Zeitgeist Watch: Art Critic Questions Winner Take All Society

Posted: 29 Mar 2011 09:39 PM PDT

One of the last places you’d expect to see serious questions raised about whether the rich deserve their lucre is the art world. It is a pure realm of trickle-down economics, or at least has been that way for quite some time in the US. (One of the gratifying things about Australia was that normal people could be serious patrons of young artists and do well by it, putting together collections good enough to be recognized in top tier museums. In the States, new artists by contrast are often discovered, which to me looks perilously close to “made” by key validators, such as particular dealers and collectors accepted as having an eye for edgy art by other, follow on collectors.)
This extract is from “Umbilical Cord of Gold,” by art critic and author Eleanor Heartney in Artnet. The fact that a member of a world that has always depended on discretionary spending by the well heeled is raising questions like this is striking. Is this a sign that those at the top have become so isolated and increasingly irresponsible that even support personnel are wondering about the true costs of their allegiance? One of the fundamental assumptions of the new world order is that everyone has a price. Yet social animals of all sorts have developed what looks like a sense of fairness and reciprocity in their dealings, and will incur personal costs to punish cheaters. The wealthy may err in assuming loyalty can be bought.
From Artnet (hat tip Michael Thomas):

Meanwhile, the class divide within the art world referred to in [my 1996 essay] “Out of the Ivory Tower” (to say nothing of the even greater class divide in society at large) is bigger than ever….
Isn’t there something basically unhealthy about a society where social programs that serve the poor and middle class are cut to the bone while a Picasso can go for over $100 million? Oh yes, I know, this is “private money,” but how did these art collectors manage to amass such huge fortunes in the first place? Is a CEO, especially one who runs the company into the ground and then floats off with a golden parachute, really worth more than 300 times his lowest paid employee? Why are the bankers who nearly toppled our financial system free to retire to their mansions while we demonize teachers who want to have a tiny bit of retirement security? Why have virtually none of the productivity gains of the last 30 years gone to workers? Whose money is it, really?
And where does this leave us? I can’t help feeling that the art world’s responses to funding crises reveal a glaring myopia. The problem isn’t how we argue for a share of the increasingly tiny budget pie devoted to funding for social services and culture. The problem is the whole concept of the pie. I keep wondering, as state and local governments careen ever closer to bankruptcy and the federal government flirts with a trillion dollar deficit, why isn’t anyone connecting the dots to the extension of the Bush tax cuts? Why is the question of increasing taxes on the very wealthy so completely off the table?
I recently brought this up at an art party, only to be told that measures like a more progressive tax system or a reduction of write-offs like the charitable deduction would diminish art patrons’ ability to fund residencies or support museums. But again, what are we really talking about? Are we saying that art supporters are only motivated by tax incentives? And isn’t part of the bind that museums now find themselves due at least in part to their own grandiosity? Is it possible that they now find themselves over-extended precisely because they expanded beyond their means in good times? Are these really good reasons to argue that the wealthy and privileged shouldn’t be expected to contribute to a more equitable society?
I’m not against the art market, and I think artists (and writers) should be paid for what they do. But what is going on now seems completely out of proportion to what is needed for a vital, innovative and lively art scene, and in fact may even be detrimental to it. Is all the money sloshing around at the top skewing our values? Have we all been bought and sold?
Rereading my 1996 article, I realize I have changed. I feel more jaded than my younger self, particularly with respect to the efficacy of voting. I was very active in the effort to elect Obama, and like many others I feel let down — duped into thinking things could change by an administration that seems completely co-opted by the corporate class. I still believe that Obama’s basic instincts are good, but somehow that doesn’t seem to matter. Why is it so much easier to take things in oligarchic directions than in democratic ones? George W. Bush profoundly changed America, but restoring the nation’s democratic values seems virtually impossible.
But I’m still not willing to accept the argument that voting is futile or that everything is predetermined by a small group at the top. And oddly, the most encouraging signs these days have come from outside our borders — from the revolutions in Egypt and Tunisia (the outcomes in Libya and Bahrain seem more uncertain) and in the faith that protesters in places like Iran and the Arab world place in the ideas of democracy. Here in this country the fight to preserve collective bargaining for state employees in Wisconsin appears to have failed (though at this writing a court has issued a stay on the law passed by the Republican lawmakers pending an examination of its constitutionality). Nevertheless, it is a small sign that people may be waking up to dangerous inequality that has been allowed to permeate this country.
Which leaves me with one final question. If there is to be a fight, which side will we be on?

Bernie Sanders Takes on Corporate Tax Dodgers
(I Love this Guy!)
Sanders Calls for Shared Sacrifice



BURLINGTON, Vt., March 27 - While hard working Americans fill out their income tax returns this tax season, General Electric and other giant profitable corporations are avoiding U.S. taxes altogether.

With Congress returning to Capitol Hill on Monday to debate steep spending cuts, Sen. Bernie Sanders (I-Vt.) said the wealthiest Americans and most profitable corporations must do their share to help bring down our record-breaking deficit.

Sanders renewed his call for shared sacrifice after it was reported that General Electric and other major corporations paid no U.S. taxes after posting huge profits. Sanders said it is grossly unfair for congressional Republicans to propose major cuts to Head Start, Pell Grants, the Social Security Administration, nutrition grants for pregnant low-income women and the Environmental Protection Agency while ignoring the reality that some of the most profitable corporations pay nothing or almost nothing in federal income taxes.

Sanders compiled a list of some of some of the 10 worst corporate income tax avoiders.

1) Exxon Mobil made $19 billion in profits in 2009. Exxon not only paid no federal income taxes, it actually received a $156 million rebate from the IRS, according to its SEC filings.

2) Bank of America received a $1.9 billion tax refund from the IRS last year, although it made $4.4 billion in profits and received a bailout from the Federal Reserve and the Treasury Department of nearly $1 trillion.

3) Over the past five years, while General Electric made $26 billion in profits in the United States, it received a $4.1 billion refund from the IRS.

4) Chevron received a $19 million refund from the IRS last year after it made $10 billion in profits in 2009.

5) Boeing, which received a $30 billion contract from the Pentagon to build 179 airborne tankers, got a $124 million refund from the IRS last year.

6) Valero Energy, the 25th largest company in America with $68 billion in sales last year received a $157 million tax refund check from the IRS and, over the past three years, it received a $134 million tax break from the oil and gas manufacturing tax deduction.

7) Goldman Sachs in 2008 only paid 1.1 percent of its income in taxes even though it earned a profit of $2.3 billion and received an almost $800 billion from the Federal Reserve and U.S. Treasury Department.

8) Citigroup last year made more than $4 billion in profits but paid no federal income taxes. It received a $2.5 trillion bailout from the Federal Reserve and U.S. Treasury.

9) ConocoPhillips, the fifth largest oil company in the United States, made $16 billion in profits from 2007 through 2009, but received $451 million in tax breaks through the oil and gas manufacturing deduction.

10) Over the past five years, Carnival Cruise Lines made more than $11 billion in profits, but its federal income tax rate during those years was just 1.1 percent.

Sanders has called for closing corporate tax loopholes and eliminating tax breaks for oil and gas companies. He also introduced legislation to impose a 5.4 percent surtax on millionaires that would yield up to $50 billion a year. The senator has said that spending cuts must be paired with new revenue so the federal budget is not balanced solely on the backs of working families.

"We have a deficit problem. It has to be addressed," Sanders said, "but it cannot be addressed on the backs of the sick, the elderly, the poor, young people, the most vulnerable in this country. The wealthiest people and the largest corporations in this country have got to contribute. We've got to talk about shared sacrifice."
http://www.youtube.com/watch?v=Sknt-UBRhxo&feature=player_embedded

Hooray! Jamie Dimon Says New Capital Rules Will Kill Zombie Banks!

Posted: 31 Mar 2011 12:20 AM PDT

It really is a sign of how complete a victory that the banks have won over the rest of us that Jamie Dimon has the nerve to complain about banking regulations. Even worse, he is egging on a effort by Republican bank-owned Congresscritters to roll weak bank capital rules back.
His position is pure, simple, unadulterated bank propaganda: what is good for banks is good for America, when the converse is true. Simon Johnson warned in his May 2009 article “The Quiet Coup” that the financial crisis had turned American into a banana republic with a few more zeros attached, a country in the hands of oligarchs, in this instance, the financiers. And we playing out the same script he saw again and again in emerging economies:

The government, in its race to stop the bleeding, will typically need to wipe out some of the national champions—now hemorrhaging cash—and usually restructure a banking system that’s gone badly out of balance. It will, in other words, need to squeeze at least some of its oligarchs.
Squeezing the oligarchs, though, is seldom the strategy of choice among emerging-market governments. Quite the contrary: at the outset of the crisis, the oligarchs are usually among the first to get extra help from the government, such as preferential access to foreign currency, or maybe a nice tax break, or—here’s a classic Kremlin bailout technique—the assumption of private debt obligations by the government. Under duress, generosity toward old friends takes many innovative forms. Meanwhile, needing to squeeze someone, most emerging-market governments look first to ordinary working folk—at least until the riots grow too large.

And if you doubt the idea that squeezing the bankers will be bad for the rest of us, pretty much everyone who has looked at this question who is not a bank-paid shill begs to differ. We’ve pointed multiple times to an estimate by Andrew Haldane, Executive Director of Financial Stability for the Bank of England that a mere 1/20th of the low end of the estimated fully-loaded costs of the crisis just past exceeds the market capitalization of the biggest global banks. They are destructive on such a massive scale that doing anything to rein them in would be progress. Similarly, the IMF warned against coddling banks in a study of 124 banking crises:

Existing empirical research has shown that providing assistance to banks and their borrowers can be counterproductive, resulting in increased losses to banks, which often abuse forbearance to take unproductive risks at government expense. The typical result of forbearance is a deeper hole in the net worth of banks, crippling tax burdens to finance bank bailouts, and even more severe credit supply contraction and economic decline than would have occurred in the absence of forbearance.
Cross-country analysis to date also shows that accommodative policy measures (such as substantial liquidity support, explicit government guarantee on financial institutions’ liabilities and forbearance from prudential regulations) tend to be fiscally costly and that these particular policies do not necessarily accelerate the speed of economic recovery.5 Of course, the caveat to these findings is that a counterfactual to the crisis resolution cannot be observed and therefore it is difficult to speculate how a crisis would unfold in absence of such policies. Better institutions are, however, uniformly positively associated with faster recovery.

Economists continue to affirm these same observations. For instance, from a short paper by Stijn Claessens and Ceyla Pazarbasioglu of the IMF, posted yesterday at VoxEU:

The comparisons between the global financial crisis and past episodes have been many, but this column argues that policymakers should look again, and closer. It says that without restructuring financial institutions’ balance sheets and their operations, as well as their assets, the economic recovery will suffer – and the seeds will be sown for the next crisis…..
Acknowledging the unique and global nature of the recent crisis and varying country circumstances, our analysis suggests that the diagnosis and repair of financial institutions and overall asset restructuring are much less advanced than they should be at this stage….Consequently, vulnerabilities in the global financial system remain considerable and continue to threaten the sustainability of the recovery.

This is polite bureaucrat-speak. Translation: “You blew it”.
So what does Jamie Dimon claim? We get hyperventilating, which makes perfect sense, since the facts are not on his side. From the Financial Times:

Jamie Dimon, chief executive of JPMorgan Chase, launched a broadside against financial regulation on Wednesday, warning that new capital rules could be “the nail in our coffin for big American banks”.
Regulators are negotiating international capital standards for the biggest banks but Mr Dimon said setting the new requirements too high, or allowing overseas banks to calculate their asset base differently, could disadvantage US banks and was already stifling economic growth.
“If you want to set it so high that no big bank ever goes bankrupt … I think that would greatly diminish growth,” he told a US Chamber of Commerce conference. Too large a disparity in capital requirements between Europe and the US would mean “you’re pretty much putting the nail in our coffin for big American banks,” he said.

Actually, Dimon is both exaggerating (the banks wouldn’t die but would morph and shrink, which would first and foremost hurt top executive pay) and misrepresenting (that shrinking the banks would be bad for the rest of us). And the idea that being nice to the banks by letting them run with too little capital helps growth is a flat out lie. Yes, before things blow up, the economy might run at a faster rate, just as athletes using performance-enhancing drugs do better too. But as Haldane showed, the PERMANENT growth losses of financial crises greatly exceed the benefits.
And as we’ve also stressed, we don’t need big banks, at least for traditional banking services. They are less efficient on a cost per dollar of asset basis (the overwhelming majority of studies say the efficiencies top out at $5 billion or below; reader Ishmael confirms that notion but says he can accept the idea that it might peak as high as $25 billion in assets).
The open and thorny question is what to do with the dealer operations, that is the capital markets functions of major financial firms. These do have strong economies of scale. The best solution may be to regulate them as utilities, strictly limiting their balance sheets to highly liquid assets (which was the profile of traditional investment banks) and severely restricting their role in OTC derivatives (which are used to a significant degree for regulatory arbitrage and accounting games, which are not socially productive uses).
Claessens and Pazarbasioglu recommend remedies that are the polar opposite of Dimon’s “do as little as possible” demands:

Establishing the long-term viability of the financial system requires recognising non-performing assets at financial institutions and a deeper operational restructuring of debts of enterprises and households. Regarding the persistent weaknesses in bank balance sheets, in-depth diagnoses still need to be conducted, including through strict and transparent stress tests. When the diagnoses call for credible recapitalisation plans or restructuring of liabilities, they should be carried out swiftly in ways that do not worsen sovereign debt burdens. Conditions in some countries require government interventions, including targeted programmes to alleviate debt overhangs in the household and commercial real-estate sectors. More broadly, asset restructuring needs to be driven by market forces, supported by tighter regulations –including in the areas of loan-loss classification, provisioning, and disclosure – and enhanced supervision.
In most countries, more effective resolution tools are required to preserve financial stability in an increasingly complex and interconnected global system.…
The policy mix applied in the recent crisis has greatly intensified moral hazard. ….Measures are needed to restore proper incentives and market discipline. Governments need to rethink how to reduce the threat that large financial institutions pose to systemic stability, including through reduced complexity, better capital structures, and, possibly, restrictions on their scope and activities.
The policy mix applied in the recent crisis is unlikely to be repeated in response to a future crisis. It would be too costly economically and too controversial politically.

The last observation, that the bailouts just past will not be repeated (or at least not to the same extent; the next wipeout is guaranteed to be bigger, central bankers will have little latitude to drop interest rates, and the political cost of rescues will be much higher) is something the banksters and their regulators simply do not grasp. As Michael Hirsh reported:

“Bottom line: Nobody on Wall Street believes that these big institutions are no longer too big to fail,” says Dan Senor, a New York City hedge-fund manager who doubles as an informal Republican advisor in Washington. “No one believes they would not be bailed out and backstopped in some way by the government. That’s just the reality.”

