Independence Day Reads

Happy Independence Day!

We have a republic and a lot of people have sacrificed a lot over the last several centuries to keep it.  Too bad most of our politicians aren’t in that number.  They can’t see past their next elections.

It seems that two senators– McCain and Corynyn–say they’re open to tax increases as a way to solve the budget stand off.   Guess there are a few of them left that would prefer not to tank our economy. Let’s hope this starts some real negotiations instead of the usual Republican hostage taking and Democratic cave-in that’s been politics as usual the last dozen years or so.

One of the senators, John Cornyn of Texas, said he would consider eliminating some tax breaks and corporate subsidies in the context of changes in the tax code, provided there was not an overall increase in taxes.

“I think it’s clear that the Republicans are opposed to any tax hikes, particularly during a fragile economic recovery,” Mr. Cornyn said on “Fox News Sunday.” “Now, do we believe tax reform is necessary? I would say absolutely.”

But he insisted that any changes in taxes be “revenue neutral,” meaning that the government would not take in any more money from individuals or businesses than it does now.

The other senator, John McCain of Arizona, said he would be willing to consider some “revenue raisers” as part of a broad deal, but he refused to name specific measures.

Mr. Cornyn, a member of the Senate leadership, also said that Republicans would be open to a short-term deal on the debt ceiling to provide more time for a comprehensive agreement.

Let’s also hope that more reasonable and less ideological heads prevail on the right and that the left stands up for what’s right for a change.  Former President Clinton had a words of policy advice over the weekend.  His advice to President Obama is “not to blink”.

Former President Bill Clinton Saturday night urged President Obama not to “blink” at Republican demands to exclude revenue increases from any agreement to extend the government’s debt ceiling.

If Republicans maintain their opposition to revenue increases, Clinton said, Obama should pursue a short-term deal to extend the debt ceiling based on spending cuts both sides have already accepted in the negotiations between the administration and Congressional leaders from both parties.

“I hope they will make a mini-deal,” Clinton said in an interview conducted with him at the Aspen Ideas Festival here.

The White House and Congressional negotiators from both parties are attempting to assemble a deficit reduction package that could win support in Congress for legislation to extend the nation’s debt ceiling, which the Treasury says the government will reach on August 2. The talks have foundered amid demands from Congressional Republicans to exclude any revenue increases from that prospective deficit reduction package.

Asked what the administration could do if GOP leaders hold to that posture, Clinton replied: “First the White House could blink. I hope that won’t happen. I don’t think they should blink.”

If Republicans will not accept revenues in a package to lift the debt ceiling by August 2, Clinton said, Obama should pursue a short-term agreement based on the spending reductions both sides have already accepted.

“There are some spending cuts they agree on …and he can take those and [get] an extension of the debt ceiling for six or eight months,” Clinton said.

Clinton also called on a package of reforms to US tax policy that includes a corporate tax cut if special interest tax loops are closed.  This is something Obama has also supported.

“It made sense when I did it. It doesn’t make sense anymore – we’ve got an uncompetitive rate. We tax at 35 percent of income, although we only take about 23 percent. So, we SHOULD cut the rate to 25 percent, or whatever’s competitive, and eliminate a lot of the deductions so that we still get a FAIR amount, and there’s not so much variance in what the corporations pay. But how can they do that by Aug. 2?”

Clinton also said Grover Norquist, who as president of Americans for Tax Reform is the GOP’s unofficial enforcer of no-new-taxes pledges, has a “chilling” hold on the nation’s lawmaking.

The former president said it has seemed like Republicans need any revenue concessions need to be “approved in advance by Grover Norquist.”

“You’re laughing,” he told the crowd of 800. “But he was quoted in the paper the other day saying he gave Republican senators PERMISSION … on getting rid of the ethanol subsidies. I thought, ‘My GOD, what has this country come to when one person has to give you permission to do what’s best for the country.’ It was chilling.

There’s an extremely interesting piece at The Atlantic Wire on “What Really Happened at Fukushima”. It includes interviews with workers that have been inside the crippled nuclear plant.

