06/03/2011 archive

Jun 03 2011

Moody

The Shame of the Ratings Agencies: How Moody’s Blows It Again

By Zachary Karabell, Time Magazine

June 3, 2011

Moody’s, Standard & Poor’s, and Fitch are three of the most powerful actors in the global financial system. Their inability to discern the flimsiness of those “investment grade” mortgage-backed securities between 2006 and 2008 was one reason for the implosion of that system in 2008 when it became apparent that those trillions of dollars of securities and their derivatives were worth a lot less than it seemed. Yet for all the reforms since then, the ratings agencies remain largely untouched.

…

Add to this yet another issue: the United States debt market of Treasury bonds and bills is one of the anchors of the global economy. The dollar remains the preferred – though not much loved – currency of international commerce. The purchase and sale of U.S. Treasuries is not something the world can halt if Moody’s or S&P or Fitch decide one day that there are credit questions. Until the Chinese yuan or the Brazilian real or the euro or some new synthetic currency replaces the dollar, and until there is a market liquid enough to absorb the trillions now invested in U.S. Treasuries, countries and institutions can’t just shift gears and divest of their U.S. holdings simply because one day ratings agencies decide that they should.

So it is patently ridiculous that these agencies are even in a position to hold court on U.S. creditworthiness. It’s not that their analysis of the challenges and pitfalls is useless: far from it. But it is the degree to which that analysis is supposed to be connected to action, and there is a world of difference between saying that company X is no longer investment grade and saying the same of the United States. At best, such a decision will roil markets and sow confusion; at worst, they will trigger a wave of selling and a race to the bottom that could make the mistakes of the ratings agencies during the financial crisis look small in comparison.

U.S. Treasuries are the world’s reserve currency.  They’re currently trading at less than 3% (as Colbert would say- the judgment of the market).  To think that any other currency could or would want to absorb the $600 TRILLION notional value of derivatives (1000% of the WORLD GDP) is as foolish as wishing the Sumerians had never invented cuneiform–

Some ten millennia ago the Sumerians began using clay tokens to count their agricultural and manufactured goods. Later they began placing the tokens in large, hollow, clay containers which were sealed; the quantity of tokens in each container came to be expressed by impressing, on the container’s surface, one picture for each instance of the token inside. They next dispensed with the actual tokens, relying solely on symbols for the tokens, drawn on clay surfaces. To avoid making a picture for each instance of the same object (for example: 100 pictures of a hat to represent 100 hats), they ‘counted’ the objects by using various small marks. In this way the Sumerians added “a system for enumerating objects to their incipient system of symbols.” Thus writing began, during the Uruk period c. 3300 BC.

Jun 03 2011

Punting the Pundits

Punting the Pundits” is an Open Thread. It is a selection of editorials and opinions from around the news medium and the internet blogs. The intent is to provide a forum for your reactions and opinions, not just to the opinions presented, but to what ever you find important.

Thanks to ek hornbeck, click on the link and you can access all the past “Punting the Pundits”.

Ari Berman: The Bank Lobby Steps Up Its Attack on Elizabeth Warren

On May 24 Elizabeth Warren was back on Capitol Hill testifying before Congress, defending her brainchild, the new Consumer Financial Protection Bureau, a key element of the 2010 Dodd-Frank financial reform legislation. Warren is a major celebrity in Washington, an Oklahoma-born Harvard law professor who’s done more than anyone since Ralph Nader to put consumer protection on the national agenda. The room was packed with reporters, consumer advocates and lobbyists. GOP Representative Patrick McHenry, who chaired the House Committee on Oversight and Government Reform hearing, could barely hide his disgust for the CFPB and Warren, accusing her of lying to Congress and frequently interrupting her answers. “In a few short weeks,” McHenry warned ominously, “the bureau will become a powerful instrument in the hands of progressive regulators.”

In part because it’s one of the strongest aspects of Dodd-Frank, the CFPB has become a favorite target of Republican attacks, right up there with George Soros, ACORN and Planned Parenthood. It’s been called “one of the greatest assaults on economic liberty in my lifetime” (Representative Jeb Hensarling) and “the most powerful agency ever created” (Representative Spencer Bachus). The Wall Street Journal opinion page denounced Warren and the bureau three times in one week in March. And the bureau hasn’t even officially launched!

