Well, Republicans feel empowered to up the crazy so they are certainly doing it. Boehner will be challenged by two of the more insane teabillies. Insane teabilly number one challenging Boehner for speaker is Texas Republican Louis Gohmert. Florida nutter Ted Yoho has also said he can’t support Boehner.
Rep. Ted Yoho (R-Fla.) on Saturday announced that he would not support Boehner for Speaker.
“This is not a personal attack against Mr. Boehner, however, the people desire and deserve a choice,” Yoho said in a Facebook post. “In November, they resoundingly rejected the status quo.”
“Eventually, the goal is second, third, fourth round, we have enough people that say ‘you know what, it really is time for a change,’ ” Gohmert said Sunday. “’You deceived us when you went to Obama and Pelosi to get your votes for the cromnibus. You said you’d fight amnesty tooth an nail. You didn’t, you funded it.’ ”
Gohmert said, if elected, he would ”fight amnesty tooth and nail. We’ll use the powers of the purse. We’ll have better oversight. We’ll fight to defund ObamaCare.”
“In 2010, Boehner and other leaders said if you put us in the majority, we will have time to read the bills,” Gohmert said. “That hasn’t happened. We saw that with the cromnibus, again.”
“We’ll get back to appropriating and we will go through regular committee process, so every representative from both parties will have a chance to participate in the process and not have a dictator running things,” he added.
“With a growing Republican majority in the House and a historically high number of liberty-voting fiscal conservatives within it, there is an urgent need replace Speaker Boehner with fresh, bold leadership that better represents the views of the whole caucus,” FreedomWorks President Matt Kibbe said in a statement on Sunday.
“Speaker Boehner has kicked fiscal conservatives off committee positions for voting against his wishes, caved on numerous massive spending bills at the eleventh hour, and abused the legislative process to stomp out opposition by holding surprise votes and giving members little time to actually read the bills before they vote,” Kibbe added.
These are just two of the states that send representative after representative that really wants to destroy the country’s economy, not being satisfied with having their own crazy ass issues in their own crazy ass states. Every time I think Louisiana hits the low in politics, Texas and Florida always step up to take the title of bottom feeders away.
Utah seems out to prove a point these days as a black Republican woman seems to think that everything is just hunky-dory with Steve Scalise chatting up virulently anti-Semitic white supremacists. It is going to be an awful few years.
Incoming Rep. Mia Love (R-UT) on Sunday said that House Majority Whip Steve Scalise (R-LA) should remain in Republican leadership despite recent reports that he spoke at an event for a white nationalist group in 2002.
“These groups are awful. And the last thing I want to do is give them any sort of publicity or credibility, and I can say, as far as I’m concerned, with Representative Scalise, he has been absolutely wonderful to work with,” Love said on ABC’s “This Week.”
When asked if Scalise should remain as GOP whip, Love indicated that his apology was enough.
“There’s one quality that he has that I think is very important in leadership and that’s humility. And he’s actually shown that in this case. And he’s apologized, and I think that we need to move on and get the work of the American people done,” she said.
As you can see, Love didn’t specify what “people” she and others were going to work for but then we know it’s pretty obviously going to be a few rich white christians who can’t seem to get past the Civil War and modern science and economics.
However, it seems even some folks at Fox News find Scalise’s story and apology to be outrageous. Greta Van Susteran joins Hannity in calling for Scalise’s resignation.
It’s rare for a Fox News employee to openly call out a Republican, but when it happens, it’s epic. And that’s exactly what Greta Van Susteran did on Sunday when she slammed GOP Rep. Steve Scalise.
During an appearance on ABC’s This Week, Van Susteran called out Scalise for not having the “moral courage” to resign after it was revealed that the Louisiana congressman had been the keynote speaker at a white supremacist convention in 2002. Scalise agreed to be the guest of honor after KKK Grand Wizard David Duke reached out to him through aides.
In response, Scalise feigned ignorance, claiming that he had no idea to whom he was speaking to at the event even though the convention was widely covered by local media because it was so controversial. Many Republicans, including Steve King and John Boehner, stood by Scalise. So far, he has refused to resign his post as House Majority Whip, and will be the third most powerful Republican in the House when the new Congress convenes this month. And this might make the KKK very happy.
But Van Susteran completely disagreed with the way Scalise and the Republican Party handled the damning revelations and not only skewered Scalise for being a coward, she also blasted the GOP for dropping the ball in their effort to appeal to minority voters ahead of 2016.
What’s amazing to me is that Democrats captured 20 million more votes in the 2014 election and still lost. What kind of democracy causes that? Why are Republican votes more valuable?
This one was shocking. It does not matter how one cuts it. The United States constitution is severely flawed when more often than not in the last few elections the majority of people voting for a particular party did not receive their relative representation. Democrats received 20 million more votes in the Senate than Republicans in 2014, yet Republicans won big.
The same occurred in the House of Representatives in 2012.
House Democrats out-earned their Republican counterparts by 1.17 million votes. Read another way, Democrats won 50.59 percent of the two-party vote. Still, they won just 46.21 percent of seats, leaving the Republicans with 234 seats and Democrats with 201.