Throughout the months of lies and misinformation, one story has stuck: “The earthquake knocked out the plant’s electric power, halting cooling to its reactors,” as the government spokesman Yukio Edano said at a March 15 press conference in Tokyo. The story, which has been repeated again and again, boils down to this: “after the earthquake, the tsunami – a unique, unforeseeable [the Japanese word is soteigai] event – then washed out the plant’s back-up generators, shutting down all cooling and starting the chain of events that would cause the world’s first triple meltdown to occur.”

But what if recirculation pipes and cooling pipes, burst, snapped, leaked, and broke completely after the earthquake — long before the tidal wave reached the facilities, long before the electricity went out? This would surprise few people familiar with the 40-year-old Unit 1, the grandfather of the nuclear reactors still operating in Japan.

The authors have spoken to several workers at the plant who recite the same story: Serious damage to piping and at least one of the reactors before the tsunami hit. All have requested anonymity because they are still working at the plant or are connected with TEPCO. One worker, a 27-year-old maintenance engineer who was at the Fukushima complex on March 11, recalls hissing and leaking pipes.  “I personally saw pipes that came apart and I assume that there were many more that had been broken throughout the plant. There’s no doubt that the earthquake did a lot of damage inside the plant,” he said. “There were definitely leaking pipes, but we don’t know which pipes – that has to be investigated. I also saw that part of the wall of the turbine building for Unit 1 had come away. That crack might have affected the reactor.”

The reactor walls of the reactor are quite fragile, he notes. “If the walls are too rigid, they can crack under the slightest pressure from inside so they have to be breakable because if the pressure is kept inside and there is a buildup of pressure, it can damage the equipment inside the walls so it needs to be allowed to escape. It’s designed to give during a crisis, if not it could be worse – that might be shocking to others, but to us it’s common sense.”

Here’s some frightening news on the disaster in Japan. Radioactive Cesium has been found in Tokyo’s water supply.

Radioactive cesium-137 was found in Tokyo’s tap water for the first time since April as Japan grapples with the worst nuclear disaster in 25 years.

Cesium-137 concentration registered at 0.14 becquerels per kilogram in the city’s Shinjuku ward on July 2, compared with 0.21 becquerels on April 22, according to the Tokyo Metropolitan Institute of Public Health. No cesium-134 or iodine-131 was detected, the agency said on its website.

The Nuclear Safety Commission of Japan sets a safety limit of 200 becquerels per kilogram for cesium-134 and cesium-137. The limit for iodine-131 consumption is 300 becquerels per kilogram.

Japan is battling radiation leaks into the air, soil and water after an earthquake and tsunami on March 11 knocked out cooling systems at Tokyo Electric Power Co.’s Fukushima Dai- Ichi nuclear station, resulting in the meltdown of three of the six reactors at the plant.

The UK Guardian lists an interesting set of Greek public assets for sale.  Many have no buyers.  Bobby Jindal is putting up a lot of Louisiana assets for sale too.  I wonder if this is going to be the new way to raise money.  The Kochs already rent a big chunk of Yellowstone.   Let’s hope we don’t have to put our national treasures on the chopping block.

Up for sale are 39 airports, 850 ports, railways, motorways, sewage works, a couple of energy companies, banks, defence groups, thousands of acres of land for development, casinos and Greece’s national lottery. George Christodoulakis, Greece’s special secretary for asset restructuring and privatisations, said the sell-off would raise €50bn (£44bn) to help pay back the country’s €110bn bailout debt.

The private equity bosses gathered in the hotel’s ballroom for the parade of Greece’s national treasures showed little interest in buying anything.

Nikos Stathopoulous, managing partner of BC Partners, which has invested more than €3.5bn in Greece, said investors are put off by bureaucracy, strong unions, corruption and a lack of transparency. “Even in the good times Greece is not a country that attracts investment. Foreign investors don’t want to invest in a country where there is no flexibility in hiring and firing people,” he said. “You don’t want to invest in a country in which you wake up and a new law has been passed which totally undermines and destroys the value of the investment you’ve just made.”

Stathopoulous said investors were finding it very hard to assess the risk of investing into Greece, which means assets “will be priced at lower than they are worth, lower than the Greek government, and even the European Union, expects”.

Here’s a compelling argument for getting the shadow banking sector into a more regulated, transparent, and standardized order.  It’s written by Henry Tabe who is a Founding Partner of Sequoia Investment Management Company Ltd.  It particularly addresses the use of the Structured Investment Vehicle (SIV).  Complex, nonstandard, and unregulated markets make pricing assets difficult and introduce unnecessary risk and volatility.

