UA-43475823-1

The Wrongologist

Geopolitics, Power and Political Economy

All Aboard The Bailout Train

In February 2014, Wrongo alerted that hedge funds and other Wall Street firms had been buying up single family homes, many of which had been foreclosed on during the housing crisis between 2007 and 2010:

Most rental houses in the US are owned by individuals…but a new breed has emerged: Wall Street-backed investment companies with billions of dollars at their disposal. In just the last two years, large investors have bought as many as 200,000 single-family houses and are now renting them out.

Tim G, a Wrongologist reader who is an expert in mortgage finance, commented at the time that he hoped that:

Fitch/Moody’s and any other rating agencies learned their lesson from 2007, and won’t (as you suggested) just slap AAA ratings on these. By definition these rental properties carry much more risk, since if they are vacant for any period, the incentive to keep paying drops quickly.

Well, slap they did. You know the drill from 2008; the new game was just like the old game: The new bundled securities were AAA rated by the same rating agencies. The bonds were sold to those seeking high yield without commensurately high risk.

Now we have a new wrinkle. Wolf Richter is reporting that Invitation Homes (owned by private equity giant, Blackstone) today owns 48,431 single-family homes. This makes Invitation Homes the largest landlord of single-family homes in the US. They just obtained government guarantees for $1 billion in rental-home mortgage backed securities. From Richter:

The disclosure came in an amended S-11 filing with the SEC on Monday in preparation for Invitation Homes’ IPO. Invitation Homes bought these properties out of foreclosure and turned them into rental properties, concentrated in 12 urban areas. The IPO filing lists $9.7 billion in single-family properties and $7.7 billion in debt.

The plan is to have a successful IPO, and then refinance some of the debt with the sale of $1 billion of government-guaranteed rental-home mortgage-backed securities.

Fannie Mae, a government-sponsored entity (GSE) that was bailed out, and then taken over by the US government during the 2008 financial crisis, is providing the guarantee of bond principal and interest, and the offering documents call them “Guaranteed Certificates”. More from Wolf: (emphasis by the Wrongologist)

This is the first time ever that a government-sponsored enterprise has guaranteed single-family rental-home mortgage-backed securities, issued by a huge corporate landlord. It’s an essential step forward in financializing rents: taxpayer backing for funding the biggest landlords.

These government guarantees allow Invitation Homes to pay lower interest rates. The bottom line is that Invitation will have cheap financing for future home purchases, and thus lower costs and greater profits.

It’s a sweet deal: low-cost funding made possible by government guarantees, is a special gift that was agreed to by the Obama administration. Other corporate landlords will want to follow in Blackstone’s footsteps, and it is difficult to see how Fannie Mae will choose not to guarantee the other firms.

Bloomberg reported on a Dodd-Frank mandated stress test conducted by the Federal Housing Finance Agency. It showed that during the next severe economic downturn, Fannie Mae and its sister Freddie Mac would need between $49 billion and $126 billion in taxpayer bailout money.

Socialize the losses, Part Infinity.

The Blackstone deal looks like new policy: The government subsidizes the largest landlords, helping increase their profits from renting out the same single-family homes that individual homeowners lost to the same financial thugs during the housing foreclosure crisis. The mission of Fannie Mae is to promote home ownership, not to give real estate entrepreneurs a way to limit their losses.

This guarantee was worked out under Obama’s watch, but Blackstone did not make it public until it updated its filing with the SEC this week. The timing is curious. The public disclosure comes after the Trump team is in charge, meaning Obama wouldn’t face criticism, and the Trump Administration will certainly let the deal stand.

This is worse than the government’s gift of TARP to Wall Street. That at least had optics that said it protected Main Street. But, this securitized mortgage market doesn’t involve Main Street, and the market isn’t even in big trouble.

This isn’t a bailout. It’s a grift. The Kleptocracy is now more entrenched than in 2008.

How ironic. Big business gets a sweetheart government deal, while the GOP moves to cut social programs.

Will this add new jobs to the Trump economy?

Facebooklinkedinrss

GOP Plans To Gut Dodd-Frank

Do you trust the banks and brokerage houses to govern themselves? Do you think that reducing banking regulations will help the economy, or your personal financial situation? Before you answer:

  • Remember that the economic meltdown of 2008 was caused by overreach by the financial industry.
  • Remember that it took the next eight years to climb out of the Great Recession and return to pre-2008 employment levels.

