News Jan 2014

From Week of Jan. 27 – Feb. 2

First, Ellen Brown’s latest piece on Abandoning Wall Street and Creating a Public Bank for the City of Los Angeles Next, here are some NY Times articles we think are good to read to keep informed. We do not necessarily agree with these articles.

  1. Detroit Sues to Cancel Some Costly Contracts The city contends that some of the complex transactions set up to finance pensions were illegal.
  2. Judge Approves Bank of America Mortgage Settlement A New York State judge on Friday approved most of an $8.5 billion agreement by Bank of America to settle claims by nearly two dozen mortgage securities investors.
  3. Accounting for Jamie Dimon’s Big Pay Raise In the world of Wall Street executive compensation the pay raise recommended for Jamie Dimon, chief of JPMorgan Chase, is not only defensible, but laudable.
  4. The Disappointing Office of Financial Research The Treasury’s Office of Financial Research seems to have little gusto for taking on the biggest banks and the dangers they pose, an economist writes.
  5. Wall Street’s New Housing Bonanza Banks have begun selling bonds backed by foreclosed homes turned into rentals in the United States, bringing calls for Congress to look into the deals.
  6. Hedge Funds Sniff for Even Bigger Payouts From Banks One hedge fund, Fir Tree Partners, is even trying to coax other investors out of participating in the $4.5 billion JPMorgan Chase settlement with private investors.
  7. Outsiders, Not Auto Plant, Battle U.A.W. in Tennessee A unionization drive has drawn national attention as business groups worry about organized labor’s efforts to gain its first foothold at a foreign-owned automobile plant in the South.

Last but not least, Tamir’s reading list (with some help from his friends):

  1. An Evening With Slavoj Zizek Fascinating discussion of philosophy, ideology and economic systems. I’m not crazy about this sort of thing but I found it both very thought-provoking and entertaining, in a bleak sort of way. Note: It seems to have been recorded a few years ago but just released (in this format, at least). Only the first discussion of “contemporary” culture is outdated.
  2. Big Foundations Undermine Democracy Out for a while but it just hit my radar screen and I thought I would pass it on. Dissent: Plutocrats at Work: How Big Philanthropy Undermines Democracy
  3. Robert Reich connects the dots Something else that’s been around a while but this short video is worth viewing and passing on. If you like it, you’ll find similar ones on Youtube, too.
  4. CBC on Wikipedia and wikis as new models for evolving truth If you enjoyed the first part of this two part series, about which we posted last week, Part II is just as good if not better.
  5. Deal Book on Hedge Funds vs. Big Banks This is wacky. Hedge Funds are bidding up the price of mortgage bonds that would stand to benefit from private litigation against the big banks. Is this a rare moment of the market fostering reform? These bonds are getting bid up because hedge funds believe the underlying litigation would get more out of the banks than the government sponsored settlements, and so they are essentially pushing for tougher treatment of the banks, even if it is just for purely selfish reasons.
  6. NYT on Volkswagen upsetting the anti-union apple cart This is a great development. After taking tremendous subsidies to open a huge plant in Tenseness, Volkswagen is bringing its German culture of worker inclusion where it is not welcome by seeking to have the UAW establish worker councils. Now the likes of Grover Norquist and the Tenseness governor are crying foul because this may upset the culture of worker exploitation that is so well rooted in that (and most other) parts of the country. boo hoo.
  7. NYT review of new book on causes of inequality Thomas Edsall’s commentary this week is really a review of Thomas Piketty’s new book, Capital in the Twenty-First Century, which is apparently being viewed as a seminal new analysis of the sources of inequality. Piketty argues, apparently with convincing empirical support, that capitalist economies, when working as they are supposed to, trend towards a maximization of marginal returns on capital investment. The natural result is growing inequality and high unemployment because most people are workers not capitalists, so the big rewards on capital ownership are poorly shared. Depressingly, he views the drop in inequality that occurred around the time of the two world wars as a 50-year blip in the trend based on some unique disruptions or failures of the system (e.g. the wars, the depression, and the political movements that followed). This sounds like a great topic to follow and discuss.
  8. Public Banking Efforts Many of us see public banks as a worthwhile addition to (or for some of us, replacement of) the existing financial system. Apparently the idea of a postal savings bank is getting some traction. See this coverage in Naked Capitalism and the report that is getting attention. It is worth noting that many site viewers from outside the US will consider us Americans primitive for the fact that this idea is new to us.
  9. Simon Johnson (belatedly posted) re financial reform and the debt This comment by Simon Johnson came out last week, but the tight correlation he draws between the pre- and post- Crisis federal debt projections and the absence of meaningful financial form are worth looking at if you haven’t already. It really ought to be a sufficient response to any Tea Bagger arguing in favor of austerity that as long as he is tolerating (in fact defending) the risk of the Financial Sector again exploding the National debt through a continuation of its current business models, it is just comical for the Bagger to to claim his underlying concern in chopping up the social safety net is restoring the country’s finances. If we have learned nothing else, it ought to be that financial implosions are really bad for government balance sheets.
  10. NYT on NY Retirement Funds Pushing Greater Bank Transparency This is a neat development. The article explains how the NY State Comptroller is pushing to force banks to identify employees whose trading activities pose risks of material losses. No success so far … but it is nice to hear seeds of reform coming from the usually pretty complacent State pension fund systems.
  11. Recently Released Report from Roosevelt Institute There is not much we don’t already know in this report, but it is a nice summary of some of the key facts about inequality and how it can be understood as a principal cause of the Financial Crisis.
  12. New Episode of Disorderly Conduct Podcast Altbankers really should just be listening to this podcast whenever it comes out, as it did again on Jan 21, entitled Spectre Hundting. This episode has a discussion of the total idiot-fest that surrounds any reference to communism in the mainstream media, a summary of a great investigation (full story to appear in The Nation) about the e mails from SIFMA that precipitated Fed agency FHFA’s bizarrely inappropriate over-reaction to Richmond County’s eminent domain proposal, and a nice interview with a Strike Debt participant.
  13. Podcast on Inequality Philosophy Bites is a sometimes interesting British-based podcast which usually in 25 minutes or less covers a topic in philosophy through an interview with a professor. This week’s episode is on what the problems with inequality from a philosophic perspective. The Prof, Tim Scanlon from Harvard, does not claim to have all the answers. His lack of dogmatism on the subject is refreshing, and might lead us to believe it is the right time for us to get in the game, as the new book project proposes.

From Week of Jan. 20 – Jan. 26

[Truthdig Podcast (in part) on Net Neutrality]. We have not discussed Net Neutrality at Alt Banking, but maybe we need to. It is really a privatization issue whereby ISP providers like Verizon and ATT are trying to compromise the presently equally accessible status of all websites, thereby converting the internet into a toll road where money could buy a site faster access-speed. The internet should be a public utility, but at least so far ISP providers have not been able to decide which site you can visit, or with what ease. Maybe not for long: the incorrigible DC Circuit just struck-down the FCC’s middling Net Neutrality regulations. Will the FCC fight this, re-write the regs, fold? We should be informed on the issue and the just-noted podcast (even if it has a misleading name re Facebook), is not a bad start. The Net Neutrality segment comes early.

[Reaction to “wealth as an addiction”] Maybe overly negative but a counterpoint in Jacobin to the self-congratulatory tone of the “Wealth Addiction” NYTimes piece cited below. Some complain that “Jacobin rags on everything”. They have a point but worth reading anyway. [Article in NY Times on cost of “Great Recession”] Great recession has huge, long-term costs. [Column in NY Times on how the problem has not been solved.] There is general agreement that we have not addressed the cause of the “Great Recession”. Given the cost, perhaps we should be putting more effort into preventing another one. You think?

[Video Clip From Colbert Report on Low Wage Workers]. We should get this inspiring young KFC fast food worker / union organizer to visit us. She is great! Watch this. He followed it up with this not as inspiring, but pretty damn funny riff on McDonald’s financial counseling tapes for its workers.

[Article in The Atlantic on new Debtors’ Prisons] Georgia has apparently taken privatization so far it is managing to re-create some of the most odious institutions of Dickensian London. Probation services are now outsourced, the private companies assess their supervised “clients” all kinds of (involuntary) fees for supervising them, and then if the folks trying to get back on their feet post-jail don’t pay … they can be found in violation of the terms of their prison-release and sent back. OMG! This is must read stuff.

[Podcast on Knowledge] The Canadian Broadcasting Company’s amazing show, Ideas, has an episode (the first of apparently two) on “The Great Book of Knowledge” by which they mean Wikipedia. The episode resonates some of the topics that briefly, but very interestingly, came up in Moe’s amazing presentation last week, in particular regarding the push by finance and our culture more generally to privatize, control, and profit from knowledge. Wikipedia is such an amazing counter-example to keep us hopeful about how when (however rarely) technologically stored knowledge is allowed to stay in communal hands, it can lead to such phenomenal stuff.

[NYT on hired guns going after Worker Centers] Workers’ Centers are such a huge part of the positive momentum building on low-wage worker issues, and a lot of other cool cooperative stuff. As this article explains, the reality is they had not previously been important enough to be the target of all the venom, lies, and obstructionism the business community throws at unions. But they are now ….

[NYT for-profit schooling and student debt] This is a really good case-study about a publicly traded for-profit technical school that created a sham trust to issue still more loans to cover the last 10% of students’ tuition bills, even if that last piece was supposed to be funded from independent sources. The result has been 57% default rates for low-means students who don’t even get paid that much if and when they graduate. At least we have the CFPB around (and the SEC too apparently) to investigate.

[Wealth as an Addiction from NYT Sunday]. Thinking — as the new (possible) second book outline suggests [see the Forum Page] — of so many of our consumer habits as addictions, this is a timely account of one trader’s path to understand his time in finance as an addition to wealth. It also — for this guy anyway — ends happily.

From Week of Jan. 13 -Jan. 19

[Simon Johnson on Occupy the SEC] This is on Cathy’s weekly e-mail, but too good not to be here too. What a great endorsement by Johnson of our sister group!

[Truthdig Podcast on Minimum Wage] About 10 minutes into the December 5 episode on the Economics of Wage Slavery there is a really good discussion about minimum wage with Sylvia Allegretto, the co-chair of Berkley’s Center for Wage and Employment Dynamics. This is a thoughtful analysis of the topic and how it’s time has come. [Ellen Brown Running for Cal. Treasurer] Ellen Hodgson Brown, the modern prophetess of Public Banking, is running for California Treasurer as a third party candidate. She explains why … and it is for all of the right (our) reasons. [Blog on the culture of work] Don’t ask where this came from, but there is a nice rumination here by some South African blogger about the beauty of recently seeing a journeyman electrician and his apprentice work together. This seems highly relevant to our discussions about the norms of ethics and civility we have a right to expect from our work places. [Kate Pickett and Richard Wilkinson in The Independent] It is kind of their usual rap, but somehow it never gets old. Picket and Wilkinson, authors of now perhaps seminal work the Spirit Level, about the wide variety of adverse effects inequality has on any society it infects, have a post about the shameful 25-year gap in life expectancy between the rich and poor in the UK. [NYT on Systemic Risk] Decent account by the NYT of the possible systemic threats posed by non-bank financial institutions, like mutual and money market funds. Read to the end because there is a great observation by one of our standard bearers, Chairman of the Systemic Risk Council Sheila Bair, about the real problem being that the SEC is stuck in a “disclosure model” and fails to adequately regulate these companies to prevent them from becoming the risks to the system they currently are. [NYT on CFPB] Another summary of the positive contribution the Consumer Financial Protection Bureau is making in many areas. [NYT on Eminent Domain] This is an excellent article on the unbelievable struggles towns, most importantly Richmond California, are going through trying to effectuate an eminent domain-based solution to the problem of writing-down underwater mortgages. The apparent greed-driven retaliatory activity of the banks is not explicitly stated, but pretty darn evident. [Daily News on charter schools] The Daily News has an extensive summary of the charter school battles about to occur under the new mayor. This is very relevant to us both because of the massive role of the Financial Sector in the charter school movement and the relationship of the Sector to the poor. [Deal Book on Just Announced Revision to Volker Rule] As feared (and explained here) five agencies have already caved to bank lobbying and litigation pressure by modifying the Volker rule supposedly in order to accommodate smaller banks that issued (now pretty much worthless) trust-preferred securities. We really need to hear from Occupy SEC as to whether the exemption will be a loop-hole for big banks to game the system, such as by packaging this old small-bank crap with other kinds of big-bank crap, and get “relief” too. [NYT Opinion piece] This article titled, “Is the United States a Racial Democracy” by Yale Philosophy Prof. Vesla Weaver does not say anything about finance. But if we are shifting at AltBanking towards a focus on the Financial System and the poor, we can’t step far without encountering the issue of race and the prison system. This is a beautifully written short essay explaining how our prison system can only be explained as the ultimate form of political exclusion for racial minorities. The true growth of this system occurs very much in tandem with the explosion of finance, including the new norms of predatory finance applied to these same communities. We need to keep trying to figure out the connections. [Blog Post from Counter Currents]. This a nice essay about how privatization of education goes way beyond charter schools, but includes changes in the structure of educational institutions and the content of what they teach. Standardized testing makes kids believe there are single answers to all problems handed down from the top of an educational chain of command, teachers are disenfranchised from the educational community in favor of wildly over-paid educational executives, and the system as a whole is converted into a training ground for future corporate employment. And the article not written in nearly as indignant a tone as this summary. [New York Times hosts Debate on Big Banks] Are Big Banks Out of Control? Simon Johnson explains how a lot of the problems coming out of Wall Street about these companies being so ginormous they are little unmanageable.

From Week of Jan. 5-Jan. 12 [Philosopher’s Zone Podcast] This week there is another great episode from the Australian Broadcasting Company, even more on point than usual. Mark Kingwell, described as the Philosopher of the Unruly Polis, does a very good job explaining, among many other things, social collective action problems in which the chase for personal advantage leaves us all worse off. He considers, for example, the sense of security provided by a bigger vehicle lasting only so long as other drivers don’t catch-up, leading to an arms race, at the end of which we are all on average less safe (the cars are bigger and more impactful). This is all very related to the posts under Voices related to Positive Psychology and Aggregationalist Metrics. If interested, also check out the Darwin Economy by Robert Frank.

[Podcast: Ananya Roy on Against the Grain Radio] This podcast, Bottom Billion Capitalism, gets 5 stars, especially in light of our new focus on finance as it contributes to and treats poverty and the poor. Roy is a UC Berkeley Prof. She provides an incredibly nuanced account of microfinance and the risk it poses of simply enrolling the billion poorest earth-dwellers into the system of debt capitalism and thereby spreading its immoral norms. At the same time, she is complimentary of work done by governmental and NGO microfiancers in places like Bangladesh. Negotiating the grey area between helping the underbanked enter the financial system, and helping expand the current system — is not easy, but is unavoidable; so we need to think about it and work at it

[George Monbiot: A Global Ban on Left-Wing Politics] Not actually new but newly noted: Great discussion of one of the more frightening impacts of the trade deal we are negotiating with Europe. This has gotten less notice than the Trans-Pacific Partnership (TPP) but is equally worrisome. Both agreements would be greatly helped if the Fast Track Authority that has just been introduced to Congress passes. We need to work to stop it now.

[Simon Johnson from NYT] Great commentary from Simon Johnson once again, and hopeful too! There is reason to think that the Fed under Janet Yellin will be more likely to focus on “Too Big To Fail”, although it will also likely continue to substantially view the problem as requiring a legislative fix. Johnson also gives us a good person to think of championing for the still open spot of Fed Vice Chairman: the most active internal Fed mover of this policy-shift: current governor Daniel Tarullo.

[Bloomberg Article] This Bloomberg article gives a great explanation of the sudden explosion of municipal debt in China and how despite the country’s huge trade surpluses, there is a frightening over-hang of bad debt at a local level, with tons of new debt being created just to cover it. Sound familiar?.

[Deal Book Article] We are now going to see just how hard it is to maintain even an OK banking regulation like the new Volcker Rule, as this article explains. Already the banks are pushing hard for exceptions based on the “burden” the new regs place on banks, like Zions, to divest from over-valued, crap-filled TrusPS securities. The proposed “fix” would be so expansive it would basically allow banks to hold any kind of junk so long as some part of the security included TrusPS securities. Ugh! Occupy SEC and other friends are going to have a lot of work holding-back the upcoming tide of roll-back initiatives, which is why, among many other reasons, this system just sucks. [NYT Article] The Times nicely summarizes the mind-boggling array of investigations JP Morgan Chase is currently facing. Geez, forget about the no doubt limp outcomes that will likely ensue — who is going to reimburse tax-payers for basically needing to staff the equivalent of a separate government agency just to perpetually investigate this law-breaking machine?

[Column] As we begin at AltBanking to think more about how Financialization and Privatization target the poor, tid-bits like this from the Duke Chronicle help round-out the picture. The privatization of GED testing services in (now Tea Bag-dominated) NC have quadrupled the cost of getting a GED for the poorest North Carolinians trying to obtain this most minimal certification necessary to enter the job market.

[Blog Post] Yves Smith does a nice job ragging on privatization in this blog post from Global Economy Intersection based on In the Public Interest’s report, Out of Control: The Coast-to-Coast Failures of Outsourcing Public Services to For-Profit Corporations,

[Article] David Graeber has an insightful short commentary in the Daily Kos about America’s culture of hucksterism in which so much of what we come to believe constitutes the value of things magically happens despite the fact that people understand the intrinsic uselessness of the crap they are presented with. Despite their initial accurate evaluation, people think their neighbors and fellow community members are stupid and so credit that they might just be dumb enough to value the crap being presented. If many people do this, then Emperor’s-new-clothes-style — value gets created and assigned irrespective of the intrinsic worth (or worthlessness) of the things being evaluated. He notes the centrality of this magical wealth generation process in the case of financial markets, especially involving complex instruments.

From Week of Dec. 29-Jan. 5

[Full Length Movie] There is a new full-length documentary, Four Horsemen, on our issues released by the Renegade Economist group referenced in the next paragraph. Jump to the Films and Movies section of Resources for the full description. Or better still, go watch the movie for free on You Tube now. See the minutes of our January 5th meeting for the group’s response, having watched it together.I

[Podcast] The Extraenvironmentalist episode of the month is not as amazing as some, especially the first 45 minutes on Steady State Economics, but the latter half by the host of an Australian web site, Karl Fitzgerald of the Renegade Economist, is actually pretty darn good. The overall theme is the need to tax passive use of land, which is something we have never much considered, but sounds pretty interesting. Ever heard of Henry George? He is apparently the prophet-figure of this movement.

[Deal Book Article] In light of the announced departure of George Canellos, the SEC’s co-chief of enforcement, this is a decent summary of the ups and downs of his tenure.

[NYT Article] Wow! This is an incredible summary of the accomplishments of, and homage to, outgoing CFTC Chairman Gary Gensler. He ain’t getting “replaced” anytime soon.

[Podcast] This is “must-listen to” material for Alt Bankers. One of the most prominent opponents of big banks’ “Too Big to Fail” status, Richard Fisher of the Dallas Fed, is Russ Roberts’ guest this week on EconTalk. A bit of a bummer that his policy suggestion of having the banks sign a commitment never to take government bail-out money is so weak.

[Blog Post] Philip Coggan is a columnist for the Economist who shares a lot of their free-trade / low-tax politics, but his book Paper Promises is an incredibly informative account of the modern monetary system. His blog post here is not that interesting for any observations he makes (although he does aptly call Gross National Product “gross”), but rather is worthwhile because of the immensely cool array of statistical aggregates he compiles in the links, all about how different countries are faring by different measures. Who knew, for example, there is a strong statistical correlation between falling world-wide rates of violent crime and countries’ success in reducing lead emissions, for which there is apparently a decent neurological explanation as well.

[End of Year List] We all need encouragement. Here is a nice list from the Huffington Post of 2013’s top 25 progressive success stories.

[Podcast] The Partially Examined Life is not an easy listen, but it can be very rewarding. It is a popular philosophy podcast by some former UT Austin philosophy grad-students who gave up that pursuit, and now in middle age try to re-kindle the spirit of what got them interested in the discipline in the first place. This month’s episode is on Thomas Kunh’s monumental 1962 book The Structure of Scientific Revolution, which gave us the notion of a “paradigm shift.” It is one of the most cited academic works of the past century. By describing how our orderings of the world even in the “hardest” of spheres like physics and chemistry are substantially culturally built and subject to change, it serve as an explication of how the “paradigm shift” that Occupy seeks in finance, money, and economics can happen. The show in fact briefly discusses the applicability of Kuhn’s work to economics at about minute 55. This episode is a good — if not an easy or short — introduction.

[NYT Opinion piece] Simon Johnson once again has some insightful observations about the distortions created by an over-sized financial sector, this one described as the “Rich Country Trap.” He muses over the link between the ability of governments of rich countries like those of the U.S. and UK to print reliable money and the consequent back-stopping they provide to a reckless financial industry. There is a negative feed-back loop created when the thus bloated financial sector staves-off the otherwise natural attacks of competing political-economic communities, like manufacturing, thereby surviving, in fact growing, in response to the crisis it creates.

[Article] The Daily Kos has a nice New Year’s list of top 6 outrageous incidents of privatization. We know about most of them, e.g. Corrections Corp. of America’s capacity guarantees in its deals to privatize prisons, but bundled together they provide a poignant account of the insidiousness of this trend.