The passing scene: November 8, 2014

What the Election Means for the Republican Brand by Daniel McCarthy for The American Conservative.

Can a party philosophically defined by Fox News win millennial voters and the electorate of the future?  Daniel McCarthy wrote that they can win only if there’s no-one well organized enough to complete with them.

The well-oiled machinery of movement conservatism remains in the hands of those who think the only trouble with George W. Bush is that he didn’t go far enough, McCarthy wrote.

Lame duck Obama’s brave new world by Pepe Escobar for Asia Times.

Election of a Republican majority in the Senate means no possibility of agreement with Iran on nuclear weapons and fighting ISIS, no possibility of agreement with Russia on Ukraine and Middle East issues, and no possibility of action of climate change.

On the brighter side, Republicans, out of spite, will probably the Trans Pacific Partnership agreement, with its investor-state provisions to block environmental and financial regulation.  The one thing the GOP and Obama administration will agree on is the so-called global war on terror.

As US and China meet at APEC summit, a drama involving billions in trade by Peter Ford for Christian Science Monitor.

China, which is excluded from the proposed Trans Pacific Partnership agreement, will launch a Free Trade Area of the Asia Pacific agreement as an alternative.  All 21 members of the Asia Pacific Economic Cooperation group will be eligible to join.

The New York Times doesn’t want you to understand this Vladimir Putin speech by Patrick L. Smith for Salon.

The Hidden Author of Putinism by Peter Pomerantsev for The Atlantic.

Vladimir Putin is right to insist on the rule of law in international affairs for everyone, including the United States.  The fact that the rule of law is not observed in Russia’s internal affairs is a separate question.

The Hospital’s Duty of Care by Greg Pond for MRSA Topic, a blog devoted to infectious disease.  (Hat tip to Mike the Mad Biologist)

About 8,000 Canadians die every year of hospital-acquired infections.  That’s because physicians and nurses are too under-staffed and over-worked to have time to wash their hands after every interaction with patients.   I’m sure that U.S. hospitals are no better.  This is a much more serious public health threat to North Americans, at this point, than Ebola.

Bill Black on why financial crime isn’t prosecuted

Bill Moyers did a great interview with Bill Black, an expert on white-collar crime and former financial regulator, on the Obama administration’s failure to prosecute financial fraud.  He sums up the situation accurately, clearly and briefly.  Here are highlights from the transcript.

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WILLIAM K. BLACK:  Yeah, in baseball terms they’re batting 0.000.  But they’re not just batting 0.000, they took called strikes. They never got the bat off their shoulder and even swung.  They didn’t even try.

BILL MOYERS:  Do you remember when President Obama told “60 Minutes,” I think it was late December of 2011 that, “Some of the most damaging behavior on Wall Street…wasn’t illegal?”

BLACK: I do.

MOYERS: What did you think?

BLACK: I thought that he was wrong. That in fact if he listened to what the United States of America has demonstrated in court and through investigations, the activity was clearly illegal, it was a violation of a whole series of laws that make it felonies.

And these are just the frauds that caused the crisis. In addition to the frauds that caused the crisis, which are massive and we could talk about, we have the largest cartel in world history. This was the bid rigging of Libor, which is an international standard that sets the prices [interest rates] on over $300 trillion in [loans and financial] contracts.

A trillion is a thousand billion, right?  And then we have the foreclosure frauds where we have false affidavits [that the records were verified].  Over 100,000 felonies in that context.  And then we have the bid rigging on bond prices where all the major banks, according to the Justice Department, were involved.

And then we had the Federal Housing Finance Administration, a federal agency suing virtually every largest, of the largest 20 banks in the United States of America, saying they defrauded Fannie and Freddie through false sales.  And it goes on and on.

The savings and loan debacle, we made over 30,000 criminal referrals [during the administration of the elder George Bush].  Here, zero criminal referrals as far as we can get any public information.  So the first thing Holder should’ve done is re-establish the criminal referral process.  Because, you know, banks don’t make criminal referrals against their own CEOs.

MOYERS: Do you tell yourself, well, there is a justifiable and understandable reason why they don’t prosecute?

BLACK: No, there is no justifiable reason.  Apparently modern financial regulators are vastly more sophisticated than we were as financial regulators 25 years ago.  Because we had never figured out that the key to financial stability was leaving felons in charge of the largest financial institutions in the world.

The government needs better repo men

The U.S. government imposes huge fines against financial criminals, but rarely collects the full amount.

Notice the chart on the right, which is in fractions of a percentage point.  That’s right.  The Commodity Futures Trading Commission has never collected as much as 1 percent of the finds it has imposed in any year.

Big money is easy to hide and hard to collect.  So why not prosecute and see if financial crooks can be sent to jail?

Source: Financial Criminals Have Been Fined Billions, But They Rarely Pay by Joe Pinsker for The Atlantic

The things that President Obama could do

The excuse given by supporters of President Obama is that he is stymied by the Republican control of the House of Representatives and by Republican obstructionism in the Senate.   It is true that the congressional Republicans are determined to block the President’s programs by any legal means necessary.

But as Thomas Frank pointed out in his latest Salon article, there are many things the President could do on his own authority that would be both popular and beneficial to the nation.  They are:

• Enforce the anti-trust laws the way Democrats used to do.
• Investigate and prosecute fraud committed during the housing bubble.
• Make it clear he will not tolerate the college tuition price spiral.

Frank noted that Obama also could tell the Federal Communications Commission that Net Neutrality is the policy of his administration.  He could reclassify marijuana so that it is no longer a Class I narcotic.  He could reform the federal contracting system so as to discourage outsourcing and promote good labor practices.  He could encourage whistle-blowers instead of punishing them.

So why doesn’t the President do any of these things?  It can’t be because he is worried about corporate donations for his next campaign.  He is not eligible to run again, so that is not a factor.

I see three possible explanations.  The most likely is that he genuinely believes in what he is doing.  My guess is that he thinks that the status quo, with some minor modifications to file off sharp edges, is the best that is possible in today’s world.

Another possibility is that he doesn’t want to do anything to jeopardize the kind of lucrative post-Presidential career that Bill Clinton enjoys.  And the third, which I think highly improbable, is that he is afraid, that the powers-that-be know some guilty secret or have some sort of leverage on him.

 

How insiders rob banks and cause crises

William K. Blank is professor of economics and law at the University of Missouri at Kansas City, a former bank regulator and author of The Best Way to Rob a Bank Is to Own One (which I haven’t read).

In this TED talk, he explains how crooked bankers enrich themselves through what he calls “control fraud”.  The method is as follows:

• Make a lot of loans to people you know can’t pay you bank.
• Conceal the bogus nature of the loans through fraudulent appraisals.
• Collect high interest rates (for a while)
• Report record profits (for a while)
• Collect an enormous salary and enormous bonuses (for a while)
• Escape scot-free with your riches when the crash comes.

There are two other elements that he doesn’t mention in this particular talk.

• Convert the loans into financial securities and sell them to suckers
• Go to Congress and the Federal Reserve Board to be bailed out when the crash comes.

Black said all this has been facilitated for the past 20 years by the Clinton, Bush II and Obama administrations, and by the Federal Reserve Board during that period.  Everything is in place for another crash as big as what came before.

It seems obvious to me that we Americans need to (1) break up the “too big to fail” banks (those whose assets exceed a certain set percentage of Gross Domestic Product, (2) refuse to insure deposits that are used for risky investment and (3) prosecute financial fraud, as was done in the Bush I administration following the savings and loan crash.

LINKS

America Has Become a “Cheater-Take-All” Nation by Willliam K. Black for AlterNet.

The Big Lie That Haunts the Post-Crash Economy by Dean Stockman for The New Republic.   The “big lie” is that “everyone” is to blame for the crash of the housing bubble, when in fact the bubble was mainly due to crooked financiers.

New Lawsuit Alleges That Wells Fargo Has a Manual for Mass Fabrication of Foreclosure Documents by Yves Smith.

Why Prosecutors Whiffed on Subprime Crime by Barry Ritholtz for Bloomberg View.

Hat tip for the video to Yves Smith.

Prosecuting Wall Street: time is running out

Two governmental agencies which investigated the causes of the 2008 financial meltdown—the Financial Crisis Inquiry Commission and the U.S. Senate Criminal Investigations Subcommittee—made criminal referrals to the U.S. Department of Justice.  These referrals were never acted on.  Soon the six-year statute of limitations on prosecuting financial fraud will run out, and it will be too late to prosecute.

Chris Swecker, former assistant FBI director in charge of its Criminal Investigations Division, issued a public warning back in 2004 about an explosion of mortgage fraud that could lead to calamity.  The warning was not heeded.  He told Al Jazeera English that the Justice Department has not allocated sufficient resources for investigation and prosecution.  He noted that Attorney General Eric Holder and Criminal Division Chief Larry Breur were white-collar defense attorneys and have a “defense mindset.”

Bryan Georgiou, who served on the Financial Crisis Inquiry Commission, said the Justice Department’s inaction shows “a lack of accountability that is really quite unique in American history.”

Part of the reason is the large sums of money the big Wall Street firms spend on campaign contributions and lobbying.  Goldman Sachs was President Obama’s largest corporate donor in 2008; the Justice Department terminated its criminal investigation of Goldman in August, saying there was no basis for indictments.  Another reason is the revolving door between working for government and working on Wall Street.

William Black, an expert on white collar crime and litigation director of the Federal Home Loan Bank Board during the savings and loan crisis of the late 1980s, said the impact of the recent financial meltdown is roughly 70 times as great, in terms of its economic impact, as the S&L crash, yet the investigative and prosecution effort is much smaller.  The subprime mortgage crisis was fraud from start to finish, from knowingly signing up borrowers based on false information to repackaging the loans and selling them based on false information.

He said the Justice Department appears not to understand “accounting control fraud,” in which executives who control a company loot it for their own benefit.  “The best way to rob a bank is to own or control one,” he said.   Unless President Obama and Attorney General Holder change course, the robbers will get away with it.  And, no, there is no reason to think that Mitt Romney, with his shady financial history, would be any different.