Undernews For November 30, 2008
Undernews For November 30, 2008
The news while there's still time to do something about it
THE PROGRESSIVE REVIEW
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Editor: Sam Smith
Sam Smith, Progressive Review - There is something wrong out there. The fiscal crisis is supposedly primarily due to the collapse of sub prime mortgages. This argument places the blame squarely on the backs of stupid borrowers and predatory lenders. It also provides the Wall Street casino players with significant cover.
But let's ask one simple question: what if all the sub prime mortgages had been held by conventional banks and there had been no securitization, mortgage backed securities, structured investment vehicles or special purpose entities that, in the polite words of Wikipedia, "enabled large financial institutions to circumvent capital requirements, thereby increasing profits but augmenting risk."
The value of all residential mortgages is around $11 trillion. As of August about 9% were either delinquent or in foreclosure, or $1.1 trillion. Assuming all were sub prime and eventually foreclosed, assuming there has been a decline of 40% in the value of the homes since the mortgages were issued and assuming every one of these mortgages was for 100% of value, we would still have around $660 billion in real value and a loss of some $440 billion - considerably less than just the first bailout sum.
It is hard to get decent figures about the fiscal disaster but simple exploratory calculations - even those like the above, based on a worse case than reality - suggest that the story may not be quite as it has been presented to us.
There is no doubt that subprime mortgages played an important and even catalytic role in the fiscal disaster, but there also seems little doubt that the problem would have been far easier to cope with if it hadn't been merged with the most complex, covert and incautious gambling scheme ever devised.
Advisor Perspectives was one of the few to hit the target, and last February at that:
"The sub-prime debt that may eventually be written off represents a small corner of the financial markets. Yet its impact has been devastating. . . According to [Dan Gertner, an analyst with Grant's Interest Rate Observer] the markets collapsed because of a loss of trust. 'One of the great innovations in structured finance was the reallocation of risk achieved by securitization,' says Gertner, adding that 'a consequence was that nobody knew where the risk was.' The markets woke up to the fact that [collateralized debt obligations] were a whole lot riskier than their AAA ratings indicated, and started to question the broader lending markets."
More recently, this - from an interview with Michael Lewis in Motley Fool:
Mac Greer: Michael Lewis, it is ugly out there. Where did it all go wrong?
Michael Lewis: The very short answer was the ability of Wall Street to repackage subprime mortgages as an investment-grade security. That is the heart of the immediate problem.
Then, having done that, [Wall Street] created alongside this market, which grew to a couple of trillion dollars, a casino in side bets where smart people could bet against the sub prime mortgages going bad -- which smart people did do -- this market in side bets, with many trillions more than the original market. So you have got -- because the subprime mortgages have all turned out to be, or mostly turned out to be kind of rotten -- you have got many trillions of dollars of supposedly investment-grade securities that are suddenly worthless. That is a traumatizing event for the global economy, but that is the very short answer. . .
Greer: How could this crisis have been prevented?
Lewis: If the financial regulatory system had controlled the leverage that investment banks were able to run, that would have dramatically reduced the amount of risk in the system. But they didn't, not properly. If the ratings agencies had done their job properly and not caved to pressure from Wall Street to . . . not allow themselves to essentially be gamed by Wall Street into putting investment-grade stickers on things that were essentially crap, then all of it would have been avoided.
In other words, what could have been a manageable crisis turned into an unmanageable disaster not because of the sub prime loans themselves but because of what happened after they were made. Wall Street turned poorly conceived loans into cards at a casino table. And sub prime mortgages weren't the only game being played. Consider the likelihood that billions of drug and other illegal profits were laundered through hedge funds. In the end, the problems created by poor sub prime loans were swamped by the effect of using them as an unprecedented form of gambling.
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Sean Penn, Nation - We spent . . . two days in Chavez's constant company, with many hours of private meetings among the four of us. In the private quarters of the president's plane, I find that on the subject of baseball Chavez's command of English soars. When Douglas asks if the Monroe Doctrine should be abolished, Chavez, wanting to choose his words carefully, reverts to Spanish to detail the nuances of his position against this doctrine, which has justified US intervention in Latin America for almost two centuries. "The Monroe Doctrine has to be broken," he says. "We've been stuck with it for over 200 years.". . .
Hitchens sits quietly, taking notes throughout the conversation. Chavez recognizes a flicker of skepticism in his eye. "CREES-to-fer, ask me a question. Ask me the hardest question." They share a smile. Hitchens asks, "What's the difference between you and Fidel?" Chavez says, "Fidel is a communist. I am not. I am a social democrat. Fidel is a Marxist-Leninist. I am not. Fidel is an atheist. I am not. One day we discussed God and Christ. I told Castro, I am a Christian. I believe in the Social Gospels of Christ. He doesn't. Just doesn't. More than once, Castro told me that Venezuela is not Cuba, and we are not in the 1960s."
"You see," Chavez says, "Venezuela must have democratic socialism. Castro has been a teacher for me. A master. Not on ideology but on strategy." Perhaps ironically, John F. Kennedy is Chavez's favorite US president. "I was a boy," he says. "Kennedy was the driving force of reform in America." Surprised by Chavez's affinity for Kennedy, Hitch chimes in, referring to Kennedy's counter-Cuba economic plan for Latin America: "The Alliance for Progress was a good thing?" "Yes," says Chavez. "The Alliance for Progress was a political proposal to improve conditions. It was aimed at lowering the social difference between cultures.". . .
On our third day in Venezuela, we thanked President Chavez for his time, the four of us standing among security personnel and press at the Santiago Marino Airport on Isla Margarita. Brinkley had a final question, and so did I. "Mr. President," he said, "if Barack Obama is elected president of the United States, would you accept an invitation to fly to Washington and meet with him?" Chavez immediately answered, "Yes.". . .
I'm sitting at a small polished table in a government office with President Castro and a translator. "Fidel called me moments ago," he tells me. "He wants me to call him after we have spoken." There is a humor in Raul's voice that recalls a lifetime of affectionate tolerance for his big brother's watchful eye. "He wants to know everything we speak about," he says with the chuckle of the wise. . .
I return to the subject of US elections by repeating the question Brinkley had asked Chavez: Would Castro accept an invitation to Washington to meet with a President Obama, assuming he won in the polling, only a few weeks away? Castro becomes reflective. "This is an interesting question," he says, followed by a rather long, awkward silence. . . "You know," he says, "I have read the statements Obama has made, that he would preserve the blockade." I interject, "His term was embargo." "Yes," Castro says, "blockade is an act of war, so Americans prefer the term embargo, a word that is used in legal proceedings. . . but in either case, we know that this is pre-election talk, and that he has also said he is open to discussion with anyone.". . .
He paused now, slowly considering a thought. "I'll tell you something, and I've never said it publicly before. It had been leaked, at some point, by someone in the US State Department, but was quickly hushed up because of concern about the Florida electorate, though now, as I tell you this, the Pentagon will think me indiscreet."
I wait with bated breath. "We've had permanent contact with the US military, by secret agreement, since 1994," Castro tells me. "It is based on the premise that we would discuss issues only related to Guantanamo. On February 17, 1993, following a request by the United States to discuss issues related to buoy locators for ship navigations into the bay, was the first contact in the history of the revolution. Between March 4 and July 1, the Rafters Crisis took place. A military-to-military hot line was established, and on May 9, 1995, we agreed to monthly meetings with primaries from both governments. To this day, there have been 157 meetings, and there is a taped record of every meeting. The meetings are conducted on the third Friday of every month. We alternate locations between the American base at Guantanamo and in Cuban-held territory. We conduct joint emergency-response exercises. . .
Now at the Friday meetings there is always a representative of the US State Department." No name given. He continues, "The State Department tends to be less reasonable than the Pentagon. But no one raises their voice because. . . I don't take part. Because I talk loud. It is the only place in the world where these two militaries meet in peace."
"What about Guantanamo?" I ask. "I'll tell you the truth," Castro says. "The base is our hostage. As a president, I say the US should go. As a military man, I say let them stay." . .
I circle back to the question of a meeting with Obama. "Should a meeting take place between you and our next president, what would be Cuba's first priority?" Without a beat, Castro answers, "Normalize trade." The indecency of the US embargo on Cuba has never been more evident than now, in the wake of three devastating hurricanes. The Cuban people's needs have never been more desperate. The embargo is simply inhumane and entirely unproductive. Raul continues, "The only reason for the blockade is to hurt us. Nothing can deter the revolution. Let Cubans come to visit with their families. Let Americans come to Cuba." . . .
By now, we have moved on from the tea to red wine and dinner. "Let me tell you something," he says. "We have newly advanced research that strongly suggests deepwater offshore oil reserves, which US companies can come and drill. We can negotiate. The US is protected by the same Cuban trade laws as anyone else. Perhaps there can be some reciprocity. There are 110,000 square kilometers of sea in the divided area. God would be unfair not to give some oil to us. I don't believe he would deprive us this way." . . .
With our dinner finished, I walk with the president through the sliding glass doors onto a greenhouse-like terrace with tropical plants and birds. As we sip more wine, he says, "There is an American movie--the elite are sitting around a table, trying to decide who will be their next president. They look outside the window, where they see the gardener. Do you know the movie I'm talking about?" "Being There," I say. "Yes!" Castro responds excitedly, "Be
According to Splice Today, for underground bands, cassettes are the new, cool vinyl: "They perfectly suit thrifty DIY labels and musicians trying to maintain a lo-fi aesthetic, as well as the more artistically inclined."
While audio went digital, the lowly cassette was down but not out. In fact, we checked to see the buzz on tapes and found a bump in searches in the last week for "music cassette tapes" (+110%), "blank cassette tapes" (+210%), "books on cassette tapes" (+900%), and the sad but definitely true "cassette tapes problems damage" (+400%).
Robert Fisk, Independent, UK - The collapse of Afghanistan is closer than the world believes. Kandahar is in Taliban hands - all but a square mile at the centre of the city - and the first Taliban checkpoints are scarcely 15 miles from Kabul. Hamid Karzai's deeply corrupted government is almost as powerless as the Iraqi cabinet in Baghdad's "Green Zone"; lorry drivers in the country now carry business permits issued by the Taliban which operate their own courts in remote areas of the country.
The Red Cross has already warned that humanitarian operations are being drastically curtailed in ever larger areas of Afghanistan; more than 4,000 people, at least a third of them civilians, have been killed in the past 11 months, along with scores of NATO troops and about 30 aid workers. Both the Taliban and Mr Karzai's government are executing their prisoners in ever greater numbers. . .
"Nobody I know wants to see the Taliban back in power," a Kabul business executive says - anonymity is now as much demanded as it was before 2001 - "but people hate the government and the parliament which doesn't care about their security. The government is useless. With so many internally displaced refugees pouring into Kabul from the countryside, there's mass unemployment - but of course, there are no statistics. . .
Afghans working for charitable organisations and for the UN are telling their employers that they are coming under increasing pressure to give information to the Taliban and provide them with safe houses. In the countryside, farmers live in fear of both sides in the war. A very senior NGO official in Kabul - again, anonymity was requested - says both the Taliban and the police regularly threaten villagers. "A Taliban group will arrive at a village headman's door at night - maybe 15 or 16 of them - and say they need food and shelter. And the headman tells the villagers to give them food and let them stay at the mosque. Then the police or army arrive in the day and accuse the villagers of colluding with the Taliban, detain innocent men and threaten to withhold humanitarian aid. Then there's the danger the village will be air-raided by the Americans."
Progressive Review - The notion that Obama was all about change is beginning to get a bit worn, so the LA Times has thoughtfully given Obama an alternative amazing virtue: "Obama assigns centrists to make radical economic moves. The team led by Lawrence Summers, Timothy Geithner and Christina Romer will have to strike a balance between extraordinary government intervention and the nation's commitment to free markets." Those centrists radicals will do it every time.
Chris Bowers - Even after two landslide elections in a row, are our only governing options as a nation either all right-wing Republicans, or a centrist mixture of Democrats and Republicans? Isn't there ever a point when we can get an actual Democratic administration? Also, why isn't there a single member of Obama's cabinet who will be advising him from the left? It seems to me as though there is a team of rivals, except for the left, which is left off the team entirely. Not a single, solitary, actual dyed-in-the-wool progressive has, as far as I can tell, even been mentioned for a position in the new administration.
Ralph Nader - Having defeated Senator Hillary Clinton in the Democratic Primaries, he now is busily installing Bill Clinton's old guard. Thirty one out of forty seven people that he has named so far for transition or appointments have ties to the Clinton Administration, according to Politico. One Clintonite is quoted in the Washington Post as saying: "This isn't lightly flavored with Clintons. This is all Clintons, all the time.". . . Now, recall Obama's words during the bucolic "hope and change" campaign months: "The American people understand the real gamble is having the same old folks doing things over and over and over again and somehow expecting a different result." Thunderous applause followed these remarks.
FREEDOM & JUSTICE
Guardian, UK - The Metropolitan police is to boycott the home secretary's plan to arm 10,000 frontline officers with Taser stun guns because of their potential to cause fear and damage public confidence. The Metropolitan Police Authority said yesterday it had no intention of immediately taking up Jacqui Smith's offer to sanction an increase in the availability of Tasers. "We recognise the potential to cause fear and damage public confidence if the use of Tasers is extended to non-specialist trained police officers and is perceived by the public to be indiscriminate," the MPA said. "There is no doubt that in some circumstances Tasers are a very effective alternative to firearms . . but their use must be tightly controlled and we have seen no case made out to extend their availability."
Newsweek - When the Olympic torch passed through Juneau, Alaska, in 2002, 18-year-old Joseph Frederick saw a chance at TV airtime. His tactic: a banner reading BONG HITS 4 JESUS. Not amused, Frederick's principal confiscated the banner and suspended him for five days. He shot back something about Thomas Jefferson. She tacked on another five. Frederick took his free-speech argument to court, with backing from the ACLU. Five years later it was before the U.S. Supreme Court, with Kenneth Starr representing the school. The court ruled that since Frederick was holding the banner at a "school-supervised" (though not on school grounds) event, the principal had a right to restrict what he said about illegal drugs-even if his message was rather nonsensical. Now 25, Frederick is learning Mandarin and teaching English in China. Although he is proud that he stood up for his rights, he regrets "the bad precedent set by the ruling." His case was finally settled at the state level in November, winning him $45,000 and forcing the school to hold a forum on free speech.
SCHOOLS & THE YOUNG
Gary Stager - Here is a most stunning principle of the school the Obama children and Biden grandchildren will be attending. . . Wikipedia: "The school does not rank its students, as this conflicts with the Quaker Testimony of Equality." . . What? Not ranking students? No winners or losers? No AYP? Where is the accountability in that? Perhaps there are other ways of identifying educational accomplishment? . . . You wouldn't think so if you listened to President-elect Obama speak about public education.
San Diego Union-Tribune - Kevin Change said it was strange the first time he saw an advertisement across the bottom of his calculus test. But now he and his classmates look for them. . . Some are pithy one-liners, hawking the names of local businesses: "Brace Yourself for a Great Semester! Braces by Henry, Stephen P. Henry D.M.D." Others are inspirational quotes, like "Keep the company of those who seek the truth, and run from those who have found it - Vaclav Havel." They only appear on the first page of an exam. The unusual advertising may be here to stay, said calculus teacher Tom Farber, who came up with the idea to pay for his printing costs.
Raw Story - US officials told scores of firms offering security in Iraq that their personnel will lose immunity from prosecution under a new US-Iraq security pact due to take effect in January. The officials told reporters that they briefed delegates from 172 security contractors employing nearly 175,000 Americans, Iraqis and others in Iraq about the new rules under a pact set to replace a UN mandate expiring December 31. . . Under the changes, contractors "can no longer expect that they will enjoy the wide ranging immunity from Iraqi law that has been in effect since 2003," when US-led forces invaded Iraq to topple Saddam Hussein, according to the statement.
Jeff Stein, Spy Talk - When last seen in these parts, Iraqi exile leader Ahmed Chalabi was serving up phony defectors to the New York Times in a campaign to justify toppling Saddam Hussein. Some suspect Chalabi was acting on behalf of Iran, to get rid of its major nemesis, and has continued to do its bidding in Baghdad. So imagine our surprise when we found Chalabi's byline in the New York Times telling the U.S. to get out of Iraq. In "Thanks, but You Can Go Now," the Iraqi Zelig writes that "there are still those in Washington's corridors of power who want to reduce Iraq to being an American puppet state, like Jordan or Egypt, nations governed through a corrosive mix of covert intelligence and military support spoon-fed to a permanent oligarchy." He should know. Years back, the portly master intriguer fled Jordan after being charged with looting a bank.
Raw Story Bolivian leader Evo Morales accused the US government of encouraging drug-trafficking as he explained his decision to banish the US Drug Enforcement Administration. Morales. . . said the staff from the US agency had three months to prepare to leave the country, because "the DEA did not respect the police, or even the (Bolivian) armed forces." "The worst thing is, it did not fight drug trafficking; It encouraged it," the Bolivian leader said, adding that he had "quite a bit of evidence" backing up his charges. Presidential Minister Juan Ramon Quintana presented a series of documents and press clippings at a news conference. . . that had influenced Morales' decision to suspend DEA activities last week.. . . Throughout the 1990s, the DEA in Bolivia "bribed police officers, violated human rights, covered up murders, destroyed bridges and roads," said Quintana. Morales earlier said that after a 1986 operation in Huanchaca National Park, it was determined that the largest cocaine processing plant "was under DEA protection." He also charged that the DEA had investigated political and union leaders opposed to neoliberal economic policies, which he said amounted to political persecution.
FURTHERMORE. . .
Guardian, UK - Two Teddington rowers
are planning to strip off for a perilous 4,350 mile trip
across the Indian Ocean in a self-built boat to raise cash
Daring Roger Haines and Tom Lee will have to manage around 2.6m oar strokes during the mammoth challenge which will see them travel from the coast of Australia to Mauritius. The pair will brave 50ft waves, 17 species of shark, 10 types of whale and even pirates - and they will do it completely nude for most of their 105-day journey in order to avoid chafing. They hope to raise L100,000 for charity, as well as become the first duo to row across the Indian Ocean - the third largest in the world. Roger and Tom are one of 30 teams competing in the Indian Ocean Race 2009, and despite putting L30,000 of their own money into the contest they still need L40,000 for items including a medical kit, a life raft, insurance and food provisions.
Fark - Florida town to rename street after Obama. That's interchange we can believe in
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