26 December 2011

Update no.523

Update from the Heartland
No.523
19.12.11 – 25.12.11
To all,
I trust everyone enjoyed a very Merry Christmas, or is continuing to celebrate a most Happy Chanukah, or rejoiced an illuminating Winter Solstice, or otherwise had a bountifully Happy Holiday season with their families.

The follow-up news items:
-- Grand Dear Leader Umpa-Lumpa [239 & sub] proved to be mortal after all. What a surprise! Now, we have the Great Successor Kim Jong Un, the 29-year-old son of Kim Jong Il and grandson of the original DPRK dictator Kim Il Sung. And so it goes!

On Wednesday, the sad saga continued almost unabated, except for the courage of Judge Jed Rakoff [520]. The Justice Department announced a US$335M deal with Bank of America to settle allegations that its Countrywide Financial unit discriminated against black and Hispanic borrowers during the housing boom. The proposed deal is reportedly the largest residential fair-lending settlement in history. The remnants of Countrywide agreed in June 2010 to pay US$108M to settle federal charges that the company charged highly inflated sums to customers struggling to hang on to their homes, and in August 2010, they agreed to pay US$600M to settle shareholder lawsuits over its mortgage losses. Regardless, Angelo R. Mozilo – former Countrywide CEO and no.4 on CNN’s Culprits of the Collapse list [358] – is still a free, rich man, despite the 15.October.2010 settlement with the SEC for a US$67.5M fine of which the company paid US$20M. Mozilo and his cronies belong in prison with forfeiture of all their ill-gotten gain assets. These damnable deals are becoming as disgusting as earmarks – another form of corruption and criminal conduct that escapes punishment.

I am disappointed in myself. I had an opportunity last week to offer a broader, more consistent and insightful opinion, but I backed away probably in deference to the sensitivity of the topic at hand – child pornography and sexual abuse. Fortunately, this week, as I was knocking off a couple more, older rulings by the Supremes from my Reading List folder – Interstate Circuit, Inc. v. Dallas [390 U.S. 676 (1968)] and New York v. Ferber [458 U.S. 747 (1982)] – I had cause to re-examine my rather narrow opinion regarding child sexting last week [522]. I will not bore you with the details. For a modicum of perspective, let it suffice to say, Interstate Circuit dealt with local classification of the motion picture “Viva Maria” [1965] as “not suitable for young persons,” and Ferber involved the sale of two films “devoted almost exclusively to depicting young boys masturbating.” I agree with Associate Justice John Marshall Harlan’s concurring opinion in Interstate Circuit, “I would limit federal control of obscene materials to those which all would recognize as what has been called ‘hard core pornography,’ and would withhold the federal judicial hand from interfering with state determinations except in instances where the state action clearly appears to be but the product of prudish overzealousness” – not quite far enough but at least a step in the correct direction. Yet, it was one word in one single sentence that brought an otherwise foggy, fuzzy perspective into brilliant, sharp focus. The opinion of Associate Justice William Joseph Brennan, Jr., concurring in the Ferber judgment, reiterated, “[T]he State has a special interest in protecting the well-being of its youth.” Brennan’s use of the third person, possessive pronoun struck me like a lightning bolt. Through all of these cases and related discussion topics, I continue to struggle mightily with one incessant, recurring question – where are the parents? In virtually every one of these morality cases, I do not recall one mention of parental responsibility or accountability; it is the State imposing its standards, its morality, its punishment to protect its children. WHERE ARE THE PARENTS? For more than a century, we have allowed the Federal government to carve away slivers and chunks of our freedom – our divine right to “Life, Liberty, and pursuit of Happiness” – in the name of “protecting” our moral values, of “protecting” our children from life, and of “making the correct choices” in our lives. From my perspective, the Federal government should withdraw from the private morality business, except where genuine interstate or international transportation / transmission is involved at specific state request, or in a supervisory role to ensure the states do not violate the individual rights and freedoms of their residents. We must stop punishing everyone else for the failings of a few complacent, irresponsible or injurious parents.

In the wake of the admonition above, we have this news item:
“Florida Community Rallies in Support of 8 year old Girl Allegedly Forced into Prostitution”
Huffington Post
First Posted: 12/22/11 06:52 PM ET; Updated: 12/23/11 07:57 AM ET
http://www.huffingtonpost.com/2011/12/22/sue-ellen-mims-florida-emerald-coast_n_1165975.html
We can always find grotesquely negative events to justify draconian laws that punish hundreds of innocent citizens to find one bad mother or father. We need a license to drive a car, to operate a beauty parlor, to fly any aircraft, or to perform as a doctor, a dentist or pharmacist. Sue Ellen Mims offers the perfect example of why some folks are not qualified to procreate and should be denied a license to do so, if there was such a thing.

“Why Is Incest All Over Prime Time? – From "Dexter" to "Game of Thrones," incest resonates -- not because a taboo has been broken, but because it endures.”
by Tracy Clark-Flory
Salon
Published: December 21, 2011
http://www.alternet.org/sex/153523
OK. There are some topics I am just not brave enough to tackle in this forum.

News from the economic front:
-- The European Central Bank (ECB) allotted €489.19B (US$639.96B) in the first of two anticipated three-year refinancing operations, in a sign that banks expect other sources of funding to remain tight through 2012. The ECB indicated they allotted the three-year loans to 523 banks. The amount is reportedly the largest for a longer-term refinancing operation and the longest maturity ever offered by the central bank.

L’Affaire Madoff [365]:
-- The former controller of Bernard L. Madoff Investment Securities LLC, Enrica Cotellessa-Pitz, 53, pleaded guilty to conspiracy, falsifying records, and making false filings to the Securities and Exchange Commission. She faces up to 50 years in prison, and joins another confessed Madoff accomplice, 66-year-old David L. Kugel.

Comments and contributions from Update no.522:
Comment to the Blog:
“I will admit that the whole ‘sexting’ uproar horrifies me. Not the act, which apparently is not especially common anyhow. What horrifies me is the notion that teenagers can be convicted of a crime and labeled sex offenders simply because they are sexual beings. When a person takes and sends pictures of herself (or himself) to a sexual partner, how is that ‘exploitation’? If I took such a picture of a young girl and sold it or misused it somehow, that would be exploitation. If she takes it and sends it to someone about whom she cares, that’s part of her relationship. Claiming she has exploited someone is utter nonsense and can be safely ignored. Sexting is indeed naïve, at least in some cases; some boys (it’s usually boys) will show pictures of their nude girlfriend(s) to their dimwit buddies, whether the pictures appear on a phone, on the Internet, or on paper. A very few of those receiving pictures will find ways to sell them, which can cause real harm to the person pictured. Ever since the invention of cameras, some girls have suffered from the abuse of their pictures. These sexting laws do not punish the abusers; they punish the naïve. The fact is those laws punish young people for admitting to having a sexual life. Certainly, the punishment far exceeds the ‘crime.’ The label of ‘sex offender’ damages the person for more than the abuse of the picture and again these laws punish the victim, not the offender.
“I share your view of the Victorian-era model of marriage as outmoded. My views in this are colored by having survived as a child in my parents’ ‘’til death do us part’ marriage. Nobody who witnessed it can explain to me why they did not divorce or simply leave, and I came to believe that marriage should be considered much more carefully than is usually the case.
“I see no way to believe that the public will ever have accurate knowledge about the downing of the US drone in Iran. I will not speculate on that.
“Perhaps the Justice Department could divert some funds from the pursuit of next year’s pot crop to use for an investigation of Wall Street et al. We can find room in Federal prisons for at least a few hundred bankers, brokers and politicians. I do not share your pessimism about convicting Members of Congress. Residents of Louisiana and Illinois know very well that Governors can be made to do time. US Representatives and Senators can be prosecuted just as well and can also live out the Beretta theme, “Don’t do the crime if you can’t do the time.”
“Apparently the SEC has dropped the ball on another settlement. Here’s an opportunity for another judge to serve the cause of justice by disallowing this crime.”
My response to the Blog:
Re: “sexting.” Very well said. I see little difference between a betrayal of confidence regardless of the medium. The “injury” to the naïve as you say is the expectation society creates that 1.) children (<18yo) cannot be sexual, and 2.) nudity is shameful. These are holdover notions from the Victorian-era morality. Punishing a minor for being sexual is tantamount to punishing a child for being human.
Re: “marriage.” We share the same view. Looking at unhappy marriages inevitably brings me to question the unreasonable, societal expectation of marriage as though it is some magical domain of happily ever after. Marriage is not particularly difference from a business contract, and yet we rely upon “love” for the decision rather than due diligence.
Re: “drone.” True, we may never know what happened . . . at least for the next 20-50 years, until the information is declassified.
Re: “prosecution of bankers.” Very well said again. Truth be told, the damage done by “flexible underwriting standards,” sub-prime mortgage lending, bundled mortgage-based securities and their associated derivatives, et al ad infinitum ad nauseum, did orders of magnitude more damage to the American economy, the World economy, and countless numbers of citizens than psychotropic substance consumption will ever do; but, we throw the pot-head in prison and let the bankers walk away with their millions & billions of ill-gotten gains. It just ain’t right!
Re: “SEC settlement.” Unfortunately, we simply do not have enough judges like Jed Rakoff. The alternative would be a law that specifically prohibits out of court settlements in financial malfeasance cases.

Another contribution:
“Allegedly our Lost UAV in IRAN had RTB and it didn't work, looking at the picture of what the Iranians had does not look as big as other pictures I have seen of the 170, don't suppose we sent them a Trojan horse to give them some more Stuxnet in other computer systems and Data Bases. Interesting to see what comes out of this.”
My reply:
The Return-To-Base (RTB) program we tested extensively in the simulator and on the AV05 ADFCS demonstrator was integral to the system. You would have to precisely hack a closed, redundant, digital system to circumvent it. The intent of the RTB mode was recovery of a single pilot LHX in the event of pilot incapacitation – part of the whole single seat objective. It was impressive and that was 1986.
Re: Trojan Horse. Oh my! I had not considered that actually. Great scenario though. Give ‘em something that looks like a duck, quacks like a duck, but is actually a carrier of the real weapon – Stuxnet II, or Super Stuxnet. They tap the software and off it goes. Nice. Nonetheless, we may not know for several decades what really happened.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
Posted by at 2 comments:

19 December 2011

Update no.522

Update from the Heartland
No.522
12.12.11 – 18.12.11
To all,
The follow-up news items:
-- At 13:15 [C] {04:15 [S] CST}, Thursday, 15.December.2011, General Lloyd James Austin III, U.S. Army, Commanding General United States Forces – Iraq, cased the colors at a ceremony in Baghdad, Iraq, as United States officially ended Operation NEW DAWN [455] and the Battle for Iraq. After the sanctions of both the Authorization for Use of Military Force Against Iraq Resolution of 2002 [PL 107-243; 116 Stat. 1498] and UN Resolution 1441, the battle began on 19.March.2003, with Operation IRAQI FREEDOM [069], which in turn closed and transitioned on 31.August.2010. {8 years, 8 months, 23 days; 4,487 KIA; 32,326 WIA; US$832B in treasure}

Child pornography and sexual abuse are extraordinarily sensitive, volatile and explosive issues, as rightly they should be. Unfortunately, sometimes our emotions short-circuit our reasoning and cloud our judgment. A friend and long-time contributor to this humble forum sent along the link to this article that re-opened the question. I presume there was foreknowledge that it would trigger my curiosity; so it did.
“Sex-Crazed Maniacs or Innocents? On the Media's Hysterical Reaction to Teen Sexuality – Another media panic about teen sex has been contradicted by an actual study”
by Tracy Clark-Flory
Salon
Published: December 7, 2011
http://www.alternet.org/sex/153353
The article provided links to two different articles and led into a recent study of teen sexting – the practice of sending text or images with sexual content via electronic media. The study at issue was:
“The True Prevalence of ‘Sexting’”
by Kaitlin Lounsbury, Kimberly J. Mitchell & David Finkelhor
Crimes against Children Research Center
University of New Hampshire
Published: April 2011
http://www.unh.edu/ccrc/pdf/Sexting Fact Sheet 4_29_11.pdf
The Lounsbury assessment reviewed and summarized the five other known studies related to the question of sexting among minor children. They concluded and advised, “[T]here are no consistent and reliable findings at this time to estimate the true prevalence of the problem [i.e., minor child sexting].” The caution applies not just to the Press, but to all legislators (federal to local) tempted to pass more laws “to defend our children.” We have too many intrusive laws as it is; we do not need more. My reviews of both higher court rulings in the case against Michael Williams remain valid and applicable in this topic [Update number in trailing brackets, if you wish to review].
United States v. Williams [11CCA no. 04-15128 (2006)] [308]
United States v. Williams [553 U.S. ___ (2008)] [338]
The 11th Circuit got it right; the Supremes did not. Nonetheless, my collateral reading sought to put the Lounsbury study in some form of perspective and took me into the law. Like most well-intentioned, noble causes, the first law specifically prohibiting child pornography – Protection of Children against Sexual Exploitation Act of 1977 [PL 95-225; 92 Stat. 7 (6.February.1978)] – began with interstate transportation or transmission of sexually explicit material involving children (<18 years old). A progression of laws ensued and expanded the reach of the Federal government, and culminated in the law at issue in Williams – Prosecutorial Remedies and Other Tools to End the Exploitation of Children Today Act of 2003 (PROTECT Act) [PL 108-021; 117 Stat. 650 (30.April.2003)]. It was buried in the Finding section of the PROTECT Act that got me fired up. Title V, Subtitle A, §501 – Findings [117 Stat. 650, 676], item (12) states, “ Child pornography results from the abuse of real children by sex offenders; the production of child pornography is a byproduct of, and not the primary reason for, the sexual abuse of children.” Then, in §502 – Improvements To Prohibition on Virtual Child Pornography [117 Stat. 650, 678], based on the Findings, Congress expanded the law to make sexting punishable as child pornography, and prosecutors have not hesitated to use the law. This is where I use the Italian admonition – Basta! I appreciate the motives of Congress and their noble purpose of protecting our children, but the government cannot and should not supersede the responsibility and accountability of parents, and carving away more and more of our precious freedom, even in the name of such a noble purpose is simply not acceptable and otherwise intolerable. It is long past the time we must shed the Victorian-era morality that is the basis of laws like the PROTECT Act. The times they are a-changin’. Beyond the obvious, this perhaps peripheral issue probably does not affect us. Well, as is so often the case, oppression comes from obtuse directions and myriad disguises. Permanently branding a 12-year-old child as a sex offender or worse a sexual predator simply because they send a sexually suggestive text message or digital image to another 12-year-old is excessive, and just flat wrong. Sexting is not a crime. If anything, it is a failure of parenting. We must get the government out of our private lives.

Finally, we have a definitive inside view of the corruption and obscene hypocrisy that has plagued Congress for several decades.
“McCaskill-led earmark probe finds $834 million in requests”
by Kimberly Kindy
Washington Post
Published: December 10, 2011
http://www.washingtonpost.com/politics/mccaskill-led-earmark-probe-finds-834-million-in-requests/2011/12/08/gIQAl0MrlO_story.html?wpisrc=nl_headlines
The McCaskill study dealt with only one piece of legislation – H.R.1540, National Defense Authorization Act for Fiscal Year 2012. They identified 115 earmarks, totaling US$834M million in unrequested, new spending. The study offered numerous specific examples, most of which were cleverly masqueraded in implied helpful words. This is just one bill, but it reflects on how mutated, compromised and contaminated our political process has become.

“Married couples at a record low”
by Carol Morello
Washington Post
Published: December 13, 2011
http://www.washingtonpost.com/local/married-couples-at-a-record-low/2011/12/13/gIQAnJyYsO_story.html?wpisrc=nl_headlines
A definition of insanity is continuing to do what we have always done and expecting a different outcome. The Victorian-era notion of marriage has prevailed within the United States for more than a century. We can discuss and argue the basis for those expectations, standards and guidelines. Let it suffice to say, the environment that produced those expectations no longer has any relevance to contemporary life. As I have said more than a few times, over a wide variety of social issues, we need to grow up. Just because something was appropriate for our great grand parents does not inherently mean it is appropriate for us. We must rationally adjust to the world in which we live rather than carry on some lame desire to preserve what was done more than a hundred years ago. So it is here.

First, the Islamic Republic of Iran (IRI) claimed to have shot down an American RQ-170 drone. Then, they decided, no they did not shoot it down, rather their superior electronic technology took control of a CIA-operated, RQ-170 Sentinel spy drone and forced it to make a belly landing in the eastern Iranian desert. As expected, the U.S. government has said very little publicly other than to acknowledge the loss of a drone along the Afghan-Iranian border. The IRI Revolutionary Guard displayed what they claimed was the highly classified, flying wing, stealth drone. I doubt the IRI claims. I am also disappointed that such sensitive machines do not have autonomous return to base flight guidance systems (that were demonstrated 25 years ago) or self-destruct systems to prevent compromise of advanced technology. Oh well, let’s just give this technology to Russia and China, and avoid all this in-between nonsense.

The U.S. Securities and Exchange Commission (SEC) filed civil suit (the SEC has no authority to file criminal charges) against six former Freddie Mac and Fannie Mae executives over false disclosures they made about subprime loans. Named in the legal action were: Freddie Mac former CEO Richard Syron, former executive vice president Patricia Cook, and former senior vice president Donald Bisenius; and, Fannie Mae former CEO Daniel Mudd, former chief risk officer Enrico Dallavecchia, and former executive vice president Thomas Lund. The SEC complaint states, “This action arises out of a series of materially false and misleading public disclosures.” The agency seeks unspecified damages against the defendants. The Justice Department is reportedly still considering criminal charges against the executives.

Just a footnote: I doubt we will see any civil or criminal charges against Members of Congress that enabled and encouraged the “flexible underwriting standards.” [521] Those perpetrators or at least contributors to the economic crisis and collapse of the housing market will claim a noble purpose and no culpability; however, they are just as involved as the Fannie Mae and Freddie Mac executives. Such is life.

News from the economic front:
-- The UK Financial Services Authority (FSA) reported on the 2008 failure of Royal Bank of Scotland Group PLC (RBS), and recommended that major acquisitions by U.K. banks should be subject to regulatory approval and bank bosses should face penalties, if their institution fails. The FSA report claims RBS managers made “multiple poor decisions” when they pursued an ill-fated takeover of European lender ABN Amro in 2007 that ultimately led to a £45.5B (US$71.3B) bailout by U.K. taxpayers.
-- The Federal Deposit Insurance Corp. (FDIC) apparently reached a deal with three former executives of Washington Mutual in a civil suit, stemming from the biggest-ever U.S. bank failure. The government will reportedly recover a mere 8.3% of the US$900M lost in the bank’s failure with most of the recovery coming from insurers and the bank’s estate – not from the pockets of the former executives. Again, there is no sign of criminal charges from the Justice Department, yet. The deal would mark another setback for the government in a high-profile, financial-crisis-related case. It is most unfortunate there are not more judges like Jed Rakoff [520]. These guys bought their way out of prison. WTF, as the kids say.
-- The U.S. Federal Reserve Open Market Committee voted 9-1 to keep the bank's easy-credit policies unchanged for the second meeting in a row and offered an assessment of the economy that was guardedly more upbeat, but still marked by “significant downside risks.”

Comments and contributions from Update no.521:
Comment to the Blog:
“I’m glad your team won.
“I think your source, Stan Liebowitz, has a bit of a misplaced focus. According to his professional web page http://www.utdallas.edu/~liebowit/ , Mr. or Dr. Liebowitz is a professor of economics at the University of Texas, but his listing of courses taught matches his list of available papers, which he describes as “articles relating to file-sharing and intellectual property issues, path dependence, network externalities, and the Justice Department investigation of Microsoft,” none of which deals with macro-level economics. The issue I have is that his analysis does not follow the big money. I would not excuse local bankers for selling mortgages to people who could never afford to pay and never claimed that ability. I would also never absolve Congress for passing laws damaging to all of us except the biggest bankers. However, those are effects, not causes. The cause is too-big-to-fail banks inventing increasingly complex, risky, and profitable financial instruments. That’s where the big profits from those mortgages went, and also the big-money bailout the bankers counted on to force the government to assume the risk. Of course, I have no issue with any of these parties replacing drug users and prostitutes in prisons.
“My central source on economics lately is Simon Johnson, who has been the chief economist at the International Monetary Fund (IMF) and is currently a professor of economics at Sloan School of Management, a senior fellow at the Peterson Institute, and a member of the Congressional Budget Office’s (CBO) Panel of Economic Advisors. I recommend his book 13 Bankers and his blog Baseline Scenario.
“I wonder whether Standard and Poor’s and their competitors have an appropriate place in rating sovereign debt. Beyond the fact that their measurement systems are geared to corporate offerings and fit poorly with the conditions of governments, an additional issue is their role in the economic collapse. Those junky mortgages we’re discussing were packaged and the packages received ratings from S & P and their brethren that convinced investors they were sound investments. Said ratings were based mostly on the fact that the people selling the packages being rated paid for the rating service in a competitive market; the ratings were as poor quality as the securities themselves. More candidates for beds in the Federal prison system.
“I wonder what has slowed the Chinese economy. Perhaps their customers in the US and the EU are just not buying anything recently. Huawei, the Chinese telecom company serving the Iran government, shows good business sense in limiting their exposure to the drama of radical government.
“I did not mean to excuse anyone in my comment from last week. The point of my comment was pretty much exactly what you said: the bankers saw terrible risks as benign. “Willful blindness” is a legal term which essentially means, “you’re liable whether or not you admit to knowing what you should have known.” The purpose of reading the book is to understand and to know what to guard against, both in one’s own conduct and in working with others. Willful blindness is an important force in people’s actions in general, not just on Wall Street, in Congress, or at your local mortgage lender.”
My response to the Blog:
Thx mate . . . always nice to win. Eventually, we will lose. An awesome rivalry among comrades.
I would encourage you to read the Liebowitz essay. He does not let the bankers off the hook, but they were not the root cause of the mortgage meltdown; the greedy bastards just sought to profit on whatever happened. We are in agreement on “too big to fail”; break up the big banks using the Sherman Antitrust Act [PL 51-190; 26 Stat. 209] to end the grip those banks have on the U.S., and return to the separations delineated in the Banking Act of 1933 [PL 73-066; 48 Stat. 162]. I just do not think we can lay the blame for the mortgage meltdown on the big banks.
I will look for Simon Johnson’s work.
Amen! All three primary rating agencies gave those mortgage-based securities their highest ratings, which certainly tainted their processes and judgment. The rating agencies were culpable as enablers of the meltdown.
Re: Huawei & Iran. I would like to think the Chinese felt the pressure of the world community. Who knows their reason? It is still a good sign.
Re: “Willful Blindness.” Indeed! Spot on! ‘Nuf said.
. . . round two:
“The too big to fail banks clearly do not bear sole responsibility, but they were the driving factor.”
. . . my response to round two:
Re: “the driver.” I just do not see it. I could accept “major” factor. They are certainly culpable, as I expect we will see in the outcome of SEC v. Citigroup. I still put most of the weight at the individual level, with the Federal government very close behind. The banks sought to make a profit on the tragedy.
. . . round three:
“You'll see it if you follow the money. That simplifies many things, including this crash.”
. . . my response to round three:
I’ll keep looking.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
Posted by at 2 comments:

12 December 2011

Update no.521

Update from the Heartland
No.521
5.12.11 – 11.12.11
To all,

Whew! That was too close. Navy 27 – Army 21. The tenth consecutive victory. I offer my condolences to my honourable and courageous cousins – Greg, USMA ’74, Colonel U.S. Army (retired), and Sandy, USMA ’78, Lieutenant Colonel U.S. Army (retired). God bless you both for your service to this Grand Republic. But, that does not alter history – Go Navy, Beat Army.

The follow-up news items:
-- Almost five years after the terrible fire during restoration, the repair and renewal of the historic RMS Cutty Sark [285, 330, 355] progressed nearly to conclusion. The Queen is expected to officially open the ship for tourism at the end of next April. Congratulations to the recovery/restoration team and the British People for saving the historic ship for posterity.

A friend and regular contributor sent along this essay on the mortgage meltdown:
“Anatomy of a Train Wreck – Causes of the Mortgage Meltdown”
by Stan J. Liebowitz
The Independent Institute
Published: October 3, 2008
As would be expected in a comprehensive assessment of a complex issue, Liebowitz illuminates the major players from Congress and the law, to real estate speculators, the mortgage lending industry, and of course the investment bankers who packaged and sold contaminated mortgages as solid investments. He clearly places considerable emphasis on the enabling influence of “flexible underwriting standards.” It took me longer than usual to track down the genesis of that relaxation in the law. Depending upon how we perceive congressional action, we could stretch back to 1934, or perhaps 1968. Liebowitz leans toward 1977 and the Housing and Community Development Act of 1977 [PL 95-128; 91 Stat. 1111], well actually, the Act’s Title VIII – Community Reinvestment Act of 1977 (CRA) [91 Stat. 1147] – that placed emphasis on home ownership in low- and moderate-income neighborhoods. After CRA, Congress began to apply pressure on mortgage brokers and lenders to increase home ownership within the low end of the family income spectrum. However, as he notes, the so-called housing bubble began to form with the passage of the Housing and Community Development Act of 1992 [PL 102-550; 106 Stat. 3672] with several succeeding laws to further coax mortgage lenders to loosen their underwriting guidelines and expand homeownership among low income citizens and other racial groups. Those who questioned the loosening of underwriting standards, even for a noble cause of social equity, ran the risk of being labeled racist – such is our political environment. Liebowitz noted with data that the mortgage market softened and began to sour in the 3rd quarter of 2006. As noted in SEC v. Citigroup [520], the bankers began conniving schemes to pass their risk off to unsuspecting investors. As disgusting punctuation on this progressively degenerative process, Congress passed and President Bush signed into law the Housing and Economic Recovery Act of 2008 [PL 110–289; 122 Stat. 2654] that included Division A; Title I; Sec. 1129 (euphemistically titled:) Duty to Serve Underserved Markets [122 Stat. 2703], which stated: “each enterprise shall provide leadership to the market in developing loan products and flexible underwriting guidelines to facilitate a secondary market for mortgages for very low-, low-, and moderate-income families”; the bill was signed into law 30.July.2008, less than two months prior to the collapse and two years after the market began to deteriorate. Liebowitz concluded, “These ‘innovations’ [enabled by flexible guidelines], heralded as such by regulators, politicians, GSEs, and academics, are the true culprits responsible for the mortgage meltdown.” He went on to note, “The main driver of foreclosures was adjustable-rate loans, both prime and subprime,” largely due to over-extended speculators, rather than bona fide homeowners. I concluded from this review that we have a prime example of what can happen when a well-intentioned Congress attempts to strong-arm the marketplace beyond reasonable and responsible conduct, even for the noblest of causes.

News from the economic front:
-- Standard & Poor's Rating Services placed 15 euro-zone nations on negative credit watch, citing tightening credit conditions and disagreements among European policy makers on how to tackle the region's immediate and long-term economic challenges. Six of those 15 countries have S&P’s highest, triple-A rating: Germany, France, the Netherlands, Austria, Finland and Luxembourg. The decision to put the countries on negative credit watch means there is a 50% probability that their credit ratings may be downgraded within 90 days. Europe’s travails continue.
-- The Wall Street Journal reported some European central banks have started making contingency plans for the possibility that one or more countries might leave the euro zone, or the entire currency union might break apart entirely. Apparently, the central banks are considering how to resuscitate national currencies based on bank notes that haven’t been printed since the first euros went into circulation in January 2002. Given the stresses on the European Union, it would be irresponsible not to have contingency plans developed, tested and ready to execute, but the existence of such plans does not represent an expectation that the euro zone is headed for dissolution.
-- On Thursday, the European Central Bank cut its benchmark refinancing rate by 0.25% to a historic low of 1.0%, fully reversing its increases earlier this year.
-- Further signs of economic stress illuminate the horizon. The European Banking Authority (EBA) announced that European banks must come up with a total of €114.7B in new capital by next June, as a result of its latest stress test. The capital shortfalls are spread across more than 30 of 71 banks in 12 countries. The affected banks must raise the necessary capital by shedding assets, retaining profits, selling shares or other means. Individual banks must inform their national regulators by 20.January, about how they intend to come up with the funds.
-- The PRC’s National Bureau of Statistics reported the country’s Consumer Price Index (CPI) rose 4.2% in November from a year earlier, sharply slower than a 5.5% year-to-year rise in October.
-- The summit of European Union (EU) leaders failed to achieve consensus among 27 member-states to changes in the EU treaty, enabling tighter fiscal coordination within the EU, with leaders still deeply divided over key elements of their credit crisis strategy. The leaders apparently decided they would take steps to forge an agreement among at least 23 of the members to tighten rules on national fiscal policy. The UK and Hungary backed out, and Sweden and the Czech Republic essentially abstained. Many believe that an agreement that did not include all 27 EU countries would be fatally weak, even if all 17 members of the euro zone agreed.
-- As previously reported [515], the Chinese telecommunications-equipment maker Huawei Technologies has been providing services to Iranian government-controlled telecom operators, enabling Iranian police to use mobile network technology to trace and arrest dissidents. On Friday, Shenzhen-based Huawei company announced they will “voluntarily restrict its business development there by no longer seeking new customers and limiting its business activities with existing customers.” The company said it was making the move due to the “increasingly complex situation in Iran.”

The Blago Scandal [365]:
-- U.S. District Judge James Block Zagel of Illinois, Northern District, sentenced convicted felon and former governor of Illinois Rod Blagojevich to 14 years in federal prison. We do not know if he intends to appeal. We can only hope that he slips quietly into the dark night.

Comments and contributions from Update no.520:
Comment to the Blog:
“For the ‘how could they?’ aspect of both Citigroup and the SEC, I again heartily recommend Margaret Heffernan’s book Willful Blindness. I suspect that most of these people never understood even a fraction of the damage they did. I commend Judge Rakoff for getting their attention. I hope that more bankers pay the prices for their choices and I wish that the SEC regulators could receive their share of the prison time. The bankers in their greed and the regulators in their laxity have done far more damage to society than the potheads currently populating our prisons. TV shows including but not limited to 60 Minutes have the opportunity to play an important role in society by bringing awareness of this corruption to ordinary people, and I appreciate 60 Minutes for their leadership.
“Partly as a follow-up to last week’s discussion, I will point out that if you buy a dog, you are responsible for any damage it does to others’ persons or property. Why should banks be excused the damage done by politicians they own?
“We shall see what we shall see in Iran. As you pointed out, nobody was detained or harmed this time, which is a sign of miniscule progress. I hope that this time the US will support a response by the entire Westernized world rather than repeat our antics in Iraq and Afghanistan. Pakistan would be another good place to avoid getting stuck, but I’m afraid we’ve already made our bed there and must lie in it.
“I am glad you mention China regularly in your economic items. Many in the US seem to have forgotten China’s existence, and they are a major player in the world’s economy and politics.”
My response to the Blog:
I would not give those bankers the out of being ignorant. I think they knew precisely what they were doing, but in their voracious, insatiable appetite for massive profits, they saw such risks in rather benign terms, i.e., real estate value has always gone up, it will always go up, therefore minimal risk.
I am currently researching the legislative genesis of “flexible underwriting guidelines . . . for very low-, low-, and moderate-income families.” I hope to have more information in this week’s Update . . . if I can get ‘er done.
Last Sunday’s 60 Minutes program was very well done and quite descriptive. I highly recommend watching it via the URLs, if you didn’t see the original broadcast.
I am not so such your dog-politician analogy is appropriate. Nonetheless, point taken.
The fact that no one was injured or detained does not excuse or lessen the severity of the Iranian Basij violation of British sovereignty. I do not see the necessity of the U.S. taking unilateral action in Iran. I suspect Israel has an order of magnitude lower threshold of tolerance regarding the antics of the mad mullahs in Iran. We have debated the Iraq & Afghanistan; I do not see any rationale for altered positions.
Anyone who ignores the PRC does so at their peril. They are and will be for the foreseeable future a force to be reckoned.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
Posted by at 2 comments:

05 December 2011

Update no.520

Update from the Heartland
No.520
28.11.11 – 4.12.11
To all,

No news is good news. Progress continues.

With the thought of hearing another opinion from a qualified citizen, I urge everyone to watch the video via the following link:
http://www.youtube.com/watch?v=yMLZO-sObzQ
University of Iowa Student Zach Wahls, 19, spoke about the strength of his family during a public forum in the Iowa House of Representatives on House Joint Resolution 6. He concluded, “The sexual orientation of my parents has had zero effect on the content of my character.” We can all learn from young Zach.

On Monday, United States District Judge Jed Saul Rakoff, Southern District of New York, rejected a US$285M Securities and Exchange Commission (SEC) Consent Judgment against Citigroup Global Markets Inc., in the case of SEC v. Citigroup [USDC NY SD case 1:11-cv-07387-JSR (2011)]. The judge had some choice words for both the offenders and the regulators. He condemned the SEC’s practice and penchant of seeking out-of-court settlements, to avoid trial, which in turn hides the truth from We, the People. To paint the background . . . in early 2007, as the mortgage-backed securities market weakened, Citigroup created a billion-dollar Fund (known as “Class V Funding III”) that allowed it to dump some dubious assets on misinformed investors. They accomplished this by misrepresenting the Fund's assets as attractive investments rigorously selected by an independent investment adviser. Then, at the pinnacle of deceit, cynicism, hypocrisy and arrogance, Citigroup took a short position against those very assets it had helped select; in essence, the supposedly stalwart bank bet on the failure of the instruments they created and duped their customers into buying. To quote the judge, “Citigroup realized net profits of around US$160M, whereas the investors, as the S.E.C. later revealed, lost more than US$700M.” This is not capitalism; it is fraud, conspiracy, and theft (or more accurately, highway robbery with a transaction rather than pistols). I am certain the wizards at Citigroup saw nothing unethical or immoral about their Class V Funding III brain-fart. Judge Rakoff concluded, “[T]he proposed Consent Judgment is neither fair, nor reasonable, nor adequate, nor in the public interest.” Other than that Missus Lincoln, how did you like your investment? The judge went on to note, “An application of judicial power that does not rest on facts is worse than mindless, it is inherently dangerous. The injunctive power of the judiciary is not a free roving remedy to be invoked at the whim of a regulatory agency, even with the consent of the regulated. If its deployment does not rest on facts – cold, hard, solid facts, established either by admissions or by trials – it serves no lawful or moral purpose and is simply an engine of oppression.” I suspect the evidence to be presented in court will be far more damning than anything our vivid imaginations could possibly conjure up. If convicted of their crimes, I expect the wrath of the Judiciary will be far more punitive than the paltry US$285M offered up by the SEC – supposedly the regulators empowered to protect us from the connivance of greedy men. I would like to see more of these damnable bank executives join their buddy Bernie for three hot’s and a cot, and a lengthy stay as our guest to contemplate the error of their ways. Thank you, Judge Rakoff. Let the facts speak for themselves.

How timely . . . on Sunday, CBS News 60 Minutes program broadcast two segments titled: “Prosecuting Wall Street.” The first segment was a virtual Press indictment of the former CEO of Countrywide Financial, Angelo R. Mozilo [358]. The second segment was like a background piece about the Citigroup mortgage situation and indirectly reflects upon the court case noted above.
Part 1:
http://www.cbsnews.com/video/watch/?id=7390540n&tag=contentBody;storyMediaBox
Part 2:
http://www.cbsnews.com/video/watch/?id=7390542n&tag=contentBody;storyMediaBox
There is hope the bastards will pay the price for their crimes.

On Tuesday, 29.November, 20 Iranian “students” “overwhelmed” the local police “guarding” the British embassy in Tehran to protest tightening sanctions against their country. As Yogi said, “It's déjà vu all over again” – 32 years hence, 4.Nov.1979. None of the British diplomats or support staff were harmed or detained. The British did not take kindly to the violation of their international sovereignty as they ordered their embassy personnel to evacuate and also ordered the Iranian diplomatic personnel to leave the United Kingdom within 48 hours. Various intelligence sources indicate the “protesters” were actually plain-clothes members of the Basij militia task force. The paramilitary Basij (formally, Basij-e Mostaz'afin = “Mobilization of the Oppressed”) is a sister unit of the Quds Force under the command of the Revolutionary Guards, all under the direct authority of Supreme Leader Ayatollah Khamenei. There is little doubt in my little pea brain that the attack on the British embassy was approved, sanctioned and ordered by the Iranian religious hierarchy. Iran continues its inexorable journey toward the precipice of the abyss. So be it!

On Monday, the Pakistani Telecommunications Authority (PTA) banned a list of 1,600 “obscene” words, most in English, from being used in text-messages and ordered the nation’s wireless service providers to block texts with these words. So much for privacy. Further, if the government can do this, what is the next step in their intrusion on the lives of individual citizens? Further, what public purpose is served by such an action? This is one of myriad reasons we must defend freedom with our lives, if necessary. We must also remain ever vigilant for those forces who seek to impose upon our Liberty and private affairs.

News from the economic front:
-- The People's Bank of China announced their intention to cut its reserve requirement ratio by half a percentage point, the first such cut since December 2008, after raising the ratio six times this year. The cut will take effect Dec. 5, and is aimed at raising liquidity amid global market turmoil.
-- The European Central Bank, the Bank of Canada, the Bank of England, the Bank of Japan, the Swiss National Bank, and the U.S. Federal Reserve agreed to lower the pricing on the U.S. dollar overnight index swap instrument by 50 basis points, to shore up the global financial system as Europe's rolling debt crisis continues to trouble markets. The public announcement of the U.S. Federal Reserve stated, “The purpose of these actions is to ease strains in financial markets and thereby mitigate the effects of such strains on the supply of credit to households and businesses and so help foster economic activity.” World markets liked the move.
-- The Labor Department reported non-farm payrolls rose by 120,000 last month, with private companies adding 140,000 jobs, while the public sector -- federal, state and local governments -- shrank by 20,000 jobs. The unemployment rate, obtained by a separate survey of U.S. households, fell to 8.6% from 9.0%, the lowest level since March 2009. October's payrolls figure was revised upward to show a gain of 100,000 from a previously reported 80,000, while September was revised up to a 210,000 gain from 158,000.

Comments and contributions from Update no.519:
“I’m glad for your good medical news, and I hope you continue healing with all possible speed.
“The ‘Super Committee’ was nonsense from the beginning. Those draconian cuts, if they take place, will undoubtedly do more harm than good because of their untargeted nature, but they put off any politically unwelcome decisions until after the elections. Same old same old.
“The article on teaching good sex is a welcome breath of reality in a debate that seems to be largely based on paranoid nonsense. I certainly believe that sex is an important part of life and, thus, should be taught as more than fear of disease or unplanned pregnancy. The idea of not actually teaching anything at all (“abstinence”) scares me. If schools taught us nothing about work or about government, people would rise up in arms. Yet this equally important area of living gets no attention. Al Vernacchio is a brave man and an excellent teacher. I hope for all of our sakes that he is not the only one.
“I see the economic situations in Europe and the U.S. as largely a function of the fact that ‘too big to fail’ has yet to be addressed either here or there. Investors are not as stupid as governments and those who finance campaigns seem to think they are. Modern communication has reduced the ability of those people to lie and to distort facts unchallenged. I doubt they have adapted to that.”
My response:
Improvement continues; the pace is frustrating. Nonetheless, in comparison to what could have been, I’m in high cotton.
The Super Committee probably would have worked 70 years ago, but given the intransigent political polarization of Stoday’s Congress, perhaps you are correct. The indiscriminate nature of cross-the-board cuts will generate a whole new level of political infighting. If we thought we had political gridlock and irresponsibility before, we ain’t seen nothin’ yet.
The Victorian-era notion that sex is a duty, for procreation only, and strictly for adult, heterosexual, monogamous-for-life couples in church-sanctioned marriage continues to dictate our socially conservative laws and zealous enforcement. Until we mature as a society regarding sex, we will continue to struggle with the proper teaching of our children. I certainly agree with you with respect to Vernacchio.
I just finished reading Judge Rakoff’s ruling in SEC v. Citigroup [USDC NY SD case 1:11-cv-07387-JSR (2011)], which is a backhanded indictment of both the SEC and Citigroup; more in this week’s Update. “To big to fail” is certainly a significant symptom; however, there are much larger forces involved. It will be interesting to see what Judge Rakoff yields from the Citigroup case. There is hope, however tenuous that hope may be.
. . . round two:
“The only follow-up I have is that few economic forces are larger than “too big to fail” banks in the world’s economies. The combined size of the six largest banks dwarfs almost anything else.”
. . . my response to round two:
Valid point. However, the larger forces include the globalization of world markets and financial interaction, the tragedy of the European debt crisis, the impact of the Federal government and intransigent political situation, et cetera. There is no doubt the banks are a major part of the problem. My point is, the difficulties cannot be placed at the doorsteps of the big banks; it is just not that simple.
. . . round three:
“The biggest banks brought about financial globalization and the European debt crisis pretty much by themselves working through their tame politicians, and they have as large a hand in political polarization as anyone other than, perhaps, the Koch Brothers. The European debt crisis is less a ‘tragedy’ than a crime, even though it will probably never be prosecuted.”
. . . my response to round three:
Whoa, now, dawg! That is like saying the bank is criminally at fault because I max’ed out my credit card and cannot pay the bill; yes, they provided the rope, but I hung myself. The bank’s responsibility rests upon understanding risk and return, to protect lender assets; they are not the adult supervision for a borrower, albeit an individual or a nation-state. This is not to say that the big banks are not culpable for aspects of the crisis, but the root cause was borrowing beyond one’s ability to pay; that’s true to the home mortgage borrower in California or Florida, just as it is true for Greece, Portugal, et al.
Thank goodness Judge Rakoff ordered a trial in SEC v. Citigroup. The results derived from evidence presented in a court of law should give us a glimpse into how at least one of those banks operated prior to the crash. I suspect, based on the judge’s opinion, that the picture will not be pretty and will most likely be very ugly and disgusting. Nonetheless, let’s call a spade a spade; greed is not limited to the big banks.
. . . round four:
“The history of financial-market globalization involves bankers re-writing or repealing regulations that are passed by legislators whose campaigns are financed by bankers. The ‘too big to fail’ bankers specifically caused the crashes in the U.S. and Europe by knowingly taking far too much risk in the certainty they would be bailed out. The people selling the mortgages must take a large share of the blame for the housing mess; many of those mortgages were sold deceptively to people the mortgage bankers knew very well would be unable to pay the mortgage. Such financial creations as ‘interest only’ mortgages are proof of that. People who make a living by their expertise must take responsibility for the abuse of that expertise. What people failed to acknowledge was that many billions of dollars in mortgages were created for the sole purpose of packaging into high-risk derivatives. When all that risk caused the crash, almost every American was harmed to some extent by the bailout, by the drop in all housing values, and by the economic ripples. The important exception to that harm is most of the bankers who caused the crash, who are still making big money. A fairly similar situation is now in the ‘crash’ stage in Europe.
“The bank is not at fault if you knowingly maxed out your credit card, but if the banker made a great effort to sell you twice the mortgage you could afford and you trusted his expertise and his honesty, he has abused his expertise and your trust. He should be liable to a reasonable degree in a civil matter at the very least. And as a group, the ‘too big to fail’ banks should be held accountable to national governments for their knowing destruction of the economies of multiple countries.”
. . . my response to round four:
We are not in disagreement; “too big to fail” is an anathema in any free or even regulated market society. I still believe the Sherman Antitrust Act [PL 51-190; 26 Stat. 209; 2.July.1890] should be used to break up the “too big to fail” banks . . . at least the separation of the banking, investment and underwriting segments. No commercial venture should be beyond the reach of market forces.
I believe you are implying that banks should be the financial nannies for ill-informed, incompetent, ignorant, greedy or wishful borrowers. If so, then we shall respectfully disagree. The law requires lenders to inform borrowers of the terms & conditions, and their rights regarding any lending instrument. Were their banks or mortgage lenders who violated those laws? Yes! Many of those lenders do not exist anymore. Some are those very same “too big to fail” banks, as noted in various Press exposés on fraudulent loan papers. They should be prosecuted to the fullest extent of the law. Some have been or are being prosecuted. The reason I keep returning to Judge Rakoff . . . it is first instance I am aware of that those banking practices will be examined under judicial rules of evidence in a public court room. Nonetheless, I cannot make that jump . . . this is all the fault of the big banks. Individual contribution, responsibility and accountability must be included in any culpability discussion / debate, in my humble opinion.

My very best wishes to all. Take care of yourselves and each other.
Cheers,
Cap :-)
Posted by at 2 comments:
Subscribe to: Posts (Atom)