LJ's blog

What? No Cat Blogging?

Fri, 18 Jul 2008 15:35:08 -0700

This is my current favorite kitten video:

Recession-Plagued Nation Demands New Bubble To Invest In

Tue, 15 Jul 2008 05:55:53 -0700

WASHINGTON—A panel of top business leaders testified before Congress about the worsening recession Monday, demanding the government provide Americans with a new irresponsible and largely illusory economic bubble in which to invest.

"What America needs right now is not more talk and long-term strategy, but a concrete way to create more imaginary wealth in the very immediate future," said Thomas Jenkins, CFO of the Boston-area Jenkins Financial Group, a bubble-based investment firm. "We are in a crisis, and that crisis demands an unviable short-term solution."

The current economic woes, brought on by the collapse of the so-called "housing bubble," are considered the worst to hit investors since the equally untenable dot-com bubble burst in 2001. According to investment experts, now that the option of making millions of dollars in a short time with imaginary profits from bad real-estate deals has disappeared, the need for another spontaneous make-believe source of wealth has never been more urgent....

My wildass guess

Thu, 26 Jun 2008 21:08:45 -0700

Obama is defining himself via this Fisa vote. Anybody who is not on board will not be considered for VP. Kinda makes somebody like a Jim Webb, for example, a more likely choice. Who else? Hillary?

If True: The Ultimate Bombshell Leak

Thu, 12 Jun 2008 06:11:57 -0700

h/t Larisa Alexandrovna

The following article, Exposing Pentagon and CIA Corruption from CounterPunch is so over the top that .... Well, just read it yourself and see what you think. It purports to claim a level of graft and cynicism at the highest levels of government beyond imagination. The article comes from only a single source, SueAnn Arrigo, a "high-level CIA insider." Here are a few paragraphs.

SueAnn Arrigo offers a glimpse and at great personal risk. In August 2001, DCI George Tenet told her to assemble "a moving van full of Pentagon documents showing Defense Contractor kickbacks to Pentagon officials." She did as instructed but not to expose corruption as she learned - to conceal it and in her judgment so CIA could divert defense business to Halliburton and "Carlyle-related contractors." She stated: "The mood at the CIA and Pentagon was 'war is coming' because the Bush Family stands to make billions from it -- so get ready."

Arrigo was shocked at what she found and how brazenly the Pentagon wrote it up because it feels untouchable, especially since 2001. That notion proved misguided after CIA used the material to blackmail or bribe its officials "into 'working on' the Halliburton-Carlyle team." Top CIA types were involved, and Tenet laid it out for Arrigo: You've "given me the keys to the kingdom. (These) documents will make me rich."

She explained: Halliburton has eight software programmers at CIA. Its home office has many more. She was on conference calls with 60 of them on ways to conceal illegalities and assure none of it leaks out. The company has less expertise than CIA so the Agency took charge to make the two systems compatible. It took several years and over 100 programmers. They came, left for other jobs, and took insider knowledge with them. It risks more leaks about Halliburton, other contractors, CIA, the Pentagon, high-ups in government, and the Basel-based Bank of International Settlements for its part in corruption.

Many investigations are ongoing, but huge pressure is exerted to quash them. It's feared leaks may unravel the whole scheme - a vast corruption web involving countless numbers of contractors, related companies, and many high level government and Pentagon insiders. Cover-up software hides it. Taxpayers fund it. Amounts keep getting greater, and they're up to unimaginable levels. [ed: trillions]

JFK and the Unspeakable: Why He Died and Why It Matters

Fri, 06 Jun 2008 09:17:30 -0700

by James W. Douglass
Orbis, 2008

"As Albert Einstein said, with the unleashing of the power of the atom,
humanity reached a new age. The atomic bombing of Hiroshima marked
a crossroads: either we would end war or war would end us. In her reflections
on Hiroshima in the September 1945 issue of the Catholic Worker,
Dorothy Day wrote: “Mr. Truman was jubilant. President Truman. True
man; what a strange name, come to think of it. We refer to Jesus Christ as
true God and true Man. Truman is a true man of his time in that he was
jubilant.”1

