Monday, September 30, 2013

HOW THE SHUTDOWN AFFECTS AMERICA (but, by the way, Obamacare is up and running in California)

From The Fiscal Times we get "The Shocking Cost to Taxpayers of a Shutdown."

From Russia Today we get "10 Ways Govt. Shutdown Would Hurt America" ...

1 Countdown to US default looms  A halt of US government operations would drag the world’s biggest economy closer to bankruptcy, something unprecedented in US history. If no budget deal is done, the US would bump up against their“debt ceiling”  and run out of money by October 17. By then, the US government would have less than $30 billion cash on hand, Treasury Secretary Jacob Lew has calculated. 
2 Hundreds of thousands of federal employees on furlough  A one-time layoff of 800,000 people working for the US government would erode the earlier projected economic growth of 2.5 percent for the fourth quarter of 2013 by about 0.32 percentage points, according to a forecast by Mark Zandi, chief economist and co-founder of Moody's Analytics. That projection assumes a two-week shutdown. If it drags into a whole month, the loss of GDP would rise to 1.4 percentage points. 
3 Troops’ paychecks stopped  About 1.4 million military active-duty personnel would keep on working, but with their paychecks delayed. Approval for troops’ paychecks is dependent on Obama’s proposed 2014 federal budget being passed by Congress. 
4 Women and children’s nutrition program threatened  Pregnant women and new moms who are poor and facing “nutrition risk” won’t be able to buy healthy food, as a looming shutdown would put bracers on the $6 billion Special Supplemental Nutrition Program for Women Infants and Children (WIC). 
5 $85 billion in cuts to federal programs  When a shutdown was last threatened in March 2013, it would have resulted in $85 billion in automatic cuts in spending on federal programs – many aimed at alleviating social hardship. The cuts, known as sequestration, would affect grants to local organizations and funds that keep those programs running. 
6 Housing loans halted  US federal programs that provide for about 30 percent of all new loans in the housing market – a backbone of the country’s economy – will be shut down. Government funding of new businesses will also be halted, as well as workplace health and safety inspections. 
7 Trade talks scuppered?  US plans to have a Pacific trade deal, the Trans Pacific Partnership, signed with the US’s Asian partners could stall, as Obama may decide not to travel to this weekend’s Bali, Indonesia meeting of the Asia-Pacific Economic Cooperation nations. While he could still go if no deal is done by then, it could be a gift for his Republican opponents if Obama was seen to be jetting off to a tropical paradise at a time when federal employees were sent home without pay. 
8 Visa delays likely  Thousands of Americans may not be able to get passports for foreign travel, and tourists travelling to the US will likely face delays in visa processing. During the last government shutdown in 1996-97, some 20,000-30,000 applications remained unprocessed daily. 
9 Space program on hold  Space agency NASA will be hit the most, as the agency will need to furlough about 97 percent of its employees, though it will continue to keep workers at Mission Control in Houston and elsewhere to support the International Space Station, where the two NASA astronauts currently on board, Michael Hopkins and Karen Nyberg, may not know whether they have jobs to come back to. 
10 National parks, museums and zoos would close to the public  State-funded museums, art galleries and zoos across the country would keep their doors closed Tuesday, leaving thousands of employees furloughed and visitors unable to see attractions. US national parks, from Yosemite to the Shenandoahs, as well as Washington’s National Mall, Lincoln Memorial and Constitution Gardens, would also be closed.
And, in the FYI category, Covered Care (Obamacare in California) - what much of the shutdown was supposed to be about - is now up and running. There are no delays announced (yet), so you might as well as get the ball rolling. Click here for details.

- Mark 

UPDATE: It's official. The roll out of Obamacare in California is on track


The Rolling Stones' Matt Taibbi has another solid article, "Looting the Pension Funds: All across America, Wall Street is grabbing money meant for public workers." The article makes primarily three points:

1. State and municipal pension plans are underfunded.  
2. To make up for underfunding pensions state and local governments have been steered into risky "alternative investments" that have high fees and many middle men. 
3. Many of the same Wall Street guys operating these "alternative investments" have a political stake in seeing unions and their pensions collapse (as long as they get their fees, what do they care about the fund if their larger political goals are met?). 

