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How you know the End is Nigh

We’ve been living with out of control capitalism, now in New Accelerated Format, for almost five years now.  It’s a quickened version of what’s been happening over the last 30 years.  Ever since Reagan, the media has bamboozled the public into giving the rich whatever they damn well please with the expectation that the rich will let us keep our jobs.  The evidence has shown that this does not work but you’ll have to read Krugman for the wonky stuff and teensy (or completely absent) labels on the x and y axises of his graphs.  I guess economists don’t need labels and units but it drives this chemist crazy.

I’m not here to talk about all the overwhelming evidence of wrongdoing that has been going on since 1980, or the massive layoffs that have probably permanently impoverished my generation or the fact that all of this has happened with the complicity of an older generation of seniors who thought the whole world revolved around what happened between women’s legs.  No, I am here to talk about the end times.

In this case, it will be the period of time when the strip miners of Wall Street have taken the top off the mountain almost completely and there is very little wealth left to extract and more and more middle class people are waking up to discover that “we wuz robbed” and there’s just no THERE, there anymore.  Where will the excess gobs of cash come from then?  I mean, after the obscenely rich have cornered all of the disposable income, and then some, in their underground lairs surrounded by their faceless, nameless goons in cold and modern chic livery, do they sit around with their heads in their hands weeping like Alexander that there is no more money in the world to conquer?

Heck no!

NOW, they get in on the payday loan scam.  It’s fricking brilliant!

Major banks have quickly become behind-the-scenes allies of Internet-based payday lenders that offer short-term loans with interest rates sometimes exceeding 500 percent.

Subrina Baptiste of Brooklyn says JPMorgan Chase allowed payday lenders to seize child-support funds in her account.

With 15 states banning payday loans, a growing number of the lenders have set up online operations in more hospitable states or far-flung locales like Belize, Malta and the West Indies to more easily evade statewide caps on interest rates.

While the banks, which include giants like JPMorgan Chase, Bank of America and Wells Fargo, do not make the loans, they are a critical link for the lenders, enabling the lenders to withdraw payments automatically from borrowers’ bank accounts, even in states where the loans are banned entirely. In some cases, the banks allow lenders to tap checking accounts even after the customers have begged them to stop the withdrawals.

What are the chances that Barack Obama will look up from scheming with his 25 year old male senior advisors to “help” the Congress “win” in 2014 by focussing all of their PR efforts on a couple of distracting issues instead of fixing the problem of chronic unemployment and gross exploitation of average Americans, or directly challenging the Republicans with muscular Liberalism, and actually develop some sense of outrage that is strong enough to prod his justice department to actually, you know, DO something to the banks besides taking them to the back bedroom, closing the door and instructing them to wail loudly as he smacks the bed with his belt?

Yeah, I didn’t think so either.

By next year, when we’re all on Obamacare (sorry, Democrats, you’re going to have to own this one in an election year.  Hope you’re ready, but all indications are that you are not.) and trying to pay all of our bills on time, with a heaping side of gigantic health insurance thrown in for good measure, there will be an increasing number of us vulnerable to the siren song of the payday loan.  “Borrow now against your paycheck, pay 500% interest later!”  What could be more natural?

The big banks are investing in it heavily, wouldn’t you know.  So, this has to be one of the signs of the end.  Now that the MBAs have skillfully evolved the work place every two seconds in accordance to their bonus shortened attention span, AND severely crippled productivity by putting all the burden of getting things done on the shoulders of a few, and because they have so completely decoupled the cause and effect relationship of work with positive reinforcement, given the fruits of labor to the shareholders, closed the pension funds, and divested themselves of all responsibility to the people who, you know, WORK,  now that they’ve scraped every last penny out of every last bank account, it is now time to reserve all incoming pennies for their own purposes too.

All our monies are belong to them.

And then what?

I’m not sure but I suspect it ain’t going to be pretty.

Bullying beyond the classroom

Emily Bazelon, a senior editor at Slate, has written a book on cyberbullying, Sticks and Stones, and gave an interview to Terry Gross yesterday on Fresh Air.  One of the schools she talks about in her book that is a notorious bullying school is located in Connecticut.  She describes the school as being extremely competitive and that a culture of meanness thrives as a way of getting ahead.  In this school, you can get bullied simply for being not as economically well off as your peers.

The mother of one of the students who was targeted was less interested in curtailing online social media access than changing the culture of the school.  Bazelon says of the girls who bullied the other student:

“We want to think that empathy is this natural quality we all have, and in fact, almost everyone is capable of empathy. But there are these moments in adolescence where kids freeze out these feelings. I spent a lot of time with some of the girls who were bullying Monique [who is profiled in the book], and in moments it chilled me to listen to how dismissive they were in talking about her. But in other reflective moments they would say things like, ‘You know, I see that she’s walking down the hall with her head hanging down and really doesn’t have as many friends as she used to have.’ So it wasn’t that they were incapable of empathy, it was much more that they were in a culture in which they were being encouraged to be cruel to another kid to enhance their own status instead of really letting their feelings of empathy for her have an outlet.”

When I heard this part, I immediately thought of bankers and wondered just how many of them are living in Connecticut.

Danger, Elizabeth Warren!

Here’s how Elizabeth Warren started her Senate career yesterday:

Now, I think these are good questions and she elicited some very uncomfortable responses.  Any of us could have asked those questions because we want to know.  Why are only ordinary people prosecuted and persecuted with the government playing the role of Javert ruining people’s lives for what may be minor infractions, like drug abuse or petty theft, while the bankers get away with murder?

