09/30/2013 archive

In his latest expose at Rolling Stone, contributing editor Matt Taibbi reports how Wall Street is making millions in profits looting the pension funds of American workers. He opens the piece with an outline of Rhode Island Treasure Gina Raimondo’s Rhode Island Retirement Security Act of 2011 and how state workers ended up funding their own “disenfranchisement”

What few people knew at the time was that Raimondo’s “tool kit” wasn’t just meant for local consumption. The dynamic young Rhodes scholar was allowing her state to be used as a test case for the rest of the country, at the behest of powerful out-of-state financiers with dreams of pushing pension reform down the throats of taxpayers and public workers from coast to coast. One of her key supporters was billionaire former Enron executive John Arnold – a dickishly ubiquitous young right-wing kingmaker with clear designs on becoming the next generation’s Koch brothers, and who for years had been funding a nationwide campaign to slash benefits for public workers.

Nor did anyone know that part of Raimondo’s strategy for saving money involved handing more than $1 billion – 14 percent of the state fund – to hedge funds, including a trio of well-known New York-based funds: Dan Loeb’s Third Point Capital was given $66 million, Ken Garschina’s Mason Capital got $64 million and $70 million went to Paul Singer’s Elliott Management. The funds now stood collectively to be paid tens of millions in fees every single year by the already overburdened taxpayers of her ostensibly flat-broke state. Felicitously, Loeb, Garschina and Singer serve on the board of the Manhattan Institute, a prominent conservative think tank with a history of supporting benefit-slashing reforms. The institute named Raimondo its 2011 “Urban Innovator” of the year. [..]

Today, the same Wall Street crowd that caused the crash is not merely rolling in money again but aggressively counterattacking on the public-relations front. The battle increasingly centers around public funds like state and municipal pensions. This war isn’t just about money. Crucially, in ways invisible to most Americans, it’s also about blame. In state after state, politicians are following the Rhode Island playbook, using scare tactics and lavishly funded PR campaigns to cast teachers, firefighters and cops – not bankers – as the budget-devouring boogeymen responsible for the mounting fiscal problems of America’s states and cities.

Not only did these middle-class workers already lose huge chunks of retirement money to huckster financiers in the crash, and not only are they now being asked to take the long-term hit for those years of greed and speculative excess, but in many cases they’re also being forced to sit by and watch helplessly as Gordon Gekko wanna-be’s like Loeb or scorched-earth takeover artists like Bain Capital are put in charge of their retirement savings.

In a preview of the article, Matt outlines three reasons to follow this scandal:

1)     Many states and cities have been under-paying or non-paying their required contributions into public pension funds for years, causing massive shortfalls that are seldom reported upon by local outlets.

2)     As a solution to the fiscal crises, unions and voters are being told that a key solution is seeking higher yields or more diversity through “alternative investments,” whose high fees cost nearly as much as the cuts being demanded of workers, making this a pretty straightforward wealth transfer. A series of other middlemen are also in on this game, siphoning off millions in fees from states that are publicly claiming to be broke.

3)     Many of the “alternative investments” these funds end up putting their money in are hedge funds or PE funds run by men and women who have lobbied politically against traditional union pension plans in the past, meaning union members have been giving away millions of their own retirement money essentially to fund political movements against them.

(all emphasis is mine)

Last week, Matt joined Amy Goodman and Juan González on Democracy Now! to discuss how hedge funds are looting the pension funds of American workers

“Essentially it is a wealth transfer from teachers, cops and firemen to billionaire hedge funders,” Taibbi says. “Pension funds are one of the last great, unguarded piles of money in this country and there are going to be all sort of operators that are trying to get their hands on that money.”

“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 thea Pundits”.

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Henry J. Aaron: Our Outlaw President?

Obama Should Ignore the Debt Ceiling

The United States government is likely to shut down nonessential services tomorrow, after House Republicans voted before dawn yesterday to attach a one-year delay of President Obama’s health care law (and a repeal of a tax to pay for it) to legislation to keep the government running. The Democratic-led Senate is expected to refuse.

House Republicans also said last week that they would not agree to lift the debt ceiling unless implementation of the health law was delayed by one year. So the government is also headed toward a mid-October default on its debts – and a full-blown constitutional crisis.

Failure to raise the debt will force the president to break a law – the only question is which one. [..]

