Sunday, April 25, 2010
In Goldman's 2009 annual report to investors, Blankfein and Cohn said that Goldman “did not generate enormous net revenues or profits by betting against residental related products."
However, in an email just released by the Senate Subcommittee Investigating the Financial Crisis, Blankfein, , wrote in November 2007: “Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts.”
In other emails released, Goldman's CFO David Viniar responded to an email that Goldman had made $50 million in one day by taking short positions : “Tells you what might be happening to people who don’t have the big short..."
In another released email, a Goldman employee wrote in response to news of a decline in some mortgage backed securities that Goldman was short, “Sounds like we will make some serious money.”
“Yes we are well positioned,” another responded.
Thus, it's clear, Goldman did make money shorting mortgage backed securities.The size of net profits is not clear, but the size of net profits becomes critical.
It is a situation where size matters, thanks to Blankfein's and Levin's claim in the annual report that net-profits were not enormous.
The "big swinging dicks" of Wall Street better hope that the size of the net profit they made from short selling mortgage backed securities was tiny. If the net profit is anywhere close to as big as they think their dicks are, they are in serious trouble for reporting false information in their annual report.
Who doesn't want more balance in their life?
But the translation is a bit ruder, something on the order of: "Suck it up. The party's over."
To keep the global economy on track, people in the United States and the rest of the developed world need to work longer before retiring, pay higher taxes and expect less from government. And the cheap imports lining the shelves of mega-chains such as Wal-Mart and Target? They need to be more expensive.
That's the practical meaning of a series of policy papers and statements issued in recent days by IMF officials, who have a long history of stabilizing economies and solving global financial problems, as they plot a course to keep the world economy growing and reduce the risk of another "great recession."
That message has been delivered subtly, woven into documents with titles such as "Resolving the Crisis Legacy and Meeting New Challenges to Financial Stability," and justified by concepts such as "raising retirement age in line with life expectancy," as IMF economic counselor Olivier Blanchard put it this week.
But fully deciphered, it means a pretty serious reworking of expectations in the developed world: changes in labor rules, product prices, currency values and even the social contract between governments and an aging citizenry.
"It is not that living standards will lower, but they will not increase as fast as they have been," said Domenico Lombardi, a former IMF executive director. The ideas being discussed by world leaders "are coded words," he said. "They don't like words like 'imposing higher taxes' and 'cutting spending.' "
The IMF has long had a reputation as a bearer of bad news -- it dispatches well-educated and diplomatically deft teams to tell economically troubled countries how many people they have to fire and which programs they have to cut to get financial assistance.
But the IMF now finds itself in the odd position of having that conversation not with a single ailing sovereign but with the developed countries at the core of the world system, including the United States.
Its prescription is centered on two concepts.
"Rebalancing" is an idea that most everyone endorses -- including the technicians at the fund and President Obama and the leaders of the G-20 group of economically powerful nations. In broad strokes, it means curbing what has been a massive transfer of capital from nations that consume more than they produce, such as the United States, to nations that produce more than they consume, such as China.
The imbalance has been key to China's modernization: The country buys U.S. government bonds by the tens of billions to keep the dollar stronger than it would be and to keep its domestic currency -- and its exports -- cheaper.
Looked at one way, the flow of U.S. debt to the People's Bank of China has acted like a giant, collective credit card, underwriting consumers across the United States and driving the business models of major retailers such as Wal-Mart.
The message from the IMF is that the card is about maxed out and that the imbalance in trade flows needs to be corrected.
How to do it? One way is for China -- or Asian exporters, more generally -- to let their currencies rise on world markets.
The other way, which IMF economist Blanchard raised this week, would be to devalue the dollar, the euro and other developed-world currencies.
"The advanced economies as a whole may need to depreciate their currencies so as to increase their net exports," Blanchard said.
The less well-advertised side of the equation: If the dollar is worth less, then imports, regardless of their source, will cost more.
U.S. exports will be proportionately cheaper -- a good thing for American businesses trying to become more competitive in overseas markets -- but everything from iPods to jeans to the latest Barbie doll would jump in price.
The ideas offered by the IMF "could certainly reorder the balance of the international economy, but not in a way that benefits the average person in the U.S.," said J. Craig Shearman, vice president of government affairs for the National Retail Federation.
He continued: "If a few factories have an increase in exports, that is good for them, but it leaves the vast majority of people paying more for consumer goods. Talking about consuming less and saving more is a nice, ivory tower approach. But it is not real world economics. People have to put clothes on their children's backs and food on the table."
Wal-Mart declined to comment.
"Fiscal consolidation" is another idea promoted by IMF leaders. Again, the aim seems unobjectionable: The United States and other developed-world governments ran record deficits during the crisis, both to pay for stimulus programs and because tax and other receipts cratered.
Across the developed world, the IMF says, government debt will rise from about 80 percent of economic output before the crisis to roughly 115 percent of output in 2014.
That's considered a dangerous trajectory, and IMF officials say that by next year, governments need to announce "credible" plans to cut their annual deficits, turn them into surpluses and start paying off what is owed.
The level of the correction needed is large, perhaps 10 percent of gross domestic product. In the United States, that would amount to roughly $1.4 trillion annually, to be cut from government programs or raised through new taxes.
Better-than-expected growth would help, or increases in productivity, or even surprises in the form of new technologies. But what's on the horizon is, more likely, a difficult reckoning -- one that Greece is facing and that other developed nations know is in the offing, French Finance Minister Christine Lagarde said in an interview Thursday.
"We're all in the same boat," Lagarde said as she looked ahead to a tough debate in France over changes in pension rules that will make not just government workers but also many in the private sector add years before their expected retirements.
The IMF is studying issues such as which taxes should be raised and which programs should be cut to make "consolidation" as painless as possible. But it views a longer working life as an important tool -- one that would save large amounts of money in the future without cutting spending and decreasing economic activity today.
In the United States, a new fiscal commission is beginning to study how to bring U.S. government debt into line.
"You will see many headlines complaining and moaning and stirring the pot," Lagarde said, as issues such as pension reform are debated. But ultimately, she said, "there is no way out."
CARACAS (Dow Jones)--Oil-rich Venezuela will send resource-hungry China 100,000 barrels a day of crude oil for the next 10 years to pay for a $20 billion loan agreed to over the weekend, Venezuela Oil Minister Rafael Ramirez said Thursday.
Ramirez, who is also the president of state-run Petroleos de Venezuela, or PDVSA, didn't indicate any specific price for the oil that may have been agreed to by the two nations. The average price for Venezuela's basket of crude oil and refined products began this week at about $75 a barrel.
The oil minister's comments ...
The US Library of Congress, currently the largest library in the world, was established on this day after president John Adams signed a bill to appropriate $5,000US for the purpose of procuring “such books as may be necessary for the use of Congress”. (Wiki)
WASHINGTON (Dow Jones)--U.S. regulators closed seven Illinois banks on Friday, including a Chicago bank closely tied to the Democratic candidate running for President Barack Obama's former Senate seat.
Friday's failures bring to 57 the number of U.S. banks that have failed already this year, after 140 failures in 2009. The FDIC said the total cost to its deposit insurance fund from Friday's failures topped $970 million.
State banking regulators shuttered Chicago's Broadway Bank, owned by the family of Alexi Giannoulias, who is locked in a fierce midterm election battle with U.S. Rep. Mark Kirk (R., ...
Hyun Song Shin, special economic advisor to the President of South Korea, gave a briefing today at the National Press Club on the G-20 activities. I attended.
During the Q & A, I asked Shin if the plans for a global bank tax had caused concern by anyone at the G-20 meeting that the tax was moving in the direction of creating a one world government. His answer scared the hell out of me.
He said that, no it was not moving in that direction because "There is no legal basis for the meetings."
In other words, there are no restrictions on the G-20 participants. They are not part of any agency that has a specific mandate. They are not part of any global agreement. It's a wild west show, without any adult supervision.
Expect future moves in global domination to take this ad hoc approach. It results in fewer roadblocks and opposition because there is no, as Shin put it, legal basis for such meetings. It's just "members coming together where there is mutual benefit."
Once they have most of a particular plan down and in place, they will form some organization to patrol what they have created for a given sector, but the serious planning is done at these wild west events.
As for the specifics of the global bank tax, as I pointed out on Wednesday, when discussing the tax:
One key point to note is that the tax will be based on "riskiness" where government paper will most assuredly be ranked as least risky, thus driving banks funds in the direction of propping up the government debt sector at the expense of the productive private sector.The tax can thus be used to drive funds to the government financial securities markets and to other politically favored investment sectors. If a sector isn't in good favor with the global elite, they will tax financial instruments coming out of that sector at a higher rate. Banks will make a lot fewer loans in sectors where instruments are heavily taxed.
Manipulative macro madness will be upon us with this move. The coming control of the financial sector at a global level will be something never before seen on the planet.The global elite are winning.
E-mails released by a Senate committee investigating the financial crisis show top executives at Goldman Sachs Inc. boasting about money the firm was making as the housing market collapsed in 2007.
The documents suggest that Goldman benefited at least for a time from bets that subprime mortgage-backed securities would lose value. The e-mails appear to contradict previous statements by the investment bank that it lost money on such securities.
"Of course we didn't dodge the mortgage mess," CEO Lloyd Blankfein wrote in an e-mail dated Nov. 18, 2007, according to the documents released Saturday morning. "We lost money, then made more than we lost because of shorts."
Short positions, in contrast to long positions, are bets that a financial security will lose value. Goldman is also the target of a civil fraud lawsuit brought by the Securities and Exchange Commission, which alleges that the firm misled investors about how a subprime mortgage-backed security was created. Goldman has denied the charges.
The e-mails were released by Sen. Carl Levin's office, who is presiding over an investigation into the financial crisis. Blankfein, along with other Goldman personnel, are scheduled to testify during a Senate hearing into the crisis on Tuesday.
In another e-mail, Goldman Chief Financial Officer David Viniar says that in one day the firm made more than $50 million on bets that the housing market would collapse, according to a statement from Levin's office.
"Tells you what might be happening to people who don't have the big short," Viniar writes in the message dated July 25, 2007. Viniar is also scheduled to testify on Tuesday.
The connection with Obama will be overblown by the neocon media complex, but it’s still interesting to point it out. Chicago Breaking Business reports:
Broadway Bank, the family-run lender that helped launch U.S. Senate candidate Alexi Giannoulias’ political career, was one of seven Chicago-area institutions seized by the U.S. government Friday and sold to healthier companies.
The failure of Broadway, which was unable to raise the $85 million it needed to remain independent, will cost the Federal Deposit Insurance Corp. $394.3 million.
Giannoulias worked for his father at Chicago-based Broadway before entering politics, and the bank’s struggles in recent years with real estate loans gone bad have weighed on Giannoulias’ Democratic bid for Barack Obama’s old Senate
Vice President Joe Biden on Friday offered a bullish prediction that the US economy could soon create 250,000 to half a million jobs per month, as the recovery picks up speed.
Biden's comments came as economic indicators, bumper earnings figures by some top firms, and a profitable run on Wall
The vice president said he had got "into trouble" with White
"All in all we're going to be creating somewhere between 100,000 and 200,000 jobs next month, I predict," Biden said.
"Even some in the White House said, 'Hey, don't get ahead of yourself.' Well I'm here to tell you some time in the next couple of months we're going to be creating between 250,000 jobs a month and 500,000 jobs a month."
"Because I'm telling you something, folks. We caught a lot of bad breaks on the way down. We're going to catch a few good breaks because of good planning on the way up."
President Barack Obama said earlier this month that the US economy was "beginning to turn the corner" after government data showed 162,000 jobs were created in March, the biggest increase in three years.
But the job growth was not sufficient to budge the unemployment rate from 9.7 percent.
In February, the economy lost 14,000 posts according to revised figures.
Sumner takes me to task for singing the praises of our American ancestors, who chose a federal government without such statist programs as income taxation, Social Security, Medicare, Medicaid, welfare, public (i.e., government) schooling, food stamps, corporate bailouts, foreign aid, a central bank, paper money, drug laws, and many, many more.
Sumner thinks that that type of society was absolutely horrible and cites the terrible things that were taking place in the United States in 1880, the year I pointed to in my article "Up from Serfdom." Sumner's response contains all the standard stuff that has long been taught in America's government-approved schools, where Sumner just happens to work as a substitute teacher.
You know, like the stuff that suggests that our American ancestors hated their wives and children, as reflected in their sending them into dangerous factories to work long hours. You know, like the stuff that suggests that liberals love the poor, needy, and disadvantaged while advocates of the free market just love the rich, greedy, and selfish people in life. You know, like the stuff that suggests that without the coercive apparatus of the welfare state, poor people and old people would just be dying in the streets.
As I have long pointed out, the problem with liberals is their dismally poor understanding of economics, and Sumner's article is just the most recent example of this phenomenon.
Permit me to explain why.
In their purported concern for the poor, liberals never ask the important question: What is it that causes wealth and prosperity to come into existence? The only question they ask themselves is, "What is the cause of poverty"?
But the latter is a ridiculous question because poverty has always been the natural state of mankind. Throughout history, most people have been poor.
Thus, the real question is: What are the causes of wealth? What is it that enables societies to break free of the chains of poverty? Why are some societies wealthier than others?
You would think that those would be important questions for a liberal, especially since liberals have long purported to be concerned about the poor.
Alas, those questions are unimportant to liberals. Sumner, not surprisingly, doesn't raise the questions either.
Instead, he points out all the bad things that were taking place in, say 1880, and then concludes that all those statist programs that our American ancestors rejected, and which are so beloved to Sumner, should be embraced. In other words, he's suggesting that the absence of the statist programs is the cause of the bad living conditions in American society that he laments. But his logic and his conclusions are faulty and fallacious.
No one denies that economic conditions were bad for many people in 1880. No question about it. No dispute there.
But in focusing on those bad conditions, Sumner makes a common mistake. He is comparing those conditions to conditions in which we live today or at least to some sort of ideal economic utopia. In doing that, he misses the important point, which is this: What were conditions for ordinary people prior to the Industrial Revolution? Answer: As Hobbes put it, life was nasty, brutish, and short -- that is, much, much worse than it was in 1880 America.
As bad as things were in 1880 America, it was a golden era compared to the pre-industrial age. This point was made as long ago as 1954 in a book entitled Capitalism and the Historians, which was edited by libertarian Nobel Prize-winning economist Friedrich Hayek. As Austrian economist Murray Rothbard stated, "Hayek contributed to and edited a series of essays that showed conclusively that the Industrial Revolution in England, spurred by a roughly free-market economy, enormously improved rather than crippled the standard of living of the average consumer and worker in England. In this way, Hayek led the way in shattering one of the most widespread socialist myths about the Industrial Revolution."
So, does that help clarify why I would refer to 1880 as a golden era? Not because of the bad things that were still existing (duh!) but rather because for the first time in history, massive numbers of poor people actually had a decent chance to survive and even prosper. In fact, in the 1880s there are countless stories of poor people actually becoming wealthy people! Imagine that!
And why was this so? That's the critical question, the one that liberals never ask. They just assume that wealth is a given, that there is this big economic pie, and that the state should confiscate the pie and redistribute it in the interests of making everyone have an equal share of the pie. What liberals fail to recognize, however, is that in doing so, they begin a process that ends up condemning people to a life of massive poverty, starvation, famines, and short life spans that characterized the pre-industrial age.
To explain why I consider 1880 to be a golden era, especially for the poor, let's consider a modern-day example, one that a good liberal like John Sumner would consider to be a model society: the socialist paradise of North Korea. In that country, everyone is equal in terms of economic condition. The state owns everything, and everyone works for the state. There are no profits, speculators, or entrepreneurs. Greed and selfishness have been stamped out of society. Total government ownership and total government control. Everyone works for the benefit of the collective.
In other words, a liberal dream!
Oh, did I mention that there is also horrific poverty, famine, and starvation in North Korea? Let's assume, just for the sake of argumentation, that each year some 10 percent of the North Korean population is dying from malnutrition or illness.
Now, suppose we asked Sumner to give us his recommendation for ending poverty in North Korea. What would he say? He would say: "Adopt a welfare state and a controlled economy! Create bureaucratic departments, modeled on the IRS and U.S. welfare agencies, whose job it is to confiscate wealth from the rich and give it to the poor!"
Do you see the problem though? Sumner would be doing what liberals always do: they assume that there is a pie of wealth to confiscate and redistribute. That's their solution to ending poverty. But he would be missing the obvious point: They already have total socialism in North Korea, which is precisely why there is no pie for Sumner to confiscate and redistribute. Everyone has nothing.
So, obviously the standard liberal statist solution for ending poverty isn't going to work in our North Korea hypothetical. Instead, we have come up with another solution.
Let's try a free-market-oriented solution, similar to the one that our American ancestors adopted and embraced. (I say "oriented" because freedom isn't really freedom when government is permitting people to exercise it.) Let's assume that the North Korea authorities place 60 percent of the land and buildings in North Korea under private ownership. They also enact a law that permits 60 percent of the North Korean populace to engage in any economic enterprise they want, without any permission or interference from the state. The people in that sector will be free to engage in any mutually beneficial exchange with anyone in the world. There will be no income tax, and people will be free to accumulate unlimited amounts of wealth. There will be no economic regulations whatsoever, including price controls, minimum-wage laws, and anti-speculation laws. There will be no Social Security, Medicare, Medicaid, or any other government welfare plan. No central bank and no paper money; the market will determine the media of exchange. No one will be coerced into helping another person but will be free to do so if he wishes. There will be no restrictions on emigration or immigration.
After 10 years, Sumner and I make a visit to North Korea. We discover that there is now an enormous difference between the liberated sector and the government-owned sector. In the liberated sector, there are no more famines, no more starvation. People's real standard of living is soaring.
That's not to say though that things are easy in the liberated sector. There is still much poverty given that it was only 10 years ago that people had absolutely nothing and were on the verge of starvation. People are having to work long hours in difficult working conditions, and that includes spouses and children. But everyone knows that those conditions are a blessing, compared to what is still happening in the government-controlled sector, where everyone is suffering much more horrific poverty and where 10 percent of the populace continues to die, year after year.
Now, I would call that a golden era, one in which 60 percent of the population was not only being saved but actually prospering.
What would Sumner say in response? He would say, "Why, that's just the most ridiculous thing I've ever heard! That's no golden era because the people in the government-owned sector are still suffering and dying. Hornberger must think that all that misery and death is a good thing. And look at how much poverty there still is in the liberated section."
Even worse is what Sumner would propose. Furious over the fact that people in the free-market sector now have more wealth than people in the government-owned sector, he would propose statist programs that would restore government control and ownership over the free-market sector. As a good liberal, what would matter to him is that everyone should be made equal, even if everyone is made equally poor.
Would his criticism leveled at me be valid? Would I really be praising the government-owned sector when I referred to this period as a golden one? Of course not! What I would be praising is that libertarian economic means -- i.e., the free market -- have been used to bring 60 percent of the population out of horrific poverty and given them a chance to survive and even to prosper, especially as the generations progress.
What would be my solution to the bad things still remaining? That's obvious -- I would expand private-property, free-market principles to the 40 percent sector, enabling everyone in North Korean society to experience the benefits of the unhampered market economy.
And this is precisely what was going on in the United States throughout the 1800s, notwithstanding the fact that there were a large number of people to whom free-market principles were not being applied, such as the slaves. But for the sector that was liberated, it was the most phenomenal era in history, insofar as living standards were concerned. People were actually going from rags to riches into one, two, or three generations.
The proof of the pudding was the thousands of penniless immigrants who were fleeing the lands of government control and regulation to come to the land of little or no income taxation, regulation, or welfare. They just wanted a chance to make it, all on their own.
Did I mention that 19th-century America was not only the most prosperous nation in history but also the most charitable nation in history? In a land with no income tax and no welfare state, it was voluntary contributions that built the churches, opera houses, museums, and so much more.
So, what was the obvious solution to those Americans who were not permitted to experience the benefits of economic liberty? Expand it to them! What was the solution to the restrictions on liberty still being enacted in the 19th century? Repeal them!
In fact, the best thing Americans could ever do today is enact a constitutional amendment for economic liberty similar to the one our American ancestors enacted for religious liberty: "No law shall be passed respecting the regulation of commerce or abridging the free exercise thereof."
The worst thing that could have ever happened was to return to the old, bankrupt idea of government ownership and control. But that's precisely where liberals took us, with their socialistic welfare state. Gripped by envy and covetousness and unable to control themselves as they saw the enormous wealth coming into existence because of the free market, liberals (or "progressives" as some of them like to call themselves) brought into existence in the 20th century a massive confiscatory and redistributive socialist system, one that has been taking our country down the road to serfdom, impoverishment, and loss of liberty, the road that humanity has traveled throughout the ages.
Liberals have long justified their socialist and interventionist schemes under the pretense of loving the poor, needy, and disadvantaged. And their favorite justification whenever their programs go awry is, "But we have good intentions." But good intentions are irrelevant. All that matters is reality, especially in terms of the immorality and destructiveness that have accompanied socialism and interventionism.
Sumner piously points out that 1880, the year that I used as an example of economic liberty, was characterized by the Chinese Exclusion Act. Of course, that couldn't be true given that the Act wasn't enacted until 1882. (Oh well, what's a couple of years?) But his real point in bringing it up was to imply that the period wasn't really golden because there was an immigration restriction on Chinese immigrants.
But let's use Sumner's example to show the rank hypocrisy with which liberals have long suffered. He complains about a law that excluded Chinese from freely immigrating to America, and rightfully so. Yet, look at what 20th-century liberals have done for decades: They've used immigration controls to exclude not only Chinese but also Mexicans, Nicaraguans, Africans, Haitians, and, well, the poor of just about every country in the world.
Isn't it the liberals -- the lovers of the poor -- under liberal icon Barack Obama who are continuing the building of that fortified fence along our southern border, to keep the poor from coming here and trying to sustain their life through labor? Isn't it the liberals who are conducting those raids on businesses all across the land, rounding up poor people who just want to work and improve the lot of their families, deporting them to their home countries where they can experience a life of hardship and poverty?
In fact, wasn't it under the regime of liberal icon Bill Clinton that U.S. forces were attacking defenseless poor people, including women and children, who had escaped socialist and communist tyranny in Cuba and were trying to make it to the United States? Didn't liberals forcibly repatriate those refugees to Cuba? Oh well, maybe Sumner would argue that is was for their own good, since in Cuba there is free education, free health care, and free everything else in that paternalistic society.
Please, Sumner, remind me again how much you liberals love the poor, because I'm tempted to say that an era in which there is only one group of people who are being excluded is golden compared to the massive numbers of poor people that you liberals have been excluding from our country for decades under the guise of immigration controls.
In fact, would you, as a good, poor-person-loving liberal, explain something to me that I've always had trouble understanding. As you know, the premier icon for you people is Franklin D. Roosevelt. You liberals say that his enactment of Social Security, the crown jewel of the socialistic welfare state, showed how much he loved the poor, needy, and disadvantaged.
Well, if that's the case, would you please explain to me FDR's attitude toward German Jews during the 1930s? Would you please explain to me why he refused to permit them to come to America when Hitler was willing to let them go? Weren't they poor? And while you're at it, can you please explain to me why he refused to let those poor Jews traveling on the SS St. Louis to disembark at Miami Harbor in the infamous "voyage of the damned"?
You see, I'm having a difficult time understanding why a man who purports to love the poor would do that to poor Jews. And I'm also having a difficult time understanding why you liberals would extol a man who did that sort of thing to poor Jews.
Please provide me with your best explanation on this, because I'm tempted to conclude that Roosevelt's Social Security plan had nothing to do with any purported love of the poor but instead everything to do with the love of power and with making as many people dependent on the federal government as possible.
Oh, and while you are at it, would you explain to me something about FDR's protégé, the liberal icon Lyndon Johnson, who brought Medicare and Medicaid into existence because of his purported love for the poor, needy, and disadvantaged? LBJ, as I hope you know, killed some million Vietnamese people, most of whom were poor, in an illegal war that was based on nothing but lies. He also sent some 58,000 of my generation to their deaths in Vietnam, many of whom were poor because that's who they were drafting to fight in that war.
