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Unilateral Disarmament

Sunday, January 13, 2013

Obama has now unilaterally declared that he lacks the independent power to deal with the debt ceiling. There are some, actually there are many, who believe he has done so because an inability to act on his own is a condition precedent to his ability to claim he had no choice but to cut vital programs. Never has a president gone to such lengths to declare himself so powerless.

If I believed he’d stand firm and blame Republicans for the wreckage I’d feel differently, but I simply can’t believe it. It’s too out of character. There is a theory that they rejected the coin to make it clear to Republicans that there is no way out; that Republicans have to cave. Again, I wish I could believe it, and I hope it’s true, but we have a lot of history here, and none of it furnishes ground for optimism.

Filed in Economics, Obama | | Comments (0)

Friday Night Music-Great Unsung Lyricists

Friday, January 11, 2013

There have been some great lyricists over the years: the Gilbert of Gilbert & Sullivan, the Ira of Gershwin and Gershwin, Cole Porter, Dylan, Lennon & McCartney, Carole King… why their numbers are legion. But some lyricists remain unsung, like that fellow who put the ram in the ram-a-lang-a-ding-dong. Well, actually I guess he was sung, but you know what I mean, we still don’t know who he was. So tonight, we celebrate two unsung lyricists whose nuanced and inventive lyrics have withstood the test of time, in the sense that you can still find them on youtube, and both are potential earworms.

Anybody can write stuff like Anything Goes, but it takes a guy with guts to pair words like Hanky, Panky, line and time and pack them with meaning many layers deep.

But that effort pales next to the inventiveness displayed in this gem from the 60s, and yes, I just love the audiences and dancers in these old Shindig shows. We’re we really like that? Actually, no we weren’t, but I guess we must have wanted to be like that, and I’m not sure which is worse.

Filed in Music | | Comments (1)

Yet another installment of “What Could Go Wrong?”

Wednesday, January 9, 2013

I just finished Robert Sheer’s book, The Great American Stickup, which traces the roots of the current economic crisis back to the early 90s, when a bi-partisan (isn’t bi-partisanship great?) group of scam artists, including Phil Gramm and his wife Wendy on the R side, and Robert Rubin and Larry Summers on the D side, effectively deregulated trades in derivatives and tore down the wall between banks and investment firms. The one heroine of the book is a woman named Brooksley Born, who briefly headed the Commodity Futures Trading Commission. Ms. Born suggested that the Commission might consider studying the question of whether it was really a good idea to unleash unregulated instruments like credit default swaps on an unsuspecting world and that something might, just possibly, go wrong, but she was squashed, it being obvious that 1) even a study of such things would destroy market confidence and 2) nothing could possibly go wrong. I am not misrepresenting on either of those points, that’s what the big guys said, including the sage, Alan Greenspan.

We’ve come a long way since then. Brooksley Born met her deserved fate. She was chewed up and spit out, and no one hears from her anymore. Something did go wrong, but curiously enough, this has not shaken the faith of the people who brought on this crisis that, in fact, nothing can go wrong, and if it did, well, these things happen and who could have seen it coming? Only people like Brooksley Born, and when was the last time she was on the Sunday shows, or was named an adviser to the president? There are lots of things Washington forgives, but it will never forgive someone for being right.

So that’s settled. Nothing can go wrong, and one thing you don’t want to do is be a Brooksley Born and say that something could. Fast forward to today, and we find that the SEC says that nothing could go wrong if it lets JP Morgan corner the copper market.

An SEC action that appears likely to do considerable harm to companies and individuals in the US and abroad appears to have gone completely unnoticed, save for an important piece in The New Republic by Linda Khan.

Heretofore, as Kahn describes, the main participants in physical commodities markets ex precious metals have been end users. While there have been reports of metals hoarding in China, it’s not easy for most investors to do since they are bulky. (Oil is a special case, since producers can speculate simply by “inventorying” oil by keeping it in the ground; above ground storage is limited and not as “efficacious” in the words of oil investor Dan Dicker, as one might think. The picture is oil is further complicated by the fact that the prices for OPEC oil are based on an average of futures prices, not spot prices, which producers found were subject to manipulation).

The SEC has paved the way for investors to take a direct stake in commodities, rather than through commodities futures. The agency gave the green light to JP Morgan to launch a fund whose shares would be backed by warehoused copper. The implications are not pretty. Per Khan:

In practical terms, the SEC handed traders at J.P. Morgan control over 20 to 30 percent of the copper available for immediate delivery from the London Metals Exchange — the commercial market where companies that use copper go to procure last-minute supplies.

The investors purchasing shares in J.P. Morgan’s fund won’t be buying copper to use, but to store. The intricacies of the fund are complex, but its underlying rationale is straightforward: the more shares investors buy, the more copper is taken off the market. And the more copper that is taken off the market, theoretically the more valuable the copper and the shares become.

