Raw Story » Helen Thomas hits White House for lack of transparency

Sometimes I think Helen Thomas is the ONLY real Reporter in the room…  and then someone like Reid shows up and reaffirms a bit of my faith. -dcm

more about “Raw Story » Helen Thomas hits White H…“, posted with vodpod

Raw Story » ACLU lawyer: On torture, Obama breaking transparency promises

When will President Obama allow US to come clean and move forward? We, and the world, need some criminal prosecutions of some high officials, obviously.-dcm

more about “Raw Story » ACLU lawyer: On torture, …“, posted with vodpod

PharmacoBiotics – Bonnie Bessler: How Bateriae Communicate

Important news in biopharmaceuticals …

more about “PharmacoBiotics – Bonnie Bessler: How…“, posted with vodpod

What Comes After Twitter? Flutter

I want it NOW! …. jeez…

more about “What Comes After Twitter? Flutter“, posted with vodpod

Merrill-Lynch Gave Billions in Bonuses on Eve of Bailout / CitiBank TakeOver

Will this larger taxpayer-funded bonus giveaway fade away without pursuit?

more about “Merrill-Lynch Gave Billions in Bonuse…“, posted with vodpod

Clues to What’s Next for the Economy – List of Troubled US Banks

All US Banks and their Texas Ratio

Chris Brunner at the Lew Rockwell Blog posted this interesting article about how to get a clue as to what banks might be the shakiest at the moment, and more likely to fail.

Brunner:

A few days ago, a friend of mine called me to ask if I had any idea how to figure out which banks would be the next to fail. Some extensive googling revealed that while lists of troubled banks obviously exist, none of them seem to be readily available to the public. Why? Because the bankers do not want you to have this. Just watch the president of the American Bankers Association in this interview talk about how important it is to keep this private.

This is a list of all of the banks in the United States and the corresponding Texas Ratio for each one. Developed by Gerard Cassidy, the Texas ratio is a measure of a bank’s credit troubles. Basically, the higher the ratio, the worse the situation is for that particular bank. Banks with a ratio of 100 and higher are in very serious danger of collapse, and banks with a ratio of 50 or higher are vulnerable.

This is the formula I used:

100 * ((Non-performing Assets – U.S guaranteed loans) + Other REO) / (Equity + Loss Reserves)

… I recommend Chris’s post – read it!

I have put the list together as a word .doc file and as an excel spreadsheet sorted (ascending) by state and city and then (descending – worst to best) by Texas Ratio.

View:            doc spreadsheet

-dcm

Why aren’t Unlimited Text Plans $1 / Year?

AT&T, Sprint, T-Mobile, Verizon Still Owe Senator Kohl (And their Customers) Some Explanations

There’s a reason costs for text plans have skyrocketed recently, and it’s not due to increased overhead.  From Randall Stross’s What Carriers Aren’t Eager to Tell You About Texting:

“…text messages are not just tiny; they are also free riders, tucked into what’s called a control channel, space reserved for operation of the wireless network. That’s why a message is so limited in length: it must not exceed the length of the message used for internal communication between tower and handset to set up a call. The channel uses space whether or not a text message is inserted.

Senator Herb Kohl would like to talk with the wireless carriers about that.

So far they haven’t been very forthcoming.  Stross writes:

The written responses to Senator Kohl from AT&T, Sprint and T-Mobile speak at length about pricing plans without getting around to the costs of conveying text messages. My attempts to speak with representatives of all three about their costs and pricing were unsuccessful. (Verizon Wireless would not speak with me, either, nor would it allow Mr. Kohl’s office to release publicly its written response.)

The carriers will have other opportunities to tell us more about their pricing decisions: 20 class-action lawsuits have been filed around the country against AT&T and the other carriers, alleging price-fixing for text messaging services.

We should All listen to what they have to say.

I wonder if they’ll get around to talking about what Common Carrier means.  Does the bus company charge You to use the bus’s rest room while enroute?  It’s there, on the bus, whether or not any passenger uses it.  And You’ve paid for it in the cost of the ticket.

From Ars Technica Sept 10 Article Senator to cellular carriers: UR TXTS R 2 XPENSIV:

Kohl’s office is asking each carrier to explain the method behind the text message rate madness, including any cost, technical, or other factors that justify the 100 percent increase between 2005 to 2008. Kohl also wants data on how text messages are utilized, comparisons of how text message packages stack up against competitors, and—perhaps most importantly—price comparisons against per-minute charges for voice plans, and per-KB charges for mobile Internet and tethering plans. It should be fun to hear AT&T defend why it charges over $1,300 per megabyte for text messages.

Again, Kohl’s office made it clear that this letter is more of an conversation starter (though a fairly forceful one) in what could turn out to be an embarrassing (for the carriers) discussion over high cost of text messages. The staffer did, however, hold out the possibility of further investigation, and even a request that antitrust regulators to look into the matter, should the situation call for it.

Donald Melanson at Engadget filed this report at the time.

Here is Senator Kohl’s letter:

For Immediate Release: 9/9/08 Phone: (202) 224-5653 KOHL CALLS ON CELL PHONE COMPANIES TO JUSTIFY RISING TEXTING RATES In Three Years, Text Message Charges Have Doubled for Wireless Customers WASHINGTON, DC — Today, US Senator Herb Kohl (D-WI), chairman of the Senate Antitrust Subcommittee, asked the presidents and chief executive officers of the four largest wireless telephone companies to justify sharply rising rates for its customers to send and receive text messages. In a letter, Senator Kohl requested an explanation from Verizon Wireless, AT&T, Sprint and T-Mobile, which collectively serve more than 90 percent of the nation’s cellular phone users. The text of Senator Kohl’s letter follows below. September 9, 2008 Lowell McAdam President and CEO Verizon Wireless Randall Stephenson Chief Executive Officer AT&T Dan Hesse Chief Executive Officer Sprint Robert Dotson President and Chief Executive Officer T-Mobile Dear Messrs. McAdam, Stephenson, Hesse and Dotson: I am writing to express my concern regarding what appear to be sharply rising rates your companies have charged to wireless phone customers for text messaging. Some industry experts contend that these increased rates do not appear to be justified by any increases in the costs associated with text messaging services, but may instead be a reflection of a decrease in competition, and an increase in market power, among your four companies. Your four companies are the nation’s leading wireless telephone companies, collectively serving more than 90% of the nation’s wireless subscribers. Since 2005, the cost for a consumer to send or receive a text message over each of your services has increased by 100%. Text messages were commonly priced at 10 cents per message sent or received in 2005. As of the end of the month, the rate per text message will have increased to 20 cents on all four wireless carriers. Sprint was the first carrier to increase the text message rate to 20 cents last Fall, and now all of its three main competitors have matched this price increase. What is particularly alarming about this industry-wide rate increase is that it does not appear to be justified by rising costs in delivering text messages. Text messaging files are very small, as the size of text messages are generally limited to 160 characters per message, and therefore cost carriers very little to transmit. Text messaging files are a fraction of the size of e-mails or music downloads. Also of concern is that it appears that each of companies has changed the price for text messaging at nearly the same time, with identical price increases. This conduct is hardly consistent with the vigorous price competition we hope to see in a competitive marketplace. What has changed in recent years is the level of consolidation in the wireless telephone industry. The number of major national competitors has declined from six to four. And the large national wireless carriers continue to acquire their smaller, regional competitors, with the announced acquisition of Alltel by Verizon Wireless being just the latest example. As Chairman of the Antitrust Subcommittee, I am concerned with whether this consolidation, and increased market power by the major carriers, has contributed to this doubling of text messaging rates over the last three years. Therefore, I specifically ask each of your companies to explain why text messaging rates have dramatically increased in recent years. Please explain the cost, technical, or any other factors that justify a 100% increase in the cost of text messaging from 2005 to 2008. Please also provide data on the utilization of text messaging during this time period. Please provide a comparison of prices charged for text messaging as compared to other services offered by your companies, such as prices per minute for voice calling, prices for sending e-mails, and prices charged for data services such as internet access over wireless devices, from 2005 to the present. Finally, please state whether your text messaging pricing structure differs in any significant respect from the pricing of your three main competitors. Please provide this information no later than Monday, October 6, 2008. If you have any questions regarding this request, please contact Jeff Miller or Seth Bloom of my Antitrust Subcommittee staff at (202) 224-3406. Thank you for your attention to this matter. ###

-dcm

Funk Break for Holidays

Stanley Clarke, Marcus Miller, Victor Wooten

Thank You Guys.  Happy Holidays All.

-dcm

Ohio TV station: Was Connell crash an accident or murder?

Brad Blog: First on the scene Live video

Here’s the only wider coverage I have been able to find so far in the actual broadcast media, other than a Velvet Revolution / PR Newswire piece ran in the NY Times.  I did see it on slashdot, though, so maybe eventually it will make it’s way into the legacy / “mainstream” media.

CBS is mirroring KDKA’s story online.  Here’s slashot’s item about the missing presidential / staff emails, with a link to an item on DominoPower, and a Wired piece from April 2007 about the Ohio Election data running through Republican servers.  Democracy Now offers this initial entry.

Via Rawstory:

more about “Scribal Thrum : Ohio TV station: Was …“, posted with vodpod

Bradblog has this first on the scene live video apparently taken by someone who lived nearby, and and a couple of interviews from lat night’s PBS …

-dcm

Presidential Records “Custodian” Dead in Plane Crash

Republican IT Consultant Mike Connell Masterminded external GWB43 email accounts

(update 1) (update 2) (update 3) (update 4)

So let me get this straight.  Rawstory is reporting that Mike Connell, Karl Rove’s IT Contractor, has been killed in a plane crash.

“A top level Republican IT consultant who was set to testify in a case alleging GOP election tampering in Ohio died in a plane crash late Friday night.

Michael Connell — founder of Ohio-based New Media Communications, which created campaign Web sites for George W. Bush and John McCain — died instantly after his single-prop, private aircraft smashed into a vacant home in suburban Lake Township, Ohio.”

This is the guy who ran the company whose mail servers handled the President’s mail for the two year period which the administration variously claims is “lost”, “archives destroyed”, “archives never created”, i.e., unavailable.  (And now, ) No matter what course of legal action, unavailable.

dead men tell no tales?

Connell’s mail servers handled at least 88 White House email accounts, according to Think Progress.  This included the VP’s and Carl Rove’s and other inner circle officials and operatives email, too.

Larisa Alexandrovna, who has reported on Connell for some time, posted this about it on her blog at-Largely yesterday (emphasis added):

Michael Connell died in a plane crash last night. He was a key witness in the Ohio election fraud case that I have been reporting on. More importantly, however, he had information that he was ready to share.

You see, Mike Connell set-up the alternate email and communications system for the White House. He was responsible for creating the system that hosted the infamous GWB43.com accounts that Karl Rove and others used. When asked by Congress to provide these emails, the White House said that they were destroyed. But in reality, what Connell is alleged to have done is move these files to other servers after having allegedly scrubbed the files from all “known” Karl Rove accounts.

In addition, I have reason to believe that the alternate accounts were used to communicate with US Attorneys involved in political prosecutions, like that of Don Siegelman. This is what I have been working on to prove for over a year. In fact, it was through following the Siegelman-Rove trail that I found evidence leading to Connell. That is how I became aware of him. Mike was getting ready to talk. He was frightened.

It is interesting how Alexandrovna was led to Mike Connell, while investigating the US Attorney firing scandal.

So all this mail has been lost.

And now the IT guy who ran the thing is dead.  And he was getting ready to talk. And he was frightened.

And he just happened to have had a fatal accident.

Uh Huh.

-dcm

Update 1 – Pissed Off Democrat is reporting that Ohio’s Election Attorney had requested Witness Protection for Connell due to threats from Karl Rove and his associates.  Also that Velvet Revolution has called for a full federal investigation after their contacts with those close to Connell revealed the threats and concern for Connell’s safety.

