Tuesday, August 31, 2010

OUTSOURCING IRS WORK, TOO COSTLY

It turns out that outsourcing IRS debt collection services to the private sector cost the U.S. taxpayer more than 3 times what it would have cost us if the IRS had done it themselves. From ataxingmatter.com we find:


The IRS's review found that collection costs for the privatization program were much higher than for government work: 24 cents per dollar collected, compared to 7 cents per dollar collected by the IRS.

But I'm sure all those outsourced, no-bid, contracts in Iraq were cheaper, right?

- Mark

BANK FAILURES UP

A little bit over a year and a half ago I wrote that more bank failures were coming. Here are some numbers (FDIC list of banks here).

* In 2008 25 banks failed (the market collapse didn't start until late 2008).

* In 2009 140 banks failed.

* To date, this year we've had 118 bank failures.

Since we're only 3/4 of the way through 2010 we should expect bank failures this year to exceed 2009. The real problem, however, seems to be the number of banks that are on the FDIC's Problem/Watch List. This number has gone up from 65 in 2007, to 171 in 2008, to 416 in 2009, and 829 to date in 2010.


Read into this what you want. But rest assured, this is not good news.

- Mark

ADDENDUM: Here's a video from newsy.com that touches on the topic of bank failures. The piece discusses whether current events are a sign of a market correction (a move towards a new equilibrium) or a sign of a slowing economy.

pp


Multisource political news, world news, and entertainment news analysis by Newsy.com

FINANCIAL TERRORISTS & FALSE PATRIOTS ARE THE REAL ENEMY?

Do you like being dependent on China to pay our bills? I know I don't. If you want to understand how we're getting cheated out of hundreds of billions of dollars in tax revenue by our very own financial terrorists, the following is a primer. While I understand this may be conceptually difficult for the Country First, false patriot Tea Baggers, they need to pay attention to this one ...

******************************

It looks like Wall Street and other financial titans who have been playing in our financial mudpit are going to pay 2011 bonuses in late 2010. Their rationale? They want to help their executives avoid paying out more taxes anticipated because of changes to tax laws. In the case of Credit Suisse Group in London, they want to compensate their executives for the tax hit they took in 2009.

Got that? Companies that drove our economy into the ground, and who should have been forced into bankruptcy, believe that their incompetence deserves to be rewarded. Instead, after happily accepting the benefits of a U.S. government orchestrated bailout, which allowed them to guarantee profits and complete big payouts, the biggest financial institutions are thanking governments by turning their backs on them precisely when budget shortfalls demand a little help from all corners.

This is one of the reasons why I called for nationalizing our failing institutions (here, here, and here). I didn't want the same people who ran our economy into the ground recovering only to socialize the losses and then, later, privatize the profits.

Too late. It's now a done deal. Our financial terrorists have socialized the losses, and seem content to ride the American taxpayer into the ground for their own financial benefit.

The end result is that you and I are paying for the bailout - in the form of increased budget deficits, lost jobs, fewer legal rights, chopped salaries, greater uncertainty, etc. - while Wall Street and their Washington friends continue to find new ways to stick it to Main Street. Check out these evolving stories ...

* OFFSHORE THEFT: Goldman Sachs, which received government debt guarantees and $10 billion in taxpayer funded bailout money, saw it's effective tax rate drop to 1%. Why? Because it moved some of its money off shore to avoid paying taxes.

* LEGAL COVER: In order to get taxpayer funded bailout money, which propped up their company and the profits of other institutions, AIG gave up it's right to sue companies who misled them. This helped keep regulators and law enforcement officials away from the mess created by Wall Street.

* HUSH MONEY: After securing trillions in guarantees and loans during the bailout Wall Street's financial institutions began paying out million dollar fines for misleading investors, selling "made-to-fail" instruments, and "mistating" anticipated losses. In laymen terms, they paid fines for fraudulent behavior.

* SIMPLE COLLUSION: Goldman Sachs and Bank of America colluded with firms that sent school district (infrastructure) money their way. Once the money was secured these firms then paid out bribes, all of which cheated cities and towns of much needed funds. Making matters worse, those involved in directing money to Goldman and BofA then deliberately withheld information about higher paying financial programs from municipalities and other governments.

* OUTSOURCING WHITE COLLAR JOBS (but here in America): Banks who received the biggest rescue packages requested visas for more than 21,800 foreign workers, to do white collar jobs! The average annual salary for those jobs was $90,721. During the last three months of 2008 - when the market meltdown was at it's height - the largest banks that received taxpayer loans announced more than 100,000 layoffs (where's organized labor here?).

Can anyone say with a straight face that the real terrorists we need to worry about are right here in our country?

Think about it ... Wall Street's stupidity and greed collapses the economy ... Wall Street uses a taxpayer funded bailout to subsidize underserved bonuses ... Wall Street shifts money offshore to avoid taxes ... Wall Street bribed convinced Washington to restrict the legal right to sue corporate incompetence ... Wall Street paid what amounts to hush money to avoid court cases ... Wall Street firms colluded to steal funds from local schools and cities ... Wall Street outsourced jobs by bringing foreign workers to America (at the same time they had their hand out to the American taxpayer) ...

Is putting America further in debt what Country First is all about? Where's the Tea Bag outrage over Wall Street's theft of American tax funds here? Why wasn't Mr. Tea Bag, Glenn Beck, discussing how all of this makes a travesty of patriotism at his white self-pity rally on Saturday?

At the end of the day, our financial terrorists are causing more problems for America than the terror babies the Glenn Becks of our world like to whine about. When the false patriot, Tea Bag Bunch, begins to figure this out (and adds a little color to their mob) maybe it will be time to take them seriously.

Until then, they're just perpetuating a debt-drenched, corporate welfare, system that increasingly makes us dependent on China. And, if I'm using my Glenn Beck-logic tin foil hat, that makes them all traitors.

- Mark

Monday, August 30, 2010

SCARE THE BEJESUS OUT OF WHITE AMERICA ... THE GOP'S SOUTHERN STRATEGY, 2.0

Salon.com's Glenn Greenwald has an interesting article detailing how the economic insecurities caused by the market meltdown have been supercharged by racial and ethnic tensions stirred up by the far right. This isn't the first time this has happened.


