TGIF Reads

Good Morning!

It’s finally Friday.

Rahm Emanuel was back on the ballot and part of a debate for candidates for the Mayor of Chicago last night.   The Illinois Supreme Court ruled unanimously in his favor. Evidently the case relied a lot on the ‘intent’ of Rahm whose lawyers argued that he had left books in the basement of his old house, rented the house out instead of selling it and other behaviors that showed that he was just away temporarily performing some kind of national service.   The city is now free to print its ballots.

The justices found that Emanuel never displayed an intent to permanently abandon his Chicago home, which they said would have been the trigger to render him ineligible. Instead, they said, it was clear that when he went to Washington, he always planned the move to be temporary and to return to Chicago one day.

The court said the appellate panel hung its decision on a misinterpretation of an 1867 Illinois Supreme Court case involving a judge who temporarily moved to Tennessee but always planned to come back. In essence, the Appellate Court concluded that the 19th century decision didn’t cover Emanuel and that residency should be defined as where one rests his head at night.

It seems unlikely that reform on the senate filibuster will have much of an impact.  It looks like it will be small if at all.

But Democrats never seemed able to reach an agreement on the scope or type of changes, and Reid announced a more modest set of changes on which the parties would vote Thursday afternoon.

The reforms include an end to secret holds, a reduction in the number of presidential nominations subject to the lengthy Senate confirmation process, an end to mandatory readings for amendments if they’ve been publicly available for at least three days, an agreement by Republicans to limit their filibusters of motions to begin debate, and an agreement by Democrats to limit instances in which they “fill the tree” — or limit the number of amendments Republicans can put to a given piece of legislation.

Perhaps the most significant agreement was that of changing the filibuster, the principal tool of the minority to stall or block legislation. Republicans used the tactic to great effect in the last Congress, though Democrats griped that the process had been abused at an unprecedented level.

Protests continue in Egypt as the scent of Jasmine spreads.  The Economist looks at what this could potentially mean to Arab leaders as the people in the era look for democracy.   The US is obviously nervous about any potential uptick for groups like The Muslim Brotherhood who could take the country in the opposite direction.

Mr Mubarak, like the rest of the Arab world’s autocrats, will be pondering the despot’s eternal dilemma. Is it better to loosen controls in order to satisfy their people with a whiff of freedom, or to tighten them in an effort to ensure their docility?

The fate of Tunisia’s strongman, Zine el-Abidine Ben Ali, suggests that an angry people will be satisfied with neither. If Mr Mubarak truly put his country’s interests first, he would immediately promise to retire before the next presidential election, due in September. At the very least he would ensure that the contest is a genuinely open one, not another farce.

The NYT looks at the possible role of religion in the Egyptian protests.

Heightening the tension, the Muslim Brotherhood, the largest organized opposition group in the country, announced Thursday that it would take part in the protest. The support of the Brotherhood could well change the calculus on the streets, tipping the numbers in favor of the protesters and away from the police, lending new strength to the demonstrations and further imperiling President Hosni Mubarak’s reign of nearly three decades.

“Tomorrow is going to be the day of the intifada,” said a spokesman for the Muslim Brotherhood here in Egypt’s second largest city, who declined to give his name because he said he would be arrested if he did. The spokesman said that the group was encouraging members of its youth organization — roughly those 15 to 30 years old — to take part in protests.

But Islam is hardly homogeneous, and many religious leaders here said Thursday that they would not support the protests, for reasons including scriptural prohibitions on defying rulers and a belief that democratic change would not benefit them. “We Salafists are not going to participate in any of the demonstrations tomorrow,” said Sheik Yasir Burhami, a leading figure among the fundamentalist Salafists in Alexandria.

One troubling thing is that the Egyptian government has ‘shut down the internet‘. SMS messages have also been blocked.  The US government has called on the Egyptian authorities to stop the block.

While access directly to the Facebook and Twitter websites are inaccessible from within Egypt, protesters are circumventing the blocks in place by using mobile applications which still work. Proxy websites are also being used, as they mask the address of website, allowing those to access social networking sites.

But as the blocking measures are failing, it appears that Egypt has sanctioned measures to ’shut down’ web access, fearing the same reprisals as seen in Tunisia earlier this month where the government collapsed and the president was forced into exile.

There are several frightening news stories on the US criminal justice system that BostonBoomer sent me for inclusion this morning.  One is a story on prison violence in one of those for-profit jails.  This from TPM. Cost saving measures are not exactly yielding good results.