And the officialdom is enabling this view in a bizarre, ongoing display of cognitive dissonance, pretending that unworkable measures like the Dodd Frank special resolution authority are viable (see the testimony by Josh Rosner for details), yet also aggressively promoting policies that would increase costly bank welfare programs (the most appalling was a New York Fed paper recommending that all asset backed securities be government guaranteed. In the rest of the world people have a right to health care; instead, we seem to be working on a plan to guarantee debt slavery via heavily subsidized credit).
The only good news is that even the MSM is starting to report on how crazy and unsustainable this all is. The fact that a piece like “Tax the Super Rich now or face a revolution” has appeared on MarketWatch, even if it is an isolated sighting, is a sign that the images of unrest in the Middle East, Greece, and London (where an estimated 250,000 to 400,000 turned out to protest against the banks) may start to penetrate the defenses of a sheltered ruling class. And if not, they may learn that the “Après moi, le deluge’” school of thought didn’t do Louis XVI much good.

Via; Naked Capitalism/Yves Smith

 

Why Liberals Are Lame (Part 2)

Posted: 31 Mar 2011 03:09 AM PDT

It may seem churlish to pick on a specific, well intentioned liberal organization to illustrate a rampant pathology within what passes for the left in the US. Nevertheless, examples serve as important case studies and hopefully will help both the object of presumably unwanted attention and its broader constituency understand that many of their campaigns actually undermine the causes they purport to represent.
Let’s look at an example, an e-mail from the Progressive Change Campaign Committee to constituents of Alabama’s Spencer Bachus, the Chairman of the House Financial Services Committee and self-proclaimed Best Friend of Banks (”My view is that Washington and the regulators are there to serve the banks”):

XXXX,
Alabama Republican Spencer Bachus is the definition of a sell out.
Bachus — who said his purpose was to “serve” the big banks — is so far in the pocket of Wall Street that he’s willing to change the definition of plain English words to suit his corporate purposes.
Today, he sent a letter to bold progressive Elizabeth Warren, who’s been fighting on behalf of people against the big banks who are fraudulently foreclosing on their homes. In that letter he tries to trap Warren with her own words: Warren had told him that she gave “advice” on how to beat back the big banks, but he accuses her of giving “recommendations.”
A quick look at the Oxford English Dictionary brings up this definition:
advice: guidance or recommendations offered with regard to prudent action
Bachus could use a little education on what the words “advice” and “recommendations” mean.
Give Rep. Bachus a call right now at 202-225-4921.
Here’s what to say:

Hi, this is [your name], and I’m calling because Rep. Bachus is clearly so much of a sell out, he’s willing to change the definition of words to attack Elizabeth Warren.

I wanted to make sure Rep. Bachus knows that the definition of advice is “guidance or recommendations offered with regard to prudent action.”
Stop attacking Elizabeth Warren, and stop being such a sell out for Wall Street.

Thanks for being a bold progressive.
– Adam Green, Jason Rosenbaum and the PCCC team
This mini-campaign is hopelessly misguided. Is Bachus going to stop calling Warren bad names, or serving the doings of his banking paymasters based on a few phone calls? Does it even matter than Bachus is calling Warren bad names when there is an orchestrated cacaphony of similar noise, starting with the vastly more off base attacks emanating from the Wall Street Journal’s op-ed page? One set of calls to one right wing noise maker, even one who happens to head an influential Congressional committee, will not make an iota of difference. Congress is not a party to the settlement negotiations.
And the other reason for caring about these attacks is equally questionable: it’s based on the fantasy that Warren might get a recess appointment to head the Consumer Financial Protection Bureau, circumventing the need for Congressional approval. I have one answer to that: over Geithner’s dead body. No matter what his public stance on her might be, he and she are philosophically at odds. Geithner has an unusually close relationship with the President and has managed to enlarge his scope of authority beyond that of a past Treasury secretaries. And if that answer isn’t good enough, consider a second: Obama needs to raise an estimated $1 billion to win the 2012 election. He’s moved further and further to the right over the course of his Presidency. Why is he going to change gears and alienate one of his biggest donor groups by appointing Warren?
Her defenders also appear not to recognize that Warren is being made the fall guy for this effort to appear to be Doing Something and at most get a HAMP 2.0 implemented. They note that Warren has become the focus of attacks for leaks about a program that is touted as a possible $20 to $30 billion. I’ve heard privately that Sheila Bair has been pushing for a tough bank settlement, and as Adam Levitin points out, the CFPB lacks the power to be running this initiative. This is a operation involving both the state attorneys general and a number of Federal regulators.
I don’t know how the settlement proposal is being pinned on Warren, but I think the Warren defenders are naive to assume this is only the result of conservative paranoia and scapegoating. It would serve the interests of officialdom to run trial balloons as Warren products; if they bomb, she’s disposable, if they succeed, Team Obama will move to make it sound like its party line.
But far more important, PCCC has no clue about what the real stakes are in this fight and are supporting a fundamentally unsound policy. As we have described at considerable length, any settlement that involves a broad waiver of liability to the banks is a sell out. And that’s the only thing the attorneys general have to offer in this trade; the lack of investigations means they are coming to a knife fight armed with a wet noodle. We’d all be much better served to have no deal at all and let the AGs that are keen to pursue the banks move ahead and develop cases (and it only takes a few, recall how feared and loathed Eliot Spitzer was).
An example we cited a few days ago, that of the settlement reached between the Minnesota attorney general and the National Arbitration Forum, illustrates this point. The NAC was so successful in stacking the deck on mandatory arbitrations in favor of its clients, big busineses, via the roster of arbitrators it chose that consumers won in only 4% of the cases. The Minnesota AG effectively put the firm out of business as far as anything related to debt collection was concerned…..but the NAC capitulated only after the AG filed its lawsuit (which almost certainly means pre-litigation attempts to resolve the matter had failed). Prosecutors have to be prepared to go to the mat, and have credible theories of action and at least some supporting evidence before they enter into talks; otherwise they have no idea of the extent of the abuses, much the less any meaningful basis to bring miscreants to heel.
The PCCC is utterly clueless that the effort that Warren is behind is merely Potemkin progressivism; they simply accepted her existing liberal branding and have bought a bill of goods. They are so invested in the idea of the telegenic and heretofore on the side of right Warren as savior that they aren’t able to see that she has gone over to the dark side. I have no doubt of Warren’s sincerity, but the Administration has managed to brainwash Warren (having spent over four hours with senior Treasury types, this is not as inconceivable as it sounds. They are remarkably convincing even when you know better. I think they’ve licensed Steve Job’s reality distortion sphere). So any settlement is in fact window dressing for yet another bailout.
The key leverage point in this fight is not Warren; she’s become part of the problem. The leverage point is the attorneys general. Thus campaigns like CrimesShouldn’tPay and Credo’s “Jail Wall Street Crooks“, which organized calls to push the AGs to reject the settlement talks and to investigate the banks, are on the right track. Left-wing efforts to rally behind this Administration should be assumed to be wrongheaded until proven otherwise.

Medical Cannabis Raids, across California & Montana, is Ohio next?

Shocking news: The Feds have raided more than two dozen medical marijuana dispensaries across California and Montana.  Armed agents from the Drug Enforcement Administration, FBI, and ATF swept through 28 stores and greenhouses, detaining the workers there and seizing computers, plants, and other items.  Where will the Feds go next?  More than 20 states, including Ohio, have decriminalized marijuana or legalized its use for medical purposes. 

Will you urge Obama to put an end to these raids?  Just click here.

According to one worker, "They came in, guns drawn, got us down on the ground and in cuffs as fast as they could."

