Thursday, January 31, 2008

Mukasey: Why Was He Ever Confirmed~ Amnesia Sets In~

~It's not as if he's changed his tune all that much, & as with all prospective politicos, tells you what he thinks you want to hear until the morning after ~
Democrats, & even some Republicans, regret drinking the kool-aid, but only when the hangover won't go away.
Remember this, last November, in the NYT, reporting on Michael Mukasey's nomination as the 3rd Attorney General to serve under Bushco?
"Six Democrats joined 46 Republicans and one independent in approving the judge, with his backers praising him as a strong choice to restore morale at the Justice Department and independently oversee federal prosecutions in the final months of the Bush administration.
"Thirty-nine Democrats and one independent opposed him.
'The Department of Justice needs Judge Mukasey at work tomorrow morning,' said Senator Arlen Specter of Pennsylvania, the senior Republican on the Judiciary Committee. 'The Department of Justice has been categorized as dysfunctional and in disarray. It is in urgent need of an attorney general.'
"But Democrats said Mr. Mukasey’s refusal to characterize waterboarding, an interrogation technique that simulates drowning, as illegal torture disqualified him from taking over as the nation’s top law enforcement official.
'I am not going to aid and abet the confirmation contortions of this administration,' said Senator Patrick J. Leahy, Democrat of Vermont and chairman of the Judiciary Committee. 'I do not vote to allow torture.'
"All five senators who are running for president -- Joseph R. Biden Jr., Hillary Clinton, Barack Obama, Christopher J. Dodd, all Democrats, and John McCain -- did not cast votes. The four Democrats had said they would not support Mr. Mukasey because of his equivocation during the confirmation hearings over whether waterboarding is torture. Mr. McCain has also denounced the interrogation method but he issued a statement last week saying he would vote to approve the nomination.
"Mukasey was initially hailed by Democrats as a leader who would bring welcome change to the Justice Department. His nomination had been recommended by Senator Charles E. Schumer, Democrat of New York, a member of the party leadership familiar with Mr. Mukasey from his service on the bench in New York.
"On the first day of his confirmation hearings, Mr. Mukasey said he would resign if directed by the White House to take any action he believed was illegal or violated the Constitution, winning Democratic praise. On the second day of his testimony, Mr. Mukasey sidestepped the question of whether waterboarding was torture and also suggested that the president’s Constitutional powers could supersede federal law in some cases.
"Those responses stirred strong Democratic opposition, throwing his confirmation into question. Trying to stem the rising opposition, Mr. Mukasey said that while he personally found the concept of waterboarding repugnant, he could not pass judgment on whether it was illegal because he had not been briefed on administration interrogation techniques.
"Senator Dianne Feinstein, Democrat of California, said she was confident that Mr. Mukasey would be nonpartisan and that his refusal to make a judgment on torture without knowing all the facts of interrogation policy should not keep him from the post.
'This man has been a judge for 18 years,' said Ms. Feinstein, who along with Mr. Schumer provided the key supporting votes to push Mr. Mukasey through the Judiciary Committee. 'Maybe he likes to consider the facts before he makes a decision.'
"But she was in conflict with most of her Democratic colleagues. Senator Harry Reid of Nevada, the Democratic leader, opposed the choice even though he said he was predisposed to back Mr. Mukasey.
'During his confirmation hearings, Judge Mukasey expressed views about executive power that I and many other senators found deeply disturbing,' Mr. Reid said. 'And I was outraged by his evasive, hair-splitting approach to questions about the legality of waterboarding.'
"Republicans hailed Mr. Mukasey and accused Democrats of stalling the nomination and focusing on the torture issue to score political points. 'The Department of Justice has a vital role to play in the war against Islamic terrorists, and it is critically important that it have a leader who can ensure that it fulfills its mission,' said Senator Jon Kyl, Republican of Arizona. 'Judge Mukasey is this kind of leader.'
That was then, this is now: Mukasey takes Bush direction well, adopting familiar nonsensical positions.
Dahlia Lithwick, one of my favorite legal commentators, points out in an article on Slate that:
.."Where Gonzales tended toward weaselly whininess, Mukasey is inclined toward curt directness. In response to an elaborate three-part question from Sen. Chuck Grassley, R-Iowa, toward the very end of a very long day, Mukasey responds, 'It is, we are, and I do.' Where Gonzales invariably blamed some faceless 'senior leadership of the department,' Mukasey is willing to shoulder sole responsibility for his decisions.
"The problem is that Mukasey is only willing to make and defend his decisions without explaining them. Still, he is very convincing in asserting that even though his decision is secret and its rationale is secret, and all future applications are secret, he is nevertheless confident that it's the right decision.
"As you'll recall, last October, nominee Mukasey promised the Senate that while he couldn't yet offer an opinion on the legality of the alternative interrogation technique called water-boarding, he'd be able to do so once he was 'read into the program.' As you may also recall, that nonanswer came close to scuttling his nomination. Last night, Gen. Mukasey let the Senate know in a sort of constitutional Dear John letter that he wouldn't opine on water-boarding today either, both because we stopped doing it and because it's 'not an easy question.'
"In other words, having set about diligently to scrutinize the legality of the interrogation program, its legal justifications, and its applications, the nation's top lawyer has come up with this lawyerly answer: It depends.
"Over the course of a long, maddening day, it's quickly manifest that Mukasey's legal opinions have a 30-second shelf life. He won't opine on what's happened in the past and he won't opine on anything that might happen in the future. When Sen. Arlen Specter—concerned about seven years of vast new claims of executive authority—asks Mukasey whether, in his view, the president 'can break any law he pleases because he's the president—including, say, statutes banning torture,' as well as FISA and the National Security Act, Mukasey replies, 'I can't contemplate any situation in which this president would assert Article II authority to do something that the law forbids.'
'Well, he did just that when he violated the Foreign Intelligence Surveillance Act,' Specter shoots back. Mukasey's response? 'Both of those issues have been brought within statutes.'
"Specter is flabbergasted: 'But he acted in violation of statutes, didn't he?'
'I don't know,' Mukasey replies. But does is really matter? What's past is past.
"Enter Sen. Ted Kennedy, D-Mass., as the ghost of Christmas Future. Even if Mukasey won't opine on past water-boarding, might he give some future guidance for future torturers? 'In your letter,' says Kennedy, 'you wouldn't even commit to refuse to bring water-boarding back, should the CIA want to do so. You wouldn't take water-boarding off the table! … Under what facts and circumstances would water-boarding be lawful?'
"But Mukasey won't speculate about future water-boarding, either, claiming he will not be drawn into 'imagining facts and circumstances that are not present and thereby telling our enemies exactly what they can expect in those eventualities.' He also refuses to tell 'people in the field ... what they have to refrain from or not refrain from in a situation that is not performing.'
"Just to be clear then, to the extent that there is any purpose to the law, i.e., to punish past bad acts and to alert people as to what types of conduct will be punished in the future, the attorney general has just obliterated that purpose. Unless someone were to actually be water-boarded before Mukasey's eyes at the witness table in the Hart Senate Building, America's lawyer cannot hazard an opinion as to its legality.
"Joe Biden, D-Del., gets Mukasey to obfuscate even further. Mukasey explains to Biden that the legal test for torture—conduct that 'shocks the conscience'—has less to do with shocking the conscience than the exigency of the situation.
Under his test, torture that 'shocks the conscience' can be 'balanced against the information you might get that couldn't be used to save lives.' That's not a legal rule. It's a judgment call.
"Biden calls him out on it: 'You're the first person I've ever heard say what you just said ... I just never heard the issue of torture discussed in terms of the relative benefit that might be gained from engaging in the technique.'
Russ Feingold, D-Wisc., pounds away at Mukasey's claim that he can't define water-boarding as torture without 'tipping off our enemies about how we apply our laws.' If that's so, wonders Feingold, 'How could you ever prosecute such acts as crimes?' Mukasey replies that a subcontractor was once prosecuted for abusing a detainee. See? Problem solved.
"Dick Durbin, D-Ill., gets off the best line of the day when—citing Mukasey's statement that 'reasonable people can disagree' about the legality of water-boarding—he asks the attorney general to name some on the pro side.
"And Sheldon Whitehouse, D-R.I., tries to get Mukasey to explain why the Justice Department is investigating the destruction of the CIA torture tapes, but not investigating the underlying torture itself.
"Mukasey's reply, 'I don't start investigations out of curiosity,' speaks for itself. When Whitehouse tries to get Mukasey to agree that they both know enough classified information to have a very concrete, nonspeculative legal discussion about whether what happened on those tapes is legal, Mukasey again insists that whether or not what happened on those tapes is legal is about which 'certifications were given' and 'who permissibly relied on it.'
"Whitehouse calls this the 'Nuremberg defense. ... I had authorization and therefore I'm immune from prosecution.'
"More and more frequently, we hear members of the Bush administration crying about the evils of "lawfare"—the notion that foreign policy gets decided in courts, and government actors are paralyzed by future legal liability and unable to act boldly to protect us. You'd think the answer would be to clarify for those government actors what the rules are, so they might conform their behavior to protect themselves. But in the new Bush/Mukasey construction, rules tip off the enemy, so it's better to make them up in secret as you go along."
"Thank You. Now Go to Hell":
Yes, Democrats who voted for Mukasey, the Democratic presidential candidates who conveniently stayed out of it, & even some Republicans are all now belatedly waking up to find the new AG-Prince Charming not only has feet of clay & looks a lot like George Bush (eek!) but farts under the covers.