The debt ceiling is the fiscal equivalent of the human appendix – a law with no discoverable purpose. It is one law too many. Once Congress has set tax rates and spending levels, it has effectively said what it wants the debt to be. If Congress leaves the debt ceiling at a level inconsistent with duly enacted spending and tax laws, the president has no choice but to ignore it.

Paul Krugman: Rebels Without a Clue

This may be the way the world ends – not with a bang but with a temper tantrum.

O.K., a temporary government shutdown – which became almost inevitable after Sunday’s House vote to provide government funding only on unacceptable conditions – wouldn’t be the end of the world. But a U.S. government default, which will happen unless Congress raises the debt ceiling soon, might cause financial catastrophe. Unfortunately, many Republicans either don’t understand this or don’t care.

Let’s talk first about the economics.

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.

September 30 is the 273rd day of the year (274th in leap years) in the Gregorian calendar. There are 92 days remaining until the end of the year.

On this day in 1791, The Magic Flute, Die Zauberflote, an opera in two acts composed by Wolfgang Amadeus Mozart to a German libretto by Emanuel Schikaneder, premiered in Vienna at the Freihaus-Theater auf der Wieden. Mozart conducted and Schikaneder played Papageno, while the role of the Queen of the Night was sung by Mozart’s sister-in-law Josepha Hofer. This was Mozart’s last opera.

History of the Cup

The Auld Mug (or more formally the “Royal Yacht Squadron £100 Cup”) was originally contested in 1851 between the America and 15 yachts of the Royal Yacht Squadron in a race around the Isle of Wight.

It is the oldest continually contested championship and the Cup was held by the New York Yacht Club from 1851 to 1983 (also a record).

After the defeat of Liberty by Australia 2 it’s bounced around a considerable bit between Australia, New Zealand, Switzerland (interesting because they have no sea coast, see Canadian challengers between 1870 and 1881), and of course the US.

Fast Boats

…for Ellison, the 2013 America’s Cup wasn’t about the race, per se. It was about disruptive innovation. It was about turning yachting into a sport for the masses. As Ellison put it, he was going to reinvent the America’s Cup for “the Facebook generation, not the Flintstones generation.”

The boats are fast.  Really fast. and can hit speeds of 50+ mph regularly.  They are literally faster than the wind and run just as fast upwind as down.

There are two principle reasons for this.  First, and most important is the semi-rigid airfoil they call a wing-sail.  Because this uses aero-dynamic lift to generate power instead of just being pushed along, it’s almost equally good whatever the wind direction and can generate more lift (power) than the air speed.

The second is hydrofoils.  These lift the hull out of the water to reduce drag, the boats are literally flying.  They also use hydro-dynamic effects to control other aspects of boat behavior which allows previously impossible maneuvers like turning on a dime.  If improperly trimmed they can also cause a boat to pitchpole, capsizing end over end instead of sideways like you’re used to.  It was a pitchpole that caused the death of Andrew Simpson.

The Races were also modified to be noticably shorter, sailing 2 a day with a firm 40 minute time limit per race.  The course was shortened too, 5 legs- a Reach from inshore to the first mark, a Downwind leg to the second mark, an Upwind leg to the third mark, another Downwind leg to the fourth mark, and a reach to the Finish Line.

The Regatta

Team Oracle started the Regatta with a 2 Race penalty for cheating during the preliminaries on the 45 foot scale boats, meaning they had to win 11 Races before Emirates New Zealand won 9.  This is quite a penalty, the harshest ever given in America’s Cup.  Just what did they do to deserve this?

They used bags of lead pellets to change the trim and that’s about as cheating as it gets.

There was also a monetary fine (cost of doing business).  Of more import were the crew sanctions.  Team Oracle lost wing trimmer Dirk de Ridder (considered Spithill’s right-hand man) who was deemed the instigator of the plot.  Also boat builder Andrew Walker and Bryce Ruthenberg, rigger, who carried it out.  Matt Mitchell, a grinder, was suspended for four races.

Oracle did not start competition well, dropping 2 the first day only one of which was close and in the subsequent 3 races spliting 1 – 2 with the All Backs.

