Go to the source: The Market Ticker

See, municipal systems can go bankrupt…

Sept. 7 (Bloomberg) — An Alabama Circuit Court judge said he intends to appoint a receiver to manage Jefferson Countys insolvent sewer system.

Judge Albert Johnson said in court today in Birmingham that he will interview people for the position and decide on the receivers authority.

I have just one question for the Honorable Judge Johnson: Will you charge that receiver with authority to go after the banks that were in no small part responsible for this crap, as they were involved in the hinky derivative deals and bribery that led to this outcome?

Bettye Fine Collins, president of the Jefferson County Commission, said her biggest concern is that a receiver would impose an immediate increase in sewerage charges. The commission governs the county.

That is very likely to happen.

But what a receiver might also do, and in my opinion should do, is also file civil racketeering (treble damage!) suits against each and every organization involved in this scam.

That might wake a few of those big banks up….. an event that sorely needs to happen.

Go to the source: The Market Ticker

Why of course they did….

As part of the tests, 91 of Europe’s largest banks were required to reveal how much government debt from European countries they held on their balance sheets. Regulators said the figures showed banks’ total holdings of that debt as of March 31.

But……

An examination of the banks’ disclosures indicates that some banks didn’t provide as comprehensive a picture of their government-debt holdings as regulators claimed. Some banks excluded certain bonds, and many reduced the sums to account for "short" positions they heldfacts that neither regulators nor most banks disclosed when the test results were published in late July.

"Didn’t provide as comprehensive a picture … as regulators claimed" = they lied.

Of course the so-called "regulators" didn’t regulate, as if they had they would have called these people out on this, and forced them to provide accurate disclosures.

But that didn’t happen.

How much "understatement" was involved here?  Oh, we have a decent guess….

BIS data from March 31 indicates that French banks were holding about 20 billion of Greek sovereign debt and 35 billion of Spanish sovereign debt. In the stress tests, four French banks, which represent nearly 80% of the assets in France’s banking system, reported holding a total of 11.6 billion of Greek government debt and 6.6 billion of Spanish debt.

So the European banks may have reported about one half to one fifth of the actual amounts held?

This morning we’ve seen some selling over in Europe which Bloomberg attributes to:

Banks still face problems in regards to their capital ratios, said Michael Koehler, head of strategy at Landesbank Baden-Wuerttemberg in Mainz, Germany. Investors will keep worrying about a possible double dip in the next few weeks, he said, referring to a renewed recession.

Uh huh.

How about this?

Investors are starting to wake up to the fact that the government lied about sovereign debt exposure, and now with Greece’s spreads widening and concern about Ireland, they have every reason to be wide awake – all night.

Psst: Listen to what is being said (quietly) in certain circles….. smell smoke yet?

Go to the source: The Market Ticker

A personal anecdote….

Last night, after taking in a movie, we decided to get some sushi at my favorite place around here – pretty much the only sushi joint that I have patronized in the last few years.

We ran into the last night…. literally.

No, this joint wasn’t cheap.  But it was good and it had location going for it – right front and center in the Destin Commons.

In the end it didn’t matter.

When you hear that "things are looking up" and "the economy is improving"….. well, no they’re not.

May the employees find other opportunities soon.

Go to the source: The Market Ticker

This morning everyone’s a-buzz about "Basel III" capital raises that might be necessary:

Investors are concerned the Basel Committee on Banking Supervision will propose higher capital requirements when it meets today, limiting banks ability to lend. Europes biggest lenders are already facing losses on more than 134 billion euros of Greek, Portuguese and Spanish bonds, according to a Bloomberg News survey.

Numbers being thrown around are as high as 105 billion – for Germany alone.  That could be trouble.

But what’s not being talked about nearly so much is this:

Recent amendments to the Bear Stearns Rule have extended this subsidy to Fannie and Freddie. The Basel Committee decided to include the debt of Government Sponsored Entititesbureaucratic code for Fannie and Freddiein the definition of high quality liquid assets. Whats more, it also included mortgage-backed securities guaranteed by Fannie and Freddie in the definition.