I bring this up because it was three years ago that I wrote this post (and this post), which explained how Wall Street was ripping off ordinary workers in America. The focus was not on public pensions but on the looting of private pension plans.

In brief, I explained how many private corporations deliberately underfunded pensions for years. This helped fatten profits and bonuses. The larger issue, however, was when they then dumped their "private" obligations on the American taxpayer. How did they do this? By shifting their underfunded pension obligations to the federally managed Pension Benefit Guaranty Corporation, (or PBGC) when their companies ran into trouble or went bankrupt.

Over time, using conservative investment strategies, the Pension Benefit Guaranty Corporation ended up providing a semblance of stability for many pensioners. Many of the PBGC's pensioners might have been wiped out in retirement were it not for the federal government, and it's steady management of these bailed out private pension plans.

Things went well until President Bush appointed former Lehman Brothers executive, Charles E.F. Millard, to run PBGC. This is a significant point because, if you recall, Lehman Brothers ended up declaring bankruptcy in 2008, in what was then the largest bankruptcy in U.S. history.

It turns out that Mr. Millard didn't embrace the cautious investment plan used by his predecessors. He decided to take much of the $64 billion in federal pension money from the PBGC and dump it into some of the more aggressive (and toxic) Wall Street investments ... right before the economy went off a cliff in 2008 (which is one of the reasons the PBGC started running in the red).

The point here is that some of Wall Street's biggest players have been looting the American worker for years. Taibbi's article is really another story in a longer line of stories documenting the systematic transfer of wealth from middle America to Wall Street and corporate America.

I encourage you to read Taibbi's article. If you don't have the time here's Matt Taibbi discussing the looting of public pension funds on Democracy Now.

- Mark

Hat tip to Tom for the link.

Wednesday, September 25, 2013


From we get their "Top 16 myths about the health care law" (with myth perpetuating cartoons) ...

1. The health care rations care, like systems in Canada and Great Britain. 

2. The health care law has "death panels." 
Pants on fire.

3. Muslims are exempt from health care law. 
Pants on fire.

4. The IRS is going to be in charge of a "huge national database" on health care that will include Americans' personal, intimate, "most-close-to-the-vest-secrets." 
Pants on fire.

5. Congress is exempt from Obamacare. 

6. Under Obamacare, people who have a doctore they've been seeing for the last 15 or 20 years won't be able to keep that doctor. 
Mostly false.

7. The health care law is a "government takeover" of health care. 
Pants on fire.

8. Non U.S. citizens are eligible for Obamacare. 
Pants on fire.

9. Because of Obamacare health care premiums have "gone up slower than any time in the last 50 years." 

10. Under Obamacare "75 percent of small businesses now say they are going to be forced to either fire workers or cut their hours." 
Pants on fire.

11. "At age 76, when you most need it, you are not eligible for cancer treatment" under the health care law. 
Pants on fire.

12. The health care law includes "a 3.8% sales tax" on "all real estate transactions." 
Pants on fire.

13. "Obamacare is ... the largest tax increase in the history of the world." 
Pants on fire.

14. A "hidden" provision in the health care law taxes sporting goods as medical devices. 
Pants on fire.

15. Obamacare will question your sex life. 
Pants on fire.

16. An Obamacare provision will allow "forced home inspections" by government agents. 
Pants on fire.

For more details on the facts behind Obamacare be sure to read the PolitiFact article and click on the links.

For those of you interested in disspelling more Obamacare myths with real facts, click here.

- Mark 

Monday, September 23, 2013


JP Morgan will pay $920 million in penalties for misleading investors AND (this is the good part) will admit that it violated federal securities law by failing to track and catch the traders working for them who hid losses in 2012.

