Saturday, May 28, 2016

Natural Weekends

Enjoy your Memorial Day weekend!  Here are more of my fine feathered friends and neighbors:


I think these are night herons but I really must find my Audubon Birds of North America book so I can make proper identifications for you.  These ones below are definitely the osprey again though:



Friday, May 27, 2016

French Open Update - Sad US Men, Rafa Out, Wide Open for Djoker

If you'd like to understand the sad state of American's men's tennis lately, see if you can watch a replay of the match today at the French Open between American Jack Sock and Spaniard Albert Ramos-Vinolas. Sock, the 23rd seed, was bounced by Ramos-Vinolas, ranked 55th in the world, in 5 sets.  Now you may be thinking that the Spaniard is one of these clay court specialists so the result is not that surprising; and, yes, clay is his best surface by far, but it would be a reach to call him a specialist - he had not gotten beyond the first round at the French since 2011. Sock has a booming first serve and wicked forehand from which he can hit winners from anywhere on the court, but the slow clay surface makes those outright forehand winners harder to hit. However, it was Sock's inability to produce anything off the backhand side except a prodigious amount of errors that was the key to his loss. And give credit to Ramos-Vinolas who kept pounding away at that wing, while keeping Sock off balance with an occasional rip to his forehand.

Now I don't mean to pick on Jack Sock and, admittedly, he was not on his game today, even on the forehand side.  But the preponderance of hard courts here in the United States makes it easier for guys like Sock and John Isner to dominate in juniors because they have a big serve and one other huge weapon. That success, however, comes at the expense of developing a true all around game, which is what you need to not only win on clay but to make it into the top ten in the world, something no American man has done since Mardy Fish(!) in 2011. Now, there is a crop of good junior talent coming of age but it remains to be seen if they have the all-around game necessary to win in the pros. Or will they have that one glaring deficiency, like Sock's backhand, that continually gets exploited and keeps them from making it to the top.  Unfortunately, that has been the pattern for good American juniors for quite a while.

In other news, Rafa Nadal had to withdraw from the tournament with a wrist injury.  You really have to wonder if Rafa's best days are behind him with the physical brand of tennis that he plays finally taking a toll on his body. Every time he seems to be on his way back to form, he is grounded by another physical breakdown. So, with Nadal and Federer out, only Andy Murray is left out of the Big Four to challenge Novak Djokovich for the title.  But Murray has looked eminently beatable going 5 sets in each of his first two rounds. Stan "the Man" Wawrinka, who defeated Novak in the final last year also has looked a little shaky.  Clearly, this is the best opportunity for the Djoker to win the French and complete his career Grand Slam. And, if he does, he will be well set up to win the calendar Grand Slam, something no man has done since Rod Laver in 1969, as he will be the prohibitive favorite at Wimbledon and the US Open later this year. But this is the French Open and anything can happen - we've seen stranger things before.


Stanley Cup Conference Finals Recap

Well, unusually for me, I was right on target with my Conference Final predictions as the Pittsburgh Penguins defeated the Tampa Bay Lightning in 7 games while the San Jose Sharks dispatched the St. Louis Blues in 6.

The Penguins-Lightning series got off to an incredibly rough start with 3 starters having to depart in the first game of the series, although the only one who did not return was Lightning goalie Ben Bishop.  Sadly, Bishop suffered a similar groin injury that limited him in the Stanley Cup finals last year. With Bishop out, the thinking was that the door was open for the Penguins, but his replacement Andrei Vasilevskiy was spectacular throughout the series, keeping the Lightning in games where they were badly outshot. His counterpart in the Penguins net, Matt Murray, also made the big saves when Pittsburgh had to have them. It certainly looks like a bright future for both of these young goalies, age 21 and 22 respectively, and their franchises.  The Penguins looked like they had the series in control going into the 3rd period of game 5 of the series which was knotted at 2.  But a couple of iffy goals from Marc Andre Fleury let the Lighting tie the game late and then win it in overtime, seemingly taking control of the series heading back to Tampa.  But Pittsburgh's team defense thoroughly stifled Tampa Bay in the final two games, limiting the Lightning's scoring chances against Murray who had returned to the nets.  Even the return of Steven Stamkos to the Lightning lineup in game 7 could not create enough offense to offset the two goals by the Penguin's Brian Rust. It was a great series and I really think the better team won.

San Jose's defense was equally as stifling to St. Louis as Pittsburgh's was in the other series.  I had been concerned about the Blues ability to generate enough scoring chances to compete with the Sharks potent offense.  Once again, no one could stop the Sharks' Joe Pavelski as he had eight points in the series. Martin Jones was steady, but not spectacular in net for San Jose, but that was all they really needed as the St. Louis never had tons of scoring opportunities or even pressure for that matter. And the Blues top offensive weapon, Valdimir Tarasenko, was completely shut down, held pointless until the final game of the series. Exceptional goaltending from Brian Elliot and Jake Allen helped the Blues stay in some games, but in the end the Sharks had too much offense and too stingy a defense for St. Louis to overcome.

So the final's matchup is set between the Penguins and the Sharks - I'll have my predictions for you on Memorial Day in the early afternoon, as the first game is set for Monday night.

Verizon Strike Settled - Waiting For Details

It looks like it might have been a good day for workers today - first the ruling on forced arbitration and now it looks like the Verizon strike might be settled. Although, the details have not been made public yet, my guess would be that Verizon finally caved to the union's demands. The union understood and seemed to be prepared for the war of attrition that the strike has turned into while Verizon looks like it had only budgeted for a strike that would end in the first quarter of its fiscal year.  The company had already issued a warning that the continued strike could effect its bottom line. Let's hope the agreement reflects some of my optimism for Verizon workers.

Forced Arbitration In Employment Contracts Ruled Illegal

Following up on the decision by the CFPB to ban forced arbitration clauses when purchasing financial services, the United States Court of Appeals in the Seventh Circuit ruled that employment contracts that forced employees to resolve disputes via arbitration and also individually, as opposed to allowing the employees to band together as a class.  This forced arbitration was always a divide and conquer strategy against workers as individual workers usually had neither the time or the resources to fight their employers individually, especially when it is clear the arbitration process is stacked in favor of the company.  On the other hand, being able to form a class minimized both those concerns for the individual employee.

This a big win for employees and will hopefully lead to firms treating their employees while providing the employees with a little more clout if they do not do so. The case that resulted in this appeals court decision was actually prompted by a suit brought by an employee of Epic Systems claiming that the company had unfairly denied him and other employees overtime wages. Yes, that's right - yet another company apparently engaged in systematic wage theft from its employees. Why am I not shocked...

Of course, this appeals court decision is at odds with an earlier appeals court decision in the Fifth Circuit, meaning that the case will probably have to be resolved by the Supreme Court. However, with only eight current members of the Supreme Court due to Republican obstruction, it is possible that an evenly divided court may just let the individual appeals court decisions stand within their own district.  Now, some conservative legal scholars seem to be quite happy with this kind of result, it would seem pretty ridiculous that you would be forced into individual arbitration if you were employed in Louisiana, but not if you were employed in Chicago. Let's hope that the Court has a ninth justice before this case comes before it.

Housing Is Back - Good News For Economy

Traditionally, the construction industry and especially new home building has been the driver for leading the American economy out of recession.  Needless to say, the housing collapse and the financial crisis meant that demand for new homes virtually disappeared. Now, it may be that the next generation will not be as home-centric as previous generations but it is nice to see that new home sales are back to levels last seen in January, 2008 and near the median that existed for the last 50 years.  I hope and doubt we will ever see the bubble in building that we saw in the early 2000s where the number of new homes being built was more that double the norm. But the resurgence of new home building will only be a boost to the national economy in the next few years.

The Real Tragedy In Ken Starr's "Demotion" At Baylor

I'm not sure it truly counts as karma, but it is certainly tragically ironic that Ken Starr has been stripped of his title as President of Baylor University over the mishandling of sexual assault cases by members of the football team. "Mishandling" may be a bit of an understatement, as it looks more like willfully turning a blind eye. In one of the cases, a Boise State football player who had been dismissed from the team for erratic and sometimes suicidal behavior was able to transfer to Baylor despite, Boise State claims, being warned by Boise State of the danger.  Baylor, however, denies it was warned. That player went on to be convicted of essentially raping a freshman soccer player.

The irony, of course, is that Mr. Starr was the inquisitor who, as special prosecutor, turned the investigation of the faux scandals of Whitewater and Vince Foster's suicide into an exploration of President Clinton's sex life. The tragedy, however, is not Mr. Starr's loss of title - he will, after all, still continue to be paid his current salary and maintain his position as a professor at Baylor Law School. It is hardly a punishment at all. No, the tragedy is for the victims of these assaults who were essentially the price to be paid for the millions of dollars that Baylor's football program brings in to the university.  The deeper tragedy is that the situation at Baylor seems to be the norm across the country in big-time college athletic programs.

Thursday, May 26, 2016

Astronomy Adventure (cont'd) - Not Much Progress

In our prior Adventure, we had some success with photos of the Moon, making sure we were focused properly through the camera and not just the telescope's eyepiece.  So it was time to take this method and go back and take a look at Saturn and see what kind of images we could get. And the results were, quite frankly, atrocious.  Because the image was so small on the cameras display, it was incredibly hard to see whether I was actually in focus. Sadly, here is the best image I could get:



Pretty bad...

Obviously, something is still seriously wrong; so, I went back to the Moon and started over again.  But this time, I decided to wear my glasses when focusing through the camera thinking that would help. And here are some results from that effort:



I think the focus on these is pretty decent, so probably wearing my glasses is a good idea - you think!  Well, they always said astrophotography was a lot of trial and error and I am proving them right. So not much real progress this week - but back next time for another try at Saturn.

Justifications For Having Only Eight SCOTUS Justices Begins

I see that the rationales for not bothering to appoint a ninth justice to the Supreme Court are starting to appear, confirming my fears that Republican obstructionism on this issue may extend well beyond the next election.  Today's op-ed in the Times by Barry McDonald from Pepperdine Law School puts forth the argument that the Supreme Court made a power grab by becoming the "arbiter of all matters of constitutional law".  Rather, he argues, the framers' vision of the Supreme Court was to resolve disputes between individual parties over whether a federal law was constitutional, and that their decision would only be binding on the individual parties to that very lawsuit.  There would be no precedence set that would extend beyond that specific decision and any decision would certainly not be binding on the legislative or executive branch. His further point is that most decisions by the court are majority decisions so not having a ninth justice is not a problem. And the remaining cases that do end up in a 5-4 vote are usually politically contentious issues "decided by one unelected justice who straddled political voting blocs on the court". Furthermore, he states, letting those decisions be decided at the local level would allow us or even force us to govern ourselves.

Now I do not know Mr. McDonald and these may quite sincerely held beliefs as Pepperdine Law School has a reputation for conservatism.  But the idea that court decisions would only be binding on individual parties would eventually mean that the court would be overwhelmed by recurring cases that cover the same constitutional issue. And I think we all know how badly things went wrong when states were given broad latitude in clearly constitutional matters - it took a Civil War and continuing legal battles for well over 100 years simply to get the full franchise to African Americans. 

As I described in an earlier post, if the upcoming election produces a Democratic President and Republicans still maintain control of the Senate, there is very little incentive for Republicans to consider any nominee that the President puts forward.  And they will be using arguments like Mr. McDonald's  as a justification for their position.

Decline Of Wilkes County Shows Why Status Quo Can Not Stand

It is a truly depressing story today in the Times about the decline of Wilkes County, North Carolina. In the last 15 years, the median income of the country has declined by about 30% as its industries were destroyed first by global competition and then by the financial crisis.  And the local businesses that became successful abandoned the county for more lucrative pastures.  The first body blow came in 1996 when NASCAR made the move into prime-time and abandoned the famed short track at North Wilkesboro Speedway. Then came the entry of China into the World Trade Organization in 2001 which put the already stressed local textile and furniture businesses under enormous pressure. And then Lowe's, the home improvement chain that was founded in North Wilkesboro in 1946, moved its headquarters out of town to Charlotte in 2003. Finally, much of the local industry that survived these successive body blows were eventually crushed by the Great Recession. 

When your median income drops by nearly a third and there are virtually no prospects on the horizon, is it any surprise that a populist demagogue like Trump would find support in a place like this.  When the establishment has abandoned you, the only hope left is someone who promises that business as usual can no longer stand.

African American Woman Breaks 20 Year Old Kentucky Barrier

And I thought Connecticut was poorly represented by having only one African American female in the State Senate.  Attica Scott, after winning the Democratic primary, will run unopposed in the November election and will then become the first African American female to serve in the entire Kentucky state legislature in nearly 20 years.

Again, Wall Street Avoids Punishment For Illegal Behavior

Two days after Bank of America had its $1.27 billion dollar fine for intentionally lying in contracts with Fannie Mae and Freddie Mac voided by an appeals court, we now have Citibank avoiding criminal charges in illegally manipulating the daily interest rate, or ISDAFix, for large numbers of derivative contracts. Essentially, Citibank traders were entering bogus bids in order to manipulate the prices of various derivative contracts in their favor.  Email exchanges among the traders make the intent of the traders quite clear, with one trader stating he was "proud of himself" for moving the price of one of the contracts in the direction that would help the bank's trading position. In addition, this behavior was not just an infrequent event, but went on continually for up to 5 years. 

Citibank was also one of a number of banks that implemented this same strategy to manipulate the LIBOR rate, a critical financial benchmark that determines rates on a wide variety on business and consumer loans around the world.  Most people who had student loans, variable rate mortgages or home equity lines of credit would have the interest rate set at LIBOR plus a certain percentage.  So this was not just "inside baseball" in the financial services sector - it effected many millions of loans around the world.  And yet, as of late last year, only one person had been convicted of a crime in relation to this scandal.  Yes, the banks have had to pay billions in fines, but for them, that is simply part of the cost of doing business; or, to put it more realistically, a minor cost to paid for illegally making profits.  I plan to do a full post on the LIBOR scandal in the future because its breadth is simply stunning and the willful ignorance of the regulators is, even after all we now know, shocking.

In any other industry, all of these traders, their managers, and their firms' executives would be behind bars under the RICO statute. But, because this is the financial industry with its huge political power and the regulators' fear of prompting another financial crisis, the criminals once again escape punishment. And, until that changes, we will probably see similar behavior by these firms again in the future.

Wednesday, May 25, 2016

Bridgeport Democratic Party Thanks Its State Rep By Not Endorsing Her

It is a pretty clear sign of the dysfunction within the Bridgeport Democratic Party establishment that, two days before our state delegation is praised for their efforts to mitigate the damage for the city within the state budget cuts, the Party refused to endorse two members of that very same, successful delegation. And one of those state reps the local party did not endorse was Marilyn Moore who has done a pretty good job in her first term in Hartford.  Moore is also the only African American female in the State Senate and the local party's endorsement of Tom McCarthy over Moore send a pretty pathetic statement to out citizens about the being an inclusive party. And it also speaks to the lack of minority representation in Connecticut as a whole. It seems as though this endorsement of McCarthy was the price to be paid to get him off the Bridgeport City Council.  But this seems typical of party leaders - always shooting themselves in the foot when it comes to dealing with the state.

Trump-like Figures Becoming Common Due To Elite Failures

It is nice to see the New York Times picking up on my posts about the rise of Trump - I wish!  But Eduardo Porter's piece nicely summarizes many of the points I've made about the reasons for Trump's support and how a wave of Trump-like figures have sprouted up all over the world and especially in Europe in response to the "Davos elites" failure to respond adequately to the financial crisis of 2008.

Please read, or re-read, all of the links above as I think they are all very informative.  Hey, I've got to toot my own horn when I can!

More Good News On Renewable Energy

Every day, it seems, there is more good news coming from the renewable energy front.  First, there is the increasing use of what is called floatovoltaics - solar panels that float on water.  These panels actually a two-for, not only providing solar energy but also reducing evaporation from the ponds and lakes that the panels float on.  This is a huge benefit in drought-stricken areas as it is an effective water conservation method. And the surrounding water manages to cool the solar panels, thereby increasing their efficiency. More efficient energy production combined with improved water conservation is a win-win all around.

The next piece of good news is that virtually all the new energy capacity added in the first quarter of 2016 came from renewable energy sources. Nearly 1,300 megawatts of power were added bringing the share of renewable energy above 15% of total energy use in the United States. And, with the phase-out of coal fired power plants around the country, it will not be long before renewables surpass coal and become the #2 source of power in the US, behind natural gas.

Domino's Considered Fixing Wage Theft Of Employees Low Priority

Domino's has now joined McDonalds in being accused of deliberate and systemic wage theft from their employees. Both companies hide behind the legal justification that their franchisees are solely to blame, not the companies themselves. But, in the Domino's case, the franchisees were required to buy a payroll system call PULSE that routinely miscalculated workers' gross pay wages.  The suit goes on to claim the Domino's was aware of the problems with PULSE but deemed the issue a "low priority".  Doesn't that pretty much sum up the way corporations treat their employees these days - making sure their employees actually get paid for the work they do is a low priority!

How We Wasted A Chance To Upgrade Our Infrastructure For Free

Corpus Christi, Texas, a city of approximately 320,000 people, has now been under a boil water notice for nearly two weeks now, and it will probably be another day at least before that notice has a chance to be lifted.  This is the third boil water notice for the city in the last 10 months and it is just another example of the failing state of infrastructure all over the US these days. Interruptions in providing safe water is becoming a common occurrence these days. A Huffington Post analysis of Google alerts of boil water notices indicated 147 separate incidents in 27 states that lasted more than one day. And the lead contamination in Flint has prompted the discovery of similar levels of contamination in other water systems around the country.  All these problems can be traced back to underinvestment in monitoring and maintaining water systems around the country.  Incredibly, the federal level for the "safe" amount of lead in drinking water is not based on a scientific health threat - it is based on the calculation that 9 out of 10 homes will fall below the accepted level.

Naryana Kocherlakota was the President of the Federal Reserve Bank of Minneapolis from 2009 until the end of 2015. In 2008, Kocherlakota actually signed a letter opposing the stimulus plan that eventually passed Congress in 2009 and he was known as a monetary hawk who actually voted in 2011 against the Federal Reserve statement to keep interest rates near zero for an extended period of time. But his review of economic data convinced him that his view of monetary policy was in fact completely wrong and in 2012 he completely reversed his positions and now believes that rates should remain low until the economy has fully recovered.

So how does Mr. Kocherlakota fit into the discussion of infrastructure. He believes that households and businesses have been hoarding safe assets in the wake of the financial crisis.  Dodd-Frank is forcing banks to have lower leverage and hold even more safe assets. In sum, he believes that there is a world-wide shortage of safe assets available and that this shortage of safe assets is holding back the US and global economy.  I encourage you to read the whole article, but here is his summation:

"From a purely economic point of view, the government’s policy seems entirely artificial. No private entity would behave like this. Imagine a corporation with such a safe cash flow and such low borrowing costs. It would issue debt to fund expansions or payouts to its shareholders.

Analogously, the U.S. government should issue more debt, using the proceeds to invest in infrastructure, cut taxes or both. Instead, political forces have imposed artificial constraints on debt -- constraints that punish savers, choke off economic growth and could sow the seeds of the next financial crisis."

Since the 1980s, when the mantra of government being a problem rather than a solution took hold, underinvestment in the maintenance of the roads, bridges, water, and electric systems has been a standard. And the results of that neglect are being felt on a daily basis around the country. Interest rates have been at historic lows for the last few years and the real interest rate (current interest rate minus rate of inflation) has actually been negative at times.  Essentially, our government could have borrowed money for free and used that money to rebuild our infrastructure - repaving roads, fixing bridges, replacing aging and lead pipes, upgrading our rail system.  And this would have put millions of people back to work at the same time.  This is typical Keynesian economic theory at work and it was what FDR did to help pull us out of the Great Depression. But the political will was and still is not there.

In short, our reluctance to issue more safe assets in the form of US Government debt is keeping our economy from growing at its potential. And, what's even more frustrating, is that we can see that this reluctance is keeping us from upgrading our infrastructure and investing in our futures.  The engine of the American growth in the 1950s, 60s, and even 70s was Eisenhower's national highway system. It allowed commerce to move quickly and efficiently all around the country and allowed for the growth of our major cities. It is hard to understand the political myopia around this subject - upgrading infrastructure puts people back to work and builds the foundation for economic growth in the future.

Of course, the Federal Reserve looks intent on raising interest rates at least twice this year, so the time to take advantage of borrowing for free is quickly passing.  Eventually, we will have to fix our aging infrastructure and we will look back at this period and see what an opportunity we had to do those upgrades at little or no cost and think how much we wasted an enormous opportunity.

Tuesday, May 24, 2016

Stepanek Puts On Clay Court Display In Nearly Beating Murray

Andy Murray defeated Radek Stepanek in 5 magnificent sets in the first round of the French Open in a match that extended from Monday into Tuesday due to darkness. The match was a perfect example of the beauty of clay court tennis when played at the highest level. Stepanek, the oldest man in the draw and primarily a doubles specialist these days, actually had to play through the qualifying tournament in order to get into the singles draw. But he showed how clay court tennis allows a player to use every conceivable shot and the slow surface requires players to actually craft points. Stepanek did not serve big, he had only 5 aces in the match I believe, and he certainly did not overpower Murray with his groundstrokes. But he used the combination of deep and accurate shots, both on his serve and with his groundstrokes; low, flat shots that stayed down, allowing him to come to net for easy winners when he could; fantastic volleying skill; and well executed drop shots. Putting these all together, he was able to move Murray all over the court and nearly pull off a tremendous upset. And that's why I love the French Open and clay court tennis.

Tony Blair - Master of Understatement

Tony Blair just made the understatement of the 21st century regarding the invasion of Iraq: "For sure we underestimated profoundly the forces that were at work in the region and would take advantage of change once you topple the regime".  I'm glad he could clear that up for us.

Trump Uses Rovian Playbook To Deflect His Own Misconduct

I really had hoped to avoid blogging about this but apparently Trump is determined to have us all revisit the horror of the 1990s.  Yesterday, he not only insinuated Clinton involvement in the suicide of Vince Foster but also called Hillary essentially an enabler of Bill Clinton's alleged and admitted sexual misconduct.  Of course, this strategy is just red meat to the Republican base. But it is also right out of the Karl Rove school of campaigning - make sure you accuse your opponent of the very thing you might be guilty of.  As Josh Marshall has a couple of rants about today, this is part of the "dominance politics" of which Trump is a master. But it also deflects focus on the fact that Trump himself, beyond his continual comments denigrating women and reported inappropriate behavior, has been accused of sexual misconduct, including rape, by two different women, one of whom was his wife, in sworn statements. In the media frenzy to apparently re-litigate the Bill Clinton Presidency, these accusations have pretty much flown under the radar.

Of course, none of this in any way deals with the real issues the country is currently confronting and the important decisions that lie ahead of us. Unfortunately, it is, however, probably an indicator of the type of tawdry and negative campaign we can expect to see in the coming months.  Of course, you can't really expect a campaign based on the issues from a man who, when a an energy company executive suggests lifting restrictions on liquefied natural gas (LNG) export terminals, has to ask what LNG means. And also needless to say, this same energy company executive thinks this kind of ignorance is the kind of leadership the country needs.

Education Cuts Could Mean Fleeting Graduation Gains

In another example of how the mechanisms for funding our public education system are failing, Bridgeport is following in Norwalk's footsteps in taking advantage of last year's change in the law that allows school districts to charge tuition to students outside that district. As all municipalities look for increased funding, this has the potential to start a "tuition war" among school districts that will ultimately leave talented but disadvantaged children with less educational opportunity.

This comes one day after Governor Malloy, who hasn't had much good news to tout lately, announced that high school graduation rates across the state had reached a record 87.2%. Numbers like that only highlight the failure of a relatively small number of schools servicing disadvantaged communities like Bassick High School in Bridgeport. And it implies that a small re-allocation of resources and talent to target these failing schools would create a greater equality in educational outcomes across the state. Sadly, these improved graduation rates may only be temporary as funding levels for education have been cut in this year's state budget, forcing local municipalities to scrounge to make up the difference.

House Judiciary Move on Minor Testimony; Senate Judiciary No Action on SC Vacancy

The House Judiciary Committee convenes today to consider the possible impeachment of the current head of the IRS, John Koskinen.  An impeachment of the head of a sub-cabinet agency has never occurred in the history of our country so, once again, Republicans have broken new ground in partisan political tactics.  The dispute revolves around the delivery of emails subpoenaed by the House in regard to the "scandal" of the IRS scrutiny of tax exempt organizations.  There is no guarantee, even if the Judiciary Committee votes for impeachment, that the full House would even consider it or vote to impeach. And the Senate has already indicated it would not convict. So this is just another exercise in futile political grandstanding by House Republicans, echoing their dozens of votes to repeal Obamacare.  As the Times points out, part of the motivation for these hearings is that the Chairman of the Judiciary Committee, Robert Goodlatte, is facing a strong primary challenge from his right.

As I noted in an earlier post, it is hard to see the full House taking up Koskinen's impeachment, if the Judiciary Committee recommends it.  The optics of carrying on an impeachment inquiry over some relatively minor Congressional testimony in the House while the Senate Judiciary Committee refuses to even consider holding a vote for Merrick Garland to fill the vacancy on the Supreme Court will probably not go down well with a majority of Americans. But we've all seen House Republicans do crazier things...

On a personal note, it is great to see Mike Gerhardt, my former college roommate and current constitutional law scholar at UNC get a few quotes in the Times article. He seems to have become the media's go-to guy on constitutional law, replacing the ever-quotable Bruce Fein.

Wall Street Fraud Goes Unpunished Again

Is there any more illustrative example of the failure of our justice system to deal with corporate malfeasance than today's ruling by the US Court of Appeals for the Second Circuit voiding the $1.27 billion fine that Bank of America had been ruled to pay over its sale of below quality mortgages to Fannie Mae and Freddie Mac during the housing bubble. The case revolved around mortgages that originated out of a program at Countrywide Financial program called High Speed Swim Lane (HSSL) that essentially stripped any controls in the loan approval process and paid bonuses for faster loan originations.  The fact that the program was known as "Hustle", a phonetic rendering of the acronym HSSL, might have been a giveaway about the intentions of this program. Incredibly, the appeals court, despite acknowledging that the Countrywide had intentionally made false statements in contracts with the government agencies, ruled that those intentional breaches of contracts did not constitute fraud.

This story goes hand-in-hand with a book that just came out that everyone should read.  The book, Chain Of Title: How Three Ordinary Americans Uncovered Wall Street's Great Foreclosure Fraud, by David Dayen, describes the rampant fraud that financial firms committed during the foreclosure crisis in the aftermath of the collapse of the housing bubble. Because of the increased securitization of mortgages and the fact that most mortgage holders were totally unprepared for the number of foreclosures that occurred, the chain of title required by property law was totally ignored. In order to foreclose, firms had to prove that they actually owned title to the home in question and, in order to accomplish that, the firms essentially set up what became known as robo-signing factories that forged signatures of bank officers to speed up the process. When some homeowners challenged those documents during the foreclosure process, banks compounded their illegality by forging new documents and backdating them. Of course, hardly anyone was prosecuted for these crimes and Obama's Justice Department seemed uniquely disinterested in pursuing these crimes, sometimes even impeding investigation by states' Attorneys General. And once again, corporate illegality went virtually unpunished.

On Wall Street and in other industries, I'm sure, everyone "knows" when illegal conduct is occurring. But as long as no one specifically acknowledges it, companies can maintain this fiction that none of it was "intentional" and thereby maintain their innocence. When you or I knowingly make a false statement on a mortgage application, it is mortgage fraud; but when Countrywide intentionally lies in mortgage contracts with government agencies, the appeals court rules it is not fraud. That makes no sense. Somehow we must end this double standard that allows companies to get away scot free doing the very same things that land individuals in jail.

Current Polls and A Wave Like 1968

Recent polls showing Donald Trump taking the lead in a few national surveys have created some angst among Democrats.  But, as David Atkins at Washington Monthly points out, these polls are pretty much meaningless at this point in time. Trump has been consolidating his support among Republicans for a couple of weeks now, while the Bernie and Hillary are still fighting the final battles on the Democratic side. Until Hillary actually secures the nomination and has a little time to consolidate Democrats behind her, any head-to-head poll with Trump is probably not indicative.

On the other hand...Mark Kurlansky wrote a fascinating book, 1968: The Year That Rocked The World, which described the uprisings, armed and otherwise, that swept the globe in that eventful year. From the anti-war and civil rights movement in the US, to student protests in France and Germany, the Prague Spring in Czechoslovakia, to the Cultural Revolution in China, calls for change seemed to know no borders. And I wonder if we are not seeing a similar wave this year as citizens around the world respond to the economic failures of the last 8 years. Call it a revolt against the "Davos elites", the centrist economic technocrats on the right and on the left who have lost all credibility due to their inability to create any kind of significant recovery from the economic disaster they created. In addition, the collapse in the price of oil and other commodities has put an economic strain on those resource rich countries, further adding to the discontent with the status quo. The collapse in support of these centrist parties has opened the door for populist, nationalist, and xenophobic demagogues to fill the void. 

In the Philippines, Rodrigo Duterte was just elected President running a nationalistic campaign and vowing to be a "dictator" against crime and corruption.  In South America, Argentina, Venezuela, Bolivia, and Ecuador have seen their governments repudiated.  In Brazil, in what is seemingly an center-right coup, the leftist government of Dilma Rousseff has been ousted in an apparent attempt to limit the investigation of massive and endemic corruption on both sides of the political spectrum. In Europe, the collapse of the centrist parties on the right and left has already occurred in Greece and Spain, openings that the far left has exploited. In Austria, both of the long-ruling center right and left parties were eliminated in the first round of voting, and the second round ended in a breathtakingly close loss for the far right Freedom Party, a party formed by former Nazis in the 1950s and whose current platform is nationalistic and xenophobic. In France, the ruling Socialists will barely be able to compete in the next election, leaving the far right National Front, another nationalist and anti-immigrant party, to compete against the Republicans in next spring's elections. And then there is the June 3 referendum in Britain to withdraw from the European Union which could change the shape of the United Kingdom and Europe in the years to come. Especially in Europe, the failure of the Davos elites has led to a frightening rise in the far right all across the continent, something that should concern us all.

One of the theories in Kurlansky's book is that the ubiquity of television helped discontented citizens in one country see that others were feeling similar frustrations which created a circular feedback loop that strengthened all these uprisings.  And, similarly today, the success, especially in Europe, of these far right nationalist and anti-immigrant parties feeds upon itself. Which brings us back to Trump. Trump's nationalist and xenophobic rhetoric is, unfortunately, not that out of step with similar trends around the globe. Sadly, Hillary Clinton is most definitely a product of the establishment and it seems that when theses tsunamis of discontent sweep around the globe, the establishment get washed away. So, while we shouldn't put too much stock in these current polls, we should fear the global sea of discontent that Trump has been able to tap into.

Monday, May 23, 2016

A Constitutional Right To Vote

Kevin Drum has grabbed onto an interesting idea - a constitutional right to vote.  At present, all male citizens have to register for the Selective Service when they turn 18 and, perhaps soon, women will as well. When they register, they would automatically be registered to vote and could receive some sort of voting card at the same time.  New citizens would also automatically be registered and receive their voting card when they get sworn in as citizens.  And convicted felons would regain their right to vote after they have served their sentence.  A voting card and a proof of address would be enough to allow someone to vote in any election they were eligible. And it would be up to the government to maintain the list of people who can not vote, rather than putting the burden on the voters to prove they are eligible.

I happen to believe that the current Republican strategy of voting restrictions and partisan gerrymandering will come back to haunt them very soon.  Eventually, the demographics in each of these restrictive states will put Democrats back in power and the restrictions will be lifted and the districts redrawn, unleashing a flood of "new" voters for Democrats and pushing Republicans further into minority status . In the interim, nothing would make it clearer to all those disenfranchised voters and voters who struggle with the hassle of properly registering under these restrictive policies that the Democratic party stands with them than to be boldly out there demanding this constitutional right to vote for every citizen.  It would be interesting to see how Republicans could oppose that idea.

Microsoft Angers Another User

Atrios describes his frustration with Microsoft automatically upgrading one of his PCs to Windows 10 without authorization in his usual colorful fashion - and he won't give Apple a pass either.  It's nice to see other people are as annoyed by Microsoft's tactics as I am.

St. Ronnie's Debts

I hope you have been enjoying the Reality Check series on our deficits and debts over the last few weeks.  I know it is a really dry and somewhat esoteric subject, but I think it's important to understand the issue so you don't get bamboozled by the politicians throwing around these huge numbers that make the problem seem worse than it is.  And one of the reasons I chose this subject to begin with was because it was a big issue in the first Presidential election that I was eligible to vote in.  At the risk of dating myself, that was the 1980 race between Reagan and Carter. Obviously, there is usually more than one issue that determines the outcome of a campaign, but Reagan spent a lot of time decrying Carter for the increase in debt under his watch - in 1980 the annual budget deficit had reached nearly $74 billion dollars, which was only about 2.6% of GDP, up from nearly $41 billion in 1979. Of course, the economy was in recession at the time, so an increase in the deficit was to be expected. But Reagan made inroads with this argument - in fact, he said this in his first inaugural speech in early 1981:

“For decades, we have piled deficit upon deficit, mortgaging our future and our children’s future for the temporary convenience of the present.”

The reality was that our debt-to-GDP ratio at that time was around 31%, which was near the historic lows in the post World War II era.  Our debt was nowhere near being a drag on our future at those levels. In fact, 1982, was the last time our debt-to-GDP ratio was as low as 31% and by the time Reagan's two terms were up that number had risen to nearly 56%, an 80% increase. And, under Reagan the annual deficit only got close to being as low as the 2.6% in 1979 and that was at the end of his term in 1989 when it came down to just under 2.7% from a high of over 5.7% in 1983. By his own standards, Reagan did more to "mortgage our future" than anyone since the outbreak of World War II.

Now, I never voted for Reagan, but I learned a lesson from following that campaign - how politicians use the "story" or our debts as a cover for other priorities, most of which will not have a positive effect on that debt. And if you want to read the inside story of the implementation of those Reagan policies and the lack of concern about our debt, I suggest you read David Stockman's account of his term as Reagan's budget czar, The Triumph of Politics. There are a lot of positive myths about the Reagan era that are false; and, to some degree, there are lots of negative myths about the Carter Presidency that are false as well. But the idea that Ronald Reagan was fiscally responsible is one myth that should be shattered - he added more to the national debt than anyone from World War II until the financial crisis of 2008. We shouldn't forget that.

Reality Check - Debt Ceiling, Balanced Budget, and Paying Down Our Debt

Monday's Reality Check - a weekly presentation of facts and figures to help us all discuss important issues with some degree of understanding. Because, despite living in this post-modern, post-truth world, the fact remains that facts still remain.

In our last Reality Check, we discussed that there are many important differences between government debt and personal debt and why the analogy between the family budget and the government budget is false in so many ways.  Today, we will discuss the debt ceiling and the idea of the balanced budget amendment and paying off our debt.  Politicians of all stripes, from Republicans to centrist Democrats, love these ideas because it allow them to have it both ways - sounding like they are being fiscally responsible while doing business as usual.

The debt ceiling is a self-imposed limit that Congress puts on US Treasury that restricts the amount the Treasury can borrow to pay its existing legal obligations.  The important part of the prior statement is "existing legal obligations".  In other words, Congress has already approved and authorized the US Treasury to spend this money, knowing full well that the artificial ceiling on borrowing they have set will be breached.  A useful analogy to our own lives would be agreeing to a mortgage of $100,000 and then saying that you've decided you can only have $80,000 of mortgage debt - if only things were that easy. Now, the politicians could easily ensure that the debt limit was not reached by making sure the budgets they pass would not lead to borrowing that will exceed the very debt limit that they themselves have imposed. But the debt ceiling, a purely political construct, allows Congress to increase spending or cut taxes which mandates that the Treasury breach the debt limit.  Then those same members of Congress can rail against the debt, or, as we have seen lately, use raising the debt ceiling as a bargaining chip to accomplish some other political goal. And, other than some on the political extremes, the idea of defaulting on the debt and breaking the full faith and credit of the US Government is a non-starter - it would be a financial calamity for us and for the global economy. One other important point - most other countries do not have a debt ceiling; it appears that the US is the only major industrialized country that has a debt ceiling. So, the next time we run up against the debt ceiling and politicians start posturing about our debt, remember that these same politicians have already authorized the borrowing that they are complaining about.

Another classic political posture is the idea of a balanced budget amendment that requires the federal budget be balanced every year as well as paying off our national debt. Put aside for the moment the difficulty in getting an amendment like this passed - Republicans would be afraid of tax increases Democrats would propose when in power; similarly, Democrats would fear the spending cuts Republicans would offer; or the fact that traditional economic theory says that we may need to run deficits in times of war or during economic downturns; or that much of the increased annual deficit during a recession is caused by "automatic stabilizers" like unemployment insurance or food stamps. All that aside, the biggest obstacle would be the objections of Wall Street and the global financial community, because a constantly balanced US budget with no debt would be an economic disaster for the US and the global economy. Now, this may seem counterintuitive, that the financial community would be opposed to a balanced budget, but it's true and we saw it happen less than 20 years ago.

It might surprise you to know that the US was actually running annual budget surpluses and was even paying down its debt as recently as the late 1990s - in fact, in fiscal year 2000, the annual budget surplus was over $235 billion. And in that same fiscal year, we reduced our total debt by over $100 billion. Because of the surplus, the US Treasury could retire, rather than roll over, some debt as it matured, and the amount of new debt that needed to be issued also decreased. Now you would think that this would make the fiscal scolds on Wall Street happy, but, in fact, it was the exact opposite.  There was a genuine fear that the entire US debt could be eliminated and the reasons for that fear are outlined in this September, 2000 paper from the New York Fed. The key takeaway from the paper is as follows:

As Treasury securities are free from default risk and highly liquid across a wide range of issues, the securities are a benchmark for risk-free interest rates. Well-developed derivatives markets that enable investors to sell Treasuries short combine with the securities' liquidity and creditworthiness to make them a reference and hedging benchmark for other fixed-income securities. Due to their creditworthiness and liquidity, Treasury securities are a popular reserve asset to numerous financial institutions and the primary asset of the Federal Reserve.

The paper argues that many of the features that make the U.S. Treasury market an attractive benchmark and reserve asset are likely to be adversely affected by the debt paydown. In fact, recent events are suggestive of reduced Treasury supply disrupting the market and may be indicative of future disruptions. In February 2000, for example, the Treasury announced that the issuance frequency of the one-year bill would be reduced from every four weeks to every 13 weeks. As the last bill auctioned on the old cycle aged, it became very expensive to borrow in the repurchase agreement (RP or repo) market. On May 31, for instance, a dealer had to lend out funds at a 2.25% annual rate in order to secure the one year bill as collateral. The liquidity of the issue in the cash market also suffered, with bid-ask spreads widening and trading volume plunging. At the same time, the issue became extremely expensive relative to other Treasuries with similar maturities and relative to similar maturity non-Treasury instruments.

In other words, there are a significant number of segments of not only Wall Street, but also of the US and global economy that rely on a steady flow of highly liquid and risk-free US Government securities in order to work smoothly and efficiently.  Since the US Dollar is essentially the reserve currency of the world, central bankers and the global financial community rely on a steady supply of those same highly liquid and risk-free securities as in indicator for the risk-free interest rate but also for the liquidity to support the global economy. And the "shadow banking system", especially the markets for repurchase agreements, rely on these very same securities to keep the cost of short term borrowing down not only for financial institutions but also for business here in the US and elsewhere. Having worked on a repo desk at that time, I know there was great anxiety about the possibility of not having enough US debt to fuel an efficient repo market and the only viable replacement for that debt would be high grade Corporate bonds whose borrowing costs would be significantly higher due to the possibility of default.  That is what I mean when I say that US Government debt, in the form of US Treasury securities, is what greases the wheels of our global economy.

And this anxiety extended to the Federal Reserve who worried that the elimination of the debt would force it into using those same Corporate bonds in their efforts to influence interest rates. As Alan Greenspan, who at the time was an almost god-like figure as Chairman of the Federal Reserve, testified in a 2001 Senate hearing:

"Continuing to run surpluses beyond the point at which we reach zero or near-zero federal debt brings to center stage the critical longer term policy issue of whether the federal government should accumulate large quantities of private -- more technically, nonfederal -- assets. At zero debt, the continuing unified budget surpluses currently projected imply a major accumulation of private assets by the federal government."

In other words, he opposed the idea of paying down our national debt, ostensibly because he did not want to the Federal Reserve to be the buyer or seller of private corporate debt in order to fulfill its mandate to control interest rates. And his stand provided the cover needed to pass the Bush tax cuts and removed the possibility of eliminating the national debt, much to the relief of the financial community worldwide.  Those tax cuts, along with the bursting of the dot-com bubble, and the September 11th attacks took us from an annual budget surplus of over $235 billion in fiscal year 2000 to an annual deficit of over $375 billion in FY 2003. So any time you hear a politician propose a balanced budget and paying down our national debt, the biggest opponents to actual implementation of those ideas will be Wall Street and the global financial community.  They may pay lip service to those ideas in principle but, when those ideas look like they might actually become a reality, they will oppose them.  They've opposed them in the past and they will oppose them again in the future - that's just a fact.

Sunday, May 22, 2016

Mars at Opposition Tonight

Sadly, it was cloudy around here last night when there would have been a beautiful view of a full blue Moon, Mars near opposition, and Saturn all bunched together in the southern sky. Mars will still be bright and beautiful for another few weeks and on May 30 it will reach its closest approach to the Earth since 2005. Hopefully, the clouds will depart for a few days as will the haze from the Canadian forest fires that are covering parts of the Northeast and I can get some images of Mars for you over the next few weeks.  Until then, go outside and check out the view for yourself or enjoy this fantastic view of Mars from the Hubble Space Telescope.

Natural Weekends

This Sunday is apparently for the birds!