Up to 40% of a banks liquidity reserve can be made up of GSE obligations, under the rules likely to be approved in the next few weeks. And while it is true that these obligations get a 15% haircut under the rules because they are considered Level 2 liquidity assets, compared with the cash, central bank reserves and sovereign debt that will now be considered Level 1 assets.

Oh that’s nice.

So now we have GSEs, which are formally not guaranteed on a perpetual basis and in fact have their "guarantee" due to expire in a year or so, and Basel III proposes to allow up to 40% of a bank’s "liquidity reserve" to be stashed in these instruments – which have no guarantee at all.

So what happens now?

Well, it will certainly put a floor under the price of these securities from a trading perspective.  But the capital losses, if any, are what they are.  They can no longer be made to disappear than you can make home prices in California go back to 2006 levels.

This is pure insanity, and is very likely to provide the precise set of conditions for the next collapse in the banking system, which at present appears to be on track for sometime around the end of 2011.

SOMEONE needs to call these people on the carpet and tell them to shove these sorts of "rules" up their backside.  "GSE" debt is only "money good" if it has an explicit government backstop – if not, it is no more "sound" than any other sort of corporate obligation – period!

Go to the source: The Market Ticker

Let’s talk about today.

Labor Day, it is called.

History recalls that it was put into place by Grover Cleveland in 1894 after the Pullman Strike in which the US Military was used to put down workers.  The legislation designating it a national holiday was rushed through Congress and signed in what must have been a record – six days - to attempt to defuse further conflict between labor – that is, the people – and her government who had just got done killing some of her own citizens over a private labor dispute.

Note that this dispute wasn’t exactly violence-free on the union side – they had derailed a locomotive, attacked strike-breakers and committed several acts of arson.  Nonetheless, the rubric used by Grover Cleveland in ordering twelve thousand US Army Troops to put down the strikers was that the strike was "interfering with the US Mail."

Such is the history of this holiday now most-celebrated with weenies roasting on the BBQ.

Today, however, I ask the plaintive question:

Why do you labor?

Let’s think about why most of us do, or at least should.  We do it to better ourselves and our families.  We get out of bed every day and go to work, in whatever vocation we practice, whether it be for ourselves as a self-employed person (e.g. as I am) or "working for ‘the man’", because we want to put food on our table, a roof over our head, and clothes on our backs.  We want a better life for ourselves and our progeny, and through the use of our minds, hands, backs and legs we hope to attain that goal.

We find common cause in our work.  Whether we look upon a roof we just put on a house with pride in our workmanship, a heart we just repaired in some man’s chest or a computer that now passes electronic mail traffic where it didn’t before, we effort to provide more value to society than what we extract in the form of a wage.

Yet out of that wage is extracted all sorts of tax and other expense that we have no direct control over.

Certainly, we would all (well, most all) would agree that there are certain things that government should do for the people.  We all want a fire department available if our home is burning, we would like the streets to be paved, and we would like the sewers to drain so that when we go to the bathroom it doesn’t come back to us via the tub.  We want a reasonable belief that our nation has enough defensive capability that other nations will not invade us, as they would suffer immeasurable loss.

On these things we all agree.

Most of us also agree that some form of help to those who are unable to help themselves is in some form appropriate.  Here we nearly all differ on where the line is to be drawn, however.  We can argue endlessly over whether someone should be able to access medical care they cannot pay for with their own funds, with much of debate focused on which forms of treatment should be paid for by taxation and under what circumstances.  Some would argue that being obese should bar you from any form of obesity-related treatment for medical conditions paid for by others via taxes, others not.  Some would argue that if you smoke you have no right to smoking-related illness treatment paid by others.  Still others would argue that anything STD-related should be barred, since you obviously contracted that via an act that you consented to (absent rape, of course.)

But these are, to a large degree, the finer points of policy debate.  Yes, they’re important, but they all come down to allocation of funds.  I will leave that debate for another time.

No, today I wish to focus on the literal trillions of dollars that we have had taken from us in the past, present and future not by the social spending that is considered a wedge issue in so many quarters (and which I would argue should not be) but rather by the support and protection of organizations that stand accused of raw criminal acts – acts that, in many cases, have directly and indirectly led to people being literally murdered.

I rather ask the plaintive question:

Why should you labor when much of those fruits are literally stolen by people who then evade any legal sanction for theft and other outrageous acts – acts that you, as an ordinary citizen, could not dream of performing yourself without landing in prison for quite literally the rest of your natural life while forfeiting every penny you have.

I speak specifically of the following sorts of acts:

• The Jefferson County Alabama scandal relating to it’s sewer project.  Originally intended to cost about $150 million, the total has now exceeded $3 billion.  Sewer rates have gone from $1.15/cf in 1992 to $7.40 in 2008 (a more than six hundred percent increase) and a good part of that was due to rank bribery.  This isn’t an allegation – there have been multiple criminal convictions related to this matter.  As Rolling Stone reported:

  • There was so much money to be made bilking these dizzy Southerners that banks like JP Morgan spent millions paying middlemen who bribed yes, that’s right, bribed, criminally bribed the county commissioners and their buddies just to keep their business. Hell, the money was so good, JP Morgan at one point even paid Goldman Sachs $3 million just to back the fuck off, so they could have the rubes of Jefferson County to fleece all for themselves.

Of note there has not been one – one – indictment leveled against the banks involved, even though one of the parties involved in the bribery is claimed to be a JP Morgan employee.  Remember, for bribery to take place you must have someone offer a bribe, and you must have someone accept a bribe.

• Mexico’s drug gangs.  We’ve all heard of the horrific violence south of the border.  Most of it is fueled by illegal narcotics – a very profitable business, if you can figure out how to move the money around without having it confiscated by rather-belligerent governments.  And that’s where Wells Fargo’s Wachovia came in:

  • Wells Fargo & Co., which bought Wachovia in 2008, has admitted in court that its unit failed to monitor and report suspected money laundering by narcotics traffickers — including the cash used to buy four planes that shipped a total of 22 tons of cocaine.

How much money was involved here?  Oh not a lot – just $374.8 billion dollars.  Yes, with a "B". What happened to Wells?  They were fined – a grant total of $160 million dollars, or about 2% of its 2009 $12.3 billion in profit, and about one tenth of one percent of it’s $135 billion market capitalization.

• Just recently The Wall Street Journal reported that nine banks have been caught laundering money for various barred organizations and nations.  What’s a "barred" organization or nation?  Primarily one involved in terrorism in some form or fashion, and thus subject to international (or US) sanction.  These are nations like Iran and North Korea, and organizations like Hamas.  Nations and organizations that use the money moved around to buy bombs, missiles and guns, with which they then shoot American soldiers, among others.  Who’s on the list?

  • Last month, Barclays PLC in London agreed to pay $298 million and admitted to allowing payments on behalf of clients in Cuba, Sudan and other countries. Lloyds Banking Group in London and Credit Suisse Group in Zurichbanks that operated extensive transfer systems for Iranian clientshave agreed to settlements totaling $350 million and $536 million, respectively.

Hmmmm.  I’ve seen some of those names before.  Where? 

Oh yeah, right here:

List of the Primary Government Securities Dealers Reporting to the Government Securities Dealers Statistics Unit of the Federal Reserve Bank of New York

BNP Paribas Securities Corp.
Banc of America Securities LLC
Barclays Capital Inc.
Cantor Fitzgerald & Co.
Citigroup Global Markets Inc.
Credit Suisse Securities (USA) LLC
Daiwa Capital Markets America Inc.
Deutsche Bank Securities Inc.
Goldman, Sachs & Co.
HSBC Securities (USA) Inc.
Jefferies & Company, Inc.
J.P. Morgan Securities LLC
Mizuho Securities USA Inc.
Morgan Stanley & Co. Incorporated
Nomura Securities International, Inc.
RBC Capital Markets Corporation
RBS Securities Inc.
UBS Securities LLC.

Anyone care to guess on the identity of the others?  Yes, I know, Credit Suisse USA is a subsidiary of the Zurich-based bank.  So what?  They share a parent company, do they not? 

Who are the "primary dealers"?  They are the institutions that the United States Treasury entrusts to maintain orderly auctions for US Government bonds that finance the operation of the United States Government!

You got that?  Some of the very firms we trust to finance our government debt for us are alleged to have set up dedicated units to systematically aid the unlawful transfer of funds through the US banking system for these prohibited parties.

What was the sanction?  A fine.  Again.  For the three that have "settled", anyway.

Incidentally, the fact that this money is going to fund people shooting our troops isn’t speculative:

At least five Iranian companies stationed in Afghanistan are covertly funding Taliban militants, paying them salaries of $233 a month with a $1,000 bonus for killing an American soldier, according to the Sunday Times of London.

Blowing up a US military vehicle is worth $6,000, making insurgents better paid than any Afghan police officer or soldier.

"Iran will never stop funding us, because Americans are dangerous for them as well," said a Taliban treasurer, who travels from the mountainous Wardak province to an Iranian construction company that operates out of Kabul to pick up the cash.

Is this clear enough?  How many of our families will have or have had their son or daughter come home in a box as a consequence of this funding, and how many of those families will sit still for this?

• You don’t really think it ended there, do you?  Of course not.  Bloomberg reported on May 18th that a host of major banks are involved in a huge investigation related to the rigging of municipal bond offerings.  This is a $1 trillion market and funds everything from your local sewer and water systems to the construction of schools, repaving of roads, additions to your local police and fire departments and building of the local library.  All of these matters are funded by bond issues, and you pay for each and every one of them in the form of taxes.  When these issues are rigged the costs go up and you get to pay for the corruption through property and sales taxes – an invisible cost-shift that lands directly on you.  What is alleged?

  • The whole investment process was rigged across the board, said Charlie Anderson, who retired in 2007 as head of field operations for the Internal Revenue Services tax-exempt bond division. It was so commonplace that people talked about it on the phones of their employers and ignored the fact that they were being recorded.

    Anderson said he referred scores of cases to the Justice Department when he was with the IRS. He estimates that bid rigging cost taxpayers billions of dollars. Anderson said prosecutors are lining up conspirators to plead guilty and name names.

Uh huh.  Wall Street’s biggest banks.  Named in the story is Bank of America, GE, UBS AG (then under Dexia), Citigroup, JP Morgan, UBS and Wells/Wachovia (again.)  Allegedly, sixteen companies are under investigation.  Notably, Bank of America has reportedly been given amnesty from criminal prosecution.

Notice any names in the Primary Dealer list up there again?  Yep.

So now we have banks standing accused of ripping off state and local governments – that is, the taxpayer, who ultimately pays for all of this grift and scam – and yet they are still handling US Government debt auctions.

Isn’t that special?

It gets better.  This wasn’t the first time it happened.  In 2000 the SEC "settled", once again, charges of "yield burning" – that is, overcharging municipal governments.  How much was the fine?  $120 million – a pittance – and only $18 million was refunded to the municipalities that were ripped off.

What did Arthur Levitt say at the time?

Arthur Levitt, Chairman of the Securities and Exchange Commission, said, "As a result of today’s actions, a dark cloud has been lifted from the municipal securities market.  This global settlement is a milestone in the federal government’s effort to resolve the problem of yield burning in a way that protects innocent municipalities and bondholders."

The hell it was.

Has any of the screwing you took as citizens in the Internet Bubble, the Housing Bubble, and the multiple Municipal bond scams (as documented above) been returned to you?  Have you been made whole from any of those scams and schemes?  Has your property tax bill, inflated by the municipal bond scams, been refunded by these banks?  Has the false "appreciation" that led you to overpay for a house between 2003 and 2006, or for Tech Stocks in the 1990s, been taken back from those who stole the money and returned to you?  Has your home’s value been allowed to contract back to where it should have been – valuations from the 1980s and early 1990s – and your property tax bill contracted back to those same levels, with a refund being issued to you in the amount of a decade of overpayment?

Of course not. 

Not only have the scammers involved in all of this not been personally fined one red cent, they have not been indicted, prosecuted, or spent one night in a prison.  The corporations involved have been "fined" a tiny fraction of one percent of their market value – and have effectively kept all of the ill-gotten "profits."  All of this has been extracted from your labor – both past and future, in an amount that literally adds to trillions of dollars.

So again folks:

WHY DO YOU LABOR?

Why do you willingly get up and make effort to feed your family and better yourself when literal trillions of your money are lavished on these enterprises by a band of 545 crooks in Washington DC who have all, each and every one of them, personally enabled, permitted and endorsed these scams?

I speak specifically of:

• 435 Representatives in Congress
• 100 Senators
• 1 President
• 9 Supreme Court Justices

All of whom took an oath to uphold and defend The Constitution, and all of whom each and every day not only permit this sort of raw lawlessness to go on, but continue to explicitly fund it through both explicit support and the Primary Dealers to the US Treasury!

Oh, some will blame Bernanke or Greenspan for his bubbles and threats, and they deserve that blame.  Some will blame Paulson.  Some will blame Geithner.

But The Fed exists only because of the acts of those 545, and both Paulson and Geithner were confirmed to hold their offices by 100 of them.

We have deficits that all 545 claim are bad.  Yet they exist specifically because of the acts of these 545 people.  Without their specific actions, there would be no deficit.

We have all 545 claim that ripping people off and plundering the public purse (which is, by the way, filled with your labor – and nothing else) is bad.   Yet that plunder happens specifically because of the actions those 545 people both take and refuse to take.

We have an SEC which claimed in 2000 that the book was closed on municipal bond market ripoffs, but then the same thing happened again, and probably began while these other guys were negotiating their "deal."  Those 545 are directly responsible for this – among other things the entire SEC serves at their pleasure, and could be replaced tomorrow or written right out of the statute books.

You thought you were getting "relief" with the alleged "CARD" act (to control credit-card abuses.)  Those same 545 wrote into the law an exception for so-called "professional cards", which allowed the banks to evade each and every one of those protections.  That’s not the bank’s fault, it’s the fault of those 545.  Each and every one of them.

You got robbed blind through serial bubbles in the Internet space and then in housing – bubbles that occurred due to the specific acts of omission and commission, intentional acts – of those very same 545 people.

Those very same 545 people have pointedly refused to cause the people responsible for these serial bubbles and your exploitation to answer for these actions, to be prosecuted where fraud or other criminality can be shown, and to pay back what they plundered to the full extent of their personal and corporate fortunes.

These same 545 have additionally provided upwards of twelve trillion dollars in promises of your future labor that they claim the right to compel performance of in support to these institutions. 

545 men and women did that – they are directly and personally responsible for voting for and permitting these individuals and institutions access to those funds that you must provide through your work after they knowingly and willingly exploited you as a direct result of the previous acts of these 545.

These same 545 are personally and directly responsible for funding and allowing the continued operation of institutions that stand accused of financing drug cartels in Mexico, terrorists in various nations and the rogue regime in Iran, ripping off hundreds of municipalities across the United States and more. They are responsible for continuing to voluntarily let these institutions not only have the privilege of a banking license in the United States, effectively operating with the sovereign credit of our nation behind them.  To add insult to injury, these 545 also allow these firms to make a profit offering and dealing in US Treasury debt.

Why do you labor?

WITHOUT YOUR VOLUNTARILY-PERFORMED LABOR THESE 545 CROOKS HAVE NOTHING!

Literally NOTHING. 

You, America – you – the common man and woman – hold the keys. 

No, I’m not talking about voting, even though that’s important.  Both of the "major parties" have explicitly supported every single act noted and documented above and dozens more.  Not one major political party candidate has gone to the Well of the House or Senate, or appeared on TV, and said in a plain, loud and clear voice:

If you elect me (or return me to office) I will do everything in my power, to the exclusion of all other issues if need be, to see to it that every one of the scams and frauds that have infested our financial system is eradicated and everyone who was involved goes straight to prison.

Not one Democrat, not one Republican, and not one of the "second-tier" parties either – including both the Libertarian and Tea Parties.  None of those candidates have stated the above – yet that, my friends, is nothing more or less than a statement that the rule of law is what that candidate is running on.  Simply put, none of them are, and none of them do, either before they get to Washington or after, interested in the rule of law.

Until you hear that from candidates and they actually perform after being elected, voting will not fix these problems.

But that doesn’t mean you, the ordinary people in America, can’t fix it, as many claim. 

You are in fact not powerless – you, the people of this nation, absolutely have all the power required, if you choose to use it.

You hold the ability to stop this – all of the above and more - dead in its tracks in one day - in you hands. 

Literally.

You provide the Federal Government with ninety percent of it’s operating revenue through income and social insurance (FICA/Medicare) taxes, both of which are only collected as a consequence of your voluntary labor.

You, through the non-violent, peaceful and perfectly legal expression of your will, simply by your refusal to labor until all of this activity is stopped, the people responsible are prosecuted, the funds stolen are returned to you and the firms involved are permanently closed - can end this BS tomorrow.

Why?

Because without tax revenues from your labor – labor you voluntarily perform and upon which 90% of the government’s revenue via taxation is based - those 545 have nothing to back up their debt issuance. 

Not one damn thing. 

All the hot air from Boehner, Pelosi, Reed, McCain, Obama and the rest – it’s all just words. It is exactly identical to you walking into the bank and telling them you want to buy a $500,000 house but you have no assets, no job and no education.

Without your daily consent in the form of your willing performance of labor the words, bluster, threats and claims of those 545 carry no force whatsoever.

None.

That’s the dirty little secret that nobody in Washington talks about out loud, but they all know it’s true.

Not one damn penny would flow to the government to fund it’s operations if there was nobody willing to buy those bonds, and without your willing labor to provide those bond buyers a reason to believe they will be paid, there will be no buyers.

So today as you grill your wieners and drink your beer, consider that Tuesday, when you get up and get in your car, get on the bus, board the train – you will, by doing so, provide your actual and physical consent to each and every act that I have outlined above – and dozens more just like it.

The difference between (financial) rape and (financial) sex is consent.

These acts stop when you refuse to fund them, and you have the power by choosing to drink beer, sleep with your wife or girlfriend, go the beach or simply turn off the alarm clock and phone, to withdraw your consent to the continual screwing you are currently receiving and have received daily for the last 20 years.

You, America, have literally ALL the power, and can stop this crap any time you choose.

So as you roast your weenies this Labor Day, and drink your beer, do America a favor and contemplate a wise choice for tomorrow.

Go to the source: The Market Ticker

Three years late, but better late than never, I guess….

The unexpectedly deep plunge in home sales this summer is likely to force the Obama administration to choose between future homeowners and current ones, a predicament officials had been eager to avoid.

There was never a way to do that.  I’ve been documenting this for the last three years.

The so-called "price appreciation" of the 2000s was false.  That is, it was not predicated on actual value, it was not predicated on a reasonable amount of leverage, and it was not predicated on rapidly rising wages.

It was a scam predicated on ever-increasing leverage – a Ponzi scheme that was impossible to continue forward with in perpetuity.

In the early part of 2008 I wrote a white paper on this and distributed it to all 535 members of Congress and all major political campaigns for President, including John McCain, Hilliary Clinton and Senator (at the time) Obama.  I said at the time:

The unfortunate reality is that home prices cannot appreciate, over long periods of time, at a rate that exceeds the growth in income among the population. That this is axiomatic should be obvious to everyone; attempting to ramp home prices by any mechanism is always a short term phenomena, and leads to a highly-destructive housing crash when the limit of debt carrying is exceeded among the population.

….

This housing bubble was created through intentional manipulation of appraisal values, dangerous and even fraudulent mortgage practices and willful blindness and tolerance among regulators that enabled the creation of off balance sheet vehicles (SIVs). Dishonest accounting and outright manipulation of credit markets also played a role.

Now the bubble has burst and we are faced with the aftermath.

It is critical that the government address these issues in a prudent and thoughtful fashion. There is a tremendous desire to bail people out, especially taxpayers who are howling in protest to the government in one form or another.

But doing so, whether those howling are banks, investors (bond or stock), homeowners, builders or anyone else would be a serious perhaps critical mistake.

Go to the source: The Market Ticker

The August numbers are in, and they’re not pretty….

$211 billion in deficits in August, nearly a record for the year, second only to March with $333 billion.

Social Security taxes (which were stolen, of course) provided a $13 billion "help".

Here’s the updated graph:

And now Obama is allegedly going to pop up with more insanity in the form of "making permanent" an R&D credit, which will force it "on-budget."

This is being sold as a "new tax incentive", when in fact it is not.  Every President since Clinton has had this credit, but due to it never being "permanent" it is not "counted" in budget estimates.

Welcome to Fraudington DC, where accounting is done in a fashion that would get you 20 (with Bubba as your "date") were it performed in any company in the private economy.

Obama is also trying to play with the Bush Tax cuts, of course.  He wants to extend them for anyone making less than $200,000 ($250k for couples.)

The Pew Group says that such an extension would cost $2.2 trillion over 10 years; $3.3 trillion if it were extended for everyone.

$300 billion a year eh?  Gee, I wonder where I’ve seen a number that might be related to before?

Oh yeah, right here:

So let’s see…. all the claims that "Bush’s deficits were all caused by the war" isn’t quite true now, is it?  No, those deficits became structural as a consequence of the tax changes, which added anywhere from half to two thirds of the deficit amounts that we actually sustained. 

So let’s cut the crap, shall we?

First, we’re already running an annualized deficit rate of close to $1.7 trillion – $1,700 billion dollars – both last year and this year.

This is about three times the level that Bush ran during his Presidency.

It is also well over 10% of GDP – the level at which other nations, including Greece, Ireland and Iceland, got into trouble – critical trouble – with being able to finance these deficits on a forward basis.

There is no tax policy that will materially address this – even if all the tax cuts were to expire, they would still leave us with well over $1.2 trillion in annualized deficits, which remains dangerously close to the 10% level.

The issue is spending, and on a $4 trillion budget spending roughly 33% more than is taken in via taxes is both unconscionable and unsustainable.

We blew our wad in the 2000-03 time frame in this regard, we’ve built in the structural deficits as a consequence, and as a result all such announcements will have no net positive impact on economic activity.

Nice try Mr. President.

Go to the source: The Market Ticker

First, head over to http://mycountrymyass.com

Then, take a few minutes and listen……

Then…… go back to the above site and look at this gent’s attempt to start something.

A peaceful something, that begins with you.

With music.

And watch for Monday….. when it’s my turn….

Go to the source: The Market Ticker

In a word, "good"

Judge Dwight H. Williams Jr. of the U.S. Bankruptcy Court in Montgomery, Ala., on Tuesday granted summary judgment to Colonial BancGroup Inc., the failed thrift’s corporate parent, in a ruling dismissing the FDIC’s attempt to go after the parent for failure to maintain capital levels at the bank.

As well he should.

Here’s why.

The FDIC had every opportunity to close Colonial using the precepts of "Prompt Corrective Action", as I have repeatedly documented.  Indeed, the fact that the FDIC keeps closing banks and in doing so reports asset and liability levels that show the bank is not insolvent on the face of the numbers, but then takes 20, 30, even 40% losses on those "assets’, is proof positive that it is accepting in it’s call reports and other documentation false asset valuations.

Prompt Corrective Action, otherwise known as 12 USC Chapter 16 Section 1831o, does not contain "mays" – it contains a litany of "SHALLs."

I have written about this misfeasance and willfully-blind abuse for more than two years.  It was apparent at the beginning of this mess that the FDIC was intentionally ignoring the precepts of that law, in that it requires assessment of capital adequacy and corrective action, and nowhere does it grant permission to lie about the actual value of assets.

There is in fact no wiggle room here.  Since PCA deals with the actions necessary in the event of a seizure, and is intended to protect the FDIC from loss, it therefore follows that any fantasy "mark-to-model" nonsense cannot be accepted by the FDIC, since for purposes of the act one must presume that the bank is being liquidated, and thus only market prices matter.

In Colonial’s case, the FDIC argued that the bank’s former parent owed it $909 million, an amount equal to the gap between how much capital its banking subsidiary was required to have and what it actually had on hand when it was seized by regulators in August 2009. The FDIC said Colonial’s holding company in recent years made numerous commitments to regulators to shore up the bank’s capital.

And there it is folks.  The holding company made numerous commitments to the FDIC did not actually meet them, and the FDIC failed to act to mitigate its own risk.  Clearly, the FDIC had the ability to know - it just decided not to care.  Sheila Bair must be held personally to account for this, as must the rest of the FDIC and regulatory organizations – in this case the OCC, in others (e.g. WaMu) OTS.

In the common civil arena you can’t willfully ignore that you’re being harmed and then later come and try to recover in court; you are generally barred from recovery from the point beyond which you both become aware of the problem and have the ability to mitigate that harm but intentionally refuse to do so.

In this case, however, the problem goes well beyond this, in that PCA is supposed to prevent any loss at all, in that it mandates steps be taken while the bank is still well within a positive-equity position – that is, not (yet) bankrupt.  This should provide plenty of time for the FDIC to come in and seize the institution if these steps prove ineffective (or are simply not taken) before an actual loss occurs.  The requirements placed on the FDIC, OTS and OCC are prospective in nature – that is, they provide that these organizations are required to both investigate and act, and cannot simply rely on "claimed" valuations or other metrics provided by those who may or may not be truthful.

That legally-mandated bank supervision of asset valuation and resulting capital adequacy not only has not but continually does not (to this day) happen must, at some point, be recognized as an intentional dereliction of duty - a duty set forth in statute.

It appears that while the judge in this case did not use this premise to arrive at the result, he nonetheless did arrive at the correct decision – you cannot willfully ignore the law, and then when harmed by your willful head-in-sand attitude and approach, appeal to the law for redress.

Go to the source: The Market Ticker

The Market Ticker has now completed the merge between the former Tickerforum comment area and the Ticker itself.  All threads back to roughly mid-2008 have been merged, such that comments appears inline under the Market Ticker post itself.  The old Ticker area on the forum has been set to read-only and demoted – there are about 300 old threads that could not be automatically converted, and as I get time I will go through them and manually match and convert them - most do, in fact, have matches in the Market Ticker but date to the old Blogspot format where in many cases the subject lines do not match and thus can’t be automatically "sussed out."

This has been a goal for several months – to put the forum and Ticker on one system, so as to provide better tracking on the web statistics side and to provide better coherence between comments and the content of the blog.  There was significant software work required to support this, as the forum software (AKCS-WWW) was never intended at the outset to be a blog-publishing package.

After a lot of code-perusal and thought, however, it became obvious that a forum is really, in many respects, a superset of a blog in terms of functionality, and that the template and database-driven format is really quite ideal for a blog.  As such I started, back in late 2009, thinking about what it would take to merge the two.

What you have now is the culmination of that codebase.  Serendipity, which I have used since the middle of 2008 when I came off Blogspot (Google’s blog hosting solution), was nice, but it was a performance pig (being written in PHP) and paid little attention to the issues that an enterprise-robust system should pay attention to, particularly when it comes to high-availability and load-distributed systems.  Bluntly, Seredipity can’t handle that, and indeed the coders never even considered that for replication purposes you must have primary keys on all database tables – even if they’re nothing more than an "ordinal" sequence column that you never really need to use.

Indeed, many of the instances of "slowdown mania" that the system experienced under peak load were traced to Serendipity.  Throwing hardware at a problem does work, but it’s not the right answer.  Fixing the code is, if you can.

Readers should enjoy a much-more robust and "liquid" experience now on the Ticker, including in the comment process.   Your Tickerforum login ID will work on the Market Ticker threads, as they share a unified login base, but you do need to sign in separately, as they are on separate domains and will remain so.  The system will automatically forward you around as is necessary, and in addition the "icon" for each of the areas is distinct to help you keep track of where you are.

Enjoy the upgrade, and if you have comments, feel free to post them here!