September 25, 2013 archive

Sep 25

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Sep 25

God’s Work, Part Deux

AIG CEO Robert Benmosche Compares Bonus Criticism to Lynch Mobs

By Matt Taibbi, Rolling Stone

POSTED: September 24, 3:50 PM ET

(W)hen you’re a white guy who just presided over a year of declining across-the-board sales but got a 24% pay raise anyway, to $13 million a year, largely because your company is invested in a market that’s overheating due to massive Fed intervention, and you’re so grateful for your cosmic good fortune that you immediately go out and publicly nail yourself to the cross of black victimhood – and not while stone drunk and with buddies at a bar, mind you, but sober and sitting in front of a Wall Street Journal reporter – that’s like a whole new category of asshole. Try to compute just exactly how obnoxious that is – you’ll be doing it until the end of time, like someone trying to figure pi.

Benmosche’s nooses-and-pitchforks fantasies have their origins in stories about some AIGFP executives who were made to feel uncomfortable by angry crowds on their way home from work, and one about a teacher somewhere in the Midwest who ridiculed in her third-grade class a child whose father worked at the firm. That last bit of course would be very wrong if it did happen, and it may very well have.

Still, comparing being leered at on a train for continuing to collect a huge undeserved bonus from the taxpayer to being taken from your wife and family and hung from a tree for no reason at all is preposterous on at least a hundred different levels.



Those FP workers would normally have been counting on performance bonuses, but since AIGFP not only didn’t perform that year, but created a historically bottomless suckhole of losses that nearly destroyed the universe, there were, alas, no performance bonuses to be had.

So management cooked up a bunch of “retention bonuses” for many of the unit’s employees. This always seemed like a scam, a way of yanking a little last bit of value out of a company most thought was headed for collapse. Moreover, the notion that anyone (but especially the taxpayer) needed to pay millions in “retention bonuses” to prevent other financial firms from poaching employees of the biggest financial disaster/PR-cancer firm since Enron or Union Carbide – and this at a time when mass layoffs on Wall Street had flooded the labor market with thousands of other highly-qualified financial professionals who would have taken huge pay cuts to fill those slots – was always absurd.



In tossing out this “everyone was a villain” line, the CEO, of course, only mentioned the small subset of ordinary people who were “villains” in those days, the low-level speculators who flipped houses and the homeowners who lied on their mortgage applications.

He conveniently left out the bigger institutional players who birthed this scheme, like the giant investment banks (including for instance Credit Suisse, where he worked) that not only knew that mass fraud was being committed at the mortgage application level but encouraged it, so that they could speed up the process of pooling and securitizing those mortgages and selling them off to unsuspecting third parties. Just to take the one example of his own former bank, investors in the mortgage securities sold by Credit Suisse incurred over $11 billion in losses, according to a complaint filed by New York AG Eric Schneiderman against the firm last year.

Banks knew, lenders knew, ratings agencies knew, and then of course firms like AIG knew that something was deeply wrong with the booming mortgage markets in the years leading up to 2008. The peculiar trade of AIGFP was the obviously crazy practice of selling hundreds of billions of uncollateralized insurance to the Goldmans and Deutsche Banks of the world, who in many cases were using these policies to bet against their own products. The 377-odd employees of that sub-unit of AIG took home over $3.5 billion in compensation for such socially-beneficial service in the seven years before it all went bust. If finance-sector pros in those years had reservations about where all that money came from, most, like Benmosche himself, kept them to themselves.

Stories like this “hangman nooses” thing give some insight into the oft-asked question of how the 2008 crisis could ever have happened, the answer being that the people who run our economy, like Benmosche, are basically idiots. They can read a spreadsheet and get through an investor conference call sounding like they know what they’re talking about, but in real-world terms, your average pimp is usually an Einstein in comparison.

These people are so used to being told by interns and finance reporters and other ballwashers that they’re geniuses that they pretty soon come to believe it, which is how concepts like “We’ll never lose a dollar – it’s all hedged” go unchallenged in rooms full of econ majors who’ve just bet the whole store on the mortgages of underemployed janitors and palm-readers. Somebody, please, tell these guys quick how smart they’re not, or else we’ll be in another crisis before we know it.

Sep 25

Cartnoon

Sep 25

On This Day In History September 25

Cross posted from The Stars Hollow GazetteThis 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 25 is the 268th day of the year (269th in leap years) in the Gregorian calendar. There are 97 days remaining until the end of the year.

On this day in 1789, the Bill of Rights passes Congress.

The first Congress of the United States approves 12 amendments to the U.S. Constitution, and sends them to the states for ratification. The amendments, known as the Bill of Rights, were designed to protect the basic rights of U.S. citizens, guaranteeing the freedom of speech, press, assembly, and exercise of religion; the right to fair legal procedure and to bear arms; and that powers not delegated to the federal government were reserved for the states and the people.

The Bill of Rights is the name by which the first ten amendments to the United States Constitution are known. They were introduced by James Madison to the First United States Congress in 1789 as a series of articles, and came into effect on December 15, 1791, when they had been ratified by three-fourths of the States. An agreement to create the Bill of Rights helped to secure ratification of the Constitution itself. Thomas Jefferson was a supporter of the Bill of Rights.

The Bill of Rights prohibits Congress from making any law respecting any establishment of religion or prohibiting the free exercise thereof, guarantees free speech, free press, free assembly and association and the right to petition government for redress, forbids infringement of “…the right of the people to keep and bear Arms…”, and prohibits the federal government from depriving any person of life, liberty, or property, without due process of law. In federal criminal cases, it requires indictment by a grand jury for any capital or “infamous crime”, guarantees a speedy, public trial with an impartial jury composed of members of the state or judicial district in which the crime occurred, and prohibits double jeopardy. In addition, the Bill of Rights states that “the enumeration in the Constitution, of certain rights, shall not be construed to deny or disparage others retained by the people,” and reserves all powers not specifically granted to the federal government to the people or the States. Most of these restrictions were later applied to the states by a series of decisions applying the due process clause of the Fourteenth Amendment, which was ratified in 1868, after the American Civil War.

The question of including a Bill of Rights in the body of the Constitution was discussed at the Philadelphia Convention on September 12, 1787. George Mason “wished the plan [the Constitution] had been prefaced with a Bill of Rights.” Elbridge Gerry of Massachusetts “concurred in the idea & moved for a Committee to prepare a Bill of Rights.” Mr Sherman argued against a Bill of Rights stating that the “State Declarations of Rights are not repealed by this Constitution.” Mason then stated “The Laws of the U. S. are to be paramount to State Bills of Rights.” The motion was defeated with 10-Nays, 1-Absent, and No-Yeas.

Madison proposed the Bill of Rights while ideological conflict between Federalists and anti-Federalists, dating from the 1787 Philadelphia Convention, threatened the final ratification of the new national Constitution. It largely responded to the Constitution’s influential opponents, including prominent Founding Fathers, who argued that the Constitution should not be ratified because it failed to protect the fundamental principles of human liberty. The Bill was influenced by George Mason’s 1776 Virginia Declaration of Rights, the 1689 English Bill of Rights, works of the Age of Enlightenment pertaining to natural rights, and earlier English political documents such as Magna Carta (1215).

Two other articles were proposed to the States; only the last ten articles were ratified contemporaneously. They correspond to the First through Tenth Amendments to the Constitution. The proposed first Article, dealing with the number and apportionment of U.S. Representatives, never became part of the Constitution. The second Article, limiting the power of Congress to increase the salaries of its members, was ratified two centuries later as the 27th Amendment. Though they are incorporated into Madison’s document known as the “Bill of Rights”, neither article established protection of a right. For that reason, and also because the term had been applied to the first ten amendments long before the 27th Amendment was ratified, the term “Bill of Rights” in modern U.S. usage means only the ten amendments ratified in 1791.

