Hey, Hey, We're The WEE Monkees! July 24-26, 2009

[Demeter]

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

http://www.youtube.com/watch?v=9daWKeyB8KM&feature=related

Here we come, walkin'
Down the street.
We get the funniest looks from
Ev'ry one we meet.
Hey, hey, we're the Monkees
And people say we monkey around.
But we're too busy singing
To put anybody down.

We go wherever we want to,
do what we like to do
We don't have time to get restless,
There's always something new.
Hey, hey, we're the Monkees
And people say we monkey around.
But we're too busy singing
To put anybody down.

We're just tryin' to be friendly,
Come and watch us sing and play,
We're the young generation,
And we've got something to say.

Any time, Or anywhere,
Just look over your shoulder
Guess who'll be standing there

Hey, hey, we're the Monkees
And people say we monkey around.
But we're too busy singing
To put anybody down.

(break)

Hey, hey, we're the Monkees
And people say we monkey around.
But we're too busy singing
To put anybody down.

We're just tryin' to be friendly,
Come and watch us sing and play,
We're the young generation,
And we've got something to say.

Hey, hey, we're the Monkees
Hey, hey, we're the Monkees


extra verse:

Hey, hey, we're the Monkees,
You never know where we'll be found.
so you'd better get ready,
We may be comin' to your town.

That really is WE, isn't it? Post What You've got, sit back and reminisce!

[Demeter]

1. Would It Be Friday Without a Bank Failure? SO FAR, TOTAL OF 7; 6 IN GEORGIA!

http://www.marketwatch.com/story/new-york-bank-is-58th-failure-of-2009-2009-07-24?siteid=yahoomy

SAN FRANCISCO (MarketWatch) -- Clarence, N.Y.-based Waterford Village Bank was closed by regulators Friday, marking the 58th U.S. bank failure of the year as the credit crunch continues to overwhelm financial institutions.

The failure marks the first in the state of New York in 2009.

The Federal Deposit Insurance Corp. said in a statement that Angola, N.Y.-based Evans Bank, National Association will assume the failed bank's deposits.

As of March 31, Waterford Village Bank had roughly $58 million in deposits and $61.4 million in assets, according to the FDIC.

The failure of Waterford Village Bank will cost the federal deposit insurance fund $5.6 million, the agency said.


The six bank subsidiaries of Security Bank Corporation, Macon, Georgia, were closed today by the Georgia Department of Banking and Finance, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with State Bank and Trust Company, Pinehurst, Georgia, to assume all of the deposits of the six bank subsidiaries of Security Bank Corporation.

The six banks involved in today's transaction are: Security Bank of Bibb County, Macon, GA, with $1.2 billion in total assets and $1 billion in deposits; Security Bank of Houston County, Perry, GA, with $383 million in assets and $320 million in deposits; Security Bank of Jones County, Gray, GA, with $453 million in assets and $387 million in deposits; Security Bank of Gwinnett County, Suwanee, GA, with $322 million in assets and $292 million in deposits; Security Bank of North Metro, Woodstock, GA, with $224 million in assets and $212 million in deposits; and Security Bank of North Fulton, Alpharetta, GA, with $209 million in assets and $191 million in deposits.

The six banks had a total of 20 branches, which will reopen during normal business hours beginning tomorrow as branches of State Bank and Trust Company...

As of March 31, 2009, the six banks had total assets of $2.8 billion and total deposits of approximately $2.4 billion. In addition to assuming all of the deposits of the failed bank, State Bank and Trust Company will acquire $2.4 billion in assets. The FDIC will retain the remaining assets for later disposition.

The FDIC and State Bank and Trust Company entered into a loss-share transaction on approximately $1.7 billion of the six banks' assets. State Bank and Trust Company will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers.

[Demeter]

2. FYI, The FDIC Snuck In Two Other Banks Last Week in CA

Vineyard Bank, National Association, Rancho Cucamonga, California, was closed by the Office of the Comptroller of the Currency, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with California Bank & Trust, San Diego, California, to assume all of the deposits of Vineyard Bank, N.A., excluding those from brokers...

As of March 31, 2009, Vineyard Bank, N.A. had total assets of $1.9 billion and total deposits of approximately $1.6 billion. In addition to assuming all of the deposits of the failed bank, California Bank & Trust agreed to purchase approximately $1.8 billion of assets. The FDIC will retain the remaining assets for later disposition.

California Bank & Trust will purchase all deposits, except about $134 million in brokered deposits, held by Vineyard Bank, N.A. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

The FDIC and California Bank & Trust entered into a loss-share transaction on approximately $1.5 billion of Vineyard Banks, N.A.'s assets. California Bank & Trust will share in the losses on the asset pools covered under the loss-share agreement. The loss-sharing arrangement is projected to maximize returns on the assets covered by keeping them in the private sector. The agreement also is expected to minimize disruptions for loan customers...

The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $579 million...Vineyard Bank, N.A. is the 56th FDIC-insured institution to fail in the nation this year, and the seventh in California. The last FDIC-insured institution to be closed in the state was Mirae Bank, Los Angeles, on June 26, 2009.



Temecula Valley Bank, Temecula, California, was closed today by the California Department of Financial Institutions, which appointed the Federal Deposit Insurance Corporation (FDIC) as receiver. To protect the depositors, the FDIC entered into a purchase and assumption agreement with First-Citizens Bank and Trust Company, Raleigh, North Carolina, to assume all of the deposits of Temecula Valley Bank, excluding those from brokers. SO THEY HAD TO GO ACROSS THE COUNTRY?...

As of May 31, 2009, Temecula Valley Bank had total assets of $1.5 billion and total deposits of approximately $1.3 billion. In addition to assuming all of the deposits of the failed bank, First-Citizens Bank and Trust Company agreed to purchase essentially all of the assets.

First-Citizens Bank and Trust Company will purchase all deposits, except about $304 million in brokered deposits, held by Temecula Valley Bank. The FDIC will pay the brokers directly for the amount of their funds. Customers who placed money with brokers should contact them directly for more information about the status of their deposits.

The FDIC and First-Citizens Bank and Trust Company entered into a loss-share transaction on approximately $1.3 billion of Temecula Valley Bank's assets. First-Citizens Bank and Trust Company will share in the losses on the asset pools covered under the loss-share agreement...The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $391 million. First-Citizens Bank and Trust Company's acquisition of all the deposits was the "least costly" resolution for the FDIC's DIF compared to alternatives. Temecula Valley Bank is the 57th FDIC-insured institution to fail in the nation this year, and the eighth in California. The last FDIC-insured institution to be closed in the state was Vineyard Bank, National Association, Rancho Cucamonga, also today.

[Dr.Phool]

8. It seems like they're shutting down every bank in Georgia.

[Demeter]

10. The Obvious Response

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

[AnneD]

82. Keeping with the theme.....

http://www.youtube.com/watch?v=53_jX_9m0g8&feature=related

[ozymandius]

19. I look forward to telling my grandkid about the Friday night bank follies.

I'll regale them about the bank closures that were a regular feature every Friday evening. "Ahhh... the good ol' days. They were horrible."

Then I expect the grandchild to ask me, "What's a bank?"

[Demeter]

23. So, We're Making Memories, Eh?

Meaning if we survive this, we will be able to laugh about it?

Two massively unsupported assumptions there....

[AnneD]

68. I am remembering the scene from the Terminator movies...

when the little kids were huddled around the fire someone had made in the old tv set.

[drm604]

20. Goin' Down

http://www.youtube.com/watch?v=URb8h4dLKps&feature=PlayList&p=3A756E92F5EED185&index=1

[Demeter]

3. Mexico bans some consumer bank fees (BE AFRAID, BANKSTERS! BE VERY AFRAID!)

http://www.ft.com/cms/s/0/cd10ad7c-76f1-11de-b23c-00144feabdc0.html

By Ronald Buchanan in Mexico City

Published: July 22 2009 20:29 | Last updated: July 22 2009 20:29

Mexico’s central bank has ordered the abolition of fees and commissions charged to customers by the nation’s banks which last year amounted to more than than a quarter of the institutions’ operating profits.

The move is seen as an effort to boost competition in a sector dominated by foreign banks such as Britain’s HSBC, Spain’s BBVA and Santander, and the Canadian Bank of Nova Scotia. It is also regarded as likely to counter growing criticism of what many regard as excessive and unfair charges, as well as promote more lending by the banks.

Bounced cheque fees are to be abolished as are charges for cancelling deposit accounts, credit cards, debit cards or internet banking services, the Bank of Mexico said.

The restrictions are to be imposed from August 21.

Mexican politicians of all leading parties have long argued that the fees charged by banks are excessive, and criticism has built to a crescendo as some charges have risen as a result of the recession and a devaluation of the peso.

Presenting the measures, the Bank of Mexico said it was “important to protect the public’s interests by adopting measures that promote transparency and competition in the provision of financial services.”

Mexico’s banking system has some 9m cheque or deposit accounts, the majority linked to payrolls.

Gabriel Casillas, a UBS economist in Mexico City, commented on Wednesday that the new rules represented “an important blow to one of the biggest sources of revenues for Mexican banks” and suggested they might be encouraged to compensate for the resulting losses by issuing more loans, so opening up credit channels that have seized up amid the global financial crisis.

The Mexican Bankers’ Association said its members were already working on implementing the new rules. “Mexico’s banks will continue to work with the financial authorities to promote greater competition among the banking institutions,” the association added.

[Demeter]

4. One-off charges force M Stanley to $159m loss (3 Q'S ALREADY, TRY FOR 4?)

http://www.ft.com/cms/s/0/c833d7a2-76b5-11de-9877-00144feabdc0.html

By Francesco Guerrera in New York

Published: July 22 2009 13:42 | Last updated: July 22 2009 20:36

After a near-death experience at the height of the crisis last year, Morgan Stanley vowed to overhaul its business so it would no longer be at the mercy of volatile markets and flighty investors.

The unspoken rationale behind plans to reduce risks, expand its retail business and trim the prime brokerage unit that services hedge funds was clear: Morgan Stanley wanted to be a lot less like its arch-rival Goldman Sachs.

Wednesday’s second-quarter results suggest that Morgan Stanley is achieving that goal but for the wrong reasons.

While Goldman reported record quarterly profits last week and held out the prospect of bumper pay for bankers, Morgan Stanley missed analysts’ expectations, reported its third loss-making quarter in a row and suffered a $700m write-down on property assets.

Its executives pointed to the high-level of “noise” generated by one-off charges that obscured underlying earnings.

John Mack, chief executive, said the bank would have been “solidly profitable” – rather than reporting a loss of $159m, or $1.10 per share – in the quarter had it not been for one-off factors.

Investors appeared to share that view, sending the company’s shares slightly higher by early afternoon in New York after marking them down for the morning. An accounting charge for the movement in Morgan Stanley’s debt – a counterintuitive rule that penalises banks when the price of their debt improves – reduced earnings by $1.32 per share during the quarter. The repayment of $10bn in Troubled Asset Relief Programme funds, which prompted Morgan Stanley to crystallise the cost of $850m in dividends to the authorities, another accounting charge, and a higher tax rate versus last year further curbed earnings.

But Mr Mack did admit he was “not satisfied” with performance in fixed- income trading, where Morgan Stanley failed to take advantage of the boom in commissions enjoyed by many of its rivals, and in the asset management unit.

The trading underperformance contributed to a $126m loss in Morgan Stanley’s securities business – one of its three core units – in the quarter, a large swing from the $651m profits recorded in the same period last year.

Colm Kelleher, Morgan Stanley’s finance chief, said the issues in the trading division were “easily fixable”.

He said Morgan Stanley’s traders had been reluctant to use the firm’s balance sheet to support clients despite favourable market conditions. “We did not take enough advantage of the market,” Mr Kelleher said. “I have said I am very prepared to use the balance sheet if needed but I cannot dictate people’s trading ”.

The bank has already made changes, hiring Jack DiMaio, a former Credit Suisse executive, to replace Roberto Hoornweg as head of fixed-income trading. Executives said its performance would shine through. Nevertheless, it warned of competitive pressures on pay as rivals offer big “guaranteed bonuses” to recruit and retain bankers.

[AnneD]

85. And for our theme.....

Gonna buy me a dog

www.youtube.com/watch?v=jRrdtaZw0Ww&feature=related

[Demeter]

5. MEANWHILE...Goldman sheds bail-out legacy

http://www.ft.com/cms/s/0/e23a469a-76f1-11de-b23c-00144feabdc0.html

By Greg Farrell in New York

Published: July 22 2009 20:06 | Last updated: July 22 2009 20:06

Goldman Sachs became the first major bank to buy back warrants held by the US Treasury on Wednesday, allowing the group to shake off the last vestige of its participation in the government bail-out programme after just nine months.

Goldman paid $1,1bn to the US Treasury to buy back the warrants. which were granted as part of the government’s $10bn investment of troubled asset relief programme funds in the bank last year.

The bank paid back the Tarp funds last month, along with several other financial institutions that were deemed to be in good health following the government-run “stress tests”.

Goldman began negotiating to buy back the warrants several weeks ago, said a source familiar with the matter, and agreed to a deal on Wednesday after trying unsuccessfully to talk the Treasury down from its asking price of $1.1bn.

Assigning a value to the warrants has been a source of contention for the financial institutions seeking to buy them back. JP Morgan Chase has said the Treasury would sell its warrants at a public auction after the two sides disagreed over how to price them.

The government said it had earned an annualised return of 23 per cent from its investment in Goldman.

The Treasury said: ”In just nine months, the taxpayers have been repaid the full $10bn that the government originally invested, along with $318m in dividends.”

Lloyd Blankfein, Goldman’s chief executive, said, “This return is reflective of the government’s assistance, which benefited the financial system, our firm and our shareholders. We are grateful for the government efforts and are pleased that this additional money can be used by the government to revitalise the economy, a priority in which we all have a common stake.”

Last September, after the collapse of Lehman Brothers and the agreed sale of Merrill Lynch to Bank of America, the government allowed Goldman and Morgan Stanley to avert an investor panic by converting into bank holding companies over a weekend.

In October, Goldman and Morgan Stanley were among nine institutions granted Tarp funds by Hank Paulson, then Treasury secretary.

In addition to the funds, Goldman was able to raise $28bn in subsequent months by gaining access to a temporary loan guarantee programme backed by the government.

[mbperrin]

52. Numbers don't add up (I should be surprised?)

The government said it had earned an annualised return of 23 per cent from its investment in Goldman.

The Treasury said: ”In just nine months, the taxpayers have been repaid the full $10bn that the government originally invested, along with $318m in dividends.”

23% of $10 billion would be $2.3 billion in a year. 9 months is 3/4 of a year, so 3/4 of $2.3 billion would be $1.7 billion+, which would be the money paid if the annualised return was 23%.

$318 million is about 1/6 of $1.7 billion, which means that the real return is about 1/6 of 23%, or less than 4%.

Gosh, wonder how Golden Sacks made money paying less than 4% on $10 billion of unsecured money with no certain payback date? They MUST be geniuses!!

Woops, think I hear the phone ringing; maybe it's from that Payroll Advance company about MY loan! Gotta go...

[AnneD]

69. So was that dividend a cash pay out...

or was is 'reinvested' in Goldman Sach stock.

[mbperrin]

77. Fine question!

It wouldn't even surprise me if the latter...

[AnneD]

81. This is where MSM

and economic news reporting fails....asking a simple follow up question.

[Demeter]

6. MEANWHILE...US banks warn on commercial property

http://www.ft.com/cms/s/0/3a1e9d86-76eb-11de-b23c-00144feabdc0.html

By Francesco Guerrera and Greg Farrell in New York

Published: July 22 2009 19:21 | Last updated: July 22 2009 19:21

Two of America’s biggest banks, Morgan Stanley and Wells Fargo, on Wednesday threw into sharp relief the mounting woes of the US commercial property market when they reported large losses and surging bad loans.

The disappointing second-quarter results for two of the largest lenders and investors in office, retail and industrial property across the US confirmed investors’ fears that commercial real estate would be the next front in the financial crisis after the collapse of the housing market.

The failing health of the $6,700bn commercial property market, which accounts for more than 10 per cent of US gross domestic product, could be a significant hurdle on the road to recovery.

Colm Kelleher, Morgan Stanley’s chief financial officer, said he did not see the light “at the end of the commercial real estate tunnel yet”, after the bank reported a $700m writedown on its $17bn commercial property portfolio in the second quarter. “Peak to trough, you have already had a pretty nasty correction in the market but it is still not looking very good at the moment,” he said after Morgan Stanley reported its third straight quarterly loss.

Wells Fargo saw non-performing loans in commercial real estate jump 69 per cent, from $4.5bn to $7.6bn in the second quarter as the economic downturn caused developers and office owners to fall behind in their mortgage payments.

Shares in the San Francisco-based bank were down more than 3 per cent at $24.55 in the early afternoon in New York as the increase in commercial non-performing loans undermined news of its best-ever quarterly profit. Morgan Stanley shares dipped before moving higher.

Ben Bernanke, chairman of the Federal Reserve, was repeatedly questioned by lawmakers on commercial real estate while testifying to Congress on Wednesday.

Mr Bernanke warned that a continued deterioration in commercial property, where prices have fallen by about 35 per cent since the market’s peak and defaults have been rising sharply, would present a “difficult” challenge for the economy.