President Truman was aboard the cruiser Augusta, returning from the
Potsdam conference, when he was informed of the United States’ incineration
of Hiroshima by the atomic bomb. Truman was exultant. He declared,
“This is the greatest thing in history!” He went from person to person on the
ship, officers and crew alike, telling them the great news like a town crier.
Dorothy Day observed: “‘Jubilant’ the newspapers said. Jubilate Deo. We
have killed 318,000 Japanese.”

Seventeen years later, during the Cuban Missile Crisis, another president,
John F. Kennedy, under enormous pressure, almost committed the United
States to a nuclear holocaust that would have multiplied the explosive power
of the Hiroshima bomb thousands of times. Kennedy’s saving grace was that
unlike Truman he recognized the evil of nuclear weapons. Kennedy resisted
the Joint Chiefs of Staff and most of his civilian advisers, who pressured him
for a preemptive attack on Soviet missile sites in Cuba. Thanks to the sheer
grace of God, to Kennedy’s resistance to his advisers, and to Nikita
Khrushchev’s willingness to retreat, humanity survived the crisis.
Kennedy, however, survived it for only a little more than a year. As we
shall see, because of his continuing turn from nuclear war toward a vision of
peace in the thirteen months remaining to him, he was executed by the
powers that be.

Two critical questions converge at Kennedy’s assassination. The first is:
Why did his assassins risk exposure and a shameful downfall by covertly
murdering a beloved president? The second is: Why was John Kennedy prepared
to give his life for peace, when he saw death coming?

The second question may be key to the first, because there is nothing so
threatening to systemic evil as those willing to stand against it regardless of
the consequences. So we will try to see this story initially through the life of
John Kennedy, to understand why he became so threatening to the most powerful
military-economic coalition in history that its wielders of power were
willing to risk everything they had in order to kill him."

The First Act of the Obama Presidency

Thu, 05 Jun 2008 21:28:48 -0700

When Barack Obama made his first appearance on the Senate floor after becoming the presumptive nominee of the Democratic Party, a very significant public event took place. First, Obama took Joe Liebermann into the corner for a private conversation. The words were private but the public aspect was the fact Obama physically took Liebermann aside and backed him against the wall.

The significance of this act, in part, is that Obama has announced to the Senate, the House, and the Democratic Party that he intends to assume the mantle leadership. And the most significant way of doing this was to physically take Liebermann for a walk. Whatever Liebermann does is secondary to Obama's act: 'I am no longer merely the junior Senator from the State of Illinois; I am the leader of the Democratic Party.' In that sense, we might well call it the first act of the Obama Presidency.

Fed Governors Openly Question Bernanke's Competence

Thu, 05 Jun 2008 19:41:08 -0700

Mish Shedlock commenting on this from Bloomberg. Sounds like things are getting worse as described by SPK.

Bernanke Loses Support

The seeds of this crisis were sewn by the loosey goosey policies of Greenspan for which there was never a dissent from Bernanke, or that matter anyone else (at least in public). And what started as a minor revolt has now turned into a major question of confidence regarding the anything goes policies of Bernanke. That Congress is holding up votes on Fed nominees is also not helping Bernanke any.

If various Fed governors continue openly questioning Bernanke's decisions, he is not going to last long as Fed chairman.

NPR: Wall Street May Be Linked to Mortgage Fraud

Wed, 28 May 2008 21:55:15 -0700

Auditor: Supervisors Covered Up Risky Loans

Morning Edition|May 27

Now that millions of people are facing foreclosure because they got into loans that never should have been approved, everybody's looking for someone to blame. Borrowers, or their brokers, lied on loan applications. Others got high interest rates they couldn't afford.