Would you be so kind as to reconcile that one for me, because I'm getting real tempted to conclude that LBJ's Medicare and Medicaid plans were nothing more than a political power grab designed to put more Americans under the yoke of federal power and dependency?
While we're on the subject, I also have a question about liberal icon Bill Clinton, another purported lover of the poor, needy, and disadvantaged. During the entire 8 years he was in office, he killed hundred of thousands of Iraqi children with the brutal sanctions that he enforced against that country. His U.S. Ambassador to the UN, Madeleine Albright, another liberal icon, said that those deaths were worth the attempt to oust Saddam Hussein from power.
That's always been difficult for me to swallow. How can the deaths of poor, innocent children ever be worth a political goal such as regime change, especially given that Saddam had once been the partner of the U.S. government?
Of course, I'd be remiss if I failed to mention the vicious attack by liberal icon Janet Reno (and Bill Clinton) on the poor people inside the Branch Davidian compound at Waco, including innocent children, given that today is the 17th anniversary of that horrific slaughter.
Oh, one final thing, Sumner. Please don't lump conservatives with libertarians, especially since there ain't a dime's worth of difference between liberals and conservatives. Both of you are statist to the core, and both of you are lovers of big government, big spending, big debt, and big inflation. And both of you are taking our nation down the road to serfdom, bankruptcy, and moral debauchery.
The only solution to the woes that you statists, both liberals and conservatives, have foisted onto our nation lies with libertarianism. Our American ancestors discovered the truth, and lots of Americans are now re-discovering it, which is precisely why you statists are so terrified.
Jacob Hornberger is founder and president of The Future of Freedom Foundation.
Goldman Sachs has been drawn into the Galleon Group insider trading case amid allegations that Raj Rajaratnam was tipped off about Berkshire Hathaway's September 2008 capital injection by one of the embattled investment bank's own board members.
Rajat Gupta, who has sat on Goldman's boards since 2006, is said to have told Mr Rajaratnam about Berkshire's $5bn (£3.25bn) investment before it was made public.
Mr Rajaratnam faces a litany of charges for his alleged leadership of an insider trading ring that made bets on companies including Goldman and IBM using non-public information.
The allegations, made in the Wall Street Journal, create yet more on heat on Goldman, as it continues to hotly contest civil fraud charges from the Securities and Exchange Commission, and as the political mood against it continues to worsen.
Gordon Brown, the Prime Minister, said any bank found guilty of wrongdoing should be forced to pay out millions of dollars in compensation.
"If what happened at Goldman Sachs and in any other bank is proven to be wrong, then hundreds of millions of dollars in compensation should be paid to British banks, and because we are the biggest shareholder in many of them, to the British taxpayer," said Mr Brown.
Royal Bank of Scotland, in which the British taxpayer owns an 83pc stake, lost $840m in connection with the Goldman derivatives package which is the subject of the SEC charges.
Goldman declined to comment on the allegations surrounding Mr Gupta, the former head of consultancy firm McKinsey & Co., who is due to step down from the bank's board next month.
The bank was first linked to the Galleon probe last week, when court papers regarding the case disclosed that Mr Rajaratnam obtained insider information on the bank.
The Journal reported that Mr Gupta – who is not mentioned in any publicly available court documents – had been interviewed by Goldman's in-house lawyers and denied any wrongdoing. However the newspaper went on to say that Mr Gupta had been told by government prosecutors that conversations between him and Mr Rajaratnam had been captured through a wire-tap on the hedge fund manager's phone.
The revelations came as one of Berkshire Hathaway's board members said that Warren Buffett – who spearheaded the $5bn in Goldman alongside a $5bn institutional placing in September 2008 – was not phased by the SEC's fraud allegations. Thomas Murphy, a Berkshire director, told Bloomberg that the 'Sage of Omaha' is "comfortable" with his stake in the investment bank, and said "he's not concerned with the investment at all".
Meanwhile, it emerged that the Senate committee that will next week question Fabrice Tourre – the Goldman trader also subject to the SEC's fraud charges – requested his presence on April 5, 11 days before the SEC's charges were made public.
U.S. District Judge Adalberto Jordan imposed the longest sentence to date for a UBS client against 65-year-old Jack Barouh, even after giving him credit for cooperating in the ongoing investigation and belatedly attempting to come clean with the Internal Revenue Service.
Barouh pleaded guilty in February, the latest in a string of convictions won by the Justice Department after UBS last year admitted orchestrating tax evasion among rich U.S. clients and paid a $780 million fine. UBS also separately agreed to turn over more than 4,450 names of wealthy Americans suspected of dodging taxes through secret UBS accounts.Jordan noted that Barouh has sought psychiatric help for the Holocaust compulsion, which his attorney described as the desire to "hide and hoard" assets to guard against a potential repeat of the Nazi attempt to exterminate Jews during World War II. After Barouh's family fled Austria, they settled in Bogota, Colombia, where Barouh was born.
"He and his family might lose everything, exactly as his parents risked everything in the 1940s," Jordan said in explaining the fear.
"I have lived under the weight of the Holocaust," Barouh told the judge. "Those fears are finally starting to subside."
Assistant U.S. Attorney Jeffrey Neiman said criminal defendants invariably come up with some justification for their illegal actions — and that Barouh's Holocaust trauma is no excuse.
"It does not give this defendant a license to break the law," Neiman said. "Tax fraud is tax fraud."
Barouh, of Golden Beach, founded the luxury brand Michele Watches, which he sold to Fossil Inc. for $50 million in 2004. But court documents show his effort to evade U.S. taxes started much earlier, in 1976, when he began skimming money from his company and stashing it in accounts in Hong Kong, the British Virgin Islands, Switzerland and Panama.
Eventually, Barouh turned to UBS, where he had as much as $10 million in accounts not declared with the IRS as required. Neiman estimated the total tax loss to the U.S. at over $736,000 from 2002 to 2007, the period covered by the U.S. investigation. Barouh pleaded guilty to a charge of filing a false 2007 tax return.
Although he faced up to 2½ years in prison, prosecutors sought a reduction because he has provided extensive information about two Swiss money managers and one Swiss attorney. Neither was identified in court.
"The information he's provided, we are using," Neiman said. "It is ongoing."
The 10-month sentence was half what prosecutors originally sought, but more than the one-year home detention Barouh requested. He also has paid more than $5 million in penalties for not reporting his overseas accounts and still owes back taxes, interest and penalties to the IRS, said his attorney, Robert Panoff. Barouh is scheduled to report to prison June 25.
Those of you worrying on Wall Street, please do not be distracted by the president’s apparent assault. He’s still got your back. With the push beginning Monday to push through a “cap-and-trade” energy tax and rationing scheme—without committee hearings and possibly, according to Harry Reid, even using “reconciliation” again—your big “ask” appears to be in better shape than ever for being crammed down on the rest of us.
Consider this excerpt from “Power Grab: How Obama’s Green Policies Will Steal Your Freedom and Bankrupt America,” released this week by Regnery (citations are omitted).
I write this from the perspective of having served very briefly and with an unhappy ending as Director of Federal Government Relations for a little company called Enron. They told me my top priority was a global warming treaty and cap-and-trade scheme (for reasons detailed in Power Grab), and they had worked out a great scheme with Goldman Sachs to make a bundle off of the ensuing scarcity. I asked questions they didn’t like and that was that. So here’s this:
Wall Street and finance players [are] calling for a “new playground,” which is how one European carbon trader famously described the EU Emissions Trading Scheme to a reporter—the cap-and-trade program which Europe now admits did not cut emissions, but did raise the cost of everything while providing some windfalls for well-connected industries. Carbon traders, of course, are parasitic, feeding off this creature of the state, not creating new wealth, but siphoning it off by the imposition of an economic inefficiency.
The Wall Street Journal cited an estimate by the broker Raymond James & Associates and claimed that, “Assuming federal cap-and-trade legislation passes the Senate, exchanges could reap $200 million or more in annual revenue from the market.” That is siphoned-off productive economic activity, in the name of changing the climate (which it will not do), while advancing the belief that the government can create economic growth by adding inefficiencies.
The recent economic rubble was brought down on us by the Wall Street derivatives-types gaming different, while at the same time highly similar, federal programs designed to advance an ideology. As already noted, even the pressure group Friends of the Earth warned that the cap-and-trade payoff to Obama’s pals was scripting a replay of the recent market meltdown, calling it “Subprime Carbon.”
As the traders climbed out from under the mess in March 2009, several grabbed reporters to tout cap-and-trade as their next big thing. Illuminating comments included that there are “bucks to be made,” “I can see nirvana coming,” and this will be the traders’ new, “huge playground.”
It is surely a coincidence that the banks most heavily leveraged in the carbon scheming led the way down in late 2008. Iconoclastic UK journalist Brendan O’Neill called on us to also remember that the green-industrial complex’s business interests played a role in bringing about the recession. The company whose collapse precipitated the credit crunch, Lehman Brothers, enthusiastically embraced the idea of carbon trading, which is held up by all members of the green-industrial complex as the way forward. In its 2007 report, The Business of Climate Change: Challenges and Opportunities, Lehman expressed hope that it might become a “prime brokerage for (carbon) emissions permits”, meaning it aspired to make money not only from speculating in mortgages but also from trading in thin air. Lehman was inspired by European carbon-trading schemes.
Lehman was the bank for Al Gore’s schemes, led by the green activist and Gore partner Theodore Roosevelt IV.
As Australia’s indefatigable Joanne Nova detailed in “Climate Money,” “carbon trading” worldwide reached $126 billion in 2008. Banks are now calling for laws to coerce us into more carbon-trading, which experts predict will make “hot air” the largest single commodity traded, absorbing anywhere from $2 to $10 trillion.
Rachel Morris wrote a detailed piece on this boomlet in the left-wing Mother Jones magazine, titled “Could Cap and Trade Cause Another Market Meltdown?” with the subhead: “The same Wall Street players that upended the economy are clamoring to open up a massive market to swap, chop, and bundle carbon derivatives.”
Cap and trade would create what Commodity Futures Trading commissioner Bart Chilton anticipates as a $2 trillion market, “the biggest of any [commodities] derivatives product in the next five years.” That derivatives market will be based on two main instruments. First, there are the carbon allowance permits that form the nuts and bolts of any cap-and-trade scheme.… In addition to trading the allowances and offsets themselves, participants in carbon markets can also deal in their derivatives—such as futures contracts to deliver a certain number of allowances at an agreed price and time.
By biggest, do we also mean this fictional “market” is thus “too big to fail”? For fail, it certainly will. Like the Fannie/Freddie mess, this too will have been created by the state, and therefore surely would be bailed out by the taxpayer.
So it fell to a nominee to the Federal Energy Regulatory Commission to tell a Senate committee that it might take 1,400 new bureaucrats to oversee the carbon-trading market that the House’s climate change bill seeks to establish.
With banks like J.P. Morgan and Goldman Sachs running with this scheme cooked up in great part by Enron (with the able counsel of Goldman) in the 1990s, the Financial Times commented, “It is perhaps not surprising, therefore, that so many carbon traders used to work at Enron. Louis Redshaw, who is now the head of environmental markets at Barclays Capital, spent four years working for Enron in London and set up its renewable energies desk. Enron alumni have also ended up on trading desks at other investment banks.”
So don’t cry for Wall Street. The Obama administration and Democratic Party are about to give them what the carbon fat cats have long pined for. What could possibly go wrong?
Goldman Sachs apparently failed to declare a potential conflict of interest which resulted in pushing up the cost of a £23.5billion bail-out of Lloyds Banking Group, City sources claimed last night.
The allegation that the Wall Street bank may have put its own interests ahead of its British clients comes just a week after it was accused of fraud in the U.S.
Earlier this week the bank, already notorious for its huge staff bonuses, revealed a £3.6billion pay and bonus pool for its bankers for three months' work.
Yesterday it emerged that Goldman acted on two sides of the £23.5billion fund-raising deal to put Lloyds on a sounder financial footing last autumn. The bank apparently did not know this.
Goldman was helping Lloyds raise fresh funds from shareholders including the government, which owns 41 per cent.
At the same time, it apparently used its influence to persuade the bank to pay extra cash to investors holding its debt.
Goldman itself had purchased a large chunk of the debt so was in prime position-to line its own pockets.
The claim will increase the pressure on the Financial Services Authority to take action against the U.S. investment bank.
Goldman Sachs insisted last night: 'There was no conflict of interest. Our position has been seriously misrepresented.'
Lloyds Banking Group denied it was bullied into changes, saying: 'Terms and pricing are always subject to review until an announcement is made.
'The final decision on the terms and pricing of this offer was made by the Group following the recommendation of the syndicate, and not any one individual bank.'
Both Iceland and the United States exalt democracy as a social achievement worthy of lasting an eternity. Yet the latter's unprecedented strength has derived not just from enlightened government, but from the release of its own hot clouds: exhaust from its vast industries, fleets and mechanized agriculture.As we have learned, these gases form an invisible barrier that, like a greenhouse's glass ceiling, keeps reflected heat of the sun from escaping our atmosphere. The denser that gaseous barrier grows, the hotter things get and the faster glaciers melt.As they flow off the land, we are warned, seas rise. Yet something else is lately worrying geologists: the likelihood that the Earth's crust, relieved of so much formidable weight of ice borne for many thousands of years, has begun to stretch and rebound.As it does, a volcano awakens in Iceland (with another, larger and adjacent to still-erupting Eyjafjallajokull, threatening to detonate next). The Earth shudders in Haiti. Then Chile. Then western China. Mexicali-Calexico. The Solomon Islands. Spain. New Guinea. And those are just the big ones, 6+ on the Richter scale, and just in 2010. And it's only April.It's looking like this may be a long decade. And if we don't pull carbon out of the way we energize our lives soon, a small clump of our not-too-distant surviving descendants may find themselves, as Gaia scientist James Lovelock has direly predicted, like the first Icelanders: gathered on some near-barren hunk of rock near one of the still-habitable poles, trying yet anew to eke out a plan for human civilization.
The Obama administration is spending billions of dollars to develop new weapons systems, including powerful conventional warhead missiles capable of striking any target in the world within less than an hour.
The US Air Force carried out two separate test launches April 22—one at Vandenberg Air Force Base in California, and the other at Cape Canaveral, Florida—designed to further the development of these weapons systems.
The first system, known as Conventional Prompt Global Strike, or CPGS, would be capable of striking anywhere across the globe within under an hour of a launch order, using intercontinental ballistic missiles fired from the US to deliver conventional warheads against targets in other countries.
Capable of striking a target with an impact speed of up to 4,000 feet per second and a payload of up to 8,000 pounds, these warheads would be able to obliterate everything within a 3,000-foot radius.
The Obama administration has requested $240 million in appropriations by Congress to pay for developing CPGS in 2011, an increase of 45 percent over this year’s budget. The total cost of the program is expected to mount to over $2 billion by 2015, by which time the Pentagon hopes to have deployed the first elements of the weapons system.
The Defense Advanced Research Projects Agency (DARPA) carried out a test launch Thursday of a space plane known as the Falcon, or Hypersonic Technology Vehicle (HTV-2), a suborbital vehicle that is the prototype for the CPGS delivery system.
It was launched from Vandenberg Air Force Base on a decommissioned ballistic missile, from which the plane separated just outside of the atmosphere, hurtling back to the Earth at a speed of more than 13,000 miles per hour, more than 20 times the speed of sound. The plane was supposed to crash into the Pacific Ocean near a US military test site on the Kwajalein Atoll.
The other unmanned space vehicle launched Thursday from Cape Canaveral was the X-37B. The Pentagon remained tight-lipped about the highly classified program, refusing to say even when the 29-foot plane—which resembles a smaller version of the space shuttle—would return to earth, much less specify what it was carrying or give any detailed explanation of its mission.
While it is estimated that the cost of developing the X-37B will run into the billions, the precise amount also remains classified, included as part of the Pentagon’s “black” budget.
Gary Payton, the deputy undersecretary for Air Force space programs, would say only that the test flight was designed to further “development programs that will provide capabilities for our warfighters in the future.”
It is widely believed that the vehicle is being developed as part of a US effort to militarize space, providing a weapons platform and launch pad for smaller spy satellites. There is also speculation that it is being developed as part of the Prompt Global Strike system.
Advocates of Prompt Global Strike have promoted the weapons system as a means to respond instantaneously to intelligence on the location of alleged terrorists or supposed threats of an imminent launch of weapons of mass destruction. They have also argued that the deployment of the new weapons would reduce the dependence of the US military on its nuclear arsenal.
Critics, including Russian officials, have pointed out, however, that the launching of intercontinental ballistic missiles, even if they were carrying conventional warheads, could easily trigger a nuclear war.
“World states will hardly accept a situation in which nuclear weapons disappear, but weapons that are no less destabilizing emerge in the hands of certain members of the international community,” Russian Foreign Minister Sergei Lavrov told reporters earlier this month in Moscow.
In a state of the nation address following the announcement of the proposed weapons system under the Bush administration, then-Russian President Vladimir Putin warned, “The launch of such a missile could provoke a full-scale counterattack using strategic nuclear forces.”
Largely as a result of such warnings, Congress previously failed to provide funding for the program. The proposal “really hadn’t gone anywhere in the Bush administration,” Defense Secretary Robert Gates said in an interview on the ABC news program “This Week.” Gates, who was held over in his post by incoming President Barack Obama, noted that the weapons system had been “embraced by the new administration.”
The New York Times reported Friday that in an interview Obama had defended the weapons system as a “move towards less emphasis on nuclear weapons” and argued that it would insure “that our conventional weapons capability is an effective deterrent in all but the most extreme circumstances.”
In a separate interview with the Times, Air Force Gen. Kevin Chilton, the head of the Strategic Command, argued that the weapons system was needed to give the White House more military options.
“Today we can present some conventional options to the President to strike a target anywhere on the globe that range from 96 hours, to several hours maybe, 4, 5, 6 hours,” Chilton told the Times.
“That would simply not be fast enough, he noted, if intelligence arrived about a movement by Al Qaeda terrorists or the imminent launching of a missile,” the newspaper said. “‘If the president wants to act on a particular target faster than that, the only thing we have that goes faster is a nuclear response,’ he said.”
Advocates of the program within the military and the administration have claimed that the danger of Russia or China interpreting the launch of a Prompt Global Strike missile as the beginning of a nuclear attack could be alleviated by positioning launch vehicles above ground, giving them a different flight path and even opening launch sites up for inspection. Military analysts point out, however, that such a system would provide an ideal subterfuge in the event that Washington decided to launch a “preventive” nuclear war.
Moscow’s concern over the proposed weapons system found expression in the recently signed New Start nuclear weapons treaty agreed by the US and Russia, which requires that the introduction of any US intercontinental ballistic missile carrying a conventional weapon capable of reaching Russian soil be compensated by the decommissioning of an existing nuclear-armed missile.
Obama’s rhetoric about the new weapons system contributing to nuclear disarmament notwithstanding, there is ample evidence that Washington remains committed to maintaining and upgrading its nuclear arsenal.
Speaking Thursday at the NATO foreign ministers meeting in Estonia, Secretary of State Hillary Clinton rejected proposals from European governments for the removal of so-called tactical or battlefield nuclear weapons that the US has deployed on the continent.
“We should recognize that as long as nuclear weapons exist, NATO will remain a nuclear alliance,” Clinton told the gathering in Tallinn. “As a nuclear alliance, sharing nuclear risks and responsibilities widely is fundamental.”
Meanwhile, at a recent hearing of the House Armed Services Committee, General Chilton, the head of the US Strategic Command, assured members of Congress that the military is proceeding with work on a “follow-on to the current Ohio-class Trident submarine fleet,” which carries D-5 nuclear-armed intercontinental ballistic missiles.
Sounding the same theme, James Miller, the principal deputy undersecretary of defense for policy, said, “The department is currently looking at the mix of long-range strike capabilities that the military will need for the coming decade or two,” adding that both nuclear and conventional weapons would figure in this “mix.”
The development of these new weapons systems will only provide Washington and the Pentagon with another instrument for carrying out so-called “preventive wars” and acts of aggression, giving the US president a non-nuclear capacity to kill thousands of people virtually instantaneously with the push of a button.
An airline pilot wrongly accused of training the September 11 hijackers is in line for a £2million Government payout, it emerged last night.
Lotfi Raissi, who is Algerian, was arrested by Scotland Yard ten days after the 2001 attacks on the Twin Towers and the Pentagon after the FBI issued an arrest warrant.
He was held for months without charge in a high security prison before a court ruled there was no evidence against him and he should not be extradited to the U.S.
Yesterday he was finally told that he was formally exonerated and would receive compensation.
The 36-year-old from Chiswick, West London, said: 'I'm delighted. My life was destroyed, my career was destroyed.
'It was hell for me and for the last nine years. I was fighting for justice and what I want at the end of it is an apology.'
The FBI asked for his arrest because he was at a flight school in Arizona at the same time as Hani Hanjour, who piloted a hijacked Boeing 757 into the Pentagon.
Mr Raissi was 27 when he was arrested and has been unable to work since because of the 'devastating' effect it has had on his health.
As a qualified pilot, he could have expected a salary of up to £100,000 for the next 20 or 30 years.
His loss of earnings since 2001 is close to £1million alone, and he will receive even more for future lost earnings.
The total settlement is expected to be at least £2million.
Moment that shook the world: The second plane hits New York's Twin Towers
Justice Secretary Jack Straw announced that the Government would pay compensation on the final day before a court-ordered deadline was due to pass.
Last month the Court of Appeal gave Mr Straw 28 days to agree in principle to compensation.
A senior lawyer, Lord Brennan QC, will decide the exact amount.
After his arrest Mr Raissi spent four and a half months in Belmarsh high security prison, confined to his cell in the maximum security wing for 23 hours a day.
Decision: Justice Secretary Jack Straw
It was only when the Crown Prosecution Service was unable to present any evidence against him, or tell the court when he would be charged or extradited, that a judge ordered his release.
In 2004 he applied for compensation under a scheme covering miscarriages of justice, but Government lawyers argued his case fell outside the rules.
He challenged that decision and lost in the High Court, but in 2008 the Court of Appeal ruled in his favour.
Lord Justice Hooper said the public labelling of him as a terrorist had a 'devastating effect on his life and on his health'.
The ruling-made clear that there was a 'considerable body of evidence' to suggest that the police and the CPS were responsible for 'serious defaults' in handling the case.
Mr Raissi's solicitor, Jules Carey, accused Mr Straw of delaying the announcement because it was 'politically difficult'.
He said: 'Mr Raissi has fought extremely hard to clear his name. The allegations of terrorism were utterly ruinous to him both personally and professionally.
'I sincerely hope that this announcement will mark a new chapter in his life and that his rehabilitation will begin.'
James Welch, legal director of human rights charity Liberty, said: 'The shabby treatment of this innocent man is a chilling reminder of why we all need the protection of the courts.
'Now the Extradition Act 2003 is in force, it is terrifying to think that, were Lotfi Raissi to face the same false accusation today, he would be packed off to the U.S. without any consideration by our courts of the strength of the case against him.'
During his testimony [Inspector General for TARP Neil] Barofsky addressed GM’s recent debt repayment activity, and stated that the funds GM is using to repay its TARP debt are not coming from GM earnings. Instead, GM seems to be using TARP funds from an escrow account at Treasury to make the debt repayments. The most recent quarterly report from the Office of the Special Inspector General for TARP says "The source of funds for these quarterly [debt] payments will be other TARP funds currently held in an escrow account."...
Therefore, it is unclear how GM and the Administration could have accurately announced yesterday that GM repaid its TARP loans in any meaningful way. In reality, it looks like GM merely used one source of TARP funds to repay another. The taxpayers are still on the hook...
The bottom line seems to be that the TARP loans were "repaid" with other TARP funds in a Treasury escrow account. The TARP loans were not repaid from money GM is earning selling cars, as GM and the Administration have claimed in their speeches, press releases and television commercials. When these criticisms were put to GM’s Vice Chairman Stephen Girsky in a television interview yesterday, he admitted that the criticisms were valid:
Question: Are you just paying the government back with government money?
Mr. Girsky: Well listen, that is in effect true, but a year ago nobody thought we’d be able to pay this back.
Girsky, you magnificent bastard! If you managed to say that line without laughing, you deserve all the unsold Pontiacs in North America.
Whole thing here. Via Real Clear Politics via Reason stalwart Manny Klausner.
And, needless to say, Grassley isn't even raising the massively important issue of whether the freaking bailout via TARP funds was legal. Spoiler alert: It wasn't.
But don't worry, GM loses money hand over fist and is poised to lose even more money when the market rebounds and they start selling more units. That's what happened in 2007, a record-setting year for GM when it sold 9.4 million cars worldwide and lost $38 billion. Check it out, why don't you?
Update: Fox News reports that TARP IG Barofsky told them on Wednesday: "I think the one thing that a lot of people overlook with this is where they got the money to pay back the loan. And it isn't from earnings.... It's actually from another pool of TARP money that they've already received...I don't think we should exaggerate it too much. Remember that the source of this money is just other TARP money."
Fox News unconvincingly hypothesizes "the TV spot [touting its early payback of loans] may land GM in hot water with the Federal Trade Commission over its truth-in-advertising laws, which prohibit ads that are 'likely to mislead consumers.'"
Duncan Black, AKA Atrios, or Eschaton, writes, referring to an article by Thom Hartmann written in July 2009,"Thom Hartman on executive pay. It's from 2009, but in light of the WellPoint news ofcanceling a woman's health insurance upon receiving a diagnosis of breast cancer, it seems quite timely. Imagine, they have meetings where this kind of abomination is discussed, they do studies of how much money will be saved with graphs, power point presentations and everything. Only a sociopath could then go home and sleep at night."Here's the article
The Wall Street Journal reported last week that "Executives and other highly compensated employees now receive more than one-third of all pay in the US... Highly paid employees received nearly $2.1 trillion of the $6.4 trillion in total US pay in 2007, the latest figures available."
One of the questions often asked when the subject of CEO pay comes up is, "What could a person such as William McGuire or Lee Raymond (the former CEOs of UnitedHealth and ExxonMobil, respectively) possibly do to justify a $1.7 billion paycheck or a $400 million retirement bonus?"
It's an interesting question. If there is a "free market" of labor for CEOs, then you'd think there would be a lot of competition for the jobs. And a lot of people competing for the positions would drive down the pay. All UnitedHealth's stockholders would have to do to avoid paying more than $1 billion to McGuire is find somebody to do the same CEO job for half a billion. And all they'd have to do to save even more is find somebody to do the job for a mere $100 million. Or maybe even somebody who'd work the necessary sixty-hour weeks for only $1 million.
So why is executive pay so high?
I've examined this with both my psychotherapist hat on and my amateur economist hat on, and only one rational answer presents itself: CEOs in America make as much money as they do because there really is a shortage of people with their skill set. And it's such a serious shortage that some companies have to pay as much as $1 million a day to have somebody successfully do the job.
But what part of being a CEO could be so difficult-so impossible for mere mortals-that it would mean that there are only a few hundred individuals in the United States capable of performing it?
In my humble opinion, it's the sociopath part.
CEOs of community-based businesses are typically responsive to their communities and decent people. But the CEOs of most of the world's largest corporations daily make decisions that destroy the lives of many other human beings.
Only about 1 to 3 percent of us are sociopaths-people who don't have normal human feelings and can easily go to sleep at night after having done horrific things. And of that 1 percent of sociopaths, there's probably only a fraction of a percent with a college education. And of that tiny fraction, there's an even tinier fraction that understands how business works, particularly within any specific industry.
Thus there is such a shortage of people who can run modern monopolistic, destructive corporations that stockholders have to pay millions to get them to work. And being sociopaths, they gladly take the money without any thought to its social consequences.
Today's modern transnational corporate CEOs-who live in a private-jet-and-limousine world entirely apart from the rest of us-are remnants from the times of kings, queens, and lords. They reflect the dysfunctional cultural (and Calvinist/Darwinian) belief that wealth is proof of goodness, and that that goodness then justifies taking more of the wealth.
Democracy in the workplace is known as a union. The most democratic workplaces are the least exploitative, because labor has a power to balance capital and management. And looking around the world, we can clearly see that those cultures that most embrace the largest number of their people in an egalitarian and democratic way (in and out of the workplace) are the ones that have the highest quality of life. Those that are the most despotic, from the workplace to the government, are those with the poorest quality of life.
Over time, balance and democratic oversight will always produce the best results. An "unregulated" marketplace is like an "unregulated" football game - chaos. And chaos is a state perfectly exploited by sociopaths, be they serial killers, warlords, or CEOs.
By changing the rules of the game of business so that sociopathic business behavior is no longer rewarded (and, indeed, is punished - as Teddy Roosevelt famously did as the "trustbuster" and FDR did when he threatened to send "war profiteers" to jail), we can create a less dysfunctional and more egalitarian society. And that's an important first step back from the thresholds to environmental and economic disaster we'renow facing.This article is largely excerpted from Thom Hartmann's new book "Threshold: The Crisis of Western Culture."
Back in 1999 on a radio program I had in NYC at the time, I was stridently critical of the Gramm-Leach-Bliley Act, which was euphemistically called "The Financial Services Modernization Act of 1999" by the very appropriately named Teabagging maestro, Dick Armey.
On the radio program, for months I protested every day that this law was nothing but yet another attempt to inflict Ayn Rand feudalism on hapless Americans.
It should be noted that this execrable and deliberately destructive law was signed by Bill Clinton.
In addition, this evil gutting of the Glass-Steagall Act (not even one of my listeners had ever heard of it) was rapturously endorsed by Lawrence Summers, the Treasury Secretary for Bill Clinton, and currently the Chief economic adviser to President Obama, and Timothy Geithner, who was then the Chairman of the New York Federal Reserve Bank, and the current Treasury Secretary to President Obama.
What does it say about Obama's commitment to financial regulation that his principal economic soothsayers are the very same individuals who aggressively counseled President Cllinton to endorse and sign this idiotic and evil obliteration of the regulatory framework that had protected the American people for over 65 years from the Dodge City economics that has recently brought suffering to billions of innocent people here and abroad !
What I will say now is heresy in the United States, but after all the financial anarchy and pain [ie.,The savings and loan Crisis (1989), The stock market crash of 1987, The Long Term Capital Crisis (1998), Enron, Tyco, Worldcom (2002), and the current mortgage crisis/derivatives crisis)], that the people of the United States have suffered repeatedly in the past twenty years, it is apparent that the problem is not regulation, nor is the "solution", to be found in "reasonable" milquetoast rules crafted by the same wretched people who imposed this fiasco in the first place.
More importantly, from 2001 through 2008, we all experienced the intrinsic vulnerability of even the most carefully crafted regulatory framework, given the ease with which the reactionary Cheney/Bush regime was able to subvert regulation across the board by merely appointing openly dedicated enemies of regulation to the chairmanships of the regulatory bodies.
What's necessary is to begin a serious inquiry as to why an economy of 300,000,000 million citizens should be held prisoner by the private money interest of a small number of people who, on the basis of nothing more than their staggering assets, can control the financial destiny and viability of the other 300,000,000 voting citizens.
There is no reason in reality why such an irrational scheme as the above should continue.
Big Business and Big Finance need to be controlled by all the citizens, for the benefit of all the citizens, not for the benefit of a tiny and elite cadre of private owners on the basis of their own whim, wealth, and private benefit, for the pleasure of themselves alone, and to the continuing misfortune of a nation of 300,000,000 at the mercy of their greater glory.
The citizens need to control the wealth of the nation, and the day to day management of that wealth needs to be directed by people directly accountable to the 300,000,000 citizens rather than to self-interested Boards of Directors accountable only to themselves and their private fortunes.
Jay Diamond pioneered progressive radio in New York City and is currently a media critic and activist.
BUDAPEST (Dow Jones)--Hungary's financial market authority PSZAF fined Deutsche Bank AG (DB) for weakening the Hungarian forint significantly Oct. 15 2008, when Hungary was hit hardest by the global credit crunch, on the spot market to close its forint-linked swap positions with high ...
