The High-Tech Wall Street Rip-Off Setting the Media on Fire

By Marshall Auerback

April 2, 2014 | A brand-new book by Michael Lewis, author of Liar’s Poker and Moneyball, has set the media on fire. In Flash Boys: A Wall Street Revolt,Lewis argues that not only do the liars on Wall Street play poker, but the poker game itself is completely rigged against the little guy.

You, my friend, are the little guy. So am I. And so is everyone else who does not have access to a supercomputer.

Lewis contends that the U.S. stock market — you know, that famous system which impacts how much money is in your 401(k) — is rigged in favor of high-speed electronic trading firms, which use their advantages to rip off investors to the tunes of billions of dollars a year. These firms engage in a widespread practice known as high-frequency trading (HFT). Let's explore why this is very bad for you and me. (Be sure to check out Lewis' 60 Minutes interview [3], which also features young Brad Katsuyama, the Canadian trader who helped suss out the problem.)

Charles Keating and the Lessons of the Savings and Loan Crisis

Wednesday, 02 April 2014 15:35
By The Daily Take, The Thom Hartmann Program | Op-Ed

Charles H. Keating Jr., one of the most notorious fraudsters in American history, died yesterday at the age of 90.

Although his status as financial criminal number one has slipped a bit in the wake of the 2008 financial crisis, Keating was for many years the guy many Americans thought off when they thought off bankster rip-off artists, and his story reminds us that historically governments have had a very specific response to bad behavior by banks and banksters.

Traffic and Weather

Chris Rasmussen

“I compare [fortuna] to one of those raging rivers, which when in flood overflows the plains, sweeping away trees and buildings, bearing away the soil from place to place; everything flies before it, all yield to its violence, without being able in any way to withstand it; and yet, though its nature be such, it does not follow therefore that men, when the weather becomes fair, shall not make provision, both with defences and barriers, in such a manner that, rising again, the waters may pass away by canal, and their force be neither so unrestrained nor so dangerous. So it happens with fortune, who shows her power where valour has not prepared to resist her, and thither she turns her forces where she knows that barriers and defences have not been raised to constrain her.”—Niccolo Machiavelli, The Prince, chapter 25


“Every loyal citizen of the United States owes New Jersey a grudge. The State is corrupt; so are certain other states. . . . The offense which commands our special attention, however, and lifts this state into national distinction is this; New Jersey is selling out the rest of us. . . . If there is such a thing as treason by a state, then New Jersey is a traitor state. My first feeling was that I’d like to see the citizens of this selfish state pickle in the corruption of Hudson County, and Essex, of Camden, and Passaic, and Middlesex, and Ocean [New Jersey] deserves all the punishment we can give her. . . . But. . . I know my feeling about punishing Jersey is wrong: it is too Jersey-like.”—Lincoln Steffens, “The Traitor State,” McClure’s Magazine, 1905

In the annals of American political corruption, the New Jersey scandal now known as “Bridgegate” is something of a puzzle. No one, as far as we know, received any payoffs. Compared to Watergate or Iran-Contra, it seems an almost laughably trivial abuse of power. Rather, the novelty here lies in the episode’s cheap venality: it was prompted by a near-operatic sense of personal pique and a seemingly insatiable will-to-punish, with pols conspiring to snarl automobile traffic in the backyard of a political rival, and then exulting over the truly idiotic achievement of stranding motorists in traffic outside a bridge on-ramp in Fort Lee, New Jersey.

Casual connoisseurs of political scandal were taken aback by the sheer, gratuitous pettiness of the thing—especially since it now jeopardizes the political future of Gov. Chris Christie, one of the stars of the Republican Party, who had cannily positioned himself as a no-nonsense problem-solver, sworn to serve the people’s interest amid the partisan rancor and money-drenched inertia of contemporary American politics. The initial Bridgegate dispatches out of New Jersey’s state capital of Trenton have revealed Christie not only to be an intense partisan, but to be a single-issue politician, whose sole concern appears to be the political power of Christopher J. Christie.

Nomi Prins: The Real Vice-President of the United States Is Wall Street

In "All the Presidents' Bankers: The Hidden Alliances That Drive American Power," Wall Street journalist (and former Goldman Sachs executive) Nomi Prins writes a painstakingly researched history of the financial industry's collusion with the White House to create a self-serving United States financial policy.

