Posts from — January 2009
James Lieber, a lawyer who writes for The Village Voice, investigated the reasons for the global financial collapse, and identified a man named Joseph Cassano, head of AIG Financial Products in London, as the key player in “the worst financial scandal in history.” That made me curious. For example, I wondered what had happened to Cassano (photo at right). I found that he resigned a year ago after AIG Financial Products posted $11 billion in losses, and now lives in an exclusive London enclave. AIG gave him a nice going-away present. Not only was he allowed to keep $34 million in bonuses, but the company hired him as a consultant at $1 million per month. That’s right – a million bucks a month, and from all accounts he doesn’t have to do any actual work. But I guess it’s no more than you would expect for a guy who made $280 million during his eight years at AIG.
Meanwhile, a bunch of anonymous global “counterparties” who bought “credit derivatives” from Cassano were bailed out with your money. You remember? AIG got that $84 billion government loan (and spent $440,000 on a spa vacation for top execs)? And then the government lent AIG another $38 billion? And then the government gave AIG another $40 billion, slashed the $85 billion loan to $60 billion, and “replaced” the $38 billion loan with a $52.5 billion aid package. That’s how generous you-the-taxpayer have been to AIG. The Bush crewe and AIG wouldn’t say where your billions went. But Lieber says it went to “counterparties who bought derivatives from Cassano’s shop in London.”
I know you don’t have time to read long blogs, but you might want to make an exception in this case. I think you would find these excerpts from Lieber’s explanation of the global meltdown interesting:
What did cause the crisis was the writing of credit derivatives. In theory, they were insurance policies for investors; in practice, they became a guarantee of global financial collapse. As insurance, they were poised to pay off fabulously when these weak bundled securities failed.
(Lieber compares the “credit derivatives” to taking out a large insurance policy on a third party who is terminally ill then cashing in when the person dies. He zeroes in on AIG Financial Products in London, which he calls “the heart of darkness.”)
AIG had placed this unit outside American borders, which meant that it would not have to abide by American insurance reserve requirements. In other words, the derivatives clerks in London could sell as many products as they could write – even if it would bankrupt the company. The president of AIGFP, a tyrannical super-salesman named Joseph Cassano, certainly had the experience. In the 1980s, he was an executive at Drexel Burnham Lambert, the now-defunct brokerage that became the pivot of the junk-bond scandal that led to the jailing of Michael Milken, David Levine, and Ivan Boesky.
During the peak years of derivatives trading, the 400 or so employees of the London unit reportedly averaged earnings in excess of a million dollars a year. They sold “protection” …. worth more than three times the value of parent company AIG…. This scheme that smacks of securities fraud facilitated the dreams of buyers called “counterparties” willing to ante up. Hedge fund offices sprouted in Kensington and Mayfair like mushrooms after a summer shower. Revenue from premiums for derivatives at AIGFP rose from $737 million in 1999 to $3.26 billion in 2005…
People still seem surprised to read that hedge principals have raked in billions of dollars in a single year. They shouldn’t be. These subprime-time players knew how to score. The scam bled AIG white….
Imagine if a ring of cashiers at a local bank made thousands of bad loans, aware that they could break the bank. They would be prosecuted for fraud and racketeering under the anti-gangster RICO Act. If their counterparties – the debtors – were in on the scam and understood that they didn’t have to pay off the loans, they could be charged, too. In fact, this scenario played out at subprime-pushing outlets of a host of banks, including Washington Mutual (acquired last year by JP Morgan Chase, which itself received a $25 billion bailout); IndyMac (which was seized by FDIC regulators); and Lehman Brothers (which went belly-up). About 150 prosecutions of this type of fraud are going forward….
So far, Cassano has not been prosecuted, although a news report today says prosecutors are taking a close look at the guy. What about the “counterparties” who bought the credit derivatives? Nobody is going after them. They’re probably enjoying your bailout money on the Riviera or someplace nice like that. Doesn’t that make you wonder just who this Cassano guy represented, and who his “counterparties” might include?