He added that one of the main problems was that the market for securities backed by commercial mortgages had “completely shut down”.

The widespread weakness in commercial real estate is a crucial issue for US banks, especially regional lenders that ramped up their exposure to local developers in the easy credit boom that preceded the crisis.

“The commercial real estate market is soft, and most of the big banks are seeing the same kind of thing,” said Howard Atkins, chief financial officer of Wells Fargo.

SEE VIDEO AT LINK!

[Dr.Phool]

7. High frequency trading is a scam. Denninger

The NY Times has blown the cover off the dark art known as "HFT", or "High-Frequency Trading", perhaps without knowing it.

It was July 15, and Intel, the computer chip giant, had reporting robust earnings the night before. Some investors, smelling opportunity, set out to buy shares in the semiconductor company Broadcom. (Their activities were described by an investor at a major Wall Street firm who spoke on the condition of anonymity to protect his job.) The slower traders faced a quandary: If they sought to buy a large number of shares at once, they would tip their hand and risk driving up Broadcom’s price. So, as is often the case on Wall Street, they divided their orders into dozens of small batches, hoping to cover their tracks. One second after the market opened, shares of Broadcom started changing hands at $26.20.

The slower traders began issuing buy orders. But rather than being shown to all potential sellers at the same time, some of those orders were most likely routed to a collection of high-frequency traders for just 30 milliseconds — 0.03 seconds — in what are known as flash orders. While markets are supposed to ensure transparency by showing orders to everyone simultaneously, a loophole in regulations allows marketplaces like Nasdaq to show traders some orders ahead of everyone else in exchange for a fee.

In less than half a second, high-frequency traders gained a valuable insight: the hunger for Broadcom was growing. Their computers began buying up Broadcom shares and then reselling them to the slower investors at higher prices. The overall price of Broadcom began to rise.

Soon, thousands of orders began flooding the markets as high-frequency software went into high gear. Automatic programs began issuing and canceling tiny orders within milliseconds to determine how much the slower traders were willing to pay. The high-frequency computers quickly determined that some investors’ upper limit was $26.40. The price shot to $26.39, and high-frequency programs began offering to sell hundreds of thousands of shares.

But then the NY Times gets the bottom line wrong:

The result is that the slower-moving investors paid $1.4 million for about 56,000 shares, or $7,800 more than if they had been able to move as quickly as the high-frequency traders.

No. The disadvantage was not speed. The disadvantage was that the "algos" had engaged in something other than what their claimed purpose is in the marketplace - that is, instead of providing liquidity, they intentionally probed the market with tiny orders that were immediately canceled in a scheme to gain an illegal view into the other side's willingness to pay.

Let me explain.

Let's say that there is a buyer willing to buy 100,000 shares of BRCM with a limit price of $26.40. That is, the buyer will accept any price up to $26.40.

But the market at this particular moment in time is at $26.10, or thirty cents lower.

So the computers, having detected via their "flash orders" (which ought to be illegal) that there is a desire for Broadcom shares, start to issue tiny (typically 100 share lots) "immediate or cancel" orders - IOCs - to sell at $26.20. If that order is "eaten" the computer then issues an order at $26.25, then $26.30, then $26.35, then $26.40. When it tries $26.45 it gets no bite and the order is immediately canceled.

Now the flush of supply comes at, big coincidence, $26.39, and the claim is made that the market has become "more efficient."

Nonsense; there was no "real seller" at any of these prices! This pattern of offering was intended to do one and only one thing - manipulate the market by discovering what is supposed to be a hidden piece of information - the other side's limit price!

With normal order queues and flows the person with the limit order would see the offer at $26.20 and might drop his limit. But the computers are so fast that unless you own one of the same speed you have no chance to do this - your order is immediately "raped" at the full limit price! You got screwed, as the fill price is in fact 30 cents a share away from where the market actually is.

A couple of years ago if you entered a limit order for $26.40 with the market at $26.10 odds are excellent that most of your order would have filled down near where the market was when you entered the order - $26.10. Today, odds are excellent that most of your order will fill at $26.39, and the HFT firms will claim this is an "efficient market." The truth is that you got screwed for 29 cents per share which was quite literally stolen by the HFT firms that probed your book before you could detect the activity, determined your maximum price, and then sold to you as close to your maximum price as was possible.

If you're wondering how this ramp job happened in the last week and a half, you just discovered the answer. When there are limit orders beyond the market outstanding against a market that is moving higher the presence of these programs will guarantee huge profits to the banks running them and they also guarantee both that the retail buyers will get screwed as the market will move MUCH faster to the upside than it otherwise would.

Likewise when the market is moving downward with conviction we will see the opposite - the "sell stops" will also be raped, the investor will also get screwed, and again the HFT firms will make an outsize profit.

These programs were put in place and are allowed under the claim that they "improve liquidity." Hogwash. They have turned the market into a rigged game where institutional orders (that's you, Mr. and Mrs. Joe Public, when you buy or sell mutual funds!) are routinely screwed for the benefit of a few major international banks.

If you're wondering how Goldman Sachs and other "big banks and hedge funds" made all their money this last quarter, now you know. And while you may think this latest market move was good for you, the fact of the matter is that you have been severely disadvantaged by these "high-frequency trading" programs and what's worse, the distortion that is presented by these "ultra-fast" moves has a nasty habit of asserting itself in an ugly snapback a few days, weeks or months later - in the opposite direction.

The amount of "slippage" due to these programs sounds small - a few cents per order. It is. But such "skimming" is exactly like paying graft to a politician or "protection money" to the Mafia - while the amount per transaction may be small the fact of the matter is that it is not supposed to happen, it does not promote efficient markets, it does not add to market liquidity, the "power" behind moves is dramatically increased by this sort of behavior and market manipulation is supposed to be both a civil and criminal violation of the law.

While the last two weeks have seen this move the market up, the same sort of "acceleration" in market behavior can and will happen to the downside when a downward movement asserts itself, and I guarantee that you won't like what that does to your portfolio. You saw an example of it last September and October, and then again this spring. As things stand it will happen again.

This sort of gaming of the system must be stopped. Trading success should be a matter of being able to actually determine the prospects of a company and its stock price in the future - that is, actually trade. What we have now is a handful of big banks and funds that have figured out ways around the rules that are supposed to prohibit discovery of the maximum price that someone will pay or the minimum they will sell at by what amounts to a sophisticated bid-rigging scheme.

Since it appears obvious that the exchanges will not police the behavior of their member firms in this regard government must step in and unplug these machines - all of them - irrespective of whether they are moving the market upward or downward. While many people think they "benefited" from this latest market move, I'm quite certain you won't like it if and when the move is to the downside and the mutual fund holdings in your 401k and IRA get shredded (again) by what should be prohibited and in fact result in indictments, not profits.
------------------------------------------

More and a video report from CNBkoo-koo at

http://market-ticker.denninger.net/authors/2-Karl-Denninger

[Demeter]

9. We Ought to Name You Sherlock Holmes!

That's stunning gall. Think GS is toast yet?

[Hugin]

63. To the Financial Media... They're the "Toast" of the Town.

:blech:

Outside of posts on this topic in the SMW and WEE... I have heard nary an ill word about this theft. Even though almost everyone who has some sort of an institutionalized investment has been affected by HFT.

Please, also keep in mind Timmeh is a huge proponent of HFT. So, it's not going anywhere any time soon.

[Demeter]

11. Citi names Fannie Mae director to board (6 DEGREES OF INCEST)

http://www.ft.com/cms/s/0/7d43ed50-77e5-11de-9713-00144feabdc0.html

By Francesco Guerrera and Chrystia Freeland in New York

Published: July 24 2009 01:23 | Last updated: July 24 2009 01:23

Citigroup is expected to name Diana Taylor, a respected former banking regulator who is the companion of Michael Bloomberg, New York city’s mayor, as a director in a revamp of its much-criticised board.

People close to the situation said that Ms Taylor, who was New York state’s banking watchdog between 2003 and 2007, was one of three new additions Citi wants for its 14-strong board in coming weeks.

Ms Taylor narrowly missed out on becoming head of the Federal Deposit Insurance Corporation, a banking regulator, in 2006 amid speculation that her nomination had been scuppered by political opposition to some of Mr Bloomberg’s policies. The job went to Sheila Bair, who has been a fierce critic of Citi’s top executives, corporate governance and risk management in recent months.

Citi, which is poised to cede a 34 per cent stake to the US government, has yet to make a final decision on the appointment but Ms Taylor has been in talks with Dick Parsons, the bank’s chairman, for at least a week, according to people familiar with the matter. Citi and Ms Taylor declined to comment.

Ms Taylor has been a director of Fannie Mae since December but she is expected to leave the troubled mortgage finance group if she joins Citi.

The addition of Ms Taylor would be a boost for Citi’s board, which has been criticised by regulators and investors for the long tenures of some directors, their lack of banking experience and their inability to stop the bank’s disastrous build-up of toxic assets before the crisis.

Citi has overhauled parts of its board, replacing four directors including Robert Rubin, the former US Treasury secretary, and chairman Sir Win Bischoff.

Mr Parsons, who took over as chairman in January, has tried to allay the FDIC’s fears that Citi’s board and management, led by chief executive Vikram Pandit, are not up to the task of rebuilding the financial giant.

Ms Taylor, 54, is managing director at Wolfensohn & Company, an emerging markets-focused investment firm founded by James Wolfensohn, the former World Bank president and current chairman of Citi’s international advisory board.

She began her career as an investment banker at Smith Barney, now part of Citi.

● Separately, Citi on Thursday completed the first phase of a $58bn exchange of preferred shares into common stock aimed at raising capital. This tranche included private holders of $12.5bn of preferred shares, such as Sandy Weill, Citi’s former chief, Singapore’s Government Investment Corporation and Saudi Arabia’s Prince Alwaleed Bin Talal. The US government exchanged $12.5bn of its shares, taking a stake of about 17 per cent in Citi. The rest of the offer expires on Friday.

[Demeter]

16. IS DIANA TAYLOR THE ONE?

http://www.youtube.com/watch?v=XfuBREMXxts&NR=1

[Demeter]

12. CAR TALK: NOT TOM AND RAY, ALAS!

GM rejects Beijing Auto bid for Opel

http://www.ft.com/cms/s/0/d86fc102-7774-11de-8c68-00144feabdc0.html


Ford in surprise $2.3bn net profit

http://www.ft.com/cms/s/0/c1562f56-777e-11de-8c68-00144feabdc0.html

Ford Motor on Thursday reported a surprise $2.3bn second-quarter net profit, thanks largely to April’s debt restructuring deal but also to well-received models that boosted its share in markets around the world.

Alan Mulally, chief executive, acknowledged that Ford’s shunning of government bail-out aid had helped its image in the US, its biggest market, and said the carmaker still planned to meet its target of becoming cash positive and breaking even at the operating level by 2011.

Ford’s net profit, against a record $8.7bn loss last time, came mostly from a net gain of $2.8bn from special items, and included gains from the group’s $10bn debt-reduction plan.

Ford lost $424m on a pre-tax operating basis, but that was smaller than expected and less than last time’s $1bn.

The carmaker, whose share has declined this decade during a downsizing, on Thursday said it had lifted its US share two points to 16.4 per cent on a year ago. It gained share overseas due to vehicles such as its small Fiesta, the second best-selling car in Europe thanks to scrappage schemes.

Mr Mulally declined to comment on whether Ford might issue equity to reduce its debt, but said: “Our plan is to continue improving our balance sheet, just like we did in the second quarter.”

Ford said it burned through $1bn of cash, $2.7bn less than in the first quarter.

The company said global demand for cars would still be weak this year across most markets, including the US, where it upheld a bearish forecast for industry sales of 10.5m-11m. It forecast European industry sales at 15m-15.5m.

Ford reported a near doubling of the quarterly pre-tax loss at Volvo, the Swedish premium brand it is trying to sell, to $231m, from $120m a year ago.

Lewis Booth, Ford’s chief financial officer, said talks with potential buyers were continuing. He said Ford intended to sell Volvo, but “we’re not going to sell it at any price”.

Ford wants $1bn-$2bn and Chinese makers Geely Automobile and Beijing Automotive have expressed interest, according to people close to the sale. Efforts have also been made to assemble Swedish financial investors for a bid.

BAIC is out of the running for a majority stake of General Motors’ European business after GM said on Thursday it would continue “detailed talks” with Magna and RHJ .

[Demeter]

13. PTSD, ANYONE? WAR PROTEST FLASHBACK

http://www.youtube.com/watch?v=ScXXaBu1Ing&feature=related

[Demeter]

14. Senate delay hits health reform push

http://www.ft.com/cms/s/0/9b4401b4-77cc-11de-9713-00144feabdc0.html

By Daniel Dombey in Washington

Published: July 23 2009 22:36 | Last updated: July 23 2009 22:36

President Barack Obama’s bid to push healthcare reform, his signature policy, through Congress suffered a significant blow on Thursday when the leading Democrat in the US Senate said it would miss a White House deadline to pass the legislation by August.

The comments by Harry Reid, Senate majority leader, come despite heightened efforts by Mr Obama to win public support for his top legislative priority, including a prime-time press conference on Wednesday night and a “town hall” meeting in Ohio on Thursday.

The debate is increasingly encompassing topics such as tax increases, restrictions in health services and legislative delay rather than the president’s preferred theme of the long-term need for fundamental reform. Recent polls have also indicated a deep division among the US public about the merits of reform.

“It’s better to have a product based on quality and thoughtfulness rather than try to jam something through,” Mr Reid said on Thursday, adding that senators took the decision to delay on Wednesday night in response to Republican calls for more time.

While Senate passage before the August recess had looked increasingly unlikely in recent days, the move frustrates Mr Obama’s drive for a vote in both houses in Congress ahead of the summer break.

Such a course would have cleared the way for negotiations on the reform once Congress returned in September, since the House of Representatives and the Senate would still have to settle their differences over the legislation.

But now, before that can happen, the administration will have to focus on rounding up votes, even after the break. Momentum has ebbed away from a measure Mr Obama hopes will be his legacy, amid concerns voiced by moderates from both parties about costs.

The White House is acutely aware that a US president typically holds most sway over his domestic agenda during his first months in office. Strong Democratic majorities in both houses makes the passage of a measure of reform highly likely. But if the debate over healthcare becomes a war of attrition, some of the measures most favoured by Mr Obama – such as a public option to compete with private insurers – could be hit.

“If you don’t set deadlines in this town things don’t happen,” Mr Obama told reporters on Wednesday.

On Thursday, seeking to strike a confident note after Mr Reid’s announcement, he added: “Reform may be coming too soon for some in Washington, but it’s not soon enough for the American people . . .  This nation never shrinks from a challenge.”

Nancy Pelosi, speaker of the House of Representatives, added that there were sufficient votes in her chamber to pass the reform and that she hoped to do so soon. But a group of self-styled “Blue Dog Democrats”, who emphasise their concerns about the US budget deficit, have expressed deep misgivings. Republicans also seized on comments by Mr Obama about imperfections in the current legislation as further reason for delay.

In his press conference, Mr Obama said that he would not sign any bill that was not paid for, adding that he could accept higher income tax on the well-paid as a means of financing.

He also backed away from earlier assurances that people need see no changes from coverage they were content with, adding that the administration wanted to “make sure decisions are being made by doctors and medical experts based on evidence; based on what works”.

[Demeter]

15. MARK FIORE HAS HIS TAKE ON THIS:

http://www.markfiore.com/political/doctor-decline-hold-tight

[Demeter]

34. Jason Rosenbaum: Why Do Blue Dogs Want You and Me to Pay 3X More Than They Do for Health Care?

http://www.huffingtonpost.com/jason-rosenbaum/why-do-blue-dogs-want-you_b_243618.html


The Blue Dog negotiating list for health reform has been floating around for days now. Here's the list:

--Effectively bend the cost curve
-- Realign incentives to reward high quality, efficient health care; include value-based purchasing, value index, innovation center for Medicare and Medicaid, and other delivery system reforms
--Increase small business exemption and adjust for inflation
--Address end-of-life care
--Adjust the value and cost of subsidy levels
-- Provide affordability credits on a sliding scale from 100-300 percent FPL
-- Public option must negotiate rates with providers, provide greater clarity on opt out, compete on a level playing field, and be available as a fallback
--Establish consumer-driven, state-based co-ops
--Create state-based exchanges with a federal fallback
--Maintain current state-federal partnership with Medicaid, while implementing reforms that increase its value and effectiveness

I've emphasized the two in the middle, because those are the two we hear are highest on the Blue Dog list right now. They are also the ones that cut to the heart of health reform. In short, the Blue Dogs want to keep health care unaffordable for you and your family.

Right now, the House bill protects families up to 400% of the Federal Poverty Level (FPL). The Blue Dogs want to cut that back to 300%. That would cut millions of people out and leave them on their own, paying full price for health care.

What's full price?

The average family health care plan costs $12,680 per year, which comes out to $1,056 per month. For someone making 350% FPL, that's 16% of their income going to health care costs. Meanwhile, Blue Dogs -- who get health care paid for by you and me through the Federal Employees Health Benefit Plan -- pay an average of just $357 per month for health care, or $4,284 per year. They pay three times less, and they make $174,000 per year.

