Thursday, January 28, 2010

Taibbi: MSM elitists try desperately to cover for Wall St.

Taibbi's in rare form.  He nails it: a nation that has been conditioned to believe in "trickle down" economics simply isn't capable of looking out for its own best interests anymore.  Such a nation by definition is ignorantly dependent on the a-holes who screwed everything and everyone to unscrew it all for them.  Good luck with that, suckers.
There's no real populism in America anymore, just a lot of common folk on the right feeling pissed off at, and adolescently unappreciated by, the same elites whom they admire and unrealistically aspire to be.  To acknowledge the truth would give them all a nasty cognitive-dissonance headache.  As a result of their cranial density, we're all screwed. 
By Matt Taibbi
January 27, 2010 | Rolling Stone
It's easy to see why politicians would be drawn to the populist pose. First, it makes everything so simple. The economic crisis was caused by a complex web of factors, including global imbalances caused by the rise of China. But with the populist narrative, you can just blame Goldman Sachs.
Normally one would have to be in the grip of a narcissistic psychosis to think that a columnist for the New York Times has written an article for your personal benefit. But after his latest article in the Times, in which he compares the "populism" of people who "blame Goldman Sachs" with exactly the sort of racist elitism I ripped him for last week, I think David Brooks might be trying to talk to me.
I think that's at least part of what's going on in his latest column, which is odd. If I were in his position, I probably would have punched me in the nose for the shot I took at him last week, but the response of David Brooks to being called out as a racist weenie is to write a passionate defense of the rich, one that includes the admonition that while blaming the wealthy is easy and feels fun, truly wise men should "tolerate the excesses of traders."
I don't want to get into the position of fixating on one guy for personal reasons. Obviously I've done too much of that with Brooks already, and I absolutely promise to give that part of it a rest for a good long while after this.
But leaving aside any discussion of Brooks the human being, this latest column of his is something that has to be discussed. The propagandistic argument he makes about the dangers of "populism"  is spelled out here as clearly as you'll ever see it expressed in print, and this exact thing is a key reason why so much of the corruption that went on on Wall Street in the past few decades was allowed to spread unchecked.
That's because this argument is tacitly accepted by almost everyone in our business, and most particularly is internalized in the thinking of most newspaper editors and TV news producers, who over time develop an ingrained habitual fear of publishing material that seems hysterical or angry.
This certainly has an effect on the content of news reporting, but perhaps even more importantly, it impacts the tone of news coverage, where outrages are covered without outrage, and stories that are not particularly "balanced" in reality — stories that for instance are quite plainly about one group of people screwing another group of people — become transformed into cool, "objective" news stories in which both the plainly bogus version of events and the real and infuriating version are given equal weight.
Brooks lays out the crux of his case his case in his first three grafs of his article:
Politics, some believe, is the organization of hatreds. The people who try to divide society on the basis of ethnicity we call racists. The people who try to divide it on the basis of religion we call sectarians. The people who try to divide it on the basis of social class we call either populists or elitists.
These two attitudes — populism and elitism — seem different, but they're really mirror images of one another. They both assume a country fundamentally divided. They both describe politics as a class struggle between the enlightened and the corrupt, the pure and the betrayers.
Both attitudes will always be with us, but these days populism is in vogue. The Republicans have their populists. Sarah Palin has been known to divide the country between the real Americans and the cultural elites. And the Democrats have their populists. Since the defeat in Massachusetts, many Democrats have apparently decided that their party has to mimic the rhetoric of John Edwards's presidential campaign. They've taken to dividing the country into two supposedly separate groups — real Americans who live on Main Street and the insidious interests of Wall Street.
Now, there's bullshit all up and down this lede. The first lie he tells involves describing everyone who is a critic of Wall Street as a populist. It's sort of a syllogism he's getting into here:
All people who criticize Wall Street are populists.
All populists think of themselves as enlightened and pure, and are primarily interested in dividing society, the same way racists do.
Therefore, all people who criticize Wall Street are primarily interested in dividing society, just like racists.
This is obnoxious on so many levels it's almost difficult to know where to start. As for the populism label, let me quote the Alison Porchnik character from Annie Hall (Woody's first wife, in the movie): "I love being reduced to a cultural stereotype."
Brooks here is trying to say that by criticizing, say, Goldman Sachs for mass thievery — criticizing a bank for selling billions of dollars worth of worthless subprime mortgage-backed securities mismarked as investment grade deals, for getting the taxpayer to pay them 100 cents on the dollar for their billions in crap investments with AIG, for forcing hundreds of millions of people to pay inflated gas and food prices when they manipulated the commodities market and helped  push oil to a preposterous $149 a barrel, and for paying massive bonuses after receiving billions upon billions in public support even beyond the TARP — that in criticizing the bank for doing these things, people like me are primarily interested in being divisive and "organizing hatreds."
He is also saying that by making these criticisms, people like me are by implication making statements about our own moral purity and enlightenment relative to others. He goes on:
It's easy to see why politicians would be drawn to the populist pose. First, it makes everything so simple. The economic crisis was caused by a complex web of factors, including global imbalances caused by the rise of China. But with the populist narrative, you can just blame Goldman Sachs.
Second, it absolves voters of responsibility for their problems. Over the past few years, many investment bankers behaved like idiots, but so did average Americans, racking up unprecedented levels of personal debt. With the populist narrative, you can accuse the former and absolve the latter.
Stuff like this makes me want to scream. If I'm writing about a bank that took a half-billion worth of mortgages where the average amount of equity in the home was less than 1%, and where 58% of the mortgages had no documentation, and then sold those mortgage-backed securities as investment-grade opportunities to pensions and other suckers — and then bet against the same kind of stuff they were enthusiastically selling to other people — is Brooks seriously suggesting that I also have to point out that the Chinese economy was doing well at the time?
Yeah, okay, the rise of China is a factor in the overall decline of the American economy, but it has nothing to do with the Goldman story, which is a specific crime story about a specific bank. If I or any other reporter is writing about a gang of car thieves, what, we're supposed to also mention that the endive crop was weak in that part of the country that year? What the fuck? And this whole business about how criticizing Goldman absolves voters — Jesus, how primitive can you get? Using that logic, criticizing anyone for anything is invalid:
ME: Well, Ike Turner was sort of a dick because he used to get high and punch his wife in the face all the time…
BROOKS: But it's so easy to say that.
ME: It's easy to say that a guy who punches his wife in the face is a jerk? (Scratching head) Well… I guess you're right about that. Would you like me to say it while juggling three chainsaws? Would you have less of a problem with it then?
BROOKS: But by criticizing Ike Turner, you're absolving all the people who do other bad things. Like purse-snatchers in Central Park, and those kids who keyed my Lexus, and all those baseball players who took steroids! Rafael Palmeiro lied to congress! What about them?
ME: Dude, are you okay? Your pupils look dilated.
BROOKS: You're absolving Mark McGwire! The single-season home run record is a fraud!
ME: (backing away slowly toward the door) Okay, yeah, sure. Listen, I'll catch up with you later, okay? I've got to return some videotapes.
And so on. The entire argument is literally this nonsensical. If Brooks disagrees with criticism of banks like Goldman, he has a fantastic platform to point out where those criticisms are incorrect. The best platform there is, in fact. But not only does he not go in that direction, he does just the opposite — he concedes that these criticisms are basically true, and chooses instead to argue against the wisdom of making those criticisms, apparently because "bashing the rich" will make them less inclined to "channel opportunity to new groups." The emphasis in this next excerpt is mine:
So it's easy to see the seductiveness of populism. Nonetheless, it nearly always fails. The history of populism, going back to William Jennings Bryan, is generally a history of defeat.
That's because voters aren't as stupid as the populists imagine. Voters are capable of holding two ideas in their heads at one time: First, that the rich and the powerful do rig the game in their own favor; and second, that simply bashing the rich and the powerful will still not solve the country's problems.
Political populists never get that second point. They can't seem to grasp that a politics based on punishing the elites won't produce a better-educated work force, more investment, more innovation or any of the other things required for progress and growth.
In fact, this country was built by anti-populists. It was built by people like Alexander Hamilton and Abraham Lincoln who rejected the idea that the national economy is fundamentally divided along class lines. They rejected the zero-sum mentality that is at the heart of populism, the belief that economics is a struggle over finite spoils. Instead, they believed in a united national economy — one interlocking system of labor, trade and investment.
Hamilton championed capital markets and Lincoln championed banks, not because they loved traders and bankers. They did it because they knew a vibrant capitalist economy would maximize opportunity for poor boys like themselves. They were willing to tolerate the excesses of traders because they understood that no institution is more likely to channel opportunity to new groups and new people than vigorous financial markets.
What's so ironic about this is that Brooks, in arguing against class warfare, and trying to present himself as someone who is above making class distinctions, is making an argument based entirely on the notion that there is an lower class and an upper class and that the one should go easy on the other because the best hope for collective prosperity is the rich creating wealth for all. This is the same Randian bullshit that we've been hearing from people like Brooks for ages and its entire premise is really revolting and insulting — this idea that the way society works is that the productive " rich" feed the needy "poor," and that any attempt by the latter to punish the former for "excesses" might inspire Atlas to Shrug his way out of town and leave the helpless poor on their own to starve.
That's basically Brooks's entire argument here. Yes, the rich and powerful do rig the game in their own favor, and yes, they are guilty of "excesses" — but fucking deal with it, if you want to eat.
And the really funny thing about Brooks's take on populists… I mean, I'm a member of the same Yuppie upper class that Brooks belongs to. I can't speak for the other "populists" that Brooks might be referring to, but in my case for sure, my attitude toward the likes of Lloyd Blankfein and Hank Paulson has nothing to do with class anger.
I don't hate these guys because they're rich and went to fancy private schools. Hell, I'm rich and went to a fancy private school. I look at these people as my cultural peers and what angers me about them is that, with many coming from similar backgrounds to mine, these guys chose to go into a life of crime and did so in a way that is going to fuck things up for everyone, rich and poor, for a generation.
Their decision to rig the markets for their own benefit is going to cause other countries to completely lose confidence in the American economy, it will impact the dollar, and ultimately will make all of us involuntary debtors to whichever state we end up having to borrow from to bail these crimes out.
And from my perspective, what makes these guys more compelling as a journalistic subject than, say, the individual homeowner who took on too much debt is a thing that has nothing to do with class, not directly, anyway. It's that their "excesses" exist in a nexus of political and economic connections that makes them very difficult to police.
We have at least some way of dealing with the average guy who doesn't pay his debts — in fact our government has shown remarkable efficiency in passing laws like the bankruptcy bill that attack that particular problem, and of course certain banks always have the option of not lending that money (and I won't even get into the many different ways that the banks themselves bear responsibility for all the easy credit that was handed out in recent years).
But the kinds of things that went on at Goldman and other investment banks, in many cases there are not even laws on the books to deal with these things. In some cases what we're talking about is the highly complicated merger of crime and policy, of stealing and government, which is both fascinating from a journalistic point of view and ought to be terrifying from the point of view of any citizen, rich or poor.
And even if I were to accept the Brooksian view of an upper class that must be looked to to fix things and take care of the lower classes and create the needed wealth to help us escape our economic crisis, the whole point is that this upper class he is talking about has abdicated that very responsibility — and, perhaps having reached the cynical conclusion that our society is not worth saving, has taken on a new mission that involves not creating wealth for all but simply absconding with whatever wealth is remaining.
It's not pessimism or "combative divisiveness" to talk about these problems and insist that they get fixed. On the contrary, it's a very positive view of what citizenship is to believe that everyone has a real role in fixing his country's problems, and that when we identify problems, we should try to do something about them because we might actually succeed.
On the other hand, telling oneself that when powerful people "rig the game" one should just tolerate it, because one's best hope for seeing the situation fixed rests in hoping those same powerful people fix it themselves — I would describe that as pessimism, or something worse than pessimism. The whole point of America is that we are all supposed to be our own masters, never viewing anyone as better or more capable than ourselves, and these people at these investment banks are the perfect example of that concept.
The fact that a lot of these guys have a lot of money recently doesn't make them "upper class." They're no different from any of us, they're the same assholes we all were in high school and college, except that they made some very particular moral choices in adulthood, and became criminals, and have now arranged things so that they're going to be tough as hell to catch. And when they fall, which a lot of them will… I mean a lot of these guys are ten seconds from losing it all and spending the next ten years pushing shopping carts under the FDR expressway. And they know it. These people aren't the nobility. They're just really stupid people.
That's not a class story. It's a crime story, and it doesn't have a damn thing to do with China.

Ames: When A attacks, America attacks country Z

Whoever hits us next, we should just retaliate against whatever liberal-socialist country pisses us off the most. If the next underwear bomber is from Saudi Arabia, we should bomb Venezuela. If the next hijacking is conducted by Yemenis, we should invade North Korea.

Believe it or not, there are those who say that an "unpredictable" U.S. war machine is the best defense of liberty. In other words, if the "bad guys" -- and their passive allies-- think America is a totally nuts loose cannon, they'll think twice about messing with us. Seriously, I'm not making this up.

Add Yemen to America's long list of easy enemies.
By Mark Ames
March 1, 2010 Issue | The American Conservative

If the last few decades prove anything about America's strategy in fighting Islamic terrorism, it's that no matter what the other side throws our way, America will respond in the most counterintuitive and self-destructive manner imaginable.

The routine goes something like this: if America is attacked by terrorists from Country A, then our response will be to bomb the hell out of Country Z, in which Z equals a doormat of a country whose sole purpose is to provide an easy, morale-boosting win. This strategy has produced mixed results, from total failure to complete catastrophe, depending on variable Z. The doormats have turned out to be booby-trapped.

Take our most recent example of this counterterror formula: a terrorist from Country A (Nigeria) tries and fails to down an American plane. According to the warped logic of the U.S. foreign-policy establishment, we must naturally attack Country Z—Yemen. Leaving aside the question of how effective it is to bomb any demographically-exploding Third World country, let's follow the hawkish logic: some misfit can't figure out how to blow up his underwear, but we still have to find perpetrators to punish. Problem is, Umar Farouk Abdulmutallab is from Nigeria, which has almost 80 million Muslims, the largest number in sub-Saharan Africa. So that's not going to work. There's Saudi Arabia, where al-Qaeda's founder, its sponsors, and its ideological support all come from—that would be a logical Country A to bomb. But the Saudis sponsor the American foreign-policy establishment at least as much as they sponsor anti-American terrorism, so bombing them would be tantamount to suicide for our policymakers. Then there's Pakistan, another logical choice: that country's notorious spy service is believed to have been protecting al-Qaeda's leadership lo these many years—why not bomb Pakistan? Answer: we're already fighting, and losing, against a Pakistani proxy army, the Taliban. Just imagine how much worse things would be if we expanded the conflict to Pakistan proper, which has over five times the population of Afghanistan and nuclear weapons to boot.

Yet the simple-minded hawks need to invade and bomb someone, just so long as it's someone they believe will be a pushover; an easy victory where the results are all but fixed in advance; some country that could play the military equivalent of the Washington Generals to America's Harlem Globetrotters.

That's how Yemen, a place Abdulmutallab passed through and supposedly got his training in, becomes the new Country Z—the tangentially related state we need to bomb to make things better. As far as the meatheads in D.C. know, Yemen should be a pushover. Otherwise, we'd have heard something about Yemen by now.

Ah yes, lovely Yemen, the perfect choice for another open-ended war, exactly what the bankrupt, overstretched, kneecapped American empire needs. It's the sort of counterintuitive target the counterintuitive imperialists who have brought us so much ruin would choose for their last gamble: it's as if they selected Yemen precisely because there's nothing to steal and nothing to conquer. The only thing a war with Yemen would guarantee is more death, more debt, and generations of anti-American hate to keep our grandchildren busy. To the serial losers who coaxed America into the Iraq and Afghanistan wars, the losing odds Yemen offers are just too tempting to pass up.

So Sen. Joseph Lieberman goes on television and says, "Iraq was yesterday's war. ... Afghanistan is today's war. If we don't act pre-emptively, Yemen will be tomorrow's war. That's the danger we face." This sums up just how deranged America's hawks have become. To their minds, wars come in three tenses: past, present, and future. Leaving aside the fact that Afghanistan was yesterday's war before it became today's war and that America is still losing both wars in whichever tense Lieberman uses, consider his argument: I gambled American power on Iraq, and I lost; I'm now in the process of losing another war. Therefore, if we don't want to lose the next war, we need to start it now—to trick time, so to speak, so that we can fight the future in the present tense.

