Social Security Looters

by Dollars and Sense

We received this comment from Matthew Skomarovsky of LittleSis, the "involuntary Facebook of powerful Americans" (if you haven't check out LittleSis, you should do so asap):

"Props as always to D&S for not letting this slip under the radar. Far too little attention has been given to how well the Social Security looters have positioned themselves in 2010.

"Here's a close look at Obama's recent appointments to the Debt Commission, and what it suggests about his administration's approach to Social Security:"

Obama Packs Debt Commission with Social Security Looters
Obama has filled his new 'debt commission' with Wall Street insiders determined to gut Social Security.
Matthew Skomarovsky | March 28, 2010

A decade of wars, tax cuts for the wealthy, and the fallout from Wall Street's housing bubble have almost tripled U.S. public debt since 2001, from $5 trillion to $14 trillion. Big, scary numbers like this, along with carefully timed downgrade warnings from Wall Street's obedient rating agencies and continuing worries about the financial collapse of Greece, Portugal and other nations have changed the political climate in Washington, breathing new life into decades-old schemes to slash Social Security and Medicare entitlements.

And defending Social Security does indeed sound like yesterday's issue—a fight the people won when they defeated Bush's attempt to privatize the system in 2005. Our Social Security program is currently solvent through 2037, while millions of Americans are unemployed, millions more are losing their homes, and still millions more are struggling to meet soaring health insurance costs after watching their retirement accounts dwindle in the financial collapse. Would the entitlement wolves—primarily Wall Street executives who stand to reap billions from Social Security privatization—really have the gall to go after Social Security now? In a word, yes.

Check out the full article on AlterNet or LittleSis.

Labels: Barack Obama, LittleSis, Matthew Skomarovsky, pensions, privatization, Social Security

 

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3/29/2010 02:05:00 PM 0 comments

 

Drumbeats on Social Security

by Dollars and Sense

The New York Times had something of a scare-mongering front-page article on Social Security the other day. The new reason for concern, the Times suggested, is that payout is expected to exceed pay-in this year. But as Dean Baker pointed out on his Beat the Press blog, "this fact makes absolutely no difference for the program since it holds more than $2.5 trillion in government bonds." Dean goes on:

In spite of the statements by the experts cited in the article, the second paragraph told readers that this event marked: "an important threshold it was not expected to cross until at least 2016, according to the Congressional Budget Office." Nothing in the article or in the structure of the program suggests that there is any importance whatsoever to this threshold.

Read the full post, in which Dean responds to challenges from commenters.

Meanwhile, the Times included a discussion of Social Security in its online feature, Room for Debate, albeit under the question-begging headline "Simple Steps to Fix Social Security"; the Times seems to welcome debate among experts on Social Security, as long as they agree that it is broken!

Economist Teresa Ghilarducci, who has written about pensions for Dollars & Sense ("When Bad Things Happen to Good Pensions," from our May/June 2005 issue), didn't take the Times' bait. The headline to her contribution to the debate states simply that "The Program Isn't Broken." The adjustment she recommends is the same one John Miller recommended in our March/April 2008 issue (Go Ahead and Lift the Cap), which is to raise the cap on taxable earnings from 85% to 100%:

Because baby boomers pay more payroll tax than the system is paying out in benefits, boomers have saved for their own retirement most of their working years. They may have run up their credit cards, but they saved through the Social Security system. These excess payroll taxes bought special-issue government bonds that always paid above the market rate for risk-free government noncallable bonds; these bonds were created especially for the Social Security taxpayers.

Gradually increase the taxable earnings base from 85 percent of earnings to 100 percent.

In 2016, we are going to cash them out like every retired person does with their retirement money. When a person cashes out their pension fund it is not called "a problem" and neither is redeeming the assets in the Social Security system a problem.

In another 25 or so years, the system will not have enough money in the system to pay full benefits. Now that would be a problem. And there are two types of fixes: cut benefits or raise revenue. Given that pensions have collapsed and are not getting better any time soon and more old people are going to be poor, benefit cuts are off the table.

Since most of the earnings growth in the last two decades went to the top paid people, those earning much more than the Social Security taxable salary of $106,800 the system lost revenue. A quick fix is to gradually increase the taxable earnings base from current coverage of just 85 percent of earnings to 100 percent by 2045. That would solve the entire predicted Social Security deficit for 75 years. Done.

Well done, Teresa.

More on the coming drumbeat to mess with Social Security over at AlterNet: Alan Greenspan and the New York Times Are Gunning for Your Social Security, by Zach Carter.

For more background, see Ellen Frank, John Miller, and Doug Orr on Social Security in the D&S archives.

Labels: New York Times, pensions, privatization, Social Security, Teresa Ghilarducci

 

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3/28/2010 11:51:00 AM 1 comments

 

Health Care Reform: A Victory for the Little Guy?

by Dollars and Sense

David Leonhardt, the New York Times economics reporter, has a cover story in today's paper, In Health Bill, Obama Attacks Wealth Inequality, that depicts the new health care reform law as the first great social legislation in a generation. It is big, and it is social legislation, and it is true that it will be funded partly by raising taxes on higher-income folks. But it is hard to view it as the challenge to inequality that Leonhardt thinks it is--or that Obama & Co. (least of all Larry Summers, whom Leonhardt mentions in a positive light in the article) intended it as such.

As a counterpoint to Leonhardt's argument, here's something from the great, relatively new blog from the good folks at the University of Missouri at Kansas City's econ dept, New Economic Perspectives. This guest post is from Robert Prasch of Middlebury College.

Think The Democrats Just Scored One for the Little Guy? Think Again.

By Robert E. Prasch | Tuesday, March 23, 2010
Professor of Economics
Middlebury College

As a resident of Massachusetts, where the backlash is already well underway, I thought I should add a comment. Let's begin by considering the origins of "Obamacare". It comes from Massachusetts. It was passed early in Gov. Patrick's reign because during the campaign it was already in debate as it was Gov. Mitt Romney's proposal. Now, one might wonder where the conservative, free market, head of Bain Consulting governor might go finding a healthcare plan? Well, he got it from the Heritage Foundation. And why did they have such a plan? Well, they developed its broad outlines during the 1993-4 years as the Republican ANSWER to Hillary's effort. So, that is our new federal plan -- it is a warmed over version of the Heritage Plan. This, I submit, might explain a few things. (1) It was Obama's idea all along to "triangulate" the Republicans on this issue, and (2) why many of them are really very bummed out that their leadership did not take up the chance to show "bi-partisanship" on this issue (see David Frum on this).

Now, I tend to be skeptical of Heritage Foundation health-care plans. For several reasons:

(1) By design, costs are not contained, neither is health care reformed. This means that "affordability" does not come from controlling costs, but by shifting them. Shift to whom? A hallmark of the Heritage/Romney plan is that no change of the distribution of income is to occur with the financing of this plan. NONE. Rather, funding is to be from three sources --- those with supposedly "Cadillac" plans, those who have "opted out' because of the laughably high cost of coverage relative to their own risks, and to the state general fund. (2), In light of state budget shortfalls, it is no surprise that the latter source is declining quickly, and tens of thousands of Mass residents have ALREADY lost their subsidies (this trend will certainly occur on Capitol Hill over the next several years as 'deficit mania" kicks in). So, get this, as your income declines and your house is repossessed, the cost of your health care rises with higher premiums AND lower subsidies. But, make no mistake, even as the subsidies decline, the mandate will stay -- why should the big companies give up this huge windfall of unchecked access to the wages of the low paid?

(3) I also wish to warn against the 'NPR version' of the story that this bill "gives" health care for those without. Nothing is given, it is a MANDATE. Now, while the original 'vision' of the bill had subsidies, these are fading rapidly. So, now we have a dramatically underfunded mandate. Solving the lack of insurance by mandating the poor to buy it is, to be blunt, Dickensian. Obama himself stated it very well during the campaign "It is like solving homelessness with a mandate that those living on the streets buy a house". Those who are poor understand this point, and resent it. True, there are some young people who are in good health and, understanding statistics and rapacious health care insurance firms, "choose" not to get health insurance (as I did for several years in my 20s as the teaching assistantship I got from DU during my years studying for my MA could not cover my living expenses AND health insurance), yet the bulk of non-buyers are people who have found that with little in the way of family funds, other priorities (rent, car repairs, food, school fees, etc.) are a greater priority.

So, now the Democrats have taken it upon themselves to decide the priorities of millions of our poorest citizens. Thus, thanks to the Democrats, non-negotiable required fees from the insurance industry will be several multiples of the current income taxes of the lowest paid. This is sticker shock at its worse. Even Republicans know that the money will go to rapacious, soulless, insurance companies under the careful guidance of the IRS (here in MA, we have several extra highly-complex pages on an already long tax form where we have to prove that we have insurance). Stated simply, the Democrats have decided to go into the business of being the "enforcers" of the big insurance firms. This is NOT a good place to be in an election year. This is ESPECIALLY not a good place to be when you are already presenting yourself to voters, as Obama seems committed to do, as the die-hard supporter of the big banks that foreclosed on people's homes and blew up their economy.

With such a context, along comes someone who calls himself a "regular guy" with a pickup truck (he failed to mention that he has five homes, one in Aruba, but the truck was in all the ads), and he takes Kennedy's seat in Mass. In MASSACHUSETTS! Only one year after Obama wins this state by 20 points! Wow. This, folks, is what a backlash looks like, and it is enormous. Turning the wages of the working classes over to the insurance companies, without recourse or mercy, is not going to win this state, and it will not win in many others. If the Democrats lose any less than 35 house seats this election I will be amazed. And, note my wording, the Republicans did not, and will not, win them. No, the Democrats have decided to lose these seats. Amazing.

Sorry about bringing the bad news. But this bill is a disaster, and it is worse than nothing, as it will destroy the incomes of those it purports to help along with the Democratic Party. It is especially bad since a public option was always an option, I do not believe the D.C. spin on this for even a minute. Just as Obama never wanted to renegotiate NAFTA or leave Iraq, it was clear from the outset that the White House never wanted a public option, which explains why Rahm said so early last summer. Why? Because the big insurance companies did not want it, so Rahm did not want it. End of issue.

Read the original post.

Labels: David Leonhardt, health care, health care reform, Lawrence Summers, Obama administration, UMKC

 

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3/24/2010 02:29:00 PM 3 comments

 

Obamacare: "Asprin for Cancer" (PNHP)

by Dollars and Sense

It has become an annual Left Forum tradition for some D&S folks to meet up with D&S friends over dinner in the East Village, and this year one of the main topics of conversation was, of course, health care reform. No one at the table liked the bill, so the discussion was about whether it would be better or worse if the bill passed.

On the bus ride home, D&S collective member and frequent blogger Larry P. wondered out loud what Steffie Woolhandler and David Himmelstein and other single-payer advocates think about the bill and the likelihood that it would pass. So I was happy to find out about this statement from Physicians for a National Health Plan, co-signed by Woolhandler and Himmelstein:

Pro-single-payer doctors: Health bill leaves 23 million uninsured
A false promise of reform

For Immediate Release | March 22, 2010

As much as we would like to join the celebration of the House's passage of the health bill last night, in good conscience we cannot. We take no comfort in seeing aspirin dispensed for the treatment of cancer.

Instead of eliminating the root of the problem--the profit-driven, private health insurance industry--this costly new legislation will enrich and further entrench these firms. The bill would require millions of Americans to buy private insurers' defective products, and turn over to them vast amounts of public money.

The hype surrounding the new health bill is belied by the facts:

* About 23 million people will remain uninsured nine years out. That figure translates into an estimated 23,000 unnecessary deaths annually and an incalculable toll of suffering.
* Millions of middle-income people will be pressured to buy commercial health insurance policies costing up to 9.5 percent of their income but covering an average of only 70 percent of their medical expenses, potentially leaving them vulnerable to financial ruin if they become seriously ill. Many will find such policies too expensive to afford or, if they do buy them, too expensive to use because of the high co-pays and deductibles.
* Insurance firms will be handed at least $447 billion in taxpayer money to subsidize the purchase of their shoddy products. This money will enhance their financial and political power, and with it their ability to block future reform.
* The bill will drain about $40 billion from Medicare payments to safety-net hospitals, threatening the care of the tens of millions who will remain uninsured.
* People with employer-based coverage will be locked into their plan's limited network of providers, face ever-rising costs and erosion of their health benefits. Many, even most, will eventually face steep taxes on their benefits as the cost of insurance grows.
* Health care costs will continue to skyrocket, as the experience with the Massachusetts plan (after which this bill is patterned) amply demonstrates.
* The much-vaunted insurance regulations - e.g. ending denials on the basis of pre-existing conditions - are riddled with loopholes, thanks to the central role that insurers played in crafting the legislation. Older people can be charged up to three times more than their younger counterparts, and large companies with a predominantly female workforce can be charged higher gender-based rates at least until 2017.
* Women's reproductive rights will be further eroded, thanks to the burdensome segregation of insurance funds for abortion and for all other medical services.

It didn't have to be like this. Whatever salutary measures are contained in this bill, e.g. additional funding for community health centers, could have been enacted on a stand-alone basis.

Similarly, the expansion of Medicaid - a woefully underfunded program that provides substandard care for the poor - could have been done separately, along with an increase in federal appropriations to upgrade its quality.

But instead the Congress and the Obama administration have saddled Americans with an expensive package of onerous individual mandates, new taxes on workers' health plans, countless sweetheart deals with the insurers and Big Pharma, and a perpetuation of the fragmented, dysfunctional, and unsustainable system that is taking such a heavy toll on our health and economy today.

This bill's passage reflects political considerations, not sound health policy. As physicians, we cannot accept this inversion of priorities. We seek evidence-based remedies that will truly help our patients, not placebos.

A genuine remedy is in plain sight. Sooner rather than later, our nation will have to adopt a single-payer national health insurance program, an improved Medicare for all. Only a single-payer plan can assure truly universal, comprehensive and affordable care to all.

By replacing the private insurers with a streamlined system of public financing, our nation could save $400 billion annually in unnecessary, wasteful administrative costs. That's enough to cover all the uninsured and to upgrade everyone else's coverage without having to increase overall U.S. health spending by one penny.

Moreover, only a single-payer system offers effective tools for cost control like bulk purchasing, negotiated fees, global hospital budgeting and capital planning.

Polls show nearly two-thirds of the public supports such an approach, and a recent survey shows 59 percent of U.S. physicians support government action to establish national health insurance. All that is required to achieve it is the political will.

The major provisions of the present bill do not go into effect until 2014. Although we will be counseled to "wait and see" how this reform plays out, we cannot wait, nor can our patients. The stakes are too high.

We pledge to continue our work for the only equitable, financially responsible and humane remedy for our health care mess: single-payer national health insurance, an expanded and improved Medicare for All.
Oliver Fein, M.D.
President

Garrett Adams, M.D.
President-elect

Claudia Fegan, M.D.
Past President

Margaret Flowers, M.D.
Congressional Fellow

David Himmelstein, M.D.
Co-founder

Steffie Woolhandler, M.D.
Co-founder

Quentin Young, M.D.
National Coordinator

Don McCanne, M.D.
Senior Health Policy Fellow

******

Physicians for a National Health Program (www.pnhp.org) is an organization of 17,000 doctors who support single-payer national health insurance. To speak with a physician/spokesperson in your area, visit www.pnhp.org/stateactions or call (312) 782-6006.

Two other tidbits on health care: First, the spin about the aftermath of the health care debate seems to be that the Republicans have overplayed their hands, what with all the hate-mongering and fear-mongering all along, with a definite crescendo at the final hour. Here's (some of) what Politico had to say:

GOP weighs costs of losing ugly
By: Glenn Thrush and Marin Cogan| March 23, 2010 05:05 AM EDT

The only thing worse than winning ugly is losing uglier.

The Democrats' ungainly march toward a victory on health care reform Sunday night provoked a graceless response from angry House Republicans, who shouted insults across the chamber, encouraged outbursts from the galleries, brandished "Kill the bill" placards from the Speaker's Balcony and, apparently, left veiled threats of electoral retribution on the benches of undecided Democrats.

And that all came before Texas Republican Rep. Randy Neugebauer shouted "baby killer!" as anti-abortion Rep. Bart Stupak (D-Mich.) spoke on the House floor.

That incident followed an even uglier series of events outside the chamber Saturday, when tea party protesters reportedly shouted the N-word at civil rights hero Rep. John Lewis (D-Ga.), spit on Rep. Emanuel Cleaver (D-Mo.) and hurled an anti-gay insult at Rep. Barney Frank (D-Mass.).

While House Minority Leader John Boehner (R-Ohio) was quick to criticize the racial and anti-gay outbursts and to distance himself from Neugebauer's shout, he made no apologies for the feisty floor debate or the overall tone of the health care opposition.

"My impression is that Rep. Boehner was satisfied with the tone of the debate, which focused on the serious factual arguments against the Democrats' job-killing government takeover bill," said Boehner spokesman Michael Steel.

Other Republicans weren't so sure.

"It was like a mob at times," lamented one House Republican, speaking on the condition of anonymity. "It wasn't good for us. ... Remember, it took years [for Democrats] to recover from the bad publicity the anti-Vietnam protests generated."

In an interview for POLITICO's "Health Care Diagnosis" video series, Rep. Paul Ryan (R-Wis.) called the "baby killer" outburst "horrible" but said the issues Democrats are pursuing are "so polarizing that they're really bringing out emotions and the darker sides of people on both sides."

Still, Ryan made it clear he would have preferred a less emotional approach over the weekend.

"In our conference [Sunday] before the vote, a lot of us said, 'Look—no screaming, no shouting, no yelling, no nyah-nyah-nyah. If they pass this thing, be somber be glum,'" Ryan said. "I said look, 'We've got to be adults about this. This is a serious situation; this isn't something that we politicize. . . . Yes, in basketball games you hear things like this. We don't do that. We're grown-ups.'"

Neugebauer's outburst, which echoed the infamous "You lie!" shout by Rep. Joe Wilson (R-S.C.), had Republicans worried about the impact on "persuadables"—independents skeptical about President Barack Obama but leery of the GOP's increasingly conservative tilt.

The incident also undermined attempts by Republicans to project the image of a sober, less combative party willing to meet Obama halfway. And it prompted a salvo of rebuke from Democrats, who spent much of their post-passage Monday accusing the other party of violating the chamber's decorum and coarsening debate.

Read the whole post.

A recent CNN poll seems to bear out the idea that the Republicans, by siding with the vituperative Tea Baggers, are not on the side of the public. According to the poll, 39% favor the bill, while 59% oppose it; but the breakdown showing why people oppose it is instructive: 39% favor; 43% oppose because it's "too liberal"; 13% oppose because it's "not liberal enough". So that means that a majority of Americans polled by CNN are in favor of health care reform at least as "socialist" as Obamacare.

So what we have is a crappy bill that is coercive and a give-away to the insurance companies, and may entrench their power. But a majority of Americans still seem to want (real) universal health care, and if you want to put an optimistic spin on it, you can take heart in the fact that the success of this bill may put the Democrats on a better footing than they have seemed to be recently. Whether we like what they do with the momentum (real financial reform, with an independent financial consumer protection agency and effective regulation? real comprehensive immigration reform, vs. some guestworker nonsense?) remains to be seen. The best-case scenario might be if this legislative victory emboldens left challengers in the 2010 congressional elections, to push incumbents to move to the left (whereas a week ago it seemed likely that the Republicans' momentum would push them all to the right).

Labels: Barack Obama, health care, health care reform, Physicians for a National Health Program, socialism, Tea Partiers

 

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3/23/2010 03:53:00 PM 0 comments

 

D&S @ Left Forum

by Dollars and Sense

Come visit the D&S exhibit table at the 2010 Left Forum, Pace University, New York City, this weekend—March 19-21. Meet D&S blogger extraordinaire Larry Peterson and D&S co-editor Chris Sturr; former book editor and D&S stalwart Amy Offner will be helping staff the table.

Visit the conference website to find out what other excitement awaits you at this year's event, which will feature the Rev. Jesse Jackson, Jr. and Noam Chomsky as plenary speakers.

Labels: Amy Offner, Chris Sturr, Jesse Jackson, Larry Peterson, Left Forum, Noam Chomsky

 

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3/18/2010 09:42:00 PM 0 comments

 

Black and Spitzer on Lehman Fraud

by Dollars and Sense

More on the scandal that is brewing in connection with the last months of Lehman Bros.: Today's New York Times business section has an article, At Lehman, Watchdogs Saw It All, that goes further in suggesting complicity on the part of the NY Fed, under the leadership of one Timothy Geithner, in Lehman's efforts to disguise the depth of its problems.

Here's an interesting piece from Bill Black, former banking regular and occasional D&S author, and Eliot Spitzer, disgraced former governor of New York (has he been rehabilitated? or are there some topics that we just trust him on?); they are calling for an investigation of the Lehman revelations. It is from the Roosevelt Institute's New Deal 2.0 project; hat-tip to LP for bringing my attention to this.

Time for Truth: Three Card Monte is for Suckers

Tuesday, 03/16/2010 - 12:50 pm by Eliot Spitzer and William Black

Eliot Spitzer and William Black call for an immediate Congressional investigation of Lehman’s accounting deception and the release of relevant emails and internal documents.

In December, we argued the urgent need to make public A.I.G.'s emails and "key internal accounting documents and financial models." A.I.G.'s schemes were at the center of the economic meltdown. Three months later, a year-long report by court-appointed bank examiner Anton Valukas makes it abundantly clear why such investigations are critical to the recovery of our financial system. Every time someone takes a serious look, a new scandal emerges.

The damning 2,200-page report, released last Friday, examines the reasons behind Lehman's failure in September 2008. It reveals on and off balance-sheet accounting practices the firm's managers used to deceive the public about Lehman's true financial condition. Our investigations have shown for years that accounting is the "weapon of choice" for financial deception. Valukas's findings reveal how Lehman used $50 billion in "repo" loans to fool investors into thinking that it was on sound financial footing. As our December co-author Frank Partnoy recently explained as part of a major report of the Roosevelt Institute, "Make Markets Be Markets", such abusive off-balance accounting was and is endemic. It was a major cause of the financial crisis, and it will lead to future crises.

According to emails described in the report, CEO Richard Fuld and other senior Lehman executives were aware of the games being played and yet signed off on quarterly and annual reports. Lehman's auditor Ernst & Young knew and kept quiet.

The Valukas report also exposes the dysfunctional relationship between the country's main regulatory bodies and the systemically dangerous institutions (SDIs) they are supposed to be policing. The NY Fed, the regulatory agency led by then FRBNY President Geithner, has a clear statutory mission to promote the safety and soundness of the banking system and compliance with the law. Yet it stood by while Lehman deceived the public through a scheme that FRBNY officials likened to a "three card monte routine" (p. 1470). The report states:

"The FRBNY discounted the value of Lehman's pool to account for these collateral transfers. However, the FRBNY did not request that Lehman exclude this collateral from its reported liquidity pool. In the words of one of the FRBNY's on-site monitors: 'how Lehman reports its liquidity is between Lehman, the SEC, and the world'" (p. 1472).

Translation: The FRBNY knew that Lehman was engaged in smoke and mirrors designed to overstate its liquidity and, therefore, was unwilling to lend as much money to Lehman. The FRBNY did not, however, inform the SEC, the public, or the OTS (which regulated an S&L that Lehman owned) of what should have been viewed by all as ongoing misrepresentations.

The Fed's behavior made it clear that officials didn't believe they needed to do more with this information. The FRBNY remained willing to lend to an institution with misleading accounting and neither remedied the accounting nor notified other regulators who may have had the opportunity to do so.

The Fed wanted to maintain a fiction that toxic mortgage products were simply misunderstood assets, so it allowed Lehman to maintain the false pretense of its accounting. We now know from Valukas and from former Treasury Secretary Paulson that the Treasury and the Fed knew that Lehman was massively overstating its on-book asset values: "According to Paulson, Lehman had liquidity problems and no hard assets against which to lend" (p. 1530). We know from Valukas' interview of Geithner (p. 1502):

The challenge for the government, and for troubled firms like Lehman, was to reduce risk exposure, and the act of reducing risk by selling assets could result in "collateral damage" by demonstrating weakness and exposing "air" in the marks.

Or, in plain English, the Fed didn't want Lehman and other SDIs to sell their toxic assets because the sales prices would reveal that the values Lehman (and all the other SDIs) placed on their toxic assets (the "marks") were inflated with worthless hot air. Lehman claimed its toxic assets were worth "par" (no losses) (p. 1159), but Citicorp called them "bottom of the barrel" and "junk" (p. 1218). JPMorgan concluded: "the emperor had no clothes" (p. 1140). The FRBNY acted shamefully in covering up Lehman's inflated asset values and liquidity. It constructed three, progressively weaker, stress tests — Lehman failed even the weakest test. The FRBNY then allowed Lehman to administer its own stress test. Need we tell you the results?

We believe that the Valukas report cries out for an immediate Congressional investigation. As we did with A.I.G., we demand the release of the e-mails and internal documents from the New York Fed and Lehman executives that pertain to analyses of Lehman's financial soundness. What downside can there possibly be in making these records available for public analysis and scrutiny?

Three years since the collapse of the secondary market in toxic mortgage product, we have yet to see significant prosecutions of the kind of fraud exposed in the Valukas report. The SDIs, with Bernanke's open support, exorted the accounting standards board (FASB) to change the rules so that banks no longer need to recognize their losses. This has made the SDIs appear profitable and allows them to pay their executives massive, unearned bonuses based on fictional profits.

If we are to prevent another, potentially more devastating financial crisis, we must understand what happened and who knew what. Many SDIs are hiding debt and losses and presenting deceptive portraits of their soundness. We must stop the three card monte accounting practices that create the potential and reality of fundamental misrepresentation.

A.I.G.'s CEO, its board of directors, and the trustees that are supposed to represent the interests of the American people have failed to respond to our December letter calling on them to release to the public the AIG documents that would be the treasure trove (along with other SDI documents) that would allow our nation to uncover and end the gamesmanship that caused this financial crisis and will bring us recurrent crises. We call on them to act.

Eliot Spitzer is a former attorney general and governor of New York.

Roosevelt Institute Braintruster William Black is a professor of economics and law at the University of Missouri-Kansas City.

Read the original article.

Labels: AIG, Eliot Sptizer, Ernst and Young, Lehman Brothers, William K. Black

 

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3/16/2010 05:59:00 PM 0 comments

 

Synergy in Security

by Dollars and Sense

An article in yesterday's New York Times, Contractors Tied to Effort to Track and Kill Militants, traces the efforts of a Department of Defense official, Michael D. Furlong, to set up a network of private security contractors, some of them former CIA agents and Special Forces operatives, to "track and kill suspected militants" in Afghanistan and Pakistan:

While it has been widely reported that the C.I.A. and the military are attacking operatives of Al Qaeda and others through unmanned, remote-controlled drone strikes, some American officials say they became troubled that Mr. Furlong seemed to be running an off-the-books spy operation. The officials say they are not sure who condoned and supervised his work.

While this kind of "off-the-books spy operation" may count as beyond the pale for today's U.S. military, the use of private security contractors is becoming more and more commonplace, to the extent that, as Tom Barry argues in his feature article in the current issue of Dollars & Sense, the military-industrial complex "has morphed into a new type of public-private partnership—one that spans military, intelligence, and homeland-security contracting, and might be better called a 'national security complex.'"

We've just posted Tom's article to the website; read it here.

Labels: Afghanistan, Afghanistan war, CIA, Homeland Security, militarism, private security contractors, Tom Barry, U.S. military

 

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3/16/2010 05:30:00 PM 0 comments

 

Lehman: The Art of the 'Sale'

by Dollars and Sense

Friday saw the release of a mammoth official report on the demise of the late, lamented Lehman Brothers. Written by Anton Valukas, a court-appointed Chicago securities lawyer, the over 2,000 page report, which was based on a staggering 350 billion pages of documentation [hard to believe the "billions," but that's what's been reported], claims that practices designed by the megabank whose travails nearly took down the global financial system in September, 2008, "ranged from serious but non-culpable errors of business judgment to actionable balance sheet manipulation." Specifically, the report documents the use of a maneuver known as "repo 105" to disguise the fact that Lehman was supporting its own balance sheet, recently loaded up with subprime mortgages that were rapidly falling in value, with, well, almost nothing.

The way this deception worked involved a part of the finance industry that has become increasingly important over the years, but remains opaque to most people. The "repo," or "repurchase" market involves the transfer of bank assets, like bonds, to other financial firms, like broker-dealers, for extremely short periods of time (often just a few days), in return for cash. The securities, then, function as a sort of collateral. The banks, after the short period of time has elapsed, are required to take the collateral back, and pay a usually nominal amount by way of interest. In this way, the banks get ready cash, and the firms that take the securities are free to use the securities for potentially profitable short sales or to just to collect the interest.

In this case, however, Lehman tried to disguise what looked like repo transactions--to the tune of up to $50 billion a quarter--as a sale of securities. Funny kind of sale: they were "selling" something they were obligated to take back within days. And they were paying far above the rate of interest customary in such transactions. For "repo 105", for instance, Lehman was paying 5%; on "repo 108", 8%.

And why would Lehman do this? Well, repos remain on the bank's balance sheet. Lehman, as mentioned before, had, in the months running up to the crisis, piled into subprime loans. So this massive expansion of assets on the balance sheet was supposed to be offset by a similar build-up of equity, or of funds which might cover potential losses on the assets. Knowing that raising so much equity was impossible, Lehman asserted that the repo transactions were in fact sales, which, of course, constituted a permanent transfer of assets, and, therefore did not require booking on the balance sheet. But Lehman was not only taking these assets back in a few days, it was paying exorbitant amounts of money to offload the assets right at the time when they were supposed to be booked for quarterly results. It was as if a drug dealer sublet an apartment in which s/he had stowed away a a boatload far below the market rate, right when the landlord was supposed to come calling. Of course, this leads to the questions as to why so many of Lehman's counterparties were willing to go along with such unusual offers.

But it was worse than this. Ernst & Young, the accounting firm, signed off on Lehman's books, and, moreover, a venerable City of London law firm, Linklaters, was asked for advice on the legality of these little transactions. Funny that Lehman didn't even bother to ask for legal advice from any other law firm, especially in the Wall Street firm's own country, the USA, and that it let its European office do the dirty work. Then again, it was AIG's London office that was responsible for that firm's fate. Regulatory arbitrage, and the financial liberalization that enables it, is and remains a powerful force in financial markets, indeed.

Lehman did this three quarters in a row: in 4Q 2007 to the tune of $38.6 billion, in 1Q 2008 for $49.1 billion, and for $50.4 billion in 2Q.

Saturday's NYTimes had two articles on the Lehman revelations: one recounted many of the details above; the other added another wrinkle—the role of the New York Fed. The articles says that the Valukas report "raises fresh questions about the role of the New York Fed in supporting Lehman during the frantic months leading up to its collapse." It seems that the Fed was the main institution The paragraphs explaining the Fed's involvement bears quoting in full:

...it was that month [March 2008] that the Fed started a spwecial lending program open to Wall Street banks like Lehman that could not [otherwise] borrow directly from it [the Fed]. The Fed also lowered its standards for the kinds of collateral that it would accept against such short-term loans.

Lehman, desperate for financing, seized its chance. It packaged billions of dollars of troubled corporate loans into an investment called Freedom CLO. Then, in a series of transactions, it shifted Freedom back and forth to the New York Fed, in exchange for cash. Those moves helped make Lehman look healthier.

Read the full article.

CLO means "collateralized loan obligation", and is the corporate cousin of the collateralized debt obligations that served to repackage mortgages during the subprime debacle. CLOs are--or were, during the boom-times, an important source of finance for mergers and acquisitions. What happened here was that Lehman was swapping nose-diving corporate loans (the M&A had all but dried up) with the Fed for hard Federally-backed cash in repo. It was trading cash for trash. And you were paying the potential difference.

This has been a rapid and brief overview, but the main lesson from this is that, only a few short years after Enron, similar devices, far from being discouraged by the convictions in that case, were being employed on a far-larger scale, and using a government vehicle designed explicitly to save the offending firm from its own abuses. Financial reform, nonexistent in the last administration, and always half-hearted under the present one, had seemingly come to a kind of dormancy akin to that applying to healthcare reform in the weeks up to the publication of this report. If this doesn't force us to demand a complete and utter makeover of financial regulation, it is difficult to say what could. Is our broken economy so dependent on the distorted exaggerations of fictitious finance that we will sit back and allow the very same abuses that slapped us in the face a few years ago to knock us unconscious again and again? Perhaps the final word today should be that of a veteran Wall Streeter, who said: "I almost threw up when I read the report. It makes me sick of this industry." If they can't endure it anymore, can we?

Labels: anton valukas, Ernst and Young, Federal Reserve, federal reserve bank of new york, financial crisis bailout, financial reform, Lehman Brothers, linklaters, repurchase agreements

 

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3/14/2010 04:53:00 PM 0 comments

 

(Repost from March 9:) Items on Greece

by Dollars and Sense

A couple of items on Greece: First, Mike-Frank Epitropoulos, who is working on an article for us on the Greek debt/default situation, sent us this image. The German magazine Focus ran a cover story headlined "Cheats in the Euro Family," with an image of the Venus de Milo giving (the rest of Europe) the finger. The Greeks were outraged, with one newspaper, Eleftheros Typos, saying that Europe is "threatened by financial naziism," according to the Wall Street Journal's blog The Source. And then there was the magazine cover response. I can't find a translation of the headline, and my Greek is rusty (and was always archaic anyhow).


Then there's this juicy piece from last Friday's Financial Times. The FT's headline writers couldn't resist the term "Greek drama," but the photo that went with this article in the print edition was especially nice: a view of the sun-drenched rooftop restaurant at the Hotel Grande Bretagne in Athens, with the Parthenon in the background; it was not just a gratuitous shot of the Acropolis—this was actually where the hedge-fund managers met to plot their speculative exploits.

Funds' role in Greek drama examined

By Sam Jones, Hedge Fund Correspondent

Published: March 5 2010 02:00 | Last updated: March 5 2010 02:00

On January 28, a cloudy, drizzly day in Athens, Goldman Sachs played host to a hotchpotch group of 10 clients at the Grande Bretagne, a palatial belle epoque hotel overlooking Syntagma square and the old royal palace, now the home of the Vouli, the Greek parliament.At dinner on the rooftop—with an unimpeded panorama of the Acropolis as the backdrop—the clients; ten bankers, asset managers and hedge fund analysts, ruminated on the future of the Greek economy—and of course, how to make money from it.Events since—a vicious collapse of confidence in the Greek debt market—have made some of those present, millions. But there has been a price. The dinner and the two-day schedule of meetings it bisected, is now one of a handful of events at the centre of a growing political backlash against some of the biggest and most powerful traders in the debt markets. Hedge funds and more broadly financial 'speculators' are finding themselves under attack from politicians and regulators on both sides of the Atlantic, who accuse them—including some of those Goldman chaperoned around Athens in late January—of exacerbating the Greek credit crisis in an effort to spin a quick buck.

Read the rest of the article.

Labels: Acropolis, Athens, Greece, hedge funds, sovereign debt, speculation

 

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3/11/2010 03:12:00 PM 2 comments

 

(Repost from Feb. 25:) Goldman Sachs and Greece

by Dollars and Sense

Dear blog readers: This is a restored version of one of the posts, from Feb. 25, that we lost when our blog got !@#$%&ed up in the past couple of days. I have figured out how to fix the half-dozen posts that were broken, and how to post new ones, but it involves a laborious fix (posting; going onto our server; downloading the resulting html file; deleting a string of javascript code that is somehow being generated now but wasn't a week ago; re-uploading the html file). If anyone's an expert on blogger or wants to help us (pro bono?) migrate our blog to some better blogging software (e.g. WordPress would be my preference), give us a shout.

Today's New York Times has two stories about Greece: one on the front page about how banks, including some that helped the Greek government hide its bad debt, are now using credit default swaps to bet that Greece will default on its debt (thereby making this more likely to happen); and another, on p. A13, about the massive protests against budget cuts in Greece, including the country's second 24-hour general strike in two weeks. (In the second article, an accompanying photo appears to show tens or hundreds of thousands of protesters, but is accompanied by a caption mentioning "thousands" of protesters.)

We have been meaning to do a post about an interesting item posted to Naked Capitalism earlier this week, by fund manager Marshall Auerback and L. Randall Wray, from the UMKC economics department (one of the main heterodox departments in the United States):

Memo to Greece: Make War, Not Love, With Goldman Sachs

By Marshall Auerback, a fund manager and investment strategist and L. Randall Wray, a Professor of Economics at the University of Missouri-Kansas City | February 22, 2010

In recent weeks there has been much discussion about what to do about Greece. These questions become all the more relevant as the country attempts to float a multibillion-euro bond issue later this week. The Financial Times has called this fund-raising a critical test of Greece's credibility in financial markets as it battles with a spiraling debt crisis and strikes. (http://www.ft.com/cms/s/0/463b205e-1d93-11df-a893-00144feab49a.html ) The "credibility" of the financial markets is an important consideration in a country which has functionally ceded its sovereign ability to create currency, and thus remains dependent on the vagaries of the very banking institutions which helped create the mess in the first place.

Maybe Greece should secede from the European Union and default on its euro debt? Or go hat-in-hand to the International Monetary Fund (IMF) to beg for loans while promising to clean up its act? Or to the stronger Euro nations, hoping for charitable acts of forgiveness? Unfortunately, all of these options are going to mean a lot of pain and suffering for an economy that is already sinking rapidly.

And it is questionable whether any of them provide long term viable answers. Polls show that given the perception of fiscal excesses of Greece and the other countries on the periphery, the public in Germany opposes a bailout of these countries at its expense by a significant margin. Periphery countries such as Ireland that have already undertaken harsh austerity measures also oppose the notion of a bailout, despite—nay, because of–the tremendous pain already inflicted on their own respective economies (in Ireland's case, the banks are probably insolvent as well). The IMF route is also problematic, given that Greece probably doesn't qualify under normal IMF standards, and many euro zone nations would find this unpalatable from an ideological standpoint, as it would mean ceding control of EU macro policy to an external international institution with strong US influence.

The Wall Street Journal recently highlighted an article by Simon Johnson and Peter Boone, lamenting that the demands being foisted on Greece and other struggling Euronations would "massively curtail demand, lower wages and reduce the public sector workforce. The last time we saw this kind of precipitate fiscal austerity—when nations were tied to the gold standard—it contributed to the onset of the Great Depression in the 1930s" (http://online.wsj.com/article/SB10001424052748703525704575061172926967984.html ). Where we disagree with Johnson and Boone is the suggestion that the IMF be brought in to craft a solution. Any help from this organization will come with tight strings attached—indeed, with a noose around Greece's neck. Germany and France would be crazy to commit their scarce euros to a bail-out of Greece since they face both internal threats from their own taxpayers and external threats from financial vampires who are looking for yet another nation to attack.

Here's a more appropriate action: declare war on Goldman Sachs and other global financial firms that created this mess. Send the troops, the planes, the tanks, and the ships. Attack every outpost of the saboteurs on European soil. Blockade the airports and ports. Make Wall Street traders and CEOs fear for their lives, or at least for their freedom to travel. Build some Guantanamo-like facility to hold these enemy financial combatants until they can be tried, convicted, and properly punished.

Ok, if a literal armed attack on Goldman is too far-fetched, then go after the firm using the full force of the regulatory and legal systems. Close the offices and go through the files with a fine-tooth comb. Issue subpoenas to all non-clerical staff for court appearances. Make the internal emails public. Post the names of all managers and traders on Interpol. Arrest anyone who tries to board a plane, train, or boat; confiscate their passports; revoke their visas and work permits; and put a hold on their bank accounts until culpability can be assessed. Make life at least as miserable for them as it now is for Europe's tens of millions of unemployed workers.
We know that the Obama administration will not go after the banksters that created this global financial calamity. It has been thoroughly co-opted by Wall Street's fifth column—who hold most of the important posts in the administration. Europe has even more at stake and has shown somewhat more willingness to take action. Perhaps our only hope for retribution lies there.
Some might believe the term "banksters" is too mean. Surely Wall Street was just doing its job—providing the financial services wanted by the world. Yes, it all turned out a tad unfortunate but no one could have foreseen that so many of the financial innovations would turn into black swans. And hasn't Wall Street learned its lesson and changed its practices? Fat chance. We know from internal emails that everyone on Wall Street saw this coming—indeed, they sold trash assets and placed bets that they would crater. The crisis was not a mistake—it was the foregone conclusion. The FBI warned of an epidemic of fraud back in 2004—with 80% of the fraud on the part of lenders. As Bill Black has been warning since the days of the Saving and Loan crisis, the most devastating kind of fraud is the "control fraud", perpetrated by the financial institution's management. Wall Street is, and was, run by control frauds. Not only were they busy defrauding the borrowers, like Greece, but they were simultaneously defrauding the owners of the firms they ran. Now add to that list the taxpayers that bailed out the firms. And Goldman is front and center when it comes to bad apples.

Lest anyone believe that Goldman's executives were somehow unaware of bad deals done by rogue traders, William Cohan (http://opinionator.blogs.nytimes.com/2010/02/18/the-great-goldman-sachs-fire-sale-of-2008) reports that top management unloaded their Goldman stocks in March 2008 when Bear crashed, and again when Lehman collapsed in September 2008. Why? Quite simple: they knew the firm was full of toxic waste that it would not be able to continue to unload on suckers—and the only protection it had came from AIG, which it knew to be a bad counterparty. Hence on March 19, Jack Levy (co-chair of M&As) sold over $5 million of Goldman's stock and bet against 60,000 more shares; Gerald Corrigan (former head of the NY Fed who was rewarded for that tenure with a position as managing director of Goldman) sold 15,000 shares in March; Jon Winkelried (Goldman's co-president) sold 20,000 shares. After the Lehman fiasco, Levy sold over $6 million of Goldman shares and Masanori Mochida (head of Goldman in Japan) sold $56 million worth. The bloodletting by top management only stopped when Goldman got Geithner's NYFed to produce a bail-out for AIG, which of course turned around and funneled government money to Goldman. With the government rescue, the control frauds decided it was safe to stop betting against their firm. So much for the "savvy businessmen" that President Obama believes to be in charge of Wall Street firms like Goldman.

From 2001 through November 2009 (note the date—a full year after Lehman) Goldman created financial instruments to hide European government debt, for example through currency trades or by pushing debt into the future. But not only did Goldman and other financial firms help and encourage Greece to take on more debt, they also brokered credit default swaps on Greece's debt—making income on bets that Greece would default. No doubt they also took positions as the financial conditions deteriorated—betting on default and driving up CDS spreads.

But it gets even worse: An article by the German newspaper, FAZ, ("Die Fieberkurve der griechischen Schuldenkrise", Feb. 20, 2010) strongly indicates that AIG, everybody's favorite poster boy for financial deviancy, may have been the party which sold the credit default swaps on Greece (English translation here).

Generally, speaking, these CDSs lead to credit downgrades by ratings agencies, which drive spreads higher. In other words, Wall Street, led here by Goldman and AIG, helped to create the debt, then helped to create the hysteria about possible defaults. As CDS prices rise and Greece's credit rating collapses, the interest rate it must pay on bonds rises—fueling a death spiral because it cannot cut spending or raise taxes sufficiently to reduce its deficit.

Having been bailed out by the Obama Administration, Wall Street firms are already eyeing other victims (and for allowing these kinds of activities to continue, the US Treasury remains indirectly complicit, another good reason why one shouldn't expect any action coming out of Washington). Since the economic collapse is causing all Euronations to run larger budget deficits and at the same time is raising CDS prices and interest rates, it is easy to pick off nation after nation. This will not stop with Greece, so it is in the interest of Euroland to stop the vampires now.

With Washington unlikely to do anything to constrain Goldman, it looks like the European Union, which is launching a major audit, just might banish the bank from dealing in government debt. The problem is that CDS markets are essentially unregulated so such a ban will not prevent Wall Street from bringing down more countries—because they do not have to hold debt in order to bet against it using CDSs. These kinds of derivatives have already brought down an entire continent – Asia – in the late 1990s (see here), and yet authorities are still standing by and basically doing nothing when CDSs are being used again to speculatively attack Euroland. The absence of sanctions last year, when we had a chance to deal with this problem once and for all, has simply induced even more outrageous and fundamentally anti-social behavior. It has pitted neighbor against neighbor—with, for example, Germany and Greece lobbing insults at one another (Greece has requested reparations for WWII damages; Germany has complained about subsidizing what it perceives to be excessive social spending in Greece).

Of course, as far as Greece goes, the claim now is that these types of off balance sheet transactions in which Goldman and others engaged were not strictly "illegal" under EU law. But these are precisely the kinds of "shadow banking transactions" that almost brought down the global financial system 18 months ago. Literally a year after the Lehman bankruptcy – MONTHS after Goldman itself was saved from total ruin, it was again engaging in these kinds of deals.

And it wasn't exactly a low-level functionary or "rogue trader" who was carrying out these transactions on behalf of Goldman. Gary Cohn is Lloyd "We're doing God's work" Blankfein's number 2 man. So it's hard to believe that St. Lloyd did not sanction the activities as well in advance of collecting his "modest" $9m bonus for last year's work.

If these are examples of Obama's "savvy businessmen", then heaven help the global economy. The transaction highlighted, if reported that way in the private sector, would be accounting fraud. Fraud – "Go to jail, do not pass Go" fraud. That senior bankers had no problem in structuring/recommending/selling such deals to cash-strapped governments should probably not surprise us at this point. However, it would be interesting to know if the prop trading desks of those same investment banks, purely by coincidence of course, then took long CDS (short the credit) positions in the credit of the countries doing the hidden swaps. A proper legal investigation by the EU could reveal this and certainly help to uncover much of the financial chicanery which has done so much destruction to the global economy over the past several years.

In this country, we have had a "war on terror" and a "war on drugs" and yet we refuse to declare war on these financial weapons of mass destruction. We all remember Jimmy Carter's "MEOW"—the attempt to attack creeping inflation that was said to sap the strength of the US economy in the late 1970s. But Europe—and indeed the entire globe—faces a much more dangerous and immediate threat from Wall Street's banksters. They created this mess and are not only profiting from it, but are actively preventing recovery. They are causing unemployment, starvation, destruction of lives, and even violence and terrorism across the world. They are certainly more dangerous than the inflation of the 1970s, and arguably have disrupted more lives than Osama bin Laden—whose actions led the US to undertake military actions in at least three countries. That should provide ample justification for Greece's declaration of figurative war on Manhattan.

However, in an ironic twist of fate, it was just announced that Petros Christodoulou will take over as the head of Greece's national debt management agency. He worked as the head of derivatives at JP Morgan, and also previously worked at Goldman—the firm that got Greece into all this trouble!

Dimitri Papadimitriou has recently made what we consider to be an important plea for moderation of the hysteria about Greece's debt. Writing in the Financial Times, he complained that

The plethora of articles in your pages and others, some arguing in favour and other against a bail-out, contribute to market confusion and drive the country's financing costs to record levels. It is not yet clear that a bail-out is even needed, but this market confusion is rendering the government's ability to achieve its deficit goals ever more difficult.

Indeed, we suspect that the same financial firms that helped to get Greece into its predicament are profiting from—and stoking the fires of—the hysteria. He goes on, "what Greece really needs now is a holiday from further market confusion being created by contradictory, alarmist public commentary".

Greece, Euroland in general, and the rest of the world all need a holiday from the manipulation and destruction of our economies by Wall Street firms that profit from speculative bubbles, from burying firms, households, and governments under mountains and debt, and even from the crises that they create. Governments all over the globe should use all legal means at their disposal to ferret out the bad faith and even fraudulent deals that global financial behemoths are foisting on us.

Read the original post.

Labels: blogger, Credit Default Swaps, Goldman Sachs, Greece

 

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3/11/2010 02:36:00 PM 0 comments

 

Unemployment at 9.7%; Links on Jobs

by Dollars and Sense

The Bureau of Labor Statistics released the jobs numbers for February this morning; find the Employment Situation Summary here.

I apologize for not keeping up with the blog for the last few days—we have been busy rushing the March/April issue of Dollars & Sense to the printers (late, but by less than usual for us!).

I have just posted an article from the new issue on military Keynesianism; and here is the editorial note for the issue, whose theme is Guns (i.e., military spending) vs. Butter (i.e., spending on jobs):

Word is out about how bad the long-term unemployment situation is likely to be. The cover story in the current issue of the Atlantic Monthly, How a New Jobless Era Will Transform America, declares, plausibly, that "a whole generation of young adults is likely to see its life chances permanently diminished by this recession."

A recent working paper from the National Bureau of Economic Research, the same outfit that calls the start- and end-dates of recessions, found that people who come of age during a recession "tend to support more government redistribution, but they have less confidence in public institutions," and tend to believe "that success in life depends more on luck than on effort." In other words, people who grow up in a recession are more likely to wind up in depression.

In a New York Times article on long-term unemployment, Allen Sinai, chief economist for Decision Economics, gave a glimpse into how economic elites tend to think about unemployment: "American business is about maximizing shareholder value. You basically don't want workers." He continued, "You hire less, and you try to find capital equipment to replace them." Our vision of a future economy—one without bosses—somehow seems more sustainable than one without workers.

There is an alternative to a jobless future: government policies that support full employment, including direct job-creation by the federal government. How would this be funded? There are lots of options, including a tax on financial transactions (which John Miller assesses in this issue's Up Against the Wall Street Journal), restoring tax rates to the progressive levels of the mid-20th century, and slashing our bloated military and "security" budgets. Now is the time to push for (many) fewer guns and (much) more butter.

Labels: military Keynesianism, military spending, unemployment

 

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3/05/2010 01:44:00 PM 1 comments

 

Debt Vultures in Liberia (Greg Palast)

by Dollars and Sense

Greg Palast continues to follow the story of debt vultures who "buy up the loans of poor governments, wait for them to win debt relief from the international community, and then use courts to pursue the countries for assets," for BBC TV Newsnight and an article in the Guardian. Palast wrote about debt vultures for D&S back in 2007 (George Bush's Favorite Vultures). Here's an excerpt from the Guardian article:

Liberian leader urges MPs to back action against vulture funds

Liberia's president calls on MPs to support bill that would bar vulture funds from pursuing debts of poorer nations in UK courts.

Heather Stewart and Greg Palast | Thursday, February 25, 2010

Ellen Johnson Sirleaf, the president of Liberia, is urging MPs to back a bill banning vulture funds from using British courts to prey on poor countries when it comes to a vote on Friday .

Liberia lost a $20m (£13m) case in London last year against two so-called vultures. Such funds buy up the loans of poor governments, wait for them to win debt relief from the international community, and then use courts to pursue the countries for assets.

Sirleaf said: "We've been waiting for a parliament or an assembly to take this kind of hard decision. I hope the US Congress and maybe some others in Europe will pick up this gauntlet and will follow the example of Britain."

An investigation for BBC's Newsnight, to be broadcast tonight, has uncovered allegations that speculators subverted the international debt relief process for Liberia, in an attempt to gain more money from its government and international donors than 97% of its other creditors accepted.

Liberia received debt relief worth $4bn from the international community in 2007 under the heavily indebted poor countries initiative, including $2bn from private-sector bondholders. Insiders to negotiations allege that two US financiers, Eric Hermann and Michael Straus, allowed other creditors to accept a low payout from Liberia, then quietly transferred their holdings to two other firms, which then sued in Britain for the debt in full.

Read the full article.

Labels: debt vultures, Greg Palast, Liberia, vulture funds

 

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3/02/2010 03:42:00 PM 1 comments

 

A Titanic Budget (Jo Comerford)

by Dollars and Sense

A great piece from Jo Comerford of the National Priorities Project, recently posted at TomDispatch. Here is Tom Engelhardt's introduction:

If there were a prize for worst headline of the week, even the month, it would surely go to a February 23rd piece in the New York Times headlined online: "Gates Calls European Mood a Danger to Peace." The bellicose "mood," so undermining of global peace that our secretary of defense had to go after it, was (according to Brian Knowlton of the Times) the "public and political opposition to the military" spreading across Europe. Who wouldn't react similarly in the face of such an unnerving phenomenon? After all, should it grow stronger, peace on Earth will surely prove a chimera.

European publics are now, it seems, so totally peaceable that, while the thousandth American died "in and around Afghanistan" in Operation Enduring Freedom last week to next to no notice here, they continued to exhibit extraordinary "weakness." After all, this was also the week in which—speak of the devil—the Dutch coalition government collapsed over a dispute about the public's desire to get Dutch troops out of Afghanistan. What an example of that anti-peace bogeyman run riot! No wonder Gates was warning that the perception of weakness could lead hostile powers (unnamed) to a "temptation to miscalculate and aggression."

Fortunately, one country is still willing to sink its money (and lives) into the armed enhancement of peace globally: the United States. As Jo Comerford of the National Priorities Project points out, the latest federal budget opens the American public to yet more pain, while shielding the military and the rest of the national security establishment from the same. Fortunately, that "antiwar mood" seems not to have jumped the wide Atlantic, which means, for the time being, peace is safe in America. —Tom

Read Jo Comerford's article.

Labels: budget, Jo Comerford, military spending, National Priorities Project, Tom Engelhardt

 

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3/01/2010 11:00:00 AM 0 comments