For those of you not old enough to remember, Richard Nixon's 1968 presidential campaign targeted Southern whites by getting them to think about the political and social mayhem (cultural upheaval) that would follow because of the new found rights women and people of color were going to exercise. Scaring the bejesus out of white America, especially in the south, became know as the republican's Southern strategy.

Today's GOP strategy is very similar, but new and improved. Let's call it Southern Strategy, 2.0. Here's how it works according to Greenwald ...

... Virtually every Fox News/right-wing-talk-radio controversy relies on scaring economically anxious white Americans into ignoring the prime cause of their economic insecurity -- plundering by Wall Street bankers, abetted by the government they own -- and focusing instead on some manufactured menace from powerless racial and ethnic minorities:

* Black people preventing them from voting (New Black Panthers), stealing their elections (ACORN), and treating them unequally (Shirley Sherrod and Eric Holder's Justice Department);

* Muslims who want to conquer their country and celebrate over their Christian corpses (the Triumphalist Ground Zero Mosque);

* Invading, marauding Latino armies coming to steal their property and rape their women while their Marxist allies in Government (led by a black Muslim President) disarm the white victims.

* Matt Taibbi, in lamenting the takeover of the GOP by the most riled-up of these factions -- the Tea Partiers -- recounts just some of the lowlights here.

What's not to be afraid of? Angry blacks, invading Latinos, sneaky Muslims, and an unresponsive government ... and don't forget all the horny homosexuals who want to destroy our way of life.

At the end of the day scaring white America about the coming boogeyman - when the real boogeyman is right in front of us - is an old political tactic. But the real crime this time is that it didn't have to happen this time. More specifically, what's happening today is a direct result of the Obama administration's decision to embrace and save Wall Street precisely at a time when America's rage over Wall Street's greed and incompetence was genuine, and demanded action. Glenn Greenwald reminds us ...

... That crisis presented a huge opportunity for Obama and the Democrats to bring about real change in Washington -- the central promise of his campaign -- by capitalizing on (and becoming the voice of) populist anger and using it to wrestle away control from Wall Street and other financial and corporate elites who control Washington. Had they done so, they would have been champions of populist rage rather than its prime targets. But, as John Judis argues in his excellent New Republic piece, they completely squandered that opportunity. Rather than emphatically stand up to the bankers and other oligarchical thieves, they coddled and served them, and thus became the face of the elite interests oppressing ordinary Americans rather than their foes. How can an administration represented by Tim Geithner and Larry Summers -- and which specializes in an endless stream of secret deals with corporate lobbyists and sustains itself with Wall Street funding -- possibly maintain any pretense of populist support or changing how Washington works? It can't.

By giving Wall Street what they wanted (and more) on a silver platter - while doing little to avenge the economic slap in the face to America's middle class - the Obama administration created the environment for it's base to become discontent, and for the political opposition to get riled up. We shouldn't be surprised that Fox News, Rush Limbaugh, and Glenn Beck have donned hi-tech hoods and are running around like demented characters is a South Park segment.


They were handed an opportunity, and they took it.

America wanted blood after 2008. Instead Wall Street got richer, while Main Street got poorer - and then got stuck with the tab. No reckoning. No justice. No vengeance. It's really that simple.

- Mark

Saturday, August 28, 2010

OUR CONTINUING HOUSING MESS

More solid information on the housing market from Michael David White ... and it's not good news. After all the price incentives, initial foreclosures, government guarantees, low % refis, HAMP modifications, etc. the supply of existing homes for sale is now larger than it was at the height of the market collapse.


While prices for residential real estate have been flat since August 2009 (they've fallen 34% from their peak in summer 2006), the number of foreclosures in progress are at a record level. About 14% of all mortgages are delinquent, which represents about 7.7 million borrowers (or one in seven mortgages).

As Michael David White points out, the key here is that no one's been talking about any of these trends at a level that they deserve ... which helps to illustrate the absurdity of spending media time focusing on Terror Babies, the pointless "mosque" fear-mongering, and Glenn Beck's tribute to himself this afternoon in front of the Lincoln Memorial. This probably explains why nothing's really being done to help the American mortgage holder. No one sees the mess, so the banks get to drive the process.

Check out White's review of our housing mess here. It's a good one.

- Mark

Addendum: For a solid and concise review of our impending housing market collapse, check this link out. It has the 15 signs that our housing market is in trouble (and, FYI, it has some of the same graphs from Michael David White that I've linked to here in the past).

Friday, August 27, 2010

GLENN BECK: THIS WEEK'S VILLAGE IDIOT

There are so many things wrong with Glenn Back speaking in front of the Lincoln Memorial on the 47th anniversary of Martin Luther King's "I Have a Dream" speech that I don't know where to begin.

Well, actually, I do know where to begin. Let's start by naming Glenn Beck this week's Village Idiot.

Beck would earn this week's honor for this claim alone: "This is a moment, quite honestly, that I think we reclaim the civil rights movement."

I might be inclined to believe Glenn Beck except for two things. First, unlike the intellectually challenged and historically clueless zombies who follow Beck, I can think for myself. Second, the last time a bigoted, hate-mongering, nutjob tried to claim the civil rights movement for white America he came with fire hoses and dogs, and was named Bull Connor.


But Glenn Beck really deserves this week's Village Idiot award because of his delusional claim that we're "going to see the Spirit of God unleashed" as he helps to "restore the values that founded this great nation."

And just who do we owe for the opportunity to see "the Spirit of God unleashed"? Why, Glenn Beck, of course.

It turns out that Glenn's only "writing a few bullet points" for the speech so he doesn't "get in the way of the Spirit in case He wants to talk."

What an idiot.

- Mark

THE TED OLSON INTERVIEW

By way of my friend Linda, this interview is a lesson in how to read and interpret the Constitution ...



Got that?

When Chris Wallace asked "Where's the right to same sex marriage in the Constitution?", Ted Olson responds with "Where's the right to interracial marriage?"

When Chris Wallace brings up the will of the people, like California's Prop. 8 initiative, Olson responded by reminding Wallace that California once approved an initiative that allowed homeowners to discriminate against certain people when they sold their homes. To drive home his point Olson followed up by asking Wallace what we should do if states started passing laws that enshrined "separate but equal" schools, separate drinking fountains, making one group sit at the back of the bus, etc.

