Tag: ek Politics

I’m sure you will be reading and watching with great interest today the testimony of Ina Drew in front of the Senate Subcommittee on Investigations.

(Annoying auto starting video now below the fold- ek)

The Fail Whale trade is a bit complicated in it’s details, but basically JPMorgan Chase was selling insurance against a basket of corporate bonds that made up a fairly regularly (as these things go) traded index (like the Dow, but not the same companies and not common stock) and was supposedly hedging these bets with actual positions in the underlying assets and making money off the spread between the price for the insurance and the cost of the bonds.

Esoteric but perfectly sound and legal (under today’s laws).

The problem was that in order to manipulate the much smaller market for the insurance and increase the spread by simulating demand (sockpuppets), JPMorgan Chase ended up in a position where it was net bearish on the bonds (i.e. betting there would be a default so it could collect the insurance from itself) thereby increasing its need to obtain bonds in the regular market that it did not totally control in order to offset potential losses should the bonds in fact do better than expected and rise in price.

And then the wolves came in.

You can’t throw large chunks of money around a small casino without somebody noticing and a lot of regular players saw the increase in demand for bonds and started buying them up, raising the price even more and making JPMorgan Chase’s insurance nearly worthless.

Now on the money losing end of the trade JPMorgan Chase tried unwinding it, selling their sockpuppet positions in the insurance for pennies on the dollar and liquidating their hedge assets at what they thought was the top of the underlying market.

Only the wolves were there first and valuations dropped like a stone to their normal equilibrium and JPMorgan Chase ended up with an approximately $6.5 BILLION loss.

Yay for our side.  Way to stick it to the man.

But wait, there’s more.

The funds JPMorgan Chase used were taxpayer insured depositor’s accounts, which is illegal.  Manipulating markets using sockpuppets is illegal.

AND to cover up these crimes JPMorgan Chase started issuing fraudulent statements to Government Regulators, which is illegal; AND TO ITS VERY OWN STOCKHOLDERS AND INVESTORS, which is illegal.

And Jamie Dimon knew all about it and lied to Congress, which is illegal.

Will anyone go to jail?  Who’s naive now Kay?

Senate investigation finds JP Morgan hid mistakes as trade losses grew

Heidi Moore, The Guardian

Friday 15 March 2013 04.38 EDT

JP Morgan’s $6.2bn London Whale trading debacle was born out of secretive trades and creative bookkeeping as the bank attempted to limit losses using a practice that one regulator called “make believe voodoo magic”, a Senate investigation has concluded.

The report by the Senate subcommittee on investigations, published on Thursday, detailed a series of failures in which accounts were hidden and trades were valued incorrectly to minimize losses. It also alleged that regulators were kept in the dark, a head trader’s concerns went unheeded and a $51bn trading portfolio ballooned to $157bn in three months.

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The report also concludes that JP Morgan CEO Jamie Dimon, whose bonus was cut in half to $11.5m last year, knew about the sustained trading losses when he dismissed the incident as a “tempest in a teapot” in April 2012.

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The investigation paints a picture of a growing debacle that started with the bank’s attempt to reduce the risk of its trades so that it would have a stronger capital cushion and look powerful to regulators. It started with the overconfidence of traders after a lucky bet made about $400m on the bankruptcy of American Airlines. Drew applauded the traders.

They suffered from that overconfidence when they bet incorrectly on the bankruptcy of Eastman Kodak in January 2012. That kicked off nine straight days of trading losses that cost the bank at least around $50 million. One trader in the CIO told the Senate committee that “they were told not to let an Eastman Kodak-type loss happen again.” As the traders scrambled to keep the trades – which were designed to benefit if there was a financial crisis – they found that the improving bond market worked against them. Between January and March 2012, it didn’t have one profitable day in its CIO portfolio, according to the report.

JPMorgan Chase CEO Jamie Dimon is accused of hiding information about big losses

By Danielle Douglas, Washington Post

Mar 15, 2013 12:59 AM EDT

Washington dealt a double blow Thursday to JPMorgan Chase as a Senate report accused its iconic chief executive of hiding information about a massive loss from regulators while the Federal Reserve unexpectedly said it had found a “weakness” in the bank’s capital plans.

The twin announcements, both unveiled in the late afternoon, escalates the problems for JPMorgan, the nation’s largest bank and arguably its most prestigious. Once viewed as the strongest bank to emerge from the 2008 financial crisis, the firm on Thursday watched its weaker rivals, Bank of America and Citigroup, sail through the Fed’s examination.

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The Senate report is the first to suggest that JPMorgan’s chief executive Jamie Dimon was less than forthright with regulators as he learned of the mounting losses. To date, Dimon has acknowledged that the bank failed to manage its risks, which allowed the bad trades to persist.

The report takes the bank to task for hiding losses for three months last year, overstating the value of its trading positions and ignoring red flags. When regulators grew concerned, JPMorgan withheld information about the nature of the portfolio, Senate investigators say.

JPMorgan Report Piles Pressure on Dimon in Too-Big Debate

By Dawn Kopecki, Clea Benson & Hugh Son, Bloomberg News

Mar 15, 2013 10:05 AM ET

JPMorgan Chase & Co. (JPM)’s efforts to hide trading losses, outlined in a Senate report yesterday, probably will ignite debate over whether the largest U.S. bank is too big to manage and ratchet up pressure on Chief Executive Officer Jamie Dimon to surrender his role as chairman.

Dimon misled investors and dodged regulators as losses escalated on a “monstrous” derivatives bet, according to a 301-page report by the Senate Permanent Subcommittee on Investigations. The bank “mischaracterized high-risk trading as hedging,” and withheld key information from its primary regulator, sometimes at Dimon’s behest, investigators found. Managers manipulated risk models and pressured traders to overvalue their positions in an effort to hide growing losses.

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The Senate report cited Bloomberg stories published last year disclosing that Dimon, 57, had transformed the CIO in the past five years from a conservative investment operation into a much larger, high-risk trading profit center, and that he exempted the office from rigorous scrutiny.

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JPMorgan’s credit portfolio more than tripled from a net notional size of $51 billion in late 2011 to $157 billion by the time trading was shut down in late March of last year, the report says. Iksil acquired more than $80 billion, or about 50 percent, of a thinly traded credit index, which made it difficult to find buyers, according to the subcommittee.

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Iksil’s book breached all five of the CIO’s internal risk measures, and with increasing frequency from January through April, totaling more than 330 violations, the report said. Instead of investigating the cause or reducing its danger, traders, risk managers and executives criticized the metrics as inaccurate and “pushed for model changes that would portray credit derivative trading activities as less risky,” the report said.