There is nothing illegal here. There is simply a very designed undemocratic flaw in the US Constitution that must be fixed lest the legislative branch of the American government will continue to be disassociated from the real wants of society.
Fairvote.org reported the following relative to the 2014 Senate race.
As a body designed to represent states rather than citizens, the Senate’s partisan makeup tends to bear a fairly loose relationship to the raw numbers of votes that were cast to elect its members. With the final election results in hand, let’s take a look at how votes cast for Senate candidates translate to seats in the world’s greatest deliberative body.
In all, Americans cast 202.5 million votes to elect the current Senate, spread across three election cycles in 2010, 2012, and 2014. Of these, 49% were cast for Democratic candidates and 46.6% for Republicans. …
In the aggregate, Democratic voters are underrepresented in the Senate and Republican voters are overrepresented compared to their respective strengths in the electorate, although Democrats outperformed their raw vote totals in two of the past four individual elections.
As for the 46 Democratic caucus members in the 114th Congress received a total of 67.8 million votes in winning their seats, while the 54 Republican caucus members received 47.1 million votes.
It’s going to be hard for Democrats to regain the Senate even though far more people vote for Democratic Senators than Republicans. That’s because Republicans still get two senators from states that have less people than any of the country’slargest cities.
On Tuesday, 33 US senators elected in November will be sworn in by Vice President Joe Biden — including 12 who are new to the chamber. The class includes 22 Republicans and 11 Democrats, a big reason why the GOP has a 54-46 majority in the Senate overall.
But here’s a crazy fact: those 46 Democrats got more votes than the 54 Republicans across the 2010, 2012, and 2014 elections. According to Nathan Nicholson, a researcher at the voting reform advocacy group FairVote, “the 46 Democratic caucus members in the 114th Congress received a total of 67.8 million votes in winning their seats, while the 54 Republican caucus members received 47.1 million votes.”
There is something definitely wrong with the outcomes in governance, given that our ruling class appears to be severely crazy and greedy. For one, they make everyone believe that our money is spent on public welfare when it’s definitely corporate welfare that steals tax dollars. Robert Reich explains their priorities very well.
Some believe the central political issue of our era is the size of the government. They’re wrong. The central issue is whom the government is for.Consider the new spending bill Congress and the President agreed to a few weeks ago.
It’s not especially large by historic standards. Under the $1.1 trillion measure, government spending doesn’t rise as a percent of the total economy. In fact, if the economy grows as expected, government spending will actually shrink over the next year.
The problem with the legislation is who gets the goodies and who’s stuck with the tab.
For example, it repeals part of the Dodd-Frank Act designed to stop Wall Street from using other peoples’ money to support its gambling addiction, as the Street did before the near-meltdown of 2008.
Dodd-Frank had barred banks from using commercial deposits that belong to you and me and other people, and which are insured by the government, to make the kind of risky bets that got the Street into trouble and forced taxpayers to bail it out.
But Dodd-Frank put a crimp on Wall Street’s profits. So the Street’s lobbyists have been pushing to roll it back.
The new legislation, incorporating language drafted by lobbyists for Wall Street’s biggest bank, Citigroup, does just this.
It reopens the casino. This increases the likelihood you and I and other taxpayers will once again be left holding the bag.
Wall Street isn’t the only big winner from the new legislation. Health insurance companies get to keep their special tax breaks. Tourist destinations like Las Vegas get their travel promotion subsidies.
In a victory for food companies, the legislation even makes federally subsidized school lunches less healthy by allowing companies that provide them to include fewer whole grains. This boosts their profits because junkier food is less expensive to make.
Major defense contractors also win big. They get tens of billions of dollars for the new warplanes, missiles, and submarines they’ve been lobbying for.
Conservatives like to portray government as a welfare machine doling out benefits to the poor, some of whom are too lazy to work.
In reality, according to the Center for Budget and Policy Priorities, only about 12 percent of federal spending goes to individuals and families, most of whom are in dire need.
In a critique of Piketty’s book “Capital in the Twenty First Century” at Project Syndicate, Joseph Stiglitz explains how are productive capital gets sucked into speculative, financial capital and asset bubbles. This is something I’ve been writing about for years here. This section of his critique is particularly compelling.
Piketty also sheds new light on the “reforms” sold by Ronald Reagan and Margaret Thatcher in the 1980s as growth enhancers from which all would benefit. Their reforms were followed by slower growth and heightened global instability, and what growth did occur benefited mostly those at the top.
But Piketty’s work raises fundamental issues concerning both economic theory and the future of capitalism. He documents large increases in the wealth/output ratio. In standard theory, such increases would be associated with a fall in the return to capital and an increase in wages. But today the return to capital does not seem to have diminished, though wages have. (In the US, for example, average wages have stagnated over the past four decades.)