Tuesday, January 29, 2008

So Long, Mr. Bush

~ Did anyone out there in TV Land really pay any attention to POTUS'S last SOTU adress? Me neither ~
Your Demon admits to having walked past the TV several times & to listening from the kitchen, but admit it ~ after almost 8 years of the fellow, even the sound of his voice makes ya cringe, doesn't it?
And I really can't help, every time I have to bear witness to his latest stupid stunts ~ never mind watch him deliver a speech as the President with the glowering evil visage of Dick Cheney perched over his shoulder ~ I can't help but think, if only the Democrats had had the spine to start investigations with an eye to impeachment, I wouldn't have to witness the sorry spectacle, & the entire world would be with me in breathing a huge sigh of relief ("those arrogant, crazy, politically-highjacked Americans have come to their senses, finally!") That's my dream, anyway.
But the disappointing reality is that they're still in office, & predictably, Bush used most of his time to continue the relentless pounding on the drums of war. Really, those two won't be satisfied until the entire Middle East is engulfed in flames.
I kept hollering from the kitchen, "Has he talked about the economy yet?" I must have lost interest entirely before he got to it, because I wandered off, yet the press accounts say he did. Seemed to me NOT to be the focus, though. And no wonder.
History is going to judge Bushco harshly, & deservedly so. Along with spineless Democrats who could've done something but didn't~they'll fare no better, I'm guessing.
Your Demon was somewhat comforted to read this newsbit titled, "Congress Unlikely to Buy Bush Proposals" early this morning:
"A Democratic Congress is poised to heed President Bush's call to help save the economy, but may not give him much else after a State of the Union speech that recycled many of the administration's past initiatives.
"A lame duck president called again for immigration reform, an end to lawmakers' pet projects, control of Social Security spending and making tax cuts permanent. Democrats have rejected those Bush initiatives before..."
And Think Progress was on the ball with a piece debunking the Bushco favorite mythologies presented in his State of the Union address, claim for claim.
Even your Demon thinks it is tiresome beyond belief that Bush still thinks we're that stupid. He's still following the Rovian advice that got him elected in the 1st place ~ "repeat silly propaganda-talking-points- endlessly-until -enough- dumbbells-believe- them-to -be true" ~ hence the boast that that whole crew were "above the reality-based community."

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Saturday, January 26, 2008

A History Lesson for David Brooks & Other Laissez-Faire Opinionators

Duelling Views of the Economy From Two Voices ~ "Wretched Excess Just an Aberration" v. "We've Been Down This Road Before." Apparently, we have to save their greedy asses again!

First up, from David Brooks,
the conservative journalist who's not an economist, but who purports to bring us absolute certitude anyway. He helpfully points out that there are 2 narratives from which to choose regarding the economic pickle we're in & the go-go cannibal capitalists whose behavior has done so much to bring it about: the "greed narrative" & the ecology narrative." (Hint: the latter is pretty much "boys will be boys!")

"There is roughly a 100 percent chance that we’re going to spend much of this year talking about the subprime mortgage crisis, the financial markets and the worsening economy. The only question is which narrative is going to prevail...

"The Greed Narrative goes something like this: The financial markets are dominated by absurdly overpaid zillionaires. They invent complex financial instruments, like globally securitized subprime mortgages that few really understand. They dump these things onto the unsuspecting, sending destabilizing waves of money sloshing around the globe. Economies melt down. Regular people lose jobs and savings. Meanwhile, the financial insiders still get their obscene bonuses, rain or shine.

"The morality of the Greed Narrative is straightforward. A small number of predators destabilize the economy and reap big bonuses. The financial system is fundamentally broken. Government should step in and control the malefactors of great wealth.

"The Ecology Narrative is different. It starts with the premise that investors and borrowers cooperate and compete in a complex ecosystem. Everyone seeks wealth while minimizing risk. As Jim Manzi, a software entrepreneur who specializes in applied artificial intelligence, has noted, the chief tension in this ecosystem is between innovation and uncertainty. We could live in a safer world, but we’d have to forswear creativity.

"The United States has generally opted for financial innovation. This has worked out pretty well. The U.S. has enjoyed 25 years of strong economic growth, in part because capital has been efficiently allocated to companies that can use it well.

"Financial instruments like adjustable-rate and subprime mortgages have allowed millions of people to get homes they could not otherwise purchase, and research shows that most of these tools have been used intelligently.

"Hedge funds have proliferated to help investors manage risk. These things exist precisely because investors want to smooth out volatility. In the old days, a blow to, say, the Texas economy could have dried up lending in Texas, but now funds flow globally, and money from one part of the world can shore up weakness in another.
As Sebastian Mallaby of the Council on Foreign Relations has pointed out, time and again hedge funds have dampened market instability. If a currency, a company or a stock market starts to spiral downward, deep-pocketed funds, smelling bargains, will come in and stabilize its assets. If a company’s price is rising to unsustainable levels, contrarian funds bet against the hype.

"Most of the time, the complex new instruments diversify risk and serve the public good. But life requires trade-offs, and, as we’re being reminded this week, the innovation process involves a painful adolescence.

"When a new instrument enters the market, it takes a while before people understand and institutionalize it. Whether the product is high-yield bonds or mortgage-backed securities, there’s a tendency to get carried away.

"In the first stage of this adolescence, investors look around and see everybody else making money off some new instrument. As Nicholas Bloom of Stanford notes: “They assume they are fine because they see everyone else buying it.” Individual bankers have a special incentive to get in on the ride because their yearly bonus is determined by how they do in the short term.

"Then there’s a moment when people realize how stupid they have been. They’ve bought a pile of subprime mortgages without really knowing what they’ve purchased. The ratings agencies suddenly don’t look so reliable. The cycle of overconfidence becomes a cycle of underconfidence because nobody knows who is holding worthless paper.

"Then, finally, maturity sets in. Those who have lost great gobs of money get fired. People still find the new product useful, but within parameters and with greater safeguards.
The lesson of the Ecology Narrative is that, in most cases, the market corrects itself. Maybe this year banks will change their pay structure so there’s not so much emphasis on short-term results. Maybe companies will change their boards to improve scrutiny over complex new instruments. In short, markets adapt.
People who embrace the Ecology Narrative don’t like the offensive bonuses that get handed out on Wall Street. They just don’t see any way the government can curtail them without rending the fabric of the ecosystem. They don’t like the periodic crises, but don’t see how government can prevent them without clamping down on innovation. The challenge is to give people the means to withstand the perturbations.

"The Ecology Narrative is not morally satisfying. I wouldn’t bet on its popularity as a backlash against Wall Street and finance sweeps across a recession-haunted country.
But the Ecology Narrative has one thing going for it. It happens to be true."

