05/17/2012 archive

In New York City, U.S. District Judge Katherine Forrest ruled that the indefinite detention provision of the National Defense Authorization Act (NDAA) is unconstitutional in violation of the First and Fifth Amendments. The NDAA was signed into law by President Obama in late December after a veto threat over language that was eventually changed at his request.

In a 68-page ruling blocking this statute, U.S. District Judge Katherine Forrest agreed that the statute failed to “pass constitutional muster” because its broad language could be used to quash political dissent.

    “There is a strong public interest in protecting rights guaranteed by the First Amendment,” Forrest wrote. “There is also a strong public interest in ensuring that due process rights guaranteed by the Fifth Amendment are protected by ensuring that ordinary citizens are able to understand the scope of conduct that could subject them to indefinite military detention.”

This puts a whole new spin on today’s debate in the House floor Thursday of an amendment to the NDAA proposed by Representatives Adam Smith (D-Wash.) and Justin Amash (R-Mich.), that would undo the detention provisions and bar military detention for any terror suspects captured on U.S. soil. The ruling was made in response to a law suit brought by former New York Times war correspondent and Pulitzer Prize winner, Chris Hedges and others who argued that the law would have a “chilling effect” on their work:

Hedges was joined in the suit by linguist, author and dissident Noam Chomsky, Pentagon whistle-blower Daniel Ellsberg and other high-profile activists, scholars and politicians.

Hedges argued in his testimony that his work as a journalist would bring him into contact with terrorist organizations that would, given the scope of the law, qualify him for indefinite detention. The plaintiffs argued that the threat of detention alone would be an unconstitutional encroachment on their First Amendment rights to free expression and association, as well as a violation of the Fifth Amendment right to due process.

As Glen Greenwald points out in his Salon article, the court rejected the argument by the government that the NDAA did nothing more than the 2001 AUMF already did and thus did not really expand the Government’s power of indefinite detention:

The court cited three reasons why the NDAA clearly expands the Government’s detention power over the 2001 AUMF (all of which I previously cited when denouncing this bill).

First, “by its terms, the AUMF is tied directly and only to those involved in the events of 9/11,” whereas the NDAA “has a non-specific definition of ‘covered person’ that reaches beyond those involved in the 9/11 attacks by its very terms.”

Second, “the individuals or groups at issue in the AUMF are also more specific than those at issue in § 1021″ of the NDAA; that’s because the AUMF covered those “directly involved in the 9/11 attacks while those in § 1021 [of the NDAA] are specific groups and ‘associated forces’.” Moreover, “the Government has not provided a concrete, cognizable set of organizations or individuals that constitute ‘associated forces,’ lending further indefiniteness to § 1021.”

Third, the AUMF is much more specific about how one is guilty of “supporting” the covered Terrorist groups, while the NDAA is incredibly broad and un-specific in that regard, thus leading the court to believe that even legitimate activities could subject a person to indefinite detention.

The court also decisively rejected the argument that President Obama’s signing statement – expressing limits on how he intends to exercise the NDAA’s detention powers – solves any of these problems. That’s because, said the court, the signing statement “does not state that § 1021 of the NDAA will not be applied to otherwise-protected First Amendment speech nor does it give concrete definitions to the vague terms used in the statute.”

(emphasis mine)

A word of caution, we shouldn’t celebrate victory just yet. This is a preliminary injunction issued by one judge and the government will surely appeal it the Circuit Court.

The debate in the House on the amendment to the NDAA introduced by House Armed Services ranking member Adam Smith (D-Wash.) and Rep. Justin Amash (R-Mich.) that would undo the detention provisions and bar military detention for any terror suspects captured on U.S. soil, will go on this afternoon. The amendment has strong bipartisan support in the House. We still need to take action and write our Representatives to vote for this amendment.

“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”.

Follow us on Twitter @StarsHollowGzt

Robert Reich: The Dog That Didn’t Bark: Obama on JPMorgan

The dog that didn’t bark this week, let alone bite, was the president’s response to JPMorgan Chase’s bombshell admission of losing more than $2 billion in risky derivative trades that should never have been made.

“JPMorgan is one of the best-managed banks there is. Jamie Dimon, the head of it, is one of the smartest bankers we got and they still lost $2 billion,” the president said on the television show The View, which aired Tuesday, suggesting that a weaker bank might not have survived.

