Duh!!!

http://chris-floyd.com/articles/1-latest-news/2052-grand-delusions-the-regressive-results-of-progressive-markets.html

But the flaw in this noble scheme is readily apparent: seeking to "make money while filling a social need." These are two entirely separate endeavors, with two entirely separate goals. Once a market is created, with whatever benign intentions, it is inevitable that it will be used, and eventually dominated, by those seeking to maximize their profits, regardless of social needs. There is no great scandal in this fact; that's what markets are for. And this inevitable heedless maximization is now happening in India, as the Times reports:

Follow the link to continue the duh . . .

Is there a correlation between teacher pay and class size?

http://www.nea.org/assets/docs/09rankings.pdf

Letters: What tired Oregon teachers say

http://www.oregonlive.com/news/oregonian/susan_nielsen/index.ssf/2009/11/what_tired_oregon_teachers_say.html

Dear Editors and Teachers:

There are a number of problems with Susan Nielsen's attempt to evoke
sympathy for teachers in her article "What tired Oregon teachers say"
on Sunday 11/15. While I agree that teachers are woefully
under-appreciated and under-valued - their role being among the most
vital to any community - along with this comes equally strenuous
responsibility. My experience leads me to believe that where the
system is failing is inculcating, fostering, and sustaining in
teachers a goal of "eudaimonia": Each and every students needs to
flourish to their maximum potential. I recognize the difficulty in a
class of 30 or so, and it would even be hard with only 10. But, I have
found that most teachers unwilling to work with me to achieve this for
my children, let alone for their class as a whole. Further, some
districts such as mine actively disallow in-class volunteering.
Consequentially, I reject the notion that teachers are lacking
volunteer support.

From zerohedge, yea the economy is doing real good now.

Required Viewing: Goodness Jon Stewart is Awesome!

Required Viewing

The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Required Reading: Continued

• On Obama: My Brilliant Career by Mike Whitney

  Obama has remained serenely detached while American-made F-16's have dumped more than one hundred tons of lethal ordnance on the captive population of Gaza. In fact, the president-elect has spent more time working on his abs at the Semper Fit gym in Honolulu than trying to stop the bloody onslaught which has already resulted in the deaths of over 300 Palestinians, half of who are civilians.
  
  When asked why he hasn't given his opinion on the conflict, Obama spokesman have blandly stated, "There's only one president at a time".
  
  Uh-huh. So why was Obama so quick to condemn Russia's invasion of South Ossetia? Is the yardstick for measuring aggression different in the Caucasus than it is in the Middle East? Or is it because politicians are just too afraid to cross Israel?
  
  "If somebody shot rockets at my house where my two daughters were sleeping at night, I'd do everything in my power to stop them," Obama proclaimed on a recent visit to Israel.
  
  Right. It's too bad Palestinian parents can't claim that same right without being branded as terrorists.

• Shock, Awe and Lies: The Truth Behind the Israeli Attack on Gaza

  
  

• Dean Baker: Free Market Myth

  The extraordinary financial collapse of recent months has been commonly described as a testament to the failure of deregulation. The events are indeed testament to a failure—a failure of public policy. Blaming deregulation is misleading.
  
  In general, political debates over regulation have been wrongly cast as disputes over the extent of regulation, with conservatives assumed to prefer less regulation, while liberals prefer more. In fact conservatives do not necessarily desire less regulation, nor do liberals necessarily desire more. Conservatives support regulatory structures that cause income to flow upward, while liberals support regulatory structures that promote equality. “Less” regulation does not imply greater inequality, nor is the reverse true.
  
  Framing regulation debates in terms of more and less is not only inaccurate; it hugely biases the argument toward conservative positions by characterizing an extremely intrusive structure of, for example, patent and copyright rules, as the free market. In the realm of insurance and finance over the last two decades, calls for deregulation have been cover for rules tilted starkly toward corporate interests. And the recent change in bankruptcy law, hailed by conservatives, requires much greater government involvement in the economy.
  
  False ideological claims have circumscribed the public debate over regulation and blinded us to the wide range of choices we can make. Without these claims, what would guide regulatory policy? What kinds of choices would we have?

• On Obama: Arthur Silber

  In the months leading up to the November election, I repeatedly argued that both major presidential candidates were war criminals. The truth is considerably worse than this statement would indicate: given the United States' corporatist-authoritarian-militarist identity and nature, a major national political candidate must be a war criminal. If he (or she) is not, he will never rise to the national level in the first place. (The rare exceptions only prove the point: they are of vanishing importance, and they exercise no power whatsoever.)

