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News and Opinion
GDP Drops As War Economy Slows Down
Call it a victory for Military Keynesianism theory as today’s dreadful GDP numbers seem to be a result of a drop off in military spending.
In any case, if for some reason it was not before it should be painfully obvious now that austerity does not work. Cutting spending slows growth under general conditions cutting spending while the economy is weak is truly stupid. Progressives would love to spend the money on things other than war but the facts remain vis a vis austerity as today’s numbers clearly demonstrate.
Unless you're ready to admit truth, which is we have industrial policy, and it's called "war."— emptywheel (@emptywheel) January 30, 2013
Folks: if cuts to defense spending turn economy south, answer is NOT to restore defense spending. Why not build a bridge instead?— emptywheel (@emptywheel) January 30, 2013
US economy shrinks a surprise 0.1% in fourth quarter
If confirmed, it would be the first contraction logged by the US economy since the 2009 global recession.
The fourth-quarter shrinkage in economic output comes as a shock to analysts on Wall Street, who had been expecting 1.1% growth according to a poll by news agency Reuters. Not one economist surveyed had predicted an economic contraction.
Growth was dragged down by a 22% cut in the federal government's defence spending - the biggest since 1972, when the US was winding down from the end of the Vietnam War - and by the decision of many businesses to halt the rapid rebuilding of their inventories that began over the summer.
Meanwhile, the recently re-elected President Barack Obama and Congress are expected to clash once again in the coming months over the debt ceiling.
BUSTLING IN THE HEDGEROWS
Drowned out by the supplications to the Deficit Gods is the fact that a drop like this is probably inevitable given the fact that, during the last quarter, we saw a massive storm hit the most important financial centers of the country, and we saw four months of economic gloom-spell casting over the Gentle Fiscal Incline that would have had Pollyanna guzzling Sterno. And also, which virtually nobody mentioned, we are coming up on sequestration which, if it happens, is going to whack hell out of the budget out of which people build submarines and airplanes for the military. Wait, isn't that John Maynard Keynes over there in camo?
The Coming Recession: How Fiscal Responsibility is Economic SuicideCalling her Wall Street's new sheriff? No wonder Eliot Spitzer is not happy with this pick. And he's right. Wall Street's highly paid defender is a more accurate nickname. Check out this article for all of the history, conflicts of interest and things she will have to recuse herself from.
It is in this environment that members of both parties are falling over themselves to show how fiscally “responsible” they are. And we achieved this lofty goal in fourth quarter 2012 by reducing federal government spending by 15%. The result? Real GDP shrank by 0.1% (Bureau of Economic Analysis; consumers were able to keep this from being even worse due to a surge in spending on durables, something that is not sustainable because once you get your new big-screen TV for Christmas, you don’t buy another one for a while). This is a preliminary figure, but it contrasts sharply with third quarter growth of 3.1%. Not coincidentally, during that period federal government spending grew by 9.5%. We are primed for another recession.
All these fiscal cliffs, debt ceilings, and threats of sequester have us poised for disaster. For the Republicans, the party that has traditionally been the least worried about the debt and deficit, budget cuts appear to simply be a means of achieving their end of destroying programs they don’t like. The Democrats, on the other hand, don’t seem to have any ulterior motive–they’re just ignorant. They also desperately want to continue to use the Clinton surpluses (a result, not a cause, of the long 1990s expansion) as a means of marketing themselves as the responsible party.
But there is nothing responsible about raising unemployment. Our economy is very weak, and the last thing we need right now is to reduce yet another component of spending. The worst may be yet to come. To add insult to injury, it appears that it is going to be self-inflicted.
Nominee for ‘Sheriff’ Has Worn Banks’ HatMatt Taibbi on Mary Jo White. The one thing that confuses me about White is that in the NYU panel I linked here last week, Neil Barofsky spoke so highly of her. Maybe this was just pure decorum, since it was his panel and she was his guest. Still, it seemed like he had a lot of respect for her. If I remember correctly, he said she had helped him in his career. I'll be curious to see if he has anything to say about this appointment.