On Jan. 30, 2012, the bank began using a new formula for so-called value at risk that cut Iksil’s estimated possible losses by about half. He had breached the limit under the prior model.

“The new VaR model not only ended the SCP’s breach, but also freed the CIO traders to add tens of billions of dollars in new credit derivatives to the SCP which, despite the supposedly lowered risk, led to additional massive losses,” the report said, referring to the synthetic credit portfolio. That model was later scrapped.

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JPMorgan misled the public by hiding losses, mismarking trades, withholding information from the Office of the Comptroller of the Currency and “lying to investigators by saying that JPMorgan was fully transparent to regulators regarding the mounting losses when it was not,” (Senator John) McCain told reporters at a press briefing.

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“None of those statements made on April 13 to the public, to investors, to analysts were true,” (Senator Carl) Levin said. “The bank also neglected to disclose on that day that the portfolio had massive positions that were hard to exit, that they were violating in massive numbers key risk limits.”

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Statements and regulatory filings by the bank “raise questions about the timeliness, completeness and accuracy of information” given to investors, the committee said in a section on securities laws and their requirements about disclosing information. The Securities and Exchange Commission has been conducting its own investigation of the bank’s losses.

The evidence suggests the bank “initially mischaracterized or omitted mention” of the portfolio’s problems partly because it “likely understood the market would move against it if even more of those facts were known,” the report says.

(h/t Susie Madrak @ Crooks & Liars)

Live-Blogging Senate Hearing Tomorrow, When J.P. Morgan Chase Will Be Torn a New One

Matt Taibbi, Rolling Stone

POSTED: March 14, 5:00 PM ET

Why should we care if a private bank, or more to the point a private banker like Chase CEO Jamie Dimon, loses a few billion here and there? What business is it of ours? And why did we have to have congressional hearings about it last year?

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What the report describes is an epic breakdown in the supervision of so-called “Too Big to Fail” banks.

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If the information in the report is correct, Chase followed the behavioral model of every corrupt/failing hedge fund this side of Bernie Madoff and Sam Israel, only it did it on a much more enormous scale and did it with federally-insured deposits. The fund used (in part) federally-insured money to create, in essence, a kind of super high-risk hedge fund that gambled on credit derivatives, and just like Sam Israel did with his Bayou fund, when it got in trouble, it resorted to fudging its numbers in order to disguise the fact that it was losing money hand over fist.

Chase for years hid the very existence of this operation from banking regulators and lied about the purpose of the fund (saying it was purely a hedging operation when it stopped being a hedge and instead became a wild directional gamble), and it also changed the way it calculated the fund’s value once it started to lose hundreds of millions of dollars. Even worse, the bank’s own internal auditors signed off on the phoney-baloney accounting of this Synthetic Credit Portfolio (SCP), at one point allowing it to claim $719 million in losses when the real number was closer to $1.2 billion.

How did they do this? In the years leading up to January of 2012, Chase used a standard, plain-vanilla method to price the derivative instruments in its portfolio. The method was known as “mid-market pricing”: if on any given day you had a range of offers for a certain instrument – the “bid-ask” range – “mid-market pricing” just meant splitting the difference and calling the value the numerical middle in that range.

But in the beginning of 2012, Chase started to lose lots of money on the derivatives in its SCP, and just decided to change its valuations, that they weren’t in the business of doing “mids” anymore.

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If you can fight through the jargon, what this basically means is that Chase decided to go into the fiction business and invent a new way to value its crazy-ass derivative bets, using, among other things, a computerized model the company designed itself called “P&L predict” which subjectively calculated the value of the entire fund toward the end of every business day.

If this all sounds familiar, it’s because it’s the same story we’ve heard over and over again in the financial-scandal era, from Enron to WorldCom to Lehman Brothers – when the going gets tough, and huge companies start to lose money, they change their own accounting methodologies to hide their screw-ups, passing the buck over and over again until the mess explodes into the public’s lap.

Transcript

The Drug Scandal That’s Finally Hitting The Big Time

By Charles P. Pierce, Esquire

March 11, 2013 at 1:45PM

(B)ack during the Golden Age Of Bipartisanship, wherein everybody made nicey-nice to each other, and deals were cut that sold out gay people (DOMA), poor people (welfare reform), and all the while the Republicans tried to give the boot to the president with whom they were cutting all the deals, and most of the Democrats, looking to suck up that sweet corporate cash that was sluicing into the party through the DLC floodgates, went along for the ride. (Joe Scarborough, the Machiavelli of the live bait industry, cited this period just the other day as being altogether remarkable. Republicans were working with a president they were trying to impeach! Mirabile dictu!) Now, here’s another masterpiece of bipartisan achievement. (The Supreme Court mucked around with it, too, gutting what remained of the FDA’s power to regulate the compounders in 2001.) They waited until Kessler was gone before passing the bill. In signing the bill, President Bill Clinton attached a presidential signing statement to it that strikes with a cruel irony today.

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Trust them. They’ve got this.

But the principle obtained – make a deal to make a deal, and the devil take the details. Now, almost 50 people are dead because Everyone Agrees that The Market will always be more efficient at doing things like picking up deadly fungal infections than the dead hand of government regulation will. Some day, we are going to have to count up the cost of The Third Way of the 1990’s, and it is not going to be pretty.

Given that it’s stupid from a macro-economic sense, one silver lining in the sequester is that the cuts fall equally on the military budget.

Of course the likelihood is that the Pentagon will take it out of soldiers’ and veterans’ wages and benefits, but here are two programs from Lockheed that are absolute boondoggles.

The first is the C-130 program.  Over 2,300 of these planes have been built, far in excess of any operational need.  Good airframes are mothballed in the desert because National Guard units can’t find any useful purpose for them.  The latest upgrade, the C-130J has been plagued with counterfeit parts and propeller cracks.

C-130 Math and a Cargo of Pork

Posted by Jeremiah Goulka, TomDispatch and Mother Jones

8:54am, March 10, 2013

After 25 years, the Pentagon decided that it was well stocked with C-130s, so President Jimmy Carter’s administration stopped asking Congress for more of them.

Lockheed was in trouble.  A few years earlier, the Air Force had started looking into replacing the Hercules with a new medium-sized transport plane that could handle really short runways, and Lockheed wasn’t selected as one of the finalists.  Facing bankruptcy due to cost overruns and cancellations of programs, the company squeezed Uncle Sam for a bailout of around $1 billion in loan guarantees and other relief.

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Then a scandal exploded when it was revealed that Lockheed had proceeded to spend some $22 million of those funds in bribes to foreign officials to persuade them to buy its aircraft.  This helped prompt Congress to pass the Foreign Corrupt Practices Act.