Stanford isn’t the only prisoner assaulted in federal custody, and he’s not even the only high-profile Ponzi schemer (Bernie Maddoff was reportedly assaulted just a few months after Stanford). But his experience calls attention to the cases of assault that continue to plague the justice system.

BOP’s 2011 budget request listed as a top priority reducing the use of double and triple bunking to help prevent violence in prisons. They also say that an increase in the inmate-to-staff ratio has negatively impacted their efforts to stop violence. In 1997, there was one staff member for every 3.6 prisoners. But by 2009, that number jumped to just one staffer for every 4.9 prisoners.

“Rigorous scientific research by the BOP’s Office of Research and Evaluation has confirmed that the greater the [inmate staff ratio] the higher the levels of serious violence among inmates,” BOP said in their budget proposal.

CNN has released a serious of videos and reports on FBI misconduct that are highly disturbing. Many of these reports of misconduct have a sex angle.

An FBI employee shared confidential information with his girlfriend, who was a news reporter, then later threatened to release a sex tape the two had made.

A supervisor watched pornographic videos in his office during work hours while “satisfying himself.”

And an employee in a “leadership position” misused a government database to check on two friends who were exotic dancers and allowed them into an FBI office after hours.

I wanted to point you over to naked capitalism and two good things written by Yves.  The first is on the incredible profit raked in by Goldman Sachs during the AIG deal.

Shahien Narisipour at Huffington Post revealed that the FCIC report, due to be released officially tomorrow, shows that contrary to its pious assertions to the contrary, Goldman received funds for its own account from the AIG bailout, to the tune of $2.9 billion.

Why is this significant? Because Goldman maintained that the monies it received from the rescue were for customer trades, not for its own account.

And while this may seem to be news, it isn’t, except for putting a firm dollar value on what Goldman received for its own account. We posted on Goldman’s AIG exposures both as principal and agent on February 7, 2010, and specifically flagged that the Abacus trades that Goldman insured with AIG were principal positions, not client trades.

The other is on the report by the FCIC. I’m still reading the report btw.  It’s 633 pages long. Frankly, I’m more interested in the other 700 documents and interviews.  So far, it’s like a dull history of something that shouldn’t be dull and should be a lot more geared to stopping more of that stuff in the future.

Merely reading news releases of the last few weeks will show the shortcomings of the FCIC report. For instance, it skips over the role of the failure of the securitization industry to adhere to its own agreements, even though the FCIC was presented with this information last summer. It also is silent on the sort of abuses coming to light, such as the fact that Bear Stearns was allegedly double-dipping on its own deals, demanding that originators make extra cash payments on bad mortgages they had sold into pools that Bear was selling to investors, while failing to pass those payments on to investors (knowing that they instead would seek to have the bond insurers be the ones who would make investors whole).

Similarly, on the eve of the release of the FCIC report, the SEC, which astonishingly had declared disclosure on mortgage-backed securities to be “robust”, has done a quiet about face and has issued a new rule requiring issuers of asset backed securities to conduct a quality review and disclose to investors what that review consisted of. Note that this closing of a gaping loophole in disclosure has gone largely unnoticed.

The sad thing isn’t that the FCIC did not do its job. As we indicated earlier, that failure was by design. No one in the officialdom wants the mechanisms of the crisis to be exposed in full. It would compromise too many influential people and restoke well warranted public ire about the bailout of a miscreant financial services industry and its ongoing extractive behavior. Ironically, this core element of the dissent’s criticism is spot on, even if their own narrative suffers from precisely the same flaws.

My biggest issue is basically this one mentioned by the NYT yesterday.

But little on Wall Street has changed. One commissioner, Byron S. Georgiou, a Nevada lawyer, said the financial system was “not really very different” today from before the crisis.

“In fact, the concentration of financial assets in the largest commercial and investment banks is really significantly higher today than it was in the run-up to the crisis, as a result of the evisceration of some of the institutions, and the consolidation and merger of others into larger institutions,” he said.

Unfortunately, somethings really don’t change and the need to put checks and balances on financial institutions is one of them.  This is especially true for banks that have the benefit of deposit insurance.  If there is implicit government bailouts of bad decisions, then hyper-vigilance is required. They’ll take on more risk and gamble more because the downside just isn’t there for them.

What’s on your reading and blogging list today?