September 2012 archive

A definition of cocktail appeared in the May 13, 1806, edition of The Balance and Columbian Repository, a publication in Hudson, New York, in which an answer was provided to the question, “What is a cocktail?”. It replied:

Cock-tail is a stimulating liquor, composed of spirits of any kind, sugar, water, and bitters- it is vulgarly called bittered sling, and is supposed to be an excellent electioneering potion, inasmuch as it renders the heart stout and bold, at the same time that it fuddles the head. It is said, also to be of great use to a democratic candidate: because a person, having swallowed a glass of it, is ready to swallow any thing else.

Compare the ingredients listed (spirits, sugar, water, and bitters) with the ingredients of an Old Fashioned, which originated as a term used by late 19th century bar patrons to distinguish cocktails made the “old-fashioned” way from newer, more complex cocktails.

One of the earliest recipes for an Old Fashioned, written in 1895, specifies the following: “Dissolve a small lump of sugar with a little water in a whiskey-glass; add two dashes [Angostura bitters ], a small piece ice, a piece lemon-peel, one jigger [1.5 fl oz or 44 ml] whiskey. Mix with small bar-spoon and serve, leaving spoon in glass.”

A Rare Look at Why The Government Won’t Fight Wall Street

Matt Taibbi, Rolling Stone

September 18, 10:28 AM ET

The great mystery story in American politics these days is why, over the course of two presidential administrations (one from each party), there’s been no serious federal criminal investigation of Wall Street during a period of what appears to be epic corruption. People on the outside have speculated and come up with dozens of possible reasons, some plausible, some tending toward the conspiratorial – but there have been very few who’ve come at the issue from the inside.

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There are some damning revelations in this book, and overall it’s not a flattering portrait of key Obama administration officials like SEC enforcement chief Robert Khuzami, Department of Justice honchos Eric Holder (who once worked at the same law firm, Covington and Burling, as Connaughton) and Lanny Breuer, and Treasury Secretary Tim Geithner.

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Connaughton writes about something he calls “The Blob,” a kind of catchall term describing an oozy pile of Hill insiders who are all incestuously interconnected, sometimes by financial or political ties, sometimes by marriage, sometimes by all three. And what Connaughton and Kaufman found is that taking on Wall Street even with the aim of imposing simple, logical fixes often inspired immediate hostile responses from The Blob; you’d never know where it was coming from.

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when Kaufman tried to advocate for rules that would have prevented naked short-selling, Connaughton was warned by a lobbyist that it would be “bad for my career” if he went after the issue and that “Ted and I looked like deranged conspiracy theorists” for asking if naked short-selling had played a role in the final collapse of Lehman Brothers. Naked short-selling is another controversial practice. Essentially, when you short a stock, you’re supposed to locate shares of that stock before you go out and sell it short. But what hedge funds and banks have discovered is that the rules provide “leeway” – you can go out and sell shares in a stock without actually having it, provided you have a “reasonable belief” that you can locate the shares.

This leads to the obvious possibility of companies creating false supply in a stock by selling shares they don’t have. Without getting too much into the weeds here, there is an obvious solution to the problem, which essentially would be forcing companies to actually locate shares before selling them. In their attempt to change the system, Kaufman and Connaughton discovered that the Depository Trust Clearing Corporation, the massive quasi-private organization that clears most all stock trades in America, had come up with just such a fix on their own.

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A roundtable to discuss the idea was scheduled by the SEC on September 24, 2009. Of the nine invited participants, “all but one” were for the status quo. Connaughton expected the DTCC representatives to unveil their reform idea, but they didn’t.

The Banker Who’d Cut Social Security and Medicare – and May Become Treasury Secretary

Richard (RJ) Eskow, Huffington Post

09/17/2012 11:08 pm

Before entering public life Bowles was a banker with Morgan Stanley. He now serves on Morgan Stanley’s board, and has done so through a series of that bank’s legal issues. As Dean Baker notes, Bowles was also on the General Motors Board “from June of 2005 until it went into bankruptcy in the spring of 2009,” and “joined the board of Morgan Stanley, the Wall Street investment bank, near the peak of the housing bubble in December of 2005.”

Bowles is also on the Board of Facebook, whose IPO has been the subject of controversy and scandal. (Baker offers a fun, interactive graph of the economic performance of the companies on whose boards Bowles has served. It isn’t pretty.)

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The Simpson/Bowles proposal is often marketed — falsely — as the product of their deadlocked and failed Presidential Deficit Commission. It claims to be “centrist” because it offers unspecified tax increases as well as cuts — probably by decimating the middle class by eliminating tax deductions for employer health care, dependent children, and home mortgage interest. It also claims “bipartisanship” because Bowles the banker is also Democratic Party insider.