So what did Lockheed do about the fate of the C-130?  It bypassed the Pentagon and went straight to Congress.  Using a procedure known as a congressional “add-on” — that is, an earmark — Lockheed was able to sell the military another fleet of C-130s that it didn’t want.

To be fair, the Air Force did request some C-130s.  Thanks to Senator John McCain, the Government Accountability Office (GAO) did a study of how many more C-130s the Air Force requested between 1978 and 1998.  The answer: Five.

How many did Congress add on?  Two hundred and fifty-six.

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According to its 2011 annual report, “82% of our $46.5 billion in net sales were from the U.S. Government, including 61% from the Department of Defense.”  And don’t forget that a significant part of the 17% of its sales that went to international customers in 2011 were actually paid for by Uncle Sam under the rubric of foreign military aid.  Only 1% of its sales that year were to “U.S. commercial and other customers.”  Its CEO made $20,538,981, while the company paid only $722 million in net federal and foreign taxes in that same year.

When it came to the C-130, the process worked like a dream. “By following this strategy from year to year,” writes a team of scholars of lobbying, “Lockheed has been able to turn what was to be the C-130’s doom in the 1970s into a regularly funded military spending program, all without a single request having been sent by the administration to Congress.” Lockheed was so successful on Capitol Hill that its work even garnered a name in honor of the 50 planes bought for every one requested: “C-130 math.”

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So what happened to those extra planes?  The Air Force didn’t have the space for them, so they retired some older models that still had plenty of life in them and shunted most of the rest off to the Air Force Reserves and Air National Guard.

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The C-130J has been plagued by problems.  In 2004, after the military had acquired 50 of the planes, the Pentagon’s Inspector General found that, even while the Air Force and Congress kept ordering more of the planes, they didn’t meet contracted standards.  The weather chasers couldn’t chase storms because propellers would crack in bad weather.  The military wouldn’t use C-130Js for air drops in Iraq or Afghanistan because they didn’t think they were safe.  “The design of the C-130J is not stable and the C-130J aircraft has not passed operational testing,” the Inspector General concluded.  It “is not operationally effective or suitable.”

Then there is the F-35.

F-35’s ability to evade budget cuts illustrates challenge of paring defense spending

By Rajiv Chandrasekaran, Washington Post

Published: March 9

The biggest barrier to cutting the F-35 program, however, is rooted in the way in which it was developed: The fighter jet is being mass-produced and placed in the hands of military aviators such as Walsh, who are not test pilots, while the aircraft remains a work in progress. Millions more lines of software code have to be written, vital parts need to be redesigned, and the plane has yet to complete 80 percent of its required flight tests. By the time all that is finished – in 2017, by the Pentagon’s estimates – it will be too late to pull the plug. The military will own 365 of them.

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When the F-35 finishes testing, “there will be no yes-or-no, up-or-down decision point,” said Pierre Sprey, who was a chief architect of the Air Force’s F-16 Fighting Falcon. “That’s totally deliberate. It was all in the name of ensuring it couldn’t be canceled.”

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Initial tests already have yielded serious problems that are forcing significant engineering modifications. The entire fleet was grounded earlier this year because of a crack in the fan blade in one jet’s engine. The Marine Corps’ version has been prohibited from its signature maneuver – taking off and landing vertically – because of a design flaw. And the Navy model has not been able to land on an aircraft carrier because its tailhook, an essential feature to alight aboard a ship, needs to be redesigned. The Pentagon’s top weapons tester issued a scathing report on the F-35 this year that questioned the plane’s reliability and warned of a “lack of maturity” in performance.

When the F-35 program was first approved by the Pentagon, Lockheed Martin said it could develop and manufacture 2,852 planes for $233 billion. The Pentagon now estimates the total price tag at $397.1 billion. And that is for 409 fewer planes.

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A bigger problem was the fundamental concept of building one plane, with stealth technology, that could fly as far and fast as the Air Force wanted while also being able to land on the Navy’s carriers and take off vertically from Marine amphibious assault ships.

Instead of meeting the original plan of being about 70 percent similar, the three versions now are 70 percent distinct, which has increased costs by tens of billions and led to years-long delays. “We have three airplane programs running in parallel,” Bogdan said. “They are very, very different airplanes.”

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An electrical engineer who worked as a manager at Lockheed’s F-35 program headquarters in Fort Worth beginning in 2001 said the development effort was beset with “tremendous organizational inadequacies” and “schedule and cost expectations that never were achievable.” In his unit, he said, there were no firm development timetables and no budgets. “It was all on autopilot,” he said. “It was doomed from the beginning.”

In 2005, the engineer, who spoke on the condition of anonymity because of concerns he will risk job opportunities in the close-knit aviation industry, participated in a two-week-long assessment of the program.”There were reds and yellows across the board,” he recalled. But when he briefed his superiors, “nobody was interested,” he said. And when he gave a copy of the assessment to those at the Pentagon office responsible for the plane, he said, “they didn’t want to hear it.”

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The Pentagon’s latest five-year budget plan, released last year, calls for a smaller volume of annual purchases to save money. Sequestration-related cuts this year also will defer a few more planes. But the overall purchase of 2,443 jets remains unchanged.

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Although Air Force and Marine leaders have held fast, an unofficial reexamination is occurring within the Navy, which is not as desperate for the F-35 because it possesses a relatively new fleet of F/A-18 Super Hornets. While toeing a public line of support for the F-35, some Navy experts are looking at whether it makes sense to reduce its planned order and plow some of the savings into high-speed drones that can operate off aircraft carriers, according to senior military officials.

Should that occur, or should Defense Secretary Chuck Hagel decide to shrink the overall purchase, it could prompt howls from key U.S. allies, including Britain, Italy and Norway, which all have contributed to the development of the aircraft. Their purchase price has been based on a U.S. order of about 2,500 jets. If that number drops, the per-plane cost will rise for the allies, possibly leading them to buy fewer then planned.

For some of them, cost increases and delays over the past decade have been significant enough to prompt a reexamination. Australia is deciding whether to halve its 100-plane order and Canada is reconsidering its plan to buy 65.

A smaller total purchase, of course, further increases unit costs for the United States, which likely would increase pressure to cut more. Procurement officers have a term for the phenomenon, borrowed from the world of aviation: a death spiral.

These are not the only examples of waste, fraud, and graft in the U.S. military inventory (the M1 Tank, Osprey VTOL, and Littoral Combat Ship spring to mind) but when you consider that the U.S. spends as much as the next 20 countries combined you have to ask yourself “Why?”

(h/t Susie Madrak @ Crooks & Liars)

Sheila Bair, FDIC Chair June 2006 – July 2011.

In major policy shift, scores of FDIC settlements go unannounced

By E. Scott Reckard, Los Angeles Times

March 11, 2013, 4:05 a.m.

Three years ago, the Federal Deposit Insurance Corp. collected $54 million from Deutsche Bank in a settlement over unsound loans that contributed to a spectacular California bank failure.

The deal might have made big headlines, given that the bad loans contributed to the largest payout in FDIC history, $13 billion. But the government cut a deal with the bank’s lawyers to keep it quiet: a “no press release” clause that required the FDIC never to mention the deal “except in response to a specific inquiry.”

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Deutsche Bank, now the world’s largest, settled to resolve claims that subsidiary MortgageIT sold shaky loans to Pasadena-based IndyMac Bank, which imploded under the weight of risky mortgages and construction loans. The IndyMac failure – considered one of the early events that helped usher in the 2008 financial meltdown – caused a scene reminiscent of the grim bank failures of the 1930s, with panicked depositors lining up outside branches trying to reclaim their money.

Overall, the FDIC collected $787 million in settlements by pressing civil claims related to bank failures from 2007 through 2012 – a fraction of its total losses.

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“In the old days, the regulators made it a point to embarrass everyone, to call attention to their role in bank failures,” said former bank examiner Richard Newsom, who specialized in insider-abuse cases for the FDIC in the aftermath of the S&L debacle. The goal was simple: “to make other bankers scared.”

Newsom said he couldn’t understand the shift, unless the agency doesn’t “want people to know how little they are settling for.”

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(FDIC spokesman David) Barr says attorneys representing the FDIC make clear to the defendants that, although it will not publicize settlements, it also cannot legally keep them secret.

The ban on secret settlements was a provision in one of the laws passed after the S&L crisis. Although the measure doesn’t require the FDIC to call attention to settlements, nondisclosure agreements like that with Deutsche Bank violate “the spirit of the law,” said Sausalito, Calif., attorney Bart Dzivi, a former Senate Banking Committee aide who drafted the provision.

FDIC Under Scrutiny For Not Announcing Settlements

By: DSWright, Firedog Lake

Tuesday March 12, 2013 8:06 am

The clause is added to keep the regulator quiet on reputation damaging legal settlements. Typically settlements are announced by regulators in hopes of deterring would be law breakers but the FDIC has changed its previous policy without explicitly stating why.

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What an odd game. During the Savings and Loan Crisis a law was passed banning secret settlements which means no matter how poorly the FDIC is negotiating with criminal bankers they can not agree to keep the settlement secret. Instead the FDIC merely agrees not to announce the deals in hopes that no one looks for the information.

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But why not announce it? Isn’t the point of settling in the first place to punish the guilty but avoid costly trials? Sending a press release is practically free and lets everyone know that certain practices will not be tolerated by regulators. Secret deterrence is a contradiction in terms and an open invitation to continue treating crime as a business expense.

FDIC Hides "Scores" of Bank Settlements Since 2007

Yves Smith, Naked Capitalism

Tuesday, March 12, 2013

The FDIC’s excuse is unpersuasive. It amounts to, “well, we publicize big settlements, why bother with these?”

In fact, this practice is yet another gimmie for banks. First, by not publicizing the settlement, it saves the target embarrassment. But far more important, it also helps them escape private litigation. A claimant has a much more persuasive suit if he can tell a judge or jury, “Look, XYZ bank engaged in this conduct, we have proof in the form of an FDIC settlement.” Mind you, it doesn’t mean for every settlement you have private litigants lurking in the wings, but given how many investors lost money in a big way during the crisis, you’d have to think that in a meaningful percentage of cases, hard evidence that a bank engaged in a particular form of prohibited behavior would be very useful to private parties.

The worst is that these secret settlements look to have become institutionalized. The only rationale I can think of (and it’s not great) is that the FDIC became overly concerned about exposing weak banks to litigation, and once it established the new pattern, it’s been unwilling or unable to roll it back. But in the S&L crisis, when the FDIC had so many dead banks drop in its lap that it had to go to Congress for additional funding, it didn’t hold back.

Which Aspect of the FDIC’s Litigation Failures is the Most Embarrassing and Damaging?

By William K. Black, New Economic Perspectives

Posted on March 12, 2013

The article contains four key facts we did not know about the FDIC’s leadership and its litigation director.  The only question is which of these … facts provides the most revealing insight into the disgrace that the FDIC has become.  The first fact is that the banks and bank officers can now cut deals with the FDIC designed to keep their settlements secret.  What that tells us is that the FDIC’s leaders are indifferent or clueless about deterrence and earning public respect for the integrity of the FDIC’s efforts to hold the officers who drove the crisis accountable.

The second key fact that we learned from the article is that the size of the settlements, for some of the most culpable fraudulent mortgage lenders, is so embarrassingly low that the FDIC’s litigators and investigators have proven to be an embarrassing failure.

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The third fact that emerges is that the FDIC’s real purpose in entering into these settlements crafted to try to keep the public from learning about them is not to secure a higher settlement but to protect the FDIC leadership from embarrassment for their failures of nerve, competence, and any understanding of the overriding need to ensure that no executive walks away making a profit from fraudulent lending.

The fourth fact that emerges is that the FDIC does not understand how a banking regulator and its litigators must deal with control fraud.  It is fine for the FDIC to lose half its litigated cases against the senior officers who run control frauds where its wins lead to large awards that remove any gains the controlling officers received from the bank.  What the “C-suite” defendants need to understand is the moral certainty that the FDIC will, as a matter of principle, never agree to a settlement that leaves a non-judgment proof controlling officer with wealth he gained by leading the bank to make fraudulent liar’s loans.  When elite defendants engage in fraud the banking regulators’ paramount task is not to maximize the expected value of the recovery – it is to deter future frauds because control fraud causes catastrophic losses and drives our recurrent, intensifying financial crises.  The defendants need to know that the FDIC will be remorseless in litigating against the senior officers running control frauds.

Bank Shots

By Charles P. Pierce, Esquire

March 13, 2013 at 9:00AM

I’m not sure what’s more breathtakingly arrogant — that there are members of the government who look the people straight in the eye and tell them that, no, nothing’s going to be done, despite the fact that you and I and the streetlamp know precisely who the crooks are, and what they did, and what should happen to them, or that there are members of government who insist that doing nothing about any of it is to act in the public good. It is one the little tin drums at this place that, too often, our elected leaders seem to believe that The American People are made of ribbon candy. Don’t prosecute Nixon. The country needs “closure.” Don’t chase Iran-Contra too hard. The country “can’t afford” another failed presidency. Don’t arraign the liars and fantasts who brought on the ruin that is the Iraq war. Look forward. Not back. Self-government gets infantilized and the crooks skate.

