Relevant and even prescient commentary on news, politics and the economy.

So much for GOP Siren of voter fraud

Maybe the appropriate title for this is: Do as I say and not as I do….

Just listening to Thom Hartman and he noted something that struck a cord (chord?) with me: voter ID, electronic ballots. In the caucuses last night, the Republican party did not require and ID, they allowed onsite registration and hand counted the ballots.  This is completely and totally counter to the Republican national position.  Even RIland passed an ID law.  Dare I use the over used word “hypocrisy”?  No, this is not hypocrisy.  This is flat out A-holeism.  This is the big middle finger from the GOP to the nation that the MSM villagers have totally…ignored? Avoided?  To stupid to recognize?  Believes in?  

To strong you say?  Then consider these graphs from Juan Cole (ht digby):

Didby looks at these graphs is sees it as a means to interpret the MSM Villagers favorite phrase: Real Americans.  She correct in that one too.

Hank Paulson and Some Animals Are More Equal than Others

byMike Kimel

Barry Ritholtz points us to a Bloomberg article showing, once again, that when it came to measures to prop up the economy in 2008, some animals are more equal than others:

Paulson explained that under this scenario, the common stock of the two government-sponsored enterprises, or GSEs, would be effectively wiped out. So too would the various classes of preferred stock, he said.

The fund manager says he was shocked that Paulson would furnish such specific information — to his mind, leaving little doubt that the Treasury Department would carry out the plan. The managers attending the meeting were thus given a choice opportunity to trade on that information.

There’s no evidence that they did so after the meeting; tracking firm-specific short stock sales isn’t possible using public documents.

And law professors say that Paulson himself broke no law by disclosing what amounted to inside information.

The article goes on:

At the time Paulson privately addressed the fund managers at Eton Park, he had given the market some positive signals — and the GSEs’ shares were rallying, with Fannie Mae’s nearly doubling in four days.

William Black, associate professor of economics and law at the University of Missouri-Kansas City, can’t understand why Paulson felt impelled to share the Treasury Department’s plan with the fund managers.

“You just never ever do that as a government regulator — transmit nonpublic market information to market participants,” says Black, who’s a former general counsel at the Federal Home Loan Bank of San Francisco. “There were no legitimate reasons for those disclosures.”

Janet Tavakoli, founder of Chicago-based financial consulting firm Tavakoli Structured Finance Inc., says the meeting fits a pattern.

“What is this but crony capitalism?” she asks. “Most people have had their fill of it.”

The Bloomberg article is worth reading in its entirety.

Notes toward A Blog Post on Chrystia Freeland’s Interview of GE CEO Jeff Immelt

UPDATE NOTE: The following isn’t complete. Many of my notes from the latter part of today’s interview can be found on Twitter, hashtagged #Immelt. At the moment, I both (1) don’t have easy access to them and (2) have other things that need to be done. Feel free to look there, and/or mention anything you want discussed here.)

The fake “news” of the day will be Immelt’s disparaging of America and Americans.

The semi-real news of the day will be that Immelt threw President Obama under the bus four or five times before finally saying that he “respects the President and respects the Presidency.” While this is progress from Jack Welch thinking that Buying George W. Bush the office meant that his firm would be exempted from cleaning up the PCBs GE dropped into the Hudson River (it did result in a nine-year delay and the likelihood that taxpayers, not GE, will foot the large majority of the bill), it’s not exactly a ringing endorsement of the man who gave us the Unforced Error of Simpson-Bowles.

Jeff Immelt, unlike Henry Aaron, believes that Simpson-Bowles is what we need for “growth.”

Jeff Immelt admits that, while the Board of Directors has some input, CEO pay is all about “getting what you believe you deserve.”

Jeff Immelt declares that if unemployment gets back down to 6%, no one will care about his being paid $21.5 million last year (about 40% of which appears to be an increase in his pension benefits; other GE pension contributors haven’t been so fortunate) to continue running GE into the ground to a standstill.

Jeff Immelt says that the US is 25th in math and 26th in science. (He’s wrong on the latter; we’re 17th.) He then spewed some horseshit about the “crisis” of Germans believing that it’s easier to find skilled workers in Mexico than it is in the United States.

Why do I call this horseshit? Well, let’s look at the two countries compared by Immeltian standards (link is PDF):

There are two three possibly-reasonable explanations. Either (1) there are a lot of Stupid Germans or (2) the places where Germans trying to hire are Significant Laggard or “Business Friendly, School Crappy” States.

Oops, or (3) the Germans pwnd Jeff Immelt, who then didn’t check the data.

And that’s without noting that, if you adjust for demographic issues such as poverty or consider racial inequalities, the U.S. is right at the top, no matter what Jeff Immelt says.