No wonder American power is collapsing harder than just about any empire in history. But it's not as though Lieberman is displaying any originality. The politicians and wonks leading America down the drain are following a logic that's been operating for the past three and a half decades, always with disastrous results. It hasn't mattered whether the controls of the U.S. war machine were in the hands of a peanut farmer or a washed-up actor, a rich white chickenhawk or a socialist of color, America's military strategy vis-à-vis Islamic terrorism knows no party line—or common sense.

Just look at the record. In 1975, America was smarting from defeat in Vietnam, Gerald Ford was president, and a couple of "bold-thinking" hotheads in his administration had a brilliant idea for how to restore America's confidence. As luck would have it, Cambodia, one of the world's poorest countries, then in the middle of a Khmer Rouge holocaust, offered itself as Country Z. Cambodian Communists seized a U.S. merchant boat, the Mayaguez, and briefly held the crew hostage.

Rather than negotiating for their release, Ford's defense secretary, Donald Rumsfeld, and his underling Dick Cheney pushed for a massive military "rescue operation." It was a disaster: some 40 American servicemen were killed in the attempt to take control of the island where our sailors were supposedly being held. In fact, the Americans had already been released before the operation started.

In 1983, Hezbollah suicide bombers killed 220 Marines, the worst death toll the service has suffered since the battle of Iwo Jima and perhaps the most pointless mass-death of Marines in the outfit's brilliant history. Reagan's response: invade Grenada, a resort island a few miles off of Florida. In his defense, at least he didn't invade Iraq or Afghanistan, but the basic policy of reacting to terrorism by invading some other "cakewalk" country was set.

Also on Reagan's watch, Iranian-backed militants in Lebanon kidnapped American citizens and twice blew up the U.S. Embassy. His response: send the Ayatollah a birthday cake and a Bible, along with shiploads of TOW antitank weapons to help Khomeini fight Iraq. Still, something had to be done for public consumption, given all the Americans that the Iranians was killing. So Reagan chose to pick on Col. Muammar Qaddafi, the Gary Numan of scary Muslim villains. He bombed Qaddafi's tents and killed the cross-dresser's 4-year-old daughter.

The last terror attack of the Reagan era came just a few weeks before the 40th president left the White House, when a Pan Am jet was blown up over Scotland. Everyone and his grandma knew that the Iranians and their Syrian proxies were retaliating for the USS Vincennes shooting down an Iranian passenger jet in the Persian Gulf a few months earlier. But guess who George H.W. Bush, Reagan's replacement, blamed the Pan Am explosion on? "Glass Jaw" Qaddafi. Unlike the Iranians, Qaddafi could be counted on to cave and cry uncle, even when he wasn't guilty. He handed over one of his agents for a show trial in Scotland, and as if it were part of the deal, that Libyan agent was released a few years later by British authorities because he wasn't feeling well, or something like that.

Then there was Clinton. In 1993, proto-al-Qaeda terrorists led and funded by Saudi Wahhabis tried blowing up the World Trade Center with van-bombs. Clinton's response: roast a bunch of American Kool-Aid drinkers in Waco, Texas. (The implication is that Texans are the Libyans of North America, all bark and no bite.) In October 1993, Somali terrorists humiliated American forces in the worst military disaster since the 1983 Lebanon barracks bombing. Briefly, America was sobered up by the experience and decided not to bomb someplace like Bhutan or Upper Volta, though I'm sure policy planners considered it. By the time of the Kenya and Tanzania embassy bombings in 1998, Clinton couldn't hold back, so naturally he destroyed a Sudanese aspirin plant and put on a harmless though expensive fireworks show in Afghanistan.

Under George W. Bush, America's asymmetrical strategy went off the scale: Saudis, Kuwaitis, and Egyptians trained in Afghanistan and commanded by a Pakistani attacked America with airplanes, and we responded with a catastrophic invasion of Iraq. Operations in Afghanistan became a sideshow to the main event in Mesopotamia. And, as it turns out, right after 9/11 our ultra-hawks considered opening an even more illogical front: a top-secret memo cited in the 9/11 Commission Report—apparently written by Under Secretary of Defense Douglas Feith for Donald Rumsfeld—urged "hitting targets outside the Middle East in the initial offensive," including Paraguay, Argentina, and Brazil. The report notes, "The author suggested … since U.S. attacks were expected in Afghanistan, an American attack in South America or Southeast Asia might be a surprise to the terrorists"—not to mention a shocker to any member of the reality-based community.

Which brings us to the Nigerian underwear bomber and 2010's pending war in Yemen. It doesn't take a genius to see how this will end up. It's just too bad that we're the ones picking up the tab for Lieberman and company's mad misdirection.

Wednesday, January 27, 2010

New Yorker: Teabaggers in Independence, KY

An East-Coast leftwing journalist travels to deep, dark Northern Kentucky to infiltrate, er, report on the Tea Party movement.

But don't you think good ole' Kentucky has a monopoly on anti-government, pro-America conspriacy theorists. The East Coast has its share, too:

"Back in New York City, you can feel the tremors in the social bedrock, if not in the earth's crust, as T. J. Randall would have it. An online video game, designed recently by libertarians in Brooklyn, called "2011: Obama's Coup Fails" imagines a scenario in which the Democrats lose seventeen of nineteen seats in the Senate and a hundred and seventy-eight in the House during the midterm elections, prompting the President to dissolve the Constitution and implement an emergency North American People's Union, with help from Mexico's Felipe Calderón, Canada's Stephen Harper, and various civilian defense troops with names like the Black Tigers, the International Service Union Empire, and CORNY, or the Congress of Rejected and Neglected Youth. Lou Dobbs has gone missing, Glenn Beck and Rush Limbaugh turn up dead at a FEMA concentration camp, and you, a lone militiaman in a police state where private gun ownership has been outlawed, are charged with defeating the enemies of patriotism, one county at a time."

The rise of Tea Party activism.

By Ben McGrath
February 1, 2010 | The New Yorker

Congrats, you paid for Wall St.'s 'performance' bonuses

Just think, each American paid $500 so that greedy, reckless Wall Street pricks could buy themselves a Beemer or a second home. Actually, since over 40 percent of Americans pays no federal income tax, that means you honest, hard-working teabagging-type folks are paying about $1,000 apiece to fund Wall Street's hard-earned bonuses -- hard-earned, because, well, you know, they would have destroyed the global economy if it weren't for $14 trillion in U.S. Government loans, guarantees, and swaps that they received, but then, like, once they got all that money, they managed to turn a profit, like the big financial geniuses they are.

I know a lot of you folks out there hold capitalism on about the same level of esteem as Christianity and (insert local high school football team's name here). But seriously, this is not capitalism. This is unprecedented stealing. From you. From every law-abiding taxpayer, and their children and grand-children. And they're not even shy about it. They still think they deserve all that money, after what they did. The truth is, they think you're all rubes and idiots who don't deserve to be as rich as they are.

Wake up, Amurica!

Friday, January 22, 2010

Shareholder value maximization (SVM) & the financial crisis

If business school were a church, shareholder value maximization would be its religion. Two INSEAD professors say it's time to find a new one

By N. Craig Smith and Luk Van Wassenhove
January 11, 2010 | BusinessWeek

Business schools have been blamed for the economic crisis. Their MBA students are said to be responsible for wreaking the havoc in the financial markets we are all now suffering from and business schools are chastised for not training them better, not least in failing to instill a clear sense of right and wrong.

Are they to blame? To the extent that MBA graduates have been closely associated with many of the spectacular failures of financial institutions witnessed over the last 18 months, they may justifiably be criticized for the mispricing of risk in relation to specific financial products and an underestimation of systemic risk more generally. They may also be criticized for failing adequately to question the assumptions of the financial models being used and, with hindsight at least, for following the crowd and gambling that they could continue to dance, to borrow the unfortunate phrase of Citibank's (C) Chuck Prince (not an MBA), when it was way past time to be off the dance floor.

In some cases, where perverse incentives of compensation systems were at work, the criticism also seems warranted that these individuals focused solely on serving their own self-interest and gave scant regard to their obligations to others, even shareholders. Much like a dodgy second-hand car salesman, it seems, they knowingly sold flawed products—such as the mortgage-backed securities they knew would blow up because of unsound origination processes. Worryingly, these practices were evident in the financial institutions that have survived—and some that have prospered—in the crisis, as well as those that failed.


It would be a mistake to say that business schools are directly to blame, even when their graduates were closely involved; there are more basic drivers. But business schools have played a role indirectly, due fundamentally to their adherence to and perpetuation of an ideology that has contributed significantly to the crisis, albeit unintentionally. That is the ideology of Shareholder Value Maximization (SVM). In most business schools, SVM is the leitmotif of finance teaching and implicit throughout the rest of the curriculum.

Ideologies often appear to be serving society as a whole while advancing the interests of particular sectors. So it is with SVM. The economic theory of the corporation holds that SVM results in the best social outcome: societal wealth maximization. But at the same time it serves the interests of shareholders and the managers who are its adherents and its beneficiaries, at least when their compensation is pegged to shareholder returns. This criticism of SVM is not to suggest shareholders are unimportant; they warrant a return on the capital they provide that reflects the financial risk incurred. However, this is not the same as maximizing shareholder value.

A theory advanced in business schools to justify SVM says shareholders are the "residual claimants." Shareholders, the theory goes, should be uppermost in the minds of management, because they receive their returns only after the claims of other stakeholders have been met. This is evident in companies meeting their contractual and legal obligations to stakeholders such as employees, but it is also evident in companies meeting noncontractual obligations determined by economic factors. For example, these might be obligations beyond legal or statutory requirements to a local community affected by a plant closure, where the company identifies that its reputation might be harmed and it might suffer an economic loss if the obligations are left unattended. As this example might suggest, however, not all ethical obligations would be reflected in a potential economic loss, even in the long term. Consider a management practice of engaging in bribery when one can get away with it. This might be consistent with shareholder value maximization, but not advancing societal welfare.


The theory also relies on assumptions amply demonstrated as lacking in recent months. For example, it assumes effective government regulation to ensure everybody plays by the rules and to manage externalities (outcomes not readily susceptible to market sanctions, such as pollution). It also presumes effective corporate governance such that shareholders hold management to account. More technically, it relies on various economic assumptions, such as the efficient market hypothesis (that share prices reflect all relevant information on the stock).

Aside from the assumptions required in subscribing to the SVM model and the potential ethical issues left unaddressed, there are major practical considerations in the teaching and application of the SVM ideology. While professors might explain in detail how the underlying theory of SVM treats shareholders as residual claimants, what matters is the message students take away. That message is shareholder primacy—that their purpose in business is to make decisions that put the interests of shareholders above all others.

When they go into their jobs—in finance and elsewhere—they find an environment that marches to the same tune and is incentivized to do so. The theory of SVM generally translates into practice through the mechanism of the share price. This flawed and often easily manipulated measure of long-term company value is then used as a basis for business decision-making. This has huge potential consequences for the individuals involved (rich bonuses they may not deserve) and their organizations (short-term decisions that harm long-term viability), as well as society.


If SVM is problematic from a developed world perspective, it can be disastrous from the perspective of the developing economies where global business and MBAs increasingly are to be found—as well as most of the 1 billion people going hungry in the world. Many large companies today operate in countries with little or no government and a huge potential for corruption, and, given such technologies as the Internet and mobile phones, how they operate can be instantly broadcast worldwide. Today's global business environment is not the simple U.S.-centric world of free-market economist Milton Friedman. It is far more complicated.

What should business schools do? While late in the day, perhaps, Jack Welch was right when he described SVM as "a dumb idea." Business schools need to stop worshipping at the altar of SVM and teach it with greater intellectual honesty and with attention to its many deficiencies, both theoretical and practical. They also need to do a better job of developing its most plausible contending framework: stakeholder theory. This is a more complex but current and realistic view of management, one that recognizes that the task of managers is to serve multiple stakeholders—giving shareholders their due, but not to the exclusion of others with legitimate claims.

Finally, business schools should give more attention to their input as well as output. With starting salaries for MBA graduates often well in excess of $100,000, business schools need to be careful not to attract narrow-minded, self-centered people who might see a way to get rich quickly by eagerly and unquestioningly embracing an ideology that serves that end. Business schools should look to attract and properly train people to be responsible leaders who are well-rounded and have the capable minds and the courage to ask the critical questions that went unasked for too long.

N. Craig Smith is a professor of ethics and social responsibility at INSEAD. Luk Van Wassenhove is a professor of operations management and academic director of the Social Innovation Centre at INSEAD.

Al Qaeda to incorporate in Delaware and donate to Palin?

I learned from that you can write the most incendiary headline you want as long as you put a question mark at the end. Sorry 'bout that.

By Greg Palast
January 21, 2010 |

In today's Supreme Court decision in Citizens United v. Federal Election Commission, the Court ruled that corporations should be treated the same as "natural persons", i.e. humans. Well, in that case, expect the Supreme Court to next rule that Wal-Mart can run for President.

The ruling, which junks federal laws that now bar corporations from stuffing campaign coffers, will not, as progressives fear, cause an avalanche of corporate cash into politics. Sadly, that's already happened: we have been snowed under by tens of millions of dollars given through corporate PACs and "bundling" of individual contributions from corporate pay-rollers.

The Court's decision is far, far more dangerous to U.S. democracy. Think: Manchurian candidates.

I'm losing sleep over the millions — or billions — of dollars that could flood into our elections from ARAMCO, the Saudi Oil corporation's U.S. unit; or from the maker of "New Order" fashions, the Chinese People's Liberation Army. Or from Bin Laden Construction corporation. Or Bin Laden Destruction Corporation.

Right now, corporations can give loads of loot through PACs. While this money stinks (Barack Obama took none of it), anyone can go through a PAC's federal disclosure filing and see the name of every individual who put money into it. And every contributor must be a citizen of the USA.

But under today's Supreme Court ruling that corporations can support candidates without limit, there is nothing that stops, say, a Delaware-incorporated handmaiden of the Burmese junta from picking a Congressman or two with a cache of loot masked by a corporate alias.

Candidate Barack Obama was one sharp speaker, but he would not have been heard, and certainly would not have won, without the astonishing outpouring of donations from two million Americans. It was an unprecedented uprising-by-PayPal, overwhelming the old fat-cat sources of funding.

Well, kiss that small-donor revolution goodbye. Under the Court's new rules, progressive list serves won't stand a chance against the resources of new "citizens" such as CNOOC, the China National Offshore Oil Corporation. Maybe UBS (United Bank of Switzerland), which faces U.S. criminal prosecution and a billion-dollar fine for fraud, might be tempted to invest in a few Senate seats. As would XYZ Corporation, whose owners remain hidden by "street names."

George Bush's former Solicitor General Ted Olson argued the case to the court on behalf of Citizens United, a corporate front that funded an attack on Hillary Clinton during the 2008 primary. Olson's wife died on September 11, 2001 on the hijacked airliner that hit the Pentagon. Maybe it was a bit crude of me, but I contacted Olson's office to ask how much "Al Qaeda, Inc." should be allowed to donate to support the election of his local congressman.

Olson has not responded.

The danger of foreign loot loading into U.S. campaigns, not much noted in the media chat about the Citizens case, was the first concern raised by Justice Ruth Bader Ginsburg, who asked about opening the door to "mega-corporations" owned by foreign governments. Olson offered Ginsburg a fudge, that Congress might be able to prohibit foreign corporations from making donations, though Olson made clear he thought any such restriction a bad idea.

Tara Malloy, attorney with the Campaign Legal Center of Washington D.C. says corporations will now have more rights than people. Only United States citizens may donate or influence campaigns, but a foreign government can, veiled behind a corporate treasury, dump money into ballot battles.

Malloy also noted that under the law today, human-people, as opposed to corporate-people, may only give $2,300 to a presidential campaign. But hedge fund billionaires, for example, who typically operate through dozens of corporate vessels, may now give unlimited sums through each of these "unnatural" creatures.

And once the Taliban incorporates in Delaware, they could ante up for the best democracy money can buy.

In July, the Chinese government, in preparation for President Obama's visit, held diplomatic discussions in which they skirted issues of human rights and Tibet. Notably, the Chinese, who hold a $2 trillion mortgage on our Treasury, raised concerns about the cost of Obama's health care reform bill. Would our nervous Chinese landlords have an interest in buying the White House for an opponent of government spending such as Gov. Palin? Ya betcha!

The potential for foreign infiltration of what remains of our democracy is an adjunct of the fact that the source and control money from corporate treasuries (unlike registered PACs), is necessarily hidden. Who the heck are the real stockholders? Or as Butch asked Sundance, "Who are these guys?"
We'll never know.

Hidden money funding, whether foreign or domestic, is the new venom that the Court has injected into the system by its expansive decision in Citizens United.

We've been there. The 1994 election brought Newt Gingrich to power in a GOP takeover of the Congress funded by a very strange source.

Congressional investigators found that in crucial swing races, Democrats had fallen victim to a flood of last-minute attack ads funded by a group called, "Coalition for Our Children's Future." The $25 million that paid for those ads came, not from concerned parents, but from a corporation called "Triad Inc."

Evidence suggests Triad Inc. was the front for the ultra-right-wing billionaire Koch Brothers and their private petroleum company, Koch Industries. Had the corporate connection been proven, the Kochs and their corporation could have faced indictment under federal election law. As of today, such money-poisoned politicking has become legit.

So it's not just un-Americans we need to fear but the Polluter-Americans, Pharma-mericans, Bank-Americans and Hedge-Americans that could manipulate campaigns while hidden behind corporate veils. And if so, our future elections, while nominally a contest between Republicans and Democrats, may in fact come down to a three-way battle between China, Saudi Arabia and Goldman Sachs.


Greg Palast is the author of the New York Times bestseller The Best Democracy Money Can Buy. Palast investigated Triad Inc. for The Guardian (UK). View Palast's reports for BBC TV and Democracy Now! at

Rush: 'Freedom is coming out of its coma'

Let me ask you: do you feel freer after this Supreme Court decision? Do you feel, like Rush said, "that the muzzle is off the American people now?" Do you seriously feel, like he does, that "freedom is coming out of its coma" thanks to this ruling? Does anybody seriously believe, as the SC majority argued, that the American people are going to make better informed political decisions now that the cap on corporate campaign spending has been ripped off? Is there some vital information we have been lacking about the candidates that corporations are just dying to tell us, but couldn't because 100 years of legal precedent and statutory law have kept them muzzled? We'll soon find out. (Lord save us.)

Corporations have been free to make issue ads; they have been free to inform the public to their heart's content. But they weren't allowed to make the connection between issues and candidates. They were not allowed, under statutory law, to advocate for political candidates without spending and time restrictions. So this ruling is not about free speech; it is about political influence. And now, thanks to Justices Kennedy, Roberts, et al, we have less influence and rich corporations have more.

You know, the right likes to say our Founding Fathers were all geniuses and masters of the English language, so if they had meant for money = speech, why didn't they just say so? If they had meant for corporations = people with all the same rights, why didn't they say so? (Modern limited liability corporations didn't exist in the 18th century, but their forebears, called charter companies, did.)

Even arch-conservative former Chief Justice William H. Rehnquist once warned that treating corporate spending as the First Amendment equivalent of individual free speech is "to confuse metaphor with reality."

This is not to mention that corporations are global; they do not have U.S. "citizenship" like you and I do. Foreign ownership of U.S. corporations more than doubled between 1996 and 2005. So now Islamist oil sheiks and Chinese billionaires will be free to play the ponies and place their bets on their favorite U.S. political candidates. (And you siwwy Wepubwicans thought Charlie Trie, Johnny Chung, Huang and Riady were a threat to our national security!)

What's more, as Justice Stevens in the minority noted, "corporations have no consciences, no beliefs, no feelings, no thoughts, no desires" like real human beings do; and "they are not themselves members of 'We the People' by whom and for whom our Constitution was established."

Anyway, it's no surprise Rush is ecstatic about this decision, because it's a fact that corporations donate more to Republicans. Contributions from unions and not-for-profits are a drop in the bucket. We're all screwed.

Freedom Awakens from Coma
January 21, 2010 | Rush Limbaugh

RUSH: Freedom is awaking from its coma today because of a huge, huge, huge Supreme Court decision -- huge. I cannot tell you how big this is. It's a 5-4 decision. The decision was written by Justice Kennedy. And what it does, it removes limits on independent expenditures that are not coordinated with candidate's campaigns. Meaning corporations and not-for-profits can spend any amount of money they want running ads and there's no limit as to when those ads can be run.

So McCain-Feingold takes a huge hit today. Now, the question of campaign contributions directly to candidates was not part of this decision because it was not before the court. So the issue was issue advocacy ads by nonprofit corporations, the Citizens United in this case, but it covers all nonprofits and all for-profit corporations. I'm going to go through it here pretty much line by line just to show you how profound this decision is.


RUSH: Now, I want you to hear this from Jeff Toobin. He is the legal analyst at CNN. The left is just agog, they are beside themselves that freedom is coming out of its coma today, is awakening from its coma with this Supreme Court decision, which I'm going to get into after the break. But I want to show you how upset that Toobin is and the left really are. Toobin is in crisis here.

TOOBIN: It's really not just the 20-year-old ruling from 1990, it's more like a hundred years of regulation of the way corporations are prohibited from being involved in the political process. It's really bigger than 20 years, it's more like a hundred years of precedent being overturned. It basically says money is speech and corporations are people, both of which are debatable propositions but both of which seem to be, you know, popular at the Supreme Court at the moment.

RUSH: What's debatable about corporations are people and money is speech? Those two things are inarguable, that's what the court said by 5-4 with Kennedy, who is the swing vote. He wrote the opinion here. That is significant. He's right, by the way. This turns over 100 years of precedent. You know how anti-corporatist the left is; you know how they hate corporations. This, folks, is causing ulcers. I can't tell you what this decision is doing today to these leftists who just a year ago, they had such high hopes that they're going to have every CEO in jail and every soldier in jail and it's just in one year, because the people of this country are not socialists. The people of this country still have roots to freedom and entrepreneurism and liberty, and nothing -- the left, Obama -- nothing can snuff that out.


RUSH: The Supreme Court decision is a defeat. I'll tell you, it's a defeat, ladies and gentlemen, for the fascists, the statists who seek to control our property, our bodies, and our speech. It is a defeat for Senator McCain. The muzzle is off the American people now because they, in fact, can spend the money on advocacy ads prior to the general and primary elections. It is a 100-year-old precedent that has been overturned. It is solid in that respect.

Citizens United produced an advocacy commercial about Hillary Clinton, which they wanted to run before the primaries. The question was whether it violated McCain-Feingold's ban as some kind of a political commercial. The Supreme Court said such advocacy by Citizens United and other groups is protected constitutional speech, but the opinion addresses more than that. The court says, "The law provides an outright ban backed by criminal and civil sanctions, including nonprofit corporations to either expressly advocate the election or defeat of candidates or to broadcast electioneering communications within 30 days of a primary, 60 days of a general election." These would be felonies and the court struck these down. The court struck down all the limits on where you can advertise, when you can advertise, and how much you can spend on this advertisement.



You gotta understand, folks. See, I know liberals -- I know these cockroaches -- and I'm telling you, this just has them boiling today. You add the fact that everything's falling apart and going wrong for Obama. I mean, you go back one year ago almost to the day. Hell, it is one year ago to the day. No, it's one year plus a day. Nevertheless, they thought they were in power in perpetuity. Forever. They had their messiah and it was going to change this country forever -- and now the American people have said: No way. They've learned what this was all about and they're saying: No way. This court decision has these people fuming. "The government may not impose restrictions on certain disfavored speakers based on the wealth or lack thereof of speakers. The public has the right..." The court said, "The public has the right to obtain all kinds of information from the widest number of sources."


Liberalism itself has just been struck down, this whole notion of "fairness" based on who has more than somebody else or who has less than somebody else, who's bigger than somebody else. There is no precedent for advantaging certain corporations and disadvantaging others respecting speech. Speech is speech. There's the First Amendment. It doesn't matter how much money you have or how big you are, there is no restriction permitted on it. They are really hammering away here, folks. This is pretty sweeping. This is landmark, I would call it. "The law's purpose and effect is to prevent small and large corporations, for profit and not-for-profit, from presenting facts and opinions to the public. There is no constitutional support for this." Struck down. "The law's purpose..." This is McCain-Feingold they're talking about.

McCain-Feingold's "purpose and effect as to prevent small and large corporations, for profit and not-for-profit, from presenting facts and opinions to the public. There is no constitutional support for this." You know, I think back. One of the things that Senator McCain always said was, "You know, money corrupts the system. These good people come to Washington and money corrupts them." We have perhaps the most corrupt presidential administration I've seen in a long time. What does money have to do with it? Is it not their ideas? Is it not their desires that are corrupting them? Is it not who they are that's corrupt? By the way, another reason you know this is a great, great piece of Supreme Court reasoning is that Chuck-U Schumer is livid. Chuck-U is beside himself over this. Chuck-U doesn't like the Constitution. Only his endless speeches are worthy of protection.


There's a lot more to this, ladies and gentlemen. But the important thing here is it's a 5-4 decision, and Anthony Kennedy wrote the opinion for the majority, which is significant. It's as good a decision as anybody could have hoped for. It's sweeping, and it is landmark.


RUSH: You gotta hear this. Chuck-U Schumer is livid, livid over the Supreme Court decision which takes away all the bans on whatever amount of money corporations want to spend on advertising in political campaigns. He just hates it.

SCHUMER: The Supreme Court has just predetermined the winners of next November's elections. It won't be Republicans; it won't be Democrats. It will be corporate America. Our system of government's the best in the world due to the ability of average citizens to participate and engage their elected officials without the belief that there are corrupting influences at play. I have not seen a decision that more undermines campaign finance and is probably one of the three or four decisions in the history of the Supreme Court that most undermines democracy. We will regret the day that this decision has been issued.

RUSH: Quite the contrary, Chuck-U. Freedom is awakening from its coma today. This does not "undermine democracy." It strengthens it.

Thursday, January 21, 2010

Supreme Court decided 5-4 to destory U.S. democracy

Gee, do you think conservatives will bitch about "judicial activism" and "legislating from the bench" after this decision, which will overturn McCain-Feingold and 100 years of legal precedent and statutory law?

Methinks not.

Get ready for an all new America. Kinda like the old America, only more of the same, and worse -- where your views aren't worth two s**ts wrapped in a one-dollar bill.

Rep. Alan Grayson, just about the only Democrat with balls in Washington, has pre-emptively introduced 5 bills in anticipation of Dubya's Supreme Court opening the gates of hell to overrun our democracy. Check it out, and write your Congressmen to get on board, or we're all f***ed.

(Meanwhile, Obama has promised a "forceful response" to the SC decision. Uh-oh. Somehow Wall Street is going to get a few $ billion out of this, I just know it.)

By Deborah Tedford
January 21, 2009 | NPR


Grayson's pre-emptive strike against SC campaign finance ruling

You know that I believe that all campaigns should be publicly financed. If the SC removes all restrictions on corporate to political campaigns, then we'll have a completely bought-and-paid-for political system. You and I won't matter at all.

By Arthur Delaney
January 14, 2009 | Huffington Post

Anticipating a Supreme Court decision that could free corporations to spend unlimited amounts of money on political campaigns, Rep. Alan Grayson (D-Fla.) introduced five bills on Wednesday to choke off the expected flood of corporate cash.

"We are facing a potential threat to our democracy," Grayson said in an interview with HuffPost. "Unlimited corporate spending on campaigns means the government is up for sale and that the law itself will be bought and sold. It would be political bribery on the largest scale imaginable."

At issue in the Supreme Court case is whether the government can limit corporate spending during presidential and congressional campaigns. The case is pitting Citizens United, a conservative group, against the Federal Election Commission. The FEC banned ads for Citizens United's film bashing Hillary Clinton during the 2008 election season.

Grayson introduced a handful of bills on Wednesday -- the Business Should Mind Its Own Business Act, the Corporate Propaganda Sunshine Act, the End Political Kickbacks Act, and two other measures.

The Business Should Mind Its Own Business Act would impose a 500 percent excise tax on corporate contributions to political committees and on corporate expenditures on political advocacy campaigns. The Corporate Propaganda Sunshine Act would require public companies to report what they spend to influence public opinion on any matter other than the promotion of their goods and services. The End Political Kickbacks Act would restrict political contributions by government contractors.

The other measures would apply antitrust regulations to political committees and bar corporations from securities exchanges unless the corporation is certified in compliance with election law.

"This case is basically about an effort to get around that. Citizens United took corporate money and tried to influence an election," said Lisa Gilbert of the U.S. Public Interest Research Group. "These are all pieces of good policy. I hope they draw attention to the potential frightening implications of Citizens United."

ABCNews reported on Wednesday that Democratic leadership is hard at work on a legislative response to the Supreme Court's expected ruling. Grayson told HuffPost that he had consulted with leadership before launching his preemptive strike.

Jeff Patch, a spokesman for the Center for Competitive Politics, an organization that advocates for lifting campaign finance restrictions, said Grayson's bills were too focused on corporate spending. "These are totally targeted at corporations, but Citizens United is widely believed to affect corporations and unions and nonprofits equally."

Grayson disagreed. "One year's profit for Exxon is greater than the entire political expenditure of all unions put together," he said.

Grayson added that he wanted to send the message that people are paying attention to the Supreme Court.

"This issue transcends the usual political arguments. I don't think the teabaggers would be very happy if our government was bought and paid for by a huge national corporation," he said.

The Supreme Court's ruling, which has been expected for months, could come as soon as Jan. 20.

Wednesday, January 20, 2010

Brooks: God & capitalism prevent natural disasters

It's weird how some figures on the right -- Limbaugh, Robertson, Brooks -- have seemed eager to turn this act of God against Haiti into some kind of "See, I told you so"/teachable moment.

It's shades of post-Katrina: instead of, "You only drowned if you deserved it," it's "That building only fell on your head because you didn't fully embrace capitalism."

My prediction is that we'll continue to hear such sanctimonious sermons from The Rich to The Poor whenever a natural disaster strikes a country that is not sufficiently Christian and/or doing its sweaty best to live out the received wisdom of neo-liberal globalist agenda.

Translating David Brooks
By Matt Taibbi
January 18, 2010 | True/Slant


Video of our true greatness (not our guns) on display in Haiti

This past weekend, a U.S. search-and-rescue team from Los Angeles pulled a woman from the rubble of a collapsed building. The large Haitian crowd assembled outside the scene responded with exuberant cheers of "U.S.A., U.S.A." LA County Fire Capt. Bill Monahan "said it brought his team to tears." The rescue team then proceeded to dig out "three more women from under three stories of another collapsed building." The White House press office sent reporters this video of the scene

We got Big Guvmint by default

Like I said, unbridled Casino Capitalism has ushered in a new era of Big Government, whether we like it or not, because Wall Street has bankrupted families, businesses, cities, and states alike, and now the only one left with any money is Uncle Sam, who's lending it out to everybody. (This is not to mention that Uncle Sam's money is all borrowed, too).

Still think federal regulation is "too expensive" and "bad for business"? Look at what bad regulation has given us -- over 12 percent of Americans dependent on food stamps, bankrupt cities dependent on states, the states dependent on the federal gov't. to meet their budgets and pay out residents' unemployment (read: "welfare") benefits, the federal government shelling out $14 trillion in loans, swaps, and guarantees to private banks -- and lenders from China, Japan, and Britain paying for it all.

Get this through your stubborn heads, you teabaggers, you Red State welfare queens, because the truth doesn't fit your Freedom vs. Socialism paradigm. The "victory" by default of Big Guvmint wasn't because of a Democratic majority in Congress or Obama in the White House, but because of "pro-business" crooks in both parties who systematically dismantled federal safeguards and oversight to please their donors and erstwhile employers on Wall Street. It's time you wised up and stopped parroting the economic talking points they've been giving you for the past 30 years. They don't care about you. They use you. They are not "the same" as you because you're both white, enjoy golf and vote GOP. No, they will always do OK, even as you suffer, because they make the rules, not you. They are not your brothers-in-arms. They are vampires at your necks.

Payroll Taxes Increase for Many Employers Across the U.S.
By Olga Pierce
January 20, 2010 | ProPublica

Last year was the worst Don Miller had seen in more than 20 years of running a graphic printing business in Norfolk, Va.

Business slumped 15 percent, and he had to lay off two of the three workers who helped him print stickers and signs for Navy ships.

Miller hopes to bring them back, but hiring will be more expensive for all Virginia business owners this year. The recession has emptied Virginia's unemployment insurance trust fund, and the state is making up for it by raising taxes on employers and cutting benefits for seniors.

In 2009, the average business owner paid $95 per employee. This year, the tax will be $171, according to estimates by the state work force agency.

"It's another added expense to hiring somebody," Miller says. "Everything's going up and business is going down."

ProPublica predicts if your state's unemployment insurance fund is about to hit the skids.
ProPublica predicts if your state's unemployment insurance fund is about to hit the skids.
Similar tax increases are hitting employers nationwide this year as states struggle to pay the 5.5 million Americans currently collecting state jobless benefits. So far, high unemployment and, in many cases, poor planning have prompted 25 states to borrow more than $25 billion from the federal government to keep benefit checks in the mail.

In other states, unemployment compensation funds are still in the black, but reserves are rapidly dwindling. Nine more states likely will be borrowing by mid-year, according to a ProPublica analysis of state revenue and benefits.

Tax on businesses

Business owners in 36 states face tax increases ranging from a few dollars to nearly $1,000 per worker. Six states are scaling back or freezing benefits for the unemployed:

  • Jobless Pennsylvania workers will get 2.3 percent less in benefits starting this month, while the average tax this year for businesses will increase from $384 to $432 per worker.
  • Hawaii's employers face an average increase from $90 to $1,070 per worker. The state also proposes decreasing the maximum benefit by as much as a third — about $190 per week.
  • Texas, where the trust fund is $1.4 billion in the red, has increased the average tax on employers from $89 to about $165 per worker.

Instead of fulfilling the unemployment insurance system's purpose of stimulating the economy, these measures may contribute to joblessness, says Gary Burtless, an economist who studies labor policy at the Brookings Institution. "We don't want to pick this moment of all moments to boost taxes on employers," Burtless says. "We want to encourage employers as much as possible to add to their payrolls."

Workers are being hurt in another way — through benefit cuts. In Roanoke, Va., James Hay, 70, received a letter from the state informing him that his monthly benefits are being cut from about $800 to $100 because state law limits payments to Social Security recipients when the state's fund runs low.

"I was devastated when I read it," Hay says. "I thought, 'Lord, what am I going to buy heating oil with this winter?' "

Like many other seniors, Hay was working full time to supplement his $1,400 monthly Social Security check, which he says was not enough to support him, his granddaughter and her two young children. Then the asphalt factory laid him off.

Unemployment insurance made up for some of the lost income, but now Hay is not sure how his family will get by. "We'll just have to do whatever we can do," he says. "I hope and pray we'll be all right."

States borrow heavily

The state hopes to save about $11 million through the cuts to seniors but anticipates borrowing about $1.3 billion to replenish its unemployment fund before the recession ends.

"The middle of a recession is when people need help most," says Maurice Emsellem, policy co-director of the National Employment Law Project, an advocacy group for low-wage workers. Cutting unemployment benefits, he says, "undermines the fundamental goals of the program — boosting the economy and keeping people out of poverty in an economic downturn."

Many states such as Virginia are already at or near the highest payroll tax rates allowed by law, and others have pushed politically difficult tax increases through their legislatures, making further benefit cuts likely if high unemployment persists, says Rich Hobbie, executive director of the National Association of State Workforce Agencies.

Some of the pain might have been avoidable. Long before the recession began, Virginia and many other states that have imposed tax increases or benefit cuts let their trust funds dwindle well below the 18 months of reserves the Labor Department recommends.

Virginia had to slow its need to borrow from the federal government despite the impact on businesses and seniors, says Republican state Sen. John Watkins, chairman of the Virginia Commission for the Unemployment Insurance Trust Fund. "I have angst for people who are unemployed," he says. "But our trust fund is busted — it's gone."

Tuesday, January 19, 2010

'Jesus rifles' aid Our Troops in GWOT

Gee, I guess the War on Terra is a crusade against Islam after all:

"It allows the Mujahedeen, the Taliban, al Qaeda and the insurrectionists and jihadists to claim they're being shot by Jesus rifles."

(Not that I actually believe that; but certainly these 'Jesus rifles' will be used as PR weapons against us by jihadists, who seem to be much more image-savvy than we are).

Pentagon Supplier for Rifle Sights Says It Has 'Always' Added New Testament References

By Joseph Rhee, Tahman Bradley and Brian Ross
January 18, 2010 | ABC News

Sunday, January 17, 2010

The case against Geithner

Where are angry, belligerent Tea Partiers when we really need them?

By Les Leopold and Dylan Ratigan
January 12, 2010 | AlterNet

Editor's Note: Published below Les Leopold's article is Dylan Ratigan's 5-point takedown of Geithner and why it's time for him to go.

"An arm of the Federal Reserve, then led by now-Treasury Secretary Timothy Geithner, told bailed-out insurance giant AIG to withhold key details from the public about overpayments that put billions of extra tax dollars in the coffers of major Wall Street firms, most notably Goldman Sachs." Huffington Post

Cover-up revelations keep coming about Timothy Geithner's secret assistance to AIG. The latest show that he urged AIG not to disclose how it would be shoveling money to Goldman Sachs and other large financial institutions by paying off its credit default swaps at par value instead of much less.

More than $60 billion changed hands that shouldn't have if Geithner had played hard ball. Therefore, the charge is that Geithner should be bounced because he was protecting the banks' interests ahead of the public interest. He may also have protecting himself during his confirmation hearings.

Ok, string him up. But what about recapturing the loot?

Before we pull the rope, let's take a closer look at this outrageous scam. During the bubble years, AIG conducted an extremely lucrative business guaranteeing all kinds of derivatives based on risky debt. They couldn't call it insurance because insurance products are regulated --- meaning you need to have reserves to back them up, which they didn't. So these toxic assets insurance polices instead got the fancy name "credit default swaps," which were not and still are not regulated. (Take a bow Phil Gramm, Robert Rubin, Bill Clinton and Alan Greenspan.)

This was the mother of all profit making businesses for AIG because in many of these deals AIG didn't have to put up any collateral as long as AIG was AAA-rated. The counter-parties (i.e. Goldman Sachs, JP Morgan Chase...) figured AIG was good for it. So AIG raked in fees for insuring toxic assets and didn't have to put up anything in return. Free money!

AIG figured the best hedge and the most money could be made by insuring more and more of this risky stuff. This was thought to disperse the risk broadly since all of the junk debt couldn't possibly fail at the same time, could it? They "insured" over $450 billion worth. (For the sordid details and comic relief, please see The Looting of America )

Then, the unthinkable happened. The assets tanked and AIG had to pay up on its policies, but couldn't. It was about to fold. Had AIG gone under it may have pulled with it hundreds of other financial institutions around the world that were relying on its insurance. The government stepped in to bail them all out. (AIG now spreads the fiction that this was just one rogue operation over in England in an otherwise safe and sound empire. But the big boys at the top of AIG all knew the credit default swap operation was a delectable source of enormous profits and shared in the booty... and they're not giving back any of the ill-gotten gains.)

We can argue some other time about whether or not some kind of bailout was necessary or what we should have gotten in return. The point here is that big fat financial houses like Goldman Sachs would have received pennies on the dollar for their AIG-backed credit default swaps had AIG gone into bankruptcy court. Instead, Goldman and others received par value and that money is now funding their mammoth profits and bonuses. (Spewing more corporate fiction, Goldman Sachs and JP Morgan Chase say they had been carefully hedged and would not have suffered from an AIG bankruptcy. Baloney. If AIG had gone under without a Federal rescue, those big banks would have gone down too or teetered on the edge.)

Here is precisely where free-market capitalism metastasizes into the billionaire bailout society. Goldman Sachs believed they had adequately covered $12.9 billion of its toxic assets by purchasing insurance from AIG. In fact, they believed those toxic assets plus the insurance made them as good as gold and part of their capital base.

In effect Goldman had placed two kinds of bets. First they bet on the toxic assets which were extremely lucrative, but risky. Then they bet that AIG could successfully insure them against losses on that first bet. They lost both bets. Too bad. That's capitalism....or used to be.

For losing their bet with AIG, Goldman Sachs should have only received about 20 cents on a dollar in a bankruptcy court. Instead, we bailed out AIG to prevent bankruptcy and Geithner et al pressured AIG to give Goldman Sachs 100 cents on the dollar. As a result, Goldman Sachs suffered no negative consequences at all from betting and losing. That's not capitalism. That's our new billionaire bailout society, where we, the taxpayers, pay off the bad bets. And the super-wealthy get more wealthy even when they lose their bets.

Think about it. Goldman Sachs alone got $12.9 billion - found money. Ka-Ching--right into its bonus pool. (OK, let's be fair. In bankruptcy they may have received $2.58 billion so the net windfall was $10.32 billion, which is about what it would cost to hire 172,000 teachers for one year.)

By all means, let's fire Geithner, and Summers too while we're at it. But if we really want to see some semblance of justice, we should slap a 90 percent windfall profits tax on all Wall Street firms. No matter how you cut it, they're all on welfare and their profits stem directly from our largesse. (Even those banks that have paid back TARP are, right this very minute, at the federal trough sucking up trillions of dollars of federal liquidity programs and asset guarantees.)

If the surging Tea Party really believed in its anti-bailout rhetoric, they'd be screaming for a windfall profits tax. But instead they so hate government and taxes that they'd rather let the biggest bankers in the world take our money and laugh all the way to the the Cayman Islands.


The Case Against Geithner -- by MSNBC Host Dylan Ratigan

As we sit here today, Wall Street continues to exploit a policy of government-sponsored giveaways and secrecy to pay themselves billions.

Record-setting bonuses due to banks like Goldman Sachs as early next week.

Yet instead of acting as our cop, Secretary Tim Geithner has become central to what may be a cover-up of the greatest theft in U.S. history.

Here is the evidence.

COUNT 1: The AIG Emails:

Recently-released emails show Geithner's New York Federal Reserve Bank directing AIG to keep details of the 100-cents-on-the-dollar bailout secret in 2008 -- A reversal of the traditional role of government, which is to force companies to become more transparent, not less.

A Treasury Spokeswoman says: "Secretary Geithner played no role in these decisions and indeed, by November 24, he was recused from working on issues involving specific companies, including AIG."

Friday, the White House also defended the Treasury Secretary:

Gibbs: These decisions did not rise to his level at the fed.

CNN's Ed Henry: How do you know that he wasn't involved? He was the leader of the New York Fed.

Gibbs: Right, but he wasn't on the emails that have been talked about and wasn't party to the decision that was being made.

He wasn't party to a decision to hide $62 billion dollar payouts to firms that became insolvent during his 5-year watch at the New York Fed?

Congressman Darrell Issa speculates that maybe Geithner wasn't on the emails in question because his people felt so strongly they already knew their boss's intentions, they didn't feel the need to bother him with the details.

COUNT 2: He wasn't even a regulator!

In Geithner's own words during confirmation hearings in March:

"First of all, I've never been a regulator...I'm not a regulator."

According to the New York fed bank's website, that was your job!! And I quote from the Fed's website: "As part of our core mission, we supervise and regulate financial institutions in the Second District."

That district of course is the epicenter for bailed out banks and billion dollar bonuses.

Count 3: "The Christmas Eve Taxpayer Massacre."

As you were wrapping those last presents, Geithner's Treasury Department lifted the 400-billion dollar cap on taxpayer responsibility for potential losses for Fannie Mae and Freddie Mac.

The new cap? Unlimited taxpayer funds! Interesting timing... Christmas eve, Tim?

Still no word on recovering the hundreds of millions paid to the CEOs who created this mess.

COUNT 4: He's too cozy with certain banks.

Remember those call logs when he first started... 80 contacts with Goldman Sachs, JP Morgan, and CitiGroup CEOs in just 7 months!

But Bank of America's CEO only got three calls. Apparently Bank of America is not one of Geithner's favorites, especially when you consider that there are still many unanswered questions about Tim Geithner's role in threatening to fire Bank of America management if they didn't go through with a deal to buy Merrill lynch.

COUNT 5: TARP Special Investigator Neil Barofsky's report says Geithner's New York Fed overpaid the big banks through AIG by billions of dollars.

Geithner says it had to be done. Maybe so, maybe not, but this takes us to our final point.

Since then, the Treasury Secretary has yet to really prove whose side he's on -- the Wall Street big wigs or the American taxpayer? Here's the litmus test: Mr. Geithner, show us the past ten years of AIG emails or step down so that we can get somebody who will. A crime has been committed against the American taxpayer and right now you are standing at the door of the crime scene refusing to let anyone in.

Show us you're not involved Mr. Geithner, prove the white house correct in defending you. All we are asking for is the transparency promised by the President you serve.

Saturday, January 16, 2010

Curious historical footnote: 'The war on terror'

Reading Victor Davis Hanson, the metaphor comes to mind of a lion in captivity proudly prowling some rich guy's fenced-in game preserve.

The women ooh and ahh, the kids point and snap photos, and the men say, "Yep, that's what a real lion looks like." Then they all drive back home, leaving that pathetic lion to rule his open-air zoo.

Hanson is a guy who takes himself way too seriouly because he doesn't realize he's just a zoo animal, a curious bare-toothed display of a bygone decade, a guy whom nobody in the real world takes seriously anymore, if they ever did at all.

Does anybody seriously believe in a "war on terror" anymore? The editors of NRO do, sure, and everybody at FOX and Clear Channel... but in the real world?

Does anybody seriously still think that we are up against a mortal enemy, our near-equal in strength, and that we may have met our match if we don't muster all our resolve and gather all our allies to defeat him?

Does anybody seriously still go for these hyperbolic WWII/Chamberlain/Churchill/Hitler analogies when discussing the dire threat from bearded loonies who hide in desert caves and communicate through messengers on donkeys about their diabolical plans for the destruction of the West?

Does anybody have a few spare acres with a nice high fence where we can let the Victor David Hansons of America roam "wild and free," under the illusion that they are proud, strong American warriors?

To be fair, Davis is right though: Obama is due all kinds of criticism for his utter hypocrisy on Iraq, G'itmo, illegal wiretapping, and renditions. But let's remember, unlike Clinton, who sought out the center because Dick Morris told him to, Obama is a guy who instinctively seeks out the middle of the road on every issue because he believes it's the right thing to do. Hence we have a senseless foreign policy that's somewhere on the left-right spectrum between Dubya and his favorite straw man, "some."

President Obama has not signed up for a serious effort against radical Islam.

By Victor Davis Hanson
January 15, 2010 | National Review

Wall St. banks offering illegal cash payments on home short sales

Yet another way the big banks are screwing us. Hey, you I'm-mad-as-hell-and-I'm-not-gonna-take-it-anymore Teabaggers, you've still got your beloved 2nd Amendment. You know what to do.

Big Banks Accused of Short Sale Fraud
By Diana Olick
January 15, 2009 | CNBC


Wall Street's record profits are on US

So JP Morgan Chase and other bailed-out Wall Street banks are reporting record profits in recessionary 2009. But those profits aren't from home loans, credit card lending, or business loans, which are all losing money. No, Wall Street's record-high profits are from securities trading. So what are they trading? Derivatives and bad securities, aka lottery tickets and crap.

The top 5 banks account for 97 percent of the $204 trillion derivatives market, which is mostly traders trading with other traders, not retail investors. There's nothing new about their legalized gambling, but never before has their gambling been funded by zero-interest loans from the Fed Reserve, and backed up by taxpayer guarantees.

What's also new is Wall Street's gaming of the Federal Reserve, which is paying huge spreads on Wall Street's re-selling of toxic bonds. Mind you, I'm not talking about banks selling toxic debt already on their balance sheets, which the Fed had already agreed to buy; I mean sleazy Wall St. traders going out and buying additional junk priced at 10 or 20 cents, and then selling it back to the Fed for 50 cents, for example. Thus the Fed is sucking all the crap out of the market and paying top dollar for it, at our expense, so that these Wall Street f*%!ers can pay each other multi-million-dollar bonuses, as if nothing happened, as if they didn't wreck the world economy and mortgage our grandchildren's future.

And sure, the big banks may have paid back most of their TARP loans, but given the above, and given that they have received favorable one-time tax breaks and suspension of debt-equity requirements, that should be no surprise to anyone.

It's torch and pitchfork time, folks. These soulless, amoral SOBs need to be taught a lesson the hard way.

JPMorgan Chase Earns $11.7 Billion
By Eric Dash
January 15, 2010 | New York Times