Call me crazy, but if some operation gets so big that it renders its crimes untouchable by the civil authorities, when power immunizes the criminals, then something’s too big to be allowed to exist. And if the institutions that are supposed to protect us from those crimes, through the customary mechanism of punishing the criminals in such a sway as to discourage other people from becoming criminals, are so worried that protecting us will do us more harm than good, then we’ve fallen through the looking glass to a place where self-government is rendered subject to a simple protection racket. I’d consider most of these guys more respectable if they threw firebombs or broke people’s kneecaps.

Thousands across Japan march against nuclear power

AFP

9 hours ago

TOKYO – Anti-nuclear rallies took place across Japan, on the eve of the second anniversary of the March 11 earthquake and tsunami disaster, urging Japan’s new government to abandon nuclear power.

Tens of thousands gathered in Hibiya park in central Tokyo, where activists and unionists packed a concert hall to voice their opposition.

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Similar rallies were held elsewhere in Tokyo and across the rest of the nation, with local media reporting as many as 150 anti-nuclear events planned for the weekend and on Monday.

Protesters are calling for Prime Minister Shinzo Abe, who took office late December following his party’s election win, to dismantle all nuclear plants.

Fukushima Toxic Waste Swells as Japan Marks March 11 Disaster

By Jason Clenfield, Bloomberg News

Mar 10, 2013 11:01 AM ET

Radiation danger prevents workers from approaching a tangle of metal and upturned cars surrounding Unit 3, which was ripped apart by a hydrogen gas explosion after the tsunami. Remote controlled cranes are used to pull steel and concrete rubble from the top of the structure.

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It will be years before even robots can work inside the steel- and concrete-encased core, according to Arnie Gundersen, chief engineer at Burlington, Vermont-based energy consultant Fairewinds Associates Inc.

“Unit 3 is in a condition that none of us has ever imagined,” he said by phone. “The entire structure is inaccessible to human beings right now.”

While clearing debris helps reduce radiation levels, it’s also filling the plant with toxic waste for which the utility has no ultimate disposal plan. More than 73,000 cubic meters of contaminated concrete, 58,000 cubic meters of irradiated trees and bushes, and 157,710 gallons of toxic sludge has built up, according to the utility.

Then there’s the water.

Tanks of it now cover an area equal to 37 football fields and the utility is clearing forest to make room for more. Some 400 tons of ground water each day seeps into reactor buildings and is contaminated.

There are 480 cesium-clogged filters, each weighing 15 tons, already warehoused in what the utility calls temporary storage.

“These filters will have to be stored for 300 years because cesium has a 30-year half-life and the rule of thumb is 10 half-lives,” Fairewinds’ Gundersen said.

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Tokyo Electric has “no plans” for what to do with the water once its filtered, plant manager Takahashi said. It will probably wind up back in tanks, spokesman Yoshikazu Nagai said, standing in front of the new treatment facility.

Graft and corruption is rampant.

Japan’s cleanup of radiation, other toxins from tsunami and nuclear fiasco anything but clean

By Associated Press

Updated: Sunday, March 10, 1:02 AM

To clear, sort and process the rubble – and a vastly larger amount of radiation-contaminated soil and other debris near the nuclear plant in Fukushima, the government is relying on big construction companies whose multi-layer subcontracting systems are infiltrated by criminal gangs, or yakuza.

In January, police arrested a senior member of Japan’s second-largest yakuza group, Sumiyoshi Kai, on suspicion of illegally dispatching three contract workers to Date, a city in Fukushima struggling with relatively high radioactive contamination, through another construction company and pocketing one-third of their pay.

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Labor shortages, lax oversight and massive amounts of funds budgeted for the clean-up are a recipe for cheating. And plenty of money is at stake: the cleanup of a 20-kilometer (12-mile) segment of an expressway whose worst contamination exceeds allowable radiation limits by 10 times will cost 2.1 billion yen ($22.5 billion), said Yoshinari Yoshida, an Environment Ministry official.

Move along, nothing to see here.

Nuclear chief: US plants safer after Japan crisis

By MATTHEW DALY, Associated Press

March 10, 2013 1:35 PM

All but five of the nation’s 104 nuclear reactors were performing at acceptable safety levels at the end of 2012, (Nuclear Regulatory Commission Chairman Allison) Macfarlane said, citing a recent NRC report. “You can’t engage that many reactors and not have a few that are going to have difficulty,” she said.

But the watchdog group, the Union of Concerned Scientists, has issued a scathing report saying nearly one in six U.S. nuclear reactors experienced safety breaches last year, due in part to weak oversight. The group accused the NRC of “tolerating the intolerable.”

Using the agency’s own data, the scientists group said 14 serious incidents, ranging from broken or impaired safety equipment to a cooling water leak, were reported last year. Over the past three years, 40 of the 104 U.S. reactors experienced one or more serious safety-related incidents that required additional action by the NRC, the report said.

“The NRC has repeatedly failed to enforce essential safety regulations,” wrote David Lochbaum, director of the group’s Nuclear Safety Project and author of the study. “Failing to enforce existing safety regulations is literally a gamble that places lives at stake.”

…

Problem-plagued plants in Florida and Wisconsin are slated for closure, and four other reactors remain offline because of safety concerns. Shut-down reactors include two at the beleaguered San Onofre nuclear power plant in southern California, which hasn’t produced electricity since January 2012, when a tiny radiation leak led to the discovery of damage to hundreds of tubes that carry radioactive water.

With a little bit of Alex Pareene just for sport.

Transcript

Dwindling Deficit Disorder

By PAUL KRUGMAN, The New York Times

Published: March 10, 2013

What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy.

…

(A)fter peaking in 2009 at $1.4 trillion, the deficit began coming down. The Congressional Budget Office expects the deficit for fiscal 2013 (which began in October and is almost half over) to be $845 billion. That may still sound like a big number, but given the state of the economy it really isn’t.

Bear in mind that the budget doesn’t have to be balanced to put us on a fiscally sustainable path; all we need is a deficit small enough that debt grows more slowly than the economy. To take the classic example, America never did pay off the debt from World War II – in fact, our debt doubled in the 30 years that followed the war. But debt as a percentage of G.D.P. fell by three-quarters over the same period.

Right now, a sustainable deficit would be around $460 billion. The actual deficit is bigger than that. But according to new estimates by the budget office, half of our current deficit reflects the effects of a still-depressed economy. The “cyclically adjusted” deficit – what the deficit would be if we were near full employment – is only about $423 billion, which puts it in the sustainable range; next year the budget office expects that number to fall to just $172 billion. And that’s why budget office projections show the nation’s debt position more or less stable over the next decade.