Update 2 - Here is VR’s press release in yesterday’s NY Times.

Update 3 – The Brad Blog has been covering this for a while.   Also, Lisa Derrick published this piece about it on Huffington Post.  A search of YouTube video’s about Connell’s various alleged crimes is here.  Below is a video explaining a bit of the context of Mike Connell’s suspicious and untimely death.

Update 4 - 1 Boring Old Man offers a couple of informative posts, Red Flags, and Re: Mike Connell.  There’s a discussion over at E. Pluribus Media.  Locally, CantonRep.com has an accident report that brings some perspective here, which includes the below video at the scene.

Post Script

Here are the background links Larisa compiled for her post’s second update.  They are valuable for understanding the context for Mike Connell’s death.

Here are the reading materials in case you have not followed any of this closely. These are articles I have done over spanning over a year of investigative work:Part 1 – Political Prisoner http://rawstory.com/news/2007/The_Permanent_Republican_Majority_1125.htmlPart 2 – Siegelman’s Daughter Speaks Out http://rawstory.com/news/2007/The_permanent_Republican_majority_Daughter_of_1127.html Part 3 – Karl Rove Running Elections from the White House http://rawstory.com/news/2007/The_Permanent_Republican_Majority_Part_III_1216.html Part 4 – Mississippi Prosecution, Justice Oliver Diaz http://rawstory.com/news/2008/How_Bush_US_attorney_riddled_with_0401.html Part 5 – Justice Diaz Speaks http://rawstory.com/news/2008/Diaz_placeholder_0408.html Part 6 – Break-ins plague targets of political prosecutions http://rawstory.com/news/2008/Breakins_plague_Justice_Department_whistleblowers_0430.html Part 7 – Justice for Sale http://rawstory.com/news/2008/Justice_for_Sale_How_Big_Tobacco_0828.html Related articles: Judge who denied Paul Minor release was protégé of Karl Rove http://rawstory.com/news/2008/Judge_in_Paul_Minor_case_was_0821.html DOJ Investigating 2 US Attorneys http://rawstory.com/news/2008/DOJ_Investigating_two_US_Attorneys_involved_0604.html 60 Minutes Segment on Siegelman “dropped” in Alabama http://rawstory.com/news/2008/60_Minutes_broadcast_on_prosecution_of_0225.html Republican IT Consultant Subpoenaed in Ohio election fraud case http://rawstory.com/news/2008/Republican_IT_consultant_subpoenaed_in_case_0929.html Abramoff said he had agreement with White House aide just a month after Bush took office http://rawstory.com/news/2008/Abramoff_said_he_had_agreement_with_1117.html Treasury Department investigating US Attorney for leaking state Supreme Court Justice’s tax returns http://rawstory.com/news/2008/Treasury_Department_investigating_US_Attorney_for_1201.htm

Economic Collapse – Game Changer for Global Markets

Building Asset-Based Market Infrastructure Best Alternative for Global Economy

(Updated 102408 – Formatting)

DJIA 9 October 2008

Few doubt that the collapse of the world economy will be a Game Changer. But the change needed is to a new game – a new infrastructure.  Not a set of minor changes to the same game.

What is the “game?”  The current model, which has gone down like a house of cards in a stiff breeze, is one tilted towards the interests of corporations, governments, and against those of the Individual.  It is based on various gradations of slavery, wage-slavery, consumerism predicated on freely available credit at usurious rates, predatory lending practices against victims disarmed by law, and perpetual debt.  We have created a debt-based global political economy, not an asset and equity based model.

Yet a non-debt based economic system is what we, the Individual Humans who collectively comprise the global economy, need the most.

We need to base our 21st Century political economies on equity, and assets.  Debt is a tool to grow equity and assets, not a substitute for it.  (Unless You are designing a slavery or permanent indentured sort of system.  It’s tougher to do that in a civil democracy.  And bear in mind the sort of Individually held asset and equities basis of global political economy hypothesised here is not the same as asset-egalitarianism.  It merely alludes to a reworking of the global financial system in a way that moves the advantage to the Individual accumulation of wealth over the current emphasis and advantage accorded to the corporate concentration of wealth.)

DJIA 15 October 2008

It is truly ironic that the heedless masters of the universe who invented opaque and impossible to value derivatives, hedges, indices and credit default swaps, and the predatory mortgage instruments they stood upon – It is truly ironic that they have so cannibalised the engine of this debt economy – Consumer Spending – that they have effectively killed this goose that laid such golden eggs for so long.

As Mike Whitney observed in his recent article at CounterPunch,

“No job is safe. American elites and corporate tycoons are loading the boats and heading for foreign shores. The only thing they’re leaving behind is the insurmountable debt that will be shackled to our children into perpetuity and the carefully arranged levers of a modern police-surveillance state.”

The past three weeks have seen the front line dominoes tumble as the jury-rigged infrastructure of perma-debt collapsed before the eyes of those reputed to for years to be the smartest and boldest “risk takers” leading the global economy.  The most rabid force for de-regulation, the US Republican Party led by George W. Bush, is winding up its occupation of the Oval Office by nationalising the most pivotal parts of the US Banking System.

One by one, the remaining investment institutions have queued up for a government bailout that gives governments an equity stake.

US - China Trade Deficit Growth Through 2006 : Source - Hoover Institute

Of course, in the US these massive infusions of government cash and guarantees are backed by the Treasury – which means borrowing from other nations, principally China.  And the repayment of this new debt will naturally fall on the US taxpayer, absent any serious reform.

LIBOR and the TED Spread are only immediate indicators of the credit market’s liquidity. The larger issue of infrastructure reform needs to consider how to build an asset-based, as opposed to debt-driven, political economy.  And that means encouraging the accumulation of assets and equities by Individuals, as opposed to corporations.  This impacts the structure and regulation of credit markets.

International leaders participating in the upcoming series of summits need to pay particularly meticulous attention to this.

For unless they obey the current inflection point and switch the game over to an asset-backed model of consumer spending, no amount of government intervention will preserve the current debt-driven model based on cannibalised captive markets.

