02/01/2013 archive

More Stupid from Matt Yglesias

Except, you know, to call it stupid is a catgory error.

Yglesias Pours the Geithner, Holder, Breuer (GHB) Banksters Immunity Doctrine in our Drinks

Bill Black, Naked Capitalism

Friday, February 1, 2013

It’s early, but Salon has published on January 30, 2013 either the funniest or saddest column of the year to date: “Are Banks Too Big To Prosecute?

The column is attributed to Matthew Yglesias, a blogger who studied philosophy as an undergraduate. It could be a brilliantly ironic satire of the Geithner, Holder and Breuer doctrine of immunity for banksters (which I am dubbing “GHB” for short). GHB is the “roofie” that the Obama administration gave us so the banksters could screw us repeatedly with impunity. Alternatively, and far more likely, Yglesias has written the saddest and most immoral apologia for elite white-collar crime that has yet made it into electronic bits. It takes a rerouted beginning student of philosophy, posing as a commentator on finance, to replace what should be a discussion that includes virtue ethics with a virtue-free, criminology-free, and economics-free apologia for the felons who became wealthy by costing the Nation $20 trillion and 10 million jobs.

Matthew Yglesias wrote a similar column on April 14, 2011 embracing the Geithner immunity doctrine. He titled it: “The Fraud Free Financial Crisis” – and it proves our family’s rule that it is impossible to compete with unintentional self-parody. In 2011, Yglesias thought we might be experiencing the first “Virgin Financial Crisis” – conceived without sin.

I find it strange that neither of Yglesias’ columns on a subject that has a vital ethical component discusses the ethics of his support for giving elite bank frauds immunity from the criminal laws. Yglesias’ relevant expertise on this subject was in ethics.

Riggs’ actions were beyond “serious.” They were criminal and they helped murderous national leaders commit murder, loot their Nations, and hide their crimes and the money they looted from U.S. and international prosecutors. Were there “serious investigations”? Not so much according to the article Yglesias relies on. The Office of the Comptroller of the Currency (OCC) failed to investigate competently for many years. Its examiner-in-chief of examining Riggs left the government and took a job with Riggs.

There were no “serious penalties” – in large part due to the weakness of the investigations. The senior officers who directed and were enriched by Riggs’ crimes were not prosecuted. Riggs became richer and more powerful through its crimes and its senior managers’ reputations were made by those illegal profits. Joseph Allbritton was inducted into the Washington Business Hall of Fame in 2002. A lower level Riggs officer was criminally investigated – but he was alleged to have embezzled from the bank.

The so-called “serious penalties” were a $25 million OCC penalty and a $16 million penalty for money laundering. At those low levels of penalties crime paid. It paid very well. The amount of funds Riggs was able to manage because it aided the looting of Equatorial Guinea was massive: $360 million. Riggs had $6.4 billion in total assets.

I don’t expect Yglesias to understand regulation or regulators, but even without relevant expertise about regulation he should have been able to see the total lack of integrity his preferred system of immunity for elite bankster frauds would create. I cannot think of any philosophical basis for believing that the senior officers of a large bank should be allowed to become wealthy by causing their bank, unlawfully, to aid murderous Dictators loot “their” Nations. The senior officers’ actions are profoundly unethical and they set the “tone at the top” that determine a bank’s ethical culture.

Fraud is a dynamic process and elite frauds are not random. Control frauds beget other control frauds. They are strongly criminogenic. Control frauds exist in all three major sectors – private enterprise, NGOs, and government. Government control frauds (“kleptocrats”) loot “their” Nations. Kleptocrats create and seek out other control frauds, such as Riggs Bank, that will aid their looting. Riggs Bank’s aid to the Dictators of Chile and Equatorial Guinea helped them murder and torture thousands of people. Control frauds are weapons of mass economic destruction, but many control frauds also maim and kill large numbers of people. Yglesias thinks a $46 million penalty assessed to a bank with $6.4 billion in assets – not the controlling officers – represents a “serious penalty” for hundreds of crimes that continued for over a decade and produced considerably greater income for the bank than the penalties and helped make the controlling officers wealthy.

Yglesias does not understand that as long as you leave the fraudulent senior officers in control they have an overwhelming interest in continuing to lie about the SDIs’ financial condition. It is absolutely essential to find the true facts about the SDIs losses – an action that the Bush and Obama administration prevented at every key stage. The stress tests, for example, are carefully designed not to find existing losses on bad assets. Two factors are essential to determine the real losses. First, one must ensure that the controlling officers have strong incentives to identify the losses instead of covering them up. “Pass through” receiverships do this superbly well. Second, one must investigate problem assets. Vigorous criminal investigations greatly aid in the detection of losses that were being covered up by the fraudulent managers. Our mantra in criminology with respect to sophisticated financial frauds is that if you don’t look; you don’t find.

Yglesias writes as if “insolvency” were some purely scientific measurement that was conducted by the regulators and that we know that the SDIs were insolvent in 2008 but are solvent now. We know no such thing. Yglesias has no concept of how to conduct a rigorous financial investigation. Think about Geithner’s incentives under Yglesias’ take on “solvency.” If Geithner ordered a rigorous investigation of the SDIs’ solvency and found that several SDIs were insolvent or even badly undercapitalized, then he (1) would be transformed into a failure and (2) he would “cause” a global crisis by triggering a “catastrophe.” Under Yglesias’ own framing of Geithner’s incentives we can only conclude that Geithner’s (and the regulators’) claims that all is well at the SDIs have no credibility because of a powerful bias by the SDIs and the regulators to hide losses.

Yglesias ends his attempt at logic by repeating his false framing of the policy options and employing euphemisms: “if saving the banks was the right thing to do, then curtailing prosecutions was the only way to execute the strategy.” I begin with the euphemism – GHB’s doctrine did not “curtail prosecutions” of SDIs and their managers for the frauds that drove the financial crisis. They prevented virtually all prosecutions of elite bank fraudsters and fraudulent banks. Indeed, they prevented virtually all prosecutions of senior officers of even non-elite banks. Worse, as we have been saying for years and as “The Untouchables” confirmed – GHB’s immunity doctrine prevented even vigorous criminal investigations of the SDIs. That denied us the facts about fraud, including how much the senior officers gained in wealth through fraud, how large were the losses their frauds caused, and how deeply did the losses drive the SDIs into insolvency. The failure to investigate and prosecute also minimized any reputational injury to the frauds – maximizing their ability to defraud us in the future. I’ve already pointed the deliberate abuse of logic exemplified by Yglesias’ false claim that preventing “prosecutions” was “the only way” of “saving the banks.” We can prosecute the SDI officers who directed the control frauds and grew wealthy through those frauds without having to prosecute the banks.

But perhaps I am being too fair to Yglesias. Perhaps he is saying that if we successfully prosecuted the SDIs’ controlling officers for using the SDIs as “weapons” to defraud the SDIs’ customers, creditors, and shareholders then we would inherently establish that the SDIs were liable through civil suits for the massive damages their frauds caused. (A corporation is normally liable for the wrongs of its officers committed in their capacity as officers.) Indeed, successful prosecutions and guilty pleas could establish “collateral estoppel” and allow the victims to easily win their civil cases against the SDIs. The damages in these civil suits should be extraordinary because fraud allows the recovery of punitive damages and the SDIs committed so many crimes that treble damages are available against the SDIs through civil RICO suits. Perhaps Yglesias, like GHB, believes that it is essential that we not be allowed to hold the officers accountable criminally and that we must act to prevent the victims of the SDIs’ frauds from receiving more than token recompense from the SDIs lest we fail to “save the banks” (by which he really means “save the SDIs”). Does Yglesias want the U.S. to add to the injury to the victims and to provide further aid and comfort to the elite fraudsters by declaring immunity from prosecution for the officers who grew rich through fraud?


A call to action from Joe Firestone

Now you probably know him better as letsgetitdone from corrente and Firedog Lake and he’s started a series which, if you have any interest in economics and the economy at all, I think you should pay attention to.

It’s called Framing Platinum Coin Seigniorage and is available in source form from New Economic Perspectives (you might want to  bookmark that).

The precis-

Framing Platinum Coin Seigniorage: Part One, Basics

Joe Firestone

Posted on January 31, 2013

How come nobody asks why, since Congress has the unlimited authority to create coins and currency, it doesn’t just create money when it deficit spends? The short answer is that Congress in 1913, constrained the Executive Branch from creating currency or bank reserves, delegated its power to do that to the Federal Reserve System, and never looked back when we went off the gold standard in 1971, even though this removed the danger of money-creation outrunning gold reserves, and also created a new monetary system based on fiat currency.

But coins, it turns out are different from currency and bank reserves. They’re the province of the Executive. And Congress provided the authority, in legislation passed in 1996, for the US Mint to create one oz. platinum bullion or proof platinum coins with arbitrary fiat face value, having no relationship to the market value of the platinum used in the coins. These coins are legal tender. When the Mint deposits them in its Public Enterprise Fund (PEF) account, the Fed must credit it with the face value of these coins. The difference between the Mint’s costs in producing the coins, and the reserves provided by the Fed is the US Mint’s “coin seigniorage” or profit from the transaction.

Platinum coins with huge face values such as $60 T, can produce seigniorage closing the revenue gap and technically end deficit spending, while still retaining the gap between tax revenues and spending that can add to aggregate demand and produce full employment. Platinum Coin Seigniorage (PCS) is also a way for the Executive to end debt ceiling crises, since the profits could be used to repay debt instruments when they fall due, without the need to issue any more debt.

The seigniorage from a $60 T platinum coin would serve as a potent symbol of the truth that the Federal Government can never involuntarily run out of money. This is one of the central ideas of MMT that the public needs to accept routinely, to understand that the Government’s budget isn’t like their household budget. The presence of the $60 T in the public purse would be a positive enabler of progressive legislation creating benefits that people want now, but austerians say we can’t pass because “we can’t afford it.”

If all debt instruments are re-paid by using PCS, then, eventually the US would have no debt subject to the limit, or presence in the bond market, and would pay no interest to bond holders. No one would worry about the public debt, or use its size to justify blocking legislation that fulfills public purpose and promotes the general welfare.

So, PCS-based elimination of debt can end the whole austerity mind set that provides our current budgetary process with its constraining conservative cast, focused on narrow monetary cost considerations, rather than on a broader progressive framework that weighs the real costs and benefits of proposed fiscal activities of the Federal Government.

It must be done now! If it doesn’t, then people who are against the use of PCS will have time to organize against it and get it repealed by the Congress. Now that the PCS capability is widely known, the FIRE (Finance, Insurance, Real Estate) Sector will be gunning for it with all the financial, political and propaganda power it can bring to bear. It will do that because using PCS, especially the $30 T or greater coin, High Value Platinum Coin Seigniorage (HVPCS) I propose, strikes at the domination of the financial and political systems by Wall Street and the big banks

HVPCS threatens the banks’ domination of the Fed, and also their role in money creation, and with it some of their income. The more time that passes without using HVPCS, the more likely it is that the Executive Branch will lose this capability to Wall Street’s persistent political efforts at repeal, and become the actual, rather than only the pretended (kabuki) prisoner of debt instruments and austerity once again.

available in orange

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”.

Follow us on Twitter @StarsHollowGzt

Paul Krugman: Looking for Mister Goodpain

Three years ago, a terrible thing happened to economic policy, both here and in Europe. Although the worst of the financial crisis was over, economies on both sides of the Atlantic remained deeply depressed, with very high unemployment. Yet the Western world’s policy elite somehow decided en masse that unemployment was no longer a crucial concern, and that reducing budget deficits should be the overriding priority.

In recent columns, I’ve argued that worries about the deficit are, in fact, greatly exaggerated – and have documented the increasingly desperate efforts of the deficit scolds to keep fear alive. Today, however, I’d like to talk about a different but related kind of desperation: the frantic effort to find some example, somewhere, of austerity policies that succeeded. For the advocates of fiscal austerity – the austerians – made promises as well as threats: austerity, they claimed, would both avert crisis and lead to prosperity.

And let nobody accuse the austerians of lacking a sense of romance; in fact, they’ve spent years looking for Mr. Goodpain.

Robert Creamer: The Verdict Is In: GOP Austerity Proposals Are Toxic for Our Economy

There are two major pillars of Republican economic ideology.

First is “trickle down” economics — the notion that if we allow the wealthiest two percent to accumulate more and more of the fruits of our economy, the benefits will “trickle down” to everyone else.

The second is fiscal austerity — the idea that the best response to an economic downturn is to “tighten our belts” and slash critical government spending that we “no longer can afford.”

Both of these pillars were created to justify the transfer of more and more income to the wealthy few and to provide a rationale for keeping their taxes as low as possible. But even recognizing the GOP’s motivation in proposing them, ordinary voters might be tempted to support them if they actually produced economic growth and good-paying jobs for everyday Americans. They don’t. And anyone who tries to make a case to the contrary must ignore the last century of economic history.

Dean Baker: The Deficit Hawks: When Did They Stop Being Wrong About the Economy?

The UK’s looming triple-dip recession should be austerity’s death knell, but in the fevered brains of Washington analysts it lives on

The news that the UK, with negative growth in the fourth quarter of 2012, faces the prospect of a triple-dip recession, should be the final blow to intellectual credibility of deficit hawks.  You just can’t get more wrong than this flat-earth bunch of economic policy-makers.

By all rights, these folks should be laughed out of town. They should be retrained for a job more suited to their skill set – preferably, something that doesn’t involve numbers, or people.

But that’s not what is happening. The people who got it all wrong are still calling the shots in the UK, the IMF, the European Central Bank, and Washington. The idea that job security would have any relationship to performance is completely alien in the world of economic policy. With few exceptions, these people enjoy a level of job security that would make even the most powerful unions green with envy.

Richard (RJ) Eskow: A Creepy Student Essay Contest Reflects Wall Street’s War For Young Minds

It may be the creepiest student competition in history. Foreclosure.Com’s essay contest may be trivial compared to what Wall Street’s doing to undermine our educational system and manipulate our thinking, but it reflects the same warped set of values. [..]

The real contest isn’t an essay question. It’s a struggle over our values and ethics, over the ways we think and the lenses through which we view our world.  Since Dr. King gave his Syracuse speech we’ve become vastly more unequal in income. Higher education has become unaffordable for millions of young people. Prosperity is shrinking, not expanding.

Dr. King spoke to his Syracuse audience of “the day when the fears of insecurity, the doubts clouding the future, will be transformed to radiant confidence, into glowing excitement to reach creative goals, and into an abiding moral balance … undergirded by a secure and expanding prosperity for all.”

Nick Turse: The Hagel Hearings: Murder in Vietnam

The last best chance for the truth about a lost war and America’s war-making future

He’s been battered by big-money conservative groups looking to derail his bid for secretary of defense.  Critics say he wants to end America’s nuclear program.  They claim he’s anti-Israel and soft on Iran.  So you can expect intense questioning — if only for theatrical effect — about all of the above (and undoubtedly then some) as Chuck Hagel faces his Senate confirmation hearings today.    

You can be sure of one other thing: Hagel’s military service in Vietnam will be mentioned — and praised. It’s likely, however, to be in a separate and distinct category, unrelated to the pointed questions about current issues like defense priorities, his beliefs on the use of force abroad, or the Defense Department’s role in counterterrorism operations.  You can also be sure of this: no senator will ask Chuck Hagel about his presence during the machine-gunning of an orphanage in Vietnam’s Mekong Delta or the lessons he might have drawn from that incident.

Ray McGovern: When Truth Tried to Stop War

Ten years ago, Katharine Gun, then a 28-year-old British intelligence officer, saw an e-mailed memo from the U.S. National Security Agency that confirmed for her in black and white the already widespread suspicion that the U.S. and U.K. were about to launch war against Iraq on false pretenses.

Doing what she could to head off what she considered, correctly, an illegal war of aggression, she printed a copy of the memo and arranged for a friend to give it to the London Observer. “I have always ever followed my conscience,” she said, explaining what drove her to take such a large risk. [..]

But Katharine Gun could smell a rat, as well as the sulfur of war, and she would not put her career and comfort ahead of the slaughter and devastation that war inevitably brings to innocent people. In that, she distinguished herself, just as many others in positions of authority disgraced themselves.

On This Day In History February 1

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.

February 1 is the 32nd day of the year in the Gregorian calendar. There are 333 days remaining until the end of the year (334 in leap years).

On this day in 1896, the opera La Bohème receives its premiere in Turin.

La Bohème is an opera in four acts by Giacomo Puccini to an Italian libretto by Luigi Illica and Giuseppe Giacosa, based on Scènes de la vie de bohème by Henri Murger. The world premiere performance of La Bohème was in Turin on 1 February 1896 at the Teatro Regio and conducted by the young Arturo Toscanini. Since then La Bohème has become part of the standard Italian opera repertory and is one of the most frequently performed operas internationally. According to Opera America, it is the second most frequently performed opera in the United States, just behind another Puccini opera, Madama Butterfly. In 1946, fifty years after the opera’s premiere, Toscanini conducted a performance of it on radio with the NBC Symphony Orchestra. This performance was eventually released on records and on Compact Disc. It is the only recording of a Puccini opera by its original conductor.

Origin of the story

According to its title page, the libretto of La bohème is based on Henri Murger‘s novel, Scènes de la vie de bohème, a collection of vignettes portraying young bohemians living in the Latin Quarter of Paris in the 1840s. Although usually called a novel, it has no unified plot. Like the 1849 play by Murger and Thèodore Barrière, the opera’s libretto focuses on the relationship between Rodolfo and Mimi, ending with her death. Also like the play, the libretto combines two characters from the novel, Mimi and Francine, into a single Mimi character.

Much of the libretto is original. The main plots of acts two and three are the librettists’ invention, with only a few passing references to incidents and characters in Murger. Most of acts one and four follow the novel, piecing together episodes from various chapters. The final scenes in acts one and four, the scenes with Rodolfo and Mimi, resemble both the play and the novel. The story of their meeting closely follows chapter 18 of the novel, in which the two lovers living in the garret are not Rodolphe and Mimi at all, but rather Jacques and Francine. The story of Mimi’s death in the opera draws from two different chapters in the novel, one relating Francine’s death and the other relating Mimi’s.

The published libretto includes a note from the librettists briefly discussing their adaptation. Without mentioning the play directly, they defend their conflation of Francine and Mimi into a single character: “Chi puo non confondere nel delicato profilo di una sola donna quelli di Mimi e di Francine?” (“Who cannot detect in the delicate profile of one woman the personality both of Mimi and of Francine?”) At the time, the novel was in the public domain, Murger having died without heirs, but rights to the play were still controlled by Barrière’s heirs.

Imbolc: First Light in the Dark of Winter

The wheel of the seasons keep turning.

All around the house tonight there are candles lit. There is a warm fire in the fireplace in the family room and, despite the cold wind and occasional snow shower, there is a blazing fire in the backyard fire pit. Each winter is different, this one like the last has been warm until last week when it seemed Mother Nature was having her way with us and sent a blast of Arctic cold. Once again, I look forward to the early signs of spring, no different from last year with tips of early spring flowers ready poking up, getting ready to add a happy splash color to the dark mulch. The Winter is shorter and milder than the ones just 10 years ago. According the NOAA, they are.

The winter of 2011, we were snowed in here in NYC with a six foot wall of snow down the drive way and along the side walk. It a way the mild winter has been a blessing for the victims of Hurricane Sandy who are still without heat and struggling to rebuild their homes and lives.

I can’t say I miss the snow, I don’t, but I know this is not a good sign for our dear Earth, our home.

I read this great post on the Days of Imbolc from Beth Owl’s Daughter that I would like to share:

The Sun’s path has returned to where it was at Samhain. Take some time to notice the quality of the light, for it is the same now as that shimmering magical glow of late October. But instead of the season of dark and silence before us, in the Northern Hemisphere, the season of light and growth lies ahead.

And so we prepare ourselves with rites of renewal, cleansing, and commitment. We celebrate the first stirrings of Spring.

The days are noticeably longer, and life awakens all around us. While some of the fiercest Winter weather may still lie ahead, listen! The birds are already beginning their courtships.

Look – cold-hardy sprouts are poking from the earth, and the first lambs are being born (hence the name Imbolc, which means “ewe’s milk,” referring to the nursing mothers). For our ancestors not so long ago, having lived on only the stored food of Winter, the first fresh milk returning was a tremendous blessing, often meaning the difference between survival or death.

h/t Hecatedemeter

Reposted from January 31, 2011

PhotobucketAlthough you’d never know it if you looked out your window here in the Northeast and throughout a good part of the northern hemisphere, we are nearing the midpoint between winter solstice and the vernal equinox. The Sun is noticeably rising earlier and setting later. It is a pleasure to take my early morning shower in daylight and start dinner preparation with daylight still illuminating the kitchen. There are seed catalogs arriving in the mail which has me contemplating the flower beds, the herb garden and maybe this year some vegetables.

In the traditions of Pagan and Wiccan religions, we celebrate this changing season as Imbolc, or Candlemas, which begins on January 31st, February Eve, and ends on February 2nd, a time of rebirth and healing. Imbolc is one of the eight Wiccan Sabbats of the Wheel of the Year, one of the four cross-quarter fire festivals. Brighid, the patroness of poetry and healing, is the Pagan Goddess associated with Imbolc.

Some of the traditions are the lighting of fires, decorating with red and white symbolizing the snow and the rising sun and green for new growth. Candles are lit in all the rooms of the house. Fires places and hearths are cleaned out of ashes and fires are lit. Since there is still snow drifts in my backyard, the fireplace will be just fine.

The symbols are ewes and lambs since Imbolc is derived from a Celtic word, “oimelc”, meaning ewe’s milk. Many of the foods that are serves are lamb, cheese, poppyseed muffins, cakes and breads. Dishes are seasoned with bay leaves and dried basil.

In rural places where farming is still a way of life, ploughs are decorated with flowers and then doused with whiskey. I know most of us have better things to do with whiskey. Sometimes the plough is dragged from door to door by costumed children asking for food and money, a kind of wintry “trick or treat”. Some traditional gifts, if your going to a friends house to celebrate, are garden tools, seeds and bulbs.

The Maiden is also honored as the “Bride” on this Sabbat. Straw corn dollies are created from oat or wheat straw and placed in baskets with white flower bedding. The older women make special acorn wands for the dollies to hold. The wands are sometimes burned in the fireplace and in the morning, the ashes in the hearth are examined to see if the magic wands left marks as a good omen. A new corn broom is place by the front door to symbolize sweeping out the old and welcoming the new.

Non-Pagans celebrate February 2nd as Ground Hog’s Day, a day to predict the coming weather, telling us that if the Groundhog sees his shadow, there will be ‘six more weeks’ of bad weather. It actually has ancient roots, weather divination was common to Imbolc, and the weather of early February was long held to be a harbinger of spring. On Imbolc, the crone Cailleach‘s grip of winter begins to loosen. She goes forth in search of kindling so that she may keep her fires burning and extend the winter a little longer. If Imbolc is rainy and cloudy, she will find nothing but twigs unsuitable for burning and will be unable to prolong the winter. If the day is dry and kindling is abundant, she will have plenty of fuel to feed her fire and prolong the cold of winter. Spring will be very far away. As an old British rhyme tells us that, “If Candlemas Day be bright and clear, there’ll be two winters in the year.”

Whatever you celebrate or believe, let us all hope that that the local groundhog doesn’t see his shadow and there is only one winter this year. I have nowhere else to pile the snow.

Blessed Be.