Category Archives: Politics

Bill Black: Obama’s Vain Search for a TPP “Legacy”

Yves here. This post confirms what readers know all to well, that Obama will use every opportunity to sell out the middle class to corporate interests.

One thing to bear in mind is that opposition to the Trans-Pacific Partnership, and its ugly sister, the Transatlantic Trade and Investment Partnership, do not split on simply party lines. This fall, when Obama was unable to get enough votes to get “fast track” approval, which the Executive Branch uses to force an up-down vote on a final trade deal, denying Congress the opportunity to influence its contents, whip counts showed that nearly 40 Republicans in the House were prepared to join Democrats in opposing it. How the numbers would break now is an open question, but that means it is worth your time and effort to call your Congressman and let them know you are firmly opposed to these toxic trade deals.

The CBO’s Bad Math: Putting $7 Trillion of Notional Value of Derivatives in Taxpayer-Backstopped Depositaries Will Cost Zero

So why did Elizabeth Warren lose her battle last month to stop banks from continuing to park $7 trillion notional value of risky derivatives like the credit defaults swaps in taxpayer-backstopped depositaries?

One of the less well-recognized reasons is that the CBO’s dubious analysis said it would not cost taxpayers a dime.

How the Republican Campaign to Gut Dodd Frank is a Huge Gimmie to Banks and Private Equity Funds

The Republicans have been quick and shameless in using their control of both houses to try to crank up the financial services pork machine into overtime operation. The Democrats at least try to meter out their give-aways over time.

Their plan, as outlined in an important post by Simon Johnson, is to take apart Dodd Frank by dismantling key parts of it under the rubric of “clarifications” or “improvements” and to focus on technical issues that they believe to be over the general public’s head and therefore unlikely to attract interest, much the less ire. However, as Elizabeth Warren demonstrated in the fight last month over the so-called swaps pushout rule, it is possible to reduce many of these issues to their essential element, which is that Wall Street is getting yet another subsidy or back-door bailout.

Today’s example is HR 37, with the Orwellian label “Promoting Job Creation and Reducing Small Business Burdens Act”.

Private Equity Miscreant Freeman Spogli Illustrates Investor and SEC Cowardice

Gretchen Morgenson of the New York Times released an important story over the holiday period on how a mid-sized private equity firm, Freeman Spogli, with $4 billion under management, was found to have made serious violations of its investment agreement. The SEC’s fund examination unit stated that Freeman Spogli, in two of its older funds, FS Equity Partners V (“FS V”)and FS Equity Partners VI (“FS VI”), looked to have repeatedly violated of fee-sharing agreements and to have operated as an unregistered broker-dealer. It asked for Freeman Spogli to make full restitution of the failure to reduce management fees and provide evidence that required reimbursements that looked to have been, um, ignored were actually made.

While Morgenson has done a fine job of presenting the facts of the case, we beg to differ with her as to some of the inferences she draws. She sees this case as a real step forward for investors. We see it as showing how loath both investors and the SEC to take serious action even in the face of clear-cut evidence of misconduct.

Ilargi: Oil, Power and Psychopaths

Yves here. One minor caveat to a fine overview. Ilargi mentions at the end that Angela Merkel has said that it is prepared to let Greece leave the Eurozone if it bucks austerity. A regular reader of the German press who also read the report in Der Spiegel thinks this is a bluff to influence the Greek election.

And there is a bigger question that goes unanswered: why so much US warmongering and destructive, and eventually self-destructive behavior (blowback, anyone?). As Karl Polanyi mentions in passing in his The Great Transformation (see our recent post) because it seems so obvious, a peace consensus had emerged among the Great Powers in the nineteenth century, largely because domestic and international commerce were now a major social organizing principle, and businessmen correctly saw war as bad for business. So why has the peace faction been successfully supplanted by a war faction? Is it that (so far) the US wars are not inflicted on parties we consider to be contemporary Great Powers?

Yanis Varoufakis: Greek and European Prospects for 2015

Yves here. Yanis Varoufakis discusses the prospects for negotiations between a new, likely Szyria-led Greek government and the Troika over the next Greek restructuring. Varoufakis in effect argues that the Greeks should go hardball because the Trokia’s demands are unreasonable. We’ll find out soon enough whether the incoming government has the public support and the guts to do so.

As much as a Grexit would be a lose-lose of major proportions, Varoufakis argues that the logic of current Eurzone arrangements is driving members to a break-up. Indeed, some observers believe that Germany would like to kick Greece out of the Eurozone. As Marshall Auerback put it by e-mail:

As far as Germany goes, let me quote Macbeth:

I am in blood
Stepped in so far that, should I wade no more,
Returning were as tedious as go o’er.‎

Thomas Ferguson: U.S. Midterm Election Voter Turnout at Pre-Civil War Level

“People are saying, who needs this? And they’re sort of nonvoting for a new America.”

Prominent MMT Advocate Stephanie Kelton to Become Chief Economist for Senate Budget Committee

Congratulations Stephanie! Amazingly, being a heterodox economist, no less a leading advocate of MMT, is not a bar to landing an influential post.

Christie Allies Offer Dubious Defenses for Payments Made to His Wife’s Firm

Increasingly defensive responses from the Christie administration and friendly media outlets show that David Sirota’s relentless reporting on pension fund improprieties is starting to draw blood.

The New York Times ran a story last week that recapped (and cited) the Sirota’s reporting on a new Garden State impropriety: that of Christie’s wife, Mary Pat, being hired by hedge fund Angelo Gordon after the firm had been told by the state to liquidate a $150 million custom fund. That should be uncontroversial except Angelo Gordon has failed to sell a portion of the fund after three years, meaning it is still generating fees from New Jersey even as Christie’s wife works there. This relationship looks to run afoul of New Jersey’s strict pay-to-play rules, which state officials from “being involved” in “any official manner” in which they have direct or indirect personal or financial interest.

The Newark Star Ledger also wrote up the story, with the addendum that Tom Bruno, chairman of the state’s largest pension fund, called for an ethics investigation.

The day after the Times story appeared in print, the Newark Star Ledger in an editorial tried to depict the accounts as off base. The timing of the response, coming so quickly on the heels of the Times’ account, strongly suggests that it was planted. An all-too-consistent feature of the rebuttals to Sirota’s charges is that they play fast and loose with facts. The bone of contention is that the state is still paying fees to Angelo Gordon, when by all normal standards payments should have ceased years ago.