11/06/2012 archive

And you thought we were all done with debates. This is the last until about 2014. This debate was supposed to take place October 30 in Washington, DC but Super hurricane Sandy had other plans. It is the second of two debates that was sponsored by the Free and Equal Elections Foundation and it is between Green Party candidate Jill Stein and Libertarian Party candidate Gary Johnson. They were the winners of an on line poll that was taken after the first debate on October 23 which included Justice Party candidate Rocky Anderson and Constitution Party candidate Virgil Goode.

The final debate was moderated by Tom Hartman, host of RT News‘ “Big Picture,” and Christina Tobin from the Free and Equal Elections Foundation.

You can read the summery of topics that the candidates debated here

“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

New York Times Editorial: The Battle for the Senate

For Republicans intent on unraveling President Obama’s accomplishments, electing Mitt Romney has been only one part of the equation. Almost as important was installing a Republican majority in the United States Senate, where 50 votes (plus the vice president) would be necessary to repeal much of health care reform, roll back tax increases on the rich and gut social welfare programs.

The party’s hopes, however, have been severely damaged in recent weeks. Republican candidates who are crucial to regaining a majority in the Senate have tumbled, according to a variety of polls, and Democrats are now considered likely to retain control. The reason for this is clear: Primary voters chose several unappealing or ideologically driven candidates who repelled general-election voters once they began speaking their minds.

Dean baker: Romney’s Global Warming Joke Should Haunt Him

When Gov. Romney gave his acceptance speech at the Republican convention he quipped that President Obama wants to slow the rise of the oceans and that he, by contrast, wanted to help American families. It would be interesting to see if Romney would care to repeat this line today.

Perhaps he wants to tell the people of New York and New Jersey who have seen their homes — and in some cases lives — destroyed by the rise of the oceans, how silly President Obama is for taking steps to counter global warming. These people will surely get a good chuckle from the Governor’s sense of humor as they wait to have to electricity restored or their home rebuilt. [..]

Anyone who thinks all this is funny should be disqualified from being taken seriously, not only as presidential candidate, but from holding any responsible position in public life. We can debate the best path for dealing with global warming, and there will certainly be grounds for dispute over the merits of any specific policy or project, but serious people do not ignore the threat posed by human-caused global warming.

Australia’s Federal Court issues landmark judgment against S&P, ABN Amro

Reuters

Mon Nov 5, 2012 4:18am GMT

SYDNEY (Reuters) – Australia’s Federal court issued a landmark judgment on Monday that Standard & Poor’s misled investors by giving its highest rating to derivatives that lost almost all their value in the run-up to the 2008 global economic crisis.

The Australian case marked the first time a ratings agency had faced trial over the complex financial products widely cited as one of the factors that triggered the crisis and could set a precedent for future litigation around the world.

…

“This is a major blow to the ratings agencies, which for years have had the benefit of profiting from the assignment of these ratings without ever being accountable to investors for those opinions,” said lawyer Amanda Banton of Piper Alderman, who represented the local councils.

“Today’s judgment will ultimately have the effect of ensuring ratings agencies are accountable and promoting transparency in the ratings process,” Banton added.

Monday’s ruling follows a judgment in September against Lehman Brothers Australia, which found that firm breached its legal duties when it sold collateralised debt obligations, or CDOs, to a group of charities, councils and churches that collectively lost A$250 million ($259 million).

Hero of the day, CPDO edition

Felix Salmon, Reuters

Nov 5, 2012 18:38 UTC

I’d never heard of Australian federal judge Jayne Jagot before today, but she’s my new favorite jurist, thanks to her decision in a recent court case which was brought against ABN Amro and Standard & Poors.

The coverage of the decision (Quartz, FT, WSJ, Bloomberg, Reuters) concentrates, as it should, on the hugely important precedent being set here: that a ratings agency – in this case, S&P – is being found liable for losses that an investor suffered after trusting that agency.

…

The case at heart is a simple one: 12 local councils in Australia bought a bunch of CPDOs, and they only did so because S&P had given those instruments a triple-A rating. S&P, in turn, should never have given the CPDOs that triple-A rating. So it’s S&P’s fault that the councils lost so much money – jointly with ABN Amro, which structured the things.

How does Jagot come to the conclusion that “a reasonably competent ratings agency” would never have given the CPDOs a triple-A rating? Simple: S&P used utterly bonkers assumptions in order to come to its conclusion.

…

There’s really no way of reading what S&P did, here, except that it simply massaged the assumptions it was using until it managed to find something which was consistent with the triple-A rating it wanted. When spreads are at 30bp, what makes you think they’ll average 40bp over one year and then 80bp over nine years? Especially when the index as a whole has never averaged anything like 80bp? It’s simply not a reasonable assumption, and the fact that S&P made it just goes to show how the agency was acting for its paymasters – ABN Amro – and was not putting out reliable ratings at all.

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You’d think that a ratings agency, of all institutions, would be alive to the risk of ratings downgrades. But, it turns out, not so much. ABN Amro, in its model , simply didn’t include what’s known as “ratings migration” – and S&P, similarly, completely ignored it.

