Wednesday, April 29, 2015


While looking at the social media responses to recent events in Baltimore it became clear that some - if not most - people are clueless about what's happening outside of their world. Here are some of the Facebook comments about the events in Baltimore that drew my interest:

"Why are they destroying their own communities" 
"Just start shooting the no good f***ing thieves and the coroners is a good place for them" 
"If you don't send your kids to school ... if you don't demand of them that they apply themselves in school and if you don't lead them by example as good parents ... budgets big or small have little impact ... this is a cultural problem"

What comments like these miss is that there is no sense of community where there is no hope.

What comments like these miss is that punitive measures alone have put us where we are today.

What comments like these miss is that a history of racial antagonisms and economic violence have led to disproportional incarceration rates that rob families of the building blocks necessary for creating and sustaining healthy communities.

Finally, what these comments miss is that there's a history of imposed joblessness and exclusion, backed by repression, that has denied an entire segment of America access to the promises of the American Dream.

Let's take a look.

One of the goals of the Civil Rights movement was access. Whether it was gaining access to the ballot box, higher education, or quality jobs with good wages, the goal of the social movements of the 1960s was to create a level playing field for people of all stripes.

The Civil Rights Act of 1964 helped deal with voter discrimination and issues of segregation. An entire generation of people of color were given a political voice, economic promise, and hope through education. Today, unfortunately, we find a mixed picture where many of the gains made during the 1960s have either stalled, or are suffering setbacks.

As evidence, it's clear that recent redistricting patterns and voter ID laws not only work to undermine democracy in America, but may even be turning back the clock on some of the gains achieved by the civil rights movement. Commenting on this, Reagan-appointed 7th Circuit Court Judge Richard A. Posner made it clear that we need to recognize that voter ID laws are effectively designed to discourage voting among the weakest and least represented groups in America.

Making matters worse, while women, people of color, and our nation's youth have to fight to prove who they are at the ballot box, the Citizens United decision has created an environment where those with money get almost unlimited access to our political system.

As civil rights leader and UFW co-founder Dolores Huerta put it, the issues of civil rights today "are much more complex." Associate Justice Ruth Bader Ginsberg is much more blunt, and refers to these developments as "second generation" barriers.

We can see the complexity behind these barriers on the education front.

Soaring college tuition costs have both undermined access and increasingly put more of those who graduate from college into crushing patterns of debt. Since the mid-1980s tuition in the California State University system - where I teach - has gone from about $600 a year in the mid-1980s to over $5,400 annually.

Fee hikes like this across the country have contributed to the quadrupling of student loan debt in the nation since 2003. It's also one of the reasons why total student loan debt today stands at $1.2 trillion.

The end result is that access to both the ballot box and higher education have become more difficult for America's middle class, the poor, and people of color.

When you shut off shut off someone's voice and mind things can turn nasty very quickly.

Things aren't much better on the jobs front either.

On the jobs front things have become positively bleak for those without an education in the inner cities of places like Baltimore and Detroit. Specifically, with robotics dominating the day, manual or blue collar labor has become a smaller part of our evolving "third industrial revolution." With diminishing access to both higher education and vocational training what we're learning is that our modern economy is built on what economist Nouriel Roubini says is a "rather shaky foundation."

If robots are doing more of our menial work, who's going to purchase the goods we produce?

But technology is only a small part of what's been happening in places like Baltimore and Detroit. For the better part of 40 years U.S. trade policies have systematically hollowed out the jobs infrastructure of America's inner cities. This is why we really shouldn't be surprised to find unemployment rates of 30 percent and higher in these regions.

What's happened in America's cities didn't happen by accident either. As I've pointed out elsewhere:

Contrary to what you've heard, the fiscal problems of Detroit, and the challenges that confront America, are not so simple, or the result of labor unions. The 79,500 Michigan jobs/workers that were displaced or shipped to China between 2001 and 2007 didn't happen because of mysterious "magic of the market" forces. Nor did Detroit's tax base suddenly disappear because of incompetent political leadership (though the incompetence didn't help).
Michigan's jobs and manufacturing picture worsened - as did the nation's - because of policies taken by the federal government over the past 30 years. These policies rewarded companies for shifting manufacturing jobs around the world. When jobs leave so does the tax base. Pretty simple.
Now, someone reading this might be screaming at their screen right now that unions priced the American worker out of the global labor pool by demanding too much. Think again.
Germany produces twice as many cars as the United States. Their unionized auto industry pays workers significantly more than what the U.S. auto industry pays. Indeed, when you take out what it costs for health care (Germany has universal health care) we find that German auto workers make about two times what their U.S. counterparts earn, while benefits for German workers are substantially more rewarding (8 weeks paid vacation, free day care, etc.).

So, yeah, government trade policies have helped gut the jobs base of America's inner cities. But we did little to nothing to help those most affected by these policies to transition into new lines of work.

