Wednesday, November 30, 2011


Most of you have heard of Deustche Bank. Some of you might even bank with them. A regional Deustche branch in Atlanta requested the eviction of Vita Lee, a 103-year-old Atlanta woman, and her 83-year-old daughter. They have lived in the home for 53 years. The good news is that when the movers and county sheriff arrived they took one look at the bed ridden 103-year-old and had a change of heart.

No doubt - in spite of the movers and sheriff being the good guys here - Deustche Bank will try to spin the event so that they look like they're merciful bankers. Then they'll probably try the eviction again, when no one's looking. But, in reality, whatever reprieve is granted to Vita Lee, the merciful banking face we're looking at resembles the one in this scene ...

For those of you who aren't familiar with Deutsche Bank know this: Deutsche Bank was a big trader bettor in the toxic market instruments that Wall Street gambled on during the U.S. mortgage bubble.

Indeed, a Senate report about Wall Street and the financial crisis found that Deutsche Bank even continued to churn out toxic crap even as the market was collapsing, with one top trader betting that home mortgages (which were inside the larger toxic instruments, or CDOs) would fail. Put more simply, Deutsche Bank set themselves up to make money when they foreclosed on certain mortgages. This helps explain why selling faulty mortgages and then kicking a 103-year-old out of her house makes good business sense for Deutsche Bank. They make money off the process.

And, yes, apart from lying to customers in the U.S. and Germany about the investments, Deustche Bank received over $12 billion in bailout funds, and was poised to take a hit of hundreds of billions if the U.S. government didn't bailout A.I.G. (kind of like the House in Vegas covering your losses into the hundreds of thousands, but allowing you to keep your winning bets).

Oh, and for good measure, the former chief economist at the International Monetary Fund called the CEO of Deustche Banks, Josef Ackermann, “one of the most dangerous bankers in the world” because of his reckless business practices.

- Mark

Sunday, November 27, 2011

Saturday, November 26, 2011


Stuff that's really not important, but kind of fun reading on a lazy Saturday afternoon. Two not so great headlines from Seattle ...

"Joshua Lambert, Whidbey's Other Accused Murderer, Defending Self, Claims Insanity"

Then we have ...

"George Hinnenkamp, Elderly Oregon Man, Has Car Stolen and Crashed--Is Now Being Sued by Folks Who Crashed In It."  

- Mark

Monday, November 21, 2011


Early last week I posted on the GOP presidential field and their penchant for blaming the housing mess - and subsequent 2008 market collapse - on government policies. Long story short? Calling on my inner Paul O'Neil, I commented that the candidates in the GOP field are acting like blind men in a room full of deaf people. I posted links to earlier posts and op-eds I've written on the topic to provide substance and background.

Today I ran into this Washington Post discussion on the market collapse by Barry Ritholtz. It's titled "What caused the financial crisis? The Big Lie goes viral."

In a few words, Ritholtz makes the same points that I do, and argues persuasively that - rather than admit error - there is an emerging industry out there bent on creating a new narrative. Not only is this new narrative full of lies but, unfortunately, it's also winning the day.

Challenged on his op-ed points, Ritholtz responded with this piece in the Washington Post. It's excellent. I encourage you to read both his Nov. 5 and Nov. 19th columns. Both have inspired a great deal of ill-informed push back.

According to Ritholtz, the "push back continues from the usual sources." He lumps the Know Nothing sources into "3 distinct categories" that tell us much about a larger "disturbing trend" in America:

1) The Cognitive Dissidents (my term for a those politically dissenting from reality); their brains simply will not allow them to see what disagrees with their ideology. This is a very real and unfortunate part of human nature;

2) The Political Manipulators, who cynically know what they peddle is nonsense, but nonetheless push the stuff because it is effective. These folks are more committed to their ideology than the good of the nation, and as such earn my disdain.

3) The Innumerates, the people who truly disrespect a legitimate process of looking at the data and making intelligent assessments. These innumerates — mathematical illiterates — seem to revel in their own ignorance; it is embarrassing.

Ritholtz adds, "denying of reality has been an issue, from Galileo to Columbus to modern times. Reality always triumphs eventually, but there are very real costs to it occurring later versus sooner . . ."

I couldn't agree more.

- Mark

Saturday, November 19, 2011


With a Hat Tip to Barry Ritholtz, here's some really good interactive graphics that provide additional information on Europe's (and our global) debt mess. Enjoy (or get worried).

And keep in mind - as I discussed here - there's a difference between systemic risk (the political stupidity in the U.S.) and financial risk (Greece). How people talk about Europe's debt is important. At the end of the day, Germany's the key ... and pray to God (or whoever you pray to) they're either poitically ambitious or still looking for redemption.

- Mark

Wednesday, November 16, 2011


For those of you who are wondering why Herman Cain's Libya Moment is so important, we can start by acknowledging that national security is something that we shouldn't play games with. We shouldn't leave our national security thoughts and judgments to personal biases and moments of the mob. I think we can all agree to that, right?

That said, in my International Relations class I often start the quarter by showing this Monty Python clip, which illustrates what happens when you embrace biases and mob moments.

This is why Herman Cain's Libya Moment is so important. You can see him searching for President Obama's policy, and then circling the drain so that he can oppose it. It's that simple. Check it out here:

Several points here. First, Cain doesn't understand what President Obama's policy is in the region. Second, this also showed that Cain doesn't understand that President Obama has a larger foreign-global policy approach that he outlined at Oslo (which former Speaker Gingrich said bordered on the "historic"). Finally, it also showed that when it comes to national security and foreign policy Herman Cain is always ready to play politics, and run with the mob, instead of looking at how real problems are solved. This is not a good thing.

I'll leave it at that for the moment.

- Mark

Tuesday, November 15, 2011


Republican presidential candidates are ignoring reality, again.

Ten months ago I wrote that the GOP would - against all the evidence - begin blaming the government for a housing mess that was largely caused by the private sector and Alan Greenspan's policies. I wrote about it again in June. So, what happened last week? GOP presidential hopefuls blamed the real estate mess on "the government."

Like Paul O'Neill's blind man in a room full of deaf people, the GOP field ignored the role "Wall Street," "deregulation," and our "shadow banking" system played in creating the conditions for our housing market to bubble and burst. Nice.

But none of this should come as a surprise. GOP operatives began laying the groundwork for this narrative ... last December. Like last year's GOP operatives, todays Republican presidential hopefuls ignored the following:

* Freddie Mac and Fannie Mae were privately managed (and even became one with Wall Street) during the worst period of the housing bubble and bust.

* The real estate bubble and crash was global. Freddie, Fannie and the Community Reinvestment Act aren't global.

* Our commercial real estate market bubbled and crashed, too. Housing policies concerning Fannie, Freddie and the CRA had nothing to do here.

* Federal Reserve data reported that more than 84 percent of subprime mortgages in 2006 (right before the crash began) were issued by private (shadow) lending institutions. Yeah, that's 84 percent.

* Of these, only one of the top 25 subprime lenders in 2006 was directly subject to the housing laws like the CRA.

For added measure, here's what Federal Reserve Chair Ben Bernanke had to say about the real estate bubble and crash: 
"(M)ore than 30 years and recent analysis of available data, including data on subprime loan performance, runs counter to the charge that CRA was at the root of, or otherwise contributed in any substantive way to, the current mortgage difficulties."

And the GOP's vaunted free market claim? Their record's not good here either. Back in 2003 Republicans began praising subprime lending as the type of innovative lending that comes from deregulated or unfettered markets. Again, they praised subprime lending that led to low quality mortgages.

But this isn't the worst of it.

The real story here is how Republican members of Congress actually used Wall Street talking points to criticize Freddie and Fannie in the lead up to collapse. They did this because it helped AIG, Goldman Sachs, Lehman, Merrill Lynch, etc., muscle in on Freddie and Fannies market share (between 2004 and 2006 Fannie and Freddie went from holding a high of 48 percent of the subprime loans to about 24 percent).

After dumping many of these products on unsuspecting clients, Wall Streets economic mandarins are now dumping many of these toxic ("legacy") assets on the American taxpayer, in exchange for cash payouts.

You won't hear any of this from the GOP list of presidential candidates. Ever.

- Mark

Monday, November 14, 2011



So Italy has a new premier, Mario Monti. If his past is any indication of what he brings to the table, Italy has a fighting chance. I wrote about Mario Monti at the beginning of Chapter 8 in my book, The Myth of the Free Market. Here's what I wrote about Monti in my book, and what we might be looking at in the immediate future ...

Months before the start of the Second Gulf War in 2003, Secretary of Defense Donald Rumsfeld chided Germany and France for not following the U.S. lead on Iraq – derogatorily referring to their leaders as holdovers from “old Europe.” The claim was both misinformed and full of hubris. Since 1945 Europe had embraced democratic and free market principles, was a solid ally during the Cold War, and pursued economic integration as a way to foment cooperation and allay past tensions in the region.

Rumsfeld’s comments demonstrated a willful ignorance of how “new Europe” fulfilled, if not exceeded, the aspirations of America’s post-war architects. Old Europe – if we are to get our history right – would not have waited for the U.S. to sweep into the Middle East. In the end, Rumsfeld would have done well to have spoken with General Electric’s former Chief Executive Officer, Jack Welch. He understands “new Europe.”