Risk management requires identification, measurement, aggregation, and effective management of risks. It should help businesses allocate sufficient capital for survival and growth. The SIV’s extinction highlights risk management failures by the vehicles, their sponsors, rating agencies, policymakers, and regulators.

Financial regulators permitted bank, insurance company, pension, and hedge-fund sponsors to establish SIV “mini-banks” without ensuring that they maintain sufficient capital or back-stop liquidity in the event of a run. Policymakers also seemed unaware of the knock-on effects of the SIV’s demise on the securitisation and global credit markets. The Financial Security Authority’s call for regulators to incorporate sectoral analytical capabilities in their micro-prudential policies should help close the knowledge gap and ensure that timely solutions can be implemented to avert collapses that engender significantly more stress on the financial system (FSA 2009).

Lessons learned include the tightening of regulation governing the sponsorship of off-balance-sheet structures and the sizing of their capital and liquidity needs. These require that regulators adopt a more proactive, dampening role in the wild swings from exuberance to despair that are so characteristic of the financial markets. Discussions around contingent capital and similar products suggest regulators have embraced that dampening role and moved away from the prevailing pre-crisis philosophy of minimal regulation.

Lessons learned also include closer supervision of shadow banks, more skin-in-the-game for their sponsors, in-house retention of risk-analytics capabilities by investors, and less reliance on credit-rating agencies. The agencies themselves are more tightly supervised in order to reduce ratings shopping by issuers and inherent conflicts of interest in the business model (CESR 2009). Tighter regulation will also help to ensure that the agencies improve the monitoring of analyst performance, qualifications, and experience (Dodd-Frank 2010).

These measures should help restore confidence in rating agencies and the global financial system, an outcome more urgently required given on-going turmoil in the sovereign debt market.

So, there’s some wonky goodness to keep you entertained if you’re inside today.  Be sure to let us know what you’re reading and blogging!  Hope your Fourth of July is a happy one!

16 Comments on “Independence Day Reads”

  1. boogieman7167 says:

    happy 4th

  2. Branjor says:

    I watched this video on the DSK case this morning. The victim’s lawyer is speaking. Very impressive.

    • Fannie says:

      Thanks Branjor. I just watched him go out of the apartment building with his wife,hand in hand. Sick Fugger. Not to mention how this case is being mucked up left and right.

      Do you know the case of the two NY cops (drunk?) who raped a woman and the dist. att. lost the case?

      • JeanLouise says:

        The cops weren’t drunk. The victim was. From what I read, she had some gaps in her memory of the assault but there was good evidence on the prosecutor’s side including the suspect’s admission over the phone that he’d used a condom.

        Sexual assault cases are notoriously hard to win because of the juries, not necessarily because the prosecution does a bad job. I do wonder if the NY prosecutor is backing off from this high profile case because of the loss of that one.

        I just hope that DSK gets his just rewards in France, not that it’s likely in a country that takes sexual assault even less seriously than ours does.

    • bostonboomer says:

      He is being charged with rape in France now, so his ordeal is far from over.

  3. paper doll says:

    Thanks for the round up!

    The Japan news is mind blowing…but it’s always far worse than is admitted…

    CEO pay in US soared 23 percent in 2010

    While US unemployment remains at near-Depression levels and health care, pensions and education are being slashed by all levels of the government, the pay of corporate CEOs is soaring.The compensation of the 200 highest-paid chief executives at large corporations increased by 23 percent in 2010 over the previous year, according to a report in Sunday’s New York Times……

    …One day before the Times published its report, President Barack Obama delivered his weekly address. Before wishing all Americans a happy Fourth of July, he boasted that he and the Republican congressional leadership had agreed to more than $1 trillion in social spending cuts “That’s trillion, with a ‘t,’” he declared. But, he continued, more cuts are required, and “nothing can be off limits.”

    Thank you Mr. President Repug for selling us down the river!!

    The private equity bosses gathered in the hotel’s ballroom for the parade of Greece’s national treasures showed little interest in buying anything

    well of course…it’s called bargaining .

