternet.org/why-idea-free-market-total-bs?akid=10940.227380.sU5hnd&rd=1&src=newsletter897196&t=12There has never been and never will be a "free" market. All markets have rules.
One of the most deceptive ideas continuously sounded by the Right (and its fathomless think tanks and media outlets) is that the "free market" is natural and inevitable, existing outside and beyond government. So whatever inequality or insecurity it generates is beyond our control. And whatever ways we might seek to reduce inequality or insecurity -- to make the economy work for us -- are unwarranted constraints on the market's freedom, and will inevitably go wrong. By this view, if some people aren't paid enough to live on, the market has determined they aren't worth enough. If others rake in billions, they must be worth it. If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they'll earn next month or next week, that's too bad; it's just the outcome of the market. According to this logic, government shouldn't intrude through minimum wages, high taxes on top earners, public spending to get people back to work, regulations on business, or anything else, because the "free market" knows best.
In reality, the "free market" is a bunch of rules about (1) what can be owned and traded (the genome? slaves? nuclear materials? babies? votes?); (2) on what terms (equal access to the internet? the right to organize unions? corporate monopolies? the length of patent protections? ); (3) under what conditions (poisonous drugs? unsafe foods? deceptive Ponzi schemes? uninsured derivatives? dangerous workplaces?) (4) what's private and what's public (police? roads? clean air and clean water? healthcare? good schools? parks and playgrounds?); (5) how to pay for what (taxes, user fees, individual pricing?). And so on.
These rules don't exist in nature; they are human creations. Governments don't "intrude" on free markets; governments organize and maintain them. Markets aren't "free" of rules; the rules define them.
The interesting question is what the rules should seek to achieve. They can be designed to maximize efficiency (given the current distribution of resources), or growth (depending on what we're willing to sacrifice to obtain that growth), or fairness (depending on our ideas about a decent society). Or some combination of all three -- which aren't necessarily in competition with one another. Evidence suggests, for example, that if prosperity were more widely shared, we'd have faster growth. The rules can even be designed to entrench and enhance the wealth of a few at the top, and keep almost everyone else comparatively poor and economically insecure. Which brings us to the central political question: Who should decide on the rules, and their major purpose? If our democracy was working as it should, presumably our elected representatives, agency heads, and courts would be making the rules roughly according to what most of us want the rules to be. The economy would be working for us; we wouldn't be working for the economy. Instead, the rules are being made mainly by those with the power and resources to buy the politicians, regulatory heads, and even the courts (and the lawyers who appear before them). As income and wealth have concentrated at the top, so has political clout. And the most important clout is determining the rules of the game. Not incidentally, these are the same people who want you and most others to believe in the fiction of an immutable "free market."
If we want to reduce the savage inequalities and insecurities that are now undermining our economy and democracy, we shouldn't be deterred by the myth of the "free market." We can make the economy work for us, rather than the other way around. But in order to change the rules, we must exert the power that is supposed to be ours.
September 17, 2013
Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked scenario.
In an August 2013 article titled “Larry Summers and the Secret ‘End-game’ Memo,” Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization. The “end-game” would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and “usury” – charging rent for the “use” of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don’t need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.
Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a $700-plus trillion pyramid scheme. Highly leveraged, completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net. These countries were not all Islamic. Forty percent of banks globally are publicly-owned. They are largely in the BRIC countries—Brazil, Russia, India and China—which house forty percent of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules. This was not true of the “rogue” Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military. Here is some data in support of that thesis.
The End-game Memo
In his August 22nd article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then Assistant Secretary of International Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the Treasury. Geithner referred in the memo to the “end-game of WTO financial services negotiations” and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided. The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors’ funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws. The “endgame” was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:
WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo; but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis. As for the others:
The Holdouts
That was the fate of countries in the WTO, but Palast did not discuss those that were not in that organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven countries were named by U.S. General Wesley Clark (Ret.) in a 2007 “Democracy Now” interview as the new “rogue states” being targeted for take down after September 11, 2001. He said that about 10 days after 9-11, he was told by a general that the decision had been made to go to war with Iraq. Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. What did these countries have in common? Besides being Islamic, they were not members either of the WTO or of the Bank for International Settlements (BIS). That left them outside the long regulatory arm of the central bankers’ central bank in Switzerland. Other countries later identified as “rogue states” that were also not members of the BIS included North Korea, Cuba, and Afghanistan.
The body regulating banks today is called the Financial Stability Board (FSB), and it is housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be bound by rules imposed by the FSB, ostensibly to prevent another global banking crisis. Its regulations are not merely advisory but are binding, and they can make or break not just banks but whole nations. This was first demonstrated in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to 8%. The result was to force a drastic reduction in lending by major Japanese banks, which were then the world’s largest and most powerful creditors. They were undercapitalized, however, relative to other banks. The Japanese economy sank along with its banks and has yet to fully recover. Among other game-changing regulations in play under the FSB are Basel III and the new bail-in rules. Basel III is slated to impose crippling capital requirements on public, cooperative and community banks, coercing their sale to large multinational banks.
The “bail-in” template was first tested in Cyprus and follows regulations imposed by the FSB in 2011. Too-big-to-fail banks are required to draft “living wills” setting forth how they will avoid insolvency in the absence of government bailouts. The FSB solution is to “bail in” creditors – including depositors – turning deposits into bank stock, effectively confiscating them.
The Public Bank Alternative
Countries laboring under the yoke of an extractive private banking system are being forced into “structural adjustment” and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted “rogue nations.” Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people. Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care. Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.
As for Larry Summers, he went on to become president of Harvard, where he approved a derivative bet on interest rate swaps that lost over $1 billion for the university. He resigned in 2006 to manage a hedge fund among other business activities, and went on to become State Senator Barack Obama’s key campaign benefactor. Summers played a key role in the banking deregulation that brought on the current crisis, causing millions of US citizens to lose their jobs and their homes. Yet he is President Obama’s first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has proven he can manipulate the system to make the world safe for Wall Street; and in an upside-down world in which bankers rule, that seems to be the name of the game.
________________________
Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://WebofDebt.com, http://PublicBankSolution.com, and http://PublicBankingInstitute.org.
Making the World Safe for Banksters: Syria in the Cross-hairs by Ellen Brown
http://webofdebt.wordpress.com/2013/09/04/making-the-world-safe-for-banksters-syria-in-the-cross-hairs/ “The powers of financial capitalism had another far reaching aim, nothing less than to create a world system of financial control in private hands able to dominate the political system of each country and the economy of the world as a whole.” —Prof. Caroll Quigley, Georgetown University, Tragedy and Hope (1966)
Iraq and Libya have been taken out, and Iran has been heavily boycotted. Syria is now in the cross-hairs. Why? Here is one overlooked scenario.
In an August 2013 article titled “Larry Summers and the Secret ‘End-game’ Memo,” Greg Palast posted evidence of a secret late-1990s plan devised by Wall Street and U.S. Treasury officials to open banking to the lucrative derivatives business. To pull this off required the relaxation of banking regulations not just in the US but globally. The vehicle to be used was the Financial Services Agreement of the World Trade Organization. The “end-game” would require not just coercing support among WTO members but taking down those countries refusing to join. Some key countries remained holdouts from the WTO, including Iraq, Libya, Iran and Syria. In these Islamic countries, banks are largely state-owned; and “usury” – charging rent for the “use” of money – is viewed as a sin, if not a crime. That puts them at odds with the Western model of rent extraction by private middlemen. Publicly-owned banks are also a threat to the mushrooming derivatives business, since governments with their own banks don’t need interest rate swaps, credit default swaps, or investment-grade ratings by private rating agencies in order to finance their operations.
Bank deregulation proceeded according to plan, and the government-sanctioned and -nurtured derivatives business mushroomed into a $700-plus trillion pyramid scheme. Highly leveraged, completely unregulated, and dangerously unsustainable, it collapsed in 2008 when investment bank Lehman Brothers went bankrupt, taking a large segment of the global economy with it. The countries that managed to escape were those sustained by public banking models outside the international banking net. These countries were not all Islamic. Forty percent of banks globally are publicly-owned. They are largely in the BRIC countries—Brazil, Russia, India and China—which house forty percent of the global population. They also escaped the 2008 credit crisis, but they at least made a show of conforming to Western banking rules. This was not true of the “rogue” Islamic nations, where usury was forbidden by Islamic teaching. To make the world safe for usury, these rogue states had to be silenced by other means. Having failed to succumb to economic coercion, they wound up in the crosshairs of the powerful US military. Here is some data in support of that thesis.
The End-game Memo
In his August 22nd article, Greg Palast posted a screenshot of a 1997 memo from Timothy Geithner, then Assistant Secretary of International Affairs under Robert Rubin, to Larry Summers, then Deputy Secretary of the Treasury. Geithner referred in the memo to the “end-game of WTO financial services negotiations” and urged Summers to touch base with the CEOs of Goldman Sachs, Merrill Lynch, Bank of America, Citibank, and Chase Manhattan Bank, for whom private phone numbers were provided. The game then in play was the deregulation of banks so that they could gamble in the lucrative new field of derivatives. To pull this off required, first, the repeal of Glass-Steagall, the 1933 Act that imposed a firewall between investment banking and depository banking in order to protect depositors’ funds from bank gambling. But the plan required more than just deregulating US banks. Banking controls had to be eliminated globally so that money would not flee to nations with safer banking laws. The “endgame” was to achieve this global deregulation through an obscure addendum to the international trade agreements policed by the World Trade Organization, called the Financial Services Agreement. Palast wrote:
Until the bankers began their play, the WTO agreements dealt simply with trade in goods–that is, my cars for your bananas. The new rules ginned-up by Summers and the banks would force all nations to accept trade in “bads” – toxic assets like financial derivatives.
Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”
And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.
The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.
Until the bankers’ re-draft of the FSA, each nation controlled and chartered the banks within their own borders. The new rules of the game would force every nation to open their markets to Citibank, JP Morgan and their derivatives “products.”
And all 156 nations in the WTO would have to smash down their own Glass-Steagall divisions between commercial savings banks and the investment banks that gamble with derivatives.
The job of turning the FSA into the bankers’ battering ram was given to Geithner, who was named Ambassador to the World Trade Organization.
WTO members were induced to sign the agreement by threatening their access to global markets if they refused; and they all did sign, except Brazil. Brazil was then threatened with an embargo; but its resistance paid off, since it alone among Western nations survived and thrived during the 2007-2009 crisis. As for the others:
The new FSA pulled the lid off the Pandora’s box of worldwide derivatives trade. Among the notorious transactions legalized: Goldman Sachs (where Treasury Secretary Rubin had been Co-Chairman) worked a secret euro-derivatives swap with Greece which, ultimately, destroyed that nation. Ecuador, its own banking sector de-regulated and demolished, exploded into riots. Argentina had to sell off its oil companies (to the Spanish) and water systems (to Enron) while its teachers hunted for food in garbage cans. Then, Bankers Gone Wild in the Eurozone dove head-first into derivatives pools without knowing how to swim–and the continent is now being sold off in tiny, cheap pieces to Germany.
The Holdouts
That was the fate of countries in the WTO, but Palast did not discuss those that were not in that organization at all, including Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. These seven countries were named by U.S. General Wesley Clark (Ret.) in a 2007 “Democracy Now” interview as the new “rogue states” being targeted for take down after September 11, 2001. He said that about 10 days after 9-11, he was told by a general that the decision had been made to go to war with Iraq. Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran. What did these countries have in common? Besides being Islamic, they were not members either of the WTO or of the Bank for International Settlements (BIS). That left them outside the long regulatory arm of the central bankers’ central bank in Switzerland. Other countries later identified as “rogue states” that were also not members of the BIS included North Korea, Cuba, and Afghanistan.
The body regulating banks today is called the Financial Stability Board (FSB), and it is housed in the BIS in Switzerland. In 2009, the heads of the G20 nations agreed to be bound by rules imposed by the FSB, ostensibly to prevent another global banking crisis. Its regulations are not merely advisory but are binding, and they can make or break not just banks but whole nations. This was first demonstrated in 1989, when the Basel I Accord raised capital requirements a mere 2%, from 6% to 8%. The result was to force a drastic reduction in lending by major Japanese banks, which were then the world’s largest and most powerful creditors. They were undercapitalized, however, relative to other banks. The Japanese economy sank along with its banks and has yet to fully recover. Among other game-changing regulations in play under the FSB are Basel III and the new bail-in rules. Basel III is slated to impose crippling capital requirements on public, cooperative and community banks, coercing their sale to large multinational banks.
The “bail-in” template was first tested in Cyprus and follows regulations imposed by the FSB in 2011. Too-big-to-fail banks are required to draft “living wills” setting forth how they will avoid insolvency in the absence of government bailouts. The FSB solution is to “bail in” creditors – including depositors – turning deposits into bank stock, effectively confiscating them.
The Public Bank Alternative
Countries laboring under the yoke of an extractive private banking system are being forced into “structural adjustment” and austerity by their unrepayable debt. But some countries have managed to escape. In the Middle East, these are the targeted “rogue nations.” Their state-owned banks can issue the credit of the state on behalf of the state, leveraging public funds for public use without paying a massive tribute to private middlemen. Generous state funding allows them to provide generously for their people. Like Libya and Iraq before they were embroiled in war, Syria provides free education at all levels and free medical care. It also provides subsidized housing for everyone (although some of this has been compromised by adoption of an IMF structural adjustment program in 2006 and the presence of about 2 million Iraqi and Palestinian refugees). Iran too provides nearly free higher education and primary health care. Like Libya and Iraq before takedown, Syria and Iran have state-owned central banks that issue the national currency and are under government control. Whether these countries will succeed in maintaining their financial sovereignty in the face of enormous economic, political and military pressure remains to be seen.
As for Larry Summers, he went on to become president of Harvard, where he approved a derivative bet on interest rate swaps that lost over $1 billion for the university. He resigned in 2006 to manage a hedge fund among other business activities, and went on to become State Senator Barack Obama’s key campaign benefactor. Summers played a key role in the banking deregulation that brought on the current crisis, causing millions of US citizens to lose their jobs and their homes. Yet he is President Obama’s first choice to replace Ben Bernanke as Federal Reserve Chairman. Why? He has proven he can manipulate the system to make the world safe for Wall Street; and in an upside-down world in which bankers rule, that seems to be the name of the game.
________________________
Ellen Brown is an attorney, president of the Public Banking Institute, and author of twelve books including the best-selling Web of Debt. In The Public Bank Solution, her latest book, she explores successful public banking models historically and globally. Her websites are http://WebofDebt.com, http://PublicBankSolution.com, and http://PublicBankingInstitute.org.
September 16, 2013
So it was Obama’s fault that he could not sell Democrats on a choice for the Fed that was opposed by every progressive group except the Center For American Progress, which actually stopped being progressive a year or two ago. Oh yes, the fault is Obama’s for wanting to choose this reactionary, sexist, architect of the 2008 economic crash. Obama, as he often does, wanted to choose a pal, not the best person for the job.
But there was no way to sell the king of deregulation.
So the ingrate Summers blames Obama, citing his disastrous Syrian policy as the reason Obama couldn’t nominate him. It’s true, of course. But one would think that Summers would not be the one to blame Obama for being loyal to HIM. He could just have let his friends say that Summers made the decision based on the situation in Congress. He certainly didn’t have to say that Obama dropped the ball on a matter of “national security” which Syria isn’t (Summers is a neocon, so he is probably worried about Netanyahu).
No, Summers went out with no class at all and no patriotism either. It is all about him, the 1% he is devoted to, and his need for more honors he doesn’t deserve. He deserves a good Henry Waxman investigation of his role in costing millions of jobs. But that didn’t happen because Obama would not allow Congressional Democrats to investigate the bankers, brokers, underwriters and policy makers who caused the 2008 crash.
Obama, what a disaster his second term is becoming....ONLY FOR HIM, THOUGH. THE PEOPLE ARE GETTING A WELL-DESERVED AND HARD-EARNED RESPITE.
THE LAST WORD: Obnoxious Larry Summers Blames Obama For His Rejection By Democrats
this would make a great comedy show...
http://mjayrosenberg.com/2013/09/16/obnoxious-larry-summers-blames-obama-for-his-rejection-by-democrats/
I had to laugh over this quote in today’s Times from one of Larry Summers’ confidantes:
Clearly Obama couldn’t bring his own most enthusiastic supporters to back him on an issue of national security,” one supporter said. “How was he going to corral them for Larry?
So it was Obama’s fault that he could not sell Democrats on a choice for the Fed that was opposed by every progressive group except the Center For American Progress, which actually stopped being progressive a year or two ago. Oh yes, the fault is Obama’s for wanting to choose this reactionary, sexist, architect of the 2008 economic crash. Obama, as he often does, wanted to choose a pal, not the best person for the job.
But there was no way to sell the king of deregulation.
So the ingrate Summers blames Obama, citing his disastrous Syrian policy as the reason Obama couldn’t nominate him. It’s true, of course. But one would think that Summers would not be the one to blame Obama for being loyal to HIM. He could just have let his friends say that Summers made the decision based on the situation in Congress. He certainly didn’t have to say that Obama dropped the ball on a matter of “national security” which Syria isn’t (Summers is a neocon, so he is probably worried about Netanyahu).
No, Summers went out with no class at all and no patriotism either. It is all about him, the 1% he is devoted to, and his need for more honors he doesn’t deserve. He deserves a good Henry Waxman investigation of his role in costing millions of jobs. But that didn’t happen because Obama would not allow Congressional Democrats to investigate the bankers, brokers, underwriters and policy makers who caused the 2008 crash.
Obama, what a disaster his second term is becoming....ONLY FOR HIM, THOUGH. THE PEOPLE ARE GETTING A WELL-DESERVED AND HARD-EARNED RESPITE.
September 14, 2013
Forty three years ago, radicals used bombs, not boycotts or petitions, against Bank of America. In the Guy Fawkes tradition, student and underground revolutionaries burned three BofA branches in 1970 during a wave of violent protest. The first incendiary incident began on Feb. 24, 1970, as campus unrest spiraled out of control at the University of California at Santa Barbara.
According to talk radio host Jeff Rense’s website: “The immediate spark was the arrest of a young black militant, accused of using obscene language in public. As deputies tried to take him to jail, they were attacked by 50 of his sympathizers. That night, a mob of 400 attacked local realty offices, which, students claim, charge inflated rents. The rioters also broke every window in the Isla Vista branch of the Bank of America.”
The following day, the outspoken William Kunstler, attorney for the Chicago 7 leaders charged with conspiring to riot during the Democratic National Convention in 1968, made a rousing speech at UCSB’s Harder Stadium. According to Coastlines, UCSB’s alumni magazine, “Shortly after the speech, police apprehended and beat a student for carrying an open bottle of wine on the walk back to Isla Vista, sparking a volatile reaction from the students.
While the speech itself may have aroused emotions, the long-standing attitude toward the police played an important role in escalating events at Santa Barbara, where students already felt aggrieved by reputedly heavy-handed law enforcement tactics.
Rense’s website recounts, “After Kunstler’s speech, a crowd of 500 gathered in a park to listen to student radicals. Many appeared to be out for a lark. But the mood suddenly turned ugly, and when police patrol cars appeared a block away, the crowd began hurling rocks.
With 1,000 students and street people shouting ‘Burn, baby, burn!’ youths set fire to piles of debris and shoved them through the Bank of America doorway. Some of the students argued that the attack was senseless. Though outnumbered, state patrolmen and sheriff’s deputies took the offensive. But after a ten-minute rock barrage, they retreated, leaving a patrol car behind. The students set it afire. Meanwhile, the bank burned to the ground — a $275,000 loss.”
http://www.rockcellarmagazine.com/2011/11/04/oh-btw-bank-transfer-day-is-this-saturday-november-5th/
38 years later, the banks burned down and terrorized the people. It was 2008 and life was crazy!
As bankster after bankster, drunk with power and driven by greed, sought to amass more and more off the backs of American homeowners and any passive investor with a little cash, the financial system swayed, and teetered, and then fell in splinters to the ground...only by paying trillions in blackmail were we able to keep the economy from diving into a repeat of the Great Depression. But the Great Recession, as they euphemistically called it, was bad enough. The first hint of doom came from Lehman Brothers:
Weekend Economists Celebrate September 13-15, 2013
Forty three years ago, radicals used bombs, not boycotts or petitions, against Bank of America. In the Guy Fawkes tradition, student and underground revolutionaries burned three BofA branches in 1970 during a wave of violent protest. The first incendiary incident began on Feb. 24, 1970, as campus unrest spiraled out of control at the University of California at Santa Barbara.
According to talk radio host Jeff Rense’s website: “The immediate spark was the arrest of a young black militant, accused of using obscene language in public. As deputies tried to take him to jail, they were attacked by 50 of his sympathizers. That night, a mob of 400 attacked local realty offices, which, students claim, charge inflated rents. The rioters also broke every window in the Isla Vista branch of the Bank of America.”
The following day, the outspoken William Kunstler, attorney for the Chicago 7 leaders charged with conspiring to riot during the Democratic National Convention in 1968, made a rousing speech at UCSB’s Harder Stadium. According to Coastlines, UCSB’s alumni magazine, “Shortly after the speech, police apprehended and beat a student for carrying an open bottle of wine on the walk back to Isla Vista, sparking a volatile reaction from the students.
While the speech itself may have aroused emotions, the long-standing attitude toward the police played an important role in escalating events at Santa Barbara, where students already felt aggrieved by reputedly heavy-handed law enforcement tactics.
Rense’s website recounts, “After Kunstler’s speech, a crowd of 500 gathered in a park to listen to student radicals. Many appeared to be out for a lark. But the mood suddenly turned ugly, and when police patrol cars appeared a block away, the crowd began hurling rocks.
With 1,000 students and street people shouting ‘Burn, baby, burn!’ youths set fire to piles of debris and shoved them through the Bank of America doorway. Some of the students argued that the attack was senseless. Though outnumbered, state patrolmen and sheriff’s deputies took the offensive. But after a ten-minute rock barrage, they retreated, leaving a patrol car behind. The students set it afire. Meanwhile, the bank burned to the ground — a $275,000 loss.”
http://www.rockcellarmagazine.com/2011/11/04/oh-btw-bank-transfer-day-is-this-saturday-november-5th/
38 years later, the banks burned down and terrorized the people. It was 2008 and life was crazy!
As bankster after bankster, drunk with power and driven by greed, sought to amass more and more off the backs of American homeowners and any passive investor with a little cash, the financial system swayed, and teetered, and then fell in splinters to the ground...only by paying trillions in blackmail were we able to keep the economy from diving into a repeat of the Great Depression. But the Great Recession, as they euphemistically called it, was bad enough. The first hint of doom came from Lehman Brothers:
Financial services firm Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. The filing remains the largest bankruptcy filing in U.S. history, with Lehman holding over $600 billion in assets.
Lehman borrowed significant amounts to fund its investing in the years leading to its bankruptcy in 2008, a process known as leveraging or gearing. A significant portion of this investing was in housing-related assets, making it vulnerable to a downturn in that market. One measure of this risk-taking was its leverage ratio, a measure of the ratio of assets to owners equity, which increased from approximately 24:1 in 2003 to 31:1 by 2007. While generating tremendous profits during the boom, this vulnerable position meant that just a 3–4% decline in the value of its assets would entirely eliminate its book value or equity. Investment banks such as Lehman were not subject to the same regulations applied to depository banks to restrict their risk-taking.
In August 2007, Lehman closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took a $25-million after-tax charge and a $27-million reduction in goodwill. The firm said that poor market conditions in the mortgage space "necessitated a substantial reduction in its resources and capacity in the subprime space".
Lehman's final months
In 2008, Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis. Lehman's loss was apparently a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. Whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and decided to raise $6 billion in additional capital.[6] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten. In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.
On August 22, 2008, shares in Lehman closed up 5% (16% for the week) on reports that the state-controlled Korea Development Bank was considering buying Lehman. Most of those gains were quickly eroded as news emerged that Korea Development Bank was "facing difficulties pleasing regulators and attracting partners for the deal." It culminated on September 9, 2008, when Lehman's shares plunged 45% to $7.79, after it was reported that the state-run South Korean firm had put talks on hold.
Investor confidence continued to erode as Lehman's stock lost roughly half its value and pushed the S&P 500 down 3.4% on September 9, 2008. The Dow Jones lost nearly 300 points the same day on investors' concerns about the security of the bank. The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman.
On September 10, 2008, Lehman announced a loss of $3.9 billion and their intent to sell off a majority stake in their investment-management business, which includes Neuberger Berman.[12][13] The stock slid 7% that day.
On September 13, 2008, Timothy F. Geithner, then president of the Federal Reserve Bank of New York called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. The New York Times reported on September 14, 2008, that Barclays had ended its bid to purchase all or part of Lehman and a deal to rescue the bank from liquidation collapsed. It emerged subsequently that a deal had been vetoed by the Bank of England and the UK's Financial Services Authority. Leaders of major Wall Street banks continued to meet late that day to prevent the bank's rapid failure. Bank of America's rumored involvement also appeared to end as federal regulators resisted its request for government involvement in Lehman's sale.
Bankruptcy filing
Barclays acquired the investment banking business of Lehman Brothers in September 2008
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. According to Bloomberg, reports filed with the U.S. Bankruptcy Court, Southern District of New York (Manhattan) on September 16 indicated that JPMorgan Chase & Co. provided Lehman Brothers with a total of $138 billion in "Federal Reserve-backed advances." The cash-advances by JPMorgan Chase were repaid by the Federal Reserve Bank of New York for $87 billion on September 15 and $51 billion on September 16.
Breakup process
On September 22, 2008, a revised proposal to sell the brokerage part of Lehman Brothers holdings of the deal, was put before the bankruptcy court, with a $1.3666 billion (£700 million) plan for Barclays to acquire the core business of Lehman Brothers (mainly Lehman's $960 million Midtown Manhattan office skyscraper), was approved. Manhattan court bankruptcy Judge James Peck, after a 7 hour hearing, ruled: "I have to approve this transaction because it is the only available transaction. Lehman Brothers became a victim, in effect the only true icon to fall in a tsunami that has befallen the credit markets. This is the most momentous bankruptcy hearing I've ever sat through. It can never be deemed precedent for future cases. It's hard for me to imagine a similar emergency."
Luc Despins, the creditors committee counsel, said: "The reason we're not objecting is really based on the lack of a viable alternative. We did not support the transaction because there had not been enough time to properly review it."[citation needed] In the amended agreement, Barclays would absorb $47.4 billion in securities and assume $45.5 billion in trading liabilities. Lehman's attorney Harvey R. Miller of Weil, Gotshal & Manges, said "the purchase price for the real estate components of the deal would be $1.29 billion, including $960 million for Lehman's New York headquarters and $330 million for two New Jersey data centers. Lehman's original estimate valued its headquarters at $1.02 billion but an appraisal from CB Richard Ellis this week valued it at $900 million."[citation needed] Further, Barclays will not acquire Lehman's Eagle Energy unit, but will have entities known as Lehman Brothers Canada Inc, Lehman Brothers Sudamerica, Lehman Brothers Uruguay and its Private Investment Management business for high net-worth individuals. Finally, Lehman will retain $20 billion of securities assets in Lehman Brothers Inc that are not being transferred to Barclays. Barclays had a potential liability of $2.5 billion to be paid as severance, if it chooses not to retain some Lehman employees beyond the guaranteed 90 days.
On September 22, 2008, Nomura Holdings, Inc. announced it agreed to acquire Lehman Brothers' franchise in the Asia Pacific region including Japan, Hong Kong and Australia. The following day, Nomura announced its intentions to acquire Lehman Brothers' investment banking and equities businesses in Europe and the Middle East. A few weeks later it was announced that conditions to the deal had been met, and the deal became legally effective on Monday, October 13. In 2007, non-US subsidiaries of Lehman Brothers were responsible for over 50% of global revenue produced.
Impact of bankruptcy fili
The Dow Jones closed down just over 500 points (?4.4%) on September 15, 2008, at the time the largest drop by points in a single day since the days following the attacks on September 11, 2001. (This drop was subsequently exceeded by an even larger ?7.0% plunge on September 29, 2008.)
Lehman's bankruptcy was expected to cause some depreciation in the price of commercial real estate. The prospect for Lehman's $4.3 billion in mortgage securities getting liquidated sparked a selloff in the commercial mortgage-backed securities (CMBS) market. Additional pressure to sell securities in commercial real estate is feared as Lehman gets closer to liquidating its assets. Apartment-building investors are also expected to feel pressure to sell as Lehman unloads its debt and equity pieces of the $22 billion purchase of Archstone, the third-largest United States real estate investment trust (REIT). Archstone's core business is the ownership and management of residential apartment buildings in major metropolitan areas of the United States. Jeffrey Spector, a real-estate analyst at UBS said that in markets with apartment buildings that compete with Archstone, "there is no question that if you need to sell assets, you will try to get ahead" of the Lehman selloff, adding "Every day that goes by there will be more pressure on pricing."
Several money funds and institutional cash funds had significant exposure to Lehman with the institutional cash fund run by The Bank of New York Mellon and the Primary Reserve Fund, a money-market fund, both falling below $1 per share, called "breaking the buck", following losses on their holdings of Lehman assets. In a statement The Bank of New York Mellon said its fund had isolated the Lehman assets in a separate structure. It said the assets accounted for 1.13% of its fund. The drop in the Primary Reserve Fund was the first time since 1994 that a money-market fund had dropped below the $1-per-share level.
Putnam Investments, a unit of Canada's Great-West Lifeco, shut a $12.3 billion money-market fund as it faced "significant redemption pressure" on September 17, 2008. Evergreen Investments said its parent Wachovia Corporation would "support" three Evergreen money-market funds to prevent their shares from falling.[28] This move to cover $494 million of Lehman assets in the funds also raised fears about Wachovia's ability to raise capital.
Close to 100 hedge funds used Lehman as their prime broker and relied largely on the firm for financing. In an attempt to meet their own credit needs, Lehman Brothers International routinely re-hypothecated[30] the assets of their hedge funds clients that utilized their prime brokerage services. Lehman Brothers International held close to 40 billion dollars of clients assets when it filed for Chapter 11 Bankruptcy. Of this, 22 billion had been re-hypothecated.[31] As administrators took charge of the London business and the U.S. holding company filed for bankruptcy, positions held by those hedge funds at Lehman were frozen. As a result, the hedge funds are being forced to de-lever and sit on large cash balances inhibiting chances at further growth.[32] This in turn created further market dislocation and overall systemic risk, resulting in a 737 billion dollar decline in collateral outstanding in the securities lending market.
In Japan, banks and insurers announced a combined 249 billion yen ($2.4 billion) in potential losses tied to the collapse of Lehman. Mizuho Trust & Banking Co. cut its profit forecast by more than half, citing 11.8 billion yen in losses on bonds and loans linked to Lehman. The Bank of Japan Governor Masaaki Shirakawa said "Most lending to Lehman Brothers was made by major Japanese banks, and their possible losses seem to be within the levels that can be covered by their profits," adding "There is no concern that the latest events will threaten the stability of Japan's financial system." During bankruptcy proceedings a lawyer from The Royal Bank of Scotland Group said the company is facing between $1.5 billion and $1.8 billion in claims against Lehman partially based on an unsecured guarantee from Lehman and connected to trading losses with Lehman subsidiaries, Martin Bienenstock.
Lehman was a counterparty to mortgage financier Freddie Mac in unsecured lending transactions that matured on September 15, 2008. Freddie said it had not received principal payments of $1.2 billion plus accrued interest. Freddie said it had further potential exposure to Lehman of about $400 million related to the servicing of single-family home loans, including repurchasing obligations. Freddie also said it "does not know whether and to what extent it will sustain a loss relating to the transactions" and warned that "actual losses could materially exceed current estimates." Freddie was still in the process of evaluating its exposure to Lehman and its affiliates under other business relationships.
After Constellation Energy was reported to have exposure to Lehman, its stock went down 56% in the first day of trading having started at $67.87. The massive drop in stocks led to the New York Stock Exchange halting trade of Constellation. The next day, as the stock plummeted as low as $13 per share, Constellation announced it was hiring Morgan Stanley and UBS to advise it on "strategic alternatives" suggesting a buyout. While rumors suggested French power company Électricité de France would buy the company or increase its stake, Constellation ultimately agreed to a buyout by MidAmerican Energy, part of Berkshire Hathaway (headed by billionaire Warren Buffett).
The Federal Agricultural Mortgage Corporation or Farmer Mac said it would have to write off $48 million in Lehman debt it owned as a result of the bankruptcy. Farmer Mac said it may not be in compliance with its minimum capital requirements at the end of September.
In Hong Kong more than 43,700 individuals in the city have invested in HK$15.7 billion of "guaranteed mini-bonds" (迷你債券
from Lehman. Many claim that banks and brokers mis-sold them as low-risk. Conversely, bankers note that minibonds are indeed low-risk instruments since they were backed by Lehman Brothers, which until just months before its collapse was a venerable member of Wall Street with high credit and investment ratings. The default of Lehman Brothers was a low probability event, which was totally unexpected. Indeed, many banks accepted minibonds as collateral for loans and credit facilities. Another HK$3 billion has been invested in similar like derivatives. The Hong Kong government proposed a plan to buy back the investments at their current estimated value, which will allow investors to partially recover some of their loss by the end of the year.[44] HK chief executive Donald Tsang insisted the local banks respond swiftly to the government buy-back proposal as the Monetary Authority received more than 16,000 complaints.[41][43][44] On October 17 He Guangbe, chairman of the Hong Kong Association of Banks, agreed to buy back the bonds, which will be priced using an agreed upon methodology based on its estimated current value.[45] This episode has deep repercussions on the banking industry, where misguided investor sentiments have become hostile to both wealth management products as well as the banking industry as a whole. Under intense pressure from the public, all political parties have come out in support of the investors, further fanning distrust towards the banking industry.
Neuberger Berman
Neuberger Berman Inc., through its subsidiaries, primarily Neuberger Berman, LLC, is an investment-advisory firm founded in 1939 by Roy R. Neuberger and Robert Berman, to manage money for high-net-worth individuals. In the decades that followed, the firm's growth mirrored that of the asset-management industry as a whole. In 1950, it introduced one of the first no-load mutual funds in the United States, the Guardian Fund, and also began to manage the assets of pension plans and other institutions. Historically known for its value-investing style, in the 1990s the firm began to diversify its competencies to include additional value and growth investing, across the entire capitalization spectrum, as well as new investment categories, such as international, real-estate investment trusts and high-yield investments. In addition, with the creation of a nationally and several state-chartered trust companies, the firm became able to offer trust and fiduciary services. Today the firm has approximately $130 billion in assets under management.
In October 1999, the firm conducted an initial public offering of its shares and commenced trading on the New York Stock Exchange, under the ticker symbol "NEU". In July 2003, shortly after the retired Mr. Neuberger's 100th birthday, the company announced that it was in merger discussions with Lehman Brothers Holdings Inc. These discussions ultimately resulted in the firm's acquisition by Lehman on October 31, 2003, for approximately $2.63 billion in cash and securities.
On November 20, 2006, Lehman announced its Neuberger Berman subsidiary would acquire H. A. Schupf & Co., a money-management firm targeted at wealthy individuals. Its $2.5 billion of assets would join Neuberger's $50 billion in high-net-worth client assets under management.[46]
An article in The Wall Street Journal on September 15, 2008, announcing that Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection, quoted Lehman officials regarding Neuberger Berman: "Neuberger Berman LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of the parent company, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and aren't subject to the claims of Lehman Brothers Holdings' creditors, Lehman said."[47]
Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent e-mail memos suggesting, among other things, that the Lehman Brothers' top people forgo multi-million dollar bonuses to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."
Lehman Brothers Investment Management Director George Herbert Walker IV dismissed the proposal, going so far as to actually apologize to other members of the Lehman Brothers executive committee for the idea of bonus reduction having been suggested. He wrote, "Sorry team. I am not sure what's in the water at Neuberger Berman. I'm embarrassed and I apologize."[48]
Controversies
Controversy of executive pay during crisis
Richard Fuld, head of Lehman Brothers, faced questioning from the U.S. House of Representatives' Committee on Oversight and Government Reform. Rep. Henry Waxman (D-CA) asked: "Your company is now bankrupt, our economy is in crisis, but you get to keep $480 million (£276 million). I have a very basic question for you, is this fair?"[49] Fuld said that he had in fact taken about $300 million (£173 million) in pay and bonuses over the past eight years.[49] Despite Fuld's defense on his high pay, Lehman Brothers executive pay was reported to have increased significantly before filing for bankruptcy.[50] On October 17, 2008, CNBC reported that several Lehman executives, including Richard Fuld, have been subpoenaed in a case relating to securities fraud.[51]
Accounting manipulation
In March 2010, the report of Anton R. Valukas, the Bankruptcy Examiner, drew attention to the use of Repo 105 transactions to boost the bank's apparent financial position around the date of the year-end balance sheet. The attorney general Andrew Cuomo later filed charges against the bank's auditors Ernst & Young in December 2010, alleging that the firm "substantially assisted... a massive accounting fraud" by approving the accounting treatment.[52]
On April 12, 2010, a New York Times story revealed that Lehman had used a small company, Hudson Castle, to move a number of transactions and assets off Lehman's books as a means of manipulating accounting numbers of Lehman's finances and risks. One Lehman executive described Hudson Castle as an "alter ego" of Lehman. According to the story, Lehman owned one quarter of Hudson; Hudson's board was controlled by Lehman, most Hudson staff members were former Lehman employees.[53]
Section 363 Sale
On February 22, 2011, Judge James M. Peck of the U.S. Bankruptcy Court in the Southern District of New York rejected claims by lawyers for the Lehman estate that Barclays had improperly reaped a windfall from the section 363 sale. "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week."=wikipedia
Lehman borrowed significant amounts to fund its investing in the years leading to its bankruptcy in 2008, a process known as leveraging or gearing. A significant portion of this investing was in housing-related assets, making it vulnerable to a downturn in that market. One measure of this risk-taking was its leverage ratio, a measure of the ratio of assets to owners equity, which increased from approximately 24:1 in 2003 to 31:1 by 2007. While generating tremendous profits during the boom, this vulnerable position meant that just a 3–4% decline in the value of its assets would entirely eliminate its book value or equity. Investment banks such as Lehman were not subject to the same regulations applied to depository banks to restrict their risk-taking.
In August 2007, Lehman closed its subprime lender, BNC Mortgage, eliminating 1,200 positions in 23 locations, and took a $25-million after-tax charge and a $27-million reduction in goodwill. The firm said that poor market conditions in the mortgage space "necessitated a substantial reduction in its resources and capacity in the subprime space".
Lehman's final months
In 2008, Lehman faced an unprecedented loss due to the continuing subprime mortgage crisis. Lehman's loss was apparently a result of having held on to large positions in subprime and other lower-rated mortgage tranches when securitizing the underlying mortgages. Whether Lehman did this because it was simply unable to sell the lower-rated bonds, or made a conscious decision to hold them, is unclear. In any event, huge losses accrued in lower-rated mortgage-backed securities throughout 2008. In the second fiscal quarter, Lehman reported losses of $2.8 billion and decided to raise $6 billion in additional capital.[6] In the first half of 2008 alone, Lehman stock lost 73% of its value as the credit market continued to tighten. In August 2008, Lehman reported that it intended to release 6% of its work force, 1,500 people, just ahead of its third-quarter-reporting deadline in September.
On August 22, 2008, shares in Lehman closed up 5% (16% for the week) on reports that the state-controlled Korea Development Bank was considering buying Lehman. Most of those gains were quickly eroded as news emerged that Korea Development Bank was "facing difficulties pleasing regulators and attracting partners for the deal." It culminated on September 9, 2008, when Lehman's shares plunged 45% to $7.79, after it was reported that the state-run South Korean firm had put talks on hold.
Investor confidence continued to erode as Lehman's stock lost roughly half its value and pushed the S&P 500 down 3.4% on September 9, 2008. The Dow Jones lost nearly 300 points the same day on investors' concerns about the security of the bank. The U.S. government did not announce any plans to assist with any possible financial crisis that emerged at Lehman.
On September 10, 2008, Lehman announced a loss of $3.9 billion and their intent to sell off a majority stake in their investment-management business, which includes Neuberger Berman.[12][13] The stock slid 7% that day.
On September 13, 2008, Timothy F. Geithner, then president of the Federal Reserve Bank of New York called a meeting on the future of Lehman, which included the possibility of an emergency liquidation of its assets. Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. The New York Times reported on September 14, 2008, that Barclays had ended its bid to purchase all or part of Lehman and a deal to rescue the bank from liquidation collapsed. It emerged subsequently that a deal had been vetoed by the Bank of England and the UK's Financial Services Authority. Leaders of major Wall Street banks continued to meet late that day to prevent the bank's rapid failure. Bank of America's rumored involvement also appeared to end as federal regulators resisted its request for government involvement in Lehman's sale.
Bankruptcy filing
Barclays acquired the investment banking business of Lehman Brothers in September 2008
Lehman Brothers filed for Chapter 11 bankruptcy protection on September 15, 2008. According to Bloomberg, reports filed with the U.S. Bankruptcy Court, Southern District of New York (Manhattan) on September 16 indicated that JPMorgan Chase & Co. provided Lehman Brothers with a total of $138 billion in "Federal Reserve-backed advances." The cash-advances by JPMorgan Chase were repaid by the Federal Reserve Bank of New York for $87 billion on September 15 and $51 billion on September 16.
Breakup process
On September 22, 2008, a revised proposal to sell the brokerage part of Lehman Brothers holdings of the deal, was put before the bankruptcy court, with a $1.3666 billion (£700 million) plan for Barclays to acquire the core business of Lehman Brothers (mainly Lehman's $960 million Midtown Manhattan office skyscraper), was approved. Manhattan court bankruptcy Judge James Peck, after a 7 hour hearing, ruled: "I have to approve this transaction because it is the only available transaction. Lehman Brothers became a victim, in effect the only true icon to fall in a tsunami that has befallen the credit markets. This is the most momentous bankruptcy hearing I've ever sat through. It can never be deemed precedent for future cases. It's hard for me to imagine a similar emergency."
Luc Despins, the creditors committee counsel, said: "The reason we're not objecting is really based on the lack of a viable alternative. We did not support the transaction because there had not been enough time to properly review it."[citation needed] In the amended agreement, Barclays would absorb $47.4 billion in securities and assume $45.5 billion in trading liabilities. Lehman's attorney Harvey R. Miller of Weil, Gotshal & Manges, said "the purchase price for the real estate components of the deal would be $1.29 billion, including $960 million for Lehman's New York headquarters and $330 million for two New Jersey data centers. Lehman's original estimate valued its headquarters at $1.02 billion but an appraisal from CB Richard Ellis this week valued it at $900 million."[citation needed] Further, Barclays will not acquire Lehman's Eagle Energy unit, but will have entities known as Lehman Brothers Canada Inc, Lehman Brothers Sudamerica, Lehman Brothers Uruguay and its Private Investment Management business for high net-worth individuals. Finally, Lehman will retain $20 billion of securities assets in Lehman Brothers Inc that are not being transferred to Barclays. Barclays had a potential liability of $2.5 billion to be paid as severance, if it chooses not to retain some Lehman employees beyond the guaranteed 90 days.
On September 22, 2008, Nomura Holdings, Inc. announced it agreed to acquire Lehman Brothers' franchise in the Asia Pacific region including Japan, Hong Kong and Australia. The following day, Nomura announced its intentions to acquire Lehman Brothers' investment banking and equities businesses in Europe and the Middle East. A few weeks later it was announced that conditions to the deal had been met, and the deal became legally effective on Monday, October 13. In 2007, non-US subsidiaries of Lehman Brothers were responsible for over 50% of global revenue produced.
Impact of bankruptcy fili
The Dow Jones closed down just over 500 points (?4.4%) on September 15, 2008, at the time the largest drop by points in a single day since the days following the attacks on September 11, 2001. (This drop was subsequently exceeded by an even larger ?7.0% plunge on September 29, 2008.)
Lehman's bankruptcy was expected to cause some depreciation in the price of commercial real estate. The prospect for Lehman's $4.3 billion in mortgage securities getting liquidated sparked a selloff in the commercial mortgage-backed securities (CMBS) market. Additional pressure to sell securities in commercial real estate is feared as Lehman gets closer to liquidating its assets. Apartment-building investors are also expected to feel pressure to sell as Lehman unloads its debt and equity pieces of the $22 billion purchase of Archstone, the third-largest United States real estate investment trust (REIT). Archstone's core business is the ownership and management of residential apartment buildings in major metropolitan areas of the United States. Jeffrey Spector, a real-estate analyst at UBS said that in markets with apartment buildings that compete with Archstone, "there is no question that if you need to sell assets, you will try to get ahead" of the Lehman selloff, adding "Every day that goes by there will be more pressure on pricing."
Several money funds and institutional cash funds had significant exposure to Lehman with the institutional cash fund run by The Bank of New York Mellon and the Primary Reserve Fund, a money-market fund, both falling below $1 per share, called "breaking the buck", following losses on their holdings of Lehman assets. In a statement The Bank of New York Mellon said its fund had isolated the Lehman assets in a separate structure. It said the assets accounted for 1.13% of its fund. The drop in the Primary Reserve Fund was the first time since 1994 that a money-market fund had dropped below the $1-per-share level.
Putnam Investments, a unit of Canada's Great-West Lifeco, shut a $12.3 billion money-market fund as it faced "significant redemption pressure" on September 17, 2008. Evergreen Investments said its parent Wachovia Corporation would "support" three Evergreen money-market funds to prevent their shares from falling.[28] This move to cover $494 million of Lehman assets in the funds also raised fears about Wachovia's ability to raise capital.
Close to 100 hedge funds used Lehman as their prime broker and relied largely on the firm for financing. In an attempt to meet their own credit needs, Lehman Brothers International routinely re-hypothecated[30] the assets of their hedge funds clients that utilized their prime brokerage services. Lehman Brothers International held close to 40 billion dollars of clients assets when it filed for Chapter 11 Bankruptcy. Of this, 22 billion had been re-hypothecated.[31] As administrators took charge of the London business and the U.S. holding company filed for bankruptcy, positions held by those hedge funds at Lehman were frozen. As a result, the hedge funds are being forced to de-lever and sit on large cash balances inhibiting chances at further growth.[32] This in turn created further market dislocation and overall systemic risk, resulting in a 737 billion dollar decline in collateral outstanding in the securities lending market.
In Japan, banks and insurers announced a combined 249 billion yen ($2.4 billion) in potential losses tied to the collapse of Lehman. Mizuho Trust & Banking Co. cut its profit forecast by more than half, citing 11.8 billion yen in losses on bonds and loans linked to Lehman. The Bank of Japan Governor Masaaki Shirakawa said "Most lending to Lehman Brothers was made by major Japanese banks, and their possible losses seem to be within the levels that can be covered by their profits," adding "There is no concern that the latest events will threaten the stability of Japan's financial system." During bankruptcy proceedings a lawyer from The Royal Bank of Scotland Group said the company is facing between $1.5 billion and $1.8 billion in claims against Lehman partially based on an unsecured guarantee from Lehman and connected to trading losses with Lehman subsidiaries, Martin Bienenstock.
Lehman was a counterparty to mortgage financier Freddie Mac in unsecured lending transactions that matured on September 15, 2008. Freddie said it had not received principal payments of $1.2 billion plus accrued interest. Freddie said it had further potential exposure to Lehman of about $400 million related to the servicing of single-family home loans, including repurchasing obligations. Freddie also said it "does not know whether and to what extent it will sustain a loss relating to the transactions" and warned that "actual losses could materially exceed current estimates." Freddie was still in the process of evaluating its exposure to Lehman and its affiliates under other business relationships.
After Constellation Energy was reported to have exposure to Lehman, its stock went down 56% in the first day of trading having started at $67.87. The massive drop in stocks led to the New York Stock Exchange halting trade of Constellation. The next day, as the stock plummeted as low as $13 per share, Constellation announced it was hiring Morgan Stanley and UBS to advise it on "strategic alternatives" suggesting a buyout. While rumors suggested French power company Électricité de France would buy the company or increase its stake, Constellation ultimately agreed to a buyout by MidAmerican Energy, part of Berkshire Hathaway (headed by billionaire Warren Buffett).
The Federal Agricultural Mortgage Corporation or Farmer Mac said it would have to write off $48 million in Lehman debt it owned as a result of the bankruptcy. Farmer Mac said it may not be in compliance with its minimum capital requirements at the end of September.
In Hong Kong more than 43,700 individuals in the city have invested in HK$15.7 billion of "guaranteed mini-bonds" (迷你債券
from Lehman. Many claim that banks and brokers mis-sold them as low-risk. Conversely, bankers note that minibonds are indeed low-risk instruments since they were backed by Lehman Brothers, which until just months before its collapse was a venerable member of Wall Street with high credit and investment ratings. The default of Lehman Brothers was a low probability event, which was totally unexpected. Indeed, many banks accepted minibonds as collateral for loans and credit facilities. Another HK$3 billion has been invested in similar like derivatives. The Hong Kong government proposed a plan to buy back the investments at their current estimated value, which will allow investors to partially recover some of their loss by the end of the year.[44] HK chief executive Donald Tsang insisted the local banks respond swiftly to the government buy-back proposal as the Monetary Authority received more than 16,000 complaints.[41][43][44] On October 17 He Guangbe, chairman of the Hong Kong Association of Banks, agreed to buy back the bonds, which will be priced using an agreed upon methodology based on its estimated current value.[45] This episode has deep repercussions on the banking industry, where misguided investor sentiments have become hostile to both wealth management products as well as the banking industry as a whole. Under intense pressure from the public, all political parties have come out in support of the investors, further fanning distrust towards the banking industry.
Neuberger Berman
Neuberger Berman Inc., through its subsidiaries, primarily Neuberger Berman, LLC, is an investment-advisory firm founded in 1939 by Roy R. Neuberger and Robert Berman, to manage money for high-net-worth individuals. In the decades that followed, the firm's growth mirrored that of the asset-management industry as a whole. In 1950, it introduced one of the first no-load mutual funds in the United States, the Guardian Fund, and also began to manage the assets of pension plans and other institutions. Historically known for its value-investing style, in the 1990s the firm began to diversify its competencies to include additional value and growth investing, across the entire capitalization spectrum, as well as new investment categories, such as international, real-estate investment trusts and high-yield investments. In addition, with the creation of a nationally and several state-chartered trust companies, the firm became able to offer trust and fiduciary services. Today the firm has approximately $130 billion in assets under management.
In October 1999, the firm conducted an initial public offering of its shares and commenced trading on the New York Stock Exchange, under the ticker symbol "NEU". In July 2003, shortly after the retired Mr. Neuberger's 100th birthday, the company announced that it was in merger discussions with Lehman Brothers Holdings Inc. These discussions ultimately resulted in the firm's acquisition by Lehman on October 31, 2003, for approximately $2.63 billion in cash and securities.
On November 20, 2006, Lehman announced its Neuberger Berman subsidiary would acquire H. A. Schupf & Co., a money-management firm targeted at wealthy individuals. Its $2.5 billion of assets would join Neuberger's $50 billion in high-net-worth client assets under management.[46]
An article in The Wall Street Journal on September 15, 2008, announcing that Lehman Brothers Holdings filed for Chapter 11 bankruptcy protection, quoted Lehman officials regarding Neuberger Berman: "Neuberger Berman LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of the parent company, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and aren't subject to the claims of Lehman Brothers Holdings' creditors, Lehman said."[47]
Just before the collapse of Lehman Brothers, executives at Neuberger Berman sent e-mail memos suggesting, among other things, that the Lehman Brothers' top people forgo multi-million dollar bonuses to "send a strong message to both employees and investors that management is not shirking accountability for recent performance."
Lehman Brothers Investment Management Director George Herbert Walker IV dismissed the proposal, going so far as to actually apologize to other members of the Lehman Brothers executive committee for the idea of bonus reduction having been suggested. He wrote, "Sorry team. I am not sure what's in the water at Neuberger Berman. I'm embarrassed and I apologize."[48]
Controversies
Controversy of executive pay during crisis
Richard Fuld, head of Lehman Brothers, faced questioning from the U.S. House of Representatives' Committee on Oversight and Government Reform. Rep. Henry Waxman (D-CA) asked: "Your company is now bankrupt, our economy is in crisis, but you get to keep $480 million (£276 million). I have a very basic question for you, is this fair?"[49] Fuld said that he had in fact taken about $300 million (£173 million) in pay and bonuses over the past eight years.[49] Despite Fuld's defense on his high pay, Lehman Brothers executive pay was reported to have increased significantly before filing for bankruptcy.[50] On October 17, 2008, CNBC reported that several Lehman executives, including Richard Fuld, have been subpoenaed in a case relating to securities fraud.[51]
Accounting manipulation
In March 2010, the report of Anton R. Valukas, the Bankruptcy Examiner, drew attention to the use of Repo 105 transactions to boost the bank's apparent financial position around the date of the year-end balance sheet. The attorney general Andrew Cuomo later filed charges against the bank's auditors Ernst & Young in December 2010, alleging that the firm "substantially assisted... a massive accounting fraud" by approving the accounting treatment.[52]
On April 12, 2010, a New York Times story revealed that Lehman had used a small company, Hudson Castle, to move a number of transactions and assets off Lehman's books as a means of manipulating accounting numbers of Lehman's finances and risks. One Lehman executive described Hudson Castle as an "alter ego" of Lehman. According to the story, Lehman owned one quarter of Hudson; Hudson's board was controlled by Lehman, most Hudson staff members were former Lehman employees.[53]
Section 363 Sale
On February 22, 2011, Judge James M. Peck of the U.S. Bankruptcy Court in the Southern District of New York rejected claims by lawyers for the Lehman estate that Barclays had improperly reaped a windfall from the section 363 sale. "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week."=wikipedia
September 10, 2013
Or anywhere else, for that matter...
The Border Is a Back Door for U.S. Device Searches
Source: NYTimes
...Newly released documents reveal how the government uses border crossings to seize and examine travelers’ electronic devices instead of obtaining a search warrant to gain access to the data...Customs and Border Protection, part of the Department of Homeland Security, said that it conducted electronic media searches on 4,957 people from Oct. 1, 2012, through Aug. 31, 2013, or about 15 a day, which is similar to the average during the previous two years. About 930,000 people are screened daily by border agents. But for those pulled aside for a secondary inspection (about 35,000 travelers a day), the experience can be distressing, resulting in a missed connecting flight, a prolonged interrogation, and in Mr. House’s case, the loss of a laptop necessary for his livelihood.
“I was worried about losing my job, and not being able to pay my rent, and what I was going to tell my parents,” said Mr. House, 26, who was working as a computer programmer at the time. He was also concerned about the government getting access to names stored on his laptop of individuals who had donated money to Private Manning’s legal defense. Private Manning was sentenced by a military judge last month to 35 years in prison for providing more than 700,000 government files to WikiLeaks.
Mr. House’s lawsuit was among a handful of cases challenging the government’s authority to search devices at the border. Pascal Abidor, a graduate student in Islamic studies, sued the government after he was detained and his laptop was seized during an Amtrak trip from Montreal to New York in 2010. A decision in that case is expected soon, according to the case manager for Judge Edward R. Korman, who is writing the opinion for the United States District Court for the Eastern District of New York. Mr. Abidor is also being represented by Ms. Crump of the A.C.L.U...As part of the settlement, the government agreed to destroy all copies of the data taken from Mr. House, and update his file so he will not automatically be detained when he returns to the United States after traveling abroad, which has happened repeatedly since 2010.
For now, the law remains murky about any limits on intrusive border inspections, including how long travelers can be detained, whether they are required to provide passwords for their devices — Mr. House refused — and whether they must answer any question an agent asks. Responses may be recorded in a traveler’s TECS file and shared with other government agencies.
Read more: http://www.nytimes.com/2013/09/10/business/the-border-is-a-back-door-for-us-device-searches.html
“Americans crossing the border are being searched and their digital media is being seized in the hopes that the government will find something to have them convicted,” Mr. House said. “I think it’s important for business travelers and people who consider themselves politically inclined to know what dangers they now face in a country where they have no real guarantee of privacy at the border.”
Or anywhere else, for that matter...
September 6, 2013
Weekend Economists Kickoff the Season, September 6-8, 2013
It is the start of football season, the start of school, and the start of Autumn following shortly thereafter.
It is the start of Budget Mania in Washington, with a Debt Ceiling kicker.
If we are very unfortunate, it is the start of the punishment of random innocent Syrians for the actions of the bastard who used chemical weapons on random innocent Syrians, and which will probably ignite World War 3.
In other words, the Silly Season in DC goes into full swing. And of course, there are local elections coming up.
The football cognoscenti among us are going to talk football. I'll throw in the stuff I can find.
I do know that Saturday night U of Michigan hosts its second ever night game, against Notre Dame, after which Notre Dame will pack up and never darken our stadium's doors again. Until the scheduled season changes. C'est la Vie!
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