we still value the truth…

Posted on Monday 11 May 2009


There’s a big piece of news about Dick Cheney and torture buried toward the end of this big Washington Post piece about the torture wars. Specifically: The White House has decided to declassify and release a classified 2004 CIA report about the torture program that is reported to have found no proof that torture foiled any terror plots on American soil — directly contradicting Cheney’s claims. The paper cites “allies” of the White House as a source.

Dem Congressional staffers tell me this report is the “holy grail,” because it is expected to detail torture in unprecedented detail and to cast doubt on the claim that torture works — and its release will almost certainly trigger howls of protest from conservatives. Tellingly, neither the CIA nor the White House knocked down the story in response to my questions, with spokespeople for both declining comment. Here’s the key nugget from the Post piece:
    Government officials familiar with the CIA’s early interrogations say the most powerful evidence of apparent excesses is contained in the “top secret” May 7, 2004, inspector general report, based on more than 100 interviews, a review of the videotapes and 38,000 pages of documents. The full report remains closely held, although White House officials have told political allies that they intend to declassify it for public release when the debate quiets over last month’s release of the Justice Department’s interrogation memos…

    Although some useful information was produced, the report concluded that “it is difficult to determine conclusively whether interrogations have provided information critical to interdicting specific imminent attacks,” according to the Justice Department’s declassified summary of it.
This news is particularly timely in light of Cheney’s continuing high-profile claims that torture may have saved “hundreds of thousands of lives.” The report is the one I wrote about recently that the ACLU obtained through litigation in highly redacted form. It has an entire redacted section that discusses the “effectiveness” of torture — or lack thereof.
It has gone on so long and been so convoluted that it’s been hard to focus on what it has all actually been about. I summarized the facts the last time I tried to swear off thinking about it [smoke and mirrors: 09/08/2002].

They were so arrogant back in those early days after 9/11. The Country was in a fever pitch, driven insane by watching in horror as the twin towers fell to rubble in the center of New York City on live television. Images of that carnage have become almost off-limits. None of us knew how to think about it or what to feel. Our invasion of Afghanistan was a welcome place to focus our rage/hurt/terror. But then there was  a lull. In his January 2002 State of the Union Speech [SOTUS], Bush talked about the "Axis of Evil" – that’s where he lost me. Up until then, I’d thought he might grow into the job. At the time, I had no notion where that came from, but I know it sounded crazy. I now know that there was a long history behind that designation. The Neoconservatives at the American Enterprise Institute and the Project for the New American Century had long criticized President Clinton for focusing on the independent terrorists like Osama Bin Laden’s al Qaeda. They insisted that these groups were  "State Sponsored Terrorists" being run by Iraq, Iran, and North Korea, and that Clinton was wasting his time chasing them down. The Prophet of this idea was Laurie Mylroie, a former Clinton Advisor turned Zionist Neoconservative – called by Peter Bergen, The Armchair Provocateur.

And so, beginning with Bush’s SOTUS four months after 9/11, there was a year-long march to war in Iraq, justified by Hussein’s supposed Weapons of Mass Destruction and his backing of al Qaeda. He was the real culprit we had to annihilate. We only slowly learned that all of the evidence was not only shaky, it was fabricated from the weakest of substance. As time progressed, it became clearer and clearer that none of that evidence amounted to anything. And then we found out that we were torturing prisoners. The more we learned, the worse that story sounded. But now, it’s becoming clear that our torture program wasn’t simply an over-reaction based on our rage at the 9/11 attack, or our determination to forstall other al Qaeda Mayhem, it was for another reason entirely. We tortured our "high value" prisoners to get them to justify the Iraq Invasion. We were using any means possible to force them to lie.

It’s almost easier to sit around sleuthing about what they did, or discussing what to do about the fact they did it, than to really ponder the magnitude of their actions. Even harder to ponder – we did it. In the final analysis, we are responsible for what happened. Our Senators and Congressmen ratified to war. Our children fired the rifles. Our Intelligence Agents did some of the torturing. Our Justice Department certified it. We elected and relected these fools to office. We can say we were scared. We can say we were provoked. We can say we were duped. But can we say we were wrong? Cheney can’t and won’t say it. But that doesn’t absolve us of the responsibility any more than Hitler’s suicide cleared the millions of Germans that followed him. We can’t undo it, but we can sure show the world that in spite of what we’ve done, we still value the truth…
Mickey @ 10:40 PM

an honest woman…

Posted on Monday 11 May 2009


Obama Adviser Sees Unemployment Rising Until 2010
New York Times
By JOSHUA BRUSTEIN
May 10, 2009

President Obama’s chief economics forecaster said on Sunday that the nation’s unemployment rate was likely to keep rising until 2010, even if the economy begins growing later this year. Speaking on C-SPAN, Christina Romer, chairwoman of the White House Council of Economic Advisers, said that she expected the economy to begin growing in the fourth quarter of this year. Ben S. Bernanke, the Federal Reserve chairman, made a similar prediction last week.

But Ms. Romer also said that she expected unemployment to rise even after the economy turns, saying that gross domestic product has to grow at a rate of about 2.5 percent before unemployment will fall. Before that happens, she said, it is “unfortunately pretty realistic” that the unemployment rate could reach 9.5 percent. It was reasonable to estimate that the G.D.P.’s growth rate in 2010 would be 3 percent, she said.

Robert Reich, who served as labor secretary under President Bill Clinton and advised the Obama campaign, said on Sunday that the rate of growth would have to be higher — 4.5 percent — to reverse rising unemployment. “I think that when we talk about — or anybody talks about — hitting bottom, what we really have to understand is that the bottom is a kind of an undefined concept here,” he said on ABC’s “This Week.”

According to figures released on Friday, the unemployment rate in April was 8.9 percent, its highest level in 25 years. The so-called underemployment rate, which counts people who are working part time because their hours have been cut and those who have given up looking for jobs, reached 15.8 percent. Still, the administration seized on the report as an early sign that the economy’s free fall was coming to a halt, because the pace of deterioration had slowed.

The economic recovery, Ms. Romer said, will be driven by business investment in sectors like renewable energy rather than consumer spending. She echoed the views of other economists who expect a long-term economic shift. “The chance that consumers are ever going to go back to their high-spending ways is not very plausible, nor do I think they should,” she said. “We were a country that needed to start saving more”…
I appreciate their candor. I’m thinking that the estimate that "the unemployment rate could reach 9.5 percent" is too hopeful. I’d love to be wrong, but right now I’d take a bet that she’s way under the mark with that estimate [but I’m not a betting man]. They’re looking at another economic indicator – the quarterly % change in the Real Gross Domestic Product over the last quarter. Ain’t that a mouthfull. Well the last two quarters have been -6.3% and -6.1% respectively [that’s minus]:
 
The idea that our economy will be clicking along at +2.5% or even +4.5% soon enough to stop unemployment at the 9.5% level just doesn’t work for me [but I hope she’s right]. And, by the way, I’d add another observation. If you look at my graph farm below, unemployment doesn’t stop rising gradually. It abruptly starts falling. The reason for the rapid upturns and downturns  in the unemployment data isn’t readily apparent to me, but it sure seems consistent…
Mickey @ 5:19 PM

point of order…

Posted on Monday 11 May 2009

There are lots of levels to the Torture Debate:
  • Torture is outlawed by the Geneva Conventions, an agreement that we’ve readily endorsed.
  • Torture is deliberate mistreatment of other human beings, inconsistant with "all men are created equal."
  • Torture doesn’t produce trustworthy information.
  • The U.S. has opposed Torture of prisoners when other people do it.
Each one of those points has arguments on either side, pro or con. But none of them are addressing what’s on the table right this minute. Right now, the allegation is that:
  • We tortured our prisoners with a specific aim – to get them to confirm that al Qaeda and Saddam Hussein’s Iraq government were in cahoots, that Iraq was a participant in the 9/11 attack. Our "Torture Program" was instituted to extract a reason for invading Iraq, whether it was true or not. And it was not.
All of the stuff Cheney is saying about how they went to the OLC, and about saving American lives is immaterial to the question at hand. In one specific, Ibn al-Shaykh al-Libi, was sent to Egypt and tortured until he told them what they wanted to hear. He subsequently recanted and admitted he was lying to make the torture stop, but the information was still used by both Colin Powell and Bush in their cheerleading for war. This is a monsterous allegation way in front of those other questions
Mickey @ 4:11 PM

another piece of the puzzle…

Posted on Monday 11 May 2009


The Arabic media is ablaze with the news that Ibn al-Shaykh al-Libi, the emir of an Afghan training camp — whose claim that Saddam Hussein had been involved in training al-Qaeda operatives in the use of chemical and biological weapons was used to justify the invasion of Iraq — has died in a Libyan jail. So far, however, the only English language report is on the Algerian website Ennahar Online, which reported that the Libyan newspaper Oea stated that al-Libi (aka Ali Abdul Hamid al-Fakheri) “was found dead of suicide in his cell,” and noted that the newspaper had reported the story “without specifying the date or method of suicide.”

This news resolves, in the grimmest way possible, questions that have long been asked about the whereabouts of Ibn al-Shaykh al-Libi, perhaps the most famous of “America’s Disappeared” — prisoners seized in the “War on Terror,” who were rendered not to Guantánamo but to secret prisons run by the CIA or to the custody of governments in third countries — often their own — where, it was presumed, they would never be seen or heard from again.

The emir of the Khaldan training camp in Afghanistan, al-Libi was one of hundreds of prisoners seized by Pakistani forces in December 2001, crossing from Afghanistan into Pakistan. Most of these men ended up in Guantánamo after being handed over (or sold) to US forces by their Pakistani allies, but al-Libi was, notoriously, rendered to Egypt by the CIA to be tortured on behalf of the US government.

In Egypt, he came up with the false allegation about connections between al-Qaeda and Saddam Hussein that was used by President Bush in a speech in Cincinnati on October 7, 2002, just days before Congress voted on a resolution authorizing the President to go to war against Iraq, in which, referring to the supposed threat posed by Saddam Hussein’s regime, Bush said, “We’ve learned that Iraq has trained al-Qaeda members in bomb making and poisons and deadly gases.

Four months later, on February 5, 2003, Secretary of State Colin Powell made the same claim in his notorious speech to the UN Security Council, in an attempt to drum up support for the invasion. “I can trace the story of a senior terrorist operative telling how Iraq provided training in these [chemical and biological] weapons to al-Qaeda,” Powell said, adding, “Fortunately, this operative is now detained, and he has told his story.” As a Newsweek report in 2007 explained, Powell did not identify al-Libi by name, but CIA officials — and a Senate Intelligence Committee report — later confirmed that he was referring to al-Libi.

Al-Libi recanted his story in February 2004, when he was returned to the CIA’s custody, and explained, as Newsweek described it, that he told his debriefers that “he initially told his interrogators that he ‘knew nothing’ about ties between Baghdad and Osama bin Laden and he ‘had difficulty even coming up with a story’ about a relationship between the two.” The Newsweek report explained that “his answers displeased his interrogators — who then apparently subjected him to the mock burial. As al-Libi recounted, he was stuffed into a box less than 20 inches high. When the box was opened 17 hours later, al-Libi said he was given one final opportunity to ‘tell the truth.’ He was knocked to the floor and ‘punched for 15 minutes.’ It was only then that, al-Libi said, he made up the story about Iraqi weapons training.”

As I explained in a recent article, Even In Cheney’s Bleak World, The Al-Qaeda-Iraq Torture Story Is A New Low, drawing on reports in the New York Times and by Jane Mayer in the New Yorker, the use of al-Libi to extract a false confession that was used to justify the invasion of Iraq was particularly shocking, because a Defense Intelligence Agency had concluded in February 2002 that al-Libi was lying, and Dan Coleman of the FBI (which had been pulled off al-Libi’s case when the CIA — and the administration — decided to render him to torture in Egypt) had no doubt that the emir of an Afghan training camp would know nothing about Iraq. “It was ridiculous for interrogators to think Libi would have known anything about Iraq,” Coleman told Jane Mayer. “I could have told them that. He ran a training camp. He wouldn’t have had anything to do with Iraq.”

There have long been suspicions that, after the CIA had finished exploiting al-Libi, he was sent back to Libya, but although Ennahar Online claimed that he “was sentenced to life imprisonment” in Libya, and that a representative of Human Rights Watch had recently met him in prison (which I have not yet had time to investigate, but find highly unlikely), the most detailed story about what happened to him, and why he was not sent to Guantánamo with 14 other “high-value detainees” in September 2006, was provided to Newsweek by Noman Benotman, an exiled Libyan opposed to the regime of Colonel Gaddafi, who said, in May 2007, that
    during a recent trip to Tripoli, he met with a senior Libyan government official who confirmed to him that al-Libi had been quietly returned to Libya and is now in prison there. Benotman said that he was told by the senior Libyan government official — whom he declined to publicly identify — that al-Libi is extremely ill, suffering from tuberculosis and diabetes. “He is there in jail and very sick,” Benotman [said]. He also said that the senior official told him that the Libyan government has agreed not to publicly confirm anything about al-Libi — out of deference to the Bush administration. “If the Libyans will confirm it, it will embarrass the Americans because he is linked to the Iraq issue,” Benotman said.

The most important question that needs asking just now, of course, is whether it was possible for al-Libi to commit suicide in a Libyan jail, or whether he was murdered. I doubt that we will ever find out the truth, but whatever the case, the focus on his death should not focus solely on Libya, which only took possession of him after the US administration had made use of him to justify the invasion of Iraq. Whatever al-Libi’s actual crimes, his use as a tool in a program of “extraordinary rendition” and torture, exploited shamelessly not to foil future terrorist plots but to yield false information about al-Qaeda and Saddam Hussein, remains a low point in a “War on Terror” that has few redeeming features.
Like Abu Zubaydah, Ibn al-Shaykh al-Libi is a name we won’t easily forget. They are the victims of our torture program. Ibn al-Shaykh al-Libi made up the story they wanted to hear in response to being tortured. How many more examples do we need to reach the inescapable conclusion that our torture program wasn’t to get information to protect us? It was a program to create the evidence used to justify invading Iraq. We don’t believe Cheney’s explanation anymore. There’s just too much evidence on the other side. The NY Times did a story about al-Libi’s fabricated allegations a long time ago:
The Bush administration based a crucial prewar assertion about ties between Iraq and Al Qaeda on detailed statements made by a prisoner while in Egyptian custody who later said he had fabricated them to escape harsh treatment, according to current and former government officials.

The officials said the captive, Ibn al-Shaykh al-Libi, provided his most specific and elaborate accounts about ties between Iraq and Al Qaeda only after he was secretly handed over to Egypt by the United States in January 2002, in a process known as rendition.

The new disclosure provides the first public evidence that bad intelligence on Iraq may have resulted partly from the administration’s heavy reliance on third countries to carry out interrogations of Qaeda members and others detained as part of American counterterrorism efforts. The Bush administration used Mr. Libi’s accounts as the basis for its prewar claims, now discredited, that ties between Iraq and Al Qaeda included training in explosives and chemical weapons
Yet, said Cheney yesterday on Face the Nation:
SCHIEFFER: What do you say to those, Mr. Vice President, who say that when we employ these kinds of tactics, which are after all the tactics that the other side uses, that when we adopt their methods, that we’re weakening security, not enhancing security, because it sort of makes a mockery of what we tell the rest of the world?
CHENEY: Well, then you’d have to say that, in effect, we’re prepared to sacrifice American lives rather than run an intelligent interrogation program that would provide us the information we need to protect America. The fact of the matter is, these techniques that we’re talking about are used on our own people. We — in a program that in effect trains our people with respect to capture and evasion and so forth and escape, a lot of them go through these same exact procedures. Now…

SCHIEFFER: Do you — is what you’re saying here is that we should do anything if we could get information?
CHENEY: No. Remember what happened here, Bob. We had captured these people. We had pursued interrogation in a normal way. We decided that we needed some enhanced techniques. So we went to the Justice Department. And the controversy has arisen over the opinions written by the Justice Department. The reason we went to the Justice Department wasn’t because we felt we were going to take some kind of free hand assault on these people or that we were in the torture business. We weren’t. And specifically, what we got from the Office of Legal Counsel were legal memos that laid out what is appropriate and what’s not appropriate, in light of our international commitments…
Mickey @ 2:40 PM

the thing Shiller saw coming…

Posted on Monday 11 May 2009


DOW JONES INDEX [last 2 years]

What will we call it, this thing that happened on Monday, September 15th, 2008? It seemed so abrupt to most of us regular Americans who were mostly thinking about the election coming in a month or so. We knew about the "housing bubble" and were just catching on to the fact that the price of gasoline might be the same thing, a bubble, but we were poorly prepared for the cataclysmic changes that started on that day. We would learn first that it was precipitated by the bankruptcy of Lehman Brothers, a financial giant that had been with us since before the Civil War – the largest bankruptcy in our country’s history. And it took us all a time to learn that it was the tip of an iceberg, that most of our financial Institutions were in the tank, largely due to something we mortals either had never heard of or had never realized the significance of – credit default swaps and mortgage backed securities. The financial world had insured the housing boom against collapse and floated bad mortgages as if they were money, so they were about to go down like a bunch of dominos. Within days, Bush was going to Congress asking for a Trillion dollars to shore up the Banks, and we regular folks were learning about all sorts of horrifying things that had gone on in the financial world. Maybe each of us knew a small piece of the story, but I doubt that many of us saw this hurricane on the radar screen until it came ashore. I sure didn’t. And it didn’t even have a name.

The analogy with Hurricanes isn’t half bad. We have governmental agencies that are specifically set up to watch Hurricanes. As we approach "Hurricane Season," they move into high gear to track the Hurricanes being generated off the African Coast that cascade across the Caribbean aiming into the Gulf of Mexico and our lower Atlantic Coast. And we give them names before they arrive. The big ones leave their mark [Hugo, Andrew] and some change the face of the country for a very long time [Camille, Katrina]. Hurricane scientists had been worried about New Orleans for some time. The had already named the Hurricane that would take the city out. It was called "the Big One."

Science, at its best, starts with data, and theories should always follow that observational base. Young scientists break away from their colleagues when they find something in their field that doesn’t fit – an exception to the prevailing rules. Einstein noted that Newton’s Laws only fit the middle, and didn’t work when you looked at either huge astronomical objects or very tiny particles. It wasn’t his theories that mattered so much. It was his observations. And science shines when it can be used to predict what’s coming. Was there such a person in the field of Macroeconomics that could’ve let us know about that graph at the beginning of this post? Sure. His name was Robert Shiller. And he did let us know.

We think of Einstein as the ultimate "egghead," locked in his study at Princeton writing obscure equations on a blackboard, lost in a daze of autistic brilliance. In fact, he was an out and about guy with an eye for the ladies. He wrote a letter to the President warning him of a coming disaster, the development of a bomb that would change history, and in the end, we got there first. Shiller’s like that. He’s a Macroeconomist at Yale, but he’s out there in the financial world selling his science [the Case-Shiller Index] and starting companies. I guess he’s something of a scientist/entrepreneur. Speaking of "clear as a bell"…

 

Robert Shiller studies "financial bubbles" – situations where there’s a boom in some financial sector that transcends our usual supply/demand view of Capitalistic Markets. The one he picked to study in depth was the housing market. It was a good choice, and he helped develop a practical index [the Case shiller Index] that showed [in spades] that our housing market was becoming radically inflated. He predicted that it was headed for a fall long before it happened. He even apologized later for not screaming loud enough.

Unlike people like me who simply decry the human greed that fuels such things, Shiller is still looking at the problem of financial bubbles with a scientific curiosity, and his current ideas have broad implications. Here he is thinking out loud in a recent Time Magazine article:
Are there structural changes we need to make so that we don’t have this sort of craziness again?
    Yes. This crisis was substantially caused by a failure to manage real estate risk. Notably, we got individual homeowners into a leveraged position typically with their entire life savings in real estate in one city, in one house. That’s very risky. I have one proposal for continuous workout mortgages. Right now we think it’s a great thing if banks will give struggling homeowners a workout. Why do we only want to come in after the fact? My vision for our future is that it should be planned for and priced into the initial mortgage. We could update mortgages in a way they protect people from things beyond their control— like high national unemployment.

What else?
    Home-equity insurance. We want to have homeowners’ insurance, which protects against things like fires, updated so that it protects against a loss of market value. Fires were a big problem hundreds of years ago. Houses were burning down all the time. Now we’ve developed a different problem—the residential housing market has gotten much more volatile.

The company you started, MacroMarkets, just got approval for tradable securities linked to the Case-Shiller house-price index. How does that factor in?
    One reason we have bubbles in the housing market is because there’s been no way to short housing [that is, to make money when prices fall]. The ability to short is essential to an efficient market, otherwise there’s nothing to stop zealots from pricing things abnormally high. If you buy one of these long securities, called UMM, it’s like buying a house, except you don’t have to go through the real estate agent, take possession of a property, maintain it, rent it out. But we also have the DMM, which is short housing. Markets like this will also create an infrastructure for products. For example, insurers could issue home-equity insurance and then hedge themselves by taking a position in this market.

He’s still in the game, and it seems to me that we need to pay attention to the guy who saw the whole thing coming. The notion that "there’s been no way to short housing [that is, to make money when prices fall]" sounds like pretty insightful to me, even if I haven’t known what "shorting" means for very long. "The ability to short is essential to an efficient market, otherwise there’s nothing to stop zealots from pricing things abnormally high" sounds right smart too. Sort of a mini e = mc2. And as for this current financial crisis. I know there were a lot of forces that came together as a Perfect Storm to make it happen, but in my mind, I have named it:

the thing Shiller saw coming

I’ll admit up front that I don’t fully grasp what he’s saying, but I’ll take a shot at it. In this crisis, one of the central things that happened was that risk could be passed on. In the past, the check on the housing market had been that the loaning institutions shouldered their own risks, which kept housing prices honest. When the loaning institutions were given a way to hedge their risks, or even worse, sell their risk, a toxic situation developed that passed the risk up a chain to people who insured that risk and made a huge short-term profit, oblivious [or indifferent] to the coming disaster.

Shiller’s solution is pretty creative. He’s suggesting that rather than  bemoaning the failures of the system that allowed this to happen, we should rethink our whole approach to the housing industry and the problem of mortgages. He wants to move risk management down to the level of the consumer, the home owner, by building the "insurance" into the mortgage itself. That puts risk management in the hands of actuarial scientists rather than speculators on an unregulated derivative market or hot-shots in places like AIG.

While I don’t understand the mechanics of his proposal, it smells like good thinking to me. Just because what happened here is a disaster doesn’t mean that it wasn’t a problem that needed to be addressed. He’s bringing the idea of "hedging" out of the realm of the slick money guys into the world of an "insurance" that might effectively deal with this very real problem, creating a viable industry of its own in the process…
Mickey @ 6:26 AM

twilight…

Posted on Sunday 10 May 2009


Hedge fund assets continued to decline in first quarter, says HFR
Fri, 08 May 2009
Investors continued to withdraw capital from hedge funds in the first quarter of 2009, redeeming nearly USD104bn, according to data released by Hedge Fund Research.

The USD104bn redemption figure amounted to 7.4 per cent of industry assets, but did not exceed the record for a quarterly withdrawal set in 4Q 2008, when investors withdrew over USD152bn from the hedge fund industry.

Indicative of continued investor pressure, withdrawals from the fund of hedge funds industry totalled USD85bn for the quarter, exceeding the 4Q 2008 redemption total of USD50bn, and accounting for the majority of capital withdrawn from the total hedge fund industry. Funds of hedge funds, which experienced a record performance decline of -21.3 per cent in 2008, posted a performance gain of 0.47 per cent in the first quarter, in line with overall industry performance.

Partially offsetting the industry asset decline, the HFRI Fund Weighted Composite Index posted a gain of 0.53 per cent for the quarter, resulting in a performance-based gain for the industry of approximately USD28bn. This figure is in sharp contrast to the performance-based losses of more USD162bn which occurred in 4Q 2008, during which the HFRI Fund Weighted Composite lost over nine per cent.

Total hedge fund industry capital declined to USD1.33trn as of the end of 1Q09, USD600bn below the industry asset peak at the end of 2Q08 and USD75bn below the year-end 2008 asset total. Capital invested in funds of hedge funds declined to just over USD525bn, USD300bn below its peak, also achieved at the end of 2Q08 and USD68bn below the year-end 2008 level.

Investor withdrawals continued to exhibit a lack of sensitivity to strategy performance, as USD16bn was withdrawn from macro strategies, an area which gained nearly five per cent in 2008. Investors also withdrew USD27bn from relative value strategies, a strategy which posted a gain of nearly 4.5 per cent in the first quarter.

The strategy that experienced the largest capital redemption was equity hedge, which had USD35bn of capital withdrawals, despite posting a gain of nearly three per cent in March, the strategy’s strongest month since October 2007.

Extreme investor risk aversion subsided into the end of the first quarter, but remained at elevated historical levels as industry consolidation continued through quarter end,’ says Kenneth J. Heinz, president of Hedge Fund Research. ‘In addition to performance, investors are focused on structure and transparency, and the industry is in the process of evolving to meet these demands.’
Derivatives Regulation Becomes a Popular Law School Offering
ABA Journal
May 8, 2009
By Debra Cassens Weiss

The financial meltdown has spurred interest in derivatives classes among law students interested in learning about the origins of the crisis and hoping to tap into an expanding job market for lawyers well-versed in financial regulations. New York Law School has seen so much interest in its derivatives course that is developing plans for a new masters in law program in financial services that will include eight separate classes, Reuters reports.

Stanford Law School is offering a course on derivatives for the first time next year, while demand for a derivative law class has more than quadrupled since 2007 at the University of Maryland, the story says. Max Romanik is a University of Maryland law student who is studying derivatives. He will be working this summer for the Commodity Futures Trading Commision.

"It’s a great experience when the professor can walk in with a statute that came off the presses that day. You don’t have to study bizarre hypotheticals,” he told Reuters. “The real world is happening all around you right now."
Sometimes change isn’t on the front page. As in the 1920’s, our current financial crisis can ultimately be linked to a familiar cycle that may well be a basic design flaw in human beings. We’re generally risk averse up front, on the lookout for get rich schemes that are scams. Flim-flam men usually hit the most vulnerable – the aged and the naive – because people in the know just don’t go for such things. And when there’s a "bubble" or a "boom," first there’s a slow upturn that picks up momentum. Once it’s sustained for a bit and seems safe, the hordes of wise men jump on board.
But it’s not just the individual "bubbles" that attract us. It’s the "big bubble" – the entire economy:
 
The human flaw? We show our reserve up front, but then we throw it away and dive in as if the "boom" will last forever – which is, of course, impossible. When do we need our ‘reserve’? At the end, and we never seem to know that. It’s a built in human flaw – no question about it. Once a "boom" gets started, we’re like the summer insects flying into the light to an early death. We do it over and over. But seemingly not going the other way. When things turn sour, we’re very attentive as we wait nervously for a turn around.

 
Unemployment 1948-2009

Looks to me like we have a spike in unemployment about every six years. And then we do what I’ve been doing – carefully look at the BLS monthly reports waiting for things to turn around. I guess it’s similar to the upside – we think it might never end. Unlike our seasonal weather, the changes in our economy always take us aback, as if they had never happened before.

So back to the two articles above. One is about the Hedge Funds and the other about Derivatives. These are two additions to our economy over the last decade or so. They are both tied together and separate in practice – but they are intimately welded together in that they operate in that netherland called THE LAND OF THE UNREGULATED and they both involve RISK. Hedge Funds originally used strategies of buying "long" and "short," avoiding risk by making profit on both rising and falling stock – "hedging their bets." But their strategies have blossomed and who-knows what exotic levels their methods have reached. They’re professional gamblers. And Derivatives? They’re simply a betting parlor where people buy and sell contracts on what they think might happen to almost anything. I’m sure there were derivatives based on the unemployment figure that came out this week. There were probably derivatives betting on when the housing bubble would burst.

What’s going to happen? Anyone following our recent economic debacle knows that this kind of nonsense cannot continue. But the people involved loved it, and would gladly fly back into the light if it comes back on. And those big Banks that jumped on board – the ones we are now financing – would too. And there are plenty of Bernard Madoffs out there ready to opportunize on the secrecy that this blackmarket financial industry thrives on to put together a really sophisticated Ponzi scheme in its cracks.

Right now, the "extreme investor risk aversion" is holding us in the road and the Law Students are focusing their attention on these murky waters. But in time, things will stabilize and the lights  that come on in twilight will shine brightly, attracting the insects who apparently think that daylight can be prolonged artificially, and their little bodies will collect on the porch under the light. Now is the time to bring the Hedge Funds and Derivatives into the LAND OF THE REGULATED, or outlaw them altogether. They exploit a basic design flaw in human beings that we share with certain insects and have cost us too dearly…
Mickey @ 6:20 PM

not bad good news…

Posted on Friday 8 May 2009

In the front room, the T.V. Commentators are going on about swine flu, wildfires, and, oh yeah, the unemployment figures released this morning. They can’t decide which way to play it. It could be worse, or it could be better. It says unemployment is still rising at 0.4%/month. It’s not accelerating, but it’s not decelerating either. It’s just sitting there. If it just "sits there" for a while, by December we’ll be at 11.7% unemployment [not good news by anybody’s standard.] Here’s the Unemployment data from the Recession in the 1980’s [Bureau of Labor Statistics]:
Notice that the duration was about 18 months. I’ve drawn in the red line. The slope of that line is about 2.5%/year or 0.2%/month. We’re moving about twice that fast as our economy contracts. Now here’s the Great Depression from 1929 to 1933:
The slope of the line I’ve drawn in is right at 0.5%/month.

So we’re going down the tubes a little more slowly than we did in the early 1930’s, but faster than we did in the 1980’s. There’s one more familiar graph to look at:

 

How did Reagan deal with the Recession? He did the same thing as F.D.R. He spent our way out!

So when I listen to the Republicans talk like this, I want to scream. All this talk of principles and philosophy is empty, as empty as the lies they wrapped around going to Iraq:

With only 20 percent of Americans self-identifying as Republicans, the GOP is searching for a way forward. Sens. Susan Collins (R-ME) and Olympia Snowe (R-ME), along with Colin Powell, have said the GOP must move toward the center to expand its tent. In an interview with Scott Hennen, a North Dakota radio host, Cheney declared that becoming more moderate “would be a mistake“:
    HENNEN:Do you think the Republican Party needs to moderate? Is that the message of the Specter defection, or the state of the party these days?
    CHENEY: No I don’t. I think it would be a mistake for us to moderate. This is about fundamental beliefs and values and ideas…what the role of government should be in our society, and our commitment to the Constitution and Constitutional principles. You know, when you add all those things up the idea that we ought to moderate basically means we ought to fundamentally change our philosophy. I for one am not prepared to do that, and I think most us aren’t. […] So I think periodically we have to go through one these sessions. It helps clear away some of the underbrush…some of the older folks who’ve been around a long time (like yours truly) need to move on, and make room for that young talent that’s coming along. But I think it’s basically healthy. I don’t spend a lot of time or lose a lot of sleep over it. I just think now is the time for people who are committed to get out there and find candidates they like and go to work for them.
Mickey @ 8:03 PM

another month to worry about the May figures…

Posted on Friday 8 May 2009

8.9%
Mickey @ 9:16 AM

future feelings…

Posted on Thursday 7 May 2009

April Unemployment numbers are due out tomorrow. This is where we left off:

Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
1999 4.3 4.4 4.2 4.3 4.2 4.3 4.3 4.2 4.2 4.1 4.1 4.0
2000 4.0 4.1 4.0 3.8 4.0 4.0 4.0 4.1 3.9 3.9 3.9 3.9
2001 4.2 4.2 4.3 4.4 4.3 4.5 4.6 4.9 5.0 5.3 5.5 5.7
2002 5.7 5.7 5.7 5.9 5.8 5.8 5.8 5.7 5.7 5.7 5.9 6.0
2003 5.8 5.9 5.9 6.0 6.1 6.3 6.2 6.1 6.1 6.0 5.8 5.7
2004 5.7 5.6 5.8 5.6 5.6 5.6 5.5 5.4 5.4 5.5 5.4 5.4
2005 5.2 5.4 5.2 5.2 5.1 5.1 5.0 4.9 5.0 5.0 5.0 4.8
2006 4.7 4.8 4.7 4.7 4.7 4.6 4.7 4.7 4.5 4.4 4.5 4.4
2007 4.6 4.5 4.4 4.5 4.5 4.6 4.7 4.7 4.7 4.8 4.7 4.9
2008 4.9 4.8 5.1 5.0 5.5 5.6 5.8 6.2 6.2 6.6 6.8 7.2
2009 7.6 8.1 8.5                  

All my life, I’ve sort of snickered when the Stock Market rises or falls and they say it had to do with some initialed number that just came out. Now, I’m into it. BLS, Unemployment, CPI, DOW. It’s like taking your temperature to see if you feel bad. So, tomorrow, I’ll look up the April unemployment figures and I’ll feel something. Just for kicks, I’m going to predict what I’ll feel:

  • under 8.6: Won’t happen, but if it does, I’ll feel great.
  • 8.6-8.8: The rate it’s rising is already slowing. Hope it continues.
  • 8.9-9.0: Another month to worry about the May figures…
  • over 9.0: We are not close to out of the woods yet…
Mickey @ 10:08 PM

she’s good!

Posted on Wednesday 6 May 2009

I just happened to find Dougie Feith’s responses to Questions for the Record the Senate Intelligence Committee asked him in 2003…

He said his little intelligence shop helped formulate policy on:
  • DoD response to the presence in Iraq of the al-Qaida affiliated Ansar al-Islam terrorist group.
  • DoD response to the presence in Iraq of al-Qaida operative Abu Musab al-Zarqawi and his CB W network.
  • Helping to formulate requirements for the debriefings of al-Qaida fighters detained at Guantanamo and Bagram.
"Helping to formulate requirements for the debriefings of al-Qaida fighters?!?!?!?!" What the hell does that mean? How do you formulate policy requirements for interrogations? I don’t know, really, but I wonder if it has something to do with this:
    [T]his is my opinion, even though they were giving information and some of it was useful, while we were there a large part ofthe time we were focused on trying to establish a link between AI Qaeda and Iraq and we were not being successful in establishing a link between AI Qaeda and Iraq. The more frustrated people got in not being able to establish this link, there was more and more pressure to resort to measures that might produce more immediate results.
Or this, coming from Dougie’s boss, Paul Wolfowitz:
    Mr. Becker also told the Committee that, on several occasions, MG Dunlavey had advised him that the office of Deputy Secretary of Defense Wolfowitz had called to express concerns about the insufficient intelligence production at GTMO.
Or this:
    Mr. Haynes’s memo stated that he had discussed the issue with Deputy Secretary of Defense Paul Wolfowitz, Undersecretary ofDefense for Policy Doug Feith, and Chairman of the Joint Chiefs of Staff (CJCS) General Richard Myers and that they concurred with his recommendation.
Anyone want to speculate whether or not Dougie Feith was giving the torturers a script to focus on Iraq’s specious ties to al Qaeda?
In spite of swearing off a preoccupation with the Iraq War and the Torture Memos, I am commenting on this post by emptywheel. As usual, she’s sees more than the rest of us, or at least than I see. I was looking at the exact same data recently, but I didn’t think of Doug Feith [at least not in this context]. But of course that’s a very good question. Doug Feith’s reason-for-being as Paul Wolfowitz’s assistant was to nail down the connection between al Qaeda and Hussein. He put together a slide show. He sent Memos. He probably leaked his own Memo to the Weekly Standard. And as emptywheel unearths, he said it was his task to the Senate Intelligence Committee. It seems like her question ["Anyone want to speculate whether or not Dougie Feith was giving the torturers a script to focus on Iraq’s specious ties to al Qaeda?"] is clearly aimed at a probable truth. Damn, she’s good!
Mickey @ 1:10 AM