When Wallace tried to use Roe v. Wade to argue that the Supreme Court may be treading on states' rights issues - if it ruled to allow same sex marriages - Olson responded by asking how Fox News would respond if individual states decided to put access to Fox News programming up to a vote.

It's a good interview. I think I'll use it in my American Politics class.

- Mark

P.S. For those of you who don't click on the links, keep in mind that Ted Olson was President George W. Bush's Solicitor General (2001-2004). This means that he argued the Bush administration's - and the federal government's - legal cases that came before the Supreme Court.

Thursday, August 26, 2010

THE GOP'S BIBLE THUMPING HYPOCRISY PARADE

So former RNC Chair, and George W. Bush political pal, Ken Mehlman has come out of the closet. Great.

I'd like to say who cares. But these conservative family value idiots have a tendency to tear down and demonize anyone who disagrees with their moral imperatives on their way up the political ladder.

So I think people like Ken Mehlman (gay), David Vitter (whore mongerer), Larry Craig (bathroom enthusiast), Mark Sanford ("I'll spend Father's Day with my mistress in Argentina"), John Ensign ("I do staffer's wives"), Newt Gingrich (serial cheater), Ted Haggard ("Spank me, I'm cured of the gay"), and other holier-than-thou Conservative/Republicans, deserve to be politically isolated for their opportunistic hypocrisy.


Instead, when they screw up, rather than take the medicine they suggested for others, they stay in the game. Worse, they're cleansed internally by political zombies who focus on power instead of moral consistency, or their party's failed ideology (though Ted Haggard did lose his church; they couldn't forgive him).


I don't expect that Mehlman's announcement will be the last "surprise" coming out party from the GOP. My guess is that we'll have another, and it will be from a GOP congressman from the south. And, no, it's not Senator Lindsay Graham. This one's in the House.

And, while we're at it, if you're going to follow God's word, shouldn't GOP, family-values, Bible thumpers like Sarah Palin follow the Bible literally instead of choosing and picking what suits her tastes ...




Just saying.

- Mark

P.S. A little unscientific fun, for the serious doubters ...



... and more political commentary on the hypocrisy ...

Wednesday, August 25, 2010

LESSONS FROM PETER THE GREAT (for President Obama, and our pampered elite)


In 1696 Peter the Great decided he was going to turn Russia into a modern power, capable of competing with Europe's best. To do so he determined that he would need access to Europe's greatest minds and to its ports. Because feudal custom and traditions prevailed at the time turning Russia into a modern power required calling on outsiders to bring new ideas. It also meant challenging entrenched conservatives (who hated foreigners) and confronting financial elites, who not only hated the idea of paying taxes but believed they deserved special privileges in Russia.

While Peter the Greats commercial goal was to gain access to European ports and it's trade routes through the Sea of Azov ...



(... which accesses the Black Sea, the entrance point to the the Mediterranean Sea ...)



... the real goal was to modernize Russia's military, solidify Russia's southern flank (raided regularly by the Tatars), and to build it's first navy.

Building a navy and waging war meant Peter the Great would have to secure the funds that would eventually help make Russia a modern nation-state. And this is where it gets interesting.

Every group that could afford to help - the church, rich landowners, and merchants - would be forced to help Peter the Great bring the nation into the modern era. For example, while the government would provide the timber, and brought in expert shipbuilders from abroad, every great landowner, church officials/monasteries, and the merchant class were forced to pay for building and supplying sea going vessels.

Compliance was demanded by the state.

Those who failed to go along had their property confiscated. When the merchants of Moscow and other major cities balked at building 12 ships, and then petitioned the Czar to lighten their burden, Peter the Great ordered them to build two more than scheduled. National greatness would not tolerate petitions from would be lobbyists.

I bring all of this up because - like Peter the Great - our country is confronted with serious problems that threaten to drown our nation in petty provincialism (racism and xenophobia) and financial irresponsibility. Like Peter the Great we're confronted with an entrenched elite who believe their station in life grants them special privileges that absolves them from contributing their fair share to the nation.

Challenges of Modernity in America
In 2009 the American Society of Civil Engineers (ASCE) issued it's annual report on America's infrastructure. In 15 categories that range from airports and bridges to schools and solid waste facilities the highest grade received was a "C+" (Solid Waste), with 5 categories receiving a "D-".  Overall our nation's infrastructure received a "D" from the ASCE. This is what it looks like when we don't do the maintenance ...



The ASCE estimates that it will take $2.2 trillion over a five year period to repair what we haven't been paying to maintain in the past. This is only the beginning.

Like in the period before Peter the Great, we've also been indulging the wishes of our wealthiest class. For reasons that can be explained by looking at people who embrace a conservative but failed ideology (trickle down), we've been steadily reducing the percentage that the rich pay ...




... and what corporate America contributes to our nation's tax base.



In the process they've become richer than they ever were, but our nation's finances have suffered. We now owe $11 trillion more (and counting) than we did in 1980. Worse, we're engaged in wars that we believe we don't have to pay for in the present. Like Peter the Great we face a dilemma.

We can continue to indulge a conservative, pampered, and increasingly clueless elite who believe custom, tradition, and xenophobia are the path to our nation's future. Or we can force them to pay their fair share as we try to pay our debts, pursue war, and rebuild our infrastructures for the 21st century.

The choice, in my view, isn't difficult.

- Mark

Tuesday, August 24, 2010

WHY WE'RE SCREWED, III: POST-REFORM VERSION ...

Last December I wrote about Structured Investment Vehicles (SIVs). While there may be legitimate reasons for SIVs, in practical terms SIVs have become a neat accounting tool for conducting what more and more looks like white-collar crime. Here's why ...

In a few words SIVs are "investment tools" - approved by the Financial Accounting Standards Board (FASB) - that give our largest financial institutions the legal means to transfer billions of dollars worth of toxic crap off their books. As a result of this neat "deregulation" gift companies like Merrill Lynch, Citigroup, etc. looked much better right before the market crash.

If you're having trouble understanding the concept think of this: It would be the same as if you were able to legally take your credit card debts, your car payments, and other annoying debts off of your financial statements. You could then get additional lines of credit, and continue doing business as usual ... like buying more toxic crap.