The number of people unemployed in the UK rose by 43,000 to 2.5 million during the three months to February, official figures have shown.
The jobless total is now at its highest since 1994.
The rate of unemployment now stands at 8% - the highest since 1996 - the Office for National Statistics said.
However, the total number of people claiming unemployment benefit fell in March by 32,900 to 1.54 million - a much sharper fall than expected.
The ONS figures showed youth unemployment rising, with 929,000 16 to 24-year-olds out of work in the December to February period - a rise of 4,000 on the previous three months. Unemployment among the over-50s rose by 7,000 to 396,000.
There was also a rise in the number of people classed as economically inactive - those out of work and not seeking work.
They rose by 110,000 to a record total of 8.16 million, equivalent to 21.5% of the population.
The majority of that rise was due to an increase in the number of students, as young people decided to enter education instead of seek jobs.
Commenting on the figures, the Work and Pension Secretary Yvette Cooper, said the figures were in line with the government's expectations.
"What this shows is that we are not out of the woods yet," she told the BBC.
"That's why it is so important that we keep increasing the support for the unemployed, but also that we sustain the overall support for the economy."
But Theresa May, shadow work and pensions secretary for the Conservatives, said it was "grim news for tens of thousands of families up and down the country".
"A clear sign that the government's policies aren't working," she said.
"I think the government isn't giving enough support in terms of the welfare system as a whole."
City economists held equally mixed views.
Vicky Redwood, economist at Capital Economics, warned the figures pointed to a recovery without job growth in the UK economy, particularly with public sector cuts looming further down the line.
But Brian Hilliard from Societe Generale was more optimistic.
"The labour market is in far better shape than we dared to hope for at this stage of the economic cycle," he said.
Figures from the ONS also showed a rise in wages for those still in work.
Average weekly earnings including bonuses were up 2.3% in the three months to February compared with the year before.
Government borrowing hit a record high of £163.4bn in the last financial year, official figures have shown.
The borrowing figure for the 2009-10 financial year is lower than the £166.5bn predicted by Chancellor Alistair Darling in April's Budget.
Including financial intervention measures, borrowing totalled £152.8bn - lower than the £155.9bn forecast.
It is the biggest annual borrowing figure for a UK government in peacetime.
A total of £23.5bn was borrowed in March, the figures from the Office for National Statistics (ONS) showed.
Borrowing in March is typically high as civil servants seek to spend the remainder of their annual budgets.
Total government debt now stands at £890bn - equivalent to 62% of GDP.
The £163.4bn borrowed is equivalent to 11.6% of GDP.
Although the annual figure came in below the Budget prediction, City analysts reacted cautiously.
"The big picture is that this is still the biggest budget deficit since World War II," said Jonathan Loynes, economist at Capital Economics.
Tax receipts rise
"With all parties' fiscal plans based on extremely optimistic economic assumptions and unspecified spending cuts, a further sizeable fiscal squeeze will still be needed after the election, whoever is in charge."
All major political parties have pledged to tackle the growing budget deficit following the next election.
But their plans rely in part on the recovery of the economy boosting tax income and therefore reducing borrowing.
Many view the Treasury's current predictions of between 3% and 3.5% growth in the 2011 calendar year as too optimistic, with an average of City forecasters suggests growth of around 2.25%.
However, the slow recovery so far already appears to have helped cut borrowing. In March, tax income rose by 3.8% according to the ONS.
Income from VAT also rose following the return to the 17.5% rate at the start of the year, and corporation tax receipts were up by more than 50%.
The layoff information, posted on the Winslow Township Police Association website, states the layoffs are scheduled to occur on June 14.
The town's layoff plan was approved by the state's Civil Service Commission on Monday, according to commission spokeswoman Mary Anne Jemison.Township administrator Joseph Gallagher could not immediately be reached for comment this morning.
If you’re looking for clues on where stocks, commodities and global economies are headed, you might be better served keeping a close eye on the euro, rather than on the incoming stream of corporate earnings reports.
That’s because the ongoing crisis in the euro zone, and the respective threat that Greece and the other weak spots in Europe are posing to the lifespan of the euro, has very significant implications for global markets.
I touched on this topic last week in my column, “How Greece Can Impact YOU!“
I also said in that piece that, despite all of the crisis management tactics used by euro-zone officials, the situation in Greece was far from over.
And this past week, we’ve seen clear evidence of that.
Since the implications of this sovereign debt crisis have a broad reach, let’s take a closer look at how things are playing out in Europe.
Investors Voting with Their Feet
Two weeks ago many market participants happily accepted a proposed euro-zone/IMF rescue plan for Greece — one with aggressive numbers behind it — as a resolution to the euro’s problems. And those same participants likely viewed the euro as a bargain, snapping up the euro at $1.35 … 11 percent lower than the post-crisis highs of just five months ago.
As such, the result was a sharp rally in the euro.
But it was short-lived.
In fact, the knee-jerk recovery in entire “euro crisis trade,” has since fully reversed … and then some.
Take a look at these three charts …
In the chart below, you can see how the initial jump in the euro was quickly reversed. And since then, the euro has traded to new 2010 lows.
This next chart compares German and Greek borrowing costs. As members of Europe’s Economic and Monetary Union, these two countries share a common currency and common monetary policy. So in theory, the cost of government borrowing should be the same.
But as you can certainly see, speculators and investors have been bailing on Greek bonds, driving up the spread between Greek yields (the white line) and German yields (the orange line) to 12-year highs. Thus making the Greek government’s ability to refinance debt nearly impossible!
Now that all of the cards are on the table, and the market vote has been one of “no confidence,” the attack is being levied on the other weak spots — especially Portugal.
This next chart of the sovereign debt credit default swap market measures the market’s appetite for insurance against a government default.
It’s certainly obvious the price of this insurance is being driven dramatically higher for those countries that represent the next likely dominos in line for Europe’s sovereign debt crisis.
These market reactions are clearly negative for the euro and negative for global economic stability, showing that …
Europe’s Sovereign Debt
Crisis Is Fully Involved
Countries that have joined the euro currency have unique challenges when economic times are tough.
That’s because the monetary union in Europe consists of a common currency and a common monetary policy. But fiscal policy is determined by each individual country. And to patrol those fiscal decisions, the European Union established its Growth and Stability Pact that, among other things, sets two criteria for member countries:
1) Deficit spending cannot exceed three percent of GDP, and
2) Total government debt cannot exceed 60 percent of GDP.
As we well know, after a battle with global recession, those limits have been completely blown out of the water by many members of the euro monetary union.
So these problems aren’t new, they’re just coming to a head! And they aren’t going away anytime soon.
I’ve written several Money and Markets columns about the fallout in Europe and the growing risks of a contagion of sovereign debt fears. In fact, my first column this year was titled “Will the Euro Become the World’s Most Hated Currency for 2010?“
And in recent months I’ve laid out even more of the story, including …
- The structural flaws of the European monetary union and the threats those flaws represent to the lifespan of the euro,
- The inability of the Emu to enforce fiscal constraints on euro members,
- The irreparable damage to the credibility of the euro as a contending primary world reserve currency,
- The vulnerability of a sovereign debt contagion within the euro zone and beyond,
- And the teetering dominos that stand behind Greece as the next likely candidates … among which are the major advanced economies of the world.
And despite the many hailed resolutions that have been proclaimed in recent months to the problems in the Greek drama, I’ve explained why the potential outcomes facing the euro are “no-win.”
Here are two of the distinct possibilities I foresee:
A euro-zone bailout of a fellow member would be a breach of the guiding principles upon which the euro was built. It would create an irreparable moral hazard, remove incentives for fiscal responsibility and open the floodgates of other weak euro-zone countries to come looking for a bailout of their own.
On the other hand, a default in Greece would make a breakup of the euro highly probable. It would set off a calamity of sovereign debt fears and threaten the European banking system.
Both scenarios jeopardize the landscape of global economic stability and the 11-year old, single currency concept.
So keep a close eye on the euro and on the ongoing developments in Europe. They could provide important clues on what to expect from financial markets and the global economy going forward.