With perfect 20/20 hindsight most commentators point at the postponement called after Race 5 and the replacement of John Kostecki with Ben Ainslie at Team Oracle Tactician as the critical moment, and say that also was the day the modifications were made to make Oracle a faster boat.  Let’s remember that at the time the Regatta stood only 4 – -1 in favor of Emirates New Zealand and they went on to score 4 more victories in the next 6 races to put the margin at 8 – 1 going into Race 12.  It’s easy to forget that All Blacks were leading the Race 12 that wasn’t by a considerable margin before high winds forced its cancellation, and the abandoned Race 13 where they were a mile ahead.

I, on the other hand, think the pivotal turning point was the 5 day set of delays and postponements before Race 14 at the end of which the match stood at 8 – 3.

This is also when most people lost interest in the contest, thinking it a sure loss.

Another more important day was Sept. 16, when the All Blacks were still leading 7 – 1 and Team Oracle was struggling with finding the proper settings for the boat.  That was a “reserve day”, scheduled to allow catching up on previous postponements.  The All Blacks had the option of forcing a race day but declined use it.  This gave Oracle more time to find the right adjustments to tune the boat.

Future Developments

Larry Ellison’s oft stated goal is to turn America’s Cup yacht Racing into Formula One for boats.  He wants to create a “World Series” of yacht racing similar to what he attempted this defense with a series of regattas at various important and well known racing ports using smaller, cheaper, and more rigidly formula boats to train crews and build interest.

If you saw any of the support racing you know it can be interesting, especially the “free for all” races where you have many boats racing at once instead of just two match racing.  Kind of like Turn Left in the water (Holy chunks of flaming twisted metal Batman!).

And of course there will be TV.

Larry Ellison’s Amazing Victory and Huge Failure

By Jonathan Mahler, Bloomberg News

Sep 25, 2013 6:13 PM ET

New Zealand would probably have won the cup several days ago, were it not for the 40-minute time limit that Ellison imposed on the races. (Imagine, say, the results of the New York City Marathon being decalred invalid because it was an unexpectedly windy day and the race times weren’t fast enough.)

Ellison did this for the purposes of making the cup more TV-friendly. In fact, for Ellison, the 2013 America’s Cup wasn’t about the race, per se. It was about disruptive innovation. It was about turning yachting into a sport for the masses. As Ellison put it, he was going to reinvent the America’s Cup for “the Facebook generation, not the Flintstones generation.”

Toward that end, Ellison added helicopter-mounted cameras and microphones on the boats. He even hired the guy who brought the virtual first-down line to the NFL’s broadcasts and the glowing hockey puck to the NHL’s.

At the end of the day, though, in trying to make the America’s Cup a TV spectacle, Ellison made it anything but. Sure, the boats look cool and go fast, but they are way too expensive to build and maintain for the costs to be offset by advertising. What’s more, the event was supposed to be over days ago but was delayed several times by weather conditions. One day it was too much wind, another day too little for these finicky, high-performance craft. How, exactly, do you create a TV spectacle around an event whose timing you can’t predict? (Even Wimbledon was forced to add a retractable roof!)

NBC Gets More Than It Expected

By RICHARD SANDOMIR, The New York Times

Published: September 25, 2013

NBC got a great deal: it paid nothing for the Cup races – the America’s Cup Event Authority bought time on NBC and NBCSN and sold advertising to its sponsors – and used the race production that was hosted by the Cup. But NBC also got lucky, televising a remarkable comeback.

…

NBC and its cable network, NBCSN, showed 13 days of racing starting on Sept. 7. NBC averaged 1.05 million viewers on the first two days; through the next 10, including Tuesday, NBCSN averaged about 165,000 viewers – about twice what it usually attracts from 4 p.m. to 6 p.m. Eastern.

Put into context, the America’s Cup races attracted more viewers for NBC Sports Group than for Major League Soccer games (111,000) but fewer than it received for its live Tour de France coverage (287,000) or its Formula One races (203,000 to date).

…

The America’s Cup was once a much stronger draw. The event became a late-night sensation in 1987 from Fremantle, Australia. In the final race, when Stars and Stripes defeated Kookaburra III, nearly 1.9 million television households watched on ESPN.

So I don’t think there’s any need for Mr. Ellison to get unduly pessimistic about his prospects.

