naked capitalism

Below you’ll find the amicus brief filed by the Alternative Banking Group on May 21 in support of Judge Jed Rakoff’s ruling questioning a proposed $285 million settlement in the SEC v. Citigroup Capital Markets (ruing here, summary and discussion here). Judge Rakoff ordered the parties to trial, which resulted in both Citi and the SEC filing appeals.

Certain procedural issues led the appeal to be referred to the Second Circuit Court’s motion panel to determine whether the appeal should proceed. The panel took the unusual step of putting a stay on the lower court case at the Southern District of New York (even though the case was still pending), and in the process criticized Judge Rakoff’s position without deciding the merits of the case. The merits panel is now charged with deciding on the substance of the appeal.

You can find the SEC’s appeal here, Citi’s here. Better Markets has also filed an amicus brief supporting Judge Rakoff’s position.

The lead authors of this brief were Akshat Tewary, MBS Guy, Andrew Dittmer, and yours truly.

OWS AB Motion&AmicusBrief

By Tom Ferguson, Professor of Political Science at the University of Massachusetts, Boston and a Senior Fellow at the Roosevelt Institute. Cross posted from Alternet

Holding your breath about the fallout from J. P. Morgan Chase’s derivatives losses? Yesterday, if you believed Politico, you could exhale. Senate Banking Committee Chair Tim Johnson of South Dakota announced his panel would call JP Morgan Chase Chair Jamie Dimon to testify.

It’s good that the watchdog is barking, but we’d all better watch closely to see if it will bite. Here’s what Politico didn’t tell you. Political Money Line’s tabulations of PAC contributions show that securities and financial firms have given more money to Johnson than any other sector in the last three election cycles. In the current cycle, for example, almost two thirds of his $361, 582 in PAC money comes from such firms. In 2008, when he collected over $2 million in PAC contributions, the swag from that quarter amounted to over half a million dollars – and neither figure takes account of numerous individual contributions. Johnson calls his leadership PAC “South Dakota First,” but, not surprisingly, contributions to his campaign committee from New York and other states often run far ahead of receipts from his own state.

Alas, it gets worse. Here’s the real punch line. Which firm is Johnson’s single largest contributor? You guessed it: The Center for Responsive Politics’ count shows that in both the current election cycle and the cycles between 2005-2010, it is JP Morgan Chase.

Don’t bank on the watchdog.

Computing experts unveil superefficient ‘inexact’ chip PhysOrg (Chuck L)

Justice Dept. defends public’s constitutional ‘right to record’ cops ars technica (Lambert)

Apple Said To Plan Overhaul Of IPhone With Bigger Screen Bloomberg

Opinion: Misleading Drug Trials The Scientist (Francois T)

New law makes Vermont the first state to ban fracking VTDigger (Aquifer)

Australia Hottest in 1,000 Years Daily Beast (Aquifer)

Why China’s RMB exodus IS the story FT Alphaville. This is a really big deal, particularly after Victor Shih has warned repeatedly of the danger to China if its wealthy started moving their money overseas.

China’s new housing starts turn negative MacroBusiness

Paul Krugman on Eurozone: “The Whole Thing Could Fall Apart in a Matter of Months” Democracy Now (Aquifer)

Motorman: Britain’s other massive press scandal The Bureau (May S)

Working in Africa: Expatriates in little danger of seeing the money run out Financial Times

Is U.S. going above and beyond for Israel? Washington Post

New Details Are Released in Shooting of Trayvon Martin New York Times

St. Louis Fed President: Break Up the Banks Dave Dayen, Firedoglake (Carol B)

Will America’s Premier Hub for Black Music Research Fall Prey to Drastic Budget Cuts? Alternet

Looting the Lives of the Poor Barbara Ehrenreich, Tom Engelhardt

Inside J.P. Morgan’s Blunder Wall Street Journal

[JPM Whale-Watching Tour] The high yield tranche piece FT Alphaville

The Dog That Didn’t Bark: Obama on JPMorgan Robert Reich

Investigating JPMorgan Chase Simon Johnson, New York Times

LTCM. Amaranth. JP Morgan? Roger Ehrenberg

Much to Answer For: James Q. Wilson’s Legacy Boston Review (Chuck L). Today’s must read.

* * *
D – 113 and counting. *

And I’ve been in the Washington Zoo. –”Show Biz Kids,” Countdown to Ecstasy, Steely Dan

Lambert here:

G8 Summit. Atmospheric piece on Thurmont, MD, nearest town to Camp David, by Dan Zak. Median income: $71,400. Ends with local government applying for new refrigerators and freezers for the food bank.

NATO summit. Eight arrested in Bridgeport in warrantless police raid; beer making equipment, cellphone seized. ABC I-Team: Cops in uniform and bikes flood protest zones. Around the corner, 15-passenger vans with officers in black commando uniforms, with extra padding, personal riot gear. Multi-Agency Communications Center: 43 agencies, 10 big screens, sekrit location out in the burbs. “Resembles something from a Jerry Lewis telethon, with rows of tables and telephones ready to be answered.” Maps here, and here.

ACLU: [Secret Service] cannot use H.R. 347 to “sanitize” the summit. SS: Summit’s one of year’s three high-priority “national security events”. Other two the legacy party conventions. FBI: “absolutely no indication” of terror attack threat. Journamalism: anarchists r n ur computur!!

Panel: “Social Responsibility and National Security: Towards a New NATO” (video). At the Pritzer Military Library. (Yes, those Pritzers. Hi, Penny! Hi, J.B.! [waves]) McCormick Center as metaphor: “There are a plethora of signs directing media to different areas, but no real signage for how to get out” (picture). Rahm pulls permit for National Nurses United rally. Many protesters older, over 40. OccupyDC in Chicago (picture).

For dessert: The “Pavé of Bittersweet Complexitie, a concoction of chocolate, caramel, fleur de sel, and popcorn.” Pass the pavés…

Occupy. Blockupy Frankfurt Day 2. Student protests continue in Quebec (picture). Quebec parliament debates Bill 78: “Any group of 10 persons or more to give at least eight hours notice to police for any demonstration.” Protests also in Quebec City, Gatineau, Sherbrooke, Trois-Rivieres.

FL (Swing State) Volusia County Council approves Central FL’s first countywide domestic partnership registry 6-1. Kudos.

IA (Swing State) Obama to give speech on the economy “plus” campaign stop (TTH).

MI (Swing state). The State Board of Canvassers rejected the petition for a referendum to repeal MI’s emergency manager law because of the ballot wasn’t in 14 point. On appeal, we find that although the MI SoS asked a graphics professor for his opinion, they never passed his conclusion (“a pretty good guess that Calibri Bold at 14 pt is used”) on to the Board, so now the petitioners can’t bring it up. (I’d bet the MI SoS supplied a reproduction for review, not the original or a file, so a good guess would be all the professor could make.)

NV (Swing State). RNC and Romney will erect a “shadow state party” to bypass the regular (now Paul dominated) apparat.

TX Paleodem Silvestre Reyes (TX-16) blasts challenger Beto O’Rourke for advocating marijuana legalization. (Reyes on FISA; Bush intel chiefs).

WI (swing state). Oversampling error in last Marquette poll? Race could be closer! New residency rules could cut student vote. No plans for Obama or Romney to visit. Sweetheart, get me rewrite! Journal-Sentinel headline before: “State loses 6,200 private sector jobs in April”. And after: “Controversial Survey Shows Estimated April Job Losses of 6,200.” (Thing is, on “Jobs!” can Walker (or Barrett) increase aggregate demand? No?)

WI locals feel DNC money is about Obama November 6 not Barret June 5. DNC feels that’s harsh. Meanwhile, I’ve gotten spam from DNCC and DFA using DNC #FAIL as a fundraising hook. “Hey, Obama Campaign guy…Don’t get lippy with me when I tell you I’ll volunteer as a poll watcher after the DNC cuts a check for Barrett. Just pass the comment up the chain of command and carry on.” “They came by the hundreds of thousands. In the snow, in the rain…. That’s what the DNC is risking…. I was in the crowd that day and I’ve never seen anything like that, never ever. I didn’t believe we were still like that, people.”

Inside Baseball. Larry Sabatto defines and discusses “feeding frenzies”. How to cover the air war: “You can tell, if you talk to enough voters, whether catch phrases from TV ads are popping up in their conversation.” NPR audience growth flatlines. I can’t think why. Grand Bargain™-brand catfood watch: Mark Udall, D-CO: “I think [energy bills] are all held hostage to a grand bargain, a grand deal, a long-term plan to put the country’s fiscal house in order.”

Prediction is difficult. Shorter Nate Silver: “Events, dear boy. Events.”

Ron Paul. Paul to appear at MN convention tomorrow. “I do not believe a republic can exist if you permit the military to arrest American citizens and put them in secret prisons and be denied a trial,” Paul said. Crazy talk!

Robama vs. Obomney Watch. Robama [heart] Reagan, Obomney [heart] Clinton. (Word of the day: Snowclone.) Good neo-liberals all!

Romney. Romney raises $40.1 million in April, nearly matching Obama. (With all that money, can’t the R design team build a website that doesn’t look like it sold reconditioned automobile parts?) Romney gains “personal best” 50% favorable rating (not high). But see feeding frenzy below.

Obama. Gaming Wonderland‘s Obama game: 10,500 plays. The Romney version: 4,500. A first-person shooter, no doubt? “‘Men in Black’ moment: Will Smith and son Jaden get real [!] with Pres. Obama”. Squee!

