Saturday Reads Around the Internets - This Week in the Economic Horror Show

shocknews Welcome to the weekly roundup of great articles, facts and figures. These are the weekly finds that made our eyes pop.


Libor Manipulating Banks Want Civil Fine Settlement

As expected, it appears those banks manipulating the LIBOR are after a group settlement. In other words, if you're expecting heads to roll and criminal charges, dream on.

A group of banks being investigated in an interest-rate rigging scandal are looking to pursue a group settlement with regulators rather than face a Barclays-style backlash by going it alone, people familiar with the banks’ thinking said.

Such discussions are preliminary, and it is unclear if regulators will enter these talks, aimed at resolving allegations that banks attempted to manipulate the London interbank offered rate, or Libor, a benchmark that underpins hundreds of trillions of dollars in contracts.


Bernanke's Testimony

While the press hunts high and low for more quantitative easing, the real warning Bernanke gave Congress goes unnoticed. Bottom line, Congress is not doing their job and will drive the nation into another recession. One would think Federal Reserve chair Ben Bernanke is all knowing and all powerful. At least that's what Congress seems to think as they abdicate their job to save the economy.

The second important risk to our recovery, as I mentioned, is the domestic fiscal situation. As is well known, U.S. fiscal policies are on an unsustainable path, and the development of a credible medium-term plan for controlling deficits should be a high priority. At the same time, fiscal decisions should take into account the fragility of the recovery. That recovery could be endangered by the confluence of tax increases and spending reductions that will take effect early next year if no legislative action is taken. The Congressional Budget Office has estimated that, if the full range of tax increases and spending cuts were allowed to take effect--a scenario widely referred to as the fiscal cliff--a shallow recession would occur early next year and about 1-1/4 million fewer jobs would be created in 2013. These estimates do not incorporate the additional negative effects likely to result from public uncertainty about how these matters will be resolved. As you recall, market volatility spiked and confidence fell last summer, in part as a result of the protracted debate about the necessary increase in the debt ceiling. Similar effects could ensue as the debt ceiling and other difficult fiscal issues come into clearer view toward the end of this year.

The most effective way that the Congress could help to support the economy right now would be to work to address the nation's fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery. Doing so earlier rather than later would help reduce uncertainty and boost household and business confidence.


Payback's a Bitch

Bain Capital sent a paper mill into bankruptcy and one of the workers there has been after Romney ever since.

“Let me show you something,” Johnson says, rising to get his “Romney box,” a copier-paper carton he’s kept since 1994. “She’s tried to get me to get rid of the box,” he says, nodding toward his wife, Rita, who smiles tolerantly. “I won’t do it.”

Johnson's pursuit of Romney has made him a union celebrityPhotograph by Mark MahaneyJohnson's pursuit of Romney has made him a union celebrity

The box contains records of a long-ago chapter in the history of Bain Capital, the Boston investment firm Romney led from 1984 to 1999. Back in 1992, Bain acquired a manufacturer called American Pad & Paper, or Ampad. Bain then used Ampad as a vehicle to buy and restructure similar companies. Following standard “roll-up” strategy, Bain closed factories and laid off workers in anticipation of selling off a leaner, more profitable company via an initial public stock offering.

Two years into the roll up, Bain had Ampad acquire an office supplies plant in Marion, Ind., a manufacturing town 70 miles northeast of Indianapolis. At the time, Johnson worked the night shift making hanging files. “We come back from the July 4th holiday, and this is what we find posted,” Johnson says, producing from the Romney box a one-page notice: “As of 3 p.m. today, July 5, 1994, your employment with SCM Office Supplies Inc. will end.” Most of the 258 employees were allowed to reapply for jobs at reduced wages and benefits. Johnson’s pay fell 22 percent, he says, from $10.05 an hour to $7.88. Dismayed to see their old union contract torn up, the Marion workers negotiated with Ampad management for several months, then called a risky strike. In early 1995, Ampad called the union’s bluff, closed the plant, and laid off the remaining workers.


Tim Geithner Covered TARP Inspector with Explicatives

This is fun. Neil Barofsky's new book describes Treasury Secretary Tim Geithner cussing him out for doing his job.

"Neil, I have been the most fucking transparent secretary of the Treasury in this country's entire fucking history!" Geithner erupted, in an episode that had Barofsky wondering if Geithner was going to "throttle" him. At the time, Barofsky was the special inspector general in charge of oversight of the Troubled Asset Relief Program.

It's one of the juicier episodes in Barofsky's new book, "Bailout: An Inside Account of How Washington Abandoned Main Street While Rescuing Wall Street." The book recounts Barofsky's front-row view of how the Bush and Obama administrations handled the bailouts of banks, auto makers and homeowners after the financial crisis.


