Morgan Stanley

In BP We Trust

During the recent weeks, when we learned that the National Oceanographic and Atmospheric Administration (NOAA) is refused access to research and measure the spill by British Petroleum (BP), and the US Coast Guard warns reporters, research scientists and engineers away from the area, stating that they are simply following orders --- from BP --- one might surmise the sovereignty of the United States of America has been ceded to an oil multinational.

It would certainly appear that way. Many complaints have been heard from a variety of scientists and engineers, eager to monitor, research and learn from this catastrophe, in order to better prepare, and avoid, future such occurrences.

But what of the past decade and BP's other adventures?

Well, in this study by the GAO from October of 2007 (p.54):

In another case, on June 28, 2006, CFTC brought an enforcement action against BP Products North America, Inc., alleging, among other things, that BP cornered the physical propane market and manipulated the price of propane in February 2004.63 Also on June 28, 2006, DOJ announced that a former BP trader had pled guilty to conspiracy to manipulate and corner the physical propane market.(emphasis added - JW)

Hmmm......interesting stuff here!

Who Owns The World

During these times of rampaging predatory capitalism, one is tempted to dwell on the details; the endless new scams and instruments to generate profits from debt, and always new creations:

  • Blythe Masters (who gave us the credit default swap) hard at work on carbon derivatives,
  • JP Morgan Chase’s q-Forwards,
  • Goldman Sachs and their collateralized risk obligations (CRO) and convoluted public-private partnership configurations,
  • Morgan Stanley and their Pinnacle Notes,
  • Citigroup’s crisis derivatives,
  • and ELX Futures’ (Goldman Sachs, JP Morgan Chase, Morgan Stanley et al.) exchange of futures for futures (EFF) gambit,

but sometimes examining the fundamentals is recommended.

A long time ago, Henry George, the great political economics thinker, came to the conclusion that the concentrated land ownership – or the monopoly of land – was the chief cause of poverty.

The free-thinking economist, J.W. Smith and his elegant economic democracy philosophy elaborated this to the monopolization of land, capital and knowledge. While in logical agreement with Dr. Smith, the second two categories are always dependent upon the primary monopoly of land.

Adam Smith, in his Wealth of Nations so very conveniently avoided a confrontation with the land owner hegemony of his day; instead writing to the status quo and avoiding the obvious concentration in land ownership.

Hedge Funds, LBOs and Banksters, oh my!

The other day many of us were exposed to a BBC interview where a business reporter kept repeating the tired old mantra that hedge funds had no involvement with the global economic meltdown.

Oh really?

Then surely, given the opaque nature of these private investment concerns, there would be no surprises forthcoming if they were to be intensively audited by forensic accounting teams together with certified fraud examiners?

And while we're at it, might not the same auditing processes yield interesting results if also directed at those private equity leveraged buyout funds (LBOs) and the major credit derivatives dealers, Goldman Sachs, JP Morgan Chase, Morgan Stanley, Citigroup and Bank of America (with Credit Suisse FB, UBS and Deutsche Bank in the mix as well)?

Awhile back, Dr. John L. Goldberg of the University of Sydney, was brought in by the Australian government as a consultant to research the financing behind a number of public-private partnerships concerning Australian toll roads and infrastructure projects.

Now public-private partnerships, where securitizations with the subsequent generation of credit derivatives occur, incorporate the same underlying fundamental financial model as hedge funds, private equity firm LBOs and credit derivatives dealing by major ("too big to fail") banks.

Dr. Goldberg's three principal points, taken from one of his executive summaries, were as follows:

"Paying equity dividends with virtually no cash flow available (CCT)"