Rather than growing closer in the coming post-bankruptcy era, many residents fear that these two Detroits — already so separate and unequal — will have increasingly divergent futures.
Read more...Yves here. Bill Black discusses his favorite topic, fraud, with Marshall Auerback of the Institute of New Economic Thinking. Some of this talk is familiar terrain for those who know Black’s work, such as Black’s well-argued criticism of the failure of financial regulators to make criminal referrals for misconduct in the runup to the financial crisis. Even so, many readers are likely to find new information here, such as the number of FBI agents assigned to handle white collar fraud, and how some regulators during the savings & loan crisis defied Congressional pressure to go easy on failing and defrauded banks, and the career costs they paid.
Read more...Yves here. The EU has gone so far astray of its original aims that its corruption and resulting fissures seem beyond repair, yet as Mathew D. Rose discusses in depth, its leaders remain dangerously complacent.
Read more...I’m still hugely behind on the AIG bailout trial, and hope to show a ton more progress in the next week. I’m posting the transcript for days three the trial; you can find the first two days here and other key documents here.
The first week was consumed with the testimony of the painfully uncooperative Scott Alvarez, the general counsel of the Board of Governors, who Matt Stoller argued needs to be fired, and the cagier-seeming general counsel of the New York Fed, Tom Baxter. Unlike Alvarez, Baxter at least in text seemed to be far more forthcoming than Alvarez and more strategic in where he dug in his heels. But the revelations about the Morgan Stanley rescue alone are juicy. The main actors have sold a carefully concocted story for years.
Read more...There is no end to the whining from Democratic activists after a rotten election, and no end to finger pointing after legislative defeats on contentious questions. This story in the Washington Post is the tell-all of the 2014 wipe-out, featuring the standard recriminations between the President and Congress. In it, the chief of staff of the Senator Majority Leader Harry Reid, David Krone, attacks the White House. “We were never going to get on the same page… We were beating our heads against the wall.” The litany of excuses is long. Democratic candidates were arrogant. The White House failed to transfer money, or stump effectively. The GOP caught up in the technology race, or the GOP recruited excellent disciplined candidates.
Everything is put on the table, except the main course — policy. Did the Democrats run the government well? Are the lives of voters better? Are you as a political party credible when you say you’ll do something?
This question is never asked, because Democratic elites — ensconced in the law firms, foundations, banks, and media executive suites where the real decisions are made — basically agree with each other about organizing governance around the needs of high technology and high finance. The only time the question even comes up now is in an inverted corroded form, when a liberal activist gnashes his or her teeth and wonders — why can’t Democrats run elections around populist themes and policies?
This is still the wrong question, because it assumes the wrong causality.
Read more...Yves here. There is a solution of sorts to the problem of the “competitiveness” of Eurozone periphery countries, which is for them to lower wage rates to improve their terms of trade. Unfortunately, that still does not resolve the issue of needed to import other inputs, like energy and sometimes raw materials, at Eurozone-wide price levels. And the response to crushing wages (or the super high unemployment that results from not being able to “adjust”) is that the people most able to leave, which is usually the young and best educated, depart.
Read more...Even though many readers have already read Matt Taibbi’s new article on how Attorney General Eric Holder acceded to Jamie Dimon’s efforts to squelch a criminal prosecution of JP Morgan’s securitization of toxic mortgages, I thought it would be useful to present the Democracy Now discussion of the story, particularly since the whistleblower, Alayne Fleischmann, discusses the case in her own words. Amy Goodman also asks Tabbi late in the broadcast about his departure from First Look.
Read more...Yves here. In this Real News Network interview, political scientist Tom Ferguson describes some of the salient characteristics of this week’s off year election, including its unprecedentedly high level of campaign spending and low voter turnout. Ferguson explains that low turnout is a feature, not a bug, of the US system. That is one reason that articles like this one in Mother Jones, Obamacare Could Have Turned Millions of Uninsured Americans Into Voters, miss the point. Both parties are happy with a system that favors the rich and connected. Even if the Democratic party is on a slow-motion path to self-destruction, the party apparatchiks are still doing well personally by their misrule.
Read more...Yves here. Brace yourself for the perverse spectacle of Republicans and their US corporate masters whinging about tax rates when effective corporate tax rates are super low by historical standards, in large measure due to clever tax structuring and the use of tax havens.
The European Union has made a show of cracking down on Ireland as a tax scam, um, tax haven for its low corporate tax rate, while leaving the even more flagrant destination of Luxembourg untouched. A newly-relesed report shed some light on the scale of the Luxembourg tax scam, which is now leading to some official kabuki as to what to do about it. What goes unsaid is the degree to which the US and UK are top players in tax avoidance, the US through destinations here (including Delaware and Wyoming limited liability corporations) and the Caymans, the haven preferred by US banks. In the UK, the City has its own network of preferred tax haven, including the Isle of Man, Jersey, and Bermuda.
Read more...Regulators look to be getting more serious about financial firm misconduct, as witness their new-found willingness to file criminal charges against banks. Not that has happened yet as regards JP Morgan, the US bank with far and away the biggest rap sheet of all US financial firms. But as we’ll discuss, while it is good to see regulators getting tougher with banks, this move still falls in the category of “too little, too late,” particularly since it looks to a last-ditch effort to improve departing attorney general Eric Holder’s file of media clips.
Here is an overview of the JP Morgan investigation from the Wall Street Journal:
Read more...The New York Times yesterday published a new story by Ben Protess and Jessica Silver-Greenberg on how Federal prosecutors are investigating reopening cases against big banks and hitting them with additional charges. Reader Richard D, who was curious about the story, wrote, “It is hard for me to know whether this is a momentous event, or a nothingburger.”
It’s actually somewhere in the middle. While it represents prosecutors starting to use muscles that had atrophied, at least as far as financial firms are concerned, as readers will no doubt suspect, the shift falls well short of the levels of official zeal needed.
But there’s actually an important shift discussed at some length in the article that may have bigger ramifications: that powerful bank consultants and lawyers are no longer being taken at their word.
Read more...One of the things that continue to be a source of anger in the American public is the way that banks were rescued en masse without the perps, the managers and producers in the businesses that produced toxic product facing much if anything in the way of consequences. Another is that the banks pay fines that are inadequate relative to the amount of damage that they did.
SEC commissioner Kara Stein has been using her post as a surprisingly effective bully pulpit to pressure the agency and other regulators into upping their game. It’s unusual for an SEC commissioner to play that role; the post is typically a runway for becoming either a lobbyist or a director on financial services company boards. Even more rare is that Stein is regularly crossing swords with SEC chairman Mary Jo White, who is taking a much more industry-friendly line than she promised at the time of her confirmation. It’s virtually never done to have a commissioner from the same party buck the chairman.
Read more...Yves here. We’ve been featuring what we consider to be standout segments in an important Real News Network series, an extended discussion between Chris Hedges and Sheldon Wolin on capitalism and democracy. This offering focuses on what Wolin calls “inverted totalirianism,” or how corporations and government are working together to keep the general public in thrall. Wolin discusses how propaganda and the suppression of critical thinking serve to a promote pro-growth, pro-business ideology which sees democracy as dispensable, and potentially an obstacle to what they consider to be progress. They also discuss how America is governed by two pro-corproate parties and how nay “popular” as in populist, candidate gets stomped on.
Read more...Yves here. I have to admit I never focused on what turns out is a blindingly obviously reason why the European bank stress tests are an exercise in optics. Even though this website derided the US stress tests as a cheerleading exercise, and earlier criticized the Administration for failing nationalize Citigroup as FDIC chairman Sheila Bair sought to do, the US authorities were in a position to Do Something about sick banks. Consider the European case (note I consider Yanis to be too charitable toward US bank regulators, but keep in mind that he’s comparing them to his home-grown version). And then you have the additional problem, which was widely discussed in 2009 to 2011 or so, that the apparent insolvency of states was the result of and bound up with the overindebtedness of European nations. Perversely, tha is almost never put front and center these days when the topic of seriously unwell European banks comes up.
Read more...Yves here. Real News Network is running an eight-part series on capitalism and democracy, with Chris Hedges and Sheldon Wolin as interlocutors. I thought the second segment in the series, which is historically focused, to be particularly strong. It seeks to trace the evolution of what they call corporate capitalism, or what we’ve sometimes called Mussolini-style corporatism.
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