Peter Doyle's Parting Shot at the IMF

Peter Doyle resigned from the IMF and his resignation letter says why.

To Mr. Shaalan, Dean of the IMF Executive Board:

Today, I addressed the Executive Board for the last time-because I am leaving the Fund.

Accordingly, I Wanted first to formally express my deep appreciation to the Swedish, Israeli, and Danish authorities With Whom I have Worked recently, as Well as all others with Whom I have Worked earlier, for their extraordinary generosity towards me personally.

But I also wanted to take this opportunity to explain my departure.

After twenty years of service, I am ashamed to have had any association with the Fund at all.

This is not solely because of the incompetence that was partly chronicled by the OIA report into the global crisis and the TSR report on surveillance ahead of the Euro Area crisis. Moreso, it is because the substantive difficulties in these crises, as with others, were identified Well in advance but were suppressed here. Given long gestation periods and protracted international decision-making processes to head off both these global challenges, timely sustained Warnings Were of the essence. So the failure of the Fund to issue them is a failing of the first order, even if such Warnings may not have been heeded. The consequences include suffering (and risk of Worse to come) for many including Greece, that the second global reserve currency is on the brênk, and that the Fund for the past two years has been playing catch-up and reactive roles in the last-ditch efforts to save it.

Further, the proximate factors which produced these failings of IMF surveillance-analytical risk aversion, bilateral priority, and European bias_­are, if anything, becoming more deeply entrenched, notwithstanding initiatives which purport to address them. This fact is most clear in regard to appointments for Managing Director Which, over the past decade, have all-too-evidently been disastrous.

Even the current incumbent is tainted, as neither her gender, integrity, or élan can make up for the fundamental illegitimacy of the selection process. In a hierarchical place like this, the implications of those choices filter directly to others in senior management, and via the appointments, fixed term contracts, and succession planning of senior staff, they go on to infuse the organization as a Whole, overwhelming everything else.

A handicapped Fund, subject to those proximate roots of surveillance failure, is What the Executive Board prefers. Would that I had understood twenty years ago that this Would be the choice.

There are good salty people here. But this one is moving on. You might Want to take care not to lose the others.

Yours Sincerely,

Peter Doyle


Beige Book Mumbo Jumbo

The Fed's beige book, unlike most recent national economic reports, paints a fairly flat-lined economic picture for regional economies, yet there is nothing new, not covered already. Fairly nondescript, there must be a reason they call the regional economies report, beige.

Reports from most of the twelve Federal Reserve Districts indicated that overall economic activity continued to expand at a modest to moderate pace in June and early July.

We'll skip the rest of the beige book, if you want a nice snooze, you can read it at the above link.


Stockton Latest Bankrupt City

Stockton is the latest city to go bankrupt:

While Stockton’s bankruptcy troubles can be traced in part to the collapse of the housing market and the subsequent erosion of the city’s tax base, for years city leaders also mismanaged and overspent funds, pushing the city into financial peril, analysts and current city officials say. Stockton cannot afford the $417 million it owes for retiree health benefits, city officials say, and this year a bank repossessed city-owned parking garages and a $40 million building the city had bought with plans for an upgraded City Hall.

Since 2009, the city has cut 25 percent of its police officers, 30 percent of its Fire Department and over 40 percent of all other city employees. And while the Police Department has started hiring again, much ground has already been lost. Last year, there were 58 homicides here, a record. Halfway through 2012, there have already been 35. Other cities across the state are also teetering. On Wednesday night, city leaders in San Bernardino, Calif., voted to declare a fiscal emergency, which would allow the city to file for bankruptcy within 30 days.


Krugman vs. Estonia

Seems Estonia declared a blogger war when Krugman poo pooed their austerity measures. Worth a read but bottom line, Estonia is a different country, different people and one thing, culturally, they hate, along with the Finns, is debt.


White House Publishes Economic Fiction on Immigration

Just unbelievable, the White House, with their never ending agenda for unlimited immigration, amnesty and more guest workers seems to have touted a host of lobbyist written spin papers on their website. FAIR, a reduce immigration group called cash on the B.S. While one may or may not approve of this organization, we're sorry, writing economic fiction to advance some ill-conceived agenda is simply unacceptable.

As part of its campaign to convince a skeptical American public about the benefits of amnesty and mass immigration, two Administration economic advisors published a blog on the White House website entitled, “Ten Ways Immigrants Help Build and Strengthen Our Economy.” The blog by Jason Furman and Danielle Gray is a case-book example of how to carefully select facts (and ignore those that are inconvenient) and cite questionable sources to support a predetermined conclusion.

Below are the “facts” and arguments offered by Furman and Gray, followed by some of the information they chose to leave out.

Immigrants are increasingly becoming our engineers and scientists because natives are being driven out of those fields. In recent months several studies (conducted by reputable researchers who have no defined position in the immigration debate) have concluded that there is a surplus of trained American STEM workers, but that many of them are openly discriminated against or have become discouraged and mover to other fields.


Who is Donating to Romney & Obama?

Zerohedge has a nice, succinct list of uber-wealthy individuals and superpacs and how much money they have given. If you want to see the real policy agendas of either 2012 Presidential Candidate, all you need to do is follow the money. Romney is racking in so much dough one has to wonder if he's running for campaign stash cash in chief or the presidency?


LIBOR Criminal Charges After All?

Naked Capitalism suggests we might see Libor rate fixers go to jail after all. We're not banking on it, but you might check out this article:

The European Commission is set to make interest rate-rigging a criminal act in the wake of the Libor scandal.

In amendments to the Market Abuse Directive to be announced on Wednesday, it is expected that the Commission President, Jose Manuel Barroso, and financial services commissioner, Michel Barnier, will ensure that anyone caught rate-rigging will be jailed.



Saturday reads updated with Libor criminal charges story

I plain don't believe it, but there is a report at the bottom that suggests there will be. I don't buy it, nothing about monitoring, how will they guarantee Libor isn't manipulated and so on.

Making it explicitly illegal now wouldn't affect past acts

It's pretty clear the game they're going to play re: making LIBOR price manipulation explicitly illegal. So that they can please the gathering mobs who are more and more looking like late 1780s France is right around the corner, they will make it explicitly clear that any rate rigging from now on will be illegal. Of course, this type of activity was illegal under any and all price fixing, theft, conspiracy, corruption, mail and wire fraud, banking, and antitrust laws before. The same way state and federal laws have been applied in courts around the country for common crimes involving everyone outside finance, but every single time a bankster is involved, the authorities can never apply the same laws, claim the crime wasn't covered under the previous laws, and new regs and laws are needed (but another exception will be found when banksters can't help themselves again).

As for Geithner, what an overly sensitive twit. How would he react if he was forced to walk through crowds of average citizens in Athens or Madrid without any taxpayer-funded protection? Would he converse with people or is he only good enough to meet with head honchos in Davos and DC secret chambers? But that's the nature of these politicians, big bureaucrats, business "leaders," and others. They surround themselves with those who don't dare disagree with them (e.g., Obama got scared by being called out by an unemployed engineer's wife about H-1B visas) because they aren't used to dissent. Odd, apparently some Americans are not used to defending their activities. But that's why they literally avoid the public and contradictory opinions at all costs. They want to hear they are right 100% of the time, that they really are as smart as they think they are, and that they do deserve to be richer than everyone else because they are better and brighter. Any information or data that goes against that makes them uncomfortable and must be dismissed ASAP.

bogus Brookings Institution

They're on a lobbyist/economic fiction/propaganda roll at the moment and the White House isn't scared at all about the facts of STEM worker displacement, labor arbitrage, offshore outsourcing and use of the U.S. immigration system to displace America workers.

In fact, they just put up pure, absolute, debunked fiction on their blog claiming displacing U.S. workers "helps" the economy! Good frickin' God these people have no shame.

I'm not kidding, if one knows what they are talking about and of course the real labor economists results, are repressed as are the many other researchers with credible research,'s very clear, overwhelming evidence U.S. immigration system, especially guest worker visas are simply a tool used to displace U.S. workers, gain more control over that worker, wage repress, deny benefits and so on. It's almost a side thing that a few foreign guest worker visas are used for their claimed intent, to bring over rare talent and skills not found in the available workforce.

I think in terms of criminal charges, that should be one, when the office of the President of the United States puts up corporate lobbyists and their cohorts pure, absolute, debunked lies and claims they are truth. That's really offensive. No wonder the U.S. economy is down the tubes, these people cannot even report facts, statistics right! Oops, that damn fact gets in the way of our corporate lobbyist funder agendas! Let's plain lie and put up some bogus brew ha-ha instead!

Good God, this nation is in so much trouble and here we are, with a Presidential choice, once again, of worse and worser.

I think you are right, this announcement assuredly is not retro-active so I think it's just public relations fodder to appease the masses until the story falls out of the public consciousness. We'll see.

Geithner, well, what can one say. He refuses to label China a currency manipulator and look who keeps him around.