Jeremiah Wright feeding frenzy. Times at news cycle start: “G.O.P. ‘Super PAC’ Weighs Hard-Line Attack on Obama”. Spiral-bound proposal, by “strategist” Fred Davis, to billionaire Joe Ricketts, would have linked Obama to his “former spiritual advisor,” the Rev. Jeremiah A. Wright, painting Obama as a “metrosexual, black Abe Lincoln” (! So which slaves did Obama free, exactly?) Proposal: “[D]o exactly what John McCain would not let us do”. (I always said the Rs weren’t serious in 2008 (10/15/2008)).

Ricketts immediately throws Davis under the bus: A “third party vendor” whose approach to politics Ricketts rejects. (True, billionaires do tend to get proposals. One of them came from Deb Fischer’s campaign.) Fun facts about Ricketts: His publishing operation scooped both New York tabs on Manhattan madam Anna Gristina. Son Tom owns the Cubbies and wants Obama’s buddy Rahm to help him rebuild Wrigley Field. Daughter Laura is a gay bundler for Obama.

Staggered, Romney steps on his own message and hands the Ds a soundbite for the ages: “I’m not familiar precisely with exactly what I said, but I stand by what I said, whatever it was.” A blank screen…

At news cycle’s end, AP: “Romney denounces idea of Obama-Wright campaign ads.” AFP: “Romney repudiates mooted attack on Obama.” Status quo ante, except for that soundbite…

Think piece. The Archdruid.

* 113 days ’til the Democratic National Convention ends with a torchlight parade on the floor Bank of America Stadium, Charlotte, NC. Fire exists the first in light, And then consolidates,—Only the chemist can disclose Into what carbonates.

READERS: Again, here are the swing states: AZ, CO, FL, IA, MI, NV, NH, NM, NC, OH, PA, VA and WI. I’m very interested in any local or state links you can send me from those states about people “doing politics” that aren’t about the horserace; original reporting, not wire services stuff. Now I have help with CO thanks to MR, and Iowa thanks to TTH but there are more!

* * *

Antidote du jour:

And a bonus from furzy mouse. I can’t embed it, but you can view it here. Very cool.

Your humble blogger is taking a vacation, in large measure due to the success of the fundraiser last year (that was one of the mini-targets we set and you met).

Matt Stoller and Lambert will be running the site while I am away (on an austerity tour, starting in Barcelona, coastal Spain, Portugal, and France). I am leaving tonight (and am hopelessly behind, so if you get more posts, consider yourself lucky). Back June 4.

Be nice to the site DJs and enjoy the change in programming! I know they have some good posts lined up.

By Delusional Economics, who is horrified at the state of economic commentary in Australia and is determined to cleanse the daily flow of vested interests propaganda to produce a balanced counterpoint. Cross posted from http://www.macrobusiness.com.au/2012/05/europes-problems-multiply/“>MacroBusiness.

It feels as if Europe has rolled the clocks back to 2011 as the effects of the ECB’s LTRO have now well and truly warn off and the markets appear to have reconnected with idea that the fundamental issues of the Eurozone have never been addressed.

Spain is 55% through its debt schedule for the year but, as the shadow of emergency operations passes over, yields are rising quickly:

Spain sold 372 million euros of a bond maturing January 31, 2015 at an average yield of 4.375 percent, after paying 2.89 percent April 4, with a bid-to-cover ratio of 4.45 after 2.4 in April.

The bond maturing July 30, 2015 sold 1.0 billion euros, had a yield of 4.876 percent compared to 4.037 percent May 3 and was 3 times subscribed following a bid-to-cover ratio of 2.9 percent at the last auction.

The bond maturing April 30, 2016 sold 1.1 billion euros with an average yield of 5.106 percent, higher than 3.374 percent March 15. Demand was lower than previously, with the bond 2.4 times subscribed after 4.1 times at the March auction.

But that wasn’t Spain’s only problem overnight:

The Spanish government moved Thursday to quell fears of massive deposit withdrawals in Bankia SA (BKIA.MC) as its shares were pummeled by an unconfirmed local media report that depositors were withdrawing savings after the government rescued the ailing lender last week.

“It is not true that there’s a deposit flight,” Deputy Finance Minister Fernando Jimenez Latorre told a news conference to discuss the country’s economic outlook. “Depositors are safer now than they were a couple of weeks ago.” He also dismissed the notion that Spanish banking sector could face massive deposit withdrawals.

Bankia’s stock fell as much as 29% early in the session, before recovering some of the ground and ending down 14% on the day.

And then this morning Moody’s took a blowtorch to the rest of the banking system:

Moody’s Investors Service has today downgraded by one to three notches the long-term debt and deposit ratings for 16 Spanish banks and Santander UK PLC, a UK-domiciled subsidiary of Banco Santander (Spain) SA. The rating downgrades primarily reflect the concurrent downgrades of most of these banks’ standalone credit assessments, and in five cases also Moody’s assessment that the Spanish government’s ability to provide support to the banks has reduced.

The debt and deposit ratings declined by one notch for five banks, by two notches for three banks and by three notches for nine banks. The short-term ratings for 13 banks have also been downgraded between one and two notches, triggered by the long-term ratings changes.

The outlooks on the debt and deposit ratings for ten of the 17 banks downgraded today are now negative. For the remaining seven banks affected by today’s actions, their ratings remain on review for further downgrade, for reasons specific to each bank

It is now quite apparent that the sovereign and banking system in Spain are so intertwined that they are coming to be seen a one thing by the CRAs. The problem is this looks like a downwards spiral for both with no apparent solution to addressing the country’s underlying economic problems. Spain’s broader equities market was down another 1.1% overnight and 35% for the year, while yields continue to rise back towards their November 2011 peaks.

But it isn’t just Spain having trouble with banking deposits, and banking stability more generally. Greece is most certainly struggling from the same, but with the added issue that the ECB is refusing to work directly with a number of Greek banks:

Depending on who you talk to, anything from €700m ($892m; £560m) to €1.2bn was taken out of banks in the days after the election, out of total deposits of around €160bn. That total, in turn, is about a third lower than it was at the end of 2009.

At the same time, the ECB has apparently now said that it won’t directly lend to some Greek banks that it judges to be technically “insolvent”. These are banks that have holes in their balance sheets, because, thanks to the restructuring of Greek sovereign debt, they can’t now expect to get back all of the money that they lent to the government.

That sounds bad, but the banks that have lost access to direct ECB funding can almost certainly still get money from the Greek central bank, which, of course, is ultimately, getting its cash from the ECB (though unlike the more direct form of ECB liquidity support, all the risk implicit in this so-called ELA lending is, formally at least, borne by the Greeks alone).

Please see this post for some further discussion of ECB/NCB interactions.

Just like Spain, Greece also managed a downgrade overnight with Fitch ratings downgrading the sovereign, sighting the outcome of country’s election as the major reason for the cut:

Fitch downgraded Greece’s credit a notch Thursday, to CCC from B-, citing political uncertainty over the country’s commitment to a crucial bailout and possible exit of the eurozone.

“The downgrade of Greece’s sovereign ratings reflects the heightened risk that Greece may not be able to sustain its membership of Economic and Monetary Union (EMU),” Fitch Ratings said in a statement.

Fitch said that a strong showing by Greek “anti-austerity” parties in May 6 parliamentary elections and the subsequent failure to form a government “underscores the lack of public and political support for the EU-IMF 173-billion-euro ($220 billion) program.”

In the meantime, as an interim procedure, Greece has installed a temporary cabinet in the lead up to elections:

Amid deepening economic and political upheaval and under the watchful eye of foreign creditors, Greece’s caretaker prime minister, Panagiotis Pikrammenos, on Thursday appointed a temporary cabinet that will be in place until June 17 when the second general election in a little more than a month is expected to determine the future of the troubled country in the euro zone and the broader stability of the bloc.

According to the polls Syriza’s leader Alexis Tsipras could be the next Greek Prime Minister, and he has kicked off his new campaign in much the same way he left the last one:

“There is no memorandum,” the Syriza leader, Alexis Tsipras, 37, told state channel Net. “The memorandum is finished politically because it has not produced results,” said Mr. Tsipras, referring to a deepening recession in the debt-wracked country.

“Mrs. Merkel is becoming increasingly isolated in Europe,” he said, referring to the German chancellor, Angela Merkel, whose country has taken the toughest line on Greek economic reforms. “Austerity has failed across Europe,” he added and he insisted that his party’s line does not expose the country to a possible euro zone exit even though European leaders have stressed that nonenforcement of the bailout provisions would achieve just that.

We’ll have to wait for the results of the June election before we can determine what happens next, but Mr Tsiparas isn’t alone in Europe calling for a serious re-think of the “fiscal compact”:

France’s new finance minister has reiterated that the country’s new socialist government will not ratify the European Union’s (EU) fiscal pact. Pierre Moscovici said the pact would have to include provisions for growth before France signed up.

The fiscal pact aims to ensure governments keep a tighter control of spending to reduce debt levels. French President Francois Hollande is campaigning for a greater focus on growth alongside austerity.

Austerity alone, he says, will not solve the eurozone debt crisis.

“What has been said quite clearly is that the treaty will not be ratified as is and that it must be completed with a chapter on growth, with a growth strategy,” said Mr Moscovici in a television interview, his first public comments since his appointment.

As I said at the start of the post it feels like 2011 again. A worrying mix of political squabbling on top of the fact that there is no credible plan to address the problems of the countries at risk.

Surely it’s time for another summit, or at least talk of LTRO 2.5.