The raids represent a swift change in law enforcement policy: When Obama took office, Attorney General Eric Holder promised to end the Bush-era attacks on sellers of medicinal marijuana and the patients who use it.  Obama made the same promise on the campaign trail:

"I would not have the Justice Department prosecuting and raiding medical marijuana users. It's not a good use of our resources." (August 21, 2007, event in Nashua, New Hampshire)
Now the Feds are even refusing to say why they conducted these raids, and if and when they'll be pressing any charges.  This shift in policy puts medical marijuana sellers and patients across America in jeopardy:  There's no telling what state will be next. 
Will you click here to tell Obama and Holder to keep their promises and end the raids right away?

Thanks for fighting back.
 -- The Demand Progress Team
P.S.  There's no telling where the next raids will be: will you help spread word by forwarding the petition to your friends and asking them to sign?

	If you're already on Facebook, click here to share with your friends.
	If you're already on Twitter, click here to tweet about the campaign: Tweet

Banksters Bargain Backroom Bailout  ?!

Are Fannie and Freddie Giving Banks Yet Another Bailout by Not Pursuing PMI Claims?

Posted: 24 Mar 2011 02:54 AM PDT

The further you look at the banking mess, the more the same problems keeps staring back: too many losses, not anywhere enough equity or reserves, and a lot of tap dancing by the officialdom to pretend otherwise.
We wrote yesterday, thanks to some sleuthing by Chris Whalen, that Fannie and Freddie might be sitting on north of $100 billion of unreported losses. If they started realizing those losses, one of the first parties that would take a hit would be the private mortgage insurers, since on high loan to value loans (over 80% of appraised value), they were in the business of guaranteeing the loan balance in excess of 80%. So while the failure of the GSEs to act is no doubt part of the extend and pretend shell game, it serves to keep PMIs that would otherwise be as dead as certain notorious parrots alive.
Adam Levitin points to a second and far more important set of beneficiaries from the GSE’s failure to take action on their defaulted loans: the TBTF banks:

…the GSEs don’t seem to be making claims on PMI policies despite being the loss payees. The reason why is that if the GSEs made claims on the PMIs, it would quickly render all of the PMIs not just insolvent, but illiquid (which is the real kiss of death). And if the PMIs went under, then the GSEs would have to take huge write-downs on all of the still performing loans with PMI insurance. Chris Whalen estiamtes that in order to avoid perhaps $100B plus in write-downs, the GSEs are forgoing several billion in PMI claims. If this is the case, it shows what a farce GSE regulation by FHFA is.
There’s a further twist, however, that Yves post didn’t capture. A lot of PMI is reinsured. And guess who does about half of PMI reinsurance? The captive reinsurance affiliates of the large banks.
While most large banks have reinsurance capitves, the captives of the big 4 banks get about 1/3 of all PMI reinsurance premiums, which probably translates to something like 1/3 of the exposure. Just to list the biggest, that’s Balboa Reinsurance (Countrywide/BoA); Bank of America Reinsurance (BoA); Cross Country Insurance (Chase); North Star Mortgage Guaranty Reinsurance (Wells Fargo). I haven’t figured out the extent of this exposure, as not all PMI is reinsured, and not all reinsurance is first-loss position, but there is definitely some bank group skin on the line with PMI.
What this all means is that if the GSEs are forbearing in making claims on their PMI policies, it not only hides the GSEs’ losses. It also means we’re seeing another quiet bailout of the banks.

Some readers in the last post asked about the level of mortgage insurance. Levitin e-mailed two sets of spreadsheets; this extract provides an overview (click to enlarge):

Tom Adams concurred with Levitin’s reading:

If Fannie and Freddie are not submitting claims, it helps the banks as much, or more, than the mortgage insurers because the captive reinsurers, presumably part of the banks, held about 50% of the premiums received in a trust. The banks would be responsible for any losses beyond the amount held in trust.

The ceding part is a thorny. There appears to be an interesting asymmetry in the economics versus the accounting treatment which also helps to support the extend and pretend game (insurance experts welcome to correct me if I have gotten this wrong, but I think this is at least directionally correct).
An overview of the captive reinsurers comes in a 2011 report by Promontory Financial (boldface ours):

Instead, most private mortgage reinsurance is written by “captive” reinsurers affiliated with the lender. The mechanics of captive reinsurance are straightforward. The primary insurer “cedes” a portion of the periodic insurance premium to the reinsurer in exchange for the reinsurer’s commitment to share losses. In some cases the reinsurer also pays an upfront fee to the primary insurer. The reinsurer shares losses on either a “quota share” basis (i.e., pro rata) or an “excess of loss” basis, whereby the primary insurer absorbs initial losses and often also subsequent losses above a certain intermediate threshold.
In recent years, excess of loss arrangements were far more common than quota share arrangements. Under a typical arrangement known as a 5-5-25 excess of loss arrangement, the reinsurer receives 25% of the primary insurance premiums, and its obligation to pay is triggered if losses exceed 5% of the primary insurer’s original risk exposure on policies issued in a given year. (The 5% threshold can also be defined with reference to the number of claims filed in a given year.) If this attachment point is met, the reinsurer is responsible for the next 5% of losses. Beyond this detachment point, the reinsurer has no obligation. Beginning in 2008, the GSEs capped the amount of premiums that PMIs could cede under captive reinsurance arrangements to 25% of gross premiums (or gross risk). This move aimed to preserve capital within the primary PMI industry.
Reinsurance does not absolve the primary insurer of its obligation to its insured—that is, the primary insurer remains liable for all coverage if the reinsurer fails to pay.….
PMIs have recently realized material recoveries from captive reinsurance, drawing on (and sometimes exhausting) trusts containing years of premium reserves accumulated by the captives. In consequence, many captive reinsurers are now in run-off mode, and the use of captive reinsurance has fallen precipitously. It is unclear whether and under what conditions the captive reinsurance market will revive.

Now here is the accounting issue, per Tom Adams:
This author suggests that the banks captive reinsurance entities were not reporting future expected losses due to quirks in the structure – they didn’t have any losses until the primary mortgage insurer’s losses were exhausted:

While all mortgage insurers encounter a mismatch between loss reserves and future paid losses, the gap is much more pronounced for lender captives under aggregate excess of loss structures, which cover a book of loans that originate from a ceding company generally over a one year period….
Because these lender captives don’t participate in a loss until a primary insurer’s retention has been exhausted, lender captives are not required to recognize a loss until the cumulative ground-up paid losses and reserves for delinquencies–the incurred loss–exceeds the aggregate loss attachment point.
In practice, this means that under accounting requirements, a lender captive does not have to recognize a loss even if the primary insurer’s incurred losses has reached 99 percent of the aggregate excess of loss’ attachment point and are expected to pierce the contract’s retention. Only when the ground-up incurred loss has reached the lender captive’s attachment point is the lender captive generally required to post loss reserves.

The irony here is that the monolines were done in by mark-to-market losses that were reported way ahead of when they’d actually have to pay claims. Those accounting losses put them in a death spiral because they led to downgrades which both increased their funding costs and killed the ratings that were necessary for them to keep writing new businesses. Here we have mortgage insurers who by any commonsense standards are terminal, and captive reinsurers that are in runoff mode even with the GSEs refraining from putting in claims. Yet both are getting an undeserved stay of execution.

Via:NakedCapitalism

Scott Walker: Bad for Wisconsin Business By: David Dayen Wednesday March 23, 2011 10:50 a

Scott Walker did not run primarily on a platform of killing public employee unions and becoming a conservative darling. His slogan during the Wisconsin gubernatorial campaign was “Wisconsin is open for business.” He put a premium on attracting new businesses to the state.
It just so happens that his method of bringing in new business aligns with longstanding conservative projects of deregulation and union-bashing. But how do they perform on their own terms? Simply put, is Wisconsin now “open for business?”
No. Right from the beginning, Walker’s cancellation of a high speed rail link between Madison and Milwaukee sent a rail car business out of Milwaukee, abandoning a large factory. The removal of collective bargaining rights from public employees may lead to a serious catastrophe for the state’s forestry industry, as they are likely to lose their third-party “certified market” status.
Now, his policies have sent other businesses throughout the state scurrying. A wind power project near Green Bay will be shuttered.

