Daily Archive: 03/08/2012

Mar 08 2012

Be Prepared

You know: of all the songs I’ve ever sung, that is the one I’ve had the most requests not to. I have time for one more here. this one is a little song dedicated to the Boy Scouts of America. [applause] We seem to have a convention here tonight. The Boy Scouts of America, those noble little bastions of democracy, and the American Legion of tomorrow. their motto is… I would like to state at this time that I am not now and have never been… a member of the Boy Scouts of America. Motto is, as you know, be prepared! and that is the name of this song.

Be prepared! that’s the Boy Scout’s marching song,

Be prepared! as through life you march along.

Be prepared to hold your liquor pretty well,

Don’t write naughty words on walls if you can’t spell.

Be prepared! to hide that pack of cigarettes,

Don’t make book if you cannot cover bets.

Keep those reefers hidden where you’re sure that they will not be found,

And be careful not to smoke them When the scoutmaster’s around

For he only will insist that they be shared. Be prepared!

Be prepared! that’s the Boy Scouts’ solemn creed,

Be prepared! and be clean in word and deed.

Don’t solicit for your sister, that’s not nice,

Unless you get a good percentage of her price.

Be prepared! and be careful not to do

Your good deeds when there’s no one watching you.

If you’re looking for adventure of a new and different kind,

And you come across a Girl Scout who is similarly inclined,

Don’t be nervous, don’t be flustered, don’t be scared. Be prepared!

Mar 08 2012

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”.

Peter Van Buren: The Day ‘Due Process’ Died: Obama, Holder and the End of Rights

Historians of the future, if they are not imprisoned for saying so, will trace the end of America’s democratic experiment to the fearful days immediately after 9/11, what Bruce Springsteen called the days of the empty sky, when frightened, small men named Bush and Cheney made the first decisions to abandon the Constitution in the name of freedom and created a new version of the security state with the Patriot Act, Guantanamo, secret prisons and sanctioned torture by the U.S. government. They proceeded carefully, making sure that lawyers in their employ sanctioned each dark act, much as kings in old Europe used the church to justify their own actions.

Those same historians will remark from exile on the irony that such horrendous policies were not only upheld by Obama, a Nobel Peace Prize winner and professor of Constitutional law, but added to until we came to the place we sadly occupy today: the Attorney General of the United States, Eric Holder, publicly stating that the American Government may murder one of its own citizens when it wishes to do so, and that the requirements of due process enshrined in the Constitution’s Fifth Amendment, itself drawn from the Magna Carta that was the first reflowering of basic human rights since the Greeks, can be satisfied simply by a decision by that same president.

Glen Ford: New Data Show Black Students Have Been New Jim Crowed

Newly-released data on the nation’s public schools document what every Black school kid already knows: African American students are far more likely to be suspended or expelled than whites. Most striking, is how closely school discipline data tracks with racial incarceration numbers. According to the U.S. Department of Education’s Civil Rights Data Collection statistics for the 2009-10 school year, more than 70 percent of students arrested or referred to law enforcement for school related incidents were Black or Hispanic – an approximate match to the ethnic composition of the nation’s prisons.

The school-to-prison pipeline is a much talked about phenomenon, although volume should never be mistaken for clarity. The apparent “tracking” of Blacks and, to a lesser degree, Hispanics, from classrooms to cellblocks, is the direct result of the behaviors of teachers and administrators who perceive and treat Black kids as if they are already criminals – just as cops act on the assumption that Black pedestrians and drivers are probably guilty of…something.

New York Times Editorial: How Good Is the Housing News?

The housing market has shown signs of life recently. Home sales have beat expectations and pending sales neared a two-year high. But prices – the crucial measure of housing-market health – are still falling, driven down by increasing levels of distressed sales of foreclosed properties. That means the market, and the broader economy, which derives much of its strength from housing, are not out of the woods – not by a long shot. [..]

