Sunday, January 31, 2010


I always find it amusing when I see this tax data. In a few words, it makes it clear that Republican, or Red, states in the country are the biggest recipients of federal tax dollars. On the other hand, the biggest tax contributors to our nation are Democratic states, like New York and California.

So, for example, while Sarah Palin likes to wax nostalgiac about the rugged individualists up in Alaska, for every dollar Alaskans pay into our nation's treasury box they take out $1.84. For every dollar California puts in we get 78 cents. Put another way, Alaska's hardened sense of "rugged individualism" is really built on a foundation of communal welfarism, direct from the American taxpayer in big Liberal states like New York and New Jersey.

This is what it looks like in graph form (click on graph to enlarge) ...

Here's a couple of other little tax nuggets you might find interesting. In the 2000 U.S. presidential election, George W. Bush won most of the states that are net beneficiaries of federal spending programs, while Al Gore won most of the states that are net contributors to federal spending.

Put another way, the Reagan loving Republican Red Staters are the real welfare queens of America. The Gipper would be proud ...

Last note. While their share of the income has increased, the tax burden on America's richest 400 tycoons has been going down for years.

- Mark


I couldn't help but notice during President Obama's appearance at the Republican Retreat in Baltimore how many speakers prefaced their questions with right wing radio talking points, followed with outright lies about the origins of our budget deficits.

Here's the standard claim, and a contrived question, as posed by Jeb Hensarling (R-Texas):

As President Obama made clear in his response to Rep. Hensarling's comments, the reality between what Republicans claim about the budget and the truth is as vast as the Grand Canyon.

Simply put, Republicans are either lying about the reality of the budget or they're simply ignorant as to the facts (or both). Here's the math ...

If you don't like reading those CBO numbers, know this ...

President Obama came into office with projected deficits of $1.3 trillion dollars for 2009. As President Obama pointed out, this was a budget deficit that he had on his desk before he was sworn into office. Those projections have turned into a $1.6 trillion deficit for this year because the recession (and the needs of the parasitic sociopaths on Wall Street) were far worse than everyone imagined.

Let me repeat. This was not President Obama's doing. It was a gift from from President Bush and his pals on Wall Street. Simply stated, President Obama inherited an economic mess, and the Republican Party is lying to America about it's origins.

President Obama's response to the mess he was left has been both straighforward, and commendable. Here's why.

Under President Bush the majority of the costs associated with the wars in Afghanistan and Iraq were never on the books. President Bush regularly - and deliberately - kept them off budget and asked for emergency "supplemental" funding. What's supplemental funding? In a few words it's like the money you find yourself spending every year on birthdays, vacations, Christmas, etc. that you didn't plan for in your yearly budget. Instead, because you don't have the money, you borrow or put it on your credit card. Then you try to pretend that you didn't spend the money. We all know how those debts eventually catch up with us. President Bush did this to the tune of about $100-200 billion per year.

President Obama thinks that since we know we're in a war that that we shouldn't play "supplemental" accounting games with the American public. He's decided to put the cost of these wars in the budget. While this does inflate our budget deficits, it is also the way serious people deal with their budgets.

Want to see how Republicans deal with budgets post Bush? Check this out.

Seriously, a budget proposal with no numbers?

The impact of embracing the smoke & mirrors behind Republican borrow-and-spend policies is quite serious.

Then we have the expenses associated with cleaning up President Bush's economic mess. You can add hundreds of billions of dollars to our deficit pot. See where this is going? The point is, Republicans are playing political games to score political points.

You would think that Republicans would show some humility on the budget topic, especially given that President Reagan almost tripled our national debt, and President Bush more than doubled it. Instead, Republicans think they should be "rewarded" in November for pointing out how deficits have increased, when they know (or should know) that President Obama's policies didn't bring our current budget mess to our doors.

It's a wonder to me that the media takes anything the Republicans have to say about the budget seriously.

- Mark

Saturday, January 30, 2010


It appears that I'm not the only one who thinks President Obama gave a major smackdown to 140 Republicans yesterday in Baltimore. It turns out that the beating was so obvious that Republican propaganda station, and conservative mouthpiece, FOX News pretty much turned the channel.

Critical here is that President Obama made himself available to the opposition party in a way that no president has done in recent memory. His appearance at the Republican House Retreat in Baltimore was, as many observers have noted, akin to the Prime Minister taking questions from Members of Parliament.

For Fox News to turn the channel, while the other networks had continuous coverage, says much about Fox News. First, they can see the truth, but willfuly choose to ignore it. Second, they are a propaganda arm of the Republican party.

So here's my question:

How stupid are the people who watch Fox News that they need Fox's general management to break away from LIVE coverage so that paid media goons can tell them what they THINK is happening?
Seriously, who would stay to watch a football game on TV if the network stopped showing the game and switched to hacks telling you that your team is doing great when you just saw them getting pounded?

At the end of the day Fox is to network news what World Wrestling Entertainment is to Greco-Wrestling and serious sport. A joke. They take a serious activity and turn it into fantasy entertainment. And all for what? So the intellectually challenged among us can indulge their fantasies about the world around them?

For the Fox viewers out there who might be reading my blog, let me make this simple for you. Here's what serious news looks like in wrestling form ...

 Here's what Fox News looks like in wrestling form ...

Any questions?

- Mark

Friday, January 29, 2010


President Obama delivered a speech, followed with Q&A, to the Republican Party House Retreat today. I guarantee you the Q&A will not end up on any Republican highlight reel. In fact, I doubt that the Republicans will invite President Obama back under the same circumstances.

Here's the speech.

Here's the Q&A ...

- Mark


In Baker v. Carr (1962) the Warren Court ruled that the principle of One Person One Vote had to be respected, and was perhaps the most fundamental element of American democracy. At the heart of the case were states that had failed to redraw districts. This left some districts with significantly less, or more, voters. According to the Warren Court, this undermined the principle of equal, or proportional, representation and violated the idea that each citizen's vote should carry equal weight during every election cycle.

The Warren Court's decision was so significant that Earl Warren would call Baker v. Carr (again, which dealt with redistricting and proportional representation) the most important decision his court ever made. As he put it, legislators represent people, not rocks or trees.

The same can not be said about corporations.

I bring up Baker v. Carr because it gets to the heart of what Senate Judiciary Committee Chairman Patrick Leahy (D-Vt.) was saying yesterday when he criticized the Supreme Court's 5-4 decision on Citizens United v. Federal Elections Commission. The Citizens United decision allows corporations to enhance their political voice by bankrolling political campaigns. This undermines the spirit of the Baker decision because it super charges the influence of corporations and the corporate lobbyists who represent their very narrow interests.