The most obvious explanation is that the increase in measured wealth does not correspond to an increase in productive capital – and the data seem consistent with this interpretation. Much of the increase in wealth stemmed from an increase in the value of real estate. Before the 2008 financial crisis, a real-estate bubble was evident in many countries; even now, there may not have been a full “correction.” The rise in value also can represent competition among the rich for “positional” goods – a house on the beach or an apartment on New York City’s Fifth Avenue.
Sometimes an increase in measured financial wealth corresponds to little more than a shift from “unmeasured” wealth to measured wealth – shifts that can actually reflect deterioration in overall economic performance. If monopoly power increases, or firms (like banks) develop better methods of exploiting ordinary consumers, it will show up as higher profits and, when capitalized, as an increase in financial wealth.
But when this happens, of course, societal wellbeing and economic efficiency fall, even as officially measured wealth rises. We simply do not take into account the corresponding diminution of the value of human capital – the wealth of workers.
Moreover, if banks succeed in using their political influence to socialize losses and retain more and more of their ill-gotten gains, the measured wealth in the financial sector increases. We do not measure the corresponding diminution of taxpayers’ wealth. Likewise, if corporations convince the government to overpay for their products (as the major drug companies have succeeded in doing), or are given access to public resources at below-market prices (as mining companies have succeeded in doing), reported financial wealth increases, though the wealth of ordinary citizens does not.
What we have been observing – wage stagnation and rising inequality, even as wealth increases – does not reflect the workings of a normal market economy, but of what I call “ersatz capitalism.” The problem may not be with how markets should or do work, but with our political system, which has failed to ensure that markets are competitive, and has designed rules that sustain distorted markets in which corporations and the rich can (and unfortunately do) exploit everyone else.
Markets, of course, do not exist in a vacuum. There have to be rules of the game, and these are established through political processes. High levels of economic inequality in countries like the US and, increasingly, those that have followed its economic model, lead to political inequality. In such a system, opportunities for economic advancement become unequal as well, reinforcing low levels of social mobility.
There are more warnings each year that we’ve traded our democracy for a plutocracy and that many of the folks that fall for these mistaken memes are the worst hurt by the changes. I’m never sure what we should do about it, but at least on social media there are many of us who can realize what’s going on and share our observations and discontent.
So this is the situation, we’re being ruled by a minority, extremist party that has managed to gerrymander its way into to controlling Congress and can have over-representation in the Senate by its very design. Since the Reagan years, they have managed to coalesce into a party of business interests, neoconfederates, and religious extremists. As a result, we have laws and programs that enrich the wealthiest at the cost of the rest of us. We have institutions where racism and sexism have been allowed to fester and where Supreme Court justices have allowed their ideology to trump the constitution and previous law to further the oppression of minorities–with the exception of the LGBT community, where some strides have been made. Undoubtedly, this has happened because some of the biggest business interests want it, not from any desire to do the right thing by the people. We’ve used a fake war to extend a police state where we’re all subjected to law enforcement officers that are out of control and institutionally encouraged to be so.
I have to say the challenges are huge. I’m just hoping that the dog and pony show that will start with this new Congress will scare the shit out of people. Given, some of this background information however, I doubt there’s much we can do about it short of a major increase in voter participation or a revolution. The fact that so many really poorly governed states have re-elected their Republicans and continue to suffer shows me that it’s not going to be over anytime soon.
What’s on your reading and blogging list today?
It has really been raining here in New Orleans. I mean really raining. Yesterday there was a series of downpours and it I don’t recall seeing the sun. I am trying to tell myself to not complain too much because this is better than the horrible hot heat of summer. But, I would like to feel like it is daytime some time during a day. This is making it very hard for me to think about posting political news. Some days the last thing you need is more doom and gloom. So let me give you a scattering of good, bad, and interesting.
Black voter turnout passed white turnout this past election. This is a historical event. My guess is that all the active voter suppression attempts caused black Americans to get out to protect their voting rights.
America’s blacks voted at a higher rate than other minority groups in 2012 and by most measures surpassed the white turnout for the first time, reflecting a deeply polarized presidential election in which blacks strongly supported Barack Obama while many whites stayed home.
Had people voted last November at the same rates they did in 2004, when black turnout was below its current historic levels, Republican Mitt Romney would have won narrowly, according to an analysis conducted for The Associated Press.
Census data and exit polling show that whites and blacks will remain the two largest racial groups of eligible voters for the next decade. Last year’s heavy black turnout came despite concerns about the effect of new voter-identification laws on minority voting, outweighed by the desire to re-elect the first black president.
William H. Frey, a demographer at the Brookings Institution, analyzed the 2012 elections for the AP using census data on eligible voters and turnout, along with November’s exit polling. He estimated total votes for Obama and Romney under a scenario where 2012 turnout rates for all racial groups matched those in 2004. Overall, 2012 voter turnout was roughly 58 percent, down from 62 percent in 2008 and 60 percent in 2004.
Did you know the Koch Brothers had a huge portion–in fact the largest portion–of the fertilizer business? Have you also noticed how we continue to see an under-reporting of the West Fertilizer Co. explosion? Why have there been no arrests made? Bangaldesh sure got their man pretty quickly when it came to those responsible for unsafe work conditions killing people.