Bubble Gum, Spit, and String

Such efforts as purchasing toxic assets, and injecting captial into the banks are short term patches of bubble gum, spit and string, and I surely hope our international leaders realise that.  There are already signs from the banks such injections, alone, won’t work.  The upcoming series of economic summits needs to focus on establishing a long term market model that honestly gives Individual Citizens a fair shake, and a more prominent role as stakeholder in the global system.

In the recent past I have been pessimistic about the real willingness of our leaders to address the root causes of this crisis.  On September 26, before the bailout was passed, in an email to Congress,  I asked “Where is the call for an international summit with our WTO trading partners, particularly China?”

But the pressure on the US by international leaders for it’s participation in a series of summits to address the current crisis in the economy gives me cause to reconsider my cynicism.

Consumer Savings

For this culture of debt, the dead end is clearly visible.  In the past 20 years and more Congress has let the Consumer Credit industry run hog wild, more recently letting predatory mortgage instruments do the same.  Debt.  Not assets.  Not equity.

In this sort of environment, consumer spending drives everything.  Like Love, it makes the world go ’round.  Henry Blodget did a lucid piece the other day on ClusterStock, entitled “US Consumers are Broke.”  I highly recommend it.

Equity/Asset Based Games vs Debt Games

If our global economic system threatens to collapse, as it is, and if consumer spending (particularly US consumer spending) is the engine; then we need to pay particularly close attention to the infrastructure changes our international leaders will try to design to address the crisis.

We don’t need to merely patch up the existing debt-based paradigm, except on the shortest term.  What we need to do is change the game to an asset and equity basis.

Consumer Debt

Consider:  Consumer spending is vital to either game as the driving force, but only in an asset / equity based economy is it guaranteed to grow, because the game is designed to build up the middle class – not hollow it out with predatory, usurious, and perpetual debt.

Consumer Credit should no longer be used as an Orwellian cyber-leash on the populace.  Instead, in building an asset-based market, the Individual owns and excercises real and legally enforceable control over their credit and other financial information.  The role for reporting agencies are transformed to data services competing to be the delivery agent for the Individual.  That means a much more direct relationship with those who would access that information – which would no longer be the sort of commercial product that automatically becomes subject to data mining.

Real protections against predatory lending instruments need to be instituted – that means no more Adjustable Rate Mortgages (ARMs), no more Balloon Payment, or Interest Only, or so-called option-ARMs.

That also means a cap on credit card rates, and a prohibition of unilateral rate changes based on the consumer’s account status with any other lender.  So one’s credit card rate doesn’t suddenly jump from 8 to 62 percent because you forgot to pay the electric bill last month – a bill you never pay with that credit card.  But the card company data mines your payment stream, sees the omission, and cranks up the rate.  Such behavior tends to gut the future ability of the account to maintain a credit relationship, and is thus cannibalistic of it’s own market.

This is what has happened to the US Consumer in this economic game of debt.  This is why the US Consumer is broke.  This is why the US Consumer is wary of credit, mortgage, and investment instruments tilted against them.  Any serious infrastructural reform that will last must address these very real concerns, and not just give them lip service.

Money To Be Made- More Reliably in Asset Based Economy

If US consumer spending has been such a great engine for growth and expansion in international trade, think of what a robust middle class would mean when combining the consumer spending of the US, China, India, and the EU.  In an international monetary system driven by the Individual accumulation of wealth, the emergence of a solid middle class would be an increasingly strong economic engine.  Perhaps international leaders should consider flattening the economic landscape in their upcoming efforts to build a newer, more resilient global economic system.  Rules and regulations should be guided by the express intent to enable and build up individual assets and equities, as opposed to corporate debt.

We must abolish the current idea of “minimum” wage and migrate to the concept of the Living Wage, indexed to the actual cost of living.

We need to encourage the invention of financial instruments for Individuals which give them certain and distinct advantages over existing corporate institutions, as a safeguard of their ability to accumulate wealth and contribute to the engine of asset and equity based consumer spending.  Predatory corporate and financial instruments are a certain death to such aims.

This means eliminating all taxes on personal income, personal savings and investments, to encourage and facilitate the accumulation of wealth regardless of class.

This will mean not just more banking regulation and tighter supervision over the mortgage and derivatives markets, but increases in wages across the board, across the world, in all countries participating in this restructuring.

In a global political economy that properly uses debt as just another tool to facilitate the building up of the actual wealth of the People, and not as a centerpiece to drive markets,  the health and robust growth of a more reliable form of Consumer Spending is ensured.

That’s all I have time to write for this weekend.  More later. Until then, the Fabulous O’Jays!

-dcm

The Real Great Depression – 1929 Wrong Model for Current Crisis

Today’s global collapse more closely resembles Panic of 1873 than 1929

By Scott Reynolds Nelson

[Occasionally I will invite a Guest to publish at Scribal Thrum - and I'm proud to welcome Scott Nelson, Professor of History at William and Mary College.  Thanks for Contributing, Scott.)

As a historian who works on the 19th century, I have been reading my newspaper with a considerable sense of dread. While many commentators on the recent mortgage and banking crisis have drawn parallels to the Great Depression of 1929, that comparison is not particularly apt. Two years ago, I began research on the Panic of 1873, an event of some interest to my colleagues in American business and labor history but probably unknown to everyone else. But as I turn the crank on the microfilm reader, I have been hearing weird echoes of recent events.

When commentators invoke 1929, I am dubious. According to most historians and economists, that depression had more to do with overlarge factory inventories, a stock-market crash, and Germany's inability to pay back war debts, which then led to continuing strain on British gold reserves. None of those factors is really an issue now. Contemporary industries have very sensitive controls for trimming production as consumption declines; our current stock-market dip followed bank problems that emerged more than a year ago; and there are no serious international problems with gold reserves, simply because banks no longer peg their lending to them.

In fact, the current economic woes look a lot like what my 96-year-old grandmother still calls "the real Great Depression." She pinched pennies in the 1930s, but she says that times were not nearly so bad as the depression her grandparents went through. That crash came in 1873 and lasted more than four years. It looks much more like our current crisis.