By Philip Pilkington, a writer and journalist based in Dublin, Ireland. You can follow him on Twitter at @pilkingtonphil

In 1936 Keynes wrote a forward to the German edition of his General Theory. Since then it has, as far as I can see, been ignored by his defenders and held up by his most virulent detractors (notably, Austrian School ideologue Henry Hazlitt). Detractors point to what they perceive to be a damning indictment of Keynes’ system in the form of the following quote:

The theory of aggregated production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire.

In quoting this sentence we are supposed to be led to believe that Keynes possessed some sort of ulterior and, indeed, nefarious motive. But any such presumed motive tends to melt away when the rest of the passage is read:

This is one of the reasons that justifies the fact that I call my theory a general theory. Since it is based on fewer hypotheses than the orthodox theory, it can accommodate itself all the easier to a wider field of varying conditions. Although I have, after all, worked it out with a view to the conditions prevailing in the Anglo-Saxon countries where a large degree of laissez-faire still prevails, nevertheless it remains applicable to situations in which state management is more pronounced.

And so it turns out that Keynes’ critical point is that his theory, being a truly general theory, can be applied to explain any economy. There’s nothing nefarious here, Keynes is simply making the point that his theory is remarkably robust in that it can explain how production and consumption takes place in pretty much any economy – not just in a market economy.

To indict Keynes on this point would be basically the same thing as to indict a sociologist whose methodology could be applied to both a totalitarian state and a democratic one; or a doctor using the same anatomical descriptions to explain the functioning of the body of a healthy man and a sick one. In fact, it shows that Keynes’ is a theory far more in the spirit of science than, for example, neoclassical theory, which only seeks to describe the functioning of rigidly defined market economies.

Indeed, these indictments tell us more about the motivations of the people who make them rather than of Keynes and his followers. The critics implicitly assume that economics should be a practice based on very specific value judgments. Thus a theory that might explain both the economy of Nazi Germany and that of the democratic US is to be distrusted because it does not contain a serious distinction between the two systems; instead it seeks to explain what they hold in common rather than where they differ.

Of course, if you like your thinking mixed up and muddled with value judgments the criticisms made by the likes of Hazlitt are indeed correct: when counting apples one should always take into account in his arithmetic his own personal opinion of the taste of apples.

But it is not surprising that such an approach has its adherents generally chalked up as cranks and ideologues by their academic colleagues (although there is some irony here given that the mainstream implicitly relies on many of the same value judgments, albeit in softer form). Not to mention the irony of their logical systems containing such strong value judgments that seek to have society organised in a very specific manner while at the same time they chastise their opponents for… telling people what to think and what to do – indeed, the whole theory appears to be written in an imperative tone that would not be out of place in the Old Testament. The sheer level of narcissism that such unreflective assertions must necessitate simply boggles the mind – one would be forgiven for thinking that some sort of psychological ‘splitting’ was at work.

As reporters keep digging into the “London Whale” story, the picture that emerges about the caliber of risk controls and management supervision at JP Morgan only look worse and worse.

The latest revelations comes via the Wall Street Journal. First, that there was no treasurer during the period when the CIO entered into the loss-making trades. The idea that a bank of any size, let alone one as big as JP Morgan, would go for months (five in this case) without a treasurer in place is stunning. JP Morgan contends this is not germane, since (allegedly) the CIO did not report to the treasurer. Then pray tell, why was it housed in the treasury at all? And the bank’s efforts to make this all sound normal are undermined by this part of the story:

Joseph Bonocore, who left the treasurer’s post last October before the trading losses ballooned, reviewed weekly the positions being taken by the office and had raised general concerns about risks being taken by the London office that placed many of the questionable trades, according to a person familiar with the situation. Mr. Bonocore knew the investment unit well; he previously was its chief financial officer for roughly 11 years.

So the former treasurer was looking over the positions, even if he was not part of the reporting line (or was he?).

But worse, the risk manager tasked to the oversight of the unit appears underqualified for the job, and that might not be unrelated to the fact that he is the brother-in-law of a JP Morgan executive. The Key extracts:

J.P. Morgan Chase JPM -4.31% & Co. didn’t have a treasurer in place during a five-month period when the bank’s Chief Investment Office placed trades that led to more than $2 billion in losses.

In addition, the executive put in charge of risk management for the Chief Investment Office in February, Irvin Goldman, was a former trader, not a risk manager. He is also the brother-in-law of another top J.P. Morgan executive, Barry Zubrow. JP Morgan argued that many risk professionals come from trading (true) but his background does not look logical for oversight of a business dealing in complex “hedges”:

Mr. Goldman had little risk-management experience before taking the chief risk officer post at the Chief Investment Office. He spent most of his career as a trader, starting at Salomon Brothers in the 1980s. He oversaw interest-rate product sales and trading at Credit Suisse First Boston and in 2003 joined Cantor Fitzgerald, where he was president of its debt capital markets and asset management divisions. Mr. Goldman ultimately left Cantor in October 2007 after his unit piled on trading losses during the previous summer.

Even though his role at Credit Suisse might sound relevant, he left that position nearly 10 years ago, and I would anticipate practice has changed quite a bit. Cantor is known primarily as an inter-dealer broker in Treasuries. Readers are welcome to correct me, but I am not aware of Cantor being a significant player in complex derivatives, and they would not seem to be positioned to play that role (you need a large balance sheet and good market share in the related cash products to be competitive).

An article at CNBC yesterday raised another troubling issue, that the CIO had a more permissive value at risk model than the rest of the bank. This is consistent with the idea raised by Michael Crimmins earlier today, that the “whoops we allowed that model to put on a lot of risk, didn’t we?” was not an accident, but a way to allow a unit that was expected to take risk to put it on, and/or put less capital against those positions. From CNBC:

The JPMorgan Chase unit that lost more than $2 billion through a failed hedging strategy had looser risk controls than the rest of the bank, according to people familiar with the situation.

The risk of losses is tallied by the bank using a so-called value at risk (VaR) calculation. However, the Chief Investment Office, the unit responsible for the high-profile loss that JPMorgan disclosed last Thursday, had a separate VaR system.

It used a less stringent calculation that gave a lower risk assessment of its trades, according to people who previously worked at the bank. The unit also reported directly to CEO Jamie Dimon, a factor which allowed it to maintain a separate risk monitoring set-up to other parts of the investment bank, these people said.

Despite repeated warnings from executives inside the firm as long ago as 2005, the CIO unit remained notably free from oversight. A source with knowledge of the situation said that these warnings included the size of the CIO, the fact that its risk reporting was not transparent and the scope for the unit to get “bigger and bigger” because it had a lower cost of funding than the rest of the investment bank.

Until April, the CIO unit’s unusual autonomy allowed it to build up risky positions without triggering alarms.

Sports fans, letting a unit run with lower VaR and is completely inconsistent with the JP Morgan party line, that the CIO was in the business of hedging. And this part is therefore no surprise:

Indeed, the unit was encouraged to be a profit center, as well as hedging against risk…

The facts in the public domain about this unit are damning. And if Jamie Dimon survives, as expected, it will serve as yet another bit of proof of how deeply the Obama Administration is in bed with major banks.

By the Alternative Banking Working Group of Occupy Wall Street

Dear Jamie Dimon:

We, the Alternative Banking Working Group of Occupy Wall Street, are staging an intervention on your behalf. Unlike many in the financial industry and press, we will not be deceived by attempts at misdirection and we are not intimidated by complexity. Your days of gambling with taxpayers’ money and pressuring the regulators to let business go on as usual are over. It’s not good for you, it’s not good for us, and it’s not good for our country.

It’s been a good ride, and we’ve been impressed with how long you have managed to keep it up. The incredible complexity of the financial system helped, of course, just as it helped obscure countless other crimes and frauds.

It’s truly a work of art how you and your enablers have created a system that nobody fully understands. It’s the perfect cover for your continuing addiction to risk, power, and money, and it keeps everyone confused just long enough, well past any statute of limitation for criminal prosecution.

Now your addiction is out of control. Rather than quitting while you and JPMorgan Chase were ahead (if you ever were), you’ve been driven to inhale every last dollar, no matter the risks involved for you and for all of us. What has really worked for you personally, and has allowed you to remain credible for so long, is your intense denial as to the underlying question of what year it is.

You seem to live in a time warp where it is still 2004, the housing market is booming, along with the associated securities market, and you and your friends are printing money with no downside in sight. But it turns out that ’04 model was a bit of a lemon — or, to borrow your words, “poorly conceived, poorly vetted, and poorly executed.”

Here is some sobering news: You are, in fact, living in 2012, leading an enormous, too-big-to-fail bank, which is being continuously bailed out by the Fed’s unlimited loans at 0% interest, on the taxpayers’ dime. In a reasonable world, under these conditions, JPMorgan Chase would be a utility bank focused on the public good, and you would be merely its custodian. You would not be incentivized to take crazy risks to chase yield. Your job would be incredibly boring and your bank only very mildly profitable.

But, sadly, the addiction is still doing the talking. So we’re here to say “no more.” It’s time to put down that fifth drink and walk away from the baccarat table, because no matter how many martinis you have and no matter how much money you lose, you’re still a glorified accountant, not a secret agent. And that’s fine. There’s nothing that JPMorgan Chase, and the world economy for that matter, needs more than a very good accountant.