The West Fertilizer Co. explosion last week in West, Texas, took the lives of at least 14 and left scores injured and homeless. But the story was largely obscured by blanket coverage of the Boston Marathon bombing. More than that, says legendary EPA whistleblower Hugh Kaufman, a guest on this week’s CounterSpin, what coverage there was often obscured the real story. Here’s a transcript of Kaufman’s appearance:
CounterSpin: In his recent piece on the Nation‘s website, Greg Mitchell interviews you about the explosion in the town of West, Texas. Before we get to what’s missing in the coverage of the West disaster, tell us what the media is reporting.
Hugh Kaufman: The media is reporting the case as if it’s some sort of an industrial accident, when in fact the town of west Texas is blown off the face of the earth. The material that did all that damage was the same material that Timothy McVeigh used to blow up the Oklahoma City building — the fertilizer, ammonium nitrate.
CS: Two hundred seventy tons of it.
HK: That’s correct. So the amount of people harmed and the ramifications are incredible. Thousands of people every year die who work in dangerous industries, whereas only a few people die because of a terrorist bombing. And yet, there is nothing but a wall-to-wall coverage of Boston disaster around the same time as a town in Texas is blown off from the face of the earth.
Both situations are frightening but what’s more frightening is that the terrorists seem to be winning the war of the TV coverage. But there are thousands more people harmed and killed because of lax law enforcement of dangerous industries. The fertilizer industry is a dangerous industry.
CS: But you’re saying that this fertilizer explosion wasn’t just a matter of some regulatory oversight. You claim in Greg Mitchell’s piece that there’s perhaps criminal activity here.
HK: The company lied to EPA when they said that there is no risk of fire or explosion at the facility, but at the same time they told EPA that, they were honest with the state because they know the state wouldn’t do anything in saying that they had 270 tons of fire and explosive material, the ammonium nitrate. So they were honest with the state because they knew the state wasn’t going to do anything, but to the federal government and the Obama administration, they lied. And of course, the local fire department — not equipped to handle the type of emergency that that entailed — they didn’t have any respirators, they didn’t have any training how to handle that type of fire.
CS: They did not know not to squirt water on that type of fire, even.
HK: Exactly. And they didn’t even know there was such a risk of an explosion.
CS: You also give some praise but many media outlets got the story wrong. Let’s have the bad first.
HK: I think the worst was the New York Times. The New York Times claimed that the company notified EPA that they had 270 tons of this explosive ammonium nitrate, but they did not notify EPA of that. In fact, they told EPA that the facility posed no fire or explosion hazard. The New York Times did not say that, and I think that’s probably the biggest problem.
Interestingly, Texas is a Republican state — a red state — and in fact, many of the leaders want to secede from the union, and they despise EPA — they want the EPA abolished. And yet the Republican newspaper, the Dallas Morning News, has probably has the best environmental coverage of the case, which makes it very ironic to me.
My scourge-of-the-country senator is still trying to tank Dodd Frank. He and three others are being sneaky about it. Course, Diaper David Vitter’s used to being sneaky about things. Here’s a story where he’s the hooker.
First, the Brown-Vitter legislation, which was introduced April 24, changes everything. The news isn’t that Brown wants to make the financial system safer. That has been a top priority of his since the spring of 2010, when he co-wrote the Brown-Kaufman amendment, which would have imposed a binding size cap on the largest banks. (It failed on the Senate floor.)
Now, however, he has a Republican co-sponsor, and they have converged on a strong message. Vitter, who is on the right of the political spectrum, articulates well the case for ending the implicit subsidies that exist because creditors understand that the government and the Federal Reserve won’t allow a megabank to fail. This broad and sensible message resonates across the political spectrum.
Second, small banks are increasingly focused on the ways megabanks have achieved an unfair competitive advantage — primarily through implicit government subsidies.
The most compelling voice at the forum last week was Terry Jorde, a senior executive vice president of the Independent Community Bankers of America. She made clear that small banks are being undermined by the reckless behavior of megabanks that are seen as “too big to fail.” There is no market at work here, just a hugely unfair and inefficient government-subsidy scheme. The U.S. economy wasn’t built on megabanks and there is no good reason to continue to accept the risks they pose.
The megabanks have more money to spend on politics than the community banks. And as the biggest banks become even larger, they acquire more clout, spreading branches and other largesse across congressional districts. But for the moment, in all 50 states, community bankers are strong enough — both directly and as leaders in their communities — to effectively stand up to the six largest banks that are at the heart of the problem.
I found this analysis in the NYT compelling. Congress get all kinds of things done for the powerful quickly. But, when it comes to doing things for ordinary people, the entire process stalls. It’s an op ed by their editorial board.
Congress can’t pass a budget or control guns or confirm judges on time, but this week members of both parties found something they could agree on, and in a big hurry: avoiding blame for inconveniencing air travelers. The Senate and House rushed through a bill that would avert furloughs to air traffic controllers, which were mandated by Congress’s own sequester but proved embarrassing when flights began to back up around the country.
