Democracy Gone Astray

Democracy, being a human construct, needs to be thought of as directionality rather than an object. As such, to understand it requires not so much a description of existing structures and/or other related phenomena but a declaration of intentionality.
This blog aims at creating labeled lists of published infringements of such intentionality, of points in time where democracy strays from its intended directionality. In addition to outright infringements, this blog also collects important contemporary information and/or discussions that impact our socio-political landscape.

All the posts here were published in the electronic media – main-stream as well as fringe, and maintain links to the original texts.

[NOTE: Due to changes I haven't caught on time in the blogging software, all of the 'Original Article' links were nullified between September 11, 2012 and December 11, 2012. My apologies.]

Saturday, June 11, 2011

Goldman Sachs Pushes Back Against Senate Report As Commentators Flip

NEW YORK -- Goldman Sachs is quietly pushing back against accusations that it may have broken the law, as employees of the firm have met with a pair of famous financial commentators and helped convince them the "vampire squid" is actually a victim.

Nearly two months after a Senate panel released a scathing assessment of Goldman Sachs, referring the findings to the Justice Department for possible criminal prosecution, Goldman's PR machine appears to be in full, if covert, swing. This week, celebrity journalist Andrew Ross Sorkin and widely cited analyst Richard Bove each changed his mind about the firm after meeting with Goldman employees.

"I have completely changed my attitude about whether they did something wrong," Bove told The New York Times. "Goldman Sachs is the scapegoat of our time."

Bove, who had placed a "sell" rating on Goldman's stock and had loudly expressed his pessimistic views on the company, recently got some special assistance: Goldman walked with him through the report, the Times says.

And now he has apparently recanted, releasing a new note that opens: "It is becoming increasingly apparent that a terrible wrong may have been done to Goldman Sachs."

This reversal comes just days after a similar revelation from the editor of the Times' financial blog, DealBook. Sorkin had earlier questioned Goldman's integrity, in a column he links to in his latest post. But now, he says, his mind is changed. He, like Bove, apparently met with Goldman:

But upon further reporting -- talking with executives at Goldman, who pointed me to other documents, and with officials in Washington, and then poring through the report, following the footnotes to the original sources and then cross-referencing them against other public records -- I have come to a different and perhaps unsatisfying conclusion for those readers looking for a big scalp: Mr. Blankfein wasn’t lying.

The whopping 639-page Senate report on the financial crisis, stuffed with damning emails from financial players, accuses Goldman of profiting off a massive bet against the housing market, misleading clients to whom it sold the investments it was betting against.

Not only that, but executives also misled Congress when asked to explain their actions, alleged Sen. Carl Levin (D-Mich.), chair of the Senate Permanent Subcommittee on Investigations, which composed the report.

New York City prosecutors served the bank with subpoenas this month, demanding additional documents. The Manhattan district attorney joined the Justice Department and the Securities and Exchange Commission in investigating the firm, Reuters reported.

When the Senate report was released in April, Goldman put up a relatively rote defense. A Goldman spokesman said the firm's executives were truthful in their testimony, and added that the firm disagreed with many of the panel's conclusions.

But now, in meeting with prominent commentators, it appears the firm is attempting to dismantle the conclusions the report has drawn.

Full Article
Source: Huffington 

Peter King Announces Second Round Of Muslim Radicalization Hearings

Representative Peter King (R-NY) has announced that the House Committee on Homeland Security will hold a second hearing on the "radicalization of the Muslim-American community" June 15.

"This radicalization hearing, like the one in March, will be a deliberate and thoughtful examination of an issue that is too important for our security to ignore," King said in a statement released on his official House website.

Titled “The Threat of Muslim-American Radicalization in U.S. Prisons”, this second hearing will focus on the relationship between current and former members of the American prison population and extremist groups.

According to King, "We have seen cases in which inmates have been radicalized at the hands of already locked-up terrorists or by extremist imam chaplains. We will focus on a number of the serious cases in which radicalized current and former inmates have planned and launched attacks or attempted to join overseas Islamic terrorist organizations."

The first round of hearings held in March sparked major protest from many Muslim-Americans and their allies who accused the Congressman of conducting a politically motivated witch-hunt intended to demonize the Muslim faith.

Full Article
Source: Huffington 

WikiLeaks Haiti: Cable Depicts Fraudulent Haiti Election

The United States, the European Union and the United Nations decided to support Haiti’s recent presidential and parliamentary elections despite believing that the country’s electoral body, “almost certainly in conjunction with President Preval,” had “emasculated the opposition” by unwisely and unjustly excluding the country’s largest party, according to a secret US Embassy cable.

The cable was obtained by WikilLeaks and made available to the Haitian newspaper Haïti Liberté, which is collaborating with The Nation on a series of reports on US and UN policy toward the country.

At a December 1, 2009, meeting, a group of international election donors, including ambassadors from Brazil, Canada, Spain and the United States, concluded that “the international community has too much invested in Haiti’s democracy to walk away from the upcoming elections, despite its imperfections,” in the words of the EU representative, according to US Ambassador Kenneth Merten’s December 2009 cable.

Haiti’s electoral body, the Provisional Electoral Council (CEP), banned the Fanmi Lavalas (FL) from participating in the polls on a technicality. The FL is the party of then-exiled former President Jean-Bertrand Aristide, who was overthrown on February 29, 2004, and flown to Africa as part of a coup d’état that was supported by France, Canada, and the United States.

This history made Canadian Ambassador Gilles Rivard worry at the December donor meeting that “support for the elections as they now stand would be interpreted by many in Haiti as support for Preval and the CEP’s decision against Lavalas.” He said that the CEP had reneged on a pledge to “reconsider their exclusion of Lavalas.”

Full Article
Source: The Nation 

US Uncut, Yes Men to Bust Corporate Tax Dodgers in Cayman Islands

The activism groups behind a widely circulated (and false) AP report stating GE would return its entire 2010 tax refund of $3.2 billion to the US Treasury appear to be getting the band back together. US Uncut and The Yes Men are planning another event to draw attention to the massive problem of corporate tax dodging, but this time they’re taking their activism directly to the source of America’s lost revenue: the Cayman Islands.

The groups have posted a Kickstarter account to help raise $10,000 by June 30 in order to fund the fact-finding mission.

US Uncut expresses the purpose for the quest:

In order to understand why thousands of teachers are losing their jobs across the country, we set out to discover where the leak was in Uncle Sam's revenue bucket. In Washington, we found myriad lobbying groups and politicians bickering about tax repatriation holidays, negative corporate tax rates and comprehensive tax reform. Oh my! But nobody could explain where the money went, and how to get it home?

Nearly exhausted, we were about to throw in the beach towel when a sign came—in the form of a palm tree. Could it be that all the money is just a few tropical waves south of Key West? Sitting in off-shore bank accounts, just waiting to be brought back to share with eager shareholders and upstanding citizens alike?

Full Article
Source: The Nation 

The Case Against a Payroll-Tax Holiday for Employers

The Obama administration must be getting frustrated. First, it passed a huge stimulus package meant to create jobs. Then, it extended the Bush tax cuts. But in May, just 54,000 just Americans found work, while the jobless rate rose to 9.1%. But it hasn't given up on unemployment yet. Bloomberg reports that the president's advisers are tossing around the idea of a temporary payroll-tax holiday for employers. Is this the right medicine to cure high unemployment?

First, what does a payroll-tax holiday do? Currently, employers face a 6.2% tax on the wages that they pay. This proposal would temporarily suspend some or all of that tax, in the hopes that employers would use that extra cash to pay new hires.

It's Demand, Not Profits

So why aren't firms hiring? As with any problem, to fix anemic job growth you have to first identify its cause. Is it that businesses aren't making enough profit to hire additional workers? This might be the case in some situations, but by in large, business profits have been faring relatively well over since 2010. Instead, the problem is demand: consumers aren't spending enough money to convince employers that it's a good time to hire additional workers.

Unfortunately, a temporary payroll-tax holiday for employers won't solve this problem. For example, let's say that the tax employers pay on wages disappears through 2012. That means that their labor costs would decline by about 6%. To be sure, this will increase their profits, which could be used to hire additional workers. But for most companies, slightly lower labor costs won't result in an epiphany that they must hire more workers, because the reason why they weren't hiring in the first place hasn't changed.

Would It Have Any Effect?

A temporary payroll-tax holiday could have a direct impact on hiring in a situation if a company is selling a product for which demand is totally exploding and wants to hire as many additional workers as possible. In that case, the company can now afford to hire more workers than before, since labor costs are lower. Even in this situation, however, there are a few problems.
First, not all that many firms are experiencing such crazy demand that they are having trouble hiring as many workers as they want. After all, if their revenues were that high, then they could probably afford to continue to hire workers pretty aggressively anyway.

Second, economics teaches us that temporary tax changes tend to have a minimal impact. But the temporary nature of the payroll-tax holiday is especially problematic when applied to employers. This economic theory is more likely to hold for businesses than for consumers. Unlike firms, most people aren't quite so technical about how they spend and save. Businesses, on the other hand, tend to care a lot about budgets and projections. If a firm learns that its costs have declined, then it will analyze how to best use the extra profit. If the windfall is temporary, then the company isn't as likely to make a permanent change -- like hiring more workers. 

Finally, even if a firm does intend to utilize the labor cost savings to hire more aggressively and ignores the temporary effect, lower employer payroll taxes won't have that big of an impact on hiring. If a firm's labor costs decline by 6%, this means that it can hire roughly six more employees for every 100 it has on staff, assuming those new employees will make salaries around the firm's average. So the smaller the business, the less effect the payroll-tax holiday will have. A firm would generally need at least 18 employees to save enough money through the tax cut to hire one more worker. And that's assuming that the holiday is for the entire 6.2% payroll tax, not a fraction. If small businesses like start-ups drive growth, then additional hiring would be negligible.

Full Article
Source: The Atlantic 

Wall Street's Latest Manufactured Outrage

The Fed and other regulators have proposed a set of rules that would put new limits on home mortgages: Borrowers would have to put 20 percent down and would have to show that their mortgage payments would amount to no more than 28 percent of their gross monthly income. The Washington Post makes this sound like doomsday:

Nearly three out of every five U.S. borrowers who bought homes last year would not have met the proposed restriction on total debt, according to an analysis by mortgage research firm CoreLogic....If the rules were in effect now, Todd Pearson of Ashburn predicts he'd be shut out of the market. Pearson wants to sell his house and buy another in Chevy Chase. He says he has no debts other than his mortgage. But he figures his mortgage payment alone would exceed the threshold proposed by the new rules.
You have to admit, these rules do sound pretty tough. In fact, they'd pretty much shut down the entire mortgage industry. So what's going on?

Answer: Lots of financial industry whining. As it turns out, regulators aren't saying that mortgage originators can't make any kind of loan they want. 20 percent down, 10 percent down, 5 percent down, whatever. Go to town. What they are saying is that if mortgage loans are bundled up into securities and resold, they want the issuer of the security to retain 5 percent of the total offering. That's part of Dodd-Frank, and it's designed to give issuers an incentive to make sure their mortgage securities aren't full of toxic waste. If they have to keep a piece of the action on their own books, they'll want to make sure their securities are safe and sound.

However, there's an exception: If your mortgages all conform to the new rules, you don't have to retain that 5 percent chunk. That's all that's happening. You can make any kind of loan you want, but if it's anything other than super safe, you have to keep a piece of it on your books.

The financial industry is in an uproar over this, claiming that it would shut millions of people out of the housing market. That's nonsense. Neither Todd Pearson nor anyone else is being denied a loan on whatever terms they can get one. All that's happening is that when their mortgages get bundled up and resold, the ABS issuer has to keep a 5 percent stake. The mortgage industry is on a rampage over this, claiming that it will dramatically raise the cost of mortgages, but that's nonsense too. Being forced to keep a 5 percent stake probably will have an impact on ABS issuers—that's the whole intent, after all—but the financial impact is almost certainly pretty minuscule. Tom Lawler at Calculated Risk roughly estimates it at perhaps 20 basis points at most on a nonconforming loan. In other words, the rate on nonconforming mortgages might go up 0.2 percentage points. At most. Something on the order of 0.1 percentage points or less is probably closer to reality.

This is yet another case of the financial industry biting the hand that's trying to help it out. The truth is that it would probably be a good idea to require ABS issuers to retain a 5 percent stake in every mortgage bundle they sell. But Dodd-Frank threw them a bone in the form of an exemption for loans that were transparently high quality and virtually certain not to default. And the result? Endless whining, a massive lobbying effort, and glossy four-color demagoguery about hardworking middle-class families being shut out of the mortgage market. Welcome to Wall Street.

Source: Mother Jones