A big unanswered question is whether the Wall Street investment banks that were packaging these mortgages knew they were selling garbage loans to investors. A wave of litigation is starting against these firms. One former worker whose job was to catch bad loans says her supervisors covered them up.

Mortgage Quality Control

Tracy Warren is not surprised by the foreclosure crisis. She saw the roots of it firsthand every day. She worked for a quality-control contractor that reviewed subprime loans for investment banks before they were sold off on Wall Street.

It was her job to dig into the loans and ferret out problems. By 2006, they were easy to find.

"I'd see people who were hotel workers saying that they made, in California, making $15,000 a month so that they could qualify for a $500,000 home," Warren says. "If a hotel worker is making $15,000 a month changing sheets at the Days Inn, everybody would want to do it. It just really made no sense."

Warren has worked in the mortgage business for 25 years, the past five in quality control. Most recently, she was a contract worker for a company called Watterson-Prime, which did loan audits for investment banks. She says their biggest client was Bear Stearns, which recently all but collapsed because of its exposure to bad loans.

Putting Bad Apples Back in the Barrel

Warren thinks her supervisors didn't want her to do her job. She says that when she would reject, or kick out, a loan, they usually would overrule her and approve it.

"The QC reviewer who reviewed our kicks would say, 'Well, I thought it had merit.' And it was like 'What?' Their credit score was below 580. And if it was an income verification, a lot of times they weren't making the income. And it was like, 'What kind of merit could you have determined?' And they were like, 'Oh, it's fine. Don't worry about it.' "

After a while, Warren says, her supervisors stopped telling her when she had been overruled. She figured it out by going back later and pulling the loans up on her computer.

"I would look every couple of days, and just see, if it was a loan that I thought was a bad loan, I'd go back and see if it was pulled."

About 75 percent of the time, loans that should have been rejected were still put into the pool and sold, she says.

'A Smoking Gun'

Some legal experts say it's a pretty big deal that people like Warren are willing to talk.

"This is a smoking gun," says Christopher Peterson, a law professor at the University of Utah who has been studying the subprime mess and meeting with regulators. "It suggests that auditors working for Wall Street investment bankers knew how preposterous these loans were, and that could mean Wall Street liability for aiding and abetting fraud."

Bear Stearns had no comment.

The loan-auditing firm Watterson-Prime's parent company, Fidelity National Information Services, provided a statement. It says the company has no incentive to give loans a passing review if they fail to meet underwriting criteria and that it uses additional quality-control measures to further check up on loan reviews.

But Peterson says such breakdowns in quality control must have happened at a lot of companies. How else did millions of people wind up in loans that they can't pay?

"People have a tendency to think about economic trends as though they're an uncontrollable force that no one understands. This isn't the weather. These are people who are individually making decisions to approve and pass on fraudulent loans," he says.

Accountability on Wall Street

Peterson said auditors like Warren basically were hired to find the bad apples in the barrel and pull them out: borrowers with payments they couldn't afford, houses with inflated appraisals, people lying about their income.

But Warren says her bosses were taking a lot of those bad apples and putting them back in. And Peterson says he thinks the investment banks had a strong financial incentive to do that.

"They put the bad apples back in the barrel because they knew that they could sell the bad apples along with the good apples and, at least in the short term, nobody would know the difference. That's why they put them back in — because they made more money that way," Peterson says.

"There's a name for this — it's called 'passing the trash,' " says David Grais, an attorney getting ready to sue Wall Street firms on behalf of investors — big pension funds and others — who bought the bad loans.

"These were immensely profitable deals. One study showed that the investment banks were making a 40 percent return on equity every two months on these securitizations, which is an eye-popping number," he says.

Grais says many people on Wall Street make huge bonuses when their business unit is making big money. So the faster they could package up loans — good, bad or ugly ones — and sell them to investors, the more money that they made, he says.

Warren thinks her managers got bonuses for how quickly they reviewed loans, not for how many bad loans they caught.

Watterson-Prime disputes that. It says its managers, staff and contractors are compensated on an hourly or salary basis and never by the number of loans reviewed.

Report: Banks Agreed to Limit Loan Rejections

Other evidence is emerging.

A bankruptcy examiner in the case of the collapsed subprime lender New Century recently released a 500-page report, and buried inside it is a pretty interesting detail. According to the report, some investment banks agreed to reject only 2.5 percent of the loans that New Century sent them to package up and sell to investors.

If that's true, it would be like saying no matter how many bad apples are in the barrel, only a tiny fraction of them will be rejected.

"It's amazing if any investment bank agreed to a maximum number of loans they would kick back for defects. That means that they were willing to accept junk. There's no other way to put it," says Kurt Eggert, a law professor at Chapman University.

Meanwhile, the attorney general in New York and other prosecutors are taking a look at all of this. They, too, want to know whether Wall Street firms were covering up bad loans and selling them to investors.

Naomi Klein: China's All-Seeing Eye

Sat, 17 May 2008 16:10:36 -0700

Rolling Stone | May 29

With the help of U.S. defense contractors, China is building the prototype for a high-tech police state. It is ready for export.

In Shenzhen one night, I have dinner with a U.S. business consultant named Stephen Herrington. Before he started lecturing at Chinese business schools, teaching students concepts like brand management, Herrington was a military-intelligence officer, ascending to the rank of lieutenant colonel. What he is seeing in the Pearl River Delta, he tells me, is scaring the hell out of him — and not for what it means to China.

"I can guarantee you that there are people in the Bush administration who are studying the use of surveillance technologies being developed here and have at least skeletal plans to implement them at home," he says. "We can already see it in New York with CCTV cameras. Once you have the cameras in place, you have the infrastructure for a powerful tracking system. I'm worried about what this will mean if the U.S. government goes totalitarian and starts employing these technologies more than they are already. I'm worried about the threat this poses to American democracy."

Herrington pauses. "George W. Bush," he adds, "would do what they are doing here in a heartbeat if he could."

China-bashing never fails to soothe the Western conscience — here is a large and powerful country that, when it comes to human rights and democracy, is so much worse than Bush's America. But during my time in Shenzhen, China's youngest and most modern city, I often have the feeling that I am witnessing not some rogue police state but a global middle ground, the place where more and more countries are converging. China is becoming more like us in very visible ways (Starbucks, Hooters, cellphones that are cooler than ours), and we are becoming more like China in less visible ones (torture, warrantless wiretapping, indefinite detention, though not nearly on the Chinese scale).

Link for this long feature article.

Hillary's Downfall

Thu, 15 May 2008 13:30:49 -0700

Over the top HILLARitY:

Andrew Bacevich op-ed: The 'Long War' fallacy

Wed, 14 May 2008 20:15:05 -0700

LA Times, March 13

Donald Rumsfeld is today a discredited and widely reviled figure. Robert Gates, Rumsfeld's successor as Defense secretary, is generally admired for manifesting qualities that Rumsfeld lacked -- a willingness to listen not least among them. Yet on one crucial point, the two see eye to eye: Both believe that the United States has no alternative but to wage a global war likely to last decades.

In the wake of 9/11, Rumsfeld wasted no time in telling Americans what to expect. "Forget about 'exit strategies,' " he said on Sept. 28, 2001, "we're looking at a sustained engagement that carries no deadlines." Speaking at West Point last month, Gates echoed his predecessor's assessment: "There are no exit strategies," he announced. Instead, Gates described a "generational campaign" entailing "many years of persistent, engaged combat all around the world."

For the United States, the prospect of permanent war now beckons.