That's just not fair, and more importantly, Blue Dogs want to weaken the main goal of health care reform -- to make it truly affordable to families.

Instead of asking families to pay huge portions of their income for health care costs, they should agree with leaders in the House and ask those in our society who can most afford it -- those families making over $350,000 per year -- to chip in their fair share by starting to roll back the tax breaks the wealthy got under George Bush.

To do any less would be to deny the crisis going on Blue Dog districts, where health care is unaffordable and uninsurance rates are sky high. It would be a dereliction of duty, it would keep health care out of reach for millions of families, and it would be shockingly unfair.

(also posted at the NOW! blog)

I'm proud to work for Health Care for America Now

[Demeter]

35. Canadians happy with primary health care, study says

http://www.theglobeandmail.com/life/health/canadians-happy-with-primary-health-care-study-says/article1229169/

But you knew that already, or should by now....

[Demeter]

38. Is the Obama Health Care Plan Really Better Than Nothing?

http://www.bestcyrano.org/?p=2926

Editor’s Note: Most visible “liberal media assets” such as MoveOn.org, The Rachel Maddow Show, The Huffington Post, The Nation, etc., have circled the wagons around Obama as the hypocritical attacks by the right continue to convince people that his healthcare plan is really a populist assault on ingrained corporate power. In doing so, these liberals are adding further credence to the ludicrous notion that this is indeed a serious if not revolutionary plan, one being secured at great cost by a heroic and embattled president, standing tall for the interests of the “little guy”. Alas, if only part of this manufactured belief were true. As it is, all that’s being obtained by such loyalty to Obama is to add confusion to an already sufficiently murky debate, rendered intentionally obscure by the Obama team itself, which is advancing a veritable Rube Goldberg concoction capable of satisfying no one, but sure to meet the demands of his real political owners, the rich financial elites who chose him, promoted him through their media, and eventually made his election possible. A lot of suckers are born every minute in America, but the birth rate for this kind of infant sure shot up since Obama rode into town.



By Black Agenda Report managing editor Bruce A. Dixon

Candidate Barack Obama told us to judge his first term by whether he delivers quality affordable health care for all Americans, including nearly fifty million uninsured. So why does his proposal not cover the uninsured till 2013, after the next presidential election when Medicare took only 11 months to cover its first 40million seniors? Why are corporate media pretending that no opinions exist to Obama’s left? And why has the public option part of the Obama health care plan shrunk from covering 130 million to only 10 million, with 16 million left uninsured altogether?]/n\

The health care debate inside and outside the matrix

Like just about everything else, your take on the national health care debate depends on whether you’re inside or outside the matrix.

Within the bubble of fake reality blown by corporate media and bipartisan political establishment, the health care news is that the Obama Plan is at last making its way through Congress. It’s being fought by greedy private insurance companies, by chambers of commerce, by Republican and some Democratic lawmakers.

Under the Obama plan, we’re told, employers will have to insure their employees or pay into a fund that does it for them. Individuals will be required under penalty of law to buy private insurance policies and for those that can’t afford it or prefer not to use a private insurer there will be something called a “public option.” This “public option, the story goes, is bitterly fought by the bad guys because it will make private insurers accountable by competing with them, forcing them to lower their costs. Both the president’s backers and opponents agree that the whole thing will be fantastically expensive, and the president proposes to fund it with cuts in existing programs like Medicaid which pay for the care of the poorest Americans and a tax on those making more than $300,000, later raised to $1 million a year.

The “public option” has that magic word “public” in it, and that’s reassuring to progressives and to most of the American people. Taxing the rich is a popular idea too. So if you rely on corporate media, the administration, or some of the so-called progressive blogs to identify the players and keep the score, it seems a pretty clear case of President Obama on the side of the angels, battling the greedy insurance companies, Republicans and blue dog Democrats to bring us universal, affordable health care.

That whole picture has about as much reality as the ones the same corporate media and most of the same politicians drew for us about Iraq, 9-11, weapons of mass destruction and some people over there who wanted us to free them. Iraq and the White House were and remain actual places, and there really is a problem called health care. But the places, problems and solutions are very different from the bubble of fake reality blown around them.

What sustains this fake reality is the diligent suppression from public space of any viewpoints, observations or proposals to Obama’s left. As long as the illusion that nobody has a better idea, that the only choice we have is Obama’s way or the Republicans’ way can be maintained, the crooked game can go on.

But bubbles are delicate things. Keeping this one intact requires so many vital topics to be avoided, so many inquiring eyes to be averted, so many fruitful conversations to be squelched that it’s hard to see how the president, the bipartisan establishment and the corporate media can pull it all off.

The real Obama Plan: doesn’t cover the uninsured till 2013, if then.

The first clue that something is deeply wrong with the Obama health care proposal is its timeline. According to a copyrighted July 21 AP story by Ricardo Alfonso-Zaldivar,

“President Lyndon Johnson signed the Medicare law on July 30, 1965, and 11 months later seniors were receiving coverage. But if President Barack Obama gets to sign a health care overhaul this fall, the uninsured won’t be covered until 2013 — after the next presidential election.

“In fact, a timeline of the 1,000-page health care bill crafted by House Democrats shows it would take the better part of a decade — from 2010-2018 — to get all the components of the far-reaching proposal up and running.”

According to a peer reviewed 2009 study in the American Journal of Medicine, 62% of the nation’s 727,167 non-business bankruptcies <3> were triggered by unpayable medical bills in 2007. Most of these had health insurance when they fell ill or were injured, but with loopholes, exclusions, high deductibles and co-payments, or were simply dropped when they got sick. In 2008 that figure was 66% of 934,000 personal bankruptcies and in 2009 it could approach 70% of 1.1 million bankruptcies. And 18,000 Americans die each year because medical care is unaffordable or unavailable. Waiting till 2013 means millions of families will be financially ruined and tens of thousands will die unnecessarily.

If the Johnson administration with no computers back in the sixties could implement Medicare for 45 million seniors in under a year, why does it take three and a half years in the 21st century to cover some, but not all, of America’s fifty million uninsured? And why does the Obama Plan make us wait till after the next presidential election? Politicians usually do popular things and run for election on the resulting wave of approval. Delaying what ought to be the good news of universal and affordable health care for all Americans till two elections down the road is a strong indication that they know the good news really ain’t all that good. And it’s not.

Inside the matrix of TV, the corporate media and on much of the internet, discussion of the Obama plan’s timeline, the human cost of another three years delay, and the comparison with Medicare’s 11 month rollout back in the days before computers are almost impossible to find. We can only wonder why.

The Obama plan is about health insurance, not health care.

As BAR has been reporting since January 2007 <4>, the Obama plan is not a health care plan at all, it is a health insurance plan. Based largely upon the failed model in place in Massachusetts since 2006, the Obama plan will require employers to provide coverage or pay a special tax. Everybody not covered by an employer will be required to purchase insurance under penalty of law, in much the same manner as you’re currently required to buy car insurance.

“In my state,” testified Dr. Steffie Woolhandler of the Harvard Medical School last month before Congress, “beating your wife, communicating a terrorist threat and being uninsured all carry $1,000 fines.”

As in Massachusetts, the health insurance plans people are forced to buy will cost a lot and won’t cover much. In a July 20 National Journal article Dr. David Himmelstein says,

“Nearly every day that he is in the clinic, Himmelstein says, he sees a patient who has problems paying for care “despite this reform.’ Some of them had free care before the 2006 law took effect but are now expected to handle co-payments. If you’re not poor enough to get a subsidy, say you’re making $30,000 a year, you’re required to buy a policy that costs about $5,000 a year for the premium and has a $2,000 deductible before it pays for anything. For substantial numbers of people, it’s effectively not coverage,’ Himmelstein said. The policy he described is about the cheapest Massachusetts plan available, according to the Physicians for a National Health Program report, which Himmelstein co-wrote.”

A family of four making under $24,000 a year in Massachusetts gets its insurance premium free, but is still expected to cough up deductibles and co-payments and live with loopholes and exclusions that often deny care to those who need it. And in both the Massachusetts and Obama plans, funds to pay those premiums come out of the budgets of programs like Medicaid that already pay for care for the poorest Ameicans.

The Obama plan’s “public option” is a bait-and-switch scam

A July 21 pnhp.org article titled “Bait and Switch: How the Public Option Was Sold” outlines how the public option is neither public, nor an option.

“Public option” refers to a proposal… that Congress create an enormous “Medicare-like” program that would sell health insurance to the non-elderly in competition with the 1,000 to 1,500 health insurance companies that sell insurance today…

“Hacker (its author) claimed the program, which he called “Medicare Plus” in 2001 and “Health Care for America Plan” in 2007, would enjoy the advantages that make Medicare so efficient – large size, low provider payment rates and low overhead…

“Hacker predicted that his proposed public program would so closely resemble Medicare that it would be able to set its premiums far below those of other insurance companies and enroll at least half the non-elderly population.”

The White House is committed to twisting arms in the both houses of Congress and reconciling the two versions of Democratic bills to emerge from the House and Senate. What emerges will be the Obama plan. According to the Congressional Budget Office, the Senate version of the Democrats’ pending health care legislation leaves 33 million uninsured and omits the public option altogether. The House version includes a “public option” estimated to cover only 10-12 million people, a number far too small for it to create price pressure on private insurance companies, while leaving 16 or 17 million uninsured. Instead of setting prices for health care, it will be forced to pay whatever the private insurers already pay, and perhaps more.

As private insurers use their marketing muscle to recruit younger, healthier people who’ll pay for but not use their benefits, the public option will be a dumping ground for the customers they don’t want… the middle-aged, the poor, those with pre-existing conditions. And of course the Obama plan’s “public option’ will be managed by contractors from the private insurance industry.

Private insurers spend a third of every health care dollar on non-health related things like bonuses, denial machinery, advertising, lobbying and bad investments. Medicare spends 2 or 3% on administrative overhead. Bush’s “enhanced Medicare” administered by private insurance contractors, spends about 11% on overhead. That’s about what we should expect from the Obama public option. So much for change.

So far, discipline is holding. Nobody in corporate media, the administration, or among Democrats in Washington has gotten round to telling us that the public option has been eviscerated. But its powerful appeal and the awesome power of the word “public” are offered by Obama supporters as the central reasons to shut up, clap harder, and get behind the president on this.

Taxing the rich, paying for health care. How the Obama Plan stacks up against single payer

Along with being funded by cuts in Medicaid, the Obama plan is supposed to be funded by taxing those who make $300,000 or more per year. That’s not a bad thing. The wealthy don’t pay nearly enough taxes. But the US already spends more on health care than anyplace else on the planet while leaving a greater portion of its population uninsured than anybody.

The “public option” has that magic word “public” in it, and that’s reassuring to progressives and to most of the American people. Taxing the rich is a popular idea too. So if you rely on corporate media, the administration, or some of the so-called progressive blogs to identify the players and keep the score, it seems a pretty clear case of President Obama on the side of the angels, battling the greedy insurance companies, Republicans and blue dog Democrats to bring us universal, affordable health care…That whole picture has about as much reality as the ones the same corporate media and most of the same politicians drew for us about Iraq, 9-11, weapons of mass destruction and some people over there who wanted us to free them. Iraq and the White House were and remain actual places, and there really is a problem called health care. But the places, problems and solutions are very different from the bubble of fake reality blown around them.

The Obama plan will not contain costs. It will subsidize the insurance vampires well into the next decade. On the other hand, single payer would eliminate the private insurance industry altogether. In many advanced industrial countries, most of the practices private insurers follow here, such as cherry picking healthy patients while dumping and denying sick ones, are illegal. Why can we do that?

Single payer, according to a study by the California Nurses Association <10> would eliminate 550,000 jobs in private insurance while creating 3.2 million new ones in actual health care. It would be responsible for $100 billion in wages annually and a source of immense tax revenues for local governments.

So is the Obama plan really better than nothing?

The Obama plan seems calculated to buy time for private insurers, to end the health care discussion for a decade or more without solving the health care problem, do so in a way that discredits the very idea of everybody in- nobody out health care. It will leave tens of millions uninsured, a hundred million or more underinsured, and the same parasitic private interests in charge of the American health care system that run it now.

The Obama plan as it now stands requires us to let another 18,000 die for each of the next three years and allow more than a million additional families to be bankrupted by medical expenses before we can judge whether or not the plan is working. It’s easy to imagine Obama partisans telling us in mid 2013 that it’s still too early to be sure.

The Kucinich amendment, which allows the few states wealthy enough to try it the liberty to fashion their own single payer regimes is intended to attract progressives and single payer votes in Congress without breaking the bubble. By itself, it should not be a reason to support this bill.. The wealthiest state in the union is probably California, and it’s handing out IOUs instead of salaries this month. It’s hard to see what would be lost if this health care bill went down in flames, and we started over again next year.

Can he get away with it?

Maybe. Maybe not. If the corporate media and the president can keep discussion of the devilish details to a minimum, if they can silence, co-opt and intimidate the forces to Obama’s left — if they can keep most of the public inside their bubble of fake reality, Barack Obama may achieve his goal of thwarting the reform that most of the American people want — an everybody in, nobody out single payer health care system on the model of Canada or Australia, or Medicare for All. It won’t be close, it won’t be easy, and with nothing to be gained, progressives shouldn’t make it any easier.

Since the president’s success depends mostly on keeping people silent and in the dark, he will probably be unable to mobilize the 13 million phone numbers and email addresses collected during the recent presidential campaign, and now held by OFA, his campaign arm. If an organizing call went out to them, too many would try to read the bill and discuss the options, and such a discussion could easily get out of hand. When OFA called house meetings on health care last December, the most frequently advanced question was why we couldn’t or shouldn’t get a single payer health care system.

Single payer isn’t dead yet. It’s very much alive among Barack Obama’s own supporters. To succeed, he has to bury it alive, to keep them in the bubble, in the dark and quiet, or clapping so loudly they cannot hear themselves or each other think. It’s not over.

see original link for article citations and links

[Demeter]

43. Steve Corrick: 50 Year Olds are Unemployable Without a Public (Health Insurance) Option (REPOST)

http://blog.buzzflash.com/contributors/2026



...So here's the dilemma: There are increasing numbers of 50 and older workers who cannot find good paying jobs commensurate with their successes and credentials because of the cost of providing them with health care. So what do they do instead?

With No Insurance, Unemployed Workers Can:

1. Retire early. If there's some small pension out there, such as one from the government or the military, it's easier to retire than to keep fighting for a job when your health insurance costs make employers unable to hire you.

2. Go bankrupt. If you have serious medical conditions, the only way to get Medicaid is to go bankrupt. Then the government will take care of you. This means you have to blow through your pension that you've worked all your life to save, and that means that you'll be living on the government dole for the rest of your life.

3. Get a job at a convenience store. As long as they don't have to pay benefits, they can pay you $7.50 per hour and know that you'll probably show up for work every day, probably won't miss work because you took Ecstasy and danced all night, and won't mess up the reconciliation of the store receipts at the end of the day.

4. Be a consultant, independent contractor, or self-employed realtor. You can hire out and your employer won't have to pay benefits. This can sometimes offer you good money and, if they hire you as a consultant, your employer gets all your expertise and none of your health insurance costs. You, on the other hand, are still stuck with soaring (or unavailable) health insurance, with the hope that you won't keel over and blow it for your family and retirement and with hope is that you can scrape through until 65 when Medicare kicks in.

5. Live on the street. According to a 2006 The New York Times article an ever increasing percentage of the homeless in New York are between 55 and 65.

6. Get married to get access to someone else's insurance coverage.

Problems Without a Public Option:

1. You'll probably have to use up your pension. You know, the one you've worked all these years to save that was supposed to help you retire in comfort. Your problem, of course, was just that you didn't know you were starting a savings plan so that it could be harvested at 55 by some pharmaceutical company or some hospital. Silly you! You believed that crap about saving for a comfortable retirement.

2. You'll quit contributing to Social Security at any significant rate and will put additional strain on a system you should have been contributing to at your highest pre-retirement levels.

3. American companies won't be able to hire you -- even though they desperately need experienced, dedicated employees -- because the company's accountants and shareholders won't let them.

4. Without proper and affordable medical care, your health may decline, but then again, there's always bankruptcy and Medicaid.

5. You'll probably have to seek early government assistance or accept whatever minimal level of Social Security they'll offer. After all, both still pay better than the greeter's job at Wal-Mart.

On the other hand, if, pray God, we get a public option whose premium doesn't discriminate based on age or pre-existing conditions, the entire job situation for older workers will change beyond belief virtually overnight.

With a Public Option:

1. Employers will be able to hire you (or not) based on your experience and qualifications. What a concept! Maybe someone with a degree and a 30-year track record of job success might actually make a good new hire? Get outta' here....

2. Fewer older employees will lose their high-paying positions, because the cost of their health care will no longer overshadow their continuing ability to do their job well.

3. More workers will work extra years before retiring. Why quit early if you're making good money and you're contributing to the success of your company?

4. With more workers working extra years, some of the increasing pressure on Social Security will be relieved.

5. Unions will be able to negotiate for better pay and better safety. They won't have to fight for expensive health care benefits that certainly offer less benefit for younger workers -- except, of course, when they really, really, really need them.

6. American corporations can be come more competitive as the crushing health care burden that sunk General Motors are no longer eating as heavily into their profits.

7. Businesses will make fewer mistakes driven by youthful exuberance and inexperience. It's great that younger workers have the drive and energy to push goals forward, but it makes sense to have top management decisions made not just by youthful visionaries, but also by those who've seen the consequences of rash decisions made by too much testosterone and Red Bull. (The Internet boom comes to mind.)

8. Uninsured health costs paid by the government would go down.

9. Hospitals could stay in business because they would reduce unpaid care provided to those without health insurance.

10. The general health of the 55-65 demographic ought to improve a bit as needed medical care can be accessed as needed, rather than only when situation become desperate.

11. State funded workman's compensation costs would go down, thereby making American employers more competitive.

12. More money will be available for banks to loan, because American savings rates will go up, when IRAs are no longer bled dry by medical bills.

13. Bankruptcies and foreclosures will go down. 50% of all bankruptcies are medically related and 25% of those facing foreclosure say their inability to pay is related to medical problems.

14. When we die, we'd get to quit having to answer all those embarrassing questions from St. Peter about why the richest country on Earth wasn't willing to provide basic health care to many of its citizens. ("And the King shall answer and say to them, Truly I say to you, Inasmuch as you have done it to one of the least of these my brothers, you have done it to me." Matthew 25:40.)

So our choices are stark:

1. We can continue as we are, with our top priority clearly demonstrated as the need to offer an earnings bonus to insurance and health companies at terrible personal, physical, and financial cost to a generation of older, injured, and sick workers. Or,

2. We can create a public option that covers all uninsured workers, thereby reducing health care costs by $150 billion over 10 years (according the Congressional Budget Office). We'll also increase American competitiveness, increase America's healthiness, dramatically reduce its medical costs, bolster Social Security, and we'll end the embarrassment of being the only first-world country that lets millions and millions of its citizens suffer without health care.



Steve Corrick is a Montana realtor, verified voting and climate change activist and 56 year old who, like most members of his generation, desperately needs better insurance options.

GOT 113 RECS AND TO SECOND SPOT OF THE GREATEST PAGE--AND WORTH IT!

[snot]

103. don't forget

a lot of us who worked hard, stayed out of debt, and saved for retirement have seen our retirement funds looted within the last 12 months. Many of us can no longer afford retirement -- but, as you say, getting ourselves re-employed won't be easy.

[bread_and_roses]

49. I am in the trenches on this one

I work for an arm of the Labor movement and am a long-time volunteer for a progressive community organizing non-profit: both up to the gills and in action daily in support of Obama's plan. I am performing the same mental gyrations we all do when acting in a way we know is dishonest to our ideals: I refuse to work on Health Care for the Community org but do it daily for my work. I justify it because I love my work, and am way, way too low on the totem pole to make a difference - not doing it would mean leaving my job. Of course, that's the justification we all use for our dishonest acts.

We - being "we" the progressive movement - set our bar way too low and now are trapped in our own rhetoric. We're now doing no more than playing football, or a baseball game. If this plan goes down, "our side" has "lost" and the "other team" has won.

We'll work for this muddle of a doomed-to-fail plan and if we "win" we'll have won nothing but the scorn of the millions who will be left out of it, who can't afford it, who don't get the treatment they need out of it, and we've set the stage for another "government is not the solution, it's the problem" moment when the profiteering Oligarchs ride high again. "Winning" may in the end be worse than losing.

And some corroborating evidence from, of all places, the NYT - highlighted of course by FAIR:
http://www.fair.org/blog/#post-11417

[Hugin]

55. Since, you have some experience in the area, I have some questions...

You say, "this muddle of a doomed-to-fail plan" (A judgement I happen to agree with, btw)

Can you explain to me why, if the Administration/Congress presumably (If they didn't, I'd be really worried) knew it was doomed to fail, instead of coming up with a muddled compromise plan... They didn't shoot for the stars?

Doing so, would clearly highlight for anyone watching, exactly who was responsible for putting the nix on "We the People's" promised trip to the Health Care Candy Store.

It only makes political sense to ask for way more than you expect to pass. Because, ultimately, you'll end up with about what is needed and at the same time it clearly highlights those in Government who aren't serving their constituents' best interests.

This is only politically logical.

A question that has been nagging at me for some time.

[bread_and_roses]

61. because the Scraps and Bones Party answers first to its Corporate Donors

and they are terrified of its Right-Wing Noise Machine, knowing their Masters will spend whatever it takes to destroy any real reform - on anything - and any of them foolish enough to defy their Corporate Masters along with it.

So between self-interest and fear "we the people" occupy some tiny sliver of their consciousness, and that sliver is mostly occupied with concocting spin to pacify us.

Had Obama not been willing to work within those parameters, he would not have been elected.

More interesting, I think, is why the Progressive community and the Labor Movement are willing to go along with it? Because of course you are correct - you don't start negotiating from your lowest possible offer.

The Labor Movement has some constraints peculiar to any democracy. Since the leadership is elected, and it is built on coalitions of dues-paying members (AFL-CIO being composed of the elected leaders of National unions)it cannot be too far ahead of its membership on issues. Union members are far from uniformly progressive, they have also their own self-interest to protect (and THAT self-interest is not profit but simply safe-guarding their own ability to live half-way decent lives), include far too many Rush-bots, and are as vulnerable as the rest of the populace that has been force-fed free-marketeerism and "big gum'mint" swill for forty years.

The Progressive community, I think, invested so much in Obama's election that it will tie itself into knots to support whatever boon-doggle he is promoting.

I supported Obama because I hoped that who he was and who supported him we would be able to exert the kind of pressure that, for instance, would force him to change his Corporate friendly candidate health care stance. We have failed to do that.

[Hugin]

62. So, what we are witnessing is the politics of corruption.

Yes, that is the only sensible explanation.

A type of politics I'm unfamiliar with... The rules are totally different. But, I can see the results of it in many of the recently passed measures...

Very interesting. Thanks for your insightful answer.


True, we have failed. :/

[Demeter]

64. It Ain't Over Until the Fat Lady Sings

or even one pleasingly plump.

[AnneD]

86. And for our theme.....

http://www.youtube.com/watch?v=E_O4K1T80Ak&feature=related

[Demeter]

17. ProPublica: Should AIG Be Keeping Terms of Deals Secret?

http://blog.buzzflash.com/contributors/2032


Last week we reported that while AIG has sold — or agreed to sell — a dozen subsidiaries as part of its efforts to repay the $85 billion it still owes taxpayers, the company is keeping the financial terms of nearly half those sales secret.

On Friday afternoon, AIG announced that it had completed the sale of two subsidiaries in Mexico. Though the sale is now final, in a press release the company repeated its mantra: "Terms of the transaction were not disclosed."

Treasury officials told us last week that they are "actively monitoring" AIG's sales, but they would keep AIG's confidence about how much the company was getting for the pieces of its former empire, at least "until binding sales are announced." Treasury officials did not return our e-mail or a call asking whether they would release that information now that the sales are final.

Why does this matter? As financial risk analyst Sylvain Raynes told us last week, the secrecy raises questions as to whether AIG is getting a good deal for the taxpayer, which owns nearly 80 percent of the company and is owed $85 billion in loans. "There’s nothing wrong with private transactions between consenting adults," said Raynes, founder of R&R Consulting, a firm that analyzes market risk. "But when the government is involved, everything changes."

But Paul Hickey, of Bespoke Investment Group, says companies frequently decide not to disclose financial terms. "Companies sometimes withhold that information whether it’s a small deal or they just choose not to," he said.

Requiring that AIG comply with higher standards of transparency than other companies could also damage the firm's chances of getting the best prices, Hickey said.

"If I'm an investment firm and I do show interest in an asset, do I necessarily want the public knowing what I paid for it? Especially with AIG, given that anyone who makes a profit, Congress gets all up in arms about it. It could open them up to too much criticism," he said. "But you can also see how people would say, oh they're not publicizing the terms of the deal because they're not getting enough money from them."

AIG delivered the news through its new "senior vice president-divestiture," Alain Karaoglan. As we pointed out a couple weeks back, Karaoglan was once one of AIG's most ardent critics. As a Deutsche Bank analyst in 2005, he co-authored a scathing 31-page report that pointed out large disparities in how AIG reported earnings, dissected the way AIG valued its companies, and argued that the whole business was overvalued.

Karaoglan again declined to speak with us about that report, or about the Mexico sales he just announced.

[Demeter]

18. It's My Bedtime, All. Sweet Dreams!

http://www.youtube.com/watch?v=grd-iHznoGM&feature=related

[tblue37]

21. Peter died recently, didn't he? nt

[Hugin]

41. According to his web site he's still perking along nicely...

Peter Tork (b. February 13, 1942) is an American musician and actor, best known as a member of The Monkees. Although born in 1942, many news articles report him as born in 1944 as this was the date given on early Monkees press releases.

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

http://www.petertork.com/

And while you're at his site... Check out Tork's "Hope On" project.


He has been battling a serious and rare form of cancer. (Read about it here.)

http://voices.washingtonpost.com/checkup/2009/07/my_blog_last_week_about.html

[tblue37]

67. That must be what I am remembering--reading about his

cancer.

[AnneD]

70. Cancer....

I believe of the throat or tongue (some sort of HNT cancer)....but he has not died as far as I know.

edited to add based on the WP article....Since he is undergoing radiation first, they are trying to shrink the tumour prior to surgery to save as much of his tongue as possible. They will still have to remove a portion of the tongue. He may end up with a g-tube for nutrition. Tongue cancer, esp at that depth is life altering. Eating, talking, even swallowing your own saliva is almost impossible. BUT YOU CAN STILL LiVE if it does not come back. I worked in the Head and Neck Clinic and enjoyed these patients. I wish him all the best.

[Dr.Phool]

22. The Automatic Earth does Springsteen. Your Home Town-video included.

Yeah, yeah, I know we're Monkees this week, but I thought it was a good coincidence that TAE did this. I just copped some Springsteen tickets Friday morning. The guy sings about us. Hell, he's sung my entire life, from "Your Hometown", to "Atlantic City", "Youngstown", "Rosalita", and many more. We gotta have a Springsteen week-end soon.

There used to be a bar back in the early '70s, on W.25th St, in Cleveland, called the Smiling Dog Saloon. They had a steady line-up of acts that hadn't broken yet, and a lot that never would break, and a few older, washed up bands. Me and a friend used to go down there regularly, even if we'd never heard of the act. One was a guy named Bruce Springsteen, about 2 years before he broke big-time.
--------------------------------------------------------------

http://theautomaticearth.blogspot.com/

Ilargi: Was that just me, or did Google News fail all over for a while? As in, the while I needed........

Anywaydeedelydays, 6 more banks were closed, and Guaranty, Texas' no 2. bank, will likely -self announced- follow as early as this weekend, and be the biggest failure in 2009 at $14 billion. Which would bankrupt the FDIC. Lovely! So let's go for a more timeless take, shall we? I’m all for it. My buddy whom I never met at EconomicDisconnect asked me today for a song to contribute to his regular Friday upbeat helping. What popped into my head within 2 seconds, for no specific reason, there's after all a million songs out there that have something to say, was Springsteen's My Hometown.

I was eight years old and running with a dime in my hand
Into the bus stop to pick up a paper for my old man
I'd sit on his lap in that big old Buick and steer as we drove through town
He'd tousle my hair and say son take a good look around this is your hometown


Written in the early 80's, in the recession then that seemed really heavy in Jersey and other places, a recession which will look like an exuberant Vegas top notch penthouse suite birthday bash compared to what’s around the Asbury corner. You'd have to go all the way back to Woody Guthrie or Leadbelly to find a song that better describes what lies ahead for America. Springsteen captured the coming decade almost 30 years before it happened, and I suggest you listen very closely, with your eyes closed, and see in your minds' eyes the images he evokes. That's what you'll be living.

Now Main Street's whitewashed windows and vacant stores
Seems like there ain't nobody wants to come down here no more
They're closing down the textile mill across the railroad tracks
Foreman says these jobs are going boys and they ain't coming back to your hometown


The whole country that America once proudly was is breaking into ever smaller shattering pieces, while you're watching Wall Street numbers go up. Hey, say what you will about God, you can't claim her sense of irony ain't dead on. California will take many years just to appear normal, forget about recovery. The mayor of Detroit throws the towel, without acknowledging he does (as is the spirit of politics). The Motor City is broke, and there's nothing on the horizon that could possibly prevent complete and utter bankruptcy. Neither in Detroit nor anywhere else, that is.

They're down to praying for miracles now. Not that there's anything wrong with that. It‘s just that there's a million other towns, counties, states and countries praying for the same sort of preferential heavenly treatment. And even if one of them miraculously got what they prayed for, don't you think they'd likely be overrun by all the rest that didn't?

Tax revenues for all levels of government, all over the country, are plummeting at frightening and astonishing rates. It's over people, the experiment that is America has failed. In its present form, that is.

Open your eyes. Put your son in your lap, as in the Springsteen song, and drive through your town. To what extent are his interests best served by your belief in some opaque sort of change to believe in, by your blind running after green shoots that are always one inch beyond your receding horizons? Isn't it perhaps a better idea to put your kids' feet down on solid ground instead of some belief based soil?

What do you think? Or do you even think to begin with? Not to insult you, but if you actually do believe in Obama's green shoots, take it from me: you ain't thinking straight. And while you're at it, take this from me too: I don't care about what you do to yourself. It's that kid on your lap I'm worried about, who's apt to fall prey to your inability to face your own reality, your own frustrations and your own failed dreams.

Will you at least consider the option that it's over, and it will not ever come back? That you need to build your next set of dreams on a foundation of your own making, and not a media slash politics induced one? That for your kid to survive, you may need to come up with a plan of your own, instead of one hammered into your dainty little skull since kindergarten? Something of your own making,


Video at link:
http://theautomaticearth.blogspot.com/

[Demeter]

24. Hell, Detroit's Been Like that Since 1969

as have many other urban areas.

[MattSh]

37. As a long time "Jersey Boy," I can relate.

As a long time "Jersey Boy," I can relate. I graduated from good old "State U" in 1982, with my trusty old Political Science degree, right in the middle of Reagan's recession. Places like Asbury Park and New Brunswick, where I was living at the time were already in decline, although NB was able to pull through, being the home of State U and J&J. Things were pretty dim then, but within a few years things seemed better. New office parks, shopping malls, and plenty of new homes and a housing bubble too, in the test run for the big housing bubble of the 21st century. I always wondered why so few people remembered the housing bubble of the late 1980's? I sure did, and was skeptical of all the bullshit about how home values always go up. In the 80's I thought I would never be able to own a home in NJ, but by 1992 home prices had come down 35% and my programming job at big telecom seemed long term secure, so I made the leap.

Sadly, big telecom jumped on the outsourcing bandwagon early on. Hell, no one wanted to continue to pay 25 cents a minute for long distance calls, so something had to give. Big telecom outsourcing may have been the beginning of the end for NJ, which had managed to adjust to the exodus of manufacturing for the most part. Assuming it was not your manufacturing job that disappeared.

After a few years I landed a Union job with the state of NJ (Yay). But even then I wasn't all that confident about the long term prospects, seeing some of the shenanigans used to balance the state budget by governors of both parties. And I would have had to work to age 72 for health benefits in retirement. Assuming NJ did not go bankrupt sometime before then. Or after then. Although everyone with a clue laments for the sad state of California finances these days, I recently read an article that states, in reality, NJ is worse off than CA. But Jersey can hide that fact by passing off a much bigger portion of spending down to the counties, cities, and towns.

When the opportunity arose in 2005 to drop out and move to Eastern Europe, the Wild Wild East, it didn't take too much convincing for me to make the leap. At sold my home that I bought at the market low in 1992, and sold it near the bubble peak in 2005. I had hope, briefly, when Obama took the reins. But that hope burst just like all the bubbles before it, but just a whole lot quicker. Now, this Jersey boy might have a hard time coming back to the states, even for a visit.

Anyway, as a Jersey boy, when there is indeed a Springsteen weekend, I have a few things I can relate there.

[Demeter]

39. Were You Single When you Left, or Did You Transition with Dependents in Tow?

It is my kids that held me back from such boldness.

http://www.youtube.com/watch?v=NsjdU7lv1m0&NR=1

[MattSh]

66. Single...

While I can appreciate that it's more challenging with kids and/or a spouse, think of it this way. Depending on what country you choose, and the future course of the USA, they might thank you for it someday.

Hate to be so pessimistic, but I'm looking for some reason to not be. Still looking...







Still looking...

[AnneD]

72. MattSH....

hubby and I are debating this now....If he GOP won we would be out now. Obama has slowed us up but we still may be out the door yet.

[AnneD]

71. Thanks, Dr. Phool...

My Hometown is on of my fav Springsteen songs. I remember it because when it came out-Houston was in a death spiral. We have been working hard ever since to head this off and pull ourselves up. We started in the 80's diversifying our economy. It is hard to prime a pump if you have nothing to prime it with.

This was one of the few songs I took time to memorize.

[DemReadingDU]

73. I come from a small town

Went home again this weekend, nephew and family from Florida came for a visit of family and fun and boating/skiing/tubing at my sister's house on the lake. Most family came, some had to work. No one discussed the economy, it's all great, nothing to worry about.

John Mellencamp - Small Town
http://www.youtube.com/watch?v=3eDkAG3R0h8

[Demeter]

25. "The economic crisis: Who caused it? Was it preventable? Was criminal activity involved in bringing

http://www.salon.com/opinion/feature/2009/07/22/economic_crisis_part_one/

From June to July of 2009, Talbott and Johnson held an e-mail conversation on the following topic:

"The economic crisis: Who caused it? Was it preventable? Was criminal activity involved in bringing it about? And is it over?"

The exchange below is the first of three sets of e-mails. The second pair will be published Thursday, and the final pair will appear Friday.

From: John Talbott

To: Simon Johnson

Subject: A Vast Criminal Enterprise

Simon,

I believe economists are doing a very poor job of explaining to the American people who and what caused the current economic crisis. I think the reasons for this are threefold.

One: Economists and media pundits -- themselves mostly gentlemanly elites anxious to please corporate America -- are slow to make the accusation that what happened here was truly criminal, and so miss the real story. The American people understand that when a group of bankers shuffle some paper unproductively and get away with hundreds of billions of dollars in bonuses, yet cause a loss of $40 trillion in global wealth and cause approximately 100 million people to become unemployed worldwide, there is only one word to describe it: criminal. We don't have to argue about whether their actions were technically illegal or violated existing statutes, as in this conspiracy the crooks were writing their own regulations and legislation through their control of the government through lobbying.

Two: There has been no criminal investigation to date, so evidence supporting criminality has not been uncovered -- no one is looking for it. Liberals hate to think that Obama, led by Geithner and Summers, is part of a grand cover-up scheme, but that is exactly what is going on. How else can you explain the lack of criminal investigations? Why isn't the FBI breaking down the doors of the commercial and investment banks and grabbing computers so as to preserve incendiary e-mails that will most definitely implicate executives? Why are managements that caused this still in their jobs and still receiving bonuses? Are the bonuses paid to the folks at AIG that caused its collapse nothing more than hush money? How can the rating agencies still be in business? Why don't we make one arrest and lean on the bankster to see if he will fold like the cheap suit that he is and name other conspirators? The FBI spends more time investigating $2,000 drug buys than they have to date investigating the biggest heist in the history of the world: $40 trillion, that's trillion with a T, that's 40 million bags each containing $1 million.

The third reason that we have not had an easy-to-understand explanation from economists as to the cause of this mess: I think we're all trying to fit the facts as we know them into one simple story of causation. I believe there are actually three different storylines occurring contemporaneously, and all of them criminal. It is similar to what Winston Churchill said about trying to forecast Russia's next moves in 1939: "It is a riddle, wrapped in a mystery, inside an enigma."

So what are these three criminal storylines? The first, and the smallest (if you can believe it) at approximately $10 trillion, is the housing crash and the mortgage meltdown. Totally criminal, as its primary cause was banksters stuffing worthless mortgage paper into CDOs and calling them AAA. Criminal at every level, as real estate agents were convincing their buyers to pay more, not less, to "earn" their fees through a winning bid, appraisers were offering non-independent and completely tainted appraisals, mortgage brokers were altering loan documents and changing income data to qualify buyers, bankers were paying rating agencies to call junk paper AAA, and principal investors like pension funds, insurance companies, and sovereign governments failed to perform even the minimum levels of due diligence demanded by their fiduciary duties.

But the second story is even bigger and extends far beyond mortgages to the entire banking system. The banks had found a way to avoid the regulation that everyone knew they needed ever since they were given federally backed depositor insurance to prevent bank runs back in the '30s. They became one of the biggest lobbyists and campaign contributors to your Congress and your presidents. Then, amazingly, they just asked that all limitations on their activities be removed -- and they were. If I paid you $2 for your vote, it would be illegal, but somehow these banks could pay hundreds of millions to our congressmen and presidents for their votes and it was all perfectly legal. Completely nuts!

So what did banks do that was criminal? Well, first they paid your government to eliminate bank restrictions, then they overleveraged, knowing they could not honor contracts with such leverage, then they lied to their shareholders about the risks and magnitudes of their positions, hid their positions illegally off balance sheet, and through the use of derivatives managed to violate minimum capital requirements on an almost daily basis. They took bank debt leverage from 8:1 to over 30:1, thus assuring that the banking system could not survive even a modest credit tightening or recession. They made crazy bets in the credit default swap market that they could never honor in a downturn. They loaned money to anyone who could fog a knife because they knew they were going to stuff it to others through securitization and CDOs. If we had a criminal investigation, we would have access to the incriminating phone calls and e-mails in which the banksters disclosed what they really thought of the assets they were pawning off on others. To see how traders incriminate themselves, watch "The Smartest Guys in the Room," about Enron's collapse.

The final storyline of criminality is the biggest of all. It is bigger than the current financial crisis. It is corporate America's complete control of our nation's elected officials, especially our Congress, through lobbying and campaign donations. Yes, the banks played this game, but the game was much bigger than just the financial industry. Coal-fired utilities have so watered down impending legislation concerning global warming that they have now come out in favor of it in the House vote. TARP money went to banking friends of Hank Paulson, although 97 percent of congressional correspondence from the American people was against it. The credit card industry took a minor slap on the wrist, but faces no limitation on the egregious interest rates it can charge its customers. Pharmaceutical and hospital corporations are fighting hard to keep Americans from having a public alternative to their healthcare, and right now are winning that fight. The transportation industry is at the government trough trying to pass a $500 billion windfall. The AARP prevents any meaningful reform of Social Security; the teachers' union does the same for education reform. Is it crazy to think that defense companies like Dick Cheney's Halliburton (which saw its stock price increase 700 percent during the Iraq war, thanks to no-bid contracts) may be promoting U.S. aggression around the world?

[Demeter]

27. You make many good points, but I think the situation may actually be worse.

The American people understand that their government is corrupt; that is why they don't want to rely solely on more government regulation to solve this crisis. No, if we are to ever to see positive growth again in this country, we need to make the fundamental reforms that are necessary without relying on regulation which is so often co-opted or captured by those we are trying to regulate. This suggests we need to find a way to get corporations out of our government and ensure they never become either too big to fail or so big that they improperly influence markets and our government.

John



From: Simon Johnson

To: John Talbott

Subject: Re: A Vast Criminal Conspiracy

John

You make many good points, but I think the situation may actually be worse.

You stress that criminal acts must have been committed, and I'm sure this is right at the level of individual lenders or investment banks that packaged and resold dubious mortgages, for example. As you point out, when and if prosecutors get their hands on the right e-mails, we'll see evidence for a great deal of intentional deception (of consumers, investors, regulators and everyone else).

Given that we have a relatively decentralized criminal justice system, within which prosecutors have an incentive to build a tough reputation, and given that it takes time to build these kinds of cases, I suspect we will see more such prosecutions in the near future. Also, civil cases now under way may well uncover evidence of criminal wrongdoing -- and this will presumably be referred to prosecutors.

The bigger problem, however, is that much of what has severely damaged our economy and still jeopardizes our future is completely legal. Take, for example, campaign contributions. You rightly rail against these and the power that they confer on big donors -- primarily lobbies of various kinds. And we're all against direct favor buying that is presumably illegal. But much of what was done -- for example, in terms of financial market deregulation since the early 1990s -- was surely completely legal, but a very bad idea.

Bad ideas in public policy, of course, are always with us. What worries me most about our situation at this moment is that while our current leadership on economic strategy issues now talks about the mistakes of their (and our) past, their policies are pointing us back in the same direction. The latest evidence in this regard is the regulatory plan released by the Treasury this June.

This plan is a long list of technocratic tweaks. But when you dig through all the details, it is hard to find anything that will really make a difference to the functioning of our financial system. Most importantly, we will still have banks that are perceived as "too big to fail," and these institutions will have access to government bailouts under vague and completely open-ended terms. In what way will this encourage responsible lending in the future?

The administration does propose to add an agency protecting consumers against financial products -- and this is an implicit recognition that you are right, that the finance industry has long been ripping off consumers in various ways. But beyond that, there is nothing currently on the table that would make our banking system and -- by implication -- the world's financial system better run.

What happened? The finance industry has captured, intellectually, both public policy and a wide range of public intellectuals. People really believe that we need something like today's financial sector in order to resume reasonable growth in this country. This is despite the fact that financial innovation has added little to productivity in the past two decades, and it flies in the face of the obvious damage done recently by overborrowing at various levels.

You point out specifically that economists have not done a good job in terms of explaining the deeper causes of the crisis, and I would agree with that. But again I think this is due to the wrong mental model more than anything else. Most economists think that if we're talking about Indonesia or Korea or Russia, considerations of political economy -- i.e., who has power, what they are trying to do, etc. -- are first order. But as soon as we start to talk about the United States, many reasonable people think that the same special interest politics are second order and that the real action comes from more technical considerations, such as the "business cycle" (whatever that really means).

Implicitly, many economists see the U.S. as quite different from those middle-income countries often called "emerging markets." If these economists allow politics into their view of the world, they consider how altruistic policymakers try to balance conflicting objectives. The U.S., supposedly, is not about the competition for power and influence between strong interest groups.

My own view is that we should be dubious whenever someone says or assumes that "the U.S. is different." Most countries have powerful groups -- almost always including the financial sector, and big banks in particular -- and they are always trying to slant things their way. The U.S. may in fact have a worse problem, as our financial sector made a great deal of money in the early deregulation years of the 1980s and plowed that back into further financial influence.

Big finance, of course, was helped by two major waves of innovation: lower communication costs meant that global investing became cheaper, and lower computing costs meant that more complicated trading strategies (i.e., involving derivatives) became more profitable. Of course, to really take advantage of these changes the finance industry needed new rules: lower barriers to capital flows across borders and no regulation for derivatives trading. When they got both, by the mid-1990s, it was off to the races -- the unsustainable rise of the financial sector since that time is what has really pulled us into our current predicament.

And the way in which the Obama administration is attempting to extricate us from the crisis -- with unconditional support for big banks, regardless of costs -- is not addressing the fundamental imbalance of power that favors the financial sector. If anything, the big banks that survive in this sector have now become more powerful -- the political market share of JP Morgan Chase or Goldman Sachs has increased because Lehman and Bear Stearns are out of business.

Private equity and hedge funds, which could have been brought on board with a more reformist agenda (as they have no great love for supersized big banks), instead are lining up with everyone else for government subsidies of various kinds (e.g., through the toxic asset purchase programs organized by the Treasury). And small banks -- who have considerable potential clout through their access to the Senate -- devote most of their time to shooting down sensible changes to more general financial rules (e.g., about whether mortgages can be modified in personal bankruptcy), rather than helping to rein in big banks.
Quantcast

In some sense, the administration's political strategy in this area is not going at all well. But in another more profound sense, the political strategy of Big Finance is proving incredibly effective. They survived the crisis essentially intact, they will keep the rules that have served them (but not us) well, and their day-to-day influence in the corridors of Washington power has never been higher.

There will be a continuing struggle for reform -- after all, we've seen overbearing financial power reined in before in this country (e.g., by FDR and Congress, following the Pecora Hearings in the early 1930s). But it's going to be a long struggle. There is nothing on the immediate horizon that will address our fundamental problems; in fact, the economic recovery will further strengthen the hand of the largest banks, as they will argue that we should now "move on."

But as long as people like you keep writing about the deeper issues at stake, and -- by all means -- pushing everyone to look for and expose criminal wrongdoing, we will eventually move in the right direction. The battle to control finance is really an argument about ideas. What is the right way to organize the economy? How should big banks be effectively brought under control? How do we prevent anyone from exercising disproportionate influence in our open political system?

Keep at it.

Thanks,

Simon

[Demeter]

29. I would shut down the hedge fund industry.

http://www.salon.com/opinion/feature/2009/07/23/economic_crisis_part_two/index.html

From: John Talbott
To: Simon Johnson
Subject: Complexity With No Purpose

Simon,

You make some very good points . Let me try to address some of them, and in so doing extend this e-mail exchange into a conversation about the real reforms needed.

Don't worry, this isn't over yet. We haven't missed our chance to enact real reform. There isn't going to be any big recovery until we address these fundamental issues. Given the debt overhang, the banks' general unwillingness to lend, the lack of transparency and trust in the markets, the possible change in people's desire for increased status-seeking through crazy borrowing and crazy consumption, a substantial decline in immigration and population growth, and the fast approaching retirement of the baby boomers, I don't see the American economy growing in real terms for years, if not decades, into the future. The real risk is that the economy will continue to suffer, unemployment will increase, and discontent will grow to the point that the Republicans stage a comeback. It may sound far-fetched now, but I can tell you: There is enormous anger out there about government spending, the increased debt, the bailouts and the fact that Washington is still taking orders from special interests. This is not the change people signed on for.

You are right -- this is much bigger than Bernie Madoff and his friends stealing billions from investors. Because the banks lobbied to change the law before they acted, their actions are technically legal. But paying elected representatives money to change laws so that you can violate them seems to me to be at the heart of what criminal activity is all about. But you are right, because the laws were changed, criminal prosecutors in the states are not going to be very effective in bringing effective prosecutions, especially given that federal enforcement agencies like the FBI and the SEC are collecting so little useful evidence and pursuing so few leads.

It is a real question how a country can stop corruption once corruption reaches its legislature, since the legislature is the place where we would expect reform legislation to be enacted. I believe this is one of the reasons why the poorest countries of the world have remained poor for centuries. As we have seen here in the U.S., once you lose control of your legislature, accomplishing real reform is a much bigger problem. Prosecuting attorneys are not going to be much help, judges and the court system have their hands tied by corrupt legislation, and well-meaning presidents face ostracism inside the Beltway if they openly oppose Congress, lobbyists and corporate special interests.

I believe pressure for reform has to come directly from the people. And I believe that Washington is so corrupt that attempts to bring reform through the vote will be ineffectual. The two parties have too much of a lock on power while incumbents have too much money (and they have gerrymandered their districts to the point that their losing is near impossible). Congress' approval rating of 14 percent and congressional incumbents' 98.4 percent success rate at re-election fully describes the problem of attempting reform through the vote.

That is why I am starting an effort to organize Americans who are angry with the power of corporate special interests to take back their country by putting pressure not on the corrupt Congress, but on the source of their funding: our biggest banks and corporations. Follow the money. The task is getting Americans organized, because once organized we hold the ultimate trump card. It is we Americans who make these corporations what they are today by buying their products and services. Any threat to not buy the products of big government lobbyists would certainly get their attention. I honestly believe it is also in the interest of our biggest corporations to stop influencing our government, because until they do, so our country is not going to be seeing any real economic growth. Banksters, greedy healthcare companies, a weak education system, unnecessary wars and a bankrupt government trying to fund its retirees' costs are not conducive to economic growth, and the corporations should come to realize this. This is a classic collective-action problem where each corporation cheats and steals a little, but the overall effect is to strangle the economy and prevent a truly prosperous future.

Of course, the real reforms that need to be accomplished, once we get corporations out of Washington and politics, include limiting the leverage of banks and prohibiting them from risky activities -- principal trading for their own account, derivatives trading, and many other investment banking activities -- and assuring complete transparency of all of their positions. We also need to strengthen the board supervision of management by getting managers, including the CEO and his cronies, out of the boardroom and replacing them with real shareholder representatives. We don't need to limit compensation, but we need to make sure that it is structured so that toxic waste cannot be left behind by a poorly thought-out bonus system.

But there are bigger reforms that are also needed. We need to downsize all corporations, especially the banks. We need to make sure they are not too big to fail. This downsizing will not hurt investors, as they will get two new smaller company shares of equal worth for every big old company share they held.

We need to shut down the credit default swap (CDS) market, because extensive trading of default risk makes everyone too interconnected to fail. I know the CDS market was created to limit risk through hedging, but it has done just the opposite. It has made all firms so interconnected that one cannot fail without bringing them all down. This violates the first rule of capitalism -- that firms must be allowed to fail -- and therefore it needs to be stopped completely. The only analogy I can think of to demonstrate how crazy this market has become is to go back in history to the early days of risk sharing when well-capitalized institutions on shore offered insurance against the loss of a ship at sea. The CDS market, if it were operating back then, would have allowed ships at sea themselves to guarantee the fate of other ships at sea, with very small boats such as hedge funds somehow insuring the return of very large merchant ships. The whole mess would have become so interconnected that one ship's sinking would have bankrupted everybody.

People today seem to think that just because two people want to trade something, it must be good. Because the CDS market is big, it must be useful, goes the argument. It gets at the belief system that you suggested people have adopted: that markets are inherently good. Maybe always efficient, but not always good. There are some things like company default risk that shouldn't be traded. In the past people wanted to buy and sell slaves, child pornography, women's bodies, or weapons of mass destruction, or to offer payments to elected government representatives and bribes to international governments and competitors. Just because a market can develop does not mean the functioning of that market is good for society. Markets cannot self-reflect. That is what humans do. Only we can decide if a particular market is doing more harm than good.

I would extend my reforms to include shutting down most derivatives trading. If used properly, it can be an effective hedging tool, but since its introduction it has made investment analysis moot, as no one actually knows what risks you are buying when you buy the stock of a company or bank actively engaged in derivatives. You may be bullish on gold prices, so you buy a gold mining stock -- only to find out that the company has in fact hedged its gold exposure so effectively through derivatives that it makes money only if gold prices decline, not increase.

Similarly, I would shut down the hedge fund industry. They are nothing more than enablers for these banks and companies like AIG to concoct schemes to avoid regulation or increase risk. Basic investment theory says you can't beat the markets, so I will bet that the hedge funds that are claiming to do so are doing it illegally through insider trading and market manipulation of individual stocks and asset prices. Don't take my word for it. Let's have the government tap the phones and check the e-mails of the hedge funds for a six-month period on a confidential basis and see what happens to their reported outsized profitability and trading brilliance.

John

[Demeter]

30. Complexity With No Purpose

From: Simon Johnson
To: John Talbott
Subject: Re: Complexity With No Purpose

John:

Thanks for your follow-up note.

I take your point that there should be a great deal of popular anger -- there is certainly plenty of reason for ordinary voters to be upset. But I'm not so sure this will be manifested anytime soon; for most people, what has happened is a bit abstract and rather too confusing.

On top of this, the big banks have done a great job of muddying the waters. Their message gets through to many: Everyone is to blame and no one is responsible for the crisis, so let's go back to some version of business as usual.

I actually agree there will be change, but I would suggest three other ways in which this will be manifested.

First, the financial sector has become so bloated that going back to any version of "business as usual" is inherently difficult. Even ardent supporters of the financial sector think that much of its supposed growth since the mid-1990s is likely to evaporate. And there is no one who thinks that finance can continue to expand its already high share of our national economy.

In our bubble/boom, we overbuilt, just like Japan overbuilt in the 1980s. Japan added excessive commercial real estate and too much manufacturing capacity; it took more than a decade to work off that overhang and the associated corporate debt. We overbuilt residential real estate to some degree, but mostly we overbuilt financial services. That overhang could disappear fast -- buildings decay over time, but financial services are just people sitting in front of computers. Turn off the perceived business model and there's nothing left -- except perhaps too much office space in former financial centers.

Of course, it is possible that this aggregate contraction will come in terms of exits by smaller players in the financial markets, rather than downsizing the biggest banks. This would be ironic and also dangerous -- the real problem we face is from the banks and other financial firms that are "too big to fail" because they are so large relative to the financial system. If the biggest banks end up increasing their political and economic market share, this would not be good.

In this context, my second potential mechanism will be important. As you suggest, much of what passes for "financial innovation" is actually various ways to rip off customers. The biggest, most "sophisticated" banks have become very good at getting people to overpay.

Resistance to this kind of overpayment is growing. The existing level of fees, implicit and explicit, for all kinds of financial services has moved from irksome to completely unacceptable. Disappointed customers and rising competitive pressures are forcing these fees down. All of finance will be affected, but the biggest hit should be on the banks that are more about "rent extraction" than actually intermediating money from savers to borrowers.

The big banks are definitely in this line of fire. You're going to see some aggressive new entrants, undermining all manner of previously effective cartels, at the same time as fewer transactions and lower fees.

Third, there is great frustration and mounting anger among other members of our business elite. What the big banks have gotten away with is absolutely not in the interest of "real economy" entrepreneurs and the venture capital that backs them financially. It's also not in the interest of small and medium-sized banks who find themselves under increasing pressure -- particularly as commercial real estate goes bad -- but who are small enough and politically unconnected enough to fail. And the executives who run large nonfinancial corporations are beginning to figure out how badly they got clobbered and by whom.

They are worried about the budget deficit, about the issue of money, and -- most of all -- about their future taxes. All of these worries are completely appropriate. And they understand very clearly who is responsible: the biggest of the big banks.

Why does this matter? These business elites wield great influence, partly behind the scenes. They are increasingly articulating to their contacts in the administration and on Capitol Hill that "too big to fail" is no longer acceptable.
Quantcast

I hear more and more, including from influential people in the financial sector, that there needs to be some sort of "tax" (speaking loosely) on size in finance. There is a growing consensus that if you are big enough to jeopardize the financial system and to require a future bailout, you should pay for that privilege.

The payment can be in terms of higher capital requirements or something else. There are many ways to make this work -- as Deng Xiaoping said, "It doesn't matter if the cat is black or white, as long as it catches mice." The cult of size within the financial sector is over.

Overall, I may be more optimistic than you about change for Big Finance being on the way. But I'm probably less positive about where this ends up more broadly for society. You have a long list of reforms throughout society, and while we can argue the details, I'm broadly sympathetic to many of your points.

These mechanisms for imposing change on Big Finance, however, would do little to move things forward on a broader front.

That needs a more comprehensive national leadership push. Personally, I have not given up on President Obama -- I think much of his strategic agenda makes sense and many of his tactics are sensible, but the banking crisis is still an Achilles' heel. If he can get past that, and put the big banks back in their (smaller) boxes, I'm optimistic that he will have the opportunity to push over time for more extensive reforms.

And if not him, who?

Thanks,

Simon

[Demeter]

31. Taking Back the Country

http://www.salon.com/opinion/feature/2009/07/24/economic_crisis_part_three/

From: John Talbott

To: Simon Johnson

Subject: Taking Back the Country

Simon,

I think you and I and most economists suffer from an antiquated belief that if we can just figure out exactly what went wrong, policymakers will beat a path to our door to ask our help in enacting necessary reforms. Unfortunately, the world no longer works that way. Our corrupted government, our criminal businesses and banking institutions, lobbyists, special interests, and the corporate controlled media are not interested in fixing this problem. They are making trillions of dollars through a vast scheme that transfers wealth from ordinary American taxpayers and consumers to their corrupt coffers. You are right that if big business thought about it, they should support efforts at restricting lobbying so that growth-oriented government policies could be implemented without the influence of corrupting special interests. But each lobbying corporation is also its own special interest, and so such internal reform is impossible.

The million-dollar question is: Why haven't ordinary Americans reacted more passionately and angrily in taking real action to end this systemic abuse? A decade ago, I wrote my first book on the corrupting influence of big business lobbying on our government and concluded at the time that average Americans would not focus on the issue until they had suffered real pain. I concluded that you can't defuse a bomb in America until after it has gone off.

But now the bomb has exploded. Forty million Americans are unemployed, millions have lost their homes, and most have taken a very substantial hit to their incomes, retirement savings and wealth. Why aren't Americans in the streets protesting this corrupt, enormously damaging criminal enterprise? I have traveled enough around America to realize that even though the current situation is enormously complex and not all Americans can describe exactly how the CDO market works, almost without exception every American can relate to you his frustration with how corrupt this government is and how unjust corporate lobbying and special influence in Washington has become. They get it. As a matter of fact, some of my high school-educated friends from my home state of Kentucky understand it a lot better than my Harvard-educated friends from Wall Street.
Quantcast

So I don't think the current challenge is figuring out exactly what caused the crisis. Focusing on what caused this episode will lead to narrow regulatory reform that reminds me that we all now take off our shoes at airports because one crazy fellow had the idea of putting a bomb in his heel. So while reform is needed in subprime mortgages, securitization, derivatives, and even in the magnitude of our financial institutions, none of these get at the fundamental problem: The people of this country are no longer making the rules by which they wish to live. If subprime mortgages hadn't blown up, some other area of highly leveraged bank lending would have eventually imploded. Even if the banking industry hadn't crashed, some other sector of the corrupt business/government criminal enterprise would have. Maybe the ice shelf of Greenland would have collapsed into the North Atlantic, maybe we would have run out of oil, maybe Microsoft's monopoly position in operating systems would have led to a worldwide computer virus shutdown, maybe poor consumer safety standards with China would have led to a global disease epidemic. The point is that when corporations make the rules, the results are not always good for the inhabitants of the planet.

So we don't have to decide today exactly what the reforms will be -- we just need to get corporate America out of our government so that the people can deliberate and make these reform decisions themselves without undue influence from bankers and corporations.

But there are two huge impediments to accomplishing this. This is not a traditional economics problem, it is an organizing problem or a collective action problem. People know the system is rigged and broken and unjust, but they feel as if there is very little that any one of them can do to effect much change. The organizing task is further complicated by the fact that our media, including television networks, cable TV, radio, newspapers, and magazine and book publishing, are almost all sponsored, owned and controlled by big corporations. The only hope is the Internet, over which big business has tried but to date failed to successfully exert its dominance. The Internet will prove to be both a source of unbiased news and information as well as the communication tool concerned citizens can utilize to fight back against big government, big business and big media.

What has to happen to get this movement started? First, I think people need to see that there is a channel being constructed that has the potential to be effective in directing their anger into real positive reform and change. I am in the process of beginning just such an organization and encourage people who are interested in fighting back against the system and against corporate lobbyists and special interests to contact me at my e-mail address, johntalbs (at) hotmail (dot) com.

Next, people have to believe that if they invest their time in such an effort they have the potential of winning. In this case, this is rather straightforward and easy to explain. If we are successful in organizing 5 million to 10 million Americans who want to see real change about how business is conducted in Washington, then by definition, we will have not only substantial political and voting power, but more important, the beginnings of a real consumer movement that could easily boycott the products and services of the worst corporate lobbyers in our government.



And this is where the magic of the Internet comes in. No one person could organize a 10 million person database in his lifetime. But Obama was able to accomplish it in less than two years. How? We don't have his money. Instead, we create our own Ponzi scheme. We create the ultimate chain letter. I e-mail 30 of my friends who each e-mail 30 of their friends and so on and so on. If only four cycles of people pass on the info we end up contacting 25 million Americans. We ask people to give us their e-mails and then contact them when we want to boycott a new offender.

It is time for Americans to realize that things are not going to improve until they get involved. It will take time. But the economy is not going to improve until we straighten out our corrupt system. Do you have anything more important that you are working on than this? The survival of liberal democratic society in the world.

Thanks for a great exchange of ideas. And best of luck in your future research and work.

John

[Demeter]

32. "I'm not saying that the banks will simply commit political suicide. Nothing is ever so simple"

From: Simon Johnson

To: John Talbott

Subject: Re: Taking Back the Country

John:

I admire your energy and focus in trying to mobilize a broader cross section of people against the big banks in particular and the way our political-financial system operates in general. I'm sure this is worthwhile and not at all a waste of time. Any efforts you or others put into educating people -- or enabling people to better educate themselves -- will surely pay off over time.

However, my sense of the political cycle around these issues is perhaps a bit different from yours. On the first round -- the crisis, immediate policy response and first-round "reform" efforts -- the big bankers have definitely won.

You were right when you argued way back that it would take a crisis before anyone really understood that we have a problem. But even so, most people still do not fully understand what has happened to them over the past 12 months -- and why their future taxes will be so much higher. I spend quite a lot of time talking to relatively well-informed people. After an hour or so of intense discussion and argument, I would say that most people see much more clearly just what the big banks got away with, although they do not necessarily agree with the idea of stricter regulatory controls on those banks. Left to their own devices, or just relying on the usual sources, I'm not sure how clear any of this is to most people.

And I worry that e-mailing friends doesn't necessarily engage people at the necessary level. You need repeated reinforcement of the key themes -- and a lot of back and forth with people you trust -- to really change minds on something this big. Or, as you say, you need to see it again and again, and perhaps you need to worry about the consequences for your own well-being.

If the big banks could just lie low for a while, I honestly think they would get away with everything -- the backlash would fade, and we'd be setting ourselves up for another massive crisis down the road.

Fortunately (in a sense), the banks cannot back off from their most egregious behavior. Perhaps this is in their DNA; definitely it is in their organizational culture and how they see the world -- the people who run the biggest financial institutions really think they are the masters of the universe and are proceeding on that basis.

Their profits, their wages, their bonuses, and their behavior have begun to antagonize people greatly. Already, some of my contacts who are close to the administration wince at the latest news from the financial sector, be it the bonuses that were paid last year to senior people who oversaw major mistakes (some of whom are now rewarded with senior policy roles!) or the blatant bragging about political influence that some CEOs are now making public.

And even if some sensible people at these banks would like to rein in employee compensation to more moderate and reasonable levels, they have a problem. If you lower the wages for your people, another bank -- perhaps one based in Europe -- will hire them away with a crazy package. The rat race, across companies and between people, means that this can only be curtailed through regulation. But the survivor banks are so strong politically that they will defeat all meaningful regulation for compensation.

This very success makes them more vulnerable to further criticism and backlash.
Quantcast

I'm not saying that the banks will simply commit political suicide. Nothing is ever so simple. But they will likely undermine themselves with Congress and eventually even with the administration. The midterm elections in 2010 and the presidential election in 2012 could well be very much about restricting the power of the big banks.

American democracy does not get on well with overweening unelected individuals who pretend to great power. Andrew Jackson saw off Nicolas Biddle in the 1830s. Teddy Roosevelt stood up to -- and eventually towered over -- even J.P. Morgan at the beginning of the 20th century. And FDR remade everything in the 1930s.

As I said before, I'm optimistic that President Obama can do the same. The challenge to democracy is palpable and growing. The fact that two -- and only two -- big banks came through the crisis unscathed is a perfect symbol of the problem. In the past, part of the myth of Wall Street was that it was competitive, that many could enter the industry, and that its political power was not too concentrated. This myth, among many, has now exploded.

We see the power for what it is. Mainstream media increasingly picks up the story line. And still the big banks cannot step back and curtail their most troubling activities.

Keep explaining and let the big banks provide the supportive evidence you need.

Best wishes,

Simon

[Demeter]

33. Obama Can, But Will He?

That is the question for the age.

http://www.youtube.com/watch?v=q5kt8cxfNRE&feature=related

[ozymandius]

42. If only 10% of this were true, we would need to double the size of the Justice Department.

RICO statutes could apply here. Same as the Sherman Act. More mundane laws involving graft, ethics rules violations and the like also could apply. The absence of any investigation is, evidently, willful.

[Demeter]

44. And a Fleet of Special Prosecutors, Too

I'm inclined to trust every word. It's, after all, the only side of the story that makes sense.

[Hugin]

45. This is the single most important article I've read on the meltdown...

Anyone who is serious about getting to the root of where these problems are stemming from and developing a real economic and regulatory recovery plan needs to read it and take it to heart.

This is what is happening... To our Wealth, our Nation and to our Health.

[Demeter]

51. It's Insider Info

That's what shows us that the die was cast long ago, and in spite of those wise folk who railed against it at the time. We are living in the aftermath of decades of wrong decisions. We have no way to change the past, the present, and it looks like the future is pretty locked up, too. All we can do is keep low and protect our own to the best of our unaided ability.

[AnneD]

88. A song from the betrayed...

www.youtube.com/watch?v=WQ6LmrP3vK8

[MattSh]

26. Well, I'm taking the fifth this morning. Err...

No, I'm giving the fifth rec.

[Demeter]

28. Good. Dr. Phool Wants His 5th Back

Although, if I drank spirits, I'd wrestle him for it. This is downright depressing news and analysis...

[MattSh]

46. What the hell...

a fifth for everybody. Or substitute your favorite libation. l

[Demeter]

53. I'll Drink to that!

God knows after going through all this stuff, some kind of anesthesia is required!

[Dr.Phool]

65. I needed it last night.

Luckily, our local liquor store had a "Economic Stimulus Special". They had a 1.75 ltr. Bottle of Polish vodka on sale for $21.99 plus a $20 rebate, Net price, $1.99. And those little airline bottles of Van Gogh Dutch Chocolate vodka for $0.99. I'm set for the week-end!

[Demeter]

36. Its Official: U.S. Trapped in an Extended Deflationary Cycle

http://www.washingtonsblog.com/2009/07/its-official-well-have-extended.html


Bernanke has just confirmed that the Fed's prediction is for extended deflation.

In an OpEd in the Wall Street Journal, Bernanke writes:

My colleagues and I believe that accommodative policies will likely be warranted for an extended period. At some point, however, as economic recovery takes hold, we will need to tighten monetary policy to prevent the emergence of an inflation problem down the road. ..

As the economy recovers, banks should find more opportunities to lend out their reserves. That would produce faster growth in broad money (for example, M1 or M2) and easier credit conditions, which could ultimately result in inflationary pressures...

There you have it . . . straight from the horse's mouth.

Deflation is the problem "for an extended period". Inflation could only threaten "down the road", if faster growth and easier credit conditions "ultimately" might result in inflationary pressures.

Remember, however, that food, energy and healthcare costs could still skyrocket, even as most other asset classes experience deflation.

And if the U.S. defaults on its debts, the dollar would experience massive devaluation, which would cause hyperinflation for U.S. consumers (because it would take more dollars to buy the same goods or services). If the U.S. defaults, all bets are off.

[Demeter]

40. Shades of Gray

http://www.youtube.com/watch?v=5JVSd95QruI&NR=1

[Demeter]

47. What's good for Goldman is generally bad for the country.

http://dailyreckoning.com/whats-good-for-goldman-is-bad-for-the-nation/


Goldman makes money by separating investors from their money. Nothing wrong with that; someone has to do it. But the big banks are most profitable when speculation is rampant and debt is growing. That is, when people are going further and further into debt...and speculating on rising asset prices. We know you don't really prosper by borrowing and gambling. But that doesn't make casinos unpopular, or lenders unlawful. Bankers, like undertakers, benefit from human frailty. At least, they benefit as long as the government bails them out. Otherwise, they fall victim to their own human frailty.

But this is a minority opinion. Most economists disagree with us. And there are so many of them...if all the economists who disagreed with us were laid end-to-end...it would be a good thing. They believe that the economy is stabilizing...and on its way back to normal. Trouble is, 'normal' ain't what it used to be.

Wall Street banks are making money, 'tis true. But they're not financing new businesses...or factories. They're not aiding the process of capital formation nor allocating capital in ways that will result in new jobs and new industries. Instead, they are refinancing old debts...and speculating on zombie assets. This will not increase the real wealth of the planet. Instead, money just changes pockets. Which, of course, raises an interesting question; where did all this money come from?

If Goldman's pockets are fatter, whose are thinner? If the four biggest banks earned a combined $11 billion in the last quarter...who did they take the money from? Who's got that kind of money?

Meanwhile, we found out this week that the feds have wagered an amount equal to 170% of GDP in their attempt to bailout the world. Part of that money was used to buy Wall Street out of the investments that they didn't want. Which ones were those?

Well, the ones that didn't work out.

No wonder the banks are making money.

But while the banks are making billions, cometh another report from another sector - manufacturing. Caterpillar announced its results for the second quarter too. Profits were down 66%. In other words, while the banks were making money speculating with taxpayer's money, Caterpillar was trying to make things and selling them to customers. Caterpillar not only makes things; it makes things that help other companies make things. Things with motors...big things...things that make noise and give off exhaust...things you use to dig holes and move dirt...things you need if you're going to have a real economic recovery. Unfortunately for CAT, these things aren't selling.

So what does this tell us? Well...it suggests that there is no real economic recovery at all. The real economy is suffering...sinking...and shutting down.

[Demeter]

48. MONKEES - PLEASANT VALLEY SUNDAY

http://www.youtube.com/watch?v=fB0bnT4QRIc&NR=1

[Demeter]

50. Those Who Do Not Learn History Are Doomed to Repeat It

Romulus, Remus, Stimulus: A Brief History of Monetary Madness

http://dailyreckoning.com/romulus-remus-stimulus-a-brief-history-of-monetary-madness/

The Roman Empire is in some measure a stimulus story. It conquered. It grew. Each conquest brought more booty...gold, silver, land and slaves. And each led to more conquests, which brought forth more booty. But the stimulus of this booty stimulated only the need for more stimulus. It did not stimulate real prosperity. Instead, it undermined it. First, slaves bought by rich landowners destroyed the free labor market and ruined small farmers. And then, imported wheat from the provinces - paid as tribute - put the large-scale farmers out of business too. Italy was then dependent on foreigners for its food.

In the first century AD, Roman conquests reached the point of diminishing returns; the stimulus came to an end. But borders still had to be protected. And Roman mobs, made up of displaced small landowners and out-of-work laborers, needed bread and circuses which drained the Treasury.

The first financial crisis of the imperial period came early. Caesar Augustus tried to solve it...with more stimulus. Neither paper money nor the printing press had yet been invented. So, Augustus increased the money supply in the only way he could; he ordered slaves in the silver mines in Spain and France to work around the clock! This extra money did not bring prosperity; it caused price inflation. In a period of about three decades, Rome's consumer price index almost doubled. Then, when output from the mines could be increased no further, Augustus's great nephew, Nero, found a new source of stimulus; he reduced the silver content of the coins. This source of stimulus proved ineffective, but enduring. By the time barbarians took over, the silver denarius contained almost no silver at all. Of course, Rome itself was played out too.

Another early and dramatic example of stimulus-in-action came in Spain in the 16th century. The conquistadors increased their supply of money in the time-honored fashion - by stealing it. Galleons brought treasure from the Americas; increasing the Spanish money supply substantially and fatally. The Spaniards had so much stimulus that they laid down their tools. Why should they work? They could buy things.

The discovery of a whole mountain of silver - Potosi - in the middle of the 16th century insured a supply of stimulus that would last for nearly a century. Results? Predictable. Inflation. In the "price revolution" from 1540 to 1640 the cost of living went up throughout Europe. In England, for which we have the most reliable data, prices went up 700%. And Spain, though it covered 40% of its state budget with this easy cash, still defaulted on its debts about once every 15-20 years, from 1557 for the next 10 decades. Spain, like Rome, welcomed stimulus; it never recovered from it.

Now we turn to the biggest misadventure in stimulus ever - the period after the United States 'closed the gold window' in 1971. In the 150 years before then, nations could stimulate their own economies with cash and credit, but only to a point. They could overspend; but they had to settle up in gold. After 1971, on the other hand, the sky was the limit - especially in the United States of America. The US could settle its bills in paper, which was then used by foreign central banks as monetary reserves. Since foreign banks were eager to add to their supplies of reserves, there was no effective limit on the amount of stimulus available. The Fed's adjusted monetary base grew 900% since 1985, and more than doubled this year alone. Total US debt tripled - as percent of GDP.

As it did with Rome and Spain, more and more stimulus stimulated spending and speculation, but not real output. During the 2001-2007 period, for example, credit in the United States increased by $22 trillion. The nation's GDP increased only by $4 trillion. For every extra dollar of output, Americans took on $5.50 of debt.

But now the bubble has blown up; the feds are on the case. What do they offer? More stimulus! Cometh a report this week that $23 trillion has already been put at risk in the various bailouts and credit guarantees. As for the US public debt, it is expected to increase until the country goes broke.

Future economic historians will look at these staggering efforts with awe and wonder; they will wonder what the Hell we were thinking.

Enjoy your weekend,

Bill Bonner
The Daily Reckoning

[Demeter]

54. Smoking the Green Shoots / Robert Kuttner Co-Founder and Co-Editor of The American Prospect

http://www.huffingtonpost.com/robert-kuttner/smoking-the-green-shoots_b_240395.html



Question for the day: Where is the economic recovery going to come from?

We are still at the stage of the recession where economic downdrafts are producing more downdrafts. Reduced purchasing power leads to fewer retail and factory sales and more layoffs, further reducing consumer demand. The Obama stimulus package, about 2.5 percent of GDP for each of two years, doesn't make up enough of the difference. But the federal deficit, caused mainly by falling revenues and not by increased public spending, is alarming the budget hawks. The administration worries, correctly, that deficits will be high for several years to come and wonders who will keep lending Uncle Sam the money. Yet cutting back spending before recovery comes would be suicidal.

In addition, the financial sector has not yet returned to health, despite outsized profits (and bonuses) reported by the likes of Goldman Sachs. This is the kind of purely financial engineering that caused the collapse. The fevered activity at Goldman is a sign of lingering economic illness, not economic health. The rest of the economy, which depends on the financial sector for real investment capital, is still deeply depressed.

Louis Uchitelle's piece in Sunday's New York Times provides some instructive numbers.

Every major sector that reflects the purely private economy has been losing jobs, the only exception being energy extraction plus a tiny increase in computer systems design and management consulting. All of the other expanding sectors that are actually adding jobs reflect government spending - education, health, general government. But the declines in the workhorse parts of the private economy such as manufacturing, construction, and retailing are huge.

With purchasing power still declining and unemployment still rising, where will the recovery come from? White House economic chief Lawrence Summers, in a major speech at the Peterson Institute July 17, emphasized the good news.

"We were at the brink of catastrophe at the beginning of the year but we have walked some substantial distance back from the abyss," he said. And, ever the empiricist, Summers reported that a Google search revealed that "hits for economic depression have returned to baseline levels." That's nice, but what Summers did not forecast was a robust recovery.

And if we stay on the present path, recovery will not come for a long time. Federal deficits will be large enough to raise questions about who will keep lending us the money - but not large enough to power a real recovery that increases real incomes and provides good jobs. The last time we had a massive financial meltdown like this, it took the hyper-stimulus of a war - World War II - to recapitalize industry and re-employ workers.

What, then, is the moral equivalent of war for the 21st century? Let's think way, way outside the box.

We might begin with a serious strategy for rebuilding American manufacturing. American corporations and politicians have been cavalier about just letting manufacturing go. Uniquely among advanced and developing nations, we have no national strategy for nurturing manufacturing at home. There's even an office in the Commerce Department that helps companies outsource.

As a result, even a modest uptick in purchasing power will not produce enough American jobs because there are so many things that America no longer makes.

We could start with clean energy, and move on to mass transit, and reclaim America's capacity to make things. Right now, even if we massively shifted to wind and solar energy, other nations would get most of the production jobs because most solar panels and wind turbines are not made here, while Americans would just get the temporary installation jobs.

We could also get serious about insisting that other trading nations not coerce or bribe our manufactures to locate facilities overseas as a condition of doing business - a flagrant violation of trade law. We could start having a real industrial policy for commercial industry in the way that we have long had a tacit industrial policy for products deemed essential to the military.

The administration is confused about how to reconcile industrial goals with trade law. It had to do a lot of backing and filling so that tens of billions of taxpayer dollars to modernize the auto industry didn't end up subsidizing more outsourcing of jobs to China. If trade law interferes with our ability to revive American manufacturing, then there's something wrong with trade law and let's change it.

For a fine summary on how to revive domestic manufacturing, take a look at the new book, Manufacturing a Better Future for America, edited by Richard McCormack and written by some of America's best experts on reviving manufacturing.

The book is published by the Alliance for American Manufacturing.

After manufacturing, we need to get serious about investing in a new generation of public infrastructure - everything from smart-grid electrical systems to broadband and modern water and sewer and transportation systems. That will produce lots of good jobs, and make for a more efficient and productive economy.

As far as the deficit is concerned, it will probably need to get bigger before it gets smaller. During World War II, when the nation was a lot poorer and nearly half of our national output went to defeat the Axis powers, my parents and grandparents and tens of millions of Americans like them bought war bonds.

We didn't depend on foreign borrowing, even though the deficits were far larger. Today, the government should create Recovery Bonds and market them to Americans, so that we can finance our own social investment and cease to be financial wards of foreign dictatorships.

The good people at Goldman Sachs can demonstrate their patriotism - not by offering to make money as financial middlemen - but by buying the first issue of these bonds as an investment. The government needs no investment bankers to market these bonds. It can sell them directly to citizens

Gentle reader, we are in a national economic emergency. This is not just about talking up the economy by emphasizing good news. The administration needs to stop smoking its own green shoots and offer strategies equal to the magnitude of the crisis.

[Hugin]

56. Well, if nothing else this mess has delivered some all time great headlines!

:rofl:

[Demeter]

58. Get the Next post--It's a Killer

[AnneD]

87. A new interpretation to the phrase...

giving good head. Still either way, we be screwn. :evilgrin:

[Demeter]

57. Arianna Huffington / Why Pompeii Has Me Thinking About Our Economic Mt. Vesuvius

http://www.huffingtonpost.com/arianna-huffington/why-visiting-pompeii-has_b_241603.html

Why Visiting Pompeii Has Me Thinking About the Smoke Billowing Out of Our Economic Mt. Vesuvius

POMPEII -- I was in Pompeii a couple of days ago. Walking around the ancient city, reading up on its history, and thinking of its people -- wiped out in 79 A.D. by a volcanic eruption -- has me thinking a lot about warning signs.

Warning signs fall into two categories: those that are recognized while there is still time to heed the warning, and those that are acknowledged as "warning signs" only after the fact, when it's too late to do anything but sift through the ashes and wonder why we didn't do something when we had the chance.

In the case of Pompeii, the warning signs included a severe earthquake in 62 A.D., continued tremors over the ensuing years, springs and wells drying up, dogs running away, and birds no longer singing. And then the most obvious warning sign of all: columns of smoke belching out of Mount Vesuvius before the volcano blew its top, burying the city and its inhabitants under 60 feet of ash and volcanic rock.

But the warning tremors were dismissed as "not particularly alarming because they are frequent in Campania." And the billowing smoke was quaintly described as looking like an "umbrella pine."

There is currently plenty of alarming smoke pouring out of our economic Vesuvius, but it too is being dismissed. Instead of "umbrella pines," we are being lulled with the sightings of green shoots. Don't worry about those economic tremors, we are told, our financial system is back on track, the worst is over, the bailout worked and we just need to sit tight and wait for the bottom to be hit (some are arguing it's already been hit), after which we'll start our slow but steady climb to recovery.

But the warning signs are all around us:

-- Unemployment has hit a level beyond the administration's worst projections, and last month reached record highs in Rhode Island (12.4 percent), South Carolina (12.1 percent), and Nevada (12 percent), while Michigan, at 15.2 percent, still has the highest jobless rate of any state. Meanwhile, over 650,000 workers will run out of unemployment benefits come September.

-- Credit card defaults have surpassed 10 percent, and in May hit a record high -- the sixth straight month that dubious achievement has been reached.

-- Foreclosure numbers continue to shatter records. There were more than 336,000 foreclosure filings in June, the fourth month in a row with over 300,000. That meant that, as of July 1, one in every 84 homes had been -- or was in danger of being -- lost. And more than 15 million homeowners now owe more on their homes than they are worth.

-- In the first six months of 2009, 675,351 individuals filed for bankruptcy. In June alone, there were 116,365 bankruptcy filings -- a 40 percent increase over June 2008.

-- Since the recession began, an estimated 2.4 million workers have lost their health care benefits.

And the biggest warning sign that the natural order of things has been disturbed is how many of the very people responsible for the economic collapse not only are still in power, but are still lining their pockets with outrageous windfalls -- courtesy of the American taxpayer.

According to last week's earnings reports, Goldman Sachs posted a $3.44 billion second-quarter profit, Citigroup earned $3 billion, and Bank of America earned $2.4 billion.

On top of this, Goldman Sachs just announced that it was setting aside $11.36 billion for employee compensation through the first half of the year.

And AIG -- which we bailed out to the tune of $150 billion -- is apparently doing so well they're ready to set aside $235 million in bonuses.

After the earthquake that severely damaged Pompeii in 62 A.D., it is said that among the first buildings repaired were Pompeii's famous brothels. The metaphor holds. Only in 2009, we call them Goldman, AIG, Bank of America, and Citi. Though that is probably unfair. To the brothels.

But wait, you might ask, isn't the government reacting to the warning signs? Isn't Congress currently redesigning our financial regulatory structure? Yes, but the redesign will give greater authority to the Fed -- which missed all the warning signs leading up to the meltdown. As Mark Williams, finance professor at Boston University and a former Fed bank examiner put it, "giving the Fed more responsibility at this point is like a parent giving his son a bigger and faster car right after he crashed the family station wagon."

And what about the new "Pecora" commission, which has been charged with investigating how the financial collapse happened and how to prevent another one -- won't it point out the warning signs? Its chairman, Phil Angelides, certainly seems determined to. But look at its vice-chairman and the restrictions the commission is operating under. The vice chairman is Bill Thomas, the former GOP congressman from California, who earlier this decade chaired the House Ways and Means Committee. Even among shills for big business, he stands out. What's more, Mitch McConnell and John Boehner ensured the committee won't have much clout by forcing Democrats to agree to a provision that allows the committee to issue subpoenas only if one of its Republican appointees votes to issue one.

Then there is the proposed Consumer Financial Protection Agency, which is supposed to protect consumers from the vultures that helped destroy our economy. But its ability to monitor warning signs is being undermined by Wall Street, with the charmingly named Financial Services Roundtable leading the charge. "Politically, it would be difficult to kill it outright," says Scott E. Talbott, the Roundtable's Senior VP for government affairs. "Our goal is to change the agency, change the proposal, to where the benefits outweigh the costs.... We're not for the status quo. We're for protecting consumers. The question is, what's the best way to do it?"

I'm going to guess that, for Talbott's group, the "best way" to protect consumers will be a way that somehow does not protect consumers.

And then we have today's blistering report from Neil Barofsky, the special inspector general overseeing the TARP program, showing that many of the banks -- instead of using the bailout money they received to boost lending -- have used it to make investments, repay debts, or buy other banks. The report also takes on the Treasury Department for its ongoing lack of transparency when it comes to requiring bailed out banks to let the public know what they have done with our money. It's hard to heed warning signs that are so deliberately kept out of view.

Walking around Pompeii my friends and I kept wondering: "How could they miss the birds not singing, the water not flowing, the earth trembling, and the smoke billowing?" The list of today's warning signs, which future generations may similarly marvel at, grows longer with each passing day.

So the tremors continue to rumble beneath our feet and the plumes of smoke continue to belch overhead.

[Hugin]

59. Meanwhile, Herculaneum has been evacuated! (Except for the house slaves)

"... the town itself, being effectively evacuated. Herculaneum was a smaller town with a wealthier population than Pompeii at the time of their destruction."

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

(To keep the metaphor going.)

[Demeter]

60. Bill Maher New Rule: Not Everything in America Has to Make a Profit

http://www.huffingtonpost.com/bill-maher/new-rule-not-everything-i_b_244050.html



How about this for a New Rule: Not everything in America has to make a profit. It used to be that there were some services and institutions so vital to our nation that they were exempt from market pressures. Some things we just didn't do for money. The United States always defined capitalism, but it didn't used to define us. But now it's becoming all that we are.

Did you know, for example, that there was a time when being called a "war profiteer" was a bad thing? But now our war zones are dominated by private contractors and mercenaries who work for corporations. There are more private contractors in Iraq than American troops, and we pay them generous salaries to do jobs the troops used to do for themselves ­-- like laundry. War is not supposed to turn a profit, but our wars have become boondoggles for weapons manufacturers and connected civilian contractors.