More specifically, instead of having disproportional political weight lie in the hands of a few people who live in sparsely populated areas - as was the case before the 1962 Baker decision - the Citizens United decision shifts political weight to a few corporations who have the resources to drown out the voice of the middle class. This caters to the interests of a select, pampered, few and violates the principle of proportional representation and One Person One Vote.

This, in part, explains why Sen. Leahy criticized Citizens United as the "most partisan decision since Bush v. Gore." He sees a political system tilting toward a condition (1) where we don't always need to count the votes (Bush v. Gore, 2000) and (2) where one group will have disproportional power over elections (Citizens United, 2010).

(As a reminder, in Bush v. Gore the Supreme Court ruled in a 5-4 decision that because Florida's vote counting standards differed from ballot to ballot, precinct to precinct, and county to county that the Florida Supreme Court's recount order was "unconstitutional." Left unsaid is that vote counting standards differ from state to state. Still, the Supreme Court stopped the Florida recount. According to Justices Rehnquist, Scalia and Thomas the recount order, which provided instructions, was unconstitutional because only state legislatures - who have created different standards across the nation - can make election law. Recognizing the Gordian Knot they had tied themselves into the Supreme Court limited it's divided opinion only to the Bush v. Gore case.)

With this background it's easier to understand why Sen. Patrick Leahy criticized Justice Samuel Alito yesterday. Simply put, he sees an increasingly politicized Supreme Court. No doubt prodded by Justice Alito's "that's not true" moment during President Obama's State of the Union address, Leahy took aim at Justice Alito's new "activist" position.

Here's the money quote from Sen. Leahy:

"In his confirmation hearing, Justice Alito — I might say under oath — testified that the role of the Supreme Court is a limited role. ... It has to be equally vigilant of not overstepping the bounds and invading the authority of Congress. That was then, when he was seeking confirmation. This is now."

Leahy's essentially saying Justice Alito's a scoundrel, and not a man of his word.  But this is a throwaway ...

Ranking judiciary committee member Sen. Jeff Sessions (R-Ala.) didn't take kindly to Sen. Leahy's words about Justice Alito, and shot back at both Leahy and President Obama (for scolding the Supreme Court), saying, "I'm disappointed that the president and my colleagues are attempting to politicize a very, very serious First Amendment question."

What he's really saying is that corporations have (or should have) all the rights and privileges as voters because, after all, they're people too. Is this true? Let's review:

1. CORPORATIONS AREN'T PEOPLE: Free speech is designed to protect the actions of naturalized and/or U.S. citizens. Corporations are neither.

2. THAT TYPO: Corporations are viewed as "persons" protected under the 14th amendment only because of the functional equivalent of a typo, not a Supreme Court decision. Put another way, corporate "personhood" status was an accident which means their claim to equal free speech status is not etched in stone.

3. THE FIRE PRINCIPLE: If we can't yell fire in a crowded theater, corporations should not be able to yell fire (or set a fire) during a political campaign. They need limits like we do.

4. CORPORATE PRIVILEGES: Unlike individuals, corporations regularly get favorable legislation (think bailouts), subsidies (think agriculture), generous tax write-offs (too many to list here), legal exemptions that boost their bottom line (especially Big Pharma), etc. They also have a limited liability standard, which you and I don't have (think exploding Pintos and how decision-making Ford executives escaped responsibility), and can live on indefinitely.

5. FOREIGN/SUBSIDIARY SHELL GAMES: Foreign corporations have subsidiaries through which they can access teams of Madison Avenue executives who can distort and elevate their "voice" above Joe Six-Pack's. 

6. LEGAL SHELL GAMES: Corporations can find legal cover behind proprietary rights (trade secrets) when called into court. This means they can both distort their voice, and then hide it. Apart from pleading the 5th, Joe Six Pack can't do this.

And the list goes on ...

fateful typo that granted them corporate "personhood" status.

This has enabled corporations to secure favorable legislation that increasingly allows them to act on their own (with less government oversight), ignore the public interest (think subsidized and protected health care industry), and to make more money with government-escorted profits (think Wall Street). Granting corporations the ability to use unlimited money in political campaigns, as the Citizens United v. Federal Elections Commission decision does, accelerates this process.

If we want to maintain Abe Lincoln's "Government of the people, by the people, for the people" maxim - and the power of One Person One Vote - Congress needs to fix Citizens United. More importantly, we need more of our elected representatives like President Obama and Senator Leahy to speak out against it.

American democracy, proportional representation, and the principle of One Person One Vote should not be drowned out by a judicial bench that not only believes corporations are people too, but has already said that we don't need to count all the votes.

- Mark

Wednesday, January 27, 2010


I generally liked President Obama's State of the Union speech tonight, and especially enjoyed watching the Republicans sit while others applauded Obama's tax cut and helping the middle-class proposals. For me, though, the highlight was watching Associate Justice Samuel Alito mouth something to the effect of "that's not true" during the speech.

Justice Alito was responding to President Obama's comments that all but scolded the Supreme Court for their decision this past week, which gave corporations the Green Light to spend as much money as they want on political campaigns. The Supreme Court's 5-4 decision is based on the notion that spending money equals speech. As such, the court ruled that the state has no business restricting the "free speech" of corporations because they're accorded the same protections as people under the 14th amendment (equal protection clause).

Missing in the Justices opinion is how a simple court reporter, who reworded a Supreme Court decision over 120 years ago, provided them with the "precedent" they needed for their decision.

As I wrote a few posts back, this week the U.S. Supreme Court essentially granted corporations the legal right to use all the financial resources at their disposal to influence political campaigns (because we all know that you and I have $10 million lying around the house, so we can match them any time we want, right?). 

Consider this: During the last presidential election, all candidates for federal office spent around $3 billion on their political campaigns. Three billion dollars was Exxon's profits for one quarter.

So I'm glad President Obama - who taught constitutional law at the University of Chicago - took the opportunity to make the comment. Undoing over 100 years of legal precedent because you think corporations are people is not good for America.

Alito and his brethren needed the scolding.

- Mark

POSTSCRIPT: It appears I'm not the only one who took notice of Alito's State of the Union moment (now last night). Additional commentary on the Supreme Court case Citizens United v. Federal Elections Commission, and Justice Alito's moment, can be found here, here, and here.


OK, one last post before the State of the Union. If you want to understand the reconciliation process you can read this, this, or this

Or, if you don't like all that reading, think about this. Reconciliation essentially restores democracy to America. It limits debate (or a filibuster) on budget related items that affect mandatory spending, or taxes. It allows the Senate a simple up-or-down vote on a budget related piece of legislation, and requires only 51 votes (or 50 votes, plus the Vice President to break the tie). It was considered so crucial to President Reagan's program that he used it to get his agenda done, as did George W. Bush.