Moreover, it’s a no-brainer that this JP Morgan “innovation” will lead to the creation of copycat fund in other markets, most troublingly those for agricultural products.

(via naked capitalism)

Keep in mind that none of this adds an ounce of copper (or a grain of wheat, when they start cornering that) to what would otherwise be produced. To an outside observer, it might appear obvious that the sole point of forming such a fund is to artificially drive up the price of copper so that the investors in your fund can get a huge return for doing something with no social utility. After all, why would anyone buy shares in this venture unless that’s precisely what they expected JP Morgan to do? Our outside observer might think this sounds like-well – like allowing an Enron to manipulate the market for electricity, but that’s because outside observers are so naïve. The SEC has looked into this, and perhaps because no one there wants to end up being a Brooksley Born, so far as it can see, nothing can go wrong.

Filed in Corporate Crime, Economics | | Comments (0)

Meet the new guy, same as the old guy

Wednesday, January 9, 2013

I know nothing about Jack Lew, who appears to be in line to be the next Treasury Secretary, but watch to see if the Republicans allow his nomination to go to the floor without a real fight. (There will be some token huffing and puffing because of the debt ceiling and because they are, after all, Republicans). If this happens, then he is Wall Street’s boy; another Timmy Geithner. It is little noted, and has not been long remembered, that Geithner breezed through, despite some tax problems that would have tanked a nominee that did not have Wall Street’s blessing, and in the end, the Republicans will dance to Wall Street’s tune on this nomination.

So, a few minutes after I wrote the above, I found this, which pretty much tells us all we need to know.

Filed in Economics | | Comments (0)

Beggars can be choosers

Tuesday, January 8, 2013

What a great country! Beggars can be choosers, provided, of course, that they’re rich enough.

Fresh from paying back a $182 billion bailout, the American International Group has been running a nationwide advertising campaign with the tagline “Thank you America.”

Behind the scenes, the restored insurance company is weighing whether to tell the government agencies that rescued it during the financial crisis: thanks, but you cheated our shareholders.

The board of A.I.G. will meet on Wednesday to consider joining a $25 billion shareholder lawsuit against the government, court records show. The lawsuit does not argue that government help was not needed. It contends that the onerous nature of the rescue — the taking of what became a 92 percent stake in the company, the deal’s high interest rates and the funneling of billions to the insurer’s Wall Street clients — deprived shareholders of tens of billions of dollars and violated the Fifth Amendment, which prohibits the taking of private property for “public use, without just compensation.”

(via NYTimes.com)

So, this is a bit like a beggar suing a guy who gave him a buck on the grounds that the donation was totally insufficient. In AIG’s case, I’ve always felt we should have averted our eyes when we saw its outstretched hands, but I’m not a Washington wise man.

Apparently the AIG shareholders take the position that having undertaken to bail them out, Washington had a duty to do so in a way that would optimize their financial position, while the silly rest of us thought the government’s duty was to the country at large.

We taxpayers can sympathize in one respect. We can all agree that it wasn’t a good idea to pay 100 cents on the dollar on those credit default swaps, as little Timmie insisted.

The government, Starr argues, used billions of dollars from A.I.G. to settle credit-default swaps the insurer had with banks like Goldman Sachs. The deal, according to the lawsuit, empowered the government to carry out a “backdoor bailout” of Wall Street.

(via NYTimes.com)

Sure, it would have been better for everyone concerned had the government told Goldman Sachs to pound sand, because Goldman had to be well aware that AIG lacked the reserves to pay off the swaps, and it was therefore relying on its (as it turned out well–founded) expectation that the government would step in when the economy blew up, ad Goldman was betting it would. So we can all agree that the country would be better off if Goldman had not been paid, but then that forces us to conclude that we’d be better off had we left AIG to face its fate alone, thereby reducing the stock price to zero. That, presumably, is where we part company with the AIG shareholders.

Filed in Corporate Crime | | Comments (0)

Shear those sheep!

Tuesday, January 8, 2013

I’ve commented before on the fact that there’s a lot of grifting happening on the right hand side of the political spectrum. Some of it is laid out here, and it occurs to me that there’s not much difference between the secular scammers and those working the spiritual beat. Nor is there  much separating the trusting, faithful and stupid sheep shorn by the televangelists and the sheep that line the pews at a Glenn Beck concert.

Filed in Grifters, Republicans | | Comments (0)

You’re welcome

Monday, January 7, 2013

Or, Great Minds Think Alike

Paul Krugman, this morning, on the platinum coin:

This still leaves the question of whose face goes on the coin — but that’s easy: John Boehner. Because without him and his colleagues, this wouldn’t be necessary.

(via NYTimes.com)

Yours truly this past Thursday:

It occurs to me that if they mint the coin they should put Boehner and McConnell on the obverse, and an elephant on the reverse.

(via CT Blue)

I’d like to believe he’s a reader but I’m not that deluded yet. More importantly, he says we should go with the coin.

Filed in Economics | | Comments (0)

Friday Night Music

Friday, January 4, 2013

This is getting a bit harder. I confess that I really don’t know much about newer music, except what I pick up on Colbert, and I’m running out of the old stuff. I’d appreciate any suggestions I can get (looking at you, MZ). Anyway, in rummaging through my mind’s back catalogue, I realized that I have never, so far as I can remember, put up anything by Jackie Wilson, and I found something surprisingly good.

No lip synching, and a real live performance.

Every time I wander through youtube looking for performances from the late 50s or early 60s, I check to see if there are any live performances by the great Sam Cooke. Sorry to say, still nothing.

Filed in Music | | Comments (0)

Fighting crazy with crazy

Friday, January 4, 2013

This, and a number of other posts on the subject, including Paul Krugman’s here, should be required reading for every progressive who is concerned about the probability possibility that the Democrats might sell us out in two months in order to “protect the nation” from the Republican’s refusal to raise the debt limit. The Republicans have already announced their intention to hold the nation hostage again (example here ), so it’s important that, when we hear the White House or our Congressfolks telling us that they simply have no choice but to cave yet again, we all know and respond that there’s a fix every bit as legal, if every bit as cynical, as the hostage taking itself.

In a situation like this, it’s often useful, as bizarre as this may sound, to ask yourself WWGBD (What would George Bush do). He was a terrible president-the worst we’ve had- but he knew how to get what he wanted. The trouble was that what he wanted was generally bad for the country. But I have no doubt that had the Democrats threatened to take the country hostage by refusing to raise the debt limit, he would, in a minute, have threatened to mint the trillion dollar coin, and if they’d called his bluff, he would have done it. In his case, there would have been no anti-Fox network to assure us that it was all the end of the world, but really, who cares what Fox has to say? After the markets react with a resounding calm the issue would go away. If the Republicans really want to dig their own graves, they can try to impeach Obama, and drive his favorables into the stratosphere. In some other universe, this scenario will play itself out. But not in ours, I feel confident. Nonetheless, it’s important for everyone to know that it could.

I should also point out that had George Bush threatened to do what Obama will never threaten to do, the Democrats would not have called his bluff, because a) they never did, and b) they would have known he would do what he said. The Republicans have a) always called Obama’s bluffs, and b) discovered he never follows through. However, there’s always a first time, and this should be one of them.

EPILOGUE: It occurs to me that if they mint the coin they should put Boehner and McConnell on the obverse, and an elephant on the reverse. 

Filed in Economics | | Comments (0)

That was quick

Thursday, January 3, 2013

Okay, I know it was a slam dunk, but still…

Filibuster reform is in trouble, proponents warn, at the hands of a scaled-back proposal they say would enhance rather than diminish the Senate minority’s power to obstruct.

Sen. Jeff Merkley (D-OR) says his proposal to force filibustering senators to occupy the floor and speak ceaselessly could be in jeopardy, thanks to a new bipartisan filibuster package that he and his ally Sen. Tom Udall (D-NM) argue would do more harm than good to the cause.

“Normally the majority party has a right to determine the agenda of the Senate. They don’t have the right to pass bills. That’s up to the majority of the Senate,” Udall said on the floor Wednesday. “But then the majority leader should have the right to bring a bill to the floor of the Senate. And that has been denied over and over again by the minority party. That’s wrong.”

The dueling proposal, spearheaded by longtime Sens. John McCain (R-AZ) and Carl Levin (D-MI), would make it somewhat tougher for the minority to block debate on legislation but also guarantee them two amendments on bills, regardless of germaneness or relevancy to the main topic of the legislation.

“It’s a step backward rather than a step forward,” a Merkley aide said. “It doesn’t attack the core of the matter. It doesn’t include a talking filibuster. And it allows the minority to kill legislation with poison pill amendments. It keeps all the tools minority has to obstruct and then gives them another tool.”

(via TPMDC)

A few days ago I predicted the following for the coming year:

The United States Senate will make a gesture toward reforming its rules, but will do nothing meaningful. To the extent anything meaningful is proposed, it will be defeated in response to cries of unfairness from the same Republicans, including the Fox News people, who condemned filibusters when Democrats threatened to use them (and didn’t because they were intimidated).

Actually, if the bi-partisan reform (which always means it favors Republicans) comes about, I will, in a sense, be wrong, as it will make the situation even worse, since I predicted that the “reform” would be merely meaningless. But I’ll still take it, lamentably as one more easy prediction that came about. There’s always a Democrat, this time the usually good Carl Levin, who will play nice with Republicans and prevent real progress on any issue. Here’s hoping (but don’t hold your breath) that Harry Reid will back the Merkley plan.

Filed in Decline, Democrats | | Comments (0)