Perhaps you will protest that you don’t need this intervention. In fact, over the past few days you have repeatedly acknowledged your sloppiness, stupidity, and bad judgment. And though that sounds compelling and humble, as we know you expect it to, you haven’t gone far enough to demonstrate that you understand just how deeply in trouble you are. And don’t claim stupidity – “stupid” isn’t a word associated with Jamie Dimon. You need to admit that you are powerless over your addiction and that your bank has become unmanageable.

Here is what we ask of you:

First, stop gambling with our money and our futures. Stop lobbying for deregulation — we are way past that now. Stop lying to us all by doing silly things like pushing proprietary trading into the treasury office and renaming it, or by pretending that there are no losses when there very clearly are, to the tune of $2,000,000,000 and growing. And, please, stop trying to convince us that nobody at JPMorgan Chase saw this coming. Ina Drew was offering to resign in April but you kept telling the world that nothing serious was amiss, a lie which could get you serious jail time.

Second, admit that your bank is too big to take risks that neither you nor anyone in your bank understands or is able to handle, and that the only thing that will stop you from misbehaving is strong, enforced, and uncompromised regulation.

Third, resign as Director of the Federal Reserve Bank of New York. It is inappropriate, and dangerous to us, for you to oversee the banking system or the economy when you have proven incompetent at overseeing your own bank — particularly since the Federal Reserve is investigating your bank and your behavior.

Because this in an intervention, you’re going to need to get used to a lot of new folks who will challenge the bad decisions that have become habit for you. The SEC should be facilitating the first step by getting you into a full in-patient rehab program, where the Fed, the FDIC, and every other regulator who has an interest in your bank’s good health can help you make a searching and fearless moral inventory of your bank and its choices. Although the “revolving door” connecting Wall Street to the Beltway has turned our regulatory agencies into the Keystone Kops of the 21st century, your crisis should serve as a wake-up call and put an end to their denial as well.

When you reach your twelfth step, you can help the regulators write tougher regulations based on the knowledge you acquired during your efforts to undermine them.

After all, if you can’t manage the risk, then nobody can. And you’ve taken the first step by admitting that you can’t. Now take the other eleven.

Best regards,
The Alternative Banking Working Group

Whales can adjust their hearing BBC

Home-built “Bio Computer” runs Linux, grows wheatgrass Gizmag (Aquifer)

Google says this makes it smarter WebProNews (Lambert)

Dental Abuse Seen Driven by Private Equity Investments Bloomberg. This is REALLY awful.

This Is Your Brain On Sugar: Study in Rats Shows High-Fructose Diet Sabotages Learning, Memory Science Daily (Aquifer)

Mixed Bacterial Communities Evolve to Share Resources, Not Compete Science Daily (Aquifer)

Looks Matter More Than Reputation When It Comes to Trusting People With Our Money Science Daily (Aquifer). Quelle surprise!

‘If We Leave the Euro, Everything Will Be Worse’ Der Spiegel

Greeks urged to run poll as euro vote Financial Times

ECB Stops Loans to Some Greek Banks as Draghi Talks Exit Bloomberg

Debt crisis: Greek euro exit looms closer as banks crumble Ambrose Evans-Pritchard, Telegraph

The Problem with the Eurozone’s Throw-Greece-from-the-Train Plan Is that its Timing Can’t Be Controlled Peter Dorman

Cost of Greek exit from eurozone put at $1tn Guardian

Hume on hold? Consequences of not abolishing Eurozone national central banks Michael Burda, VoxEU

Money is fleeing China MacroBusiness

Whites Now Account for Under Half of Births in U.S. New York Times

Federal court enjoins NDAA Glenn Greenwald. Wow, the good guys win one for a change.

The Great Modulation MacroBusiness

Federal Reserve wary of eurozone risks Financial Times. NOW they’re worried?

White House Steps Up Push to Toughen Rules on Banks Wall Street Journal. This part is funny: “White House officials have intensified their talks with the Treasury Department in the days since J.P. Morgan’s losses came to light.” Translation: “White House tells Geithner he has to do a more convincing job of not looking like the banks’ water boy.”

JPM’s Jamie Dimon Talked Volcker Rule In Private Meeting With Timothy Geithner TPM

‘London Whale’ Said to Be Leaving JPMorgan New York Times. Wonder why that took so long.

Wells Fargo Has Blood on Its Hands: Desperate Man Commits Suicide After Shocking Foreclosure Mistreatment Alternet (furzy mouse)

* * *
D – 114 and counting. *

A week is a long time in politics. –Harold Wilson, of all people

Lambert here:

G8 Summit. Camp David is in MD, near Thurmont. The nearest large town is Frederick. OccupyFrederick and OccupyBaltimore seem to be holding the scheduled events. An anonymous farmer in Thurmont is letting Occupy Baltimore camp on his land. Statement from Sherriff Chuck Jenkins of Frederick County. “There has been a recent trend toward flash mob protests.” Bucolic. There will be drones, so Obama should feel comfortable. Protest photography, with useful tips.

NATO summit. Multiple sources telling TimCast Chicago NATO people will lose cell service. Standard Operating Procedure 303 gives “state homeland security advisors” the power to call for the “the termination of private wireless network connections.” Of course a National Emergency is whatever Obama wakes up in the morning and says it is. (Interestingly, the chance of “mobile phone service gaps” near Thurmont was one reason the G8 people didn’t march on Camp David.) Iraq Veterans Against the War organizer Aaron Hughes will be leading a column of veterans this Sunday where he’ll be returning the service medals he earned in Iraq. Media Operation in a Wicker Park loft (including live coverage of #99SBus Occupy buses arriving). (Interesting to see links to IndyMedia in local press coverage.)

Buses from Albany, Atlanta, Burlington, Detroit, Los Angeles, Minneapolis, New York City, Philadelphia, Portland, Providence, and Washington, D.C. are expected. “Protesters from all walks of life — from unemployed construction workers to dumpster-diving former cycle messengers and paramedics to a tech millionaire who helped lead the 1989 student protests in Tiananmen Square — are along for the ride.” Housing unclear, but the Wellington Avenue United Church of Christ will take as many as the church can hold. “As the first #OWS bus pulls into Chicago, an announcement that if the media wants comments, we use progressive stack. #99SBus” Awesome.

“Nobody in November will remember what happened,” an Obama team source told me. It will be a short news cycle on the cable outlets “and a month in the [Chicago] papers.” Oh?

Occupy. London Tents (slideshow). Walter Russell Mead harrumphs “OWS RIP”. Charlotte occupies Bank of America (pictures).

Green Party. SF debate, Stein: “We do not have a functioning press. We have an o-press. We have a re-press.” Barr: “If they could just leave the Democratic Party and register as Greens, they could still vote for Obama but it would be sending the Democratic Party itself a message it needs to hear.” Pacific Green Party in danger of losing OR ballot status. HI Convention this Saturday.

CO (Swing State). Camping ban could mean OccupyDenver’s days are numbered (MR). Loveland, CO approves a drilling moratorium. (Outcomes like this take a lot of work, and courage by officials as well.)

IA (Swing State). Three of the Catholic Worker activists who got arrested at Obama’s HQ for NATO were from IA. Nuclear energy bill stalls in IA Senate (Dee). U-235, baby, U-235? No? Did Rs give the Register a make-good for going with FOX for their debates, and then renege? (Dee)

MI (Swing state). “Follow the money” in the Detroit consent agreement; it’s interest, not pensions, that are the killer. That’s off the table, though.

NC (Swing State). Libertarian Party’s Johnson polls 6% in NC.

OH (Swing State). Gov. Kasich signs bill to get rid of restrictive new election law Ds had challenged.

VA (Swing State). Wood County, bellwether county. (What is a bellwether? Do they exist anymore, or have they gone digital?) Uranium briefing scheduled in Virginia Beach. U-235, baby! U-235!

WI (swing state). Absentee ballot mailing delayed. Brad Blog: Watch for dirty tricks soon. Walker dislikes job numbers, so puts out his own. Obama and Romney are tied. But Obama has no coat tails. “Voters prefer to keep the current collective bargaining law rather than return to what it was prior to last year, by a 50-43 percentage point margin”. The margin is the size of Walker’s lead. Pierce: “By citing the ‘civil war] as the reason for voting for him, and without, I believe, intending to do so, Barrett makes all those people standing in the cold last January marginally complicit in what he says as the problem the recall was meant to solve.” So, when GOTV is key, and the national Ds won’t give them any money, the state Ds could manage not to fire up but to chill off the exact same people that got them their recall election in the first place. I say bring in Ilya Sheyman’s team! Washington Generals….

Inside Baseball. The joke Jimmy Kimmel didn’t tell. Grand Bargain™-brand cat food watch: The Peterson Foundation’s selfless generosity to DC influencers, including many weasel Ds (sorry for the redundancy). There is an alternative. Obama says he won’t allow U.S. debt ceiling crisis repeat. Boehner says he will allow it, and he’ll like it. Harry Reid: “We’re not going to do [the nuclear option] this Congress”. Obama Super PAC hires… Kerry 2004 manager Mary Beth Cahill. Understatement of the millenium: “Role unlikely for George W. Bush in Romney bid.”

Prediction is difficult. Nationally, Obama and Romney are neck and neck. “The usual drill: OH and FL and a very late night.” Swing-state unemployment down, Obama’s chances up. (Could be why Romney shifted to ZOMG!! Teh Debt!!!) Except for college grads. Carter Eskew throws the unemployment stats against the electoral map and comes up with Obama 313/225.

Ron Paul. Paul says ‘“no plans” for third-party White House run.