Prins' book uses short passages to weave together in understandable terms a longterm relationship between economic and political power that has remained unchallenged. Yes, there were occasional periods when Wall Street did not receive everything that it wanted from the White House (such as in the New Deal). However, adding up the ledger of government policy toward Wall Street results in a decisive victory for the financial titans.

Robert Reich writes of "All the Presidents' Bankers,"The relationship between Washington and Wall Street isn't really a revolving door. It's a merry-go-round. And, as Prins shows, the merriest of all are the bankers and financiers that get rich off the relationship, using their public offices and access to build private wealth and power."

The American Government Is Open For Corruption

By Charles P. Pierce on April 2, 2014

The remarkable story of how we have come to privatize political corruption in this country reached another milestone today as the Supreme Court, John Roberts presiding, handed down its decision in McCutcheon v. FEC, effectively demolishing the aggregate, two-year limit on contributions by individuals, and taking a big chunk out of Buckley v. Valeo, the misbegotten 1976 decision that got the ball rolling in the first place. It was a 5-4 vote, with the court split exactly as it had in the Citizens United case. In writing the opinion for the court, Roberts further emphasized the equation of money with speech, and also seemed to agree with Anthony Kennedy's famous assertion in Citizens United that the ability of megadonors to shovel gobs of money into the election process,"We now conclude that independent expenditures, including those made by corporations, do not give rise to corruption or the appearance of corruption."

Paul Krugman: Ignoring the Evidence, and Waiting for Inflation

Canon to right of me, canon to left of me - actually, scratch that, it's all canon to right of me.

Noah Smith, a finance professor at Stony Brook University, recently wrote on his blog about the "finance macro canon."

This is the view that money-printing and deficits lead inexorably to runaway inflation, plus assorted other arguments about why easy money is a terrible thing, even in a depressed economy.

Emails Show Sen. Corker’s Chief of Staff Coordinated with Network of Anti-UAW Union Busters

By Mike Elk

Leaked documents obtained by Nashville TV station NewsChannel 5 WVTF reveal communications between the employees of two Tennessee Republicans—Sen. Bob Corker and Gov. Bill Haslam—and a network of prominent anti-union professionals during the United Auto Workers' union drive at a Volkswagen plant in Chattanooga earlier this year.

Sen. Corker and Gov. Haslam have been blamed by the union for contributing to the drive’s defeat by making public statements against the UAW. Prior to the election, Corker claimed that the plant would add an additional SUV assembly line if workers voted against the union, while Haslam implied that businesses had told him that they might not relocate to Tennessee if workers at Volkswagen voted to join the UAW.

Hijacking the American Plane of State

Old Scripts and Empty Stories Signal a New Age
By Tom Engelhardt

Isn’t there something strangely reassuring when your eyeballs are gripped by a “mystery” on the news that has no greater meaning and yet sweeps all else away? This, of course, is the essence of the ongoing tale of the disappearance of Malaysia Airlines Flight 370. Except to the relatives of those on board, it never really mattered what happened in the cockpit that day. To the extent that the plane’s disappearance was solvable, the mystery could only end in one of two ways: it landed somewhere (somehow unnoticed, a deep unlikelihood) or it crashed somewhere, probably in an ocean. End of story. It was, however, a tale with thrilling upsides when it came to filling airtime, especially on cable news. The fact that there was no there there allowed for the raising of every possible disappearance trope -- from Star Trekkian black holes to the Bermuda Triangle to Muslim terrorists -- and it had the added benefit of instantly evoking a popular TV show. It was a formula too good to waste, and wasted it wasn’t.

Amanda Marcotte: 5 Things Conservatives Lie Shamelessly About

April 2, 2014 | Mark Twain once famously said, “A lie can travel halfway around the world while the truth is putting on its shoes.” Twain wasn’t praising lies with this comment, of course, but modern-day conservatives seem to think he was dishing out advice instead of damning the practice of dishonesty. Conservatives have figured out a neat little rhetorical trick: One lie is easy for your opponents to debunk. Tell one lie after another, however, and your opponent’s debunkings will never catch up. By the time the liberal opposition has debunked one lie, there’s a dozen more to take its place.

Science educator Eugenie Scott deemed the technique the “Gish Gallop,” named for a notoriously sleazy creationist named Duane Gish. The Urban Dictionary defines the Gish Gallop as a technique [3] that “involves spewing so much bullshit in such a short span on that your opponent can’t address let alone counter all of it.” Often users of the Gish Gallop know their arguments are nonsense or made in bad faith, but don’t particularly care because they are so dead set on advancing their agenda. Unfortunately, the strategy is so effective that it’s been expanding rapidly in right-wing circles. Here are just a few of the most disturbing examples of the Gish Gallop in action.

How the Case Against Bank of America CEO Fizzled

by Jesse Eisinger
ProPublica, April 2, 2014, 12:10 p.m.

The regulatory cloud has lifted for Kenneth D. Lewis. Last week, the former head of Bank of America received a modest penalty, paid for by his former employer, and a temporary ban from an industry he is no longer a part of.

In this seminal financial crisis investigation, regulators put on a master class in how to take a strong case and render it weak.

Tomgram: Michael Klare, Shooting Up on Big Energy

By Michael Klare
Posted on April 1, 2014, Printed on April 5, 2014
http://www.tomdispatch.com/blog/175825/

Pssst, buddy, you want a report?

Hey, I’ve got three for you, all in the news last week! There was a rare intervention by the American Association for the Advancement of Science, which issued a report warning that “the rate of climate change now may be as fast as any extended warming period over the past 65 million years, and it is projected to accelerate in the coming decades.” There was a risk, it added, “of abrupt, unpredictable, and potentially irreversible changes in the earth’s climate system with massively disruptive impacts,” including the possible “large scale collapse of the Antarctic and Greenland ice sheets, collapse of part of the Gulf Stream, loss of the Amazon rain forest, die-off of coral reefs, and mass extinctions.” Then there was the prestigious Intergovernmental Panel on Climate Change’s latest grim assessment, whose key message is: “It's not just about melting ice, threatened animals, and plants. It's about the human problems of hunger, disease, drought, flooding, refugees, and war becoming worse,” or as one of the scientists writing the report put it, “The polar bear is us.” And, of course, the U.N.’s World Meteorological Organization released its annual report last week, pointing out that, though we are only 14 years into a new century, 13 of them fall into the category of warmest ever recorded.

Bill Black: Deflation Dementia

Posted on April 2, 2014 by Yves Smith

Yves here. This piece by Bill Black not only does a great job of kneecapping some typically poor MSM reporting, but it’s also valuable as a high-level overview of the insanity of European economic policies.

By Bill Black, the author of The Best Way to Rob a Bank is to Own One and an associate professor of economics and law at the University of Missouri-Kansas City. Originally published at New Economic Perspectives

There must be some café in Brussels where all the most inept U.S. financial journalists meet with to get their take on eurozone deflation. Regular readers know that I am a strong critic of much of what passes for financial journalism, but there are special qualities to the U.S. coverage of the topic of eurozone deflation. It is so homogenous and its logic is so internally inconsistent that it is breathtaking that so many journalists can repeat the same demented “logic” no matter how many times we explain that it is facially nonsensical.

The latest example of this genre is an AP story that has already been reproduced by elite media without even a scintilla of scrutiny. Here’s how the AP begins its tale.

Tenn. TV station finds evidence Gov. Haslam offered VW incentive for anti-UAW scheme

By Joshua Holland, Moyers & Company
Wednesday, April 2, 2014 8:34 EDT

In February, workers at Volkswagen’s Chattanooga, Tenn., plant voted by a narrow margin against joining the United Auto Workers (UAW). In the weeks leading up to the election, during a heated anti-union campaign by outside “pro-business” groups, Republican state lawmakers had held press conferences threatening to withhold incentives from the company if workers opted to join the union. It was widely reported that Tennessee Gov. Bill Haslam may have made similar threats, but according to Nashville’s local News Channel 5, “the governor had emphatically denied rumors heard by Democratic lawmakers that state incentives were tied to Volkswagen rejecting the UAW.”

But yesterday, the station reported that it had uncovered documents that appear to contradict the governor’s statements. Phil Williams reports, “documents leaked to NewsChannel 5 Investigates offer conclusive proof that the Haslam administration wanted a say in the automaker’s deal with organized labor — in exchange for $300 million in economic incentives to help VW expand its Chattanooga operations.”