The problem is that President Bush used reconciliation primarily in the name of tax cuts for the rich. Because President Bush's initiatives undermined the spirit of the reconciliation process - because his tax cuts added to our national debt - Congress passed a reconciliation bill in 2007. It said in plain language that reconciliation could only be used for budget matters that REDUCED budget deficits.

You would have thought that the "fiscal conservatives" during the Bush administration would have thought about this in 2001 and 2003, when they voted for tax cuts without finding ways to off-set their impact. They didn't. But I digress ...

The real  beauty of the reconciliation process is that it reinstates the principle of an up-or-down vote when you have a stubborn party, or a stalled process.

Read the Center on Budget and Policy Priorities piece, or Rep. Louise M. Slaughter's overview for some historical perspective. In all cases, it's clear that reconciliation is not the high drama route Republicans would have you believe. Perhaps more importantly, it also becomes clear that Republican presidents have been using it whenever they want to push their agenda.

Democrats need to use reconciliation, especially since the "health care bill before the Senate would cut costs and reform health-care delivery more than any piece of legislation in American history."

- Mark

Tuesday, January 26, 2010


Reconciliation to get the health care bill passed? I must be dreaming. After learning about President Obama's decision to pander to the right wing on deficits (after he stood by and watched as Wall Street looted our treasury), I really like this for Main Street.

But I especially like this from Ed Schultz.

Seriously, Democrats need to start acting like they have a majority, instead of fretting over whether the Republicans are going to filibuster in the Senate and call them names. If you can't govern with 59-41 majority you really shouldn't be in the politics business.

Force the filibuster, use reconciliation, and let the Republicans explain their Party of No position.

- Mark


A few posts back I suggested that President Obama needs to get on the side of Main Street and should enact an immediate payroll tax cut, spend hundreds of billions on infrastructure projects, and then go after Wall Street. I still think he needs to this. This Robert Reich post offers two other proposals that I like.

(1) Enact a second stimulus. It should mainly focus on bailing out state and local governments that are now cutting services and raising taxes, and squeezing the middle class. This would be the best way to reinvigorate the economy quickly.

(2) Help distressed homeowners by allowing them to include their mortgage debt in personal bankruptcy — which will give them far more bargaining leverage with morgage lenders. (Wall Street hates this.)

There's a reason why Wall Street hates the second proposal. It would force them to renegotiate with homeowners in a fashion that the big banks were able to negotiate with Washington when they had their economic meltdown. In many ways it would force the banks to consider negotiating TALF-like loans for homeowners, which would allow homeowners to get new loans by using their "legacy assets" as collateral.

More simply, it would allow homeowners to claim that, in their world, their house and their lives are too big to fail so they deserve help. Just like the big banks homeowners would be able to secure a new, lower value, loan on their home, as long as they stay in the home for a certain period. The loan would be made by the banks, and guaranteed by the federal government (like the TALF loans are). The argument, which was "all good" when Wall Street's financiers were going under, is not viewed as legitimate when it comes to Main Street. Nice.

Apparently, in the grand scheme of things, President Obama isn't going to put the effort into helping Main Street that he put into bailing out Wall Street. He's going to propose a three-year freeze on a large portion of discretionary spending, which will make it virtually impossible for him to stand up for Main Street's immediate needs, or it's interests. Economist (and frequent guest on my program) Mark Thoma calls it a "cheap political trick." I agree. This recession isn't your Great-Grandfather's depression. And, as Robert Reich points out, it's not the recessions Reagan or Clinton had to deal with either.

Of course Wall Street's happy as a bug in a rug because it signals that President Obama isn't going to put any teeth into taxing or reining in Wall Street's greed and stupidity. Main Street is the only sector that's going to take the hit on the recovery. This is all we need to know that President Obama's proposal stinks.

Like Julius Caesar, I get the strange feeling that our friends are stabbing us in the back, again. I'll have more to say on this later.

Sigh ...

- Mark

Monday, January 25, 2010


We all know that part of what drove our economy into a tailspin in 2008 were the incredibly stupid bets market players made. These bets are called credit default swaps. Essentially they are unregulated insurance contracts written and sold by market players who never intended on paying out if things went wrong (primarily because they didn't have the capital on hand).

What the "insurance writers" were really after were the premiums. When the unregulated insurance writers found out that they couldn't pay out on the bets that went bad (like subprime mortgage securities), all financial hell broke loose.

Well, hang on to your hats. It looks like we're going to do this financial stupidity all over again, but on another level. Only this time the big market players are banking on death. Here's how it works.

Traditionally if you purchase a life insurance policy the expectation is that you will pay premiums. In return you have a life insurance policy that can pay anywhere from $100,000 on into the millions. Your family, or your designee, receives a payment upon your death. If you decide you want to cash out, for whatever reason, you cancel the insurance policy and settle with the insurance company. You get a fraction of what you paid into the policy. Most insurance companies anticipate people cashing out, which helps to keep their costs down (since they don't have the big payout at the end). Pretty simple, huh?

Today, however, Wall Street's investment banks want to purchase your life insurance policy and turn it into a security. Specifically, the idea is to get life insurance policy holders to sell their policies to Wall Street. In return the insured party (you, for example) receive a fraction of what you paid into the policy. The new beneficiary of your death are Wall Street market players.

To be sure, Wall Street market players continue making payments on your insurance policy. But instead of waiting for one person to die, what they do is bundle up hundreds, if not thousands, of insurance contracts. These contracts - and the future payouts - are then sold to market players as securities. So you could conceivably have 10,000 life insurance policies wrapped into one security.

What we end up with is a system that creates what economists call "perverse incentives" because of how they encourage the holders of these securities to cheer on your death. Worse, it provides Wall Street and the market players who buy into these securities a financial incentive to oppose national health care initiatives, to stall the release of new medicines, or to hinder medicinal patent sharing proposals. Anything that might prolong your life is viewed as bad news for this security market.

Death is money.

As economists Marshall Aueback and L. Randall Wray put it, we could see the evolution of a powerful alliance where:

Big Pharma and Big Finance might well try to keep new miracle drugs off the market; or, if these drugs were capable of extending life and thereby reducing profits on the securities, make them prohibitively expensive, thus curbing access.
Aueback and Wray add that it's "fairly easy to see some profitable synergies developing between financial firms marketing bets on death and health insurers opposed to universal, single-payer health care."

By keeping health insurance policies alive the securitization of death could bankrupt the insurance industry. Keep in mind that insurance companies have traditionally banked on policy holders canceling their policies long before they pass on. Keeping policies alive for Wall Street undermines this approach.

Or, Wall Street could do an end run around the insurance industry - as they did with credit default swaps - and create securities with the sole purpose of purchasing insurance policies. Another unregulated market, with a focus on encouraging death. Great.

