I posted on Wilkinson over a year ago, and I’m glad to see www.angybearblog.com [corrected] covering his work. This is an oldie but goodie, definitely must-watch even if you’ve seen it before.
Thirty-some years ago, having completed an honors English degree from Yale, I decided to get a Ph.D. in Economics to study the dominant mythology of our age. It can’t fall soon enough….
Saw the hot new Wall Street movie “Margin Call” last night with a special appearance from New York City via Skype of the director, whose father, it turns out, was a New York City investment banker.
The movie sugar coats the cynicism of the investment bankers. Kevin Spacey gives a nice portrayal of a long time investment banker and trader who knows that screwing one’s customers is not good for repeat business.
But the movie merely makes the greatest sin of its Goldman Sachs-like fictional firm (GS-like because it doesn’t go bankrupt) the beat-the-crowd unloading of its tons of merde, toxic MBS assets that a young engineer quant has figured are going to bankrupt the firm in an environment of increasing levels of market volatility, due to the extreme leverage the firm has put on.
No, JC Chandor backs off of showing what really happened, which was that some investment banks and colluding hedge funds actually shorted the same securities they were selling at the same time.
Most people would call that fraud.
JC Chandor missed the opportunity to capture the truly depraved language of the traders, which has been displayed in transcripts of Enron’s traders’ conversations and emails.
When a forest fire shut down a major transmission line into California, cutting power supplies and raising prices, Enron energy traders celebrated, CBS News Correspondent Vince Gonzalesreports.
"Burn, baby, burn. That's a beautiful thing," a trader sang about the massive fire.
Four years after California's disastrous experiment with energy deregulation, Enron energy traders can be heard – on audiotapes obtained by CBS News – gloating and praising each other as they helped bring on, and cash-in on, the Western power crisis.
"He just f---s California," says one Enron employee. "He steals money from California to the tune of about a million."
"Will you rephrase that?" asks a second employee.
"OK, he, um, he arbitrages the California market to the tune of a million bucks or two a day," replies the first.
Though Mr. Tourre was a more junior member of the Goldman team, the S.E.C. case against him was bolstered by colorful e-mails he wrote, calling mortgage securities like those he created monstrosities and joking that he sold them to “widows and orphans.”
I have a number of investment banking and hedgie friends, and I find all of them extraordinarily double-minded when it comes to the ethics of what they do. In that regard, Spacey’s character accurately reflects the tensions some, if not all, folks in the toxic Wall Street environment feel.
But the movie Disney-fies the moral dimensions of what Wall Street has become in recent years.
Too bad.
As of now, democracy and the rule of law are pretty dead in America. Bill Black, who sent a lot of crooks to prison in the aftermath of the S&L crisis twenty years ago, knows from personal experience. How far we have fallen. Must watch.
This indicator has been making the rounds. Recession soon follows when real GDP year-over-year falls below two percent, as it has for the past two quarters. The indicator has a pretty good track record over the past 60+ years, never having missed signaling an ensuing recession a year or so in advance with no false positives.
And the situation in Europe is similar, with a garnish of extreme political instability thrown on for seasoning:
The national campaign to Abolish Corporate Personhood and Defend Democracy.
Sign the Petition: http://MoveToAmend.org/motion-to-amend
* * *
Good morning Benign
Last night Boulder became the second city in the nation to pass a ballot measure
calling for an amendment to the US Constitution that would state that corporations
are not people and the legal status of money as free speech! At midnight, with 93%
of the ballots counted, the measure was handily winning with 74% of voters in support.
Boulder’s campaign is the latest grassroots effort by Move to Amend, a national coalition
working to abolish corporate personhood.
“From Occupy Wall Street to Boulder, Colorado and every town in between, Americans are
fed up with corporate dominance of our political system,” said Kaitlin Sopoci-Belknap, a
national spokesperson for Move to Amend. “Local resolution campaigns are an opportunity
for citizens to speak up and let it be known that we won’t accept the corporate takeover
of our government lying down. We urge communities across the country to join the Move
to Amend campaign and raise your voices.”
Earlier this year voters in Madison and Dane County, Wisconsin overwhelmingly approved
similar measures calling for an end to corporate personhood and the legal status of money
as speech by 84% and 78% respectively. Next week voters in Missoula, Montana will have
an opportunity to vote on a similar initiative in their community.
Move to Amend volunteers in dozens of communities across the country are working to place
similar measures on local ballots next year.
“Working on this campaign was electrifying,” said Scott Silber, a local Move to Amend organizer
in Boulder. “We had such an outpouring of enthusiasm from our community. Folks were so thrilled
to finally have an opportunity to have their voices heard and resoundingly call for an end to
corporate corruption of our democracy. From here we’re taking the campaign to Denver, and then
on to Washington, DC.”
Move to Amend’s strategy is to pass community resolutions across the nation through city councils
and through direct vote by ballot initiative. “Our plan is build a movement that will drive this issue
into Congress from the grassroots. The American people are behind us on this and our federal
representatives will see that we mean business. Our very democracy is at stake,” stated
Sopoci-Belknap.
WHAT YOU CAN DO
FOR PRESS INQUIRIES ABOUT THE BOULDER CAMPAIGN
Move to Amend
P.O. Box 260217
Madison, WI 53726-0217
United States
End Corporate Rule. Legalize Democracy. Move to Amend.
We have entered one of those periods when things are happening so fast it’s difficult to update one’s mental maps in a meaningful way. You know what was there, but you don’t know what’s there now. The last time I felt this way was in the fall of 1990 when the Iron Curtain fell. The map was crumbling.
In the past week we’ve learned that because of “language arbitrage,” another word for sharp business dealings, the entire CDS market is compromised. The Greek default may be deemed “voluntary” by the banks who wrote the worthless paper, and, surprise surprise, also comprise the “regulatory agency” that makes the rules about what is and is not a default.
As the formidable Reggie Middleton says, the CDS market is shot to hell one way or the other, and the five big banks that hold the vast majority of the trillions of dollars of exposure and now effectively unhedged.
It’s a Mexican standoff. Can we trust bankers to honor the rules of Mutual Assured Destruction? Not hardly. Look at how Hank Paulson took advantage of the opportunity to nuke Lehman. At the first whiff of blood in the water the sharks will attack.
The miracle cure of inflation, which really would have been a better way to get out from under bad debt, is not going to happen in a debt deflation. In the banks unwillingness to recognize that their bad debt is not going to be repaid in full, and the whorish accounting profession’s willingness to let them carry it at fictitious values on their books, the downward spiral of debt deflation is guaranteed.
One of the scariest things I’ve seen this Halloween was an interview with Larry Fink of Blackrock Investments on FT in which he (licking his lips) expressed a willingness on the part of the trillions of dollars of Big Money parked on the sidelines worldwide to participate in the rebuilding of some of these troubled economies at equity-like rates of return (with credit enhancements provided by governments and the IMF, if they could only learn how to behave and keep mostly out of the way)….
If the Greeks are smart they’ll tell the EU to shove and just default on their debts. Once bad debts are written down, it’s amazing how quickly new money can appear.
The world economy will stagnate and tend toward war until honesty returns to the financial statements of the big banks.
As John Hussman has pointed out recently, and as I’ve pointed out all along, the failure of big financial institutions does not necessarily mean the economy falls into depression. In the 1930s, the problem was that deposits were wiped out. All the Feds had to do when the crisis hit was to tell Americans their deposits were insured. When a bank fails, the biggest change from a depositor’s point of view is that the sign changes.
Would the investors in the bank, equity holders and probably most bond holders, have been wiped out? Sure. That’s what risk taking is all about.
But our leaders elected to send good money after bad, and bail the banks out on the taxpayers’ backs. The Germans and French and Americans should just admit they made some really bad loans—and were stupid enough to believe the toilet paper CDSs they were selling each other were actually going to protect them from anything. But then, the big banks were stupid enough, in some cases, to hold the “AAA'” securitizations of sub-prime mortgage paper that Wall Street conned them into creating on their own balance sheets.
There’s plenty of equity-backed liquidity sitting on corporate balance sheets.
Can the global financial oligarchy survive a Mexican standoff? That’s what this historical moment will decide.
And if the oligarchs turn to fratricide, and the strongest become even stronger, and exercise their greed even more, how long until the population of the world coalesces into a hard-edged resistance to financial feudalism through outright rebellion?
See also:
Consent Needed for Debt Repayments Michael Hudson, Credit Writedowns