Prisons used to be a non-profit business, too. And for good reason --­ who the hell wants to own a prison? By definition you're going to have trouble with the tenants. But now prisons are big business. A company called the Corrections Corporation of America is on the New York Stock Exchange, which is convenient since that's where all the real crime is happening anyway. The CCA and similar corporations actually lobby Congress for stiffer sentencing laws so they can lock more people up and make more money. That's why America has the world;s largest prison population ­-- because actually rehabilitating people would have a negative impact on the bottom line.

Television news is another area that used to be roped off from the profit motive. When Walter Cronkite died last week, it was odd to see news anchor after news anchor talking about how much better the news coverage was back in Cronkite's day. I thought, "Gee, if only you were in a position to do something about it."

But maybe they aren't. Because unlike in Cronkite's day, today's news has to make a profit like all the other divisions in a media conglomerate. That's why it wasn't surprising to see the CBS Evening News broadcast live from the Staples Center for two nights this month, just in case Michael Jackson came back to life and sold Iran nuclear weapons. In Uncle Walter's time, the news division was a loss leader. Making money was the job of The Beverly Hillbillies. And now that we have reporters moving to Alaska to hang out with the Palin family, the news is The Beverly Hillbillies.

And finally, there's health care. It wasn't that long ago that when a kid broke his leg playing stickball, his parents took him to the local Catholic hospital, the nun put a thermometer in his mouth, the doctor slapped some plaster on his ankle and you were done. The bill was $1.50, plus you got to keep the thermometer.

But like everything else that's good and noble in life, some Wall Street wizard decided that hospitals could be big business, so now they're run by some bean counters in a corporate plaza in Charlotte. In the U.S. today, three giant for-profit conglomerates own close to 600 hospitals and other health care facilities. They're not hospitals anymore; they're Jiffy Lubes with bedpans. America's largest hospital chain, HCA, was founded by the family of Bill Frist, who perfectly represents the Republican attitude toward health care: it's not a right, it's a racket. The more people who get sick and need medicine, the higher their profit margins. Which is why they're always pushing the Jell-O.

Because medicine is now for-profit we have things like "recision," where insurance companies hire people to figure out ways to deny you coverage when you get sick, even though you've been paying into your plan for years.

When did the profit motive become the only reason to do anything? When did that become the new patriotism? Ask not what you could do for your country, ask what's in it for Blue Cross/Blue Shield.

If conservatives get to call universal health care "socialized medicine," I get to call private health care "soulless vampires making money off human pain." The problem with President Obama's health care plan isn't socialism, it's capitalism.

And if medicine is for profit, and war, and the news, and the penal system, my question is: what's wrong with firemen? Why don't they charge? They must be commies. Oh my God! That explains the red trucks!

Bill Maher, host of HBO's Real Time with Bill Maher airs live at 10pm

[DemReadingDU]

74. Charles Hugh Smith: A Wild Speculation: the Stock Market and the Economy

7/25/09 A Wild Speculation: the Stock Market and the Economy
Charles Hugh Smith

Here's a wild speculation on the stock market and the real economy: the Powers That Be have engaged in a covert but easily visible wild speculation.

Bear with me while I speculate wildly about an unprecendented campaign of wild speculation by The Powers That Be.

The U.S. economy is at a cross-roads. Either it is exiting the recession and about to resume its glorious path of "growth" or it is teetering on the abyss.

If you were the Powers That Be--those holding the reins of political power and those making hundreds of millions in Wall Street bonuses--which alternative would you prefer? Which one would you throw your weight behind?

Duh--you'd be working every covert and PR lever possible, and inventing many new ones, to push the idea that the recession is over so spend, spend, spend.

Now here's the first thing we have to understand: borrowing $200 billion at zero-interest and dumping it into the $12 trillion U.S. economy is akin to spitting in the wind. The Bush-era "stimulus" of around that size just vanished sight unseen, barely registering in the economy at all.

But $200 billion dumped into stock market futures and churned in program trading and high-frequency trading has enormous leverage. While the total value of the U.S. stock market is in the $10 trillion range (down from $15 trillion at its 2007 height), only a few percent of the total outstanding shares trade hands each day.

But by buying futures contracts and churning via program and high-frequency trading--essentially buying from oneself or others in your manipulation game until other traders join in the bogus rally--the leverage is greatly increased. Thus a mere $10 billion thrown in relentless buying of futures contracts can spark a huge rally.

Before the Internet era, technical analysis was a black art of charting done by hand. Now every punter and middle-class owner of a 401K or IRA has access to thousands of charts displaying dozens of indicators and models. Everyone has access to data which was once limited to the exchanges and large brokerage houses.

Now that everyone see the same indicators and data, guess what becomes much easier: manipulating the market. Just two weeks ago, the mainstream financial media was filled with stories about the supposedly ominous "head and shoulders" chart pattern. In the past, H&S patterns were never mentioned in the MSM except in commentaries by market technicians. For Technical Analysis to have spread to the headlines is noteworthy.

Why? If you set out to manipulate the market higher, this makes your job much easier. Now that everyone "knows what to look for," then all you have to do is engineer a rise to certain levels which triggers "buy signals" that will be screamed and trumpeted in one media venue after another.

Want to engineer a rally behind the scenes? It's easy:

1. Kick-start a rally with massive buying at the open of the market day. Counter every bout of selling with massive buying of futures, and then "paint the tape" with more buying in the last 15 minutes. Then buy thousands of futures contracts at higher bids in the after market to set expectations that the rally will continue the following day.

2. As everyone who holds bets that the market would decline (shorts) has to buy back the stock they shorted, then this adds buyers (albeit reluctant ones) which further boosts the "Bull rally."

3. Do this for 10 days in a row, so the MSM can make fawning comparisons to previous "bull runs" in previous "Bull markets."

4. Identify key "technical signals" and then trigger them so the MSM can pump up this "proof that the Bear is dead and the recession is over." Recently, there was a frenzy of MSM coverage of the "bullish cross" in which (on at least some charts) the moving averages crossed in a "we're going higher" signal.

Other "buy" signals which have recently been triggered include "a new yearly high" for all the indices and a "Dow Theory Buy" as the Dow Transports and the Dow Industrials both logged new annual highs.

Seen in this light, sparking a Bullish frenzy is like taking candy from a baby. And most amazingly, it doesn't take much money to do so because the leverage offered by futures contracts and high-frequency trading is so extreme.

To market insiders this fly in the Bull-market ointment is critical, because "volume is the weapon of the Bull." If there's declining volume, that is extremely suspicious because volume is the one metric insiders can only pump so high on their own.

If you follow the market, you've seen the charts which depict that over half the trading done every day is program ("black box," "algorithmic," "computer," "quant," etc.) trading by Goldman Sach and other large broker-dealers, large hedge funds and other insiders. Trading by so-called "retail" investors (like me and you) and other investors below the level of top-tenth of one-percent make up only 17% of the trading. The other 83% is all in the hands of the 1/10th of 1%.

Despite their tremendous leverage, the insiders (and the Fed and Treasury, which announced last year that they would do anything to goose the markets higher, including buying equities and Treasuries, an unprecedented confession of open market manipulation by the Federal government) cannot force others to participate in the rally.

All they can do is drive the markets so relentlessly that anyone who wants to make money has to buy into the rally. And that includes, well, just about everyone.

As I've indicated on the chart above, there are basically three scenarios in play at this critical juncture:

1. The "melt-up" continues as the MSM announces (endlessly) that "the recession is over." In this scenario, the stock market continues its relentless ascent as everything gets better and better. The ultimate "top" has been touted as 15,000 on the Dow: a level which would top the 2007 high of 14,000+ by a wide margin. Go team, rah, rah, rah!

2. A school of technical analysis known as Elliott Wave Theory (EW or EWT to those in the know) forecasts a slightly less positive future: a brief dip in the coming days which will be followed by one last rise--and then a sharp drop to previous lows or even new lows.

3. Then there's the scenario which virtually no one even states, much less touts as plausible: the rally collapses right here, starting next week. Nobody is dumb enough, naive enough, foolish enough or uninformed enough to even timidly suggest that the open manipulation of the Powers That Be could actually fail because it's obviously so well funded, planned and executed that it can't possibly fail.

Well, there is one person foolish enough to voice it, I guess: me. This entire 10-day "rally" (or call it 12 days if you look only at the Nasdaq) simply doesn't pass the "sniff test." Technical analysts avoid confusing the charts with fundamental data like auto sales, unemployment, etc.--they look only at "the tape" (prices) and various indicators.

Techical analysis (TA) thus does not attempt to explain trends, it only seeks to identify and follow them. Thus a manipulated rally is just like an organic or "real" rally (that is, one driven by actual profitability, low price-earnings ratios, robust economic growth as measured by metrics which haven't been manipulated, etc.)

Nonetheless, TA practitioners should be wary that volume is declining during this "rally." Despite all the trickery, manipulation, tape-painting, propaganda and false "buy" signals, the market is showing very little participation as measured by volume.

This suggests to me a market in which every participant is anxiously eyeing the exit doors. That is, everyone is waiting to see how much higher their profits will rise before they exit (sell). The problem with this "wait to get the last dime" strategy is that when the selling begins, those exit doors will turn out to be awfully narrow and few will get their sells through before the declines turn into a waterfall.

Ironically, this "don't sell because the market's going higher" strategy is based on an implicit faith in the Powers That Be: this rally can't fail, Goldman Sachs is behind it!

In a manipulated rally, the market falls once the spigot of insider buying is turned off. And when everyone has been holding on to the last moment to see just how high this puppy can run, then everyone will try to sell not on the way up but on the way down. That's how a low-volume rally turns into a rout.

Why would the Powers That Be gamble so heavily on creating a bogus rally here? Because it's the cheapest way to convince the American middle-class that "everything's fixed and the recession is over." It's also the easiest way to generate billions in trading profits which can distributed to the 1/10th of 1% playing the manipulation game.

(If you don't believe in manipulation, please start reading Zero Hedge.)

Anecdotally, I see evidence that this ploy--"proving" the "recession is over" by goosing the stock market to "new highs for the year"--is working. A friend of mine who rents vacation rental cabins in Virginia told me his phone started ringing two weeks ago (when the rally started) and he booked over $10,000 of business in the past two weeks--and this is after a very slow start to the summer season.

Granted, this flurry of summer-fun could have many causal factors, but it would be rather obtuse not to notice the alignment with the "recession is over" stock market rally.


It's really quite brilliant. Dump a few trillion dollars into "saving" the investment banking sector from any hardship (like well-deserved bankruptcy), spread another $787 billion around as mulch in the real economy ("stimulus") and then "buy" a blazing-hot stock market rally for a relatively paltry sum which forces every mutual fund and hedge fund manager to jump on board lest they "underperform" and consequently find themselves unemployed.


It's like paying people to stand in line at a new restuarant opening; passersby will assume the food is outstanding and join the line. It's only when the meal is served do they realize they've been conned.

But funny things can happen on the way to an economic "recovery" triggered by blatant, orchestrated stock market manipulation: reality can still stick its nose under the tent flap. While I cannot predict what sort of reality could penetrate the wall of manipulation which has bulldozed all doubts and all selling, I do see the declining volume as the Achilles' Heel of this manipulated rally. Once the players and punters and managers seeking alpha (outperformance) realize the game is over, the selling could overwhelm the dealers' card tricks.

Right now that seems impossible, but the very fact that literally no one anticipates that as even a remote possibility ironically makes it much more likely. When the consensus of Bulls and Bears alike is that we will get a brief, shallow "correction" which will inevitably be followed by another massive leg up, I start wondering if the market--as manipulated as it is--will do what 90% of the punters expect.

and some charts...
http://www.oftwominds.com/blogjuly09/speculation07-09.html

[Demeter]

78. Of This I Have No Doubt--The Market Is in Play

but it's going to fizzle like damp wood in much less time than TPTB expect.
Maybe they will get caught (again) with their shorts down....

[Hugin]

98. Another Excellent Article!

Very good.

[ozymandius]

75. I hope you take the time to read this. It's about the Goldman Sachs trading scam.

By Dailykos diarist bobswern:

Read through the recap of previous information on the grand swindle. Plus there is a detailed description of how this scheme would work.

Oh! And, yes - this all ties into the brand new New York Times opinion piece about Goldman Sachs' Secret Sauce. Apparently this has not escaped the attention of Senator Schumer who has asked the SEC for a ban on flash orders.

Take a peek.

[Demeter]

79. Hope The Democrats in Congress Bust It Open Like a Rotten Melon

That would be real change. And while they're at it, dump that broken Reid back into the swamp.

[AnneD]

89. I saw this posted in the Economy thread.......

I was going to post it on SWT Monday. Goldman's sack is caught in the tractor's gears on this one. They have made enough enemies they just might have to pay on this one. They will have to call in powerful friends to protect them. What is interesting about this is not what happened-but what rats get flushed out. We will see just who is owned by GS. I predict a short life span for our Russian and a few others.

[Demeter]

100. What Friends? Goldman Doesn't Have Friends

You're either in, or out. Or on the payola.

[Hugin]

92. Has anyone posted, "Stepping Stone" yet?

If not, this is most definitely the place for it. ;)

[AnneD]

93. Post away....

I was holding back on that one...

[Hugin]

95. Okay, you asked for it...

Dear Goldman-Sachs (and other HFT traitors),

Consider this a message from Forced Institutionalized Investors... Everywhere. ;)



Sex Pistols - Stepping Stone (Parental Guidance Version)

http://www.youtube.com/watch?v=OTHqgOipqN8


Stepping Stone (Traditional Version)

http://www.youtube.com/watch?v=fAWI_t2FG7I&NR=1


Monkees "Steppin Stone" live 1997

http://www.youtube.com/watch?v=9pF1iZbBBfA

[Demeter]

76. Well, Folks, Tonight is the Night

Younger Kid and I just got back from search and deliver for the first TMC delivery. TMC= Total market Coverage, or Advertising, as we mortals know it.

Between the map of non-existent streets and the list of non-existent addresses, we did pretty well. It helped that I'd been doing that route for two years already, well, part of it. Everything I know about getting around this town (and believe me, it can be a challenge) I learned on a paper route. In the dark. Usually raining and/or snowing.

So at 3 Ack Emma, we will go out and do the Real Paper (such as it is this incarnation). The odds are that this venture won't last 3 months, which would mean missing the snow (I don't know whether to pray they are right, or hope they are wrong).

Wish me and the Kid2 luck. She will have a girlfriend riding shotgun, said friend is supposed to substitute next weekend, when Kid2 takes off up North...we will see how that goes, too!

With a favoring wind, I'll be back in the morning around 8 or 9...


Oh, and will somebody post something? How about fan photos of the group?

[Hugin]

80. Good luck!

Being a former award winning paper carrier myself, I can sympathize!

[Demeter]

83. Thanks Hugin! It Was More Than Excruciating

Kid2 and her friend got done more or less on time--but they had to wait around for somebody to bring them 5 more papers for the last street, since the count was off.

Then I was struggling alone--with a list printed on a printer that badly needs a new ribbon. There wasn't any room in the car for anyone to assist, anyway.

And I was 15 papers short. I'm waiting now for the ruck to bring them by--fortunately, the papers go on my cul de sac. There's an advantage and a disadvantage to delivering to your immediate neighbors....

Oh, and did I mention that the delivery was 2 hours late to begin with?

I had hoped that the second time around, the company might get a few things fixed. Instead, they found new and better ways to screw up and make the job impossible in fact.

Three months, tops. The long-suffering customers (let alone the working people) aren't going to put up with this much longer.

[Demeter]

84. A Most Timely And Appropriate Cartoon from the New Yorker:

http://www.cartoonbank.com/product_details.asp?sitetype=1&sid=131072&did=4&utm_campaign=CartoonOfTheDay&utm_medium=RSS-Feed&utm_source=RSS-Feed

[kickysnana]

90. kicking n/t

[Hugin]

91. And now for a special Sunday treat: A Monkees and Beatles Tribute

WRT, the last two weeks here at the WEE, I couldn't pass up posting this...

A custom tribute to the Ethereal Eight on YouTube set to the wonderful music of KT Tunstall.

http://www.youtube.com/watch?v=IX90RcTWfe0

[AnneD]

94. Paperback Believer

www.youtube.com/watch?v=I21rLU5GmYM&feature=related

If that doesn't bake your noodle, I don't know what will.

[Hugin]

96. I was thinking this one would go out to...

Tansy_Gold... Our very own Paperback Writer. :lol: :D

[Demeter]

101. Excellent Find!

Sorry to poop out on you all. Between the paper route fiasco and the horrible, depressing, very bad stuff already on this thread, I didn't have the heart to add more for fear of spontaneous combustion or a black hole forming...although it appears the black hole has already formed and we're all falling in it forever...

[AnneD]

97. OT. I just posted a funny, Sunday appropriate story on GD.....

http://www.democraticunderground.com/discuss/duboard.php?az=show_mesg&forum=389&topic_id=6153748&mesg_id=6153748

[Dr.Phool]

99. kick

[Demeter]

102. About Next Week...How About Country and Western?

I have a feeling drunken maudliness will be the best we can expect. I'll need some help with this...the best I can come up with is more folk than anything else.

So, pick tunes and such suitable for an extended stay at the bar, pub, or watering hole. Wherever the miserable go to pretend they aren't.

I'm having flashbacks of the Blues Brothers trying to pass as bluegrass...