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More Ugly Truth about Deepwater Horizon

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Too many of the news reports concerning the second anniversary of the Deepwater Horizon oil rig blowout are suspiciously similar to the BP commercials featuring testimonials about how the company’s wonderful clean-up job has brought life along the Gulf Coast “back to normal”.  Unfortunately, the ugly truth about life along the Gulf of Corexit has not been thrust before the American public with the same aggressiveness as BP’s public relations propaganda.

Since the catastrophe occurred back in April of 2010, one steady source of unvarnished reports on the matter has been Washington’s Blog.  On April 18 of this year, Washington’s Blog posted this great piece which links to a number of reports documenting the extent of ongoing damage to the Gulf ecosystem.

We are constantly bombarded with propaganda emphasizing how offshore oil rigs create jobs.  What we don’t hear are reports concerning the number of people from the fishing industry who lost their jobs (and their health) as a result of the Deepwater Horizon incident.  Consider this AFP report from last year:

Local chemist Wilma Subra has been helping test people’s blood for volatile solvents, and said levels of benzene among cleanup workers, divers, fishermen and crabbers are as high as 36 times that of the general population.

“As the event progresses we are seeing more and more people who are desperately ill,” she said.

“Clearly it is showing that this is ongoing exposure,” Subra said, noting that pathways include contact with the skin, eating contaminated seafood or breathing polluted air.

“We have been asking the federal agencies to please provide medical care from physicians who are trained in toxic exposure.”

She said she has received no response.

The most devastating exposé on the Deepwater Horizon disaster came from Greg Palast, who wrote a two-part report for EcoWatch.  A British investigative television program – Dispatches – sent Palast into Baku, Azerbaijan, with a cameraman to investigate a whistleblower’s report that in September of 2008, a BP off-shore rig in the Caspian Sea suffered a nearly identical blow-out to the Deepwater Horizon incident.  BP concealed the true cause and extent of the Caspian Sea event from the U.S. regulators and Congress.  From Part One:

The witness, whose story is backed up by rig workers who were evacuated from BP’s Caspian platform, said that had BP revealed the full story as required by industry practice, the eleven Gulf of Mexico workers “could have had a chance” of survival.  But BP’s insistence on using methods proven faulty sealed their fate.

One cause of the blow-outs was the same in both cases:  the use of a money-saving technique – plugging holes with “quick-dry” cement.

By hiding the disastrous failure of its penny-pinching cement process in 2008, BP was able to continue to use the dangerous methods in the Gulf of Mexico – causing the worst oil spill in U.S. history.  April 20 marks the second anniversary of the Gulf oil disaster.

There were several failures in common to the two incidents identified by the eyewitness.  He is an industry insider whose identity and expertise we have confirmed.  His name and that of other witnesses we contacted must be withheld for their safety.

The failures revolve around the use of “quick-dry” cement, the uselessness of blow-out preventers, “mayhem” in evacuation procedures and an atmosphere of fear which prevents workers from blowing the whistle on safety problems.

In Part Two of the report, Greg Palast revealed that one of the classified cables leaked by Private Bradley Manning through WikiLeaks.org to The Guardian was a briefing from the U.S. Embassy in Azerbaijan to the State Department in Washington.  The cable summarized information obtained from Bill Schrader, President of BP-Azerbaijan, about the cause and extent of the 2008 blowout.  The collusion of the State Department in this cover-up became an important aspect of Palast’s report:

From other sources, we discovered the cement which failed had been mixed with nitrogen as a way to speed up drying, a risky process that was repeated on the Deepwater Horizon.

Robert F. Kennedy Jr., president of Waterkeeper Alliance and senior attorney for Natural Resources Defense Council, calls the concealment of this information, “criminal.  We have laws that make it illegal to hide this.”

The cables also reveal that BP’s oil-company partners knew about the blow-out but they too concealed the information from Congress, regulators and the Securities Exchange Commission.  BP’s major U.S. partners in the Caspian Sea drilling operation were Chevron and Exxon.

*   *   *

Kennedy’s particular concern goes to the connivance of the State Department, then headed by Secretary of State Condoleezza Rice, in the cover-up and deception.  Chevron, noted Kennedy, named an oil tanker after Rice who had served on the oil company’s board of directors.  “BP felt comfortable – and Chevron and Exxon – in informing the Bush State Department, which was run by Condoleezza Rice,” he said, “and they felt comfortable that that wasn’t going to come out.”

The U.S. Securities Exchange Commission requires companies to report “material” events.  BP filed a “20-F” report in 2009 stating, “a subsurface gas release occurred below the Central Azeri platform,” suggesting a naturally occurring crack in the seafloor, not a blow-out.  This contradicted the statements of three eyewitnesses and the secret statement of BP’s Azerbaijan President in then WikiLeaks cable.

“The three big actors, Chevron, Exxon and BP all concealed this from the American public,” concludes Kennedy.  “This is a criminal activity.”

At this point, anyone who believes that Condoleezza Rice could be chosen as Mitt Romney’s running mate is headed for a big disappointment.

With the passing of time, the Deepwater Horizon story isn’t getting any better.  It just keeps getting worse.


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Israel for Dummies

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I don’t pretend to be an expert on Middle East politics.  I usually rely on the perspective of Steve Clemons at The Washington Note, who provides candid, unvarnished commentary on the complicated issues in that region.  Since December of 2008, I have been following the accomplishments of Jeremy Ben-Ami, the Executive Director of J Street, which he describes as “the political arm of the pro-Israel, pro-peace movement”.

Concern over the threat to Israel from Iran’s nuclear ambitions has been a hot topic during this election year.  Nevertheless, on February 27, Andrew Jones wrote a piece for The Raw Story, which included some disclosures published by Wikileaks concerning Iran’s uranium enrichment efforts:

Growing concerns over Iran’s nuclear facilities may prove to be all for naught.  Officials from the global intelligence company Stratfor allegedly discussed that Israel may have already destroyed the Iranian nuclear facility, according to one of the emails released by Wikileaks Monday.

In one of the over five million emails leaked, the conversation centered on Israeli Defense Minister Ehud Barak praising the news of deadly munitions blasts at a base of Iran’s elite Revolutionary Guards.

“I think this is a diversion.  The Israelis already destroyed all the Iranian nuclear infrastructure on the ground weeks ago,” one intelligence official wrote in an email dated November 14, 2011. “The current ‘let’s bomb Iran’ campaign was ordered by the EU leaders to divert the public attention from their at home financial problems.  It plays also well for the US since Pakistan, Russia and N. Korea are mentioned in the report. ”

This scenario makes sense.  Iran would not likely admit to having been humiliated by Israel .  Beyond that, the European Union plutocrats would enjoy nothing more than a decent sideshow to distract attention from their economic austerity fiasco.

For years, I have been waiting for someone to write a book called Israel for Dummies.  Too many American teevee pundits seem completely ignorant about Israel’s internal political strife and its impact on the prospects for peace with the Palestinians.  It appears as though someone has finally written that book.  I recently came across a great piece written by Noah Millman for The American Conservative.  Mr. Millman wrote a review of a new book entitled, The Unmasking of Israel by Gershom Gorenberg.  As Millman explains, the book takes us back to the early days of Israel, with David Ben-Gurion at the helm, bringing us to the present-day, never-ending conflict with the Palestinians.  Here are some highlights from Noah Millman’s book review:

Rather, the thrust of the book, as the title states, is to demonstrate that the series of decisions made during and after the 1967 War that resulted in the occupation of the West Bank and Gaza set in motion a process that has progressively “unmade” the State of Israel.  Indeed, the progressive expansion of the settlement enterprise has so eroded the foundations of the signature achievement of political Zionism – Israel as we now know it – that not merely a “Jewish democratic state” but the state as such is now imperiled.

*   *   *

Since 1967, Gorenberg relates, the settlement enterprise has undermined the Israeli state top to bottom.  It has fostered secrecy and corruption in government.

*   *   *

Again the story is familiar.  Less so is the framing. Gorenberg, though he is outraged by the plight of the Palestinians, is not really writing about that plight.  Nor is he writing from an anti-Zionist perspective.  Rather, he is writing from a deeply Zionist point of view.  Zionism, we tend to forget, was not a self-defense movement.  It was a nationalist movement. Nationalism tells a people a story about what it means to be free – that being free means being part of a self-conscious, self-governing, sovereign, and independent collective.  Losing consciousness of one’s national group, being governed by other groups, failing to achieve independence and sovereignty on par with other nations – these are signs of unfreedom.  Of immaturity. The Jews before Zionism were, from the perspective of this narrative, either an exceptionally immature nation or not a nation at all.  The goal of Zionism was not simply – or even primarily – to provide for a “safe haven” for Jews fleeing persecution by the Czar or the Nazis.  The goal was the spiritual rejuvenation of the Jewish people by molding them into a nation like other nations and achieving independent statehood.

This is a narrative frame that, in broad strokes, Gorenberg accepts, which is why he is properly seen as a Zionist.  Indeed, the whole argument of the book is that by holding onto and settling the territories captured in 1967, Israel has reverted to a mode of existence that Zionism was supposed to help the Jews grow out of. By undermining the authority of the state, the settlement enterprise has revived modes of being and of argument that, from Gorenberg’s perspective, the Jewish people should have grown out of when they acquired the power and responsibility of a state. Indeed, that was the whole point, from a moral perspective, of acquiring state power in the first place.  The settlement enterprise doesn’t just undermine the moral case for Israel because it’s an injustice (plenty of states have perpetrated injustices – indeed, far worse injustices – without undermining the case for statehood as such) but because it is evidence that Zionism failed in what was arguably its primary objective.

As an aside:  Be sure to read the Comment stream following Millman’s piece.  It included some astute remarks and a good debate.

One American’s experience in attempting to get a better understanding of the Israeli – Palestinian conflict was chronicled on the Al Jazeera website.  Punk rock icon, Jello Biafra of The Dead Kennedys discussed his decision to cancel a show he was scheduled to perform at the Barby Club in Tel Aviv with his new band (Jello Biafra and the Guantanamo School of Medicine).  His bandmates had decided to boycott Israel in order to support the Boycott Divestment and Sanctions (BDS) movementWikipedia lists this explanation of the BDS movement’s three main goals:

  1. Freeing all Palestinian territories from Israeli influence since 1967 and dismantling the Israeli West Bank barrier;
  2. Acting towards the rights of the Arab-Palestinian citizens of Israel; and
  3. Promoting the interests of Arab Palestinian refugees in reference to the United Nations General Assembly Resolution 194 of 1948.

Jello Biafra’s account of what followed his decision to cancel the Tel Aviv gig made for some interesting reading:

So with the rollercoaster still in my stomach and my head, I flew solo to Israel instead.  The mission:  to check things out myself and hopefully at least get closer to some kind of conclusion on whether artists boycotting Israel, especially me, was really the best way to help the Palestinian people.

*   *   *

I also got an invitation from a self-proclaimed fan to “come meet the Israeli right” and see the settlements through their eyes, complete with a wine-tasting party.

Many people I met on my trip to Israel feel that the boycott has damaged the Israeli opposition more than it has anyone else and “helped silence the peace camp in Israel”.  A veteran journalist I met later told me, “the best way to contribute to peace is to try and work to understand both sides” and that he felt that boycotts strengthen extremists by keeping people apart.

*   *   *

One of the few things both Israelis and Palestinians seem to agree on is that one of the main obstacles to peace these days is the settlers.

Today the illegal settlements are completely out of control, with 300,000 settlers planted across the Green Line in the West Bank and another 200,000 beyond the Green Line in East Jerusalem. Borders are creatively moved and enforced by the infamous wall, started by the ideas of Yitzhak Rabin and greatly expanded by Ariel Sharon.  It’s a black eye on the face of Israel’s reputation today, considered so even among many of Israel’s citizens and supporters.

Some people told me that if the wall had been built along the Green Line, it might have actually worked.  But Sharon then used it as a land grab, creatively and maniacally routing it through the middle of Palestinian towns, Palestinian farmland and across Palestinian roads, in a deliberate attempt to make the West Bank such a splattered Swiss-cheese hodgepodge of impassable walls and checkpoints that a free Palestinian state could never get off the ground.

Any fantasy that Palestinians could one day be broken down to stay on “their side” of the wall and live happily ever after is ridiculous.  It flies in the face of all human instinct and human rights. It is never going to happen.  Like the Berlin Wall, it is destined to fall sooner rather than later.

*   *   *

A boycott of products made in settlements has begun inside Israel.  There is also a growing boycott by artists refusing to cross the Green Line and perform for the settlers.  A fancy venue has opened in one of the largest settlements in Ariel.  Many artists refuse to perform there.

*   *   *

Yet bringing down this regime by boycott may be a much higher mountain to climb than the boycott of South Africa.  The 1985 musician boycott of Sun City (a posh, government-owned golf resort and casino in South Africa) was just a promotional tool for the financial boycott, where banks, universities and corporations caved into pressure to pull their investments out of South Africa and broke the back of the white apartheid regime.

*   *   *

I am not saying the same tactics that brought down apartheid South Africa can’t be done.  I am just saying that there are different and heavier obstacles this time and people need to be ready for them.

South Africa never had anything like the AIPAC (American Israel Public Affairs Committee) lobby, which is now considered more of a lobby for Likud than for the Israeli people.  Nevertheless, they have a stranglehold over almost every member of Congress of both parties, using Joe McCarthy-type tactics to smear anyone they don’t like as anti-Jewish – and get them voted out of office.

*   *   *

I will not perform in Israel unless it is a pro-human rights, anti-occupation event that does not violate the spirit of the boycott.  Each artist must decide this for themselves. I am staying away for now, but am also really creeped out by the attitudes of some of the boycott hardliners, and hope someday to find a way to contribute something positive here.  I will not march or sign on with anyone who is more interested in making threats than making friends.

As for the Arab Spring, I cross my fingers on one hand and bite my nails with the other.

I have a lot to learn and a long way to go.

We all have a lot to learn.  Jello Biafra’s humility is refreshing.  If only our politicians were so humble  .  .  .


 

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Abundance Of Goofiness

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The world is beset by a plague of goofiness.  I thought it was limited to the United States until recent events demonstrated that goofiness has become a worldwide phenomenon.  Premature European austerity programs, commenced before unemployment subsided, have led to higher deficits, elevated bond yields and more recession.  Although sober-minded economists warned against implementation of austerity measures until justified by economic circumstances, there was this itch that politicians had to scratch.  Now they have a nice infection.

In America, everyone had some good laughs of this video clip of President Obama’s discovery that he was locked out of the White House upon his return from Brazil.  Although it was widely reported that the White House staff was “caught off guard” by the First Family’s early return from their Brazilian vacation, I don’t believe it.  Such things don’t happen by accident.  My suspicion is that Chief of Staff, Bill Daley and his real boss, The Dimon Dog, deliberately locked Obama out of the White House as an admonition against cracking down on the megabanks, increasing taxes on the rich and empowering Elizabeth Warren.

Our President has been busy puzzling over the situation in Libya, where he (with authorization from the United Nations) has joined in on the “kinda-sorta” invasion.  Few people have dared to suggest that interloping in the Libyan civil war is sheer goofiness.  Many Republicans, such as Newt Gingrich, were in favor of intervention until Obama made the decision to launch air strikes.  Gingrich and his contrarian cohorts suddenly found it necessary to do a 180 on the issue.  Meanwhile, the smart conservative, George Will, was asking all the right questions.  I’ll reprint just a few of them here – but be sure to read his complete list.  These questions are among those that remain unanswered:

  • The world would be better without Gaddafi. But is that a vital U.S. national interest? If it is, when did it become so? A month ago, no one thought it was.

*   *   *

  • Presumably we would coordinate aid with the leaders of the anti-Gaddafi forces. Who are they?
  • Libya is a tribal society.  What concerning our Iraq and Afghanistan experiences justifies confidence that we understand Libyan dynamics?

More recently, George Will wrote an essay raising the question, “Is it America’s duty to intervene wherever regime change is needed?”  Consider this point:

.  .  .  America has intervened in a civil war in a tribal society, the dynamics of which America does not understand. And America is supporting one faction, the nature of which it does not know.  “We are standing with the people of Libya,” says Secretary of State Hillary Clinton, evidently confident that “the” people are a harmonious unit.  Many in the media call Moammar Gaddafi’s opponents “freedom fighters,” and perhaps they are, but no one calling them that really knows how the insurgents regard one another, or understand freedom, or if freedom, however understood, is their priority.

While many commentators have been busy condemning Bradley Manning as a “terrorist” and the worst American traitor since John Anthony Walker, few of those hypocrites would admit that the “people power” revolutions now taking place throughout the Middle East have resulted from the publication of Manning’s purloined files by WikiLeaks.  Beyond that, few – if any – of those self-righteous journalists have hesitated to quote from those leaked documents in their own essays.  A look at one of those leaked cables (dated February 15, 2008 and originating from the American Embassy in Tripoli) gives us a better understanding of who some of those Libyan “freedom fighters” really are:

xxxxxxxxxxxx partly attributed the fierce mindset in Benghazi and Derna to the message preached by imams in eastern Libyan mosques, which he said is markedly more radical than that heard in other parts of the country. xxxxxxxxxxxx makes a point of frequenting mosques whenever he visits Libya as a means to connect with neighbors and relatives and take the political pulse.  Sermons in eastern mosques, particularly the Friday ‘khutba’, are laced with “coded phrases” urging worshippers to support jihad in Iraq and elsewhere through direct participation or financial contributions.  The language is often ambiguous enough to be plausibly denied, he said, but for devout Muslims it is clear, incendiary and unambiguously supportive of jihad.  Direct and indirect references to “martyrdom operations” were not uncommon.  By contrast with mosques in Tripoli and elsewhere in the country, where references to jihad are extremely rare, in Benghazi and Derna they are fairly frequent subjects.

The foregoing cable was discussed in a recent piece by Alexander Cockburn of CounterPunch.  Mr. Cockburn also focused on some information contained in the so-called Sinjar Records, which American forces retrieved from an Al Qaeda stronghold in northern Iraq during 2007:

The West Point study of the Iraqi Sinjar Records calculates that of the 440 foreign al-Qaeda recruits whose hometowns are known, 21 came from Benghazi, thereby making it the fourth most common hometown listed in the records.  Fifty-three of the al-Qaeda recruits came from Darnah, the highest total of any of the hometowns listed in the records.  The second highest number, 51, came from Riyadh, Saudi Arabia.  Darnah (80,000) has less than 2 per cent the population of Riyadh.  Darnah contributed “far and away the largest per capita number of fighters.”

The Embassy cable from February of 2008 and the Sinjar Records provide some useful information to consider when pondering the questions raised by George Will.  Is Team Obama “up to speed” on any of this?

The aforementioned CounterPunch article by Alexander Cockburn covered another episode of tragic goofiness – the Fukushima power plant disaster.  As I previously discussed here and here, the feeble information flow concerning this crisis has been downright sleazy.  Mr. Cockburn provided a must read critique of how this critical situation has been mishandled and misrepresented by the media:

Amid reasonable suspicions that leading news media might have been in receipt of informal government advisories to stop creating panic, it became much harder to find credible bulletins on what was actually happening.  In fact careful perusal of the daily briefings at the  Vienna hq of the UN’s International Atomic Energy Agency in Vienna disclosed absolutely no substantive progress and indeed discreet admissions that “[this was on March 23)  the “Agency still lacks data on water levels and temperatures in the spent fuel pools at Units 1, 2, 3 and 4.”

*   *   *

On our own website, by contrast, several articles and interviews stressed what Hirose Takashi said:

“All of the information media are at fault here I think.  They are saying stupid things like, why, we are exposed to radiation all the time in our daily life, we get radiation from outer space.  But that’s one millisievert per year.  A year has 365 days, a day has 24 hours; multiply 365 by 24, you get 8760.  Multiply the 400 millisieverts by that, you get 3,500,000 the normal dose.  You call that safe?  And what media have reported this?  None.  They compare it to a CT scan, which is over in an instant; that has nothing to do with it.  The reason radioactivity can be measured is that radioactive material is escaping.  What is dangerous is when that material enters your body and irradiates it from inside.   .  .  .”

Allow me to repeat Hirose Takashi’s question:  “And what media have reported this?  None.”  That’s because the media are incapable of covering serious (non-goofy) subjects.  Unfortunately, those vested with positions of responsibility and authority all over the world are impaired by a degree of goofiness, leaving them incapable of making the right decisions or taking the necessary steps to protect public safety and welfare.  Is this a permanent situation or just a temporary condition?


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More Disaster And Dishonesty

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Unfortunately, the cynicism expressed in my last posting was well-founded.  The Japanese government has been misleading everyone about the extent of the nuclear hazards at the aptly-named Fukushima power plant.  The only remaining question is whether the Japanese government was knowingly misleading everyone or whether it was just passing along the deception generated by the Tokyo Electric Power Company (TEPCO).  If the latter is the case, the Japanese are living under a similar system of “regulatory capture” to what we have in the United States.  The frustration I expressed about the difficulty involved in attempting to obtain credible information about the Japanese nuclear crisis was experienced and discussed by a number of other commentators.  Clive Crook put it this way:

From the start of this calamity I have wanted to know, “What is the worst that can happen at these nuclear sites?  Suppose everything that could go wrong does go wrong:  what then?”  I still don’t know the answer.  In what I have read so far — dozens of articles –nobody who knows what he is talking about has spelt this out carefully.

We are now learning that in 2008, the Japanese government had been warned by the International Atomic Energy Agency (IAEA) that the nuclear reactors on the island nation could not withstand an earthquake.  Through cables obtained by WikiLeaks, The Telegraph was able to provide this report:

The document states:  “He [the IAEA official] explained that safety guides for seismic safety have only been revised three times in the last 35 years and that the IAEA is now re-examining them.

“Also, the presenter noted recent earthquakes in some cases have exceeded the design basis for some nuclear plants, and that this is a serious problem that is now driving seismic safety work.”

The cables also disclose how the Japanese government opposed a court order to shut down another nuclear power plant in western Japan because of concerns it could not withstand powerful earthquakes.

*   *   *

Another cable reported to Washington local concerns that a new generation of Japanese power stations that recycle nuclear fuel were jeopardising safety.

The cable, quoting a local newspaper, reports:  “There is something precarious about the way all electric power companies are falling in step with each other under the banner of the national policy.  We have seen too many cases of cost reduction competition through heightened efficiency jeopardizing safety.”

The cables also disclose how Taro Kono, a high-profile member of Japan’s lower house, told US diplomats in October 2008 that the government was “covering up” nuclear accidents.

The outrage expressed by Japanese citizens over their government’s handling of the entire situation – both pre-crisis and post-tsunami, is rapidly receiving more coverage.  American journalists who are covering the situation are expressing concern over their own safety.  NBC’s Lester Holt and his crew had been exposed to what was described as  “minute levels” of radiation, which was found on their shoes.

At a hearing before the House Energy and Commerce Subcommittee on March 16, Nuclear Regulatory Commission Chairman Greg Jaczko testified that despite the fact that the Japanese government had established an evacuation zone with a radius of only 12 miles from the Fukushima plant, the NRC had recommended a 50-mile evacuation zone for U.S. forces and American citizens.

ABC News quoted the reaction of an expert from Europe, who provided a harshly different message than the vague statements issued by the Japanese government:

“There is talk of an apocalypse and I think the word is particularly well chosen,” European Union’s energy commissioner Günther Oettinger said today, according to various reports.  “Practically everything is out of control.  I cannot exclude the worst in the hours and days to come.”

The coming days will reveal the extent of the misrepresentations by TEPCO and the Japanese government concerning the threat posed by the hazardous situation at the Fukushima power plant.  As I said last time:  It’s not looking good.


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Grasping Reality With The Opinions Of Others

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In the course of attempting to explain or criticize complex economic and financial issues, it usually becomes necessary to quote from the experts – often at length – to provide an understandable commentary.  Nevertheless, it was with great pleasure that I read about a dust-up involving Megan McArdle’s use of a published interview conducted by Bruce Bigelow of Xconomy, without attribution.  The incident was recently discussed by Brad DeLong.  (If you are a regular reader of Professor DeLong’s blog, you might recognize the title of this posting as a variant on the name of his website.)  Before I move on, it will be necessary to expand this moment of schadenfreude, due to the ironic timing of the controversy.  On March 7, Time published a list of “The 25 Best Financial Blogs”, with McArdle’s blog as number 15.  Aside from the fact that many worthy bloggers were overlooked by Time (including Mish and Simon Johnson) the list drew plenty of criticism for its inclusion of McArdle’s blog.  Here are just some of the comments to that effect, which appeared on the Naked Capitalism website:

duffolonious says:

Megan McArdle?  Seriously?  I’ve seen so many people rip her to shreds that I’ve completely ignored her.

Is she another example of nepotism?  Like Bill Kristol.

Procopius says:

Basically yes, although not quite as blatant.  Her old man was an inspector of contracting in New York City.  He got surprisingly rich.  From that he went to starting his own contracting business.  He got surprisingly rich.  Then he went back to New York City in an even higher level supervisory job.  He got surprisingly rich.  So Megan went to good schools and had her daddy’s network of influential “friends” to help her with her “job search” when she graduated.  Of course, she’s no dummy, and did a professional job of networking with all the “right” people she met at school, too.

For my part, in order to discuss the proposed settlement resulting from the investigation of the five largest banks and mortgage servicers conducted by state attorneys general and federal officials (including the Justice Department, the Treasury and the newly-formed Consumer Financial Protection Bureau) I will rely on the commentary from some of my favorite financial bloggers.  The investigating officials submitted this 27-page proposal as the starting point for what is expected to be a weeks-long negotiation process, possibly resulting in some loan modifications as well as remedies for those who faced foreclosures expedited by the use of “robo-signers” and other questionable practices.

Yves Smith of Naked Capitalism criticized the settlement proposal as “Bailout as Reward for Institutionalized Fraud”:

The argument defenders of the deal make are twofold:  this really is a good deal (hello?) and it’s as far as the Obama Administration is willing to push the banks, so we have to put a lot of lipstick on this pig and resign ourselves to political necessities.  And the reason the Obama camp is trying to declare victory and go home is that it is afraid that any serious effort to deal with the mortgage mess will reveal the insolvency of the banks.

Team Obama had put on a full court press since March 2009 to present the banks as fundamentally sound, and to the extent they needed more dough, the stress tests and resulting capital raising took care of any remaining problems.  Timothy Geithner was even doing victory laps last month in Europe.  To reverse course now and expose the fact that writedowns on second mortgages held by the four biggest banks and plus the true cost of legal liabilities from the mortgage crisis (putbacks, servicer fraud, chain of title issues) would blow a big hole in the banks’ balance sheets and fatally undermine whatever credibility the officialdom still has.

But the fallacy of their thinking is that addressing and cleaning up this rot would lead to a financial crisis, therefore anything other than cosmetics and making life inconvenient for the banks around the margin is to be avoided at all costs.  But these losses exist already.  The fallacy lies in the authorities’ delusion that they are avoiding creating losses, when we are in fact talking about who should bear costs that already exist.

The perspective taken by Edward Harrison of Credit Writedowns focused on the extent to which we can find the fingerprints of Treasury Secretary Tim Geithner on the settlement proposal.  Ed Harrison emphasized the significance of Geithner’s final remarks from an interview conducted last year by Daniel Gross for Slate:

The test is whether you have people willing to do the things that are deeply unpopular, deeply hard to understand, knowing that they’re necessary to do and better than the alternatives.

From there, Ed Harrison illustrated how Geithner’s roadmap has been based on the willingness to follow that logic:

More than ever, Tim Geithner runs the show for economic policy. He is the last man standing of the Old Obama team.  Volcker, Summers, Orszag, and Romer are all gone.  So Geithner’s vision of bailouts and settlements is the one that carries the most weight.

What is Geithner saying with his policies?

  • The financial system was on the verge of collapse.  We all know that now – about US banks and European ones too.  Fed Chair Ben Bernanke has said so as has Bank of England head Mervyn King.  The WikiLeaks cables affirmed systemic insolvency as the real issue most demonstrably.
  • When presented with a choice of Japan or Sweden as the model for crisis resolution, the US felt the Japan banking crisis response was the best historical precedent.  It is still unclear whether this was a political or an economic decision.
  • The most difficult political aspect of the banking crisis response was socialising bank lossesAll banking crisis bailouts involve some form of loss socialisation and this is a policy which citizens find abhorrent.  That’s what Geithner meant most directly about ‘deeply unpopular, deeply hard to understand’.
  • Using pro-inflationary monetary policy and fiscal stimulus, the U.S. can put this crisis in the rear view mirror.  Low interest rates and a steep yield curve combined with bailouts, stress tests, dividend reductions and private capital will allow time to heal all wounds.  That is the Geithner view.
  • Once the system is healthy again, it should expand.  The reason you need to bail the banks out is that they have expansion opportunities abroad.  As emerging markets develop more sophisticated financial markets, the Treasury secretary believes American banks are well positioned to profit.  American finance can’t profit if you break up the banks.

I would argue that Tim Geithner believes we are almost at that final stage where the banks are now healthy enough to get bigger and take share in emerging markets.  His view is that a more robust regulatory environment will keep things in check and prevent another financial crisis.

I hope this helps to explain why the Obama Administration is keen to get this $20 billion mortgage settlement done.  The prevailing view in the Administration is that the U.S. is in a fragile but sustainable recovery.  With emerging markets leading the economic recovery and U.S. banks on sounder footing, now is the time to resume the expansion of U.S. financial services.  I should also add that given the balance sheet recession in the U.S., the only way banks can expand is via an expansion abroad.

I strongly disagree with this vision of America’s future economic development.  But this is the road we are on.

Will those of us who refuse to believe in Tinkerbelle face the blame for the next financial crisis?


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A Bad Week For Rupert Murdoch

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We all know how this awful week began.  For Rupert Murdoch, one of his prized investments — Sarah Palin — had become the subject of heated debate.  Murdoch’s News Corp publishes her ghost-written books and Palin works for News Corp’s Fox News as a contributor.  While a team of doctors in Tucson heroically scrambled to save the life of Representative Gabrielle Giffords, a team of spin doctors at Fox News scrambled to save the political life of Sarah Palin.  At this point, I defer to an excellent piece written by Glynnis MacNicol of The Business Insider:

It is clear that Palin spent the last few days testing the waters and leaving the heavy lifting of the defending her to the folks at Fox News, most notably Glenn Beck.

As Ms. MacNicol explained, Palin returned to her Facebook page on January 12:

In equally typical fashion, Palin offered little introspection into her role in the political dialogue of the past year and laid the blame directly at the feet of the media, whom she accused of “blood libel.”

As MacNicol and many other commentators pointed out, this choice of words exemplified yet another classic Palin mistake.  Palin’s gaffe drew criticism from the Anti-Defamation League and it gave her critics yet another opportunity to emphasize that Palin has been in over her head with her attempts to establish a national leadership identity.  The Hill quoted what Representative James Clyburn had to say about Palin’s latest misstep:

“You know, Sarah Palin just can’t seem to get it, on any front. I think she’s an attractive person, she is articulate,” Clyburn said on the Bill Press radio show. “But I think intellectually, she seems not to be able to understand what’s going on here.”

While Rupert Murdoch’s investment in Sarah Palin was obviously deteriorating and becoming an embarrassment for his Fox News organization, things were headed in a more catastrophic direction in his Australian homeland.  The intense flooding that had been ongoing for the past several weeks was being attributed to climate change.  A report from Reuters began with this statement:

Climate change has likely intensified the monsoon rains that have triggered record floods in Australia’s Queensland state, scientists said on Wednesday, with several months of heavy rain and storms still to come.

Although Murdoch now personally admits that climate change poses a serious environmental threat, his News Corp subsidiaries have an established track record of denying that any such threat exists.

An article from the Treehugger website provided details about how badly conditions had deteriorated in Queensland:

When 75% of Queensland is disaster declared due to flooding, that is a huge area, roughly equivalent to two Texas’s or the entirety of South Africa.  On the 31st of December Reuters was saying flood water was “covering an area bigger than France and Germany combined, inundating 22 towns and stranding 200,000 people.”  This is a continually unfolding natural disaster, of which the financial bill alone was projected to reach $5 billion AUD, and that was before the flash flooding of the past day or so.

*   *   *

Australia is a rich, industrialised ‘First World’ country.  But it’s third most populous state, Queensland, is currently coping with floods which have already decimated food crops, livestock, road and rail infrastructure, mining and so on.  The impacts of which will flow on (pardon the pun) to effect most every Australian. Already some particular fruits have all but disappeared from commercial markets.

If all that weren’t bad enough, what must have been the most chilling news for Rupert Murdoch came from Julian Assange of Wikileaks.  Ian Burrell of The Independent provided this report:

A year that has begun badly for Rupert Murdoch grew a little worse yesterday after the founder of WikiLeaks, Julian Assange, claimed to be in possession of secret documents damaging to the media mogul and his News Corp empire.

Mr Assange told John Pilger in the New Statesman he had withheld a cache of confidential US government cables and files relating to Mr Murdoch’s business as “insurance”.  He has claimed that his life is in danger if he is extradited to Sweden to face allegations of sexual assault.

*   *   *

Mr Assange indicated that he had paperwork which could be hurtful to News Corp.  “There are 504 US embassy cables on one broadcasting organisation and there are cables on Murdoch and News Corp.”

Assange does lots of talking about documents he is holding as “insurance”.  Nevertheless, many commentators have mentioned the possibility all this boasting could amount to nothing more than a bluffing strategy.

In addition to discussing the Wikileaks threat, the Independent article provided us with the perspective of a former Murdoch associate on the possibility that Rupert might not be too happy with the way things are going at Fox News:

In a further broadside yesterday, one of Mr Murdoch’s former henchmen, Andrew Neil, publicly questioned whether the world’s most powerful media figure retained his grip over his organisation.

*   *   *

“My own view is [Fox] is out of control,” Neil told Richard Bacon yesterday on BBC Radio 5 Live.  “I think Rupert Murdoch has lost control of it. I know from sources he’s not happy with a lot that appears on it and I think he’s lost over the Glenn Becks and the O’Reillys,” said Mr Neil.

“[Murdoch] is uncomfortable with Glenn Beck and various other positions they take and some of the things they say.”  Neil, who fell out with Mr Murdoch in the early Nineties, claimed he had “very good sources at the heart of News Corp”.

If there is any truth to Andrew Neil’s revelations, it will be very interesting to see if Mr. Murdoch makes any changes at Fox News, due to his reported concerns.  Either way, 2011 could turn out to be a very important year for Rupert Murdoch.


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Formula For Failure

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The Democratic Party is suffering from a case of terminal smugness. Democrats ignored the warning back in 2006, when the South Park television series ran the episode, “Smug Alert”.

I recently came across a dangerous manifestation of  “The Smug” in a recent article written by Ed Kilgore for The New Republic, in which Mr. Kilgore complacently explained “why Obama won’t face a primary challenge”.  We are supposed to forget about the “shellacking” taken by Democrats in the mid-term elections.  We are to ignore the fact that “mischief-making pundits have seized on a couple of polls to burnish their narrative”.  In an act exemplifying what my late father described as “tempting fate”, Mr. Kilgore proceeded to belittle the most serious criticisms of the President, while daring lightening to strike:

Above all, primary challenges to incumbent presidents require a galvanizing issue.  It’s very doubtful that the grab-bag of complaints floated by the Democratic electorate — Obama’s legislative strategy during the health care fight; his relative friendliness to Wall Street; gay rights; human rights; his refusal to prosecute Bush administration figures for war crimes or privacy violations — would be enough to spur a serious challenge.  And while Afghanistan is an increasing source of Democratic discontent, it’s hardly Vietnam, and Obama has promised to reduce troop levels sharply by 2012.

The timing of Kilgore’s supercilious disregard of a challenge to Obama’s presence atop the 2012 ticket could not have been worse.  Thanks to the efforts of the late Mark Pittman, a Freedom of Information Act lawsuit filed by Bloomberg News has forced the Federal Reserve to disclose the details of its bailouts to those business entities benefiting from the Fed’s eleven emergency lending programs initiated as a result of the 2008 financial crisis. The Fed’s massive document dump on December 1 (occurring right on the heels of the WikiLeaks publication of indiscretions by Obama’s Secretary of State — Hillary Clinton) has refocused criticism of what Kilgore described as the President’s “relative friendliness to Wall Street”.  Although Mr. Obama had not yet assumed office in the fall of 2008, after moving into the White House, the new President re-empowered the same cast of characters responsible for the financial crisis and the worst of the bailouts.  The architect of Maiden Lane III (which included a $13 billion gift to Goldman Sachs) “Turbo” Tim Geithner, was elevated from president of the New York Fed to Treasury Secretary.  Ben Bernanke was re-nominated by Obama (over strenuous bipartisan objection) to serve another term as Federal Reserve Chairman.

In the 2008 Democratic Primary elections, voters chose “change” rather than another Clinton administration.  Nevertheless, what the voters got was another Clinton administration.  After establishing an economic advisory team consisting of retreads from the Clinton White House, President Obama has persisted in approaching the 2010 economy as though it were the 1996 economy.  Obama’s creation of a bipartisan deficit commission has been widely criticized as an inept fallback to the obsolete Bill Clinton playbook.  Robert Reich, Labor Secretary for the original Clinton administration recently upbraided President Obama for this wrongheaded approach:

Bill Clinton had a rapidly expanding economy to fall back on, so his appeasement of Republicans didn’t legitimize the Republican world view.  Obama doesn’t have that luxury.  The American public is still hurting and they want to know why.

The Pragmatic Capitalist criticized President Obama’s habitual reliance on members of the Clinton administration as futile attempts to bring about the same results obtained fifteen years ago.  Obama’s appointment of Erskine Bowles (Clinton’s former Chief of Staff) as co-chair of the deficit commission was denounced as a recent example.  Bowles’ platitudinous insistence that it’s time for an “adult conversation about the dangers of this debt” drew this blistering retort:

Yes.  America has a debt problem. We have a very serious household, municipality and state debt crisis that is in many ways similar to what is going on in Europe.   What we absolutely don’t have is a federal government debt problem.  After all, a nation with monopoly supply of currency in a floating exchange rate system never really has “debt” unless that debt is denominated in a foreign currency.  He says this conversation is the:

“exact same conversation every family, every single business, every single state and every single municipality has been having these last few years.”

There is only one problem with this remark.  The federal government is NOTHING like a household, state or municipality.   These entities are all revenue constrained.  The Federal government has no such constraint. We don’t need China to lend us money.  We don’t need to raise taxes to spend money.  When the US government wants to spend money it sends men and women into a room where they mark up accounts in a computer system.   They don’t call China first or check their tax revenues.   They just spend the money.

*   *   *
Mr. Bowles finished his press conference by saying that the American people get it:

“There is one thing I am absolutely sure of.  If nothing else, I know deep down the American people get it.   They know this is the moment of truth”

The American people most certainly don’t get it.  And how can you blame them?  When a supposed financial expert like Mr. Bowles can’t grasp these concepts how could we ever expect the average American to understand it?  It’s time for an adult conversation to begin before this misguided conversation regarding the future bankruptcy of America sends us towards our own “moment of truth” – a 1937 moment.

I hope it doesn’t take “a 1937 moment” for the Democrats to appreciate the very serious risk that the Palin family could be living in the White House in 2013.


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