The Bill of Rights plays a key role in American law and government, and remains a vital symbol of the freedoms and culture of the nation. One of the first fourteen copies of the Bill of Rights is on public display at the National Archives in Washington, D.C.

Sep 25

Muse in the Morning

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Sep 25

Late Night Karaoke

Sep 25

US Spying Lambasted by an Ally

Cross posted from The Stars Hollow Gazette

The president of an close US ally, Dilma Rousseff of Brazil, told the audience of dignitaries at the annual United Nations General Assembly session that the US is in violation of international law by using the NSA to indiscriminately collect “the personal information of Brazilian citizens and economic espionage targeted on the country’s strategic industries.”

Rousseff’s angry speech was a direct challenge to President Barack Obama, who was waiting in the wings to deliver his own address to the UN general assembly, and represented the most serious diplomatic fallout to date from the revelations by former NSA contractor Edward Snowden.

Rousseff had already put off a planned visit to Washington in protest at US spying, after NSA documents leaked by Snowden revealed that the US electronic eavesdropping agency had monitored the Brazilian president’s phone calls, as well as Brazilian embassies and spied on the state oil corporation, Petrobras. [..]

Also, Brazilian diplomatic missions, among them the permanent mission to the UN and the office of the president of the republic itself, had their communications intercepted,” Rousseff said, in a global rallying cry against what she portrayed as the overweening power of the US security apparatus. [..]

She warned, using very strong words that the the NSA surveillance was a direct threat to freedom of speech and democracy.

“Meddling in such a manner in the lives and affairs of other countries is a breach of international law and as such it is an affront to the principles that should otherwise govern relations among countries, especially among friendly nations,” [..]

“Without the right to privacy, there is no real freedom of speech or freedom of opinion, and therefore, there is no actual democracy,” [..]

“A country’s sovereignty can never affirm itself to the detriment of another country’s sovereignty,”

She called for the “establishment of multilateral mechanisms” to protect the internet and the privacy of individuals, businesses and diplomats.

Many countries have denounced the US at the UN, coming mostly from nations that disagree with US international policies. This rebuke, coming from a large influential and close ally was diplomatically painful.

The full transcript of Pres. Rouseff’s speech can be read here and here (pdf).

Sep 25

The Increasing Inequality of the 99%

Cross posted from The Stars Hollow Gazette

The income gap between the 99% is has grown to the point that it now as great as it was a the start of the Great Depression. In New York City, Democratic candidate Bill de Blasio built his campaign for mayor around the increased poverty of New Yorkers that he says is creating two cities. According to the US Census Bureau the poverty rate continues to climb in NYC threatening the viability of the city:

The poverty rate rose to 21.2 percent in 2012, from 20.9 percent the year before, meaning that 1.7 million New Yorkers fell below the official federal poverty threshold. That increase was not statistically significant, but the rise from the 2010 rate of 20.1 percent was.

Former Labor Secretary for President Bill Clinton, Robert Reich has released a documentary, Inequality for All, on the fifth anniversary of the fall of Lehman Bothers and the second anniversary of Occupy Wall Street which brought attention to the income gap and change the nation’s conversation about the “American Dream.” Sec. Reich joined Bill Moyers on his show Moyers & Company to discuss his film and the increasing income inequality for all of us.



TRanscript can be read here

“The core principle is that we want an economy that works for everyone, not just for a small elite. We want equal opportunity, not equality of outcome. We want to make sure that there’s upward mobility again, in our society and in our economy.”

By the Numbers: The Incredibly Shrinking American Middle Class

by Karen Kamp, Moyers & Company

A typical American household made about $51,017 in 2012, according to new figures out from the Census Bureau this week. That number may sound familiar to anyone who remembers George H. W. Bush’s first year as president or Michael Jackson in his prime. That’s because household income in 2012 is similar to what it was in 1989 (but back then it was actually higher: you had an extra $600 or so to spend compared to today).

That sobering statistic gives an indication of where the American middle class appears to be headed. Take a look below at a snapshot of where the middle class is now, the problems they face and what our Facebook audience has to say about squeaking out a living these days.