I'm oversimplifying, but this is how it worked for Merrill Lynch ...

1. BAD BETS: Because they're greedy and stupid they made terrible investments in soon to be toxic mortgage-backed securities (also called collaterlitized debt obligations, or CDOs). They now had toxic crap they needed to get off their books.
2. FRAUD FRONTS: Merrill Lynch created a special company, Pyxis, which helped them borrow money. Pyxis issued  I.O.U.s saying they would pay the borrowed money back (referred to as issuing short-term debt).

3. SIV DEBT BOMBS: With borrowed money Pyxis purchased portions (tranches) of toxic crap from Merrill's CDOs. These purchases by Pyxis created our SIVs and made it look like someone else (Pyxis) was on the hook for the toxic crap Merrill Lynch had in their CDOs.
4. SMOKE & MIRRORS: To make the people at Pyxis look legit Merrill entered into a "derivatives" contract (known as a "total return swap"), which obliged Merrill to cover any losses at Pyxis. Because derivative markets are NOT controlled or regulated like the NYSE billions of dollars of these toxic contracts flew under the regulatory radar.

This is how Merrill Lynch was able to claim that it was exposed to only about $15.2 billion in toxic crap. In reality it was actually exposed to $46 billion worth of securities that would eventually collapse. As I pointed out in December, these neat little financial toilets allowed our nation's largest financial institutions to flush billions of dollars in future losses off their books, legally.

This encouraged Merrill Lynch - and other firms on Wall Street - to go out and create more CDO and derivative contracts (for which they paid themselves handsome fees and bonuses).

I ask you, is this financial innovation or financial fraud? The geniuses on Wall Street think it's financial innovation.

However you look at it (it's "control fraud" in William K. Black's book) there's little doubt that even the experts who have a reputation for understanding the nitty gritty behind these transactions find the details hard to follow, or understand. Take a look at this and this to see what I mean.

This is important because the rules were changed after the 2008 market collapse so that banks had to bring certain derivative assets back on to their balance sheets.

But - and this is a very big "but" - companies like Wells Fargo found that they would NOT have to add certain derivatives back on their books after all. Why? Because, while they believed they would have to add $46 billion back on to the books, government guarantees from the bailout programs (and other agency guarantees) allows Wells Fargo to claim that they're only exposed to $10 billion in losses from the derivatives market ... when they're actually into the derivatives market for $2 trillion (see page 31).

Throw in the trillions Bank of America, JPMorgan Chase, etc. have in derivative markets and you can imagine how much value in toxic derivatives we still have out there (to get an idea you can start here, here, and here ...)

 Sigh.

- Mark

Monday, August 23, 2010

THE OTHER GUYS

I went to the movies with my son to watch The Other Guys. Go see it. It's not a gut splitter, but it will keep you chuckling throughout. My son liked it and he's 11 years old. Here's one of my favorite scenes (which isn't in the trailer).



Be sure to stick around for the credits too. You'll understand why I appreciate them when they start rolling.

- Mark

WEALTH EXTRACTION 101

This is the essence of wealth extraction.

Credit card companies borrow money from the Federal Reserve at historically low rates (about 3%). Then they charge their customers on average 14.7%, regardless of their credit score or payment history.


They're doing this for several reasons. But the primary reason is because they can.

It's really that simple.

- Mark

Thursday, August 19, 2010

ONE-QUARTER OF AMERICANS ARE COMPLETE IDIOTS (and FOX News followers)

Houston, we have a problem ... America is full of morons (still).

I have a survey outside my office from a scientific journal that shows 1 in 5 Americans believe the sun revolves around the earth. This is a line of thought the Western world dispensed with long ago ... you know, back in the 17th century (that's the 1600s for you FOX News viewers out there). So it shouldn't be surprising that we're treated to this nonsense today: fully 24% of Americans believe President Obama is a Muslim.

And that number represents an increase from the beginning of his presidency.

Where do these idiots get their information? Oh, yeah. Think FOX News.

Think about it. Remember how FOX News ran with the "Obama is a former Madrassa student" headlines? Then we had that "terrorist fist jab" nonsense. And how about when Fox & Friends and others saw a "Muslim image" in the logo for the Nuclear Security Summit which President Obama attended. And we all know how FOX News has been giving the birther idiots air time, which only feeds the "Obama is a foreigner-muslim" meme.

Well, I guess if 67% your audience believes that Saddam Hussein actually had something to do with 9/11 you can't expect much from those who follow what you present, no matter how shallow it is. Keep in mind that FOX News is built around satisfying the low intellectual expectations of people who are prone to seeing legitimate scientific history in Kentucky's Creationist Museum - which presents "evidence" that the world is only 6,000 years old, and that Adam and Eve rode dinosaurs.


Oh, and don't forget. The world is flat too. So don't book any ocean voyages any time soon.


Seriously, at the end of the day, surveys like this prove that a steady drone of lies from FOX News can help convince large segments of Americans into believing virtually anything.

I don't know about anyone else, but like any conspiracy of stupidity (which includes 9/11 conspiracy nut jobs) this is embarrassing.

- Mark

THE TRIUMPH OF SOVIET-STYLE CENTRAL PLANNING ...


In "Amar Bhide on the Stalinization of Finance" Yves Smith at nakedcapitalism.com directs us to an excellent article from the Harvard Business Review ...

Bankers of the World Unite (under one model)
The article discusses the loan activities of our financial institutions. Specifically it discusses how they have evolved from emphasizing decentralized decision-making (crucial for capitalist markets to function) to an increasing dependence on lending processes that resemble the centrally-planned economy of the Soviet Union. Personal one-on-one time with local bank loan officers, who traditionally studied regional conditions and developed a personal relationship with borrowers, has been replaced with mortgage brokers, who have to take their lending cues from abstract models developed by a few rocket scientists in the biggest financial institutions (which is also discussed in The Quants).

What makes this so dangerous is that the models and the programs they spawn are principally designed to benefit the narrow interests of market players who control the keys to the financial kingdom (the use of Net Present Value models in determining who can actually get home loan modifications, which I discuss here, is an example of this).

This is a troubling development when you consider that the patron saint of capitalism, Adam Smith, argued that the consumer should be the primary concern of a market economy. Protecting consumers was at the core of his "laws of justice" principle.