Then lawmakers scurried out of town, taking a week’s vacation while ignoring the low-income victims of the mandatory budget cuts, who have few representatives in Washington to protest their lost aid for housing, nutrition and education. Though they are suffering actual pain, not just inconvenience, no one rushed to give them a break from the sequester, and it is clear that no one will.
Catering to the needs of people with money, such as business travelers, is the kind of thing the country has come to expect in recent years from Congressional Republicans. But Democrats share full responsibility for this moment of cowardice. The Senate version of the bill passed by unanimous consent. That means not a single Democrat opposed bailing out travelers while poor kids are getting kicked out of Head Start or nutrition programs.
Even worse, the White House said President Obama would sign the bill. Apparently the ridicule pouring out of Republican offices — with Twitter hashtags like #ObamaFlightDelays — was extremely effective.
In the House, only 29 Democrats voted against the gift to travelers, which was made possible by switching some funds for airport improvement into the controllers budget. One of the few willing to brave the Republican attack machine was Steny Hoyer, the Democratic whip, who said he could not support repealing a piece of the sequester while preserving its harmful impact. “Seventy thousand children will be kicked out of Head Start,” he said. “Nothing in this bill deals with them.”
As I said, I found this article compelling because I’ve noticed that they’ve scrambled to ensure that small airports–home to private jets and planes–are getting priority over children, cancer patients, and all kinds of things that benefit people What kind of country has those kind of priorities?
Foreign Policy has decided it wants to see more lists like in Gawker and Buzzfeed. You know those buzzfeed lists with items like the top 12 reasons why Justin Beieber annoys us or the ten reasons George Bush and Dick Cheney should share cell in prison. So, as a last little morning laugh, go check out the link and see great suggestions like this one:
Seriously, it’s a good idea.
So, what’s on your reading and blogging list today?
It’s amazing what kind of nonsense the right wing can come up with when their interests and myths are threatened. Here’s the latest Faux News canard about Occupy. It’s an ACORN plot! If any one believes that, I have a few bridges across the Mississippi I’d like to sell them. The Crescent City Connection even comes with tolls!!
How can a group that folded 19 months ago secretly conspire to bolster Occupy protests? Apparently, “sources tell” Fox News that people who used to work for ACORN have now taken on roles helping organize Occupy protests. In fact, Fox News reports that the former director of New York ACORN and his aides are now working for New York Communities for Change (NYCC), which is turn supporting demonstrations.
I’m not sure why this would be especially interesting if true — if folks who used to be involved with one group then started playing a role with another, who cares? — but as it turns out, a spokesperson for Occupy Wall Street said the NYCC isn’t playing a role in the protests anyway. But don’t worry, Fox News’ unnamed “source” said the group really is up to secret misdeeds, adding, “And yes, we’re still ACORN, there is a still a national ACORN.”
It’s safe to assume that Fox News has reliable contacts among progressive activist organizations, right? There’s bound to be plenty of former ACORN staffers and Occupy activists eager to dish to the Republicans’ cable news outlet, right?
Please. It’s really no wonder at all why Fox News’ audience ends up believing so much nonsense.
They do believe the nonsense, which makes Fox News watchers very dangerous in the voting booth.
Dems on the Super Committee are offering up Medicaid and other ‘entitlements’ in order to get tax increases from Republicans. It didn’t work, but you have to wonder exactly what all they’re willing to put on the table.
Republicans have pressured supercommittee members to reject any deficit-reduction deal that raises taxes — including stimulus spending for the economy would almost certainly be a non-starter for most in the party.
Democrats have said from the beginning that the supercommittee should produce a “jobs plan” that includes “investments” to help the economy.
The supercommittee is charged with devising a plan that will cut at least $1.2 trillion over 10 years from annual deficits, but deep divisions exist on the panel over whether to raise taxes and cut entitlements to meet that goal.
The members met again Wednesday afternoon and Democrats were looking to see if the GOP would present an alternative path to the grand bargain.
You may recall that the grand bargain was the giveaway President Obama offered to Boehner last summer during the debt ceiling talks. More details are available at this WAPO link.
The panel has floundered since meetings began in September. If the supercommittee fails to reach agreement to trim borrowing by at least $1.2 trillion through 2021, automatic spending cuts of an equal amount would be triggered in January 2013. These cuts would strike especially hard at the Pentagon, an outcome that Republicans are eager to avoid.
Ralph B posted this tidbit downthread last night. Chelsea Clinton is said to be considering a congressional run.
Clinton has been approached by “the right people” in the New York Democratic Party, according to one source in Albany. While no decision has been made, Clinton is said to be “actively considering” a Congressional run from New York State in 2012.
Chelsea Clinton, 31, is the only child of former U.S. President Bill Clinton and U.S. Secretary of State Hillary Rodham Clinton.
The discussions of running Chelsea Clinton for a house seat grew out of the redistricting plans currently underway in the New York State legislature in Albany.