Incredibly, we expected things to work out, as if some kind of invisible hand or magic market pixie dust would make things better over time. Detroit and places like Baltimore help to make it clear that Market Tinker Bells don't exist in the real world - especially when the federal government is offering tax credits that encourage companies to ship high paying jobs over seas.

Sending taxpayer funded trade representatives to negotiate trade deals, while we ignore the social and economic impact of these deals in America's inner cities, is a form of economic violence because of how it cripples the growth of economic communities. Our corporate citizens, as you can imagine, reap the benefits of outsourced jobs and higher unemployment in the United States.

Via Daily Kos we learn from the current edition of Rethinking Schools about the "Stop the School-to-Prison-Pipeline" movement. The Rethinking Schools editorial board makes it clear that our nation's students of color - African-Americans, Latinos, Native Americans, and Southeast Asians - are being unfairly targeted and pumped into a lifetime of prison and second class status because of zero tolerance and punitive expulsion policies in our school systems.

In "Schools and the New Jim Crow" Michelle Alexander explains how school discipline programs are instrumental in reintroducing Jim Crow into our national psyche:

In the era of colorblindness, it is no longer socially permissible to use race, explicitly, as a justification for discrimination, exclusion, and social contempt. So we don’t. Rather than rely on race, we use our criminal justice system to label people of color “criminals” and then engage in all the practices we supposedly left behind. Today it is perfectly legal to discriminate against criminals in nearly all the ways that it was once legal to discriminate against African Americans. Once you’re labeled a felon, the old forms of discrimination—employment discrimination, housing discrimination, denial of the right to vote, denial of educational opportunity, denial of food stamps and other public benefits, and exclusion from jury service—are suddenly legal. As a criminal you have scarcely more rights, and arguably less respect, than a black man living in Alabama at the height of Jim Crow. We have not ended racial caste in America; we have merely redesigned it.

In "Arresting Development: Zero Tolerance and the Criminalization of Children" Annette Fuentes writes about how the pipeline process begins:

A week before classes ended last spring, 13-year-old Diana Nava was waiting with her mother, Modesto, for the Los Angeles city bus that goes near her school. Even though her mother had awakened Diana early, she was behind schedule. An LA police officer patrolling for truants spotted them at the bus stop and gave Diana a ticket for violating the city’s daytime curfew. “My mother said, ‘She’s on her way to school’ but the officer said it didn’t matter.” For being late, Nava and her mother would have to go to court and face a $250 fine, a loss in time and money they could ill afford.

While these aggressive truancy programs were originally designed to financially punish and legally scare students and parents into regular attendance, they also ended up discouraging students from attending school. The school to prison pipeline is not difficult to enter for families who are experiencing transportation difficulties, financial strain, and family breakdown:

Jose Gallego’s story is a case in point. The 23-year-old explained: “I’m a high school dropout. I was supposed to graduate in 2008, but I missed a few days of school because my parents were going through a hard time. They kicked me out of school. So, then I started selling CDs downtown. I was arrested for selling CDs, I was locked up, and I got out with a whole different perspective. I never had been in juvenile detention. I didn’t know what to do. I started selling drugs. Now I’m lost. I’ve got a little brother and a little sister, they don’t look up to me anymore. I’m a two-time convicted felon. It’s hard for me to get a job.”

Other articles in the Rethinking Schools prison-pipeline edition include an autobiographical essay describing what it's like having a parent behind bars, how school discipline disproportionately affects people of color, and a look at the prison industrial complex.

Specifically, we learn that while our nation's population has increased 67 percent since 1970 that our prison population has climbed by 660 percent. As the editorial staff at Rethinking Schools make clear in their article:

... this is a phenomenon that cannot be explained by crime rates or drug use. According to Human Rights Watch (Punishment and Prejudice: Racial Disparities in the War on Drugs, 2000) although whites are more likely to violate drug laws than people of color, in some states black men have been admitted to prison on drug charges at rates 20 to 50 times greater than those of white men. Latina/os, Native Americans, and other people of color are also imprisoned at rates far higher than their representation in the population. Once released, former prisoners are caught in a web of laws and regulations that make it difficult or impossible to secure jobs, education, housing, and public assistance—and often to vote or serve on juries. Alexander calls this permanent second-class citizenship a new form of segregation.
The impact of mass incarceration is devastating for children and youth. More than 7 million children have a family member incarcerated, on probation, or on parole. Many of these children live with enormous stress, emotional pain, and uncertainty. 

The school to prison pattern that emerges helps us understand how the political and economic prospects of an entire class of Americans have been diminished or wiped out over the past 40 years. Simply put, our nation's educational infrastructure and prison system - intended or not - conspire to punish people of color, those who happen to be poor, and those without resources.

Access to the ballot box and higher education have been slowly cut off. Student loan debt has soared while jobs are being shipped overseas for the benefit of America's well connected corporate citizens. Throw in the fact that our high schools have become a feeder program for our prison system when it comes to people of color and it's not hard to understand how stunted opportunities, and a lifetime of frustration, can turn into demonstrations and riots at the slightest provocation.