Apart from the financial issues involved, there are also the ethical ones (which I discussed with reference to Dead Peasant Insurance in my book). Should we allow market players to literally bank on death in a way that might encourage them to oppose the release of medicines and public policies that make our lives healthier?

In my view, markets should neither encourage nor cheer on death. Like Dead Peasant Insurance, banking on death through the creation of death securities is not an industry that needs to be encouraged.

- Mark

Post Script: Here's a video with some interestings numbers on death.

Sunday, January 24, 2010


A few posts back I discussed Legacy Assets. In a few words, legacy assets are poorly performing, or non-performing contracts. More simply stated, they're toxic crap. Rather than watch these toxic legacy assets drag the mortgage market down the federal government created a series of loan programs designed to get market players reinvolved in the mortgage market. One of those programs is TALF.

TALF is the acronym for Term Asset-Backed Loan Facility.

This loan program allows market players to use toxic assets - what the financial industry has ingeniously gotten everyone to call legacy assets - as collateral (check out the Federal Reserve's mind-numbing explanation of the program here). Using toxic (legacy) assets as collateral is just one of the ways the federal government determined it could support the market because (1) it allows market players to use the loans to get cash into the mortgage market, and (2) it provides a guarantee that if the loan is not repaid the federal government American taxpayer will take the hit.

Either way, it is a market subsidy. First, to the loan originators (mortgage brokers and banks) who made the dumb decisions that inflated our market (and it gets them off the hook legally). It also subsidizes the mortgage/housing market, which is still reeling from the 2008 bubble and market collapse.

I provide this background because it appears that we've been making billions in TALF loans over the past year, as you can see here, here, and here. Here's a list of the banks market players work with on these legacy asset loans (interestingly, they're the same guys who got us in this mess; e.g. Goldman Sachs, J.P. Morgan, etc.).

So you know, if your "legacy asset" (your home) is under water you're not eligible for these type of loans. Only the institutional market players are.

- Mark

Friday, January 22, 2010


A couple of days I wrote that the Democrats needs to stop whining about not having enought votes when they have a 59-41 advantage in the Senate. Then I wrote that Dems need to grow a pair. Here's one path that explains how you do it.

Step 1 -- The Senate passes a "reconciliation" bill with the popular public option and other budget-related fixes to the original Senate bill on issues like the national exchange and excise tax. This takes only a simple majority.

Step 2 -- The House passes both the original Senate bill and final reconciliation bill back-to-back and sends them to the President.

Step 3 -- A signing ceremony takes place that Democrats and voters can be proud of.

I know. This kind of strategy is bold and will piss off the Republicans. My response is, So What. They've been angry (and hateful) for years.

Look, the Republicans could care less about working with President Obama. They also have no shame about how they left the country (and want to pursue the same deregulation/tax cuts for the rich policies again). And they definitely don't have any sense of responsibility about fixing what they broke under President Bush.

Instead, they're acting like the homeowner who set their own house on fire, then show up to complain to the Fire Department about the water damage ... and the fact that the house isn't rebuilt. Why President Obama still thinks he can work with them is beyond me. 

Read this, and then sign the petition.

- Mark

POSTSCRIPT: This is great. I guess there's more Dems out there who think like me on this.

Thursday, January 21, 2010


In 1907 Congress passed a law that prohibited corporations and banks from contributing money to federal campaigns. Teddy Roosevelt, who made a name for himself as America's Trust Buster (breaking up Standard Oil), supported the legislation because of the amount of power corporations had over elections and the political process.

Put simply, corporations were buying and corrupting our state and federal governments.

Later, in Buckley v. Valeo (1976), the Supreme Court ruled that spending money to influence elections is a form of constitutionally protected free speech (but the SC did uphold a federal law which set limits on campaign contributions).

It appears that this all went out the door with today's Supreme Court decision

In a 5-4 decision the majority said that the government has no business regulating or limiting political speech by putting limits on corporate contributions. Specifically, since corporations use money to voice their opinion, and are considered protected persons, the Supreme Court said that the state could not violate their First Amendment rights (free speech).

In practical terms, corporations can now spend what they want on political campaigns.

One of the issues that should be addressed (hopefully) after this decision is whether corporations should be accorded the same protections as living, breathing human beings in America. Consider the following:

1. Corporations have the financial resources to hide behind propriety rights, indefinitely.
2. Corporations can hide behind different bankrutpcy laws.
3. Corporations can be foreign owned.

More importantly, people often forget that corporations gained "personhood" status because of the functional equivalent of a typo in 1886. Consider this ...

In the Santa Clara County v. Southern Pacific Railroad Company (1886) decision, the Supreme Court ruled that corporations are entitled to 14th Amendment protections when it came to taxes (yes, I've deliberately oversimplified the primary issue involved here). They had lost their initial court effort in California's Superior Court. This is where it gets really fun.

The railroad company used the Jurisdiction and Removal Act of 1875 - which was designed to help blacks avoid hostile southern state courts in their pursuit of justice - to appeal their case to the U.S. Supreme Court. The U.S. Supreme Court ruled in the railroad's favor. Their decision said nothing about corporate "personhood" (it focused on the tax claim). Then a court reporter - not a SC Justice - wrote a case summary of the decision in the headnotes that would literally change the content of the decision.

In the summary the reporter wrote that corporations enjoy the same rights under the 14th amendment (equal protection, 1868) as does a natural person. The U.S. Supreme Court didn't issue this interpretation. A court reporter did!

And just like that - because of the functional equivalent of a typo - corporations were enshrined with the same 14th amendment protections as living and breathing people. Now, because of Chief Justice Roberts and Justices Scalia, Thomas, Kennedy, and Alito, they can spend as much as they want ... because they're people too.

- Mark

Wednesday, January 20, 2010


OK, this should be the last post on yesterday's election in Massachusetts.

First, I like these quotes from Yves Smith. They mirror my blog comments from last night and this morning.

He [President Obama] clearly doesn’t get it ...

Mr. President, the American people have core values, and they don’t encompass political cronyism and tolerance of fraud and corruption ...

When Obama continued the Bush/Paulson moves on the bank bailouts, that was the beginning of the end of his “change” Presidency ...

The President expended so much political capital and goodwill placating the likes of Jamie Dimon and Lloyd Blankfein. Now that they’ve got their government checks, they can do whatever they like and continue to poison the polity ...

For those of you unfamiliar with the two clowns in the last quote, here's a score card.

Jamie Dimon is CEO of bailed out JP Morgan ($45 billion) and once famously said that "we should teach the American people, you're supposed to meet your obligations."  Dimon made the deal of the century by scamming the Obama administration American taxpayer, and is worth about $1.7 billion.

Oh, and he apparently can't hold his own umbrella.