According to the article, the vast majority of market players in the financial sector depend on a standardized, model-reliant, process for accepting or rejecting loan applications. So, Why does this matter, you ask? Good question.

Why It Matters ...
As Smith points shifting lending from loan officers in local branches to standardized, score-based templates developed by faceless math geeks in New York has resulted in a "considerable loss of information": face to face assessment of the borrower (does he understand what he is getting into? Does he regard the loan as a serious commitment?) and knowledge of the community (How healthy is his employer? What is the outlook for the local economy?) have been lost in the process.

More importantly, as the article notes, reduced "case-by-case scrutiny has led to the misallocation of resources in the real economy." In the recent housing bubble, for example, lenders did little due diligence and "extended mortgages to reckless borrowers" because the models kept their focus on securing loan origination fees, and bonuses, rather than on the lenders actual ability to pay.

In a few words, because the models accepted the cooked up numbers of unscrupulous mortgage brokers the system became increasingly impaired as more and more brokers could give a dam as to whether the lender actually paid. Fixing the numbers to model is what mattered.


Today, our lending institutions continue to rely less and less on Adam Smith's "invisible hand" and depend more and more on a Stalin-like approaches to lending. Unfortunately these approaches bear "a troubling resemblance in its process and outcomes to a centrally planned economy."  

The actual article, and Smith's review and commentary, may be long for those of you who are short on time. But, as usual, they're worth the effort.

- Mark

Wednesday, August 18, 2010

JON STEWART GOES AFTER GOP TERROR BABY NONSENSE

In my last post I discussed the far right's penchant for coming up with insane distractions, which are designed to keep Americans from thinking about the real problems we face as a nation. So I was happy to see Jon Stewart on the Daily Show last night. He did a great job going after the Terror-Baby-in-the-Mosque nonsense coming from the far right. Check it out.

Stewart drew from a CNN Anderson Cooper interview with Rep. Louie Gohmert (R-TX). In the interview Rep. Gohmert went nuts because Anderson Cooper kept asking for evidence about the Terror Babies (who Gohmert tried to tie into Arizona border crossings here). Here's the full Cooper interview ...



I don't know if he's a bigger lunatic than Michelle Bachmann, but one thing's clear: Louie Gohmert is a freakin' nutjob. If he's not one of Chicken Little's lost siblings, he's somewhere in the family tree (most probably in the Chickenhawk wing).


Yelling like a lunatic about Terror Babies today, and not presenting any evidence from national security agencies or their agents (who presumably would want border agents, America's hospitals, nurses, pediatricians, etc. looking out for these guys) isn't healthy. It also tells me that the nutjobs from the far right also believe that if you scream loud enough about any stupidity that crosses your mind that people (beyond Fox News) will believe you ... no matter how ignorant you really are.

Don't believe me? Check out this classic Chris Matthews smackdown of a completely clueless (but very loud) right-wing nut Kevin James. As you will see, Kevin James' loud inability to back up his "appeasement" assertion is one of the most embarrassing media moments ever.



As you might imagine, Rep. Gohmert gets unchallenged air time on Fox News.

- Mark

Monday, August 16, 2010

BEWARE OF TERRORIST MOSQUE BABIES ... AND OTHER GOP DISTRACTIONS

Do you want to know what the political strategy for the Republican Party is this November? Check this out ...


That's about it. The GOP knows they can't run on their "let's-cut-taxes-and-deficits-will-disappear" record in November. The truth behind that lie has been exposed. Their record on two failed wars is nothing to write home about either.

And forget about bringing George W. Bush back to campaign for candidates. Even die-hard republicans know that he's an embarrassment. History will show his presidency to be a train wreck of epoch proportions ...


The goal of the republican party this November is to distract and trot out false threats that have little to do with what actually confronts our country. The goal is to encourage Americans to forget about the Bush years, and to remind Americans that they need to fear what the GOP fears ... which is pretty much their own shadow.

In this case their shadows are being followed by a spooky set of foreigners, led by Terrorist Babies, Undocument Workers, and non-existent mosques being constructed in lower Manhattan. Think about it. How many times over the past month have you been told to be afraid of this guy ...


And, of course, we know many terrorists (and their babies) crossed the border from Mexico 35 years ago in order to fly airplanes into buildings. You know, the guys that looked like this  ...


You would think that after years of being lied to by George W. Bush (are we still looking for those WMDs?), and being told to be afraid "or else", that Americans would be used to hearing about false enemies built on a pack of lies. Apparently not.

Instead, we're treated to the idiocy of Newt "I'm-Working-On-Wife#4" Gingrich, and assertions that building an Islamic community center (it's not a mosque) two blocks away from ground zero is akin to the nazis building a center close to a cherished Jewish site.

Apart from the fact that not all muslims are terrorists, we need to consider what it means that republicans and conservatives want to turn the proposed community center in Manhattan into a wedge issue. To be sure, people on the left like Senator Harry Reid (D-NV) have jumped on the "let's be afraid" bandwagon. But we need to remember that Harry Reid is in the middle of tough election, where the nut jobs (i.e. the Tea Baggers) are out in force. 

The reality is that the GOP wants you to forget how their failed policies gave us the Bush Debacalypse, which we see in two failed wars, a collapsed economy, and political incompetence of the highest order. This is why the GOP wants you to stare into the political equivalent of this ...


Go ahead and stare.

And then go ahead and focus on a non-existent Manhattan mosque that will surely house undocmented terrorist babies from Mexico. But stare into the optical illusions first. At least it will challenge your senses into considering the deceptive force of optics.

But beware. Following the GOP's lead on things like terrorist babies in non-existent mosques will only lead you down a crippling mind path sure to make you crazy stupid. Oh, look, a shiny spoon.

- Mark

Friday, August 13, 2010

THIS IS HOW WE DEFEAT THE PARIS HILTON PRINCIPLE


THE PARIS HILTON PRINCIPLE:
Living in a world where your status & wealth prevents
you from having to suffer the same financial and  
lifestyle hit for breaking the law that others do.


A driver caught doing 180 mph in Switzerland is set to be fined between $835,000 and $962,000. The reason the fine is so high is that Switzerland calculates fines based on the severity of the offense and the offender's income level.

I like this law.

In many ways Switzerland's method of assigning fines to drivers is their way to making sociopaths - who have money - feel some pain for their mistakes. Think about it. A $500 fine for a working-class driver (who makes $30-40,000 a year) will feel the penalty. A $500 fine means there are no frivolities for the month and/or some bills don't get paid. A $500 fine for the Donald Trumps and Paris Hiltons of the world mean nothing.

However, a driving fine of, say, $50,000 for someone making $3-4 million a year would go a long way in leveling the reward-penalty field in America. Specifically it would add some punch to the notion of merit and equality under the law ... principles that everyone in America understands, but are also quite sure doesn't always exist.

We could defend our new approach to equality under the law by telling the world we're trying to defeat the Paris Hilton Principle. The Paris Hilton Principle - which has already been linked to sex (what else?) - in many ways is akin to the Dunning–Kruger effect.


In a few words the Dunning-Kruger effect refers to unskilled and incompetent people whose cognitive bias (world view) allows them to make poor decisions - which they never acknowledge or recognize - because their incompetence denies them the capacity to realize their mistakes. Incompetence, after all, requires screwing up on many levels.

Defeating the Paris Hilton Principle refers to popping the bubble of rich sociopaths by forcing them to feel the same financial penalties the rest of us do when we're punished or fined for legal transgressions.

Incompetence, like rich sociopaths, should always feel the pinch of justice when they undermine society's rules.

- Mark

Thursday, August 12, 2010

SOLVING OUR ILLEGAL IMMIGRATION PROBLEM ... LET'S BRING BACK ATTORNEY GENERAL MUKASEY

Hey, I have an idea that may solve the legal side of the "illegal immigration" debate. If precedent means anything we should get the support of the conservatives. Check this out ...

Remember when then-Attorney General Michael Mukasey's Inspector General found that half a dozen officials in President Bush's Justice Department illegally rejected viable job candidates? The IG found that their criteria for dismissing candidates was that they had “liberal” backgrounds (members of the ACLU, Democrats on Campus, etc.).

Weeding out candidates because of political beliefs or affiliations at the federal level is a crime.

In this case, the perpetrators of the crime were religious conservatives. One of the perpetrators, Monica Goodling, graduated from Christian fundamentalist madrassa Regent University Law School (founded by Pat Robertson), and believed that her religion came first. Her responsibilities as a citizen of the U.S. was a secondary concern. Specifically, she believed she was doing the right thing because she was doing "God's work" (this mind-set forms the heart of the Dominionist movement in America, which argues that the Kingdom of God will be established here on earth through political and even military means). Her partner in crime, Kyle Sampson, is a "devout Mormon" who graduated from Brigham Young University.

Ignoring the evidenc laid out by the IG report, the Bush administration's Justice Department declined to press charges against Goodling, Sampson, and others who helped weed out perceived "liberal" candidates. The reasoning was clear: According to then-Attorney General Michael Mukasey, "not every wrong, or even every violation of the law, is a crime.”

So much for Republicans being the party of law and order.

According to Mukasey, because those who might have violated "federal and civil service law" had already suffered "substantial negative publicity" his office wouldn't act on the Inspector General's findings. It didn't matter that Goodling believed her responsibilities as a citizen of the U.S. didn't always fit into her religious beliefs. Respecting your duties as a U.S. citizen and protecting the Constitution is really no biggy, as long as you have God on your side.

No charges were ever filed against the perpetrators.

Got that? If you've got faith, and have already been persecuted in the court of public opinion, your duties as a citizen are optional, and you don't have to respect our laws. Screw citizenship. Screw the law. That is, of course, if the Attorney General will speak up for you and says "every violation of the law" isn't a crime.

I say let's bring back Michael "Laws-Are-Relative" Mukasey. If he can be convinced to revive his "every-violation-of-the-law-isn't-a-crime" doctrine almost every undocumented worker will find themselves in a new legal universe.  More specfically, we should be able to do away with the "What part of 'illegal' don't you understand?" nonsense coming from the anti-immigrant crowd.

With a little faith, and a wink and a nod from the Attorney General, the path towards redemption and citizenship will be open.

See how that works?

With religion and faith trumping the laws of our land, and with the proper ideological blinders, virtually anything can be justified ... including flying a couple of planes into buildings.



- Mark

Monday, August 9, 2010

WE'RE SCREWED, II ... THE HOUSING MARKET VERSION

Remember this graph from Chicago mortgage broker Michael David White?

It shows us (red line) that housing values have fallen. But what's also true is that the amount of debt (blue line) tied to those homes have not collapsed, even with write-offs and renegotiations. There are a number of reasons for this. Among those include not enough homeowners qualifying for renegotiations and the fact that the biggest banks haven't had to mark down failing mortgage loans. This means our nation's financial institutions are carrying bad loans but they haven't been forced to mark them down to their actual market value.

And why should they?

When the market meltdown started in 2008 President Bush and Congress gave Wall Street and the banking industry a magnificent "deregulation" gift when they said financial institutions wouldn't have to mark down their toxic financial assets (and the instruments that they spawned). In essence they regulated market prices out of the market (by suspending mark-to-market accounting methods) and said to the banks, "You can attach any value you want to your toxic assets ... but don't worry, consumers and homeowners still have to abide by their contracts. If they don't, go ahead and attach fees and/or foreclose. Be happy."

Then we have President Obama's gift to Wall Street. His $75 billion Home Affordable Modification Program (HAMP) has turned into a significant market subsidy for the banks and Wall Street. This Huffington Post piece by Shahien Nasirpipour and Arthur Delaney helps explain why.

Here a few key points about HAMP:

* REJECTIONS DOMINATE: Of the 1.2 million distressed homeowners who entered HAMP (through June) more than 529,000 have been kicked out (though 389,000 have benefitted from permanent modifications).

* FINANCIAL INSTITUTIONS FIRST: Banks are using a "Net Present Value" test. This allows financial institutions to determine whether a loan modification will make "investors"  more money than a foreclosure. Put another way, even after dumping trillions of taxpayer funded bailout dollars on to Wall Stree, the needs of banks and investors dominate a $75 billion program that was designed for homeowners.

* UNICORN MATH: Extending a loan modification process to distressed homeowners has only served to allow banks to carry bad loans on their books at full value, delaying loss recognition.

* HOMEOWNER FORECLOSURES, BUT NO PENALTIES FOR BANK NON-COMPLIANCE: Companies like Countrywide - the beneficiary of billions in taxpayer funded loans and guarantees - have told applicants that they aren't participating in HAMP. Foreclosures continue. Yet, the Treasury Department has yet to fine a single servicer for noncompliance with HAMP.

BLOATED FINANCES: Delays have allowed banks to tack on tens of thousands of dollars in additional interest and other fees, which they use to inflate the value of the mortgage contracts they hold.

There's more, but you get the point.

While many market analysts will tell you that HAMP has helped achieve stability for the housing market, it has done little to nothing for the majority of distressed homeowners who've applied to the program. Worse, it shows that in spite of creating trillion dollar loans, transfers, and other guarantees for Wall Street - in the process, creating the biggest bailout in human history - individual homeowners were never supposed to be the primary beneficiaries. The biggest financial institutions on Wall Street were the targeted group.

But wait. It gets better (or is that worse?). Mortgage broker Michael David White explains why our housing problems pale in comparison to what's going on around the world. As bloated as our housing bubble economy got, it's not as bad as other parts of the western world ...



In a few words, many of the key western countries (except Germany and Japan) are looking down the barrel of gun when it comes to housing. Greece may have been the first salvo in a much wider market mess facing Europe, and the world.

Stay tuned. Things will be getting worse.

- Mark

Friday, August 6, 2010

AGAIN, IT'S NOT FANNIE OR FREDDIE'S FAULT ...

I've posted on this before, but since the far right lunatics like to demonstrate their ignorance by telling lies about the issue (yes, it's a lie if you know the truth and purposely ignore it), I'm posting the information again.

Again, Fannie Mae and Freddie Mac DID NOT cause the market meltdown. Click here to see the data.

Then go out and share the news with your clueless and ignorant friends. Not that it will help ... 


The Kool-Aid drinkers, after all, are self-medicated zombies.

- Mark

Thursday, August 5, 2010

THE FAMILY VALUES CROWD ... THEIR HYPOCRISY RUNNETH OVER

In a landmark decision yesterday, a Federal judge overturned Proposition 8, California's ballot initiative which banned same sex marriages.

I've been asking myself whether I should write about the constitutionality of the decision, the judges legal insights, or the political fall out sure to come. Rather than do any of this, I've decided to post what I think a couple of our Republican "family values" politicians are probably thinking (to themselves, of course).

Remember "Mr. Family Values" and part-time whore mongerer Senator David Vitter (R-LA)?


I'm sure he's probably thinking: "Thank God. Now homosexuals can get married and protect the sanctity of marriage the old fashion way ... by going out and buying a prostitue. Let them know what it's like to come home to a pissed off spouse after spending the rent money ..."

And for the record, here's a couple of sanctimonious quotes from Vitter (who still has his job) and his equally pious wife during President Clinton's Monica Lewinsky moment ...


Then we have conservative, and a very married, Senator Larry Craig (R-ID). If you recall, he likes doing the two-step in bathroom stalls. Specifically, he got caught looking for gay love in a Minnesota airport, and said it was all a big mistake, placing blame on his "wide stance."


Given that he was convicted for soliciting love, I have to imagine he's probably thinking: "Good, now all we have to do is make it legal to go looking for love in all the wrong places. I mean, why should it be illegal to propose in a bathroom stall? Time to work on my stance."


Here's a few more humorous takes on Senator Craig's two-step in Minnesota, and some of the "official" Republican responses to his lifestyle choices.


But I especially like this one ...



I could go on talking about the hypocrisy behind the Bible thumping family values crowd but I won't. Digging deeper into this only brings us to the "family values" hypocrisy of the movement, and forces us to look at the conservative politicians who like to point fingers and then thumb their noses at family values, like Newt Gingrich (R-GA), Mark Sanford (Governor, R-SC), John Ensign, (Senator, R-NV) and other serial cheaters.

Simply put, the Bible thumping family values crowd has a lot more on their plate than harping about gay marriage.

In fact, if they really cared about family values, they would start looking at proposed anti-immigration laws, and what they would do to families who have been here in the United States for decades. Once they jump on this bandwagon (instead of sweeping their messes under the rug), I'll begin to take them seriously.

- Mark

Wednesday, August 4, 2010

AMERICA'S LUNATIC FRINGE ... "SHE'S A WITCH!"

By way of my good friend Luis, I was directed to this piece by the LA Times' Tim Rutten. In the article Rutten explains what's happened to the American psyche, and describes how many citizens in post-9/11 America have effectively replaced common sense and studied analysis with empty patriotism, blind denunciations, and false science.

Whether we're talking about the anti-Muslim/anti-immigrant crowd, the Tea Baggers, the birthers, or the emerging secessionist lunatics, little thought is given to what actually ails this country. Like our medieval predecessors, many in these groups let their phobias and prejudices get in the way of better judgment. In practical terms blind rage and witch hunts are preferable to the hard work of gathering evidence and facts.

While I encourage you to read the piece, you'll understand where the American mind-set is at, according to Rutten, when you watch this clip ...



If you watched this clip and thought "Tea Baggers and Birthers" you're not alone.

There's a reason why Sarah Palin and Rush Limbaugh are the leaders of the right (and why Fox News is their news source). Their world is a Roman Colosseum. They only seek to appease a mob, and they do their level best to provide us with the modern-day equivalent of Rome's Bread and Circus. Making matters worse, while they take themselves seriously, they're both as clueless as Nero, and as self-absorbed as Caligula. 


But, as is the case with all things that please our modern mob, the Palin-Limbaugh Colosseum goes beyond drunken revelry and being a showcase for exotic, wild animals taken from all corners of the Roman Empire (which conveyed the extent of Rome's conquests). Their Colosseum showcases a culture that gets it's jollies from watching personal train wrecks, regularly available on Jerry Springer and the assorted Bachelor shows of our day ... Jackass: The Movie was no accident. It may well be the prequel to Sarah Palin, President of the United States.

At the end of the day, our modern-day Colosseum has transformed our current Neros and Caligulas into acceptable bacchanalia.

