Thursday, April 29, 2010

Goldman Hearings are Sham Theater

A special adaptation of Little Red Riding Hood and the Big Bad Wolf is open for a special onetime run in Washington. Oh poor little Red (that would be the American people) has been ravaged mightily by the nasty Wolf (that would be Goldman and Sachs). It all seems so dire, so unfair – but wait, who is that rushing to her defense? It is the brave Woodsman (that would be congress), he has come rushing in – axe in hand. The Wolf snarls and snaps but he is no match for our stalwart hero. The fight is fierce and much noise is being made. But in the end, we know our brave Woodsman will avenge Little Red Riding Hood and all fear and injustice will sink into a glorious sunset as the curtain closes.

This is the reality of the hearings. It is very gratifying to hear our anger voiced so clearly on TV for all to hear. Oh the snide remarks, the dripping contempt of Goldman crushed under the angry demands and bone chilling threats of our local congressman. This will go on for several days. In this manner our little spectacle more closely resembles the Roman spectacles held for the very same purpose as these hearings. Namely, to calm and entertain the populace while a handful of men gets back to running the nation.

Unfortunately for us, the Roman analogy does not hold very close beyond that however. For at least the Roman citizen, got to see real blood in exchange for their liberty. We however will have to muddle through with our humble vaudeville. It will have to suffice because it is all we are being offered.

These hearings will come and go having accomplished nothing. No more than the bailout hearings prevented further bailouts, abuse of bailouts or the banana republic corruption of bonuses paid from bailout funds. By all accounts the reform bill in congress will, like health care before it, be a giant gift bag to the finance industry. In exchange for meaningless paper reforms Goldman and others will keep access to the federal paper money mill. No banks will be broken, no trading outlawed. Sure some specific types of securities will come under tighter control – but only in areas where Goldman has so overfished the waters that no fish is likely to bite again for years.

The hearings will end, the limelight will dim. Congress and Goldman will retire for the weekend and remove the dirt and grime of public performance sharing drinks together on the Goldman dime. The “reform” bill will pass. The stock market will rise in anticipation of higher profits. Goldman will begin to reap its toxic returns from the debt crisis it fueled in Europe. Taxpayers will feel that their ongoing pain and abuse has been made meaningful. All will be well and happy – for a while.

Tick Tock

Wednesday, April 28, 2010

Islam's Prophet and America's Profit - two radical fundamentalisms

To many people - wise and foolish, it seems that America is locked in a struggle with Islam or at the very least with the radical elements of Islam. The question is whether this conflict will be limited in time and intensity or whether it will erupt into an all out battle to the death.

I do not propose to enter into that debate. I would simply like to point out that there is a direct correlation between the likelihood of struggle and the degree of radical fundamentalism. When you look at the Muslim citizens of American it is hard to find a radical majority. Most Muslim Americans are proud to be American and vigorously self police their community for signs of terrorism. Show a group of Islamic parents walking their children to mosque and you will be hard pressed to get the average American to declare them mortal enemies.

However, present that same American an image of raging Pakistani youth burning an American flag or stoning rape victims to death and you will quickly reach a consensus that “those” people are dangerous and must be confronted totally.
So we have established that a radical fundamentalist response is met much more forcefully than a more measured one. The higher the degree of fundamentalist fervor the higher the antagonism towards the group. We see that relationship between Islam and the American public. Let is now turn the mirror on ourselves. Do we present any degree of radical fundamentalism to the Muslim world?

Some might argue that we do offer a fundamental Christian view to the world. I do not think that is true enough to be a general statement. Some may argue that we present a fundamentally western view. Now, that is closer to truth and frankly I am perfectly satisfied to be tied to the western principles of the enlightenment.

However, I would argue that America may adhere to enlightened principles in law and society but they hold closer to an even higher god. That god is capitalism. Not just capitalism but a radical fundamental view of capitalism that stands at the very core of our values. No cry of heresy is hurled as loudly as that of being against the free market. No profanity can reach the staining power of socialist.  No violation of morality or social justice is unredeemd by a healthy income statement. Yet we do not see ourselves as radical nor fundamental.

America complains about the insanity of the Muslim extremist who follows the word of the Prophet Mohammed to any excess. Yet American worships our own prophet – Profit and we are every bit as radical in its defense – we destroy environments, cultures, entire civilizations in the holy name of Profit. We parade 12 year old girls in lingerie ads in the name of Profit. We send entire communities into poverty and despair when we ship their jobs overseas in the name of Profit. Profit is holy and Profit is an answer unto itself.

We build temples to Profit - our very homes are measured by how much profit they represent. Our careers are measured in Profit. We earnestly declare that no scientist would want to cure cancer if it did not end in Profit. Our coal is mined and cars built with a keen balance being kept between the cost of funerals and bottom line Profit. Liberal arts have withered to ghost presences on our campus because they yield no Profit. Profit – holy Profit – it is the ghost in the machine of American culture.

The Islamic world values sanctity and order and worships their Prophet. America values capitalism and freedom and worships our Profit. Two zealots locked in a battle of heresies do not bode well for compromise. We need to realize how our own radicalism threatens their world before we expect them to abandon their own fundamentalism. One irrational radical fundamental fanaticism deserves another.  If there is any hope of coexistence, we need to recognize our own orthodoxies.

Monday, April 26, 2010

In Goldman Sachs They Trusted - 1929 and 2008 Deja Vu

“In Goldman we trust” - Kenneth Galbraith warned us 55 years ago

In 1955 Kenneth Galbraith published what is considered the definitive book on the great depression called with all the wit and imagination of an economist – “The Great Depression”  What it may have lacked in marketing edge it made up for in content and insight. It has been held to the test of time and emerged today as an essential work on the economic meltdown of the 1930s.

However, a recent reread showed how it can also be seen as a prescient warning. You might want to be sitting down for this one. Chapter 3 of his historic book is titled “In Goldman Sachs We Trust” In it; Galbraith explains how the firm went from being one of the newest kids on the block to the leading promoter of closed end stock funds prior to the great crash.

Essentially these closed end funds were exactly the same as the ones operated today by Goldman and reputable firms throughout the world. A fixed number of shares in the closed end fund are sold to raise capital. This money is used to invest in other stocks. The manager of the fund is presumed to be able to outperform the market and from this performance the fund will earn a profit in excess of the market.

These funds were essentially the first derivatives, since they drew their value not from their own effort but by the underlying value of the stocks they bought. But, the difference is that in 1928 Goldman basically turned the idea of closed end funds into a pyramid ponzi scheme. They issued Goldman Sachs Trading Company in December 1928. One million shares were issued at $100 a share to capitalize the firm at $100, 000, 00. Then 90% of the stock was sold to the public. Within 2 months Goldman bought back 560,724 shares of its own stock, this created huge market demand and the stock prices soared. By the end of the month after sending prices to $222 a share Goldman sold of most of its shares at over 120% profit. Then in 1929, Shenandoah Corporation was created. Its major purpose – to purchase shares of Goldman Sachs Trading Company. Within months they had created the Blue Ridge Corporation. Its major purpose – you guess it – to purchase shares of Shenandoah.

This scam went on until the US economic meltdown in October of 1929. At its peak, this pyramid scheme drove shares of Goldman Sachs Trading Company to over $280 a share. By 1932 when Goldman was being hauled into Congress for a series of investigations the shares were worth a buck and some change. On the stock of the Trading Company alone Goldman Sachs had lost over $565 million dollars. Adjusted for inflation that would be over 7 billion dollars today.

The losses for Shenandoah and Blue Ridge were similar in style and scope. However, this is not the limit to the Goldman touch on the great depression. In their first two years of operation Goldman Sachs issued similar deals with leveraging of up to 99 to 1. These created, merged, bought or managed dozens of the closed end funds. The total cost to the people is billions and billions of dollars beyond calculation.

Goldman was hauled into Congress and all over Washington. They were excoriated and fined. But to no avail. For Goldman showed even way back then how adept it was at creating a profit opportunity – seizing the bulk of the profit – but then astutely letting go before the phony economics caught up with the deal.

Goldman Sachs always leaves someone else holding the bag. In 1929 they did it to millions but most spectacularly to William Crapo Durant. Durant was the founder of General Motors and later became a big player in the stock market. Goldman sold a huge amount of its shares to Durant. By 1936, Durant died bankrupt and living on charity. Goldman Sachs however, had stashed away enough of its money to pay all the fines it was levied and to hire the best admen available to rehabilitate its image.

In 2008 they did it to AIG, Lehman Brothers and the American taxpayer. Now it only awaits for them to suffer whatever pitiful fury their lapdogs in congress are willing to parade out for public consumption. That dealt with, Goldman will do what it has done before. Pay its fines and go on to the next scheme.

At the height of the current meltdown, Michael Robinson, the ex public affairs and policy chief for the SEC said of Goldman: "This is entirely new territory for them," "They are not accustomed to it.” Unfortunately no, it isn’t new to them and yes, they are accustomed to it. The problem is we never learn even from our most vivid histories. “Those who refuse to learn from history are doomed to repeat it” – historian George Santayana.


“The Great Depression” by Kenneth Galbraith 1955

Sunday, April 25, 2010

Sec Watched Porn During Economic Meltdown

Take us the foxes, the little foxes, that spoil the vines: for our vines have tender grapes” Song of Solomon 2.15 KJV

The SEC watchdogs were licking themselves while the foxes from Wall Street raided the American hen house. I think that just about sums up the news story part of this discussion. Revelations have come out that agents of the SEC were spending vast amounts of time in diligent search of porn. One chap fought his way around over 16,000 warnings in his search of porn. Not only were they spending large portions of every workday looking for fresh titillation, but there was a huge increase in this behavior after the 2008 meltdown began.

This is the instructive part of this sordid little tale. I realize job is a nebulous term in government bureaucracy, but weren’t they hired to monitor the financial sector? Why would the amount of time they had for leisure increase during the height of a financial crisis?

The answer that comes to my mind is clear and simple. They stayed even further away from their ostensive jobs as monitors because they were told to do so. So far the SEC has been a toothless, senseless watchdog who sleeps through every violation and excess and only acts when goaded repeatedly into action. Not only were these agents trained to sloth and indolence by years of abiding by the holy covenant between the government regulators and corporations in every sector. The corporations pretend to observe regulations and the regulators pretend to monitor. It is a very polite little dance with precise rules to be sure neither party is ever upset by having reality intrude upon their little cotillion.

I am sure the agents knew from years of learned behavior that it was best to wait. For even when finally roused from slumber the hounds of the SEC tend to bark more and bite less. Any overzealous agent who uncovered problems with a corporation is sure to be accused of damaging a corporation’s free market rights. The sin of offending profit is the ultimate sin against capitalism and can easily cost a fellow his “job”. So naturally, our highly paid SEC agents chose to search for chicks on the internet rather than a fox in the henhouse. Waiting to see if this was another little scandal that would wash away with the next news cycle.

The agents watched more porn in 2008 than in 2006 because they were even less engaged in monitoring during the height of the crisis. But, they were not disengaged from any extraordinary lack of work ethic on their part. They sat idle because the whole recent history of American corporate regulation told them to sit idle until their bosses were given the go ahead for some real investigation, however feeble.

In fact, the scandal did last more than a news cycle and the SEC was finally wakened to some action. But do not be deceived - the SEC is more a doorman for the financial corporations than a guard. They know and the corporations know that they will never be allowed to interfere with business.

This small and fragile fraud case against Goldman Sachs is a perfect example. If it is pursued and a judgment goes against Goldman Sachs the fine levied is likely to be so small in comparison with their profits that is will disappear into the rounding errors on their financial statement. Worse yet, this whole case is just as likely to be set up as a mere morality play in which Goldman sallies forth to demonstrate their diligence and honor as custodians of America’s paper wealth. It is not beyond the corruption of the relationship to believe that this is a setup case to prove that some few – aka Fabrice Tourre did some bad things but the noble folks of Goldman were right on his heels and about to fire him anyway.

Fab will walk away with a scarlet A on his designer suit and walk straight into a limo and onto another high paying job in Finance. He will be a well paid and well looked after scapegoat that clears the Wall Street foxes and lets the SEC hounds return to napping on the porch.

NPR story on porn at the SEC
Second Song of Solomon, King James version of the bible

Friday, April 23, 2010

Goldman Sach's Fabulous Fab Says Let Them Eat Cake

“More and more leverage in the system, The whole building is about to collapse anytime now…Only potential survivor, the fabulous Fab…standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstruosities!!!”

Article 18 of the SEC fraud filing against Goldman Sachs quotes VP Fabrice Tourre in an email to a friend where he pats himself on the back as “fabulous Fab”. Apparently, obscene salary and the sycophancy of an entire Wall Street cult in America was not enough to satisfy his ego. No, “Fab” needed self sastisfaction so much he has to refer to himself as some sort of cartoon super hero? This is just disgusting and it comes from the very top of the “best and brightest” at Wall Street. It is a bold indictment as to how juvenile, artificial and scheming the finance “industry” is.

But not only does “Fab” fawn over his brilliance, he admits in the same sentence that he has no idea what he has created or how to manage it.  Later on in another memo, he exhorts a friend to hurry making deals because “the cdo biz is dead we don’t have a lot of time left.”.  Here in his own words is proof that the people running Wall Street are nothing more than salesmen who hype their product without the slightest real competency. The sales pitch is the thing, the main thing, the only thing. This is the skill we need so desperately that we must pay billions in salary to acquire the “very best”?

Goldman VP Fabulous Fab is the epitome of some carny barker who has created a sales pitch so slick and so confusing that even he can’t follow it any more. He just keeps repeating the pitch and calling in the suckers. Well that is what Wall Street was and what it remains – a glorified carny game where there can be only one winner no matter how many suckers try to play the game.

I hope that this memo has the power to engage and enrage the popular imagination like its predecessors in the past. Classic ditties like “let them eat cake” comes to mind. If this does not awaken American to the people who purposely orchestrated the American meltdown – I simply do not know what will.


SEC Fraud Filing on Goldman Sachs

Wednesday, April 21, 2010

Mr. Rubin and the Definition of Morally Bankrupt

Robert Edward Rubin currently sits on the board of Harvard, Mount Sinai, and Council on Foreign Relations. To put it mildly, he is a big deal. He is the ex chairman of Citicorp, Ex Secretary of the Treasury and of course sine qua non – ex chairman of Goldman Sachs.

He is a key player in both the deregulation run-up to the American financial meltdown and its current incarnation as a circus of bailouts and “gosh, I didn’t know” statements by people alleged to be brilliant and talented. They say you cannot judge a man’s life until he has lived it all. So I will withhold my judgment on his talent. Although he will need a great many “up” years to make up for crashing Citigroup, not to mention his key part in deregulation which led directly to the meltdown of the entire economy.

Robert Rubin spent most of his early life working his way up through Goldman Sachs. He joined in 1966 to work in the area of risk arbitrage. Over the next two decades he climbed the Goldman ranks to become Chairman.

In 1992 he joined the Clinton administration as Secretary of the Treasury. He was a strong advocate for deregulation and globalization. Under his watch the safeguards put in place after the Great Depression were dismantled. Between Robert Rubin and Phil Graham basically all the FDR era regulations were swept aside as part of Rubin’s financial modernization. The key piece – the Glass Steagall Act which created FDIC insurance and strictly separated banking from financial speculation was repealed in 1999.

When Rubin resigned as Bill Clinton’s head of Treasury, Clinton called him the “greatest Secretary of the Treasury since Alexander Hamilton” In fact, Mr. Rubin liked that epithet so much he founded The Hamilton Project. Said project has as it goal: “to help build an economy that benefits more Americans” Lovely mission statement. Recent papers include a call to reduce taxes on corporations, and one declaring the meltdown a “panic” caused by unsophisticated citizens failing to see the real economy. If this is Hamiltonian economics then it single handedly justifies that little trip to the oaks with Aaron Burr.

After leaving the administration, Rubin joined the board of Citigroup in 1999. By 2001 he was named in a scandal over a phone call he made to Moodys to try and prevent them from reducing the debt rating of Enron. Does Enron ring a bell with anyone? Rubin carved out a position in Citigroup as senior advisor and chair of the executive committee. 2007 he stepped into the Chairman’s seat. In 2008 under his direction Citigroup was on the verge of bankruptcy and received 45billion in direct bailout and government guarantees against 300 billion in the sort of leveraged debt Rubin has been touting for years. In that same year, Mr. Rubin received over 17 million dollars in salary and over 33 million in stock options. He resigned in January, 2009.

Having resided over the meltdown of the 3rd largest American bank and profited mightily from it, one would think Mr. Rubin would have the grace to be humble. Far, far from it – he has stated that we need a more educated population to be able to address these issues. He even told congress that as the senior advisor to Citigroup he had no idea – none what so ever, about what they were doing with the very type of “investments” he specialized in while at Goldman.

But the pinnacle of his hubris was surely reached this month while speaking at his very own Hamilton Project forum. On April 20th 2010 he told reporters from the Huffington Post that he had been a supporter of regulation all along. With a straight face he stated that "I thought we should regulate derivatives; I thought so when I was at Goldman Sachs and I thought so afterwards," The Huffington article by Dan Froomkin is terse clear and shocking. Rubin is so glib and so unflustered by his part in the disaster that he makes a concerted effort to prove he was for regulation his entire career. Fortunately, Froomkin smashes that rhetorical edifice with some real world facts. Pointing out that when regulation of derivatives was brought up by the Futures Commission both Rubin and Greenspan called the idea caused "…grave concerns about this action and its possible consequences,"

The story of Robert Rubin’s life is one of influence and applause for his talent and intelligence. But if we balance his losses with his successes the net results would indicate a man whose central idea has been an unmitigated disaster. In a few months or collective reality, all the spun sugar financial empires built up by Rubin and his followers have vanished. Huge profits remain in the hands of a very few, but America as a whole is much diminished.

So, if you can define a man by his history and his works – this is Robert Rubin. He has provided that testimony over 40 years in business and government. My title proposes a link to moral bankruptcy. Here unfortunately Robert Rubin has also defined that term with his words and testimony over the last year.

By the way, on April 18, 2010, speaking on ABC’s “This Week” Clinton said Rubin was wrong to advise deregulation and that he was wrong to accept that advice. That is something we used to call – responsibility, it is an antonym of morally bankrupt.


Huffinton Post – Dan Froomkin

Fortune --- Rubin said part of the problem is that we need a "more educated electorate"

Senate investigation into Enron and Citigroup

Tuesday, April 20, 2010


Rule Britannia – and umm hurrah Germany – Germany really needs a new slogan, the old ones have image issues. In any case, it is a great and abiding relief to see more evidence that popular democracy and enlightenment still exist in the western world.

The BBC has posted an article that brings a real chance of a serious and vigorous investigation into the crimes of Wall Street. UK Prime Minister Gordon Brown hit it right on the head when he called the situation one of “moral bankruptcy”. The German government announced that “After a careful evaluation of the documents we will decide about legal steps” France has yet to make a statement, but that may have something to do with the fact that Societe Nationale – one of their largest banks made billions out of the AIG bailout.

This is a solid indication that somewhere in the world people have a clue to how monstrously harmful the mega banks have become. They are no longer a beneficial tool helping to grow economies. The giant financial corporations have become feudal bandit lords. Just like the petty kingdoms that used to dot the Rhine in Germany and charge “tolls” for passage down every mile of the river they impede real economic progress and simple exist to enrich themselves.

England has already passed a 50% tax on bonuses. Mr. Brown is calling for a special investigation. Hopefully this is an indication that they are serious about this and will pursue the Goldman Sachs hierarchy like the thieves and parasites they are.

The whole BBC article can be read here

Saturday, April 17, 2010

Financial Gimmicks extend to movie futures


I had spoken of it earlier in jest. Now in a surreal moment of utter stupidity, the US has actually approved a futures market based on trading forecasts of movie box office receipts. The Trend exchange as it is to be called was authorized by the U.S. Commodity Futures Trading Commission.  Imagine all your retirement money being placed on a bet that Nicole Kidman can make a hit movie.  To their credit the major Hollywood studios are in opposition.

But, the cretins in charge of American finance are hot to open up a brave new world of gambling disguised as investment. This is unbelievable in any time – but now, on the heels of a world class financial calamity brought about by exactly this kind of overinflated under regulated financial pixy dust.  Their is not a single logical reason to do this and certainly not now in a time of financial chaos.  This idea is even worse than the usual futures trading schemes.

Even I, who hold most of our leaders to be utter imbeciles – find this new market for 2 card monty finance beyond credence. Most of the people running the capital markets in America have the brains and morals of used car salesmen.  I would say they were operating way over their pay grade, but that is clearly a tragic misnomer in their case.  This has all the financial folly of the last disaster of synthetic assets and convaluted market manipulations all rolled up into a shiney new package.

Not that the snake oil salesmen of Wall Street can be held solely to blame. This is also proof that not a single effective measure has been taken to prevent a repeat of the 2008 financial meltdown. Despite noble efforts by Elizabeth Warren and a tiny few other voices in the wind, the government has not done a thing to regulate the travesty that is our investment and capital markets.

I do not know how to respond to this other than to warn anyone with have a brain to go running from securities into whatever market you think may bring you safety. If it means putting your cash under your mattress, then so be it. At the rate we are going, the financial market will become in reality the beanie baby trading floor it already is in concept.

We are on a train to utter ruin and no one is willing to put on the brakes. Next stop – the American meltdown.

Friday, April 16, 2010


I never thought I would see it, but it has happened. The SEC has filed civil fraud charges against Goldman Sachs. Today, April 16, 2010 the government has made a solid first step towards bringing the cretins and thieves of Wall Street to justice. Goldman is one of the key players in the American meltdown and they have been totally immune to justice so far.

Filing the 22 page complaint in the Southern New York US District Court, the SEC has charged both the company and specifically one of its vice presidents with fraud. The particular fraud in question scammed over a billion dollars from investors. The vice president charged is Fabrice Tourre. He was in charge of an operation in which Goldman allowed a 3rd party hedge fund – Paulson and Co, to mislead investors.

In exchange for a fee of 15million Goldman allowed Paulson to place tottering investments for which it held credit default insurance into a basket of securities being sold to the public as solid and backed by the good will of Paulson and Goldman Sachs. All the time they were selling these investments as sound and well connected they were buying up insurance positions which would net them huge profits when the investments collapsed. Make no mistake, the investments were going to fail – that is the very point of their creation. Paulson made sure the bundled securities were packed with low grade mortgages on the verge of collapse. It was like selling a house with walls made of matches, telling the buyer that it was safe and sound and then taking out a fire policy.

In fact, the fund was designed from the very beginning to collapse so that Paulson and Co. could cash in their insurance. As the Director of SEC enforcement said: “The product was new and complex but the deception and conflicts are old and simple” It was a total scam from beginning to end and it cost investors over a billion dollars. Of course this is just the tip of the iceberg and Goldman Sachs will mobilize all its lawyers and lobbyist to defeat this indictment. Already the corporate shills in the media are calling this political showboating by the SEC. But, however improbable – it is still a sign of hope and I wanted to bask in that light however brief it may be.

This is a sign that the SEC Chair Mary Shapiro is still struggling to bring some justice to this scandal. She and most especially TARP Congressional Oversight Committee chair Elizabeth Warren have been dim beacons of hope in this latest financial debacle. I fear this may just be a little bone tossed to the masses as a show of enforcement. But, perhaps integrity may yet prevail and bring at least some justice to this part of the American meltdown.

Thursday, April 15, 2010

The Manipulation of Economic Data – Part 1: Unemployment

One of the very few bipartisan efforts that our government has managed in the last couple of decades has been the manipulation of economic data. Starting back in the great old 80s the government began to alter the way data was collected and presented. This ability to alter data was amazingly easy in the over thought and under tested environment of government statistics. Better still, it was effective and useful. The Technocrats could solve problems for the politicians by simply redefining them out of existence. It was a perfect tool to mask reality as we headed down the American meltdown.

This rampant manipulation of data was so useful that it has spread to almost every aspect of current government data. I will run through the highlights of current Unemployment data and how it has been multiplied and massaged to create confusion and delusion. First there was the multiplication of “the unemployment number” into 6 unemployment numbers – U1 through U6.

• U1: Percentage of labor force unemployed 15 weeks or longer.

• U2: Percentage of labor force who lost jobs or completed temporary work.

• U3: Official Unemployment Rate – percent of people unemployed AND actively seeking work

• U4: U3 + "discouraged workers"- those who have stopped looking for work

• U5: U4 + "marginal workers" - those who are working at marginal jobs out of their field

• U6: U5 + Part time workers who want full time, but cannot due to economic reasons

In the great depression when we said unemployment was 24% we were talking U6 type of numbers. Not exactly U6 because in the 1920s and 30s we did not yet have data sets U3 and U6. It is not exactly the same – but close enough. In todays press releases, when the government says unemployment is 9% they are talking U3 numbers. The change from U4 to U3 happened in the Clinton Administration and has been happily followed by every president after. Recent tweaks have defined U3 to be more closely tied to unemployment benefits. That is, you are only counted towards unemployment figures so long as you are drawing unemployment

It is really quite brilliant. How to lower Unemployment? Create jobs or solve economic inequality – invest in real infrastructure? Heck no, just redefine your terms. So, now, you vanish from the unemployment report if you exhaust your benefits, take a crappy underpaid job or take in even one hour of part time employment. Now that is a solution Democrats and Republicans can agree on – and they have.

The official U3 rate for March 2010 is 9.7%. But, now we know this does not include over 11 million who work at low paying jobs they took to put food on the table. Nor does it counts over 2 million people who have lost benefits, have no job and have given up looking for one.

So U6 includes everyone who is dislocated by economic conditions. What is our official U6 rate? Well, that would be around 16.9%. You have to dig through pages of spun sugar to get to it on the Department of Labor reports. But really, aren’t you happier with a 10% unemployment rate? No need to trouble yourself with unpleasant facts. Just listen to the mainstream media and that is all you will ever hear. Rarely if ever do they even mention the existence of more than one unemployment figure. Whether that is a sign of their limited intelligence or an indication of complicity is an unanswered question. What we do know is that hiding more realistic unemployment data is a great convenience to the government and it is part of a larger manipulation of data. It is also a sure sign that the great American meltdown is proceeding apace.

Monday, April 12, 2010

72 percent of Corporations pay zero taxes - so middle class has to make up the difference.

Busy, preparing your tax return for the April 15th deadline? Well, not to put a big burden on you but you are going to need to cough up around a little more. Probably something around $66,000,000,000 extra for the middle class to make up for the corporations that pay no taxes. That is the amount of taxes that 25% of US corporations will not pay on the 1,100,000,000,000 they made last year.

A GAO (government accounting office) report shows that 72 percent of corporations paid no Federal taxes. The Chamber of Commerce defends this by stating that many of those corporations did not earn any income. Well, perhaps after using double accounting methods for inventory and playing other clever games with the books some corporations may be able to show zero income on paper. I will simply accept that very contrived argument for now. Fine, some corporations generated no profit.

Ok, then, let us examine how the really profitable corporations fared. Let’s look at companies worth over 250 million dollars and reporting over 50 million in revenues. These companies reported incomes from 50 million to 378,799 million. Even among these mega corporations over 25% paid zero tax.

Those paying zero taxes this year include GE who had $10.4 billion in pre-tax income. Bank of America with over $4.4 billion in income got a handy little tax credit of 1.9 billion. Exxon paid a whopping $15 billion in taxes to foreign governments, but not a penny to the US. Much maligned Wal-Mart on the other hand paid a healthy 34% of its $20.9 pre-tax income for a total tax of over $7.1 billion. They stand out almost alone of the top 25 corporations as having paid a fair share of taxes.

Oh and before you shrug off any of the 72 percent or 25 percent numbers as acceptable, let me point out one thing. Those numbers refer to corporations who paid ZERO taxes as in $0.00 dollars. If a company paid any amount over zero then they were not included. The GAO did not include any level of taxation between Zero and everything else. I suspect because the number would be too shocking for simple minded citizens to handle.

Well, now you may return to your tax return. It’s up to you to fund the government – because no one else is doing it. Remember it’s not what your country can do for you – it’s what it can do for Citicorp.

Friday, April 9, 2010


As if the normal abuses of Massey Energy Corporation and its ghoulish thug of a CEO were not horrid enough.  Now, their feudal arrogance has become openly disdainful of social or legal restraint. At first, I viewed the Upper Big Branch mine disaster as yet another sign of the American meltdown.  Old rotting infrastructure literally collapsing under its own neglect.  But, the April 5 coal mine disaster has led the coal lords on to new levels of hubris.

They have become used to the cowed serfs of Montcoal meekly accepting a press release and a check in exchange for the body of a loved one.  In their arrogance, they forgot that some of us are not yet under their thumb.  Some pockets of free thought remain.  We are not yet all so beaten down and blackmailed by the deadly choice between unjust work or watching our family starve. Some of us can still think clearly and are not yet afraid to raise our voice. 
Not one sign of shame has been shown. In fact, I have seen no act of contrition however tiny on the part of the Massey feudal lords. Far from accepting any share of blame, they are busy pointing out how blameless they are. How in fact, they are as much the victim here as those crushed and defiled bodies laying miles beneath the feet of their grieving families. 

Fortunately, Massey can blow the top off another mountain and increase production.  The coal industry uses the  equivalent of one Hiroshima atomic bomb a week in its campaign to destroy the oldest moutain range on earth in the name of profit.  Since mountain top removal already has massively reduced the need for humans the loss of a few miners will be no loss to the corporate bottom line.  However, the children of Montcoal will not find much comfort in such debits and credits.  

Forget, the shameful excuses that CEO Don Blankenship is tossing around. Oh, ok, so if we subtract this and divide that, we get to a number where you were only committing one violation a day. He smugly asserts that since one a day is the industry average, he and his corporation are without blame.

Well ok, you monster, I’ll accept your math. So your company is not worse than the average. Here sir is what that says to me. I want to assert that even if we believe Blankenship’s math, that one violation a day in fact proves that not only is he and his company at fault, but the entire coal industry is.

Why haven’t the coal corporations instituted effective safety measures – too costly? No, I can find no record of a coal mining corporation filing for bankruptcy due to insufficient profit. Now, I realize some subsidiaries have filed bankruptcy. But they did so only to shed the company’s responsibilities and avoid environmental and pension costs.

Has the government pushed too fast for reform and the companies cannot keep up? No, this is a ludicrous assertion actually. The US regulatory agencies responsible for mine safety have constantly watered down regulation under lobbying pressure. Not to mention the fact that every single regulation that has made its way into legislation has been thoroughly contested every step of the way in a review system that offers companies more chances to appeal than a murder suspect gets.

No, only one answer remains as to why coal companies have not instituted safety measures. That is cold capitalist calculation of profit versus cost. The mines simply look at their ongoing expenses on the one hand. These consist of lobbying and bribery expenses, court costs of legal actions and then the clean up by finally paying for some funerals and a public relations firm. These current costs are weighed in the profit and loss scale against the cost of instituting effective safety measures. The scale almost always points to the side with the most bodies in it. The honest fact is that dead miners cost less than safety.

Is it not time we stopped trading needless human tragedy for improved quarterly profit reports. If one violation of basic safety regulations a day is the industry norm, then the entire industry is immoral. I think simple investigation will also show them to be criminal. Mr. Blankeship himself is in fact already on record with several violations of election law in which he was busy buying judges and regulatory favor.  Okay, so we accept that the whole industry is corrupt and immoral - what is my answer?

Nationalize the entire industry. No compensation, no buyout - seize them wholesale on the basis of gross neglect of human rights, our environment and flagrant disregard of the law. They deserve no money for their property because the backlog of accumulated abuse will cost us billions to correct. Break the companies up into individual mine holdings that are owned 75% by the miners and 25% by the Government. Use the government’s share of profits to ensure proper remediation of the safety issues left unfixed over these decades of coal lords and king profit. These companies have been arrogantly disregarding regulation, law and morality for years. End it now.

This is 10 minutes that should help you decide should you be wavering Blankeship nightline Expose

Tuesday, April 6, 2010

Coal mine disaster and why the corporation will not suffer

Finally, all those years of watching crime based TV shows has paid off.  I was reading the news about the coal mine disaster in West Virgina and the fact that the mine has had 57 safety violations in just the last month.  They said it was infamous Massey Coal.  Then i saw a post calling it Peformance Coal Company. Then it hit me.  Remember, the first rule of setting up a criminal enterprise is make sure you have a fall guy ready in case something goes wrong.

The latest coal mine disaster is as familiar as all those that have come before it. It will be met with great dismay and sympathy by the American public, the coal corporation will suffer no meaningful penalty, and the final sad certainty is that the miners will return to equally unsafe mines as soon as the last funeral is over. They will return because they have no other choice. The miner workers are as close to serfs and it is possible to get. They are tied to the mines by poverty. They have to choose between two horns of the same dilemma. Unfair working conditions in the mines or crushing poverty outside of the mines. The coal companies have spent decades perfecting these methods and they show no signs of changing. 

This is a dismal situation and there is no quick answer to the fundamental injustice of paying people to put their lives at stake needlessly or watch their families starve. However, there is a solution to the coal companies avoiding the consequences of their greed over and over. That is to make the corporations pay for their violations and not hide behind a shield of corporate subsidiaries. They shuffle assets and cash in one company and liabilities and debt in another. Then allow the loser company to file bankruptcy. Voila – no debt, no fines, and no cost to correct the environmental disasters you create and heck if you’re really good, no reason to pay pensions you promised.

Massey energy and its numerous puppet corporations are experts at this shell game. Massey is one of the most blatant offenders in the coal industry. They almost take pride in their obstructionism to reform, breaking of unions and flaunting of regulations. The CEO of Massey told a CBS news crew that if they did not want to be shot they had better not take any pictures. But the best thing Massey energy has done is to learn how to play the subsidiary and spin off game. 

You may have heard this mine disaster as being at a Massey mine. But no, no it’s not really a Massey mine it belongs to one of their zombie subsidiaries –Performance Coal Company. The pattern goes something like this. Once a mine has operated long enough to need massive upgrades to maintain safety and environmental standards, the mine is spun off into an “independent” corporation. As long as the mine is profitable, the phony company can shift cash back to the mother corporation by dozens of ways – most perfectly legal. But, the minute there is a disaster, wham Massey? Who is Massey, we are Performance mining. Of course, the shadow company does not have deep pockets and so any fines or cleanup costs are simply swept away with a convenient bankruptcy. 

The same thing happens when the mine plays out and the company is facing the cost of cleaning up all the mess like it promised to do in its mining applications. Of course, they do not spend tens or even hundred millions of dollars to honor their legal obligations when a few million will get them a comfortable bankruptcy settlement. Massey and the coal industry are famous for this. But in truth, it is a common corporate trick. The phosphate mines of central Florida have done the same things over and over. Somehow all the dead mines, devastated land, and huge lakes of radioactive toxic sludge end up on the books of a minor corporation. The billions of dollars of profit however are safe in some offshore account with the major corporation de jour. 

I really don’t have the slightest hope that our corporate purchased legislature will do anything to fix this. But I wanted to explain it to anyone willing to listen. We live in a world of corporate corruption and it has real consequences. Not just the tops of 500 mountains blown away to maximize profit, not the valleys and streams choked with debris. Those are terrible irrevocable costs. But other costs abide, men blown to bits in shoddy mines and their families choked with grief and facing a life without income, without hope and without family. 

Living simply does not mean living blindly and this kind of economic injustice and wage slavery is increasing everyday in the great American meltdown.

Monday, April 5, 2010


“We didn’t see it coming”

Bull #$%#! - Greenspan, Bernanke and Geithner can try to sing that tune all they want but it won’t play. There are dozens of reasons they should have seen it coming. Not the least of which that we paid them billions because they are supposedly so smart something like this could never sneak up on them.  But now comes official, straight from the horse’s mouth proof that they were told and took no actions to stop it.

FBI warned banking and US Treasury officials about out of control mortgage fraud 4 years before the crash. The FBI stated in September 2004 that we were on the verge of an “epidemic” of mortgage fraud that could lead to a financial meltdown. Assistant FBI Director Chris Swecker told CNN that "We think we can prevent a problem that could have as much impact as the S&L crisis," Dozens of Federal agents were engaged in tracking the problem all over the US with particular trouble in California, Florida, and Nevada.

Ironically the FBI felt that the banks were cooperating with them. That was correct, unfortunately, it turned out that “them” was not the FBI, but the mortgage scammers. Banks made no effort to reign in insupportable loans because they needed them to feed the limitless appetite for mortgage backed securities. These securities were then bundled and resold over and over as prime investments.

Then came the day of reckoning and here we are today trillions of dollars in debt, up to 16 trillion in capital lost and 8.5 million jobs gone. The American meltdown is upon us – but not because we did not know. That is a blatant lie; this is the same group of financiers who have led us into crisis after crisis. Did they know it was likely to melt down – probably so. What is a certain fact is that they knew their men in congress would rescue them once again and they would end up profiting whether their crazy bets paid off or failed. Roulette is a win/win deal when you have the dealer paid off.

Saturday, April 3, 2010


I am terribly sorry to have to be one to tell you this - but, you're bankrupt. No, really, it's true, here let me explain it to you.

The median biweekly income in the US is $1,478. Hey do not complain - this salary includes the guys at the top if you are closer to the bottom like a retail worker, your average check would be barely $700. But that is another travesty and we cannot cover them all in one post. Also, of course, this is before taxes. Just for the sake of simplicity and to keep all the statistics equal we will pretend there are no taxes. Don’t get excited, it won’t keep you happy for long.

Now, let’s pretend it is a nice warm Friday. Not just any Friday but a payday. Awesome, you run to the bank to cash your check. You hand the payroll check over and wait for the cashier. While you are waiting for the check to be cashed you decide to open your mail. There is a pale gold envelope with the US government seals all over it. This must be important, so you rip it open. Yuk, It’s an invoice – holy cow - a bill for $116,599. It is your share of the national debt – due and payable.

What is the first thing you think? Well if you are the average american, you decide it must not be real. After all, that’s how we have treated most debt and certainly, the national debt. Haven’t our own leaders such said “deficits don’t matter’? It must be a mistake, some sort of joke. Well, of course it is not fake or a joke – it is very very real and not funny in the least. Unless you are one of those people who laugh at funerals. If you’re like me your thinking – Im done for – bankruptcy and ruin looms close. How did I get into this mess? How can I possibly pay this off.

The per taxpayer debt burden goes up by over $40 every single day of the week. No weekends off, no holidays. The fierce reality is the average american worker earns less than 106 dollar every day of the week. In other words every other Friday, when you cash your $1,478 paycheck you are another $556 in debt. Feeling better yet?

Now I can guarrantee you , that if these figures were presented to a financial advisor they would immediately advise you to file bankruptcy. This is real, this is truth, the United States is bankrupt and it is going to take you down with it. You may or may not be able to do anything to soften the crisis, but the meltdown is coming and its best to face it.
I am not going to go further with this post, because I want you to stay here with the stark reality that yes you do owe this money and believe me it is real. Not only do you owe this amount of money, but it is increasing by leaps and bounds every day.

Ok – I am done, return to your lives. But I would like for you to at least spend a few minutes every payday thinking of the situation we are in. If we face it realistically, we have a better chance of surviving the inevitable economic consequences to our nation and ourselves. I will provide any hope and any guidance I can find. Stay tuned.

NOTES – Following are the numbers and the method I used to prepare this post. All figures came from the US Government. First, you may notice that I often use the long numbers when talking about debt. I do so because we have become numb to the words billion and trillion and millions don’t even seem to count in todays crazy meltdown of common sense.

1) As of 10pm on April 2, 2010 the national debt is $12,690,026,571,814.
2) There are 138,584,486 people employed in the US.
3) However, many workers fall below the taxable threshold.
3) The number of taxpayers in the US is estimated at 108,834,743.
4) Now if you divide our national debt by the number of actual taxpayers you get a debt per taxpayer of a little over $116,599.

PS: in the time it took me to write this post another 9,865 people lost their job so that increases our share of the debt. Nor did I throw in the extra $1,480,635 the US government ran up in debt in the 29 seconds it took for me to copy down the number and verify it.

Welcome to the economic meltdown of the United States. Hang on, because this roller coaster hasn’t even crested the first rise yet. Keep all hands securely in the vehicle and hold on.

Friday, April 2, 2010

MONEY FOR NOTHING and your perks for free.

Why do we allow financial executives to drive us into disaster after disaster without any consequences at all?

Train operators get reviled and fired for being asleep on the job – but financial gurus get rewarded for it. This is one of the new realities in the American meltdown. It is like Orwell – “Error is Talent” “Most for the most” “Mistake is profit” God, you could go one all night doing this – let me get to the point.

In July of 2009, the Washington DC transit authority made it a one strike you’re out offense to be texting while on the job. Needless to say sleeping on the job will also get you fired instantly. Funny how that works. In fact, the lowly bank teller would also lose their job the second their employer found them asleep at the desk. (Perhaps exhausted from the night job they have to work to pay their bills.)

All those who toil for a living are held to a code of conduct - some stricter, some more lenient. But apparently, there are those for who conduct and consequences have no relationship what so ever. The mega elite executives who control our economy in between lattes and fraternity handshakes sit at their burly walnut desks untroubled by such mortal annoyances.

I speak specifically of the Wall Street geniuses who engineered the latest US financial meltdown. Actually, I question if they deserve the term engineer. Piling up a house of cards until it falls over is a favorite pastime time of cretins and the insane. It is not engineering – that takes talent.

Every time anyone ever questioned or questions their grotesquely inflated salaries, the answer is always “that’s what it takes to keep people of that talent with the company” My question is simple and to the point. What talent are they referring to? In my experience anyone can destroy things and most everyone is capable of stealing. For it is destroying the productive capacity of the real economy and stealing money from the working class that are the only outstanding talents I can identify in our Wall Street leaders.

Their leveraged buy outs and shell game investments cost the American economy over $8,500,000,000,000. They caused the loss of millions of jobs. Destroyed retirement plans and brought great businesses into ruin and bankruptcy.

This was the result of their “talent” and their genius for business. They were supposed to be the stewards of our finances. We paid them millions of dollars to manage their growth and ensure their safety. What did we get – operators asleep at the wheel.

But were they terminated on the spot. Did security hover over them as they stuffed their personal items into a Gucci briefcase and headed to the executive elevator? – no. Oh no, these guys ducked under a little cover for a while. Robert Rubin, one of the great cheerleaders for deregulation, told us “nobody saw this coming”. They did not have to stay under cover for long. A brief flurry of congressional hearings and it was over. Within weeks of the sight of free market warriors and champions of free enterprise and capitalism running to congress for socialist bailouts, everything was back to normal.

The executives had brought in more money through bailouts than they ever had through actual financial work. AIG received a bailout that equaled over 400 years of their annual profit. Goldman Sachs completed its takeover of every government department having to do with money. Goldman and Morgan Stanley also got crowned as “banks” and given the key to the Federal Reserve vaults for endless supplies of free money.

Oh and of course, let’s not forget the bonuses. Despite having created unprecedented losses all over the globe, our heroes got their bonuses. In fact, in a year where they nearly halved the nation’s wealth, they got bonuses just slightly less than the best year in history.

So this is how it works apparently. If you are found to be asleep at the wheel of a bus wearing a bright blue polyester jumper with your name on it –you are reviled and terminated. If however, you are found asleep at the wheel of the economy wearing a navy blue Italian serge suit with a designer label – then all is forgiven and you get a bonus.

This my friends, is why America is in the middle of a meltdown of historic proportions. I would not count on a smooth ride in the years to come. Unless, of course, you have a chauffeur.

Thursday, April 1, 2010


Well yea its a profit, umm if you don't really count the expenses, well and technically we generated the revenue by loaning them free money and then paying to borrow it back. Oh, and we exempted them from paying taxes. But hey, whoohoo, the Financial gurus say its good news and they are never wrong. Right?

The Wall Street Journal stated that the American taxpayer stands to make a tidy 8 billion dollar profit on the sale of the Citibank stock the government received during the great bail out. This is hilarious and I might add it shows that the level of intelligence that led us into this mess has not improved in the interim. There are two options – either the vast majority of financial professionals are congenital idiots or they are pathological liars. Either choice is bad and frankly I think both are possible. It is this sad combination of conspiracy and incompetence that has led to the American meltdown. But for the sake of internal logic within this posting, I will assume choice number one – idiocy.

First off let’s define profit – last time I looked it was the excess of income over expense. So, after we sell off our Citibank shares will we really earn 8 billion more than we spent? Of course, it is very hard to tell how much we spend in the first place to acquire the shares, the numbers are not compiled coherently and everyone reports differing amounts. The best number from the TARP people is that we tossed them 25 billion.

But this was just the cash we gave. It does not seem to include the value of guaranteeing 300 billion in bad assets for Citibank. We received 7 billion in stock for that that – seems like that’s a loss to me. Nor do we take into account that we have been tossing working cash to the banks at practically zero percent interest. Banks operate by renting money in at a low rate and then renting it out at a higher rate. The taxpayers let them borrow at 0 percent and then pay the bank almost 5 percent on US treasury bonds. That is a tidy 5 percent profit with no cost to them and no risk, 5 percent is very high rate of real return in historic terms, it is also requires no work. The trade is all between Citibank and the Federal Reserve. Therefore the economy receives no benefit – no houses are bought, no business loans made so no impact on the economy at large. The profits stay neatly under the thumb of the tight little group of board members that populate most of the biggest corporations in the world.

Oh and of course, we are going to pay one of the very institutions we bailed out to broker this deal. I wonder if Morgan Stanley will give us a discount rate for the 10 billion dollars they received. It just gets funnier and funnier.

But best yet – we will make (if we do) this 7 to 8 billion profit from the sale of stock we bought only after the cretins who run Citibank and their fellow financial “professionals” had driven their stock price down from over 50 dollars a share to less than 3$. In the meantime their shenanigans cost the America public over in market value as they whole stock market collapsed under the weight of their schemes losing over 1.2 trillion dollars in a single day, over 8.5 trillion in a year.

So to review, the same geniuses who got us into this mess are now telling us that we are going to make 8 billion on the sale of some stock we got from Citibank. Great return, all it cost us was:

1) Paying 25,000,000,000 dollars in upfront cash

2) Unlimited free money to them which we borrow back at over 4% a year

3) Backing every stupid investment the banks made with our check book

4) Losing 8,500,000,000,000 dollars in 2008 so that in 2010 we could sell some stock at an 8,000,000,000 profit. (Seems like we dropped off three whole zeros in the process, but who's counting.)

As far as I can see the Wall Street Journal’s statement works like this. (I will drop off 9 zeros so the numbers can be grasped by us poor slobs.) You go into a casino and start jumping for joy when you hit an $8 jackpot on the nickel slots. This is great as long as you ignore the $25 cover fee to get in the casino or that you just lost $8,500 on the blackjack table. Oh and don’t forget you have to tip the staff for the privilege of giving them your money. Then there is the Taxman to talk to.

Oh hell, I forgot, the US government also gave Citibank and several others billions in tax exemptions. Of course, the government is not reducing spending it is increasing it to bail out more corporations. So if the banks don’t pay any taxes, then it’s up to us to pay the difference. Wow, this isn’t any fun anymore.