Lloyd Blankfein is CEO of bailed out Goldman Sachs, and made $56 million the year before the market collapsed, which included a $26 million bonus. He's famous for saying (a year into the market collapse) that as a banker he's doing "God's work."  No word on whether he holds his own umbrella.

On the political side, one thing is clear: Democrats need to grow a pair.

Specifically, they need to stop wondering what to do about a Republican filibuster in the Senate. Democrats still have 59 votes out of 100. It takes 51 votes to pass legislation in the Senate. President Bush would have made himself emperor with 59 Republican Senators.

As I've said on air many times, the Democrats should craft their own policy and then force the Republicans to filibuster every one of them. Then leave it up to the Republicans to explain their obstructionism to the American public. Seriously. Break up the health care bill into 25 small bills, if you must. Then strip out all of the crap the Republicans and fake Democrats (i.e. Senators Lieberman and Nelson) wanted. Then let the games begin. If that doesn't work, go to reconciliation. That takes only 51 votes too.

Finally, do something for Joe Six-Pack. Three things stick out. An immediate payroll tax cut, spend hundreds of billions on infrastructure projects, and then go after Wall Street. 

- Mark


Dylan Ratigan gets it right when he says that the vote in Massachusetts yesterday was a good one because it sent a simple message: NO MORE POLITICS AS USUAL.

We all know that Americans are still pissed off about Wall Street laughing all the way to the bank while unemployment, debt, and uncertainty hangs over the head of Joe Six-Pack. Political bribery, like we saw on the health care vote, is not good politics.

President Obama needs to stop embracing politics as usual in Washington (lobbyists, money, and old fashion legislating/bribery) and start working for middle-class America. Otherwise the politics of change that delivered him to the White House will sweep him and the Democrats out. Unfortunately, after blowing his trump card on saving the ungrateful bankers, he may have blown his leverage with the Massachusetts vote.

More simply, he may have lost the aura of change that swept him into the White House.

- Mark

Tuesday, January 19, 2010


Off the top of my head, this is why I think the Democrats lost the U.S. Senate seat in Massachusetts.

1. President Obama rewarded Wall Street for their incompetence, while doing little to nothing for Main Street. Americans are rightfully pissed.

2. President Obama didn't push Congress when it came to allowing cheaper medicines in from countries like Canada. There goes the elderly independent vote.

3. President Obama made it look like he didn't really want a single payer system, or a public option, both of which he pushed for on the campaign trail. The base was uninspired.

4. Unemployment is at 10% when the Obama administration said it wouldn't hit 10%. This was simply a dumb move.

5. After the House passed foreclosure legislation that would help stem record foreclosures by allowing bankruptcy judges to rewrite mortgages, it died in the Senate without President Obama pushing for it. Nothing for Main Street.

6. President Obama's Making Home Affordable plan is being undermined by banks, who have Federal trillion-dollar guarantees and aren't in any hurry to negotiate with distressed homeowners. Sitting by as homeowners get kicked out of their homes by the very banks that created our mess is no strategy for winning votes.

Now, to be sure, Martha Coakley ran a terrible campaign. But there's little doubt that people are still pissed about what happened last year. Especially since no one's been disciplined and Joe Six-Pack has been left holding Wall Street's bags. This is not the Change people voted for. It's really that simple. I understand why independents bailed out on Barack Obama.

I may have more to say about this tomorrow. Then again, maybe not.

- Mark


If you want to know what's happening on the national real estate market scene check out these 10 charts from Michael David White. For my money, the key charts are the national debts that need to be cleared out (Chart #5), the Housing Market Overhang (Chart #7), and the Mortgage Performance/Negative Equity (Chart #8) that continues to bog down our markets.

I've discussed these issues on air and on this blog before. Still, it's nice to see them bunched together in a market that many people think is recovering. In a few words, we're still in trouble. As I've written, much of the positive news we've seen vis-a-vis the banks is smoke & mirrors. As well, President Obama's Making Home Affordable plan has become a disaster, especially since the banks don't have to negotiate in good faith (having the Treasury Department and the Federal Reserve backstop your toxic bets, and other derivative products with trillions of dollars in guarantees encourages banks to drag their feet).

In all cases, Michael David White makes it clear that we've got more big hurdles to clear. Why the MSM continues to interview the same tired cheerleader/analysts - i.e. the same people who didn't see our 2008 train wreck coming - instead of interviewing people like Michael David White is a mystery to me.

- Mark


Have you ever wondered how manipulating the money supply helped bring on last year’s economic meltdown? Probably not. Simply put, using the money supply to explain what happened last years just isn’t that interesting. It's kind of like when you play Monopoly. No one counts all the money in the Monopoly bank (every game comes with $20,580). It just doesn’t seem that important.

I'll try and change that here.

THE MONOPOLY CONCEPT (understanding our parasitic sociopaths)
Continuing with our Monopoly game concept it appears to me that as long as everyone gets their $1,500 to start the game most of us don't think twice about the money supply in our Monopoly game.

But we begin to think about the "money supply" when, over time, money gets lost from the game, or when someone cheats and takes money out of the bank. If money is lost over time most families will either buy another game, or order more money. Problems emerge, however, when someone starts cheating, or manipulating the money supply deliberately.

When cheating happens the game is ruined on many levels. For example, if the theft is on a grand scale eventually the bank won’t have enough money to pay out $200 to everyone who passes GO. Or the bank won't be able to pay out when someone needs a loan and wants to mortgage their property. In most game situations – especially among friends - the culprit is usually caught and receives a scolding, pounding, or dogpile.

All are richly deserved.

Our lives after the 2008 meltdown would be so much simpler if we operated by the Monopoly Standard. Simply put, the morons who caused our financial collapse were moving money to their side when no one was looking. They cheated. By making claims on money they didn't earn they manipulated the money supply. But instead of 'fessing up and suffering the consequences of their actions (like becoming unemployed, foregoing bonuses, reduced wages, etc.) our parasitic sociopaths essentially said, "I'm keeping my money for the next game." With the bailout we essentially said, "OK."


In a Monopoly game among friends and family a dogpile might be sufficient to teach these people a lesson. But we're not talking about cheating in a game among friends or family. Cheating and manipulating claims on our money supply happened in the real world. Our world. The idiots on Wall Street should have gotten pounded, but good.

So how did our Wall Street players cheat and manipulate claims on our money supply? According to economist - and frequent guest on my (still on hiatus) radio show - Mark Thoma there were three developments that helped inflate the money supply. These developments, along with regulatory lapses, contributed to the great bubble and crash of 2008. Using Professor Thoma's arguments I'll try and make our money games as Monopoly-friendly as possible.