That was it.

Not a word about Jamie Dimon’s tireless campaign to eviscerate the Dodd-Frank financial reform bill; his loud and repeated charge that the Street’s near meltdown in 2008 didn’t warrant more financial regulation; his leadership of Wall Street’s brazen lobbying campaign to delay the Volcker Rule under Dodd-Frank, which is still delayed; and his efforts to make that rule meaningless by widening a loophole allowing banks to use commercial deposits to “hedge” (that is, make offsetting bets) their derivative trades.

Jeff Madrick: Germany’s Attempt to Beat Greece Into Submission Won’t Work

Treating Greece like an incorrigible child won’t improve its economy or the future of the eurozone.

“German Patience with Greece Wears Thin,” says the New York Times headline. My patience with the mainstream media also wears thin. Like a bad parent, Germany scolds Greece for something its constant beatings basically forced it to do. The media buys into Germany’s logic. Were high-pressure tactics to adopt punishing austerity cutbacks ever going to encourage Greek solidarity and social peace? Is the parent who beats the child ever going to encourage obedience and healthy behavior? Psychology has taken us a long way past the value of spankings to instill constructive attitudes. It seems not so for the Germans, although it should be said that not all of them agree with their prime minister, Angela Merkel, and government officials.

Are the Germans actually trying to get Greece to leave the euro? If so, they are probably underestimating the turmoil that would cause. On the other hand, it may be getting to the point where it is a better option for the Greeks to incur the possible closing of financial markets should they adopt a new drachma, which will quickly fall in value. They will not pay their debts to German banks and others in full-fledged euros. But they can start to determine their own fate and work with what industries they have. Their export sector is not as weak as people seem to think.

You know, some of us drink because we’re not poets.  I’ve been a writer all my life and it’s as much a part of me as my sexual orientation and skin color (‘tro, male, and white not that it should make a difference).  I don’t pretend to special expertise even in the matter of piloting river boats which is why I’m careful to maintain my anonymity.  Feel free to disagree, you’re probably right.

Yet as a writer it’s gratifying to come across affirmations of sanity, if not an audience, and in that spirit I offer this-

Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in ‘Naked Short Selling’

Matt Taibbi, Rolling Stone

POSTED: May 15, 5:39 PM ET

“Fuck the compliance area – procedures, schmecedures,” chirps Peter Melz, former president of Merrill Lynch Professional Clearing Corp. (a.k.a. Merrill Pro), when a subordinate worries about the company failing to comply with the rules governing short sales.

…

A quick primer on what naked short selling is. First of all, short selling, which is a completely legal and often beneficial activity, is when an investor bets that the value of a stock will decline. You do this by first borrowing and then selling the stock at its current price, then returning the stock to your original lender after the price has gone down. You then earn a profit on the difference between the original price and the new, lower price.

What matters here is the technical issue of how you borrow the stock. Typically, if you’re a hedge fund and you want to short a company, you go to some big-shot investment bank like Goldman or Morgan Stanley and place the order. They then go out into the world, find the shares of the stock you want to short, borrow them for you, then physically settle the trade later.

But sometimes it’s not easy to find those shares to borrow. Sometimes the shares are controlled by investors who might have no interest in lending them out. Sometimes there’s such scarcity of borrowable shares that banks/brokers like Goldman have to pay a fee just to borrow the stock.

These hard-to-borrow stocks, stocks that cost money to borrow, are called negative rebate stocks. In some cases, these negative rebate stocks cost so much just to borrow that a short-seller would need to see a real price drop of 35 percent in the stock just to break even. So how do you short a stock when you can’t find shares to borrow? Well, one solution is, you don’t even bother to borrow them. And then, when the trade is done, you don’t bother to deliver them. You just do the trade anyway without physically locating the stock.

Thus in this document we have another former Merrill Pro president, Thomas Tranfaglia, saying in a 2005 email: “We are NOT borrowing negatives… I have made that clear from the beginning. Why would we want to borrow them? We want to fail them.”

Trafaglia, in other words, didn’t want to bother paying the high cost of borrowing “negative rebate” stocks. Instead, he preferred to just sell stock he didn’t actually possess. That is what is meant by, “We want to fail them.” Trafaglia was talking about creating “fails” or “failed trades,” which is what happens when you don’t actually locate and borrow the stock within the time the law allows for trades to be settled.

If this sounds complicated, just focus on this: naked short selling, in essence, is selling stock you do not have. If you don’t have to actually locate and borrow stock before you short it, you’re creating an artificial supply of stock shares.

Magic beans.

Make Banking Boring

By JOE NOCERA, The New York Times

Published: May 14, 2012

Let’s begin by stipulating the obvious: nobody outside of JPMorgan Chase knows for sure what really happened with those trades that have cost it so much money and done such severe damage to its once stellar reputation.

You know Joe, it’s really not very hard to understand at all.

JP Morgan invested a ton of money, and by a ton I mean Trillions of exposure, in an obscure and lightly traded piece of paper labeled CDX NA IG 9 that represents a notional basket of 125 European stocks.

What do I mean by “notional”?  Well, there’s not actually a pile of stock certificates lying around that you can use to wrap fish or wipe your ass or wallpaper your living room, these stocks are “synthetic” meaning that if anyone ever needs to see one you have to go down to the store and buy it at whatever the market price is.

But there is always a price and a market- or is there?

As the Hunt brothers found out in the early ’80s with a far more tangible and useful (you can use it to make photographic film and it has excellent electrical conductivity) asset, you can assemble a position that so dominates a market that you can’t sell without lowering the price which is high because of your artificially created scarcity.

Supply increases in the face of fixed Demand and the price goes down.  Real Economics 101 stuff, not hard to understand at all.

Now the problem with CDX NA IG 9 is you can’t use it to make spoons or candlesticks.  Heck, as I pointed out before you can’t even use it to wipe your ass because it doesn’t exist.

So its value is entirely dependent on finding another sucker investor who’s willing to give you something for nothing.

Good luck with that.

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

May 17 is the 137th day of the year (138th in leap years) in the Gregorian calendar. There are 228 days remaining until the end of the year.

On this day in 1954, in a major civil rights victory, the U.S. Supreme Court hands down an unanimous decision in Brown v. Board of Education of Topeka, ruling that racial segregation in public educational facilities is unconstitutional. The historic decision, which brought an end to federal tolerance of racial segregation, specifically dealt with Linda Brown, a young African American girl who had been denied admission to her local elementary school in Topeka, Kansas, because of the color of her skin.

Brown v. Board of Education of Topeka, 347 U.S. 483 (1954), was a landmark decision of the United States Supreme Court that declared state laws establishing separate public schools for black and white students unconstitutional. The decision overturned the Plessy v. Ferguson decision of 1896 which allowed state-sponsored segregation. Handed down on May 17, 1954, the Warren Court’s unanimous (9-0) decision stated that “separate educational facilities are inherently unequal.” As a result, de jure racial segregation was ruled a violation of the Equal Protection Clause of the Fourteenth Amendment of the United States Constitution. This ruling paved the way for integration and the civil rights movement.

Supreme Court Review

The case of Brown v. Board of Education as heard before the Supreme Court combined five cases: Brown itself, Briggs v. Elliott (filed in South Carolina), Davis v. County School Board of Prince Edward County (filed in Virginia), Gebhart v. Belton (filed in Delaware), and Bolling v. Sharpe (filed in Washington D.C.).

All were NAACP-sponsored cases. The Davis case, the only case of the five originating from a student protest, began when sixteen-year-old Barbara Rose Johns organized and led a 450-student walkout of Moton High School.

The Kansas case was unique among the group in that there was no contention of gross inferiority of the segregated schools’ physical plant, curriculum, or staff. The district court found substantial equality as to all such factors. The Delaware case was unique in that the District Court judge in Gebhart ordered that the black students be admitted to the white high school due to the substantial harm of segregation and the differences that made the schools separate but not equal. The NAACP’s chief counsel, Thurgood Marshall, who was later appointed to the U.S. Supreme Court in 1967, argued the case before the Supreme Court for the plaintiffs. Assistant attorney general Paul Wilson, later distinguished emeritus professor of law at the University of Kansas, conducted the state’s ambivalent defense in his first appellate trial.

Unanimous Opinion and Key Holding

In spring 1953 the Court heard the case but was unable to decide the issue and asked to rehear the case in fall 1953, with special attention to whether the Fourteenth Amendment’s Equal Protection Clause prohibited the operation of separate public schools for whites and blacks.