So we do not, repeat do not, face any kind of deficit crisis either now or for years to come.

…

Now, I’m aware that the facts about our dwindling deficit are unwelcome in many quarters. Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security. People whose careers are heavily invested in the deficit-scold industry don’t want to let evidence undermine their scare tactics; as the deficit dwindles, we’re sure to encounter a blizzard of bogus numbers purporting to show that we’re still in some kind of fiscal crisis.

Transcript

Gone Deficit Gone

Paul Krugman, The New York Times

March 9, 2013, 8:31 am

Anyone who is serious (as opposed to Serious) about matters fiscal knows that it’s highly misleading just to focus on the raw deficit numbers (ONE TRILLION DOLLARS), for two reasons.

First, fluctuations in the deficit tend to be driven by the business cycle; when the economy slumps, revenues fall and some kinds of expenditure, like unemployment benefits, rise. You want to take out these “automatic stabilizers” when assessing the underlying state of the budget.

Second, we don’t have to balance the budget to have a sustainable fiscal position; all we need is to ensure that debt grows more slowly than GDP.

So CBO is now out with its latest report on automatic stabilizers. It estimates that in fiscal 2013 these stabilizers will amount to $422 billion, accounting for just about half of a projected $845 billion deficit. So the cyclically adjusted deficit will be $423 billion.

How does this compare with the deficit consistent with fiscal sustainability? Well, there’s about $11.5 trillion in federal debt in the hands of the public. A reasonable, indeed fairly conservative guess is that nominal GDP will in future grow by 4 percent per year, half from real growth and half from inflation. This means that the sustainable deficit is 4 percent of $11.5 trillion, or $460 billion. Hey, we’re there!

And next year the adjusted deficit is projected to be much smaller.

Dwindling Deficit Disorder

By PAUL KRUGMAN, The New York Times

Published: March 10, 2013

What’s really remarkable at this point, however, is the persistence of the deficit fixation in the face of rapidly changing facts. People still talk as if the deficit were exploding, as if the United States budget were on an unsustainable path; in fact, the deficit is falling more rapidly than it has for generations, it is already down to sustainable levels, and it is too small given the state of the economy.

…

Now, I’m aware that the facts about our dwindling deficit are unwelcome in many quarters. Fiscal fearmongering is a major industry inside the Beltway, especially among those looking for excuses to do what they really want, namely dismantle Medicare, Medicaid and Social Security. People whose careers are heavily invested in the deficit-scold industry don’t want to let evidence undermine their scare tactics; as the deficit dwindles, we’re sure to encounter a blizzard of bogus numbers purporting to show that we’re still in some kind of fiscal crisis.

But we aren’t. The deficit is indeed dwindling, and the case for making the deficit a central policy concern, which was never very strong given low borrowing costs and high unemployment, has now completely vanished.

The undead, unnecessary, unhelpful Grand Bargain

By Alex Pareene, Salon

Monday, Mar 11, 2013 07:45 AM EDT

The Grand Bargain is revered, among the Sunday Show set, as a goal essentially for its own sake. Its Grandness is its point. The thought of the parties coming together, agreeing on a mutually unpleasant compromise involving great political “sacrifice” (symbolic sacrifice for the politicians, likely eventual actual sacrifice for the constituents), warms the cockles of the Beltway Establishmentarian’s heart. If liberals and conservatives can’t stand the deal, all the better, even if one or both sides have perfectly valid reasons for blanching. The Bargain must, by necessity, reduce the deficit by “reining in entitlements.” “Entitlements” means Social Security and Medicare, two very popular and successful programs designed to keep retired people alive. Social Security and Medicare “reforms” that make both programs less generous are among the least popular policy proposals in America today, but both parties – at least, the leaders of both parties – support them (rhetorically). Cutting these programs is probably the single highest priority of the tiny centrist elite, and it has been for years, excepting the usual run-ups to our various wars. Part of the elaborate theater of Performing Seriousness in Washington is claiming that “everyone agrees” that the cuts are urgent and necessary, while also bemoaning that no politicians are “brave” enough to support them.

Cuts to those programs have been offered, repeatedly, by the president, to Republicans. Republicans, thus far, have pretended not to notice, because their parallel news media misinforms them and because they incorrectly believe the president to be insincere in his desire to hack away at those very popular and successful programs. The recent Obama charm offensive is designed to convince Republicans that he is very sincere in his efforts to get a Serious Debt Deal, involving “entitlement” cuts and tax reform.

…

(I)f Barack Obama finally gets his Grand Bargain, we’re going to get “entitlement” cuts despite the fact that is a bad idea that Americans do not want.

There are two important things to remember about “entitlements”: They are hugely popular programs for a very good reason, and actual sensible “reform” would mean improving them, not sacrificing them at the altar of “fiscal responsibility.” A “grand bargain” that was done with the intention of creating the best possible outcome for the most Americans, instead of with the intention of purposefully doing unpopular things because doing unpopular things denotes “seriousness,” would lower the Medicare eligibility age and expand Social Security. That the opposite approach is effectively the bipartisan consensus approach is the special sort of Beltway madness that makes sensible people wish for either a proper parliamentary system or at the very least for an EMP to take out Georgetown and much of Washington’s surrounding suburbs.

Medicare is very expensive. It’s the “entitlement” that is actually pretty much responsible for those scary “debt will be 10 million percent of GDP by the time the rapidly rising seas have swallowed much of the Earth” graphs. Medicare is expensive because we spend a lot on healthcare. We spend a lot on healthcare basically just because we want to, and doing so has been very good to a lot of people who work in healthcare fields. The way nearly every other advanced nation controls healthcare costs is by just having the government set prices. I thought everyone knew Medicare was cheaper than private insurance because it could negotiate lower rates, but apparently lots of people didn’t understand this until Steven Brill wrote a big article about it in Time. Again, many people understand that “reining in healthcare costs” means just spend less on healthcare, but for some reason Washington is fixated on passing the existing ballooning costs onto old and working people instead of just agreeing to pay doctors less in general.

…

Social Security, meanwhile, is lumped in with Medicare not because it faces rapidly ballooning costs in the future – it doesn’t – but because a lot of people just really, really, really want to cut it, or make it less generous, or let the finance industry get its hands on the money. Social Security would seriously be “fixed” just by a) raising taxes and/or b) deciding to pay for it, with borrowing or with some other pot of money.