Chicago energy development firm Invenergy on Monday notified state regulators that it’s withdrawing plans to build a large wind power project south of Green Bay.
The company said it was concerned about moving forward because of the state of flux in Wisconsin’s regulatory climate when it comes to wind siting. Gov. Scott Walker has proposed a bill that would sharply curtail wind development.

In fact, since Walker has been sworn in, 19 plants have closed down for a variety of reasons. And as you can see, some of them are directly related to Walker’s policies on regulations, public employee unions, renewable energy and high speed rail. Without including Talgo (the rail car maker) and Invenergy (the wind power company), 2,207 workers in Wisconsin have lost their factory jobs since Walker’s inauguration. Even Walker’s one claim of “job creation” for Wisconsin is nonsense:

Meanwhile, Walker has taken a victory lap for “creating jobs” by paying an Illinois company $1.25 million to move their address a few miles north to Wisconsin. As discussed earlier, this doesn’t create jobs or tax revenue: All the Illinois employees will just have a slightly longer commute to work and because of Illinois-Wisconsin tax reciprocity agreements, will continue to pay taxes to Illinois.

Keep in mind that this is going on during a period of relatively decent job growth in the rest of the country.
It’s no wonder that Senate Majority Leader Scott Fitzgerald had to pause when asked if the Legislature could pass the anti-union bill again, if necessitated by court cases. Scott Walker is unpopular because of his extremist tendencies, but also because his policies are hurting Wisconsin’s economy.
via : FireDogLake

Morgan Stanley's Liquidity Pool

More on Morgan Stanley's secret

Morgan Stanley's Liquidity Pool

Posted by Economics of Contempt at 2:07 PM It’s now official: the week of September 15, 2008 was a really bad week to work in Morgan Stanley’s prime brokerage. And the next week wasn’t so hot either. Various internal documents released with the FCIC report provide a fairly detailed picture of Morgan Stanley’s liquidity position during the crisis, and it’s not pretty. Prime brokers like Morgan Stanley relied heavily on customer cash held in prime brokerage accounts (known as “free credits”) to fund themselves. So when hedge funds all pulled their cash from Morgan Stanley’s prime brokerage after Lehman failed, that had a direct effect on Morgan Stanley’s liquidity pool.

On one day alone (Wednesday, September 17th), Morgan Stanley’s prime brokerage lost $36.6 billion in free credits. That’s $36.6 billion instantly gone from the firm’s liquidity pool. To add insult to injury, that same day, prime brokerage customers also withdrew $12.3 billion of excess margin, which dealers also count toward their liquidity pool. For the week, Morgan Stanley’s prime brokerage lost an amazing $86.5 billion in liquidity. And the next week, they suffered an additional $43.3 billion of outflows, for a two-week total of $129.8 billion. That’s a hell of a fortnight!

Overall, Morgan Stanley’s liquidity pool was falling by tens of billions per day — the firm was basically imploding. Without the government bailout, it’s pretty clear that they wouldn’t have lasted another week.

****

Unfortunately, I had to pull the stats on Morgan Stanley’s liquidity pool from the internal documents posted on the FCIC’s website, because the FCIC absolutely mangled the liquidity pool numbers in the actual report. They constantly confuse the parent company’s liquidity pool with the firm’s overall liquid assets, which are two completely different measures. They include several dramatic statements like, “Morgan Stanley’s liquidity pool had dropped from $130 billion to $55 billion in one week,” which isn’t even close to right. In fact, they seem to have simply pulled that $130 billion number out of thin air, as it’s not in any of the underlying documents. At one point, they say that “By the end of September, Morgan Stanley’s liquidity pool would be $55 billion,” and then cite to an email written on September 19th. (And the email was talking about parent company liquidity anyway!) Basically, it’s clear from the report that the FCIC didn’t understand anything about liquidity management — which, given the prominent role liquidity management played in the financial crisis, is pretty sad.
crossposted via: Economics of Contempt

Morgan Stanley’s Deep Secret Now Is Revealed: Jonathan Weil

By Jonathan Weil - Mar 23, 2011 7:00 PM ET

Bloomberg Opinion

J.P. Morgan smacks photographer with cane

Jonathan Weil

Here’s a little secret the Federal Reserve Board doesn’t want you to know. On Sept. 24, 2008, while financial markets were collapsing, Morgan Stanley borrowed $3.5 billion through the Fed’s oldest lending program, the 98-year- old discount window.
The Fed has long claimed that releasing this type of data could trigger bank runs, public hysteria, death spirals at financial institutions large and small, and other horrible outcomes. Yet I’ve got a hunch Morgan Stanley somehow will survive this revelation. Mass panic will not ensue. The world will not end.
This is the kind of information the late Bloomberg News reporter Mark Pittman was seeking when he filed a Freedom of Information Act request with the Fed in May 2008, nine months after the financial crisis began. Among other things, he asked for documents showing which banks had borrowed money under the Fed’s emergency-lending programs and the details of those loans.
The Fed blew off his request. Bloomberg LP, the parent of Bloomberg News, responded by suing the central bank. The company won both at the district court level and on appeal. This week, the Supreme Court decided to let those rulings stand. And so almost three years after Pittman sent his original FOIA letter, the Fed finally will have to comply with the law.
Fox News is pressing a similar request concerning Fed loans from August 2007 to November 2008. Much of the information the two companies sought has been disclosed already. The Dodd-Frank Act, which President Barack Obama signed last July, forced the Fed to release details of many of its bailout programs. Still, the Fed has yet to divulge which banks borrowed through its discount-window program. It won’t be long now, though.

Stigma Avoidance

The discount window functions as a lifesaver through which qualifying borrowers can secure emergency liquidity during times of severe stress. Historically the Fed had kept the names of borrowers confidential on the grounds that disclosure could stigmatize them in the public’s eyes, even though it was the public’s money the Fed was lending.
As it turns out, the information about Morgan Stanley (MS)’s $3.5 billion discount-window loan has been sitting on the Financial Crisis Inquiry Commission’s website since last month. The panel didn’t mention it in its final report. And nobody had written a story about it before. So there: Now it can be told.
You can see the raw data by clicking here. The link takes you to a Morgan Stanley spreadsheet showing the company’s day- to-day liquidity changes during a two-week period in September 2008 when the New York-based bank was fighting for survival. (You may need to magnify the pages 400 percent to see all the numbers.)

‘Confidential’

The loan came three days after Morgan Stanley said it had received Fed approval to become a bank holding company, giving it access to the discount window for the first time.
A Morgan Stanley spokesman, Mark Lake, confirmed that my reading of the spreadsheet is correct. The bank had stamped the document “confidential treatment requested” when it handed it over to the crisis commission. The panel released it anyway, apparently seeing no harm.
The Fed’s arguments for keeping this sort of data secret were transparently bogus. One Fed economist, Brian Madigan, said in an affidavit that disclosing discount-window borrowers’ names “can quickly place an institution in a weakened condition vis- a-vis its competitors by causing a loss of public confidence in the institution, a sudden outflow of deposits (a ‘run’), a loss of confidence by market analysts, a drop in the institution’s stock price, and a withdrawal of market sources of liquidity.”

‘Inherent Risk’

U.S. District Judge Loretta Preska in Manhattan rejected that line of reasoning as bunk.
“The risk of looking weak to competitors and shareholders is an inherent risk of market participation,” she wrote in her August 2009 decision ordering the Fed to release the documents. “Information tending to increase that risk does not make the information privileged or confidential.” The Second Circuit Court of Appeals in New York upheld her ruling.
Still, the banking industry kept fighting. Identifying banks that tapped the discount window during the credit crisis would be harmful even years after the fact, the Clearing House Association, representing the largest U.S. commercial banks, wrote in an October 2010 petition asking the Supreme Court to intervene. Disclosure would let the public “observe their borrowing patterns during the recent financial crisis and draw inferences -- whether justified or not -- about their current financial conditions,” it said.

New Requirements

They’ll just have to get used to that, though. Under Dodd- Frank, the Fed will be required to publish details of its discount-window loans, including borrowers’ identities, after two years. That’s why the Obama administration stepped in last year and urged the high court not to take up the case, saying the new disclosure rules made an appeal by the Fed unnecessary.
This whole sorry exercise by the Fed has shown the central bank at its worst. The Fed lost on the merits. Yet it succeeded in serving notice that anyone who challenges its judgments must be prepared to spend absurd amounts of time and money on litigation as the price for busting its wall of secrecy and holding its leaders accountable.
Most citizens, and news organizations, would be deterred by such tactics. Mark Pittman, who died on Nov. 25, 2009, must be smiling.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
To contact the editor responsible for this column: James Greiff at jgreiff@bloomberg.net

cross-posted via:counterpunch

Bad Times at Indian Point

Inside America's Most Dangerous Nuclear Plant

By JEFFREY ST. CLAIR

This essay is adapted from Born Under a Bad Sky: Notes From the Dark Side of the Earth by Jeffrey St. Clair (CounterPunch/AK Press).

These are desperate days for Entergy, the big Arkansas-based power conglomerate that owns the frail Indian Point nuclear plant, located on the east bank of the Hudson River outside Buchanan, New York—just twenty-two miles from Manhattan.

First, a scathing report issued in 2005 by a nuclear engineer fingered Indian Point as one of the five worst nuclear plants in the United States, and predicted that its emergency cooling system “is virtually certain to fail.”

This disclosure was hotly followed by the release of a study conducted by the Los Alamos National Laboratory for the Nuclear Regulatory Commission that ominously concluded that the chances of a reactor meltdown increased by a factor of nearly 100 at Indian Point, because the plant’s drainage pits (also known as containment sumps) are “almost certain” to be blocked with debris during an accident.

“The NRC has known about the containment sump problem at Indian Point since September 1996,” said David Lochbaum, a nuclear safety engineer with the Union of Concerned Scientists. “The NRC cannot take more than a decade to fix a safety problem that places millions of Americans at undue risk.”

Entergy and the NRC both downplayed the meltdown scenario and defended the leisurely pace of the planned repairs. Entergy says that there’s no rush to fix the problems with the emergency system because a breakdown isn’t likely in the first place.

But that’s flirting with almost certain disaster. Entergy and the NRC are staking the lives of millions on odds of a single water pipe not breaking under pressure. The problem is that these very kinds of pipes have corroded and been breached at other nuclear plants, which featured similar pressurized water design. At the Davis-Bessie plant near Toledo, Ohio, a vessel head on one of the cooling water pipes had been nearly corroded away by acid and was dangerously close to rupturing.

The cooling water in these pipes is kept at a pressure of 2,200 pounds per square inch. If a pipe breaks, the 500-degree water would blow off as steam, tearing off plant insulation and coatings. The escaped water will pour into the plant’s basement, where sump pumps are meant to draw the water back into the reactor core. But the Los Alamos tests showed that the cooling water would collect debris along the way that will clog up the mesh screens on the pipes leading back into the reactor. If this happens, the cooling of the reactor fuel would stop, the radioactive core would start to melt, and the plant will belch a radioactive plume that will threaten millions downwind.

All this would happen very fast. The Indian Point 2 reactor would exhaust all of its cooling water in less than twenty-three minutes, while the number 3 reactor would consume all of its water in only fourteen minutes. Try getting a nuclear plumber that quickly.

Yes, it sounds trite, but that’s essentially what Entergy proposes as its quick fix to the meltdown scenario. Jim Steets, Entergy’s spokesman on Indian Point matters, told the New York Times last month that the company was training its workers to scour the plant for flaking paint and potential debris, and that if an accident occurred, they would pump the water into the core more slowly, a plan that would buy plant managers and executives a few more minutes to flee the scene.

Where people would go and how they would get there in the event of a nuclear meltdown or other radioactive release at Indian Point is unclear. In September 2002, New York Governor George Pataki commissioned a report on Indian Point’s evacuation plan. He picked James Lee Witt, who served as head of FEMA during the Clinton administration, to oversee the investigation. At the time, Pataki said that he would support closure of the plant if Witt’s report revealed that communities near the plant could not be safely evacuated.

Witt submitted his report on January 10, 2003. While somewhat timid and cautious, Witt concluded that Entergy’s off-site evacuation plans for Indian Point were woefully inadequate.

Witt wrote: “It is our conclusion that the current radiological response system and capabilities are not adequate to overcome their combined weight and protect the people from an unacceptable dose of radiation in the event of a release from Indian Point, especially if the release is faster or larger than the design basis release.”

In the end, Witt concluded that it was not possible to fix the evacuation plan, given the problems at the plant, the density of the nearby communities and looming security threats.

This scenario was followed by news that a review of the company’s security record revealed that Entergy, in cahoots with the Nuclear Regulatory Commission, faked a test designed to determine whether the plant is vulnerable to a terrorist attack.

The NRC assured members of Congress that Entergy had developed a “strong defensive strategy and capability” for the plant and passed a so-called “force-on-force” test—a mock assault—with flying colors.

It turns out that the NRC gave Entergy officials months of advance warning about the test and then, as the Indian Point team cribbed for the exam, dumbed down the assault to ensure that they would pass.

Most assessments by the CIA and other intelligence agencies suggest that a raid on a nuclear plant would require a squad-sized force of between twelve and fourteen attackers, assaulting the plant by night, armed with explosives, machine guns with armor-penetrating bullets, and rocket-propelled grenades.

This isn’t the attack that was repelled by the Entergy security team. Instead, Entergy’s men battled off a squad of four mock terrorists, armed only with hunting rifles, who assaulted the plant in broad daylight. Moreover, the attacking squad weren’t former Delta Force operatives trained in terrorist tactics, but security officers from a nearby nuclear plant, who assault the plant from only one point after crossing open fields in plain view of Indian Point’s security guards.

Just to make sure that there were no surprises, the Entergy security team, which consisted largely of guards hired only for the test, was warned that a mock attack would take place sometime within the next hour. Even under these rigged conditions, Entergy barely passed the security test.

Environmentalists and anti-nuke activists living near the plant hoped this would be the final straw for the aging reactor. They marshaled their evidence of safety violations, inept evacuation plans, and lax security and headed off to offices of the most powerful Democrat in America, Hillary Clinton.

But Hillary remained as reserved as Pataki on Indian Point, issuing robotic requests for more studies, but refusing to call for the plant’s closure. Not that her words mean much. The senator pledged to filibuster the nomination of Utah governor Mike Leavitt for director of the EPA. She ended up voting to confirm his nomination.

Of course, Hillary’s ties to Entergy are almost primal. The Little Rock-based Entergy Corporation, which once employed John Huang, the infamous conduit to the Lippo Group, was one of Bill Clinton’s main political sponsors, shoveling more than $100,000 into his campaign’s bank accounts from 1992 to 1996.