The result, in reality, was devastating. Because companies could borrow at such low rates, they were particularly vulnerable to being taken over by private-equity firms which could load them up with cheap debt, devastating their credit ratings. And that’s exactly what happened. A whole series of investment-grade companies, like Alliance Boots, Alltel, and Boston Scientific, got levered up by their new private-equity owners, and lost their investment-grade credit ratings.

…

Put it all together, and you get a very shocking view of S&P. Here’s the list:

• S&P used the wrong model input for starting spread.
• S&P used the wrong model input for volatilty.
• S&P used the wrong model input for average spread.
• S&P completely ignored ratings migration.

If S&P had just got any one of these things right, the CPDO would never have gotten that triple-A rating. If it had got them all right, the CPDO would almost certainly not even have been investment grade, let alone triple-A.

S&P was not doing its job, and as a result a bunch of Australian municipalities lost a great deal of money. Jagot has found S&P liable, as she should. Good for her.

Australian Court: Standard and Poor’s Liable for Bad Ratings on Securities

By: David Dayen, Firedog Lake

Monday November 5, 2012 12:26 pm

This will get approximately no attention today, but a federal court in Australia ruled that Standard and Poor’s, the credit rating agency, lied to investors when they awarded their highest, triple-A rating to derivative securities that lost their value within two years of purchase.

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Further rulings of this type in this very new area of case law would be devastating to the rating agencies. They would also be correct. Rating agencies, paid by the banks whose securities they rate, simply failed to model the potential for a collapse in value of a basket of securities, particularly mortgage backed securities during the housing bubble. This led a host of investors to trust the ratings and buy the products, only to have their values collapse. While the banks got bailed out, the investors did not; they were collateral damage in the financial crash. And when I say “investors” I also mean municipal and union pension funds.

Those who want to defend the system argue that investors should have done their own due diligence before deciding on purchasing these structured finance products. The Australian court didn’t agree. They argued that the rating agencies are culpable for their work, and that their failures amounted to fraud. Rating agencies have never been held accountable for the ratings they assign, and this ruling, if replicated, would completely upend that expectation. The first place we could see further action from investors would be in Europe. The US has seen some case law in this area, and by and large the rating agencies have gotten off scot-free, using both disclaimers in their written materials and Constitutional protections on freedom of speech, believe it or not. There are some outstanding cases, however.

But Mr. Market certainly took notice of this ruling, dropping the stock of S&P’s parent company, McGraw-Hill, over 5%. Other rating agency stocks fell as well. And that’s appropriate, because the money that Standard and Poor’s will now have to pay the local councils in Australia outstrips the money the councils lost on the securities. There’s massive exposure here.

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.

November 6 is the 310th day of the year (311th in leap years) in the Gregorian calendar. There are 55 days remaining until the end of the year.

On this day in 1860, Abraham Lincoln is elected the 16th President of the United States over a deeply divided Democratic Party, becoming the first Republican to win the presidency. Lincoln received only 40 percent of the popular vote but handily defeated the three other candidates: Southern Democrat John C. Breckinridge, Constitutional Union candidate John Bell, and Northern Democrat Stephen Douglas, a U.S. senator for Illinois.

Lincoln received 1,866,452 votes, Douglas 1,376,957 votes, Breckinridge 849,781 votes, and Bell 588,789 votes. The electoral vote was decisive: Lincoln had 180 and his opponents added together had only 123. Turnout was 82.2%, with Lincoln winning the free Northern states. Douglas won Missouri, and split New Jersey with Lincoln. Bell won Virginia, Tennessee, and Kentucky, and Breckinridge won the rest of the South. There were fusion tickets in which all of Lincoln’s opponents combined to form one ticket in New York, New Jersey, and Rhode Island, but even if the anti-Lincoln vote had been combined in every state, Lincoln still would have won a majority in the electoral college.

As Lincoln’s election became evident, secessionists made clear their intent to leave the Union. On December 20, 1860, South Carolina took the lead; by February 1, 1861, Florida, Mississippi, Alabama, Georgia, Louisiana, and Texas followed. The seven states soon declared themselves to be a sovereign nation, the Confederate States of America. The upper South (Delaware, Maryland, Virginia, North Carolina, Tennessee, Kentucky, Missouri, and Arkansas) listened to, but initially rejected, the secessionist appeal. President Buchanan and President-elect Lincoln refused to recognize the Confederacy. There were attempts at compromise, such as the Crittenden Compromise, which would have extended the Missouri Compromise line of 1820, and which some Republicans even supported. Lincoln rejected the idea, saying, “I will suffer death before I consent…to any concession or compromise which looks like buying the privilege to take possession of this government to which we have a constitutional right.”

Lincoln, however, did support the Corwin Amendment to the Constitution, which had passed in Congress and protected slavery in those states where it already existed. A few weeks before the war, he went so far as to pen a letter to every governor asking for their support in ratifying the Corwin Amendment as a means to avoid secession.

Let me start by saying that this is not an endorsement of any particular party, candidate, or course of action.  For one thing it would be awfully presumptuous of me to think that anything I could do or say would influence you more than stark reality, the thing about truth is that it’s unpersuadable- it doesn’t change because of the excellence of the argument or the eloquence of the presenter.

Likewise you have no expectation or entitlement to know anything at all about me like what I had for breakfast (a spinach quesadilla) or especially what I choose to do in a voting booth unless I tell you and at that I’ll likely lie my ass off unless my answer is inconsequential and then I’ll probably lie just for sport.

I’m not your mommy or daddy, or your child.

I’ll also repeat this just in case it’s slipped out of your consciousness-

DocuDharma and The Stars Hollow Gazette are explicitly non-partisan.  You may freely express your support for any candidate.  They are also public so if you publish an unpopular sentiment or inconvenient truth only your discretion and the obviously mean spirited nature of cross blog stalking protect you from consequences and suppression in other forums.  Nor are your ideas immune from criticism and discussion here, but you won’t be sanctioned for anything except violating the normal rules of behavior.

Another thing that I don’t think people ‘get’ about me politically is that I’m really pretty conservative.  Sure I’m in favor of confiscatory wealth taxes; strict environmental, fraud, business and financial regulation including criminal imprisonment of guilty managers, officers and directors in the general population just like any common cut purse; transaction taxes, punitive tariffs and currency controls; and dismantlement of the corporate welfare system including carbon energy, genetically modified agriculture and factory farming, and the military industrial complex including the subsidized National Security Theater, Prohibition Morality Police, and Privatized Prisons.

But I’m generally against changes to our Constitution.  I like the Electoral College and filibuster because I think they help preserve minority and regional rights.

And yes, I do realize that the filibuster is not “Constitutional” except that part which says that Article One institutions (the House and Senate) get to establish their own rules.

On the other hand I am in favor of Article Three Court packing because the exact number of Justices is nowhere enshrined even nearly as well in our founding document or its amendments and has been set by legislative precedent (a power explicitly given to the Legislature by the Constitution and subject to Executive Veto) at various configurations between 6 and 10 (see, no historic preference for odd numbered tie breaking either).

FDR was right.

The nature of evil

The Republican Party is composed of 30% of the population who are either avaricious scoundrels or hopelessly bigoted or both.  They propose policies, and enact them if possible, that reflect their evil nature.  I am not one to sugar coat the stark inhumanity of their souls and while I admire the idealism of those missionaries who think they can educate them away from their willful ignorance I find them fundamentally foolish, their energy misguided, their faith misplaced.

Ignorance does not equal stupidity.  They are cunning, ruthless, and resourceful and they look upon you as naive rubes, mere marks to be exploited and harvested like sheep.  The trouble with Kansas is that there are so many Kansans in it and they are happy being evil, not that they are dumb.

And of course they’re not limited to Kansas, would that they were.  The War of Northern Aggression was primarily motivated by the fact that northern states aggressively didn’t recognize the obvious moral superiority of the South and it’s peculiar institution of race slavery and instead condemned it as hateful and uncivilized.  This itself was not was not without a class economic component as over half the wealth of the entire United States was held in the value of human cattle, its breeding, and labor.

Representative Democracy

“The past is never dead.  It’s not even past.”

A house divided against itself cannot stand. I believe this government cannot endure, permanently, half slave and half free. I do not expect the Union to be dissolved – I do not expect the house to fall – but I do expect it will cease to be divided.  It will become all one thing or all the other.  Either the opponents of slavery will arrest the further spread of it, and place it where the public mind shall rest in the belief that it is in the course of ultimate extinction; or its advocates will push it forward, till it shall become alike lawful in all the States, old as well as new – North as well as South.

Mr. Lincoln’s argument goes something like this- At the beginning of 1854 race slavery was legislatively excluded from more than half the United States.  With the incorporation of Kansas and Nebraska that legislation was superseded by mandate for a local plebiscite and the Supreme Court subsequently found in Dred Scott that the property right to own, work and breed human cattle for profit once granted to a citizen under that laws of any State must be equally enforced in all States in the absence of Federal legislation which was impossible to achieve due to bi-partisan acquiescence in the institution of slavery.

Lesser Evilism

Remember the Whigs!  In 1852 the party fractured along pro and anti slavery lines and was never again a national political force.  By contrast the Democrats were the party of slavery uncontested and united.

Does that mean loyal Whigs should have supported Millard Filmore?

I guess that depends on whether you think it would have delayed or prevented the War of Southern Rebellion and that “compromises” such as compensating the owners of slave wealth and shipping their Cain marked property back to Africa like the inhuman savages they were was less evil.

Wesley Culp died assaulting the hill named after his Uncle defending slavery and compromise after all.  I’m sure his family and dog loved him and missed him terribly.

Greater Evilism

I suppose you expected me to talk about War Crimes.  About torture and ovens and extermination.  When I was younger I used to wonder what could bring an entire nation to such depths of depravity that they could condone and ignore aggressive war.

Now, unfortunately, I know.

And the question is what I must do.

Out there is a hill with my family’s name on it and when I visit it will not be to compromise or defend evil of any sort.

I will wear a white rose.