Glen Greenwald: The WH/Politico Attack on Seymour Hersh

Seymour Hersh has a new article in The New Yorker arguing that there is no credible evidence that Iran is pursuing nuclear weapons; to the contrary, he writes, “the U.S. could be in danger of repeating a mistake similar to the one made with Saddam Hussein’s Iraq eight years ago — allowing anxieties about the policies of a tyrannical regime to distort our estimates of the state’s military capacities and intentions.”  This, of course, cannot stand, as it conflicts with one of the pillar-orthodoxies of Obama foreign policy in the Middle East (even though the prior two National Intelligence Estimates say what Hersh has said).  As a result, two cowardly, slimy Obama officials ran to Politico to bash Hersh while hiding behind the protective womb of anonymity automatically and subserviently extended by that “news outlet”:

   the Obama administration is pushing back strongly, with one senior official saying the article garnered “a collective eye roll” from the White House . . . two administration officials told POLITICO’s Playbook that’s not the case. . . . a senior administration official said. . . . “There is a clear, ongoing pattern of deception” from Iran . . .”the senior administration official added” . . . And a senior intelligence official also ripped Hersh, saying his article amounted to nothing more than “a slanted book report on a long narrative that’s already been told many times over” . . .

Dutifully writing down what government officials say and then publishing it under cover of anonymity is what media figures in D.C. refer to as “real reporting.” …

Margaret Kimberley: Freedom Rider: The Obama Surveillance State

Big Brother got even bigger under the first “Brotha” president, Barack Obama. Government also became even more secretive. “The Obama Justice Department says that only the executive branch has the power to determine what information courts ought to have” – a novel doctrine that wreaks havoc with the rights of people accused of crimes, especially whistleblowers. The death of Osama bin Laden, says Obama’s Attorney General, makes the Patriot Act even more vital to national security. “Perhaps we were better off when bin Laden was still alive.”

The state security apparatus which came into being during the Bush administration is now supported just as strongly, if not more so, under president Barack Obama. There has been no let up, no change in course for a system which becomes stronger with each passing day and which faces almost no political opposition.

John Nichols: Pro-Choice, Anti-Choice, Mitt Romney Cannot Be Serious

The New Hampshire Democratic Party has got the number of the newly-announced candidate who will not be the Republican nominee for president.

The party is distributing t-shirts that feature “The Two Sides of Mitt Romney.”

On the front the shirts read:

   “Mitt Romney:  

   Pro-Individual Mandate    

   Pro-Recovery Act

   Pro-Immigration Reform  

   Pro-Cap and Trade

   Pro-Gay Rights”

On the back they read:

   “Mitt Romney:

   Anti-Individual Mandate

   Anti-Recovery Act

   Anti-Immigration Reform

   Anti-Cap and Trade

   Anti-Gay Rights”

All true.

But Romney’s biggest flip-flop is not mentioned.

In 1994, when he was mounting a serious challenge to Democratic incumbent Edward Kennedy in a Massachusetts U.S. Senate contest, Romney tried on a number of issues to position himself as a reasonably liberal alternative to the veteran senator. This was especially true on the question of abortion rights, where Romney did not merely offer a soft pro-choice line like “Roe v. Wade is settled law” or “I support the current law.”

Bill McKibben: Three Strikes and You’re Hot: Time for Obama to Say No to the Fossil Fuel Wish List

In our globalized world, old-fashioned geography is not supposed to count for much: mountain ranges, deep-water ports, railroad grades — those seem so nineteenth century. The earth is flat, or so I remember somebody saying.

But those nostalgic for an earlier day, take heart. The Obama administration is making its biggest decisions yet on our energy future and those decisions are intimately tied to this continent’s geography. Remember those old maps from your high-school textbooks that showed each state and province’s prime economic activities? A sheaf of wheat for farm country? A little steel mill for manufacturing? These days in North America what you want to look for are the pickaxes that mean mining, and the derricks that stand for oil.

There’s a pickaxe in the Powder River Basin of Montana and Wyoming, one of the world’s richest deposits of coal. If we’re going to have any hope of slowing climate change, that coal — and so all that future carbon dioxide — needs to stay in the ground.  In precisely the way we hope Brazil guards the Amazon rainforest, that massive sponge for carbon dioxide absorption, we need to stand sentinel over all that coal.

Vincent Iacopino: A Memo on Torture to John Yoo

The former Bush administration official continues to defend the indefensible: his authorization of a disastrous policy of abuse

Whether torture helped lead to the killing of Osama bin Laden or not, the beating of John Yoo’s tell-tale heart has compelled him to speak. His preemptive rush, in a recent op-ed article for the Wall Street Journal, to vindicate the Bush administration’s torture policies that he and Jay Bybee created betrays his guilt for approving one of the most reprehensible policies in US history – a policy of systematic torture that not only failed to provide actionable intelligence, but undermined the security of the United States.