The plan is to identify an open seat for Clinton in or around New York City where she currently resides with her husband, Marc Mezvinsky. While no specific district has been determined, New York City and Westchester are said to be the focus with New York’s 18th District considered a strong possibility. The 18th encompasses much of Westchester County, just south of where her parents have maintained a home for the past 12 years.
The Daily Beast reports that Herman Cain was delinquent in paying taxes in 2006. Additionally, he fought paying the bill.
According to court documents obtained by The Beast, Cain and his wife, Gloria, were served in February 2008 with a tax lien totaling $8,558.46 for unpaid income taxes and penalty due for the 2006 calendar year.
Gordon said Cain had filed with the IRS and won a six-month reprieve in paying his 2006 federal taxes as he was undergoing his treatment for stage four lymphoma and believed that filing should also have bought him time with the state of Georgia. “In Georgia, a taxpayer can submit a copy of his federal extension to request an extension of state income taxes,” Gordon said.
But instead, the state sent a notice of overdue taxes in October 2007, and then proceeded with the tax lien four months later, he said.
Cain’s accountant fought the Georgia Department of Revenue on behalf of his client well into 2008 and the two sides finally settled the matter in November 2008. A court formally withdrew the state tax lien on Dec. 8, 2008, court records show.
Gordon said the campaign was researching the exact date on which Cain made the payment to extinguish the lien
Dodd-Frank is rife with so many loopholes and exemptions that the largest Wall Street banks – larger by far then they were before the bailout – are back to many of their old tricks.
It’s impossible to know, for example, the exposure of the Street to European banks in danger of going under. To stay afloat, Europe’s banks will be forced to sell mountains of assets – among them, derivatives originating on the Street – and may have to reneg on or delay some repayments on loans from Wall Street banks.
The Street says it’s not worried because these assets are insured. But remember AIG? The fact Morgan Stanley and other big U.S. banks are taking a beating in the market suggests investors don’t believe the Street. This itself proves financial reform hasn’t gone far enough.
If you want more evidence, consider the fancy footwork by Bank of America in recent days. Hit by a credit downgrade last month, BofA just moved its riskiest derivatives from its Merrill Lynch unit to a retail subsidiary flush with insured deposits. That unit has a higher credit rating because the Federal Deposit Insurance Corporation (that is, you and me and other taxpayers) are backing the deposits. Result: BofA improves its bottom line at the expense of American taxpayers.
Wasn’t this supposed to be illegal? Keeping risky assets away from insured deposits had been a key principle of U.S. regulation for decades before the repeal of Glass-Steagall.
The so-called “Volcker rule” was supposed to remedy that. But under pressure of Wall Street’s lobbyists, the rule – as officially proposed last week – has morphed into almost 300 pages of regulatory mumbo-jumbo, riddled with exemptions and loopholes.
It would have been far simpler simply to ban proprietary trading from the jump. Why should banks ever be permitted to use peoples’ bank deposits – insured by the federal government – to place risky bets on the banks’ own behalf? Bring back Glass-Steagall.
The MSCI Asia Pacific Index gained 0.9 percent to 120.25 as of 11 a.m. in Tokyo, set for the highest close since Sept. 9. Standard & Poor’s 500 Index futures added 0.8 percent. The 17- nation euro climbed 0.5 percent to $1.3979 and rose 0.3 percent to 106.26 yen. Treasury 10-year notes erased earlier gains. Copper, zinc and lead jumped more than 1.4 percent in London and crude climbed 1.9 percent in New York.
French President Nicolas Sarkozy said the euro region’s bailout fund will be leveraged by four to five times, and investors have agreed to a voluntary writedown of 50 percent on Greek debt. Sarkozy plans to call Chinese leader Hu Jintao today to discuss contributions from the Asian nation to a fund European leaders may set up to fight the crisis, a person familiar with the matter said.
The news of a deal is “certainly mildly positive news for markets,” Adarsh Sinha, head of strategy for Group of 10 foreign exchange at Bank of America, said in a Bloomberg Television interview in Hong Kong. “We have got a plan out but a lot of the details aren’t in place.”
French President Nicolas Sarkozy said Greek bondholders voluntarily agreed to write down the value of Greek bonds by 50%, which translates to €100 billion and will reduce the nation’s debt load to 120% from 150%.
Sarkozy said the leaders agreed to boost the firepower of the EU bailout fund, known as the European Financial Stability Facility, “by four or five fold.” He added that officials have negotiated additional funding from the International Monetary Fund.
The writedowns were one of three inter-related problems political leaders must solve to devise a comprehensive solution to Europe’s debt crisis. They must also determine how to leverage a government-backed bailout fund and stabilize the banking sector.
EU leaders had pledged to resolve these issues Wednesday at their summit in Brussels. But given the bondholders’ resistance, it was unclear until the early hours of Thursday if the leaders would be able to follow through.
Earlier, the European Council issued a statement saying heads of state had agreed to raise capital requirements for banks vulnerable to losses on euro-area government bonds.
