This is fundraising week for Naked Capitalism. There’s a lot in this post since we report on what we did since the last fundraiser, so if just you want to give, you can do so here, right now. Bottom line: this site exists because of you.
You would not be reading this site regularly unless you want change. It’s much more pleasant to take your Soma and watch cat videos, read celebrity gossip, play video games, and patronize escapist fare than keep close tabs on the sorry state of affairs. So it’s a given that you are looking for better information and answers, and may even be looking for ways to take effective action.*
We started this site in late 2006 because it was obvious that a massive credit bubble was going to come to a nasty end soon. But as the collapse and its resolution only further entrenched the power of the big financial firms, we, like many of you, wanted and increasingly demanded that Big Finance be leashed and collared.
We’ve come to focus more and more on identifying the forces that are working against the financial and physical well-being of most citizens and the leverage points for taking our society back. And the community that has gathered here is key to that effort: providing information, testing for error, and discussing the concrete steps many of you are taking, be it attending local meetings, writing letters and op-eds, and passing what you’ve learned along to friends, family, and colleagues.
It may seem unreasonable to act as if you can change the way lives are lived on a mass basis. But if you aren’t willing to assign yourself that job, you can’t ask others to do it for you. And the urgency of the debates in the comments section suggests that many of you have accepted that mission, whether you recognize it or not.
Your donations are an important vote of confidence in our work. They tell us that you value Naked Capitalism as a place where we work together. And on a practical level, your contributions are critical to improving our content and your site experience.
We ask you to join us once again. You can give by using the Tip Jar to make a one-time, monthly, or quarterly donations either on-line or via check. If you send a check, please also e-mail yves_at_nakedcapitalism.com, with “Check is in the mail” in the subject and the $ amount in the body, so we can include your donation in our running tally.
If you can’t afford to give, please take what you’re learning here and share it. If you are can only afford a little, we’d still appreciate your contribution. But if you can afford more, please give more. The truth costs money, but it is far cheaper than having someone buy the right to lie to you by paying for your media.
Your donations are key to our independence. They empower us to build a platform to take on Big Finance and other vested interests. We need your help and ask you to contribute to our collective effort.
What We Did Last Year: Make More Trouble Than Ever
As we said in an interview with Pando earlier this year, “We are in the business of making trouble. We seem to be doing a better job of that every year.” We think you’ll agree when you look at what we’ve done since our last fundraiser and hope you’ll chip in.
One of the most important targets in our fundraiser last year was doing more original reporting. We did, and you’ll see that your contributions led to tangible results.
¶ Breaking the story of the SEC’s enforcement chief Andrew Bowden saying he’d like his son to work for the very people he regulated. Our report was picked up by the International Business Times, Truthout, Bill Moyers, Bloomberg, the Los Angeles Times, and Matt Taibbi. Bowden resigned three weeks after we exposed his fawning remarks.
¶ Exposing capture, complacency and cluelessness among private equity investors. Private equity has over $6 trillion in buying power, compared to US stock market capitalization in the low $20 trillions. It has built a wall of secrecy around its activities, which are often extractive. Even after the SEC in 2014 described widespread stealing from investors and other significant abuses, its victims, the investors, have done virtually nothing.
Thanks to your help, that is beginning to change. We’ve focused on the issue of fees and returns. Across major investors in private equity, the results are consistent: over the past decade, private equity has fallen short of the return needed to justify the risks. And the underperformance is substantial, hundreds of basis points, meaning several percentage points.
Mind you, shortfalls, unjustifiably high fees, and grifting by private equity affects everyone, not just the beneficiaries of public pension plans. In many places, taxpayers are on the hook for shortfalls. So when private equity steals from public pensions, and when staff and trustees refuse to push back on rapacious fees and charges, the loss to public pension funds comes out of the public purse.
Our coverage of CalPERS’ conduct in private equity is already rattling nerves. After we broke the story that CalPERS had no idea what it was paying in the profits interest commonly mislabeled as “carry fees,” a firestorm of criticism ensued, with Pensions & Investments, New York Times, the Fortune, and the Sacramento Bee piling on.
CalPERS reversed itself less than a month after our story ran, telling its general partners to provide the full history of carry fees paid for all funds.
And this outcry is already leading to policy changes. Insiders tell us that calls and letters from California citizens, particularly Naked Capitalism readers, have led California Treasurer John Chiang, who sits on the CalPERS and CalSTRS boards, to declare that he will seek legislation to require disclosure of all private equity fees and costs, as well as related party transactions, another area of abuses.
¶ Continuing our in-depth examination of ObamaCare. Naked Capitalism was the among the first to warn that the back end of the ObamaCare site was a mess, and that an up-to-spec version could not be delivered on time, and that the front end, too, was a mess, wasted huge amount of user time, and in many cases, led to actual hardship, as people were unable to confirm sign-ups, unable to cancel sign-ups they could not complete or correct, and had payments rejected or misapplied.
