Periodic Posts

Posts made periodically by a particular author. The periodicity may be totally random.

How Many Lies Can the WSJ Pack into a Chart on Liar’s Loans?

William K. Black has a second article in his series, this one titled How Many Lies Can the WSJ Pack into a Chart on Liar’s Loans?

If you don’t read this article you have no way of knowing just how fraudulent Wall Street has been, nor how clueless are the people that Barack Obama put in charge of prosecutng Wall Street. I had the “pleasure” of engaing one of these clueless appointees in a Facebook exchange.

Here is an excerpt from the article.

I have discovered even more amazing indicators of fraud in my pro bono efforts on behalf of alleged fraud “mice.” One of the largest home lenders in America ordered its staff – in a passage that they put in all-caps to highlight its importance – never to verify the borrower’s income on liar’s loans even when the underwriters could have done so without any expense. In particular, while the underwriter was permitted to call the employer and verify the borrower’s employment, the underwriters were forbidden to verify the borrower’s income even though they had the boss on the phone line staring at the employee’s records. Everything about liar’s loans screams “accounting control fraud” by the lenders’ controlling officers.

Hillary Clinton Explains the Clinton Foundation   Recently updated !

Crooks and Liars has the video excerpt I have been looking for from the CNN Democratic Town hall

At about 3:35 into the video below, Hillary Clinton said about the billionaires,

They could care less about income inequality. They salve their consciences by giving big money to philanthropy. And, you know, getting great pictures of them standing in front of whatever charity they have donated to.

Is she trying to describe the purpose of the Clinton Foundation? I have often thought that the billionaires might do good works by giving philanthropy, but they might have done much better by not stealing the money from the middle-class in the first place.

One also has to wonder if the Clintons have any self-awareness at all.

Video Shows State Police Discussing How To Charge Protester

The Hartford Courant has this article and video Video Shows State Police Discussing How To Charge Protester.

Picard told The Courant Thursday that he was standing near a state police DUI enforcement checkpoint near the on-ramp to I-84 on Park Road at about 7 p.m. holding a sign that read “Cops ahead. Keep calm and remain silent.” He said he also had a handgun visible in a holster on his waist because Connecticut is an open-carry state and he had a valid permit for the gun.

What this really shows is that some state laws lead to a paradox. Picard was legally and openly carrying a weapon. It is also true that people openly carrying weapons logically scares the hell out of people. Is there a solution.

I know the feeling of the passers-by. I was driving home from work in Oregon one day. Less than half a block from my house there was a teenager standing in his driveway aiming a rifle toward the spot in the street that I was about to pass by. I took a detour and notified the police. What do you think I should have done instead? Should I have just continued to drive, and hope to hell I wasn’t going to get shot? Should I have taken the detour, not notified the police, and hoped to hell the next person by wouldn’t get shot?

Then there was the time I was walking to my car in my employer’s parking lot. A person was getting into his pickup truck and momentarily a concealed handgun revealed itself. I knew that guns were forbidden on the property. A call to company security revealed to me that the person wearing the concealed weapon was a security officer employed by my employer.

I maintain that there is a difference between being frightened by people because of the color of their skin or some other ethnic identifier and being frightened by someone carrying a gun, especially one that is about to be aimed at you. In the one case I am suffering from a belief in a stereotype of what someone is (and has no choice about) and an observation about someone who chooses to carry something that does threaten my life.

Wall Street’s Third Way Absurdly Wrong About Sanders’ Social Security Plan   Recently updated !

The Huffington Post has the article Wall Street’s Third Way Absurdly Wrong About Sanders’ Social Security Plan. Maked Capitalism comments on this article in their article titled Third Way Misleads Hard in a Weak Effort to Discredit Social Security Expansion.

Read the rest of this post to understand the magnitude of the deception that Third Way is pushing.

The Naked Capitalism article said:

As Altman goes on to point out, Third Way isn’t even playing straight on the benefit side, to say nothing of ignoring the tax side. The report breaks beneficiaries into quintiles based on average lifetime income.

This made me suspicious that Third Way was using a particularly egregious ploy that few people will understand the depth of the deception unless they think about it a little more deeply.

I went to the original article to see if it was more explicit about this trick. There is a section in that original article:

The only way to even plausibly make the case that the Sanders proposal disproportionately favors the rich is to obscure the facts.
Instead of using dollar figures to analyze to whom the new benefits go, the report refers to “quintiles.”

This does not clarify my point. I will see what I can do to clarify the point. The headline in the Politifact article Bernie Sanders, in Madison, claims top 0.1% of Americans have almost as much wealth as bottom 90% is a good starting point for my explanation.

These numbers can be converted into another way to look at the wealth imbalance per capita. Per capita, the top 0.1% have almost 900 times the wealth that the per capita bottom 90% have. This multiplier of 900 is only for an equal distribution of total wealth between the top 0.1% and the bottom 90%. There is no upper limit on the ratio of what the top can have compared to the bottom. As more and more of the wealth gets concentrated at the top, the multiplier goes up without limit.

This is decidedly not the case when you talk about money received from Social Security in retirement. The top payment from Social Security does not go up without limit. The ratio between the top payment and the minimum payment does not go up without limit. Even if the top payment were 10 times higher (I think an overestimate) than the minimum payment and all the lower 99.9% got the minimum and all the top 0.1% got the maximum, the ratio of total dollars per segment of the population would be [10 X ( 1/1009 )] : [1 x (999/1009)]. This is 0.99% going to the top 0.1% and 99.0% going to the bottom 99.9%.

To summarize the comparison – the top 0.1% of Americans have almost as much wealth as bottom 90% , and, with some pessimistic assumptions about the unequal distribution of Social Security pension benefits, the top 0.1% would get 0.99% of the benefits and the bottom 99.9% would get 99.0% of the benefits. If you took all the skew out of the Social Security payments, the bottom 99.9% would hardly see any difference. If you took all the skew out of the wealth distribution, the bottom 90% would see their wealth double.

I doubt you could have guessed that the Social Security payments could possibly be this minimally skewed compared to the wealth distribution. This is an indication of the magnitude of the deception promulgated by Third Way.

If you want a revolution, you’re going to have to do something about it

I received an email from Alan Grayson, If you want a revolution, you’re going to have to do something about it.

Of course it is a fund raising email, and if you want to support Alan Grayson, I urge you to follow the link.

I mainly post this here as another explanation of what it takes to have a Bernie Sanders’ type of political revolution. You are going to have to do something about it.

Announcing the Bank Whistleblowers United Initial Initiatives

New Economic Perspectives has several articles on this topic, the first is Announcing the Bank Whistleblowers United Initial Initiatives. The second one, An Explanation of the Bank Whistleblowers United 60-Day Plan, is included at the end of the first one. There are two other documents in the set.

Here is what William K. Black wrote in the introduction of the first document.

I am writing to announce the formation of a new pro bono group and a policy initiative that we hope many of our readers will support and help publicize. Gary Aguirre, Bill Black, Richard Bowen, and Michael Winston are the founding members of the Bank Whistleblowers United. We are all from the general field of finance and we are all whistleblowers who are unemployable in finance and financial regulation because we spoke truth to power and committed the one unforgivable sin in finance and in Washington, D.C. – being repeatedly proved correct when the powerful are repeatedly proved wrong.

This may be a good litmus test for Presidential hopefuls. If I were a betting person, I would bet that Sanders would back most of these proposals, and Hillary would claim her experts tell her not to. (Those experts being from the banking business.)

Are Economists in Denial About What’s Driving the Inequality Trainwreck?

Naked Capitalism has the article Are Economists in Denial About What’s Driving the Inequality Trainwreck?

A new paper by economist Lance Taylor for the Institute For New Economic Thinking’s Working Group on the Political Economy of Distribution takes on the way economists have looked at wealth and income inequality.

The existing social order does not necessarily guarantee that the rich will get richer (remember Keynes on the essential uncertainty of the future). But even if they do, a stiff tax on capital gains could be used to build up a socially-oriented wealth fund that would help offset that.

Look at Norway’s “oil fund,” which takes a cut of petroleum revenues and invests the money while giving a small annual pay-out from its investment returns. An example closer to home is California’s CalPERS retirement fund. The key point is that such funds can save at a higher rate than wealthy households, amassing market power and potentially using capital income for social purposes.

In the labor market, real wages of employees have lagged productivity growth, which is why the profit share for the boss has gone up. Outsourcing has played some role, but policies and legal interpretations (think of so-called “right to work” legislation and attacks on public sector unions) that reduce labor’s bargaining power have been more important. Recreating that power could reverse the trends and slow the accumulation of wealth. Our studies and others suggest that simply raising taxes on the rich and transferring the proceeds downward in the income distribution will not have a large immediate effect on distribution, but the impacts could cumulate over time.

It’s possible to reduce U.S. wealth and income disparity, but reversing the trends of the past 30 or 40 years that got us there will not be easy or quick.