You might recall that much the same kind of scam occurred back in the late Eighties with the Savings and Loan failures in the U.S. Several books have since been published revealing how organized crime rigged the system to siphon off money in “bad loans.” And you might recall that the taxpayers ended up with a multi-billion-dollar bailout bill back then, too.
January 31, 2009 2 Comments
While the U.S. economy slips into an abyss from which it might never recover, the nation’s television screens are full of the trials and tribulations of a political hack. And in Washington, it’s party politics as usual. What will it take to make the media recognize the gravity of the situation? When will politicians in Washington wake up to the fact that if they continue their squabbling there might be nothing of value left to squabble over?
Thousands of breadwinners are being thrown out of work every day, families are losing their homes, the nation’s young people are being robbed of their dreams. And in the midst of this epidemic of despair. an emergency recovery plan to halt the cycle of economic decline is being picked apart by self-serving politicians, interested only in scoring points for their party and themselves.
But that is not what TV “journalists” find most fascinating. They are obsessed with the impeachment and expulsion of Illinois Governor Rod Blagojevich, who is accused of trying to sell Barack Obama’s vacant Senate seat.
If the Blagojevich scandal is enlightening in any way, it reveals (to the more naive among us) a common practice in American politics known as “pay for play.” Simply put the tradition calls for campaign conributions from those who want favors from a politician. For example, lobbyists who approach a politician with a request are told to “drop by my office.” According to MSNBC TV’s Chris Matthews, that means “drop by my office and bring a campaign contribution.”
There may be some politicians who do not accept campaign contributions from those who benefit from their decisions, but I would imagine those politicians do not remain in office for long, as it takes a lot of money to run a campaign. Admittedly, Blagojevich took the practice to an absurd extreme, demanding the contributions up front, and expressing his “pay-for-play” policy in blunt and offensive language. But how was he to know he was doing anything wrong? He grew up in Chicago and has spent his life in the political culture there. Monkey see, monkey do.
January 30, 2009 1 Comment
The people in the photo (appropriately at right) are Republicans. You might want to save the picture as it could become a historical relic. The reason? This could be the last crop of Republicans seen in the United States Congress. In future years, I expect to see Democrats and possibly a few Libertarians or members of some other party that might not yet exist, but I think the Republicans have just sealed their political doom. Voters will remember that not one Republican representative voted for the $819 billion economic recovery plan approved by the House yesterday by a vote of 244-188.
The names of House Republican leader John Boehner (speaking) and party whip Eric Cantor (looking over his right shoulder) will live in infamy. They led the failed blockade against the stimulus bill. Both are far-right conservatives who would rather see Americans sink into poverty and despair than give in to “liberal” policies, such as creating jobs, feeding the poor, healing the sick and providing educational opportunities for bright but underprivileged kids. What they want is more tax breaks for Big Business and the richest of the rich.
To become law, the economic recovery plan must also win approval in the Senate, where Republicans could use a filibuster to block it. While I expect a lot of saber rattling from these political dinosaurs, I don’t think they’re dumb enough to use the filibuster. That would, indeed, be the final nail in their coffin.
Fortunately for America, political representatives must be re-elected to remain in office. And I cannot believe that those who stand in the way of America’s economic recovery will be re-elected.
January 29, 2009 3 Comments
I knew the bipartisan approach would do no good. The American system of governance is based on checks and ballances, not on mutual cooperation. The voters are supposed to look at proposals submitted by the candidates and choose the package they like most – or hate least. Then the winner implements the proposed policies chosen by the most voters, and if it doesn’t work in four years the losing party gets to offer an alternative.
I am sure the founding fathers did not anticipate that the winning party would seek to implement the losing policy proposals. As a Constitutional law professor, Barack Obama knows this. So why is he pandering to the irrational right?
Voters kicked the Republicans out of office, giving Obama a mandate to keep his campaign promises. So come on, Barack, let’s get it on! Enough of this “free-market” mumbo-jumbo. Americans clearly want a government that governs, not a laissez-faire pack of enablers who help the corporate elite loot the country (and the world).
Obama must see that losers like House Republican Leader John Boehner have no intention of helping him to produce a workable stimulus plan, and are pretending to participate in the process only in order to sabotage it. I am convinced the Ohio Congressman (and a lot of other Republicans) would like the Obama Administration to fail because that would give them a chance to regain power.