“You don’t want to mess with Mary Jo.”
That’s what President Obama said about his pick to run the Securities and Exchange Commission, Mary Jo White. The nomination of Ms. White, a former prosecutor who took on the terrorists behind the bombing of the World Trade Center in 1993 and the Mafia boss John Gotti, was meant to signal that the S.E.C. would be getting tough on Wall Street. CBS called her “Wall Street’s new sheriff.” The Wall Street Journal said she would be “putting a tougher face on an agency still tainted by embarrassing enforcement missteps in the run-up to the financial crisis.” The New York Times said her appointment represented a “renewed resolve to hold Wall Street accountable.”
While Ms. White is a decorated prosecutor, she has spent the last decade vigorously defending — and billing by the hour — Wall Street’s biggest banks, as a rainmaking partner at the white-shoe law firm Debevoise & Plimpton. The average partner at the firm was paid $2.1 million a year, according to American Lawyer; but she was no average partner, very likely being paid at least double that. Her husband, John W. White, is a corporate partner at Cravath, Swaine & Moore. He counts JPMorgan Chase, Credit Suisse and UBS as clients. The average partner at Cravath makes $3.1 million. [...]
So how conflicted is Ms. White? Let’s count the ways. [...]
New SEC Chief Mary Jo White Thinks the Government Should Bring Cases – 'To A Point'
A few more things about Mary Jo White, the former prosecutor and corporate lawyer recently chosen by Barack Obama to head the SEC. Last week, I wrote about White's involvement in the notorious Gary Aguirre episode, wherein the former U.S. Attorney and then-partner at the hotshot white-shoe defense firm Debevoise and Plimpton helped squelch then-SEC investigator Aguirre's insider trading case against future Morgan Stanley CEO John Mack.
White, who was representing Morgan Stanley in this affair, went over Aguirre's head to talk directly to then-SEC enforcement chief Linda Thomsen about "reviewing" the case. After Aguirre was fired and the case against Mack went away, the official responsible for terminating the case, Aguirre's boss Paul Berger, was given a lucrative, multimillion-dollar job with Debevoise and Plimpton, closing the circle in what looks like a classic case of revolving-door corruption.
There are a few more troubling details about this incident that haven't been disclosed publicly yet. The first involve White's deposition about this case, [...]
Bank of America Foreclosure Reviews: How the Cover-Up Happened (Part IV)
As we described in earlier posts in this series (Executive Summary, Part II, Part IIIA and Part IIIB), OCC/Federal Reserve foreclosure reviews meant to provide compensation to abused homeowners were abruptly shut down at the beginning of January as the result of a settlement with ten major servicers. Whistleblowers from the biggest, Bank of America, provide compelling evidence that the bank and its independent consultant, Promontory Financial Group, went to considerable lengths to suppress any findings of borrower harm.
These whistleblowers, who reviewed over 1600 files and tested hundreds more in the attenuated start up period, saw abundant evidence of serious damage to borrowers. Their estimates vary because they performed different tests and thus focused on different records and issues. When asked to estimate the percentage of harm and serious harm they found, the lowest estimate of harm was 30% and the majority estimated harm at or over 90%. Their estimates of serious harm ranged from 10% to 80%.
ALL THAT’S WRONG WITH THE GUANTANAMO TRIALS
The idea that a trial judge has control over his courtroom is about as sacrosanct a notion in American law as you can find. And even though military judges traditionally have had to serve conflicting masters (the law, their superior officers, etc.) the idea that a litigant would have the power to control the courtroom without the judge’s knowledge or consent goes to the heart of the problem with our current tribunals. A trial judge who does not have the authority to control his own courtroom, who is subject to the whims of the very officials whose charges against the detainees must be fairly weighed, cannot be the sort of independent judge which the Constitution requires and which justice demands. It’s not Judge Pohl’s fault. By Congress, by the Pentagon, by the Obama Administration, by the CIA, he’s been dealt a hand no truly independent judge could play. That’s just another big reason why these tribunals are doomed to fail, in the court of world opinion if not before the United States Supreme Court, no matter how many convictions they ultimately gin up.