The many shortcomings that Lambert, Michael Olenick, reader Dromaius, as well as many readers called out have been confirmed by the mainstream media and academic studies, including: narrow networks leading to large coverage gaps; patients routinely finding that doctors that are listed as being part of a plan in fact aren’t; and worst of all, even under the most optimistic assumptions nearly half of the uninsured who are eligible are better off opting out.
¶ Digging deeper into regulation-gutting trade deals, such as the TransPacific Partnership, the Transatlantic Trade and Investment Partnership, and the Trade in Services Agreement. Thanks to the efforts of Wikileaks and Public Citizen, deals that were meant to stay under the radar have become hard-found political struggles. Naked Capitalism readers played their part by writing and calling their Congressmen to demand they oppose these toxic pacts. And even though Obama has secured a preliminary deal, our Beltway sources say that his chances of getting Congressional approval are only barely over 50%, and that was before the wild card of a revolt by the Republican Ultras in the House. We hope readers will join us in fighting to defeat these dangerous bills in the coming year.
¶ Providing crisis-level coverage of the Greek bailout negotiations. This was one of the most difficult stories we’ve covered. As much as the incoming Greek government had the correct analysis of its and the Eurozone’s economic plight, it would have been difficult to devise a worse negotiating posture. As we foretold, to considerable ire, Syriza’s loss would set the European left back. Indeed, even before Syriza’s defeat, Podemos was distancing itself from the Greek effort and moving to the center. Even with that effort to win votes, the latest polls show Podemos at 14% if a general election were held now, down from its peak in January of 28%.
As much as defeats like this are painful, it’s critical to learn from them. The biggest reason Syriza was at such a disadvantage was the time required to reintroduce the drachma. It wasn’t just printing and distributing the physical currency, which the Greek government estimated would take at least a year, but also the complex and extensive changes that had to be made across many participants in the payments system so that Greece could pay for critical imports, such as food, pharmaceuticals, and petroleum, as well as maintain its tourist industry where vacationers use credit cards to pay for hotels and rent cars. Payment systems experts that had been involved in the conversion to the Euro and similarly complex projects estimated it would take a minimum of three years to get the payments system running at the needed standard; members of the commentariat who are now working in those environments said it was more likely to take twice as long.
¶ Launching a new beat: systemic risk of bank information technology systems. As incredible as it seems, banks are still running their main transaction engines on mainframes with thirty to forty year old code, as Louis Proyect, Clive, Nathan Tankus, and Richard Smith have explained over a series of posts. Due to the fact that it was neither modularized nor documented, transitioning off these legacy systems is a fraught and costly task. Despite the fact that regulators know that bank IT is a ticking time bomb, and it’s starting to go off at banks like RBS, no one has been willing to force them to deal with it. That may be because the failure rate of large IT projects is well over 50% and readers estimate the cost of this scale of conversion would equal at least equal a full year of bank profits, which means the expected cost (estimate adjusted for failure risk) is more than double that. You can see why baling wire and duct tape are preferred solutions. Expect to see seize-ups in the not-too-distant future.
¶ Catching more international scammers. Richard Smith has uneathed multi-billion dollar frauds in the last year, including at Power8 and GXG. His sleuthing has gone mainstream, with the BBC, the Wall Street Journal, and the Herald Scotsman all running reports that rely on his work.
Last but not least, we were busy on the technology front:
¶ Launched a major redo of the site’s plumbing to improve rendering on mobile devices
¶ Upgraded site hosting and made other tweaks to improve loading speeds
In terms of where your 2014 donations went versus all those results, the short version is we spent a more on original reporting and technology than anticipated due to problems with site stability (this is sadly an ongoing problem with WordPress**) than we’d estimated. That meant we had to cut spending on travel and on our intern Jessica.
Why Naked Capitalism Deserves Your Support
We have been able to make a tangible difference because this site has consistently been fast, even first, to take clear, often outspoken positions on financial markets and economic policy issues that have proved to be accurate. Shorter: We are second to none in being early and being right.
And unlike the mainstream media, we can stay focused on our priority topics, which over the years have included CDOs, widespread defects in mortgage chain of title and securitization documentation, mortgage servicing and foreclosure abuses, ObamaCare defects and ripoffs, toxic “trade” deals, the failure to end the “too big to fail” problem, Mary Jo White’s dereliction of duty at the SEC, private equity grifting, and more recently, our coverage on the Eurozone.
Naked Capitalism is breaking out of the blogosphere ghetto, although this gradual change may not be obvious to the daily reader. Even though we have been described by someone who has served in important policy roles as “one of the most trenchant progressive voices on financial reform since the financial crisis, and has really moved the ball forward on a number of policy issues,” we’ve often found ourselves in the peculiar position of being The Blog That Must Not Be Named, in that mainstream media stories that were clearly prompted or influenced by our work fail to give us credit. That’s changing with our private equity stories and Richard Smith’s relentless scammer gumshoe work, where major media outlets have cited our work.
But this effort, in which we’ve moved partly out of the traditional role of bloggers as commentators into more original reporting and activism, demands far more of everyone on the site. Working with sources, reviewing and vetting their information, getting reactions and quotes from other other experts, and other newsroom-like tasks, takes far more time that producing posts that add insight to breaking news or newly-released research. Yet this higher-value-added product, which as you can see from our bullet points above also has much greater impact, does not produce any more in ad revenues. Those are largely a function of how many posts we produce. So perversely, doing important work is actually a negative for our site’s economics….unless you tell us you want more, as you did last year, by supporting this work through your donations.
Moreover, tangible wins, like Andrew Bowden’s resignation, CalPERS’ reversal on carry fees, and Treasurer John Chiang’s plan to introduce private equity fee and cost transparency legislation in California, are rare. As reader Richard Kline pointed out:
The nut of the matter is this: you lose, you lose, you lose, you lose, they give up. As someone who has protested, and studied the process, it’s plain that one spends most of one’s time being defeated. That’s painful, humiliating, and intimidating. One can’t expect typically, as in a battle, to get a clean shot at a clear win. What you do with protest is just what Hari discusses, you change the context, and that change moves the goalposts on your opponent, grounds out the current in their machine. The nonviolent resistance in Hungary in the 1860s (yes, that’s in the 19th century) is an excellent example. Communist rule in Russia and its dependencies didn’t fail because protestors ‘won’ but because most simply withdrew their cooperation to the point it suffocated.
Yet success in activism is self-reinforcing. For instance, a key insider in private equity pursued us based on our mortgage and foreclosure work. Similarly, our DC connections from older campaigns are frequently invaluable on new efforts.
And you can see that activism is making headway on a broader scale. A post we ran at the end of May by Gaius Publius that argued that Sanders had a real chance of winning the Democratic party nomination struck many as quixotic. Sanders’ success in fundraising and the polls has proven that he speaks to the mood of the times: citizens are tired of elite-serving policies and want a fairer deal, and his unexpected popularity has forced Democratic presidential aspirants to move to the left.
You can help change the terms of debate by taking the information you’ve gotten here and sharing it with your friends, family, and colleagues, by calling and writing political officials and local media outlets, and by helping us help you by donating to our efforts via this link.
How This Fundraiser Works
We’d like to get broad-based participation from the NC community. So even if you can only make a small contribution, we’d still appreciate that, because we also have readers who can make much bigger donations. Our target is 1000 donors over the next week. You can help right now by following this link to make a donation.
We will also identify specific things that your donations will fund and will tell you when we’ve hit each of these monetary goals.
The first goal is funding for digital infrastructure essentials as well as more improvements in the user experience of the site. Even with all our investments last year, there is lots more to do.
We want to improve the readability of the text proper and make feature and design tweaks. We also want to do more to speed site loading, and that involves some not-trivial changes with ad-related software that sits with our ad service.*** We are also way overdue for some hardware upgrades, and if the fundraiser goes well, we would also like to invest in recording equipment and software.
The result is that our “nut” for digital essentials is certain to increase this year. So our first target is $15,200. Once we’ve hit that, we’ll let you know what our next item is.
How to Give
As we described earlier, there are multiple channels for donating, and you will see them all if you click on our Tip Jar. If you decide to give by check (which saves us PayPal/credit card fees), please make it out in the name of “Aurora Advisors Incorporated” and send it to:
Aurora Advisors Incorporated
903 Park Avenue, 8th Floor
New York, NY 10075
At the same time, please send an e-mail to firstname.lastname@example.org with the headline “Check is in the mail” (and just the $ amount in the message) so we can count your contribution in the total number of donations.
Thanks again for your interest and generous support!
* If you are coming here because you don’t like change, you should support us anyhow! Paraphrasing that great social philosopher, Josephine, answering the complaints of her husband, the Reverend of Flip Wilson’s Church of What’s Happening Now: “If it wasn’t for us, you wouldn’t have a job.”
** We suffer from what is called the “2% WordPress” problem. We run a very large database by WordPress standards due to our number of posts and comments (over 650,000). The cost of WordPress being designed to be a multi-author editor platform and highly tunable is that it is breakage-prone for those who run it hard, and we run it very hard. This is compounded by the fact that people who have experience running “2% WordPress” sites are being hoovered up by sites like Huffington Post and other MSM sites that use WordPress. So while we have an able code jockey in the form of our current WordPress person, he is sometimes in the position of having to debug problems afresh, which takes more time than for people at big publishers that have a team babying WordPress, and among them is very likely to have someone who has seen the various ways it can kludge up before.
*** Because NC itself is a very lightweight site, most of the time involved in loading is due to our ads. We’d really prefer to live without them, but the fact that our first fundraising target is for our tech budget should clue you in that our ad revenue does not cover our site’s overhead.
We also must stress that we sacrifice a very large amount of potential advertising income because we reject high revenue ads that we think are unduly intrusive and would distract readers from out content, including: video ads, ads that are inserted into the body of posts, ads that pretend to be posts (that’s a new vogue these days), large images with Huffington Post/Daily Mail type photos and clickbait headlines, usually involving celebrities, diets, or advice on sex; and virtually all of those ads that take over your screen and you have to wait or find the “x” to click to get rid of them. So as much as ads are necessary, we exercise considerable restraint in what we run. If you normally eschew ads, please make an exception and whitelist NC.