  ( Chomsky has said this for years. )
• NYRB on Torture Books

  Because so many of the facts surrounding the torture policy are now well known, Sands's book is illuminating not so much for breaking new factual ground as for the human insight he brings to the events. Through his interviews, he tells a story about how ordinary human beings, all working within an institution designed to fight by the rules, felt tremendous pressure to bend the rules—and in most cases did so without apparent concern or self-doubt. A narrowly pragmatic ethos guided virtually all actors. The real arguments were for the most part not about whether coercive tactics were legally or morally acceptable, but about whether they worked. Some, especially those in the FBI, felt strongly that they were counterproductive, and that building rapport through noncoercive questioning was the only way to gain credible intelligence from captives.[4] Others thought the idea of building rapport with al-Qaeda suspects was foolish; it could not be done. But with the courageous exception of Navy General Counsel Alberto Mora, few argued that coercive tactics were wrong because they were immoral and illegal, whether or not they worked. In America after September 11, idealists were few and far between, and an amoral, blinkered pragmatism ruled the day.

• Glenn Greenwald: Committing war crimes for the "right reasons"

  But we don't accept that justifying reasoning when offered by others. In fact, those who seek merely to explain -- let alone justify -- the tyranny, extremism and/or violence of Castro, or Chavez, or Hamas, or Slobodan Milosevic or Islamic extremists are immediately condemned for seeking to defend the indefensible, or invoking "root causes" to justify the unjustifiable, or offering mitigating rationale for pure evil.
  
  Yet here we have American leaders who now, more openly than ever, are literally admitting to what has long been known -- that they violated the laws of war and international treaties which, in the past, we've led the way in advocating and enforcing. And what do we hear even from the most well-intentioned commentators such as Douthat? Yes, it was wrong. True, they shouldn't have done it. But they did it for good reasons: they believed they had to do it to protect us, to guard against truly bad people, to discharge their heavy responsibility to protect the country, because we were at war.

• WHO ENDED THE 6 MONTH CEASE-FIRE IN ISRAEL/PALESTINE?

  More crucially, Israeli and international sources from the first week of November 2008 – sources that are scholarly and (otherwise) more reliable than the NYT – shed further light on the misleading claim by the NYT editors. They include, but are by no means limited to:

  The Israeli Haaretz, November 5, 2008: "Israel Defense Forces troops yesterday killed a Hamas gunman and wounded two others in the first armed clash in the Gaza Strip since a cease-fire was declared there in June. […] An Israeli army spokeswoman said troops had entered the territory."
  
  The Israeli Yediot Ahronot, November 5, 2008: "For the first time since the ceasefire took effect in June, IDF forces operated deep in the Gaza Strip Tuesday night."
  
  (Note: had the NYT editors bothered to consult Hebrew sources they would have easily found that the Hebrew version of the news item cited above is even clearer.)
  
  The Times (UK), November 5, 2008: "A five-month truce between Israel and the Islamist rulers of the Gaza Strip was foundering yesterday after Israeli special forces entered the besieged territory and fought."
  
  Amnesty International, November 10, 2008: "A spate of Israeli and Palestinian attacks and counter-attacks in the past 24 hours could spell the end of a five-and-a-half-month ceasefire. […] The killing of six Palestinian militants in Gaza by Israeli forces in a ground incursion and air strikes on 4 November was followed by a barrage of dozens of Palestinian rockets."
  
  The Guardian, November 5, 2008: "Hamas militants fired more than 35 rockets into Israel today, hours after the Israeli army killed six people inside the Gaza Strip in the first major exchange of fire since a truce took effect in June."
  
  The Independent, November 5, 2008: "Hamas militants in the Gaza Strip fired more than 35 rockets towards Israel today, the army and the Islamist group said, hours after the Israeli army killed six militants in the coastal territory."

  ( Ed: See links on original. )

More financial meltdown links

Matt Taibbi and Byron York Butt Heads Over Whether McCain Deserves Blame for the Wall Street Meltdown

M.T.: Oh, come on. Tell me you're not ashamed to put this gigantic international financial Krakatoa at the feet of a bunch of poor black people who missed their mortgage payments. The CDS market, this market for credit default swaps that was created in 2000 by Phil Gramm's Commodities Future Modernization Act, this is now a $62 trillion market, up from $900 billion in 2000. That's like five times the size of the holdings in the NYSE. And it's all speculation by Wall Street traders. It's a classic bubble/Ponzi scheme. The effort of people like you to pin this whole thing on minorities, when in fact this whole thing has been caused by greedy traders dealing in unregulated markets, is despicable.

