Tag: ek Politics

Crossposted from The Stars Hollow Gazette

The Economist has recently published an article describing 3 schools of Economic thought that have gained prominence recently because of their advocacy on blogs.  Indeed, being a political blog reader you may not be aware that there are more Economic blogs and they are more active and have better traffic than political ones like this.

Two of my favorites are Naked Capitalism (Yves Smith) and EconoMonitor (Nouriel Roubini) but I also frequent Krugman and Felix Salmon as well as a few others.

To summarize briefly before I excerpt some of The Economist’s descriptions of each school, the 3 Schools are Modern Monetary Theory (neo-Chartalism), Austrian (Austerian), and Market Monetarism.  I would say the article is more sympathetic to the 3rd school than the others though you may disagree.

Also I’m not quite sure what they consider “mainstream”, but in fact the Friedmanite Freshwater School has been thoroughly discredited by the abject failure of their models to predict events.  It is not science of any sort, but the faith based mystical mutterings of rattle shaking Shamen.

Heterodox economics, Marginal revolutionaries

The crisis and the blogosphere have opened mainstream economics up to new attack

The Economist

Dec 31st 2011

This invisible college of bloggers focuses first on the level of spending on American products: America’s domestic output, valued at the prices people pay for it. This is what economists call “nominal” GDP (NGDP), as opposed to “real” GDP, which strips out the effects of inflation. They think the central bank should promise to keep NGDP on a steady upward path, rising at, say, 5% a year. Such growth might come about because more stuff is bought (“real” growth) or because prices are higher (inflation). Mr Sumner’s disinhibition is to encourage the Fed not to care which of the two is doing more of the work.

Central banks set targets to make their currencies credible and their policies predictable. The target for many is to keep consumer prices growing at 2% a year or thereabouts. For the past few decades that has largely succeeded in stabilising inflation; but in the current crisis it has singularly failed to stabilise the economy. In America NGDP plunged over 11% below its pre-crisis path and remains there; what people buy at the prices they pay for it is much less than most would want.

…

(P)ut into the context of a pathetic response to the current crisis, the ideas offered by these very different schools all take on a similar form: that policymakers are overly worried about something that should concern them less. The Austrians see the bogeyman as deflation, the fear of which inflates bubbles. The market monetarists, diametrically opposed, see exaggerated fear of inflation. And the economy is getting too little help from fiscal stimulus, according to neo-chartalists, because of the government’s superstitious fear of insolvency.

Modern Monetary Theory

The neo-chartalists believe that because paper currency is a creature of the state, governments enjoy more financial freedom than they recognise. The fiscal authorities are free to spend whatever is required to revive their economies and restore employment. They can spend without first collecting taxes; they can borrow without fear of default. Budget-makers need not cower before the bond-market vigilantes. In fact, they need not bother with bond markets at all.

…

The policy conclusions neo-chartalism draws from this owe a lot to Abba Lerner, John Maynard Keynes’s “militant prophet”. Lerner believed governments should judge their fiscal policy by its economic results-its impact on jobs and inflation-and ignore any red ink it might spill. Governments should seek high employment and stable prices, much as the Fed does today. But instead of relying on monetary policy to meet these objectives, they should use fiscal policy instead. If private spending is too strong, pushing up prices and threatening inflation, the government should raise taxes or cut its own spending. If, on the other hand, private spending is too weak, jeopardising jobs, the government should cut taxes or increase its own spending.

So far, so Keynesian. But most Keynesians, anxious to appear fiscally responsible, say that budget deficits in bad times should be offset by surpluses in good times, keeping the level of debt seemly. Lerner admitted this might not be possible. Private spending might be chronically weak. If so, the government should run chronic deficits, adding continuously to the national debt. Lerner did not see that as much of a problem, though he recognised that many others were “easily frightened by fairy tales of terrible consequences”.

Austrian Economics

The “Austrian” school of economics, which traces its roots to 19th-century Vienna, is more sternly pre-Freudian: more inhibition, not less, is its prescription. Its adherents believe that part of the economy’s suffering is necessary, an inevitable consequence of past excesses. They do not think the Federal Reserve can rescue the economy. They seek instead to rescue the economy from the Fed.

(A)dvocate(s) of Austrian economics-a resurgent school of thought that, unlike market monetarism, has not been doing much to change the minds of most mainstream economists but, unlike neo-chartalism, has built up a broad constituency on and through the web… agree that interest rates should reflect the fundamental forces of thrift rather than the whims of central bankers.

The Austrian school’s thinking centres on the way “malinvestment” orchestrated by central banks distorts the business cycle. By keeping interest rates artificially low, central banks trick entrepreneurs into believing that society is more abstemious than it really is. The entrepreneurs then embark on ambitious, long-gestation investment projects, only to discover that the men and materials they require are otherwise engaged in the production of more immediate gratifications. Once this realisation dawns, the entrepreneurs abandon their follies, firing their workers. If wages are flexible and workers mobile, this bust need not be too bad. But misguided attempts by the government or the Fed to prevent unemployment will delay the necessary reshuffling of labour from industries too tied up in the future to those catering to the needs of the present.

…

Most economists do not share their admiration for the gold standard, which did not prevent severe booms and busts even in its heyday. And their theory of the business cycle has won few mainstream converts. … While it provides insights into booms and their ending, it fails to explain why things must end quite so badly, or how to escape when they do. Low interest rates no doubt helped to inflate America’s housing bubble. But this malinvestment cannot explain why 21.8m Americans remain unemployed or underemployed five years after the housing boom peaked.

Market Monetarism

The market monetarists point out that their 5% (NGDP) target is consistent with inflation of about 2%, provided the economy grows at about 3% a year, its rough average for the pre-crisis years. If growth slowed to 1%, inflation would have to be permanently higher, ie 4%. If output suffered a one-time drop, inflation might have to surge temporarily above 5%. But as growth returned to normal, inflation would recede.

In pursuing this target, the central bank would use many of the same tools as today: tweaking the short-term interest rate and, when that reaches zero, increasing NGDP by printing new money to buy more assets (ie, quantitative easing). And the very creation of the NGDP target would make such intervention more effective, Mr Sumner says. If people expect the central bank to return spending to a 5% growth path, their beliefs will help get it there. Firms will hire, confident that their revenues will expand; people will open their wallets, confident of keeping their jobs. Those hoarding cash will spend it or invest it, because they know that either output or prices will be higher in the future.

…

The market monetarists argue that fiscal stimulus should be redundant, because a central bank can always revive spending-if it sets its mind to it. If the Fed’s efforts have disappointed, it is not because market monetarism is wrong, but because the Fed is not sufficiently committed to the cause.

…

The market monetarists do not fret about the side effects of the activism they seek, which can misdirect capital, inflate bubbles and seduce people into over-borrowing.

So, if I may be permitted to summarize, Austrians believe that over-supply of money is what causes busts and depressions, Market Monetarists think that vigorous application of monetary stimulus can solve them, and Modern Monetary Theorists think that the amount of money available to the economy is mostly irrelevant and that aggregate demand should be managed to provide predictable levels of employment and growth.

As always the specters of Weimar and Zimbabwe are raised, but those are special cases where money was manufactured for the sole purpose of speculating in external currencies, NOT the internal economy.  In Germany’s case it was the necessity of purchasing gold (external currency) to fulfill their Versailles reparations obligations.  In Zimbabwe it was so the corrupt political elite could ex-patriate their stolen wealth.

Crossposted from The Stars Hollow Gazette

The Party’s Over

By Taylor Marsh

01 January 2012

As a recovering partisan these days and after watching Pres. Obama’s compromising conservatism, I no longer feel the urgency to support a political party who has threatened dire consequences if I don’t vote for them. Beyond foreign policy, economic, and civil rights issues mentioned above, Pres. Obama has also chosen to short-change women again and again on our freedoms, starting in the health care bill, then by executive order that empowered conservatives of both parties, and finally by making the decision on Plan B that would have come from Mitt Romney, too.

Pres. Obama has helped Democrats deliver a climate that this party has threatened since the ’70s would happen if I didn’t vote for them.

…

For over 30 years, modern feminists like myself have been hearing that we must support Democrats, because if we don’t our freedoms will be on the line yet again. After supporting Democrats since my one vote for Ronald Reagan in 1980, what has finally happened through Pres. Obama is exactly what I was told this political party would guard against. So now, as the 2012 elections approach, Barack Obama and the Democratic Party are once again relying on the theory that because Republicans are worse women like me can be suckered into falling in line one more time.

The latest political move against women of all ages came recently when Pres. Obama decided to put politics over science on Plan B, even though it was conclusively proven safe for women, regardless of age. He said he was squeamish about it as a father. What made it worse is that he hid behind Kathleen Sebelius’s skirt, also saying he had nothing to do with the decision.

This kind of cowardice in a grown man is unattractive; in a president it is unacceptable.

…

It’s now even considered an extreme position to think women’s individual freedoms are important. On Obama’s conservative Plan B decision, you get replies like “it’s smart politically” or his fans argue from the right using parental rights over individual female freedoms.

…

Is it enough that the 111th Congress passed the Lily Ledbetter Fair Pay Act, which Pres. Obama signed? Women of all political persuasions need to expect all 21st century politicians to support economic equality. We should also demand that when it’s found out we aren’t being treated equally we have recourse, which is what Ledbetter is all about. Would any other Democratic president not have signed the Ledbetter Act? To laud something so simple as financial equality for the same job done reveals women are expecting way too little from politicians that depend on our support to politically survive.

Obama’s constant chant on reforming entitlements, including changing COLA on Social Security, would hit women the hardest, because in older age we are more likely to depend on it, a subject I’ve written on before (here, here).

…

On “reforming” entitlements, Pres. Obama comes down the same place as Republicans, though he’s the moderate conservative, so we can expect entitlement “reform” to happen regardless of who is in the White House. In his last political term, why wouldn’t Mr. Obama join with Republicans? If the Senate goes GOP, he’ll even have an excuse. Meanwhile, there’s no one suggesting that the limit on income taxed for Social Security be raised for the wealthy, with Democrats caving again and again on a millionaire surtax, so the progressive argument is not only weakly offered, but also never fought strategically.

Pres. Obama proved his economic timidity in the 2010 midterms, when you didn’t hear anything close to the speech he gave in Kansas, which didn’t come until he began campaigning for his own reelection. At least he always has his own back. Back in 2010, he and his pal at the DNC, Tim Kaine, now running for senator in Virginia, refused to make any Democratic case at all on economics. Obama then followed that up by caving and extending the Bush tax cuts. Obama and the Democratic midterm shellacking is what delivered state houses in record numbers to the right, which led to an assault on unions, the middle class, as well as women’s individual freedoms. At a time when we all needed an economic champion what we got was a total Democratic collapse.

…

Pres. Obama not being able to find a reelection slogan boils down to the fact that “hope and change” has been reduced to Republicans are worse.

For 30 years I’ve unflinchingly supported and voted Democratic. Over the last thirty years I’ve held my nose to vote for some pretty uninspiring Democratic candidates. Many of my colleagues, friends, readers and people I hear from via email, now put Pres. Obama in the “hold your nose” category, too. He’s earned the spot, so, boy, do I understand how they feel. Cenk Uygur wrote recently that he’s "uncommitted."

As a feminist having listened to the Democratic Party’s warnings on what could happen if we let the right take charge, I’m no longer buying their propaganda or that the Democratic Party is worthy of support. On individual freedoms the entire Democratic structure has caved, including the first female Speaker of the House in U.S. history, Nancy Pelosi, all the way down to the so-called “Progressive Caucus.” This includes on economics, where Democrats, with Pres. Obama leading, never made the progressive Democratic economic case, whether it’s for tax increases on Social Security taxed income, higher taxes on multi-millionaires, all of which would have required a barnstorming campaign to pigeon hole recalcitrant Republicans, then shame them into submission.

…

The two political parties have been under siege for some time, because Americans just don’t trust Republicans or Democrats anymore. Barack Obama was the last chance for political parties, specifically the Democratic brand, with George W. Bush having already given rise to rebellion inside the GOP, which is seen best through Ron Paul and the Tea Party. Meanwhile, Congress long ago ceded their importance as an equal branch of government, preferring loyalty oaths to their political party, as well as the boss in the Executive branch, which has become a marketing tool for itself, an American kingship of sorts, with no difference between Republican or Democratic presidents. Once in the White House, the presidents club rules.

Crossposted from The Stars Hollow Gazette

I saw Mark Antony offer him a crown;–yet ’twas not a crown neither, ’twas one of these coronets;–and, as I told you, he put it by once: but, for all that, to my thinking, he would fain have had it. Then he offered it to him again; then he put it by again: but, to my thinking, he was very loath to lay his fingers off it. And then he offered it the third time; he put it the third time by: and still as he refused it, the rabblement hooted and clapped their chapped hands and threw up their sweaty night-caps and uttered such a deal of stinking breath because Caesar refused the crown that it had almost choked Caesar; for he swounded and fell down at it: and for mine own part, I durst not laugh, for fear of opening my lips and receiving the bad air.

Julius Ceasar, Act I, Scene 2

Start Out the New Year with Indefinite Detention

By: emptywheel

Saturday December 31, 2011 4:03 pm

Shorter Obama: we were prepared to continue indefinitely detaining people based on my Executive Order until they die off. What’s wrong with that?

…

At one level, it’s nice to see Obama affirming that he won’t indefinitely detain us in military custody. Partly, though, Obama is still signing a law that President Mitt or Newt or Santorum could-and would-use to indefinitely detain Americans. As I said, “Vote for me, or President Newt will indefinitely detain you.”

But Obama isn’t even making that campaign promise! Note the trick here. Section 1021 pertains to all indefinite detention, not just military detention. But Obama only promises not to put Americans into indefinite military detention. I guess promising that Americans wouldn’t be indefinitely detained, period, was too much of a stretch.

…

Remember, "other applicable law" includes Scott v. Harris, which authorizes the use of deadly force when you’re pretending to try to detain someone.

…

A belated defense of civilian law. And an attempt-one even more timid than I imagined-to pretend that Obama objects to the principle of indefinite detention, even including the possibility of indefinite civilian detention for American citizens.

The Worst Part of the Signing Statement: Section 1024

By: emptywheel

Saturday December 31, 2011 4:49 pm

Section 1024, remember, requires the Defense Department to actually establish the provisions for status reviews that Obama has promised but not entirely delivered.

…

Lindsey Graham (and other bill supporters, both the right and left of Lindsey) repeatedly insisted on this review provision. Lindsey promised every detainee would get real review of his status.

…

And yet, in spite of the fact that Section 1024 includes no exception for those detained at Bagram, Obama just invented such an exception.

Section 1024 was one of the few good parts of the detainee provisions in this bill, because it would have finally expanded the due process available to the thousands of detainees who are hidden away at Bagram now with no meaningful review.

But Obama just made that good part disappear.

…

This seems to be saying two things. First, DOD doesn’t have to go back and grant everyone they’ve given the inadequate review process currently in place a new review. The 3,000 detainees already in Bagram are just SOL.

In addition, this says DOD gets to decide how long new detainees will have to wait before they get a status review with an actual lawyer-and Congress is perfectly happy making them wait over six months before that time.

Obama seems to have taken that language and pushed it further still: stating that DOD will get broad discretion to decide which reviews will carry the requirement of a judge and a lawyer.

It sort of makes you wonder why the Obama Administration wants these men to be held for over six months with no meaningful review?

New Year’s Eve News Dump: Obama Signs Defense Authorization Bill

By: David Dayen, Firedog Lake

Saturday December 31, 2011 12:58 pm

The problem with this bill was always about the codifying of indefinite military detention into the law, available for any future President to pick up and use. The vagaries of the language in the statute, which allows for detentions of people “associated” with Al Qaeda, and the burden on Presidential waivers to avoid military detentions rather than an opt-in kind of process, make the language extremely unadvisable from the standpoint of the civil liberties community. However, it’s important to recognize that the Obama Administration really was already in practice allowing for the indefinite military detention of terrorist suspects. They didn’t want language that hindered their counter-terrorism processes, particularly those of the FBI. That’s what they got out of the changes, so the codification really didn’t matter to them at that point. There are painfully few political actors in Washington opposed to this complete breach of the Constitutional right to due process.

Three myths about the detention bill

By Glenn Greenwald, Salon

Friday, Dec 16, 2011 6:56 AM Eastern Standard Time

(T)here is simply no question that this bill codifies indefinite detention without trial (Myth 1). There is no question that it significantly expands the statutory definitions of the War on Terror and those who can be targeted as part of it (Myth 2). The issue of application to U.S. citizens (Myth 3) is purposely muddled – that’s why Feinstein’s amendments were rejected – and there is consequently no doubt this bill can and will be used by the U.S. Government (under this President or a future one)  to bolster its argument that it is empowered to indefinitely detain even U.S. citizens without a trial (NYT Editorial: “The legislation could also give future presidents the authority to throw American citizens into prison for life without charges or a trial”; Sen. Bernie Sanders: “This bill also contains misguided provisions that in the name of fighting terrorism essentially authorize the indefinite imprisonment of American citizens without charges”).

(New York Times link added but previously cited- ek)

The NDAA, 2011 & a Happy New Year

By: Kevin Gosztola, Firedog Lake

Saturday December 31, 2011 7:34 pm

(H)ours before 2011 came to an end, as ACLU executive director Anthony Romero stated, President Obama became “a president who will forever be known as the president who signed indefinite detention without charge or trial into law.”

“The statute is particularly dangerous because it has no temporal or geographic limitations, and can be used by this and future presidents to militarily detain people captured far from any battlefield,” adds Romero. This is all deeply troubling. But, the provision for indefinite detention is even worse. As Glenn Greenwald has pointed out, US citizens would not be exempted.

The bill expands the scope of the “war on terrorism” and also puts Congress’ stamp of approval on powers that had previously been primarily exercised by the Executive Branch without institutional support from legislators.

The NDAA is a product of the US government clinging onto the belief that it must project itself into the furthest reaches of the globe and exercise unbridled power because there is this far-reaching network of extremists, declared and undeclared, that want nothing more than to bring America to its knees. It comes from the same government that sent in special forces to kill Osama bin Laden but, with clear evidence that al Qaeda would no longer be able to thrive, declined to admit how irrational it is continue to treat terrorism as such a great threat to America. And, it is the same government that just over a week ago showed its true authoritarian spirit as it revealed Pfc. Bradley Manning, accused whistleblower to WikiLeaks, is being charged with “aiding the enemy” because the government believes he knowingly released “intelligence” through WikiLeaks to Al Qaeda.

ACLU Blog Postings-

• President Obama Signs Indefinite Detention Into Law
  
  Amanda Simon
  
  Dec 31st, 2011

• Senators Demand the Military Lock Up of American Citizens in a “Battlefield” They Define as Being Right Outside Your Window
  
  Chris Anders
  
  Nov 23rd, 2011

(h/t Jeralyn @ TalkLeft)

Obama Crowned Himself on New Year’s Eve

By: David Swanson, Firedog Lake

Saturday December 31, 2011 8:06 pm

To prevent the U.S. government from behaving like a king, the drafters of the U.S. Constitution empowered an elected legislature to write every law, to declare every war, and to remove its executive from office.  To further prevent the abuse of individuals’ rights, those authors wrote into the Constitution, even prior to the Bill of Rights, the right to habeas corpus and the right never to be punished for treason unless convicted in an open court on the testimony of at least two witnesses to an overt act of war or assistance of an enemy.

President Barack Obama waited until New Year’s Eve to take an action that I suspect he wanted his willfully deluded followers to have a good excuse not to notice.  On that day, Obama issued an unconstitutional signing statement rewriting a law as he signed it into law, a practice that candidate Obama had rightly condemned.  The law that Obama was signing was the most direct assault yet seen on the basic structure of self-governance and human rights that once made all the endless U.S. shouting of “We’re number one!” significantly less ludicrous.  The National Defense Authorization Act is not a leap from democracy to tyranny, but it is another major step on a steady and accelerating decade-long march toward a police-and-war state.

President Obama has claimed the power to imprison people without a trial since his earliest months in office. He spoke in front of the Constitution in the National Archives while gutting our founding document in 2009. President Obama has claimed the power to torture “if needed,” issued an executive order claiming the power of imprisonment without trial, exercised that power on a massive scale at Bagram, and claimed and exercised the power to assassinate U.S. citizens. Obama routinely kills people with unmanned drones.

…

My chief regret is that we have not seen the major resistance we could have, and without any doubt would have, seen to this if only Obama were a Republican.

And now at last it comes.

You will give me the Ring freely! In place of the Dark Lord you will set up a Queen. And I shall not be dark, but beautiful and terrible as the Morning and the Night! Fair as the Sea and the Sun and the Snow upon the Mountain! Dreadful as the Storm and the Lightning! Stronger than the foundations of the earth.

All shall love me and despair!

Happy New Year.

Well, what would you expect from a bank named after a tax cheating idiot plutocrat?

Internal BNY Mellon Documents Show Panic

By JEAN EAGLESHAM And MICHAEL SICONOLFI, The Wall Street Journal

DECEMBER 28, 2011

Five states, including Florida, and the Manhattan U.S. attorney have filed civil lawsuits over the past several months against BNY Mellon, seeking a total of more than $2 billion in damages. The suits allege the bank defrauded pension funds and other clients by systematically overcharging them on currency transactions.

…

At issue in the suits filed against BNY Mellon is its “standing-instruction” service. That is when pension funds and other clients allow the bank unilaterally to handle their foreign-exchange, or FX, transactions. Clients could instead negotiate their own foreign-exchange trades, but that would require staff and technology.

In the documents, Mr. Wilson described how a “transaction desk” collected currency trades for BNY Mellon’s “standing-instruction” clients and then later in the day set the price at which the bank would record those transactions. The prices often were at or near the day’s least-favorable exchange rates, state attorneys general and prosecutors allege, with the bank profiting from the difference.

And you may ask yourself ‘where have I heard about BNY Mellon recently?’  Why, they are the bank colluding with Bank of America to pay off Countrywide’s securities fraud at pennies on the dollar.

But this is a totally different scam for stealing from their customers.

This goes beyond stopped clock into “Man Bites Dog” territory.

Midlife Crisis Economics

By DAVID BROOKS, The New York Times

Published: December 26, 2011

The United States spends far more on education than any other nation, with paltry results. It spends far more on health care, again, with paltry results. It spends so much on poverty programs that if we just took that money and handed poor people checks, we would virtually eliminate poverty overnight.

So, uhh…, why don’t we do that?

DSCC Wastes $1 Million in Ads on Retiring Ben Nelson

By: David Dayen, Firedog Lake

Tuesday December 27, 2011 12:00 pm

Ben Nelson, Nebraska’s Democratic senator, will retire from the Senate next year, despite benefiting from a million dollars in early-cycle advertising funded by the Democratic Senatorial Campaign Committee.

…

I understand that the ad money was meant to entice Nelson into running for re-election by showing him the support he would receive from national Democrats. I don’t understand why you would spend that money. Nelson has spent the last couple years voting in lockstep with the Republican minority on dozens of key issues, particularly around spending and debt. His vote to keep Harry Reid in the majority obviously meant more to the leadership than any of his votes on substantive issues.

What’s more, Nelson was going to lose next year. Polling showed him consistently under 40% in Nebraska, and unlike in some other states, increased turnout from the Presidential race would not help him. Senate observers were writing this one off all ready, and any money the DSCC sunk into this race would have been as wasted as money put toward re-electing Blanche Lincoln or Rick Santorum or any other doomed incumbent.

I once again put forth the proposition that I could vaporize money much more efficiently than any of our current banksters, political consultants, or pundits.

You know where to find me.

Crossposted from The Stars Hollow Gazette

When it comes up again, as it inevitably will, you’ll want this link to remind people that it’s all about lining the pockets of Oil Companies.

Not Jobs.

Not Angry Brown Heathens squatting on our Jesus Gas.

Money for corporatists.

Provision May Halt Pipeline, but Oil Is Still Likely to Flow

By JOHN M. BRODER and DAN FROSCH, The New York Times

Published: December 23, 2011

Stephen Harper, the Canadian prime minister, said in a television interview this week that if the United States blocked the Keystone pipeline, Canada would look to China as a market for its oil.

“I am very serious about selling our oil off this continent, selling our energy products off to China,” Mr. Harper said.

…

(E)xperts in oil economics say that the oil is coming out of the ground in any event because of steadily growing global demand and the heavy investment in infrastructure already made in Alberta.

…

“In an era of limited accessibility to overseas oil resources and in contrast to conventional oil fields that produce at their peak production level for only three to six years before going into decline,” Mr. Budzik said, “long-lived productive assets such as oil sands provide a company some insurance as to its long-term financial viability.”

Crossposted from The Stars Hollow Gazette

(h/t Calculated Risk)

Details of Mortgage Servicing Settlement Between Banks and AGs Begin to Emerge

By Massimo Calabresi, Time Magazine

December 23, 2011

In return for the $5 billion in cash and the $20 billion in credits, the banks would be released from claims against them for servicing and foreclosure abuses that might be brought against them by the states and the federal government. The states also release the banks from origination claims, that is, claims they might face for all the fraud and duplicity they engaged in when they made bad loans at the height of the housing craze. The banks do not get immunity or a release of for individual claims by homeowners-just a release from past practices State- and Federal-initiated claims. They also don’t get released for securitization abuses of the kind Citibank and Goldman Sachs have been investigated for.

The Iowa AG’s office, which led the negotiations, is bracing for criticism of the deal. The limited payments are likely to be criticized, as is the release for origination abuses. The state negotiators say all the originators are already out of business and that in most cases the claims would be too old to prosecute. Arguments over what the banks would and wouldn’t get off the hook for are what led several liberal State AGs to bolt from the deal. The $25 billion version of the price tag drops to $19 billion if California stays out of the deal, which looks likely. Other states that have dropped out have been in talks with Housing and Urban Development chief Shaun Donovan about coming back into the fold: in particular, Donovan has been in talks with New York State Attorney General Eric Schneiderman in recent weeks in the hope of getting him back into the deal, but that also seems unlikely.

Crossposted from The Stars Hollow Gazette

Have I mentioned yet that banksters are stupider than you and I?

About the only way they can find to make money is to borrow it from Central Banks at low or non-existent rates of interest and lend it back to governments at significantly higher rates.

This is why Modern Monetary Theory is so appealing.  Why not just cut out the bloodsucking middlemen?

Oh, in theory they lend that money to producers of goods and services.  In fact, not so much.  Take for instance the European Central Bank’s outstandingly “successful” auction.

Where will the ECB’s billions go?

Felix Salmon, Reuters

Dec 22, 2011 09:50 EST

Norris’s bullishness is based on what you might call the Sarkozy trade – the idea that a huge amount of the ECB’s new lending will end up being invested in Eurozone government debt. He calls it “an obvious, virtually risk-free, option” for the banks who borrowed ECB funds.

…

(T)he prudent course of action, for Europe’s banks, is to use this ECB money to pay down their own debts. Doing so would address a big funding risk, and would also help derisk their balance sheets in the eyes of the world and of Basel.

The big question, then, is how long the ECB is going to be doing this kind of thing. If this operation is a signal to the market that the ECB will be the lender of last resort to European banks for at least the next couple of years, then the banks don’t need to worry so much about their own financing needs and can lock up the funds in two- or three-year government bonds as Norris and Sarkozy anticipate.

…

If I were running a European bank, I’d fill up on ECB lending now, when it’s plentiful, because you never know for sure when that limit might be reached. That’s what happened yesterday. But I’d definitely think twice before turning around and lending it all back out again to Italy or Spain. Yes, that trade is a profitable one. But the one thing that European banks need more than anything else right now is liquidity. Profits come second.

So the 2 choices on the table right now are stealing money using the ‘Carry Trade’ to extort it from governments and calling that ‘profit’ OR simply using it to write off the Trillions of crap they already have on their bloated, insolvent books.

Crossposted from The Stars Hollow Gazette

No Joke.

Last night I had TDS/TCR duty and while I found this story incredibly funny, it’s also very serious and topical.

(h/t qm1pooh)

The question on everyone’s mind, indeed the only question of any political significance whatever this election cycle is whether Stephen Colbert’s Stephen Colbert’s Colbert Super PAC™ will be allowed to sponsor this year’s South Carolina Republican Primary.

I’m sure you all remember this segment from 12/7-

where Stephen reveals his negotiation to place a simple non-binding referendum question on the 2011 South Carolina Republican Primary ballot.

In order to address the issue of Corporate Personhood, the enfranchised People of the Sovereign State of South Carolina declare that:

   ( ) Corporations are people.

   ( ) Only people are people.

As Stephen reveals today in his explosive guest editorial in The State, South Carolina’s leading newspaper for publishing explosive guest editorials by Stephen Colbert, South Carolina has 2 (count ’em) TWO State Mottos-

   Animis opibusque parati – “Prepared in mind and resources.”

   AND

   Dum spiro spero – “While I breathe, I hope.”

Oh, and that his Stephen Colbert’s Colbert Super PAC™ has made a firm cash offer of $500,000 to become the official sponsor of the South Carolina Republican Primary.

This is no joke.  Stephen has in fact written “No Joke” on the memo line of each check.

ek you say, how can someone “sponsor” a Primary?

Civium Coniunctionem

Please remember to say that like Hermione and not Ronald.

For years the South Carolina Republican Party has paid for the expenses of each county.

Colbert Sought Naming Rights For South Carolina Primary

By Reid Wilson, National Journal

December 22, 2011 11:20 AM

Until 2008, the state Republican Party had paid for the entire primary process, renting the polling places and voting machines, printing the ballots and providing the volunteers. In 2008, the state paid for both parties’ competitive primaries.

No joke: Stephen Colbert wants naming rights to S.C. GOP primary

Richard Fausset, L.A. Times

December 22, 2011 9:28 am

This month the State newspaper in Columbia, S.C., reported that Colbert offered to help cover the costs of the Jan. 21 presidential primary, the first in the South, if the state GOP would change its name to “The Colbert Nation Super PAC Presidential Primary,” just as Frito-Lay has paid to affix “Tostitos” to “Fiesta Bowl.”

He also asked the party to support placing a referendum question on the January ballot asking voters whether they believe “corporations are people,” an issue at the heart of the Citizens United case, or “only people are people,” an assertion echoing a 1984 Depeche Mode hit.

The State’s Gina Smith reported that the GOP passed on the naming rights, but agreed to put the question on the primary ballot in exchange for a pledge of a “significant contribution” from Colbert’s PAC.

Then, however, the South Carolina Supreme Court struck all referendum questions from the ballot.

That wasn’t the end of things. South Carolina’s GOP is also caught up in a complicated drama over how much of the primary it should pay for, and how much of the tab should be picked up by the government. Matt Moore, the executive director of the state GOP, has said he believes that a recent court ruling makes the state and counties “solely responsible for the primary.”

South Carolina GOP rebuts Stephen Colbert on primary naming rights

By MICHAEL A. MEMOLI, Sacremento Bee

Published: Thursday, Dec. 22, 2011 – 12:00 am

Ultimately, the South Carolina Supreme Court decided that the state’s counties had to foot the bill for the cost of the election. And Colbert is offering again to step to the plate, under the same conditions he offered before.

“The counties need the money, and Colbert Super PAC wants to give it to you; call it a Christmas Miracle,” he says.

op. cite–

The South Carolina Republican Party confirmed they had been engaged in talks with Colbert, talks sources said have continued for months. And party chairman Chad Connolley did visit Colbert in New York, a spokesman confirmed.

Colbert’s not giving up on S.C. primary

Reuters

Dec 22, 2011 21:10 IST

Colbert said talks continued with the state party over plans including still selling them the naming rights or whether the GOP would petition to get his referendum back on the ballot. When that failed, he said he reached out to the state Democrats, who agreed to seek to reinstate the referendum. At that point, the state Republicans declined Colbert’s money because they “were concerned about the sanctity of the primary election.”

“If nothing else good comes from this, we have at least narrowed down the exact value of sanctity – somewhere between $200,000 and $400,000,” Colbert wrote.

Colbert wrote that he thought the issue was dead, until learning that South Carolina’s Republican party had reneged on almost all funding for the primary, which prompted him to offer to cover the counties’ $500,000 shortfall.

Colbert guest editorial: Naming rights, state mottoes and the GOP primary + video

By Stephen Colbert – Guest Columnist, The State

Thursday, Dec. 22, 2011

I assumed that was the end of the story, but last week I saw that the South Carolina GOP has reneged on funding any part of the primary, save for the legal minimum percentage of candidate filing fees, leaving the financially strapped counties on the hook for $500,000. That’s money that counties need for emergency services, infrastructure repair, and to complete the wall to keep out North Carolinians. Once again, our first-in-the-South primary is in jeopardy.

…

Colbert Super PAC will cover the counties’ $500,000 shortfall. In return, I ask for only two things: that you support the Democrats’ petition to get my referendum back on the ballot, and that you grant me the pre-negotiated naming rights, which, I think we can all agree, you now own. To paraphrase Ronald Reagan, “You paid for that microphone!”

Do not despair

Oh, and you may resume breathing.  Stephen has left us this message of eksmas cheer (op. cite)-

Dear Colbert Super PAC Members And Incorporated MemberCo’s,

Colbert Super PAC got you a Christmas present, but it didn’t arrive in time. You want to know what it was anyway?

I was going to give you the South Carolina primary. I was so sure you’d like it, I didn’t even ask for a receipt.

I’ve explained it all in an opinion piece that’s just been published in “The State” newspaper in Columbia, South Carolina. You can take a look here.

Sorry it didn’t get here in time. Remember, it’s the thought that counts. So next year I’m going to give you thoughts.

Whatever holiday you celebrate this season:

Merry Christmas from Colbert Super PAC!

   Stephen Colbert

   President And Fourth Wise Man

   Americans For A Better Tomorrow, Tomorrow

^{Contributions to Americans for a Better Tomorrow, Tomorrow (“ABTT”) are not deductible as charitable contributions for federal income tax purposes. ABTT may accept unlimited corporate contributions, unlimited individual contributions, unlimited labor-union contributions, and unlimited PAC contributions. Contributions from foreign nationals and federal-government contractors will not be accepted. *Federal law requires ABTT’s best efforts to obtain and report the name, address, occupation, and employer of any individual who contributes more than $200 in a calendar year.}

Crossposted from The Stars Hollow Gazette

Obama and Geithner: Government, Enron-style

Matt Taibbi, Rolling Stone

POSTED: December 20, 10:06 AM ET

The notion that what Wall Street firms did was merely unethical and not illegal is not just mistaken but preposterous: most everyone who works in the financial services industry understands that fraud right now is not just pervasive but epidemic, with many of the biggest banks committing entire departments to the routine commission of fraud and perjury – every single one of the major banks, for instance, devotes significant manpower to robosigning affidavits for foreclosures and credit card judgments, acts which are openly and inarguably criminal.

Banks and hedge funds routinely withhold derogatory information about the instruments they sell, they routinely trade on insider information or ahead of their own clients’ orders, and corrupt accounting is so rampant now that industry analysts have begun to figure in estimated levels of fraud in their examinations of the public disclosures of major financial companies.

Beyond that, as Jeff points out, Obama is simply not telling the truth about the supposedly insufficient penalties available to regulators. Employing the famous "mistakes were made" use of the passive tense, Obama copped out in his December 6 speech by saying that “penalties are too weak.” As Jeff points out, what Obama should have said is that “the penalties my own regulators chose to dish out were too weak”

…

What makes Obama’s statements so dangerous is that they suggest an ongoing strategy of covering up the Wall Street crimewave. There is ample evidence out there that the Obama administration has eased up on prosecutions of Wall Street as part of a conscious strategy to prevent a collapse of confidence in our financial system, with the expected 50-state foreclosure settlement being the landmark effort in the cover-up, intended mainly to bury a generation of fraud.

…

Geithner and Obama are behaving like Lehman executives before the crash of Lehman, not disclosing the full extent of the internal problem in order to keep investors from fleeing and creditors from calling in their chits. It’s worth noting that this kind of behavior – knowingly hiding the derogatory truth from the outside world in order to prevent a run on the bank – is, itself, fraud!

…

Obama and Geithner are engaged in the same sort of activity, only they’re trying to prevent a run not on an individual bank, but the entire American financial services sector. Geithner seems really to believe that if fraud were aggressively policed, and the world made aware of the incredible extent of the illegality in our markets, that international confidence in the American financial sector would plummet and our economy would suffer – and suffer, incidentally, on Barack Obama’s watch.

…

(B)y taking a dive on fraud, and orchestrating mass cover-ups like the coming foreclosure settlement fiasco, what they’re doing instead is signaling to the world that not only are our financial markets corrupt, but our government is broken as well.

The problem with companies like Lehman and Enron is that their executives always think they can paper over illegalities by committing more crimes, when in fact all they’re usually doing is snowballing the problem so completely out of control that there’s no longer any chance of fixing things, thereby killing the only chance for survival they ever had.

This is exactly what Obama and Geithner are doing now. By continually lying about the extent of the country’s corruption problems, they’re adding fraud to fraud and raising such a great bonfire of lies that they probably won’t ever be able to fix the underlying mess.

Too little, too late.

Nevada AG Masto Sues LPS for Document Fraud

By: David Dayen, Firedog Lake

Friday December 16, 2011 12:16 pm

LPS did commit the document fraud. But they did it on behalf of mortgage servicers. So you can figure out the next step up the chain here. Masto is closing in on the big banks in a similar fashion as Martha Coakley did in Masachusetts.

LPS stands accused of a “pattern and practice of falsifying, forging and/or fraudulently

executing foreclosure related documents.” Nevada is a non-judicial foreclosure state, so these documents typically were the ones sent to county recording offices. But they were used as the basis for the foreclosure, and the documents were indeed fraudulent. So these are wrongful foreclosures, and thousands of them. The suit alleges that LPS forced employees to notarize up to 4,000 of these fraudulent documents every day. To get this done, they demanded their employees engage in forgery, to keep up the speed on the document processing, and they had their employees notarize documents without knowing the underlying material or without even witnessing the original signing, which is the purpose of notarization.

And LPS lied about this, time and again, attributing the irregularities to “clerical errors” or other back office mistakes. Instead, this was policy. They cut corners to maximize profits and emphasize speed. And that included illegal document fraud.

Masto alleges other violations in the suit, including a kickback scheme whereby Nevadans paid for “attorney’s fees” that went right back to LPS. And by the way, this is not some fly-by-night organization; LPS is the industry leader in providing document processing for foreclosures. They do over half of all the foreclosure documents in the country. And nobody should believe that this sweatshop type of atmosphere was somehow limited to Nevada.

Masto asks in the suit for $5,000 per violation (remember they signed thousands of fraudulent documents every day) and $12,000 per violation if it was directed against an elderly or disabled person. Masto also wants a special monitor to “ensure that deceptive documents and practices are corrected and improper foreclosures are remediated.”

Harris Sues Fannie and Freddie for Information in Mortgage Investigation

By: David Dayen, Firedog Lake

Wednesday December 21, 2011 6:16 am

Kamala Harris, the Attorney General of California, sued government-sponsored enterprises Fannie Mae and Freddie Mac over information on foreclosures in California. Rather than the endpoint of the investigation, this is the beginning of it; Harris wants information out of Fannie and Freddie that they have so far been unwilling to provide.

…

The lawsuits in foreclosure fraud all have their own specialized nature. Martha Coakley has taken on the big banks for stealing homes. Beau Biden sued MERS. Eric Schneiderman is focusing on securitization. Catherine Cortez Masto charged LPS with systematic document fraud. And now Harris has targeted Fannie and Freddie. This puts her in conflict with the FHFA, an independent agency that has at times acted on its own, suing 17 banks over representations and warranties claims and even sharing information between its inspector general and Schneiderman. An FHFA attorney said the volume of information Harris requested was “staggering” and questioned whether Harris had the ability to issue the subpoenas.

The importance of settling that question is obvious: if states can investigate Fannie and Freddie, even if they are under the auspices of a federal conservator, then they have access to the misdeeds of mortgage giants that currently own or guarantee over half of the market. The SEC did just bring civil fraud charges against former Fannie and Freddie CEOs and other executives on securities fraud, but Harris is looking into specific acts against borrowers in her state. If the subpoenas are upheld here, it could open the floodgates.

Meanwhile, there will be no settlement from Tom Miller and his crew by Christmas, as they miss yet another deadline. In fact, the banks are increasing their demands, essentially wanting immunity from CFPB regulations on past mortgage origination. So to those who say that we need a settlement to provide immediate aid to borrowers, well, there isn’t going to be any settlement, because the banks don’t want to give up more than a pittance and they want release from practically all liability.

Tom Miller Can’t Even Lie Well Anymore: Not Only No Deal By Christmas, As Promised, But Banks Upping Demands Even As Attorneys General Leave Table

Yves Smith, Naked Capitalism

Tuesday, December 20, 2011

We’ve commented previously on Tom Miller as the contemporary exemplar of what in the 1960s was called a credibility gap. Readers no doubt know that he is the lead negotiator on behalf of the state attorneys general in what was formerly called the 50 state attorney general [mortgage] settlement. (Notice separately how the state AGs are providing cover for several Federal banking regulators, HUD and the Department of Justice, which are also parties to this deal).

A partial recap: Miller started by promising criminal prosecutions, then reneged. He has refused to do investigations, then had the temerity to try to claim they took place). He said there would not be a big waiver on mortgage liability, when as we discussed, that was the only thing Miller & Co. could offer that would get a deal to the numbers he had unwisely committed himself to (north of $20 billion). And several state attorneys general have walked from the deal precisely because they object to the plan in motion: a big release for an impressive-sounding number, when they have an inadequate idea of how much questionable activity is being forgiven.