Crib mattresses emit potentially harmful chemicals, Cockrell School engineers find

In a first-of-its-kind study, a team of environmental engineers from the Cockrell School of Engineering at The University of Texas at Austin found that infants are exposed to high levels of chemical emissions from crib mattresses while they sleep.

Analyzing the foam padding in crib mattresses, the team found that the mattresses release significant amounts of volatile organic compounds (VOCs), potentially harmful chemicals also found in household items such as cleaners and scented sprays.

The GOP's Amazing Doublespeak On Medicare And Social Security

Sahil Kapur – April 1, 2014, 6:00 AM EDT

The new Republican budget will adopt cuts to Medicare under Obamacare that the party is attacking Democrats for ahead of the 2014 congressional elections.

And it won't include cuts to Social Security that Republicans bashed President Barack Obama for omitting from his budget proposal just six weeks ago.

Paul Krugman: Poor Billionaires, Victimized by Highfalutin Ideas

Here comes another billionaire who thinks that anyone who talks about income inequality is a Nazi; this time it's Ken Langone, the co-founder of Home Depot. I don't have anything useful to say about this, other than observing that there must be a lot of these guys.

I mean, there aren't that many billionaires. Our sightings of multiple examples of the genus that not only believes that progressives are just like Hitler but will say so in public must indicate that a substantial proportion of our billionaires share this belief, but they're more private about it.

Hobby Lobby's Hypocrisy: The Company's Retirement Plan Invests in Contraception Manufacturers

When Hobby Lobby filed its case against Obamacare's contraception mandate, its retirement plan had more than $73 million invested in funds with stakes in contraception makers.

—By Molly Redden  | Tue Apr. 1, 2014 3:00 AM PDT

When Obamacare compelled businesses to include emergency contraception in employee health care plans, Hobby Lobby, a national chain of craft stores, fought the law all the way to the Supreme Court. The Affordable Care Act's contraception mandate, the company's owners argued, forced them to violate their religious beliefs. But while it was suing the government, Hobby Lobby spent millions of dollars on an employee retirement plan that invested in the manufacturers of the same contraceptive products the firm's owners cite in their lawsuit.

Documents filed with the Department of Labor and dated December 2012—three months after the company's owners filed their lawsuit—show that the Hobby Lobby 401(k) employee retirement plan held more than $73 million in mutual funds with investments in companies that produce emergency contraceptive pills, intrauterine devices, and drugs commonly used in abortions. Hobby Lobby makes large matching contributions to this company-sponsored 401(k).

Stiglitz: Why Inequality Matters and What Can Be Done About It

Apr 1, 2014, Joseph Stiglitz

It is a great pleasure for me to discuss with you one of the critical issues facing our country, its growing inequality, the effect it is having on our economy, and the policies that we might undertake to alleviate it. America has achieved the distinction of becoming the country with the highest level of income inequality among the advanced countries. While there is no single number that can depict all aspects of society’s inequality, matters have become worse in every dimension: more money goes to the top (more than a fifth of all income goes to the top 1%), more people are in poverty at the bottom, and the middle class—long the core strength of our society—has seen its income stagnate. Median household income, adjusted for inflation, today is lower than it was in 1989, a quarter century ago.[1] An economy in which most citizens see no progress, year after year, is an economy that is failing to perform in the way it should. Indeed, there is a vicious circle: our high inequality is one of the major contributing factors to our weak economy and our low growth.

The Myth of Working Your Way Through College

Once upon a time, a summer spent scooping ice cream could pay for a year of college. Today, the average student's annual tuition is equivalent to 991 hours behind the counter. 

 

Svati Kirsten Narula, Apr 1 2014, 7:58 AM ET

 

A lot of Internet ink has been spilled over how lazy and entitled Millennials are, but when it comes to paying for a college education, work ethic isn't the limiting factor. The economic cards are stacked such that today’s average college student, without support from financial aid and family resources, would need to complete 48 hours of minimum-wage work a week to pay for his courses—a feat that would require superhuman endurance, or maybe a time machine.

To take a close look at the tuition history of almost any institution of higher education in America is to confront an unfair reality: Each year’s crop of college seniors paid a little bit more than the class that graduated before. The tuition crunch never fails to provide new fodder for ongoing analysis of the myths and realities of The American Dream. Last week, a graduate student named Randy Olson listened to his grandfather extol the virtues of putting oneself through college without family support. But paying for college without family support is a totally different proposition these days, Olson thought. It may have been feasible 30 years ago, or even 15 years ago, but it's much harder now.
 

US Supreme Court strikes down overall donor limits

The US Supreme Court has struck down overall contribution limits for individual political donors.

The court ruled 5-4 that individuals could give to candidates, parties and political groups without observing an overall cap of $123,200 (£74,000).

The ruling leaves in place the limit on how much a donor can give to a single candidate - currently $2,600 (£1,560)

Gaius Publius: How Climate Change Could Cause an Ice Age in Europe

Posted on March 31, 2014 by Lambert Strether

Lambert here: NC has flagged this risk before: As global warming progresses, the melting of polar and Greenland ice will lower ocean salinity, which will slow or stop the Gulf Stream, on which Europe depends for its temperate, relatively mild climate. The Pacific Northwest, which benefits from a less pronounced gulf stream effect, is also at risk.

By Gaius Publius, a professional writer living on the West Coast of the United States and contributing editor at AmericaBlog....Originally published at AmericaBlog

So far, the progress of global warming and climate change has been relatively smooth, a gradual decline in livability marked by a gradual increase in increasingly catastrophic events. Yes, catastrophic events — but a gradual increase in their number and degree. Key word, gradual.

We assume, perhaps to comfort ourselves, that the (so far) slow and gradual decline in the livability of the planet will remain … slow and gradual.

Thomas Frank: Plutocracy without end: Why the 1 percent always defeats the middle class

There are more of us than them. But income inequality keeps getting worse -- and there is sadly no end in sight

I’ve been writing about what we politely call “inequality” since the mid-1990s, but one day about ten years ago, when I was traveling the country lecturing about the toxic curlicues of right-wing culture, it dawned on me that maybe I had been getting the entire story wrong. All the economic developments that I spent my days bemoaning—the obscene enrichment of the CEO class, the assault on the regulatory state, the ruination of average people—were very possibly not what I thought they were. When I talked about these things, I assumed they were an outrage, an affront to the affluent nation I still believed we were; once the scales fell from our eyes and Americans figured out what was happening, I argued, we would yell “stop,” bring this age of folly to a close, and get back to middle-class prosperity as usual.

If This Terrifying Report Doesn't Wake You Up to the Realities of What We're Doing to This Planet, What Will?

Eight reasons you should be worried about the UN's latest climate report.

—By Tim McDonnell, Jeremy Schulman, and James West | Sun Mar. 30, 2014 8:36 PM PDT

The impacts of climate change are likely to be "severe, pervasive, and irreversible," the chair of the Intergovernmental Panel on Climate Change said Sunday night in Yokohama, Japan, as the world's leading climate experts released a new survey of how our planet is likely to change in the near future, and what we can do about it.

The Economic Scam of the Century

by MIKE WHITNEY 

 

The leaders of the U.S. Senate Banking Committee,  Sen. Tim Johnson (D., S.D.) and Sen. Mike Crapo (R., Idaho),  released a draft bill on Sunday that would provide explicit government guarantees on mortgage-backed securities (MBS) generated by privately-owned banks and financial institutions. The gigantic giveaway to Wall Street would put US taxpayers on the hook for 90 percent of the losses on toxic MBS the likes of which crashed the financial system in 2008 plunging the economy into the deepest slump since the Great Depression. Proponents of the bill say that new rules by the Consumer Financial Protection Bureau (CFPB) –which set standards for a “qualified mortgage” (QM)– assure that borrowers will be able to repay their loans thus reducing the chances of a similar meltdown in the future. However, those QE rules were largely shaped by lobbyists and attorneys from the banking industry who eviscerated strict underwriting requirements– like high FICO scores and 20 percent down payments– in order to lend freely to borrowers who may be less able to repay their loans.  Additionally, a particularly lethal clause has been inserted into the bill that would provide blanket coverage for all MBS  (whether they met the CFPB’s QE standard or not) in the event of another financial crisis.