Sunday, October 10, 2010

Evil or stupid?

The economic absurdities of the past 35 years have often made me ponder--are the guys making the big economic decisions evil or stupid.  There is a very large case for believing the answer to almost any question about a motivation is just plain raw, naked ignorance and stupidity.  It's the "Father forgive them for they know not what they do" argument straight from Christianity.  And in economics, this answer is usually correct.  Because MOST of the interesting economic questions are so complex, it's a wonder when theory describes more than 10% of the problem.  As a result, the practitioners of the dismal science seem to run in the range from being wrong ALL the time (the neoliberals) to being occasionally correct.

Even so, it is also quite obvious that there has been a LOT of economic fraud perpetrated on the gullible, the lesser informed, the folks who believe good rules make for great nations.  "Cutting corners" is the most charitable description for most of this fraud. But even here, this cheating is made easier to rationalize because of the complexity of economic questions.  The reasoning goes: "Since no one actually understands how the economy works, all rules and regulations are simply the expression of the power of well-connected interest groups.  If I am not a member of those interest groups, why should I be bound by their rules?  In fact, by breaking those old stodgy rules, I am helping the economy grow by introducing innovation."

It turns out, a lot of those stodgy old rules were written in response to the sort of catastrophes that we currently face because we forgot those rules were usually a pretty pragmatic response to a real problem.  Creating daring and innovative financial instruments looks extremely stupid if it destroys the trust in real estate documents.  Now you ARE fucking with the primal forces.

From The Daily Show, John Oliver representing Team Stupid and Wyatt Cenac representing Team Evil debate the best description for Fox News.  The debate begins at the 5:55 mark.

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Stupidity doesn't explain everything.  And just remember, it is quite possible to be evil and stupid at the same time.  History is replete with examples.
The Protest Movement. Financial Fraud in Iceland
by Rady Ananda

Global Research, October 5, 2010
As proceedings begin against Iceland’s former Prime Minister, Geir Haarde, for the banking crisis of 2008, at least two thousand Icelanders took to the streets in two days of protest this weekend. Iceland joins over a dozen other nations protesting economic measures taken out on the public while banks and large corporations receive bailouts. Class war is on, and it’s gone global.
Mass protests were also held in Greece, Portugal, Spain, Ireland, Germany, Italy, France, Slovenia, Lithuania, Latvia, Czech Republic, Cyprus, Serbia, Romania, Poland, and the U.S., according to reports from several sources. Folks around the world reject corrupt banking practices and bailouts, while social services are cut and tens of millions have been forced into joblessness and homelessness. 
Dori Sigurdsson, an Icelandic blogger, reports that when Parliament returned from recess on October 1st, they were met by a loud, angry crowd who tossed eggs, bread, dairy products and keys at them. People slept outside the Parliament building the night before its return session. He’s posted videos and several images.
Dori notes, “because of the lack of help from the Goverment for the public, many are now losing their houses and cars.” In a nation of only 317,000, 12 percent (or 40,000) have lost or are about to lose their homes, he says. Icelanders condemn the injustice of large companies and their CEOs having had their debts forgiven by government, while theirs are not.
Three other officials were charged with “misconduct in the lead up to, during and following the banking crisis,” reports Ice News. Parliament voted to prosecute only Haarde for negligence, under a 100-year-old law that has never before been used.
Icelanders are also angry that only the former PM is being charged. One commenter on the Ice News article noted, “Is this not a total betrayal of the people?” And criminal, to reasonable minds. more
The French Connection: That Jailed Banker Raises US Issues
Richard (RJ) Eskow
Consultant, Writer, Senior Fellow with The Campaign for America's Future
Posted: October 5, 2010 07:10 PM
Remember 2003, when so many Americans hated France for refusing to participate in the Iraq invasion? The airwaves were filled with insults about "effete" and "cowardly" Frenchmen, the phrase "cheese eating surrender monkeys" was on lips across the nation, and rich patriots were boycotting Rhône wine in the spirit of national sacrifice. Well, munch on a Freedom Fry and ponder this: Finally, after one stunning revelation of big bank lawlessness after another, a banker is going to jail... in France.
That's a bit of a national embarrassment, n'est-ce pas?
Jerome Kerviel was sentenced today to five years in prison (with two years suspended), and was ordered to pay the equivalent of $6.7 billion US in damages. There are a number of questions about Kerviel's case, although the most puzzling one for American banker sensibilities might be the fact that he never profited personally from his massive trades. That part of Kerviel's psychology is incomprehensible to the Wall Street mind: He made his firm billions of dollars, yet earned less than $200,000 US per year for his efforts. A true American shark would have nothing but contempt for a sucker like that. 
Guess who got off pretty much scot free in the whole deal? Société Générale, the bank that employed him. If the name sounds familiar, here's why: Société Générale was one of beneficiaries of the US taxpayers' largesse when, as a counterparty to AIG, the government directed AIG to pay the French bank $11.9 billion. That's 100 cents on the dollar for what AIG owed Société Générale for credit default swaps and CDS collateral postings. more
Foreclosuregate and Obama's Pocket Veto
A Massive Fraud
Amid a snowballing foreclosure fraud crisis, President Obama yesterday blocked legislation that critics say could have made it more difficult for homeowners to challenge foreclosure proceedings against them.
The bill, titled The Interstate Recognition of Notarizations Act of 2009, passed the Senate with unanimous consent and with no scrutiny by the DC media. In a maneuver known as a "pocket veto," President Obama indirectly vetoed the legislation by declining to sign the bill passed by Congress while legislators are on recess.
The swift passage and the President's subsequent veto of this bill come on the heels of an announcement that Wall Street banks are voluntarily suspending foreclosure proceedings in 23 states.
By most reports, it would appear that the voluntary suspension of foreclosures is underway to review simple, careless procedural errors. Errors which the conscientious banks are hastening to correct. Even Gretchen Morgenson in theNew York Times characterizes the problem as “flawed paperwork.”
But those errors go far deeper than mere sloppiness. They are concealing a massive fraud
They cannot be corrected with legitimate paperwork, and that was the reason the servicers had to hire “foreclosure mills” to fabricate the documents.These errors involve perjury and forgery -- fabricating documents that never existed and swearing to the accuracy of facts not known. more
Finally, we have a video of a speech by James K. Galbraith on the steps necessary to restore the economy. Naturally, there is the necessary inclusion of a call for a clampdown on fraud. Turns out there ARE rules worth enforcing. As Gomer would say, "Surprise! Surprise! Surprise!"

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