Otherwise, mostly, Jeff Immelt lies through his teeth, and Chrystia Freeland—who was tougher on George Soros last year—lets him get away with saying it.

It is left as an exercise whether this is because her boss openly declaring this was going to be a powder-puff interview (“I’m a big fan” of a man who has lost 60% of shareholder value for his investors over the past ten years) or because she decided to let Immelt hang himself. (I know which way I’m betting.)

Charlie Stross Discovers that The WSJ has been Teaching to the Test

And, therefore, ripping off its (at least European) advertisers:

The Guardian has just broken a new story about News International: Wall Street Journal circulation scam claims senior Murdoch executive: Andrew Langhoff resigns as European publishing chief after exposure of secret channels of cash to help boost sales figures.

To quote a little bit of the extensive — and hair-raising — article:

One of Rupert Murdoch’s most senior European executives has resigned following Guardian inquiries about a circulation scam at News Corporation’s flagship newspaper, the Wall Street Journal.

The Guardian found evidence that the Journal had been channelling money through European companies in order to secretly buy thousands of copies of its own paper at a knock-down rate, misleading readers and advertisers about the Journal’s true circulation.

Misleading is British-newspaper-speak for “defrauding.” As Charlie explains:

[A]udited circulation figures are the bedrock on which advertising revenue is based — the higher the ABC figures, the more the publisher can charge advertisers per inch of paper. Note that for many newspapers or periodicals, advertising accounts for up to 80-90% of revenue; you, the reader, are merely there as a draw for the real customers, the advertisers, who will pay more for pages that are seen by more eyeballs.

This kind of circulation ramping looks like bare-faced fraud.

If that’s been happening in the U.S. as well, Charlie’s expectations may come true:

And while the large corporate advertisers might be willing to put up with dirty tricks aimed at the readers, this is something else. (I expect a collapse in NewsCo’s advertising revenue, not to mention an imminent FBI investigation …)

(cross-posted from Skippy the Bush Kangaroo)

Patrick on OWS and Steve Jobs

You can go read the OWS stuff yourself; I want to highlight this:

Escaping on the R train from Rector Street, we got home to discover that Steve Jobs died. And that my Twitter feed is full of people wanting to wag their finger in my face for caring too much, in the wrong way.

As John Emerson said on Facebook, “I would hate to use a product that I loved so much that I would mourn its creator the way I mourned a family member.” Otoh, some of us have been using Macs since long before we were married (even if there was that period of, you know, trial separation and dalliances with Ubuntu and RedHat). And even John finished that statement with “I have guarded carefully against that possibility by using Microsoft products (damn him to hell).”

The other half of the backlash was summed up by Michael Moore on Twitter:

Devices made in sweatshops. We all use them. We use them at times for the greater good. Don’t think about where they come from.

He later amended that with:

Correction: FEW PEOPLE think about where these devices come from. We ignore this at our own peril. R.I.P., Steve Jobs.

but the point is clear: all the people talking about the miracle of “cheap technology” are ignoring that it’s only cheap because people price their lives and their health too cheaply in the “labor market.” Or, as Erik Loomis noted of a similar technological marvel, ” I’ll tell you one thing for damn sure—the cotton gin made the lives of slaves a hell of a lot worse.”

So I’m guessing those are the types of things Patrick was seeing, though probably more stridently. And his response—again, a few paragraphs at the end of a long, informative post that you should go read the whole thing—is worth quoting here on this “slightly left of center economic commentary” blog, or whatever we are today:

He was complicit in many of the sins I just got home from marching against. He gamed the inequities between labor in the First World and labor in the Third. He was probably a lot of people’s boss-from-hell.

He also made a world in which people like me and Teresa—computer users since 1988, when we got our first Mac SE—are technologists rather than passive victims of someone else’s vision of technology. Selfish though it may be, I have to acknowledge that this means a very great deal to us.

The world is complicated. Late capitalism sucks. Our systems don’t work. Our futures are controlled by people who don’t give a crap for anything we care about.

Steven Jobs cared about something. Without him, our lives would have been different, and probably worse. We’ll miss him. Anyone who wants to take this as the occasion to wag a reproving finger is invited—not entirely cordially—to comprehensively plobz the frap off. You may quote me, in this life or the next.

I’ll let Steve Jobs have his night, and note that the local Fox News station just posted this:

What was once a protest of powerful Wall Street financial firms and banks is growing into a larger movement about the working class, employment, poverty, education, and more.

As they say, a liberal is just a conservative who got maced and batoned by police.

Why Are You Out There?

When someone attempts to impede democracy actions are good things:

Writer and naturalist Henry David Thoreau was once locked up for refusing to pay a poll tax. He opposed the tax on moral grounds – in a democracy, he argued, a man shouldn’t have to pay to vote….

That night, so the story goes, Thoreau looked up from his jail cell to see Ralph Waldo Emerson…standing outside. Emerson looked at him and asked, “Henry, why are you in there?” Thoreau fired right back: “Ralph, why are you out there?”…

The man outside the bars may be every bit as much a prisoner as the one inside. Or even more so, if his so-called freedom is built on a foundation of denial and lies.

Now, Thoreau was anything but a Christian. That particular idea, though, was downright Biblical. It’s more or less what Jesus is getting at [in John 8:31-47]. Jesus is comparing two kinds of freedom: the outward kind, built on a foundation of happy lies and outright denial, which in the end turns out to be just another kind of slavery; and the inward kind, which comes from a clean conscience before God, and can never be taken away.

Far be it for me to cite The Sequel; I’ll take Bentleyville’s current Presbyterian minister* at his word. And tell anyone who happens to be in the area of One Liberty Plaza this afternoon to say “hello.”

*Full disclosure: one of the previous Ministers is an ex-roommate of mine. That said, the above was found from a Google search, purely a fortuitous coincidence. At least as far as I know.

LBO:Private Equity::HFT:Algorithmic Trading?

The High-Frequency Traders who have been distorting the U.S. stock market and raising the costs for everyone else have had their pride wounded. After starting with a straightforward definition:

High frequency trading — the use of computer-driven, algorithmic-based techniques to execute trades in a matter of microseconds — is drawing scrutiny, but Wall Street argues regulators may be focusing on the wrong issues.

we quickly get the we-don’t-like-our-name crowd:

“The term is widely used. Yet you never find a definition for it,” said Chris Concannon, partner at Virtu Financial. “People have stats based on a term that has not been defined. How do you know that HFT volume in the US moved up to 63% without knowing what that term even means?” he asked.

Rarely do journalists make people stupider so quickly, outside of political reporting.

It gets worse:

Virtu Financial is often referred to a high frequency trading firm. But Concannon says he struggles with the definition. “The brand we like to fit under is electronic market making,” he said. “we need to craft better terms,” he added.

Other panelists also seemed reluctant to define themselves as high frequency traders. Adam Nunes of Hudson River Trading, said his firm, founded by mathematicians, considered itself a “quantitative trading” outfit….

It was a theme echoed later in the day by NYSE Euronext(NYX) COO Larry Leibowitz. “We have lumped anyone who does algorithmic trading into high frequency because so much of what algorithm trading does is high frequency,” he said.

Gosh, the poor, suffering HFT traders who desperately want another name. But at least we know that Regulatory Capture is still enforced:

Gregg Berman, senior advisor to the director of the SEC’s Division of Trading and Markets, said there was no “clear, identifiable” link between high-frequency trading and the volatility that was experienced in the global market in August. He called the debate over HFT’s role, “high frequency theorizing”, the Wall Street Journal reported.

Yep, it’s all just theory (last link h/t Barry Ritholtz).

Is the House Trying to Encourage Criminal Activity?

I left out of the last post why David Vitter (claims) he is blocking the two SEC nominees:

Sen. David Vitter (R., La.) will block two nominees to the Securities and Exchange Commission until the agency announces whether victims of R. Allen Stanford’s alleged Ponzi scheme are owed compensation from the Securities Investor Protection Corp….

“We’ve known for some time that the SEC waited far too long to take action against Allen Stanford, and now they’re dragging their feet in responding to the victims. I will continue to hold them accountable—including holding these nominations—until these fraud victims get an up-or-down answer from the SEC,” Mr. Vitter said in a statement.

Well, economics can help him here. Even old economics, such as the pieces cited by Casey Mulligan in a disingenuous piece he wrote for the NYT last week. (No NYT link from this non-subscriber. I believe the NBER pieces are ungated, but haven’t checked from a network without access.) As the Stigler piece notes, optimal spending should be based on your expectation of catching criminal activity.*

So I expect that David Vitter is up in arms about what his colleagues in the House are doing:

The Republican-led House of Representatives is poised to pass, as early as Wednesday, a sweeping spending bill that would slash funding for the regulatory agency responsible for policing against excessive speculation and price manipulation in oil markets.

This rather understates the CFTC’s purvey. As their website notes:

Congress created the Commodity Futures Trading Commission (CFTC) in 1974 as an independent agency with the mandate to regulate commodity futures and option markets in the United States. The agency’s mandate has been renewed and expanded several times since then, most recently by the Commodity Futures Modernization Act of 2000….

[T]he futures industry has become increasingly varied over time and today encompasses a vast array of highly complex financial futures contracts.