The problems had emerged around 1870, starting in Europe. In the Austro-Hungarian Empire, formed in 1867, in the states unified by Prussia into the German empire, and in France, the emperors supported a flowering of new lending institutions that issued mortgages for municipal and residential construction, especially in the capitals of Vienna, Berlin, and Paris. Mortgages were easier to obtain than before, and a building boom commenced. Land values seemed to climb and climb; borrowers ravenously assumed more and more credit, using unbuilt or half-built houses as collateral. The most marvelous spots for sightseers in the three cities today are the magisterial buildings erected in the so-called founder period.

But the economic fundamentals were shaky. Wheat exporters from Russia and Central Europe faced a new international competitor who drastically undersold them. The 19th-century version of containers manufactured in China and bound for Wal-Mart consisted of produce from farmers in the American Midwest. They used grain elevators, conveyer belts, and massive steam ships to export trainloads of wheat to abroad. Britain, the biggest importer of wheat, shifted to the cheap stuff quite suddenly around 1871. By 1872 kerosene and manufactured food were rocketing out of America's heartland, undermining rapeseed, flour, and beef prices. The crash came in Central Europe in May 1873, as it became clear that the region's assumptions about continual economic growth were too optimistic. Europeans faced what they came to call the American Commercial Invasion. A new industrial superpower had arrived, one whose low costs threatened European trade and a European way of life.

As continental banks tumbled, British banks held back their capital, unsure of which institutions were most involved in the mortgage crisis. The cost to borrow money from another bank — the interbank lending rate — reached impossibly high rates. This banking crisis hit the United States in the fall of 1873.

Run on the Fourth National Bank, No. 20 Nassau Street New York City, 1873 : WikiMedia Commons

Railroad companies tumbled first. They had crafted complex financial instruments that promised a fixed return, though few understood the underlying object that was guaranteed to investors in case of default. (Answer: nothing). The bonds had sold well at first, but they had tumbled after 1871 as investors began to doubt their value, prices weakened, and many railroads took on short-term bank loans to continue laying track. Then, as short-term lending rates skyrocketed across the Atlantic in 1873, the railroads were in trouble. When the railroad financier Jay Cooke proved unable to pay off his debts, the stock market crashed in September, closing hundreds of banks over the next three years. The panic continued for more than four years in the United States and for nearly six years in Europe.

The long-term effects of the Panic of 1873 were perverse. For the largest manufacturing companies in the United States — those with guaranteed contracts and the ability to make rebate deals with the railroads — the Panic years were golden. Andrew Carnegie, Cyrus McCormick, and John D. Rockefeller had enough capital reserves to finance their own continuing growth. For smaller industrial firms that relied on seasonal demand and outside capital, the situation was dire. As capital reserves dried up, so did their industries. Carnegie and Rockefeller bought out their competitors at fire-sale prices. The Gilded Age in the United States, as far as industrial concentration was concerned, had begun.

As the panic deepened, ordinary Americans suffered terribly. A cigar maker named Samuel Gompers who was young in 1873 later recalled that with the panic, “economic organization crumbled with some primeval upheaval.” Between 1873 and 1877, as many smaller factories and workshops shuttered their doors, tens of thousands of workers — many former Civil War soldiers — became transients. The terms “tramp” and “bum,” both indirect references to former soldiers, became commonplace American terms. Relief rolls exploded in major cities, with 25-percent unemployment (100,000 workers) in New York City alone. Unemployed workers demonstrated in Boston, Chicago, and New York in the winter of 1873-74 demanding public work. In New York’s Tompkins Square in 1874, police entered the crowd with clubs and beat up thousands of men and women. The most violent strikes in American history followed the panic, including by the secret labor group known as the Molly Maguires in Pennsylvania’s coal fields in 1875, when masked workmen exchanged gunfire with the “Coal and Iron Police,” a private force commissioned by the state. A nationwide railroad strike followed in 1877, in which mobs destroyed railway hubs in Pittsburgh, Chicago, and Cumberland, Md.

In Central and Eastern Europe, times were even harder. Many political analysts blamed the crisis on a combination of foreign banks and Jews. Nationalistic political leaders (or agents of the Russian czar) embraced a new, sophisticated brand of anti-Semitism that proved appealing to thousands who had lost their livelihoods in the panic. Anti-Jewish pogroms followed in the 1880s, particularly in Russia and Ukraine. Heartland communities large and small had found a scapegoat: aliens in their own midst.

The echoes of the past in the current problems with residential mortgages trouble me. Loans after about 2001 were issued to first-time homebuyers who signed up for adjustablerate mortgages they could likely never pay off, even in the best of times. Real-estate speculators, hoping to flip properties, overextended themselves, assuming that home prices would keep climbing.

Those debts were wrapped in complex securities that mortgage companies and other entrepreneurial banks then sold to other banks; concerned about the stability of those securities, banks then bought a kind of insurance policy called a credit-default swap, which risk managers imagined would protect their investments. More than two million foreclosure filings — default notices, auction-sale notices, and bank repossessions — were reported in 2007.

By then trillions of dollars were already invested in this credit default swap derivative market. Were those new financial instruments resilient enough to cover all the risk? (Answer: no.)

As in 1873, a complex financial pyramid rested on a pinhead. Banks are hoarding cash. Banks that hoard cash do not make short-term loans. Businesses large and small now face a potential dearth of short-term credit to buy raw materials, ship their products, and keep goods on shelves.

If there are lessons from 1873, they are different from those of 1929. Most important, when banks fall on Wall Street, they stop all the traffic on Main Street — for a very long time. The protracted reconstruction of banks in the United States and Europe created widespread unemployment.

Unions (previously illegal in much of the world) flourished but were then destroyed by corporate institutions that learned to operate on the edge of the law. In Europe, politicians found their scapegoats in Jews, on the fringes of the economy. (Americans, on the other hand, mostly blamed themselves; many began to embrace what would later be called fundamentalist religion.)