France 'totally bankrupt', says labour minister Michel Sapin
France's labour minister sent the country into a state of shock on Monday after he described the nation as “totally bankrupt”.
Michel Sapin made the gaffe in a radio interview, which left French President Francois Hollande battling to undo the potential reputational damage.
“There is a state but it is a totally bankrupt state,” Mr Sapin said. “That is why we had to put a deficit reduction plan in place, and nothing should make us turn away from that objective.”
Home Prices Help Advance Economy's Slow Recovery
The Case-Shiller report showed that 19 of the 20 metropolitan areas it tracks registered year-over-year price increases, with New York as the sole city to see prices fall. The improvement has been considerable in much of the nation: 11 cities in the Case-Shiller index saw year-over-year price gains of 7% or more.
Prices are rising after housing inventory fell precipitously over the past year. While much of this was driven by investors who buy homes in bulk and pay cash, the flurry of activity put a floor under prices and made regular consumers more confident about buying again—a development helped by low interest rates.
Many economists expect home prices to keep rising in 2013 because those two forces—low interest rates and a slender inventory of homes for sale—are expected to persist throughout the year. "We're not building enough at a high enough rate," said Patrick Newport, an economist at IHS Global Insight.
Fed Risks Losses From Bonds
The Federal Reserve doesn't make monetary-policy decisions based on its projected profits or losses and most officials are confident the Fed could continue to operate without problems even with large losses.
Still, minutes of the Fed's December meeting showed officials are considering the matter as they evaluate the bond-buying programs, which are adding $85 billion a month in mortgage and Treasury securities to their $3 trillion portfolio.
Under law, the Fed is required to use its income to cover operating expenses and send much of the rest to the Treasury's general fund. Of the $91 billion the Fed earned last year, it sent nearly $89 billion to the Treasury, a record amount.
If the Fed were to record a loss, it could print its own money to cover its expenses—at no cost to the Treasury. The Fed would record a loss as a deferred asset, which would represent how much money the Fed would need to make up before it started sending profits to the Treasury again.
The Gulf States: Shared Geography, Shared Culture, Shared Oppression
Apart from their geography and shared culture, what these countries have in common is aging authoritarian leadership coupled with a young, Internet-savvy populace: an obvious recipe for tension. And though one need only look to the rest of the region to see the various directions in which such tension might lead, one thing is immediately clear: the governments of Oman, Kuwait, and Bahrain are, in all of the aforementioned cases, in violation of their citizens’ human rights.
This is Saudi Arabia in the age of new media. With so many Twitter users (according to the Dubai School of Government’s Arab Social Media Report, Saudi Arabia comes in second in the region to Turkey at nearly 350k users), Saudis wishing to mock their government officials on the site benefit from strength in numbers. Not so in neighboring Oman, for example, which has an estimated 6,500 users, or Bahrain, where Twitter users number around 58,000.
This matters because, in the countries that comprise the “Gulf States,” citizens are increasingly taking to social media to air their grievances against government officials, and are also increasingly being arrested, detained, or harassed for it, as we’ve noted in the past.
It's Time for Transparency Reports to Become the New Normal
When you use the Internet, you entrust your thoughts, experiences, photos, and location data to intermediaries — companies like AT&T, Google, and Facebook. But when the government requests that data, users are usually left in the dark. In the United States, companies are not required by law to alert their users when they receive a government request for their data. In some circumstances, they are explicitly prohibited from doing so. As part of our ongoing Who Has Your Back campaign, EFF has called on companies to be transparent by publishing their law enforcement guidelines and statistics on government requests for user data.
Surveillance is a growth industry: every existing report shows that the number of government requests for user data is rising, and this trend shows no sign of abating. Transparency reports are essential to helping users understand the scope of Internet surveillance and make informed decisions about storing their sensitive data or engaging in private communications. Companies should not wait until their users are clamoring for clarification. The time has come for transparency reports to become the new normal.