What happens to be true, actually, is that David & other apologists for the sorry mess we're in fail to mention is that, no, Wall Street is not going through an unfortunate adolescence. They've already been through it, dragged the entire country under, & Republicans have failed to learn from the miserable experience. Ever hear of the Gilded Age of Robber Barons & the Great Depression that followed it, David? ~ Stay tuned as we educate you~

Recent history lessons

For the David Brookses of the world *in denial or blinded by ideology*, here's an informative read from 2002 by Robert Kuttner, educated at the London School of Economics & a co-founder of the American Prospect about the parallels to that era this. Then, it fell to liberals to save capitalism from itself. Kuttner points out that crony capitalism was practiced by Bush himself (according to the article, he benefitted from insider stock sales when he was CEO of Harkin Energy) so neither he, nor any other lasseiz-faire fantasists who profited can be said to be credibly neutral on the topic, having succeeded in disembowelling protections that the New Deal liberals put into place ~ to prevent just what we've been seeing take place before our very eyes ~ following on Enron & other debacles ~ another meltdown that has the potential to grow into a full-fledged crisis.
"While the New Deal is commonly remembered for its public-spending and social-insurance legacies, its regulatory changes were at least as important to the stabilization of capitalism. The Roosevelt administration initiated much tougher regulation of banking, securities underwriting, accounting, electric power, civil aviation, telephones, broadcasting and labor relations. It added new teeth to pre-existing regulatory agencies in charge of railroads and trucking, as well as antitrust.

"The rationales for the new spate of regulation were diverse, often ad hoc and even contradictory. One strand of regulation addressed the problem of ruinous competition. In a normal economy, competition is good. But in a depression, if companies keep cutting prices and laying off workers, the result is a general downward spiral. Some of the New Deal's regulation was aimed at stabilizing prices and breaking the cycle of deflation. Other regulations set rates--in order to stabilize emergent industries, such as airlines, power companies and telephones--by assuring profits high enough to stimulate innovation and investment, but not so high as to gouge consumers.

"At its heart, however, New Deal regulation was about the stabilization of finance, for financial markets are both the essence of the market system and its Achilles heel. Congress and the White House wanted to make sure that the conflicts of interest and speculative ruin that characterized the 1920s would never be repeated.

"New Deal regulation, entrusted to the new SEC, imposed standards on corporate governance, on the issuance and sale of stocks and bonds, on the accounting profession and on stock exchanges. New Deal banking regulation put a wall between the operation of commercial banks and the underwriting and sale of securities. It regulated bank interest rates, offered deposit insurance, and imposed new conditions on bank safety and soundness. All of this succeeded in stabilizing capitalism--for about 70 years.

"To infer a consistent theory of the economy from New Deal regulation, one might say: Some sectors of the economy need to be regulated for purposes of financial stability, some to introduce greater income security and equality, and some to provide social goods that markets don't efficiently deliver. But underlying all these kinds of regulation is a distrust of the market's ability to regulate itself, and a reliance on government to keep capitalism efficient and honest. This insight was the centerpiece of the modern Democratic Party.

"One is the vast waste of economic resources in speculative investments. Despite nonsensical tracts such as the book Dow 36,000, it's now clear that much of the stock run-up of the 1990s was an enormous bubble. Until the Enron affair, many analysts thought that the damage was limited to dot-coms and closely related technology companies. But as one corporation after another gets a new auditor and 'restates' its recent profits, it's evident that trillions of dollars of investment in far-flung corners of the economy went to no useful purpose. It remains to be seen how disastrous the assault on the real economy turns out to be, and how much lower the stock market has to fall.

"The second parallel is that much of the speculative excess was the result of conflicts of interests that could and should have been prevented. Bankers, brokers and corporate insiders all enriched themselves by temporarily pumping up stocks and contriving off-the-books deals.

"The whole system of compensation by stock option gave senior executives irresistible incentives to contrive phony profits and merger deals that made no economic sense. Corporate directors, never the arm's-length supervisors promised by market theory, were in fact cronies of the CEO. Auditors were in bed with their clients. All of this reflected the systematic dismantling of financial regulation, causing the economy to revert to the laissez-faire world of the 1920s, with its myriad attendant vulnerabilities. If the regulation of options-trading and electricity had not been undermined, Enron would have had to make its money in the old-fashioned way: selling real products and services and reporting honest earnings. If the Glass-Steagall Act had not been gutted by regulatory indulgence and then formally repealed, banks could not have enriched themselves by making profit-sharing deals with dishonest partners such as Enron. If the Congress and the SEC had not undercut the regulation of accountants, corporate books could not have been cooked to artificially inflate profits. If SEC oversight had held corporate directors personally accountable for their decisions and their lapses, corporate boards would never have approved many rotten deals. If stock options had been more tightly regulated, insiders would not have had an incentive to artificially pump up share prices in order to cash them in. What deregulation has produced is an economy and a culture rooted in conflicts of interest.

"The SEC already had the power to police most of these, but [the Republican] Congress directed it not to. And when Bill Clinton vetoed Newt Gingrich's bill that made it almost impossible for investors to sue for securities fraud, (see also Nice Work if You Can Get It I post re Supreme Court decision & Bush SEC intervention) Congress, with the support of many Democrats, passed it over Clinton's veto.

"Bush's law-and-order rhetoric and his call for longer prison terms for felonious CEOS misses the point utterly. What's needed is tighter scrutiny and clearer barriers to prevent such double-dealing at every step. Moreover, regulation is not a one-time action but an ongoing process. Financial scammers are always coming up with new gimmicks to circumvent existing prohibitions.

"For example, New Deal regulators, mindful that speculative stock investments in the 1920s were made substantially with borrowed money, limited that practice by regulating 'margin'--money lent to customers by brokers to finance direct stock investment. But margin is now archaic. You can speculate with borrowed money by investing in derivatives.

"Many of the abuses of the 1990s were the intended consequences of new inventions. The aggressive use of derivatives was new. The use of huge personal loans to executives to create off-the-books subsidiaries was new. Enron-style trading of futures was new. The ubiquity of options to reward CEOS was new. If the general conceit is that anything invented by markets should be celebrated as innovation and that any excesses will be disciplined by investors, existing regulations won't do the job, and there will be a bias against new regulation to counter new abuse. In the era that began with Reagan, when the market fundamentalism of The Wall Street Journal and the Heritage Foundation spread like an oil slick to the general media and the Democratic Party, markets got a free pass. When new scams were contrived, it took uncommonly courageous regulators such as SEC Chairman Arthur Levitt to call for new forms of regulation.

"That's why the counteroffensive needs to be much broader than a mere crackdown on the current spate of frauds. The mixed economy itself needs to be rehabilitated, and market fundamentalism disgraced.

"The economic commentator George Goodman, who wrote in the 1970s and 1980s under the pen name Adam Smith, liked to say that you don't see the bones until the tide goes out. A lot of the long-term damage to the economy is still hidden, and the tide is still going out.

"For example, it has almost been forgotten that the Federal Reserve has been keeping interest rates at historic lows in order to contain the damage of the first stock-market meltdown, the collapse of the dot-coms.

"Monetary policy to keep the economy afloat is already being used to its practical maximum. As Jeff Faux observes in this issue [See "Falling Dollar, Rising Debt," page 12.], America's chronic trade deficit is a source of hidden weakness that is suddenly far more precarious in a stock market meltdown. We finance the trade deficit by importing capital--about $400 billion a year. Until recently, the United States had no trouble importing that capital, despite our very low interest rates, because of America's reputation as the safest investment haven. But that inflow is now slowing, causing the dollar to lose value, and at some point the Federal Reserve will need to raise rates to keep foreign investors from fleeing--just as the economy is weakening.

"That will only slow economic growth and worsen the stock market slide. The late bull market also provided a lot of economic stimulus, which is now reversing. In the 1990s, institutions as well as individuals became addicted to the premise of a stock market permanently rising at four or five times the rate of economic growth. Pension funds that assumed a l0 percent normal annual return and thus were considered "overfunded" suddenly have far weaker balance sheets. So do many insurance companies. Large nonprofit institutions reliant on endowments--such as foundations, universities and hospitals--are suddenly a lot poorer. They must either curtail their existing operations or raise costs to consumers. So far, banks have not taken a big hit, but consumer and corporate debt are at record levels and bank profit margins are thin. A lot of banks overextended themselves in their own merger binge. As corporate stock prices fall, corporate ratios of equity to debt worsen. As the economy softens, bad loans mount. Banks would be in even worse shape were it not for the fact that some tougher supervision by examiners was restored in the wake of the banking and savings-and-loan scandals of the 1980s. And as the banks' own prices fall, their own debt-equity ratios deteriorate. As the stock market has softened, a lot of money has poured into real estate--the last safe haven. But real estate is built and purchased with borrowed money, and offices and apartments need tenants. If the real economy falters and vacancy rates keep rising, the real-estate boom could be the next bubble, and another key sector would succumb to debt deflation.

"It's hard to think of any large sector of the economy that is immune to what is now unfolding. But aren't rates of productivity growth impressively high? And didn't the economy bounce back smartly from both the dot-com crash and the shock of September 11? Yes on both counts, but productivity is not relevant when the problem is a financial implosion. If retirees lose their stock portfolios and workers their jobs, the money to purchase products--no matter how efficiently produced--dries up.

"The history of capitalism is replete with eras in which new inventions made the real economy highly productive but chaos in the financial sector still dragged it into depression. The 1930s was a time of technological progress, in electronics, automobiles, telephones, electric power generation and basic science. But none of it was sufficient to compensate for the financial hangover and the shortfall of total demand. Japan still makes countless products more efficiently than anybody else, but its financial mess has kept it in a self-perpetuating slump. Although the economy still retains a lot of momentum, at some point all of this corporate unwinding has to translate into a slowdown of growth and a rise in unemployment.

"Ideally, the carnage will be contained--it will be enough to discredit laissez-faire and corporate excess, but not so serious that it produces a prolonged slump. Thanks to the part of the New Deal that the right has not managed to repeal, the economy is far more resilient than it was in 1929. Social Security, welfare checks and unemployment compensation are far from adequate, but they do prevent the bottom from falling out of consumer demand. Despite the efforts of the right to condemn the interference with free markets, bank deposits are still insured. The Federal Reserve, given new powers in the 1930s to be a lender of last resort, is a lot more savvy and effective than it was in 1929. Total public spending is about one-third of GDP, and this provides a lot of ballast.

"The more venturesome Democrats have assembled an adequate package of reforms to deal with the financial abuses now unfolding. Taken together, legislation sponsored by key Democrats would sever auditing from consulting, require a majority of corporate directors to be independent, tighten accounting standards across the board, define new categories of corporate criminal fraud, constrain exorbitant stock-option compensation to insiders, protect ordinary employees' pension plans and hold senior executives criminally liable for fraudulent practices that are now beyond prosecution. Republicans are already backing some of these measures in spite of themselves. (A nice summary is on Rep. Richard Gephardt's Web site,

"None of this is 'anti-business.' It is emphatically pro-business in that it prevents the squandering of capital for personal enrichment and because it is necessary to restore investor confidence. Such measures are only the beginning of a long struggle to wrest back a mixed economy. The unleashing of market forces has been harmful to ordinary people and to the modern liberal project in ways that go far beyond the harm inflicted in the current crisis. Why, for example, don't Americans have decent health care? Because the health-care industry wants it that way, and because the ascendant ideology says that markets can do the job better than government-sponsored insurance. Ordinary experience and scholarly evidence both demonstrate that market provision of health care is a disaster.

"But the ideological conventions of the era blind politicians to what their own constituents know and desire. By the same token, the problem with retirement security isn't just that some 401(k) plans are inadequately regulated and at risk of being looted. Half of America's workers have no pensions at all save Social Security, and they will only get pensions when government policy demands it.

"The free market is supposed to solve this problem, but it doesn't. The voucher craze, lately supported even by some Democrats, is another money-making scheme relying on the spurious claim that markets are superior to public investments. The view that lifesaving drugs are commodities rather than social goods is yet another market conceit.

"Bush's appalling tax cut reflects the belief that personal income is entirely private rather than subject to social claims. And the ultimate manifestation of the laissez-faire's hegemony is the global free market, in which speculative money flows periodically wreck the economies of developing countries, undercut labor and environmental regulation in advanced democracies, and invite the creation of tax havens for the wealthy.

"The market fundamentalists also insist that the deregulation of particular industries, such as airlines and telephones, saves consumers hundreds of billions of dollars by cutting prices. But these calculations leave out the sheer economic waste that occurs when a natural monopoly such as telephone service is fragmented. They ignore the huge financial loss that results from hundreds of billion dollars of duplicative investments and bankruptcies...deteriorating service ... and the lost wages to workers when high-wage industries become hypercompetitive low-wage sectors.
"Can Liberals Save Capitalism Again?"
Author Bio:

"The entire set of free-market era claims are due for scholarly reappraisal and broad political challenge. Just as the soaring stock market and the cult of the CEO gave prestige to markets and deregulation generally, so the disgrace of corporate capitalism is an opportunity to dethrone the role of the market generally. Only when that occurs will the liberal project regain the momentum that it enjoyed in the mid-20th century. Ordinary people are able to connect the dots, if leaders will only lead. It's a pity that it took this kind of crisis to open the door. Lately it has been the right, not the liberal left, that it is ideologically serious. But ultimately, in this pragmatic country, nothing fails like failure.

And furthermore: Paul Krugman, another economist, on why tax rebates for those already paying taxes (& doing well, presumably,) isn't likely to be an effective stimulus:

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Thursday, January 24, 2008

Nice Work If You Can Get It, Pt. Two

Ill: Wizard of Whimsy
More from the Frontlines of the War to Protect Rich Peoples' Preogatives:
Heretic liberals take untoward advantage of economic woes to taunt proven money makers (well, for themselves. at least). You should be outraged!
Robert Borsage, writing in support of the liberal agenda, dares to criticize the captains of cannibal capitalism whose hard work made this latest recession bearable for CEO's, & unfairly taunts former Citibank CEO Charles Prince. (Who really didn't get paid enough to take this crap!):
As long as the music is playing, you’ve got to get up and dance. We’re still dancing.
"These now-immortal words of former Citibank President Charles 'Chuck' Prince were uttered in July, as Citibank was about to lose billions in everything from mortgages to credit cards. Prince departed with a reported $68 million good-bye package. Stanley O’Neal, who led Merrill Lynch to write off a record $9.9 billion in last quarter, departed with a $161 million severance package.
"Now the top five Wall Street banks – three of whom racked up record losses – have announced that they are paying their employees a record $39 billion in year-end bonuses. Hemorrhaging losses, Morgan Stanley, Merrill Lynch and Bear Sterns had to increase the percentage of revenue they devote to pay to ladle out these bonuses. So much for pay for performance.
"Bank spokesman were not exactly lining up to justify this, but Jeanne Branthover, managing director of a global search firm, helpfully explained: 'It’s essential that pay is still there or you’re going to lose really good people.'
"Well. Is she talking about the really good people whose feckless speculation is now pushing the global economy into recession and will cost hundreds of thousands of Americans their homes? The really good people whose 'dancing' got so risqué that the somnambulant Federal Reserve just issued new regulations requiring bankers to assess whether the borrowers they are lending money to actually have a blue moon chance at repaying the loan? The wizards who, as Allan Sloan points out in The Washington Post, spent the last couple years buying back their stock at the top of the market, only to be forced to sell it off to foreign investors at the bottom in the desperate effort to keep from going belly-up?
Mean, mean Robert Borsage, attacking defenseless free-market capitalists when they're down!
But, in other news today, President Bush's Ronald Reagan Republicans, with neo-con lite Democrat friends like Nancy Pelosi & Harry Reid, struck a blow today in the much-vaunted "bipartisan effort" to inject some stimulus into the economy that the captains of commerce, despite their best efforts to buy bigger McMansions, more Beamers, stretch Hummers, small jets & expensive jewelry for their soon-to-be 2nd or 3rd wives, could not, by themselves, fulfull through no fault of their own.
Tax refunds for the working poor, extended unemployment benefits, & more foodstamps are OFF the table in the House of Representative's proposal.
Hooray! After all, who would the captains of industry (or money-churning, as it were) get to work for them as maids, office boys, clerks, secretaries & miscellaneous beancounters at slave wages if we gave the self-evidently UNDESERVING a break? Bush capped it by heroically vetoing for a 2nd time the Children's Health Insurance Plan expansion which would have spread the scourge of socialized medicine to their even more undeserving children.
If you insist in reading about the tawdry mess yourself:

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Tuesday, January 22, 2008

Study: Bush Lied About Iraq

259 times, to be precise

In the not-news-but-it-is-always-fun-to be- reminded department today, we look up from checking the status of our retirement accounts to learn that Bush lied us into war with Iraq, according to a pair of non-profit foundations on journalism & media.

"Bush led with 259 false statements, 231 about weapons of mass destruction in Iraq and 28 about Iraq's links to al-Qaida, the study found. That was second only to Powell's 244 false statements about weapons of mass destruction in Iraq and 10 about Iraq and al-Qaida.

"The center said the study was based on a database created with public statements over the two years beginning on Sept. 11, 2001, and information from more than 25 government reports,

"'The cumulative effect of these false statements — amplified by thousands of news stories and broadcasts — was massive, with the media coverage creating an almost impenetrable din for several critical months in the run-up to war,' the study concluded.

"'Some journalists — indeed, even some entire news organizations — have since acknowledged that their coverage during those prewar months was far too deferential and uncritical. These mea culpas notwithstanding, much of the wall-to-wall media coverage provided additional, 'independent' validation of the Bush administration's false statements about Iraq,' it said. ";_ylt=AsRTUAFZg8771RYorozu9Uas0NUE

Now go back to worrying about your investments, if you have any, or the lack of any social safety net if you don't. (See really lengthy diatribe below.) Bush took away the latter when you weren't paying attention ~ maybe you were hopefully wishing against hope that you'd never need it.

With the news of the heroic interest rates cuts today on top of an already weak dollar, your DP is worrying about inflation, food prices, etc., the things normal patriotic Americans think about. I advise y'all to stock up on canned tuna.


Monday, January 21, 2008

Pablum, Nostrum & Ronald Reagan's Magic Beans

Ill: Wizard of Whimsy

Bush's Fantasies About Economic Fixes Lacking in Substance or Details ~ Surprise!
~ Hoisted on the petard of the Ronald Reagan Magic Bean Theory of Economics, America is stunned as things reach a predictable impasse ~
In big kimchee, Bush uncharacteristically reaches out to Democrats in Congress (the only people in America whose approval ratings are lower than his own), Neo-con lite Harry Reid takes the bait.
Ah, the sainted RR, whose name is yet whispered reverently among the true believers (& whom even Obama has taken to praising recently ~ why, your Demon can't for the life of her fathom, but she can guess ~ politix indeed makes strange bedfellows)!
A brief history of economics in America since Reagan
All hail Reagan, he who 1st sold America on an economic program which started a long, debilitating process of eviscerating traditional American bulwarks of the middle class such as unions, ever-deeper tax cuts for the hyper-rich, trickle-down theories which remain just that ~ theories ~ all the way to the present time, along the way forcing the Clintons into a "centrist" strategy & "triangulation"(& "impeaching" Bill for sexual peccadilloes we now know that Gingrich, Guiliani & other luminaries of the neo-con movement, straight & gay, can't seem to resist either. But, hooray, they drove the immoral Clinton out of office, but not before he balanced the budget & left a surplus, all of which is just a memory now.)
Campaigning on tax cuts for the wealthy, an ideology impervious to fact & real life (though incapable of noticing, conveniently enough), Neocons since Reagan managed to get elected in sufficient numbers to carry the day, all of the above resulting in our time in a series of manic, illusory bubbles by which the rich became super-rich, manifesting the Gordon Gekko Creed (greed is good, & greedier is gooder yet) even though there is no industrial base in America anymore, full-time employment with benefits has been replaced by permatemps, & the primary foundation of prosperity is really just the empty activity of churning money markets.
And for icing on the cake, all hail Ronnie again for alerting us to dangers of the duplicitous Cadillac-driving welfare queens buying filet mignon with their foodstamps, a preposterous (& imaginary) bugaboo that even the Clintons bought into to keep the peace. So now, uh-oh, there are no more government social services left, universal healthcare is still just a fantasy, extended unemployment is taking even the skilled middle class by surprise (see WaPo article below), the stock market panic is spreading to Europe & Asia, & George has racked up untold deficit spending on his War on Terra & the Entire Middle East.
Back in 2003, we were warned by voices abroad that the "extreme" Republican fantasies of tax cuts for the rich while starving the social safety net was, in a word, suicidal.
'''The lunatics are now in charge of the asylum.' So wrote the normally staid Financial Times, traditionally the voice of solid British business opinion, when surveying last week's [U.S.]tax bill.
"Indeed, the legislation is doubly absurd: the gimmicks used to make an $800-billion-plus tax cut carry an official price tag of only $320 billion are a joke, yet the cost without the gimmicks is so large that the nation can't possibly afford it while keeping its other promises.
"But then maybe that's the point. The Financial Times suggests that 'more extreme Republicans' actually want a fiscal train wreck: ''Proposing to slash federal spending, particularly on social programs, is a tricky electoral proposition, but a fiscal crisis offers the tantalizing prospect of forcing such cuts through the back door.''
"Good for The Financial Times. It seems that stating the obvious has now, finally, become respectable.
"It's no secret that right-wing ideologues want to abolish programs Americans take for granted. But not long ago, to suggest that the Bush administration's policies might actually be driven by those ideologues -- that the administration was deliberately setting the country up for a fiscal crisis in which popular social programs could be sharply cut -- was to be accused of spouting conspiracy theories.
"Yet by pushing through another huge tax cut in the face of record deficits, the administration clearly demonstrates either that it is completely feckless, or that it actually wants a fiscal crisis. (Or maybe both.)
"Here's one way to look at the situation: Although you wouldn't know it from the rhetoric, federal taxes are already historically low as a share of G.D.P. Once the new round of cuts takes effect, federal taxes will be lower than their average during the Eisenhower administration. How, then, can the government pay for Medicare and Medicaid -- which didn't exist in the 1950's -- and Social Security, which will become far more expensive as the population ages? (Defense spending has fallen compared with the economy, but not that much, and it's on the rise again.)
"The answer is that it can't. The government can borrow to make up the difference as long as investors remain in denial, unable to believe that the world's only superpower is turning into a banana republic. But at some point bond markets will balk -- they won't lend money to a government, even that of the United States, if that government's debt is growing faster than its revenues and there is no plausible story about how the budget will eventually come under control.
"At that point, either taxes will go up again, or programs that have become fundamental to the American way of life will be gutted. We can be sure that the right will do whatever it takes to preserve the Bush tax cuts -- right now the administration is even skimping on homeland security to save a few dollars here and there. But balancing the books without tax increases will require deep cuts where the money is: that is, in Medicaid, Medicare and Social Security.
"The pain of these benefit cuts will fall on the middle class and the poor, while the tax cuts overwhelmingly favor the rich. For example, the tax cut passed last week will raise the after-tax income of most people by less than 1 percent -- not nearly enough to compensate them for the loss of benefits. But people with incomes over $1 million per year will, on average, see their after-tax income rise 4.4 percent.
"The Financial Times suggests this is deliberate (and I agree): 'For them,'' it says of those extreme Republicans, 'undermining the multilateral international order is not enough; long-held views on income distribution also require radical revision.'
"How can this be happening? Most people, even most liberals, are complacent. They don't realize how dire the fiscal outlook really is, and they don't read what the ideologues write. They imagine that the Bush administration, like the Reagan administration, will modify our system only at the edges, that it won't destroy the social safety net built up over the past 70 years."
What's a boy to do, besides standing by as Americans plead for foreign cash infusions & auction themselves off at fire sale prices to the highest bidder? Make it somebody else's (preferably the Democrats') problem! (See above).
The New York Times reported Friday that, after ignoring the signs for so long (much as he ignored the information that a crazy buncha militant Islamists were planning an attack on American soil), he had hastily pulled out a proposal "for roughly $145 billion in tax relief for individuals and businesses that he said would 'provide a shot in the arm' for the economy, while Congressional Democrats, in a rare show of Washington bipartisanship, pledged to work with him to enact a plan quickly.
"Mr. Bush laid out his ideas for an economic rescue package only in broad strokes, saying the plan must be 'built on broad-based tax relief' and 'big enough to make a difference in an economy as large and dynamic as ours.' He did not use the word recession, but acknowledged that 'there is a risk of a downturn.'

"His comments, in the Roosevelt Room of the White House, reflected a heightened sense of urgency within the administration and on Capitol Hill about the need to stimulate spending in an economy shaken by higher gas prices and instability in the housing and credit markets.
"Though the details must still be negotiated, both the White House and Congressional Democrats are leaning heavily toward a combination similar to the one the administration turned to in 2001 as a recession-fighting tool. It would include a one-time tax rebate for individuals and an immediate expansion in the deductions that businesses take for investment in equipment. If Congress acts quickly, checks could be in the hands of American taxpayers as early as spring.

"Still, there will be sticking points. In laying the foundation for a plan rooted in tax policy, Mr. Bush held fast to a central theme of his presidency, that cutting taxes, rather than increasing spending, was the route to prosperity. Democrats, by contrast, supported an extension of unemployment benefits, coupled with tax breaks aimed at the middle class. Some reacted warily, even as they praised Mr. Bush..."
Your Demon Sez: The Neocon Insane Mantra of Tax Cuts/ Rebates Alone Won't Cut It
Here's why, according to Charles Schumer, speaking on Fox. "The White House, for now, envisions providing one-time rebate checks to people who pay federal income taxes. That would leave out millions of the working poor, who do not make enough to pay income taxes but do pay Social Security and Medicare payroll taxes.
"Families of four earning less than $24,900 a year would not get a rebate under the White House approach, said Chad Stone, chief economist at the Center on Budget and Policy Priorities, a research group that focuses on how government programs affect the poor and middle class.
"He has estimated that about 22 million households file income tax returns but do not pay that tax because their earnings are so low. An additional 22 million households do not file a return, he said. This group includes many older people on fixed incomes, he said.
"Treasury Secretary Henry Paulson has said Bush 'is focused on broad-based tax relief for those who are paying taxes." Paulson said that worked in 2001 and 2003.
"The centerpiece of an economic aid plan should be a tax cut for the middle class, and the overall proposal could include relief for business and spending incentives for the unemployed, Schumer said.
"'I'm not going to draw any lines in the sand,' said Schumer. But he said any plan that does not carefully balance help for people making less than $50,000 with relief for those making $200,000 or more 'doesn't make much sense from either a fairness or economic point of view.'
"President Bush and Democrats in Congress have expressed an interest in working together to pass a plan quickly that could help the struggling economy. Schumer agreed on the need for fast action.
"'Partisan fights and dithering could only make whatever recession we're going to have worse,' Schumer said. 'There's a real spirit of compromise in Washington right now, a spirit of let's get together, put away the bipartisan differences, because the economy is in poor shape.'
"Schumer said that in a balanced plan,'the centerpiece would be a tax cut for the middle class and working families, and the bookends might be some business tax cuts as well as some spending stimuli for, say, people who are unemployed.'"
As Donna Summer once famously put it before the lights of the Disco were shuttered for a long, dark night: "Last chance for romance tonight."
Your Demon leads the way by announcing to the RR Republicans that if you think you're going to fuck us again, you've got another think coming. We want a real display of love & commitment that also says you won't run out when the chips are down (as they are, RIGHT now!) Time to pay for all the fun you've been having at our expense, & no, we don't really care that your foolishness has bankrupted you in the meantime. Don't forget who pays (more than) half the bills in this common enterprise. If you make nice & render a real apology & you're prepared to demonstrate you really mean it, maybe we'll think about it. Here's news for you Gordon Gekko types ~ you can't get as rich as you wanna be without taking care of us.
Republicans, don't make a bad situation worse by continuing to hammer on the Ronald Reagan magic bean theory, which is not improving with age. You've driven the country into bankruptcy & pulled the collective rug from under our feet. This is your LAST CHANCE to prove you're still on board with the broader well -being of the country economically, & sane. After all, what did those barons of commerce do with the hefty tax bonanza disproportionately allotted to them in 2003? If they actually created jobs doing something productive & tangible, they did it overseas. If they actually owed taxes as a result of the expansion, they moved their headquarters overseas to more favorable cardboard shack tax shelters seaside, or to Abu Dubai (Halliburton).
America, in the next Presidential election, choose a grown up, not another puppet of moneyed interests who can spout the rhetoric but can't see beyond it long enough to comprehend the damage he's foisted upon us collectively, nor the fact that we always have been the land of hard work & opportunity, not the land of the money-takes-it-elsewhere-so-we- don't have to pay our fair share.
Further reading:
Stocks Plunge Worldwide on Fear of US Recession:
Highly Skilled & Out of Work:
Very entertaining 1999 report on Bush's personal finances: [After driving his own oil businesses into bankrupcty, he could report] "No debts" & being a "multimillionaire":

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Friday, January 18, 2008

Hear, Hear: "History Will Hold Us Complicit If We Don't Impeach"

Ill: The Wizard of Whimsy
Tilting Toward Tyranny in America, & How to Fix It Constitutionally
Some Democrats (centrists & neo-con lites) have fallen under a spell of mass amnesia, or perhaps perceive themselves the defenders of an imaginary mass American Uniparty, it seems, when it comes to remedying wrongs that our Founders foresaw~ fresh from the trenches & fights with King George as they were. Politics will always tend toward authoritarianism, tyranny, & covert campaigns to cover it up. That's why they gave us the gift of impeachment.
The "can't we all just get along" route works only if one assumes one is dealing with reasonable persons, & your Demon would argue that's not the case with by-hook-or-crook-or propaganda power-at-any-cost Neocons. They've been very bold about it, after all, & we who still believe in democracy should push back with equal force. Else "democracy" be perverted into something unrecognizable ~ say, a campaign slogan for a war on terra.
Watch Representative Robert Wexler's speech about the support for impeachment (despite all the attempts to keep it off the table) & the fact that history has taught us (Watergate), that we really can't expect to learn the full extent of what really happened until we commit to investigate. Seems we have plenty of preliminary evidence to suspect some really rotten stuff at the core:
Read the WaPo's series on Dick Cheney, and the radical changes to the office of Vice President under him:
Watch the PBS Frontline documentary The Dark Side online. "Amid revelations about faulty prewar intelligence and a scandal surrounding the indictment of the vice president's chief of staff and presidential adviser, I. Lewis "Scooter" Libby, FRONTLINE goes behind the headlines to investigate the internal war that was waged between the intelligence community and Richard Bruce Cheney, the most powerful vice president in the nation's history."

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Saturday, January 12, 2008

Nice Work If You Can Get It

Good News for Latter-Day Robber Barons ~ Social Darwinism Wreaks Havoc on the Economy Again

Wherein your Demon is inspired, Horatio Alger-style, to want to be CEO of Halliburton, KBR, any Oil Company, or a Mortgage Banker. All upside, no down, unless of course you're a working Joe (& who cares about you)

It's the roaring '20's again in Bushworld, kittens, & cause to celebrate ~ that is, if you were shrewd enough to maneuver yourself into a favorable position. (As for the rest of you ~ too bad ~ to the winners go the spoils. There's no public social safety net left, so you'll either be forced to compete with low-wage undocumented aliens forced North in desperation by NAFTA, or beg in the streets, & that's the way we like it. )
Another update: "Judicial Activism we like." Supreme Court decides "the most important business case in decades," ignores Bushco SEC interventions in favor of hampering investor actions against companies fraudulently inflating stock value. (Only government gets to play.) Justice Roberts sells stock in one of the alleged manipulator's parent company so as to be able to weigh in with a clear conscience.
Result: court ignores how manipulation really works & who is really hurt, Enron cases go down the drain ~ so sorry, suckas!
From Scotusblog:
"The Supreme Court, in one of the most important securities law rulings in years, decided Tuesday that fraud claims are not allowed against third parties that did not directly mislead investors but were business partners with those who did. The 5-3 ruling came in Stoneridge Investment Partners v. Scientific-Atlanta (06-43).
"Investors, the Court said, may only sue those who issued statements or otherwise took direct action that the investors had relied upon in buying or selling stock — whether that involved public statements, omissions of key facts, manipulative trading, or conduct that was itself deceptive. One impact of the decision is likely to be the scuttling of a massive $40 billion lawsuit against financial institutions growing out of the Enron scandal. The Court has a case on its docket involving that very dispute, and Tuesday’s ruling will be followed up soon, perhaps by next week, with action on that case — California Regents v. Merrill Lynch, et al. (06-1341).
"Justice Anthony M. Kennedy, who wrote the Stoneridge ruling, said the private right to sue for securities fraud 'does not reach the customer/companies' [who allegedly participated in perpetrating the fraud] because the investors did not rely upon their statements or misrepresentations.”
"The ruling upheld a decision by the Eighth Circuit Court rejecting claims against Scientific Atlanta, Inc., and Motorola, Inc. The investors contended that those two companies helped a giant cable TV firm, Charter Communications, inflate artificially its financial statements in order to bolster its stock’s price. The investors contended that the two companies should be treated as 'primary violators,' even though they had not themselves issued any public statements to advance the alleged manipulation plot.
"The scheme challenged in the case was carried out in the fall of 2000. Investors claimed that the plot was designed to improve the public appearance of an adequate opeating cash flow for Charter by getting its business partners in TV set-top boxes to engage in 'sham' deals under which Charter paid extra for the boxes, but the companies simply turned around and paid that money to Charter in advertising at above-market rates on its cable TV outlets. The result, the lawsuit contended, was to generate some $17 million in phony revenues, so that Charter’s cash position – in reality, a shortfall of $15 to $20 million — did not appear to be below the amount projected by the company and by stock analysts. After losing in the Eighth Circuit, the investors took the case to the Supreme Court, arguing that 'the simplicity of the scheme was trumped only by its brazenness.'
"The plot led to a federal indictment against two of Charter’s officers, and a cease and desist order against that company by the Securities and Exchange Commission. The Stoneridge investors’ lawsuit was also aimed at Charter and some of its officers. The appeal to the Supreme Court, however, only involved the dismissal of their claims against the vendors, Scientific Atlanta and Motorola. Also sued in the case was the now-defunct accounting firm, Arthur Andersen (which went under after its role in the Enron scandal), but it, like Charter, was not involved in the case before the Supreme Court.
"The case involved what has been called 'scheme liability'” in which everyone involved in a plot to deceive securities investors would be legally at fault, whether or not each of them had issued any public statements. The Securities and Exchange Commission had previously supported such liability, and wanted to enter the Stoneridge case to say so, but its participation was vetoed by the Bush Administration, with President Bush and Treasury Secretary Henry Paulson directly involved in the decision to keep the SEC out of the case. The Court took the case apparently to resolve a dispute among federal appeals courts on the issue.
"The private right to sue at issue is one that has been created by court decisions, not by a direct federal statute. Justice Kennedy said that Tuesday’s ruling limiting the range of such a lawsuit was 'consistent with the narrow dimenions we must give to a right of action Congress did not authorize when it first enacted the [Securities Exchange Act of 1934] and did not expand when it revisited the law.'

"In ruling Tuesday that Scientific Atlanta and Motorola could not be sued, Kennedy wrote that the two outside companies 'had no duty to disclose; and their deceptive acts were not communicated to the public. No member of the investing public had knowledge, either actual or presumed, of [the two companies’] deceptive acts during the relevant times. [Stoneridge], as a result, cannot show reliance upon any of [the companies’] actions except in an indirect chain that we find too remote for liability'
"Noting that the investors had argued that Scientific Atlanta and Motorola had done what they did with the aim, and the result, that a false appearance was created about Charter’s revenues, and that what Charter said publicly was 'a natural and expected consequence' of the suppliers’ deception, the Court said this was not a sufficient link in the chain toward liability.
“In effect,” Kennedy wrote, Stoneridge 'contends that in an efficient market investors rely not only upon the public statements relating to a security but also upon the transactions those statements reflect. Were this concept of reliance to be adopted, the implied cause of action would reach the whole marketplace in which the issuing company does business; and there is no authority for this rule'
However, your Demon adds, such a rule would have a salutary effect on the honesty of the market as a whole ~ tort law, after all, presumes that individuals will bear the consequences of their actions, deliberate or negligent. And if those actions have the potential to reverberate throughout the economy, well, is that not something we'd want to prevent, which is what the prospect of hefty damages are thought to accomplish? Where's the "party of personal responsibility" when you need them?
"The Court said that 'secondary actors,' like the two outside companies in this case, are subject to criminal penalties under a specific federal law, and civil enforcement action by the SEC. 'The enforcement power is not toothless,' Kennedy wrote, attempting to direct dispute a suggestion by the dissent.
"The Kennedy opinion was supported by Chief Justice John G. Roberts, Jr., and by Justices Samuel A. Alito, Jr., Antonin Scalia and Clarence Thomas. Justice John Paul Stevens dissented, joined by Justices Ruth Bader Ginsburg and David H. Souter. Justice Stephen G. Breyer took no part in the ruling; he reportedly owns stock in Cisco Systems, Inc., the parent company of Scientific Atlanta. The Chief Justice also was out of the case when the Court granted review on March 26, but got back into the case in September, presumably after selling stock — reportedly, he, too, owed stock in Cisco.
"Justice Stevens, in dissent, argued that Charter could not have inflated its revenues to cover up a cash flow shortfall 'absent the knowingly fraudulent actions of Scientific-Atlanta and Motorola.' Investors, he wrote, relied upon Charter’s revenue statements in deciding whether to buy its stock, and 'in doing so relied on [the two companies’] fraud, which was itself a ‘deceptive device’ ” under securities law. 'This is enough,” he concluded, to show a violation of the law against stock fraud.

"Congress passed that law, Stevens argued, 'with the understanding that federal courts respected the principle that every wrong should have a remedy. Today’s decision simply cuts back further on Congress’ intended remedy.”...'I respectfully dissent from the Court’s continuing campaign to render the private cause of action under [the fraud law] toothless.”
"In his dissent in Stroneridge ...Justice Stevens wrote...that the majority opinion's 'hostility' towards implied causes of action is not grounded in 'the first two centuries of this Nation's history...'Courts near in time to the enactment of the securities laws recognized that the principle in Rigsby [ -- the right to recover the damages from the party in default is implied -- ] applied to the securities laws,' and the decision 'simply cuts back further on Congress’ intended remedy.'"
Update: The true sweetness of it all ~ American taxpayers help finance BofA bailout of Countrywide ~ can it get any better for a robber baron? ~
"Guess who's helping Bank of America pay for its $4.1 billion purchase of Countrywide Financial? Answer: The taxpayers of the United States.
"That's because if all goes as planned, Bank of America, which is solidly profitable, will be able to offset part of its own taxable income with the losses Countrywide ran up before being acquired.
"The tax break could total about half a billion dollars over the first five years, according to an estimate by Robert Willens, Lehman Brothers' long-time tax expert who's now in business as Robert Willens LLC. The losses could be worth considerably more to Bank of America starting in the sixth year."
* * *
Money-pushing, the latest New Frontier for self-styled mortgage bankers & would-be Captains of Industry, was a very cushy gig as far as it went.
Witness in today's WaPo, the inspiring story of the enterprising fellow who built Countrywide Mortgage into all it is today, bringing the company to the verge of bankruptcy & extinction, only to bail with a very golden parachute when it is snapped up at bargain-basement rates by Bank of America:
"Angelo R. Mozilo has pocketed $410 million in salary, bonuses and stock-option gains since he became executive chairman of mortgage lender Countrywide Financial in 1999, according to the executive compensation company Equilar.
"Now, the man at the center of the national mortgage crisis stands to collect an additional $112 million in severance when Bank of America buys the company he helped found.
[...] most of Mozilo's compensation since becoming chairman -- $285 million -- has come from stock options. Mozilo has been criticized for selling pieces of his stake in Countrywide, cashing in tens of millions of dollars in options as the housing market dropped.
"His contract as chairman of Countrywide runs through the end of next year, and he is expected to continue as a non-employee chairman of the board until the end of 2011. During that time, he will receive a director's salary, plus $200,000 a year, office space and the use of the corporate jet for business trips. His country-club dues will also be paid.
"Even if Mozilo is fired as chairman, he would receive $400,000 a year to consult until the end of 2011. "
Countrywide clerks, tabulators, putters-of-labels on files & miscellaneous beancounters stand to lose their jobs in the transition. (I'm wondering whether a mortgage broker I know of will find herself faced with bankruptcy, & if so, whether she'll have to forfeit her perky breast implants & her Lexus SUV in a Chapter 13).
Lesson to all young enterepreneurs out there: slash-& burn capitalism is the American way, & you can expect to profit handsomely thereby, even though some annoying Congresscritters may say things like this for consumption of the gullible American press:
"In a written statement yesterday, House Financial Services Committee Chairman Barney Frank (D-Mass.) said Mozilo, 'who will be profiting from this transaction personally,' should 'donate a substantial portion of the $150 million he has collected over the last several years to nonprofits and other institutions that are helping us deal with the problem he helped to create.'
Even better, he should be investigated & made to do community service ladling goop-soup to poor people in community kitchens. Of course, your Demon is only kidding. There are no enforceable laws in this country by which to convict him of anything. He's already planning a nice retirement in a warm, sunny place far far away from Wall Street, we bet.
And in the meantime, we continue to read news like this in the NYT:
"Citigroup is turning to cash-rich foreign investors for a second time as it confronts mounting losses on mortgage-related investments.
"The financial giant is in talks to sell a large stake to a Chinese bank and several other investors, including foreign governments, in a deal that could raise $10 billion, people briefed on the plan said Friday.

"The China Development Bank, which is controlled by the Chinese government, is expected to invest at least $2 billion, these people said. Citigroup is also in talks with the Government of Singapore Investment Corporation and the Kuwait Investment Authority.
"Large investors like Prince Walid bin Talal of Saudi Arabia, who helped rescue Citigroup in the early 1990s, and Capital Research and Management, a money management firm that is the bank’s biggest shareholder, are being offered the chance to invest as well to avoid having their current stakes diluted, but it is unclear if they will choose to do so. Other investors may also be involved.

"While the deals may yet fall through, announcements are expected within days. The talks come as Citigroup is expected to disclose additional huge losses stemming from bad mortgage-related investments. Analysts project the company is likely to announce charges of $12 billion to $18 billion when it reports earnings on Tuesday."
Your Demon continues to predict that John Edwards, with his anti-corporate-money in politix "strident neo-populist stance" will gain a lot more traction despite Bush's headline-grabbing push to expand the War on Terra to Iran & Pakistan. Or at least influence other Democratic candidates to stop cheering themselves & start paying attention to the mess we're in here at home.

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Monday, January 07, 2008

Pentagon Sez: Evil Iranians Provoke US! Update

~ Not the other way around ~

Well, your Demon has to give it to the Iranians ~ they sure know how to annoy Bushco, without giving the satisfaction of an excuse to launch an attack on Iran. Which is just what Bush wants, & has been doing everything he can to provoke.

~ Further history lessons with respect to Iran ~

Remember this way back in May '07?

"The CIA has received secret presidential approval to mount a covert 'black' operation to destabilize the Iranian government, current and former officials in the intelligence community tell the Blotter on

"The sources, who spoke on the condition of anonymity because of the sensitive nature of the subject, say President Bush has signed a 'nonlethal presidential finding' that puts into motion a CIA plan that reportedly includes a coordinated campaign of propaganda, disinformation and manipulation of Iran's currency and international financial transactions.

'"I can't confirm or deny whether such a program exists or whether the president signed it, but it would be consistent with an overall American approach trying to find ways to put pressure on the regime,' said Bruce Riedel, a recently retired CIA senior official who dealt with Iran and other countries in the region. "

And further developments with the Iranian speedboats v. American military might in the strait of Hormuz incident last weekend: the Pentagon shreds its own credibility on its initial reports, parrotted mindlessly by a press you'd think would know better after the hype & propaganda of the Bush years.

The Pentagon released what, on closer inspection, is an artfully mashed-up video possibly intended to inflame anti-Iranian sentiment at home, & people started to notice that the allegedly provocative remarks, "I am coming to you. You will explode after a few minutes," were apparently delivered by "Boris Karloff" in a perfect unaccented English-speaking voice, & without any background noise or static. H/T to Glenn Greenwald on Salon, quoting the Huffington Post & others. (If you want to hear it for yourself:

"Just two days after the U.S. Navy released the eerie video of Iranian speedboats swarming around American warships, which featured a chilling threat in English, the Navy is saying that the voice on the tape could have come from the shore or from another ship.[...]

"The Navy never said specifically where the voices came from, but many were left with the impression they had come from the speedboats because of the way the Navy footage was edited.
"Today, the spokesperson for the U.S. admiral in charge of the Fifth Fleet clarified to ABC News that the threat may have come from the Iranian boats, or it may have come from somewhere else.

"'We're saying that we cannot make a direct connection to the boats there,' said the spokesperson. 'It could have come from the shore, from another ship passing by. However, it happened in the middle of all the very unusual activity, so as we assess the information and situation, we still put it in the total aggregate of what happened Sunday morning. I guess we're not saying that it absolutely came from the boats, but we're not saying it absolutely didn't.'"

* * *

The WaPo reports today that "Iranian boats harassed and provoked three American Navy ships in the strategic Strait of Hormuz, threatening to explode the vessels, U.S. officials said Monday.

"In the most serious such incident in years, U.S. forces were on the verge of firing on the Iranian boats during the incident early Sunday, when the boats _ believed to be from the Iranian Revolutionary Guard's navy _ turned and moved away, a Pentagon official said.
Defense Department spokesman Bryan Whitman called it a 'serious incident.' Another U.S. official, speaking on condition of anonymity, called it 'the most serious provocation of this sort that we've seen yet.'"

"Iran's Foreign Ministry said Monday the confrontation was 'something normal' and was resolved, suggesting the Iranian boats had not recognized the U.S. vessels. National Security Council spokesman Gordon Johndroe said the Bush administration urges Iranians 'to refrain from such provocative actions that could lead to a dangerous incident in the future.'

"The incident raised new tensions between Washington and Tehran as President Bush prepared for his first major trip to the Middle East."

Bushco relies on American short-attention spanners out there to forget, not only U.S. backed installation of the Shah, but all the way forward to March of this past year, when American & British war ships most recently seriously tried to provoke Iran into attacking us, no doubt to make a "defensive" bomb, bomb, bomb Iran politically palatable to the war-weary American public as a grand farewell gesture. After all, the Neocon "Project for a New American Century" first proposed it way back in 1997.

Refresher course on March '07 events:

"American warplanes screamed off two aircraft carriers Tuesday as the U.S. Navy staged its largest show of force in the Persian Gulf since the 2003 invasion of Iraq, launching a mammoth exercise meant as a message to the Iranians.

"The maneuvers with 15 warships and more than 100 aircraft were sure to heighten tensions with Iran, which has frequently condemned the U.S. military presence off its coast and is in a faceoff with the West over its nuclear program and its capture of a British naval team."

Contrast that with today's efforts to portray Iran as the provacateur. Getting a sense of deja vu yet?