While the admission is not one of deliberate deceit and fraud, getting the firm to admit that it had insufficient internal controls to catch deviant behavior is a start.

- Mark 


Twelve must-see views at U.S. national parks (MNN).

Three infuriating facts about failed CEOs after the 2008 market crash (Think Progress).

Harvard Law Professor: U.S. tax policy may have helped spark 2008 market collapse by encouraging debt accumulation (Money News).

Growth in food stamp program is not because of fraud or over payments, but because of the economic downturn (Truthout).

NSA shares raw intelligence, including Americans' data, with Israel (The Guardian).

U.S. spying on allies sparks outrage, Brazil and Mexico demand answers (Bloomberg).

Narco Politics: How Mexico got there and how it can get out (Council on Hemispheric Affairs).

Military contractors among the highest-paid CEOs of the past two decades (Foreign Policy in Focus).

The U.S. spy budget (i.e. the Black Budget) for the 16 spy agencies has been disclosed - thank you Eric Snowden - and now stands at $52.6 billion (Washington Post).

The United Kingdom asked the NY Times to destroy the Snowden materials (Reuters).

The CIA's involvement in the 1953 overthrow of Iran's Mohammed Mossadegh is detailed in All the Shah's Men: An American Coup and the Roots of Middle East Terror. The CIA is just now admitting its role in organizing the 1953 coup (Aljazeera).

Obamacare is better than you think ... plus some of its shortfalls (Truthout).

How to end the Obamacare debate that the health care law works (National Journal).

Defunding Obamacare won't actually defund Obamacare (National Journal).

The fiction of Obamacare rate shock (Center for Public Integrity).

An uplifting story of someone doing the right thing (Huffington Post).

Fracking triggers over 100 earthquakes in Ohio (Grist).

Why are companies reluctant to hire military veterans? (National Journal)

How Putin saved Obama, Congress, and the European Union from further embarrassing themselves on Syria (Juan Cole / Informed Comment).

Yes, the U.S. Senate ignores the masses (Nation of Change).

Power and privilege has its benefits ... special license plates in Colorado give state lawmakers free parking, protects them from photo radar tickets, and protection from past due parking tickets (CBS / Denver).

- Mark

Saturday, September 21, 2013


In the "Why You Should Always Mind Your Own Business" department.

A young thug tries to start a fight with a 54 year-old man, who also happens to be former WBA Featherweight Champion Rocky Lockridge (44-9, 36 KO). I think you know how this one is going to end  ...

Hat tip, Tom.

- Mark 


- Mark 

Friday, September 20, 2013


Consider yourself pretty sharp if you get this in 3 seconds ...

If you need help, this is Russia's president ... or you can just click here.

- Mark 


Five years after the market collapse a just released PEW survey shows that the vast majority of Americans believe that wealthy people (59%), large corporations (67%), and financial institutions (68%) benefited most from the bailout programs. More than 7 out of 10 Americans believe that the poor and the middle-class did not benefit much (or not at all).

At the same time 63 percent of Americans believe that the U.S. economic system is no more secure today than it was before the market crash in 2008. Worse, more than 98 percent of respondents make it clear that household incomes and the job situation has recovered "partially" or "hardly at all."

With the stock market reaching record levels today, and with record profits in the financial sector, these numbers help to remind us that things aren't right in America.

- Mark 


As expected, the Republican-led House voted 230-189 to defund Obamacare today ...

With the Senate promising to effectively do nothing with this piece of legislation - and with a guaranteed veto from President Obama - the vote is yet another example of how Kabuki Theater is now the dominant political form of Republicans in Washington.

But here's the real kicker. Even if the impossible happened, and the legislation got through the Senate and was signed by President Obama, it still wouldn't defund Obamacare. Simply stated, Medicaid expansion and the subsidies used to purchase insurance are exempt from the legislation. This portion of Obamacare is funded through "mandatory" spending provisions, which means they have permanent funding authority. What the GOP-led House is targeting are smaller parts of the law that are subject to annual appropriations.

So, yeah, with no possibility of the legislation passing, or actually defunding Obamacare, what the Republicans are doing is exponentially dumber than you think. Call it Kabuki squared.

Seriously, these people are idiots.

- Mark

Thursday, September 19, 2013


For years Wal-Mart and other companies with 500 or more employees have increased profit levels by paying salaries that don't provide a living wage. A living wage is the wage necessary for a worker to meet basic needs, which include shelter, clothing health care, utilities, nutrition, etc. (more on this below). When wages aren't sufficient to survive the state - or the taxpayer - must step in to help provide for basic necessities of life.

The interesting thing is that we've known how miserly wages paid by companies like Wal-Mart have cost the taxpayer for some time now.

The larger issue behind not paying a living wage, and having the state pick up the slack, is not that it happens. The larger issue is understanding that employers like Wal-Mart actively work to game the system so that it happens. Compounding the issue is that there is no shame in paying poverty wages, or in having the taxpayer subsidize profit levels that allow six members of the Walton family to have as much wealth ($89.5 billion) as the millions of individuals who make up the 40 percent of American families living at the bottom of the country's wealth distribution ladder.

Incredibly, the Wal-Mart story is an old one. While the details may differ, history tells us that those with wealth and power, and not just today's largest corporations, have been milking the state to pad their profits for some time now. Indeed, having the state subsidize wealth accumulation has been going on since well before Wal-Mart - and even market capitalism as we know it - came along.

Check it out ...

The Great Transformation 
While describing the evolution of modern market economies Karl Polanyi explained in The Great Transformation (1944) how the market, and the prospects of market players, got a significant boost from state policies. Describing the conditions that existed in 17th century England, Polanyi explains how paupers were essentially required to stay in their parish districts after the Act of Settlement (or the Poor Relief Act) was signed in 1662.

While the goal was to keep the wretched and the poor from wandering into other communities, and becoming a burden on others, the end result was that those with wealth in England benefited.

Specifically, the Act of Settlement benefited owners of large estates and farmers because they could now depend on a captive tenant and labor market pool. They also benefited from having access to dormant laborers from other parishes, who might be invited to work, but could also be fired and forced to return to their home parishes (before they could establish residency, usually after 40 days).

But wait. That's not all that was going on.

Adam Smith, the godfather of capitalism, also condemned the Act of Settlement. He argued that it undermined the system of reward because it prohibited the individual laborer from exercising "his industry in any parish but that to which he belongs."

Smith understood that the Act of Settlement hindered worker mobility, which prevented labor from finding its level price. Not only did these dynamics subsidize those with property and wealth, it came at the expense of the common worker.

In effect, by tying people to their parish the Act of Settlement had created a system of Parish Serfdom.

Because workers found it difficult to travel outside of their parish district, they had to compete with cheap labor brought in from other parishes (who could be dismissed at any time without cause), or were forced into work houses. The fact that the family plot and common land were disappearing (industrialization) only made matters worse since workers could no longer rely on eking out a living from the land when the economy soured.

In this environment landowners and industrialists had no reason to pay competitive market wages. So they didn't.

Parish Serfdom & State Subsidized Profits
By 1795 the Act of Settlement had been partially repealed. Unfortunately, a series of events (the Enclosure Movement, bad harvests, the Napoleonic Wars, tariffs, etc.) would also create a larger than normal pool of impoverished workers who could not afford to feed themselves. After suggesting that higher wages be paid by farmers and other employers - a suggestion that was rebuffed - local authorities in the village of Speenhamland saw mass famine and political upheaval on the horizon. They decided to act.

In the absence of higher wages, the working poor in the village of Speenhamland would receive public assistance, which would be paid by parish authorities. To be sure, new taxes were assessed to help defray costs (on large estates too). But the Speenhamland System allowed farmers and emerging industrialists to continue paying below subsistence wages.

And why not? The community parish would was picking up the tab for keeping workers healthy and alive.

This is where it gets interesting. Rather than recognize how the Speenhamland system subsidized the profits of those with wealth, critics of the Speenhamland system at the time complained that public assistance encouraged paupers to have more children, enter into early marriage, and created a system of "dependence" on state assistance within the poorer classes.

Those who pointed out that the Speenhamland System was really a massive subsidy for the landed elite, and other employers, were drowned out by the cacophony of disdain for the lazy and the wretched poor.

Proof positive that history echoes in eternity.

Back to Wal-Mart
By refusing to pay their employees a living wage - as was the case with the employers in 17th century England - companies like Wal Mart are effectively encouraging their workers to seek public assistance.

In a revealing study produced in the U.S. House of Representatives (prepared by the Democrats, since the GOP is focused on saying No, and trying to defund Obamacare) we learn that Wal-Mart employees are applying for state welfare programs in record numbers. Unable to pay for basic necessities Wal-Marts workers need help and apply for state assistance for school meals (breakfast and lunch), housing, Medicaid, utilities, food (SNAP, or food stamps), and child care, among other basic needs.

And it's happening across the country

For example, the study found that a single store in Wisconsin "likely costs taxpayers at least $904,542 per year - and could cost taxpayers up to $1,744,590 per year - about $5,815 per employee."

In California the story is not much different. According to the LA Times over the next 5 years an additional 130,000 workers who work for large firms like Wal-Mart will be placed on California's Medi-Cal rosters. Part of the reason for doing this is to take advantage of Obamacare, which means that in spite of having the resources to pay for their full-time employees Wal-Mart is going to dump as many eligible workers into the state system as they can.

Wal-Marts actions will boost the number of full-time workers on Medi-Cal to 400,000 people by 2019. This will cost the state between $5-6,000 per year, but will also boost company profits.

To deal with this development legislation made its way through California's legislature earlier this summer that would have fined large companies like Wal-Mart for every full-time employee that ends up on the states Medi-Cal program (California's version of Medicaid). The rationale is simple. California doesn't want to subsidize corporate profits by using tax payer dollars to keep a company's workers healthy and fed. Unfortunately, the legislation (AB 880) failed to pass.

While ordinary workers today are no longer held to their "parish district" the harsh reality is that they are forced to compete in a labor environment that undercuts the ability of laborers to earn a decent wage (hostility to unions, lax immigration policies, etc.). The fact that the state continues to subsidize the profits of large companies like Wal-Market by augmenting their miserly wages should tell us all that Parish Serfdom is not just a concept for historians.

Our march towards Parish Serfdom is real, on so many levels.

- Mark

FYI: The living wage differs from the minimum wage and subsistence wage. The former is an arbitrary wage established by law, while a latter is the income necessary to buy enough food to keep your body functioning.

Wednesday, September 18, 2013

WHY THE BANKS FAILED (and will fail again)

I should have posted this with my Five Year Anniversary post on the market meltdown.

From the Financial Times, but via Zero Hedge, we get the five primary reasons banks failed in 2008 - reckless mergers (M&A), not enough cash reserves (LC), excessive debt-based bets (RFS), poorly vetted loans (BL), and too many stupid bets on derivative products (BI/T) - in an easy to understand infographic (click here to enlarge) ...

The key, for me, is the "What hasn't happened?" category at the bottom. The banks are still on life support, and they're still too big to fail.

- Mark 


Yeah, they just hate President Obama ...

Republican support for the health care law jumped to 22 percent when it was called the Affordable Care Act, and languished at 14 percent when it was called Obamacare. For the Fox News viewers reading this, Obamacare and the Affordable Care Act are the exact same thing.

Put another way, Republicans like the Affordable Care Act more than they like Obamacare.

I know, I know ...

- Mark

Tuesday, September 17, 2013


Seriously ...

- Mark


PBS will air a six hour documentary on Latino Americans starting tonight, September 17th, at 8 pm EST. Here's the promo for the PBS documentary:

Immigration is at the heart of the American experience, and a central part of the long-running democratic experiment that is the United States. So it is that our series intersects much that is central to the history of the United States. The story includes expansionism, Manifest Destiny, the Wild West, multiple wars (Mexican-American, Spanish-American, World War II), the rise of organized labor, the Great Depression, the post WWII boom, the Cold War, the Civil Rights movement, globalization, and the effects of multiple kinds of technologies – from the railroad and barbed wire to the internet and satellite television.

Be sure to watch. The PBS timeline and history promises to be both informative and eye opening for many, as these short stories of Macario Garcia and Hector Garcia demonstrate.

- Mark 


Texas is editing science out of our textbooks (Salon).

 Be sure to click on both links because these people are idiots (Think Progress / Addicting Information).

The top 1 percent played the Tea Party for suckers (Salon).

Brutal obituary reminds all to be good to their children (Buzzfeed).

A decade of flat wages (Economic Policy Institute).

Health / Science
Meat inspector: "We are no longer in charge of safety" ... chunks of feces is now making its way through flawed meat inspection program (Salon).

USDA to allow China to process chickens, and ship back to the U.S.A. (Yahoo).

Half of all antibiotics in China go to livestock, who are now developing antibiotic resistant genes (Mother Jones).

How Right-Wing regligious communities give measles a chance to spread (Think Progress).

Suicide rate for veterans far exceeds that of civilian population (Center for Public Integrity).

These 6 corporations control 90 percent of the media in America (Business Insider).

How anti-intellectualism in the media has created "multiple dead zones of the imagination" so that critical thought has been crowded out by "a cesspool of conformity" (Truth Out).

- Mark


I've written about the issues surrounding the health care debate numerous times (see here, here, and here). Most recently I offered three questions to ask your "I hate Obamacare" friends.

If you don't have the time to read through the posts and links, but want some quick talking points, here's a brief overview of the state of health care in America  ...

Hat tip to Cathee for the link.

- Mark 

Monday, September 16, 2013


Comparing Time covers from around the world ...

This, in part, is what Russian President Vladimir Putin was referring to when he questioned the assumptions of American Exceptionalism.

Most of you undestand the point when I say that this says much more about our nation than most Americans care to admit. This is embarrassing, on so many levels.

- Mark


If you enjoyed my explanation of how markets were formed in "War & Markets ..." - and it appears that many of you did (thank you) - you're going to love this FB post from former Secretary of Labor Robert Reich.

His discussion of our modern "free market" system, which is posted below, nails it. Specifically, he makes it clear that our understanding free markets is seriously flawed ...

One of the most insidiously deceptive ideas is that the "free market" is natural and inevitable, existing outside and beyond government -- so whatever inequality or insecurity it generates is beyond our control. By this view, if some people aren't paid enough to live on, the market has determined they aren't worth enough. If others rake in billions, they must be worth it. If millions of Americans remain unemployed or their paychecks are shrinking or they work two or three part-time jobs with no idea what they'll earn next month or next week, that's too bad; it's just the outcome of the market. According to this logic, government shouldn't intrude on the free market -- through minimum wages, high taxes on top earners, public spending to get people back to work, regulations on business, or anything else -- because the "free market" knows best and government always messes things up.

In reality, the "free market" is a bunch of rules about:

(1) what can be owned and traded (the genome? slaves? nuclear materials? babies? votes?); (2) on what terms (equal access to the internet? the right to organize unions? corporate monopolies? the length of patent protection? ); (3) under what conditions (poisonous drugs? unsafe foods? deceptive Ponzi schemes? uninsured derivatives?) (4) what's private and what's public (police? roads? clean air and clean water? health care? good schools? parks and playgrounds?); and (5) how to pay for what (taxes, user fees, individual pricing?).
In other words, markets don't exist in a state of nature; they're human creations. [my italics/bold]. Governments don't intrude on free markets; governments organize and maintain markets. Markets aren't "free" of rules; the rules define them. The rules can be designed to maximize efficiency (given the current distribution of resources), or growth (depending on what we're willing to sacrifice to obtain that growth), or fairness (depending on our ideas about a decent society). They can even be designed to entrench and enhance the wealth of a few at the top, and keep almost everyone else comparatively poor and economically insecure.

If our democracy was working as it should, elected representatives, agency heads, and courts would be making the rules roughly according to what most of us want the rules to be. Instead, the rules are being made mainly by those with the power and resources to buy the politicians, regulatory heads, and even the courts (and the lawyers who appear before them). Not incidentally, these are the same people who want you and most others to believe in the fiction of an immutable "free market."

Which is all to say: If we want to reduce the savage inequalities and insecurities that are now undermining our economy and democracy, we have the right to do so. But we must exert the power that is supposed to be ours.

- Robert Reich

So, yeah, there is no homo economicus, and you don't get rich on your own.

FYI: Reich will be on The Daily Show with Jon Stewart tonight.

- Mark 


This is pretty cool. Achieving synchronicity from 32 discordant pendulums ...

Hat tip to Tom Webster for the link.

- Mark 

Saturday, September 14, 2013


This seems appropriate given my previous post ...

Hat tip to Robin.

- Mark 

MARKET COLLAPSE, FIVE YEAR ANNIVERSARY EDITION ... And, yes, we're still dealing with the same crap

It was five years ago today that I started writing about the market collapse, in real time. Today, the people on Wall Street are doing the same thing that blew up the market in 2008. Only this time, instead of terrible lending practices and bad investment decisions, we now have to worry about the fact that the financial institutions are much larger. Worse, they're now dependent on bailout programs and the easy money policies (QE) of the Federal Reserve.

Below I'm going to explain, in very general terms, how Wall Street and the largest financial institutions continue to do many of the same things they were doing before 2008. The focus below is on how they use their clients money to make stupid bets, which most people know nothing about. Since the details make this a complex topic for many I'm going to over simplify the story below (you can click on the links for the details behind the process)

With that, here's how Wall Street works today ..


About a year and a half ago I wrote how Wall Street "borrows" the hard earned money of the investors who have accounts with them. What do they do with the money they borrow? They gamble on things that they think will pay off big time. When the Wall Street guys and the large financial institutions win big with your cash they get to keep it all and give themselves bonuses. To be sure, they return what they borrowed, but you get no cut for letting them use your account to bankroll their bets.

When they lose the bet ... well, that's why I'm writing this.

It's a long history, but borrowing money from customer accounts is an easy thing for the big financial institutions to do.

To be sure, it's not the same as you and me going to a bank and borrowing money (again, click on the links to understand the details). But let's be clear here. The guys on Wall Street can borrow and ride on the financial coattails of your accounts because favorable legislation from Congress allows it. Deregulation, you know.

Worse, many of the lobbyist influenced agencies that regulate this game essentially wink and nod at their practices.

In effect, what Wall Street does is the same thing the wayward child does when they "borrow" the family jewels (without any one's knowledge) and hock them at a pawn shop so they can gamble or "invest" it in some easy money scheme that they're sure will pay off in the end.

If the gamble pays off and the family jewels are returned - with no one the wiser - no harm is done (keep in mind this is Wall Street's logic).

But things don't always work out this way.

What ends up happening is what happened in 2008, and what's happening with former former Goldman Sachs CEO John Corzine now.

In a few words John Corzine - who was also a U.S. Senator and governor from New Jersey - is being sued by the federal government (the Commodity Futures Trading Commission, CFTC). The suit claims that as head of MF Global Corzine allowed his company to "borrow" and transfer over $1 billion in customer accounts to MF Global accounts in an attempt to prevent MF Globals collapse, and eventual bankruptcy, in 2011.

The CFTC lawsuit says that Corzine and MF Global essentially used customer accounts to try and pay off debts accumulated when MP Globals bets (they weren't investments) in Europe failed.

The counter argument by Corzine and MF Global is that things were happening so fast that they didn't know which money accounts they were using. Here's what MF Globals lawyers claim:

“If MF Global’s employees could not distinguish customer funds from proprietary funds in real time, then it was impossible for them to know whether any particular withdrawal from the customer segregated accounts in fact dipped into forbidden customer funds, much less intend to do so.”

In essence what Corzine and MF Global are saying is that "If we take big risks and win, great for us. If we lose big, Why in the hell should we blamed for our incompetent and klepto-like reactions when the financial ship is sinking and we're simply trying to find the life boats?" At the end of the day, we should just trust that they were doing the right thing.

I don't know whether Corzine and friends will get off or not. The rules are so opaque that Corzine and MF Global probably have little to worry about. Their claim that they didn't know what was happening will help them too (and proves why we need to use RICO-like statutes to go after Wall Street).

The sad reality is that 5 years after the events of 2008 we live in a world where borrowing and gambling with other people's money, on murky and unstable derivative products, are still the driving forces behind Wall Street's activities ... and the Achilles heal of the American economy.

Only this time these guys are bigger, and drawing on funds that are ultimately backed by the American taxpayer.

So, yes, apart from doing what got us into trouble in 2008, these guys are bankrolled by you and me. Nice.

- Mark


This is one of the clearest and most succinct explanations of why you can't run the government like a business. Enjoy ...

- Mark 

Friday, September 13, 2013


Yesterday, September 11, Russian President Vladimir Putin penned an op-ed in the NY Times. Regardless of what you may think of President Putin, his motives, or the origins (did he write it?) of "A Plea for Caution From Russia" his article is a sweeping and thoughtful look at the role of international law and American Exceptionalism in the international community.

For my money, Putin's piece offers an extraordinary glimpse into how much international relations and our approach to war has changed over the past 100 years.

Appealing to "international law" 100 years ago - with the world on the brink of 30 years of major war and economic turmoil - would likely have made Putin a pariah at home, and turned him into the laughing stock of a global community still focused on balance of power and realpolitik. This is not the case today, which explains why I sent Putin's article to all my American Foreign Policy and International Relations students (and we're not meeting until next week).

If you're inclined to read the piece (and I encourage you to do so) you probably should also take a look at what the Washington Post's Max Fisher has to say about the op-ed in "Vladimir Putin's New York Times op-ed, annotated and fact checked". While it doesn't provide broad historical insights it's balanced and will help those who might find some of Putin's references to be murky.

For a less than flattering take on Putin's work check out what Gary Kasparov - a former chess champion and an elected member of Russia's opposition movement's Coordination Council - had to say.

In these stinging and even humorous Tweets, picked up by the The Daily Beast, Kasparov makes it clear that, for him at least, Putin is a fraud.

- Mark 

Thursday, September 12, 2013


This is an interesting bit of news. It turns out that California is the "toughest state" in the union for getting food stamps. That's right, liberal California has been doing a better job of keeping eligible residents off the dole than conservative Red states.

For every state resident in California that was eligible in 2010 only 55% received food stamps. California also ranked dead last when it came to participation rates for the working poor (42%).

This stands in contrast to the national average (about 75%), and to the participation rates we see in conservative Republican-led states, which have between 80-90% of eligible residents receiving food stamps.

According to the LA Times, there are several reasons California has the lowest participation rates. They include understaffed agencies, less than helpful offices, and confusing applications. California is also one of 13 states that bans people from receiving benefits if they are convicted of drug dealing.

One of the surprising reasons that California ranks last is that conservative states also understand the economic gain that comes from having more people on the dole. The federal government fronts the money for the vast majority of food assistance programs. So states like (Republican-led) Florida see food stamps as "free money" and "pay contractors to scour the landscape for people to enroll in the program."

Yeah, that's right. Conservative states actually go trolling for the poor. Imagine that.

In all cases, this helps explain why conservative Red states are net takers from the federal government, while liberal California puts in more than it takes from America.

- Mark