Chris Floyd

• Cronytopia: What the World Knows -- and Americans Don't -- About the Bailout

  Readers of The Guardian were greeted with this leading story -- front-page, up top -- on Saturday morning:

  Wall Street banks in $70bn staff payout
  Pay and bonus deals equivalent to 10% of US government bail-out package

  Having laid out the thrust of the story very plainly in the headline and sub-head, the paper then detailed the way that the Bush-Obama bailout (the most apt moniker for a scheme devised by the top echelons of the bipartisan elite) is yet another inside job by the Beltway bandits who move in and out of the revolving door between "public service" and vast feeding troughs of Cronytopia.

• Not Enough Money in the World: The Real Monster in the Meltdown Closet

  What has struck mortal fear in the heart of markets and governments is not bad mortgages, but the almost incomprehensibly huge and complex market for "derivatives," based in part on mortgage debt -- but also on a vast array of other sources that were "securitized," turned into tradable if ghostly commodities then sold off in a bewildering variety of increasingly arcane forms. This was accompanied by the expansion of yet another vast market in insurance mechanisms designed to protect these derivatives -- mechanisms which themselves became "securitized."

Mike Whitney: No More Investment Banks

It is 100 percent certain now that Paulson’s plan to use the $700 billion bailout to buy-back the non-performing loans and bad mortgage-backed securities from the banks would have failed and led to disaster. Paulson stuck by his wacko plan even though more than 200 economists opposed him and the stock market tumbled 8 straight days in a row losing more than 15 percent of its value. Paulson's Wall Street bias is so great that he would have driven the country off the cliff just to reward his dodgy friends with lavish cash giveaways from the US taxpayer.

In fact, right after the European plan was announced, Paulson convened a meeting of the country's largest banks so he could hand out $125 billion of freshly-minted, taxpayer-generated loot to shore up their flimsy balance sheets. Citigroup got $25 Billion, as did JPMorgan Chase and Bank of America. Goldman Sachs and Morgan Stanley both netted $10 Billion each. None of these banks had to submit to any type of regulatory investigation to see how much of their asset-base was held in worthless mortgage-backed slop or other structured garbage. Paulson never even tried to find out if they are even solvent! On top of that, taxpayer gets no voting rights, no position on the board of directors, and no limits on executive compensation for the $125 billion contribution to Wall Street's biggest white-collar criminals. On Thursday, all of the aforementioned banks reported horrendous quarterly losses, multi-billion dollar write-downs, and more grim warnings on future profits. It's clear that Paulson wanted to deliver the bailout money before the public discovered the extent of the carnage

Pam Martens: How the Banksters are Making a Killing Off the Bailout

The bulk of the $125 billion will be dispersed among Uncle Sam’s own brokers, or in street parlance, Primary Dealers. Primary dealers are those financial firms anointed by the Federal Reserve to participate in the Fed’s open market activities and are required to participate to a significant degree in buying up Treasury securities at every Treasury auction. In other words, without these firms, the U.S. Government would have no means of financing its own funding needs.

. . .

In 1988 there were 46 primary dealers. That number had shrunk to 30 by 1999. In June 2008 there were 20, in no small part as a result of the mergers facilitated by Simpson, Thacher & Bartlett. In rapid succession since July, three more have disappeared from bad bets: Countrywide Securities (shotgun marriage with Bank of America); Lehman Brothers, bankrupt; Bear, Stearns (shotgun marriage with J.P. Morgan Securities). That currently leaves 17 and that number will drop to 16 when Merrill Lynch is folded into Bank of America. (The rest of the 16 primary dealers that are not getting part of the $125 billion are foreign banks.)

Coffee Klatch Research: Who Pays Taxes?

Via the Tax Foundation:



UPDATE 1

From the CBO:

The Daily Show: On Finance

 

Financial meltdown links cont.

Peter Morici: The Dow Tanks as Bank Bailout Fails to Restore Confidence

It’s official! The bank bailout has not worked.

Global stock prices are in a panic rush to the bottom.

The bank bailout cannot fulfill its primary mission to restore investor confidence, because it does only half the job.

The bank bailout will provide banks with much needed liquidity but it does not address the compensation and management practices on Wall Street that drove irresponsible decisions and gave rise to the crisis. It does not address the void of sound leadership at the top of major financial institutions like Citigroup and Merrill Lynch.