Well into the first decade of this generational struggle, Americans remained oddly confused about its purpose. Is the aim to ensure access to cheap and abundant oil? Spread democracy? Avert nuclear proliferation? Perpetuate the American empire? Preserve the American way of life? From the outset, the enterprise that Gates now calls the "Long War" has been about all of these things and more.

Back in September 2001, Rumsfeld put it this way: "We have a choice -- either to change the way we live, which is unacceptable, or to change the way that they live; and we chose the latter." In this context, "they" represent the billion or so Muslims inhabiting the greater Middle East.

When Rumsfeld offered this statement of purpose and President Bush committed the United States to open-ended war, both assumed that U.S. military supremacy was beyond dispute. At the time, most Americans shared that assumption. A conviction that "the troops" were unstoppable invested the idea of transforming the greater Middle East with a superficial plausibility.

Yet by the time Gates spoke last month, the limits of American military power had long since become apparent. In Iraq and Afghanistan, the opening rounds of the generational campaign are now well underway. By historical standards, each qualifies as a fairly small war. In neither case, however, have U.S. forces been able to achieve decisive victory. In both cases, barring drastic changes in U.S. policy, fighting will drag on for years to come.

In the meantime, what has the Long War achieved? The answer to that question is indisputable: not much. Counting on military might to change the way they live isn't working. If anything, the effort has backfired.

Since 2001, the price of oil per barrel has quadrupled, adversely affecting all but the wealthiest Americans. Efforts to spread democracy have either stalled or succeeded only in enhancing the standing of groups like Hamas and Hezbollah. The much-hyped Iraqi nuclear threat turned out to be illusory. To sustain the overstretched American imperium, we are accumulating debt at a staggering clip. And with U.S. soldiers shouldering repetitive combat tours, the strength of our army slowly ebbs away.

Meanwhile, the immediate danger to the American way of life comes not from terrorists but from our own adamant refusal to live within our means. American profligacy, not Islamic radicals, triggered the mortgage crisis that underlies our current economic distress.

Bluntly, the Long War has proved to be a monumental flop. Yet Gates, channeling Rumsfeld, would have us believe that perpetual war constitutes the sole option available to the world's most powerful nation. This represents a profound failure of imagination. It also misreads our own history.

The truth is that the United States, with rare exceptions, has demonstrated little talent for changing the way others live. We have enjoyed far greater success in making necessary adjustments to our own way of life, preserving and renewing what we value most. Early in the 20th century, Progressives rounded off the rough edges of the Industrial Revolution, deflecting looming threats to social harmony. During the Depression, FDR's New Deal reformed capitalism and thereby saved it. Here lies the real genius of American politics.

Rumsfeld got it exactly backward. Although we do face a choice, it's not the one that he described. The actual choice is this one: We can either persist in our efforts to change the way they live -- in which case the war of no exits will surely lead to bankruptcy and exhaustion. Or we can recognize the folly of generational war and choose instead to put our own house in order: curbing our appetites, paying our bills and ending our self-destructive dependency on foreign oil and foreign credit.

Salvation does not lie abroad. It's here at home.

Fox Reporter Pwned by Catholic Priest

Sat, 19 Apr 2008 13:31:42 -0700

David Einhorn: Private Profit and Socialized Risk

Fri, 18 Apr 2008 12:19:13 -0700

speech(.pdf) from the Grant's Spring Investment Conference:
April 8th

A great read. Introduces a term I have not heard before: Value-at-Risk.

Who controls account number 990N?

Fri, 18 Apr 2008 08:49:48 -0700

from The Daily Reckoning

A Reader Writes…

"…My firm and I have contacted the Merc on three different occasions with video proof that I recorded of my trading. It shows blatantly this guy crossing his orders thousands of times a day. The first person we talked to in compliance admitted that he saw something there when they reviewed the video of the trades I taped of him. He was mysteriously fired the next day…"

Only have a minute, but will write more later but…The entire S&P price action in the Futures is being controlled by one counter party. All the guys strongly hate them: their CME clearing number is 990N and they clear through Gelber trading.

That one account is solely responsible for the current level of the S&P.

They are the ones that are throwing the S&P up overnight.

Then they are the ones that are sitting on the bid all day long, supporting the market action. The S&P pits have been decimated, absolutely ruined.

There is no volatility, so all the traders have left.

Now the hot pit is the Eurodollar pit. Go figure, that used to be like watching paint dry.

All the traders I have talked to view the market as being rigged.

They keep waiting for the price action to break loose, but it never does.

They are stunned by the lack of volatility. And furious. Time after time after time 990 just sits there on the bid. Don't they ever go away. They just absorb the entire market and then push the price wherever they want it to go. "Gee, I wonder who that counter party is." They are all terrified of shorting, because every time they do, they get drilled. I thought it was just my systems that weren't working that well, but they are far more dispirited than I.

Intervention at its finest, your tax dollars at work, providing the ultimate tax to us all.

We have watched 2000 contract market orders on the Bid at key down levels of - 50 and - 100 on those rare days when 990N decides the program trading will revert to a well-defined pattern of "allowable" retracements. The Mini's are being rigged in order to provide "support" for swollen price levels. They have to be for now, as without the daily rigging, "Price" would revert to its inherent "Value", a disturbing proposition to those benefiting from the financial economy's adolescent denials.

Counterparties provide an important function in any exchange, liquidity. Given the incessant "intervention" by 990N, there is very little liquidity beneath these markets to provide real support.

I am actually writing you to alert you to this complete market manipulation and to see if you had any pull to get the word out to different traders and the media. I am one of the biggest S&P traders in the world as far as volume per day in that I average over 40,000 round turns per day on the screen in the e-mini. I tell you this because that is how I know one house is completely manipulating the market everyday because of all the trades I do with this guy. I know it sounds hard to believe that one person can control a world market but trust me: this is occurring. He works for the firm Gelber, which is house 990.

This is the basic premise for his game. He waits until the market is relatively slow, around 9:30 to 10:00 everyday, usually when the "paper trade" starts to subside then he begins a theme, mostly always long and he begins to buy. He is always looking for confirmation of his theme with what other people are doing.

When the market stops trading in his direction he then drops in a offer of 300 to 700 which he sees if anyone is interested in buying it. If there is no interest he then buys the order from himself, with the order actually trading. He does this enough times until he attracts other buyers which then hits price points and the market runs violently in his direction.

I am sure I do not have to tell you that this is completely illegal to do. He started doing this with 300 lots back in November, now he has made so much money doing it that he is up to 2000 lots. He is completely in control of the market (illegally) the majority of the time.

My firm and I have contacted the Merc on three different occasions with video proof that I recorded of my trading. It shows blatantly this guy crossing his orders thousands of times a day. The first person we talked to in compliance admitted that he saw something there when they reviewed the video of the trades I taped of him. He was mysteriously fired the next day.

We then came up with more examples for them to review and in the beginning claimed he wasn't doing it. We called them a third time, this time talking to the head of compliance and he finally admitted that they had the guy under investigation because they saw something, but in the meantime he is still allowed to trade and make millions until their "investigation" is concluded.

They obviously love the volume the guy is putting up and how it makes the emini S&P look from a standpoint of a liquid market. But if the public had knowledge of what this guy was doing I don't think they would be too impressed with the liquidity.

There is obviously some kind of cover-up. Do any of the pit traders you know have knowledge this is happening? And do you have any advice on how I can anonymously get the word out with what this guy is doing? I know you are not a true tick by tick "scalper," but this is getting to the point where it is starting to effect everyone in the marketplace.

Please let me know what you think.

Kevin Phillips on NPR

Tue, 15 Apr 2008 10:57:29 -0700

Steve Inskeep interviews Phillips about his new book: Bad Money: Reckless Finance, Failed Politics, and the Global Crisis of American Capitalism.