…

We should, in other words, be having a big national debate about how to expand Social Security, not find ways to make it less generous for future retirees. (Maybe let’s make our country seem like a nice livable place and get a bunch of immigrants here to expand our population and contribute to the economy and pay taxes and stuff?) Otherwise instead of a Social Security funding crisis we will have a “no one has enough money to retire” crisis, in a few years. Which will likely require expensive government intervention anyway. Instead, the Obama/Democratic/Centrist position is “chained CPI,” which reduces benefits. (The Republican position is “let’s wait a while and try to privatize it again later, maybe.”)

In a country with a political system that was actually responsible and responsive to public preferences, the “grand bargain” following the resounding victory of the more liberal party in national elections would be the expansion of the welfare state and the social safety net. Instead, we have two austerity parties arguing over the rate at which they’ll impoverish the future elderly.

We’ll just have to count on the wingnuts in the House GOP to blow the whole deal up again, like they usually do.

The Extraordinary Science of Addictive Junk Food

By MICHAEL MOSS, The New York Times

Published: February 20, 2013

The snack that Dunn was proposing to sell: carrots. Plain, fresh carrots. No added sugar. No creamy sauce or dips. No salt. Just baby carrots, washed, bagged, then sold into the deadly dull produce aisle.

“We act like a snack, not a vegetable,” he told the investors. “We exploit the rules of junk food to fuel the baby-carrot conversation. We are pro-junk-food behavior but anti-junk-food establishment.”

The investors were thinking only about sales. They had already bought one of the two biggest farm producers of baby carrots in the country, and they’d hired Dunn to run the whole operation. Now, after his pitch, they were relieved. Dunn had figured out that using the industry’s own marketing ploys would work better than anything else. He drew from the bag of tricks that he mastered in his 20 years at Coca-Cola, where he learned one of the most critical rules in processed food: The selling of food matters as much as the food itself.

Later, describing his new line of work, Dunn told me he was doing penance for his Coca-Cola years. “I’m paying my karmic debt,” he said.

Revealed: Pentagon’s link to Iraqi torture centres

Mona Mahmood, Maggie O’Kane, Chavala Madlena and Teresa Smith, The Guardian

Wednesday 6 March 2013 11.13 EST

The Pentagon sent a US veteran of the “dirty wars” in Central America to oversee sectarian police commando units in Iraq, that set up secret detention and torture centres to get information from insurgents. These units conducted some of the worst acts of torture during the US occupation and accelerated the country’s descent into full-scale civil war.

Colonel James Steele, then 58, was a retired special forces veteran nominated by Donald Rumsfeld to help organise the paramilitaries in an attempt to quell a Sunni insurgency, according to an investigation by the Guardian and BBC Arabic. After the Pentagon lifted a ban on Shia militias joining the security forces, the membership of the Special police commandos was increasingly drawn from violent Shia groups like the Badr brigades.

A second special adviser, retired Colonel James H Coffman (now 59) worked alongside Steele in detention centres that were set up with millions of dollars of US funding. Coffman reported directly to General David Petraeus, sent to Iraq in June 2004 to organise and train the new Iraqi security forces. Steele, who was in Iraq between 2003 – 2005, and kept returning to the country through 2006, reported directly to Rumsfeld.

…

“They worked hand in hand,” said General Muntadher al-Samari, who worked with Steele and Coffman for a year while the commandos were being set up. “I never saw them apart in the 40 or 50 times I saw them inside the detention centres. They knew everything that was going on there … the torture, the most horrible kinds of torture.”

Additional reporting by the Guardian confirmed further details of how the interrogation system worked. “Every single detention centre would have its own interrogation committee,” claimed Samari, who has for the first time talked in detail about the US role in the brutal interrogation units. “Each one was made up of an intelligence officer and eight interrogators. This committee will use all means of torture to make the detainee confess like using electricity or hanging him upside down, pulling out their nails, and beating them on sensitive parts.”

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The Guardian has learned that the Special police commandos unit’s involvement with torture entered the popular consciousness in Iraq when some of their victims were paraded in front of the television audience on a TV programme called “Terrorism In The Hands of Justice.” SPC detention centres bought Canon video cameras, funded by the US military, which they used to film detainees for the television show. When the show began to outrage the Iraqi public, Samari remembers being in the home of General Adnan Thabit – head of the special commandos – when a call came from Petraeus’s office demanding that they stop showing tortured men on television.

…

Thabit is dismissive of the idea that the Americans he dealt with were unaware of what the commandos were doing. “Until I left, the Americans knew about everything I did; they knew what was going on in the interrogations and they knew the detainees. And even some of the intelligence about the detainees came to us from them – they are lying.”

Just before Petraeus and Steele left Iraq in September 2005, Jabr al-Solagh was appointed as the new minister of the interior. Under Solagh, who was closely associated with the violent Badr Brigades militia, allegations of torture and brutality against the commandoes soared. It was also widely believed that the unit had evolved into death squads.

There is a 5 minute digest of a 50 minute video attached to this piece.  The 50 minute video is titled James Steele: America’s mystery man in Iraq and autoplays.

Who is this ‘good’ guy, Colonel James Steele?

From El Salvador to Iraq: Washington’s man behind brutal police squads

Mona Mahmood, Maggie O’Kane, Chavala Madlena, Teresa Smith, Ben Ferguson, Patrick Farrelly, Guy Grandjean, Josh Strauss, Roisin Glynn, Irene Baqué, Marcus Morgan, Jake Zervudachi and Joshua Boswell, The Guardian

Wednesday 6 March 2013 11.16 EST

On the 10th anniversary of the Iraq invasion the allegations of American links to the units that eventually accelerated Iraq’s descent into civil war cast the US occupation in a new and even more controversial light. The investigation was sparked over a year ago by millions of classified US military documents dumped onto the internet and their mysterious references to US soldiers ordered to ignore torture. Private Bradley Manning, 25, is facing a 20-year sentence, accused of leaking military secrets.

Steele’s contribution was pivotal. He was the covert US figure behind the intelligence gathering of the new commando units. The aim: to halt a nascent Sunni insurgency in its tracks by extracting information from detainees.

It was a role made for Steele. The veteran had made his name in El Salvador almost 20 years earlier as head of a US group of special forces advisers who were training and funding the Salvadoran military to fight the FNLM guerrilla insurgency. These government units developed a fearsome international reputation for their death squad activities. Steele’s own biography describes his work there as the “training of the best counterinsurgency force” in El Salvador.

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But the arming of one side of the conflict by the US hastened the country’s descent into a civil war in which 75,000 people died and 1 million out of a population of 6 million became refugees.

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It was in El Salvador that Steele first came in to close contact with the man who would eventually command US operations in Iraq: David Petraeus. Then a young major, Petraeus visited El Salvador in 1986 and reportedly even stayed with Steele at his house.

But while Petraeus headed for the top, Steele’s career hit an unexpected buffer when he was embroiled in the Iran-Contra affair. A helicopter pilot, who also had a licence to fly jets, he ran the airport from where the American advisers illegally ran guns to right-wing Contra guerrillas in Nicaragua. While the congressional inquiry that followed put an end to Steele’s military ambitions, it won him the admiration of then congressman Dick Cheney who sat on the committee and admired Steele’s efforts fighting leftists in both Nicaragua and El Salvador.

…

In June 2004 Petraeus arrived in Baghdad with the brief to train a new Iraqi police force with an emphasis on counterinsurgency. Steele and serving US colonel James Coffman introduced Petraeus to a small hardened group of police commandos, many of them among the toughest survivors of the old regime, including General Adnan Thabit, sentenced to death for a failed plot against Saddam but saved by the US invasion. Thabit, selected by the Americans to run the Special Police Commandos, developed a close relationship with the new advisers. “They became my friends. My advisers, James Steele and Colonel Coffman, were all from special forces, so I benefited from their experience … but the main person I used to contact was David Petraeus.”

With Steele and Coffman as his point men, Petraeus began pouring money from a multimillion dollar fund into what would become the Special Police Commandos. According to the US Government Accounts Office, they received a share of an $8.2bn (£5.4bn) fund paid for by the US taxpayer. The exact amount they received is classified.

With Petraeus’s almost unlimited access to money and weapons, and Steele’s field expertise in counterinsurgency the stage was set for the commandos to emerge as a terrifying force. One more element would complete the picture. The US had barred members of the violent Shia militias like the Badr Brigade and the Mahdi Army from joining the security forces, but by the summer of 2004 they had lifted the ban.

…

The commandos used the most brutal methods to make detainees talk. There is no evidence that Steele or Coffman took part in these torture sessions, but General Muntadher al Samari, a former general in the Iraqi army, who worked after the invasion with the US to rebuild the police force, claims that they knew exactly what was going on and were supplying the commandos with lists of people they wanted brought in. He says he tried to stop the torture, but failed and fled the country.

“We were having lunch. Col Steele, Col Coffman, and the door opened and Captain Jabr was there torturing a prisoner. He [the victim] was hanging upside down and Steele got up and just closed the door, he didn’t say anything – it was just normal for him.”

…

General Muntadher fled after two close colleagues were killed after they were summoned to the ministry, their bodies found on a rubbish tip. He got out of Iraq and went to Jordan. In less than a month, he says, Steele contacted him. Steele was anxious to meet and suggested he come to the luxury Sheraton hotel in Amman where Steele was staying. They met in the lobby at 8pm and Steele kept him talking for nearly two hours.

“He was asking me about the prisons. I was surprised by the questions and I reminded him that these were the same prisons where we both used to work. I reminded him of the incident where he had opened the door and Colonel Jabr was torturing one of the prisoners and how he didn’t do anything. Steele said: ‘But I remember that I told the officer off’. So I said to him: ‘No, you didn’t – you didn’t tell the officer off. You didn’t even tell General Adnan Thabit that this officer was committing human rights abuses against these prisoners’. And he was silent. He didn’t comment or answer. I was surprised by this.”

According to General Muntadher: “He wanted to know specifically: did I have any information about him, James Steele? Did I have evidence against him? Photographs, documents: things which proved he committed things in Iraq; things he was worried I might reveal. This was the purpose of his visit.

“I am prepared to go to the international court and stand in front of them and swear that high-ranking officials such as James Steele witnessed crimes against human rights in Iraq. They didn’t stop it happening and they didn’t punish the perpetrators.”

Steele, the man, remains an enigma. He left Iraq in September 2005 and has since pursued energy interests, joining the group of companies of Texas oilman Robert Mosbacher. Until now he has stayed where he likes to be – far from the media spotlight. Were it not for Bradley Manning’s leaking of millions of US military logs to Wikileaks, which lifted the lid on alleged abuses by the US in Iraq, there he may well have remained. Footage and images of him are rare. One video clip just 12 seconds long features in the hour-long TV investigation into his work. It captures Steele, then a 58-year-old veteran in Iraq, hesitating, looking uncomfortable when he spots a passing camera.

Ships to sail directly over the north pole by 2050, scientists say

John Vidal, The Guardian

Monday 4 March 2013 15.00 EST

(B)y 2050, say Laurence C. Smith and Scott R. Stephenson at the University of California in the journal PNAS on Monday, ordinary vessels should be able to travel easily along the northern sea route, and moderately ice-strengthened ships should be able to take the shortest possible route between the Pacific and Atlantic Oceans, passing over the pole itself. The easiest time would be in September, when annual sea ice cover in the Arctic Ocean is at its lowest extent.

…

“The prospect of common open water ships, which comprise the vast majority of the global fleet, entering the Arctic Ocean in late summer, and even its remote central basin by moderately ice-strengthened vessels heightens the urgency for a mandatory International Maritime Organisation regulatory framework to ensure adequate environmental protections, vessel safety standards, and search-and-rescue capability,” it adds.

A Stealth Tax Subsidy for Business Faces New Scrutiny

By MARY WILLIAMS WALSH and LOUISE STORY, The New York Times

Published: March 4, 2013

(T)he ability to finance a variety of business projects cheaply with bonds that are exempt from federal taxes – has not only endured, it has grown, in what amounts to a stealth subsidy for private enterprise.

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In all, more than $65 billion of these bonds have been issued by state and local governments on behalf of corporations since 2003, according to an analysis of Bloomberg bond data by The New York Times. During that period, the single biggest beneficiary of such securities was the Chevron Corporation, which issued bonds with a total face value of $2.6 billion, the analysis showed. Last year it reported a profit of $26 billion.

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In 2005, Congress created a similar program to spur rebuilding in areas of Louisiana, Alabama and Mississippi that were ravaged by Hurricane Katrina. The Times’s data shows that much of the bond proceeds went to the oil and gas industry, or to showcase projects like hotels or the Superdome. In 2008, Congress passed the Heartland Disaster Tax Relief Act, a bond program to help 10 Midwestern states hit by flooding and tornadoes. The goal was to help businesses rebuild their destroyed property. But by the time the program was set to expire at the end of last year, the criteria had been expanded to include new businesses.

One of those businesses was Orascom Construction Industries of Egypt, which raised $1.2 billion of tax-exempt bonds to build a fertilizer plant in Iowa. Another was the Fatima Group of Pakistan. In December, a Fatima subsidiary raised $1.3 billion, tax-exempt, to build a fertilizer plant in Mount Vernon, Ind.

But weeks later, Indiana received alarming news: Pentagon officials said that fertilizer from Fatima’s operations in Pakistan had been turning up in Afghanistan, in homemade bombs used against American troops.