Links 10/3/11

Dear readers, I have to make an unexpected trip this week which will wreak havoc with my schedule. You will likely get more cross posts and thinner Links. I hope you’ll bear with me.

India sues Monsanto for biopiracy Food Freedom (hat tip reader Aquifer)

Texas cattle industry withered by drought Financial Times

European Stocks Plunge Wall Street Journal. Is this going to be one of those “I love the smell of naplam in the morning” days?

Blue Shield of California Won’t Cover Breast Cancer Drug New York Times. The aggressive marketing of drugs with questionable efficacy to populations desperate for hope was always going to lead to ugly outcomes.

US Congress presses China on currency Financial Times

Holding China to Account Paul Krugman, New York Times. Erm, as much as China has been gaming the Bretton Woods II system for a while (and we tolerated it for too long), we need a more integrated approach, in particular ending tax and other incentives for Big Corps to offshore and outsource.

China’s manufacturers miss their Xmas bounce MacroBusiness

Greek cabinet approves budget cuts Financial Times

Why a reworked Greek deal will happen John Dizard, Financial Times

How the American Taxpayer Got Plucked in Iraq Peter Van Buren, TomDispatch

Why business despairs of Obama Mort Zuckerman, Financial Times. These guys live in a parallel universe.

Others Go, but Buffett Stays on Side of President New York Times

A Supreme Court Ruling Against the Mandate Unlikely to Be a Political Win for Obama Jon Walker, FireDogLake

Wait. Rick Perry’s Hunting Camp Was Called What? Atlantic, via Yahoo (hat tip reader Thomas R)

In new bombshell story, “Bloomberg Markets” reveals that Koch Industries sold petrochemical equipment to Iran and paid bribes in six countries PoliticalGates (hat tip Mark Ames)

Ghosts Could Be Lurking in Banking Machines Wall Street Journal

Still Growing Michael Panzner

Lenders Put the Lies in Liar’s Loans and Bear the Principal Moral Culpability Bill Black, New Economic Perspectives

Grandmother nearly loses condo to foreclosure after $4.70 fee balloons to nearly $3,000 FloridaToday (hat tip Lisa Epstein)

Foreclosures Are Killing Us New York Times

An echo Steve Waldman

Antidote du jour:

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  1. cpmhughes

    Liar loans (no doc)were being pushed by RE agents as early as 2003 in my experience.
    We moved from LI to C’ville, VA in 2003–cashed out so to speak. We looked at C’ville properties, but I was “between positions” and I told RE agent that we wouldn’t qualify for mortgage as a result.
    “Not to worry ” she said and then educated me on the benefits
    of no doc loans; state your income and there is no further verification. Cost a half-point or point extra at closing. Mentioned the nickname “liar loan’.
    The whole subject was addressed as a completely normal and ethical action that all parties were happy with. The assumption being we’d all get rich together as RE continued it’s relentless appreciation. Having fled LI because we saw the end of the RE dream just over the horizon we declined to participate in this proffered fraud.
    So the meme was out there in 2003 and no doubt was created by collusion between banking and RE industries and the offered to buyers as legitimate and acceptable way to do business. We were encouraged to lie as it was what was expected and welcomed. We were probably better informed and educated than many who accepted these loans, yet we were tempted none the less because everyone (all the commissioned agents, that is) said it was “the thing to do”.
    This was a fraud perpetrated on consumers by the various rent seeking industries involved in RE transactions and securitization.

    1. Pwelder

      One thing I don’t remember seeing in Bill Black’s invaluable commentaries is a ballpark estimate of what might be recovered (at this late date)from the proceeds of accounting control fraud by moderately energetic and competent law enforcement.

      Black is uniquely qualified to produce a range of estimates that would be generally regarded as credible. If as I suspect the numbers are still pretty large, we need to have them in a form suitable for referring to the tort bar – and maybe even to our congressmen.

  2. Jim Haygood

    Now the concealed daggers are getting longer and sharper. Dr. John Hussman has delivered one of his most pointed commentaries ever, which could serve as the analytical manifesto for the Wall Street protests. Excerpt:

    When banks become insolvent, my view is that receivership and restructuring is exactly what should happen, and swiftly.

    Look at Bank of America’s balance sheet, for example. Reported assets are $2.261 trillion. Against that, liabilities to depositors amount to less than half that, at $1.038 trillion. Add in $239 billion for securities that they are obligated to repurchase, $129 billion in trading account and derivative liabilities, and $155 billion for accrued expenses. Now you’ve covered counterparties, as well as vendors or others who might have invoices outstanding. Even then, and you’re still only up to $1.561 trillion of the liabilities.

    The remaining 31% of Bank of America’s liabilities represent obligations to its own bondholders and equity of its own shareholders. This is well beyond what is sufficient to buffer any loss that the company might take on its assets, while still leaving customers and counterparties completely whole.

    You can do the same calculations for nearly every major financial institution in the world. What “failure” really means is that bondholders lose money, and the operating part of the institution is taken into receivership, sold for the difference between assets and non-bondholder liabilities, and recapitalized under different ownership. Often the only thing that customers and depositors notice is that there is a new logo on top of their statements.

    /sarcasm on/
    It would be catastrophe, utter catastrophe, no, Armageddon, to let the global financial system collapse – collapse! – because the world as we know it will indeed collapse, as day follows night, if bondholders, who knowingly and voluntarily take risk and invest at a spread, are actually allowed to lose anything! We cannot, in a thinking society, allow losses to befall risk-takers who make reckless loans and bad investments. We must, must at all costs, divert money away from health, education, and welfare, in order to save these companies from failure, because neither health, nor education, nor welfare are even possible unless we save the financial system from unthinkable meltdown.

    We have no choice. No choice at all. They are too big to fail, and we cannot hesitate – they must be saved, for the sake of our children, for our children’s children, for our freedom, for the flag, and to honor the legacy of our forefathers, so that these Champions of Disfigured Capitalism can continue to do their vital work with impunity, unbound by any of the incentives or consequences that actually allow capitalism to work in practice.

    WHOA — you kick ass, Dr. H!

    Remember — use cash, starve a bankster. Support your local ’10K Run on Deposits.’

  3. alex

    Yves (commenting on ‘Holding China to Account’): as much as China has been gaming the Bretton Woods II system for a while (and we tolerated it for too long), we need a more integrated approach, in particular ending tax and other incentives for Big Corps to offshore and outsource.

    Fully agreed, but addressing the overvalued dollar is sure a good start. The question is whether congress is actually serious this time, and whether they’ll stand up to Obama and Turbo ‘I don’t see no currency manipulation’ Geithner.

    Why this issue doesn’t get more attention is beyond me. It’s a ‘costless’ (in terms of tax dollars) form of stimulus.

    I know the whole ‘strong’ (overvalued, uncompetitive) dollar thing was promoted by Rubin as SecTreas, but what’s the FIRE sector’s interest in keeping the dollar overvalued?

    1. Jim

      alex, Congress may be more serious this time (at least the House) b/c Romney has gone on record calling China a currency manipulator. If Congress passes and Obama signs the bill, the issue is off the table. If President Obama vetoes it, then Romney has an issue.

  4. Jerry Denim


    I’m sure you’ve pondered this idea already, but may I humbly suggest a Naked Capitalism meet-up event in Zucotti Park?

    C’mon, it will be the most fun NC meet-up ever!

    All those in favor feel free to chime in

    1. Wendy

      Love it! I would be in. Wednesday Oct. 5 would be nice, as a number of OWS events are going on that day, but I think Yves has a conflict. Perhaps when she returns from this week’s trip?

    2. Jumpjet

      Someone needs to make sure that the protestors know they’re at risk of getting co-opted by Van Jones and his stupid Take Back The Dream shilling. I’m going to assume many of them are aware of it, because they’re smart and well-connected, but we ought to be absolutely certain. They need to be warned and re-warned.

  5. Hugh

    The Greek Socialist government has shown itself to be nothing but a bunch of marionettes with European and Greek kleptocrats pulling the strings. They are the stuff of which revolutions are made, speaking of which so is Mort Zuckerman. He’s like some French aristo lamenting that the king has been too soft on the peasants. This fits in with Pilkington’s post on marginal utility. For kleptocrats like Zuckerman, too much still isn’t enough.

  6. Anonymous Jones

    That “grandma in the condo” story was pretty sensationalistic, no?

    I mean, who was supposed to bear the burden of the late payments and the collection efforts (including attorneys’ fees)? Her neighbors? That doesn’t so reasonable, does it?

    I’m sure this dispute probably could have been resolved better, on all sides. But that’s the counterfactual, isn’t it? It wasn’t resolved that way. There were losses and damages (especially attorneys’ fees) incurred in the way it was actually resolved in reality.

    Who bears those losses and damages?

    All of a sudden, we’re throwing out centuries of common law rules about allocating damages because we “feel sorry” for a grandmother?

    You don’t dispute that the county can foreclose for back property taxes and penalties, right? So why can’t the HOA foreclose in this case? Yeah, f*ck her neighbors. Make them pay for her delinquency because she had the foresight to have children who then had children and she grew old enough to get that “sweet grandma” appellation.

    Hard cases, even the small ones, make bad law.

    1. JR

      I’ve been a President and I’ve been a Treasurer of a condo association and I would never, ever have treated one of my neighbors in such a manner, nor wasted our scarce and valuable administrative resources, over a stupid amount like Four Dollars and Seventy Cents. Good Heavens. Although there are always “realists” on the Board who will say “We need to run this Association like a business!,” not recognizing that no business that treated their customers that way would remain in business. I hope that condo association has a robust election process ‘cuz whoever is making decisions needs to be replaced pronto.

  7. Jim Haygood

    From the Atlantic:

    Outside the U.S. government, President Obama’s order to kill American citizen Anwar al-Awlaki without due process has proved controversial, with experts in law and war reaching different conclusions. Inside the Obama Administration, however, disagreement was apparently absent, or so say anonymous sources quoted by the Washington Post. “The Justice Department wrote a secret memorandum authorizing the lethal targeting of Anwar al-Aulaqi, the American-born radical cleric who was killed by a U.S. drone strike Friday, according to administration officials,” the newspaper reported. “The document was produced following a review of the legal issues raised by striking a U.S. citizen and involved senior lawyers from across the administration. There was no dissent about the legality of killing Aulaqi, the officials said.”

    Isn’t that interesting? Months ago, the Obama Administration revealed that it would target al-Awlaki. It even managed to wriggle out of a lawsuit filed by his father to prevent the assassination. But the actual legal reasoning the Department of Justice used to authorize the strike? It’s secret. Classified. Information that the public isn’t permitted to read, mull over, or challenge.

    Both the president and attorney general have grossly violated their duty to protect and defend the constitution.

    Both should be promptly impeached and ejected from office, as clear and immediate dangers to the public welfare.

  8. Herman Sniffles

    I’m not coming to Perry’s defense, I hate the guy, but when I worked on shrimp boats in Texas 30 years ago, all the skippers called the spinning metal wheel that you wrap the rope around to pull up the nets a “Niggerhead.” It never seemed to bother the black deckhands, or I never noticed that it did. Before I opened the link I figured it would be something demeaning to women. Texas is a weird, weird place.

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