Archive for Corruption
In business today, too often integrity is an afterthought.
The San Francisco Chronicle quotes from the blog, Both Sides of the Table, by investor Mark Suster, “I believe that integrity and honesty are very important to most venture capital investors. Unfortunately, I don’t believe that they are required to make a lot of money.”
In a piece that might be titled, “The Real Jerks of Silicon Valley,” Alyson Shontell examines how many rising stars in Silicon Valley tend to be “–holes”. (The construction pops up frequently in the piece.) The rogues gallery is expansive, including Uber’s Travis Kalanick. He’s had a particularly bad week. Still,
“Sometimes,” one acquaintance said of Kalanick, “–holes create great businesses.”
America has lost faith with itself.
Grazing on the Net this morning, one story after another pops up where a common thread is the lies we tell ourselves and the ugly truths about ourselves we struggle to hide.
According to conservative dogma, which denounces any regulation of the sacred pursuit of profit, the financial crisis of 2008 — brought on by runaway financial institutions — shouldn’t have been possible. But Republicans chose not to rethink their views even slightly. They invented an imaginary history in which the government was somehow responsible for the irresponsibility of private lenders, while fighting any and all policies that might limit the damage.
Matt Taibbi (on securities fraud at Chase and collusion between the company and the Justice Department to cover it up):
When [Alayne] Fleischmann and her team reviewed random samples of the loans, they found that around 40 percent of them were based on overstated incomes – an astronomically high defect rate for any pool of mortgages; Chase’s normal tolerance for error was five percent. One mortgage in particular that sticks out in Fleischmann’s mind involved a manicurist who claimed to have an annual income of $117,000. Fleischmann figured that even working seven days a week, this woman would have needed to work 488 days a year to make that much. “And that’s with no overhead,” Fleischmann says. “It wasn’t possible.”
But when she and others raised objections to the toxic loans, something odd started happening. The number-crunchers who had been complaining about the loans suddenly began changing their reports. The process she describes is strikingly similar to the way police obtain false confessions: The interrogator verbally abuses the target until he starts producing the desired answers. “What happened,” Fleischmann says, “is the head diligence manager started yelling at his team, berating them, making them do reports over and over, keeping them late at night.” Then the loans started clearing …
“That’s the thing I’m worried about,” she says. “That they make the whole thing disappear. If they do that, the truth will never come out.”
Just because you don’t hear the term “free-market fundamentalism” much these days doesn’t mean the faith has gone away. More on that in a minute.
Der Spiegel looks at The Zombie System: How Capitalism Has Gone Off the Rails. The wizards of finance are not the choir boys that prove the moral superiority of capitalism, as analyst Mike Mayo believed when he entered the business. Instead, writes Michael Sauga, Mayo found “the glittering facades of the American financial industry concealed an abyss of lies and corruption.”
Ironically, some the most blessed(?) beneficiaries of the corruption, global financial and political leaders, now say they want to fix capitalism, make it more inclusive:
It isn’t necessary, of course, to attend the London conference on “inclusive capitalism” to realize that industrialized countries have a problem. When the Berlin Wall came down 25 years ago, the West’s liberal economic and social order seemed on the verge of an unstoppable march of triumph. Communism had failed, politicians worldwide were singing the praises of deregulated markets and US political scientist Francis Fukuyama was invoking the “end of history.”
Today, no one talks anymore about the beneficial effects of unimpeded capital movement. Today’s issue is “secular stagnation,” as former US Treasury Secretary Larry Summers puts it. The American economy isn’t growing even half as quickly as did in the 1990s. Japan has become the sick man of Asia. And Europe is sinking into a recession that has begun to slow down the German export machine and threaten prosperity.
“We’re not a democracy, we’re a republic,” friends on the right will cheerfully correct when a Democrat refers to this country as a democracy. It’s true — a true fact, if you hew to the right — but that’s not why they’re so adamant about it. For some reason, Republicans just like the sound of republic better.
But they also don’t really like the idea of democracy itself. It’s a plutocrat thing, Paul Krugman writes, quoting Leung Chun-ying, the leader of Hong Kong, on why full democracy there would be a bad idea: “You would be talking to half of the people in Hong Kong who earn less than $1,800 a month. Then you would end up with that kind of politics and policies.” Plutocrats worldwide (and their sycophants) really hate the idea of having to share power with people they consider inferiors. Recall Mitt Romney’s 47% and the makers-takers narrative? Krugman does too:
For the political right has always been uncomfortable with democracy. No matter how well conservatives do in elections, no matter how thoroughly free-market ideology dominates discourse, there is always an undercurrent of fear that the great unwashed will vote in left-wingers who will tax the rich, hand out largess to the poor, and destroy the economy.
In fact, the very success of the conservative agenda only intensifies this fear. Many on the right — and I’m not just talking about people listening to Rush Limbaugh; I’m talking about members of the political elite — live, at least part of the time, in an alternative universe in which America has spent the past few decades marching rapidly down the road to serfdom. Never mind the new Gilded Age that tax cuts and financial deregulation have created; they’re reading books with titles like “A Nation of Takers: America’s Entitlement Epidemic,” asserting that the big problem we have is runaway redistribution.
“So what’s a plutocrat to do?” Krugman asks. Since they can’t come straight out and say only the wealthy should have the franchise, they resort to propaganda about voter fraud, etc.
As I wrote at my home blog, they find the whole notion of government of, by, and for the people very, very inefficient.
At the end of the Revolutionary War, there were an estimated half million Tories in this country. Royalists by temperament, loyal to the King and England, predisposed to government by hereditary royalty and landed nobility, men dedicated to the proposition that all men are not created equal.
After the Treaty of Paris, you know where they went? Nowhere. A few moved back to England, or to Florida or to Canada. But most stayed right here.
Take a look around. Their progeny are still with us among the one percent and their vassals. Spouting adolescent tripe from Ayn Rand, kissing up, kicking down, chasing their masters’ carriages or haughtily looking down their noses at people they consider inferiors.
(cross-posted from Hullabaloo.)
It doesn’t take a rocket scientist to figure out the system is rigged. Sen. Elizabeth Warren makes that point at every opportunity. But her most recent interview about that with Thomas Frank in Salon shifted too quickly from philosophy to process. Warren would rather talk about how the rigging hurts working people. She wants to explain how the system is rigged and by whom:
The system is rigged. And now that I’ve been in Washington and seen it up close and personal, I just see new ways in which that happens. But we have to stop and back up, and you have to kind of get the right diagnosis of the problem, to see how it is that—it goes well beyond campaign contributions.
Indeed it does. But “the question that lies at the heart of whether our democracy will survive” isn’t a matter of process or policy.
Janine Wedel comes closer to the mark in an excerpt (also in Salon) from her book, “Unaccountable: How Elite Power Brokers Corrupt our Finances, Freedom, and Security.” Everyday people know the system is rigged better than the elite. Wedel sees it in the comments section of Transparency International’s annual rankings of corrupt countries. “Ordinary people have an instinctual grasp of the real nature of corruption and the inequality that often results.” The United States, they believe, is “grievously under-scrutinized.”
Perhaps it is not just a coincidence or a quirk of American policy-making that the words “innovation” and “reform” lately seem to attach themselves to ideas that drive more public money, public infrastructure, and public control into the hands of private investors. Nor that this meme is driven by lobbyists for public-private partnerships (P3s) where corporations stand to rack up profits by privatizing the commons.
Whether it is turning over state prisons to for-profit Corrections Corporation of America or public education over to publicly traded K12 Inc., we are to believe that despite the scandals and poor outcomes, the private sector will always do a better job than big gummint. We hear the private sector is more “efficient” than efforts run by the people and for the people. But more efficient at what?
This last week, as we noted, ITR Concession Co, and its parent company, the Spanish-Australian consortium Cintra-Macquarie declared bankruptcy on its concession to operate the Indiana Toll Road. The 75-year deal fell apart after only eight.
But getting back to efficiency. Think maybe the Germans could do it better? Maybe not.
Your dystopian future has arrived. NPR’s May series, Guilty and Charged, explored the spreading judicial practice of judging people guilty of misdemeanor offenses then imprisoning those unable to pay fines and an expanding menu of fees. (The poor.) But while practice of billing defendants for their punishment may be relatively new, the municipal courts in St. Louis County, MO, where the unarmed Michael Brown was shot by police last month, resemble something out of Dickens. Or else Terry Gilliam’s Brazil. Radley Balko (Rise of the Warrior Cop) painted a detailed portrait of the county’s legal culture — if you can call it that — in the Washington Post last week.
It’s a world in which white flight created a string of subdivisions-turned-towns stretching north and west from St. Louis. As black families followed, whites retreated or quickly established dozens of zoned, postage-stamp-sized municipalities.
“The state’s one requirement before giving you the power to zone was that you had to incorporate and draw up a city plan,” [University of Iowa historian Colin] Gordon says. “That plan could be as simple as getting an engineer to slap a ‘single family’ zone over the entire development. Your subdivision is now a town.”
Gordon says this is why the towns in St. Louis can have such unusual names, such as Town & Country or Bellefontaine Neighbors. “Look at a place like Black Jack in North County. It began as a private subdivision in the 1970s. When they saw the looming threat of housing projects, they quickly zoned the neighborhood as single-family and incorporated as a municipality.” Today Black Jack is more than 80 percent black. There’s a similar town of about 1,200 people near Ferguson, just across the street from the Normandy Country Club. It’s 91 percent black, has a 35 percent poverty rate, and has a median household income 40 percent below the state median. Its name? Country Club Hills.
As black families filtered in, the towns too small to sustain local government with property and sales taxes made police departments into profit centers that generate revenues by shaking down residents, most of them poor.
“You see that sort of thing a lot,” [legal aid attorney Michael-John] Voss says. “We’ll get a client who was pulled over and cited for failure to provide proof of insurance, or driving with a suspended license. But there’s no additional citation for a moving violation. So why was she pulled over in the first place?”
But the stop might generate a string of violations, fines and fees that, if not addressed, result in arrest warrants and court costs.
There are many towns in St. Louis County where the number of outstanding arrest warrants can exceed the number of residents, sometimes several times over. No town in Jackson County comes close to that: The highest ratios are in the towns of Grandview (about one warrant for every 3.7 residents), Independence (one warrant for every 3.5 residents), and Kansas City itself (one warrant for every 1.8 residents).
St. Louis County is a dispiriting labyrinth of speed traps and police demands to see permits and papers. Those so targeted are unlikely to afford the fees, much less an attorney to help get them discharged or reduced. Balko explains that with 23,457 pending arrest warrants in 2013 in Pine Lawn (roughly 7.3 per resident), the town brought in about $576 per resident. Antonio Morgan’s story is especially instructive and infuriating. Just trying to support his family by repairing cars makes Morgan a police target, like Brazil‘s “terrorist” heating and air conditioning engineer Archibald “Harry” Tuttle.
It’s a place where the poor are prey, and the prey are black. With “the every day harassment and degradation” of such a system, it’s a wonder Ferguson, MO didn’t explode sooner.
(Cross-posted from Hullabaloo.)
Joe Nocera reflects on the lack of accountability over the financial crash of 2008. You’d have thought we might have learned from the Savings & Loan scandal of the 1980s, but no.
In some ways, the legislators who deregulated the S.&L. industry felt that they had no choice — if they didn’t act, the S.&L.’s would have been in terrible trouble, just of a different kind. Seventeen years later, when Congress repealed the Glass-Steagall Act — thus deregulating the entire financial services industry — it didn’t have that excuse. The drive to abolish Glass-Steagall was ideologically inspired, the core belief being that the market would keep the industry honest. But the S.&L. crisis had proved that wasn’t true.
About 1,100 were prosecuted in the wake of the S&L scandal. Federal prosecutions in the wake of the 2008 economic collapse have been a joke, writes Nocera, wondering if when it repealed the Glass-Steagall Act, government had failed to learn its lesson from the S&L deregulation.
Or, perhaps, in the intervening years Wall Street learned that capturing government regulators more fully would allow them to commit financial crimes without fear of prosecution?
Another day in Wake County Superior Court yesterday in the case of “Moffitt v. Asheville,” Judge Howard Manning Jr. presiding. Rep. Tim Moffitt and Rep. Chuck McGrady, R-Henderson were on hand for the hearing in the lawsuit challenging Moffitt’s “Regionalization of Public Utilities” law that forcibly transfers control of Asheville’s water system to a new regional authority.
Much hinges on whether or not Moffitt’s bill was deliberately written to evade the state’s constitutional ban in Article 2, Sec. 24 on enacting local legislation “relating to health, sanitation, and the abatement of nuisances.” Asheville activist Barry Summers was there to remind attendees — graphically — not of the water system’s history, but of the legislation’s.
While both McGrady and Moffitt watched the proceedings in court, Asheville’s attorney Dan Clodfelter disagreed with the state’s assertion that the bill was not local in nature. An attorney with the Charlotte-based law firm Moore and Van Allen, Clodfelter himself served as a state senator until last month, when he was named the mayor of Charlotte.
The bill does not specifically name the city of Asheville. But Clodfelter said it was clear that was lawmakers’ intent, rather than creating a statewide bill with a general set of principles to administer.
“Our constitution says what it says,” Manning said, indicating that the constitutional question was the crux of the case. Expect an appeal, however Manning rules.
Moffitt v. Asheville is a style of legal shenanigans we have seen emerge over the last decade from Wall Street to Jones Street to Pennsylvania Avenue. That is, to push the limits of the law to the breaking point and beyond, to knowingly step over the line and — using the law itself for cover — to arrogantly dare anyone to push back. If no one does, or if they do and fail, those who twist the law to their own ends succeed, and the boundary between the legal and the criminal moves again, and not in the direction of the public good. Rinse, repeat. Thus, torture becomes “enhanced interrogation,” fraudulent securities become top-rated investments, and public investments in schools, water systems, highways and airports slowly become the private wealth of oligarchs. Like watching an accident in which everything goes into slow motion, it is happening before our very eyes. Because it transpires in remote meeting rooms under color of law, we the people are not supposed to notice.
(Original post has been corrected. Rep. Nathan Ramsey was not in attendance Friday, but was cited in reporting as an original sponsor of the water bill.)
If you’ve been following the nasty, divisive “makers vs. takers” meme promoted on the right, Fox News in particular, add this to what makers “make.”
Some of those makers — you know, job Creators (it is capitalized, right?) — are wheeling and dealing and spending millions on technology to shave milliseconds of high-speed trades. That is, they are investing in speed — milliseconds — digitally running ahead of a stock order to buy it first and sell it to the buyer at a markup when the order arrives. Something like “The Wire” in the movie, “The Sting.” Speculators are boring through mountains between New York and Chicago to put in straighter, shorter fiber-optic cables to make this con work.
Paul Krugman this morning:
What are we getting in return for all that money? Not much, as far as anyone can tell. Mr. Philippon shows that the financial industry has grown much faster than either the flow of savings it channels or the assets it manages. Defenders of modern finance like to argue that it does the economy a great service by allocating capital to its most productive uses — but that’s a hard argument to sustain after a decade in which Wall Street’s crowning achievement involved directing hundreds of billions of dollars into subprime mortgages.
What this game shows is how finance has become a game not of job creation or productively allocating financial resources, but of playing small-time investors for suckers. This is what the so-called makers are in the business of making. And Fox thinks you’re the parasite.
At least Newman and Redford ran The Big Con with more panache.