Sunday, March 29, 2009

The Death of Hope

I've seen Matt Taibbi on the Daily Show and Real Time with Bill Maher and he seemed like a bright guy. His recent article for Rolling Stone does a nice job of explaining how the US got into a horrible financial mess we are in and how the Bush administration and Congress made it worse.

In essence, Paulson and his cronies turned the federal government into one gigantic, half-opaque holding company, one whose balance sheet includes the world's most appallingly large and risky hedge fund, a controlling stake in a dying insurance giant, huge investments in a group of teetering megabanks, and shares here and there in various auto-finance companies, student loans, and other failing businesses. Like AIG, this new federal holding company is a firm that has no mechanism for auditing itself and is run by leaders who have very little grasp of the daily operations of its disparate subsidiary operations.

In other words, it's AIG's rip-roaringly shitty business model writ almost inconceivably massive — to echo Geithner, a huge, complex global company attached to a very complicated investment bank/hedge fund that's been allowed to build up without adult supervision. How much of what kinds of crap is actually on our balance sheet, and what did we pay for it? When exactly will the rent come due, when will the money run out? Does anyone know what the hell is going on? And on the linear spectrum of capitalism to socialism, where exactly are we now? Is there a dictionary word that even describes what we are now? It would be funny, if it weren't such a nightmare.|The Big Takeover - Rolling Stone|


Lack of adult supervision indeed...

In my email today, I found a summary of the article by Steve Selengut, which does a nice job of capturing the gist of the article:

"The Big Takeover" by Matt Taibbi is probably the best article written to date explaining the financial crisis and how we got to where we are now. Taibbi's necessarily lengthy article explains the problems, names the "poipetrators", and exposes all of the conflicts of interest--- absolutely a must read.

AIG, Goldman Sachs, and J. P. Morgan turn out to be the major players causing perhaps the greatest financial crisis in modern history--- even if the pain is unlikely to get near Great Depression proportions, the dollar losses to individual investors have certainly gone as far.

JPM was the brewmeister of the CDO, a vat full of various kinds of income securities, determined to be less risky because the income on most would almost certainly keep flowing--- kind of like the once popular junk bond fund that Wall Street insisted was not risky at all because of the great diversification.

A few years later, the Captains of the Universe created a breed of high yield foreign government bonds where the interest was guaranteed but not the principal. (Read that again.) Certainly, the CDO product should have been looked over thoroughly by all the normal scam detectors and regulators.

But, what's that? Senator Phil Gramm, and his cronies on both sides of the aisle, had just OK'd the demise of the depression era regulations that prohibited the combination of Insurance Companies, Banks, and Investment Banks. Let the games begin.

Later on, the bewigged ones would loosen bank-lending rules, institute others that value mortgages as if they were common stocks, eliminate the only firewall protecting shareowners from predatory short-sellers, and deem that derivatives were not something that could be regulated by any existing entity.

Basically, Taibbi rightly accuses Wall Street firms of finding loopholes in rules and regulations, and squeezing creative products through the cracks in the law for their own benefit. Even in areas where they are under SEC supervision, over paid corporate lawyers and mathematicians are faster on their feet than your average government employee.

AIG, and more specifically, its AIG Financial Products Unit was responsiple for making the ridiculously risky CDO (Collateralized Debt Obligation) the subject of the quasi insurance gambling devices known as Credit Default Swaps, or CDS--- a CD with a capital S. (The AIGFP was headed by Joseph Cassano, allegedly a student of Michael Milken.)

Taibbi explains how AIG used these Certificates of Doom as gambling chips to create a multi-level risk betting industry, with no backing other than the idea that nothing would ever cause the housing bubble to pop. The CDS vehicle allowed the CDO industry to multiply because all of the risk was being assumed by AIG.

But, and this particular "but" should be in 72-point type, they insured the same loss multiple times without ever having the reserves on hand to cover any of the potential losses. The house-of-cards on the Hudson is built on a shared and intertwined foundation. Paulson's Goldman Sachs, for example, was AIG's biggest whale.

The final straw was how AIG got itself out from under the regulatory eye by fraudulently arranging for supervision by the OTS (Office of Thrift Supervision), a regulatory entity with only one insurance specialist on its entire staff. The OTS, it seems, never examined AIG, ever.

The article goes on to dig deeply into the bailouts; the Paulson, Geitner, and Liddy interrelationships, and more. But it reverberates the message voiced years ago in the first edition of "The Brainwashing of the American Investor: The Book that Wall Street Does Not Want You to Read".

The arrogance of the financial institutions, the mad scientists they employ to manipulate the rules and rule makers, and the Emperor's New Clothes (trust me they're safe) marketing tactics they employ really do need to be regulated--- by the government, sure; by corporate boards of directors, absolutely.

In a Working Capital Model world, there would be no financial crisis.

- Steve Selengut

The Underground


duplicity, originally uploaded by chr15.eat0n.

Spanish to Indict Bush Officials

My views on the torture and treason committed by the Bush administration are pretty clear, so I'll just quote the following without any colorful commentary.

Criminal proceedings have begun in Spain against six senior officials in the Bush administration for the use of torture against detainees in Guantánamo Bay. Baltasar Garzón, the counter-terrorism judge whose prosecution of General Augusto Pinochet led to his arrest in Britain in 1998, has referred the case to the chief prosecutor before deciding whether to proceed....

The officials named in the case include the most senior legal minds in the Bush administration. They are: Alberto Gonzales, a former White House counsel and attorney general; David Addington, former vice-president Dick Cheney's chief of staff; Douglas Feith, who was under-secretary of defence; William Haynes, formerly the Pentagon's general counsel; and John Yoo and Jay Bybee, who were both senior justice department legal advisers....

Obama administration officials have confirmed that they believe torture was committed by American interrogators. The president has not ruled out a criminal inquiry, but has signalled he is reluctant to do so for political reasons.

"Obviously we're going to be looking at past practices, and I don't believe that anybody is above the law," Obama said in January. "But my orientation's going to be to move forward."....

The lawsuit also points to a direct link with Spain, as six Spaniards were held at Guantánamo and are argued to have suffered directly from the Bush administration's departure from international law. Unlike the German lawsuit, the Spanish case is aimed at second-tier figures, advisers to Bush, Cheney and Rumsfeld, with the aim of being less politically explosive. |Spanish judge accuses six top Bush officials of torture - Guardian|

Thursday, March 26, 2009

Stars and Bars


Civil Rights Art, originally uploaded by Safety Neal.

Torture, the gift that keeps on giving

The Attorney General for England and Wales, the Right Honourable Patricia Scotland, has quite a list of titles. She's also the Baroness Scotland of Asthal and Queen's Counsel, I gather.

Anyway, the AG has referred to the police and the Director of Public Prosecutions the case of Binyam Mohamed. A British citizen who was held by the US without charges for seven years and claims he was tortured repeatedly while in US custody.

The British case would only address whether UK intelligence officials were complicit in these crimes, I gather. Although investigations like this can take on a life of their own...

The attorney general, Lady Scotland, said in a written statement (pdf) today that she had given the allegations of possible criminal wrongdoing "very serious consideration" and felt there were sufficient grounds to launch a criminal investigation. But she stopped short of conceding a full judicial inquiry, which many critics have demanded. |Police to investigate Binyam Mohamed claims of MI5 torture complicity - Guardian|


I predict that this is only the first of many prosecutions that will be result from the illegal acts of the Bush Administration.

Wednesday, March 25, 2009

Dealing with Pakistan

'[Indian] Military involvement [in Afghanistan] would not only be considered unwelcome by Pakistan but it would also be exploited by them in a counter-productive way,' he said.

Senior Indian officials say the killing of 58 people in a suicide bombing of the Indian embassy in Kabul, the Afghan capital, last year was intended by Pakistan's military establishment as a warning to New Delhi not to deepen involvement in Afghanistan. Pakistan has denied any responsibility for the bombing....

Pakistan’s sensitivity over Afghanistan has roots in its view of Afghanistan as an area its forces could retreat.
|New Delhi seeks to bolster Afghan role - Financial Times|


In my view, the Bush administration was far too deferential to Pakistan and we should ally with India (the world's largest democracy) to try and contain (not necessarily destroy -- but contain) Islamist extremists who base themselves in Pakistan and Afghanistan.

Now that they're gone I can discuss my disagreements with the Bush administration in a less enraged state of mind...

Wednesday, March 18, 2009

Attempted Arson against St. Paul Police

This is the first I've read about RNC protesters making molotov cocktails to use against the police.

[RNC protesters] McKay, Crowder and [FBI plant] Darby were part of a group from Texas who came to St Paul as part of a larger collection of protesters. McKay and Crowder made the Molotov cocktails after police seized a trailer containing shields that protesters had hoped to use in street demonstrations.

The FBI said McKay and Crowder made the bombs to get back at police.|US man pleads guilty to making Molotov cocktails during Republican convention - Guardian|
My first reaction is to be dismayed that someone would actually try to kill cops like this. And the cops would not respond kindly, they would likely respond with gunfire.

My second reaction is to wonder how a "firefight" between police and protestors at the RNC might have affected the election... it could have changed the whole dynamic of the McCain campaign.

Thank goodness the FBI stopped these two lunatics... for so many different reasons.

Stark Beauty


Snowbird at Dawn (yes, dawn), originally uploaded by Thing Family.

Bad Moon Rising

A recent news item by Ian Sample reinforces some of my worst suspicions about our global economy and ecosystem.

A "perfect storm" of food shortages, scarce water and insufficient energy resources threaten to unleash public unrest, cross-border conflicts and mass migration...[warns] the UK government's chief scientist... Professor John Beddington...

[T]he growing population and success in alleviating poverty in developing countries will trigger a surge in demand for food, water and energy over the next two decades, at a time when governments must also make major progress in combating climate change.

"We head into a perfect storm in 2030, because all of these things are operating on the same time frame," Beddington told the Guardian.

"If we don't address this, we can expect major destabilisation, an increase in rioting and potentially significant problems with international migration, as people move out to avoid food and water shortages," he added... according to Beddington, global food reserves are so low – at 14% of annual consumption – a major drought or flood could see prices rapidly escalate again. The majority of the food reserve is grain that is in transit between shipping ports, he said.

"Our food reserves are at a 50-year low, but by 2030 we need to be producing 50% more food. At the same time, we will need 50% more energy, and 30% more fresh water. |World faces 'perfect storm' of problems by 2030, chief scientist to warn - Guardian|
I've suspected for years that the world will be walloped simultaneously by fossil fuel scarcity and global warming's impacts, which will alter growing seasons, cause drought and floods, and inundate much of the most heavily populated real estate in the world, primarily along the coasts of Asia.

Friday, March 13, 2009

Craggy


Playa de las Catedrales, originally uploaded by PCharln.

Microblogging in a Disaster

I've previously blogged about Twitter being used during an active shooter lockdown and this recent article shows that some disaster managers are seeing the overlap between social networking and information-seeking behavior in a disaster.

Emergency managers say social networking sites like Facebook, MySpace, Twitter and Flickr are changing the way disaster situations are handled.

Dr. Jeannette Sutton of CU Boulder’s Natural Hazards Center has been conducting joint research with the school’s Department of Computer Science. The center's research found that, increasingly, when disaster strikes, the Web-savvy are seeking out and sending out information via social networking sites.|Researchers: Social Networking Sites Critical In Disaster Situations - Denver News|


There's also an interesting article titled: Wind, Water, and Wi-Fi: New Trends in Community Informatics and Disaster Management |Abstract Only|by Kalpana Shankar, published in the journal Information Society (Volume 24, Issue 2, April 2008, page 116).

Cyborgs among us

A documentary filmmaker is having his prosthetic eye outfitted with a camera, according to this Wired article by Priya Ganapati.

[If Spence is] successful [in creating his camera-eye] he will be more than just another cyborg. The documentary film he's making about his efforts, plus the experience of living with a video camera in his eye, could help build greater awareness about the culture of surveillance in our society today, he says.

"No one is going to ban surveillance cameras," says Spence. "It's more about being aware of it. It's about giving a shit in the first place."

Having a bionic eye doesn't mean Spence will be recording all the time, he says...

Spence is willing to turn off his camera in spaces such as gyms, theaters or private events. But he will be making many of those decisions on the spur, every day. "I wouldn't behave that differently than someone with a cellphone today," he says.


Strikes me as perfectly reasonable, but then again, I'm a transhumanist... if not a cyberpunk.

Wednesday, March 11, 2009

California investigates legalizing (and taxing) drugs

California Assembly member Tom Ammiano recently introduced the Marijuana Control, Regulation and Education Act (AB 390). The bill may be found at the California Assembly website, the introduction to AB 390 reads:

Existing state law provides that every person who possesses, sells, transports, or cultivates marijuana, concentrated cannabis, or derivatives of marijuana, except as authorized by law, is guilty of one or more crimes.

This bill would remove marijuana and its derivatives from existing statutes defining and regulating controlled substances. It would instead legalize the possession, sale, cultivation, and other conduct relating to marijuana and its derivatives by persons 21 years of age and older, except as specified.

It would set up a wholesale and retail marijuana sales regulation program, including special fees to fund drug abuse prevention programs, as specified, to commence after
regulations concerning the program have been issued, and federal law permits possession and sale consistent with the program.

It would ban local and state assistance in enforcing inconsistent federal and other laws relating to marijuana, and would provide specified infraction penalties for violations of these new marijuana laws and regulations, as specified.


James Saft, a Reuters columnist, lays out some of the pros and cons of drug legalization in this recent column.

There is [approximately] $100 billion in annual illegal drug sales in the U.S. [in addition to sales] of cannabis, which might produce another $25 billion annually in revenue [in addition to taxes on cannibas]. The U.S. Federal government alone spent $13 billion on the drugs war in 2002, not counting prison costs.

Then there are other costs of the American drug interdiction efforts internationally, not least in Afghanistan, where opium revenue fuels the Taliban. The U.S. spends more than $1 billion a year there on anti-drug efforts, but opium money undoubtedly raises the total costs for the U.S. by much more.

The stream of income from all of this extending into the future is very valuable indeed and would go a way towards paying the price of fixing the banking system.

This brings us to another point of weakness for the U.S.; namely its ability to fund all of the costs it has already taken on and is likely to have to shoulder in the next several years. Moody’s credit rating agency did what everyone has pretty much taken for granted for a while not long ago, acknowledging that the U.S.’s AAA credit rating is being “tested” and falls into a category below those on the top shelf like Canada and Germany.

It’s not all wine and roses though. Cheaper legal drugs may lead to a spike in use, which might hit productivity and impose lots of costs, such as higher health and other welfare costs. All of those prison, military and law enforcement jobs are a huge source of stimulus, and the cut backs implied by legalization would raise transitional problems.

Moreover, drug legalisation, just like for alcohol, is essentially a moral and political decision about which reasonable people can disagree. It’s also, to put it mildly, not very likely.

Still the war on drugs rolls on, costing billions, creating huge incentives for violence and crime, imprisoning hundreds of thousands and seemingly never much closer to victory. The waste and misery involved must make it rival the sub-prime bubble as a misallocation of resources. |A revenue and legalization lesson from FDR - The Great Debate| (emphasis added)

When I was a sophomore in high school I did a report for my Economics class on drug legalization and I thought the case for legalizing drugs on strictly economic grounds was compelling. Nothing I've learned since then has changed my mind.

Mexican Army strained by drug war

CNN has a recent news article by Rey Rodriguez which indicates that the use of the Mexican Army to levy war on drug traffickers and narcoterrorists is leading to desertions and the drug cartels are beginning to corrupt the Mexican armed forces as well.

The Zeta defection is old news, but indicates the power of the drugs to corrupt the armed forces, as Al Jazeera noted last year.

One entire unit of army special forces deserted in the late 1990s to form a paramilitary commando called the Zetas, who work as bloody enforcers for the Gulf Cartel.

Their rival, the Sinaloa Cartel, imitated their paramilitary style by training hundreds of would be enforcers in special weapons and tactics.

After years of beheadings and reprisal massacres, these two cartels recently reached a truce, only to turn their wrath on the federal government, according to Mexican and US drug officials. Mexico's 'narco' uprising - Al Jazeera|


We need a new strategy...

Monday, March 09, 2009

Disaster Preparation Woeful

The bungled response to Hurricane Katrina put us all on notice that the Department of Homeland Security is a financial black hole and an administrative nightmare created by George W. Bush's national security team.

There's a new sheriff in town, but DHS is still a cause for great concern according to a recent report.

Christine Wormuth and Anne Witkowsky waste no time getting to the point in Managing the Next Domestic Catastrophe: the first line of the report states, "America is not prepared for the next catastrophe." From there, their report analyzes the current federal preparedness apparatus and makes a series of policy recommendations.

Aside from some admirable frankness, at this point it probably sounds like much of the leaden mass. What sets it apart? Rather than vanishing into esoterica, the recommendations target the same attributes that make all organizations work better: clear chain of command, clear roles and responsibilities, improved interjurisdictional relationships, executive oversight and accountability, strategic planning, and a sustainable preparedness process. |Thinking assignment: Are we ready? - Homeland1|
I hope (for all our sakes) that Obama's team can make a dent in this problem before the next disaster strikes.

Wednesday, March 04, 2009

Neal's Favorite Scotches

For my birthday, my friends took me to see some live music. We also went to a bar that had over 65 types of Scotch whiskey. I've never been much of a drinker, but I bought a bottle of Scotch for our Halloween party two years ago and discovered that I liked the taste of Scotch, but hadn't really explored many scotches. I sampled several 10 year old scotches and these are what I thought, based on the SMS notes I took.

What I discovered tonight is that Glenmorangie, Auchentoshen and Edradour are all really good IMHO. I liked Balvenie. It was smooth with a satisfying smoky aftertaste. I also had some Macallan, which is good with its oak flavor.

But I don't like peaty scotches. I thought Ardbeg was too smoky and I didn't like Springbank at all.