Dean Baker: The Fed Can Buy Commercial Paper Directly From Corporations: Who Knew?

Remember way back to last week when it was going to be the end of the world if Congress didn't pass the bailout package? Remember the Washington Post's account in which Treasury Secretary Henry Paulson told President Bush, "there is no Plan B."

Well, it looks like the Fed has discovered a Plan B. It turns out that the Fed can buy commercial paper directly from non-financial corporations needing credit to maintain operations. This will keep the credit markets working even if the zombie banks aren't up to the task. In other words, the threat of a complete meltdown in the absence of a bailout was nonsense and the media once again got taken for a ride by the Bush administration.

Paul Krugman: The International Finance Multiplier

Finally, if you think Obama is going to be any better, then you really do not understand that our system of government is actually corporatism. See opensecrets.org:

• Contributions by Sector
  
• Commercial Banks: Top Contributors to Federal Candidates and Parties

More financial meltdown links

Mike Whitney: Still on the Edge of the Abyss

Now we're in a terrible fix. People are scared and removing their money from the banks and money markets. This is intensifying the freeze in the credit markets and driving stocks into the ground like a tent stake. Meanwhile, our leaders are caught in the headlights, still believing they can finesse their way through the biggest economic cataclysm since the Great Depression.

If something is not done to increase the flow of credit immediately, the stock market will tumble, unemployment will spike, and many businesses will grind to a standstill. We could be just days away from a severe shock to the system. Secretary of the Treasury Henry Paulson's $700 billion bailout does not focus on the fundamental problems and is likely to fail. At best, it puts off the day of reckoning for a few weeks or months. Contingency plans should be put in place so the country does not have to undergo post-Katrina bedlam.

Paul Craig Roberts: A Futile Bailout as Darkness Falls on America

The deregulation of the financial sector was achieved by the Democratic Clinton Administration and by the current Secretary of the Treasury, Henry Paulson, with the acquiescence of the Securities and Exchange Commission.

The Paulson bailout saves his firm, Goldman Sachs. The Paulson bailout transfers the troubled financial instruments that the financial sector created from the books of the financial sector to the books of the taxpayers at the US Treasury.

This is all the bailout does. It rescues the guilty.

The Paulson bailout does not address the problem, which is the defaulting home mortgages.

The defaults will continue, because the economy is sinking into recession. Homeowners are losing their jobs, and homeowners are being hit with rising mortgage payments resulting from adjustable rate mortgages and escalator interest rate clauses in their mortgages that make homeowners unable to service their debt.

Shifting the troubled assets from the financial sectors’ books to the taxpayers’ books absolves the people who caused the problem from responsibility. As the economy declines and mortgage default rates rise, the US Treasury and the American taxpayers could end up with a $700 billion loss.

Nouriel Roubini: The Fed keeps on wasting time while the mother of all bank runs is underway

The only way to stop this liquidity panic is a blanket guarantee of financial sector liabilities and direct public provision of liquidity to the parts of the financial system and the corporate system that are now at risk of a meltdown driven by a liquidity run on their short term liabilities. So it is time for the Fed to stop wasting time and start the actions that will make a difference. We are now at risk of a systemic financial meltdown of the financial system and the corporate sector too.

Finally, I called Wu and told him I was very unhappy about him changing his vote. Here is his explanation for why he voted for the "new" bill on Friday. I requested a reply from Wu to my call. I will post what he says when I get it.

[ On this note, here is Barbra Boxer's justification for changing her vote. ]

Financial duh

The bailout failing:

Market plummets

Google's interactive market graph

Financially F*cked

Nouriel Roubini: Financial and Corporate System is in Cardiac Arrest: The Risk of the Mother of All Bank Runs

House Passes Bailout Bill
Here is the vote: Wu voted for it. Gotta call and make my displeasure known.

Paul Craig Roberts: Why Paulson's Plan is a Fraud

Paul Craig Roberts: Can a Bailout Succeed?

Mike Whitney: Why the Bailout Stinks

Thanking Wyden!! Have you?

Well, I never got through to Wyden either via the capital switchboard or direct: Busy or put on hold.

But, Wyden voted no!! Yay!

Just called him and thanked him. Will also send a nice email. Grin!

Of course "small government" Smith voted yes. Honestly, I need someone to tell my why they are Republican or why they vote Republican!??

Now I need to contact Wu and tell him to stay strong!

My understanding cont.

As my good friend corrects me, we should not be bailing out the banks at all.