The more plaintive the cries for Indian Point’s closure, the more money Entergy spreads around to politicians with reputation for flexibility in these matters. Already this year, Entergy’s New York Political Action Committee—ENPAC New York—has doled out more than $25,000 to New York politicians alone. Everyone got into the act from Pataki and Clinton to Democratic congressman Eliot Engel to lowlier foot-soldiers for the nuclear plant, including two state assemblymen; commissioners from Westchester and Orange counties; Bronx Borough president Adolfo Carrion; and state comptroller Alan Hevesi, whose election campaign was endorsed by the Sierra Club.

Political money isn’t the only tool in Entergy’s bag of tricks. In late October, community activists in the Bronx reported that emissaries from Entergy were canvassing black and Hispanic neighborhoods in New York City and Westchester County with an ominous warning: If Indian Point closes, air quality in urban areas will deteriorate and more blacks and Hispanics will develop respiratory illnesses. The Entergy reps told people that new coal-fired power plants would be built in their neighborhoods and urged them to sign a petition.

“In recent years, nearly all proposals for new power plants in New York state have been in or adjacent to areas with high concentrations of people of African descent and Latinos,” a memo handed out at the door warns. There is, naturally, much truth to this claim, and Entergy is in a unique position to know, since throughout the Southeast the company has targeted its power plants in black neighborhoods, where it has heralded them as bringing economic engines for impoverished communities.

The canvassers also carried cell phones as they ambled from door to door. They hit the speed dial number of a local legislator, handed the phone to the resident and then prompted them on how to express their concerns about the possible closure of Indian Point.

The petition drive, which discreetly by-passed the thirteen predominately white districts in Westchester County, was run by a group calling itself by the lofty-sounding name: “The Campaign for Affordable Energy, Environmental & Economic Justice.”

The group was supposedly based in Manhattan. In fact, it was created and wholly funded by Entergy.

Jeffrey St. Clair is the author of Been Brown So Long It Looked Like Green to Me: the Politics of Nature and Grand Theft Pentagon. His newest book, Born Under a Bad Sky, is just out from AK Press / CounterPunch books. He can be reached at: sitka@comcast.net.

Foreclosure-Gate 4.0  "The Sleazy Financial Press..."

Paul Jackson’s “Follow the Money” Shows Housing Wire Deep Financial Ties to Mortgage Market Bad Actors

Posted: 25 Mar 2011 06:58 PM PDT

David Dayen, in a pointed article titled, “The Corruption of the Financial Press: A Look at Housing Wire” documents how that mortgage “news” site has extensive business and financial connections with firms and individuals at the frontlines of dubious mortgage industry practices and has repeatedly gone to bat for its biggest advertiser even in the face of criminal investigations.
Housing Wire’s proprietor, Paul Jackson, made this inquiry fair game in a recent post, “Follow the money: Interpreting U.S. Bank v. Congress” in which he took aim at the Alabama attorneys who tried defending a client against what they contended was a wrongful foreclosure, using the untested strategy we had mentioned on this blog, the so-called New York trust theory. The court rejected the case on narrow grounds (the suit was fighting the ejectment, a stage after the foreclosure; any precedent on ejectment actions will have limited applicability in Alabama and none in other states). But Jackson went further than arguing the issues of the case or the importance of the decision. Based on no evidence, he denigrated the attorneys involved, claiming they must have big money backers (and we separately dispatched his spurious charges):

In other words, everything is about the money, and if you can find a viable angle to make more of it than someone else. And I mean everything….. As a result, it would be fascinating to learn who really bankrolled the defense in this particular case. Sometimes defense attorneys will put up their own money to defend a case like this — it’s not unheard of — but it’s far from the norm.

With the benefit of Dayen’s sleuthing, Jackson’s post is revealed as a classic case of projection, in which someone attributes to others the very sort of behavior he engages in. Per Dayen:

What is Housing Wire, anyway? The principals of it and its parent company, the LTV Group, are Paul Jackson, and Richard Bitner. He used to be a subprime mortgage broker, and he wrote a book about it called Confessions of a Subprime Lender. Bitner has compared himself in interviews to a drug dealer for his career in the subprime industry.
The main shareholders in Housing Wire, and its publisher LTV Publishing, which is also an advertising/PR/marketing company, are:
Robert Jackson, Paul’s father and a CEO at Jackson and Associates, an REO (real estate owned; it means a property owned by a bank or government entity after an unsuccessful foreclosure auction) lawyer; Berry Laws, a partner at Martin, Leigh, Laws & Fritzlen, a foreclosure mill law firm out of Kansas, linked to robo-signing, which also owns a title company; and Benny Nassiri, the owner of Asset Financial Network, which specializes in foreclosure properties. Basically, someone cashing in on the misery of others. She has also worked with IndyMac, the collapsed subprime lender.
(h/t bystander)
So this is the group around Housing Wire: foreclosure firms, an REO broker and an ex-subprime lender. If it is indeed “all about the money,” there’s a lot of guilt by association here. All of these people make money off the broken housing market and its constant stream of foreclosures.
But there’s more. The leading advertiser for Housing Wire is, in fact, LPS (Lender Processing Services). You may have heard of them because they have been implicated in multiple criminal investigations for producing fake documents for foreclosure cases. LPS ran DocX, the company that sold “authentic” documents to foreclosure mill law firms at cut rates. And they continued this profit center even outside of DocX:

Questionable signing and notarization practices weren’t limited to its subsidiary, called DocX, but occurred in at least one of LPS’s own offices, mortgage assignments filed in county recorders’ offices show. And rather than halt such practices after the federal investigation got underway, the company shifted the signing to firms with which it has close business ties. LPS provided personnel to work in the new signing operations, according to information from an LPS spokeswoman and court records including an October 21 ruling by a judge in Brooklyn, New York. Records in county recorders’ offices, and in the judge’s opinion, show that “robosigning” and preparation of apparently false documents went on at these sites on a large scale.
In one instance, it helped set up a massive signing operation at the nearby office of a major client, a spokeswoman for the client, American Home Mortgage Servicing, confirmed. LPS-hired notaries who worked there said in interviews that troves of documents were improperly handled. They said that about 200 affidavits per day were robosigned during the two months the two notaries remained there.

See also here and here. Yet Jackson has repeatedly defended LPS, its leading advertiser, from these charges, minimizing their legal exposure. One of the principals of the company, Benny Nassiri, also lists herself as affiliated with LPS.
Here’s the point. Jackson has a habit of throwing around statements like “it’s all about the money,” but his organization really fails under that standard. It’s filled with people from the mortgage industry who obviously have an incentive to minimize the conduct of the mortgage industry. It also makes its money from the mortgage industry. This is part and parcel of the financial press in all its sleaze.

Our Richard Smith pointed out that Jackson’s “follow the money” standard meant Jackson himself was not reliable:

Taking guidance from this exceedingly dubious, indeed self-refuting claim (if it’s all about the money, we can’t trust Jackson either, can we?) is quite foolish.

I think we can now go even further, that if you listen to Jackson, you can assume it’s only the money talking.
 via:Yves Smith Naked Capitalism

Dear Friends Over the past few weeks, we’ve seen how far corporate special interests will go to trample on the rights of working Americans -- and we’ve seen what it will take to stop them. In Wisconsin, in Indiana, and right here in Ohio, we’ve taken a stand -- putting our time, energy, and limited resources into standing with workers and saying no to right-wing power grabs. But my campaign is going to be another test of our resolve. This is why we’ve set a goal to raise $125,000 from our online supporters by March 31, our campaign’s first fundraising deadline. That’s what it will take to build a campaign strong enough to stand up to the special interests targeting Ohio. Help us reach our $125,000 goal by contributing $10 right now. Those waging this assault on working families have endless resources at their disposal -- and if you thought the Republican special interests hit our state hard last year, wait until you see the torrent of campaign cash they’ll unload to defeat those standing up for the middle class. I know it’s early, and I know it’s a big number. But we can send a strong signal that we’re ready to do what it takes to stand with working Ohioans. Stand with me today by contributing $10 before our March 31 deadline. Thank you, Sherrod PS: We just launched our new campaign website, and I wanted you to be the first to hear the news. We’re not wasting any time building the strongest campaign possible, and that’s why your support is so important. Check out the new site -- then help us keep it going by contributing $10 before our March 31 deadline.

Libyan Freedom Fighters retake Key city after Air-strikes

Raw Video Via:AP&Youtube- Protests against Austerity cuts in London

Buzz Potamkin: Still Getting Away With Murder Manslaughter

Buzz Potamkin: Still Getting Away With Murder Manslaughter

By Buzz Potamkin, former studio executive and producer, in the biz for 40+ years, now a consultant
Today is the 100th Anniversary of the Triangle Shirtwaist Factory Fire.
Readers of this blog will notice a certain resemblance between Max Blanck and Isaac Harris, proprietors of the Triangle Waist Company, and today’s financial industry titans: serial fires (at least 4 previously, apparently at times with excess inventory, all conveniently insured), disregard for risk, blatant violation of governmental regulations and codes, use of corporate veils, aggressive legal representation, friendly “powers that be,” and continued unaltered conduct after the fact. Neither of them ever went to jail: both were beneficiaries of Judge Thomas C.T. Crain’s overly limiting jury charge in their trial for manslaughter in the death of 24-year old Margaret Schwartz, and both were cleared in the death of 23-year old Jacob Klein by Judge Samuel Seabury’s instructions to that jury to find for the defendants. (If you, humble reader, notice a certain pattern in judges named Crain and Seabury presiding in the cases of victims named Schwartz and Klein, let me not dissuade you.)
While Harris does not appear to have come to the notice of the authorities in later life, in just 2 years Blanck was back in court over another locked fire door at his new factory at 79 Fifth Avenue. Chief Justice Isaac Franklin Russell apologized to Blanck for his troubles, and then fined him the mandatory minimum the law provided: $20. No further action.
As for developer and landlord Joseph Asch, nothing. No citation or action regarding the rusted-close standpipe, the rotted inoperable fire hose, or the flimsy, incomplete, and collapsed fire escape. He did renovate the Asch building and add fire prevention aides, including sprinklers – but in August, 1913, the Times thundered that the Fire Commissioner’s visit to the renovated building (still called the Asch by the Times, but already name-changed to the Greenwich Building) “revealed once more the singular carelessness of humanity.” However, the building was not closed nor even cited.
And in 1914 the wrongful death civil suits were settled for $75 per life.
Today, the Triangle Fire commemoration industry is in full swing: TV specials, theatrical productions, street art projects, New York Times blanket coverage, and an expected 10,000 person march from Union Square to the corner of Washington Place and Greene Street ending with a solemn service in memory of the 146 who died in the fire and a speech from US Secretary of Labor Hilda Solis. The tonality of most of these remembrances can be summarized as “This was horrible, but these 146 victims will not be forgotten and their deaths brought us to today’s enlightened and forceful workplace safety standards.” Unfortunately, not true.
Mike Wallace (not that Mike Wallace, this one is Distinguished Professor of History at John Jay College of Criminal Justice of the City University of New York and co-author of the 4.2 pound 1,416 page Gotham) put it far better than I ever could:
:

Such triumphalism, while inspiring, overlooks the fact that history can run backward, and that gains won can be lost again — and have been, repeatedly. Many of the initial post-Triangle reforms were strenuously opposed by conservative businessmen. Unable at first to prevail amid mass indignation at the fire and shocking revelations about working conditions in the city and state, they were soon back in the saddle and able to halt, hamstring or reverse liberal initiatives.

Not to forget that laws, regulations and codes require enforcement, and enforcement requires not only intent but also appropriations. Both intent and enforcement have been on the decline this century throughout the land, and currently all regulatory appropriations (federal, state and local) are under attack with the convenient excuse of The War on The Deficit. Over the past few years:
2005

BP refinery in Texas City – 15 dead, over 150 injured

2006

Sago mine, West Virginia – 12 dead
Darby mine, Kentucky – 5 dead

2007

Deutsche Bank fire, NY – 2 firefighters dead, 2 injured

2008

Sugar refinery, Georgia – 13 dead, over 40 injured

2010

Power plant, Connecticut – 6 dead, over 50 injured
Upper Big Branch mine, West Virginia – 29 dead
Deepwater Horizon – 11 dead, GOM decimated by worst US oil spill

Interestingly, the Deutsche Bank fire brings us back full circle to Triangle: faulty standpipe, inoperable sprinklers, blocked exits, no city inspections, even no permits, and parties that should be indicted but aren’t, including the City of New York for gross negligence. Yes, there are 4 indictments: John Galt and 3 others are currently on trial for second-degree manslaughter, criminally negligent homicide and reckless endangerment. (I would hope that Alan Greenspan and the other Randians have formed the John Galt Defense of Freedom Committee with tax-deductible donations from the Koch brothers and others, but I have no cite.) In Galt’s case, the maximum fine is $10,000 or $5,000 per life, not much off (current-dollar adjusted) the $75 per life paid in 1914.
One final ironic question: what happened to the building? Asch continued to operate the building for manufacturing tenants, until 1915 when NYU began to expand into the building from its Main Building next door; by 1919, NYU occupied all 3 Triangle floors, now renovated. In 1920 Asch sold the building to the Arrow Holding Company, which 4 days later sold it on to Bleecker-Washington Properties, Inc., headed by Aaron Rabinowitz and Maurice Spear. (Maurice Spear later sold Spear Co., Inc., to Harry Helmsley to form Helmsley-Spear. Harry’s second wife was Leona of “We don’t pay taxes. Only the little people pay taxes…” fame.) NYU expanded in the building, taking all of it by 1926. In 1929, Fredrick Brown bought the building from Bleecker-Washington for $700,000 and gave it to NYU the same day. Amid much publicity, NYU renamed it the Brown Building. Brown assumed the building’s $280,000 mortgage and added another $120,000 mortgage on top; he agreed to make all due payments. Unfortunately for NYU, but true to the building’s history, in 1932 Brown ceased making payments and the debt was left for NYU to pay. Nevertheless NYU kept his name on the building, as it is today. (NakedCapitalism)
My research is finding more to this...
“Why were Blanck and Harris rotten risks? They repeatedly had early morning fires when no one was in the factory. There were two fires at their Triangle factory in 1901 (shortly after it opened) and two at their new factory, the Diamond Waist Factory, in 1907. The shirtwaist business had two peak periods in the year. Having a large inventory at the end of the peak period was not good business. Blanck and Harris were able to get rid of the leftover inventory and be reimbursed by the insurance company. Their policies covered all of their losses, or more.
Although Blanck and Harris were never charged with arson or
insurance fraud, the circumstantial evidence of repeated early morning
fires at the end of the busy seasons with full reimbursement from the insurance companies speaks for itself. Too bad this did not come out during their trial.”
John M. Hoenig, Ph.D., The Triangle Fire of 1911, History Magazine, April/May 2005
I understand that David Von Drehle (Triangle – the Fire that Changed America, Grove Press, 2003) discusses at length the interest of the insurance companies of the time in looking the other way; apparently it had something to do with high premiums and not rocking the boat. Could you believe that of an insurance company?   We haven't come very far have we? or are we walking backward?