There are rumors that the race will move from San Francisco to Lanai, the Hawaiian island Ellison recently purchased.  That’s a Billionaire (#8 worldwide) joke folks.  Lanai is too remote for the crowds Ellison craves, and why would h want to stink it up with crowds and media, not to mention the time zone problem (races would start around 10 pm ET).

Another frequent complaint is that there aren’t enough Americans in the America’s Cup.  You hear this most strongly from the Kiwis who have indicated that they might not mount a challenge next cycle and have complained for years that all their best talent is hired away.  There is a possibility that there may be some kind of “nationality quota” in the near future.

The next challenger of record for the Cup is set to be the Hamilton Island Yacht Club from Queensland, Australia.  As challenger of record they will negotiate with the defending Golden Gate Yacht Club (actually Larry Ellison) about the rules for the next round.  Don’t pretend they have a lot of influence though, the New York Yacht sat on the Auld Mug from 1920 to 1930 and again from 1937 to 1958 because they didn’t like the cut of the challenger’s jib.

After the racing there was a lot of talk about changing the formula.  I don’t think the AC72s are uniquely dangerous or expensive.  A big rap against them is that when you’re foiling and dip your bow you can easily get an end over end crash.  This is unusual for a boat, but falling off your foils is almost always pilot error.  Likewise, the formula is so different and so new this time around that everything is incredibly expensive.

I think that if you keep the formula the same you reduce the learning curve and standardize the parts making them cheaper.  The costliest things at the moment are research and development, and training.  Now that potential rivals have had a change to see and learn from the mistakes of these prototypes I think that you can expect the next roud to be faster, safer, and cheaper so that more teams can participate.

Wikipedia-

• America’s Cup
• 2013 America’s Cup

2013 America’s Cup Official Site

Below the fold you will find a sampling of stories from Bloomberg News, Bloomberg News Video, The New York Times, The Guardian, and The San Jose Mercury; as well as complete OFFICIAL Video coverage of all Races, Postponements, and Press Conferences with a short summary of each Race’s action and the reason for delays and postponements.

One point that constantly comes up when the push to 100% sustainable, renewable power is raised is the problem that “renewable power sources cannot be relied on to deliver power 24/7”. This is a talking point pushed by the propagandists for Big Coal in particular, since the biggest challenge to their long term existence as an industry in the United States is the threat that we begin to get serious about tapping our abundant Wind Power resources on-shore in the Great Plains and Mountain West and off-shore on the Great Lakes and Atlantic Coast. When the wind is blowing, it substantially undermines the market for fossil-fuel “Baseload Power” (see (The Myth of Baseload Power).

After all, consider two scenarios, one in which a power source replaces half of the power from coal by replacing half the power, all of the time, and a second, in which a power source replaces all of the power, half the time. The second is a greater threat to coal-fired power, since it swings the advantage to natural-gas fired power. Natural-gas fired power is presently killing off coal-fired plant construction, and a sufficiently large and volatile supply of Windpower would make that permanent.

So of course Big Coal spreads the idea that all sustainable power is volatile and if its volatile, it can’t provide all of our power.

This present essay is not about answering that argument rationally. That was the topic of The Myth of Baseload Power. This present essay is about attacking the political foundations of Big Coal.

After all, propaganda about “Clean Coal” and spreading the myth that there is this special kind of power called Baseload power that sustainable energy has impact because of the political influence of Big Coal in Coal Country. And this is a particularly pernicious influence, since it runs on a cycle of:

• Coal production provides export base employment in an area.
  
• Coal production also diverts a majority of the value-added from production out of the production area;.
  
• which helps assure that the Coal production areas are, on average, lower income economies than elsewhere in the country;
  
• which undermines the area’s capability to diversify its economy, helping to assure that the jobs in Coal production are valued jobs in the local area, which increases local political support for “supporting” Big Coal;
  
• And with a less diversified economy, there are fewer resources available to contest the political power and influence of Big Coal.
  
• With its political power, Big Coal ensures that the rules in place continue to ensure that a majority of value-added is drained out of the production area

This essay is about undermining that political power at its base, by creating more jobs from a direct rival to coal production than Big Coal can offer. Once a better deal is made available, with more employment, more value-added circulating locally, and no destruction of people’s health through the hauling up of poisonous by-products from underground, the foundation on which Big Coal’s political power is based is in a position to fracture.

What is that direct rival to coal production? Bio-coal production.