Because the banks held off on foreclosure while the settlement was being negotiated, reclosure filings are set to rise in the coming year to more than two million. That means more pain for struggling homeowners – and the economy. By this point, homeowners should be inundated with relief, not still anxiously awaiting help.

John Nichols: What America Lost When Dennis Kucinich Lost

Ohio Congressman Dennis Kucinich, a two-time presidential candidate who for the past decade has been the most consistent critic of war and militarism in the U.S. House of Representatives, was defeated Tuesday in a Democratic primary that pitted him against fellow progressive Marcy Kaptur. [..]

A Congress without Dennis Kucinich will be a lesser branch. It’s not just that the loss of the former leader of the Congressional Progressive Caucus will rob the House of its most consistent critic of wars in Iraq, Afghanistan and Libya, and one its steadiest critics of corporate power.

Nicholas D. Kristof: In Athens, Austerity’s Ugliness

Europe declared war on Keynes, and Keynes is winning.

In the United States, Republicans lambaste President Obama’s stimulus package as a failure and insist on bone-crunching budget-cutting. If you want to know how well that works, come visit Europe – especially Greece.

Yes, Greece needed a wake-up whack and economic reform, but Republican-style austerity knocked the patient unconscious. Contrast the still-shrinking economies of Europe with the stirrings of recovery in the United States, and you feel lucky to be an American and a beneficiary of President Obama’s stimulus.

Frances Beinecke: Keystone XL Tar Sands Pipeline Won’t Ease Gas Prices; Senate Must Reject It

This week the Senate is likely to vote on an amendment that would force approval for the Keystone XL pipeline. President Obama already rejected the dirty tar sands pipeline because it needed a more thorough safety and environmental review.

Yet instead of allowing engineers, public safety, and other experts to assess the pipeline’s sweeping impacts-on American communities, drinking water supplies, and the stability of our climate-this amendment would let the politicians in Congress decide what is safe.

It would bypass our nation’s long-standing environmental review process and give Congress the unprecedented authority to hand out permits on massive projects.

Mar 08 2012

The Day Due Process Died

US Attorney General Eric Holder asserted in a speech at Northwestern University’s law school that it is lawful for the government to kill American citizens if officials deem them to be operational leaders of Al Qaeda who are planning attacks on the United States and if capturing them alive is not feasible. He did this without legal citations or footnotes to the speech. Eric Holder needs to reread the Constitution, in particular the 5th, 6th, and 14th amendments, with an emphasis on the 6th

In all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury of the State and district wherein the crime shall have been committed, which district shall have been previously ascertained by law, and to be informed of the nature and cause of the accusation; to be confronted with the witnesses against him; to have compulsory process for obtaining witnesses in his favor, and to have the Assistance of Counsel for his defence.

There are seven rights in just that one amendment that go to the heart of the principles of the judicial process:

   1. The right to a speedy trial

   2. The right to a public trial

   3. The right to be judged by an impartial jury

   4. The right to be notified of the nature and circumstances of the alleged crime

   5. The right to confront witnesses who will testify against the accused

   6. The right to find witnesses who will speak in favor of the accused

   7. The right to have a lawyer

Due process balances the power of law of the land and protects individual persons from it. When a government harms a person without following the exact course of the law, this constitutes a due-process violation, which offends against the rule of law.”

And according to the 5th Amendment‘s brief but very clear language, no person “be deprived of life, liberty, or property, without due process of law.”

Law professor Jonathan Turley wrote at his blog that Holder has promised to kill citizens with care. That, in effect, is the pledge the Obama administration’s attorney general says has replaced our constitutional protections:

[..]The good news is that Holder promised not to hunt citizens for sport. Holder proclaimed that:

   “The president may use force abroad against a senior operational leader of a foreign terrorist organization with which the United States is at war – even if that individual happens to be a US citizen.”

