This week, the FBI arrested another on its Top 10 Most Wanted List - notorious gangster Whitey Bulger. He was charged in connection with 19 murders, racketeering, extortion and a host of other mob-like crimes. His story was the motivation behind Jack Nicholson's character in Martin Scorsese's The Departed. The man was living in Santa Monica since he evaded Boston police in 1994.
The LATimes released an editorial comparing Bulger's capture to the capture of Osama Bin Laden, as they were both "living in plain sight" and evaded capture. The article pointed to the fact that Pakistan might leverage Bulger's capture as a way to deflect criticism that Pakistani officials knew of Bin Laden's whereabouts and did not catch him because of corruption.
I will admit that there are some similarities between the two. Both were on the FBI's Top Ten Most Wanted List, both were wanted for orchestrating mass murder, both men were captured after multi-year investigations, and both were hiding in plain sight. But, leveraging Bulger's capture as an example that a highly wanted fugitive could hide in the plain sight ignores a serious and glaringly obvious problem: corruption.
There have been a couple events in the 10-yr search for Osama Bin Laden that have shown obvious corruption amongst the ranks of the Pakistani intelligence. In 2008, militants from a Pakistani arm of the Taliban attacked Mumbai, killing hundreds with AK-47s and explosives. After pressure was put on the ISI (Pakistani intelligence), it was revealed that they provided support and weapons to the terrorists who staged the attack. At the beginning of the War in Afghanistan, US intelligence pinpointed the exact location of OBL and allowed for a joint Pakistani-Afghan force to carry out the assault on his compound. Without US intelligence or military oversight, the force "let him go." The ISI has worked with militants in attacks on India and western forces in Afghanistan while helping the NATO alliance track down Taliban insurgents. There has been convincing proof that Pakistani intelligence is working both sides.
These allegations provide a compelling reason to doubt the veracity of the Pakistani's claim that OBL could live in plain sight and that the ISI and any other Pakistani military force was not in cahoots with him. The evidence also negates any comparison to Bulger that might attempt to exculpate Pakistan.
Thursday, June 23, 2011
Tuesday, June 14, 2011
Corporate Personhood and the Stretching of the First Amendment
In a recent decision (Nevada Commission of Ethics v. Carrigan) the Supreme Court backed away from its Citizens United perspective to strike down a Nevada state court ruling that a vote by a legislator is protected speech.
I am no conservative by any measure, but the loose interpretation of the first amendment that came out of the Citizens United was chilling. I can't imagine, with any stretch of the imagination, how a corporation could have first amendment rights and how campaign spending is tantamount to free speech.
Looking at past jurisprudence, you can see how corporations began to be recognized as people. In the case Dartmouth College v Woodward, the Supreme Court applied the right to contract to an educational institution and corporation (Dartmouth College) when they ruled the state of Maryland could not change the school's charter (as it is a contract). In 1886, the Supreme Court ruled in Santa Clara County v Southern Pacific Railroad that corporations were recognized as people for the purposes of applying the XIV Amendment.
Michael A Carrigan was censured by the NV Ethics Commission for voting as a Sparks city councilman on a hotel that also hired his friend as a consultant. NV Ethics law requires that an legislator recuse themselves from cases involving someone who they are related to or have a "substantially similar" relationship with. The NV state court ruled in his favor, saying that voting is protected first amendment speech.
But, the Supreme court ruled unanimously that a vote by an individual legislator is not protected speech and reversed the decision. Justice Antonin Scalia, writing for the court, said that the legislators vote is his responsibility as a part of the legislature to approve or repeal proposals. The power therein is committed to him by the people, so the legislator has no personal right to it.
It is about time the Supreme Court stopped cow-towing to those who want to gut conflict of interest laws in the name of stretching the First Amendment to its breaking point. This decision finally allows for citizens to hold their elected officials to the highest ethical standards.
I am no conservative by any measure, but the loose interpretation of the first amendment that came out of the Citizens United was chilling. I can't imagine, with any stretch of the imagination, how a corporation could have first amendment rights and how campaign spending is tantamount to free speech.
Looking at past jurisprudence, you can see how corporations began to be recognized as people. In the case Dartmouth College v Woodward, the Supreme Court applied the right to contract to an educational institution and corporation (Dartmouth College) when they ruled the state of Maryland could not change the school's charter (as it is a contract). In 1886, the Supreme Court ruled in Santa Clara County v Southern Pacific Railroad that corporations were recognized as people for the purposes of applying the XIV Amendment.
Michael A Carrigan was censured by the NV Ethics Commission for voting as a Sparks city councilman on a hotel that also hired his friend as a consultant. NV Ethics law requires that an legislator recuse themselves from cases involving someone who they are related to or have a "substantially similar" relationship with. The NV state court ruled in his favor, saying that voting is protected first amendment speech.
But, the Supreme court ruled unanimously that a vote by an individual legislator is not protected speech and reversed the decision. Justice Antonin Scalia, writing for the court, said that the legislators vote is his responsibility as a part of the legislature to approve or repeal proposals. The power therein is committed to him by the people, so the legislator has no personal right to it.
It is about time the Supreme Court stopped cow-towing to those who want to gut conflict of interest laws in the name of stretching the First Amendment to its breaking point. This decision finally allows for citizens to hold their elected officials to the highest ethical standards.
Monday, June 13, 2011
Alabama's HB56: Good Old Southern Hate
Alabama passed the strictest anti-illegal immigration law in the country. Completely ignoring the Federal injunction against Arizona's SB1070, Alabama governor and Southern Baptist deacon Robert J Bentley gave his John Hancock on HB56, reviving what made the South so famous during the 1950s: Hate and Discrimination
Bentley was quoted as saying: "We have a real problem with illegal immigration in this country"
But...not in Alabama. And, last I heard, the Federal Government is the enforcer of laws cracking down on illegal immigration. Maybe we should ask the esteemed Senators from Alabama, Richard Shelby and Jeff Sessions. Yes, I am referring to the same Senators who blocked cloture on immigration bills on the Senate floor. I suppose when you say that we have a problem, elect people who do nothing and then reiterate that we have a problem...you really didn't do anything.
Back to the discrimination.
Illegal immigration comes from a variety of countries. But, the most visible and highest concentrated source of illegal immigration is Latin America and Mexico. But, Latinos only make up 3.9% of the population in Alabama. It must be easy to vote in a law targeting one ethnicity if that ethnicity isn't really represented in the population.
If we can eliminate the logical reason for passing HB56, then what are we left with? For the Alabama legislature, it would be nothing but discrimination. If the state cannot legally enforce this law, then it is just a bunch of angry white people lashing out.
The main job of migrants in the state of Alabama is agriculture. You show me a blue collar white Alabamian who wants to work in the fields for long hours and low pay, and I will eat my hat.
What's even more ridiculous about this law is not the fact that it makes it illegal to fire or refuse to hire a legal citizen if an illegal immigrant is on the payroll. No. It's also not the fact that it makes it illegal to rent property to illegal immigrants, instructs police to "make a reasonable attempt to determine a persons citizenship status," or that a legal contract is automatically void if entered into with an illegal immigrant. And, its even not that they use the same language that the Arizona law used ("reasonable suspicion") that made it a prime target for a Federal Injunction.
It's the backwardness. It's the lack of short term memory. It's the use of public funding (salaries) and time to make a completely symbolic gesture that will not be worth the paper it is written on. But above-all, its the institutional discrimination.
Bentley was quoted as saying: "We have a real problem with illegal immigration in this country"
But...not in Alabama. And, last I heard, the Federal Government is the enforcer of laws cracking down on illegal immigration. Maybe we should ask the esteemed Senators from Alabama, Richard Shelby and Jeff Sessions. Yes, I am referring to the same Senators who blocked cloture on immigration bills on the Senate floor. I suppose when you say that we have a problem, elect people who do nothing and then reiterate that we have a problem...you really didn't do anything.
Back to the discrimination.
Illegal immigration comes from a variety of countries. But, the most visible and highest concentrated source of illegal immigration is Latin America and Mexico. But, Latinos only make up 3.9% of the population in Alabama. It must be easy to vote in a law targeting one ethnicity if that ethnicity isn't really represented in the population.
If we can eliminate the logical reason for passing HB56, then what are we left with? For the Alabama legislature, it would be nothing but discrimination. If the state cannot legally enforce this law, then it is just a bunch of angry white people lashing out.
The main job of migrants in the state of Alabama is agriculture. You show me a blue collar white Alabamian who wants to work in the fields for long hours and low pay, and I will eat my hat.
What's even more ridiculous about this law is not the fact that it makes it illegal to fire or refuse to hire a legal citizen if an illegal immigrant is on the payroll. No. It's also not the fact that it makes it illegal to rent property to illegal immigrants, instructs police to "make a reasonable attempt to determine a persons citizenship status," or that a legal contract is automatically void if entered into with an illegal immigrant. And, its even not that they use the same language that the Arizona law used ("reasonable suspicion") that made it a prime target for a Federal Injunction.
It's the backwardness. It's the lack of short term memory. It's the use of public funding (salaries) and time to make a completely symbolic gesture that will not be worth the paper it is written on. But above-all, its the institutional discrimination.
Wednesday, June 8, 2011
Healthcare Mandate: A Justification "Shot in the Dark"
I am no legal scholar, but I am going to take a "Shot in the Dark" in trying to prove the constitutionality of the new Healthcare mandate by precedent.
Here we go...
In 1905, the Supreme Court rejected a New York law that restricted the working hours of bakers. The majority opinion (by Justice Rufus Peckham) in the case Lochner v New York said that laws regulating working hours of bakers is not within the "Police Powers" of the state and violates the inherent liberty of contract within the Due Process Clause of the 14th Amendment. Legal scholars call the next quarter century the "Lochner Era" where the Supreme Court struck down regulations on business using the same argument.
In 1908, The Supreme Court upheld Oregon regulations on working hours for women. The majority opinion (by Justice David Josiah Brewer) in the case Muller v. Oregon said that Lochner was not overruled, but tweaked. They made the distinction between the role of women and men adding special protection for women because "the physical well-being of woman becomes an object of public interest." Justice Brandeis supported the unanimous decision with a series of studies (later called Brandeis Briefs) that brought social science into the purview of Supreme Court jurisprudence.
In 1923, the Supreme Court struck down a federal minimum wage statute for women. The majority opinion (by Justice Sutherland) in the case Adkins v. Children's Hospital used the Lochner argument, saying that the federal minimum wage statute was a violation of the 14th Amendment.
In 1937, the Supreme Court upheld a minimum wage law in Washington, overruling the Adkins decision. In the majority opinion in the case West Coast Hotel Co v Parrish (by Justice Hughes), the court upheld the law saying that the 14th Amendment protection does conflict with laws that are meant to protect the community and the health and safety of vulnerable groups.
in 1942, the Supreme Court upheld the Agricultural Adjustment Act of 1938 (controlled the wild fluctuation of wheat prices with quotas) in the case Wickard v Filburn. The majority opinion (by Justice Robert Jackson) said that the power to regulate price at which commerce occurs in inherent in the Commerce Clause.
The Healthcare mandate us currently being argued before Federal Judges. 26 states have challenged the law in court, and some have struck it down while others have upheld it. One of the arguments against the law is that it does not have precedent - there is no power or ruling that upholds the federal government's power to force people to take part in commerce (in this case - buy insurance).
I disagree...
Explicit in the Supreme Court cases I have listed is the ability of the Federal Government to regulate commerce. Minimum wage laws, as in the Parrish decision, were upheld to protect the health and well being of a vulnerable group. The Filburn decision showed that, through the power of Interstate Commerce, the federal government can regulate economic issues. The Supreme Court also upheld Social Security, the Voting Rights Act of 1964 and the ban on White's Only lunch-counter through its ability to regulate interstate commerce. The Interstate Commerce Clause, in some regard, can be used to avoid a confusing and patchy regulatory environment of issues of safety and commerce. If an individual were to get sick across state lines and he/she is uninsured, they are subject to the laws of that state. This is where an Healthcare interface with interstate commerce exists. The uninsured become an "object of public interest" because of the burden of care they have on taxpayers. Thus, the federal government has the right to require a minimum standard.
Here we go...
In 1905, the Supreme Court rejected a New York law that restricted the working hours of bakers. The majority opinion (by Justice Rufus Peckham) in the case Lochner v New York said that laws regulating working hours of bakers is not within the "Police Powers" of the state and violates the inherent liberty of contract within the Due Process Clause of the 14th Amendment. Legal scholars call the next quarter century the "Lochner Era" where the Supreme Court struck down regulations on business using the same argument.
In 1908, The Supreme Court upheld Oregon regulations on working hours for women. The majority opinion (by Justice David Josiah Brewer) in the case Muller v. Oregon said that Lochner was not overruled, but tweaked. They made the distinction between the role of women and men adding special protection for women because "the physical well-being of woman becomes an object of public interest." Justice Brandeis supported the unanimous decision with a series of studies (later called Brandeis Briefs) that brought social science into the purview of Supreme Court jurisprudence.
In 1923, the Supreme Court struck down a federal minimum wage statute for women. The majority opinion (by Justice Sutherland) in the case Adkins v. Children's Hospital used the Lochner argument, saying that the federal minimum wage statute was a violation of the 14th Amendment.
In 1937, the Supreme Court upheld a minimum wage law in Washington, overruling the Adkins decision. In the majority opinion in the case West Coast Hotel Co v Parrish (by Justice Hughes), the court upheld the law saying that the 14th Amendment protection does conflict with laws that are meant to protect the community and the health and safety of vulnerable groups.
in 1942, the Supreme Court upheld the Agricultural Adjustment Act of 1938 (controlled the wild fluctuation of wheat prices with quotas) in the case Wickard v Filburn. The majority opinion (by Justice Robert Jackson) said that the power to regulate price at which commerce occurs in inherent in the Commerce Clause.
The Healthcare mandate us currently being argued before Federal Judges. 26 states have challenged the law in court, and some have struck it down while others have upheld it. One of the arguments against the law is that it does not have precedent - there is no power or ruling that upholds the federal government's power to force people to take part in commerce (in this case - buy insurance).
I disagree...
Explicit in the Supreme Court cases I have listed is the ability of the Federal Government to regulate commerce. Minimum wage laws, as in the Parrish decision, were upheld to protect the health and well being of a vulnerable group. The Filburn decision showed that, through the power of Interstate Commerce, the federal government can regulate economic issues. The Supreme Court also upheld Social Security, the Voting Rights Act of 1964 and the ban on White's Only lunch-counter through its ability to regulate interstate commerce. The Interstate Commerce Clause, in some regard, can be used to avoid a confusing and patchy regulatory environment of issues of safety and commerce. If an individual were to get sick across state lines and he/she is uninsured, they are subject to the laws of that state. This is where an Healthcare interface with interstate commerce exists. The uninsured become an "object of public interest" because of the burden of care they have on taxpayers. Thus, the federal government has the right to require a minimum standard.
Wednesday, June 1, 2011
Kansas: A Microcosm for the Debate over Cuts and Job Creation
Kansas Governor Sam Brownback privatized the state's art agency this week by signing a bill that stripped all state funding. Brownback was elected Governor after a 2010 campaign based on job creation. His privatization of the state art's agency was a way to reduce the deficit.
But...not really.
Brownback based his decision on the return that the state of Vermont got when it privatized its arts agency.
Except...not.
In an open letter to governor Brownback, Vermont Arts Council Executive Director Alex Aldrich debunked his claim saying that all states should have a publicly-supported arts program, citing that Vermont got a whopping 775% return on its investment.
As for job creation, or reducing the deficit....not so much.
According to an LATimes Article covering the story, the arts commission generates $95.1 million in household income and $15.6 million to state and local revenues. They are also forfeiting an $800,000 grant from the National Endowment for the Arts and another $400,000 grant from the Mid-America Arts Alliance. Arts non-profits who receive funding from the state's coffers also employ over 4,600.
This fight in Kansas is a microcosm for a larger debate over cuts and job creation. Somehow, in the minds of Congressional Republicans, there is no conflict between drastic and painful cuts and job creation. Republican governors all over the country have chosen to exploit this directive to make cuts to programs that they have a moral objection to: Planned Parenthood, National Public Radio, Environmental Protection and the Arts. This is pure political opportunism.
There is a contempt amongst Republican ranks towards every aspect of the government, including public workers. They don't view them as people, but moreso as collateral damage in the process of growing the economy and creating jobs. But, when you make drastic cuts to programs, like Brownback did, you lose the economic support that those programs provide to public entities (like grants from the NEA) and you layoff thousands. In the name of debt reduction you have destroyed jobs, reduced a financial support line for private business and...well...not reduced the deficit. A recent report on layoffs reported that 40% of all layoffs in April were from public workers. Hey...they're people too.
There has to be a "come-to-jesus-moment" (no pun intended) for Republicans of this ilk: drastic budget cuts means layoffs, and layoffs means less jobs.
But...not really.
Brownback based his decision on the return that the state of Vermont got when it privatized its arts agency.
Except...not.
In an open letter to governor Brownback, Vermont Arts Council Executive Director Alex Aldrich debunked his claim saying that all states should have a publicly-supported arts program, citing that Vermont got a whopping 775% return on its investment.
As for job creation, or reducing the deficit....not so much.
According to an LATimes Article covering the story, the arts commission generates $95.1 million in household income and $15.6 million to state and local revenues. They are also forfeiting an $800,000 grant from the National Endowment for the Arts and another $400,000 grant from the Mid-America Arts Alliance. Arts non-profits who receive funding from the state's coffers also employ over 4,600.
This fight in Kansas is a microcosm for a larger debate over cuts and job creation. Somehow, in the minds of Congressional Republicans, there is no conflict between drastic and painful cuts and job creation. Republican governors all over the country have chosen to exploit this directive to make cuts to programs that they have a moral objection to: Planned Parenthood, National Public Radio, Environmental Protection and the Arts. This is pure political opportunism.
There is a contempt amongst Republican ranks towards every aspect of the government, including public workers. They don't view them as people, but moreso as collateral damage in the process of growing the economy and creating jobs. But, when you make drastic cuts to programs, like Brownback did, you lose the economic support that those programs provide to public entities (like grants from the NEA) and you layoff thousands. In the name of debt reduction you have destroyed jobs, reduced a financial support line for private business and...well...not reduced the deficit. A recent report on layoffs reported that 40% of all layoffs in April were from public workers. Hey...they're people too.
There has to be a "come-to-jesus-moment" (no pun intended) for Republicans of this ilk: drastic budget cuts means layoffs, and layoffs means less jobs.
Tuesday, May 31, 2011
A Post Glass-Steagall World: The Proliferation of Too-Big-to-Fail
In 2008, Bear Sterns collapsed. A couple months after its quick-acquisition by JP Morgan, I was sitting on a bus at 4am driving towards Masada in Israel. I turned to my friend Max from Boston, an associate at Lehmann Brothers. I asked him what he thought about Bear Sterns. He shrugged and told me that he would "wait and see." Three months later, Lehmann filed for bankruptcy.
And, so it began. Bank of America bought out Merrill Lynch (forced acquisition, depending on who you are talking to), JP Morgan bought Washington Mutual, AIG tanked, Goldman Sachs tanked and the NYSE dropped precipitously, sending the Down-Jones Industrial average from a high of over 14,000 to just below 6,000 (this occurred over a number of months). Small banks failed, big banks went bust, investments flopped and "too-big-to-fail" entered into the political and social lexicon.
As is the tradition with many major financial emergencies, politicians and businessmen pointed fingers. Democrats blamed the Bush Admin and Alan Greenspan, citing deregulation of banks and the egregiously bad enforcement of regulations by the Securities and Exchange Commission. Republicans blamed the Clinton Admin for its mission to allow anyone with a pulse to get a home loan. And, populists blamed shady and high risk investments by big firms like Goldman Sachs and AIG.
They are all correct:
The Clinton Administration's policies that gave home loans to individuals with terrible credit was a driver of many of the foreclosures when the housing bubble burst. But, in his compromise with the Republican-led Congress, he signed the repeal of the Glass-Steagall Act. This allowed for the creation of the behemoths that became "too-big-to-fail" by removing the separation between Wall St banks and Depository banks. Add in a host of high risk home mortgages that were packaged as securities based on an idea of a "never-ending" rise in housing prices, and you have the right mix for financial collapse stew.
What should be emphasized about the banking and investment environment, post-financial collapse, is the 1999 repeal of the Glass-Steagall Act. The Act, passed in 1933, created the Federal Deposit Insurance Corporation (FDIC) and introduced bank reform measures to curb speculation. The Great Depression, caused by a combination of international monetary policy (see "Dollar Diplomacy") and high speculative financial policy (See "Buying on Margin c. 1920s), was the main driver for bank reform. During the 1980s, investment banks lobbied heavily to get the Act repealed. In 1987, arguments arose for preservation and repeal:
Preservation:
1. Conflicts of interest for granting credit - lending and investing would happen in the same place, an abuse the Act was created to curb
2. Depository banks have a lot of power because they control the people's money - they should be regulated
3. Investments banks could make risky moves, putting the people's money in jeopardy.
Repeal:
1. Banks are losing market share to securities firms
2. Conflicts of interest can be avoided by regulatory enforcement
3. Combination of commercial and investment banks would lead to diversification and a reduction in risk
For those who argued for preservation, it seems as if they had some sort of financial crystal ball. For those who argued for repeal, eating your words doesn't even cover it:
1. Banks are losing market share to securities firms
What Happened: Securities firms invested in the bundled high-risk mortgages that were backed by loans from banks. Once the housing market tanked, the defaults shot up. Banks were left with trillions (yes...trillions) in toxic investments, which the government was forced to buy out.
2. Conflicts of interest can be avoided by regulatory enforcement
What Happened: Government bodies responsible for overseeing financial markets (SEC) did a piss-poor job at enforcement where they took a complacent attitude towards high risk investments. Ponzi schemes like Bernie Madoff's showed that "regulatory enforcement" wasn't worth the paper it was written on.
3. Combination of commercial and investment banks would lead to diversification and a reduction in risk
What Happened: High risk, high return, highly insulated investments led to "too-big-to-fail" institutions to play Russian Roulette with people's deposits and long-term savings (401[k]s, Retirement Funds, etc). Now, imagine what it would be like if Social Security was privatized before this happened.
A major criticism of the TARP/Bank Bailout initiative was based on "dependence." (my characterization). When an financial institution makes a risky investment, like buying up sub-prime mortgage securities, and the investment fails, the institution will learn one of the major lessons of capitalism - learn from your mistakes. But, with the advent of "too-big-to-fail," the institution will never learn their lesson. If the consequences of allowing that institution to fail have such a detrimental effect on the global economy that it must be "bailed out" then policies that lead to such a status must be reviewed. Due to the lack of strong regulation in the financial market, coupled with the surety that a financial institution will be "bailed out," we will never learn from the mistakes of the financial crisis, and there will only be a continued proliferation of "too-big-to-fail."
A return to the Glass-Steagall Act may not be pertinent at this time. We have entered a post-Act era, and must accept the existence of "too-big-to-fail." It is in this environment that the Fed and the Private Sector have to dance a fine line between punishing institutions for risky investment and growing a recessed economy.
And, so it began. Bank of America bought out Merrill Lynch (forced acquisition, depending on who you are talking to), JP Morgan bought Washington Mutual, AIG tanked, Goldman Sachs tanked and the NYSE dropped precipitously, sending the Down-Jones Industrial average from a high of over 14,000 to just below 6,000 (this occurred over a number of months). Small banks failed, big banks went bust, investments flopped and "too-big-to-fail" entered into the political and social lexicon.
As is the tradition with many major financial emergencies, politicians and businessmen pointed fingers. Democrats blamed the Bush Admin and Alan Greenspan, citing deregulation of banks and the egregiously bad enforcement of regulations by the Securities and Exchange Commission. Republicans blamed the Clinton Admin for its mission to allow anyone with a pulse to get a home loan. And, populists blamed shady and high risk investments by big firms like Goldman Sachs and AIG.
They are all correct:
The Clinton Administration's policies that gave home loans to individuals with terrible credit was a driver of many of the foreclosures when the housing bubble burst. But, in his compromise with the Republican-led Congress, he signed the repeal of the Glass-Steagall Act. This allowed for the creation of the behemoths that became "too-big-to-fail" by removing the separation between Wall St banks and Depository banks. Add in a host of high risk home mortgages that were packaged as securities based on an idea of a "never-ending" rise in housing prices, and you have the right mix for financial collapse stew.
What should be emphasized about the banking and investment environment, post-financial collapse, is the 1999 repeal of the Glass-Steagall Act. The Act, passed in 1933, created the Federal Deposit Insurance Corporation (FDIC) and introduced bank reform measures to curb speculation. The Great Depression, caused by a combination of international monetary policy (see "Dollar Diplomacy") and high speculative financial policy (See "Buying on Margin c. 1920s), was the main driver for bank reform. During the 1980s, investment banks lobbied heavily to get the Act repealed. In 1987, arguments arose for preservation and repeal:
Preservation:
1. Conflicts of interest for granting credit - lending and investing would happen in the same place, an abuse the Act was created to curb
2. Depository banks have a lot of power because they control the people's money - they should be regulated
3. Investments banks could make risky moves, putting the people's money in jeopardy.
Repeal:
1. Banks are losing market share to securities firms
2. Conflicts of interest can be avoided by regulatory enforcement
3. Combination of commercial and investment banks would lead to diversification and a reduction in risk
For those who argued for preservation, it seems as if they had some sort of financial crystal ball. For those who argued for repeal, eating your words doesn't even cover it:
1. Banks are losing market share to securities firms
What Happened: Securities firms invested in the bundled high-risk mortgages that were backed by loans from banks. Once the housing market tanked, the defaults shot up. Banks were left with trillions (yes...trillions) in toxic investments, which the government was forced to buy out.
2. Conflicts of interest can be avoided by regulatory enforcement
What Happened: Government bodies responsible for overseeing financial markets (SEC) did a piss-poor job at enforcement where they took a complacent attitude towards high risk investments. Ponzi schemes like Bernie Madoff's showed that "regulatory enforcement" wasn't worth the paper it was written on.
3. Combination of commercial and investment banks would lead to diversification and a reduction in risk
What Happened: High risk, high return, highly insulated investments led to "too-big-to-fail" institutions to play Russian Roulette with people's deposits and long-term savings (401[k]s, Retirement Funds, etc). Now, imagine what it would be like if Social Security was privatized before this happened.
A major criticism of the TARP/Bank Bailout initiative was based on "dependence." (my characterization). When an financial institution makes a risky investment, like buying up sub-prime mortgage securities, and the investment fails, the institution will learn one of the major lessons of capitalism - learn from your mistakes. But, with the advent of "too-big-to-fail," the institution will never learn their lesson. If the consequences of allowing that institution to fail have such a detrimental effect on the global economy that it must be "bailed out" then policies that lead to such a status must be reviewed. Due to the lack of strong regulation in the financial market, coupled with the surety that a financial institution will be "bailed out," we will never learn from the mistakes of the financial crisis, and there will only be a continued proliferation of "too-big-to-fail."
A return to the Glass-Steagall Act may not be pertinent at this time. We have entered a post-Act era, and must accept the existence of "too-big-to-fail." It is in this environment that the Fed and the Private Sector have to dance a fine line between punishing institutions for risky investment and growing a recessed economy.
Thursday, May 19, 2011
The Massey Way
Massey Energy, the company that owned the Upper Big Branch Mine (UBB) in West Virginia, has finally been faulted with the disaster that killed 29 miners. It only took 13 months.
After the disaster, J David McAteer asked then governor Joe Manchin III (now Senator Joe Manchin III) for an independent investigation into Massey Energy and the cause of the UBB explosion. McAteer is the president for special programs at Wheeling-Jesuit University and was a former secretary of Labor in charge of the Mine Safety and Health Administration (MSHA) under President Clinton.
McAteer's report made the following conclusions about the cause of the UBB explosion:
1. The explosion was preventable
2. The explosion was the result of egregious failures and violations of minimum safety standards including proper ventilation and water of coal particulates. The free flowing particulates coupled with methane buildup ignited an explosion that killed the 29 miners.
3. Self regulating pre-shift examinations broke down leading to violations that were not recorded. MSHA did not provide enough oversight to ensure minimum safety standards were complied with and the West Virginia Office of Miners Health Safety and Training failed in its role to oversee miner's working conditions.
4. Self regulation of miner's working conditions and health as a responsibility of the coal company broke down.
5. The disaster revealed an egregious disregard for the health/safety of coal miners working for Massey.
McAteer also commented on the culture of violations and avoidance at Massey. This section of the report sums up the "Massey Way":
"...Massey is...well known for causing incalculable damage to mountains, streams and air in the coalfields; creating health risks for coalfield residents by polluting streams, injecting slurry into the ground and failing to control coal waste dams and dust emissions from processing plants; using vast amounts of money to influence the political system; and battling government regulation regarding safety in the coal mines and environmental safeguards for communities."
Close to one year ago, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. The Bill had an obscure section that required all coal companies to report mine violations under MSHA's Federal Mine Safety and Health Act section 104. Section 104 defines and sets penalties for violations that are deemed "significant and substantial...where there exists a likelihood...of injury or illness of a reasonably serious nature."
According to Massey's most recent 10-Q filings, which include the reporting requirement, they received 1,158 violations, including 126 at the UBB-South mine. The resulting fines were $4,416,785.
And, that's just for the first quarter of 2011.
After the UBB disaster, Democrats in both chambers introduced legislation to expand the regulatory power of MSHA by giving them power of subpoena and the power to close a mine, bolster mine safety laws, hiking fines for mine violations and whistle-blower protection. Republicans complained that the regulations would kill jobs and put a burden on coal companies. Sen Jay Rockefeller (D-WV) and Rep George Miller (D-CA) have introduced bills that would strengthen health protection for miners. One bill passed the Education and Labor committee in House on a party-line vote, but stalled in the Senate. The bill has be reintroduced to the current Congress, but is taking a backseat to the debt ceiling debate.
What is so damning about the McAteer report was not the conclusion about Massey's fault in the UBB disaster or the safety violations. It was a short box on page 32 of the report that explained a post-mortem autopsy on 24 of the miners who died in the explosion. 17 of the 24 miners autopsied had Coal Workers Pneumoconiosis (CWP or Black Lung). That is a whopping 71%, or about ten times the WV average and thirteen times the national average. Of the seven that did not have an official diagnosis of CWP, four had "anthracosis" or what is often used as a placeholder for CWP. So, it is possible that 21 out of 24, or 87.5%, had CWP. The miners' ages ranged from 25-61.
A 25 year old with Black Lung...
After the disaster, J David McAteer asked then governor Joe Manchin III (now Senator Joe Manchin III) for an independent investigation into Massey Energy and the cause of the UBB explosion. McAteer is the president for special programs at Wheeling-Jesuit University and was a former secretary of Labor in charge of the Mine Safety and Health Administration (MSHA) under President Clinton.
McAteer's report made the following conclusions about the cause of the UBB explosion:
1. The explosion was preventable
2. The explosion was the result of egregious failures and violations of minimum safety standards including proper ventilation and water of coal particulates. The free flowing particulates coupled with methane buildup ignited an explosion that killed the 29 miners.
3. Self regulating pre-shift examinations broke down leading to violations that were not recorded. MSHA did not provide enough oversight to ensure minimum safety standards were complied with and the West Virginia Office of Miners Health Safety and Training failed in its role to oversee miner's working conditions.
4. Self regulation of miner's working conditions and health as a responsibility of the coal company broke down.
5. The disaster revealed an egregious disregard for the health/safety of coal miners working for Massey.
McAteer also commented on the culture of violations and avoidance at Massey. This section of the report sums up the "Massey Way":
"...Massey is...well known for causing incalculable damage to mountains, streams and air in the coalfields; creating health risks for coalfield residents by polluting streams, injecting slurry into the ground and failing to control coal waste dams and dust emissions from processing plants; using vast amounts of money to influence the political system; and battling government regulation regarding safety in the coal mines and environmental safeguards for communities."
Close to one year ago, the Dodd-Frank Wall Street Reform and Consumer Protection Act was passed. The Bill had an obscure section that required all coal companies to report mine violations under MSHA's Federal Mine Safety and Health Act section 104. Section 104 defines and sets penalties for violations that are deemed "significant and substantial...where there exists a likelihood...of injury or illness of a reasonably serious nature."
According to Massey's most recent 10-Q filings, which include the reporting requirement, they received 1,158 violations, including 126 at the UBB-South mine. The resulting fines were $4,416,785.
And, that's just for the first quarter of 2011.
After the UBB disaster, Democrats in both chambers introduced legislation to expand the regulatory power of MSHA by giving them power of subpoena and the power to close a mine, bolster mine safety laws, hiking fines for mine violations and whistle-blower protection. Republicans complained that the regulations would kill jobs and put a burden on coal companies. Sen Jay Rockefeller (D-WV) and Rep George Miller (D-CA) have introduced bills that would strengthen health protection for miners. One bill passed the Education and Labor committee in House on a party-line vote, but stalled in the Senate. The bill has be reintroduced to the current Congress, but is taking a backseat to the debt ceiling debate.
What is so damning about the McAteer report was not the conclusion about Massey's fault in the UBB disaster or the safety violations. It was a short box on page 32 of the report that explained a post-mortem autopsy on 24 of the miners who died in the explosion. 17 of the 24 miners autopsied had Coal Workers Pneumoconiosis (CWP or Black Lung). That is a whopping 71%, or about ten times the WV average and thirteen times the national average. Of the seven that did not have an official diagnosis of CWP, four had "anthracosis" or what is often used as a placeholder for CWP. So, it is possible that 21 out of 24, or 87.5%, had CWP. The miners' ages ranged from 25-61.
A 25 year old with Black Lung...
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