In the 10 May 2010 issue of The New Yorker, Malcolm Gladwell writes Pandora’s Briefcase, a review of Ben Macintyre’s book, “Operation Mincemeat.” It is the retelling of the “William Martin” story and the deceiving of German Intelligence during WWII.

“They know you know they know you know.”

In my youth, I first read about “Operation Mincemeat” in Ewen Montagu’s 1953 book, “The Man Who Never Was.” Montagu was one of the “creators” of “William Martin.”

Note:  New Yorker links eventually disappear behind its paywall.

-RichardH

In the 25 April 2010 issue of the New York Times, Frank Rich says, Fight On, Goldman Sachs!. Rich argues that GS’s alleged past misdeeds in the synthetic CDO market, the SEC fraud suit against GS, GS’s protestations to the contrary,  the suspicion that other financial organizations have committed fraud, Senate Minority Leader Mitch McConnell’s obviously flawed assertion that the Senate reform bill somehow guaranteed bank bailouts, and that a Pew Poll finding that even in a divided America 61 percent favor financial regulatory reform, is causing the 41 Republican Senatorial coalition against financial regulation reform to show signs of crumbling around the edges.

In Rich’s words, “The [Republican Senators’] unity pledge in McConnell’s pocket was now worth as much as a mortgage-backed security.”

Check out the links in Rich’s article.

-RichardH

On 23 April 2010, Barry Ritholtz posted 10 things you don’t know (or were misinformed) about the GS case. Looks bad for Goldman Sachs. [Crocodile tears]

-RichardH

In the 21 April 2010 issue of The Guardian, Simon Winchester gives a history of disastrous volcanoes.

-RichardH

On 16 April 2010, Bill Moyers Journal (PBS) aired an excellent interview with Simon Johnson and James Kwak on Financial Regulation Reform. [This link takes you to both an archived video and a transcript of the broadcast.] The interview is an indictment of the historical (and current) intertwining of large financial institutions and political legislators to create and maintain a financial oligarchy in this country. Shame on the members of Congress who are trying to thwart efforts to reform our financial system!

This interview is emblematic of the hard-hitting and well-reasoned analysis of Bill Moyers Journal. I am deeply saddened that Bill Moyers is retiring on 30 April 2010; I hope that PBS finds someone nearly as talented as Moyers to fill his shoes.

Simon Johnson is former Chief Economist at the International Monetary Fund and is currently a Professor at MIT’s Sloan School of Management and a Senior Fellow at the Peterson Institute.   James Kwak is  a former Consultant at McKinsey and Co. and is currently a student at Yale Law School.

Both Johnson and Kwak are co-founders of the financial crisis blog, BaselineScenario, and are co-authors of the recently published book, 13 Bankers. Here are two reviews of “13 Bankers”:

“The best explanation yet for how the smart guys on Wall Street led us to the brink of collapse. In the process, Johnson and Kwak demystify our financial system, stripping it down to expose the ruthless power grab that lies at its center.”
— Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard Law School; and Chair, TARP Congressional Oversight Panel

“Too many discussions of the Great Recession present it as a purely economic phenomenon – the result of excessive leverage or errors of monetary policy or algorithms run mad. Simon Johnson was the first to point out that this was and is a crisis of political economy. His and James Kwak’s analysis of the unholy inter-twining of Washington and Wall Street – a cross between the gilded age and a banana republic – is essential reading.”
— Niall Ferguson, Professor of History, Harvard University; Professor, Harvard Business School; and author of The Ascent of Money

-RichardH

Planet Money’s 16 April 2010 piece, The SEC’s Case Against Goldman Sachs, Explained, briefly summarizes the SEC’s contention that a hedge fund (Paulson & Co) “wanted to bet against the housing market. It talked to Goldman about putting together a CDO full of mortgage-related assets that Paulson thought were likely to lose value. Paulson’s plan was to bet against the CDO, so it would profit if the CDO lost value.” “Goldman didn’t tell people who invested in the CDO about the hedge fund’s role” and intentions.

CDO stands for Collateralized Debt Obligation.

On 17 April 2010, Louise Story and Gretchen Morgenson (NYT) lay out some more detail in U.S. Accuses Goldman Sachs of Fraud in Mortgage Deal.

-RichardH

SteveG’s post, Sen. Dodd Accuses Republican Leader of Lying About His Bill, points to a McClatchy article which in turn refers to a memo by Republican strategist and wordsmith Frank Luntz on how to defeat financial regulatory reform. Luntz is in the news because Republican Senate Minority Leader Mitch McConnell lifts phrases almost verbatim from Luntz’s “roadmap.”

Ezra Klein makes similar points in his 15 April 2010 Washington Post article, What’s the Republican Alternative to Bailouts?. Klein not only shows that Senator McConnell follows Luntz’s roadmap and also has misrepresented Senator Dodd’s bill but also goes on to say:

But there’s a good argument to be made that this bill doesn’t go far enough. On some level, so long as we have systemically important firms, there will be the risk of bailouts. Management and shareholders might not win out, but many creditors will do better than they should, and so too will some firms. Criticizing the Dodd bill for not entirely ending the problem of systemically-crucial firms — and thus rescues of some form or another — is a fair critique.

The ways to permanently end bailouts, however, are very radical: The most common suggestion is to break up large firms before they become too big to fail. Another option, put forward by Gary Gorton, is to insure the securities that banks lend to one another. Another option is to impose such enormous capital requirements on systemically important banks that they can’t take many risks and can mostly cover their debts.

If you want to read Luntz’s 17-page memo, you can find it in Sam Stein’s 1 February 2010 HuffPost article, Frank Luntz Pens Memo to Kill Financial Regulatory Reform.

-RichardH

On 24 March 2010, Hullabaloo reports Wolf Blitzer’s tardy explanation on “why so many people might suddenly be in favor of the HCR bill when they thought it was a bad idea before.”

Humph!

-RichardH

In his 20 March 2010 Boston Globe editorial, Fight Republicans’ hypocrisy, Vermont Senator Bernie Sanders writes,

The good news is that, in order to get this country moving again, all the Democrats have to do is to use the same Senate procedure that Republicans employed — time and time again — in the past. The “reconciliation process’’ requires a simple majority of 51 votes to pass legislation in the Senate, not 60. I find the hypocrisy extraordinary that when Democrats now talk about using reconciliation, Republicans begin whining and howling about how unfair and undemocratic it is. They have used that very same approach time after time when it suited their purposes.

Remember Newt Gingrich’s “Contract with America,’’ the bible of the Republican Revolution of the 1990s, which attempted to slash Medicare and Medicaid, cut education, raise taxes on working families, weaken environmental standards, and give huge tax breaks to the rich? Before President Clinton vetoed that bill it passed by reconciliation. In fact, of the 22 times that reconciliation has been used since 1980, Republicans have used it 16 times — often to provide tax breaks to the wealthy and slash health care for the elderly and poor.

Sen. Judd Gregg of New Hampshire, among many Republicans, is now a critic of reconciliation. But back in 2005, when the Republicans used it, he sang a different tune: “All this rule of the Senate does is allow a majority of the Senate to take a position and pass a piece of legislation… Is there something wrong with majority rules?’’ Gregg was right then. He’s wrong now.

In 1985, Congress provided health insurance for the unemployed, a backstop insurance policy commonly known as COBRA. Do you know what COBRA stands for? It’s the Consolidated Omnibus Budget Reconciliation Act. In 1996, Republicans used reconciliation to pass legislation that ended six decades of welfare policy. In 2001, Republicans used reconciliation to pass President Bush’s $1.35 trillion tax cut that mainly benefited the wealthy. In 2003, Republicans increased the deficit by $350 billion by providing generous tax breaks for the wealthy and large businesses. In 2005, Republicans passed a reconciliation bill without a single Democratic vote that provided deep cuts to Medicaid and raised premiums on Medicare beneficiaries.

Republicans believed in reconciliation when George W. Bush was president and wanted to push an agenda that benefited the wealthy and large corporations. Now, however, they vigorously oppose reconciliation because some of us want to reform a disintegrating health care system and make college more affordable for working families.

Want more?  Paul Krugman says read Senate Majority Leader Harry Reid’s 11 March 2010 letter to Senate Minority Leader Mitch McConnell. Krugman also says Ezra Klein of the Washington Post sums up Reid’s letter to McConnell as “Reconcile This!”

-RichardH

In the 19 March 2010 issue of the Boston Globe, James Stone (former Chair of the Commodities Futures Trading Commission and CEO of Plymouth Rock Assurance) wrote a thoughtful column on reforms to our financial system: Taxpayers deserve sensible free marketplace. It follows along lines similar to those of former Federal Reserve Chairman Paul Volcker and MIT Professor Simon Johnson (co-author of BaselineScenario).

-RichardH