Robama vs. Obomney Watch (this once…). Biden: “Romney made sure the guys on top got to play by a separate set of rules, he ran massive debts, and the middle class lost. So what do you think he’ll do as president?” Er, just what Obama did? Romney: “I’d like to take shipbuilding from 9 to 15 a year, by the way that will help put people to work.” Military Keynsianism is always on the table. It’s bipartisan!

Romney. Mitt Romney debt speech “ignores key facts”, even if he used a debt clock for a prop. That’s giant AP making the call on facts, even if facts are hardly the point. Romney faces headwinds from press. “How to Act Human: Advice for Mitt Romney From Inside the Actors Studio.” Meme watch: Romney advisers say 2012 is about “eHarmony versus Monster.com.”

Obama. The Non-Campaign of 2012 (BAR). Obama’s broad path to victory: Western, Midwestern, Southern, Southwestern, and Florida strategies. Letterman: Obama demonstrated “great courage and great intelligence” when he “gunned down” bin Laden, asking “what more do you want to lead your country?” Gee, I dunno. Obama can order a hit like you or me can order a pizza. Isn’t Letterman setting the bar a little low?

* 114 days ’til the Democratic National Convention ends with a light collation followed by a showing of The Exterminating Angel on the big screen at Bank of America Stadium, Charlotte, NC. Ununquadium is the temporary name of a radioactive chemical element with the temporary symbol Uuq and atomic number 114.

READERS: Again, here are the swing states: AZ, CO, FL, IA, MI, NV, NH, NM, NC, OH, PA, VA and WI. I’m very interested in any local or state links you can send me from those states about people “doing politics” that aren’t about the horserace; original reporting, not wire services stuff. Now I have help with CO thanks to MR, and Iowa thanks to TTH but there are more!

* * *

Antidote du jour:

By Michael Crimmins, who has worked on risk management and Sarbanes Oxley compliance for major banks

The scandal surrounding JP Morgan’s losses in its Chief Investment Office is not going away, and for good reason. Its trading book continues to lose money at an astounding rate. The most recent report estimates that the losses have increased by at least 50% more than the bank’s original loss estimates. The total damage is anyone’s guess at this point.

This fiasco is beginning to look a lot like accounting control fraud. The Justice Department and the FBI have begun criminal probes. The SEC is also investigating. So far, the objectives of these investigations are under wraps, but if I were an SEC or DOJ enforcement official I’d be laser-focused on bringing a Sarbanes-Oxley case against Jamie Dimon.

Sarbanes-Oxley emerged out of the Enron frauds. This law requires the CEO to certify that internal controls are operating effectively to give comfort to readers of the financial statements that the disclosures contained in the reporting are reliable. There are civil penalties for filing a false certification and criminal penalties, including jail time, for false filings found to be fraudulent. So far none of the obvious candidates like Dick Fuld at Lehman or Jon Corzine at MF Global have been prosecuted under the law.

Jamie Dimon looks like a very attractive candidate to investigate for SOX violations.

For starters, Dimon’s description of what happened rings SOX alarm bells:

First of all, there was one warning signal — if you look back from today, there were other red flags. That particular red flag — you know, we made a mistake, we got very defensive and people started justifying everything we did. You know, the benefit in life is to say, ‘Maybe you made a mistake, let’s dig deep.’ And the mistake had been brewing for a while, so it wasn’t just any one thing.

- Meet the Press, May 13, 2012

Warning signs and red flags were ignored. And they’ve apparently been ignored since 2007. Once again, echoing what happened at MF Global, risk managers who raised alarms about the riskiness of the positions in 2009 were replaced with more cooperative risk managers:

Several bankers said that risk controls were not sufficiently strengthened by Doug Braunstein, who took over as chief financial officer in 2010, another reason the bolder trades continued.

This indicates the firm was aware of deficiencies in the controls if other executives knew Braunstein had a mandate to improve them. These concerns are probably documented in the meeting minutes of the management committees responsible for risk, financial reporting and SOX compliance. It shouldn’t be difficult for the SEC to review these sources to determine who knew what and when about the state of the internal control environment.

JPM has issued quite a few financial statements since 2007 and 2009. If the controls and riskiness of the trades were as alarming and deficient as the managers indicate, then the reliability of the financial statements for the last 5 years are questionable. For a portfolio of this size and importance it’s inconceivable that the controls and risk issues were not reported up the management chain.

More damning is Dimon’s tacit admission that the controls designed to protect the firm from these sorts of blowups were ineffective, due to lack of intervention. Ignoring internal controls, or red flags as Dimon characterizes them, is a failure in the control environment. The failure to disclose inoperative key controls in the CEO certification is a violation the law.

That’s the big picture case. Recent reporting about the trade itself point to other areas that should be investigated for Sox violations.

When is a Hedge not a Hedge?

It appears that the JPM portfolio ‘hedge’ isn’t a hedge at all, at least according to current accounting standards. As Dina Dublon, CFO of JP Morgan Chase from 1998 to 2004, explained:

Dublon also pointed out that JP Morgan’s $200 billion mistake was not an accounting loss. “There is a difference between accounting and economic valuations,” she said. “You have a mark-to-market hedge against an accrual exposure that is not being marked to market. So you can have a gain or loss on the hedge, but you will not recognize the change in value of the loan portfolio, which is on an accrual accounting basis.

Translating this into non accountant language, JPM had a portfolio of assets which are available for sale. The change in the value of those securities is tracked, but since they aren’t considered to be trading assets, the change in value doesn’t hit the bottom line until they are sold. By contrast, positions held in trading books are “marked to market,” meaning they are revalued as market prices change and the resulting gains or losses are reported on an ongoing basis.

JPM reported that this portfolio contains significant unrealized gains. Indeed, it realized some of those gains to offset the losses on the portfolio ‘hedge’.

To hedge this portfolio JPM bought and sold credit default swaps. This portfolio ‘hedge’ is accounted for on a mark to market basis. This is odd since a true hedge should get the same accounting treatment as the asset it’s hedging. This indicates that the ‘hedge’ failed the hedge effectiveness test required by the accounting rules that would qualify it for hedge accounting treatment. More precisely the correlation between the hedge and the underlying isn’t strong enough to qualify it as a hedge.

Further confirmation that the ‘hedge’ wasn’t technically a hedge comes from Jamie Dimon himself.

In hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored. The portfolio has proven to be riskier, more volatile and less effective an economic hedge than we thought.

As Dublon explained above, “There is a difference between accounting and economic valuations.” Dimon takes care to refer to the ‘economic hedge’, which is a term of art. It has no significance for financial disclosure purposes. It means whatever the user wants it to mean. If Dimon has not been vigilant in using the phrase ‘economic hedge’ in his disclosures and public comments about this portfolio then he’s made some false disclosures.

An “economic hedge’ is not a ‘hedge’ for financial disclosure purposes. ‘Economic hedge’ is a meaningless phrase. The abbreviated term ‘hedge’ when used to describe the trading portfolio embedded in the CIO book is a false characterization of the portfolio. He should not be permitted to describe this as a hedge in any of his comments about this book. At a minimum, he should be called on it every time he utters the phrase.

If It’s Not a Hedge Then What is It?

To recap, JPM owns a portfolio of securities it is ‘economically hedging” with a portfolio of credit default swaps. The purpose of a hedge is to reduce the risk of adverse price moves on the underlying portfolio.
The CDS portfolio consists of CDS purchased and CDS sold.

CDS purchased for the portfolio may have been put on as a hedge against the “available for sale” portfolio. But the CDS sold as a hedge doesn’t seem to make any sense. Selling CDS is equivalent to increasing the exposure to the underlying credits. The CDS sold don’t seem to have a risk mitigating role as part of a hedge, but to date JPM hasn’t provided the information to evaluate the overall portfolio.

It’s possible JPM was funding the CDS purchases by selling longer dated CDS and justifying the inclusion of the CDS sales as funding of the hedging purchases, but that would seem to be pretty expansive definition of a hedge. Perhaps ‘economic hedging’ as JPM defines it includes the funding sources of the combined ‘economic hedge’. That seems ridiculous but the term is open to any interpretation.

Since the combined CDS portfolio is accounted for on a mark to market basis, the position may not have raised any red flags with readers of the financial statements as long as it was in the money. That appears to have been the case for an extended period, as evidenced by the enormous pay packages (over $100 million for the chief trader, the infamous Whale, if reports are to be believed) for the CIO desk. You don’t pay that kind of money to hedgers.

But the position has cratered this year and JPM was forced to disclose the losses on the CDS portfolio. To offset those losses JPM sold off some of its AFS portfolio. We’re still waiting for a precise definition of economic hedge from JPM.

This characterization raises additional alarms, since it appears that JPM effectively viewed the AFS/CDS portfolio combination as a net trading position. Normally, you wouldn’t sell your AFS portfolio (or enjoy the beneficial accounting treatment) unless there was an extraordinary exogenous event that caused you to liquidate the portfolio. Trading losses on a portfolio jointly managed as part of the AFS portfolio wouldn’t qualify.

This raises the question of whether JPM has correctly classified the available for sale assets since they acquired them. That’s a serious issue. If JPM misclassified a $200B position for years, it should be investigated for a host of regulatory violations and fraud.

For all intents and purposes the hedge portfolio is a separate trading book, and the financial reporting reflects that fact. There should be no way JPM should be able to spin this as a hedge of anything and deny the proprietary trading characterization the accounting treatment signifies.

What’s up With the Value at Risk?

Another area the SEC needs to investigate is the curious restatement of the VaR, which is a measure of risk used in disclosures to investors and regulatory reviews.

As discussed above, the risk exposure of the marked to market positions (the hedge porfolio) must be disclosed in the financial statements. JPM recently replaced the VaR model for this portfolio. It appears that the new model significantly understated the risk exposure and the bank has hastily reverted to an “older” model. One benefit of a reduced risk exposure is a reduction in capital held against the portfolio. Under the new model JPM would only have been required to hold half as much capital on the portfolio, than it did under the original model

It is extremely unusual that a risk model for such a critical portfolio isn’t exhaustively vetted both internally and by the regulators before it was permitted to be installed. There was clearly a breakdown in the controls around that model replacement. This breakdown resulted in a significant and material underreporting of risk in the initial 1Q 2012 SEC reporting. The restatement validates that a material breakdown in internal controls existed before the model was implemented.

It also raises other questions. Blaming models for management failures has become a fairly standard first response during the financial crisis. When HSBC took their first big hit on their securitization business in the 2007 (for fiscal year 2006), and shut down their US securitization business, they attributed the losses to the discovery that their credit risk models were flawed. I have no doubt this was true, but the discovery of the flawed model also coincided with the beginning of the collapse of the RMBS market.

The revelation by JPM in the days immediately following the reports of the Whale’s trade, that the new VAR model seriously underestimated the riskiness of the portfolio, is more significant to a SOX investigation around adequacy of controls than an investigation into the adequacy of the model itself for risk management purposes.

This sort of “whoops our models understated risk” is a convenient way to shift blame off management to “model error” for a decision to take on additional risk. Given that easy profits in banking are vanishing, which are we to believe: that JPM, heretofore seen as a leader in the CDS marker, suddenly became grossly incompetent? Or did they decide to take on more risk and implement models that would mask from regulators and the public the scale of the wagers they were taking?

It also raises concerns about other models use for these portfolios. Many of the underlying assets in the portfolio are illiquid and complex securities. The models used for pricing these instruments and reporting valuations deserve additional scrutiny at this point as well.

It doesn’t look like JP Morgan made a bunch of egregious mistakes. It looks like they broke the law, at least the Sarbanes-Oxley law.

By Brett Scott, who operates as a consultant bridging the gap between finance and those involved in socio-environmental justice and international development. He has also written for the Guardian, the Ecologist, New Internationalist and Open Democracy. Brett blogs at www.suitpossum.blogspot.com and tweets as @Suitpossum. He is a fellow of the WWF/ICAEW Finance Innovation Lab.

The greatest barriers to financial whistleblowing are social and economic, not legal. Fear of being shunned by colleagues, passed over for promotion, bullied and harrassed, summarily dismissed and even shut out of Wall Street or the City for life plays a big part in dissuading executives who become aware of crimes and misdemeanours inside their organisations from blowing the whistle.

Occasionally, as we saw with Greg Smith and his remarkable New York Times op-ed Why I Am Leaving Goldman Sachs, an employee’s conscience gets the better of them. But fear of being ostracised for “spoiling the party”, coupled with an attachment to the high pay that a financial career can bring (you might call it ‘moral cowardice’) is sufficient to persuade the vast majority of putative whistleblowers to keep schtoom.

That’s why I believe we need a financial version of the whistleblowing website WikiLeaks. It would protect employees from management retribution and eliminate the social barriers to speaking out. There are already several leak sites available (check out the Leak site directory).

While Anonymous Analystics specializes in ‘primary research’, it also briefly offered a dropbox facility for would-be whistleblowers. This was recently closed down. The offshoot of the hacker group claimed this was because it had been unable to handle the volume of tips, comments and emails it had received.

Organisations such Anonymous Analytics are firmly focused on overt cases of corporate fraud and headline-grabbing controversies. Nevertheless, while having channels to expose criminality is important, there are many other equally valid reasons to create a financial leaks site.

WikiLeaks’s release of the US Embassy Cables, which commenced in November 2010, didn’t provide much sensational news, but it did provide a rare window into the normally opaque worlds of diplomacy and espionage and the conflict between the State department and more nefarious arms of the US state. It will be an invaluable resource for academic researchers and journalists for years to come. But there are few, if any, such open windows into the financial sector.

The Safe Deposit Box: A Tool for Transparency

This, coupled with the inadequacy of most financial regulators around the world, is why a specialised financial leak site is so badly needed.

Here’s my back-of-the-envelope sketch for the Safe Deposit Box, a site that would improve transparency in financial institutions (including banks, insurers, funds, brokers) and commodity trading outfits, by providing a channel that would encourage internal leaks. It could be curated by individuals with financial expertise, such that information leaked could be vetted for accuracy and presented correctly (something that non-specialist leak sites would be unable to do). The site could be split into two main divisions with different purposes:

• A whistleblowing section to allow employees of banks and other financial institutions to expose dubious behaviour, including instances of financial crime, market manipulation, insider trading, ‘creative’ accounting and rogue trading.
• A transparency initiative focused on shedding light on the inner workings of financial institutions. This section would encourage employees to contribute information such as organisational structures, divisional strategies, risk exposures, compensation, and other information that helps to break the near impenetrable wall of secrecy (omertà) large financial institutions frequently enjoy.

Many people intuitively understand the value of division one, but division two is perhaps harder to justify. What’s the point of transparency for transparency’s sake, some might ask? I would argue that banks and other financial institutions still enjoy huge political clout (and indeed some are owned by the public), yet citizens have virtually no insight into their inner workings and strategies, including who they are lending to, how they treat distressed assets, or their level of speculation on energy and food prices. (see “Barclays shame award“)

For example, I suspect that the residents of Chicago do not have the faintest idea of how a Morgan Stanley consortium came to own the city’s parking meters. I also suspect the residents of Edinburgh have no idea how a RBS consortium came to own the city’s main hospital, the Edinburgh Royal Infirmary.

At a systemic level, the very opacity of financial transactions increases systemic risk, which in turn has a massive impact broader society. Providing a channel for financial employees to shed light on their organisations would have: (1) a democratic empowerment benefit and (2) A research and regulation benefit, providing more material for citizens, academics and regulators to understand and monitor the financial sector.

The transparency initiative could be split into specific research domains that are of particular concern (or ought to be) to journalists, researchers, campaigners, regulators, and even some politicians. For example, domains could include:

• A high-pay transparency programme to gather leaked payrolls, compensation reports and other material to help in monitoring financial incentive systems.
• A tax haven programme to gather lists of subsidiaries, offshore transactions and other material to help shed light on tax avoidance systems.
• A loan transparency programme to gather information on loan portfolios of the banks’ corporate banking divisions, thereby helping keep tabs on socially and environmentally irresponsible lending
• A programme gathering information on banks’ dealings with Polically Exposed Persons (including deposed dictators and their families), authoritarian regimes, and dodgy individuals
• A systemic risk programme gathering info on prop trading levels, interbank risk exposures, and shadow banking systems
• A programme collecting information on ‘mis-selling’ and poor customer service (aka. treating clients as muppets)

I don’t want to be flippant. I also accept that actively encouraging breaches of confidentiality might border on being illegal. Yet confidentiality and non-disclosure agreements are often used by banks to bury frauds and other issues of concern, whose victims are often outside the institution that perpetrates them.

For example, in my research into the potentially damaging effects of commodity speculation, I hit a brick wall when seeking to establish how much banks earn from their agricultural commodity trading desks. They simply don’t report it, and stonewall all requests for information.

I recognise that that leak sites are far from perfect mechanisms and that innumerable issues would have to be overcome before a site along the lines I describe could be launched.

These would include how it would be structured and who would be permitted to access the information. Would it be better to use a centralised WikiLeaks structure, or something more decentralised along the lines OpenLeaks (set up by Wikileaks defectors, but yet to launch)? Might it be better to consider something more conciliatory and collaborative, more like Wikipedia, a financial commons that would allow people with financial expertise to freely and anonymously contribute?

What I do know though, is that financial secrecy benefits a very small section of society, but harms a very large section of society, and I’m also sure that there are a great many financial workers who would love the opportunity to spread the love by spreading the knowledge. There again, there’s always the risk that such a site might also attract the attention of the financial blockade.

More than four years after Serena Ng and Carrick Mollencamp of the Wall Street Journal first took notice of the highly destructive ways of the Chicago hedge fund Magnetar, which created a series of toxic CDOs, the SEC finally appears to be taking a serious look at some of their deals. More accurately, it seems to be dusting off and perhaps expanding a probe that it started last June (hhm, wonder if this flurry of activity has anything to do with polls showing how independents in swing states are giving Obama thumbs down for his complacency on Big Finance?) The SEC is also reportedly looking at the deceptive role played by collateral managers, something we discussed in ECONNED and that Tom Adams has written about extensively on this blog.

The short version of the story is that Magnetar constructed the perfect trade. It would fund the equity tranche of CDOs, usually 4-5% of their total value. Deal sponsors like Magnetar got significant influence over the deal, at a minimum veto rights over the assets chosen to go into the CDO. Magnetar took a much bigger short bet on these same CDOs (either by buying the CDS that were the majority of the assets in these deals) or by buying CDS on the CDO itself. The equity paid a very high interest rate (15% to 20%) until the deal started to fail. The interest on the equity funded the CDS premiums on the short bet. But these deals paid big money only if they failed, which they did with impressive speed. (For more background, see this post).

Key points from the Wall Street Journal article:

U.S. securities regulators are investigating hedge-fund firm Magnetar Capital LLC, which bet on several mortgage-bond deals that wound up imploding during the financial crisis, according to people familiar with the matter….

If the SEC were to file civil charges, it would be its first enforcement action against hedge funds related to CDOs. No decision has been made on whether to file charges, the people said…

Investigators are looking at whether Magnetar had such a strong influence in designing any of the deals that in effect it took over the role of collateral manager, a person familiar with the probe said.

The article then discusses at some length a lawsuit filed by Rabobank against Merrill Lynch on a Magnetar-sponsored CDO called Norma. That suit was settled but the SEC is apparently looking into that deal.

It is also possible that a suit by Intesa over another Magnetar deal, Pyxis, got the SEC’s attention. Here is the guts of the argument, per Bloomberg:

Intesa claims Calyon told investors that the CDO — known as Pyxis ABS CDO 2006-1 — was based on residential mortgage- backed securities that had been chosen by an independent investment firm, Putnam Advisory Co., when the underlying securities were really selected by Magnetar.

Putnam was also named as a defendant in the case.

“The scheme was designed by Magnetar,” Intesa alleged. “Calyon collected fees on the deal and, through the Pyxis swap, shifted losses on the CDO which it would have otherwise borne itself.”

The Intesa filing is a road map for SEC action. It is detailed and solid on the tradecraft:

Intesa v. Magnetar Complaint

It would be nice to see the SEC get serious on this front. But it’s been poking around Magnetar for a while (it looked into its behavior on a JP Morgan CDO, Squared, and decided not to pursue Magnetar) and has not gone forward. Some of this hesitancy is no doubt due to the fact that disclosure requirements are lower in CDO-land than for SEC-registered offerings. But a lot also appears to be due to a reluctance to try financial complex cases. And until it is willing to do so, the perps will retain the upper hand.

By Abigail Caplovitz Field, a freelance writer and attorney. Cross posted from Reality Check

Jamie Dimon, John Stumpf, and to a lesser extent, Vikram Pandit and Bryan Moynihan, are running massive hedge funds. They’re placing enormous, incredibly risky bets. “Hot money” investors are giving them the cash to gamble because they all understand that you and me will make good on any losses, since we’ve started guarantying the banks-turned-hedge-funds as “Too big to fail.”

The money flowing to these gamblers-in-chief is growing by double digit percentages, and includes so much borrowed money the “leverage” may be six times what Lehman Brothers was doing when it flamed out. As long as this situation continues, a new financial crisis is inevitable, and the risks of it grow faster every day. There’s only one solution: cut these gamblers off from public support. The market will do the rest.

We cut them off by reinstating Glass-Steagall, a depression era law that kept the bankers in check for decades, until their Clinton-era lobbying prowess repealed it. Senate Candidate Elizabeth Warren has a petition going to do just that. Please sign it.

“Deposits”, the Word that’s Hiding the Hedge Funds

The information on the bailed out bankers’ hedge funds I just summarized comes from this incredibly important Bloomberg interview of Amar Bhide. (H/T to Yves Smith at Naked Capitalism.) Bhide is a professor at Tufts University who knows a lot about the financial services industry, as the excerpts I discuss below make clear. In a little more than four minutes, Bhide detailed how and why JPM “is a systemically important, structurally defective bank. As are all the other megabanks.”

Crucially, Bhide debunks the bailed-out-banker PR spin that his Bloomberg TV interviewers parrot, and he schools them in other ways too. If enough people are clued in to what is really going on, we will break up the banks and restore Glass-Steagall. But there’s no chance of that so long as major media embraces the bankers’ key word for their hedge fund money: “deposits”.

Hedge Fund Money is the “Surplus Deposits”

The media keep talking about the money JPMorgan lost as “surplus deposits” or “excess deposits“. You know what deposits are, right? It’s your money at the bank, and mine. And the business’s down the street; even big businesses. It’s the cash we all give the banks for safe keeping.

But that’s not what Ina Drew was “investing.” She playing hedge fund, speculating with hot international money.

Here’s Bhide’s first attempt to get Media Guy and Media Gal (his Bloomberg interviewers) to understand:

There’s this amazing narrative I keep hearing. The investment office exists to quote unquote “invest surplus deposits.” It isn’t the case that the surplus deposits walk in through the door. JP Morgan goes out and solicits these deposits in hot markets in order to invest them, in order to speculate with them.

Later in the interview, Bhide twice has to revisit the point because the interviewers have bought into the imagery of the bankers’ word “deposits.”

Media Guy:

But let’s explore a little bit what the bank does. We’re taking in deposits, we’re in a deleveraging economy, loan growth is anemic, what do you do with these deposits?…

See his subconscious bias in action? “Taking in deposits.” That’s “what the bank does” all right, the retail bank branch. The Chase that you and I might use. But the hedge fund branch, the “Chief Investment Office”, doesn’t “take in deposits.”

Bhide responds:

I think you have the chain possibly a little bit off. The deposits aren’t deposits put into the bank by individuals or even commercial deposits. These aren’t IBM’s deposits. These are deposits that JPM proactively goes out and solicits from hot money markets. If it didn’t solicit these deposits it would not have them to invest with.

But Media Guy isn’t ready to listen yet. Watch how he recites some data and then pronounces bank talking points, including the taking in deposits line.

Media Guy:

Well, I don’t know, the data suggest a couple of things. On the first hand, on a one-year basis JPM’s deposits on hand has grown by 13%. Wells Fargo’s have increased 11%. Citigroup 5%, Bank of America 2%. All of these banks are fighting for the same deposits. Either JPMorgan is doing something uniquely well, or, people think it’s a safer bank and Wells Fargo is a safer bank to put their money with. That’s a choice.

See how his words still evoke you and me? Notice too the “fortress balance sheet” meme in “safer bank”. Media Gal piles on that one: “Or they think Jamie Dimon’s is the risk manager.”

Bhide tries again:

Again, the word deposits is so misleading. This is hot international money. Hot international money going wherever it sees too big to fail institutions, so they’re ‘depositing’ this money, more or less, with the US Government.

To recap: Jamie Dimon and his bailed out counterparts are soliciting money, money that is looking for a hedge fund to gamble with. Dimon’s sales pitch has two parts: 1) I won’t lose your money, because I’m the greatest risk manager ever was (very Barnum of him) and 2) I can’t lose your money, because I can stick my hand into Uncle Sam’s pocket if I really need to, as deep into his pocket as I want.

The Bankers Are Going All In With Our Money

The hundreds of billions in play right now are real money. But the numbers are system threatening when you consider the “leverage.” Just like we shouldn’t call the solicited hot international money “deposits”, we should say “cash advance to gamble with” instead of “leverage.” Because that’s what “leverage” is in the hot money, hedge fund context.

Bhide:

Leverage upon leverage. The ‘deposits’ are leveraged 10 to 1. And the investor gets quote unquote “invested” by the investment office for possibly another 10 to 1. Possibly 20 to 1. So the activities of the investment office are a levered fund, probably levered 200 to 1. Levered on the backs of guarantees by you and me. And this is an enormous threat to the public good.

Let’s be clear why: enormous bets can lose and that’s bad enough when we taxpayers stand behind them. But hugely levered bets not can not only lose, they increase the losses by an order of magnitude or two, and can bring a daisy chain of other institutions into play–the money was borrowed from somebody, right? And don’t kid yourself about how big the risks are that these funds are taking. As Bhide says:

What scares me is not the $2 billion that JPMorgan lost. It’s the record $19 billion profits that JP Morgan made. How on earth do they make a $19 billion profit quote unquote “putting customers first” in an economy that’s supposedly slowing down and their customers are flat on their backs?

By placing really big, highly leveraged, very risky bets. That’s how.

The Mythology of Risk Management

Bhide makes one other extremely important point: the idea that these bailed out bankers are managing their hedge funds’ risks is complete b.s.; it’s fundamentally an impossibility.

Here’s his first try to get Media Guy and Gal to understand:

[Dimon’s] managing an organization of over 200,000 people scattered all over the world. In dozens and dozens of businesses. This is not a …Berkshire Hathaway who is on top of the specific trades that he’s doing. How could he possibly know?

Media Gal: “It’s his job to know.”

Bhide: “Well it’s a job that no human being can do.”

But the obviousness of what Bhide’s saying doesn’t sink in, so later on he tries again.

Media Gal: “Do you think the risk managers understand the type of products these traders are trafficking in?”

Bhide:

Well it’s one thing to understand the type of product generically, it’s another to know every single trade. The people running these very large organizations who are taking these very large audacious risks ought to be on top of every single trade. I know successful hedge fund managers, they make a fortune, it’s a well made fortune.

Media Guy:

So you’re saying if the CEO…cannot have enough visibility into these individual positions and understand the risks they present there’s no way that his or her institution should even be dabbling in this stuff.

Bhide: “Absolutely. I mean I have nothing against these individual instruments per se…”

Media Gal: “So you’re saying the derivatives products, it’s not them. It’s the way they’re being managed?”

Bhide: “I’m saying they don’t belong in JPMorgan, they do not belong in a large commercial bank, period.”

Media Gal: “Then where do they belong?”

Bhide: “In a specialized hedge fund!”

So there it is. Jamie Dimon and his peers are running massive hedge funds that are getting more massive (remember, Dimon’s grew by 13% last year alone), taking enormous, highly leveraged risks they cannot manage, secure in the knowledge that the American taxpayer is guaranteeing their bets.

We are accelerating toward our next, and larger, financial crisis. Time to bring back Glass-Steagall. Sign the petition, please. And watch the Bloomberg interview of Amar Bhide. And pass them both on.

As regular readers no doubt recall, Eric Schneiderman abandoned the dissident state attorney general effort to get a better mortgage settlement, assuring the Administration a win on this sellout to the banks. The bright shiny prize Schneiderman got in return for his betrayal was serving as one of five co-chairmen on a Federal mortgage task force, which appears to have gotten close to nada in resources beyond the staff in various Federal agencies who were already working on mortgage investigations. And given that were are now close to a full five years past the origination of toxic subprime deals, those existing investigations don’t exactly look to have been pursued with much in the way of vigor.

We’ve criticized the Schneiderman sell out, yet the PR push to position him as the True Hero of What Passes for the left continues apace, including some ham-handed efforts like the American Prospect’s “The Man the Banks Fear Most“.

Schneiderman today proved the skeptics to be correct (hat tip reader Peter). From a writeup in the New York Law Journal of a presentation Schneiderman made on white collar crime. It seems Schneiderman is in favor of it:

Noting his role as co-chair of President Barack Obama’s mortgage-fraud task force, he said that he was “very pro-Wall Street” and had represented some financial services firms in private practice.

He said that the majority of people working in the financial industry are honest, but added that the “ability to tell people that and not have people scoff has been damaged” by ongoing scandals.

This telling admission of the truth comes as polls in swing states show that ordinary citizens aren’t fooled about Obama’s sell out on the mortgage front and to big banks. From CFS:

….majorites of independent likely voters in three swing states (Nevada, Arizona, and North Carolina) and near-majorities in two others (Pennsylvania and Florida) say they disapproved of Barack Obama’s handling of the housing crisis, and majorities in each state say the Administration is not doing enough to police Wall Street banksi in the housing market.

Strong majorities of likely voters in each state polled – Nevada, Florida, Arizona, North Carolina, and Pennsylvania – also say the economic crisis was caused partly by criminal actions of Wall Street executives.

It is going to be instructive to see whether token gestures by the Administration on the financial front between now and the election will be enough to fool voters who have suffered serious economic setbacks.

Fawns use ‘escape plan’ to evade predators BBC

Mysterious illness strikes hundreds of flight attendants, causes rashes and hair loss – are ‘toxic uniforms’ really to blame or is it Fukushima? Natural News (furzy mouse). The piece is a bit histrionic, but that does not mean this is not a possibility.

Ahead of I.P.O., G.M. to Quit Advertising on Facebook New York Times. What do you want to bet GM used the IPO (as well as the extant doubts about the ad model) to negotiate for better ad rates and Facebook refused to budge?

“France’s Hollande’s plane struck by lightning en route to Germany” Climateer Investing (Scott)

‘It’s a witch hunt’: Rebekah Brooks comes out fighting Telegraph (Anon)

Merkel and Hollande spell out Greek fear Financial Times. “We want to you to stay in the euro, and we still want to break you on the rack.” How inviting is that?

Weisbrot and Krugman are Wrong: Greece cannot pull off an Argentina Yanis Varoufakis

Italy’s banks shaken as economic slump deepens Ambrose Evans-Pritchard, Telegraph

Europe’s growth gulf MacroBusiness

ECB’s dilemma on the euro rescue Gene Frieda, Financial Times. This is important. The reason the Fed still maintains it could not have rescued Lehman was that Lehman didn’t have good enough collateral to pledge.

Greek President Told Banks Anxious as Deposits Pulled Bloomberg

Wenzou’s debt deflation MacroBusiness

Turkey’s Attack on Civilians Tied to U.S. Military Drone Wall Street Journal

Corn on MSNBC: Romney Takes a Lead in the Polls Mother Jones. Is this why the Feds are going after JPM with such uncharacteristic speed?

Republican Party suckles at the breast of Big Business Los Angeles Times

The Main Point Peter Dorman, Econospeak (Aquifer)

Standing up to Jamie Dimon: Is it SAFE? Jerry Epstein (Triple Crisis)

The dogma of ‘credibility’ endangers stability John Kay, Financial Times

Credit event of the year…(drumroll) FT Alphaville

U.S. Said to Start Probe of $2 Billion JPMorgan Loss Bloomberg. Why is the word “criminal” not in this headline?

F.B.I. Inquiry Adds to JPMorgan’s Woes New York Times

Flawed Dimon Eliot Spitzer, Slate (Jesse)

Obama has assets in JPMorgan accounts: White House Reuters (Joe Costello)

Hedging and Proprietary Trading Adam Levitin, Credit Slips

US bank CDS hit fresh 2012 highs Financial Times. So much for the US not being exposed to a Euromeltdown.

Needy States Use Housing Aid Cash to Plug Budgets New York Times. Dave Dayen wrote about this IIRC over two months ago.

Wells Fargo Has Blood on Its Hands: Desperate Man Commits Suicide After Shocking Foreclosure Mistreatment Alternet (furzy mouse)

Accidentally Released – and Incredibly Embarrassing – Documents Show How Goldman et al Engaged in ‘Naked Short Selling’ Matt Taibbi (Matt S). You have to read this. Pretty much proves the worst of what the public believes about Goldman.

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D – 115 and counting. *

It would be irresponsible not to speculate. –Peggy Noonan

NATO Summit. Guides: from OccupyChicago (PDF) and Occupy Peace. Coverage and media: Mainstream wrap-up. TimCast (independent video streamer). Guardian live blog. Inflammatory headline watch: Chicago braces for violence at NATO summit

Participants: The NATO guest list is rawther long and includes every shade of left opinion — including OccupyChicago. And the ClownBloq (avec entartistes?). For unaffiliated out-of-towners, organizing bus travel fraught (true for Occupy DC also).

Legalities: NATO could be the first public test of H.R. 347 “restrictive zones” (a la Zucotti Park “frozen zone”).

Authorities: DHS leads NATO security through Secret Service and Federal Protective Services divisions, working with the CPD (12,500 strong). (What was “shocking” six months ago is normal now.) Northern Command Gen. Jacoby reminds the troops (3000) they may not “solicit prostitutes.” Philly PD sends 67 officers to assist. (Oh great. But shows independent streamers are important.) interestingly, Charlotte, too. (Historically, forces from multiple jurisdictions face chain-of-command and communications issues, risking violence.)

Police tactics: A field guide for NATO. Kettling is costly! CPD chief McCarthy will control deployments of tear gas, bean bags, etc. “We’re going to take people who are committing crimes out of those crowds.”

Gear: For NATO, $1 million. Including LRAD sound cannons. “This is simply a risk management tool.”

Venues: NATO Summit itself is in McCormick Place (map). Protest stage, sound system permitted near venue (map). “NATO summit visitors promise to continue Chicago’s record tourism numbers.”

Occupy. Polling data on Occupy. Note NY vs. Oakland. Citizen journalist arrested during OWS march fights city and wins.

Green Party. Stein, with 50% of delegates won, claims mantle of presumptive nominee, crowd sources VP. After appeal, PA Democrats allowed to seize $56,928 from Nader campaign after Nader’s 2004 candidate petition ruled invalid and court costs were levied against the campaign.

WI (swing state). DNC offers support in every form but money. Barret blasts Walker’s criminal defense fund, connected to a secret probe of his associates. Yeah, “known unknowns”, campaign fodder, poor choice of companions, yadda yadda yadda, but “felony child enticement”?! Also, “massive [human] waste violation”. Also, too, jobs. Not.

CO (Swing State). 47,000 active oil and gas wells in CO and 17 inspectors (hat tip MR).

IA (Swing State). Gov. Branstad insists he’s ‘way ahead’ of job creation goal; state data suggests otherwise (hat tip TTH).

Inside Baseball. Everybody’s building models: Ezra Klein; WaPo; Nate Silver. Americans Elect “failed to generate interest in possible campaigns from Sens. Joe Lieberman and Lamar Alexander.” Nobody could have predicted. Schadenfreude from Krugman, and a whole gallery of very serious people who were wrong. And why not nominate The One True Wanker of The Decade?

Ron Paul. Paul’s campaign chair: “premature” to discuss Romney endorsement. “The most passive-aggressive political maneuver in modern political history.” Paul backers fail to win OK convention. Paulistas en regalia.

Romney. Romney pivots to ZOMG! Teh Debt!!! in IA barnburner: “A prairie fire of debt is sweeping across Iowa and our nation, and every day we fail to act, that fire gets closer to the homes and children we love.” In unrelated incident, Romney Veeps audition on same theme at Pete Petersen’s Catfood Conference.

Obama. The First Family has between $500,001 and $1,000,000 in a “JP Morgan Chase Private Client Asset Management Checking Account.” Have they never heard of “Move Your Money”? Why not avoid the FBI taint? Obama campaign releases “blistering” anti-Romney Bain Capital ad while raising $2 million at fundraiser held by Tony James, President of Blackstone Group. On the very same day. Pierce comments: “The problem is that the president goes around the country undermining the strategy by cozying up to the people who are in the same business as Romney is.” Obama will win in November, Americans predict.

* 115 days ’til the Democratic National Convention ends with funeral baked meats on the floor of Bank of America Stadium, Charlotte, NC. Because 115 has an odd number of 1s in its binary representation, it is sometimes called an “odious number.”

READERS: Again, here are the swing states: AZ, CO, FL, IA, MI, NV, NH, NM, NC, OH, PA, VA and WI. I’m very interested in any local or state links you can send me from those states; original reporting, not wire services stuff. Now I have help with CO thanks to MR, and Iowa thanks to TTH but there are more!

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Antidote du jour: