I predict future happiness for Americans if they can prevent the government from wasting the labors of the people under the pretense of taking care of them.- Thomas Jefferson.

debt clock

Thursday, April 15, 2010

Financial reform (not), anarchy (I'm all for it, esp on tax day), and liberalism

Casey's Daily Dispatch

I liked yesterdays entire article, with good pieces on Reagan's deficits (too high), and New Jersey governor Chris Christie, and his rational arguments for cutting spending against the usual complaints about govt programs being too important to cut.  I would encourage reading both sections.  A third section on financial reform, and why it probably won't work is even better, and I'm copying it below.

The next item on President Obama’s populist to-do list, we are told, is for his administration to unleash righteous reform on the financial services industry. Already, the Democratic National Committee is airing ads linking the Republicans to Wall Street, while conveniently ignoring that many of the Great One’s top advisors, including Treasury Secretary Geithner himself, attended the Goldman Sachs Finishing School for the Power Mad.

Regardless, while there are few certainties in this world of ours, you can take it to the bank that by the time the ink is applied to whatever financial reform bill is pushed through, the only real reform contained in the hundreds of pages of detail will be a change in the location of the boys’ Thursday lunch club from Dickie Brennan’s to Harry’s at One Hanover Square.

Of course, people will think some sort of reform has been passed and so will continue to unthinkingly trust their preferred financial institution, without having any real idea what they are doing with their money.

Am I advocating sweeping financial reforms? No. Call me a utopian idealist, but in my book the appearance of regulation is a major part of the problem.

Entertain me for just a moment, and try to envision a world where there were literally no financial regulation at all. Now, I am not talking about doing away with laws sternly punishing frauds, but rather about a world where anyone could create and market any security or bond their scheming brains could concoct.

Kind of scary, eh? So, in this new world, what would be the first thing you’d do when pitched on a hot, hot stock or a thrilling new fund that showed all the promises of a rich tomorrow, with no discernable downside?

Would you jump at it like a trout at a succulent slice of fresh liver? Or might you actually do some due diligence?

Do you suppose that, just maybe, some enterprising financial institutions might look to grab market share by building a totally transparent enterprise, one that submits to a forensic audit every six months?

Might some other enterprising firm make a business out of doing said forensic audits, charging investors a subscription fee to be privy to their findings?

And how much do you think financial institutions, the government, and individuals could save if the entire regulatory apparatus were to be shuttered tomorrow?

I know, I know – it’s never going to happen. But then again, neither is effective financial reform. Especially not with the wolves directly, or indirectly, in charge of building the better chicken coop.

Staying with the storyline of financial shenanigans, following are a couple of stories on the inside dealings that played a role in the current financial meltdown.

The first was sent to me by a friend who knows of what he speaks. It provides some illuminating detail about what was called the “Magnetar Trade,” after a hedge fund that made out very well by soaking the unsuspecting with packages of bad loans. In my friend’s view, this is a good exposé of the sort of thing happening behind the scenes in the collateralized debt obligations (CDO) market.

(Embedded in the article is also a good video explaining CDOs in lay terms).

Then, after reading that, read this second article – sent along by Bud Conrad – which contains some additional finger pointing at the cozy relationship between Alec Litowitz-, the head of Magnetar, and certain well-connected individuals in Washington. Here’s a quote…

The sponsors of this toxic trade did bother to make sure they had a powerful friend. The head of the firm in question gave substantial amounts of money by political contribution standards to Rahm Emanuel’s PACs, and only his PACs, over the period when these transactions were in play.

Litowitz and his wife had never before made significant political donations. In 2005, they started giving to Rahm and his PACs, and only PACs connected to Rahm, just before the Magnetar CDO program began, and continued through the first quarter of 2008, when the trade would have started to pay out handsomely. The Litowitzs gave a total of $8,000 to Emanuel and $10,000 to his Our Common Values PAC in May 2005. In 2006 and 2007, they contributed $51,700 to the Democratic Congressional Campaign Committee, while Emanuel was chairman. We have been advised by individuals involved in political fundraising that the amounts given would be considered significant, and the way the payments were distributed across the PACs is sophisticated. Put it another way: this money was not given impersonally.

But this troubling connection should be no surprise. Rahm has long been a favorite of the hedge funds, having raised more money from them than any Senator not running for President. Not surprisingly, he has been a staunch supporter of the financial services industry, and is widely credited with playing a key role in securing passage of the TARP after its initial defeat.

As the Magnetar-Rahm connection highlights, Obama raised more money from financial services players than any previous presidential candidate, so it can hardly be a surprise that he and his minions are happy to give the industry a free pass. Key policy figures maintain that no one was at fault, that there was a pervasive lack of regulation, and there are therefore no bad actors. That party line also means that destructive behavior is and will remain unquestioned, unexamined, uncorrected, and unpunished. We are still paying for the costs of the financial train wreck of 2007 and 2008. We can no longer afford the costs of willful blindness.

Read the full article here.


As a nice segue, I was waiting for a place to put an earlier article, also by Doug Casey, on the real meaning of anarchy, and why it would be preferable any other form of Govt, including our current Unconstitutional Republic (We are not a democracy.  It is one of the failures of Govt run education that so many in the Media, and politicians, and perhaps even some of you reading this, persist in calling the US a democracy, and talk about bringing democracy to Iraq, and making the world safe for democracy.  We need to make the world safe FROM democracy.)

an excerpt- Look, I’d be happy enough if the state — which is an instrument of pure coercion, even after you tart it up with the trappings of democracy, a constitution, and what-not — were limited to protecting you from coercion and absolutely nothing more. That would imply a police force to protect you from coercion within its bailiwick. A court system to allow you to adjudicate disputes without resorting to force. And some type of military to protect you from outside predators.

Unfortunately, the government today does everything but these functions — and when it does deign to protect, it does so very poorly. The police are increasingly ineffective at protecting you; they seem to specialize in enforcing arbitrary laws. The courts? They apply arbitrary laws, and you need to be wealthy to use them — although you’re likely to be impoverished by the time you get out of them. And the military hardly defends the country anymore — it’s all over the world creating enemies, generally, of the most backward foreigners.

Anarchy, Part One


Thanks to Peter Newton for the following article-  The descent of liberalism (...or humanity as animals)

It's a little longish but a good read about the co-opting of classical liberalism by modern or (as Glen Beck would say) progressive liberalism.  Please believe me when I say the only time I ever see Glen, is when John Stewart or Stephen Colbert are making fun of him.  It is probably more important to read this if you call yourself a liberal.


George Soros, with whom I rarely agree, predicts another major market crash.  I think he's right, but the timing is off.  He says 8 years from now, I don't think it will take that long.

I know I had something else, but have run out of time and can't find it.  Until next time, Happy tax day!

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