During his tenure as CEO Welch merged more than 900 firms with GE. When Honeywell became available in October 2000 Welch went into action. While Honeywell produced many of the same products as GE – plastics, chemicals, electrical machinery, and aircraft engines –Welch was not concerned about anti-trust legislation because he believed Honeywell’s products were “complimentary” rather than competitive. And, besides, why should he worry? He was Jack Welch.

After getting the green light from the U.S. Justice Department Welch met with Eurocrat, Mario Monti, the European Union’s Director-General for Competition (its “antitrust” division). In Brussels Welch would find “new Europe.” In The United States of Europe T.R. Reid described the introduction: “Welch flashed his friendly, casual smile, stuck out a hand, and said, ‘Mario – call me Jack’ … ‘Mr. Welch,’ [Monti] replied in his accented but precise English, ‘we have a regulatory proceeding under way. I feel the proper approach would be to keep things on a more formal basis. You can call me Sgr. Monti.’”

Monti’s team had done their homework. They secured information from both GE’s industry competitors and United Technologies (the firm GE outbid for Honeywell). At one point, when asked about aircraft electronic parts manufactured by Honeywell, GE’s team offered only blank stares. And on it went.

When Monti finally called Welch to tell him the “deal is over” he would end the conversation by saying, “Now I can say to you, ‘Good-bye, Jack.’” Fifty-five years after the end of WWII Mr. Welch learned the hard way that the system U.S. post-war architects wanted to build for the world had found a home in Europe. Welch learned something else: By creating the conditions for a prosperous and independent Europe to emerge America’s grand liberal strategy had – and apparently without Donald Rumsfeld’s knowledge – erased “old Europe.”


If Monti does his homework and can stick to his guns like he did with Welch, things could work out. I'm not hopeful (Greece and the larger debt situation are a mess), but Monti could give Italy and Europe a new lease on life.

- Mark

Wednesday, November 9, 2011


It's déjà vu all over again ... yet, all the U.S. media want to talk about are Herman Cain's girlfriends, while ignoring the GOPs "Just Say No" obstructionism in Congress. Today, with the debt crisis in Europe flaring up again (this time with Italy), we're reminded that there's another world out there that warrants some serious discussion. Yet, America's political burlesque show is mesmerized (again) by sex scandals, and appears more than content pondering why Mitt Romney hasn't caught fire with the GOP (like that's some kind of mystery). Sigh ...

All of this kind of reminds me of all the Gary Condit sightings, and the shark fear mongering off the Florida coast right before 9/11. Seriously, what's happening with Europe's debt-to-default dance is pretty big stuff, and deserves more attention than Herman Cain's predations. Consider the following ...

Here's a statistical table with more countries that could be affected once the financial dominoes begin to collapse in Europe ...

I know, I know. Simply putting figures like these up without context is unfair.

So consider this. When Germany finally defaulted on it's World War I debt obligations after 1929 it had a debt-to-GDP ratio that stood at around 90 percent (they owed about $33 billion, or about $402 billion today, which was a reduction from the original $63 billion, or about $768 billion today). Today Greece's debt-to-GDP ratio stands at 157.7 percent, while Italy is around 120 percent. Is history whispering in our ear, again? I think so.

Relatedly, when Germany finally defaulted the French Chasseurs Alins (elite mountain infantry) had already occupied Germany's Buer (in North Rhine-Westphalia) region in 1923.

Today, instead of sending in the troops to deal with troubled debtors the world's economic mandarins are banking on central bank (or IMF sanctioned) cash. Specifically, they're banking on the Federal Reserve shoving half a trillion dollars or more on to Europe's books (and hoping no one notices). When all is said they're doing little more than pushing the economic debt can down the road.

This is especially not good when you consider that MF Global's recent Chapter 11 bankruptcy was not supposed to happen. Think about it. In our post 2008 market collapse environment, a firm like MF Global wasn't supposed to be able to borrow so heavily (or use investor funds) to make multi-billion bets on European debt. How much did MF Global borrow? It appears that MS Global may have had a 40:1 debt to equity ratio. What does this mean? It means that if you made $40,000 per year at your job, the bank would give you a $1.6 million loan ... three years after doing the same thing and watching previous clients piss it away gambling.

Yet MF Global's private industry regulator raised no red flags about MF Global debt to equity ratios, nor said anything about it dipping into $600 million of investor money to make their bets.

Yeah, it's déjà vu all over again, on so many levels.

- Mark


For those of you who think America's embrace of neoliberal, market-players-do-the-right-thing, policies is unique to the United States think again. Check out this overview of what's happening (and one persons take on voting) in Israel.

The piece raises the same issues that many in the U.S. (and Europe, I'm sure) are grappling with today. Long story short? We're all in the same political boat, and it appears to be sinking.

- Mark

Friday, November 4, 2011


Recall when the GOP arrived on the scene after winning the House in 2010? They immediately went to work ... pursuing reckless and largely symbolic policies.

It was so pathetic (and transparent) that I wrote about their epic failures during their first few weeks in power here and here. Reading the Constitution on the House floor. Redefining rape. Passing symbolic bills with no chance of being signed by the president.

And let's not forget the crying. All that manly-man, "I'm so proud of myself" crying.

Anyways, the goal for the GOP then wasn't to govern. And it still isn't today. This helps explain why, in spite of an on-going recession that still threatens to slide into an all out depression, our GOP led House has done a fraction of the work that they could have.

At the end of the day, the goal of our House led GOP is to gum up the works so much that President Obama can't govern either. Check out this week's "Just Say No" nonsense:

* This past week our GOP led Congress decided to follow an idolatrous path and loudly reaffirm our nation's commitment to God ... like God really cares if we kiss His ass on the House floor. Like that's so much better than finding ways to create jobs for the unemployed, or working to fix our housing and mortgage mess.
* God, I'm sure, must be happy with the super committee's stalled talks over the GOP's decision to keep the richest Americans from seeing their taxes increased to help pay down our nation's debt (which forces us to borrow from China).  
* Related, not only did our Congress fail to deal with unemployment (or increasing revenue), but the Senate voted to block President Obama's $60-billion jobs plan this past Thursday (Nov. 3). This was a follow up to last month's "let's do nothing" filibuster of President Obama's larger $447-billion jobs plan, and their subsequent "let's continue doing nothing" rejection of Obama's $35-billion proposal to save the jobs of teachers and firefighters. Nice. 
* Incredibly, though, our GOP led House found the time to pass H.R. 2527, which allows for the creation of a baseball Hall of Fame commemorative coin.

So, there you have it. Nothing on jobs. Nothing on infrastructure. Nothing for teachers and firefighters. Nothing on revenue from those most able to pay. Not even a murmur about the Greek situation.

And, no, the GOP job proposal legislation that's "sitting in Congress" doesn't count. They're really deregulation-tax favor poison pills, which are industry favors and only serve to set us up for a replay of the Bush Titanic.

Still, we need to understand how politically useful all of this obstinacy and obstructionism is for the GOP. Simply put, it allows Republicans to point to President Obama as a president who "can't get it done."

Never mind that no president has ever had to work with a Senate that requires a filibuster proof 60 votes to pass a bill.

Never mind that just saying "no" is no way to govern.

Never mind that 30 years of a failed ideology should be proof that we can't do it all over again.

And never mind that all of this is destructive to our nation's democracy and our economic health.

As long as the GOP gets Americans to believe that President Obama is not fit to govern, all is good in their world. Which explains why this past week was yet another epic fail week for the GOP.

- Mark

Thursday, November 3, 2011


If you've missed any (or all) of the Republican presidential debates, you're in luck. This piece pretty much synopsizes the talking points for the GOP lineup on the economy ...

Relatedly, this piece tells us how myopic and intellectually bankrupt the GOP's position on President Obama's economic proposals really are ...

And let's not forget the GOP's position on science and the Enlightenment ...

It doesn't change much from this. Seriously. And, no, Newt Gingrich becoming their flavor of the month won't change anything either. It will still be the same.

Consider yourself free to do something useful the next time the GOP presidential debates come around.

- Mark

Wednesday, November 2, 2011


The United States has less than 5% of the world's population. Yet, we have 25% of the world's total prison population. OK, let's hear it, "We're #1, we're #1 ..."

How much does our punitive and wasteful prison culture cost America? Think about this: If California emptied its prisons today and sent every inmate to college in California we would save almost $7 billion per year. Check it out ...

Prison vs Princeton
Created by: Public Administration

Here are a few more numbers ...

Now, I'm not saying that we should empty our prisons, but we definitely need to have a discussion about our priorities. And, yes, the Tea Party should be all over this issue too.

- Mark

Tuesday, November 1, 2011


- Mark

ADDENDUM: This one from Goldwater is pretty good too ...

I'm frankly sick and tired of the political preachers across this country telling me as a citizen that if I want to be a moral person, I must believe in "A," "B," "C" and "D." Just who do they think they are? And from where do they presume to claim the right to dictate their moral beliefs to me?