The case was being reargued at the behest of Associate Justice Felix Frankfurter, who used re-argument as a stalling tactic, to allow the Court to gather a unanimous consensus around a Brown opinion that would outlaw segregation. Chief Justice Vinson had been a key stumbling block. The justices in support of desegregation spent much effort convincing those who initially dissented to join a unanimous opinion. Even though the legal effect would be same for a majority versus unanimous decision, it was felt that it was vital to not have a dissent which could be relied upon by opponents of desegregation as a legitimizing counterargument.

Conference notes and draft decisions illustrate the division of opinions before the decision was issued. Justices Douglas, Black, Burton, and Minton were predisposed to overturn Plessy. Fred M. Vinson noted that Congress had not issued desegregation legislation; Stanley F. Reed discussed incomplete cultural assimilation and states’ rights and was inclined to the view that segregation worked to the benefit of the African-American community; Tom C. Clark wrote that “we had led the states on to think segregation is OK and we should let them work it out.” Felix Frankfurter and Robert H. Jackson disapproved of segregation, but were also opposed to judicial activism and expressed concerns about the proposed decision’s enforceability. After Vinson died in September 1953, President Dwight D. Eisenhower appointed Earl Warren as Chief Justice. Warren had supported the integration of Mexican-American students in California school systems following Mendez v. Westminster.

While all but one justice personally rejected segregation, the self-restraint faction questioned whether the Constitution gave the Court the power to order its end. The activist faction believed the Fourteenth Amendment did give the necessary authority and were pushing to go ahead. Warren, who held only a recess appointment, held his tongue until the Senate, dominated by southerners, confirmed his appointment.

Warren convened a meeting of the justices, and presented to them the simple argument that the only reason to sustain segregation was an honest belief in the inferiority of Negroes. Warren further submitted that the Court must overrule Plessy to maintain its legitimacy as an institution of liberty, and it must do so unanimously to avoid massive Southern resistance. He began to build a unanimous opinion.

Although most justices were immediately convinced, Warren spent some time after this famous speech convincing everyone to sign onto the opinion. Justices Robert Jackson and Stanley Reed finally decided to drop their dissent to what was by then an opinion backed by all the others. The final decision was unanimous. Warren drafted the basic opinion and kept circulating and revising it until he had an opinion endorsed by all the members of the Court.

Holding

The key holding of the Court was that, even if segregated black and white schools were of equal quality in facilities and teachers, segregation by itself was harmful to black students and unconstitutional. They found that a significant psychological and social disadvantage was given to black children from the nature of segregation itself, drawing on research conducted by Kenneth Clark assisted by June Shagaloff. This aspect was vital because the question was not whether the schools were “equal”, which under Plessy they nominally should have been, but whether the doctrine of separate was constitutional. The justices answered with a strong “no”:

   Does segregation of children in public schools solely on the basis of race, even though the physical facilities and other “tangible” factors may be equal, deprive the children of the minority group of equal educational opportunities? We believe that it does… Segregation of white and colored children in public schools has a detrimental effect upon the colored children. The impact is greater when it has the sanction of the law, for the policy of separating the races is usually interpreted as denoting the inferiority of the negro group. A sense of inferiority affects the motivation of a child to learn. Segregation with the sanction of law, therefore, has a tendency to [retard] the educational and mental development of negro children and to deprive them of some of the benefits they would receive in a racial[ly] integrated school system… We conclude that, in the field of public education, the doctrine of “separate but equal” has no place. Separate educational facilities are inherently unequal. Therefore, we hold that the plaintiffs and others similarly situated for whom the actions have been brought are, by reason of the segregation complained of, deprived of the equal protection of the laws guaranteed by the Fourteenth Amendment.

Establishment Dems Proving Themselves Clueless in Washington’s 1st District Race

By David Neiwert, Crooks and Liars

May 16, 2012 06:00 PM

If you want a classic example of the way Establishment Democrats are perfectly tone-deaf when it comes to the concerns of the working families they like to flatter themselves as representing, take a look at how the race in Washington’s brand-spanking-new First District is shaping up, particularly on the Democratic side.

Because instead of backing Darcy Burner, the progressive candidate with far and away the greatest name recognition and a record of working for working-class families and their interests — particularly when it comes to things like protecting Medicare and Social Security, and getting their children out of war zones — the state’s establishment Dems seem to be lining up behind Susan DelBene, a pro-business faux-progressive Dem with little popular support but very deep pockets.

Evidently, it’s all about the money. In a year when Democrats should be listening to the anger of their constituents at the failure of Washington politicians to take care of the interests of ordinary people, these dimbulbs are going back to politics as usual and backing the candidate with the deepest pockets, not the deepest support among voters.

Well, what I like to do on formal occasions like this is to take some of the various types of songs that we all know and presumably love, and, as it were, to kick them when they’re down.

I find if you take the various popular song forms to their logical extremes, you can arrive at almost anything from the ridiculous to the obscene, or — as they say in New York — sophisticated.

I’d like to illustrate with several hundred examples for you this evening, first of all, the southern type song about the wonders of the American South. but it’s always seemed to me that most of these songs don’t go far enough. the following song, on the other hand, goes too far. It’s called I Wanna Go Back To Dixie.

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.

Hackett schools were horrible when I was going there, so after the seventh grade my parents decided to look for alternatives.  My friend’s parents actually bought a house in a good Fort Smith school district, but there were some domestic issues involved as well and his mum and dad actually preferred living apart.

The only other legal alternative was for me to attend Saint Anne’s High School, the only Catholic high school in town.  Arkansas is only about 3% Catholic, so even to have a Catholic high school was sort of amazing.  The problem was that Saint Anne’s started at ninth grade.  We went for an interview and the principal decided that I had sufficient background to bypass the seventh grade.

Runaway train on entitlement cuts?

digby, Hullaballoo

5/16/2012 01:00:00 PM

I’m afraid we are looking as a scenario in which they’ll end up accepting “tax reform” (another word for tax cuts for the wealthy and corporations) in exchange for tax hikes on the middle class and benefits cuts to social security and medicare. And they will strut and puff and knock themselves over patting each other on the back for being “responsible” and doing the “hard work” of screwing the American people, including the most vulnerable, in the middle of a depression and at a time when their futures have never been more insecure. Heckuva job.

I don’t know what more to say about this. Voting against them will not stop it. Voting for them will not stop it. So far, public opposition will not stop it. Certainly, there’s little reason to believe that the administration will stop it.

…

Everyone keeps telling me that they will never cut social security and medicare because they’re popular programs. One would certainly think that should be true. So can someone please tell me what they have to gain by pretending they want to? Honestly, I don’t see it either as a negotiating ploy or a public relations tactic. The only thing I can come up with is that they believe the Village hype that they will be “heroes” for bucking the popular will. And perhaps they will be — not in the public’s mind, of course, but Gloria Borger and Cokie Roberts will think they’re just dreamy and Pete Peterson and his pals on Wall Street will surely be grateful.

…

Democrats know all this. Becerra should have his district offices inundated with phone calls. People should picket and protest. But I doubt it will do any good. They are determined to do this and they aren’t being honest about the reasons why. (Either that or they are too stupid to be in elective office and that’s saying something.) Bill Clinton is one of the most astute students of the budget in the entire country. He knows very well that he is spouting utter crapola. There is no earthly reason for him to do this except as a reflexive desire to appear reasonable to people who loathe the very air he breathes — or appease Pete Peterson and his pals. Actually, in his case, it’s probably both.

This has the feeling of a runaway train to me. The Republicans have worn them down and they just want to get past the election. Sure, they may get some little token of a tax hike on the wealthy in return. But it will be nothing to the sacrifices that average Americans will have to make. Indeed, this whole formulation is fundamentally immoral — tax hikes on millionaires in exchange for poor, sick old people having to do with less than their already meager guarantee is disgusting. Couldn’t we at least agree to fuck over the sick, old people only as a last resort?

I disagree with digby.  Vote against them.

• Be Prepared by: ek hornbeck
• On This Day In History May 16 by: TheMomCat
• Not Capitalism by: ek hornbeck
• Say it ain’t so. by: ek hornbeck
• Don’t Believe Your Lying Eyes by: ek hornbeck
• The Wild West Is Where I Want To Be by: ek hornbeck

DocuDharma