Admittedly I came up with the "dollar-for-dollar" solution mostly because I thought it was reasonably pragmatic: I just can not imagine Congress not paying off the bankers and financiers that they whore to. But as it says right here on this blog: Everything revolutionary is impractical: I should have been more revolutionary! I will endeavor to be next time.

And little did I realize that the solution is not completely stupid: Glenn Greenwald documents a number of "real" economists suggest simply buying the "toxic" mortgages: A bailout for the little guy. Glenn also provides a number of links to other solutions.

Glenn's post is not really about solutions though. It is about the media -- specifically one award winning journalist: Steven Pearlstein -- who just can not stand the little people having their say. You should read it.

Capital switchboard has been busy!

Tried to call my (Dem) Senator but the switchboard was busy both times!! Yay! I hope Congress is getting an earful.

I guess I will try calling direct...

UPDATE 11am: Put on hold with Wyden.

My understanding of the financial meltdown

 
In answer to my good friend, I believe this is being called a "credit" crisis because right now the biggest problem is that the "shadow banking system" is near collapse: Banks are afraid to lend to each other. If this happens, the US and global economy will pretty much halt: 60 - 0 in nanoseconds. That is definitely not good.

But this is just a symptom of the real cause: sub-prime mortgages ( again, as my good friend points out ).

I am no economist, but I certainly have my opinion. I am quite happy that the bailout was rejected in the House. But the probable effects on "average" people -- those outside Wall Street -- is real. So, my suggestion is a dollar-for-dollar bailout: For each dollar given to "write-off" a "toxic" mortgage/asset, a dollar goes to write-down the mortgage of a needy home owner; eg. one of those "toxic" mortgages. $350billion in funds for the "shadow banking system" and $350billion in mortgage write-downs.

Now I am not really happy with any sort of equal treatment between "Wall Street" and "Main Street" -- I would prefer the whole $700billion to write-off the mortgages -- but this seems reasonable: To me, not an economist.

Anyone with comments?

More links on the market/credit meltdown

Chris Floyd: The Shadow of the Pitchfork: Elite Panic Attack as Bailout Goes Bust

Pam Martens: What Wall Street Hoped to Win

Nouriel Roubini: The US and global financial crisis is becoming much more severe in spite of the Treasury rescue plan. The risk of a total systemic meltdown is now as high as ever ( free reg req )

Let me explain now in more detail why we are now back to the risk of a total systemic financial meltdown…

It is no surprise as financial institutions in the US and around advanced economies are going bust: in the US the latest victims were WaMu (the largest US S&L) and today Wachovia (the sixth largest US bank); in the UK after Northern Rock and the acquisition of HBOS by Lloyds TSB you now have the bust and rescue of B&B; in Belgium you had Fortis going bust and being rescued over the weekend; in German HRE, a major financial institution is also near bust and in need of a government rescue. So this is not just a US financial crisis; it is a global financial crisis hitting institutions in the US, UK, Eurozone and other advanced economies (Iceland, Australia, New Zealand, Canada etc.).

And the strains in financial markets – especially short term interbank markets - are becoming more severe in spite of the Fed and other central banks having literally injected about $300 billion of liquidity in the financial system last week alone including massive liquidity lending to Morgan and Goldman. In a solvency crisis and credit crisis that goes well beyond illiquidity no one is lending to counterparties as no one trusts any counterparty (even the safest ones) and everyone is hoarding the liquidity that is injected by central banks. And since this liquidity goes only to banks and major broker dealers the rest of the shadow banking system has not access to this liquidity as the credit transmission mechanisms is blocked.

Blog to watch: http://calculatedrisk.blogspot.com/: Fed's Lockhart on Financial Crisis

Credit markets remain quite strained. This is particularly the case in interbank markets in the United States and abroad. The interbank markets are a fundamental element of the plumbing of the financial world. Banks with excess balances put them to work by lending to other banks that have clients—companies and individuals—who need the funds.

The loan portfolios of U.S. banks and financial institutions are, as you would expect, mostly dollar-denominated. But foreign banks in recent years have also built sizeable "books of business" in dollars. The dollar interbank credit contraction is a worldwide problem that affects not only our banks here but banks overseas, particularly in Europe.

When banks lend or take on other forms of exposure to each other, they gauge the counterparty risk. In recent weeks, there has been a widespread withdrawal of confidence in counterparties that has resulted in efforts to reduce exposure.

Thom Hartmann: How Wall Street Can Bail Itself Out Without Destroying The Dollar

Peter Morici: The Bailout and the Economy

Required Viewing

My favorite image so far: