Banks Rule – and Ruin

February 21, 2014 by Leave a Comment

Matt Taibbi, in his last piece for Rolling Stone, wakes us to the next, higher, floor of corporate corruption:

…banks aren’t just buying stuff, they’re buying whole industrial processes. They’re buying oil that’s still in the ground, the tankers that move it across the sea, the refineries that turn it into fuel, and the pipelines that bring it to your home. Then, just for kicks, they’re also betting on the timing and efficiency of these same industrial processes in the financial markets – buying and selling oil stocks on the stock exchange, oil futures on the futures market, swaps on the swaps market, etc.

Allowing one company to control the supply of crucial physical commodities, and also trade in the financial products that might be related to those markets, is an open invitation to commit mass manipulation. It’s something akin to letting casino owners who take book on NFL games during the week also coach all the teams on Sundays.

The situation has opened a Pandora’s box of horrifying new corruption possibilities, but it’s been hard for the public to notice, since regulators have struggled to put even the slightest dent in Wall Street’s older, more familiar scams. In just the past few years we’ve seen an explosion of scandals – from the multitrillion-dollar Libor saga (major international banks gaming world interest rates), to the more recent foreign-currency-exchange fiasco (many of the same banks suspected of rigging prices in the $5.3-trillion-a-day currency markets), to lesser scandals involving manipulation of interest-rate swaps, and gold and silver prices.

But those are purely financial schemes. In these new, even scarier kinds of manipulations, banks that own whole chains of physical business interests have been caught rigging prices in those industries. For instance, in just the past two years, fines in excess of $400 million have been levied against both JPMorgan Chase and Barclays for allegedly manipulating the delivery of electricity in several states, including California.

Rolling Stone:

Taibbi will be missed.  Here’s a link to his archive.

Filed under Corporations Tagged with , ,

Corporations and Stakeholders

February 12, 2014 by Leave a Comment

Many people believe, improperly, the only obligation corporations have is to maximize shareholder returns. This is a belief encouraged by repetitive assertion and open eared credulity.

But there is “no law [that] requires corporations to maximize returns to share holders

In fact … No such law in any of the 50 states even raises the topic of maximizing shareholder returns. ”

The idea that corporations exist to reward their shareholders arose not in a body of law but from the work of ideologically driven economists. In 1970, Milton Friedman wrote that business properly had but one goal: to maximize profits. The same year, Friedman’s University of Chicago colleague Eugene Fama argued that a corporation’s share price was always the accurate reflection of the enterprise’s worth, an idea that trickled down into the belief that the proper goal of a corporation was to boost its share value — particularly after most CEO salaries and bonuses became linked to that value.

Read All at WaPo

Filed under Corporations Tagged with ,

Republicans: Soft Heads, Hard Hearts

February 10, 2014 by Leave a Comment

Krugman — on the unconscionable Republican filibuster to block aid to the long-term unemployed.

If you follow debates over unemployment, it’s striking how hard it is to find anyone on the Republican side even hinting at sympathy for the long-term jobless. Being unemployed is always presented as a choice, as something that only happens to losers who don’t really want to work. Indeed, one often gets the sense that contempt for the unemployed comes first, that the supposed justifications for tough policies are after-the-fact rationalizations.

The result is that millions of Americans have in effect been written off — rejected by potential employers, abandoned by politicians whose fuzzy-mindedness is matched only by the hardness of their hearts.

Filed under Economy, Labor / Unions Tagged with

Megalomania: MegaDelusional

January 30, 2014 by Leave a Comment

Silicon Valley venture capitalist Tom Perkins is under fire for comparing criticism of the rich to Nazi persecution of Jews – but that hyperbolic analogy wasn’t his only inaccurate claim.

Income Changes

He thinks it’s not just unfair, but what, plutocraticidal(?), to attack those whose success is trickled down to the benefit of so many others. As Garofoli points out — ain’t much tricklin’ goin’ on.

Filed under Economy, Poverty Tagged with , ,

Divestment from Fossil Fuel Companies Increases

January 30, 2014 by Leave a Comment

Seventeen foundations controlling nearly $1.8 billion in investments have united to commit to pulling their money out of companies that do business in fossil fuels, the group announced on Thursday.

In addition to the foundations, 22 cities, two counties, 20 religious organizations, nine colleges and universities and six other institutions had signed up to rid themselves of investments in fossil fuel companies, frequently defined as the top 200 coal-, oil- and gas-producing companies identified in a report from the Carbon Tracker Initiative based in London.

NY Times

Filed under Climate Change, Energy Tagged with , ,

GOP Moves to Encourage More Bad Bank Behavior

January 8, 2014 by Leave a Comment

Representative Jeb Hensarling, a Republican of Texas and chairman of the House Financial Services Committee, is expected to propose a bill that could open up a huge loophole in the Volcker Rule. The proposed change could allow banks to create and own securities with many types of investments that are barred under the Volcker Rule, which is intended to prohibit speculative trading by banks while letting them both make markets for customers and hedge other investments.

NY Times

Filed under Economy Tagged with , ,

Laissez-faire = Laisser souffrir

December 9, 2013 by Leave a Comment

The much debunked economic theory of laissez-faire, usually translated as ‘let them be,’ meaning let those with wealth do as they will, no regulation needed has had a resurgence in the past 35 years or so.  For a while in the United States it was understood that laissez-faire was the shiny face of the coin, the other side of which was laisser-souffrir — let them suffer.  For a quick review here is Thomas O. McGarity in the NY Times.

The laissez-faire revival of the past 35 years was no accident. The protective statutes and liberal common-law doctrines of the late 1960s and early 1970s — what can be called the Public Interest Era — had a profound impact in such areas as occupational safety and health, environmental protection, consumer finance and the safety of food, drugs and consumer products. This legislative and judicial activism placed far more constraints on the economic freedom of corporate America than had any legal regime preceding it.

It also galvanized a “divert and delay” strategy of resistance by businesses, which lobbied against the new statutes and resisted the efforts of newly empowered regulators and plaintiffs. The laissez-faire revival, however, required more than resistance to change. It also took the determined efforts of a relatively small number of philanthropists and academics to create what I call an “idea infrastructure” around minimalist regulation, popularizing that ideology and persuading Congress, the executive branch, and the courts to scale back constraints on corporations.

Corporate activists — responding in part to a call to action by William E. Simon, a financier and architect of the modern conservative movement, who served as Treasury secretary under Presidents Richard M. Nixon and Gerald R. Ford — devoted tens of millions of dollars to the creation of right-leaning think tanks, media operations and free-enterprise centers in academia, as well as lobbying and public relations firms and “grass-roots” (but actually business-financed) organizations.

The business community launched three frontal assaults on the regulatory agencies that Congress had created over the years to protect the American public. … read all.

Filed under Economy Tagged with ,

SIGTARP proves that some bankers aren’t too big to jail

December 7, 2013 by Leave a Comment

We’re heard a lot about the lack of prosecutions on Wall Street for the players that brought the world economy to its knees, and almost lower still.  There is one outfit, however, that takes its defend and protect mandate seriously — and of all places, from the heart of the hated bailout: the Inspector General’s Office of TARP

 

Since 2008, the Office of the Special Inspector General for the Troubled Asset Relief Program has pursued criminal charges against 107 senior bank officers, most of whom have been sentenced to prison. Created to supervise the government bailout of the auto and financial industries, the agency has found dozens of cases of bank executives who misused bailout funds.

SIGTARP has a staff of 170, a budget of $41 million and an enforcement track record that rivals agencies twice its size. The agency’s work has resulted in $4.7 billion in restitution paid to the government and victims. Lawmakers are holding SIGTARP up as a model and questioning why other agencies are not producing similar results.

Sure, these aren’t the biggest fish in the predator pool, but at least an example is being set and other regulators are being goaded. Go Christy Romero!

Filed under Corruption, Economy Tagged with , , ,

Krugman: Obama Gets Real

December 6, 2013 by Leave a Comment

Paul Krugman in the NY Times:

Much of the media commentary on President Obama’s big inequality speech was cynical. You know the drill: it’s yet another “reboot” that will go nowhere; none of it will have any effect on policy, and so on. But before we talk about the speech’s possible political impact or lack thereof, shouldn’t we look at the substance? Was what the president said true? Was it new? If the answer to these questions is yes — and it is — then what he said deserves a serious hearing.

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Much of our political and pundit class remains devoted to the notion that rising inequality, to the extent that it’s an issue at all, is all about workers lacking the right skills and education. But the president now seems to accept progressive arguments that education is at best one of a number of concerns, that America’s growing class inequality largely reflects political choices, like the failure to raise the minimum wage along with inflation and productivity.

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Says Obama: “A relentlessly growing deficit of opportunity is a bigger threat to our future than our rapidly shrinking fiscal deficit.”

I hope Krugman’s  right, that Obama has turned a corner.  He’s got himself into such a maze of compromise delusion that he’s got many corners to turn to get clear of it.

Filed under Economy Tagged with , ,

American “Squeeze the Workers” Spreads to Europe

December 4, 2013 by Leave a Comment

This cannot be good news, at any level…

In 2008, 1.9 million Portuguese workers in the private sector were covered by collective bargaining agreements. Last year, the number was down to 300,000.

Spain has eased restrictions on collective layoffs and unfair dismissal, and softened limits on extending temporary work, allowing workers to be kept on fixed-term contracts for up to four years. Ireland and Portugal have frozen the minimum wage, while Greece has cut it by nearly a fourth. This is what is known in Europe as “internal devaluation.”

Spain Unemployment

While most of the debate over Europe’s response to the financial crisis has focused on the budget austerity enveloping the Continent, the comparatively unheralded erosion of worker protection is likely to have at least as big and lasting an impact on Europe’s social contract.

“It has a disastrous effect on social cohesion and a tremendous effect on inequality,” argued Jean-Paul Fitoussi, an economics professor at the Institut d’Études Politiques de Paris. “Well-being has fallen all across Europe. One symptom is the rise of extremist political parties.”

UPDATE:

On Monday, Ikea started taking applications for 400 jobs at the new megastore  near Valencia store, due to open next summer.

The company wasn’t prepared for what came next.

Within 48 hours, more than 20,000 people had applied online for those 400 jobs. The volume crashed Ikea’s computer servers in Spain.

“We had an avalanche of applicants!” Ikea spokesman Rodrigo Sanchez told NPR in a phone interview. “With that quantity, our servers just didn’t have the capacity. They collapsed. After 48 hours, we had to temporarily close the job application process. We’re working on a solution, to reopen the as soon as possible.”

That initial volume alone gives applicants a 1-in-50 chance of landing the job — three times more difficult than getting into Harvard last year.

And to complement  Porter’s reporting, Jared Bernstein helps out on the minimum wage policy debate.

I can’t open the paper these days without stumbling onto something about the minimum wage, which I take to be a good thing as it’s a simple, popular way to help address the problem of very low-wage work in America.  It’s not a complete solution; it’s not the only solution — it is, in fact, a relatively small-bore policy that sets an important labor standard: the government will compensate for the severe lack of bargaining clout among our lowest-wage workers by setting a floor below which we won’t allow their wages to fall.

Filed under Economy, Labor / Unions Tagged with , ,

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