The use of the word “abroad” is interesting since senior administration officials have asserted that the president may kill an American anywhere and anytime, including in the United States. Holder’s speech does not materially limit that claimed authority. He merely assures citizens that Obama will only kill those of us he finds abroad and a significant threat. Notably, Holder added, “Our legal authority is not limited to the battlefields in Afghanistan.” [..]

Holder became particularly cryptic in his assurance of caution in the use of this power, insisting that they will kill citizens only with “the consent of the nation involved or after a determination that the nation is unable or unwilling to deal effectively with a threat to the United States.” What on earth does that mean? [..]

He was more clear in establishing that due process itself is now defined differently than it has been defined by courts since the start of this Republic. He declared that “a careful and thorough executive branch review of the facts in a case amounts to ‘due process.'” Of course, from any objective standpoint, that statement is absurd and Orwellian. It is basically saying that “we will give the process that we consider due to a target.” His main point was that “due process” will now no longer mean “judicial process.” [..]

This Administration has consistently maintained that courts do not have a say in such matters. Instead, they simply define the matter as covered by the Law Of Armed Conflicts (LOAC), even when the conflict is a war on terror. That war, they have stressed, is to be fought all around the world, including the United States. It is a battlefield without borders as strikes in other countries have vividly demonstrated.

Brian Sonenstein at FDL calls for action:

Since the whole world is a battlefield in the vague ‘war on terror,’ the only due process afforded to someone who has been targeted for extrajudicial execution is a secret ‘review’ by the panel of senior officials in the executive branch.

Just as the public demanded the release of the Bush Administration’s Torture Memos to expose the ludicrous rationale behind their secret torture program, we too must demand to know the legal rationale for a program that allows our president to unilaterally choose to deprive someone of life and liberty – without any oversight or recourse available to the victim.

Holder’s speech was a cheap attempt to feign transparency without actually releasing the legal memos that define the administration’s execution program. We need your help to demand the Obama administration release these memos immediately so there can be an open public debate about Executive power and the execution of American citizens without any due process or outside accountability.

Please sign our petition demanding the Obama administration produce the internal memos and legal justification for their targeted execution program.

Mar 08 2012

The End of the Credit Default Swap

Credit Default Swaps (CDS) Are Insurance Products, Not Tradeable Assets

Author: Barry Ritholtz, EconoMonitor

March 2nd, 2012

The CFMA radically deregulated derivatives. The law changed the Commodity Exchange Act of 1936 (CEA) to exempt derivatives transactions from regulations as either “futures” (under the CEA) or “securities” under federal securities laws. Further, the CFMA specifically exempted Credit Defaults Swaps and other derivative products from regulation by any State Insurance Board or Regulators.

This rule change exempting CDS from insurance oversight led to a very specific economic behavioral change: Companies that wrote insurance had to explicitly reserve for expected losses and eventual payout in a conservative manner. Companies that wrote Credit Defaults Swaps did not.

Hence, AIG was able to underwrite over THREE TRILLION DOLLARS worth of derivatives, reserving precisely zero dollars agianst potential claims. This was enormously lucrative, except for that whole crashing & burning into insolvency thingie.

How Greece’s default could kill the sovereign CDS market

By Felix Salmon, Reuters

February 29, 2012

The way that CDS auctions are meant to work is that once a borrower defaults on its debt, that defaulted debt continues to be traded in the market, and its value then determines the amount that credit default swaps need to pay out. But in this case, Greece’s defaulted debt might well not continue to be traded in the market. In which case, when traders need to find a cheapest-to-deliver bond to bid on in the CDS auction, they’re going to have to use one of the new bonds, rather than one of the old ones.



In other words, Greece’s CDS really aren’t protecting holders of Greek bonds at all – or if they do, it’s more a matter of luck than of law. When they get paid out on their CDS holdings, people owning protection against a Greek default won’t get paid according to how much money they lost on their old bonds. Instead, they’ll get paid according to the nominal price of the new bonds.

What this means is that the CDS architecture is broken, and can’t cope with collective action clauses. And as a result, according to the hedge fund manager who tipped me off to the whole problem, “this Greece CDS imbroglio might be the final blow for sovereign CDS as a product.”

Greece Readies Record Debt Swap With 60% Commitments

By Maria Petrakis and Fabio Benedetti-Valentini, Bloomberg News

Mar 8, 2012 6:59 AM ET

While Greece would prefer a voluntary deal, the government has said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so-called private sector involvement falls short and it gets sufficient approval from investors to change the bonds’ terms.

“I think that the markets are aware of the risk that a majority for voluntary restructuring is not available, and so I think the surprise won’t be too big if tonight when they realize the collective action clauses will have to be applied,” Bofinger said.



“I do fully expect to be part of the collective action clause,” Patrick Armstrong, managing partner at Armstrong Investment Managers in London, said yesterday in a Bloomberg Television interview. He won’t voluntarily join in the swap because of the “minuscule” chance his bond maturing March 20 will be redeemed at face value.

Compelling holdouts to take part will likely trigger insurance contracts on the debt known as credit default swaps.

“I can’t see any scenario where people are forced to participate against their will and they aren’t triggered,” Armstrong said.

How all CDS are at risk of not paying out

By Felix Salmon, Reuters

March 5, 2012

At heart, the problem is what happens when an issuer swaps out all of its bonds for some new bonds. There’s no reason at all why the new bonds should trade at a massive discount to par – indeed, issuers often like it when their new bonds trade at or near 100 cents on the dollar. But if the CDS auction happens after the bond exchange, and if all of the old bonds are exchanged, then holders of the new bonds are forced to tender new bonds into the exchange, even if they’re trading at 100 cents on the dollar. Which means that holders of old bonds could suffer a huge haircut in the value of their bonds, but still get no payout from their CDS.

This has been an issue in the past. When Anglo Irish Bank restructured its bonds, it amended the old bonds to include a call option which allowed the bank to buy back every €1,000 of bonds for €0.01. That was an effective way of wiping out the value of the old bonds – but it also risked serious damage to the CDS market, since in a CDS auction, the value of a bond is calculated as the price of the bond considered as a percentage of the outstanding principal – and the outstanding principal is considered to be not the face value of the bond but rather the amount of the call option. If Anglo Irish had done the exchange quickly, before a CDS auction was possible, then bondholders would have had to tender bonds with a call option at €0.01 – which would mean that they couldn’t claim any payout on their CDS at all.

In the end, Anglo Irish took pity on the CDS holders, and staggered its restructuring so that there was enough time for ISDA to conduct an auction before the bonds got changed out of all recognition. But hoping that the issuer will act in a friendly manner is not exactly an optimum strategy – especially since, by definition, the issuer will be in the process of going bust.



This doesn’t just seem unsatisfactory at first blush; it is unsatisfactory. And there is no second blush. Essentially, CDS holders are reduced to hoping that the issuer will be nice, and structure the exchange in such a way as to let them get paid out. But there’s no particular reason why the issuer should do that, especially seeing as how the CDS holders were the people who were effectively shorting the issuer as it tumbled into bankruptcy.



If you own protection on a credit, then, you’re very much in a world of caveat emptor. You can trade in and out of CDS and make a good living; these things are, first and foremost, trading vehicles. That’s why they’re more liquid than bonds. But if you have a strategy which involves actually getting paid out on your CDS in the event of default, then you should definitely worry that the payout might not happen, even if the event of default is clear and declared. What’s more, there’s really no good way to hedge that risk.

Mar 08 2012

On This Day In History March 8

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.

March 8 is the 67th day of the year (68th in leap years) in the Gregorian calendar. There are 298 days remaining until the end of the year.

On this day in 1911, International Women’s Day is launched in Copenhagen, Denmark, by Clara Zetkin, leader of the Women’s Office for the Social Democratic Party in Germany.

International Women’s Day (IWD), originally called International Working Women’s Day is marked on the 8th of March every year. It is a major day of global celebration of women. In different regions the focus of the celebrations ranges from general celebration of respect, appreciation and love towards women to a celebration for women’s economic, political and social achievements.

Started as a Socialist political event, the holiday blended in the culture of many countries, primarily Eastern Europe, Russia, and the former Soviet bloc. In many regions, the day lost its political flavour, and became simply an occasion for men to express their love for women in a way somewhat similar to a mixture of Mother’s Day and St Valentine’s Day. In other regions, however, the original political and human rights theme designated by the United Nations runs strong, and political and social awareness of the struggles of women worldwide are brought out and examined in a hopeful manner.

The first IWD was observed on 19 March 1911 in Germany following a declaration by the Socialist Party of America. The idea of having an international women’s day was first put forward at the turn of the 20th century amid rapid world industrialization and economic expansion that led to protests over working conditions.

In 1910, Second International held the first international women’s conference in Copenhagen (in the labour-movement building located at Jagtvej 69, which until recently housed Ungdomshuset). An ‘International Women’s Day’ was established. It was suggested by the important German Socialist Clara Zetkin, although no date was specified. The following year, 1911, IWD was marked by over a million people in Austria, Denmark, Germany and Switzerland, on March 19. In the West, International Women’s Day was first observed as a popular event after 1977 when the united Nations General Assembly invited member states to proclaim March 8 as the UN Day for Women’s Rights and International Peace.

Demonstrations marking International Women’s Day in Russia proved to be the first stage of the Russian Revolution of 1917.

Following the October Revolution, the Bolshevik Alexandra Kollontai persuaded Lenin to make it an official holiday in the Soviet Union, and it was established, but was a working day until 1965. On May 8, 1965 by the decree of the USSR Presidium of the Supreme Soviet International Women’s Day was declared a non working day in the USSR “in commemoration of the outstanding merits of Soviet women in communistic construction, in the defense of their Fatherland during the Great Patriotic War, in their heroism and selflessness at the front and in the rear, and also marking the great contribution of women to strengthening friendship between peoples, and the struggle for peace. But still, women’s day must be celebrated as are other holidays.”

2012 International Women’s Day

The UN theme for International Women’s Day 2012 is Empower Women – End Hunger and Poverty. In many countries, International Women’s Day is an occasion to honor and praise women for their accomplishments. In 2012, Oxfam America is inviting people to celebrate inspiring women in their lives by sending a free International Women’s Day e-Card or honoring a woman whose efforts make a difference in the fight against hunger and poverty with Oxfam’s International Women’s Day award.

On the occasion of International Women’s Day 2012, the ICRC is calling for more action to help the mothers and wives of people who have gone missing during armed conflict. The vast majority of people who go missing in connection with conflict are men. As well as the anguish of not knowing what has happened to the missing person, many of these women face economic and practical difficulties. The ICRC underlines the duty of parties to a conflict to search for the missing and provide information for the families.

Mar 08 2012

My Little Town 20120307. More Correspondance from a Previous Post

Those of you that read this regular series know that I am from Hackett, Arkansas, just a mile or so from the Oklahoma border, and just about 10 miles south of the Arkansas River.  It was a rural sort of place that did not particularly appreciate education, and just zoom onto my previous posts to understand a bit about it.

Writing this series is a continuous learning experience.  Last time I posted some email traffic that I had had with descendents of Ben Boggs, and they took me to task, properly, for not portraying him as they knew him.  Amongst other things, he held the Purple Heart.  I honor him for serving our Nation in time of war.

This weekend I received a long email from his daughter, Jenny, whom I knew well with even more information.  Here is what she sent me, her words exactly copied and pasted in blockquote, and my responses to her words in plain text.

Ben taught his children manners.  There is no doubt about it.  I could not have come up with a better topic for tonight than to give the side of the story that I never realized.