Assange to run for Australian senate: WikiLeaks
WikiLeaks unveiled the plan with a tweet that read “Australia: Julian Assange has confirmed he will run in the 2013 national election for the Australian Senate”, just hours after Prime Minister Julia Gillard said the nation would go to the polls on September 14.
Assange said last year that he was planning to register a WikiLeaks party with the Australian Electoral Commission, The Age newspaper reported at the time.
To do so he would require the support of 500 eligible voters, the paper said, adding that if he were elected while still out of the country a nominee would occupy the Senate seat.
It was unclear whether being elected a senator would have any bearing on his status in Britain and whether London would allow him to leave the country of his own accord.
Despite the allegations against him Assange remains a popular figure in Australia.
Blog Posts and Tweets of Interest
Gawker's list of Tom Friedman "hyperconnected" columns rules... TF must be constantly high to self-plagiarize this much gaw.kr/118GOU1— Matt Taibbi (@mtaibbi) January 30, 2013
Thanks to @davidsirota for pointing out that ludicrous David Axelrod tweet on Mary Jo White -- more on that on the blog this morning— Matt Taibbi (@mtaibbi) January 25, 2013
POTUS pick of tough ex-prosecutor Mary Jo White to head SEC is strong signal to those on Wall St. who would game system. Tough cop on beat!— David Axelrod (@davidaxelrod) January 25, 2013
Maybe the best photo I've seen all week: mentalfloss.com/article/48652/…— David Sirota (@davidsirota) January 31, 2013
Still wondering why folks are surprised NYT got hacked. But now interested in what it says abt conception of Great Firewall of China.— emptywheel (@emptywheel) January 31, 2013
And again, it's FAR more important we learn whether Brennan part of Tenet-era serial lying than his tangential role in torture.— emptywheel (@emptywheel) January 30, 2013
So maybe Brennan came to meeting prepared bc he doesn't want to talk abt--or promise to stop--CIA's lies to Congress? emptywheel.net/2013/01/30/may…— emptywheel (@emptywheel) January 30, 2013
Obama nominee for CIA director had detailed knowledge of torture huff.to/129shH2— HuffPost Politics (@HuffPostPol) January 31, 2013
@jameeljaffer Silly. John Brennan is the new Dick Cheney. Or whoever else claims to be OCA for black sites until he gets confirmed.— emptywheel (@emptywheel) January 29, 2013
Pretrial hearings at Guantanamo resumes tomorrow at 9 am.— Jason Leopold (@JasonLeopold) January 31, 2013
Back at Ft Meade for another 9/11 tribunal hearing. Here is short story from today's paper on the offstage censors. nytimes.com/2013/01/31/us/…— Charlie Savage (@charlie_savage) January 31, 2013
Unclear what's on today's #911trial agenda: We're hoping to hear more from the judge on hidden-hand censor issue, a plan for going forward.— Carol Rosenberg (@carolrosenberg) January 31, 2013
We've had the playing of the National Anthem across the base, soldiers standing ramrod in salute, and movement of media pool to courthouse.— Carol Rosenberg (@carolrosenberg) January 31, 2013
Whoa. Lovely. Glenn retweeted these.
@ggreenwald OH LK THE BRAZILAN BITCH WHO WHILE IN AMERICA DEFENDED NEO NAZI RACIST FUCKS EVENTS IN OUR AA NEIGHBORS F U GLENN BITCH— lovelyladypa (@lovelyladypa) January 31, 2013
@ggreenwald BITCH U ARENT THE LEFT U R A KOCH BROS BITCH NOW LETS TLK SOME REAL FACTS BASTARD U WRKD FOR PPL WHO BACKED DRONES & WARS— lovelyladypa (@lovelyladypa) January 31, 2013
STEVIE WONDER- "UPTIGHT (EVERYTHING'S ALRIGHT)