The “Simpson Bowles” austerity cuts to U.S. government spending closely resemble the cuts that have devastated the economies of Europe and Great Britain. Their plan would also cut Medicare and Social Security benefits — while providing drastically lower tax rates for billionaires and millionaires.

When you look at it carefully, Simpson/Bowles only differs from the radical right-wing Republican budget in a few areas, the most important of which is this: While the Republican plan calls for no tax increases at all, the Simpson/Bowles plan says it would offset its billionaire tax cuts. But since they also lower tax rates for billionaires, millionaires and corporations, they’re left to rely like Romney on unspecified loopholes, or “tax expenditures,” which could eviscerate the tax deductions that help the middle class get health insurance and pay their mortgages.

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Washington insiders scoff at anybody who dares question the sanctity of the “Simpson Bowles” concept. But once you leave Washington, that includes pretty much everybody. About 96 percent of the country’s voters reject their emphasis on deficits as our top priority, according to recent polling. The same poll showed that 37 percent of those polled considered “the economy and jobs” their top priority. That’s nearly ten times as many people.

That tracks closely with other poll results which showed that seventy percent of Americans were either “very uncomfortable” or “somewhat uncomfortable” with the Simpso(n)/ Bowles plan when it was released.

Meanwhile polls show that Medicare is a key issue in three battleground states, with Paul Ryan’s unpopular plan giving Democrats a decided edge on that issue. The selection of Bowles would damage that advantage if it was announced before the election, and would create a sense of betrayal if announced afterwards.

That particular form of right-wing wealth redistribution is what allows Simpson, Bowles, their funders and supporters to keep bragging that their plan is “brave.” If they were really brave they’d admit that they’re offering a right-wing austerity plan, not a “nonpartisan” solution to a long-term issue that’s receiving attention that should be focused on today’s jobs crisis.

Since Romney Raised the Issue of Freeloaders, What Is Erskine Bowles?

Dean Baker, cepr

Tuesday, 18 September 2012 04:42

Mr. Bowles has earned millions of dollars sitting on corporate boards over the last decade. The stock prices of the companies on whose boards he sat have mostly plummeted. Since 2003 the Erskine Bowles stock index has lost more than one third of its value. By comparison, the S&P 500 has risen by more than 50 percent. If Mr. Bowles was trying to serve shareholders, he has not done a very good job.

If people think that this is a private matter, with Mr. Bowles just ripping off shareholders while Governor Romney’s freeloaders are ripping off taxpayers, think again. One of the companies on whose board Mr. Bowles sat, General Motors, went bankrupt with substantial costs to the government. Another, Morgan Stanley, would have gone bankrupt without extraordinary assistance from the Fed and Treasury, which continues to this day in the form of implicit too big to fail insurance.

So, if we want to have a debate about people who freeload on the rest of the country, we should have folks like Erskine Bowles at center stage. Of course he is in a much higher income bracket than the folks who get Social Security or unemployment insurance from the government, but that fact should not be allowed to color the debate.

I’m actually a great admirer and have been for years.  I freely admit that I’ve adjusted my writing style based on his which I think works much better for Front Page pieces than my 2500 word Jim Blaine homages.

He has a new temporary gig-

Writing Stuff Elsewhere

Atrios, Eschaton

Tuesday, September 18, 2012

Doing a weekly online column for USA Today until the election. I’ll use it to promote some crazy ideas.

Viva Social Security

By Duncan Black, USA Today

Tuesday, September 18, 2012

Instead of considering some exciting new program to try to encourage workers into saving more, another Rube Goldberg incentive contraption designed to nudge individual behavior in the right direction, we should increase the level of retirement benefits in the existing Social Security program.

That sounds like blasphemy because we’ve all been fed the myth that Social Security is bankrupt. It is almost universally accepted in policy circles and in the pundit class that strengthening Social Security involves cutting future benefits relative to what current law promises because according to current projections, Social Security only has the ability to pay promised benefits in full until 2033, and then 75% of them thereafter. The basic thinking is that we must promise to cut benefits now so that we won’t necessarily have to cut them 22 years from now. What?

Imagine if that is how we treated defense spending. Since it appears budgets will be tight in the 2030s, best to mothball all those aircraft carriers today. Who would buy that argument?

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Social security is only bankrupt to the extent that our political leaders lose the will to invest in a decent retirement for American workers.

It be Talk Like A Pirate Day tomorrow.  Originally posted here May 25, 2011.

Who are dependent upon government, who believe that they are victims, who believe the government has a responsibility to care for them, who believe that they are entitled.

Breuer Admits That Economists Have Convinced Him Not to Indict Corporations

by emptywheel

Posted on September 14, 2012

I’ve become increasingly convinced that DOJ’s head of Criminal Division, Lanny Breuer is the rotting cancer at the heart of a thoroughly discredited DOJ. Which is why I’m not surprised to see this speech he gave at the NYC Bar Association selling the “benefits” of Deferred Prosecution Agreements.  (h/t Main Justice) He spends a lot of his speech claiming DPAs result in accountability.

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But the real tell is when he confesses that he “sometimes-though … not always” let corporations off because a CEO or an economist scared him with threats of global markets failing if he held a corporation accountable by indicting it.

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None of this is surprising, of course. It has long been clear that Breuer’s Criminal Division often bows to the scare tactics of Breuer’s once and future client base. (In his speech, he boasts about how well DPAs and NPAs have worked with Morgan Stanley and Barclays, respectively.)

It’s just so embarrassing that he went out in public and made this pathetic attempt to claim it all amounts to accountability.

Crony Capitalism, American Style

L. Randall Wray, EconoMonitor

September 16th, 2012

Our nation’s top cops freely admit that they have no interest in prosecuting criminal behavior perpetrated by our elite 1% at the top of our crony capitalism pyramid. As reported at Naked Capitalism, Lanny Breuer, head of the DOJ’s Criminal Division, practically brags about the absence of criminal convictions for all the fraud perpetrated over the past decade. He freely admits that when his department suspects a big bank of fraud, he calls in the bank’s team to provide a flashy presentation showing why it should not be investigated. The banksters make the argument that actually prosecuting fraudsters would be bad for crony capitalism, which of course scares the bejeebers out of Washington. So Breuer’s office then makes nice with the banksters, and they all go back to doing what they’ve been doing-moving all wealth to the cronies in the top 1%.

The Wall Street bank’s business model is fraud.

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You all already understand that mortgage brokers and property appraisers were in cahoots-overvaluing property to justify out-sized mortgages. You know that brokers pushed “don’t ask, don’t tell” “Liar’s loans” to put borrowers into loans they could not afford, and that they doctored loan documents after borrowers had signed them to cover up the lender’s fraud. And you know that the Wall Street banks created MERS to evade proper recording of property records, effectively wiping out half a millennium of record keeping so that no one any longer knows who owns what.

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(I)n fact, in many cases mortgages were never bundled into the securities. So it is not just a problem with the quality of the mortgages backing the securities. And it is not just a problem with the fact that the trustees lied about what was behind the securities. And it is not just a problem of splitting off the notes from the deeds. There is accumulating evidence that the only thing backing securities is an empty “paper bag“: mortgages were never actually securitized. The securities your pension fund might be holding were never worth a dime because they securitized air.

And many of these securitizations were supposed to be REMICs, which offer tax advantages but only if done properly. Guess what. One of the rules is that the mortgages must be put in the REMIC almost immediately. That rule was probably rarely followed; and of course if the mortgages were never put there at all, REMIC rules were certainly violated so the investors owe huge backtaxes. Wall Street’s response is to make a new “Wall Street Rule”: hey we all did it, and if the IRS pursues taxes and if we are pursued for fraud, then the whole system blows up. This is precisely the kind of line Breuer finds irresistibly logical, so you can bet his office won’t be going after the securitizers.

What I think is shocking is that a President of the United States would go behind closed doors and declare to a group of wealthy donors that they are ‘victims’, entitled to handouts, and don’t have to take ‘personal responsibility’ for their thefts and fraud.

Cocktail Hour is a some times feature where we’ll examine the hallmark of civilization, the production and consumption of spiritous beverages.  It is no accident that among the earliest surviving writings is a beer recipe from Mesopotamia.  Our ancestors were prodigious drinkers in amounts that would make most Deltas hurl, of course they died young and the water was no healthier (“How can you tell he’s the King?” “Well, he’s not covered in shit.”).

The Martinez

(A) popular theory suggests it (Martinis) evolved from a cocktail called the Martinez served at the Occidental Hotel in San Francisco sometime in the early 1860s, which people frequented before taking an evening ferry to the nearby town of Martinez. Alternatively, the people of Martinez say the drink was first created by a bartender in their town. Another theory links the first dry martini to the name of a bartender who concocted the drink at the Knickerbocker Hotel in New York City in 1911 or 1912. The self-styled Court of Historical Review in San Francisco ruled that the martini was invented in San Francisco. A court in Martinez, California, recently overturned this decision. (These “courts” have neither legal nor academic authority and are primarily for entertainment.)