Today, the CFTC assures the economic utility of the futures markets by encouraging their competitiveness and efficiency, protecting market participants against fraud, manipulation, and abusive trading practices, and by ensuring the financial integrity of the clearing process. Through effective oversight, the CFTC enables the futures markets to serve the important function of providing a means for price discovery and offsetting price risk. [emphasis mine]

That’s right; the CFTC is responsible for regulating derivative trading activity. Which is why…

The Obama administration requested more than $300 million for the fiscal year that ends on Sept. 30, a steep increase because the CFTC gained sweeping new powers under last year’s broad revamp of financial regulation—short-handed as the Dodd-Frank Act.

This is pure Stigler. More responsibility, higher expectation of detecting malfeasance, higher budget necessary for optimal crime enforcement. Otherwise, you end up more criminal activity going undetected as the risk of being caught is reduced.**

So what is the House doing?

The House bill would provide $171.9 million for the agency, a decrease of about $30 million from the $202.2 million given to the agency the prior year.

With the duties expanded by around 50%, the budget gets cut by 15%. Within the Stigler framework, we should expect (without any multiplier effect***) that it will be 43% less likely that any given criminal activity that falls under the CFTC’s jurisdiction will be detected and prosecuted.

The House wants to make the Stanford Ponzi scheme, or something similar, more likely to occur. Will David Vitter be decrying this, even as he blocks nominees?

*That this concept is outdated at best is subject for a future post, but it’s a fine baseline assumption.

**As I said, it’s a simplified model, but functional if one assumes continuities.

***Short version: this is where the model needs to be revised. The incentives to commit crimes are greater (detection less likely). That Mulligan could find no better cite than these works as the defence of his idiocy (as noted, no NYT link from me) is damning.

Pay no attention to the man behind the curtain.

As the title indicates, this will be a more than usually confused post.
The stimulus was the now famous grief over elementary fairness which errupted when “[Judge] Scott Fairgrieve of Nassau County District Court, wrote that ‘swearing to false statements reflects poorly on the profession [of law] as a whole” and fined lawyer Steven J Baum $20,000 for false statements in support of a foreclosure. Baum also suffered a Schack attack when Judge Arthur M. Schack referred to one filing as “incredible, outrageous, ludicrous and disingenuous.”

Baum wrote “Pay no attention to the man behind the curtain.”

In Toto not a good time to be a sleazy lawyer in New York (when was the last time that was true?).

The part which stunned me was

Anne Reynolds Copps, the chairwoman of the real property law section of the New York State bar, said, “We had a lot of concerns, because it seemed to paint attorneys as being the problem.” Lawyers feared they would be responsible for a bank’s mistakes. “They are relying on a client, or the client’s employees, to provide the information on which they are basing the documents,” she said.

So her view is that lawyers do not have the responsibility to check the claims of fact they make to judges, to look at the evidence. So what exactly do they do? Is the claim that their job is to look good in a suit and speak proper English with a confident tone?

Lawyers have discovered that they can make a whole lot more money by not doing their jobs and claiming they have done their jobs. Big surprise. Now the idea that they might have to give up that income, because they don’t have time to do what they have been claiming they have been doing is shocking.

I think that this is a very general phenomenon.

I don’t know how much money Baum made, but it is clear that one lawyer with a huge income must have been mainly taking money for doing what he didn’t bother to do

“David J. Stern, a lawyer whose Florida firm has been part of an estimated 20 percent of the foreclosure actions in the state, has been accused of filing sloppy and even fraudulent mortgage paperwork.” One firm [working on] 20% of the foreclosures, how many partners? How many associates with law degrees? How many robo signers?

Bankers and lawyers used to earn good money for, among other things, due diligence, keeping records, keeping proof if the records were contested, and complying with burdensome laws and regulations.

Relatively recently, they have earned immense incomes claiming they had done those things without bothering to do them. I guess that the fee charged by the lawyers who didn’t glance at the evidence is the same as the fees charged by lawyers who check if something is true before telling it to a judge. Clearly, one can make a lot of money claiming to have done something difficult and time consuming without bothering to do it.

Banks charge fees for handling transactions, but clearly stopped bothering to, say, handle transfer of a mortgage in a way that the entity which paid them could foreclose when the time came.

Banks charge to exchange currencies. If they are trading pieces of paper for pieces of paper, then they have to hold money to do that and they have to keep people from stealing it. If I am taking money out of an ATM in a country with a different currency from my bank account, I am forcing some computer somewhere to multiply two numbers. Ouch. But they charge as if they were doing it with pen and paper (or maybe an abacus).

I’d guess that most of the huge profits of the financial services sector are based on separating gamblers from their money, but a large part come from charging for services not rendered and another large part come from charging a lot for services which cost very little to provide now that they have computers.

The terror at the idea that judges won’t accept “because I say so” as proof shows how much the system depends on no one checking what was actually done in exchange for the huge flow of fees.