    Stathopoulous said investors were finding it very hard to assess the risk of investing into Greece, which means assets “will be priced at lower than they are worth, lower than the Greek government, and even the European Union, expects”.

    exactly…they want the assets for just about nothing .We are now suppose to see them as courageous captains of Industry . How brave of them to steal the country’s assets and do business / rape Greece in a volatile atmosphere their own class created with the austerity cuts! Bravo! /snark

    Lessons learned also include closer supervision of shadow banks, more skin-in-the-game for their sponsors, in-house retention of risk-analytics capabilities by investors, and less reliance on credit-rating agencies

    yeah but the lessons won’t be applied. We will be told again, all must be given to business and business must be bailed out …..because business does it better .

    Thanks for posting about Greece….their plans for many other places laid bare.

    The smart group steals the county’s assets….then before the place blows up, sells them at fantasic prices to rubes to hold the bag. … the ones who sold them the stolen assets will have moved on to the next place by that time.

    • dakinikat says:

      I think it is safe to assume that most governments will cover up the horrible behavior of their big corporations at the expense of their citizens. They decide to save their economies over lives. Corporations are too big to fail and there appears to be an acceptable level of dead and sick people to keep them propped up.

  4. Peggy Sue says:

    Last night, I watched a PBS flick on the recommendation of Larry Johnson over at NQ. At one time, I was active on NQ’s board. Now, not so much because many of the posters turned from Hillary Clinton supporters into TP libertarians, where a difference of opinion is considered Marxist in nature. This isn’t Johnson or most of his writers but far too many members of the community itself.

    In any case, the PBS special is here:

    and is well worth the 1 hour of invested time. It gives a good summary background on the heroic but sadly unsuccessful attempt of Brooksley Born to warn of the financial dangers back in 1998–the unregulated derivatives market, the fraud and lack of transparency inherent in these highly questionable trading transactions and the absolute risk the country faced unnecessarily.

    Unfortunately, she was met with absolute hostility, marked as an alarmist and eventually put into a position where she resigned, even after her predictions came true in ’98 when the Long Term Capital Market started to collapse, the Nobel prize computer models failed and the financial markets were facing ruin.

    Still, she was ignored. The LTCM was bailed out, the usual suspects returned to business as normal and a decade later the dirty bomb went off.

    All sounds pretty depressing but Born’s role is nothing short of heroic, where a smart, dedicated public servant pitted herself against the powers-that-be, who were ultimately proven wrong and are still wrong. It’s a study in contrasts, the good against the bad, the dedicated against the arrogant and greedy. The latter group are still winning the messaging wars. But the documentary is a clear reminder that people of good will and sense are still out there. And their voices are starting to be heard in documentaries like this one, in books and on-going essays.

    This bit of film made me hopeful that the truth will eventually surface. I hope it’s not too late, that we can, in fact, turn this mess around. 4th of July seems like the right day to take another look, to remember all the sacrifices our ancestors have made, and to fight like hell against the demented, deluded forces that would sell the country out.

  5. AliceP. says:

    The news out of Japan is indeed frightening. I’ve been trying to keep up with it and still not forget about BP in the gulf! I was in Floria on the gulf side last month. Little tar balls were still washing up there but, that issue has fallen off the face of the earth.

    Thanks for the doc recommendation, Peggy Sue..I am not brave enough to venture into NQ territory anymore..too many hateful comments about Hillary being a “traitor” and other such nonsense.

    Lots of good reading here today. Happy Independence Day!

    National Holiday
    Pat McDonald
    Oh boy, hey hey
    It’s a national holiday

    So let’s all sing the national anthem
    Free the hostages, pay the ransom
    Raise the flag, lower the taxes
    Band the bomb and bury the hatchet

    The chiefs of staff called a session
    Called for an end to armed aggression
    They’re easing up on covert actions
    Appeasing all opposing faction
    They communicated with the communists
    Pacified the pacifists
    Stopped all pain, stopped all sorrow
    Real life shall resume tomorrow
    Oh boy, hey hey
    It’s a national holiday

  6. jillforhill says:

    Good for her trying to get justice.

  7. AliceP. says:

    Hey Fannie!

    Maybe we’ll see more journalists coming out and speaking up.

  8. foxyladi14 says:

    Happy Birthday USA! 🙂