Dave Dayen in the Fiscal Times points out that there will be a vote this week in the Congress that will say a lot about how willing the Democrats in Congress will be to fight the deregulation avalanche that’s about to come crashing down on We the People. From Dayen: (brackets and emphasis by the Wrongologist)

As early as Wednesday, the House will take up H.R. 6392, the Systemic Risk Designation Improvement Act. This bill would lift mandatory Dodd-Frank regulatory supervision for all banks with more than $50 billion in assets, meaning those financial giants would no longer be subject to blanket requirements regarding capital and leverage, public disclosures and the production of “living wills” to map out how to unwind [the bank] during a crisis.

The intent of the new regulation authored by Blaine Leutkemeyer (R-MO), isn’t about helping the biggest banks, but the relatively smaller regional players, firms like PNC Bank, Capital One and SunTrust. An estimated 28 institutions would be affected. The eight “global systemically important banks” would remain subject to the standards: Citigroup, JPMorgan Chase, Bank of America, Goldman Sachs, Wells Fargo, Bank of New York Mellon, Morgan Stanley and State Street Bank.

But the so-called regional banks are not small operations. These 28 regionals have combined assets of about $4.5 trillion. It is useful to remember that in the 2008 crisis, regional banks like Washington Mutual and Wachovia also came crashing down.

The American Banker says that the Financial Stability Oversight Council (FSOC), the new super-regulator charged with monitoring systemic risk, will be gutted by the Trump administration: (brackets and emphasis by the Wrongologist)

Because the FSOC is headed by the Treasury secretary…[a cabinet post selected]…by the White House, a Trump administration is unlikely to continue any of the council’s…priorities, including the designation of nonbanks or continued regulation of those firms already designated.

It is obvious that if this bill passes and is signed by President Trump, financial regulation will be relaxed, not by repeal, but through atrophy. Republicans want to replace any mandatory rules for regulation with discretionary ones. That way they can claim that they’re merely improving the system by putting the decisions in the hands of the experts instead of members of Congress.

A next step will be to hire regulators dedicated to turning a blind eye to what the financial industry does. The chair of FSOC is the Treasury Secretary. Trump’s candidates for Treasury Secretary include Steven Mnuchin, Trump’s national finance chair and the most likely choice for Treasury, who sits on the board of directors of CIT, a financial services company with more than $50 billion in assets. The Treasury Secretary will ensure that the rest of the FSOC board is made up of regulators and presidential appointees who share Trump’s laissez-faire philosophy.

President Obama will veto this bill if it passes the Senate before January 20th. But the Republicans plan to roll it out this week, instead of waiting for Trump to enter the Oval Office. They want to gauge just how much backbone Democrats have after their thumping in the election. More from Dayen:

This is really a moment of truth for those Democrats. If Republicans put up a big bipartisan vote in the House for this, the Senate will be more inclined to try to pass it down the road. And it will serve as a test case for Democratic resolve more generally.

Wall Street-friendly Dems have already endorsed tailoring Dodd-Frank rules to eliminate smaller regionals from the rules. This bill is a big change, and the question is whether Democrats play ball with Trump’s deregulation agenda, or will they recognize the harm it will cause?

This is an early test for those Dems whose seats are at-risk in 2018 and 2020.

Financial deregulation has rarely been a partisan political matter. Democrats and Republicans have typically worked together to roll back rules and loosen up the Wall Street casino.

HR 6392 could represent a return to those times, or it could be the moment when Democrats join together and say “no”, forcing Republicans to support the banking industry agenda on their own.

Party line resistance by Democrats could be in their longer-term best interest.

Facebooklinkedinrss

Our New Political Majority

(This is the last column for this week. We will resume on Sunday with cartoons. Everyone has reasons to be thankful, so take the time to talk about them with your loved ones, or your close friends this week.)

Last weekend, like most Americans, Wrongo spoke with friends and family about how we got to the disappointing political place where we are today.

Der Spiegel Online asked: If you think back ten years, could you have imagined in 2006 that America’s reality would be Donald Trump as president of the US? Probably not, but ten years ago:

  1. Economic growth and job growth both fell in 2006 as the residential housing boom came to an end.
  2. Wages were the smallest share of national income since the government began compiling the statistic in 1947.
  3. Consumer debt soared to new heights, while consumer debt payments rose to the highest on record.

Those were dispatches from the ongoing war that corporations and neoliberal economic elites made on our citizens. And it didn’t stop there. After 2006, we had the financial meltdown and the Great Recession. Banks had to be bailed out. Millions of people lost their jobs. Debt grew, and faith in government’s willingness and ability to improve the fortunes of their citizens evaporated.

The clear losers were workers in traditional economic sectors, particularly in manufacturing. According to a study by economists David Autor, David Dorn and Gordon Hanson, the increase in imports from China have resulted in the loss of 1.5 million manufacturing jobs since the early 1990s.

But automation had a greater impact: In total, some 6.9 million manufacturing jobs were lost in the US between the early 1990s and 2011. For those who have lost their jobs, it seems that their political representatives have forgotten them. Particularly when establishment Democrats and Republicans continue to push for more trade, by which they mean more imports from our global corporations who continue to export those jobs to lower-wage countries.

In 2016, despite substantially better economic times, many American still worried about losing their jobs and their financial security. They saw themselves as the losers in a game that only helps corporations and the elites. This domination of our politics by the economic elites has produced a defacto disenfranchisement of everyone else.

A new political map has emerged, one that doesn’t neatly fit into the Left vs. Right model of our politics. The new dividing line is between those who support, and those who oppose, America’s economic elites and their neoliberal policies. Those on both sides of the old ideologies who distrust the elites are connected by their fear of being left behind. This was clear in 2016 in those precincts where Trump outperformed Romney, and where Clinton underperformed Obama.

This is today’s landscape, but in 1998, Richard Rorty, an American philosopher who died in 2007, wrote “Achieving Our Country” which predicted our current political situation. According to the NYT, the following fragment of the book has been retweeted thousands of times since the election:

Members of labor unions, and unorganized unskilled workers, will sooner or later realize that their government is not even trying to prevent wages from sinking or to prevent jobs from being exported. Around the same time, they will realize that suburban white-collar workers — themselves desperately afraid of being downsized — are not going to let themselves be taxed to provide social benefits for anyone else.

At that point, something will crack. The nonsuburban electorate will decide that the system has failed and start looking around for a strongman to vote for — someone willing to assure them that, once he is elected, the smug bureaucrats, tricky lawyers, overpaid bond salesmen, and postmodernist professors will no longer be calling the shots.

One thing that is very likely to happen is that the gains made in the past 40 years by black and brown Americans, and by homosexuals, will be wiped out. Jocular contempt for women will come back into fashion…All the resentment which badly educated Americans feel about having their manners dictated to them by college graduates will find an outlet.

Rorty’s basic contention is that the left abandoned its core philosophy in favor of a neo-liberal worldview that promoted globalism and corporatism. Rorty said in a lecture in 1997:

This world economy will soon be owned by a cosmopolitan upper class which has no more sense of community with any workers anywhere than the great American capitalists of the year 1900.

Mr. Rorty’s most prescient words:

The cultural Left has a vision of an America in which the white patriarchs have stopped voting and have left all the voting to be done by members of previously victimized groups.

Rorty said that in 1998. And in 2016, it was Hillary Clinton’s failed election strategy.

What’s so striking about “Achieving Our Country” is Rorty’s argument that both the cultural and political left abandoned economic justice in favor of identity politics, ignoring too many economically disadvantaged Americans.

According to voter turnout statistics from the 2016 election, 58.4% of eligible voters actually voted (135.2 million). Clinton received about 63.7 million votes (27.5% of eligible voters) to Trump’s 62 million, (26.8%) while 9.5 million votes went to others.

This means that 41.6% of America voted for nobody, far outweighing the votes cast for Trump or Clinton.

That the majority of Americans did not vote is not because they don’t care. They voted no confidence in a political system that forgot about them a long time ago.

A minority elected Trump. The majority voted against our neoliberal political system.

 

(BTW, Tuesday was the 53rd anniversary of JFK’s assassination. While it remains fresh in Wrongo’s mind, it hardly registers in the minds of the press or the public. A new idea on Oswald’s motives appeared in the LA Times. Take a look.)

Facebooklinkedinrss

Capitalism, It’s Not You, It’s Me

There is a meme that has gone global since the early days of the Occupy movement. Here it is as a wall graffiti from Greece that uses the same meme we first saw in NYC in 2011:

Capitalism Lotek

Just kidding capitalism, it really is you.

The artist is a Greek who styles himself as Lotek. The name Lotek is derived from the short story (and later, a film) by William Gibson called Johnny Mnemonic. The story is set in 2021, in a world ruled by corporations. An anti-authoritarian gang that are called Lo-Teks, fight the power. They are in fact not low tech at all, but are high tech hackers. Sound familiar?

Greece is surely a place at war with neoliberalism and free market capitalism. So is it also time for us to reconsider capitalism?

Consider this from Mark Blyth in Foreign Affairs:

An inherent tension exists between capitalism and democratic politics since capitalism allocates resources through markets, whereas democracy allocates power through voting.

The compromises both systems have struck with each other over recent history shapes our contemporary political and economic world. Blyth observes:

  • In the three decades that followed World War II, democracy set the rules, taming markets with the establishment of protective labor laws, restrictive financial regulations, and expanded welfare systems.
  • Starting in the 1970s, a globalized, deregulated capitalism, unconstrained by national borders, began to push back.

And today, capital markets and capitalists are setting the rules, and democratic governments follow them.

Some background: Cutting taxes in the 1980s caused government revenues to fall. Deficits widened, and interest rates rose as those deficits became harder to finance. At the same time, conservative govern­ments, especially in the UK and the US, dismantled the regulations that had reined in the excesses of the financial service industry since the 1940s.

The financial industry began to grow unchecked, and as it expanded, investors sought safe assets that were highly liquid and provided good returns: the debt of developed countries.

This allowed governments to plug their deficits and spend more, all without raising taxes.

But the shift to financing the state through debt came at a cost. Since WW II, taxes on labor and capital had provided the foundation of postwar state spending. But, as govern­ments began to rely more on debt, the tax-based states of the postwar era became the debt-based states of today.

This transformation had pro­found political consequences. The increase in government debt has allowed capitalists to override the preferences of citizens:

  • Bond-market investors can now exercise an effective veto on policies they don’t like by demanding higher interest rates when they replace old debt with new debt.
  • Investors can use courts to override the ability of states to default on their debts, as happened recently in Argentina
  • They can shut down an entire country’s payment system if that country votes against the interests of creditors, as happened in Greece in 2015.
  • Citizens United dictates who runs for office in the US, and in many cases, who wins.

Now that the financial industry has become more powerful than the people, should we blindly follow capitalism’s meme as the only way forward?

Free-market rhetoric hides the dependence of corporate profits on conditions provided for, and guaranteed by, governments. For example:

  • Our financial institutions insist that they should be free of meddlesome regulations while they depend on continuing access to cheap credit from the Federal Reserve.
  • Our pharmaceutical firms have resisted any government limits on their price-setting ability at the same time that they rely on government grants of monopolies through our patent system.

To use a sporting metaphor, it’s as if the best football team purchased not only the best coaches and facilities, but also bought the referees and the journalists as well. Those responsible for judging economic competition have lost all authority, which leaves the dream of ‘meritocracy’ or a ‘level playing field’ in tatters.

In our country, the divide between the business oligarchs, the political class and “the people” increasingly appears unbridgeable, marked by hostility and deep distrust. When people are told for a generation that government mustn’t make decisions that interfere with free markets, it is inevitable that people will lose faith in democratic governance, and in government’s capacity to help them solve their problems.

Capitalism in its current form no longer works for the people. We have seen a reaction in the start of movements by Occupy, by Bernie, and by others in Europe.

Remember that the greatest prosperity in living memory in the US came during the brief social democratic moment, in the 1950s and 1960s, when the constraints on business were the greatest.

More democracy and more economic justice are the necessary foundations for the path to a more prosperous, and sustainable economy.

A reformed capitalism must be a part of what emerges from that fight.

Facebooklinkedinrss

Will We See a Recession Soon?

With Trump vs. Clinton vs. Sanders sucking all of the oxygen out of the news cycle, it’s probable that you missed the release by the Federal Reserve on May 18th of its delinquency and charge-off data for all commercial banks in the first quarter. It isn’t a pretty picture.

Here’s a few nuggets:

  • Delinquencies of commercial and industrial (C&I) loans at all banks, after hitting a low point in Q4 2014 of $11.7 billion, have ballooned. C&I loans are classified delinquent when they are 30 or more days past due.
  • Between Q4 2014 and Q1 2016, delinquencies have increased by 137% to $27.8 billion. Currently, they are halfway to the all-time peak during the Financial Crisis in Q3 2009 of $53.7 billion. And they’re higher than they were in Q3 2008, when Lehman Brothers melted down.

Below is a chart of delinquencies released by the Board of Governors of the Fed. The shaded areas are times of economic recession. Wolf Richter of Wolf Street added the emphasis in red to point out where we stand in relationship to the 2008 Lehman moment:

C&I Deliq Q1 16

As you can see from the chart, business loan delinquencies are usually a leading indicator of economic trouble. They begin rising at the end of the credit cycle, since loans made in the good times start to go bad when the economic situation changes. Then, the obligations of interest payments and loan repayments begin to pose a problem for weaker borrowers whose sales, instead of rising as expected when times were good, may be flat or shrinking while expenses can be rising. Suddenly, there’s not enough money to service the loan.

This started with the oil and gas sector reacting to lower crude oil prices in 2015, but it has moved beyond the oil patch. Total US commercial bankruptcy filings in April, 2016 rose 3% from March, and are up 32% from a year ago, to 3,482, according to the American Bankruptcy Institute.

This is happening at an interesting time.

First, the health of the economy will be a huge deal in the General Election. Both Trump and Clinton have a stake in saying it isn’t as good as it could be. Yet, it is highly unlikely that we will be in a recession in November 2016, because our current economic momentum will carry us for at least another 6 months.

Second, the Fed is now indicating that it believes the economy is strong enough to raise rates for a second time this year, perhaps as soon as June, according to the Fed’s recent Open Market Committee minutes. That supports the idea that no recession is imminent.

But we still have this pesky loan delinquency data.

Loan delinquencies must be cured within a specified time. If not, they’re taken from the delinquency bucket and dropped into the default bucket. If defaults are not cured within a specified time, the bank deems a portion (or all) of the loan balance uncollectible, and writes it off, therefore moving it out of default and into the write-off bucket.

That’s why the delinquency statistics usually do not get very large – loans don’t stay delinquent for a very long period.

The Fed has painted itself into a corner. They have to raise rates because low rates are destroying many pension funds and they hurt retirees who rely heavily on interest-bearing investments. Pension funds have been modeled on interest rates of between 6%-8%, which have not been seen for at least 10 years.

But, a Fed rate hike would add more risk of more loans becoming delinquent.

And the largest American corporations are awash with the debt that they used to fund buy-backs of their shares. That debt has to be renewed periodically. If rates rose high enough to help pension funds, it could wound quite a few large companies.

If that wasn’t bad enough, South America, Europe and the Chinese are looking increasingly fragile. Even if the Fed engineers a domestic miracle of sorts, it may not be enough. The financial world can be a minefield when we are trying to hang on to our hard-earned money.

So, prepare to hear both Trump and Hillary tell you they have the answers.

Since their global corporate benefactors now rule the world, they should be able to figure out what to do with it.

Facebooklinkedinrss

Are Trump and Sanders a Ripple of Populism, or a Wave?

Since sophomoric jokes have failed to derail Donald Trump’s presidential campaign (e.g., running silly pictures of Trump, mocking his soundbites while ignoring his policies and his authoritarian condemnations), let’s try understanding what’s happening.

So, is Trump a problem, or just a symptom of the problem? And folks, what is the problem? The Donald captured the essence of “the problem” in his Super Tuesday victory speech: (Brackets and emphasis by the Wrongologist)

People in the middle-income groups are making less money than they were 12 years ago. And in her speech, [Hillary Clinton] said, ‘they’re making less money.’ Well, she’s been there with Obama for a long period of time. Why hasn’t she done anything about it?

Trump for the win! He asks a question that neither Hillary Clinton, or the Establishments of both parties, have a satisfying way to answer (so far), something like what we said about John Kerry being “for the war before he was against it.”

The nation’s real problems are those articulated by Bernie Sanders, but he is not a messenger who can win in the fall. But his popularity, and that of Donald Trump show that we are looking at the swelling of a populist wave in America. Maybe it is still far from the beach; maybe it is just a ripple. We will know in November, but early signs are that the wave could be big when it hits us.

Consider Trump’s victory in the Massachusetts primary – 310,847 voted for Donald Trump. That gave him 49.3% of the vote in a five-candidate race. A pretty overwhelming endorsement, even considering that independents can vote in either primary, and many use that option to vote against a candidate.

The next day, Massachusetts’ Republican Governor Charlie Baker refused to endorse him. He said that he did not vote for Trump on Tuesday and:

I’m not going to vote for him in November.

Charlie Baker is immensely popular with pretty much every segment of the state’s voting population; his job approval numbers are about 70%. He’s perceived as highly competent at running the government, he’s socially liberal, and people just plain like him. So, Baker doesn’t need the Trump wing of the GOP.

Trump isn’t going to carry Massachusetts in November, Clinton and Sanders totaled 1,190,500 votes between them. But the current populist resurgence will not end with Bernie’s failure to win the Democratic nomination, or with a Trump general election loss in November, because the underlying anger isn’t going away. Remember that Trump and Sanders totaled 897,500 votes in MA, to Hillary’s 603,800. From Fabius Maximus:

Populism’s resurgence has, as always, terrified our ruling elites and their servants. Since most journalists don’t understand it, Campaign 2016 is a series of surprises to them.

Maximus goes on to say that from the start of Trump’s campaign, the similarities between Trump and Andrew Jackson were obvious: Trump’s isolationist foreign policy (but bellicose towards threats), his hostility to minorities and Wall Street bankers, his concern for the poor, his appeal to national greatness — these same views also astonished the elites in 1830 when Andrew Jackson rode the wave to the White House. The 1830 elites despised Jackson like today’s elites despise Trump today.

Jacksonians were the first populists in America to gain power. Even today, their strain of suspicion of federal power, skepticism about both domestic and foreign do-gooding (welfare at home, foreign aid abroad), opposition to federal taxes, but obstinately fond of federal programs seen as primarily helping the middle class (Social Security and Medicare, mortgage interest subsidies) continues.

These “Crabgrass Jacksonians” constitute a large political bloc in America. Crabgrass Jacksonianism sees the contemporary homeowner working on his/her modest suburban lawn, as a hero of the American story.

The Establishments of both parties may have fun demonizing their populists, but they ignore the similarities between the strategies of Trump and Sanders, and the appeal both have to significant numbers in both parties. Separately, progressives and populists are weak. If they can be combined as they were at the time of the New Deal, they can be a huge force for change.

US News reports that historical patterns and political data all show that the real presidential election battle takes place in just seven states: Florida, Ohio, Virginia, Colorado, Nevada, Iowa and New Hampshire. Based on recent Clinton vs. Trump head-to-head polls in these seven states, Trump is within striking distance of winning the general election against Clinton.

For those who believe a Trump presidency is not really possible in today’s America, you may want to re-think that proposition.

That populist wave may be closer to the beach than you think.

Facebooklinkedinrss

Monday Wake Up Call – June 29, 2015

Mylan, a generic drug maker based outside Pittsburgh, abandoned its status as a US corporation, gaining tax advantages by moving its headquarters to the Netherlands. The move reduced the taxes the company pays on profits from sales of drugs overseas, but Mylan continues to maintain most of its operations in Pennsylvania.

Mylan was viewed by some in Congress and the Obama administration as a symbol of corporate greed when they undertook a corporate inversion that placed profits above any commitment to its home country.

But now, Mylan is demanding that the US Federal Trade Commission (FTC) protect it from a hostile takeover bid by an Israeli company, Teva Pharmaceuticals. Mylan asked the FTC to examine Teva’s purchase of Mylan stock for possible violation of the requirement that large purchases of stock of US firms must be reviewed by antitrust authorities, because Mylan is still listed on the NYSE. The company claims that its principal office remains in Pennsylvania, which makes it a “US issuer” of stock for federal anti-trust purposes.

The irony of this is not lost in Washington. Rep. Chris Van Hollen (D-MD), the senior Democrat on the House Budget Committee said:

Mylan is trying to have its cake and eat it too…It is an intolerable abuse of a loophole when US corporations pretend they are based overseas in order to get out of paying their fair share and duck their responsibilities to the United States. It’s just plain hypocrisy when one of those same inverted companies claims that it is actually a US company because it needs the special protections US law gives to American companies.

Mylan may have a case. Its plea for help from the US government could pass legal muster but, the optics of a company that abandoned its US citizenship in order to pay less in federal taxes, and then seeking the protection of a federal agency is problematic.

Compounding the farce, Mylan is attempting its own hostile takeover of Perrigo, in order to stave off Teva.

Mylan’s unabashed lack of shame is impressive. Maybe the FTC’s decision-making on this case should take quite a while.

So, wake up Congress, and deal conclusively with corporate inversions! Our wake-up calls for the next few weeks will be songs about summer. We start with the Lovin’ Spoonful’s only #1 hit, “Summer in the City”:

For those who read the Wrongologist in email, you can view the video here.

Monday’s Hot Links:

The return trip often seems shorter than the initial trip, even though the distance traveled and the actual time spent traveling are identical. This is called the “return trip effect”. Two studies say it is real, but you already knew that.

Trucker jobs will be the first casualty of driving robots. Trucker salaries average $40,000/year. Most truck accidents are due to user error: Driving too fast, driving while tired, or driving while intoxicated. Robots don’t drink, don’t get tired, and won’t drive unsafely in order to get to a destination faster. Drivers will still be needed for inner-city driving (at least initially), but most long-haul operations will quickly vanish as soon as licensing is complete in most states.

Three years ago, Saudi Arabia announced a goal of building, by 2032, 41 gigawatts of solar capacity by 2032, slightly more than Germany has today. The Saudis burn about a quarter of the oil they produce—and their domestic consumption has been rising at 7% a year, nearly three times the rate of population growth. According to a British think tank, if this trend continues, domestic consumption could eat into Saudi oil exports by 2021 and make the kingdom a net oil importer by 2038.

Privail Diagnostics, has developed a simple, portable blood test that can detect the HIV virus (not antibodies) for the first time. That means an earlier diagnosis, and reduced infection rates. Privail’s at-home testing device is like a diabetes test, needing only one drop of blood. It shows the results in a color bar, like an at-home pregnancy test or digital output, like a diabetes meter. Invest at your own risk.

Hackers have apparently cracked the computer systems responsible for issuing flight plans to pilots of every airline. The apparent weak link? The flight plan-delivery protocol used by every airline. Ground computers calculate the appropriate flight plan for planes, and someone on ground approves the plan before distributing it to pilots. Pilots receive plans before taking off, as well as enroute, when a change occurs during a flight. Plans are uploaded to planes via a datalink. Once a hacker figures out those protocols, it is possible to issue a bogus flight plan. But, the industry says, not to worry.

Your thought for the week: Giving money to poor people is socialism, or even communism…..giving money to AIG or Goldman Sachs is capitalism, and that’s what made this nation grrrreat!!!

Facebooklinkedinrss

Monday Wake Up Call – April 27, 2015

Last week saw the sentencing of David Petraeus, former CIA director and the highest-profile general from our wars in Iraq and Afghanistan, to two years’ probation for providing classified information to his mistress. Mr. Petraeus was also fined $100,000.

Petraeus remains a four-star US Army general. His retired pay is $220,000/year, plus the perks of shopping at the PX and the commissary store, full medical benefits, free travel on government aircraft, free legal advice; the list goes on.

A US officer convicted in a US civilian court of a felony is subject to dismissal from the service, at the discretion of the service secretary. A dismissal is the equivalent of a dishonorable discharge for an enlisted soldier. It strips the former member of all the perks, everything.

What Petraeus was convicted of would normally be a felony in a civil court. But he was charged by the Obama Administration with a misdemeanor so he wasn’t vulnerable to an administrative dismissal. This misdemeanor conviction will have about the same impact on his life as a conviction for littering. From the New York Times:

As part of the plea agreement, Mr. Petraeus admitted that he gave his lover, Paula Broadwell, who was writing a biography about him, black notebooks that contained sensitive information about official meetings, war strategy and intelligence capabilities, as well as the names of covert officers.

War strategy. That would be the strategy written by the guy giving it to Broadwell, along with the names of covert officers? Compare that to the crimes for which Jeffrey Sterling and 8 others are facing hard time in prison. Sterling was convicted on 9 counts of violations of the Espionage Act for providing much lesser information to a guy writing a book, James Risen. Manning got 35 years, John Kiriakou gets 2, Assange is holed up in the Ecuadorian embassy for 3 years and counting, Snowden is on the run, and no military brass is doing time for Abu Ghraib.

Petraeus gave Broadwell that information for personal profit. It helped him in his amorous adventure and, most likely, helped the sales of her book. He has since moved on to Kohlberg Kravis Roberts & Co. L.P., a New York investment firm where he is a partner.

That makes Petraeus just another example of too big to fail.

The Justice Department and the Obama administration need today’s wake-up, for not pursuing Mr. Petraeus to the fullest extent of the law.

So here is your Monday wake-up, the White-Throated Sparrow. These guys are all over our property right now:

If you read the Wrongologist via email, you can view the video here.

Your Monday Hot Links:
Everyone wants to appear smart when in a meeting. Here are a few tricks:

Kochs were defeated in Montana after spending a bundle to defeat Medicaid expansion. What? Medicare expansion passed in a Red state?

How much water is in your food? See this graphic. Everyone should look at this, not just Californians.

Wall Street Journal says more people are out of the stock market than are in it. About 52% of Americans are not investing in the stock market, and 53% of them say they don’t have the funds to invest. A different study from the National Institute on Retirement Security found that 45% of working-age households had no retirement savings at all; among the 55-64 age group, the average was only $12,000.

Facebooklinkedinrss

Friday Music Break – January 30, 2015

We know something about billionaire consumption, but it is hard to measure some of it. Some billionaires are consuming politicians, others consume reporters, and some consume academics.” – Thomas Picketty

Today’s music has a populist message designed to help you fight the Plutocracy over the weekend. It is “First We Take Manhattan, Then We Take Berlin”, written and performed by Leonard Cohen. The song was originally recorded by Jennifer Warnes for her 1987 album, “Famous Blue Raincoat”. Cohen recorded it a year later for his album, “I’m Your Man”. This version was recorded in London in 2009:

It has become an occasional anthem for Syriza, the Greek Populist Party that just won power on an anti-austerity, anti-European Union platform. In Greece, it was played with the words, “First we take Athens, then we take Madrid!

Sample Lyrics:
They sentenced me to twenty years of boredom
For trying to change the system from within
I’m coming now, I’m coming to reward them
First we take Manhattan, then we take Berlin
I’m guided by a signal in the heavens
I’m guided by this birthmark on my skin
I’m guided by the beauty of our weapons
First we take Manhattan, then we take Berlin.

You loved me as a loser,
but now you’re worried that I just might win,
You knew the way you could have stopped me,
but you never had the discipline,
So many nights I prayed for this,
to let my work begin.

 

See you on Sunday

Facebooklinkedinrss

Monday Wake Up Call – December 15, 2014

Today’s Wake-Up Call is for Congress and the president. Mr. Obama’s support of the “CRomnibus” year-end spending package showed how the next two years in Washington will play out, and it doesn’t bode well for anyone (you) who doesn’t employ a registered lobbyist.

You already know that the budget bill included a rollback of derivatives reform, and a nearly ten-fold increase in the donation limits for party committees. What may have been less obvious is that the bill cuts $60 million from the EPA and $346 million, about 3%, from the IRS. The IRS cuts tell wealthy earners that tax avoidance is safe, with little expectation of an audit.

The White House basically turned on its own party, accepting roll-backs of liberal priorities. It’s clear that this kind of legislative sausage-making will be the rule in 2015.

Other benefits for specific lobbies:

• Private Pension Plan trustees could cut pension benefits to current retirees, reversing 40 years of promises to workers who earned their retirement packages.
• Voters in DC who approved legalized marijuana will see their initiative die, since Congress prevented the DC government from taxing or regulating the drug’s sale.
• Trucking companies can make their employees put in an 82-hour work week without mandatory time off.
• Pell grants for college students will be cut, with the money diverted to private student loan contractors.
• Blue Cross and Blue Shield will be allowed to count “quality improvement” measures toward their mandatory health spending under Obamacare’s “medical loss ratio” provision, a windfall that saves millions of dollars.
• The EPA is blocked from regulating certain water sources for farmers.
Reduced nutrition standards in school lunches and the Women, Infant and Children food aid program was a gift for potato growers.
• The bill halts the listing of new endangered species.
• It stops the regulation of lead in hunting ammunition.

The White House never threatened a veto of the CRomnibus over these riders, and actually supported the bill. House Democrats complained of being “lobbied by the White House” on the legislation. This is sure to be a recurring policymaking feature of the next two years.

So this is the new normal on Capitol Hill. The precedent for making changes on headline issues by tucking rollbacks into must-protect or must-pass legislation has been set with the White House’s active cooperation.

In other words, there’s your proof that elections have consequences.

Here are a couple of wake-up tunes for Monday. First, in keeping with the prime directive (well, maybe it’s the sub-prime directive), that the banks can never fail again, here is the late Pete Seeger doing “The Banks are made of Marble”:

The song was written by Les Rice in 1948 or 1949. Rice was a farmer in Ulster County, NY. Seeger lived across the Hudson from him, and apparently they met on several occasions.

Our second tune is in keeping with the other prime directive of a holly, jolly season. Captain Picard does “Let it Snow”:

Monday’s Hot Links:

The US attempted to co-opt Cuba’s hip-hop scene to foment revolution: USAID tried to recruit underground rappers in Cuba to sow unrest against Raul Castro’s government. They failed. Compared to the CIA torture story, this is small potatoes, but still another example of how we can’t stay out of any country’s internal affairs. Because, freedom!

The 2nd U.S. Circuit Court of Appeals in New York ruled that insider trading is ok as long as the person accused of insider trading didn’t know that the original tipper disclosed the information in return for personal gain. Guessing that you’ll never know.

Thirty years after the Bhopal chemical accident, the worst in history, the spill’s effects are hitting a new generation. Professional clean-up hasn’t happened and there are no signs that the environmental catastrophe will end.

Congress and the President are going in the opposite direction from the Federal Reserve. The Fed is making the banks pony up more reserves to protect their balance sheets, while Congress and Obama are saying “go big on derivatives baby, we’ve got your back”.

Study supports the theory that all ‘men are idiots’. Well, it wasn’t a scientific study, but it looked at 318 Darwin Awards cases, of which 282 Darwin Awards went to males, and just 36 awards were given to females. Males made up 88.7% of Darwin Award winners.

Old news department: The latest Wall Street Journal/NBC News poll says that 56% of Americans say the country’s economic and political systems stacked against them. Different result from the NYT survey last week.

Your thought for the week:

I had two options, to remain silent and then be killed. Or I could speak up, and then be killed. I chose to speak up. – Malala Yousafzai, from her Nobel Peace Prize speech

Facebooklinkedinrss