April 24, 2010
April 23, 2010
The Government Accountability Office (GAO) notes that the current federal deficit to GDP ratio is 99%, a figure not reached since 1945. Paul Krugman, among others, sometimes cites this data point to prove we've been here before. One thing I would note before taking too much solace in this analogy is that in 1945 we were fighting World War II. That's maybe what you call your classic special circumstance. The globe was being encircled by two fascist empires and the USA, Great Britain and the Soviet Union were all that stood between them and success. So the question becomes: how can a country get into this kind of a mess without a world war to explain it? That's a much different way of looking at the same facts, don't you think? The United States overcame this monumental debt through post-War prosperity, something else Krugman and the Cornucopians also note without pointing out a rather obvious problem with this part of the analogy. The world lay in ruins in 1945, the USA was the economic colossus with the biggest manufacturing capacity on Earth, the homeland was essentially untouched, and we were on a racehorse productive footing. Does any of that sound remotely similar?
Requires officials and agencies to reasonably attempt to determine the immigration status of a person involved in a lawful contact where reasonable suspicion exists regarding the immigration status of the person, except if the determination may hinder or obstruct an investigation.
April 20, 2010
I'm tempted to keep writing about Wall Street Fraud because the Stat Counter is going through the roof, and I'm aware of my public, you know. Just stick that in the label down below ("Wall Street Fraud," that is) and the world beats a path to your door. So I say hello to my new friends in India & France. I don't know any Hindi, but I can say bonjour. I suppose the citizens of the Earth have been waiting for the United States to begin, at least, the process of trying to clean up the mess that Wall Street has inflicted upon the civilized world at large, and the SEC complaint against Goldman Sachs, while barely a start, is a move in the right direction. I see where the brave and honorable Marcy Kaptur has even sent a letter to Eric Holder expressing her desire to see the Department of Justice use its criminal powers to come to the assistance of the SEC.
April 19, 2010
As a public service, I offer one or two comments on the legal framework relevant to an evaluation of the SEC's case against Goldman Sachs. I am moved to describe this framework by the highly undedifying spectacle of watching Maria Bartiromo on CNBC hysterically defend GS against the SEC's "unfair" allegations against this venerable den of financiers currently infesting Wall Street.
"Rule 10b-5: Employment of Manipulative and Deceptive Practices":
- It shall be unlawful for any person, directly or indirectly, by the use of any means or instrumentality of interstate commerce, or of the mails or of any facility of any national securities exchange,
- (a) To employ any device, scheme, or artifice to defraud,
- (b) To make any untrue statement of a material fact or to omit to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading, or
- (c) To engage in any act, practice, or course of business which operates or would operate as a fraud or deceit upon any person,
- in connection with the purchase or sale of any security."
- That's it, the whole statute. Refreshingly pithy, direct, effective. Goldman is up against subsection (b) of the rule. It omitted "to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading.
- Here are the statements which Goldman made to the German bank and other investors in the Abacus CDO: okay, meine Freunden, here are some wonderful mortgage bonds for you to invest a billion dollars in, easy money, fixed income, and all secured by hard-working Americans religiously devoted to making timely payments, and also you should know that ACA, that big asset manager you like so much, played a role in choosing the specific collateral (American houses) in the portfolio.
- So far so good. But you also need to avoid the omission of a statement necessary to make sense of the statements actually made, so that they're not misleading. Did Goldman omit to say anything? Well, yes. While it's true that the person "on the other side of the deal," in this case John Paulson, is not ordinarily disclosed, Paulson was somewhat more than just the person "on the other side of the deal" in this situation. Paulson was actually the guy choosing the collateral for the CDO, and he was choosing it not for its strong, Amerikanischer creditworthiness, but instead for its essential crappiness. Instead of those idealized Americans of the German fantasy with the picket fence and Priuses in the two-car garage, Paulson was looking for part-time lap dancers in over-limit status on their Discover Cards who claimed, on an unverified basis, that they made $200 k a year writhing and squirming in the Ultra Room of the Flamingo, and scored five houses to flip on just such credentials.
- Details slightly exaggerated for effect; your parody may differ.
- You see, Paulson wanted the short side of the bet, because he had a more realistic appreciation of his fellow Americans. But for a short side to work, you need a sucker on the long side. Just as a bookie who takes a bet on the Lakers, give the 6-1/2 points, Goldman needs to find someone who thinks the OK Thunder can beat the spread. This is what Goldman means by saying it acts as an "intermediary;" they're the tout, and their cut of the action was $15 million from Paulson to make this tanked game work.
- What can we say? Paulson and Goldman had home court advantage. Pays to know the players before you start throwing a billion around, especially when you're relying on a shifty book like the one run by the fine "investment bankers" at Goldman Sachs. It's the oldest permanently established floating con game in New York.