Tag: TMC Politics

Cross posted from The Stars Hollow Gazette

The Department of Energy, like the Treasury Department and Justice, has become a revolving door for shills for oil and fracking companies. Pres. Barack Obama’s nominee for Energy Secretary, Ernest Muniz to replace out going Secretary Steven Chu, is no different.

President Obama’s pick to run the Department of Energy has been a highly paid consultant for a private equity firm heavily invested in the oil and gas sector while running MIT’s premier energy research center, according to financial disclosure documents.

Ernest Moniz, who has directed the MIT Energy Initiative since it was established in 2006, has earned at least $75,000 since 2008 advising Riverstone Equity Holdings LP, which according to government filings has $2.5 billion invested in a variety of fossil fuel production and storage companies in the United States and abroad.

Amy Goodman at Democracy Now discussed Prof. Muniz’s nomination with Kevin Connor of the Public Accountability Initiative and ProPublica reporter Justin Elliott, who have both authored investigations into Moniz’s ties to industry.

Energy secretary nominee Ernest Moniz has deep ties to oil, gas, and nuclear industries

by John Upton, Grist

The Republican minority in the Senate loves to obstruct confirmation of President Obama’s Cabinet nominees, but it isn’t saying boo about the man who appears set to become the nation’s next energy secretary.

That might be because Ernest Moniz has friendly relations with a number of dirty energy companies – the kind of companies that generously fund so many senators’ campaigns. [..]

Moniz also directs the MIT Energy Initiative, which gets significant corporate funding from BP, Saudi Aramco, Shell, Chevron, and a number of utilities that operate nuclear plants.

At the same time, Moniz has stressed the importance of moving away from coal and has promoted and called for more funding for renewable energy and energy efficiency. That’s earned him praise from the Natural Resources Defense Council. But other environmental and watchdog groups are campaigning against his nomination because of his industry ties. [..]

Moniz is also coming under criticism for a big report on natural gas released by the MIT Energy Initiative in 2011. It called the environmental impacts of fracking “challenging but manageable,” endorsed natural-gas exports, and talked up gas as a “bridge fuel” that could help the country move away from dirtier fossil fuels and toward clean energy (a controversial notion).

The Energy and Natural Resources Committee is scheduled to hold a hearing on Moniz April 9. MIT has said that Prof. Muniz is not giving interviews, and the White House didn’t respond to requests for comment.  

Cross posted from The Stars Hollow Gazette

On Friday, a 20 inch pipeline carrying Canadian heavy crude oil ruptured in Arkansas flooding the town of Mayflower with 84,000 gallons of the world’s dirtiest oil. The pipeline was carrying Canadian Wabasca Heavy crude, a heavy bitumen crude diluted with lighter liquids to allow it to flow through pipelines. the oil is produced in the Athabasca region, where the oil sands are located.

According to Exxon, the Pegasus pipeline carries 90,000 barrels of oil per day from Pakota, Illinois, to Nederland, Texas. The proposed Keystone XL pipeline will carry 800,000 barrels per day from Canada the Gulf Coast refining hub. This is the second spill of Canadian oil in the past week. A tanker train derailed in Minnesota spilling 15,000 gallons of oil.

This has prompted critics of Keystone XL, to point out the dangers of the pipeline and urge the president to reject the permit. “This latest pipeline incident is a troubling reminder that oil companies still have not proven that they can safely transport Canadian tar sands oil across the United States without creating risks to our citizens and our environment,” said Rep. Edward J. Markey (D-MA), the ranking Democrat on the House Natural Resources Committee.

Chris Takkett at Treehugger explains what happens when a pipeline breaks:

I’m no engineer, but from what I understand, when a section of pipe ruptures, the quantity of oil that can spill is as large as the pipe is thick and long until you reach the nearest shutoff valve. It also depends on how fast the pipeline operators notice the spill, shut off the flow and close the leak.

At Crooks and Liars, Diane Sweet noted:

In 2009, Exxon modified the capacity of the Pegasus pipeline, increasing the capacity to transport Canadian tar sands oil by 50 percent, or about 30,000 barrels per day. In a 2012 report, Bloomberg News reported the pipeline daily capacity to be 96,000 barrels of oil per day.

Tar sands oil is the most toxic fossil fuel on the planet, that leaves in its wake scarred landscapes, a web of pipelines, and polluting refineries.

This morning on Democracy Now, Amy Goodman spoke with environmental activist Bill McKibben of 350.org about the spill.

The Sierra Club explains why this type of oil, diluted bitumen (dilbit), is different making it difficult to clean up:

As you know Chris Hayes will be hosting a new MSNBC show beginning April 1 at 8 PM EDT that he promises will be the same format as Up. Up’s new host Steve Carnacki takes over as the Saturday and Sunday host of the new “Up with Steve Carnacki” on April 13. This Sunday and next the best segments of the last two years will be aired.

Before his January suicide, Aaron Swartz was a leader in the fight against the Stop Online Piracy Act, or SOPA.  The groups with which Swartz worked-Demand Progress, the Electronic Frontier Foundation, and many others-continue to fight for information transparency and reforms to the laws currently used to prosecute individuals for alleged crimes committed online.

Swartz’ death shifted debate from piracy and regulation to the Computer Fraud and Abuse Act and the government’s attitude towards what it deems cybercrime, and hackers continue to be arrested and prosecuted. On March 26, the Justice Department announced that it had arrested a Wisconsin man for his alleged involvement in a Dedicated Denial of Service attack on two websites owned by Koch Industries. This arrest comes only a week after another hacker, Andrew Auernheimer, was sentenced to more than three years in prison for exposing a security hole in AT&T’s iPad user database.

Cases like these and actions like those of Operation KnightSec, the group of hackers who leaked information about the Steubenville rape investigation are sure to become more common, which means that over the issues SOPA raised will surface again.

Chris leads a debate on the controversial Stop Online Piracy Act (SOPA) with NBC Universal Executive Vice President and General council Richard Cotton; Reddit co-founder Alexis Ohanian; former Rep. Joe Sestak (D-PA); and former lobbyist Jack Abramoff.

SOPA is gone but it’s ugly twin is back. Meet the “Patriot Act of the Internet“, the Cyber Intelligence Sharing and Protection Act (CISPA) which the House is expected to vote on in mid-April:

The House is expected to vote on a set of cybersecurity-focused bills in mid-April. One of those bills would include the Cyber Intelligence Sharing and Protection Act (CISPA) by Mike Rogers (R-Mich.) and Rep. Dutch Ruppersberger (D-Md.), which is aimed at removing the legal hurdles that prevent companies from sharing information about cyber threats with the government.

The bill boasts support from a broad swath of industry sectors – including the telecommunications, banking and tech industries – but has stoked criticism from privacy and civil liberties groups.

Privacy advocates charge that CISPA lacks sufficient privacy protections for people’s personal data and would increase the pool of Americans’ electronic communications that flow to the intelligence community, including the secretive National Security Agency.

The bill passed the House last spring but went untouched in the Senate, largely because it was working on its own comprehensive measure.

CISPA’s Problem Isn’t Bad PR, It’s Bad Privacy

by  Robyn Greene, Washington Legislative Office of the ACLU

Representative Mike Rogers (R-MI) made the argument last week that the privacy community’s significant concerns with CISPA, the privacy-busting cybersecurity bill, don’t stem from actual problems with the bill language, but rather from a misunderstanding of the bill itself. Speaking on behalf of himself and his co-sponsor, Representative Dutch Ruppersberger (D-MD), he told The Hill, “We feel that the bill clearly deals with privacy, that the checks and balances are there, but [we] know there’s still a perception and we’re still trying to deal with that.”  

The ACLU, along with a coalition of 41 privacy and civil liberties groups, are very concerned about the real-world impact that the authorities proposed in CISPA could have on Americans’ privacy and civil liberties. President Obama, along with top administration officials including Department of Homeland Security Secretary Janet Napolitano, have echoed many of our concerns. CISPA, in its current form (pdf):    

• Creates an exception to all privacy laws to allow companies to share our personal information, including internet records and the content of emails, with the government and other companies, for cybersecurity purposes;
• Permits our private information to be shared with any government agency, like the NSA or the Department of Defense ‘s Cyber Command;
• Fails to require the protection of Americans’ personally identifiable information (PII), despite repeated statements by the private sector that it doesn’t want or need to share PII;
• Once shared with the government, allows our information to be used for non-cybersecurity “national security” purposes – an overbroad “catch-all” phrase that can mean almost anything;
• Immunizes companies from criminal or civil liability, even after an egregious breach of privacy;
• Fails to implement adequate transparency and oversight mechanisms.

In a recent article in Wired, Chris Finan, former White House director for cybersecurity, urged Congress to fix CISPA by amending the bill so as to require companies to strip their customers’ PII before sharing it with the government; restrict information sharing to civilian agencies; restrict the further dissemination and use of information to cybersecurity purposes; place reasonable limits on companies’ liability protections; and establish a non-profit to act as an “independent ‘watchdog'”  over any information sharing program to enhance oversight and transparency.

It will would be great if Congress amended CISPA to address all of our privacy concerns, but it’s hard to hold out hope for sufficient changes so long as its chief sponsor thinks that it doesn’t have a privacy problem so much as a PR problem. Everyone, from the privacy community to the president, agrees that CISPA is bad on privacy – the problem isn’t our perception.

For Aaron and for us.

Cross posted from The Stars Hollow Gazette

Former constitutional rights lawyer Glenn Greenwald contends that the United States has a two-tiered judicial system, one for the “haves” and one for the “have-nots.” Mr. Greenwald presents his argument by tracing the evolution of judicial inequality, from President Richard Nixon’s pardon for the Watergate scandal to what the author deems were economic and political crimes committed during the George W. Bush administration. The author posits that both political parties and the media are culpable for creating an unequal judicial system. Glenn Greenwald presented his thoughts in conversation with political activist Noam Chomsky. They also responded to questions from members of the audience. This was a special event of the Harvard Book Store, held at the Brattle Theatre in Cambridge, Massachusetts.

I’m including the article below by Glenn because the tactics that are employed by the powers that be and their adherents need to be exposed. Those of us who dissent from the CW are told to “sit down and shut up” because the president’s “got this.” Now, after Barack Obama has been reelected his true colors are really shining through with his appointments of torture advocates to even higher office and the revolving door of Wall St. and banking shills to protect the super wealthy. Much of what Glenn says about Noam Chomsky has also been applied to Glenn, himself, and many of us who expose the true agenda of this government. These are the tactics of the right wing used to silence the dissent during the Bush regime now being directed at those of us who have not been fooled by promise of change that will never come unless we expose it.

How Noam Chomsky is discussed

by Glenn Greenwald, The Guardian

The more one dissents from political orthodoxies, the more the attacks focus on personality, style and character

One very common tactic for enforcing political orthodoxies is to malign the character, “style” and even mental health of those who challenge them. The most extreme version of this was an old Soviet favorite: to declare political dissidents mentally ill and put them in hospitals. In the US, those who take even the tiniest steps outside of political convention are instantly decreed “crazy”, as happened to the 2002 anti-war version of Howard Dean and the current iteration of Ron Paul (in most cases, what is actually “crazy” are the political orthodoxies this tactic seeks to shield from challenge).

This method is applied with particular aggression to those who engage in any meaningful dissent against the society’s most powerful factions and their institutions. Nixon White House officials sought to steal the files from Daniel Ellsberg’s psychoanalyst’s office precisely because they knew they could best discredit his disclosures with irrelevant attacks on his psyche. Identically, the New York Times and partisan Obama supporters have led the way in depicting both Bradley Manning and Julian Assange as mentally unstable outcasts with serious personality deficiencies. The lesson is clear: only someone plagued by mental afflictions would take such extreme steps to subvert the power of the US government.

A subtler version of this technique is to attack the so-called “style” of the critic as a means of impugning, really avoiding, the substance of the critique. Although Paul Krugman is comfortably within mainstream political thought as a loyal Democrat and a New York Times columnist, his relentless attack against the austerity mindset is threatening to many. As a result, he is barraged with endless, substance-free complaints about his “tone”: he is too abrasive, he does not treat opponents with respect, he demonizes those who disagree with him, etc. The complaints are usually devoid of specifics to prevent meaningful refutation; one typical example: “[Krugman] often cloaks his claims in professional authority, overstates them, omits arguments that undermine his case, and is a bit of a bully.” All of that enables the substance of the critique to be avoided in lieu of alleged personality flaws.

Nobody has been subjected to these vapid discrediting techniques more than Noam Chomsky. [..]

Like any person with a significant political platform, Chomsky is fair game for all sorts of criticisms. Like anyone else, he should be subjected to intense critical and adversarial scrutiny. Even admirers should listen to his (and everyone else’s) pronouncements with a critical ear. Like anyone who makes prolific political arguments over the course of many years, he’s made mistakes.

But what is at play here is this destructive dynamic that the more one dissents from political orthodoxies, the more personalized, style-focused and substance-free the attacks become. That’s because once someone becomes sufficiently critical of establishment pieties, the goal is not merely to dispute their claims but to silence them. That’s accomplished by demonizing the person on personality and style grounds to the point where huge numbers of people decide that nothing they say should even be considered, let alone accepted. It’s a sorry and anti-intellectual tactic, to be sure, but a brutally effective one.

Cross posted from The Stars Hollow Gazette

Economist Richard Wolff discusses how austerity is making economic problems worse and the cure for these economic woes.

As Washington lawmakers pushes new austerity measures, economist Richard Wolff calls for a radical restructuring of the U.S. economic and financial systems. We talk about the $85 billion budget cuts as part of the sequester, banks too big to fail, Congress’ failure to learn the lessons of the 2008 economic collapse, and his new book, “Democracy at Work: A Cure for Capitalism.” Wolff also gives Fox News host Bill O’Reilly a lesson in economics 101.

   AMY GOODMAN: Professor Wolff, before we end, I want to turn back to the crisis in Cyprus and relate it to what’s happening here. Bill O’Reilly of Fox News warned his audience last week that Cyprus and other European countries are facing economic hardships because they’re so-called “nanny states.”

       BILL O’REILLY: Greece, Italy, Spain, Portugal, Ireland, now Cyprus, all broke. And other European nations are close. Why? Because they’re nanny states, and there are not enough workers to support all the entitlements these progressive paradises are handing out.

   AMY GOODMAN: That’s Bill O’Reilly of Fox News. Richard?

   RICHARD WOLFF: You know, he gets away with saying things which no undergraduate in the United States with a responsible economic professor could ever get away with. If you want to refer to things as nanny states, then the place you go in Europe is not the southern tier-Portugal, Spain and Italy; the place you go are Germany and Scandinavia, because they provide more social services to their people than anybody else. And guess what: Not only are they not in trouble economically, they are the winners of the current situation. The unemployment rate in Germany is now below 5 percent. Ours is pushing between 7 and 8 percent. So, please, get your facts right, Mr. O’Reilly.

   The nanny state, you call it, the program of countries like Germany and Scandinavia, who tax their people heavily, by all means, but who provide them with social services that would be the envy of the United States-a national health program that takes care of you, whether you’re employed or not, and gives you proper healthcare. In France, for example, the law says when you go to work, you get five weeks’ paid vacation. That’s not an option; that’s the law. You get support when you’re a new parent for your child care and so forth. They provide services. And they are successful in Germany and Scandinavia, much more than we are in the United States and much more than those countries in the south.

   So they’re not broken, the south, because they’re nanny states, since the nanny states, par excellence, are doing better than everyone. The actual truth of Mr. O’Reilly is the opposite of what he says. The more you do nanny state, the better off you are during a crisis and to minimize the cost of the crisis. That’s what the European economic situation actually teaches. He’s just making it up as he goes along to conform to an ideological position that is harder and harder for folks like him to sustain, so he has to reach further and further into fantasy.

H/t Heather at Crooks and Liars

Capitalism efficient? We can do so much better

by Richard Wolff, The Guardian

For all its vaunted efficiency, capitalism has foisted wasteful inequality and environmental ruin on us. There is an alternative

What’s efficiency got to do with capitalism? The short answer is little or nothing. Economic and social collapses in Detroit, Cleveland and many other US cities did not happen because production was inefficient there. Efficiency problems did not cause the longer-term economic declines troubling the US and western Europe.

Capitalist corporations decided to relocate production: first, away from such cities, and now, away from those regions. It has done so to serve the priorities of their major shareholders and boards of directors. Higher profits, business growth, and market share drive those decisions. As I say, efficiency has little or nothing to do with it.

Many goods and services once made in the US and western Europe for those markets are now produced elsewhere and transported back to them. That wastes resources spent on the costly relocation and consequent return transportation. The pollution (of air, sea and soil) associated with vast transportation networks – and the eventual cleaning up of that pollution – only enlarges that waste.

This Sunday on MSNBC’s “Melissa Harris-Perry,”  Gay and Lesbian Alliance Against Defamation announced that in an effort to be more inclusive it would be now known as “GLAAD.” It was also announce that GLAAD would direct more focus to transgender issues.

“This is a reflection of the work we’re doing today, and a reflection of the work the gay and lesbian community needs to be doing,” GLAAD spokesman Rich Ferraro told MSNBC.com in an earlier interview. “Our name was hindering that in many instances.”

Ferraro also pointed out that shifting societal attitudes created an opportunity to do more. “There have been huge increases in support for gay and lesbians, and for marriage equality. We’ve noticed that trend and wondered how we could use the tactics that the gay and lesbian community had used to get to today’s tipping point [for the trans community].”

“I was happy to hear GLAAD has committed to prioritize trans issues,” said Laverne Cox, an actress and transgender advocate. “They really need to be.”

People who identify as transgender were nearly 30% more likely to be a victim of physical violence than people who adhere to gender norms, according to a 2011 study by the National Coalition of Anti-Violence Programs, and discrimination based upon gender expression is widespread.

Ms. Harris-Perry discusses transgender issues with guests Wilson Cruz, national spokesperson for GLAAD; New York City Council candidate for the upper west side of Manhattan, Mel Wymore; Janet Mock, journalist and transgender activist; and Kenji Yoshino, constitutional law professor at NYU.

Cross posted from The Stars Hollow Gazette

In the aftermath of 9/11 and the run up to the invasion of Iraq, the world was glued to television news, especially cable. Here in the US the news is dominated by three networks. CBS, ABC, and NBC and three major cable channels, CNN, Fox News and MSNBC. Most of the them spewed the Bush administration spin that Sadaam Hussein had weapons of mass destruction, was building a nuclear weapon and had ties to Osama bin Laden, Al Qaeda and 9/11, all lies and they knew it. This war was about the control of the oil reserves in Iraq, it always from the moment that the neocons got their hooks into the White House with Ronald Reagan’s election. It was under Reagan that the free press started to die with the end of the Fairness Doctrine and the loosening of regulation that allowed the likes of Rupert Murdoch to gobble up the airways, Fox news, and print media. It culminated in the 90’s with the corporate acquisition of NBC by General Electric and CBS by Viacom and CNN by Time Warner.

During the lead up to Iraq there was one voice on the airways that stood out against the hype, Phil Donahue, whose liberal voice focused on issues that divide liberals and conservatives in the United States, such as abortion, consumer protection, civil rights and war issues. His feud with another MSNBC host, Chris Matthews over the Iraq War led to the cancellation of Donahue’s popular show. Matthew’s involvement in the outing of CIA operative Valerie Plame is never mentioned.

I am not sure exactly when the death of television news took place. The descent was gradual-a slide into the tawdry, the trivial and the inane, into the charade on cable news channels such as Fox and MSNBC in which hosts hold up corporate political puppets to laud or ridicule, and treat celebrity foibles as legitimate news. But if I had to pick a date when commercial television decided amassing corporate money and providing entertainment were its central mission, when it consciously chose to become a carnival act, it would probably be Feb. 25, 2003, when MSNBC took Phil Donahue off the air because of his opposition to the calls for war in Iraq.

Donahue and Bill Moyers, the last honest men on national television, were the only two major TV news personalities who presented the viewpoints of those of us who challenged the rush to war in Iraq. General Electric and Microsoft-MSNBC’s founders and defense contractors that went on to make tremendous profits from the war-were not about to tolerate a dissenting voice. Donahue was fired, and at PBS Moyers was subjected to tremendous pressure. An internal MSNBC memo leaked to the press stated that Donahue was hurting the image of the network. He would be a “difficult public face for NBC in a time of war,” the memo read. Donahue never returned to the airwaves.

In 2003, the legendary television host Phil Donahue was fired from his prime-time MSNBC talk show during the run-up to the U.S. invasion of Iraq. The problem was not Donahue’s ratings, but rather his views: An internal MSNBC memo warned Donahue was a “difficult public face for NBC in a time of war,” providing “a home for the liberal antiwar agenda at the same time that our competitors are waving the flag at every opportunity.” Donahue joins us to look back on his firing 10 years later. “They were terrified of the antiwar voice,” Donahue says.

Transcript here

Democracy Now! host Amy Goodman confronted Matthews on Donahue’s firing outside NBC headquarters in New York City on the 10th anniversary of the invasion.

Buzzfeed unearthed the videos of the vitriolic exchanges between Matthew and Donahue revealing how much they despised each other. Matthews was the driving force that got Donahue fired and MSNBC was not eager to promote the anti-war point of view. Thank the internet for You Tube, here are the videos of the episode from Donahue’s show with guest Matthews:

Cross posted from The Stars Hollow Gazette

As the dust of enthusiasm settles over this morning’s Cyprus deal with the European Union that closed the country’s second-largest bank and created a set of capital controls to prevent a run on the remaining banks, the financial world is taking a closer look and they aren’t happy. The agreement adheres to the law protecting insured accounts less than 100,000 euros. Supposedly, this deal prevented the immediate collapse of the Cyprus economy and its exit from the euro and, possibly, the European Union. Several economic analysts discuss the ramifications on the global banking and economy.

The Prodigal Greek has the simplest explanation of what capital controls entail (h/t Yves Smith):

Here is what a cash economy looks like:      

• Restrictions in daily withdrawals
• Ban on premature termination of time savings deposits
• Compulsory renewal of all time savings deposits upon maturity
• Conversion of current accounts to time deposits
• Ban or restrictions on non cash transactions
• Restrictions on use of debit, credit or prepaid debit cards
• Ban or restriction on cashing in checks
• Restrictions on domestic interbank transfers or transfers within the same bank
• Restrictions on the interactions/transactions of the public with credit institutions
• Restrictions on movements of capital, payments, transfers
• Any other measure which the Finance Minister or the Govern or of Cyprus Central Bank see necessary for reasons of public order and safety

In other words, Cyprus euros can only be spent in Cyprus and cannot be taken out of Cyprus to any other country; checks, debit and credit cards are useless. It is a strictly cash and carry local economy since Cypriots will not be able to make internet purchases. It will restrict travel into and out of the island, as well. The agreement has isolated the tiny island from the rest of the EU. Economics and financial analyst, Frances Coppola explains the ramifications of these restrictions:

From Tuesday, Cyprus becomes a black hole in the Eurozone: any money that goes into it stays there, and no money can leave……From a safe distance, it will appear frozen in time, a small cash-based economy, isolated from the rest of the EU. While inside, invisible to all except those who actually go there – or live there – its social fabric is torn apart as its economy collapses. Note the final clause in the capital control bill:

   Any other measure which the Finance Minister or the Governor of Cyprus Central Bank see necessary for reasons of public order and safety

So as people’s livelihoods are destroyed and their standard of living crashes, other measures may be introduced to ensure that they can’t take matters into their own hands.

From Yves Smith at naked capitalism is her summation of the attempt to contain Cyprus:

First, confiscating bank deposits is now on the table in any future crisis. That’s toothpaste that’s not going back in the tube. Commerzbank chief economist Jörg Krämer has already suggested (Google translates) “a one-time property tax levy” for Italy and “a tax rate of 15 percent on financial assets.” And adding fuel to the fire, the Leader of the UK Independence Party has urged expats in the periphery countries, in particular the 750,000 British in Spain to “Get your money out of there while you’ve still got a chance.”

Second, capital controls in Cyprus mean that there are now two Euros in effect: The Euro that you can use only in Cyprus, and the Euro you can use elsewhere in the so-called “monetary union.” So from the perspective of people in Cyprus, the results are in some ways worst that a breakup: rather than having depreciated dough, you have dough that has been impounded, particularly in terms of using it outside Cyprus. [..]

Third, these concerns may be amplified by how rapidly and visibly the Cypriot economy craters. The “rapidly” is due to the fact, as discussed in greater detail in the post from Cyprus.com below, that the Cyprus economy will suffer a one-two punch: the loss of a big chunk of wealth, plus the disappearance of much of the financial services sector, which was 45% of GDP.

The capital controls have isolated Cyprus from the rest of the EU without actually expelling the country.

The deal may have stayed the immediate crisis but it hasn’t stopped the eventual collapse of the Cyprus economy or its future exit from the euro. Not only that, it is the shot across the bow for other economically troubled EU countries of things to come.  

Cross posted from The Stars Hollow Gazette

Gaius Publius of Americablog succinctly defined one of those vague terms that we heard so often since the banking crisis began in 2007, Credit Default Swaps (CDS) :

Credit default swaps are pure casino bets. They were originally designed as a form of insurance against bond and other credit defaults (“I’ll pay you a monthly fee and you pay me my losses if these bonds default.”)

It’s a simple concept, but CDSs soon evolved. Turns out you don’t have to actually hold the bonds to insure them. This means that one guy can sit at a table with a bunch of bonds (or bundles of mortgages), while another guy can insure them. Meanwhile, at 50 other tables, 50 more guys can buy the same “insurance” on the same bonds from anyone who will sell it to them. Keep in mind, only the first guy actually holds the bonds. The other guys just know they exist.

That’s 50 side-bets on one set of bonds. Placing side-bets on someone else’s property is like betting on a ball game you’re just watching. Like I said, pure casino money.

Do you see the problem? One guy’s bonds default and suddenly 51 guys in that room, everyone who sold “insurance,” they’re all wiped out. Why? Because the dirty secret of derivatives bets is that the people offering the “insurance” rarely have the money. They’re betting that they can collect “insurance” fees forever and the defaults will never come. That’s what happened with mortgage-backed bets in 2007, and that’s what’s happening today.

In 2010, the Democratic held Congress passed the Dodd-Frank Wall St. Reform and Consumer Protection Act to rein in the worst practices of the banks and Wall St. Needless to say, it is overly complicated, inadequate and has yet to be fully implemented.

That has not stopped the now Republican held House, along with some Democrats, to end some of the regulations. Less that week after Sen. Carl Levin released a scathing report on the $6.7 billion loss (pdf) of JP Morgan Chase in the infamous “London Whale” deal, the House Agriculture Committee, go figure that logic, approved seven bills that would gut regulation of the derivatives market and once again, if the banks lose, the tax payer makes good the losses. Sound familiar? Does TARP ring a bell? The housing market crash?

In his Salon article David Dayen asks if JP Morgan is a farmer?

It turns out that the Agriculture Committees have held jurisdiction over derivatives since the mid-19th century, when farmers used derivatives to achieve stability over future prices. Traders still use derivatives for corn and other commodities, but the world of derivatives has grown far more sophisticated over the decades. Nevertheless, congressional committees zealously guard their jurisdictions, and so a bunch of lawmakers from rural states get to determine a major aspect of financial policy. [..]

To see how this all works, just look at the hearing on these derivatives bills, held last week. When Ag Committee chairman Frank Lucas wasn’t openly parroting industry scare tactics about energy price spikes from regulation, he called on a list of witnesses that included four industry trade group representatives and one public advocate from Americans for Financial Reform, Wallace Turbeville. (He did great (pdf).) Or for an even clearer indication, read these PowerPoint slides created for Ag Committee staff by the Coalition for Derivatives End-Users, an industry-backed lobbyist organization. This extremely one-sided perspective on the issue simply becomes the default position for committee members and their staffs, an example of the “cognitive capture” in D.C. that sidelines alternative voices. And it all happens under the radar.

One of the Democratic House members who is sponsoring these bills, is Rep. Jim Himes, a former Goldman Sachs vice president who represents the Connecticut bedroom communities of Wall Street traders. It’s not hard to imagine why he defended his support of these bills when asked by the press. The Democratic members of the committee who voted with the 25 Republicans to send these bills to the House floor are: Pete Gallego (TX-23); Ann Kuster (NH-2); Sean Patrick Maloney (NY-18); Mike McIntyre (NC-07); David Scott (GA-13); and Juan Vargas (CA-51).

These are the bills that were passed by the committee:

H.R. 634 (pdf), the Business Risk Mitigation and Price Stabilization Act of 2013

·       H.R. 677 (pdf), the Inter-Affiliate Swap Clarification Act

·       H.R. 742 (pdf), the Swap Data Repository and Clearinghouse Indemnification Correction Act of 2013

·       H.R. 992 (pdf), the Swaps Regulatory Improvement Act

·       H.R. 1003 (pdf), To improve consideration by the Commodity Futures Trading Commission of the costs and benefits of its regulations and orders.

·       H.R. 1038 (pdf), the Public Power Risk Management Act of 2013

·       H.R. 1256 (pdf), the Swap Jurisdiction Certainty Act

Even if these bills all get passed, they will never see the light of day in the Senate.

Sheila Bair, the longtime Republican who served as chair of the Federal Deposit Insurance Corporation (FDIC) during the fiscal meltdown five years ago, joins Bill to talk about American banks’ continuing risky and manipulative practices, their seeming immunity from prosecution, and growing anger from Congress and the public.

“I think the system’s a little bit safer, but nothing like the dramatic reforms that we really need to see to tame these large banks, and to give us a stable financial system that supports the real economy, not just trading profits of large financial institutions,” Bair tells Bill.

This week on Up with Chris Hayes we learned about the extreme impact climate change on our coastal cities. New research show storm surges like the one from Hurricane Katrina could become ten times more frequent. Host Chris Hayes and his guests Rashid Khalidi, professor of modern Arab studies at Columbia University; Noura Erakat, adjunct professor at Georgetown University; Matt Duss, policy analyst at American Progress; and Ann Lewis, former advisor to Secretary of State Hillary Clinton discuss what they have learned this week.

More hurricane surges in the future

by Aslak Grinsted, Nils Bohr Institute

By examining the frequency of extreme storm surges in the past, previous research has shown that there was an increasing tendency for storm hurricane surges when the climate was warmer. But how much worse will it get as temperatures rise in the future? How many extreme storm surges like that from Hurricane Katrina, which hit the U.S. coast in 2005, will there be as a result of global warming? New research from the Niels Bohr Institute show that there will be a tenfold increase in frequency if the climate becomes two degrees Celcius warmer. The results are published in the scientific journal, Proceedings of the National Academy of Science, PNAS.

NFL passes new helmet rule, eliminates ‘Tuck Rule’

by Jim Corbett, USA Today

The most controversial rules change passed at these now-concluded owners meetings will ban players from delivering forcible blows with the crown of the helmet. It was the biggest step aimed at making the game safer, particularly in regards to concussion prevention in these meetings that approved three new rules related to player safety. [..]

Wednesday’s other changes included passing a rule to fix the Thanksgiving Day challenge faux pas when Detroit Lions coach Jim Schwartz tried to challenge a Justin Forsett 81-yard touchdown run and his challenge negated the official’s ability to review the scoring play. Now a challenge of a play like that will result in a 15-yard penalty with the original play getting reviewed.

The other notable change? The infamous “Tuck Rule” is no more. The New England Patriots abstained from voting, as did Washington Redskins general manager Bruce Allen, who was an Oakland Raiders executive in January 2002 when Patriots quarterback Tom Brady’s seeming fumble when his throwing arm came forward was ruled an incompletion. The Patriots went on to win that playoff game and eventually the Super Bowl.

No More Drones for CIA

by Daniel Klaidman, The Daily Beast

At a time when controversy over the Obama administration’s drone program seems to be cresting, the CIA is close to taking a major step toward getting out of the targeted killing business. Three senior U.S. officials tell The Daily Beast that the White House is poised to sign off on a plan to shift the CIA’s lethal targeting program to the Defense Department.

The move could potentially toughen the criteria for drone strikes, strengthen the program’s accountability, and increase transparency. Currently, the government maintains parallel drone programs, one housed in the CIA and the other run by the Department of Defense. The proposed plan would unify the command and control structure of targeted killings and create a uniform set of rules and procedures. The CIA would maintain a role, but the military would have operational control over targeting. Lethal missions would take place under Title 10 of the U.S. Code, which governs military operations, rather than Title 50, which sets out the legal authorities for intelligence activities and covert operations. “This is a big deal,” says one senior administration official who has been briefed on the plan. “It would be a pretty strong statement.”

Cross posted from The Stars Hollow Gazette

Earlier this week it was leaked to the press by those “anonymous White House sources” that the CIA’s drone program would be gradually transferred to the Pentagon supposedly making oversight by Congress more transparent and according to Daniel Klaidman, who first reported the shift at the Daily Beast it would also toughen the “criteria for drone” strikes and “strengthen the program’s accountability:”

Currently, the government maintains parallel drone programs, one housed in the CIA and the other run by the Department of Defense. The proposed plan would unify the command and control structure of targeted killings and create a uniform set of rules and procedures. The CIA would maintain a role, but the military would have operational control over targeting. Lethal missions would take place under Title 10 of the U.S. Code, which governs military operations, rather than Title 50, which sets out the legal authorities for intelligence activities and covert operations. [..]

Officials anticipate a phased-in transition in which the CIA’s drone operations would be gradually shifted over to the military, a process that could take as little as a year. Others say it might take longer but would occur during President Obama’s second term. [..]

uring that time, CIA and DOD operators would begin to work more closely together to ensure a smooth hand-off. The CIA would remain involved in lethal targeting, at least on the intelligence side, but would not actually control the unmanned aerial vehicles. Officials told The Daily Beast that a potential downside of the agency’s relinquishing control of the program was the loss of a decade of expertise that the CIA has developed since it has been prosecuting its war in Pakistan and beyond. At least for a period of transition, CIA operators would likely work alongside their military counterparts to target suspected terrorists.

Spencer Ackerman at The Wire, doesn’t think that this is much of a change. The CIA will still be involved telling military personnel what and who to target. Nor does Ackerman think that the program will be more transparent:

The congressional reporting requirements for so-called Title 50 programs (stuff CIA does, to be reductive) are more specific than those for Title 10 (stuff the military does, to be reductive). But the armed services committees tend to have unquestioned and broader oversight functions than the intelligence committees enjoy, not to mention better relationships with the committees: Witness the recent anger in the Senate intelligence committee that the CIA lied to it about its torture programs. The military is more likely than the CIA to openly testify about future drone operations, allow knowledgeable congressional staff into closed-door operational briefings and allow members of Congress to take tours of drone airbases.

As, Klaidman pointed out this could lead to even less transparency since there is nothing in the law that requires the military to account for its lethal operations while the CIA is obligated to report its activities.

Sen. Diane Feinstein (D-CA), the chair of the Senate Intelligence Committee which has oversight of the CIA, expressed her concerns

Feinstein told reporters her “mind, certainly, is not made up.” But she quickly added she has reservations about turning over to the military the CIA’s armed drone fleet and the missions they conduct.

   During the last few years, she said, “We’ve watched the intelligence aspect of the drone program: how they function. The quality of the intelligence. Watching the agency exercise patience and discretion,” Feinstein said.

   “The military [armed drone] program has not done that nearly as well,” she said. “That causes me concern. This is a discipline that is learned, that is carried out without infractions…. It’s not a hasty decision that’s made. And I would really have to be convinced that the military would carry it out that way.”

Sen. John McCain (R-AZ) preferred the program be transferred to Defense bringing it under the House and Senate Armed Services Committees:

“I believe the majority of the responsibility for this should rest with the military,” McCain told reporters Tuesday. [..]

“The majority of it can be conducted by the Department of Defense,” McCain said. “It’s not the job of the Central Intelligence Agency. … It’s the military’s job.”

Transferring the program to the Pentagon — and under the auspices of the House and Senate Armed Services committees — would create more “openness” and “oversight” and public hearings about the program, he said.

In reality, the Obama administration would still be running a secretive and questionably legal program.

Rachel Maddow, host of MSNBC’s “The Rachel Maddow Show,” gives a a short history of the CIA and talks with former congressman and now MSNBC contributor, Patrick Murphy, who served on the House Armed Services Committee, about oversight of the drone program.

Cross posted from The Stars Hollow Gazette

Up Date 3.23.2013 0100 AM EDT: The Cyprus Parliament has passed part of a bailout plan but has delayed voting on a tax for unsecured deposits:

One of the provisions Parliament approved Friday would impose new restrictions on withdrawing cash or moving money out of the country when the banks reopen. These new capital controls would prohibit or restrict check-cashing and bar “premature” account closings or any other transaction the authorities deemed unwarranted.

Lawmakers also voted to restructure the nation’s largest and most troubled bank, Laiki Bank, by splitting off its troubled assets into a so-called bad bank. Accounts with no problem would be transferred to the nation’s largest financial institution, the Bank of Cyprus. Lawmakers also voted to require that any bank on the verge of bankruptcy be split apart in the same way. [..]

Still to be voted on is the measure to impose a tax of 22 to 25 percent on uninsured deposits at the Bank of Cyprus. That proposal was made after lawmakers rejected a plan earlier in the week to tax insured deposits to help raise the amount needed to secure the bailout. The Parliament appears to be trying to make up the difference in part by shifting the burden to large account holders.

Cyprus Finance Minister Michael Sarris returned empty handed from Russia after the Russians ruled  out helping until after a deal is struck with European Union. Yesterday, German Chancellor Angela Merkel rejected the proposal to nationalize pension funds and insisting that depositors, especially large savings accounts, be taxed to raise the needed €5.8 billion of the €10 billion bailout deal. Part of the reason for the refusal to accept nationalization of pensions as part of the deal is that Germany did just that to finance both world wars. Germans also face an election in six months and have been reluctant to give up on the bank levy since it protects them from accusations of using European taxpayers money to bail out big Russian investors in Cyprus.

In a nut shell, Cyprus got into this mess because the country’s banks were using Russian deposits to buy Greek bonds to help forestall the collapse of the Greek banks. The Greek bonds went bad, and the Cypriot banks lost a bundle. No good deed goes unpunished.

So where is Cyprus now? At this time, the Parliament is going over a series of bills that would consolidate its ailing banks and the creation of a fund that pools state and church assets, i.e. real estate and pensions, against which they would issue bonds. The deputy leader of he ruling Democratic Rally party, Averof Neophytou, cleared the way for the reconsideration of tax levy on savings accounts which had been flatly reject ted on Tuesday.

The other monkey wrench in all of this is Turkey’s challenge of the any move by Cyprus to speed up offshore natural gas exploration as a way of attracting desperately needed investment to save the economy.  

“This resource belongs to two communities and the future of this resource can’t be subject to the will of southern Cyprus alone. (We) may act against such initiatives if necessary,” one of the Turkish officials told Reuters.

“The exclusive use of this resource … by Southern Cyprus is out of question … and unacceptable.”

Cyprus has been divided between the Greek Cypriot south and Turkish north since a Greek coup d’etat followed by a Turkish army invasion in 1974. Efforts to reunite the island have repeatedly failed and Turkey is the only nation to recognise the self-declared Turkish Republic of Northern Cyprus.

At the Washington Post‘s “Wonkblog”, Dylan Matthews predicted two possible scenarios if Cyprus accepts the EU bailout terms:

What’s the best case scenario from a bailout?

The best we can hope for is that Cyprus takes the hit, gets some money, recapitalizes its banks, and recovers from there. It had a fairly conservative banking sector before the crisis, with deposits far outstripping loans, and its government was actually running surpluses, so it doesn’t have to engage in the kinds of fundamental structural reforms that appear necessary in Greece. So if the Greek losses were just a temporary shock, the rescue money should get the country back on its feet.

And the worst-case scenario?

The worst-case scenario under a plan with a haircut is that the plan triggers a run on banks not just in Cyprus (that appears to already be happening) but in other vulnerable countries like Spain and Italy as customers worry that the E.U. will try to impose similar conditions there. That would exacerbate an already bad situation as it would increase bank shortfalls; fewer deposits, after all, mean a worse deposit-to-liability ratio. Those kinds of runs could lead to a continent-wide crisis of the kind observers have been fearing since the euro zone started its slow-motion collapse back in 2009.

However, the failure of the initial haircut plan renders this outcome less likely. It does render a Cypriot exit from the monetary union quite a bit more likely. That would trigger bank runs in Cyprus as people try to get their money out before the Cypriot pound falls dramatically in value relative to the Euro, and could trigger further runs in Spain and Italy. That’s bad for the same reason haircut-inspired bank runs are bad.

Truthfully, it’s all bad and there is no reason for this since as Ezra Klein points out that the solution is to just give Cyprus the money:

Seriously. €15.8 billion ($20.5 billion) is not a lot of money in the scheme of European finance. It is trivially easy for the European Central Bank, or the IMF, or the Federal Reserve, or really any central bank of any consequence to just hand it over. That the troika is already committing €10 billion ($13 billion) is evidence enough. All the troubles in the negotiations are linked to the demand that €5.8 billion ($7.5 billion) come from Cyprus’ own coffers. Dropping that requirement could solve everything.

The Germans will never allow that until they are in the same boat. This is also why the euro will eventually fail.