SHOW ME THE MONEY (so I can loot and steal it ...)
First, the regulators at the Federal Reserve adopted an easy money policy. If we're talking Monopoly, essentially we allowed every player to start with $3,000 instead of $1,500. Then we said when you Pass GO you'll get $400 instead of $200. In the real world, the Federal Reserve's low interest rate policies essentially did the same thing. This created new flows and new claims on money which added cash to our financial system.

Second, since we always knew that we had older Monopoly games lying around the house we knew that we could always draw money from those games if we ever ran out of money. In the real world, this was the equivalent of knowing that we had our oil producing friends (OPEC) and Asia (particularly China) available to provide us with a never-ending line of credit. So we borrowed recklessly.

Finally, we allowed players to mortgage their properties for more money than they were worth. The bigger the property (like Boardwalk and Park Place), the bigger the mortgage (loan). Then we allowed the borrowers to make bets on which players would pay off their mortgages. We went from a "work hard and get ahead" system to a “what’s mine is mine” Casino Economy. Conceptually this is what Professor Thoma is talking about when he wrote about generating more cash "endogenously within the system." We borrowed and bet our way to wealth and thought it was all real (actually, we've made it real with taxpayer backed bailouts).

Easy money, a generous line of credit, and a debt-based casino economy is what we ended up with. No wonder the market players played along. There was virtually no limit to what they could claim.

For most of us, playing Monopoly like this is neither challenging, nor fun. We all understand why. Similarly, most of us understand that these practices, in the real world, do not represent capitalism. It's government-escorted market socialism. It transfers wealth from one group (you and me) to another (Wall Street).

Now for the fun part.

In Monopoly we know that someone is going to get rich. The game gets challenging when someone ends up with 3 to 4 times what everyone else has. It stops becoming fun when the wealth gaps get bigger, or when everyone goes broke.

In the real world, economists count the amount of money "Main Street" has (or has a claim on) by keeping tabs of something called M-1. When economists look at the amount of money the big players have (or make a claim on) they look at something called M-3. Traditionally the amount in M-1 has run behind what Wall Street claims by a factor of 3 to 4, just like in our Monopoly game.

Friday, January 15, 2010


Some kids want to play centerfield for the Yankees. Others want to play quarterback for the Dallas Cowboys. Then you grow up and realize that real talent is singing like Teddy Pendergrass. He passed away on Wednesday, at age 59.

Some argued that he lost something after he was paralyzed in an auto accident in 1982. I don't think so. You be the judge.

and now this ...

What a loss.

- Mark

Thursday, January 14, 2010


This is way cool. Turn up the volume and put it on Full Screen.

Canon 5D Mark II Slow Motion + Jaws ( Peahi ) 12-7-09 from iamkalaniprince on Vimeo.

- Mark


Pat Robertson got so many things wrong when he suggested that Haiti is to blame for their many problems, which includes their recent earthquake. Cenk Uygur from The Young Turks nails it, on so many levels.

Napoloeon III? In 1804? Pact with the Devil? As if slavery under the French was an angelic Caribbean retreat ... Who made the deal? Why does this pact condemn an entire population in perpetuity?

Look, if Pat can unilaterally claim that Haiti - a virtual slave colony at the time of it's independence - made a pact with the devil then he needs to explain the role of the United States in the devil's work.

People forget that we (i.e. Thomas Jefferson) helped foment revolt in Haiti because we wanted to make things difficult on Napoleon Bonaparte (not Napoleon III, his nephew, who was born four years after the slave/devil's pact revolt Robertson refers to). Our goal was to get the French out of the Americas so we could make a move on the Louisiana territory. It's also why we encouraged the Indians to rebel in the areas in and around the Louisiana territories at the time. We wanted to harass Napoleon Bonaparte out of the Americas (the Louisiana Purchase was completed in 1803).

On another level, pointing to the Dominican Republican (Haiti's neighbor) as some kind of dream enclave is simply nuts. Has Robertson ever read the history of the Dominican Republic? It was no swim party under General Rafael Trujillo. Anyone who's seen the film In the Time of the Butterflies, with Salma Hayek, understands this (the film does a good job of portraying the Dominican Republic's past under Trujillo, who was the "inspiration" for the UN's International Day for the Elimination of Violence Against Women ).

In all cases, if Haiti made a pact with the devil, Robertson needs to think through our role in fomenting the devil's work. Does that make us the complicit angels of the devil?

What an idiot.

- Mark

Wednesday, January 13, 2010


Watch this clip before scrolling down. If your computer can't support the piece click here.

I've done a couple of book signings since The Myth of the Free Market was released. One of the questions I've been asked at these signings is "What can we do?" Apart from suggesting that we pound on the doors of Congress I urged those in attendance to take their money out of the large commercial/investment banks and move it into local community banks and credit unions.

I've been meaning to write about this for some time now. As it turns out, someone's not only beaten me to the punch, but there is now a national movement. It's called "Move Your Money" and can be accessed at The idea behind the movement is simple: If our government won't discipline or break up our bungling but "bailed out-bonus sucking-Too Big To Fail" banks then we should do what we can to punish them on our own.

I won't go into details - primarily because this piece does a great job of explaining why you should move your money (with links) - but the links here provide you with the sites that grade regional banks (local banks here) and credit unions (our local Safe 1 is a four star) that are stable, safe, and (more importantly) are doing the right thing. I don't have my money in any of our big, Too Big To Fail, bailed out banks. I don't primarily because, in my view, they're run by parasitic sociopaths who continue to bet on the same market garbage (like CDOs and CDSs) that brought our economy down.

I encourage you to got to the links in this post. More importantly, if you haven't done so already, I hope you move your money.

- Mark


Senator Claire McCaskill calls it like it is. Last year, after hearing about Wall Street's billion dollar bonuses, she tells her congressional colleagues: "We have a bunch of idiots on Wall Street ..." (starts at 53 seconds).

She reminds everyone that executives at the 116 banks that were bailed out would receive an average of $2.6 million in bonuses and compensation in 2008. Sen. McCaskill also reminded America that Merrill Lynch paid out $3-4 billion in bonuses in a year (2008) that they lost $21 billion (and then turned to the American taxpayer for a bailout).

Well, guess what? Wall Street is preparing to do it again.

I guess that means they're still idiots.

- Mark

Tuesday, January 12, 2010


Back in March and July I wrote about how our non-regulatory and non-punitive responses to the 2008 market collapse effectively sets us up for an Extreme Do Over.

In a few words - and using ABC's Extreme Makeover Program as an example - I argued "that rather than demolish the commercial banking and investment infrastructure that got us into this mess - and then rebuilding everything with strong firewalls - the Obama administration has signed off on the old framework."

The point I made in both posts was that we've learned little to nothing from the market meltdown. The same people, the same thinking, and the same institutions that got us into this mess are still dominating our economy. In many respects, these developments create all the trappings for an Extreme Bailout Do Over.