The post-panic winners, even after the bailout, might be those firms — financial and otherwise — that have substantial cash reserves. A widespread consolidation of industries may be on the horizon, along with a nationalistic response of high tariff barriers, a decline in international trade, and scapegoating of immigrant competitors for scarce jobs. The failure in July of the World Trade Organization talks begun in Doha seven years ago suggests a new wave of protectionism may be on the way.

In the end, the Panic of 1873 demonstrated that the center of gravity for the world’s credit had shifted west — from Central Europe toward the United States. The current panic suggests a further shift — from the United States to China and India. Beyond that I would not hazard a guess. I still have microfilm to read.

Scott Reynolds Nelson is a professor of history at the College of William and Mary. Among his books is Steel Drivin’ Man: John Henry, the Untold Story of an American legend (Oxford University Press, 2006).

Reprinted by Special Arrangement with the Author.  A slightly different version of this article appeared in The Chronicle of Higher Education, October 17, 2008 issue, Volume 55, Issue 8, Page B98, and in the Online Edition, here.

AIG Not Telling US Treasury How They Used Up 3/4 of $123 Billion in 2 Weeks

Possible Signs of Internal Financial Irregularities

After taking an $85 billion emergency loan from the Fed, and then another $38 billion, A.I.G isn’t being very specific on how it has already spent most of the money, according to Mary William Walsh’s article in the New York Times:

(emphasis added)

A.I.G. has declined to provide a detailed account of how it has used the Fed’s money. The company said it could not provide more information ahead of its quarterly report, expected next week, the first under new management. The Fed releases a weekly figure, most recently showing that $90 billion of the $123 billion available has been drawn down.

A.I.G. has outlined only broad categories: some is being used to shore up its securities-lending program, some to make good on its guaranteed investment contracts, some to pay for day-to-day operations and — of perhaps greatest interest to watchdogs — tens of billions of dollars to post collateral with other financial institutions, as required by A.I.G.’s many derivatives contracts.

No information has been supplied yet about who these counterparties are, how much collateral they have received or what additional tripwires may require even more collateral if the housing market continues to slide.

Some industry observers say there must be undisclosed irregular accounting leading up to the bailout for so much of the $123 Billion lifeline to have been used up so fast.

“You don’t just suddenly lose $120 billion overnight,” said Donn Vickrey of Gradient Analytics, an independent securities research firm in Scottsdale, Ariz.

Mr. Vickrey says he believes A.I.G. must have already accumulated tens of billions of dollars worth of losses by mid-September, when it came close to collapse.

The article details indications of a sustained effort on the part of AIG top management to bury any details of an internal debate on how to value it’s derivatives contracts over the past few years.  When a former SEC accountant was brought in due to previous irregularities,

He began to focus on the company’s accounting for its credit-default swaps and collided with Joseph Cassano, the head of the company’s financial products division … When the expert tried to revise A.I.G.’s method for measuring its swaps, he said that Mr. Cassano told him, “I have deliberately excluded you from the valuation because I was concerned that you would pollute the process.”

(emphasis added)

Astounding Burn Rate

In the roughly 6 weeks since AIG got the massive government loans they have already used up 90 of an available $123 billion at last reports.

A spokesman for the insurer, Nicholas J. Ashooh, said A.I.G. did not anticipate having to use the entire $38 billion facility. At midyear, A.I.G. had a shortfall of $15.6 billion in that program, which it says has grown to $18 billion. Another spokesman, Joe Norton, said the company was getting out of this business. Of the government’s original $85 billion line of credit, the company has drawn down about $72 billion. It must pay 8.5 percent interest on those funds.

…

For $59 billion of the $72 billion A.I.G. has used, the company has provided no breakdown. A block of it has been used for day-to-day operations, a broad category that raises eyebrows since the company has been tarnished by reports of expensive trips and bonuses for executives.

(emphasis, links added)

US Federal Deficit 1989 - 2004

Possible Legal Violations

Rep. Barney Frank, House Financial Service Committee chairman said on Friday in remarks directed at Banks who had received a separate $125 Billion government buy-in, that financial institutions were “distorting” the government’s $700 billion economic bailout plan by using the money for bonuses, dividends and acquisitions.  Frank said any uses of that money other than lending were “violation of the terms of the act.”

On 7 October Rep. Henry Waxman’s Committee on Oversight and Government Reform held hearings on the causes of AIG’s need for a bailout. (Full Hearing Video).  At the hearing it came out that the week after AIG got an $85 Billion initial govenrment bailout, executives went on a retreat at a luxury resort, spending $443,343.71. Rep. Elijah Cummings (D-MD) said:

Have you heard of anything more outrageous – a week after taxpayers commit $85 billion dollars to rescue AIG, the company’s leading insurance executives spend hundreds of thousands of dollars at one of the most exclusive reports in the nation…Let me describe for some of you the charges that the shareholders, taxpayers, had to pay. AIG spent $200,000 dollars for hotel rooms. Almost $150,000 for catered banquets. AIG spent $23,000 at the hotel spa and another $1,400 at the salon. They were getting manicures, facials, pedicures and massages while American people were footing the bill. And they spent another $10,000 dollars for I don’t know what this is, leisure dining. Bars?

(emphasis added)

AIG Gets Another $25 Billion – Total: $144 Billion (so far…)

On Thursday 30 October, AIG said “it would be able to borrow up to $20.9 billion under the new program, raising its maximum available credit from the Fed to $144 billion under three different programs,” the New York Times reports.  And there’s no sign yet that will be enough.

From Walsh’s article:

Edward M. Liddy, the insurance executive brought in by the government to restructure A.I.G., has already said that although he does not want to seek more money from the Fed, he may have to do so.

AIG’s unwillingness or inability to place a determinative valuation on their deriviative contracts has poisoned the credit market. As Tavakoli Structured Finance President Janet Tavakoli observes, “When investors don’t have full and honest information, they tend to sell everything, both the good and bad assets. … “It’s really bad for the markets. Things don’t heal until you take care of that.”

The NYT reports “Ms. Tavakoli said she thought that instead of pouring in more and more money, the Fed should bring A.I.G. together with all its derivatives counterparties and put a moratorium on the collateral calls.”

Tavakoli is an expert in derivative and similar financial products, and recently debated “mark to market” options on Bloomberg.

more about “Derivative Valuation Debate – Bloombe…“, posted with vodpod

Morningstar Analyst – May be better to let losses be realised

Bill Bergman, Senior Equity Analyst at Morningstar observed, “We may be better off in the long run letting the losses be realized and letting the people who took the risk bear the loss.”

– assembled from various reports by dcm

President-Elect Obama Speaks

Reaffirms America’s Penchant for Change

Ladies and Gentlemen, The President-Elect of the United States …

Well, who could possibly follow that?

Threat Micro Thread Alerts Widget Added to Tech Resources

The Trend Micro Thread Alerts will now appear on the Tech Resources page.

Warrantless NSA Suveillance Hasn’t Gone Away

Downloadable Collection at Civiblog.org

Here’s a collection of related documents I made shortly after the NY Times broke the story in December 2005 about blanket Warrantless NSA (National Security Agency) domestic (within the US borders) surveillance.

I think the NY Times is reprehensible for sitting on this story since before the 2004 election, waiting 13 months to publish, and then only because the reporters involved had the same story in a book coming out.

This is a comment I left on LawGeek in 2006.

I have been working on translating some of the publicly available PDF’s on this issue into html. They are here – http://thewall.civiblog.org/rsf/house_nsabrief_docs_012006.html Here are the legal briefs and stuff: LAWSUITS: Pending Litigation re Warrantless NSA Wiretapping ELECTRONIC FRONTIER FOUNDATION: Here is the EFF’s Class Action Complaint against AT&T. http://thewall.civiblog.org/rsf/att-complaint.html AMERICAN CIVIL LIBERTIES UNION Here is the ACLU’s Complaint for Declatory and Injunctive Relief against the NSA. http://thewall.civiblog.org/rsf/aclu-nsa-complaint.html FOIA Here is the ACLU’S Pentagon Spying FOIA February 1, 2006, seeking from the Pentagon records from Talon, CIFA, MX of infiltration, intimidation, dirty tricks, and spying on Richard Hersh, The Truth Project, Inc., Patriots for Peace, Ft. Lauderdale Friends, Melbourne Florida Counter Inaugural, Broward Anti-War Coalition, Jeff Nall, Maria Telesca-Whipple, and others. http://thewall.civiblog.org/rsf/PentagonSpyingFOIA_020106.html ISSUES BRIEFINGS Here is the ACLU’s October 30, 2003 Issues Briefing THE MATRIX: Total Information Awareness Reloaded – DATA MINING MOVES INTO THE STATES with addendum, Shane Harris’ February 23, 2006 National Journal report, TIA Lives On. http://thewall.civiblog.org/rsf/aclu_matrix_report.html I put a lot of work into these…the ACLU Complaint has lots of internal navigation. You can go directly to any page from any page (60 pages), or directly to any of the 195 paragraphs of the complaint from the table of contents, a click away from any page. I hope these, and the other documents on this site are of use to You. Cheers, -dcm

Torturing Democracy – See it

Documentary GOP Insiders Failed to Block Now Online

A compelling video about the Bush – Cheney Administration’s path to their torture policies is now available online.

(Update 1) (Update 2 – above)

Glenn Greenwald at Salon:

Last month, I interviewed Harper’s Scott Horton regarding a piece he had written on the efforts of several PBS officials, including Jay Rockefeller’s wife (the CEO of Washington’s PBS affiliate) to block broadcast of the documentary Torturing Democracy, which compellingly documents how virtually all of the torture and other illegalities and abuses of America’s interrogation programs were authorized and ordered at the highest levels of the Bush administration (of which waterboarding is but one small example).

That documentary is now available to be viewed in its entirety online — here — and I can’t recommend it highly enough.

(Note – Jay Rockefeller is the ranking GOP member and Co-Chair of the Senate Intelligence Oversight Committee.)

Ditto for me. Here’s a link to each of the 3 parts:

• Part 1 From 9/11 to waterboarding: The inside story
• Part 2 From the CIA to Guantanamo: Copying harsh Communist interrogation methods
• Part 3 While hundreds remain imprisoned in Guantanamo, Congress grants immunity to US Officials who may have ordered torture

(Update! – 111708)

And here is an excerpt:

Also, There’s a pretty good timeline at the Torturing Democracy site, as well as all the key documents in the Bush administration’s decisions to stray beyond the boundaries of the Law.

About Those Bailouts…

By Andrew McCoy

I have read all I can (Yeesh my head hurts) on the current financial crisis. Especially interesting to me is all the partisans blaming everyone else for it. Here’s my thought’s.

The roots of the issue lie all the way back after the first S&L Crisis in the late 80’s.  Fannie Mae and Freddie Mac hired a bunch of people and gave out lots of money to both parties to ensure they had the best possible regulations (for them to make money). They had the best of both worlds, they could loan whatever they wanted, and have very little cash reserves.

Then came the wild 90’s. The Clinton administration decided home ownership was especially important and encouraged banks to make loans to marginal candidates and they would get tax breaks for doing so.

Things were going swimmingly in the late 90’s for the homes market. Inevitably though, a slow down was happening.  There is a market saturation point after all.

Then something else was thrown into the mix. Phil Gramm ,as a senator in Dec 2000, put an addendum on a spending bill that allowed companies to package up mortgages and sell them as securities (CDS’s), the best part of this bill (for wallstreet) was that it was a totally unregulated market. This allowed a lot… no, massive amounts of capitol to be injected into the mortgage market.

Well, now there was all this money

and not a lot of demand. So interest rates were lowered and people started taking out 2nd mortgages, buying up houses they could barely afford, etc. These were packaged into CDS’s, and since it was an unregulated item, sold as AAA investments. Wall street made billions selling these, banks were rolling in value (not cash, it was lent out).

Sometime, in the 2002 timeframe, state attorney generals started noticing these loans were becoming more and more predatory, so started asking for regulations on these loans. In response US Government (Bush administration) did this

“In 2003, during the height of the predatory lending crisis, the OCC (Office of the Comptroller of the Currency) invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks”.  Which by the way all 50 state AG’s and banking superintendents were totally against.

Ensuring that predatory lenders were completely protected from the states.

In 2004, Republicans on the banking committee wanted to look into Fannie and Freddie and the Democrats threatened a filibuster to the discussion so it was tabled. But, the same year, the SEC (bowing to pressure from the republicans) allowed investment companies to have greater than a 12 to 1 debt to cash ration. This means that prior to 2004 if Lehman Bros. had 120 billion in debt, they would have to have 10 billion in cash to cover any shortfalls. After 2004 they could have a 30 to 1 or even 40 to 1 debt to cash ration. So that same 10 billion would allow them to have 300 billion (or 400 billion) in debt. This ensured their competitiveness, really.

So we fast forward a few years and the AAA rated debts (remember, they’re AAA because we said so, no regulation involved) started faltering. Normally the banks and investments houses would have a lot of cash on hand to cover these issues, but now don’t thanks to the SEC, so start taking major losses. They don’t have the cash and when these items hit 50-60% of their previous values they have to revalue them/ sell them for a value much lower than what they said it’s worth (that value set arbitrarily, remember).

My solution is as follows:

The government nationalized fannie and freddie a few months ago.  So if we (they) bought all the housing loans under 500k made since 2003, chopped 25% off the amount owed, then made the people pay back the rest at say 4% interest. That would take the “bad debt” out of the CDS’s that were sold and help the banks. It would also help people due to them being able to afford their houses and not defaulting on them. We, the tax payers, would still take a bath financially, but we would do it at least helping people, not just big corporations.

If the treasury secretary and the financial houses don’t like this it’s because they are hiding something other than mortgages on their balance sheets and shouldn’t be bailed out.

Then, the long term fixes. Stop letting corporations pay elected officials, and by that I mean donate to their campaigns, for really good helpful legislation.  Second, if you want fannie mae/ Freddie mac to exist, either completely nationalize it, or make it completely private, no in between. Third, don’t let wall street trade in un-regulated items. And fourth, go back to the 12-1 debt to cash ration for Wall Street companies.

Andrew McCoy is an IT Consultant

Why Kill Detroit Now?

…When 2 out of the Big 3 Have already taken Serious Steps at Reform?

By Andrew McCoy

So the Big 3 need 25 gazillion dollars to stay viable. According to bad accounting people the average worker makes $73 an hour working there. Of course these are silly numbers. No factory worker brings home $151,000 (73×40x52). As of 2006 the wage breakdown at Chrysler was:

Base Wage & COLA
		Health Care*		All other elements		Total
$/hr.	%Total	$/hr.	%Total	$/hr.	%Total
29.15	38%	20.14	27%	26.57	35%	75.86

This was the latest data I could find with good hard numbers.

Health Care

The ‘Healthcare’ and ‘all other elements’ contains healthcare and pension payment for retirees. That’s 111,000 at Chrysler, 450,000 at all of the Big 3. The numbers bandied about say Japanese companies only pay 40 to 50 an hour per employee. That gives them an $1800 advantage per car made in labor costs.

Of the 20.14 in healthcare costs listed less than half goes to employees. Most goes to retiree healthcare. That issue has already been addressed; retiree healthcare will be cut, provided GM, Ford, and Chrysler, put in the upfront 50 billion needed before 2010 for the UAW health plan.

Pension Plans

The largest ‘other’ expense going forward is the continuing pension plans. The Pension fund of the GM is fully funded ( I can’t find similar info on Ford and Chrysler, but they GM’s pension covers 300,000 and Ford/ Chrysler combined cover 150,000)  currently and pays UAW member $18,000 per year after the age of 63.

So, of the 73  mythical dollars, my guess is 50 goes to current employees.

No Raises for Years Ahead

Employees have already agreed to no raises for a few years, and the new UAW contract allows new workers to be hired at a lower rate.  Nearly half of all UAW members are eligible for retirement within 5 years. That means the labor cost will go down even further.

In the chart above healthcare costs 20 bucks an hour, but let’s look realistically going forward. The average healthcare plan in the US for 2009 is projected to be $9660. According to the above chart healthcare costs $41,891 a year. Even with really good insurance, based on the $9660 number, healthcare should only cost $15,000.

So, I’m Stuck with $32,231 Out of Pocket

Just for Health Insurance?

I’m a middle class earner, for where I live. My company offers average or above average benefits across the board. At year end, when I get my “total compensation” packet, it shows that the company pays less than $15,000 for my total compensation (besides my salary). If we assume my company pays its 78% share of my health insurance (9660×78%), then $7534 goes to health insurance and about the same amount goes to other stuff (vacation, holidays, 401k, etc).

Total Compensation

For the next bit, I am assuming about 7500 is needed for ‘other stuff”.  If GM pays 29.15 per hour worked (a tad high I think), and pays all 15k for health insurance, and 7500 for ‘other stuff’. Total compensation is (29.15×2080) =60,132 + 15000 + 7500 = $83132, that equals $39.9673 per hour.

Even if “total compensation” goes up to $103132, that’s 60k in wage, 40k in healthcare/ other stuff, that only equals 49.50 an hour, which is about equal to Toyota’s costs.

Two out of the 3 have Taken the Steps…

This shows, although the hour is late, GM and others have worked out the appropriate steps to rein in their over the top expenditures. Their cars have gotten better, well 2 out of 3 ain’t bad… Chrysler still sucks.

In normal circumstances, a bankruptcy would be the right choice. It would allow their debts to be re-organized and new capital infused. There is a snag with that right now though; who is going to give them the capital? No banks have any money now.

Why Kill Detroit Now?

If our precious financial district is worth 700 billion (over 5 trillion by some counts) then the last of our major manufacturing sector should get enough to survive until their already implanted changes help them out.

Andrew McCoy is an IT Consultant