Category Archives: System Abuse

Citi’s Moral Hazard

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The Special Inspector General of the TARP has just released a report on the government’s role in saving Citigroup from failure. You can read the report here (PDF). If you are short on time, just skip down to the “Conclusions” section on p.47. While it appears that the govt. has profited by the bailout, the TARP legacy has left “too big to fail” intact. The following excerpt examines the danger still latent in the system:

When the Government assured the world in 2008 that it would use TARP to prevent the failure of any major financial institution, and then demonstrated its resolve by standing behind Citigroup, it did more than reassure troubled markets – it encouraged high-risk behavior by insulating the risk takers from the consequences of failure. Unless and until institutions like Citigroup are either broken up so that they are no longer a threat to the financial system, or a structure is put in place to assure that they will be left to suffer the full consequences of their own folly, the prospect of more bailouts will potentially fuel more bad behavior with potentially disastrous results.

Notwithstanding the passage of the Dodd-Frank Act, which does give FDIC new resolution authority for financial companies deemed systemically significant, the market still gives the largest financial institutions an advantage over their smaller counterparts. They are able to raise funds more cheaply, and enjoy enhanced credit ratings based on the assumption that the Government remains as a backstop. Specifically, creditors who believe that the Government will not allow such institutions to fail may under price their extensions of credit, giving those institutions access to capital at a price that does not fully account for the risk created by their behavior. Cheaper credit is effectively a subsidy, which translates into greater profits, giving the largest financial institutions an unearned advantage over their smaller competitors. And because of the prospect of another Government bailout, executives at such institutions might be motivated to take greater risks than they otherwise would, shooting for a big payoff but with reason to hope that if things went wrong they might still be able to keep their jobs.

I think that Citi’s moral hazard = America’s moral hazard. More thoughts on our current state of affairs soon.

We The Bechtel

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The Supreme Court has just released a very important decision which regards corporate financing of political advertising. Below, I’m embedding and attaching a version of the decision which I have hilighted. Given that the actual document is very long, and would take a few hours to read, I have provided this hilighted version so that you may quickly pick up all the salient points. My hilighting is limited to the majority’s opinion, pp. 1 – 57, and then the dissent, pp. 81 – 170 of the document.

Yes, I know I’m a law student, and I read cases all the time, but to those of you who are not law students, I’d like to encourage you to take a look at my hilights of this very important case. When’s the last time you read a Supreme Court opinion anyway?

The majority basically said that the First Amendment prohibits a ban on political advertisements funded by corporate money. The dissent claims that the major corrupting potential of such advertising subverts the very principles which the First Amendment seeks to protect. Make no mistake; this is a case about the very fundamental values of our political system.

I hope you will take a look at what I have hilighted. I’ve attempted to draw your attention to enough background so that you will have a deeper understanding of each side’s best arguments. If you are going to read the document in the embedded Google Docs viewer, I recommend that you click the full screen icon in the top right… the resulting reading experience is much better. You may also download the file and read it in your preferred PDF viewer.

Direct Download – [PDF]

The New Blackwater

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Blackwater has a new name and look. The infamous security company has been given a makeover, and if I’m correct, most Americans will forget.

Former:
blackwater

Current:
blackwater-redux

From a design perspective, the new website has a much lighter background, and the main area has a white background. As if to escape the old name decisively, the webmaster sought to abolish the “black” from Blackwater. The new design makes me feel like I’m floating in some underwater mario world. I still find the new site sinister, however, thanks in large part to the surveillance blimp hovering above.

If you have read Jeremy Scahill’s book Blackwater, you are aware that the company’s founder, Erik Prince, is an extremely wealthy and powerful Dominionist. Taking this into account, I noticed two features of the new website that seem to be coded references to this fact. First, the logo of the new company, “XeServices LLC,” is itself very cross-like. If you can’t see that, just tilt your head 45⁰ to the left. Also, on the “About Us” page, one of the images used in that page is this:
blackwater-chopper

Maybe I am reading too much in to things, but this latest story in The Nation makes me feel otherwise. It appears that Mr. Prince may have ordered killed individuals who had provided or were going to provide the federal government with information regarding Blackwater’s criminal activities. In sum, Blackwater operatives knowingly committed war crimes and were enabled by a complicit federal government.

Stay tuned…

15 Soldiers Dead in Iraq 4/09

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Following up on my last post and Dan’s comment, I will borrow from a far better wordsmith than myself:

Five years after the Abu Ghraib revelations, we must acknowledge that our government methodically authorized torture and lied about it. But we also must contemplate the possibility that it did so not just out of a sincere, if criminally misguided, desire to “protect” us but also to promote an unnecessary and catastrophic war. Instead of saving us from “another 9/11,” torture was a tool in the campaign to falsify and exploit 9/11 so that fearful Americans would be bamboozled into a mission that had nothing to do with Al Qaeda. The lying about Iraq remains the original sin from which flows much of the Bush White House’s illegality.

– Frank Rich, NYT, 4/25/09

Rich goes on to propose that the best way forward would be for the DOJ to appoint a panel of non-partisan outsiders, such as retired federal judges, to analyze all the information and set the wheels in motion for the correct prosecution. While I was not a fan of Obama’s initial response, I have come around to understanding that his relative lack of outrage is calculated to ensure that this investigation is handled in a non-partisan manner. The gravity of the information now available is strong enough to stand on its own, and I suspect that many Republicans will end up supporting such an investigative commission.

Torture Memos Utilized Flawed Legal Reasoning

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If you have not looked over the torture memos, please do so.

Then, take a look at this video from Philip Zelikow, a high level State Department lawyer during the Bush administration. He authored a memorandum expressing grave concerns with the legal reasoning underlying those torture memos. While a copy of Zelikow’s memorandum is not yet available, a FOIA request has been made and it is likely to surface soon: