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Wall Streeters Who Support The Occupy Movement

December 8th, 2011 Posted in Uncategorized
Dec, 08 2011
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Forget about what you have been hearing from those idiotic, mainstream blovaitors – who rose to prominence solely because of corporate politics.  Those bigmouths want you to believe that the Occupy Wall Street movement is anti-capitalist.  Nevertheless, the dogma spouted by those dunder-headed pundits is contradicted by the reality that there are quite a number of prominent individuals who voice support for the Occupy Wall Street movement, despite the fact that they are professionally employed in the investment business.  I will provide you with some examples.

On October 31, I discussed the propaganda war waged against the Occupy Wall Street movement, concluding the piece with my expectation that Jeremy Grantham’s upcoming third quarter newsletter would provide some sorely-needed, astute commentary on the situation.  Jeremy Grantham, rated by Bloomberg BusinessWeek as one of the Fifty Most Influential Money Managers, finally released an abbreviated edition of that newsletter one month later than usual, due to a busy schedule.  In addition to expressing some supportive comments about the OWS movement, Grantham noted that he will be providing a special supplement, based specifically on that subject:

Meriting a separate, special point are the drastic declines in both U.S. income equality – the U.S. has become quite quickly one of the least equal societies – and in the stickiness of economic position from one generation to another.  We have gone from having been notably upwardly mobile during the Eisenhower era to having fallen behind other developed countries today, even the U.K.!  The net result of these factors is a growing feeling of social injustice, a weakening of social cohesiveness, and, possibly, a decrease in work ethic.  A healthy growth rate becomes more difficult.

*   *   *

Sitting on planes over the last several weeks with nothing to do but read and think, I found myself worrying increasingly about the 1% and the 99% and the appearance we give of having become a plutocracy, and a rather mean-spirited one at that.  And, one backed by a similarly mean-spirited majority on the Supreme Court.  (I will try to post a letter addressed to the “Occupy … Everywhere” folks shortly.)

Hedge fund manager Barry Ritholtz is the author of Bailout Nation and the publisher of one of the most widely-read financial blogs, The Big Picture.  Among the many pro-OWS postings which have appeared on that site was this recent piece, offering the movement advice similar to what can be expected from Jeremy Grantham:

To become as focused and influential as the Tea Party, what Occupy Wall Street needs a simple set of goals. Not a top 10 list — that’s too unwieldy, and too unfocused.  Instead, a simple 3 part agenda, that responds to some very basic problems regardless of political party.  It must address the key issues, have a specific legislative agenda, and finally, effect lasting change.  By keeping it focused on the foibles of Wall Street, and on issues that actually matter, it can become a rallying cry for an angry nation.

I suggest the following three as achievable goals that will have a lasting impact:

1. No more bailouts: Bring back real capitalism
2. End TBTF banks
3. Get Wall Street Money out of legislative process

*   *   *

You will note that these three goals are issues that both the Left and the Right — Libertarians and Liberals — should be able to agree upon. These are all doable measurable goals, that can have a real impact on legislation, the economy and taxes.

But amending the Constitution to eliminate dirty money from politics is an essential task. Failing to do that means backsliding from whatever gains are made. Whatever is accomplished will be temporary without campaign finance reform . . .

Writing for the DealBook blog at The New York Times, Jesse Eisinger provided us with the laments of a few Wall Street insiders, whose attitudes are aligned with those of the OWS movement:

Last week, I had a conversation with a man who runs his own trading firm.  In the process of fuming about competition from Goldman Sachs, he said with resignation and exasperation:  “The fact that they were bailed out and can borrow for free – it’s pretty sickening.”

*   *   *

Sadly, almost none of these closeted occupier-sympathizers go public.  But Mike Mayo, a bank analyst with the brokerage firm CLSA, which is majority-owned by the French bank Crédit Agricole, has done just that.  In his book “Exile on Wall Street” (Wiley), Mr. Mayo offers an unvarnished account of the punishments he experienced after denouncing bank excesses.  Talking to him, it’s hard to tell you aren’t interviewing Michael Moore.

*   *   *

I asked Richard Kramer, who used to work as a technology analyst at Goldman Sachs until he got fed up with how it did business and now runs his own firm, Arete Research, what was going wrong.  He sees it as part of the business model.

“There have been repeated fines and malfeasance at literally all the investment banks, but it doesn’t seem to affect their behavior much,” he said.  “So I have to conclude it is part of strategy as simple cost/benefit analysis, that fines and legal costs are a small price to pay for the profits.”

Mr. Kramer’s contention was supported by a recent analysis of Securities and Exchange Commission documents by The New York Times, which revealed “that since 1996, there have been at least 51 repeat violations by those firms. Bank of America and Citigroup have each had six repeat violations, while Merrill Lynch and UBS have each had five.”

At the ever-popular Zero Hedge website, Tyler Durden provided us with the observations of a disillusioned, first-year hedge fund analyst.  Durden’s introductory comments in support of that essay, provide us with a comprehensive delineation of the tactics used by Wall Street to crush individual “retail” investors:

Regular readers know that ever since 2009, well before the confidence destroying flash crash of May 2010, Zero Hedge had been advocating that regular retail investors shun the equity market in its entirety as it is anything but “fair and efficient” in which frontrunning for a select few is legal, in which insider trading is permitted for politicians and is masked as “expert networks” for others, in which the government itself leaks information to a hand-picked elite of the wealthiest investors, in which investment banks send out their “huddle” top picks to “whale” accounts before everyone else gets access, in which hedge funds form “clubs” and collude in moving the market, in which millisecond algorithms make instantaneous decisions which regular investors can never hope to beat, in which daily record volatility triggers sell limits virtually assuring daytrading losses, and where the bid/ask spreads for all but the choicest few make the prospect of breaking even, let alone winning, quite daunting.  In short:  a rigged casino.  What is gratifying is to see that this warning is permeating an ever broader cross-section of the retail population with hundreds of billions in equity fund outflows in the past two years. And yet, some pathological gamblers still return day after day, in hope of striking it rich, despite odds which make a slot machine seem like the proverbial pot of gold at the end of the rainbow.  In that regard, we are happy to present another perspective:  this time from a hedge fund insider who while advocating his support for the OWS movement, explains, in no uncertain terms, and in a somewhat more detailed and lucid fashion, both how and why the market is not only broken, but rigged, and why it is nothing but a wealth extraction mechanism in which the richest slowly but surely steal the money from everyone else who still trades any public stock equity.

The anonymous hedge fund analyst concluded his discourse with this point:

In other words, if you aren’t in the .1%, you have no access to the derivatives markets, you have no access to the special deals that hedge funds and other wealthy investors get, and you have no access to the resources, information, strategic services, tax exemptions, and capital that the top .1% is getting.

If you have any questions about what some of the concepts above mean, ask and I will try my best to answer.  I’m a first-year analyst on Wall Street, and based on what I see day in and day out, I support the OWS movement 100%.

You are now informed beyond the influence of those presstitutes, who regularly attempt to convince the public that an important goal of the Occupy Movement is to destroy the livelihoods of those who work on Wall Street.


 

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More Favorable Reviews For Huntsman

December 5th, 2011 Posted in Uncategorized
Dec, 05 2011
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In my last posting, I focused on how Jon Huntsman has been the only Presidential candidate to present responsible ideas for regulating the financial industry (Obama included).  Since that time, I have read a number of similarly favorable reactions from respected authorities and commentators who reviewed Huntsman’s proposals .

Simon Johnson is the former Chief Economist for the International Monetary Fund (IMF) from 2007-2008.  He is currently the Ronald A. Kurtz Professor of Entrepreneurship at the MIT Sloan School of Management.  At his Baseline Scenario blog, Professor Johnson posted the following comments in reaction to Jon Huntsman’s policy page on financial reform and Huntsman’s October 19 opinion piece for The Wall Street Journal:

More bailouts and the reinforcement of moral hazard – protecting bankers and other creditors against the downside of their mistakes – is the last thing that the world’s financial system needs.   Yet this is also the main idea of the Obama administration.  Treasury Secretary Tim Geithner told the Fiscal Times this week that European leaders “are going to have to move more quickly to put in place a strong firewall to help protect countries that are undertaking reforms,” meaning more bailouts.  And this week we learned more about the underhand and undemocratic ways in which the Federal Reserve saved big banks last time around.  (You should read Ron Suskind’s book, Confidence Men: Wall Street, Washington, and the Education of a President, to understand Mr. Geithner’s philosophy of unconditional bailouts; remember that he was president of the New York Fed before become treasury secretary.)

Is there really no alternative to pouring good money after bad?

In a policy statement released this week, Governor Jon Huntsman articulates a coherent alternative approach to the financial sector, which begins with a diagnosis of our current problem:  Too Big To Fail banks,

“To protect taxpayers from future bailouts and stabilize America’s economic foundation, Jon Huntsman will end too-big-to-fail. Today we can already begin to see the outlines of the next financial crisis and bailouts. More than three years after the crisis and the accompanying bailouts, the six largest U.S. financial institutions are significantly bigger than they were before the crisis, having been encouraged by regulators to snap up Bear Stearns and other competitors at bargain prices”

Mr. Geithner feared the collapse of big banks in 2008-09 – but his policies have made them bigger.  This makes no sense.  Every opportunity should be taken to make the megabanks smaller and there are plenty of tools available, including hard size caps and a punitive tax on excessive size and leverage (with any proceeds from this tax being used to reduce the tax burden on the nonfinancial sector, which will otherwise be crushed by the big banks’ continued dangerous behavior).

The goal is simple, as Mr. Huntsman said in his recent Wall Street Journal opinion piece: make the banks small enough and simple enough to fail, “Hedge funds and private equity funds go out of business all the time when they make big mistakes, to the notice of few, because they are not too big to fail.  There is no reason why banks cannot live with the same reality.”

The quoted passage from Huntsman’s Wall Street Journal essay went on to say this:

These banks now have assets worth over 66% of gross domestic product—at least $9.4 trillion, up from 20% of GDP in the 1990s.  There is no evidence that institutions of this size add sufficient value to offset the systemic risk they pose.

The major banks’ too-big-to-fail status gives them a comparative advantage in borrowing over their competitors thanks to the federal bailout backstop.

Far be it from President Obama to make such an observation.

Huntsman’s policy page on financial reform included a discussion of repealing the Dodd-Frank law:

More specifically, real reform means repealing the 2010 Dodd-Frank law, which perpetuates too-big-to-fail and imposes costly and mostly useless regulations on innocent smaller banks without addressing the root causes of the crisis or anticipating future crises.  But the overregulation cannot be addressed without ending the bailout subsidies, so that is where reform must begin.

Beyond that, Huntsman’s Wall Street Journal piece gave us a chance to watch the candidate step in shit:

Once too-big-to-fail is fixed, we could then more easily repeal the law’s unguided regulatory missiles, such as the Consumer Financial Protection Bureau.  American banks provide advice and access to capital to the entrepreneurs and small business owners who have always been our economic center of gravity.  We need a banking sector that is able to serve that critical role again.

American banks also do a lot to screw their “personal banking” customers (the “little people”) and sleazy “payday loan”-type operations earn windfall profits exploiting those workers whose incomes aren’t enough for them to make it from paycheck-to-paycheck.  The American economy is 70 percent consumer-driven.  American consumers have always been “our economic center of gravity” and the CFPB was designed to protect them.  Huntsman would do well to jettison his anti-CFPB agenda if he wants to become President.

Mike Konczal of the Roosevelt Institute, exhibited a similarly “hot and cold” reaction to Huntsman’s proposals for financial reform.  What follows is a passage from a recent posting at his Rortybomb blog, entitled “Huntsman Wants to Repeal Dodd-Frank so he can Pass Title VII of Dodd-Frank”:

So we need to get serious about derivatives regulation by bringing transparency to the over-the-counter derivatives market, with serious collateral requirements.  This was turned into law as the Wall Street Transparency and Accountability Act of 2010, or Title VII of Dodd-Frank.

So we need to eliminate Dodd-Frank in order to pass Dodd-Frank’s resolution authority and derivative regulations – two of the biggest parts of the bill – but call it something else.

You can argue that Dodd-Frank’s derivative rules have too many loopholes with too much of the market exempted from the process and too much power staying with the largest banks.  But those are arguments that Dodd-Frank doesn’t go far enough, where Huntsman’s critique of Dodd-Frank is that it goes way too far.

Huntsman should be required to explain the issues here – is he against Dodd-Frank before being for it?  Is his Too Big To Fail policy and derivatives policy the same as Dodd-Frank, and if not how do they differ?  It isn’t clear from the materials he has provided so far how the policies would be different, and if it is a problem with the regulations in practice how he would get stronger ones through Congress.

I do applaud this from Huntsman:

RESTORING RULE OF LAW

President Huntsman’s administration will direct the Department of Justice to take the lead in investigating and brokering an agreement to resolve the widespread legal abuses such as the robo-signing scandal that unfolded in the aftermath of the housing bubble.  This is a basic question of rule of law; in this country no one is above the law. There are also serious issues involving potential violations of the securities laws, particularly with regard to fair and accurate disclosure of the underlying loan contracts and property titles in mortgage-backed securities that were sold.  If investors’ rights were abused, this needs to be addressed fully.  We need a comprehensive settlement that puts all these issues behind us, but any such settlement must include full redress of all legal violations.

*   *   *

And I will note that the dog-whistles hidden inside the proposal are towards strong reforms (things like derivatives reform “will also allow end-users to negotiate better terms with Wall Street and in turn lower trading costs” – implicitly arguing that the dealer banks have too much market power and it is the role of the government to create a fair playing field).  Someone knows what they are doing.  His part on bringing down the GSEs doesn’t mention the hobbyhorse of the Right that the CRA and the GSEs caused the crisis, which is refreshing to see.

If Republican voters are smart, they will vote for Jon Huntsman in their state primary elections.  As I said last time:  If Jon Huntsman wins the Republican nomination, there will be a serious possibility that the Democrats could lose control of the White House.


 

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Here Comes Huntsman

December 1st, 2011 Posted in Uncategorized
Dec, 01 2011
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The bombastic non-Romney Republican Presidential hopeful, Herman Cain, has been providing us with a very entertaining meltdown.  He has attempted to silence the handful of women, who came forward to accuse him of sexual harassment, with threatened defamation suits.  Nevertheless, a woman who claimed to have been his paramour for thirteen years – Ginger White – possessed something the other women lacked:  documentation to back up her claim.  She has produced phone records, revealing that Cain was in contact with her at all hours of the day and night.  Cain’s humorously disingenuous response:  He was providing advice to Ms. White concerning her financial problems.  When I first heard about Ginger White’s allegations, I assumed that she was motivated to tell her story because she felt outraged that Cain had been trying to cheat on her by making inappropriate advances toward those other women.

The next non-Romney candidate to steal the Republican spotlight was Newt Gingrich.  Aside from the fact that Newt exudes less charisma than a cockroach, he has a “baggage” problem.  Maureen Dowd provided us with an entertaining analysis of the history professor’s own history.  The candidate and his backers must be counting on that famously short memory of the voting public.  The biggest problem for Gingrich is that even if he could win the Republican nomination, he will never get elected President.

Meanwhile, Romney’s fellow Mormon, Jon Huntsman, is gaining momentum in New Hampshire.  Huntsman has something the other Republicans lack:  the ability to win support from Independent and Democratic voters.  The unchallenged iron fists of Rush Limbaugh and Fox News, currently in control of the Republican party, have dictated to the masses that the very traits which give Huntsman a viable chance at the Presidency – are negative, undesirable characteristics.

Conservative commentator Ross Douthat of The New York Times, took a hard look at the mismanaged Huntsman campaign:

Huntsman is branded as the Republican field’s lonely moderate, of course, which is one reason why he’s currently languishing at around 3 percent in the polls.

*   *   *

Huntsman has none of Romney’s health care baggage, and unlike the former Massachusetts governor, he didn’t spend the last decade flip-flopping on gun rights, immigration and abortion.

*   *   *

At the same time, because Huntsman is perceived as less partisan than his rivals, he has better general election prospects.  The gears and tumblers of my colleague Nate Silver’s predictive models give Huntsman a 55 percent chance of knocking off the incumbent even if the economy grows at a robust 4 percent, compared to Romney’s 40 percent.

*   *   *

On issues ranging from foreign affairs to financial reform, Huntsman’s proposals have been an honorable exception to the pattern of gimmickry and timidity that has characterized the Republican field’s policy forays.

But his salesmanship has been staggeringly inept.  Huntsman’s campaign was always destined to be hobbled by the two years he spent as President Obama’s ambassador to China.  But he compounded the handicap by introducing himself to the Republican electorate with a series of symbolic jabs at the party’s base.

As Ross Douthat pointed out, New Hampshire will be Huntsman’s “make-or-break” state.  The candidate is currently polling at 11 percent in New Hampshire and he has momentum on his side.  Rachelle Cohen of the Boston Herald focused on Huntsman’s latest moves, which are providing his campaign with some traction:

Monday Huntsman introduced a financial plan aimed at cutting the nation’s biggest banks and financial institutions down to size so that they are no longer “too big to fail” and, therefore, would never again become a burden on the American taxpayer.

“There will be no more bailouts in this country,” he said, because taxpayers won’t put up with that kind of strategy again.  “I would impose a fee [on the banks] to protect the taxpayers until the banks right-size themselves.”

The strategy, of course, is likely to be music to the ears of anyone who despised not just the bailouts but those proposed Bank of America debit card fees.  And, of course, it gives Huntsman a good opening to make a punching bag of Mitt Romney.

“If you’re raising money from the big banks and financial institutions, you’re never going to get it done,” he said, adding, “Mitt Romney is in the hip pocket of Wall Street.”  Lest there be any doubt about his meaning.

That issue also happens to be the Achilles heel for President Obama.  Immediately after he was elected, Obama smugly assumed that Democratic voters would have to put up with his sellout to Wall Street because the Republican party would never offer an alternative.  Huntsman’s theme of cracking down on Wall Street will redefine the Huntsman candidacy and it could pose a serious threat to Obama’s reelection hopes.  Beyond that, as Ms. Cohen noted, Huntsman brings a unique skill set, which distinguishes him from his Republican competitors:

But it’s on foreign policy that Huntsman – who served not only in China and Singapore but as a deputy U.S. trade representative with a special role in Asia – excels, and not just because he’s fluent in Mandarin.

This is the guy anyone would feel comfortable having answer that proverbial 3 a.m. phone call Hillary Clinton once talked about.

If that phone call is coming from China – Huntsman won’t have to wake up an interpreter to conduct the conversation in Chinese.

Any other Republican candidate will serve as nothing more than a doormat for Obama.  On the other hand, if Jon Huntsman wins the Republican nomination, there will be a serious possibility that the Democrats could lose control of the White House.


 

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European Sovereign Debt Crisis Gets Scary

November 28th, 2011 Posted in Uncategorized
Nov, 28 2011
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The simplest explanation of the European sovereign debt crisis came from Joe Weisenthal at the Business Insider website.  He compared the yield on the 5-year bond for Sweden with that of Finland, illustrated by charts, which tracked those yields for the past year:

Basically they look identical all through the year up until November and then BAM.  Finnish yields are exploding higher, right as Swedish yields are blasting lower.

The only obvious difference between the two:   Finland is part of the Eurozone, meaning it can’t print its own money. Sweden has no such risk.

While everyone’s attention was focused on the inability of Greece to pay the skyrocketing interest rates on its bonds, Italy snuck up on us.  The Italian debt crisis has become so huge that many commentators are voicing concern that “sovereign debt contagion” across the Eurozone is spreading faster than we could ever imagine.  The Los Angeles Times is now reporting that Moody’s Investors Service is ready to hit the panic button:

Throwing more logs on the Eurozone fire, Moody’s Investors Service said early Monday that the continent’s debt crisis now is “threatening the credit standing of all European sovereigns.”

That’s a not-so-subtle warning that even Moody’s top-rung Aaa ratings of countries including Germany, France, Austria and the Netherlands could be in jeopardy.

Meanwhile, every pundit seems to have a different opinion about how the crisis will unfold and what should be done about it.  The latest buzz concerns a widely-published rumor that the IMF is preparing a 600 billion euro ($794 billion) loan for Italy.  The problem with that scenario is that most of those billions would have to come from the United States – meaning that Congress would have to approve it.  Don’t count on it.  Former hedge fund manager, Bruce Krasting provided a good explanation of the Italian crisis and its consequences:

I think the Italian story is make or break.  Either this gets fixed or Italy defaults in less than six months.  The default option is not really an option that policy makers would consider.  If Italy can’t make it, then there will be a very big crashing sound.  It would end up taking out most of the global lenders, a fair number of countries would follow into Italy’s vortex.  In my opinion a default by Italy is certain to bring a global depression; one that would take many years to crawl out of.  The policy makers are aware of this too.

So I say something is brewing.  And yes, if there is a plan in the works it must involve the IMF.  And yes, it’s going to be big.

Please do not read this and conclude that some headline is coming that will make us all feel happy again.  I think headlines are coming.  But those headlines are likely to scare the crap out of the markets once the implications are understood.

In the real world of global finance the reality is that any country that is forced to accept an IMF bailout is also blocked from issuing debt in the public markets.  IMF (or other supranational debt) is ALWAYS senior to other indebtedness of the country. That’s just the way it works.  When Italy borrows money from the IMF it automatically subordinates the existing creditors. Lenders hate this.  They will vote with their feet and take a pass at Italian new debt issuance for a long time to come.  Once the process starts, it will not end.  There will be a snow ball of other creditors.  That’s exactly what happened in the 80’s when Mexico failed; within a year two dozen other countries were forced to their debt knees.  (I had a front row seat.)

I don’t see a way out of this box.  The liquidity crisis in Italy is scaring us to death, the solution will almost certainly kill us.

Forcing taxpayers to indemnify banks which made risky bets on European sovereign debt is popular with K Street lobbyists and their Congressional puppets.  This has led most people to assume that we will be handed the bill.  Fortunately, there are some smart people around, who are devising better ways to get “out of this box”.  Economist John Hussman of the Hussman Funds, proposed this idea to facilitate significant writedowns on Greek bonds while helping banks cope the impact of accepting 25 percent of the face value of those bonds, rather than the hoped-for 50 percent:

Given the extremely high leverage ratios of European banks, it appears doubtful that it will be possible to obtain adequate capital through new share issuance, as they would essentially have to duplicate the existing float.  For that reason, I suspect that before this is all over, much of the European banking system will be nationalized, much of the existing debt of the European banking system will be restructured, and those banks will gradually be recapitalized, post-restructuring and at much smaller leverage ratios, through new IPOs to the market.  That’s how to properly manage a restructuring – you keep what is essential to the economy, but you don’t reward the existing stock and bondholders – it’s essentially what we did with General Motors.  That outcome is not something to be feared (unless you’re a bank stockholder or bondholder), but is actually something that we should hope for if the global economy is to be unchained from the bad debts that were enabled by financial institutions that took on imponderably high levels of leverage.

Notably, credit default swaps are blowing out even in the U.S., despite leverage ratios that are substantially lower (in the 10-12 range, versus 30-40 in Europe).  As of last week, CDS spreads on U.S. financials were approaching and in some cases exceeding 2009 levels.  Bank stocks are also plumbing their 2009 depths, but with a striking degree of calm about it, and a definite tendency for scorching rallies on short-covering and “buy-the-dip” sentiment.  There is a strong mood on Wall Street that we should take these developments in stride.  I’m not convinced.  Our own measures remain defensive about the prospective return/risk tradeoff in the stock market.

The impact this crisis will have on the stock market explains why mainstream news media coverage has consistently understated the magnitude of the situation.  It will be interesting to observe how the “happy talk” gets amped-up as the situation deteriorates.


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Harsh Reality

November 24th, 2011 Posted in Uncategorized
Nov, 24 2011
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Several years ago, at one of the seven Laurie Anderson performances I have attended, Ms. Anderson (now Mrs. Lou Reed – although I seriously doubt whether she uses that moniker) described her first meeting with Philip Glass.  Immediately after meeting Glass, she anxiously asked him:  “Are things getting better or are things getting worse?”

These days, that same question is on everyone’s mind.  It appears as though the mainstream news media are hell-bent on convincing us that everything is just fine.  Nevertheless, many of us remember hearing the same thing from Ben Bernanke and Hank Paulson during the summer of 2008.  As a result, we ponder the onslaught of rosy prognostications about the future of our economy with a good degree of skepticism.  Regardless of whether there might be some sort of conspiracy to convince the public to go out and spend money because everything is all right  . . . consider these remarks by Steve Randy Waldman from a discussion about market monetarist theory:

Self-fulfilling expectations lie at the heart of the market monetarist theory.  A depression occurs when people come to believe that income will be scarce relative to prior expectations and debts.  They nervously scale back expenditures and hoard cash, fulfilling their expectations of income scarcity.  However, if everybody could suddenly be made to believe that income would be plentiful, everyone would spend freely and fulfill the expectations of plenty.  The world is a much more pleasant place under the second set of expectations than the first.  And to switch between the two scenarios, all that is required is persuasion.  The market-monetarist central bank is nothing more than a great persuader:  when “shocks happen”, it persuades us all to maintain our optimism about the path of nominal income.  As long as we all keep the faith, our faith will be rewarded.  This is not a religion, but a Nash equilibrium.

The persuasion described by Steve Waldman has been drowning out objective analysis lately.  Obviously, the sovereign debt crisis in Europe has created quite a bit of anxiety in the United States.  The mainstream media focus is apparently targeting that consensual anxiety with heavy doses of “feel good” material.  One must search around a bit before finding any commentary which runs against that current.  I found some and I would like to share it with you.  The first item appeared in Bloomberg BusinessWeek on November 22:

Pacific Investment Management Co.’s Chief Executive Officer Mohamed A. El-Erian said U.S. economic conditions are “terrifying” as the nation struggles to recover from recession.

The odds of the U.S. returning to recession are as much as 50 percent, El-Erian said during an interview on Bloomberg Television’s “In the Loop” with Betty Liu.  U.S. economic growth was worse than expected and congressional policy makers are gridlocked over what to do about the economy and the deficit, which risk exacerbating an already weak recovery, he said.

“We have less economic momentum than we thought we had and we have no policy momentum,” said El-Erian, who also serves as co-chief investment officer with Pimco founder Bill Gross at the world’s largest manager of bond funds.

“What’s most terrifying,” he said, “we are having this discussion about the risk of recession at a time when unemployment is already too high, at a time when a quarter of homeowners are underwater on their mortgages, at a time then the fiscal deficit is at 9 percent and at a time when interest rates are at zero.”

Let’s not forget that all of this is happening at a time when we are plagued by the most dysfunctional, stupid and corrupt Congress in our nation’s history.  President Obama is currently preoccupied with his re-election campaign.  His own leadership failures are conveniently re-packaged as products of that feckless Congress.  As a result, Americans have plenty of justification for being worried about the future.

One of my favorite commentators, Paul Farrell of MarketWatch, recently shared some information with us, which he acquired by attending an InvestmentNews Round Table, as well as from reading Gary Shilling’s expensive newsletter:

Get it? Main Street America, you should “expect very slow growth” in 2012.  That was the response when asked what “scenarios are you painting for your clients?”  The panelist at a recent InvestmentNews Round Table then added:  “It’s going to be ugly and violent.”  Why?  Because the politicians “are driving things” and they are “capricious, which leads to volatility.”  And clients are “not really happy,” but “they lived through ‘08 and ’09,” so 2012 will be “just a little bump in the road.”

*   *   *

So don’t kid yourself folks, recent economic and market “ugliness and violence” not only won’t end soon, it’ll get meaner and meaner for years after 2012 elections … no matter who wins.  Only a fool would believe that a new bull market will take off in 2013.  Ain’t going to happen.  That’s a Wall Street fantasy.  Fall for that, and you’re delusional.

In fact, you better plan on a very long secular bear the next decade through 2020.  With the European banks, credit and currency on the edge of a global financial meltdown, there’s a high probability that a black swan virus, a contagion will sweep the world, making all investing “uglier” and more “violent” for Americans in 2013, indeed for the rest of the decade.

*   *   *

Shilling sees “a secular bear market really started in 2000 and may persist for a decade as a result of slower GDP growth,” yes, persist till 2020 “with 2% to 3% deflation.”  He warns:  “Nominal GDP might not gain at all,” like recent flat-lining.  Which coincides with the expectations of America’s professional financial advisers.

Are you still feeling optimistic?  Consider the closing thoughts from a piece by Karl Denninger entitled, “The Game Is About Done”:

30+ years of lawless behavior has now devolved down to blatant, in-your-face theft.  They don’t even bother trying to hide it any more, and Eric “Place” Holder is too busy supervising the running of guns into Mexico so the drug cartels can shoot both Mexican and American citizens.

What am I, or anyone else, supposed to do in this sort of “market” environment?  Invest in…. what?  Land titles are worthless as they’ve been corrupted by robosigning, margin deposits have been stolen, Madoff’s clients had confirmations of trades that never happend and proved to worthless pieces of paper instead of valuable securities and while Madoff went to prison nobody else has and the money is still gone!

Without enforcement of the law — swift and certain — there is no deterrent against this behavior.

There has been no enforcement and there is no indication that this will change.

It will take just one — or maybe two — more events like MF Global and Greek CDS “determinations” before the entire market — all of it — goes “no bid” as participants simply stuff their hands in their pockets and say “screw this.”

It’s coming folks, and I guarantee you this:  Whatever your “nightmare” scenario is for such an event, it’s not bearish enough.

Keep all of this in mind as you plan for the future.  I would not expect that you might hear any of this on CNBC.


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Obama Backpedals To Save His Presidency

November 10th, 2011 Posted in Uncategorized
Nov, 10 2011
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President Obama’s demotion of his Chief of Staff, Bill Daley, has drawn quite a bit of attention – despite efforts by the White House to downplay the significance of that event.  The demotion of Daley is significant because it indicates that Obama is now trying to back away from his original strategy of helping Wall Street at the expense of Main Street.  This move appears to be an attempt by Obama to re-cast himself as a populist, in response to the widespread success of the Occupy Wall Street movement.

In September of 2010, I wrote a piece entitled, “Where Obama Went Wrong”.  Despite the subsequent spin by right-wing pundits, to the effect that voters had been enamored with the Tea Party’s emphasis on smaller government, the true reasons for the mid-term disaster for the Democrats had become obvious:

During the past week, we’ve been bombarded with explanations from across the political spectrum, concerning how President Obama has gone from wildly-popular cult hero to radioactive force on the 2010 campaign trail.  For many Democrats facing re-election bids in November, the presence of Obama at one of their campaign rallies could be reminiscent of the appearance of William Macy’s character from the movie, The Cooler.  Wikipedia’s discussion of the film provided this definition:

In gambling parlance, a “cooler” is an unlucky individual whose presence at the tables results in a streak of bad luck for the other players.

*   *   *

The American people are hurting because their President sold them out immediately after he was elected.  When faced with the choice of bailing out the zombie banks or putting those banks through temporary receivership (the “Swedish approach” – wherein the bank shareholders and bondholders would take financial “haircuts”) Obama chose to bail out the banks at taxpayer expense.  So here we are  . . .  in a Japanese-style “lost decade”.  In case you don’t remember the debate from early 2009 – peruse this February 10, 2009 posting from the Calculated Risk website.  After reading that, try not to cry after looking at this recent piece by Barry Ritholtz of The Big Picture entitled, “We Should Have Gone Swedish  . . .”

Back in December of 2009, Bill Daley – a minion of The Dimon Dog at JPMorgan Chase – wrote an op-ed piece for The Washington Post, which resonated with Wall Street’s tool in the White House.  Daley claimed that Obama and other Democrats were elected to office in 2008 because voters had embraced some pseudo-centrist ideas, which Daley referenced in these terms:

These independents and Republicans supported Democrats based on a message indicating that the party would be a true Big Tent — that we would welcome a diversity of views even on tough issues such as abortion, gun rights and the role of government in the economy.

*   *   *

All that is required for the Democratic Party to recover its political footing is to acknowledge that the agenda of the party’s most liberal supporters has not won the support of a majority of Americans — and, based on that recognition, to steer a more moderate course on the key issues of the day, from health care to the economy to the environment to Afghanistan.

Unfortunately, Obama was pre-disposed to accept this rationale, keeping his policy decisions on a trajectory which has proven as damaging to his own political future as it has been to the future of the American middle class.

On November 8, Jonathan Chait wrote a piece for New York magazine’s Daily Intel blog, wherein he explained that the demotion of Bill Daley revealed a “course correction” by Obama, in order to a pursue a strategy “in line with the realities of public opinion”.  Jonathan Chait explained how the ideas espoused by Daley in his 2009 Washington Post editorial, had been a blueprint for failure:

Daley, pursuing his theory, heavily courted business leaders.  He made long-term deficit reduction a top priority, and spent hours with Republican leaders, meeting them three-quarters of the way in hopes of securing a deal that would demonstrate his centrism and bipartisanship.  The effort failed completely.

The effort failed because Daley’s analysis – which is also the analysis of David Brooks and Michael Bloomberg – was fatally incorrect.  Americans were not itching for Obama to make peace with corporate America.  Americans are in an angry, populist mood – distrustful of government, but even more distrustful of business.  In the most recent NBC/The Wall Street Journal poll, 60 percent of Americans strongly agreed with the following statement:

The current economic structure of the country is out of balance and favors a very small proportion of the rich over the rest of the country.  America needs to reduce the power of major banks and corporations and demand greater accountability and transparency.  The government should not provide financial aid to corporations and should not provide tax breaks to the rich.

At the website of economist Brad DeLong, a number of comments were posted in response to Jonathan Chait’s essay.  One can only hope that our President has the same, clear understanding of this situation as do the individuals who posted these comments:

Full Employment Hawk said:

.   .   .   The defeat of the Democrats was due to the fact that the Obama administration did too little, not because it did too much.

Daley’s view that it was because the moderately progressive policies of the Obama administration were too far left for the center was totally wrong.  And listening to Daley’s advice to further shift from job creation to deficit reduction was a major blunder that reinforced the blunder of the first two years of dropping the ball on making the economy grow fast enough for the unemployment rate to be coming down significantly by the time of the Fall election.

In reply to the comment posted by Full Employment Hawk, a reader, identified as “urban legend” said this:

Obama should have been making the point over and over and over and over that getting more money into the hands of more Americans — principally right now by creating jobs — is the most pro-business stance you can take.  Continuing to let the 1% dictate everything in their favor is the most anti-business thing you can do.  We are the ones who want demand to rise for the goods and services of American business.  Right-wingers don’t care much about that.  What they do care about is maintaining their theology against all the evidence of its massive failure.

At Politico, Jonathan Chait’s essay provoked the following comment from Ben Smith:

It is entirely possible that no staff shift, and no ideological shift, can save Obama from a bad economy.  You don’t get to run controlled experiments in politics.

But it does seem worth noting that this argument pre-dates Daley: It’s the substance of the 2008 debate between Hillary Clinton and Obama, with Clinton portraying Obama as naive in his dream of bipartisan unity, and the Republicans as an implacable foe.  It’s the Clinton view, the ’90s view, that has prevailed here.

Indeed, it would be nice for all of us if Obama could get a “Mulligan” for his mishandling of the economic crisis.  Unfortunately, this ain’t golf.


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Losing The Propaganda War

October 31st, 2011 Posted in Uncategorized
Oct, 31 2011
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The propaganda war waged by corporatist news media against the Occupy Wall Street movement is rapidly deteriorating.  When the occupation of Zuccotti Park began on September 17, the initial response from mainstream news outlets was to simply ignore it – with no mention of the event whatsoever.  When that didn’t work, the next tactic involved using the “giggle factor” to characterize the protesters as “hippies” or twenty-something “hippie wanna-bes”, attempting to mimic the protests in which their parents participated during the late-1960s.  When that mischaracterization failed to get any traction, the presstitutes’ condemnation of the occupation events – which had expanded from nationwide to worldwide – became more desperate:  the participants were called everything from “socialists” to “anti-Semites”.

Despite the incessant flow of propaganda from those untrustworthy sources, a good deal of commentary – understanding, sympathetic or even supportive of Occupy Wall Street began to appear in some unlikely places.  For example, Roger Lowenstein wrote a piece for Bloomberg BusinessWeek entitled, “Occupy Wall Street: It’s Not a Hippie Thing”:

As critics have noted, the protesters are not in complete agreement with each other, but the overall message is reasonably coherent.  They want more and better jobs, more equal distribution of income, less profit (or no profit) for banks, lower compensation for bankers, and more strictures on banks with regard to negotiating consumer services such as mortgages and debit cards.  They also want to reduce the influence that corporations – financial firms in particular – wield in politics, and they want a more populist set of government priorities: bailouts for student debtors and mortgage holders, not just for banks.

In stark contrast with the disparaging sarcasm spewed by the tools at CNBC and Fox News concerning this subject, The Economist demonstrated why it enjoys such widespread respect:

So the big banks’ apologies for their role in messing up the world economy have been grudging and late, and Joe Taxpayer has yet to hear a heartfelt “thank you” for bailing them out.  Summoned before Congress, Wall Street bosses have made lawyerised statements that make them sound arrogant, greedy and unrepentant.  A grand gesture or two – such as slashing bonuses or giving away a tonne of money – might have gone some way towards restoring public faith in the industry.  But we will never know because it didn’t happen.

On the contrary, Wall Street appears to have set its many brilliant minds the task of infuriating the public still further, by repossessing homes of serving soldiers, introducing fees for using debit cards and so on.  Goldman Sachs showed a typical tin ear by withdrawing its sponsorship of a fund-raiser for a credit union (financial co-operative) on November 3rd because it planned to honour Occupy Wall Street.

The Washington Post conducted a poll with the Pew Research Center which compared and contrasted popular support for Occupy Wall Street with that of the Tea Party movement.  The poll revealed that ten percent of Americans support both movements.  On the other hand, Tea Party support is heavily drawn from Republican voters (71%) while only 24% of Republicans – as opposed to 64% of Democrats – support Occupy Wall Street.  As for self-described “Moderates”, only 24% support the Tea Party compared with Occupy Wall Street’s 45% support from Moderates.  Rest assured that these numbers will not deter unscrupulous critics from describing Occupy Wall Street as a “fringe movement”.

The best smackdown of the shabby reportage on Occupy Wall Street came from Dahlia Lithwick of Slate:

Mark your calendars:  The corporate media died when it announced it was too sophisticated to understand simple declarative sentences.  While the mainstream media expresses puzzlement and fear at these incomprehensible “protesters” with their oddly well-worded “signs,” the rest of us see our own concerns reflected back at us and understand perfectly.  Turning off mindless programming might be the best thing that ever happens to this polity.  Hey, occupiers:  You’re the new news. And even better, by refusing to explain yourselves, you’re actually changing what’s reported as news.  Because it takes a tremendous mental effort to refuse to see that the rich are getting richer in America while the rest of us are struggling.  Maybe the days of explaining the patently obvious to the transparently compromised are finally behind us.

By refusing to take a ragtag, complicated, and leaderless movement seriously, the mainstream media has succeeded only in ensuring its own irrelevance.  The rest of America has little trouble understanding that these are ragtag, complicated, and leaderless times.  This may not make for great television, but any movement that acknowledges that fact deserves enormous credit.

Too many mainstream news outlets appear to be suffering from the same disease as our government and our financial institutions.  Jeremy Grantham’s Third Quarter 2011 newsletter will be coming out in a few days and I’m hoping that he will prescribe a cure.  My wilder dream is that those vested with the authority and responsibility to follow his advice would simply do so.


 

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Straight Talk On The European Financial Mess

October 24th, 2011 Posted in Uncategorized
Oct, 24 2011
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The European sovereign debt crisis has generated an enormous amount of nonsensical coverage by the news media.  Most of this coverage appears targeted at American investors, who are regularly assured that a Grand Solution to all of Europe’s financial problems is “just around the corner” thanks to the heroic work of European finance ministers.

Fortunately, a number of commentators have raised some significant objections about all of the misleading “spin” on this subject.  Some pointed criticism has come from Michael Shedlock (a/k/a Mish) who recently posted this complaint:

I am tired of nonsensical headlines that have a zero percent chance of happening.

In a subsequent piece, Mish targeted a report from Bloomberg News which bore what he described as a misleading headline:  “EU Sees Progress on Banks”.  Not surprisingly, clicking on the Bloomberg link will reveal that the story now has a different headline.

For those in search of an easy-to-read explanation of the European financial situation, I recommend an essay by Robert Kuttner, appearing at the Huffington Post.  Here are a few highlights:

The deepening European financial crisis is the direct result of the failure of Western leaders to fix the banking system during the first crisis that began in 2007.  Barring a miracle of statesmanship, we are in for Financial Crisis II, and it will look more like a depression than a recession.

*   *   *

Beginning in 2008, the collapse of Bear Stearns revealed the extent of pyramid schemes and interlocking risks that had come to characterize the global banking system.  But Western leaders have stuck to the same pro-Wall-Street strategy:  throw money at the problem, disguise the true extent of the vulnerability, provide flimsy reassurances to money markets, and don’t require any fundamental changes in the business models of the world’s banks to bring greater simplicity, transparency or insulation from contagion.

As a consequence, we face a repeat of 2008.  Precisely the same kinds of off-balance sheet pyramids of debts and interlocking risks that caused Bear Stearns, then AIG, Lehman Brothers and Merrill Lynch to blow up are still in place.

Following Tim Geithner’s playbook, the European authorities conducted “stress tests” and reported in June that the shortfall in the capital of Europe’s banks was only about $100 billion.  But nobody believes that rosy scenario.

*   *   *

But to solely blame Europe and its institutions is to excuse the source of the storms.  That is the political power of the banks to block fundamental reform.

The financial system has mutated into a doomsday machine where banks make their money by originating securities and sticking someone else with the risk.  None of the reforms, beginning with Dodd-Frank and its European counterparts, has changed that fundamental business model.

As usual, the best analysis of the European financial situation comes from economist John Hussman of the Hussman Funds.  Dr. Hussman’s essay explores several dimensions of the European crisis in addition to noting some of the ongoing “shenanigans” employed by American financial institutions.  Here are a few of my favorite passages from Hussman’s latest Weekly Market Comment:

Incomprehensibly large bailout figures now get tossed around unexamined in the wake of the 2008-2009 crisis (blessed, of course, by Wall Street), while funding toward NIH, NSF and other essential purposes has been increasingly squeezed.  At the urging of Treasury Secretary Timothy Geithner, Europe has been encouraged to follow the “big bazooka” approach to the banking system.  That global fiscal policy is forced into austere spending cuts for research, education, and social services as a result of financial recklessness, but we’ve become conditioned not to blink, much less wince, at gargantuan bailout figures to defend the bloated financial institutions that made bad investments at 20- 30- and 40-to-1 leverage, is Timothy Geithner’s triumph and humanity’s collective loss.

*   *   *

A clean solution to the European debt problem does not exist. The road ahead will likely be tortuous.

The way that Europe can be expected to deal with this is as follows.  First, European banks will not have their losses limited to the optimistic but unrealistic 21% haircut that they were hoping to sustain.  In order to avoid the European Financial Stability Fund from being swallowed whole by a Greek default, leaving next-to-nothing to prevent broader contagion, the probable Greek default will be around 50%-60%.  Note that Greek obligations of all maturities, including 1-year notes, are trading at prices about 40 or below, so a 50% haircut would actually be an upgrade.  Given the likely time needed to sustainably narrow Greek deficits, a default of that size is also the only way that another later crisis would be prevented (at least for a decade, and hopefully much longer).

*   *   *

Of course, Europe wouldn’t need to blow all of these public resources or impose depression on Greek citizens if bank stockholders and bondholders were required to absorb the losses that result from the mind-boggling leverage taken by European banks.  It’s that leverage (born of inadequate capital requirements and regulation), not simply bad investments or even Greek default per se, that is at the core of the crisis.

Given the fact that the European crisis appears to be reaching an important crossroads, the Occupy Wall Street protest seems well-timed.  The need for significant financial reform is frequently highlighted in most commentaries concerning the European situation.  Whether our venal politicians will seriously address this situation remains to be seen.  I’m not holding my breath.


 

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Dubious Reassurances

October 20th, 2011 Posted in Uncategorized
Oct, 20 2011
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There appears to be an increasing number of commentaries presented in the mainstream media lately, assuring us that “everything is just fine” or – beyond that – “things are getting better” because the Great Recession is “over”.  Anyone who feels inclined to believe those comforting commentaries should take a look at the Financial Armageddon blog and peruse some truly grim reports about how bad things really are.

On a daily basis, we are being told not to worry about Europe’s sovereign debt crisis because of the heroic efforts to keep it under control.  On the other hand, I was more impressed by the newest Weekly Market Comment by economist John Hussman of the Hussman Funds.  Be sure to read the entire essay.  Here are some of Dr. Hussman’s key points:

From my perspective, Wall Street’s “relief” about the economy, and its willingness to set aside recession concerns, is a mistake born of confusion between leading indicators and lagging ones.  Leading evidence is not only clear, but on a statistical basis is essentially certain that the U.S. economy, and indeed, the global economy, faces an oncoming recession.  As Lakshman Achuthan notes on the basis of ECRI’s own (and historically reliable) set of indicators, “We’ve entered a vicious cycle, and it’s too late: a recession can’t be averted.”  Likewise, lagging evidence is largely clear that the economy was not yet in a recession as of, say, August or September. The error that investors are inviting here is to treat lagging indicators as if they are leading ones.

The simple fact is that the measures that we use to identify recession risk tend to operate with a lead of a few months.  Those few months are often critical, in the sense that the markets can often suffer deep and abrupt losses before coincident and lagging evidence demonstrates actual economic weakness.  As a result, there is sometimes a “denial” phase between the point where the leading evidence locks onto a recession track, and the point where the coincident evidence confirms it. We saw exactly that sort of pattern prior to the last recession. While the recession evidence was in by November 2007 (see Expecting A Recession ), the economy enjoyed two additional months of payroll job growth, and new claims for unemployment trended higher in a choppy and indecisive way until well into 2008. Even after Bear Stearns failed in March 2008, the market briefly staged a rally that put it within about 10% of its bull market high.

At present, the S&P 500 is again just 10% below the high it set before the recent market downturn began. In my view, the likelihood is very thin that the economy will avoid a recession, that Greece will avoid default, or that Europe will deal seamlessly with the financial strains of a banking system that is more than twice as leveraged as the U.S. banking system was before the 2008-2009 crisis.

*   *   *

A few weeks ago, I noted that Greece was likely to be promised a small amount of relief funding, essentially to buy Europe more time to prepare its banking system for a Greek default, and observed “While it’s possible that the equity markets will mount a relief rally in the event of new funding to Greece, it will be important to recognize that handing out a bit more relief would be preparatory to a default, and that would probably be reflected in a failure of Greek yields to retreat significantly on that news.”

As of Friday, the yield on 1-year Greek debt has soared to 169%. Greece will default. Europe is buying time to reduce the fallout.

As of this writing, the yield on 1-year Greek debt is now 189.82%.  How could it be possible to pay almost 200% interest on a one-year loan?

Despite all of the “good news” about America’s zombie megabanks, which were bailed out during the financial crisis (and for a while afterward) Yves Smith of Naked Capitalism has been keeping an ongoing “Bank of America Deathwatch”.  The story has gone from grim to downright creepy:

If you have any doubt that Bank of America is in trouble, this development should settle it.  I’m late to this important story broken this morning by Bob Ivry of Bloomberg, but both Bill Black (who I interviewed just now) and I see this as a desperate (or at the very best, remarkably inept) move by Bank of America’s management.

The short form via Bloomberg:

Bank of America Corp. (BAC), hit by a credit downgrade last month, has moved derivatives from its Merrill Lynch unit to a subsidiary flush with insured deposits, according to people with direct knowledge of the situation…

Bank of America’s holding company — the parent of both the retail bank and the Merrill Lynch securities unit — held almost $75 trillion of derivatives at the end of June, according to data compiled by the OCC.  About $53 trillion, or 71 percent, were within Bank of America NA, according to the data, which represent the notional values of the trades.

*   *   *

This move reflects either criminal incompetence or abject corruption by the Fed.  Even though I’ve expressed my doubts as to whether Dodd Frank resolutions will work, dumping derivatives into depositaries pretty much guarantees a Dodd Frank resolution will fail.  Remember the effect of the 2005 bankruptcy law revisions:  derivatives counterparties are first in line, they get to grab assets first and leave everyone else to scramble for crumbs.  So this move amounts to a direct transfer from derivatives counterparties of Merrill to the taxpayer, via the FDIC, which would have to make depositors whole after derivatives counterparties grabbed collateral.  It’s well nigh impossible to have an orderly wind down in this scenario.  You have a derivatives counterparty land grab and an abrupt insolvency.  Lehman failed over a weekend after JP Morgan grabbed collateral.

But it’s even worse than that.  During the savings & loan crisis, the FDIC did not have enough in deposit insurance receipts to pay for the Resolution Trust Corporation wind-down vehicle.  It had to get more funding from Congress.  This move paves the way for another TARP-style shakedown of taxpayers, this time to save depositors.  No Congressman would dare vote against that.  This move is Machiavellian, and just plain evil.

It is the aggregate outrage caused by the rampant malefaction throughout American finance, which has motivated the protesters involved in the Occupy Wall Street movement.  Those demonstrators have found it difficult to articulate their demands because any comprehensive list of grievances they could assemble would be unwieldy.  Most important among their complaints is the notion that the failure to enforce prohibitions against financial wrongdoing will prevent restoration of a healthy economy.  The best example of this is the fact that our government continues to allow financial institutions to remain “too big to fail” – since their potential failure would be remedied by a taxpayer-funded bailout.

Hedge fund manager Barry Ritholtz articulated those objections quite well, in a recent piece supporting the State Attorneys General who are resisting the efforts by the Justice Department to coerce settlement of the States’ “fraudclosure” cases against Bank of America and others – on very generous terms:

The Rule of Law is yet another bedrock foundation of this nation.  It seems to get ignored when the criminals involved received billions in bipartisan bailout monies.

The line of bullshit being used on State AGs is that we risk an economic crisis if we prosecute these folks.

The people who claim that fail to realize that the opposite is true – the protest at Occupy Wall Street, the negative sentiment, the general economic angst – traces itself to the belief that there is no justice, that senior bankers have gotten away with economic murder, and that we have a two-tiered criminal system, one for the rich and one for the poor.

Today’s NYT notes the gloom that has descended over consumers, and they suggest it may be home prices. I think they are wrong – in my experience, the sort of generalized rage and frustration comes about when people realize the institutions they have trusted have betrayed them.  Humans deal with financial losses in a very specific way – and it’s not fury.  This is about a fundamental breakdown of the role of government, courts, and leadership in the nation.  And it all traces back to the bailouts of reckless bankers, and the refusal to hold them in any way accountable.

There will not be a fundamental economic recovery until that is recognized.

In the mean time, the quality of life for the American middle class continues to deteriorate.  We need to do more than simply hope that the misery will “trickle” upward.


 

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Too Smart For The Democrats

October 17th, 2011 Posted in Uncategorized
Oct, 17 2011
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This was bound to happen.  Now that the Occupy Wall Street protest has become a big deal, the Democrats are trying to claim it as their own franchise.  Fortunately, the protesters aren’t interested.  My October 6 posting focused on the hypocrisy of the pseudo-populist Democrats, who – as of that time – had failed to express any support for this new movement:

The Occupy Wall Street protest has exposed the politicians – who have always claimed to be populists – for what they really are:  tools of the plutocracy.  Conspicuously absent from the Wall Street occupation have been nearly all Democrats – despite their party’s efforts to portray itself as the champion of Main Street in its battle against the tyranny of the megabanks.  As has always been the case, the Democrats won’t really do anything that could disrupt the flow of bribes campaign contributions they receive from our nation’s financial elites.

The party-crashing Democrats are now attempting to advance their status from interlopers to hosts.  At the Occupy Wall Street website, this question was posted with an invitation for comments:

“Are you cool with the Democrats taking ownership of OWS?”

Not surprisingly, the responses were overwhelmingly negative.  Here are a few examples:

WorkingClassAntiHero (Manchester, NH):

Anyone thinking about this thing in the old terms of left, right, Democrat, Republican, etc…is either not paying attention or isn’t really involved.

IndpendentTX:

There needs to be more visible demonstration that this is not a Democrat movement but a movement by a non-partisan group against the corporate political machine.  More signs protesting Democrats people!

Also make more signs that clearly state that both parties can get lost.  They’re BOTH part of the problem.

1zouzouna:

We no longer accept the idea of political ownership.  It is the corporate media wolves trying to define us as Republicrat’s, because they want to deny there is a Revolution happening here and all over the globe.  They so desperately need to define us because they are scared shitless of us.  They pretend to not comprehend our agenda, they keep saying we don’t know what we want.  They only see in Republicrat terms.  Both parties Rep. and Dem. alike have had a direct hand in passing legislation that has aided in this ponzi scheme whereby we, the 99% have been robbed of our wealth and savings and dignity.  This is a global societal movement/revolution, which I am proud to be witnessing and participating in.  Together with all our brothers and sisters of the world we will effect global change so we can all enjoy our right to abundance.

Glenn Greenwald of Salon did a thorough job of trashing the notion that Occupy Wall Street could be turned into a Democratic Party movement:

Can the Occupy Wall Street protests be transformed into a get-out-the-vote organ of Obama 2012 and the Democratic Party?  To determine if this is likely, let’s review a few relevant facts.

In March, 2008, The Los Angeles Times published an article with the headline “Democrats are darlings of Wall St“, which reported that both Obama and Clinton “are benefiting handsomely from Wall Street donations, easily surpassing Republican John McCain in campaign contributions.”   In June, 2008, Reuters published an article entitled “Wall Street puts its money behind Obama”; it detailed that Obama had almost twice as much in contributions from “the securities and investment industry” and that “Democrats garnered 57 percent of the contributions from” that industry.  When the financial collapse exploded, then-candidate Obama became an outspoken supporter of the Wall Street bailout.

After Obama’s election, the Democratic Party controlled the White House, the Senate and the House for the first two years, and the White House and Senate for the ten months after that.  During this time, unemployment and home foreclosures were painfully high, while Wall Street and corporate profits exploded, along with income inequality.  In July, 2009, The New York Times dubbed JPMorgan Chase CEO Jamie Dimon “Obama’s favorite banker” because of his close relationship with, and heavy influence on, leading Democrats, including the President.  In February, 2010, President Obama defended Dimon’s $17 million bonus and the $9 million bonus to Goldman CEO Lloyd Blankfein – both of whose firms received substantial taxpayer bailouts – as fair and reasonable.

*   *   *

Would it not be a bit odd for a protest movement to “Occupy Wall Street” while simultaneously devoting itself to keeping Wall Street’s most lavishly funded politician in power?

At Washington’s Blog, we were informed about an attempt by the Democratic-aligned MoveOn organization to wrest control of Occupy Wall Street:

David DeGraw – one of the primary Wall Street protest organizers – just sent me the following email:

Top MoveOn leaders / executives are all over national television speaking for the movement.  fully appreciate the help and support of MoveOn, but the MSM is clearly using them as the spokespeople for OWS.  This is an blatant attempt to fracture the 99% into a Democratic Party organization.  The leadership of MoveON are Democratic Party operatives.  they are divide and conquer pawns.  For years they ignored Wall Street protests to keep complete focus on the Republicans, in favor of Goldman’s Obama and Wall Street’s Democratic leadership.

If anyone at Move On or Daily Kos would like to have a public debate about these comments, we invite it.

Please help us stop this divide and conquer attempt.

DeGraw – who is wholly non-partisan [like the writers at Washington’s Blog] – tells me that there are many political views represented, and that Occupy Wall Street is very diverse with opinions across the political spectrum (and see this.)

This mirrors what some of the original organizers of various “Occupy” protests in other cities have said as well:  MoveOn attempted to take credit for the events.

As I noted last week:

Everyone’s trying to cash in on the courage and conviction of the Wall Street protesters.

People are trying to associate Occupy Wall Street with their pet projects, in the same way that advertisers try to associate the goodwill of the Super Bowl, NBA playoffs, World Series or Olympics with their product.

But I hear from OWS organizers that the protesters come from totally diverse political affiliations.  Many protesters support Ron Paul, many like Obama, others are for other parties or candidates or don’t vote at all.

The protesters themselves are having none of it, tweeting today:

We don’t want to be the democratic tea party or liberal tea party. We want to be our own movement separate of any political affiliation.

Just as President Obama disregarded the opportunity to turn the economy around in 2009, his party scoffed at the opportunity to rehabilitate its tattered reputation in the wake of its failure to enact meaningful financial reform legislation.  The efforts by Democrats to jump the OWS train at this point are transparently specious.  They aren’t fooling anyone.


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