If the new President doesn’t believe this, he should consider what Russ Limbaugh said recently. Limbaugh, who seems to be the spokesman for the Republican Party these days, came right out and said he wants Obama to fail.
These guys don’t care about the suffering an economic failure would cause not only in America but also in the rest of the world. The Republican Party represents the selfish rich, and – thanks to eight years of Bush – the selfish rich have deep enough pockets to survive an economic collapse.
It is time for Obama to stop the bipartisan charade and spend the political capital we gave him. He should trust the voters to recognize Republican obstructionism and reward it in 2010 by kicking the obstructionists out of Congress.
January 28, 2009 2 Comments
This time Rush Limbaugh has gone too far. The bloated buffoon is quoted as saying he wants President Obama’s administration to fail. How’s that for a man who constantly flaunts his “patriotism”?
I don’t listen to his radio show, of course, so all I know is what I read in the newspapers, hear on TV or see online. But I recall reading a few years back that he was accused of fraudulently concealing information to obtain prescription drugs. (I think prosecutors dropped the charge after Limbaugh submitted to an addiction treament program). Yet he doesn’t hesitate to fulminate self-righteously against everybody else’s peccadilloes.
Apparently, he also rails constantly against progressive policies, twisting facts and figures and stitching them together with spurious logic to make his case. But you would expect no less from someone with his IQ. According to Wikipedia, Limbaugh is so brain-dead that he flunked out of college after a couple of semesters. His mother is quoted as saying he “failed everything,” including ballroom dancing.
From all accounts, Limbaugh is revered by thousands (millions?) of conservatives. His radio audience is said to be among the largest in the U.S. and he is being paid $400 million over the next eight years by Premiere Radio Networks (a Clear Channel subsidiary). To me, that doesn’t say a lot for the intelligence of conservatives. But I never suspected conservatives of being all that intelligent, anyway.
President Obama, who is bending over backwards to be a gracious winner, has suggested to the Republican losers that they might want to avoid listening to Limbaugh in order to maintain their objectivity and give bipartisanship a chance to work. Personally, I don’t give bipartisanship much of a chance of surviving for long, so I have another suggestion: the rest of us should listen to Limbaugh’s show so we can find out who his advertisers are and boycott their products.
UPDATE: I thought the boycott idea was original but when I checked I found that someone else has already thought of it. Infuriated by Limbaugh’s description of anti-war protesters as Communists and homosexuals (video parody of Limbaugh, above), a group called “Take Back the Media” has organized a boycott of the show’s sponsors. And it seems their boycott is working! Micheal Stinson, a Vietnam-era veteran and co-founder of “Take Back The Media,” reports that RadioShack, Bose and Amtrak have all dropped the Limbaugh program as a result of the boycott.
Maybe we could go a little farther. How about boycotting Clear Channel Network and its subsidiaries as well as the products advertised on the shows they broadcast?
January 26, 2009 5 Comments
By now, most thinking people must have recognized that the “free market” revered by conservatives is just a fancy term for chaos and eventual financial disaster. If you applied that concept to your own family, everyone, kids included, would just shop, shop, shop until you had no money or credit left, and then starve, starve, starve…
It’s the “free market” that caused the American housing-bubble disaster. With little or no central planning to guide or inhibit them, developers went wild a few years ago, grabbing vacant land wherever they could find it, and building millions of ticky-tacky homes, especially in “Sun Belt” states like Arizona, California and Florida. I was working for the Tampa Tribune at the time and interviewed some of these “entrepreneurs.” They told me they were anticipating the retirement of “baby boomers” who would indubitably want to buy houses in the sunshine.
Possibly seduced by this line of thinking, a horde of speculators, many of them amateurs with limited resources, snapped up houses as fast as they could be tacked together. And banks opened their vaults to enable reckless speculation. Politicians eager to be thought of as fostering the American Dream pulled out all the stops on government backed housing loans. Low-income families took out mortgages they could not possibly afford, misled by deceptive introductory rates. Banks and unscrupulous predators encouraged homeowners to take out second mortgages based on soaring real estate prices. Homeowners felt rich. Many of them went on a disastrous binge, borrowing (mortgage) money for vacations, remodeling, new SUVs, college fees, and whatever else they felt they “needed.” It was a bubble that had to burst.
I don’t know exactly what burst the bubble. I guess the the 78 million “boomers” didn’t retire soon enough, or couldn’t afford houses in the sun, or couldn’t sell their houses in the snow, or something unexpected like that. Anyway, the “free market” failed to provide whatever “checks and balances” conservatives had envisioned.
Now, there are houses for sale everywhere and far too few people buying them. The National Association of Realtors estimates that there were 4.2 million existing homes for sale in November, an 11.2-month supply at the current sales pace. (And it seems likely that these figures, which are already at record highs, are underestimating the situation.) Economists are warning that until supply can be reduced to a level of six-to-seven months, home prices will continue to spiral into the abyss.
The bursting real estate bubble caused the collapse of the financial and economic system in America and a devastating ripple effect throughout the world. Unless something drastic is done,the global economy might cease to function, and we could be back to the barter system before long. The crisis is so severe that in the final days of the Bush Administration, the G7 (America, Canada, the UK, Germany, France, Japan and Italy) agreed on an emergency plan to partly nationalize failing banks.
Meanwhile, the Obama Administration has been left to pick up the pieces in America, and you can bet that any restrictions the new President and Congress impose will evoke screams of protest from “free market” conservatives. Yet something must be done – and I don’t mean simply bailing out the banks and, along the way, some of the multitude of homeowners facing foreclosure. The government must accept long-term responsibility for the market. That means financial and development planning.
If conservatives are dismayed by the “socialist” policies being implemented by developed countries today, wait until they see what is coming – what has to come – before the situation is brought under control.
January 26, 2009 No Comments
The U.S. “war on terror” is being conducted in the most wrong-headed way imaginable. It should be called “a war of revenge against people suspected of sympathizing with terrorists.” And that kind of war can produce only one result – more people who sympathize with terrorists and even some who become terrorists. President Obama must reverse this counterproductive approach and find a new way to deal with the threat of terrorism.
One immediate move should be to suspend the strikes against civilians in Afghanistan and Pakistan while his envoy Richard Holbrooke assesses the situation and works out a more reasonable way forward.
It is unconscionable for U.S. troops to blow up inoffensive men, women and children in Pakistan and Afghanistan. Pakistan’s president Asif Ali Zardari and Afghanistan’s President Hamid Karzai are justifiably infuriated by this senseless slaughter.
I know that Obama promised on the campaign trail that he would attack Al Quaida positions in Pakistan if the Pakistani authorities would not or could not root out the terrorists entrenched in the wild mountains bordering Afghanistan. It was a promise unworthy of a thoughtful and temperate leader, but I wrote it off as a rhetorical concession to conservatives.
Obama’s decisions to close the infamous Guantanamo Bay detention center and to outlaw torture are important steps in the right direction, sending a powerful message to the Muslim world. And his recent appointment of Holbrooke as his special envoy to recommend a coordinated approach to the Afghanistan-Pakistan problem is also the right way to go. But civilian bloodshed is continuing even as Holbrooke prepares to visit the region.
I am sure the President recognizes the folly of the Bush Administration’s policy of fighting terror with terror. It is bad enough when Islamic extremists and other barbarians slaughter innocent civilians to make a point; it is far worse when a civilized nation adopts the same brutish tactics.
President Obama is too intelligent and compassionate to continue this savagery. I am surprised that he has not issued a cease-and-desist order to the commanders in the field who persist in shedding innocent blood in the name of American national security. And I hope that Holbrooke will come up with a more sophisticated policy designed not only to keep America safe but also to promote peace and good will among the civilian populations of this troubling region. I believe such an approach is far more likely to defeat the extremists than a mindless campaign of bloodshed.
Photos show U.S. missiles (top), villagers inspecting missile damage (middle) and protesting Afghans (bottom).
January 25, 2009 No Comments
While American politicians deliberately place obstacles in his path, American feminists complain about the lack of females in his cabinet and American commentators grumble about this and that during his first few days in office, a Jamaican Daily Gleaner cartoonist gets to the heart of the matter:
January 24, 2009 No Comments
I hope President Obama doesn’t plan to take his bipartisan shtick too far. As he said in a meeting with the Republican cry-babies yesterday, he won the election. More important, Mr. President, we your supporters, won the election. With respect, that means we should get what we voted for. And we did not vote for tax breaks to big business and handouts to the richest of the rich.
I am troubled, Mr. President, by some of your key players – Tim Geithner, who was one of the whiz-kids who got us into the financial mess we’re in, Larry Summers, an old supply-side guru from way back, and Raytheon lobbyist William J. Lynn III, to name a few.
Most troubling of all is the stimulus package wending its way through Congress. It has been watered down to the point where I can hardly recognize it as a stimulus package. Less than 20 per cent is now assigned to the rebuilding of crumbling roads and bridges, construction of a modern electrical grid, and so on. The biggest slice of the pie consists of tax breaks (see New York Times chart below), and while some of the breaks go to po’ folks like me, the lion’s share of it is designated for Big Business and “the upper classes.” If you allow Republicans to dilute the stimulus package, my response would be to echo Hillary’s old war cry: “Shame on you Barack Obama!”
January 24, 2009 6 Comments
New York Governor David Paterson has reportedly chosen Kirsten Gillibrand (photo at right) to fill Hillary Clinton’s vacant Senate seat. And you are probably asking, “Who in tarnation is Kirsten Gillibrand?” Well, she is an obscure Congresswoman from upstate New York, where (if my memory is accurate) they have things like county fairs and tractor pulls. When I lived in Toronto, I would lie in bed on a dreary winter afternoon and watch TV from across Lake Ontario, programs like Bowling for Dollars and commercials for Utica Club beer… It was a mind-numbing vision of Sarah Palin’s “real America.”
Political insiders know Gillibrand as a “Blue Dog Democrat,” which is the name given Republicans who have infiltrated the Democratic Party. Blue Dog Democrats cower at the word “liberal,” and refuse to acknowledge that the only gains Americans have made regarding civil rights were because of liberals. (I suspect a plot by the cunning Republicans to take over the Democratic Party now that their own party is defunct. But maybe that’s just me and my suspicious nature.)
To Gillibrand’s credit, her career as a lawyer included pro bono cases on behalf of abused women and tenants in unsafe housing. During the Clinton years, she served as Special Counsel to the Secretary of Housing and Urban Development, Andrew Cuomo (photo at left), who – by the way – also expressed interest in Clinton’s Senate seat.
I don’t mean to be unfair to Paterson (who became governor by accident after Elliot Spitzer got caught with a prostitute, reportedly in a trap set by underworld opponents), but it certainly looks as if he showed a yellow streak when he chose Gillibrand. My guess is that he flinched at choosing Caroline Kennedy (photo below) because the New York City press curs and anonymous bloggers were yapping at her heels (I know, I know, she “withdrew” but he wasn’t going to pick her, anyway). And I imagine he didn’t dare select Cuomo (Caroline Kennedy’s former cousin-in-law) for fear of angering the powerful interests in the Kennedy camp. Besides, he was under pressure to replace Hillary, who happens to be a woman, with another member of the same gender. So I conclude that he weaseled out and picked Gillibrand.
The likely result? He has teed off both the Kennedy and the Cuomo camps. I guess he plans to retire at the end of his current term, as his chances of getting re-elected governor seem to me to be somewhere between plus-zero and minus-zero. I wouldn’t give Gillibrand much better odds in the 2010 elections, either.
Ironically, dishonored Illinois Governor Rod Blagojevich’s controversial choice of Roland Burris (photo at left) to fill President Obama’s Senate seat looks a lot smarter than Paterson’s choice to replace Secretary of State Hillary Clinton. (After holding their breath and stamping their feet like spoiled brats, Senate Democrats have relented and tapped Burris to serve on the powerful Armed Services, Homeland Security and Veterans Affairs committees.)
Once again – thanks to Paterson – I think the Democratic Party has shot itself in the foot.
January 23, 2009 1 Comment