Under the terms outlined by EU officials, banks would be required to sharply increase core capital levels to 9% to create a buffer against potential losses. The amount to be raised would be determined after accounting for declines in the value of euro-area government bonds, including debt issued by Greece.
Based on market rates in September, banks will need to raise a total of €106 billion to meet the new targets, according to the European Banking Authority.
So, that’s the headlines that have grabbed my attention today. What’s on your blogging and reading list today?
The major objective of this article is to begin the process of understanding the financial market to enable intelligent discussion on the blog.
One of the major pillars of financial collapse was Derivatives. They are very complex financial instruments with a wide diversity. They are described by a gaggle of terminology used by the high priests of finance. Because of complexity most of the books on the collapse skirt the detail of the Derivative Market. After we get through some basic definitions, we will focus on Credit Default Swaps (CDS); a subset of the Derivatives offerings. We will see how the government created a non regulated environment where fraud, compromised regulators and incompetent people ran the Investment Financial community in a very high risk mode.
A Derivative is a financial instrument whose value is dependent on the value of another entity at a future time. Its primary function is to mitigate risk. A simple analogy would be your Home insurance. These policies guarantee that you will be remunerated if the value of your home falls due to fire, wind, or accident. A relatively small premium of money can mitigate a large potential financial catastrophe. State regulators are in charge of most regular Insurance products and solvency is less of an issue as adequate capital reserves are defined.
We need to think of Derivatives as a “risk tool” meant to stabilize the financial businesses (markets). The wide variety of Derivatives creates confusion, so we are going to restrict our discussion to Credit Default Swaps (CDS). Anticipating problems with Sub Prime mortgages, Securities were insured by investors. It was the Credit Default Swaps inability to perform that was a party to the financial collapse after the Lehman bankruptcy. They did not have the financial reserves to back up the policies they wrote How did that happen?
For our discussion today, three government deregulation actions are relevant.
- 1999 Graham Leach Bliley Act repealed the 1933 Glass Steagall act. The Glass-Steagall Act prohibited any one institution from acting as any combination of an investment bank, a commercial bank, and an insurance company.
- 2000 Commodity Futures Modernization Act deregulated Derivatives creating a Wild West environment for “Derivatives financial innovation”. See this link for a excellent Brooksley Born interview
- April 28, 2004 SEC drastically relaxed leverage standards for the Big Five Investment Banks: Goldman, Merrill, Bear, Lehman and Morgan Stanly. This created a very high risk environment. The session can be viewed here.
Financial self regulation brought the system down in 8 years. Bush de-funded Federal regulation. Greed, incompetence and corruption reigned supreme. Enron people went to jail. As of 2010, under Obama only bit players have been jailed. Civil fines are a joke.
We need to understand the environment created by the above regulation changes to understand the role of CDS Derivative failure. We will concentrate on the Real Estate Industry
Traditionally, according to HBSwiss, the real estate industry was handled by local banks who retained the loans. Their exposure to losses resulted in more careful origination of loans. For a long time, Fannie, Freddie and FHA were packaging (securitizing) mortgages and selling them to Investors. They enjoyed a good reputation because they had good loan origination standards. These were categorized as Prime mortgages. Generally these securities obtained a AAA rating which rarely changed. Good consistent returns were recorded with these products.
Early in the 2000 decade the Investment banks adopted the securitization model called Private Label Securities. They purchased their mortgages from unregulated brokers (Country Wide, Ameriquest etc) who had little or no standards regarding underwriting of loans. The private label market latched on to the fact that high risk “Sub Prime” loans carried higher interest rates, hence higher profits. They had no exposure to the failure of the loan as risk was passed on to the Investors. They simply collected the lucrative fee’s.
Investment Banks packaged the loans (millions and billion level). They paid the rating agencies (S&P. Moody and Fitch) for ratings structuring the packages to get AAA ratings. It is clear the rating agencies did not do their job as traditionally solid AAA ratings were changed as the packages started to fail. These packages were sold to the domestic and world markets. Trillions of dollars were involved. The banks simply passed the risk on to the investors and collected the origination and servicing fee’s
Risk could be mitigated by purchasing a CDS against the failure of the security. So if the security failed the investor was held harmless. Remember that as of 2000 the CDS market was unregulated. AIG – London Financial Services is the poster child of the CDS industry. AIG wrote most of the CDS contracts cheaply as they held inadequate reserves (in the event of a default) and had a good company rating based on the parent insurance company whose operations were regulated. Office of Thrift Supervision was the responsible regulator, but their presence was effectively non existent, Goldman Sachs (Hank Paulson as CEO) was one of their major clients.
However, late 2006 / 2007 AIG FP realized they were over exposed and got out of the market retaining the previous contracts. Recall in the unregulated market anyone could write CDS and the big banks did. As the Mortgage Backed Securities began to fail, the banks started writing CDS between the banks to mitigate risk always falsely believing the market would recover. This was necessary because When Bear and Lehman started to fail the banks were joined at the hip, guaranteeing each others toxic securities. Based on the 2004 SEC relaxing reserve requirements, that banks were leveraged up and things were starting to fail. In a leveraged market things get serious to critical in a matter of hours.
The daily, weekly and monthly credit markets froze up because nobody trusted anybody. Even GE was having trouble borrowing for daily operations. Andrew Ross Sorkin’s book—‘Too Big to Fail’— gives a good account of the scenario in 2008. Fannie and Freddie were in conservator ship, near bankruptcy Bear was bought on a fire sale by JP Morgan, Lehman was bankrupt, Merrill near bankruptcy was bought by Bank Of America and AIG had to be rescued by the Federal Government. Morgan Stanly and Goldman were within days of bankruptcy, but got bailed out by Warren Buffet and a Korean financial entity.
The AIG story is discussed in this newspaper article ‘Behind Insurer’s Crisis, Blind Eye to a Web of Risk’.
It is interesting to know that just before the 2008 collapse, the rating agencies down graded AIG forcing them to hold more reserves. They were forced to raise cash in a collapsing market. In a high leverage industry, when it rains it pours.
Investors can buy CDS on securities even though they do not own the security. This is equivalent to a neighbor buying insurance on your house. So if you know that a Mortgage Backed Security has a lot of high risk loans in it and is headed to failure, you buy a CDS anticipating the default. Michael Lewis’ book—‘The Big Short’–is all about the people who anticipated the failures and bought CDS products. A Bloomberg video interviews Lewis and it provides a lot of insight into the mess that evolved.
I look to Dakinkat, Gillian Tett, Yves Smith, and Janet Tavakoli on technical issues of Derivatives. Lewis’ forte is being able to write to the general public. His book gives a lot of insight to the CDS market nuances. It is interesting that Smith and Tavakoli consider Lewis to be a light weight. Yet, his book sales exceed theirs.
To get a notion of the size of the CDS market we need to look at these numbers. The size of our national economy this year is roughly $15 trillion. The whole world GDP is about $56 trillion. At the time of the 2008 failure, the size of the Credit Default Swaps (CDS) market was $64 trillion. The exposure at the time of the collapse was huge. The magnitude of the Naked CDS is not known, but is understood to be huge.
Given that the unregulated CDS underwriters were prone to not provide adequate capital reserves for defaults, there was a massive liquidity problem, hence the government had to step in and bail out the likes of AIG and banks who wrote these products.
The whole CDS market is described as being part of the Casino Gambling image in the financial markets
The Dodd Frank Bill has a moderate approach for Derivatives Regulation. However it is up to the regulators for implementation and the banks are attempting to minimize the impact of regulation. This is documented by two recent NYT articles.
A short summary of the above articles is that the big banks are attempting to save their Oligopoly through the Risk Committees of the Clearing Houses. This is being done by imposing high capital reserve requirements for participants. This has the effect of limiting competition which limits price competition and transparency. The elephant in the room is the risk committee’s saying certain derivatives are to complex to be cleared. This gets us right back to where we were in the financial crisis. Over the Counter non clearing house products are the most profitable and open to risk.
In the spirit of Brooksly Born regulation, It has been proposed that Derivatives be run using a Clearing House or a Exchange Trading Requirement.
From The Economist:
Clearing House: A clearing requirement is a requirement that all eligible derivatives be cleared on a central clearinghouse (also known as a central counterparty, or CCP). A clearinghouse provides critical counterparty risk mitigation by mutualizing the losses from a clearing member’s failure, netting clearing members’ trades out every day, and requiring that parties post collateral every day. Clearinghouses also centralize trade reporting, and can provide any level of post-trade transparency to the OTC derivatives markets that your heart desires — same-day trade reporting, including prices, aggregate and counterparty-level position data, etc. Virtually all of the harmful opacity and murkiness of the current OTC derivatives markets can be ended with just a clearing requirement — that is, a clearing requirement is a prerequisite for getting rid of the harmful opacity in OTC derivatives
Exchange Trading: An exchange-trading requirement, on the other hand, is simply a requirement that all eligible derivatives use a particular type of trade execution venue: exchanges (also known as “boards of trade”)..The exchange is just the trade execution venue (think NYSE vs. Nasdaq). The only thing that an exchange-trading requirement adds to the clearing requirement is “pre-trade price transparency.”
The clearing house is obviously the better because it brings a degree of financial integrity and transparency. It certainly is the more expensive of the options, but its cost is minuscule when we think of the financial collapse.
However based on the articles above, it is clear that the big bankers are attempting to preserve their oligopoly in terms of the CDS market. They also want to preserve the option to take the market back to the opaque high risk environment because of profit opportunities. The Opaque Over the Counter market is the biggest threat to the stability of the market
In Dodd – Frank, the CFTC and SEC have co-jurisdiction The CFTC commission seems to be moving to the bankers view. SEC has been relatively quiet on this subject
We need to remember that Mary Schapiro (SEC) and Gary Gensler (CFTC) were part of the problem before the 2008 Financial Crisis. It remains to be seen how well they address the problem. Will they do the right thing or are they financial industry moles?