Read the piece. It will make you think. And don't be surprised if you finish by asking yourself, So, when do we start feeding the Christians to the lions?

- Mark

Tuesday, August 3, 2010

GREENSPAN vs. GREENSPAN CAGE MATCH ... WE LOSE

"... A New Paradigm
of Active Credit Management."

- ALAN GREENSPAN (October 5, 2004)

Translation: "I don't see no credit 
market Chernobyl-like meltdowns in America."

One of the things you get when you follow free market ideologues long enough is that their words come back to haunt them. In this case former Federal Reserve Chair (1987-2006), Alan Greenspan, claimed in 2004 that credit markets were just fine. Big private market players, rather than "over regulated" banks, were spreading money and credit around efficiently.


Private market players (our shadow banking system), Greenspan argued, know what they're doing. Even if they were funding the purchase of toxic assets, and providing easy money that helped create our housing bubble, they were the ones who were on the hook if they lost money -- so the argument went. The market not only knew best according to Greenspan but, in this case, had created a "new paradigm of active credit management."

No Chernobyl-like credit market meltdowns were on his horizon.



Then the September 2008 credit market meltdown happened. Ooops.



Mr. Greenspan spoke up again on Sunday (Aug. 1). He claimed that we should repeal President Bush's tax cuts for the rich because we can't afford them. Specifically, he said (in typical Greenspanspeak):

"We believe it is appropriate to let those tax cuts that go to the most fortunate expire,"

I have only one question. Where the hell was this Alan Greenspan when President Bush said we needed tax cuts for the rich in 2001?

If  you recall, when George W. Bush ran for president in 2000 he gained considerable support telling America that the surpluses generated during the Clinton administration was "your money." It didn't matter that we had a $5.6 trillion national debt to pay down. In his mind budget surpluses should be given back to the American taxpayer in the form of tax cuts. So, instead of paying down our national debt (where were the Tea Bag crazies then?), President Bush proposed tax cuts, most of which would go to the nation's wealthiest Americans.

As he pointed out in his book The Age of Turbulence, Greenspan supported tax cuts at the time because "chronic surpluses could be almost as destabilizing as chronic deficits." We have two problems here. First, while we had a budget surplus in 2001, we hadn't started to run "chronic" surpluses. Second, Greenspan ignored how previous Republican tax cut policies had effectively quadrupled our national debt between 1981 and 1993.

What's key here is that Alan Greenspan knew all of this. Yet he still supported tax cuts that would primarily benefit the wealthy (yes, he understood the Bush proposal) to deal with "chronic surpluses."

To be sure, Greenspan was careful to say at the time that he supported tax cuts in general, and not necessarily President Bush's tax cut proposal. But he was being politically naive, at best. More probably, as an Ayn Rand sycophant, Greenspan was using his position to help get more money into the hands of private market players. More bluntly, he was playing a parlor game and was deliberately disingenuous.


Whatever inspired him, with decades of experience in Washington, Greenspan had to know that his congressional testimony supporting tax cuts would give President Bush the political gravitas - or greenlight - he needed to ram his tax cut program through congress. Ten years later, and with an additional $5 trillion added to our national debt, Mr. Greenspan is now saying "Hey, I think we need to pay for these tax cuts."

Still, perhaps we shouldn't be so hard on Greenspan and his sudden fiscal two-step. As chair of President Reagan's National Commission on Social Security Reform (the "Greenspan Commission") Alan Greenspan supported raising social security (FICA) taxes on the middle class in 1983 to help pay for projected social security shortfalls.

Got that? To deal with looming deficits in 1983 a tax hike on middle-class America was fine. This helps explain why the payroll (FICA) tax was raised in the 1980s (yes, President Reagan raised taxes). But to deal with real deficits in 2001 ($5.6 trillion) Mr. Greenspan was fine with tax cuts, most of which would go to America's wealthiest class.

Are you kidding me? How do you go from, "Let's raise taxes on the middle class to pay for projected shortfalls" in 1983 to "In spite of an actual $5.6 trillion debt, let's take projected surpluses and use them for tax cuts, which will go primarily to the rich" in 2001?

Now, in 2010, we have Mr. Greenspan saying that we should allow tax cut legislation that benefitted primarily the richest Americans to "expire" because we can't afford them. I guess you're never wrong if you're an intellectual schizoid ...


So, which Mr. Greenspan should we go with? Mr. We-Should-Pay-Our-Bills-So-Let's-Tax-The-Middle-Class? (1983), or Mr. To-Hell-With-the-Deficits-Taxes-for-the-Rich-Are-OK-by-Me? (2001), or Mr. Ooops-Now-We-Should-Pay-Our-Bills? (2010). Will the real Mr. Greenspan please stand up. Cue the music...




For my money, we also run into problems when we sit down and do the math.

What we find is that the billion dollar surpluses, generated in part by the social security tax hike, were effectively handed over to America's wealthiest during the Bush years -- making it one of the greatest transfers of wealth in human history. No wonder the far right is afraid of discussing class warfare. They're winning, and they don't want America to find out how it happened.

Today America finds itself staring at bloated budget deficits (a product of Bush's failed policies), more than $12 trillion in debt (due to a failed trickle-down theory), and another social security hole that Republicans claim can only be fixed with more tax cuts and deregulation.

(To be sure, the vast majority of our projected social security short fall is attributed to slowing wage growth and increased inequality in America. These are two economic shifts that Greenspan's commission didn't anticipate. Then again, they probably didn't anticipate the Republican Party tearing up the post-war social contract, which helped slow wage growth and increased income gaps in America.)

In all cases, Mr. Greenspan now concedes there was a flaw in his model, and that he was shocked by the results of the casino mentality that he helped create.



Incredible. Still, the damage has been done. And Alan Greenspan was there egging it on, every step of the way.



While Greenspan 2010 seems to be channeling Greenspan 1983, the reality is Greenspan 2001-2006  -- and the policies he rubber stamped during his time at the Fed -- is emerging as the winner in this Greenspan vs. Greenspan Cage Match.

Unfortunately, that's bad news for the rest of us.

- Mark

UPDATE (12/17/12): I just found this Tom Tomorrow cartoon. It pretty much explains the post ...