The problem is I think her own party is setting her up.  That’s not to say she shouldn’t be doing what she’s doing.  This is the kind of stuff we, the average citizens, like to see.  But because she is so prominent, right out of the gate, and such a threat to the right wing AND to the Democrats’ campaign warchests, she’s going to be put out there with enough rope to hang herself.

It’s hard for me to see exactly what angle Rush Limbaugh and the Glenn Beck types are going to use to neutralize her because there’s really nothing wrong with her line of questioning.  But I guarantee that she will become the next target of ridicule and misogyny before very long.  Both parties’ leadership want her out of the way.  They’ll do a Franken on her.

I hope she’s ready and that there are enough of us out here to push back the tide of nastiness headed her way.

Or at least that Paul Krugman can spare some time from his exhausting job tilting at windmills to put in a good word for her.

By the way, if banks are too big to fail or prosecute then the answer to our problems seems to be pretty simple- break them up first.  Voile!  We could prosecute them to our heart’s content.

*********************************

Matt Taibbi has a review of Neil Barofsky’s book Bailout.  Taibbi focuses on the political gamesmanship and back stabbing aspect of Barofsky’s book while  I was shocked by the sheer amount of money we allowed the banks to have access to without any oversight.  Anyway, it’s all connected with what is about to fall down on Elizabeth Warren.

It’s the best $9.99 you’ll spend at Amazon this month (for the Kindle edition).

Uncomfortable conclusions

Matt Taibbi has a follow up to his Secrets and Lies of the Bailout article in the Rolling Stone.  This one, called “One Broker’s Story” is about the consequences of the bailout to ordinary brokers as a result of asymmetric information.  Neil Barofsky hinted at this in his book Bailout when he described all of the money that the government let the banks have access to.  It amounts to trillions and trillions of dollars.  It’s a little like opening the bank vault doors to people who have a habit of setting money on fire and telling them, “We know you didn’t mean to burn up everyone’s nest eggs.  Now, don’t do it again.”

Trillions and Trillions.  Imagine all of the money that the Republicans are constantly going on about in the deficit crisis hysteria and multiply it my several times over.  The social security shortfall requires a minor adjustment, a teensy tweak.  But the amount of money we have thrown at bankers and allowed them to access whenever they want is vastly, vastly larger.  When it comes right down to it, the bankers pretty much own the money supply.  They can tap into it whenever they want, charge interest on money they lend to others on money they got virtually interest free, and they don’t have to tell you about it.

The hapless broker in Taibbi’s story didn’t know that the bank he worked for, Wells Fargo, had access to all this cash.  He was looking at the fallout of the 2008 disaster, estimated the financial solvency of all of the major banks and decided to short them because he figured it was only a matter of time before they started falling like dominos due to the weight of all their bad assets.  But the broker didn’t know that all these banks had nothing to worry about because not only did the US government bail them out, it covered up their problems and then opened the money sluice to them in perpetuity.  So, stocks continued to climb in spite of all evidence to the contrary and the broker lost his shirt and everyone else’s shirts he did business with.

He only found out when Bloomberg filed a FOIA to obtain information on where all the bailout programs money was going.  The banks and the Treasury (and the White House, I’m sure) were hoping to keep it a secret as long as possible.

What the stock market is showing everyday is an illusion.  The banks are doing well because they’re being propped up by our money.  That is the observation.  The question is, why?  Why are we allowing the banks to have so much money?  Why aren’t we letting the market suffer?

I think it comes back to the 401K and IRAs again.  So many of us have so much of our money locked into the market instead of pensions that if the government let the market sink to its natural level, there would be a social and political crisis.  It is a vicious circle.  And we can’t take our money out to start new businesses or pay debts or just live without paying punitive taxes.  Those taxes virtually guarantee that the money stays in the market.  So, the government has to prop up the market until it can’t be propped up anymore.  That should happen when the next bubble bursts on Wall Street.

Taibbi finishes the post like this:

This is the real problem with the bailouts, and the issue we tried to underscore with the “Secrets and Lies” piece. With their hide-and-seek policies, bogus stress testing and stubborn insistence on calling failing banks healthy and publicly endorsing other such fibs, the architects of the federal rescue (from both the Bush and Obama administrations, as well as from the Federal Reserve) created a two-tiered market. The new economy has two classes of investors: those who know the real numbers, and those who don’t.

So while the proponents of the bailout will argue they were a success, and the covert and overt federal support helped bring the Dow all the way back from below 7,000 to above 13,000 – seemingly a good thing no matter how you look at it – there’s another bitter reality, which is that the bailouts officially created a sucker class.

When banks started making fortunes again in 2009 and beyond, it wasn’t a victimless situation. There were losers in this trade, too. Hartzman and his clients are examples of the kind of people who lost when the government made decisions about who’s entitled to the truth and who wasn’t. As one former hedge fund manager put it to me recently, “Joe Sixpack has no chance in this market.”

We are the sucker class.  Well, some of us are suckers.  Some of us weren’t suckered into voting for Obama either time.  Ultimately, the responsibility for this fiasco falls on his shoulders and those of the people he hired.  And the people who unquestioningly supported him.