In the infamous torture memos of 2002, Yoo and Bybee, authorized “enhanced interrogation” techniques (EITs), acts previously recognized by the US as torture – and the same torture methods used on US soldiers to obtain false confessions during the Korean war. In 131 pages of memos, the two justice department legal counsels redefined torture in a manner that required medical monitoring of all EITs, but failed to provide any meaningful provisions to detect medical evidence of torture as defined by them. Moreover, their “good faith” defence against criminal liability for torture rested on two presumptions, that interrogators would not exceed the severe physical and severe and prolonged mental pain thresholds for torture as defined by Yoo and Bybee, and, even if they did, that it would not constitute torture unless these physical and psychological harms were the precise objectives of the interrogators.

Peter Custers: Fears of Depleted Uranium Use in Libya

EIDEN, The Netherlands – The pattern of deception to gain legitimacy for war in the eyes of the public by now is familiar. In the middle of March, Western powers led by the U.S., Britain and France initiated actions of war against Muammar Gaddafi’s government of Libya. The start of war was preceded by a publicity offensive in which the Libyan leader was depicted as a madman.

The war was defended on the grounds that the Libyan people needed to be protected against their dictator via a ‘no-fly’ zone, and the public was made to believe the West exclusively aimed at defending the humanitarian interest of Libya’s population. Now, concerns among the Western public over Libyan events have thinned. The need to camouflage war aims has concomitantly decreased.

Time to highlight some of the long-term implications of the Western intervention. A sound, but difficult test case is the West’s use of depleted uranium weapons. Though U.S. and British officials have so far denied their employment over Libya, from the very start of the intervention to overthrow Gaddafi speculation has been rife that ammunitions used by the U.S. and NATO (North Atlantic Treaty Organisation) contain ‘depleted’ uranium. What to make of these stories?

Jun 03 2011

Hilda Solis- Shill

“I’m optimistic!”

That was the message from Hilda Solis, Secretary of Labor, in response to a jobs report that can only be described as appalling.

The Obama administration is in a complete disconnect from the Main Street economy and Ms. Solis looked pathetic and frantic as she denied reality on behalf of her employer.  It’s really not a good sign when you let a CNBC reporter PWN you like this.

Unless Obama can change these numbers (or at least the stink of failure that permeates his record) he is doomed no matter what nut job the Thugs put up.

Photobucket

From Calculated Risk, h/t Atrios

The Mistake of 2010

By PAUL KRUGMAN, The New York Times

Published: June 2, 2011

In fact, in important ways we have already repeated the mistake of 1937. Call it the mistake of 2010: a “pivot” away from jobs to other concerns, whose wrongheadedness has been highlighted by recent economic data.

…

Back when the original 2009 Obama stimulus was enacted, some of us warned that it was both too small and too short-lived. In particular, the effects of the stimulus would start fading out in 2010 – and given the fact that financial crises are usually followed by prolonged slumps, it was unlikely that the economy would have a vigorous self-sustaining recovery under way by then.

By the beginning of 2010, it was already obvious that these concerns had been justified. Yet somehow an overwhelming consensus emerged among policy makers and pundits that nothing more should be done to create jobs, that, on the contrary, there should be a turn toward fiscal austerity.

…

(T)he news has, indeed, been bad. As the stimulus has faded out, so have hopes of strong economic recovery. Yes, there has been some job creation – but at a pace barely keeping up with population growth. The percentage of American adults with jobs, which plunged between 2007 and 2009, has barely budged since then. And the latest numbers suggest that even this modest, inadequate job growth is sputtering out.

…

(T)he mistake of 2010 may yet be followed by an even bigger mistake. Even if that doesn’t happen, however, the fact is that the policy response to the crisis was and remains vastly inadequate.

Somewhat corrected transcript below.

Jun 03 2011

On This Day In History June 3

This is your morning Open Thread. Pour your favorite beverage and review the past and comment on the future.

Find the past “On This Day in History” here.

Click on image to enlarge

June 3 is the 154th day of the year (155th in leap years) in the Gregorian calendar. There are 211 days remaining until the end of the year.

On this day in 1916, United States President Woodrow Wilson signs into law the National Defense Act, which expanded the size and scope of the National Guard, the network of states’ militias that had been developing steadily since colonial times, and guaranteed its status as the nation’s permanent reserve force.

The National Defense Act of 1916 provided for an expanded army during peace and wartime, fourfold expansion of the National Guard, the creation of an Officers’ and an Enlisted Reserve Corps, plus the creation of a Reserve Officers’ Training Corps in colleges and universities. The President was also given authority, in case of war or national emergency, to mobilize the National Guard for the duration of the emergency.

The act was passed amidst the “preparedness controversy”, a brief frenzy of great public concern over the state of preparation of the United States armed forces, and shortly after Pancho Villa’s cross-border raid on Columbus, New Mexico. Its chief proponent was James Hay of Virginia, the chairman of the Committee on Military Affairs.

Sponsored by Rep. Julius Kahn (R) of California and drafted by the House Chairman of the Committee on Military Affairs Rep. James Hay (D) of Virginia, it authorized an army of 175,000 men, a National Guard of 450,000 men. It created the modern Army Reserve Officer Training Corps (ROTC) and empowered the President to place obligatory orders with manufacturers capable of producing war materials.

Langley Field in Virginia was built as part of the act. Now U.S. Air Force Command HQ as Langley Air Force Base, this “aerodrome” was named after air pioneer Samuel Pierpont Langley (died 1904). The President also requested the National Academy of Sciences to establish the National Research Council to conduct research into the potential of mathematical, biological, and physical science applications for defense. It allocated over $17 million to the Army to build 375 new aeroplanes.

Perhaps most important, it established the right of the President to “Federalize” the National Guard in times of emergency, with individual States’ militias reverting to their control upon the end of the declared emergency. With the Defense Act, Congress was also concerned with ensuring the supply of nitrates (used to make munitions), and it authorized the construction of two nitrate-manufacturing plants and a dam for hydropower as a national defense measure. President Wilson chose Muscle Shoals, Alabama as the site of the dam. The dam was later named for him, and the two Nitrate plants built in Muscle Shoals were later rolled into the Tennessee Valley Authority in 1933.

Developments after September 11, 2001

Prior to the attacks against the United States on September 11, 2001, the National Guard’s general policy regarding mobilization was that Guardsmen would be required to serve no more than one year cumulative on active duty (with no more than six months overseas) for each five years of regular drill. Due to strains placed on active duty units following the attacks, the possible mobilization time was increased to 18 months (with no more than one year overseas). Additional strains placed on military units as a result of the invasion of Iraq further increased the amount of time a Guardsman could be mobilized to 24 months. Current Department of Defense policy is that no Guardsman will be involuntarily activated for more than 24 months (cumulative) in one six year enlistment period.

Traditionally, most National Guard personnel serve “One weekend a month, two weeks a year”, although personnel in highly operational or high demand units serve far more frequently. Typical examples are pilots, navigators and aircrewmen in active flying assignments, primarily in the Air National Guard and to a lesser extent in the Army National Guard. A significant number also serve in a full-time capacity in roles such as Active Guard and Reserve (AGR) or Air Reserve Technician or Army Reserve Technician (ART).

The “One weekend a month, two weeks a year” slogan has lost most of its relevance since the Iraq War, when nearly 28% of total US forces in Iraq and Afghanistan at the end of 2007 consisted of mobilized personnel of the National Guard and other Reserve components.

Jun 03 2011

Six In The Morning

Chaos in Yemen Drives Economy to Edge of Ruin



By ROBERT F. WORTH and LAURA KASINOF  

 Even as Yemen’s political crisis deepens, the country is on the brink of an economic collapse so dire it could take years to recover, and hobble efforts to rebuild its fragmented society.

After four months of mass protests and political deadlock, Yemen – already the poorest Arab country, a place where many people have become accustomed to mere subsistence – has had its domestic oil supplies and electricity network largely cut off by hostile tribes. Gas lines now extend for miles in the capital, Sana, provoking fights and new protests; electricity is available for only a few hours a day.




Friday’s Headlines:

Israel accused after Palestinian boys burned by mystery canister

Bahrain lobbies to retain Grand Prix as Formula One staff are held and abused

China says claims it hacked into Gmail accounts of US officials ‘unacceptable’

Ivory Coast President’s forces accused of killings

Tahawwur Rana knew Major Iqbal from army days: Wife

Jun 03 2011

DocuDharma Digest

Regular Features-

Featured Essays for June 2, 2011-

DocuDharma

Jun 03 2011

Evening Edition

Evening Edition is an Open Thread

Now with 51 Top Stories.

From Yahoo News Top Stories

1 Syrian opposition demands Assad’s resignation

AFP

Thu Jun 2, 1:14 pm ET

DAMASCUS (AFP) – Syrian opposition groups demanded President Bashar al-Assad’s immediate resignation Thursday, snubbing government concessions after a week in which activists said security forces killed more than 60 people.

Opposition groups called for the “immediate resignation of President Bashar al-Assad from all functions he occupies,” in a joint declaration at the end of a two-day meeting in Turkey’s Mediterranean resort of Antalya.

They urged the holding of “parliamentary and presidential elections within a period that will not exceed one year” following Assad’s ouster and vowed to work “to bring down the regime.”