This article from William Black offers additional insight into why we should not be surprised if we go through another 2008 market meltdown.

Black - who is a white-collar criminologist, a former senior financial regulator, and now an Associate Professor of Economics and Law - tells us that the epic regulatory failures at the Federal Reserve are the product of the continued intersection of a failed ideology with bad economics.

Specifically, Black points to five failures that are the stuff of legend:

1. Former Fed Chair Alan Greenspan believed that the Fed should not regulate fraud because the market would clean up fraud on it's own.

2. Current Chair Ben Bernanke also believed that the Fed should rely on self-regulation by “the market.”

3. Former Federal Reserve Bank of New York President Tim Geithner believed that he was never a regulator while he headed the NY Fed (a true statement as it applied to him, but not one he’s supposed to admit).

4. Bernanke gave key support to the Chamber of Commerce’s effort to gimmick bank accounting rules to cover up their massive losses — allowing them to report fictional profits and “earn” tens of billions of dollars in bonuses

5. Bernanke recently appointed anti-regulation crusader Dr. Patrick Parkinson as the Fed’s top supervisor.

Of these five developments, Dr. Parkinson's recent appointment is especially noteworthy because it shows that our regulatory mandarins have learned nothing from the past year.

Specifically, Dr. Parkinson was appointed largely because he shared Dr. Bernanke’s anti-regulatory ideology, a view that he hasn't changed even in the face of the Great Recession. Perhaps more importantly, as Black points out, Parkinson is an economist who has never examined or supervised. This is important because Parkinson is also known for naively claiming that credit default swaps (CDS, a.k.a the financial derivatives that destroyed AIG) should be unregulated because fraud was impossible among sophisticated parties! Huh?

Who believes crap like this? Oh, that's right. The same people who believe "invisible hand" pixie dust creates free markets where people magically become virtuous in the pursuit of profit.

And fairy tale market conditions exist too ... if you just close your eyes, click your heels together, and repeat the words, "There's no place like home ..."

Look, I'm all for creating useful myths and legends that help to build and unify a society (like George Washington never told a lie). But saying fraud is impossible among sophisticated parties in a market setting is like saying mingling among societies' power elites will turn ladies of the night into ladies of virtue. It doesn't happen.
At the end of the day, the anti-regulatory policies that Greenspan, Bernanke, Geithner, and now Parkinson champion are simply naive and reckless. Wishful thinking is no substitute for good policy.

- Mark

Monday, January 11, 2010


OK, let's assume that you're upside down on your house. You owe more than your house is worth. Still, you walk into a bank and are able to get a government-guaranteed loan based on the promise that the house eventually will create enough wealth (equity) so that you can pay off the loan. Imagine, getting a $250,000 loan (it's market value today) on a house when you owe $350,000.

You can use the money for many things, until the market recovers. Better yet, since there's a government guarantee, you could even walk away and leave the bank with your house if the market doesn't recover. Heads I win, tails you lose.

Many of you who owe more than your house is worth are probably thinking, Wouldn't that be nice? Well, this is exactly what Wall Street's financial titans have access to with the Federal Reserve's $2.45 trillion legacy asset program (one of many such programs).

So, what's a legacy asset? In a few words, legacy assets are the fine sounding name that the financial sector and the Federal Reserve gave to debt investments that were not paying off after last year's market panic. In your world a legacy asset would be a house that is upside down. On Wall Street legacy assets are debt contracts (home loan mortgages, credit cards, or other debts) that were sold to market players as money making instruments, but are no longer being paid. They are bad debts.

In the real world, non-performing debts would be written off, and the lender (or the industry) would learn a very hard lesson about reckless lending. Not so in our Alice in Wonderland Economy.

Here's how we got to this point.

Starting about 25-30 years ago once-promising debt contracts were bundled up and sold to market players. Over time we would call these bundled up debt contracts "asset backed securities" (ABS). Market players purchased these ABS products because America's middle-class could always be counted on to make regular payments over the life of the loans they took out. Your credit card payment or your home mortgage payment are the real assets here.

Because of vigorous lobbying by the financial sector, bankruptcy and foreclosure laws were tightened up to help make sure this would happen (see especially the Bankruptcy Act of 2005). Over time market players got giddy and even started making big (and incredibly stupid) bets on these debt products paying off. These were trillion dollar bets that dwarfed the size of our national economy, and threatened our economic viability.

As we now know, things didn't work out too well. Credit and loans between financial institutions dried up. The market collapsed. People lost their jobs. Market players who made big stupid bets (called credit default swaps) didn't have the money to pay their bets. 

Market players and financial institutions who thought America's middle-class would make their (ABS) investments pay off went nuts. They even blamed consumers for not paying their bills, even when they couldn't pay the stupid bets they had made.

No matter how you looked at it, the ABS markets were in trouble.

This explains, in part, why the Bush and Obama administrations swung into action. With the help of the financial sector and the Federal Reserve they created a nifty sounding name to deal with collapsed ABS markets. They called them "legacy assets." They were still worth crap, but at least "legacy assets" sounded better than "liability" or what they were, dying assets.

Legacy assets ... it's a nice name for a dying instrument. Kind of like euthanasia. Except instead of killing someone painlessly - especially someone suffering from an incurable illness - we put our tumor riddled and dying financial assets on life support. Here's how.

To put America's legacy assets on life-support we created something called Term Asset-Backed Securities Loan Facility (TALF). In real simple terms TALFs are government-backed loans. They can be accessed by those who hold financial crap, or non-performing ABSs. To better understand the concept let's use our home example from above.

If TALFs were available to America's home owners they should be able to use their homes to get a loan from the bank, even if they're upside down on the loan. Unfortunately, TALF loans are only made available to America's largest and most powerful financial players by the Federal Reserve of New York (and, no, President Obama's Making Home Affordable Program doesn't even come close to TALF; it's a joke).

Here's the real good part.

The big financial players don't need to put up any good collateral for the loans they get. They can use their poorly performing ABSs as collateral. If the collateral doesn't pay off then you and I are stuck with the bill (see "What happens if a borrower does not repay its loan?"). How much will this add up to? We don't know just yet. But we do know that the Federal Reserve has made at least $1 trillion available for these TALF (ABS) products, and another $1.45 trillion for non-performing assets in the housing market.

This is well above the $1.5 trillion that Presidents Bush and Obama made available via the Congress-approved bailouts.

So, how well are things going? No one is quite sure, especially since there's no telling how bad markets really are because of our bailout-driven, re-inflated economy (not to mention the impact of mark-to-market garbage inflation). But we do know that the TALF terms are quite good for Wall Street, especially given the terms that the credit card and mortgage companies give middle-class America. Consider the following:

1. No Pre-Payment penalties (unlike many home loan contracts).
2. Principal rather than interest paid first.
2. TALF loans can continue if underlying product is paid off (TALF's % rate terms make this attractive).

Over 2009 we know that at least $50 billion has been lent out for "legacy assets" (via TALF) either in the form of mortgage backed loans or other debt-driven instruments (credit card debt, student loan debt, car loans, etc.). The Federal Reserve has already lent money for products that may not be worth the amount of the loan. Either way, market players have been able to generate cash for necessities - like their bonuses - and can walk away from the loan if the underlying product doesn't pay off.

Again, heads they win, tails we lose.

But the U.S. taxpayer is told not to worry about being taken for a ride. Somehow, rigged "stress" tests in a bailed out industry are supposed to give us confidence that "markets" will work and the Fed will get our money back. And besides, the only way these the product can fail - according to the NY Fed - is if "extremely unlikely economic circumstances" appear (you know, like in 2008).

With record bonuses continuing to occur, in a bailed out and undisciplined market, somehow this doesn't inspire confidence.

- Mark

UPDATE: For an overview of what productive, non-financial, legacy assets are supposed to look like click here.

Thursday, January 7, 2010


Imagine that you rent a room to relative - we'll call him Paul - who stops working and then stops paying rent. You let Paul stay because he means well, and promises to get a job and start paying "next month". Imagine, then, how you would feel if Paul started eating and drinking everything in the house, while jacking up your utilities and pay-for-view cable bills. In the real world you might call Paul a liability (or worse). You might even kick his free-loading butt to the curb.

Unfortunately, these dynamics don't apply to Wall Street ...

You see, if you're a financier on Wall Street who promised to be productive, and then became a free-loading couch potato, you don't get kicked to the curb. In fact, debt-laden deals that fail to pay out - and then threaten to drag the entire household down - are even given fancy or neutral sounding names like "capital arbitrage" or "credit default swaps". In a way, it's kind of like your free-loading relative telling you that his joblessness and couch potato habits are really a "leisure recharge" laced with "horizontal power naps".

This article from explains how and why this happened on Wall Street in 2008 and 2009.

In a few words, all the toxic crap that stopped producing money in 2008 and 2009 was re-energized by billions of dollars from the Federal Reserve of New York when Treasury Secretary Tim Geithner was still the boss. More importantly, while Geithner headed the NY Fed in 2008 and 2009, American International Group (AIG) was told by Geithner's Fed "to withhold details from the public about the bailed-out insurer’s payments to banks during the depths of the financial crisis."

The impact of this financial muzzling was that AIG was able to pay its partners (in crime) 100 cents on the dollar for the debt-laden toxic instruments that weren't producing income.

This would be akin to one of your respectable relatives borrowing money from you - we'll call you Peter - and then handing it to your free-loading relative, Paul, so he could pay the rent ... and then telling Paul not to tell anyone where he got the money.

So, how do we know that AIG took money from the Fed and was then asked to stay quiet about what it was doing? Because e-mails between the company and it's regulator tell us the following: The NY Fed (incredibly, the "respectable relative") took money from the hardworking U.S. taxpayer (Peter), handed it to AIG (Paul), and then told them not to say anything about what was happening.

In the real world most of us would have figured what was happening and told our "respectable relative" to take a hike. Then we would have kicked our free loading relative (Paul) to the curb. But Wall Street's bankers don't live in the real world. They live in a world where Congress intercedes and guarantees that ambitous but irresponsible financial couch potatoes on Wall Street can take horizontal power naps all day long.

America's bankers have become wards of the state, plain and simple. This is the Peter Principle in the 20th Century.

- Mark

Wednesday, January 6, 2010


In 2005 Congress passed the Bankruptcy Abuse Prevention and Consumer Protection Act. It was a gift to the financial sector in that it made it more difficult for debtors (especially credit card debtors) to discharge their obligations through personal bankruptcy filings.

According to the industry - who was making record profits at the time - the BAPCPA was necessary because so many debtors were abusing bankrutpcy proceedings. More specifically, because debtors were "irresonsible" they needed to be held accountable with new laws that would force them into structured repayment plans instead of simply writing off their debts. According to the industry free markets couldn't operate properly if people were allowed to act financially irresponsible and then hide behind legal protections.

(I know, I know. The irony of it all. The facts behind the 2008 market collapse and the subsequent industry bailout makes the financial sector even more hypocritcal and ethically challenged on the BAPCPA than we thought. Anyways ...)

Focusing on personal irresponsibility would have been a good industry story-line except for one thing. It wasn't true. In fact, well over 90% of all personal bankruptcies in America were being filed for primarily three uninvited life altering reasons: (1) Catastrophic Illness, (2) Job Loss, or (3) Divorce. Little has changed today.

The real reason the industry wanted the BAPCPA was because they are simply too lazy to do their own due diligence. It was easier to get Congress to do their bidding. What they really wanted was to make it more difficult for Americans to discharge their debts because the longer someone had to sit on debt the more fees, penalties, interest rate hikes, etc. could be tacked on to that debt.

Well, guess what? It looks like the favorable legislation backfired on the industry (and the American taxpayer). It appears that, because of the industry's stupidity and greed, Americans are once again filing for bankruptcy at a staggering pace. Personal bankruptcy filings in America hit 1.41 million last year, up 32% from 2008.

The difference between today and 2005 is that more and more Americans are using Chapter 7 to file for bankruptcy (which allows debts to be discharged once assets are sold off) instead of Chapter 13 (which simply restructures debt if you can afford to make some payments under the 2005 BAPCPA). The indsutry didn't really anticipate this development. As well, in addition to divorce, catastrophic illness, and job loss, bankruptcies today are also being driven by home foreclosures (brought on by industry greed and bi-partisan stupidity).

Why is all of this important? Because in spite of getting Congress to write them favorable legislation the financial sector still shot themselves in the foot. In real simple terms they did this because they're too damn greedy and myopic for their own good.

More specifically, the financial sector shot themselves in the foot because they believed they would have a stronger and continuous stream of income because the 2005 BAPCPA was supposed to force more and more Americans into court-enforced bankruptcy repayment plans (which it appears to have done for a while). Confident that the courts would enforce indentured financial servitude on America's debtors the financial sector irresponsibly sent out more credit card offers (for example) with teaser rates, and then went out and sold more and more consumer debt to other entities. All of this helped fuel confidence in the CDO markets that would tank in 2008 and 2009.

There's more to this story. The point is you do not attack bankruptcy in America by writing favorable legislation that allows the financial sector to extract wealth from America's middle-class. The industry is too myopic, greedy, and stupid to do the right thing. Instead, Congress should be doing something about limiting the effects of uninvited life events like divorce, catastrophic illness (hello, public option), and job loss. Otherwise, all we end up with is a massive transfer of wealth in America.

This is not rocket science.

- Mark