Of course I would like this article. It substantiates a lot of what I have been writing on this blog. Just because I suffer from confirmation bias, doesn’t mean that the article is wrong, though. It is just possible that my ideas really are close to correct.

The talk about Norway’s “oil fund” demonstrates what I think are the benefits of having large parts of the Social Security Trust Fund invested in the stock market. California’s CalPERS retirement fund is just another example. Admittedly CalPERS management has gone off the rails a bit in recent years as documented by the Naked Capitalism web site. That just means we need to develop better control mechanisms for the Social Security Trust Fund when it gets into stock market investing.

Search this website for the many articles I have posted on investing Social Security in the stock market.

Investors Piling into Illiquid Assets to Avoid Discipline of Market Prices

Naked Capitalism has the article Investors Piling into Illiquid Assets to Avoid Discipline of Market Prices.

Now the entire point of illiquid investments is that they supposedly don’t go boom in such a dramatic way. But the crisis just past showed that they lead investors to underestimate the risks of those strategies and overdo them in a very big way. And the undue enthusiasm for investments with flattering valuations evident in the BlackRock survey suggests the odds of a recurrence of bad outcomes, meaning major losses, is high.

I was wise enough to resist the dot com bubble which took quite a few years to blow up in people’s faces. This article mentions one of the things that I observed at the time.

One of the factors that keeps pushing investors into greater risk taking is competitive pressure. If your performance lags, even if it is because you are making better risk/return decisions, you will lose assets (and if you are at a big firm, you will be replaced). Yet we see remarkably little impetus to change a system which rewards the fund managers and gatekeepers (who have a particularly powerful role in keeping this system intact) since they earn….annual fees! A classic “And where are the customers’ yachts?” problem.

It was so discouraging to see wise mutual fund managers being replaced by ones that were willing to take unwarranted risks.

I am not touting my enduring superior wisdom. In the real estate bubble I was fooled into thinking I was taking less risk than I was. It wasn’t disastrous for me because I did at least maintain some diversification. However, I am glad to see article like this one to remind me to stick to my plan, and not get drawn into false senses of security. The strategies that stand the test of time, are the ones that have passed that test for good reason. History has shown over and over again that strategies that claim to beat the market ultimately fail to do so. They usually fail in dramatic ways if you wait long enough for the final outcome. More importantly, you never know very much in advance when the final outcome is about to happen.

Will those who led the financial system into crisis ever face charges?

The ABA (American Bar Association) Journal has the article Will those who led the financial system into crisis ever face charges?

The article is about William K. Black.

Black’s expertise long preceded the scandal at hand, making his defense testimony in U.S. v. Charikov all the more ironic. He made his bones prosecuting fraud back in the savings and loan crisis during the 1980s and early ’90s. As a senior financial regulator, he was a leader in bringing criminal and civil cases against individuals to clean up a then-unprecedented scandal involving officials looting their own financial institutions, largely through self-dealing and extreme risk-taking. More than 1,000 were convicted, many of them high-level.
For years the DOJ has come under withering criticism for not going after high-level executives and other officials in top banks and lending institutions. Black put it succinctly while discussing the Sacramento acquittals: “They’ve been chasing mice—in this case Russian-American mice—while watching the lions roam free.”

Even though I am a huge fan of William K. Black, I learned a lot about him and the 2008/2009 Financial crisis from reading this entertaining article. If you have not been following this as closely as I have, you might learn a lot about how the system is rigged, and which current Democratic Presidential candidate is likely to do something about this and which one is not.

There is a hint of an answer in my previous post Hillary’s Record on Regulating Wall Street Amounts to a Non-Confidence Vote. Bill Clinton’s statements to the S & L Regulators when Clinton took office is what convinced William K. Black to resign as a senior regulator.

Hillary’s Record on Regulating Wall Street Amounts to a Non-Confidence Vote

The Real News Network has the interview Hillary’s Record on Regulating Wall Street Amounts to a Non-Confidence Vote.

Former regulator Bill Black and Public Banking Institute founder Ellen Brown say Hillary’s track record gives no indication that she will fulfill any promise in her 2016 campaign to implement regulations on Wall Street

If you don’t watch this video, you won’t fully appreciate the Clinton’s horrible record on bank regulation, bankruptcy, and shafting the middle-class.

When I tell people why I am so dead set against Hillary Clinton, there is no way I can tell people this information as well as Bill Black does.

Pay particular attention to what Bill Black says about his own, personal experience with what Bill Clinton told him. That certainly is more powerful than anything i could possibly say. Bill Black resigned his job as a bank regulator over what Clinton said.