Lazy Saturday News and Views

Out of Town News, Harvard Sq., Cambridge, MA

Good Morning, Conflucians!!!!

It’s a gorgeous Saturday morning here in the Boston ‘burbs. I just love Spring!

Personally, I’m still mainly interested in the Blago-Rezko-Obama story, but there is some other news today.

ECONOMIC MELTDOWN

The New York Times informs us that Rating Agency Data Aided Wall Street in Mortgage Deals Yes, as you probably already guessed, the fix was in on those “complex investments” from the very beginning. The ratings agencies were collaborating with the investment banks to make sure all those “high risk” bets came out the way the banks wanted them to.

The rating agencies made public computer models that were used to devise ratings to make the process less secretive. That way, banks and others issuing bonds — companies and states, for instance — wouldn’t be surprised by a weak rating that could make it harder to sell the bonds or that would require them to offer a higher interest rate.

But by routinely sharing their models, the agencies in effect gave bankers the tools to tinker with their complicated mortgage deals until the models produced the desired ratings. [….]

But for Goldman and other banks, a road map to the right ratings wasn’t enough. Analysts from the agencies were hired to help construct the deals.

In 2005, for instance, Goldman hired Shin Yukawa, a ratings expert at Fitch, who later worked with the bank’s mortgage unit to devise the Abacus investments.

It really is time to break up these greedy “too big to fail” (TBTF) banks, but the Obama administration still defends their right to exist. Scarecrow at FDL has a great post on Larry Summers’ latest excuse for TBTF: Why Is Larry Summers Afraid of Having Many Small Banks? Summers says we can’t do that because that’s what was tried before the Great Depression, and it failed.

…if we broke up the megabanks and instead had many smaller regulated banks, it would be the end of America and the financial industry as we know it.

And that would be bad why? Scarecrow:

Funny, I always thought the smaller bank system, if that’s what it was, failed because Wall Street wasn’t sufficiently regulated, and the local bank runs happened because we didn’t have the FDIC at the time. So is Larry now saying that having the FDIC to take over smaller bank failures has been a failure?

And what’s he saying about needing diversified megabanks that lose money on risky stuff but loot, uh, borrow money from better managed activities? Surely he doesn’t mean to argue for letting the investment casino borrow from the government-guaranteed deposit-based divisions?

Reuters: Goldman emails: firm lauds profits from shorts

Goldman Sachs Group Inc officials discussed making “serious money” in 2007 off the subprime crisis as mortgages were starting to falter in rapid numbers, according to a collection of e-mails released by a Senate panel on Saturday.

“Of course we didn’t dodge the mortgage mess. We lost money, then made more than we lost because of shorts,” Goldman Sachs Chief Executive Lloyd Blankfein said in an e-mail from November 2007.

“Sounds like we will make some serious money,” said Goldman Sachs executive Donald Mullen in a separate series of e-mails from October 2007 about the performance of deteriorating second-lien positions in a collateralized debt obligation, or CDO.

Monday Morning News and Views

Good Morning Conflucians!!!!!

The big story in the mainstream media is President Obama’s $3.8 trillion budget. From the LA Times:

President Obama today will propose a $3.8-trillion federal budget that includes a $100-billion jobs package, more education spending and higher taxes on families earning more than $250,000 a year.

The budgetary blueprint for fiscal 2011, which starts Oct. 1, is 3% more than the government is spending this year, according to the Office of Management and Budget.

The White House envisions a $1.267-trillion deficit in fiscal year 2011, smaller than this year’s projected $1.56 trillion. That would be 8.3% of the gross domestic product, down from 10.6% this year. The White House Budget Office forecasts that it could be trimmed to less than 4% of the GDP by 2015.

The “jobs package” consists of:

$100 billion for investments in small-business tax cuts, infrastructure and clean energy, all designed to create jobs. This includes a new Small Business Jobs and Wages Tax Cut to spur small-business hiring and wage increases, at a cost of $33 billion.

I’ll defer to Dakinikat on this, but it doesn’t sound that dramatic to me. And how do we know those jobs that are created will go to Americans anyway? Isn’t it about time for something a little more FDR-like?

The budget also include $270 million to buy and renovate Thompson Prison in Illinois:

The administration hopes to house detainees from Guantanamo there, as part of its effort to close the controversial camp in Cuba. But the purchase of Thomson “would be warranted in any case to house maximum security prisoners,” according to Orszag. The federal Bureau of Prisons will require additional space, he said.

That’s a lot of money just to move the prisoners from Cuba to Illinois. I suppose there will be jobs involved in renovating the prison, and of course jobs for prison guards. Will those jobs go to Americans? And will anything be done about the fact that many of those prisoners may not be guilty of anything? They have already been held for years without being charged.

Meanwhile, President Obama’s good buddy Lloyd Blankfein of Goldman Sachs, who helped crash our economy and put millions of Americans out of their jobs and homes is “expecting a $100 million bonus” this year.

Goldman Sachs, the world’s richest investment bank, could be about to pay its chief executive a bumper bonus of up to $100 million in defiance of moves by President Obama to take action against such payouts.

Bankers in Davos for the World Economic Forum (WEF) told The Times yesterday they understood that Lloyd Blankfein and other top Goldman bankers outside Britain were set to receive some of the bank’s biggest-ever payouts. “This is Lloyd thumbing his nose at Obama,” said a banker at one of Goldman’s rivals.

Thumbing his nose? {wink, wink, nudge, nudge} I’m not sure. Goldman Sachs was Obama number one donor in 2008 and former Goldman executives are pretty much running our government. And Blankfein wouldn’t be getting that bonus without the money they raked in from the bailout and AIG.

The Illinois primary is tomorrow, and President Obama’s basketball buddy and campaign donor and bundler Alexi Giannoulias is still leading in the Democratic race for the Senate seat briefly held by Obama.

One of Giannoulias’ rivals for the Senate nomination, Jacob Meister, has dropped out and endorsed Giannoulias. Giannoulias’ main rival, David Hoffman, claims that Meister was only in the race in the first place to help Giannoulias and that this was all planned ahead of time. Hoffman has been attacking Giannoulias for his role in running the Broadway Bank, owned by the Giannoulias family.

“This is something we knew all along, that he was in the race to help the treasurer. That being said, he was only pulling 1 percent at best. So I think it was inconsequential.”

Meister dismissed as “preposterous” any suggestion that he was a Giannoulias plant.

Hoffman, a former federal prosecutor and city of Chicago inspector general, started the day with a news conference challenging Giannoulias to answer more questions about his four years as vice president and chief loan officer at Broadway [Bank].

Citing a New York Times column, Hoffman said that under Giannoulias, the bank saw a six-fold increase in the granting of risky loans and a 400 percent increase in brokered deposits, during a time in which the average community bank would have seen an increase of about 36 percent.

“Mr. Giannoulias is still refusing to answer questions about the extent of his role in the decisions that look like they will lead to the bank’s collapse.

If Giannoulias does get the nomination, as appears likely, will Illinois see a repeat of what happened in Massachusetts?

Public opinion polls ahead of Tuesday’s party primaries in Illinois show five-term U.S. Representative Mark Kirk likely to win the Republican nomination easily.

Favored to win the Democratic primary and face off Kirk for the vacant seat is Alexi Giannoulias, Illinois treasurer and Obama’s basketball-playing buddy.

“The Democratic candidates are second-tier. They’re not particularly exciting, not particularly experienced,” DePaul University political analyst Michael Mezey said.

Kirk has lent his own twist to Brown’s best-known line in the campaign, saying: “This is not Obama’s seat, it’s the people’s seat.”

One poll showed Kirk trailing Giannoulias if the two face off — but only narrowly. That’s a far cry from the 62 percent of Illinois voters who cast ballots for Obama against 37 percent for the Republican John McCain in November 2008.

I want to call attention to a couple of stories the the mainstream media is soft-pedaling.

Jeremy Scahill interviewed the father of “Blackwater’s Youngest Victim,” 9-year-old Ali Kinani who was shot in the head in Bagdad’s Nisour Square on September 16, 2007, by Blackwater thugs who had left the Green Zone against orders and for no reason whatsoever murdered 16 and wounded 20 innocent Iraqis that day. I broke down sobbing while reading this story yesterday, and had to take a break before finishing it. All I can says is that Ali’s father, Mohammed Kitani is a true hero. He may yet succeed in holding the murders and their employer Eric Prince accountable for their disgusting actions.

Mohammed’s American lawyers contend, as did federal prosecutors, that the Blackwater men disobeyed orders from superiors not to leave the Green Zone, which ultimately led to the shooting at Nisour Square, and that they did not follow proper State Department guidelines for the use of force, instead shooting unprovoked at Mohammed’s car and the other civilians in the square. They also allege that Blackwater was not guarding any US official at the time of the shooting and that the Nisour Square killings amounted to an offensive operation against unarmed civilians. “Blackwater was where it shouldn’t have been, doing something it was not supposed to do,” says Mohammed’s lawyer Gary Mauney. They “weren’t even supposed to be in Nisour Square, and if they hadn’t have been, no shootings would have occurred.”

Unlike the other civil suits against Blackwater, which were settled in federal court in January, Mohammed’s case was filed in state court in North Carolina. It is also different because Mohammed is directly suing the six Blackwater men he believes were responsible for the shooting that day. The suit also argues that Prince and his network of Blackwater companies and affiliates are ultimately responsible for the conduct of the men at Nisour Square. The Blackwater shooters “weren’t doing anything related to their work for the government,” Mauney says. “After the events happened, Blackwater came out and said, ‘We support what they did. We think it was justified.’ They ratified the conduct of their employees.”

Moreover, Mohammed’s lawyers contend that the evidence that was ruled inadmissible in the criminal Nisour Square case because it was obtained in exchange for a promise of immunity and reportedly under threat of termination is valid evidence in their civil case. Several statements by Blackwater guards who were at the square that day directly bolster Mohammed and other Iraqis’ claim that it was an unprovoked shooting.

Remember that “break-in” in Senator Mary Landrieu’s offices in Louisiana last week? Much of the focus in the media has been on James O’Keefe, a young conservative “activist” and independent filmmaker who was involved in a sting on Acorn awhile back. But Raw Story learned that the two other men arrested with O’Keefe “have links to” the CIA.

Two of the three men arrested on Monday along with “ACORN pimp” James O’Keefe for “maliciously tampering” with Sen. Mary Landrieu’s (D-LA) phones in her New Orleans office have ties to the United States intelligence community.

The three accused by the FBI of “aiding and abetting” O’Keefe are Stan Dai, Robert Flanagan and Joseph Basel. O’Keefe is 25, and the other three are 24.

Dai’s links to the intelligence community appear to be particularly strong. He was a speaker at Georgetown University’s Central Intelligence Agency summer school program in June 2009, and is also listed as an Assistant Director at the Intelligence Community Center of Academic Excellence at Trinity in D.C.

The university’s president Patricia McGuire told The Associated Press that it promoted careers in intelligence but denied that it trains students to be spies.

The Trinity program received a “$250,000 renewable grant from the U.S. Intelligence Community” upon launching in 2004, according to its Web site.

The article goes on to detail Dai’s intelligence connections at length.

The CIA and Office of Director of National Intelligence have both told Politico that despite Dai’s evident connections to the intelligence community, he never officially worked for them. Then it discusses the intelligence connections of Dai’s “co-conspirator,” Robert Flanagan.

Dai’s co-conspirator Robert Flanagan is currently seeking a Master of Science degree from the Missouri State University’s (Fairfax, Virginia) Defense and Strategic Studies program, according to his LinkedIn profile (which was captured by Beyerstein before it was taken down Tuesday.)

The DSS Web site description affirms its connections to “the intelligence community”

Curiouser and curiouser.

So what are you all reading this morning? As always, please post your own links in the comments.

HAVE A MARVELOUS MONDAY!!!!!!!!!!!