Unnamed Hedge Fund or Investor Earned $10 Billion Betting on U.S. Downgrade

According to The Daily Mail,

A mystery investor or hedge fund reportedly made a bet of almost $1billion at odds of 10/1 last month that the U.S. would lose its AAA credit rating.

Now questions are being asked of whether the trader had inside information before placing the $850million bet in the futures market.

The Daily Mail suggests this might involve George Soros, but a knowledgeable source denied it. The article also suggests that whoever made the bet could have had inside information–arguing that Obama and Geithner seem to have known for some time that a downgrade by S&P was in the works. Of course The Daily Mail is a conservative rag.

The latest bet was made on July 21 on trades of 5,370 ten-year Treasury futures and 3,100 Treasury bond futures, reported ETF Daily News.

Now the investor’s gamble seems to have paid off after Standard and Poor’s issued a credit rating downgrade from AAA to AA+ last Friday.

Whoever it is stands to earn a 1,000 per cent return on their money, with the expectation that interest rates will be going up after the downgrade.

Recall that Eric Cantor was revealed to have an investment that would have paid off handsomely if the U.S. had defaulted. Salon reported on June 27:

Last year the Wall Street Journal reported that Cantor, the No. 2 Republican in the House, had between $1,000 and $15,000 invested in ProShares Trust Ultrashort 20+ Year Treasury EFT. The fund aggressively “shorts” long-term U.S. Treasury bonds, meaning that it performs well when U.S. debt is undesirable. (A short is when the trader hopes to profit from the decline in the value of an asset.)

According to his latest financial disclosure statement, which covers the year 2010 and has been publicly available since this spring, Cantor still has up to $15,000 in the same fund. Contacted by Salon this week, Cantor’s office gave no indication that the Virginia Republican, who has played a leading role in the debt ceiling negotiations, has divested himself of these holdings since his last filing.

Why are these kinds of investments bets even legal? This is nothing but high stakes gambling, and it’s just plain wrong.

Thursday Reads

The view from my front door

Good Morning!! Isn’t it fun to look out your window and see a coating of ice all over everything? Especially when you already have mountains of snow out there. I plan to spend much of the day throwing ice pellets around and trying to chip the pile of ice that a snowplow left at the end of my driveway. Oh joy!

So what’s in the news this morning? Let me see….. I thought I’d post some video of Noam Chomsky discussing the Egyptian protests on Democracy Now.

NOTE: There are more parts to the Chomsky interview that you can watch at Democracy Now.

That’s the view from a real leftist. Have you heard what Tony Blair had to say about the situation?

Former British Prime Minister Tony Blair explained Tuesday that the embattled Egyptian president was “immensely courageous and a force for good.”

Appearing on CNN, Blair praised Mubarak’s role in brokering peace between Israel and Palestine. The former prime minister is now an envoy to the peace process….

…where you stand on him depends on whether you’ve worked with him from the outside or on the inside,” Blair replied. “And for those of us who worked with him over the — particularly now I worked with him on the Middle East peace process between the Israelis and the Palestinians, so this is somebody I’m constantly in contact with and working with.”

George Soros expressed his ideas about Egypt in today’s Washington Post.

President Obama personally and the United States as a country have much to gain by moving out in front and siding with the public demand for dignity and democracy. This would help rebuild America’s leadership and remove a lingering structural weakness in our alliances that comes from being associated with unpopular and repressive regimes. Most important, doing so would open the way to peaceful progress in the region. The Muslim Brotherhood’s cooperation with Mohamed ElBaradei, the Nobel laureate who is seeking to run for president, is a hopeful sign that it intends to play a constructive role in a democratic political system. As regards contagion, it is more likely to endanger the enemies of the United States – Syria and Iran – than our allies, provided that they are willing to move out ahead of the avalanche.

The main stumbling block is Israel. In reality, Israel has as much to gain from the spread of democracy in the Middle East as the United States has. But Israel is unlikely to recognize its own best interests because the change is too sudden and carries too many risks. And some U.S. supporters of Israel are more rigid and ideological than Israelis themselves. Fortunately, Obama is not beholden to the religious right, which has carried on a veritable vendetta against him. The American Israel Public Affairs Committee is no longer monolithic or the sole representative of the Jewish community. The main danger is that the Obama administration will not adjust its policies quickly enough to the suddenly changed reality.

I am, as a general rule, wary of revolutions. But in the case of Egypt, I see a good chance of success. As a committed advocate of democracy and open society, I cannot help but share in the enthusiasm that is sweeping across the Middle East. I hope President Obama will expeditiously support the people of Egypt.

Here’s an interesting article from the Wall Street Journal about why both the U.S. and Egyptian government were unprepared for the Egyptian uprising.

A close look at how Egypt’s seemingly stable surface cracked in so short a time shows how Egypt’s rulers and their Western allies were caught almost completely off guard as the revolution unfolded, despite deep concerns about where Egypt’s authoritarian government was leading the country.

From the moment demonstrators began pouring into the street, those leaders have been scrambling to keep up, often responding in ways that have accelerated the crisis.


…last week, tens of thousands of Egyptians began taking to the streets, flooding into the central Tahrir Square after pitched battles with thousands of riot police. It became the largest popular protest in Egypt since the so-called Bread Riots against rising prices in 1977.

Mr. Mubarak’s regime was stunned. “No one expected those numbers that showed up to Tahrir square,” said Ali Shamseddin, a senior official with the National Democratic Party in Cairo.

In faraway Washington, the demonstrations were only starting to register. Last Tuesday’s State of the Union address, delivered the day the protests started, had only a short section on foreign policy. President Barack Obama planned to nod to the democratic movement that swept away the ruler of Tunisia, a place “where the will of the people proved more powerful than the writ of a dictator,” the speech read.

After that, it’s kind of embarrassing that Obama is clearly more concerned about “stability” (oil?) in Egypt than the “will of the people.”

Trees uprooted by Cyclone Yasi

We had a gigantic storm here in the U.S., but the one in Australia might have been worse. From the Daily Telegraph: Cyclone Yasi: Queensland wakes to widespread devastation

As the winds dropped on the coast and locals emerged from cyclone bunkers and evacuation centres, they found widespread damage, especially in the coastal communities of Tully, Mission Beach and Cardwell.

Driving winds of 180mph had uprooted trees and torn roofs and walls from homes and businesses.

During the morning, dangerous storm surges were causing flooding in low-lying urban areas in the cities of Cairns and Townsville and the authorities urged residents to stay indoors.


In total, 170,000 properties were without power and thousands of people were likely to be left homeless after their homes were severely damaged by the worst cylone to hit Australia since 1918. Storm surges and flooding were also rolling into low-lying areas and inundating homes throughout the morning. Compounding the crisis, saltwater crocodiles had been spotted in floodwater.

Yikes! At least my power didn’t go out, and there aren’t any crocodiles out there.

That’s all I’ve got. What are you reading and blogging about this morning?

Thursday Reads

Woman Reading, by Marie Fox

Good Morning!!!

You’ve probably heard about George Soros’ remarks at a meeting for big bucks progressive donors on Tuesday. Sam Stein at Huffpo:

The Hungarian-American financier was speaking to a small side gathering of donors who had convened in Washington D.C. for the annual gathering of the Democracy Alliance — a formal community of well-funded, progressive-minded individuals and activists.

According to multiple sources with knowledge of his remarks, Soros told those in attendance that he is “used to fighting losing battles but doesn’t like to lose without fighting.”

“We have just lost this election, we need to draw a line,” he said, according to several Democratic sources. “And if this president can’t do what we need, it is time to start looking somewhere else.”

Michael Vachon, an adviser to Soros, did not dispute the comment, though he stressed that there was no transcript of a private gathering to check. Vachon also clarified that the longtime progressive giver was not referring to a primary challenge to the president.

Really? Hmmmm…. So um, who leaked the news from the secret meeting?

And there’s more:

Dissatisfaction with the Obama administration was not limited to Soros’s private gathering with donors. On Wednesday morning, Deputy Chief of Staff Jim Messina received several tough questions during his address to the Democracy Alliance. According to a source in the room, he was pressed multiple times as to why the administration has declined to be more combative with Republicans, both in communication and legislative strategy.

So Soros and pals are all hunky-dory with Obama? I’m not sure I buy that. Anyway this is being spun as simply a discussion about giving money to outside groups instead of directly to Obama–a change from 2008 when Obama directed his donors to funnel all money through his campaign instead of giving to groups like Move on.org.

Let’s look at some of the reactions to this political bombshell.

Dave Wiegel dismisses out of hand the notion that Soros is unhappy with Obama.

Soros isn’t actually a liberal Democrat — he has a diverse collection of interests, some of which (drug legalization) don’t move at all when Democrats win. There may be some millionaires who want to beat Obama in a primary, but there are more who want to activate the third party pro-Democrat groups that Obama wanted to evaporate in 2008-2010.

Kenneth P. Vogel at Politico:

Soros, a billionaire who has been among the most generous donors to liberal causes over the years, has recently indicated he no longer intends to fund the kind of independent political advertising campaigns he backed in 2004 and that Republican allies used to bombard Democrats in the midterm elections.

During a private session Wednesday on the sidelines of a conference of major Democratic donors organized by the Democracy Alliance, Soros reiterated the position that wealthy liberals should focus their giving on groups that will push President Barack Obama and congressional Democrats on liberal legislative initiatives, rather than groups supporting individual candidates, according to a source in the meeting.

“George was talking about how, in the context of the election, progressives are disappointed, and that they should keep (the administration) focused on certain issues that we should be promoting,” said the source, who did not want to be identified because Democracy Alliance bars attendees from discussing its conferences.

New York Magazine responded with snark:

According to some loose-lipped folks that attended a private event for the Democracy Alliance in Washington today, the hedge-fund billionaire and longtime Democratic donor George Soros is very upset about the last election, not least because his plans to grow a crop of Maui Wowie in his front yard were stymied, and he hinted darkly that the president may not have his support for much longer.

I have to say I agree with Soros on the legalization issue.

In other news, unemployment benefits will soon expire for two million Americans, and since Congress won’t be in session next week (they get whole weeks off for holidays), they will have to do something soon or face the wrath of voters when they go home for Thanksgiving.

Currently five million people are receiving aid under two federally-funded programs for the long-term unemployed.

Yet no clear path forward has emerged in Congress for reauthorizing those programs. Aides have floated the idea of coupling the benefits with a reauthorization of the expiring Bush-era tax cuts for the top two percent of earners.

But it won’t happen if Ben “Scrooge” Nelson gets his way.

Sen. Ben Nelson, a Nebraska Democrat who sided with Republicans when they blocked the previous reauthorization for nearly two months this summer, said he doesn’t love the tax cut deal.

“That’s a mistake,” said Nelson, who has joined the GOP in opposing the extended benefits unless their deficit impact is offset with spending cuts. “Unless unemployment is paid for, I can’t support it.”

Why don’t you just switch parties, Ben, and take President teleprompter Jesus with you.

Jim Morrison

I love this story: The Charlie Crist wants to pardon Jim Morrison. For those too young to remember:

It was a classic skirmish of the 1960s culture war, pitting a nonconformist rock star and his bohemian fans against clean-cut defenders of acceptable behavior, the counterculture against the mainstream, and Jim Morrison against Anita Bryant.

Now the governor of Florida says he will seek to put an end to it by pursuing a posthumous pardon for two criminal convictions that Morrison, the frontman for the Doors, received after some very bad behavior at a 1969 concert in Miami.

I can get behind that. Why not give Morrison a posthumous Medal of Freedom too? And lets submit his name for the Nobel Peace Prize. Morrison gave me a lot more joy than I ever got from the latest Medal of Freedom winner or the Nobel Peace Prize winning War President.

“The more that I’ve read about the case and the more I get briefed on it,” Mr. Crist said in an interview on Tuesday, “the more convinced I am that maybe an injustice has been done here.”

For those on the other side, the passion has dimmed, but a sour taste lingers. The anger that once brought them to the barricades has dulled to an impatient pique at the notion that the fate of a dead rock star still commands attention 40 years later.

The fight began on March 1, 1969, when the Doors played a raucous concert at Dinner Key Auditorium in Miami. An intoxicated Morrison stumbled through songs like “Light My Fire” and “Break On Through (To the Other Side),” taunted the crowd and threatened to expose himself before fans mobbed the stage. A newspaper review said the singer appeared to simulate masturbation during his performance, and the concert was investigated by a Miami crime commission as six arrest warrants were issued for Morrison, including one for a felony charge of lewd and lascivious behavior.

I’ll end with a great Morrison song with some stirring lyrics that are very relevant today.

Five to one, baby
One in five
No one here gets out alive, now
You get yours, baby
I’ll get mine
Gonna make it, baby
If we try

The old get old
And the young get stronger
May take a week
And it may take longer
They got the guns
But we got the numbers
Gonna win, yeah
We’re takin’ over

Come on!

Except maybe we should change that to

“the rich get richer/ and the poor get angrier.”

So what’s on your reading list today?

What Devil Did Obama Make a Deal With?

Barack Obama speaking at 2007 fundraiser in New York

As Dakinikat pointed out in her latest post, Paul Krugman used his column today to describe (and bemoan) Barack Obama’s negotiating style and his apparent lack of ideology. Krugman argues that the problem we face now (emphasis added) is:

…the contrast between the administration’s current whipped-dog demeanor and Mr. Obama’s soaring rhetoric as a candidate. How did we get from “We are the ones we’ve been waiting for” to here?

But the bitter irony goes deeper than that: the main reason Mr. Obama finds himself in this situation is that two years ago he was not, in fact, prepared to deal with the world as he was going to find it. And it seems as if he still isn’t.

In retrospect, the roots of current Democratic despond go all the way back to the way Mr. Obama ran for president. Again and again, he defined America’s problem as one of process, not substance — we were in trouble not because we had been governed by people with the wrong ideas, but because partisan divisions and politics as usual had prevented men and women of good will from coming together to solve our problems. And he promised to transcend those partisan divisions….the real question was whether Mr. Obama could change his tune when he ran into the partisan firestorm everyone who remembered the 1990s knew was coming. He could do uplift — but could he fight?

So far the answer has been no.

Although Krugman has come a long way from the days when he defended Obama’s health care “reform” bill, he is still clinging to the notion that Obama is a well-meaning, although hopelessly weak and gullible liberal. But what if Obama never intended to keep his campaign promises? What if he always planned to help cover up the Bush administration’s crimes and continue their wars?

In a recent post, I linked to this article at Common Dreams: Obama Was Used, And Is Now Used Up, by Robert Freeman. Freeman writes:

Barack Obama was used. Of course, he knew he was being used when he made the deal. But what he didn’t know was how quickly he would be used up. Now he has to face two years of humiliation knowing that he betrayed the people and the country he claimed to champion – and knowing that everyone else knows it as well – but also knowing that he’s gotten what’s coming to him.

Obama made a deal to get the job in the first place. The deal was that he would carry on with Bush’s bailout of the banks, with Bush’s two wars, with Bush’s suppression of civil liberties, that he wouldn’t prosecute or even investigate any of the enormous fraud that had brought down the country, or the lies that had railroaded it into war.

I haven’t been able to learn very much about Freeman. According to the description on one of his earlier Common Dreams pieces,

he teaches history and economics at Los Altos High School in Los Altos, CA. He is the founder of One Dollar For Life, a national non-profit that helps American students build schools in the developing world through contributions of one dollar.

He has been contributing to Common Dreams since at least 2004. Freeman doesn’t say with whom Obama supposedly made a deal, or why that entity would want the U.S. to continue the Bush administration’s policies. For all I know, Freeman could be just talking through his hat when he makes this unsourced claim; but isn’t it something many of us have wondered about for the past several years? I know I have.

Still, Why would Obama do that? Why would he campaign on high-minded generalities, leading gullible “progressives” and even well-meaning liberals to believe he would transform Washington DC and reverse Bush policies like torture, indefinite detention, and concentration of power in the executive branch?

Why did the financial community back him so strongly? Wasn’t it most likely their desire to get their hands on the Social Security trust fund? Perhaps they made a deal with Obama to engineer an assault on Social Security, Medicare, and other social programs, but would the financial community also demand that Obama continue the Bush policies of torture, detention, and endless war?

Now let’s look at the latest article by Bruce Dixon at The Black Agenda Report: Barack Obama, Social Security and the Final Irrelevance of the Black Misleadership Class. Dixon also claims that Obama’s betrayal of all that is liberal was foreordained because of a deal to make him President.

The masters of corporate media proclaim that their raid on social security, is a done deal. “Entitlements,” their code word for Medicare, Medicaid and Social Security, will be cut in the lame duck session of Congress, with Democratic president Barack Obama taking the lead. Though the outlines of this raid have been clear for months, what passes for black America’s political leadership class have been silent. As far as we know, they have not been ordered to shut up. They have silenced themselves, in abject deference to the corporate black Democrat in the White House.

It took a Republican Richard Nixon to open relations with China in the seventies. It took Democrat Bill Clinton to impose draconian cuts in welfare and end college courses for prisoners in the nineties. And today, only a black Democratic president can sufficiently disarm Democrats, only a black Democrat can demobilize the black polity completely enough for the raid on “entitlements” to be successful.

Dixon then points out a fact that many white “progressives” are missing:

Many among the current Congressional Black Caucus are utterly unprepared to stand against the corporate onslaught to gut social security because it is backed by the same forces who have made their political careers possible, and spearheaded by a black Democrat in the White House. The NAACP and similar advocacy organizations too have neutered themselves with a generation of corporate financing and the “reward” of regular meetings with White House officials

Some “progressives” are discussing as possibilities for a primary challenger to Obama in 2012 or, alternatively, a third party challenger. Both of these efforts will fail, because any challenger to Obama will not win the black vote. Dixon implies that Obama’s “deal with the devil” was a sellout to corporate interests.

Inflicting a fatal wound on social security has been the aim of America’s business class for generations. It is a project upon which some of them have spent billions. Thanks to our lack of a functioning black press, or electronic media that address black audiences, most African Americans don’t know who billionaire Pete Peterson is.

Peterson is a billionaire who announced his intention almost 20 years ago to spend every last dime of his net worth to kill social security…. [Peterson has] push[…] the fraudulent notion that social security is “a Ponzi scheme,” unsustainable, a drain on the nation’s finances, and won’t be there when people currently in their thirties and forties get old anyhow. A decades-long campaign of fear, uncertainty and doubt has been waged against the American people to prepare for the final undoing of the New Deal and Great Society programs of social security, Medicaid and Medicare. But it’s a campaign most of us are barely aware of.

Is Dixon right? Did Obama sell out in order to destroy social security? Then who demanded that Obama continue all of the Bush policies and block any close examination of Bush administration crimes?

I’m not suggesting any vast, all-encompassing conspiracy–clearly Obama’s corporate and political backers had differing goals in mind when they gave him their money. They probably didn’t all gather in a large room and deliberately plan to make Obama President. Some, like Teddy Kennedy, probably believed that Obama would really follow in JFK’s footsteps, inspiring a new generation to enter politics and change the system in radical ways. Read the rest of this entry »