********************************************

And about that $1Trillion platinum coin, mint the damn thing already.  As Krugman pointed out yesterday:

There seem to be two kinds of objections. One is that it would be undignified. Here’s how to think about that: we have a situation in which a terrorist may be about to walk into a crowded room and threaten to blow up a bomb he’s holding. It turns out, however, that the Secret Service has figured out a way to disarm this maniac — a way that for some reason will require that the Secretary of the Treasury briefly wear a clown suit. (My fictional plotting skills have let me down, but there has to be some way to work this in). And the response of the nervous Nellies is, “My god, we can’t dress the secretary up as a clown!” Even when it will make him a hero who saves the day?

The other objection is the apparently primordial fear that mocking the monetary gods will bring terrible retribution.

It sounds like another civility bluff to me.  The bullies announce they are going to steal your lunch money, push you down in the dirt and stomp on your face but if you protest or come up with some clever workaround, they start heading to the fainting couch with the vapors.

Normally, I’d say that this kind of silliness with the coin is just going to make the matter worse because who in the world will take us seriously.  But there shouldn’t be any real economic fallout, so mint the damn coin.

On the other hand, maybe we should just call their bluff.  Let them wreck the economy, pull down our credit rating, sow chaos and confusion and ruin people’s lives.  I’m sick of Republicans pulling this shit.  They need to be terrified of the consequences of their actions for a change.  If you mint the coin, they’ll just come back with something else to hold hostage.  So, let the babies have their way and get the end of the financial world over with.  It’s out of control and an unmitigated disaster and it’s going down eventually anyway.  Why prolong the suffering.  Let’s just lance the boil now and start over.   I want a capitalism without exploitation.

Reboot.  Do it now.

Read the latest Matt Taibbi article on the bailout

Secret and Lies of the Bailout

It’s got two very colorful opening paragraphs:

To listen to the bankers and their allies in Washington tell it, you’d think the bailout was the best thing to hit the American economy since the invention of the assembly line. Not only did it prevent another Great Depression, we’ve been told, but the money has all been paid back, and the government even made a profit. No harm, no foul – right?

Wrong.

It was all a lie – one of the biggest and most elaborate falsehoods ever sold to the American people. We were told that the taxpayer was stepping in – only temporarily, mind you – to prop up the economy and save the world from financial catastrophe. What we actually ended up doing was the exact opposite: committing American taxpayers to permanent, blind support of an ungovernable, unregulatable, hyperconcentrated new financial system that exacerbates the greed and inequality that caused the crash, and forces Wall Street banks like Goldman Sachs and Citigroup to increase risk rather than reduce it. The result is one of those deals where one wrong decision early on blossoms into a lush nightmare of unintended consequences. We thought we were just letting a friend crash at the house for a few days; we ended up with a family of hillbillies who moved in forever, sleeping nine to a bed and building a meth lab on the front lawn.

I haven’t read the whole thing yet but if Taibbi is consistent with Sheila Bair, Ron Suskind and Neil Barofsky, Tim Geithner is going to look pretty bad.  There was a point in Barofsky’s book when I finally realized the magnitude of the scam that just made my jaw drop and made me want to join the Doomsday Preppers.  It really is that bad.

There will be a quiz.

More…

This part is good.  I mean bad:

To guarantee their soundness, all major banks are required to keep a certain amount of reserve cash at the Fed. In years past, that money didn’t earn interest, for the logical reason that banks shouldn’t get paid to stay solvent. But in 2006 – arguing that banks were losing profits on cash parked at the Fed – regulators agreed to make small interest payments on the money. The move wasn’t set to go into effect until 2011, but when the crash hit, a section was written into TARP that launched the interest payments in October 2008.

In theory, there should never be much money in such reserve accounts, because any halfway-competent bank could make far more money lending the cash out than parking it at the Fed, where it earns a measly quarter of a percent. In August 2008, before the bailout began, there were just $2 billion in excess reserves at the Fed. But by that October, the number had ballooned to $267 billion – and by January 2009, it had grown to $843 billion. That means there was suddenly more money sitting uselessly in Fed accounts than Congress had approved for either the TARP bailout or the much-loathed Obama stimulus. Instead of lending their new cash to struggling homeowners and small businesses, as Summers had promised, the banks were literally sitting on it.

Today, excess reserves at the Fed total an astonishing $1.4 trillion.”The money is just doing nothing,” says Nomi Prins, a former Goldman executive who has spent years monitoring the distribution of bailout money.

Nothing, that is, except earning a few crumbs of risk-free interest for the banks. Prins estimates that the annual haul in interest­ on Fed reserves is about $3.6 billion – a relatively tiny subsidy in the scheme of things, but one that, ironically, just about matches the total amount of bailout money spent on aid to homeowners. Put another way, banks are getting paid about as much every year for not lending money as 1 million Americans received for mortgage modifications and other housing aid in the whole of the past four years.

It’s like the guys who made up these rules on the bailout never had to deal with children or adolescents.  I guess that kinda makes sense, given that they are all guys who probably have wives and nannies to do that stuff.

 

Ok, here’s my theory about why the Masters of the Universe want to kill the social insurance programs

Remember what I said about Wall Street workers?  Let me refresh your memory:

The finance class actually consists of a bunch of overqualified strip miners.  They’re overworked, which might explain the number of bad decisions they make, and their compensation system decouples the consequences of their actions from the actions themselves.  They are being paid to make “deals” and the purpose of those deals is to extract “wealth”.  In a way, it’s not that much different from getting into the cab of some giant piece of earth moving equipment and mowing down the side of the mountain and then loading that potential ore onto a conveyor belt to be separated from dirt.  They live in a “company” town and are paid “company scrip”.  It’s a truck system for them as well.  The compensation is not proportional to the amount of work they do, they can be fired at will and they’re never going to leave that mountain because they owe their souls to the company store.  The more they work, the more compensation in bonuses they are promised but it’s never enough.

Once you think about this metaphor of Wall Street doing the work of strip miners, the present set of circumstances will start to make a lot of sense.

We know that Social Security does not add to the deficit.  In fact, we have a trust fund worth almost $3 trillion dollars.  Sure, that trust fund has taken a hit in the past four years because so many people are out of work and can’t pay their taxes but once people are working again, the kitty will start to grow again.  And if all that is needed is a couple of tweaks to solve the minor shortfall, it’s really not as damaging to the economy or rich people’s ability to spend ungodly amounts of money on themselves as they pretend.

So, it’s not a deficit problem- at least not from the government’s side of things.  Sure, Medicare does need to be fixed but that requires some spine stiffening on the part of the Democrats to crack down on providers.  Did I tell you about my lab partner’s husband’s 4 hour hernia operation and recovery in the hospital?  $70,000.  No, that is not a mistake.  There’s something truly out of whack when if comes to costs and payments to hospitals, doctors, insurance companies.  It’s a real problem.  And since the rest of the developed world has found reasonable solutions at much lower costs, it’s moronic for our elected officials to tell us that the costly ACA, with downstream repercussions they failed to study, is the best we can do.  Please, do we look stupid to you?

Anyway, back to Wall Street.  The Social Security trust fund is solid and fixable and millions of us late boomers paid into the surplus funds to cover our own retirements.  What isn’t solid and fixable is the 401K system, which really is a Ponzi scheme.  Pretty soon, a lot of aging baby boomers will be taking money out.  That’s going to hurt someone’s bottom line.  The bonuses and skimming going forward isn’t going to be nearly so lucrative as it was over the past two decades.  After the Baby Boom came the Baby Bust in the late 60’s.  Looks like The Pill really caught on in a big way.

In the past couple of decades, many companies ditched their pensions for the 401K.  Let the kids pay for their own retirements.  None of this deferred compensation crap.  And life was good for the shareholders and the bankers.  But once that money starts to get withdrawn, the salad days will be over.  So, Wall Street must get more people into 401Ks or they won’t be able to continue strip mining.  The problem is that most people are already in one if their employer offers it.  The market is finite and pretty soon will plateau.  At some point, the investment portfolios are also going to reach a steady state.

BUT, if you raise the retirement age and keep a lot of older people working, they will be forced to put their money back into the market.  Well, they won’t be able to retire until they’re much older than their parents were at retirement.  If they have any hope of ever taking time out to go travel or garden, they’re going to have to risk their money in the market, hope that it will pay off so they can get out of the job market before they’re dead and forget about social security.

My theory is that raising the retirement age forces more savings to stay in the market longer and that with a pool of people who can’t retire yet still working, the amount of money going into 401Ks and IRAs is going to go up. Stripville!

It makes sense from a timing perspective.  There’s really no need to cut a deal with Republicans right now.  The Democrats have enough seats to keep things pretty much unchanged.  If the tax cuts expire, it’s going to look bad for Republicans to hold middle class tax cuts hostage in order to satisfy their rich friends.  In fact, just about anything the Republicans stamp their feet and insist on is going to look bad for them.

But Obama still wants to cut a deal and make us all a lot poorer as a nation and as individuals.  And he really doesn’t have to do this.  So, why do it?  I think it’s because the strip miners have told him that if he doesn’t, the market is going to start to drop and it will pick up speed and saving the banks is the most important thing ever!!!  All serious people agree about this.  If he doesn’t cut the social insurance programs in order to prop up the 401K system, it will be all his and the Democrats’ fault when the market finally starts to fall.

Yep, that would suck for seniors who are about to retire so if I were them, I’d start looking around for other places to put that money.  But history has shown that Obama and his droogs at Treasury will bend over backwards to please bankers even if it means opening a revolving line of credit for the bankers to the taxpayer cash stream in perpetuity.  (Read Neil Barofsky’s book for more horrific details).

It’s been my feeling that the 401K is behind a lot of what’s really messed up in our economy and for some reason, we never hear anyone of sufficient gravitas talking about it.  But just imagine what would happen to the economy if we tried to phase it out even if most of us hate it with a white hot passion.

All hell would break loose.

Throwing up a little

Krugman writes today about the homeowner mortgage crisis.  You remember the homeowners, don’t you?  They are those people who got into the market too late and are now underwater on their mortgages and paying much higher interest rates than they could get right now.

So, anyway, there’s an idea floating around that maybe if the guy who heads the Federal Housing Finance Agency would cooperate with the Obama White House, some of those mortgages could be restructured to take advantage of those low interest rates, thus sparing some of those homeowners some financial pain.  But the director of that agency, Edward DeMarco, a Bush holdover, refuses to do what’s necessary to get the ball rolling.

Now, this is strange.  Presumably, this is an executive branch office so Obama should be able to bear down on this guy and make him do what he’s told.  That worked with Sheila Bair, the former head of the FDIC.  She wanted to restructure the biggest banks and make the shareholders take a haircut.  But Geithner would have none of it. Haircuts are for taxpayers who have been PREPAYING their social security benefits, not bankers and their shareholder buds.  So, Geithner stuffed a sock in Bair’s mouth and forced her to bailout the shareholders against her objections.  Easy Peasy.  Tim showed her how to strong arm.  Besides, who’s going to stick up for a girl, right?

So, you’d *think* that the same tactic could be used to force DeMarco to get off his duff but so far, none has been forthcoming from the Obama administration.  I noticed that Krugman is getting that pizza and orange juice taste in the back of his mouth when writing about this topic.  It must be hard to understand the inertia and then have to defend the stationary object behind it.  Let’s see if I can break it down.

Politically, DeMarco serves as a target for scorn, derision and hatred.  He’s a Republican holdover.  You have to ask yourself *why* Obama didn’t replace him back in 2009 when he became acting director after the former Bush appointee left.  If could be that Republicans would bend over backwards to block the new Obama nominee.  But that doesn’t make any sense because at the time DeMarco became the acting director, the Democrats had control of the Senate and with the right kind of political strong arming, Obama should have been able to get his nominee through.  Same for the Treasury appointees that were meeting with opposition.  There’s really no excuse for this.  When you have a filibuster proof majority, not using it to your party’s advantage is politically incompetent.

Second option- just fire the guy.  How hard is this?  Sure the Republicans would scream bloody murder.  So?  Bush did this all the time.  He just ignored the ranting and raving from the other side and he usually got his way.  Hey, remember when Dick Cheney shot that guy in the face and we thought it was curtains for Dick?  And then his victim took the blame and said he shouldn’t have gotten in the way of the shotgun pellets?  Was that genius or what?  Obama could have used his reputed political giftiness to get whatever he wanted in 2009.  I guess he was keeping his powder dry for something special.  And then 2010 came and that was the end of that.  Nevertheless, DeMarco is in his territory, so, presumably, Obama could keep firing acting directors until he got to the person who would do his bidding, if it were important to him.

Ahhh, now we’re getting to the nitty gritty.  How important is it to fire the guy so that his bidding is executed?  I’m guessing it’s about as important as making the shareholders take a haircut in the bank bailout.  In other words, it isn’t.  The people who hold those mortgages are much more important to him than the people who actually pay them.  Obama still needs those campaign donations.  One wonders why he can’t just point to all of the good things he’s done.  Why does he need to raise more money than Romney to show what a terrific and irreplaceable president he is?  The answer to this question is behind why I am so disinterested in this election and probably why Krugman throws up a little every time he has to climb the water tower with a bucket of paint to defend this guy.

So, to recap, DeMarco is convenient to the Democrats because they can point to him and blame the Republicans for being so mean and heartless while at the same time, they can party with their donors who haven’t paid a price for their moral hazard.

Nauseating, isn’t it?

*******************************

Rehab the Banks or I’m Going Green

Remember Amy Winehouse?  She was bright and talented and a total basket case. For years, her family and friends tried to get her to clean up her act.  I remember an interview with one of the Dap Kings who backed her as well as singer Sharon Jones.  He hinted that it was much, much less fun to tour with Winehouse.  Well, I guess so.  You’re trying to be professional and you never know what you’re going to get with an out of control alcoholic.  It makes you not want to play for her anymore.  She’s unreliable.

Her parents pleaded with the public to stop going to her concerts until she got sober. She looked like a train wreck waiting to happen.  When she died, was anyone really surprised?  I know I wasn’t.  She joined the 27 Club, predictably.  All very avoidable.  What a crying shame.

Same thing with the banks.  They’re out of control, unreliable and unstable.  At any moment now, they could just die on us.  But where Amy just ruined herself and not the rest of the world because she resisted rehab, having the banks act like addicts for extended periods of time has much more serious consequences to the rest of us.

Both candidates are enablers.  Obama has had many opportunities in the last 4 years to force the banks to clean up their act but he’s passed on nearly all of them.  He seems to not like regulation much, approaching each bank bailout as a new problem that needs a customized solution.  He slaps them on the wrist and tells them not to do it again.  Romney is a Republican.  Enough said.  Never trust them.  No, no, you former PUMAs, they are not nice people.  I even wonder if they’re a party and not simply a mob of crazed whip kissers lead by con men.  Actually, that’s *exactly* what the Republican party is today.  If you buy into that, you’re really buying into a culture of selfishness and greed disguised by a thin but garish veneer of piety.  And that’s about it.  They have no other goal than to dismantle government and take everything that isn’t nailed down.  Deep down inside, you know this but you can’t get over your anger and hatred of the DNC for what they did in 2008.  I’m not over it either but I’m not so blinded by it that I can’t see what the Republicans are up to.  The enemy of my enemy is NOT my friend in this case.

What I want is rehab.  Yep, if Obama can’t come up with a plan to rehab the financial services industry for our and their good, even at the risk of pissing some of them off, he needs to step aside.  If he can’t do the rehab thing, then he’s no use to us.  Everyday he continues to enable them and puts off getting them clean and sober, he puts us at risk for a catastrophic failure.  And this will happen because as long as they never suffer the consequences of their reckless behavior, they will get even more reckless.  Sooner or later, probably sooner, we will have another financial catastrophe on our hands.

If I were a Democrat, I’d be particularly concerned with the period after the convention and before the election.  Because once the candidate is selected, unexpected failures will fall on the head of the person in office.  Republican are masters of engineering when it comes to making voters scared to death.  If you don’t have a strong, steady, competent candidate to calm the waters, you’re screwed.

Don’t think the Republicans don’t want to win.  They want it very badly.  The last four years were entirely predictable.  The idea was to force an economic crisis on the American people and then make it as difficult as possible for the Democratic president to do anything about it.  The Republicans got an unexpected assist from the Democrats who nominated the weakest possible candidate they could find.  That leaves Obama holding the bag after four years of unrelenting pressure on the American people.  If you didn’t expect this, you weren’t paying attention.  And if you thought Obama was somehow going to overcome all of it when what was really needed was a president with some insight into the mechanisms of government and how to optimize efforts in a very bad situation, like firing Edward DeMarco and putting your guy in his place, then you were probably better off than most average American working people.  Those average Joes are now your responsibility.  You dragged them into this.

It’s all avoidable.  Rehab the party, rehab the banks.  Save the world.

The NYTimes finally puts LIBOR on the frontpage

It took long enough.  This article even starts poking around the edges at the Federal Reserve Bank of NY:

As big banks face the fallout from a global investigation into interest rate manipulation, American and British lawmakers are scrutinizing regulators who failed to take action that might have prevented years of illegal activity.

Politicians in both London and Washington are questioning whether regulators allowed banks to report false rates in the run-up to the 2008 financial crisis and afterward. On Monday, Congress stepped into the fray, requesting information about the role of the Federal Reserve Bank of New York, according to people close to the matter.

 […]

On Monday, the oversight panel of the House Financial Services Committee sent a letter to the New York Fed seeking transcripts from at least a dozen phone calls in 2007 and 2008 between central bank officials and executives at Barclays.

“Some news reports indicate that although Barclays raised concerns multiple times with American and British authorities about discrepancies over how Libor was set, the bank was not told to stop the practice,” Representative Randy Neugebauer, a Texas Republican and the head of the House oversight panel, said in the letter, which was reviewed by The New York Times.

Tim Geithner was the head of the Fed in NY during the time frame in question.  It is hard for me to imagine that he didn’t know that LIBOR was being manipulated.  We have already heard the panic defense, that if the true LIBOR rate was known, a financial apocalypse would have swiftly followed.  But it’s the aftermath of the manipulations when the panic had subsided that intrigue me.  Tim Geithner gave a lot of advice to Obama that was very friendly to bankers.  But he must have known that a couple of banks, like Citigroup, were insolvent.  Yet instead of nationalizing those failed banks, we merely stress tested them, bought their toxic assets and bailed them out.

Much of our current unemployment woes and struggling economy can be traced back to those early days of the Obama administration when we saved the bankers and ignored everyone else’s needs.  There were many smart people who were in favor of being more aggressive with the bankers and making a strong case for a bigger fiscal stimulus package.  They were ignored.  You can blame the Republicans, if you are so inclined.  But let’s remember that the Democrats were in charge in the first two years.  We can only speculate how they might have come together to push financial reforms and New Deal programs if we had only known how serious the situation was.

Hiding the true nature of the financial collapse from our elected officials amounts to a coverup, in my humble opinion.  It’s a coverup that cost many of us our houses, jobs and security.  Heads have got to roll for this one and THIS time, we have to demand that the parties responsible are held fully accountable.  There has to be real reform and perp walks or our present economic environment will never get better.

Yes, it sucks for the White House that it all comes to light in an election year.  What can I say? When you sell your soul to a bunch of people who have more money than God, they usually expect something significant in return. It looks like they got it.

Has someone found a smoking gun?  Reuters reports that Geithner had a “Fixing LIBOR” entry on his calendar in 2008.  Does that mean fix the rate or fix the problem with banks manipulating the rate?  Such ambiguity.

In early 2008, questions about whether Libor reflected banks’ true borrowing costs became more public. The Bank for International Settlements published a paper raising the issue in March of that year, and an April 16 story in the Wall Street Journal cast doubts on whether banks were reporting accurate rates. Barclays said it met with Fed officials twice in March-April 2008 to discuss Libor.

“FIXING LIBOR”

According to the calendar of then New York Fed President, Timothy Geithner, who is now U.S. Treasury Secretary, it even held a “Fixing LIBOR” meeting between 2:30-3:00 pm on April 28, 2008. At least eight senior Fed staffers were invited.

It is unclear precisely what was discussed at this meeting or who attended. Among those invited, along with Geithner, was William Dudley, who was then head of the Markets Group at the New York Fed and who succeeded Geithner as its president in January 2009. Also invited was James McAndrews, a Fed economist who published a report three months later that questioned whether Libor was manipulated.

It doesn’t look like LIBOR got fixed.  But clearly, Geithner knew what was going on.  And if he didn’t have a come to Jesus meeting with politicians right after he took office to explain how dire the situation was, then what can we conclude except that he was operating in the bankers’ interests at the expense of ours?

This s^*( is serious.  It affects mortgages, credit card rates, student loans and economic health and every decision that has been made in the past 4 years.  The timing is even crucial.  These meetings were taking place in the middle of the primary season when money was pouring into Obama’s campaign coffers from Wall Street and crazy Obots were screaming for Hillary Clinton to quit the race even as she was still winning big state primaries.  We know from other sources that the meltdown started in 2007.  So, even our primaries might have been affected by the shaky bank situation.

Darrell Duffie, a Stanford University finance professor who has followed the Libor issue for several years, said that he believed regulators were “on the case reasonably quickly” after questions were raised in 2008.

“It appears that some regulators, at least at the New York Fed, indeed knew there was a problem at that time. New York Fed staff have subsequently presented some very good research on the likely level of distortions in Libor reporting,” Duffie said. “I am surprised, however, that the various regulators in the U.S. and UK took this long to identify and act on the misbehavior.”

Surprise!

One last thing: If Geithner want to fix LIBOR in April of 2008, why did it take the CFTC to launch an investigation about it in March of 2011?  You’d think something as big and potentially litigious as a LIBOR scandal would have prompted swifter action. The fact that that didn’t happen suggests there is some bigger thing that is being covered up.  I can’t imagine what it is but it must be huge.

Tuesday: Reality Check

So, does anyone believe that the red beanie boys lost their case against no-cost contraceptives in the health insurance plan because Barack Obama has a deep commitment to women’s reproductive freedom or equality?

Or does he have a problem with women and he needs to throw them *just* enough of a bone to win their votes but not enough to piss off the religious too much?

It’s the latter.

While the percentage of Democrats who describe themselves as liberal has also increased since 2000, rising ten points, the Democratic Party remains much more ideologically diverse than the G.O.P. Roughly forty per cent of Democrats call themselves “liberal,” forty per cent call themselves “moderate,” and twenty per cent call themselves “conservative.”

“Such numbers explain why liberals seem destined to perpetual disappointment in Democratic presidents, who cannot lean too far left without alienating the party’s moderate-to-conservative majority,” Will Marshall of the Progressive Policy Institute argues in a recent report.

So, if moderates are still crucial to Obama’s election, what do they look like? Over at Third Way, Michelle Diggles and Lanae Erickson take a deep dive into the data to show that the real swing vote for Obama is a group they call Obama Independents—voters who “liked and voted for [Obama] just 3 years ago… were the most ideologically moderate segment of the electorate,” and “are true swing voters, with one-quarter voting Republican in 2010 and one-quarter voting for President Bush in 2004.” This group, which we are likely to hear a lot about in the coming months, is disproportionately young, female, and secular, and it was hit hard by the recession. One quarter of its members are non-white.

If Obama goes, so does the free Lo-Ovral.

This is the problem with politicians who do not have a coherent worldview, and Obama never has had one.  He has not made any effort to craft policy that will advance women’s equality in the workplace or the doctor’s office.  It’s not one of his goals.  Failure to plan on your part does not constitute an emergency on his.  The problem with Democrats is not that their factions are all over the place.  The problem is that they try to cater to these factions without providing a coherent vision for the future.  There is nothing that sticks Democrats together under one united idea of how the country and world should work.  So, Obama careens from one interest group to another trying to thread the needle between pissing off the religious nutcases, who do have a particular worldview, whether we like it or not, and the rest of us.  Plan B is a contraceptive too far.  Women should get a majority vote from their family and pastors before an abortion.  But contraceptives are probably ok, according to the data mining algorithm.

He’s done the same on the banker/financial sector fiasco.  Instead of developing policy and solutions based on an understanding of what is wrong with the economy and having a vision of how it should work, he has taken an ad hoc approach and tries to cut deals with each player individually.  That is more of the Teddy Roosevelt model but it leaves us open to more misbehavior by the banks because there still aren’t any rules to keep them from gambling our money away and then expecting the government to bail them out.  He should have started with the premise that it is wrong to compensate gamblers for their losses and then figure out how to prevent that from happening again.

Well, you know the rest.  Obama is pandering here to his swing voters, who happen to be moderate, secular women of childbearing age, in order to get votes.  He’s going to save them a bunch of money between now and November.  But that won’t get them better jobs or jobs at all.  It won’t prevent Walmart from subtle sexism that prevents women from getting ahead.  It won’t make measurements of workplace parameters to prevent “he said/she said” accusations about discrimination that no one will take seriously.  He’s not interested in equality.  He’s interested in getting re-elected.

No, Obama’s decision to cover contraceptives is a one time only deal.  There’s no systemic change to the culture.  He is not an agent of change.  He is an agent of Obama and women are the worse for it.

Saturday: Why the desperation?

So, I went to see my employment counselor, like a cat dragged in from the cold.  “Fix my CV! PLEASE!”, I cried.  He calmly and methodically walked me through the procedure of finding a new job.  Just being with him lowers my heart rate.  During the first meeting, he told me that the he sees signs that the job market is starting to return, slowly, but that the pharmaceuticals research jobs are responding much more slowly.

By the way, anyone out there interested in pursuing a career in chemistry (biologists, you’re next), should read some of the entries in this post.  Here’s a sample:

I’m a synthetic organic chemist. I used to like organic chemistry a lot. It’s a cool science, but it’s not a valid career path anymore. Universities should really restrain the number of new students in chemistry programs, for their sake. In 2000, when I started my degree, the pharma industry was doing very well and paying big bucks for chemists. This is NEVER going to happen again. Our jobs are all in China now. I have a PhD from a top Canadian school and I did a postdoc in a top US lab. I’ve now been looking for a job for 6 months, and I’m willing to relocate ANYWHERE in North America, Europe or Australia, but I can’t find anything! Talk about wasted time! If you are ready to work very hard (easily 70 hrs/week) to do a PhD & postdoc, and then need to work as a store clerk to pay the rent, then organic chemistry is for you. If you don’t want to completely waste the best years of your life, then PLEASE PLEASE choose something else!!

This is what you’ll be up against: years and years of hard study in math and the sciences while your business major buddies are pledging down at Sigma Chi.  When you finally get your PhD after 10 years, you may be stuck in a post doc position making $40K- for years- if you’re lucky.  That’s the kind of thanks we get.  Americans do not appreciate scientists and you know what?  This country’s going to pay for that neglect and hostility.  Big Time.  Because young people who would make better money selling cars are going to sell cars, not run Suzuki couplings and Friedel-Crafts acylations.

We STEM researchers feel abandoned.  No one wants to invite people like us to jobs summits and we are virtually ignored by the media.  So, when this generation of R&D specialists die out, don’t expect a new generation to take its place.  The children most likely to succeed in these fields see what is happening to their parents and will avoid careers in science like the plague.

Anyway, where was I?  Oh yes, the nice man who is trying to keep me focussed on finding a job.  So, I asked him, does he see any employment trends.  Yes, he says, the people who run the corporations are desperate for money.  You can draw your own conclusions from that but here’s my interpretation:

The current retirement structure is primarily based on a 401K.  Some of us have pensions, that we can’t tap into for decades to come.  But these are small.  Without social security supplements, our pensions will not be enough to live on. For those of us in the science industry, we were partially compensated with stock.  And that was peachy keen in the 90’s but in order to benefit from stock options, you have to wait a few years to cash them in and the pharma industry has been hit with so many recalls and gigantic lawsuits that most of our options are underwater compared to when we received them.  Yeah, really, go look at the stock prices of the pharmas for the past 15-20 years.  Despite what you might think, they’re not doing so well.  The did pretty well during the late 90s but since then, the stocks have plateaued or ailing companies have been absorbed by others.  There haven’t been significant gains.  So, if you’re a pharma exec during the last 15 years, you should be asking yourself why you’ve spent so much money lobbying Republicans.  They haven’t done a damn thing for you.  But I digress.

Most of us have our savings in 401Ks.  But 401Ks are like a giant pyramid scheme.  Imagine Bernie Madoff in a casino doing speedballs and shooting heroine (if those are the same things or combinations thereof, that just goes to show how innocent my illegal drug patois is).  The problem is that babyboomers are starting to cash in their chips.  They are going to start cashing more and more chips in the next decade or so.  Lucky me, I was born at the tail end of the baby boom generation and actually identify more with the gen Xers.  We will be the ones holding the bag.  So, imagine you’re a CEO and you have to keep the shareholders happy.  It’s going to be like bailing out at sinking ship.  You have to keep bailing more and more water at an ever increasing speed.  You cut and cut and pay your MBAs who are addicted to money and appease the Wall Street Gods because they are running the casino and the players are swilling champagne in their black tie tuxes around the craps table in an ever more dizzying frenzy of the game.  It’s out of control.

The shareholders must be appeased.  The money has to come from somewhere.  The end of the quarter is coming up.  Jobs will be cut.  They’re desperate.  But their short term thinking only makes the situation worse.  Because the fewer the number of people with good salaries that are employed, the fewer number will be contributing to the 401K scheme.  So, even as they cut jobs to pump up the stock prices, they are losing players to put down their money.  Which leads to more desperation and job cutting.  I’m no Paul Krugman but if I didn’t know better, I’d think we were looking at a new financial/economic phenomenon.  Maybe there’s a name for it illustrated with the kind indecipherable graphs that Paul is so fond of putting on his wonky blog posts.

This phenomenon might also explain (partially) the pressure to cut Social Security benefits.  If you make Social Security look like a welfare program, maybe workers would be more receptive to risking everything they own on the stock market through their 401K.  After all, what are your options?  Put it in a bank?  With the lousy interest rates??  Stuff it under your mattress?  Buy gold?  But giving the finance “geniuses” more of our money to invest in emerging markets will just add to the decline of our economy here.  There’s only so much money to earn or burn.  Sooner or later, the demands of the shareholders are going to exceed the ability of the CEOs and the consultant braintrusts to cut.  I think we have already reached that limit in pharma.  I’m going to guess that research is badly damaged if not disfunctional at some large pharmas.  Someone correct me if I’m wrong.  And if your corporation is based on research, what the heck are those high paid marketing and sales people going to sell exactly?  Pretty soon, the ideas from outside entities are going to get really expensive to buy.

I think when the job guy said “they’re desperate”, he means they are on a merry-go-round and they can’t get off.  It’s a more and more vicious circle that has one potentially catastrophic end.  There will soon be nothing left to cut and the financial guys are going to need another bailout.

Speaking of bailouts, check out William Cohan’s recent appearance on the Daily Show with Jon Stewart as he discusses the biggest casino operators, Goldman-Sachs.  Not to be missed.

What to do?  I dunno.  I hate playing with money.  It seems wasteful to me even if my own 401K has done pretty well lately. Right now, I wish there was a nice secure pension fund I could stuff it into.  I’d love to live in a small place in a medium sized city close to public transportation with a regular job with benefits.  Nothing fancy.  Give me modesty and security over glitz and desperation any day.

And check out this guy’s Swiss Army knife apartment.  Brilliant.