Add in a senseless killing of a community member, which seems to happen on a regular basis, and our nation's racial tinder box is much easier to see, even if it is difficult to understand.

Then we have places like Ferguson, Missouri.

We learned after Michael Brown's murder that its municipal court system was a prized revenue generator for the city. It's punishing ticket-to-fine-to-warrant-to-jail system helps explain why Ferguson's police department handed out about 3 warrants per household every year. Things were so bad that one city council member commented that if one of the more punitive judges were to leave the bench that the city would have to consider the revenue effects on the municipality.

Unless we begin to open up and guarantee access for those most affected by America's second generation barriers we should expect more Baltimore's and Ferguson's in our future. Choking off an entire community's political voice, economic promise, and hope virtually guarantees they will happen, over and over.

This isn't rocket science.

- Mark

Edit: "Baltimore: The Big Picture" added May 4, 2015.


- Mark 

Tuesday, April 28, 2015


Check this out. In 2012 the richest .01 percent of all Americans - or the top 1 percent of the top 1 percent - spent about 42 percent of all the money that is paid out trying to influence American politics. As a point of contrast consider this: In 1980 this segment spent only about 16 percent on political campaigns.

Wait. It gets worse. Corporations now spend more money lobbying Congress than the American taxpayer spends funding Congress. 

For more on political influence and campaign spending by America's oligarchs, read this piece from Zero Hedge.

- Mark

Monday, April 27, 2015


From Bloomberg Business ... 

Business schools are supposed to produce graduates who have the abilities companies need most. But corporate recruiters say some highly sought-after skills are in short supply among newly minted MBAs. As part of our ranking of 122 top business programs, Bloomberg surveyed 1,320 job recruiters at more than 600 companies to find out which skills employers want but can’t find—and which B-schools are best at meeting the needs of the market.

Click here for an interactive on job skills wanted by industry.

- Mark 


According to a newly declassified document, warrantless surveillance and mass data collection done by the National Security Agency (NSA) after 9/11 did little to make America safer. After Edward J. Snowden leaked a draft version of the report in 2013, the government declassified many elements about the surveillance program, which lead the NY Times to file a lawsuit asking for the full and final report (though it has been redacted).

The domestic spying program was code-named Stellarwind, and was used by five intelligence  and law enforcement agencies. Early in 2002 details of the program were shared with the chief judge of the secretive Foreign Intelligence Surveillance Court (FISC), which is the product of our Nixon-inspired Foreign Intelligence Surveillance Act. How secret was the program? It was so secret that the ... 

... White House would not let [presiding FISC] Judge Kollar-Kotelly keep a copy of a letter written by a Justice Department lawyer, John C. Yoo, explaining the claimed legal basis of the program, and it rejected a request by Attorney General John Ashcroft to tell his deputy, Larry Thompson, about the program.

While 1.2 percent of the tips from the program provided some useful information from 2001 to 2004, two years later the FBI reviewed all of the Stellarwind leads and found that none of them proved useful. 

Whether you agree with the secretive domestic spying programs as a matter of policy, it's important that we understand how we arrived at the point where Stellarwind became part of our national security profile. Below is a revised overview of that profile drawn from a previous post. 

The Post-9/11 Environment: Fear dominates America's national scene, which put our secretive FISA courts into overdrive and helped lay the groundwork for programs like Stellarwind.

The Patriot Act: After 9/11 the Patriot Act reduced restrictions on law enforcement for gathering information, and expanded the definition of terrorism to include domestic incidents (however loosely defined). Many FISA-like provisions were made available as well. In 2011 President Obama signed a four year extension for roving wiretaps, business record searches, and for the surveillance of "lone wolves" (individuals suspected of terrorist activities, but not connected to any terrorist groups). 

Operation Enduring Freedom (originally Operation Enduring Justice): An on-going and seemingly open-ended war linked to the larger and more amorphous war on terror. This has given rise to what has been called the national security state and America's unitary executive.

The Unitary Presidency: After 9/11 White House lawyer John Yoo wrote a memo to President Bush that stated the president’s powers were not confined to the battlefield or wars because “Congress has recognized the President’s authority to use force in circumstances such as those created by the September 11, 2001 incidents … These decisions, under our Constitution, are for the President alone to make.”

NSA Eavesdropping: President Bush ordered the National Security Agency to eavesdrop on ordinary Americans without obtaining a warrant, and did so numerous times. The president and his advisers claimed the president has the authority during war time and that judicial oversight is not necessary and/or is too cumbersome to deal with real time threats.

Extraordinary Rendition: The Bush administration asserted that it had the authority to kidnap and fly (or transport) suspected enemies to interrogation stations around the world. This practice is called extraordinary rendition, and was initiated during the Clinton administration. 

Torture Redefined: An August 2002 memo, written largely by John Yoo but signed by Assistant Attorney General Jay S. Bybee, argued that torture required the intent to inflict suffering “equivalent in intensity to the pain accompanying serious physical injury, such as organ failure, impairment of bodily function, or even death.”

Tools of War and State Secrets: The Bush administration claimed they could not release prisoners exposed to certain interrogation "programs" (i.e. torture techniques).  The administration claimed that torture programs – which they also denied existed – are state secrets. 

Releasing prisoners who have been part of the "program" could undermine national security because they could then speak with the press, and release details of our interrogation methods. Al Qaeda, it’s assumed, would then begin to practice these methods and build up some kind of - for lack of a better term - torture stamina.

State Secrets and Corruption: According to the State Secrets Doctrine Congress and the American taxpayer can’t ask to take a look at national security related items - like the books of Iraqi Prime Minister Nuri al-Maliki’s troubled Shi'ite government - because releasing embarrassing information could undermine U.S. security, or U.S.-Iraq relations.

State Secrets and Due Process: The Supreme Court refused to hear Masri v. United States. Here the plaintiff, a German national, argued that he was abducted in Macedonia in 2003 and then transported to overseas prisons where he was tortured. The assumption here is that the State Secrets Doctrine can be employed (by the Supreme Court) to dismiss cases without evidence ever being produced.

Intent is Good Enough: Hamid Hayat of Lodi, Ca. was arrested and convicted although the government had no direct evidence. What the U.S. government argued was that Hamid Hayat had a “jihadi heart and a jihadi mind.” In spite of withdrawing their original affidavit because of what it revealed about Hayat and the process, the prosecutor’s argued Hayat’s intent was clear. For those who have seen Tom Cruise’s “Minority Report” you know where this leads. 


If the above and our growing culture of state secrecy doesn't represent the America you believe in then we need to change how we do business, and how we approach national security. We have to remember that the United States of America represents an idea as much as it does a nation-state.

As I've pointed out before, the war on terror helped turn America into a national security fortress, and the American president into a fledgling American Caesar. If Americans don't like what's happening with domestic spying and our drone wars (among other developments) we need to learn more, and get Congress to turn back the clock on the developments listed above. 

We can't continue to spend our way into the ash heap of history because we are led to believe that we have to feed a growing military-industrial complex (that we were warned about).

The most "egregious part" of the Patriot Act dealing with the NSA's call-records program - Section 215 - is set to expire on June 1. Senate Majority Leader Mitch McConnell has already introduced legislation to extend it another five years. This shouldn't happen. 

If you don't like the idea of the federal government spying on you without cause call your representatives and tell them to oppose McConnell's legislation. It's time to unwind America's national security state.

- Mark 

Sunday, April 26, 2015


If you say neither one, then you're part of the problem. Seriously. 

- Mark

SUNDAY READING (April 26, 2015)

A guide to the billionaires bankrolling the GOP candidates (The Atlantic).

Koch group sends envoy to Rome to convince the Pope to shut up about climate change (Addicting Info).

White fragility: Why it's so hard to talk to white people about racism (Good Men Project).

Scientists have found a 10 million gallon 'bath mat' of oil on the floor of the Gulf of Mexico (Oil Price).

Corporations now spend more money lobbying Congress than taxpayers spend funding Congress (Vox).

FBI admits flaws in hair analysis over decades (Washington Post).

Off the grid: Exonerated death-row inmate receives no compensation (Ora TV).

Some historical perspective ... Have you ever heard of the Ludlow Massacre? You might be shocked when you see what happened (AFL-CIO).

The American Dream is a myth, says Nobel-prize winner (CNN Money).

How the new "flexible" economy is making workers' lives hell (Robert Reich).

Justice Department sues Quicken Loans over mortgages (NY Times).

Dahr Jamail: El Salvador farmers successfully defy Monsanto (Truth Out).

Right after announcing he was taking a pay cut to raise employees' salaries, business is booming (Upworthy).

Crackdown on Apple in Ireland opens front on tax avoidance war (Bloomberg Business).

Why the Trans-Pacific Partnership agreement is a pending disaster (Robert Reich).

AFL-CIO head Richard Trumka explains why labor unions hate Obama's trade deal (Vox).

The TPP: Toward Absolute Capitalism (Naked Capitalism).

Elizabeth Warren tells Obama to put up or shut up on trade deal (Huffington Post).

Bill Black: Obama & TPP - Everyone that doeth evil hateth the light (Naked Capitalism).

Joe Firestone: Another danger of the TPP: It sacrifices monetary sovereignty (Naked Capitalism).

Western black rhino officially declared extinct (11 Alive).

Bomb sniffing dogs detect prostrate cancer with more than 95% accuracy (IFL Science).

Protected wild horse dying for ranchers' profit (The Daily Beast).

Recently spotted 103-year-old orca is bad news for Sea World - Here's why (The Dodo).

Sick, starving sea lion pups wash up in record numbers on California coast (Sacramento Bee).

Dead dolphins in Fukushima stranding found with white radiated lungs (Your News Wire).

Tony Perkins: Obama and gay rights movement inspire ISIS to murder Christians (Right Wing Watch).

Paul Ryan: Poor kids should go hungry so they know they're loved (Daily Kos).

Texas Senate votes to abolish renewable energy programs (Texas Vox).

Tennessee lawmaker (a female) tables abortion bill exceptions because rape and incest are 'not verifiable' (Raw Story).

The unholy alliance between Fox News and the 1 percent can no longer stand (Salon).

Republican religious fanatics pose a much bigger threat to our country than ISIS (Forward Progress).

What Texas voting laws really amount to, and what they defend: "We don't want Democrats to vote" (Daily Kos).

Mentally ill homeless man severely beaten by police because his beach umbrella was too big (The Free Thought Project).

Hyper-accurate atomic clock won't lose a second in 15 billion years (Los Angeles Times).

Research linking autism to vaccines is even more bogus than you think (Vox).

The sun must go down on the Patriot Act (ACLU).

Anonymous declares cyber war on ISIS Twitter users (Russian Times).

- Mark

Saturday, April 25, 2015


From PBS, and the Independent Lense ...

When people in traditional Navajo culture are categorized as gender-variant (or bi-sexual) those individuals are described as people of two-spirits. Of the culture's four basic genders, it's the two-spirited who are honored and considered spiritually gifted.

Two spirits ... I like it.

- Mark

Friday, April 24, 2015

MOST HONEST POLITICAL AD, EVER (It's so good you could argue it's not a parody)

Now, this is political parody at its finest ...

- Mark 


I wrote about the Trans-Pacific Partnership (TPP) over a year ago. Comparing the TPP to the North American Free Trade Agreement (NAFTA) - which I wrote about over 25 years ago (it's in Spanish) - I make it clear that the TPP is not about free trade. How can it be about free trade when one of the primary factors of production, labor, is no where near as mobile or exchange ready as the other two factors, land and capital?

In reality the TPP is all about going after and undermining the rights of labor, while subsidizing and protecting the profits of a global corporate class. The NY Times helps start the discussion on this point ...

An ambitious 12-nation trade accord pushed byPresident Obama would allow foreign corporations to sue the United States government for actions that undermine their investment “expectations” and hurt their business, according to a classified document.

How can the interests of foreign corporations trump U.S. law and state sovereignty, you ask? Very simple. According to Art. VI of the Constitution,

... This Constitution, and the laws of the United States which shall be made in pursuance thereof; and all treaties made, or which shall be made, under the authority of the United States, shall be the supreme law of the land; and the judges in every state shall be bound thereby, anything in the Constitution or laws of any State to the contrary notwithstanding.

You can read the NY Times piece here. There's a video on the topic here.

- Mark 

Thursday, April 23, 2015


'The blob' in Pacific Ocean might be to blame for California drought, erratic U.S. weather - studies suggest (Russian Times).

Republicans push for $269 billion handout for heirs and heiresses (Huffington Post).

The childhood Kevin Spacey endured under his American-Nazi father (Movie Pilot).

Jon Stewart goes after Dick Cheney, big time (Daily Kos).

Rise of the Crony Wars ... Bank of England asks why Buffet's Berkshire Hathaway is not too big to fail (Zero Hedge).

Corporate welfare in the federal budget (CATO Institute).

Walmart fined $4.8 million for failure to pay overtime (Inquisitr).

Walmart closed store that voted to unionize and now they must compensate the workers (ATTP).

At U.S. companies, time to coax the directors into talking (NY Times).

Despite federal regulation, CEO-worker pay gap data remains hidden (NY Times).

Bachmann: Rapture imminent thanks to gay marriage & Obama (Right Wing Watch).

Tony Perkins: Netanyahu defeat could have ushered in the end of times (Right Wing Watch).

James Dobson: Gay marriage will lead to civil war (Right Wing Watch).

Roy Moore compares anti-gay fight to resisting slavery & segregation (Right Wing Watch).

Marco Rubio's deranged religion, Ted Cruz's bizarre faith: Our would-be presidents are God-fearing clowns (Salon).

Greek debt crisis coming to a head - Contagion (Zero Hedge)?

Europe has floated border and capital controls before ... just three years ago (Zero Hedge).

Lehman Brothers failed when it was leveraged at a 30 to 1 ratio ... which makes the suggestion that the European banking system is leveraged at a 26 to 1 ratio a serious matter (Graham Summers).

The collapse of the petrodollar: Oil exporters are dumping U.S. assets at a record pace (Zero Hedge).

America, meet your brand new biggest creditor ... Japan (Zero Hedge).

China takes aim at dollar reserve status: Promotes Yuan in Investment Bank (Zero Hedge).

Yes, energy companies did manipulate market prices during California blackouts ... U.S. top court allows antitrust claims over natural gas prices (Reuters).

Driver's license suspensions creates cycle of debt (NY Times).

Iran nuclear deal: A definitive guide (Harvard Kennedy School).

The crowning glory of Keynesianism (Zero Hedge).

- Mark

Wednesday, April 22, 2015


So I'm reading the Securities and Exchange Commission's (SEC) 2011 "Study on Investment Advisers and Broker-Dealers." After 2008 so many shady deals and self-serving transactions were discovered on the part of Wall Street that one of the requirements of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was for the SEC to produce a study on how broker-dealers (traders) and investment advisers operated.

The goal of the study is help guide Congress as it works to protect the American consumer from traders and advisers who might be inclined to put their interests ahead of their clients. Before discussing what caught my eye in the 2011 SEC study a little history explaining why traders and advisers need to be regulated is in order here.

What's presented below offers us some jargon free historical perspective, and is drawn from a post I did on the topic more than 3 years ago.

Once upon a time there was a big problem on Wall Street. But it wasn't 1929. It was 1968. And the problem would persist until 1970. More than 40 years ago broker-dealers who over saw individual investment portfolios decided that it would be a good idea to use the assets in client accounts as collateral for their personal business deals.

So, for example, if you had $500,000 invested with a Wall Street firm they would use your assets (mostly securities) as collateral for their own investment purposes.

The idea was that they would put up your assets as collateral, take out a loan, invest that money, make a quick killing, and then return the asset before anyone knew what happened. Shear brilliance, wouldn't you say?

Anyways, in part because of the increased number of trades being made at the time, major market players - but especially the broker-dealers - found it difficult to keep track of all the transactions (it was before computers and automation dominated the day). No one really knew who had what. This was OK by many broker-dealers because they didn't really want their clients (or the Feds) to know what they were up to (proprietary information, you know).

Because market players weren't offering up their own assets as collateral they made big bets. Needles to say, they were also reckless. As the brilliant schemes of broker-dealers began to collapse, a large number of their client's assets (i.e. securities) were seized and sold. After the dust settled it was discovered that big chunks of customer accounts - many of whose assets were stuffed with fully paid securities - had disappeared.

Wow. As Yogi Berra might have said, it could be déjà vu all over again.

Banks who had granted loans to broker-dealers had cashed in the collateral. Broker-dealer clients lost millions. Many Wall Street firms who had either participated or winked and nodded at the activities crashed too.

In fact, more than a dozen New York Stock Exchange firms failed (many because their "back offices" couldn't keep up). Losses exceeded $100 million. To stop the bleeding of public confidence swift action was taken to prop up the securities industry. Funds were pooled from industry survivors to help compensate clients who had been cheated. But this was just the beginning.

To protect the public Congress enacted the Securities Investment Protection Act (SIPA) in 1970 which, generally speaking, is the cornerstone of Rule 15c3-3 for the Securities Exchange Commission (SEC).

Among the changes that Rule 15c3-3 did was:

Segregate Accounts: SIPA mandated that fully paid off securities in a customer's account be kept separate from client assets that have been used as collateral, or that have not been fully paid off (i.e. purchased on margin).
Reserve Requirement / Net Capital Rule: SIPA mandated that accounts have enough liquid assets on hand. This meant implementing a requirement that broker-dealers had to tabulate how much a client's portfolio was worth in the market, and then limited how much could be borrowed against those assets (about 8-15 times the total value; this is the "net capital" rule).
Securities Investor Protection Corporation (SIPC): SIPC is a federally mandated, member-funded, corporation that protects securities investors if their broker-dealer cheats them or goes under. In many ways, SIPC is an insurance program for holders of securities.

Well, guess what? Because of deregulation (especially with reference to reserve requirements in 2004), much of what SIPA was supposed to do was undermined. To be sure, SIPA is still there. But the spirit of the law was - and has been - turned into a cruel joke. This is what makes the SEC's 2011 study so interesting.

What caught my eye in the SEC's 2011 study is very simple. Here it is, from page 165 in the conclusion:

Retail customers should not have to parse through legal distinctions to determine whether the advice they receive was provided in accordance with their expectations. Instead, retail customers should be protected uniformly when receiving personalized investment advice or recommendations about securities regardless of whether they choose to work with an investment adviser or a broker-dealer. 

In plain English, the above is SEC-speak for, "you as a client shouldn't have to worry that your broker-dealer or investment adviser might actually be using your account for their own benefit; nor should you have to worry if they're taking your money and using it to purchase the toxic instruments and financial crap that other, bigger, clients are trying to dump on to other portfolios."

Yeah, that's right. Even after 2008 the SEC is still concerned that broker-dealers and financial advisers - hiding behind legal walls created and maintained by Congress - might be ripping off unsuspecting clients who know little about how market structures, or how market players operate. And, yes, those unsuspecting clients include people like you and me.

Worse, what they're doing is happening on a colossal level.

- Mark

The SEC's 2011 study ...


Via Huffington Post ...


When you hear the term "welfare" or "welfare reform" what comes to mind? If you are like most people, you conjure up images of people who are getting checks or food assistance each month. You may think of the many children who get assistance, or the millions of working families that get some sort of financial aid to help make ends meet each month. But what you may be surprised to know is that a heck of a lot of money gets spent in this country each year in the form of corporate welfare.

Corporate welfare takes a big bite out of our country's finances each year. In fact, it's estimated by the CATO Institute, that $100 billion per year is spent on corporate welfare in America. Yes, that's billion. It's a big problem that the country faces, and yet it's one you barely ever hear about.

Why does corporate welfare pose such a problem? There are a lot of reasons, including:

  • Corporate welfare goes to businesses that are usually failing or being mismanaged somewhere along the pipeline. Just because money is being thrown at a business to help it stay afloat does not mean that those issues are going to be addressed so that the problem doesn't happen again. Case in point - Enron. They received billions in corporate welfare, and we all know how that story ended.
  • We as a people usually have no say over which companies deserve the corporate welfare. How many people were excited to bail out the banks when the mortgage crisis hit? The banks were bailed out with billions in corporate welfare. Meanwhile, millions of homeowners got foreclosure notices. Nobody came along to bail all those people out of the same mess.
  • When it comes to what businesses will get corporate welfare, there may also be some race issues. There are questions of whether or not the corporate welfare being given out is race-neutral or if particular races and ethnic groups are being overlooked for the funding.
  • When people talk about making cuts in welfare, especially during an election year, they are usually talking about social programs. Those social programs are in place to help the people, just like you and I, who are trying to make their way in America and need a little extra help. Rarely do you hear someone suggest that corporate welfare allocations should be cut, or even examined. It's as if it is a given that businesses deserve a financial crutch to stay afloat. Seems to me like this may be in direct conflict with the free enterprise business system that our country is known for.

Can the country afford to keep spending $100 billion per year to keep certain businesses afloat? No, not when we have the financial issues we do and need to make cuts to the budget wherever we can. Rather than focusing on making cuts to social programs, which actually help the people, politicians need to start taking a look at the cuts they can make in corporate welfare. Many of the businesses they are giving it to are making poor choices to begin with, have CEO's making millions per year, and are wasting the funds left and right.

Corporate welfare is something we rarely see, but that we all feel. It puts a strain on our society and does not always come back to help the little people. This is an issue that both political parties need to take into account and think about the people, rather than the big businesses that will go on to provide them with large contributions later, or will spend a lot of money lobbying.

The next time you hear someone talking about making cuts in welfare or discussing "welfare reform," ask them if they are referring to those in corporate America to keep mismanaged and failing businesses afloat, or the ones that are helping the people of America to survive. There's a good chance, like most people, their mind will not have even thought of the corporate welfare. But by putting the thought in their head, perhaps we can begin to make some positive changes in this area.

For more on the issue, you can take a look at what I wrote about corporate welfare almost two years ago. It's one of my most popular posts.

- Mark

Tuesday, April 21, 2015


This is a great project that deserves support. 

My nephew spent some time in Guatemala during fall 2014 with his engineering colleagues from Cabrillo College (Santa Cruz County). This is what they did ...

The Engineering Abroad Program at Cabrillo College is in a contest to win funds for their program. All they need is for you to "like" their Guatemala 2014 project, which you can access and like here

In the FYI department, I started my college career at Cabrillo College in 1979. So, please, like the video, and like often :-)

- Mark

Monday, April 20, 2015

WALL STREET: From "L'État, c'est moi" to "L'État est le mien"

Back in January, when the House of Representatives passed a GOP-led bill that crippled Wall Street reforms, I thought back to an earlier post of mine. In that post I wrote about Wall Street gaining so much control over Congress that it has effectively assumed the prerogatives of the state. Worse, like France's Louis XIV, Wall Street now acts as if it is the state. It's time to update that post.

During his reign as the King of France (1643-1715) Louis XIV is said to have remarked, "L'État, c'est moi" ... or "I am the State." The implications were clear: Bestowed with the divine right to rule, as head of state Louis XIV could draw on the resources of the nation to do what he wanted because his best interests, it was believed, served France's best interests.

There were no countervailing powers to speak of domestically. Merchants vied for royal favors. Commoners sought out the benefits of the royal touch. Because there were few checks on his actions, whether he actually uttered the words "L'État, c'est moi"  or not, Louis XIV was the French state.

Fast forward almost 300 years and we find ourselves in a not too dissimilar - albeit twisted - situation. Today our Too Big To Fail (TBTF) financial institutions can draw on the resources of the state, almost at will. This has especially been the case when they make poor decisions. From legislated bailouts and long-standing subsidies, to trillion dollar market guarantees and relentless tax breaks, Wall Street is running the show in Washington.

We should kid ourselves no longer. Wall Street effectively owns the state.

The ability of our TBTF institutions to push Congress around, and to secure what they want after making a mess of things, is clear from this past winter's GOP-led legislation. From delaying the Volcker Rule (again), to watering down private equity rules and loosening rules on derivative markets, Wall Street is acting as if the U.S. Congress is staffed by their errand boys. As I discussed at the end of chapter 10 in The Myth of the Free Market:

It’s at this point [America's financial institutions] have the power to “raise revenue” by imposing on the state ... taxing it's resources through credit extensions, bailouts, transfer payments, and favorable legislation, among others. This type of control and influence over the state ... is akin to the systematic poaching of state prerogatives. History and common sense tell us this should not happen. Recent developments, however, tell us it is now an accepted practice that raises few eyebrows.

Think about it. Wall Street now has the power to raise revenue (from bailouts), tax our resources (through subsidies & write-offs), and to secure favorable legislation (from legal protections to off-shore gimmicks and other market guarantees).

Worse, they can now scare off legislation designed to reign in their excesses because members of Congress are afraid of Wall Street's moneyed wrath. Citizen's United has helped to insure this reality. Campaign donations withheld, or sent to political opponents, is a powerful weapon.

It really doesn't matter how many times the President or members of Congress say "never again." We all know they're lying to themselves, and to America.

Under the current mind-set, any TBTF financial institution can tax the resources of the state to serve their interests. While American families saw their homes and jobs go up in smoke during the 2008 market meltdown Wall Street and our TBTF banks were rescued and showered with taxpayer-backed credits and loans.

The threat of economic meltdown has become a politically accepted form of financial extortion for America's financial sector. This helps explain why we've embraced market subsidizing debt and other market activities that do little more than extract wealth from the economy, while putting the nation deeper into a debt-drenched mud pit.

The demands of Wall Street, and their TBTF financial institutions, have moved beyond the control of the modern nation-state. In many respects, Wall Street can now declare "L'État, c'est moi" ... and perhaps even "l'état est le mien."

- Mark

Saturday, April 18, 2015

Friday, April 17, 2015


The founder and CEO of Gravity Payments, Dan Price, just gave up $900,000 a year in wages so that over the next three years all of his employees could make $70,000 a year as their minimum wage ...

To be sure, bonuses and dividends should keep Price comfortable. Still, the move is a marketing and labor motivating stroke of genius.

The genesis of the raise is tied to some solid research. Specifically, "happiness research" carried out by a Nobel Prize winning psychologist Daniel Kahneman and Angus Deaton found that the emotional quality of an individuals daily experience rises with income, but only to a point. That point is about $75,000.

They also found that while more money doesn't buy much more happiness after $75,000, earning less than $75,000 can deprive you of happiness and emotional well-being because of the stress associated with trying to make ends meet.

Whatever Price's motivation, or what the cynics might say about his bonuses and dividend payouts, it's clear that Price is embracing a salary model that both puts him ahead of the curve and makes many corporate CEOs uneasy

- Mark

Thursday, April 16, 2015


- Mark 


Spain, South Korea and Australia approved as founding member of China-led Asian Infrastructure Investment Bank (Russian Times).

We are all in this together; Elizabeth Warren understands that (Buzz Flash).

Seriously, stop demonizing almonds (Gizmodo).

Federal judge says Blackwater guard who murdered innocents is a "good young man," gives him a life sentence (BoingBoing).

Police have killed way more Americans in America than terrorists (BoingBoing).

Former police commander sentenced to prison for multiple abuses (Nation of Change).

Police sergeants says cop who killed unarmed Eric Harris is a "true victim" (Truth Out).

Texas wants to outlaw filming police (Truth Out).

War makes men hot. What about women (OZY)?

Woman admits to marrying at least 1 of her 10 husbands for money (NY Times).

The banana massacre in Central America, and the roots of our global assault on labor (OZY).

The tragedy of Robert Oppenheimer (Prospect Magazine).

Social Security ... where government excels, so let's deepen it (Paul Krugman / NY Times).

Bill Clinton slams Dick Cheney: 'If they hadn't gone to war in Iraq none of this would be happening' (Crooks & Liars).

Scapegoat Economics 2015 ... How the bailout of Greece was really a bailout for German, French, and Greek bankers, and a blueprint of what's happening around the world (Richard Wolff / Truth Out).

New Report: Big banks require tellers to use predatory practices to extract bigger fees and penalties from customers (Crooks & Liars).

White House report makes it clear that investment advisers are more interested in jacking up their fees than they are in building your retirement nest ... and it's costing you/us money (White House).

One example of the rip off: Wall Street fees wipe out $2.5 billion in New York City pension gains from 1994 through 2014 (NY Times).

The NRA's open-carry hypocrisy shines at their annual convention (Salon).

Let's ban 'war' while we're at it ... First Florida, now Wisconsin bans the words 'climate change' (Nation of Change).

Senate Republicans vote to sell off our national parks to private industry (Reverb Press).

Fast & Fringiest: Meet the top cranks and conspiracy theorists in Rand Paul's world (TPM).

The most amazing houses on earth ... or at least in the United States (Front Door).

I'm taking a Chicano Studies course and I'm angry - Now what (OC Weekly)? [Be sure to read the follow up Q&A.]

This refrigerator uses zero energy & cools your food by suspending it in gel-like substance (Collective Evolution).

How politics and red tape are preventing doctors from practicing around the world (OZY).

- Mark