A world leader

Stephen Walt has an interesting take on the subject of just how far America should go in its role as a world leader.

This demand that the United States constantly "lead from the front" also makes it easier for other states to drag us into their quarrels. Georgia tried to sucker us into its dispute with Russia a few years ago (and if McCain had been in charge, it would have succeeded), and Israel is still trying to get America to bomb Iran on its behalf. Countries like Vietnam and the Philippines are trying to push the United States to confront China over issues like the South China Sea, and everybody seems to think the United States should "do something" about Syria. Perhaps we should, but first you need to explain why doing any of these things will make Americans safer or more prosperous here at home, and then you need to convince me that the countries who have a lot more at stake aren't up to the task. And if some other country wants me to spend American money and risk American lives, they'd better have a lot of skin in the game, too. Finally, if weaker countries want to demand my protection, they'd better be willing to follow my advice on other issues. Otherwise, they're on their own. 

This favorable geopolitical position is an enormous asset; it means that other states tend to worry more about each other than they do about us, and it means many countries will remain eager for U.S. support. Which in turn allows Washington to "play hard to get," and extract lots of concessions from others in exchange for our help. Those who pompously insist that America must always take the lead are throwing this diplomatic asset out the window, and guaranteeing that other states will take advantage of us instead of the other way around. And it should enable us to spend a lot less on national security, thereby easing our budget problems and allowing investments that will ensure our long-term productivity.  

The Golden Kitty

“Henri 2, Paw de Deux” won the first Golden Kitty award given at the Cat Video Festival in Minneapolis.

Simple is better

Nicholas Brady, Treasury Secretary under Reagan and Bush I, prefers simplicity rather than complexity in financial matters.  He thinks regulation would be firmer if the regulations were simple, rather than complex.  In his view, the banking business has changed dramatically in the 21st century.  Most banks now rely on complicated computer models and arcane algorithms to make money.

What the banks don't acknowledge is that the models are based on assumptions about human behavior.  And you know what they say about assumptions (they make an ass out of u and me).  Furthermore, these algorithms are written by human beings.  In forty plus years in the software business, I never saw a perfect algorithm.  People are fallible.  People make mistakes.  You don't want them making mistakes that can bring down an economy.

Brady does not have a new idea as to regulation.  He just wants to keep it simple.  Leverage is his answer and the answer of more and more smart people.  High leverage results in high risk, lower leverage lowers risk.  And leverage is something that can be easily defined by regulators and the finance industry.

Have you no sense of decency, sir?

That's a famous quote of Joseph Welch, the Boston lawyer who, by asking that question, sank Senator McCarthy, who for several years had been spewing venom and lies about Communists in government back in the prehistoric days of the 1950s. I hope that at some point someone like Welch will make us realize that the candidates for our highest offices will lie just as soon as they will speak the truth. Clearly, the Republicans have shown that these past few days and I strongly suspect the Democrats will do the same thing at their convention. 

I was not blessed with the gift of faith. I guess that's why I find it so hard to understand why people would vote for someone who promises the moon but has no plan for achieving that promise. I recognize that most of us vote for the lesser of two evils, but it would be nice if one of those evils actually had a plan and actually cared for the citizens of this country much more than they wanted to win an election.

Caballe sings Puccini

Who is being prosecuted?

Citicorp shelled out $590,000,000 to settle a class-action lawsuit brought by shareholders who contended that they had been misled about the bank’s exposure to subprime mortgage debt on the eve of the financial crisis.  Last year the bank paid $360,000,000 to resolve civil mortgage securities cases brought by federal regulators.  In 2010 the bank paid $75,000,000 to settle a SEC complaint that the bank made misleading public statements about the extent of its subprime exposure.  How much will it be next year?

These crimes were not committed by a computer.  Why is no one being charged?

They can't build bridges very well

Since July of 2011 six major bridges have collapsed in China.  The latest shown below cost $300,000,000.  This bridge had been in operation only ten months but apparently could not stand the weight of four trucks.  Three people have died.  The official Chinese news agency attributes the collapses to shoddy construction and overloading.

Overly Pessimistic?

Robert Gordon, an economist from Northwestern, questions whether our economic growth is over.  He does so from an interesting perspective: looking at the industrial revolutions.  Yes, that is the plural of revolution, as Gordon thinks we've had three.  The first, from 1750 to 1830, brought steam and the railroads.  The second, from 1870 to 1900, gave us electricity, the internal combustion engine, running water, indoor toilets, communications, entertainment, chemicals, petroleum. The third began in 1960 and produced computers, the web, mobile phones.

Gordon then moves on to estimate the productivity growth from these revolutions once the spin-off inventions had run their course.  He concludes that the productivity growth from the second revolution lasted from 1972 to 1996.  That from the third was much shorter, from 1996 to 2004.

Gordon's next point concerns the most powerful of the revolutions, the second.  Many of the original and spin-off inventions of this revolution could happen only once – urbanization, transportation speed, the freedom of females from the drudgery of carrying tons of water per year, and the role of central heating and air conditioning in achieving a year-round constant temperature.

His view of a future revolution is clouded by what he sees as very difficult obstacles:  demography, education, inequality, globalization, energy/environment, and the overhang of consumer and government debt. 

What do you think?  Is Gordon overly pessimistic?

Why the secrets?

In June I wrote about the Trans-Pacific Partnership (TPP) and passed along a severe criticism of the pact by Leo Hindery.  Another smart guy, Dean Baker, has picked up the hammer and inveighed against the pact. 

One wrinkle he adds to the debate is the secrecy relative to the negotiations about the pact.  For some reason - probably to protect large corporations - these negotiations are considered virtually top secret.  Not even congressional committees involved in the issues being negotiated are in the loop.  However, the in guys at some major corporations know what is being discussed.

What has slipped out does not sound good.  The implications are that these negotiations will really benefit the entertainment and pharmaceutical industries.  Plus, the idea of our being a sovereign nation will likely be diminished as the rules TPP creates would override domestic laws on the environment, workplace safety, and investment.

Why has there been zero mention of this in the campaigns?

Forever Enduring Always Ready or FEAR

That's the name of the latest terrorist group. This is a hometown group comprised of soldiers stationed at Fort Stewart in Georgia. They are being tried for murdering one of their former members and his girl friend. In investigating the murders, the police discovered the group. They killed their comrade because they thought he would tell on them. 

The charges are malice murder, felony murder, criminal gang activity, aggravated assault and using a firearm while committing a felony.  The group was funded by the proceeds from an insurance policy on the leader's pregnant wife.  The $500,000 proceeds enabled them to buy $87,000 worth of weapons and bomb components.  (It does seem odd that a 19-year-old would insure his wife for that kind of money.)

FEAR was thinking big:  taking over Fort Stewart, bombing a Savannah fountain, bombing a dam in Washington, poisoning the state's apple crop.  Their ultimate goal was to overthrow the government and assassinate the president.

Prostheses for Dogs

Truth from George Eliot

The egoism which enters into our theories does not affect their sincerity; rather, the more our egoism is satisfied, the more robust is our belief.

George Eliot (1819-1880)

A Pea Grows in Sveden

That's 'Sveden' as in Ron Sveden.  A pea plant was removed from Mr. Sveden's lung earlier this month. 

Mr. Sveden, a 75-year old lifelong smoker, was just about convinced he had lung cancer.  But, after several hypotheses proved wrong, a biopsy showed the one-and-a-half inch long pea plant growing in one of his lungs.  Sveden and his doctors believe that while eating peas, one went into his windpipe, lodged to his lungs and began sprouting. 

We're #1

Last year was a record year for U.S. arms dealers, sales tripled over the previous year.  We sold $66.3 billion last year, or more than three-quarters of global sales of $85.3 billion.  Our closest competitor was Russia with $4.8 billion.  China came in third. 

      

 

 Our sales have been made mainly to Persian Gulf states, such as Saudi Arabia, which are worried about Iran.  China's sales have been made largely in South Africa to countries which are under U.N. arms sanctions.

Not a good defense of megabanks

Earlier this week, William Harrison, former CEO of JP Morgan, wrote a defense of big banks in the NY Times.  I hadn't seen any comments on it until today when Simon Johnson takes the article apart. 

Harrison has six arguments in favor of the banks, Johnson rebuts each of them.

1. Harrison claims that the banks have grown because that's what consumers want.  Johnson feels lobbying by the banks was a large factor in the megabanks growth. 
2. In Harrison's view their size enables the megabanks to provide unique services.  Johnson cites sources that assert that there are no economies of scale or scope in banks with over $100 billion of total assets.
3. In a truly outlandish claim Harrison asserts that “large global institutions have often proved more resilient than others because their diversified business model ensures that losses in one part of the enterprise can be cushioned by revenues in other parts.”  Johnson believes that Harrison's memory must be faulty as Citigroup and B of A would have failed without the bailouts.
4. Another wild claim by Harrison:  megabanks don't receive special government subsidies.   Johnson asks what about the lower costs of capital because of government support of TBIF.
5. And one more wild Harrison claim “complexity can be an antidote to risk, rather than a cause of it”.  Tell that to Jamie Dimon.
6. Finally,  Mr. Harrison claims regulators are not cowed by banks.  Would Tim Geithner or Sheila Bair agree?

The Middle Class in the 21st Century

Another shooting

Today it's at the Empire State building.  Two are dead as of now.  Many have been shot.

What will it take to have meaningful gun control in our country?

An unbelievable story

I've just finished reading an amazing article in Truthout. It alleges that Sunny Sheu, a homeowner from Queens, was murdered by a judge working through the NYC Police. The murder was the end of a 10-year struggle by Mr. Sheu to reclaim his house that had been fraudently taken from him. 

The authors accuse a long list of those who they feel could have prevented the murder: 

Centex Home Equities
Old Republic Title Insurer
The Honorable Joseph Golia
The NYPD
NYPD Internal Affairs
The Civilian Complaint Review Board 
The FBI
The New York Office of Court Administration
The New York Commission on Judicial Conduct (Robert Tembeckjian)
Special Commission on Judicial Compensation
The New York Senate Judiciary Committee
New York State Sen. Eric Adams
New York State Sen. John Sampson
New York Attorney General Eric Schneiderman
New York Gov. David Paterson
New York City Mayor Michael Bloomberg
Queens DA Richard Brown
Dr. Zasheen Ahmed
The New York Hospital of Queens  

It is a truly scary article.  The case has not been picked up by the mass media.  Clearly, one has to question the validity of the article.  I would think if the allegations made - particularly those made against the judge, the police department and the DA,s office - were false, the authors of the article would have been sued.  

This is another example of how low we have sunk.

Lobbying pays off once more

This time it paid off for the money market funds.  The SEC chair, Mary Schapiro, wanted them to stop pretending they are as solid as banks.  The failure of Reserve Primary Fund in 2008 sparked a $300 billion run on money market funds which aggravated the financial conditions of that troublesome time.  Of course, we bailed them out then and everything is just fine without any new rules.

One of the new rules would require the funds to reflect the real world and stop pricing their shares at a stable $1 value. Another would require the funds to put aside an insurance buffer of capital that could be used to absorb losses.   A third would prevent investors from withdrawing their money immediately. 

The industry objected to any of the new rules.  The board of the SEC agreed with Fidelity etal.  It was a close vote, 3-2, with one Democrat voting with the Republican board members.  It so happens that the Democrat had previously served as general counsel, executive vice president and corporate secretary of the investment firm Invesco.  He felt that the SEC had not studied the issue enough, although discussions have been ongoing for two-and-a-half years.

Where do these people come from?

Today is a typical day in this election season.

First we have a hurricane expert: “The National Hurricane Center is Obama.  The National Weather Service is part of the Commerce Department. It is Obama.  You know what it is in the media, it’s all about the hurricane hitting next week and they’re not talking about Biden.  They are talking about this Hurricane Isaac thing. We, who live in south Florida, become experts on it and we don’t need the National Hurricane Center — we don’t need all these weather dolts analyzing this for us.” The hurricane expert is Rush Limbaugh.

Tom Head, a judge in Texas: “He’s (Obama) going to try to hand over the sovereignty of the United States to the U.N., and what is going to happen when that happens?  I’m thinking the worst.  Civil unrest, civil disobedience, civil war maybe. And we’re not just talking a few riots here and demonstrations, we’re talking Lexington, Concord, take up arms and get rid of the guy. Now what’s going to happen if we do that? If the public decides to do that? He’s going to send in U.N. troops.”

Frank Szabo, a candidate for sheriff in New Hampshire:  said Wednesday that he would be willing to use deadly force to prevent a woman from terminating her pregnancy.  “I would respond specifically by saying that if someone is under threat, a full-grown human being, if they’re under threat, what should the sheriff do? Everything in their power to prevent them from being harmed.  Why is there a difference between someone who is 20 years old and their life is in danger and someone who is nine months in utero?” 

Why don't we emulate sane countries and cut the electioneering period back from being perpetual?  It would at least cut down on the number of inanities we have to listen to.

What happened to General Ward?

He was the first leader of US Africa Command, one of only six commands.  Prior to his selection in 2007, he had an exemplary Army record.  He's worked all over the world at a wide variety of tasks and he must have done a good job to be picked as commander of Africom.  However, while he was in charge of Africom he went wild spending money, far above his budget.  Here are some of his 'excursions' according to the Daily Mail:

• $129,000 on an 11-day trip to Washington with his wife and 13 staff where he only had short engagements on the first three days of the trip. The cost covers the hotel and 'other' costs such as transportation

• $10,000 on hotels rooms for himself and staff during a 'refueling stop' in Bermuda on the way to an engagement in Germany. He and his wife stayed in a $750 suite. The bill does not include transport or other costs
• $18,500 on producing and publishing 2,000 books about the Command's plush residence in Germany and its first three years of work
• One staffer stayed in the Ritz Carlton Hotel in McLean, Virginia for 49 consecutive nights in early 2010 - even though Ward was in the area for just 18 of the nights
• Use of government-rented vehicles to run errands including collecting flowers, books, football game tickets and snacks 
• Dinner and a Broadway show - paid for by a government contractor - before meeting Denzel Washington and staying in the five-star Waldorf Astoria HotelWife joined him on 52 of his 79 trips even though she had no official capacity
• Ward also set officials meetings after being refused the use of military aircraft for personal travel.

 

He was a 4-star general.  He no longer is.

A Mixed Day

Today I attended the funeral of one of my nephews.  He was 59, the victim of a rare, punishing and painful disease.  He lived a good life but died a tough death.  The older I get the more I believe that a sudden death is better for the survivors than an extended period of a slow death.

My nephew was a staunch Catholic, so I thought I was prepared for the Requiem Mass, particularly since I've been to a few in recent months.  This was a different Mass.  There were the traditional hymns I had expected, however, there were three songs I did not expect in a Catholic church.  Two were what I was raised to believe were "Protestant' hymns: Morning Has Broken and Amazing Grace.  The third was the Beatles "Let It Be". Perhaps these songs were played because the church was relatively new, or so it seemed to me at least.  Or because it was located in a small town and right next door to the Congregational church. 

The nice part of the day was driving through rural Massachusetts.  The weather was gorgeous.  The traffic light.  The main streets fairly quiet, but people were doing their business. And I was listening to a wonderful compendium of Rogers and Hart songs.

The Summer Is Not Over

ProPublica has an excellent summary of this summer's banking scandals.  I've written about several: Libor, money laundering, JPMorgan.  I did miss two: Wells Fargo and Capital One.

Wells Fargo cheated black people to whom they granted a mortgage; they charged them more than white people.  Capital One had two failures this season.  They tried to boost revenues by pressuring their cardholders to buy unnecessary features and charged them a lot for these features.  The bank also violated the law by foreclosing on servicemen.

21st Century Entertainment

Pretending your killing Osama Bin Laden is one form of entertainment these days.  And you can do it for only a few hundred dollars in New Hope, MN.  A retired Seal, Larry Yatch, has started a business called Sealed Mindset Firearms Studio, the function of which is to empower the mild-mannered and the meek by teaching them how to kill people, assuming, of course, you have the equipment of a Navy Seal.  The studio offers a range of classes "To enable any individual to take control of his or her own personal safety with awareness, self defense or firearms training classes. We are about helping people learn how to keep themselves and their families safe while having a fun experience!"

It's featured attraction is simulating the killing of Bin Laden.  Yatch has built a replica of Osama's Pakistan home.  It is there that you can enjoy the killing.  Business is decent; in four months 137 people have participated in the killing.  That's about $43,000 of revenue.

Where are the real auditors?

The Public Company Accounting Oversight Board has issued its first report about the audits of brokerage firms.   Perhaps, the most common phrase in the report is "did not perform sufficient procedures".  Basically, the auditors did very little auditing. It's true the board did not look at many audits, only 23.  But it is pretty clear that the auditors flunked.  One of the primary jobs of these auditors was to ensure that consumers were protected.  They did not do a good job here.

Who wrote the autopsy report?

The autopsy report in the case of Chavis Carter, who allegedly committed suicide while handcuffed by the police, supports the police claim that Carter committed suicide.  The conclusion of the report - “He was cuffed and placed into a police car, where apparently he produced a weapon, and despite being handcuffed, shot himself in the head.”- could have been written by the police, rather than the medical examiner.  We'll never know what the truth is, but the case does not reflect favorably on the police.

You have to wonder

Is The Guardian an anti-Muslim newspaper?  I don't think so, but in the world in which we live you have to wonder, as the newspaper describes some actions Muslims are bringing against Christians in Pakistan.  The catalyst for these actions is the arrest of an 11-year-old Christian girl for blasphemy because she supposedly burned a portion of the Koran.  If convicted, she may be executed.

The article goes on to describe other anti-Christian actions ascribed to Muslims:

• 900 Christians living on the outskirts of Islamabad have been ordered to leave a neighborhood where they have lived for almost two decades.
• Shopkeepers have refused to serve their Christian neighbors or supply them with water.  
• Complaints were made about the noise coming from three churches in the area during religious services. Two of the landlords who owned the buildings had already ordered an end to worship and some services were forcibly broken up.
• A Christian couple was sentenced to 25 years in 2010 after being accused of touching the Qur'an with unwashed hands.
• Christians have been killed by lynch mobs demanding instant punishment.

You have to wonder how these actions could be performed by anyone who claims to be a follower of God..
 

Another brilliant candidate

This guy wants to be a senator from Missouri.

"This is robo-signing redux."

So says Peter Holland, a lawyer who runs the Consumer Protection Clinic at the University of Maryland Francis King Carey School of Law.  Noach Dear, a civil court judge in Brooklyn, adds “I would say that roughly 90 percent of the credit card lawsuits are flawed and can’t prove the person owes the debt.”

It looks like the banks are using the same processes to collect credit card debt as they did with mortgage debt:  file suits which rely on erroneous documents, incomplete records and generic testimony from witnesses.  And they are winning many cases as the debtors often do not show up in court.

The current state of financial regulation

You recall that the latest banking scandal concerns Standard Chartered Bank, an English bank that has been clandestinely violating our sanctions against Iran and others for 10 years or more.  It was finally called to task by the New York State Department of Financial Services and paid a fine of $340,000,000 quite quickly.  (However, as is typical with just about all these financial crimes, no one will go to jail for the crime.)

What was the reaction of the UK authorities?  They complained “that the sudden move could have damaged the stability of the bank and that the lack of advance notice breached long-standing protocol among bank regulators.”  Never mind that the bank violated the law.  Never mind that the UK authorities did nothing about the bank.  Never mind that our federal government did nothing.  Who do the UK financial authorities work for?  I should have asked who should they work for.

Talk before fighting

Nicholas Burns, former diplomat, offers an approach to the Iran situation.  He acknowledges that the approach, which is diplomacy, may fail, but, as a civilized nation, we must first try it.  There are three parts to his approach:

• Bi-lateral - the US and Iran - talks.  We haven't talked like that since before the hostage crisis.
• We must be ready to "permit Iran civil nuclear power but deny it a nuclear weapon."
• We, not Israel, must be in charge of the negotiations.

Makes sense to me.

Black on Goldman and Justice

You be the judge

Did Chavis Carter commit suicide while handcuffed? That's what the Jonesboro, Arkansas police try to prove in this video.

Questions remain. Were the handcuffs put on Carter in the same way? How could the police have missed a gun after searching him twice? Why would Carter have killed himself?

Less than Chernobyl

A study of 9,500 people living near Fukushima has found very little radioactivity in their bodies.  It's true that this is a preliminary study and not as scientifically controlled as one would like, but it does offer hope to those affected.

Another stupid proposal

One of the most successful businessmen who became president was Herbert Hoover. One of the least successful was Abraham Lincoln.

The biggest one so far

What do you suppose is that long thing on the table? It's a Burmese python weighing 164½ pounds, measured at 17 feet, 7 inches long and pregnant with 87 eggs.  It's the largest one caught in Florida thus far.  But it's by no means the first one.  The state has been trying to get rid of them for a while now but does not seem to be making much progress,  It's estimated that there are tens of thousands of the pythons having fun in the Everglades - and sometimes in people's pools.

I'm not the only one who finds it assinine

A couple of weeks ago I wrote about the upcoming reality show "Stars Earn Stripes".  Now we have a group of Nobel Prize winners, including Desmond Tutu, who are urging NBC to cancel the show.  This is part of what they say:

“It is our belief that this program pays homage to no one anywhere and continues and expands on an inglorious tradition of glorifying war and armed violence. Military training is not to be compared, subtly or otherwise, with athletic competition by showing commercials throughout the Olympics. Preparing for war is neither amusing nor entertaining.”

Perhaps NBC welcomes the publicity.

Murder in Arkansas?

Helping Homeowners and the Economy

In the 1930s we established the Home Owners Loan Corporation to refinance home loans that were approaching foreclosure.  The program helped over 1,000,000 homeowners to avoid foreclosure and it also made a few dollars over its lifetime (1933 - 1951).  Senator Jeff Merkley of Oregon has proposed a similar program to tackle our current real estate problems.  

Merkley has introduced Rebuilding Homeownership,  a government-financed trust to buy the mortgages of homeowners who are current on their existing mortgage and who meet "ordinary underwriting criteria".  Significantly, the program is aimed at those who do not have a government-backed mortgage and there are millions of these homeowners.  Those in this category would be eligible for new mortgage rates reflective of today's low rates.  There would be a 2% spread between the rates borrowers and the Treasury would pay.

Arctic ice is decreasing

CryoSat is a satellite built to study the thickness of the Earth's polar caps.  The first results from the satellite are disturbing.  The volume of ice in the Arctic is disappearing at a much faster rate than formerly thought.  

It seems as though summer ice is disappearing faster than winter ice.  In 2004 there was about 13,000 cubic kilometres of sea ice in the Arctic. In 2012, there is 7,000 cubic kilometres, almost half the figure eight years ago. If the current annual loss of around 900 cubic kilometres continues, summer ice coverage could disappear in about a decade in the Arctic.  And the ice is getting thinner. 

While the results are preliminary and may change, if the change holds, then ocean temperatures will rise and methane deposits on the ocean floor could melt, evaporate and bubble into the atmosphere.

Why not lease?

“People don’t buy gas stations. People don’t buy utilities. Why are we having them buy solar equipment?”  That's an interesting question raised by Lyndon Rive, who has a strong financial interest in solar power.  It's also a question that makes a lot of sense to those who don't have the thousands of dollars needed to install solar power in their homes.

Over the past few years the question is being answered by solar power companies providing long term leases or payment plans to home owners and others who recognize the value of renewable energy.  Five years ago, third-party-owned systems accounted for none of the residential solar market. In the first quarter of 2012, according to the Solar Energy Industries Association, 63 percent of new solar systems in California were third-party-owned, and in Colorado, that number was as high as 80 percent.  This new way of financing solar power is a major factor in the growth of revenue in the global solar-energy industry $17 billion in 2007 to $93 billion in 2011.  There is a strong market in providing this type of financing.

It is estimated that enough sunlight falls on the earth’s surface every hour to meet the entire world’s energy needs for one year.  Imagine where will be if we can make the switch over the next 50 or so years.

Bedmates

Travis, the chimp above, was 'adopted' by Sandra Herold in 1995.  Herold loved Travis so much that the chimp slept with her and her husband even when it had grown up and weighed 200 pounds.  Travis was apparently a rather unique chimp as, according to  Herold, he ate steak and lobster, drank wine from stemmed glasses, watched TV, used a computer and traveled to work with her.  

Travis has been in the news since February 2009 when he just about tore off the face of a woman whose primary job was taking care of Travis.  The woman is suing the estate of Herold and is also trying to sue the state, which, she claims, should have removed Travis from Herold's home.

And so it ends

Back in January, as part of the PR re the State of the Union, Obama announced the formation of the Residential Mortgage-Backed Securities Working Group.  The function of this new group in the president's words: “This new unit will hold accountable those who broke the law, speed assistance to homeowners and help turn the page on an era of recklessness that hurt so many Americans.”

Seven months later the SEC and DOJ have decided that they do not have a case re Goldman Sachs.   I guess Goldman did not break the law.  Perhaps Obama will buy that bridge I've been trying to sell.

What a contrast between our governments re the Savings & Loan scandal, the Great Depression and the Great Recession.  Could Vermin Supreme be worse than Obama or Romney?

Dear Ben

Senators Sherrod Brown and David Vitter wrote a powerful letter to Bernanke this week. As with any good marketing letter, they make the basic point right up front:

We urge you to revisit your proposed rule and modify it so that megabanks fund themselves with proportionately more loss-absorbing capital per dollar of assets than smaller regional or community banks. The surcharge on the megabanks should be high enough that it will either incent them to become smaller or will help to ensure they can weather the next crisis without another taxpayer bailout.

Enough said.

Time is getting shorter

James Hansen of NASA escalates his warnings.

Is this the nuttiest presidential campaign ever?

Without a doubt!

This morning I went to Raw Story (which is a little nuts on the liberal side) and here's what I saw.  Gingrich is reported as saying that Rep. Michele Bachmann (R-MN) was not wrong to accuse a top State Department aide of being an Islamic infiltrator because “behind McCarthyism there were real spies.”  An author named  Jerome Corsi said there was evidence that President Barack Obama was married to another man before he married Michelle. Then, a true star of the legislature, Rep. Steve King (R-IA), a favorite among tea party Republicans, told an audience on Tuesday that he would like to introduce a bill that, once enacted, would nullify every single law President Barack Obama has signed over the last three years.

Vermin Supreme is  looking more normal every day.

How independent are the auditors of today's banks?

If you believe an article by Francine McKenna in Forbes, you'd have to answer "not very".  

If you read the article, you are very likely to believe it.  McKenna focuses on Deloitte, which was chosen as the independent consultant to review that Standard Chartered was adopting sound Bank Secrecy Act/Anti-Money Laundering practices with respect to foreign bank correspondent accounts.  This was back in 2004 when apparently the bank was first caught violating the law.  It looks as though Deloitte was not very independent.  For example, New York authorities report that, in August and September 2005, Deloitte “unlawfully gave [Standard Chartered Bank] confidential historical transaction review reports that it had prepared for two other major foreign banking clients that were under investigation for OFAC violations and money laundering activities.”

  

McKenna believes that "before long Deloitte had morphed from “independent” consultant, in service to the regulators, to “service provider”. As a “service provider” Deloitte apparently aided and abetted the bank’s continued illegal activities by sharing confidential information about other clients’ similar illegal activities and “watering down” reports to the regulators". And then Deloitte is also involved with HSBC, another scammer.

Not exactly an article to pick up one's spirits.

A Banana Republic

That's what Barry Ritholz thinks we have become.  He has a wonderful riff on New York state's charges against Standard Chartered Bank.  Ritholz has given up on federal regulators - except the FDIC - of the finance industry and is hoping that more states will follow the lead of New York.

Monitoring Flight Schools

9/11 made it obvious that we had to better monitor foreigners who were attending flight schools in this country.  And there are a lot of them.   From January 2006 through September 2011, more than 25,000 foreign nationals had applied for Federal Aviation Administration (FAA) airman certificates (pilot’s licenses), indicating they had completed flight training.  We don't know how many had learned something about flying (like not being interested in learning how to land a plane) but did not apply for a pilot's license.

We established a program (the Alien Flight Student Program (AFSP)) to vet foreign flight student applicants.  But, the GAO found this program to be wanting.   The Transportation Safety Agency (TSA) and Immigration and Customs (ICE) have devised a procedure to improve vetting.  However, the procedure has a few problems: it does not specify desired outcomes and time frames, or assign individuals with responsibility for fully instituting the program. Basically, it has a plan but no way to implement it or measure its effectiveness.

More worries about electricity

Last week I wrote about the massive power failures in India and questioned whether we were investing enough in our electricity infrastructure.  The GAO is concerned about cybersecurity in the electric industry.  In its most recent study of the matter, the following disturbing conclusions were made:

• A lack of a coordinated approach to monitor industry compliance with voluntary standards.
• Aspects of the current regulatory environment made it difficult to ensure the cybersecurity of smart grid systems.
• A focus by utilities on regulatory compliance instead of comprehensive security.
• A lack of security features consistently built into smart grid systems.
• The electricity industry did not have an effective mechanism for sharing information on cybersecurity and other issues.
• The electricity industry did not have metrics for evaluating cybersecurity.

Barofsky vs, Geithner

I have no idea what round this is, but Barofsky goes after Geithner once more, this time for Tim's reaction to DeMarco's refusal to place homeowners above Fannie and Freddie.   Barofsky argues that Barack and Tim have "never prioritized coming up with an effective approach to helping homeowners and reviving the housing market, even when it had a multi-hundred-billion-dollar TARP war chest at its disposal".

Tim, in Neil's view, preferred to help the banks rather than the people.He ends his article with the following:

Geithner wrote this week to Demarco: “You have the power to help more struggling homeowners and help heal the remaining damage from the housing crisis.” If only he had heeded his own advice.

Still not competitive

How can it be that the country that invented the Internet is ranked 16th in the world in broadband penetration, speed and price?  But that is reality.

The really difficult thing to accept is that the reason for our being second-rate in the world of the Internet is because our Internet providers have managed to snuff out competition.  Most of us have really only one cable provider.  Sure, there is DSL and satellite, but are they really competitive?

August 6, 1945

Most of us alive today don't remember that day.  But it was a day that changed the world.  On that day we dropped the atomic bomb on Hiroshima.  67 years later we are still the only country to detonate an atomic bomb.  Perhaps the justification Truman used was the right one - it saved the lives of many Americans who would have died in an invasion of Japan.   We'll never know if he was right.  

We who were alive on that day felt - and, I think, still feel - that particular war was justified. We did some evil things, but sometimes one has to.  There are very,very few of us who leave this earth without having committed evil.  We hope that the good we do more than equals the evil.

It was a lot easier to justify that war than all of our wars since - Korea, Vietnam, Iraq, Afghanistan and all the minor conflicts we have forgotten.  Have we learned something?  I'd like to think so.  But, when one looks around at drone wars, at the insanity proposed by some of our leaders re Iran, at the futility of our actions in Afghanistan, at our glorification of the military, one has to wonder.

What's with the London banks?

First, it was Barclay's with the Libor scandal.  Then, it was HSBC with money laundering.  Today's London bank is Standard Chartered.  It has been accused by the New York State Department of Financial Services of giving Iran and other countries the opportunity to violate our sanctions.  The department claims that through the bank's efforts from 2001 through 2010 Iranian banks and corporations were able to hide about 60,000 transactions worth at least $250 billion within the bank.

Further, the department asserts that top management of the bank knew about it.  In fact, they even published a procedures manual, “Quality Operating Procedure Iranian Bank Processing,” explaining how to violate the sanctions.

Another Surprise

In May I learned about Group Zero, an organization working to eliminate nuclear weapons here on earth.  Surprisingly, two former generals play a major role in the organization.  Now, we learn that an active general supports reducing our nuclear stockpile.  And, the active general happens to be General Norton A. Schwartz, chief of staff of the Air Force.  "We have more backup systems in terms of weapons systems than we actually have deployed.  Some of that is a reasonable hedge [but] there is probably room for reductions,’’  Schwartz said recently.

We are spending billions to maintain weapons that were built decades ago.  It costs us money to upgrade these weapons so that they continue to be reliable  And, of course we spend more money to prevent vandalism and theft.   

Isn't the Pentagon looking for places to save money?

Maybe our parents knew more than we thought

A weekend wedding in Vermont brought back memories of my father and mother, who have been dead for 30+ years.

It was the music at the reception that brought back my father's distaste for the music I loved.  He was an opera buff and a lover of hymns.  He couldn't understand how I could like jazz and some of the popular music of the day.  To him that was not music, it was just noise.  I had the same reaction listening to the music of Michael Jackson etal, the pop stars of the '80s.  Like me, the dancers, who hardly ever left the dance floor, could not understand my reaction.  They loved it and had a great time.  

When I complained about some situations - perhaps, listening to a bore pontificate or not being able to quiet my child - my mother, who was quite religious, would say, "Offer it up for the poor souls in purgatory."  I followed her advice on the ride home when I had to listen for 1.5 hours to Connie Francis.

Maybe my kids will have a similar reaction to some of my sayings when I am long gone.

Talk About Assinine Reality Shows

In general, I don't watch reality shows.  In fact, mostly I watch movies.  But Stephen Walt has identified an upcoming reality show that I find virtually unbelievable.  I can't understand how the producers got the money to fund it.  I gather that NBC is having tough times so they are probably desperate and willing to try anything.  And I guess the host, General Wesley Clark, must need the money.

The show is called "Stars Earn Stripes" and follows very minor celebrities going through military training.  Walt doesn't lambaste the show because it is idiotic.  Here are his basic complaints:

For starters, war is a serious business in which real human beings die. It's not a sporting competition to be conducted for our amusement. 

Turning military training into a tawdry reality show obliterates the moral significance of violent conflict and invites us to pretend that it's all some sort of game.

Finally, this new show must be seen as yet another manifestation of the uncritical deference to all things military that gets in the way of an intelligent national security policy. Don't get me wrong: I support a strong national defense and I am grateful for the sacrifices that real soldiers and sailors make on our behalf. But based on the promo I saw last night, this silly show portrays military service as the acme of human achievement, as the most demanding set of skills that these minor celebrities could aspire to master. As such, it subtly contributes to the idea that people in uniform are the greatest Americans, which in turn reinforces the belief that shoveling more and more money at the Pentagon is the best way to make Americans safer and more prosperous. 

Talking Points re Defense Budget

With all the recent hullabaloo about what sequestration will do to people's jobs, POGO has produced a briefing paper which counters the arguments McCain, Graham and company are making for the defense contractors.  Here are POGO's major points, details are available here.

• Pentagon contractors are making record earnings.
• Even under the deepest cuts—the unlikely budget sequestration—Pentagon contractors have huge revenue streams for years to come.
• If Pentagon contractors need to tighten their belts, they should start at the top. Contractor executive pay is out of sight, on par with Wall Street execs. 
• There is plenty of fat to cut in mismanagement and waste by big defense contractors.
• Defense contractors should cut their massive spending on lobbying and campaign contributions before layoffs.
• Even if the deepest proposed cuts to the Pentagon budget—under sequestration—were to happen, there would still be record Pentagon spending.
• Job loss threats are overblown political scare tactics.

Keeping it secret

The Senate is so concerned about leaks of classified intelligence information that they have proposed a bill which would allow only a few people at each agency to speak to reporters on “background,” or condition of anonymity; require notice to the Senate and House intelligence committees of authorized disclosures of intelligence information; and permit the government to strip the pension of an intelligence officer who illegally discloses classified information. At the same time the FBI is conducting a criminal investigation into intelligence leaks.  Now they're just gathering information, they are not accusing anyone of breaking the law.  They've interviewed people in the White House, NSA, CIA and Pentagon.

One problem in all this - beyond the Big Brother similarities - is the sheer number of classified documents.  Back in 2004, 15,600,000 documents were classified.  How many are really "secret"?  I wonder how many documents are being classified annually now.  Tom Kean, the chair of the 9/11 Commission, said, “The best ally we have in protecting ourselves against terrorism is an informed public.”

It Can't Happen Here

Earlier this week we saw a massive power failure in India.  Such a failure could happen here if we don't invest sufficiently in our aging and weak electrical infrastructure. In recent months we've seen significant power failures in Boston, New York, San Diego and DC. 

The American Society of Civil Engineers (ASCE) has published their thoughts on the issue.   They think we're okay for the next five - eight years.  But. if we don't start really investing now (on the order of $75 billion annually), a world of frequent blackouts around the country awaits after 2020. The equipment is not getting younger and the demand for electricity will only increase.

Be prepared for higher electrical costs.

More Savings at the Pentagon

A single Mine-Resistant Ambush Protected Vehicle (MRAP) costs $600,000.  Basic Humvees cost $50,000 each, and up-armored Humvees with medium amounts of protection cost $170,000 each.  What should we buy?

Gates said that MRAPs save "thousands and thousands of lives."  A couple of professors recently studied the situation using For Official Use Only (FOUO) Pentagon data and disagree with him.  They dispute the findings of the analyses performed by the Pentagon. For example: "While the heavier vehicles are safer in principle, they are bulky and lack maneuverability, and they were introduced at a relatively calm time in the conflict, when there were few deaths for them to prevent."  And there are further questions.

The professors concluded that MRAP vehicles did not save more lives than lesser protected vehicles.  The cost differential of the vehicles was not justified.  

They conclude:  "There may be a case for supplying MRAPs to some of these units in a more lethal situation, but it does not make sense for the Defense Department to purchase MRAPs in large numbers."  Yet, the Pentagon is planning to buy more than 5,000 MRAPs.

Friend or Foe

After reading the latest Tomgram, that's the question you have to ask about Afghan soldiers, policemen and security guards.  The people we have trained or mentored are killing allied soldiers. In the first six months of this year thirty soldiers have been killed in twenty-one attacks by uniformed Afghans.  In all of 2011, there were also twenty-one attacks resulting in thirty-five deaths.  In 2007-2008 there were only four attacks leading to four deaths.

Most of these attacks are by one person who has become so fed up with individual soldiers or the conditions in Afghanistan that he is willing to essentially commit suicide in order to kill us.  And these 'one persons' are scattered all over Afghanistan killing us no matter where we are stationed. One wonders how many Afghan soldiers experience the same frustrations but are not yet willing to kill themselves.