Saturday, December 31, 2016

Natural Weekends - Happy New Year!!

Natural Weekends - Cloudy End To A Dark Year

Oligopoly Control Of Food Production And Retailing Keep Prices Higher Than They Should Be

Leonard Lopate on WNYC had a interesting segment this week on what are called "slotting fees". I had never heard the term before but it refers to the fee a food maker would pay to get their product into a store, especially the large supermarket chains. For these large chains, food makers may pay anywhere from $50,000 to $75,000 just to get their product into about 500 stores for just a few weeks. And, once you have established your product in a store via the slotting fee, you will also pay a "placement" fee that allows you to stay on the shelves. These placements fees  are normally paid via free or discounted products rather than cash. So that 2-for-1 sale you may see in the aisle of your supermarket is quite possibly the result of the "placement" fee that the producer was required to pay the grocery chain. In addition, there are premiums for prominent placements in the grocery store such as the "end caps" (the displays at the end of each aisle) and the "waterfront property" surrounding each checkout aisle. Product placement near the checkout aisle can cost the producer anywhere from $3 to $5 PER INCH for each checkout area.

Now, some might call this bribery or at least a pay-to-play system, not much different from the payola scandal surrounding the music industry in the 1950s and 1960s. Back then, none of these fees existed in the grocery business. The practice began in the 1970s as a way for these large supermarket chains to make sure that the food producer had enough capital to actually be a reliable supplier as well as to help defray the grocery's marketing costs. Of course, with deregulation in the 1980s, the system really began to take off.

Initially, the large producers objected to these fees but soon learned to embrace them as they realized they provided a high barrier for smaller competition to enter their market. In addition, to the high cost of entry into the large grocery chains, smaller producers face another huge obstacle even after they have paid their placement fee to get on the shelf. An incredible system known as "category captains" allows the largest producer in a particular food category to lay out the display case for that product for all the other producers. An example given by one of the guests on Lopate's show was a small ice cream producer who had paid his placement fee but discovered that his product was always found behind the hinge in the ice cream display.

The whole system of slotting fees, placement fees, and category captains are now just vehicles for the larger producers to make it incredibly hard for any smaller competitor to enter the market. And, although you may go to a supermarket and think to yourself that there are so many choices, the reality is that most of the brands in any particular food group are owned by a small handful of companies. These oligopolies control so many of the products you see on your supermarket shelf. The condiment section where you buy mustard, ketchup, and mayo is dominated by Hunts and Heinz. General Mills, Post, Quaker, and Kellogg own around 85% of the cereal market. In the ice cream cabinet, Unilever and Nestle own 12 out of the top 15 brands.

The control of a huge market segment by just a handful of companies has been shown to actually increase prices as the firms really have no incentive to compete with other. It encourages price-fixing within the oligopoly in order to prevent a price war, simply because it is easier to get three or four companies to agree to price fix than getting one hundred to do so. In addition, their huge economies of scale allow them to temporarily reduce prices to drive a smaller, upstart competitor out of business, and then restore prices to their original level. In the food producing business, these additional slotting and placement fees as well as the category captains process make it even more difficult for smaller producers to actually compete.

In the late 1990s and early 2000s, the Senate looked into these fees and ordered the FTC to investigate. It created a bizarre scenario where some producers had to testify behind a screen and with disguised voices because of the fear of retaliation not only from the supermarket chains but possibly also from the market leaders in their food sectors. Needless to say, the FTC decided that the issue needed further study, probably under pressure from both the large supermarket chains and food producers, and nothing came of the investigation. Please listen to Lopate's whole segment on this system is it is a fascinating look into what is essentially bribery that drives much of American capitalism today.

As far as consumers are concerned, these cost of these fees to producers are probably passed along in the price of the product. So, not only are consumers getting shafted by higher prices because of oligopoly control they are also paying more to cover these slotting and placement fees. However, the supermarkets argue that they would have to raise the price of these goods if they were not collecting these fees. That may well be true as these supermarkets run on unusually small margins, usually only around 1% or 2%. That is why there are so few markets in low-income and low-density markets. On the other hand, it is not like these supermarket chains are going broke either. The US supermarket business is itself an oligopoly, largely controlled by five large chains - Albertsons, Ahold-Delaize, Kroger, SuperValu, and Publix. Together, under a variety of brand names, these companies control nearly 12,000 stores across the country. All of them, with the exception of Albertsons, make annual profits in the hundreds of millions. The reason that Albertsons is an outlier is that they are carrying nearly $12 billion in debt due to an ill-fated buying spree in the mid-2000s and the $9.4 billion purchase of Safeway in 2014. The interest costs alone on that debt exceed $200 million per year.

While it therefore might be debatable that supermarkets would need to raise prices without these fees, it is certainly without doubt that the system in place right now is perfectly designed to keep small producers out of the game. That lack of competition alone contributes more to higher prices than these slotting and placement fees. And the consumer pays for those higher prices. The oligopolies win and we lose. That pretty much sums up American capitalism in the early 21st century.

Friday, December 30, 2016

Uber Drivers Try Unique Lawsuit Challenging Their Contractor Status

Reader CDW passes along another challenge to Uber's assertion that its drivers are just contractors. A federal judge in eastern Pennsylvania is hearing a case where Uber drivers are claiming that they should be on the clock when they are logged into the Uber app, waiting for a ride. In addition, they are claiming this should entitle them to minimum wage and overtime pay. The judge has dismissed Uber's motion to dismiss the case. The core of the case revolves around the fact that the contractor has the direction and control over how and when his services are performed. The Uber drivers are saying that certain requirements that Uber demands of its drivers make that flexibility impossible and that they should therefore not be considered contractors. Among some of the requirements the drivers listed were a specific dress code when logged into the app, suspension or termination for refusing a ride, and certain vehicle requirements. A lawyer familiar with independent contractor law said that this case is breaking new ground and is "likely to motivate other lawsuits against Uber and against other on-demand services".

Now a skeptical guy like myself might note that this case is being heard in eastern Pennsylvania and would also note that Pittsburgh is one of two cities where Uber is testing its self-driving vehicles. The other city was San Francisco where Uber was testing the cars illegally and, after ignoring the DMV order to shut the test down, finally had the permits for their cars revoked. One might wonder whether the testing of autonomous vehicles in Pittsburgh was a warning shot across the bow to the drivers bringing this case, essentially reminding them to be happy with what they have now because Uber may not need them at all in the future.

Trump Misleads About Same 5,000 Jobs But It's A Lesson Democrats Should Learn

Donald Trump announced on Wednesday that Sprint would be creating 5,000 new jobs and he, of course, took credit for that. Said Trump, "I was just called by the head people at Sprint, and they are going to be bringing 5,000 jobs back to the United States. They have taken them from other countries. They are bringing them back to the United States." As usual with all things Trump, this was just another fiction.  As Kevin Drum points out, this is the fourth time that these same 5,000 new jobs have been announced and Trump has taken credit for them the last two times. Sprint originally announced these jobs all the way back in April. Then the jobs were announced again in October when Softbank created a large investment fund. Then, in November, Softbank CEO Masayoshi Son met with Trump at Trump Tower and announced the investment fund would create 50,000 new jobs in the US. These 5,000 jobs are part of that 50,000. And then on Wednesday Trump supposedly received a call from Softbank again simply to remind him about those same 5,000 jobs.

Of course, the real reason behind all this PR is that Softbank owns Sprint and wants to merge Sprint with T-Mobile. That merger was previously and correctly rejected on antitrust grounds. The telecom industry is already a pretty tight oligopoly with ATT, Verizon, Sprint, and T-Mobile and this merger would basically reduce the dominant firms to just three. This kind of oligopoly presents huge barriers to entry, less competition among the dominant firms, higher prices for consumers, and reduced productivity.

Now the fact that Trump is misleading us once again is something that most of us who live in the real world have come to expect. But these kind of announcements are politically shrewd. Most Americans do not follow the news out of Washington very closely and this kind of announcement will sound to them like Trump is creating even more jobs. And it is this relentless pounding away on message that has helped make the Republican party successful. It is also something that Democrats seem incapable of doing well. Obama and the Democrats should have been talking about how they saved the auto industry over Republican objections at least once every week since 2009. Because it is only through that kind of relentless messaging that Democrats can break through the noise of people's everyday life and the Republican/Fox/Drudge echo chamber. And with Republicans in total control, Democrats, now more than ever, need to learn how to become a real opposition party and relentlessly stay on message.

Thursday, December 29, 2016

Obama Hits Russia With Sanctions Over Hacking; NOW Comey Is On Board

President Obama leveled some serious sanctions on Russia today, expelling 35 Russian nationals and sanctioning Russian individuals and entities associated with the hacking of the 2016 election. In addition, the Department of Homeland Security (DHS) and the FBI released a report that detailed some of the hacking activities. That report focuses on two intrusions, one in the summer of 2015 and another in the spring of 2016.

It is interesting to note that the FBI is joint author of this report and it certainly implies that the agency was aware of these hacking activities months ago, certainly before the election. Which makes a skeptical guy like myself wonder why the FBI refused to sign on to the joint statement by the DHS and the Office of the Director of National Intelligence put out on October 7th that clearly stated that Russian was hacking the election. Apparently the reason the FBI refused to sign on was because James Comey felt an announcement like that would be interfering in the election. It's enough to make you want to puke. Now, after Comey has gotten Trump elected, he is allowing the agency to finally admit what it always knew about the Russian hacking.

Needless to say, Republicans continue to pretend that the hacking was not directed by Russia, or that it was perfectly OK even if Russia did it. Paul Ryan basically blamed it all on Obama's "ineffective foreign policy that has left America weaker in the eyes of the world". Republican Trent Franks of Arizona took it one step farther, saying, "There’s no suggestion that Russia hacked into our voting systems or anything like that. If Russia succeeded in giving the American people information that was accurate, then they merely did what the media should’ve done." Perhaps Franks doesn't realize that much of the hacked material released was misleading and that the hacking also involved a huge propaganda effort of fake news. He probably does but doesn't care. Meanwhile Trump simply believes that computers are too complex so we should just move on. Trump said, "We ought to get on with our lives. I think that computers have complicated lives very greatly. The whole age of [the] computer has made it where nobody knows exactly what’s going on." That's the kind of insightful analysis we expect from a "real" President.

I am all for a complete investigation of the Russian hacking. But James Comey's (lack of) responsibility in this election continues to be almost totally ignored. It is well past time for him to account for his actions.

Dems Will Miss Harry Reid; Schumer Is Poor Substitute

I've said it before and I'll say it again, I am really going to miss Harry Reid. He was a street fighter who was not afraid to get his hands dirty and fight the Republicans on their level. And that is what it will take to fend off the onslaught that Trump/Pence and the Republicans have planned for the next four years. It sure doesn't look like there is any Democrat in the Senate who is capable of filling his shoes. Kevin Drum points us to a story by Jason Zengerle at NY Magazine that is a nice profile of Reid and how his successor, Chuck Schumer, looks to be a poor substitute.

One of the most telling moments was when Reid went on the Senate floor in 2012 and accused Mitt Romney of not paying any taxes. Romney, like Trump, was trying to get through the elections campaign without releasing his taxes. The tactic forced Romney to release his taxes which showed that Reid was not correct but also showed that Romney's effective tax rate was just over 14%. According to Reid, "I tried to get everybody to do that. I didn’t want to do that. I didn’t have anything against him personally. He’s a fellow Mormon, nice guy. I went to everybody. But no one would do it. So I did it." It is a sad state of affairs that no Democratic Senator was willing to do what Reid did. And, As Kevin Drum points out, the story also vividly illustrates the so-called "hack gap". There would have been multiple Republican elected officials and press outlets that would have picked up this story and pounded away at it 24/7 for weeks. As Drum says, "Sean Hannity would have practically paid for the privilege. Rush Limbaugh would have happily spent an entire show on it. The Wall Street Journal edit page would have been all over it. Newt Gingrich would have pitched in. At least 20 or 30 members of the House would have been happy to do it. I bet Jim Inhofe would have given a speech in the well of the Senate in a heartbeat. Half a dozen Super PACs would have rushed to buy air time. But among liberals, zilch. No one would do something like this." And, of course, because so few Democrats were willing to stand up in 2012, Trump probably felt even more emboldened in his stance to not release his taxes this year. And now that the precedent has been set, the incentives and the chances of future candidates releasing there taxes are just not there. Of course, Trump and the Republicans are responsible for destroying this norm, but Democrats certainly bear a small part of the blame for not fighting Trump hard enough on the issue. Yes, even Hillary pointed out that Trump probably did not pay any taxes. But I never heard any Democrat go on record as saying that Trump refuses to release his taxes because it would show massive tax evasion. I can guarantee Republicans would have gone there if the situation was reversed.

Zengerle's article also highlights just how weak Reid's fellow Senate Democrats are. Schumer's initial moves are particularly disturbing. His embrace of Trump's campaign pledge on infrastructure may put Democrats in a real bind when the plan the administration actually puts forward turns out to basically be a privatization scheme under the guise of infrastructure spending. Despite the fact the Congressional GOP leadership seems opposed to any infrastructure spending, they will probably be slightly more interested in moving forward if it puts big money in the pockets of their corporate donors. Schumer has commented that, "We think it [the infrastructure package] should be large. He’s mentioned a trillion dollars. I told him [Trump] that sounded good to me." Those words may come back to haunt him and the Democrats.

On a broader level, Zengerle's piece also points out how Schumer is always playing it safe, a strategy that will be death for Democrats in this environment. According to one Senate aide, "Chuck will go to the ramparts on an issue when it’s polling at 60 percent, but as soon as it gets hairy, he’s gone. Chuck wants issues to have no negatives, but it’s the Trump era. He’s looking at polls ­showing 60 percent for the Carrier deal and thinking to himself, 'Maybe we should support that'."  Democrats are in serious trouble if this is the thinking of the minority leader. Rather than trying to signal the issues on which he can "work" with Trump, Schumer and the Democrats need to be laying down the markers for the upcoming onslaught on Obamacare, Medicare, and even Social Security. Right now, every Democrat should be making the case that repealing Obamacare will result not only in the loss of health insurance, but an increase in medical bankruptcies, and hundreds if not thousands of unnecessary deaths. Every Democrat should be talking about how every American pays into Medicare while they are working to receive their entitled benefits when they retire. To privatize Medicare is to steal from those "savings" that people have worked their whole life to put away for their health in old age. That privatizing Medicare will result in more poverty for the elderly and more unnecessary deaths. If those Senators in red states who are up for re-election in 2018 think that they can win by being Republican-lite, they are sadly mistaken. And, as Reid showed in Nevada, if you really want to succeed as a Democratic Senator, you need to make sure you help build a strong state party on the ground. That is surely another lesson for Democrats. If anything, the most recent election has shown that you only win when you fight hard, pound away at your message, and fight dirty when necessary. And it has also shown that total obstruction works against the party that holds the Presidency. Anything less will allow Trump and the Republicans to tout their bipartisan success.

Zengerle's article shows just how few Democrats are willing to play the dirty game of politics. From Obama on down to Patty Murray, Democrats always relied on Reid to do the dirty work for them. And he did. Harry Reid took up the fight against Social Security privatization back in 2005 and united Democrats in that battle, a battle that they won. That should be a lesson to Chuck Schumer. We need another Harry Reid more than ever. I will miss him. And so will Democrats.

New York City Should Not Be Footing Bill To Protect Trump

Earlier this week, Trump Tower had to be evacuated because of a suspicious package. In the end, it turned out that the package contained children's toys and was not a threat. That would normally been the end of it all, but Mayor Bill de Blasio's press secretary took the opportunity to make a point about the cost that New York City was bearing to protect Trump and his family, asking Trump to help defray the cost of the operation. Now, I am totally opposed to asking citizens to pay extra for the police protection they are already entitled to, but I certainly do understand the de Blasio administration's frustration with the current set up to protect Trump and his family. The de Blasio administration had asked for $35 million from the federal government in order to offset the cost of protecting Trump Tower. In a classic middle finger to a blue state that provides more tax dollars to the feds than it receives, Congress allocated just $7 million. Even if you believe that de Blasio overstated the cost by 100%, the $7 million is still woefully short of the actual cost of protection. But rather than trying to twist Trump's arm to make up the difference, why doesn't be Blasio simply pull back to a normal police presence once the $7 million has been spent. Protecting the President-elect is surely a federal responsibility and it seems unreasonable that New York City should be footing the bill for the job. I'm pretty sure that if de Blasio really called their bluff and pulled back, the federal government would find some emergency money to cover protecting Trump pretty darn fast. This may be the one case where the GOP's strategy of pushing costs back down to state and local governments could actually be confronted and overcome.

Wednesday, December 28, 2016

General Flynn And Hillary's Emails - Compare And Contrast

I'm glad the mainstream media could spill so much ink obsessing about Clinton's emails and the potential leak of classified information, despite no evidence ever being presented that national security was compromised in any way. It stands in stark contrast to the minimal amount of press that Trump's National Security Adviser, General Michael Flynn, who has admitted sharing classified information with the British and Australians, has received. It has now been revealed that he was also investigated for sharing classified information with the Afghanis back in 2010. I think the general assumption that anything shared with the Afghanis and the Karzai government back then would eventually get back to the Taliban and al-Qaeda. According to the Washington Post article, "Although Flynn lacked authorization to share the classified material, he was not disciplined or reprimanded after the investigation concluded that he did not act 'knowingly' and that 'there was no actual or potential damage to national security as a result." This is in direct contradiction to Flynn's earlier assertions about this investigation when he said he had shared information with the British and Australians in Afghanistan. Flynn said, "I did it with the right permissions when you dig into that investigation. I’m proud of that one. Accuse me of sharing intelligence in combat with our closest allies, please." Some of the information that Flynn apparently shared with the Afghanis contained classified information about CIA activities in Afghanistan, something that clearly may have put CIA assets in serious danger.

Shockingly, this wasn't the first time that Flynn had been accused of the unauthorized sharing national security secrets with a foreign power. Just the year before, in 2009, Flynn had disclosed sensitive information about US intelligence on a Pakistani group that was believed to be attacking US forces in Afghanistan. Again, secrets shared with the Pakistani government had a way of ending up in the hands of Al-Qaeda and other terrorist groups supported by the Pakistani intelligence service, Inter-Services Intelligence (ISI).

Interestingly, James Clapper was the man who reprimanded Flynn over the 2009 incident in Pakistan. Clapper later recommended Flynn for the Director of National Intelligence but then forced Flynn out of that position in 2014 over concerns about Flynn's abusive management style. More interestingly, General James Mattis was responsible for the investigation of Flynn's leaks in Afghanistan in 2010. Mattis is Trump's nominee to become Secretary of Defense. Amazingly, Flynn managed to share sensitive national security secrets with multiple countries over the span of just two years without authorization. In addition, he was essentially fired from his last management position. Yet he was merely reprimanded, protected by his fellow generals, and allowed to fail up to his new position of National Security Adviser.

You may be thinking that the media will highlight this story with multiple front page articles a la Clinton's emails when Flynn comes up for Senate confirmation. And you would be wrong. Not only because the media wouldn't bother to do that but, more importantly, because the position of National Security Adviser does not require Senate approval.

During the campaign, Flynn said this, "If I, a guy who knows this business, if I did a tenth, a tenth of what she [Clinton] did, I would be in jail today." Flynn assuredly did well more than ten times the damage Clinton was accused of but never did. And rather than being in jail, he is the chief national security officer in the Trump administration.

Heads I Win, Tails You Lose - Rules Of The Kleptocracy

It's always a god idea to keep your eye on the news that comes out on a Friday before a holiday weekend because that is everyone's favorite time to release some "inconvenient" news. Last Friday's NY Times Business section has a nice foursome of stories about the wonderful ways of Wall Street.

Let's start off with Deutsche Bank (DB) which announced that they were going to settle their dispute over toxic mortgages with the Department of Justice (DOJ) for a mere $7.2 billion. The case involved the bank's misrepresentations about the quality of mortgages it sold before the financial crisis. The statement from DB pointed out that the settlement has not yet been approved by DOJ, so it is not final. Earlier stories had suggested the DOJ was looking to settle for over $14 billion, a total that was equivalent to the bank's current market value and that some believed may have forced the bank to be bailed out by the German government. The fact that DB was willing to settle for just half that amount will not make investors any less nervous about the precarious state of this major bank, although its shares have risen after the election of Donald Trump. It is rumored that DB is the only Wall Street bank that would continue to do business with Trump - (that may change now that he will be President) - and that he was into the bank for over $300 million. That loan is backed by Trump's person guarantee (whatever that is worth), but the bank is looking to restructure the loan and drop that guarantee. Now a skeptical person like myself may look at this statement from DB that notes that the DOJ has not signed off on the agreement and think that DB is sending a message to DOJ to settle for the $7 billion now or perhaps get far less when Trump becomes President. I'm pretty sure Trump's DOJ will be far less aggressive in going after Wall Street banks going forward but I'm positive they will be even less interested in going after a bank that manages to let Trump wriggle out of a $300 million personal guarantee.

At the same time DB was announcing its proposed settlement, Barclays was sued by the DOJ for their role in selling toxic mortgages after months of negotiations apparently could not result in a settlement. For Barclays, the case involves over $30 billion in mortgagees, subprime to AAA rated, that Barclays sold from 2005 and 2007. Over half of these loans defaulted and even the AAA tranches suffered heavy losses. Barclays had been advised repeatedly by outside vendors that provided due diligence on these mortgages that the loans were overstated and, in some cases, the properties backing those loans were even underwater. Those vendors used standard economic terms like "craptacular" and "the distinct aroma of default" in describing the mortgages. In 2007, a Barclays executive who is named in the DOJ lawsuit sent a distressed email to a colleague saying, "I just don’t think we’re able to hide as much as we were last year, jam things in, you know, bob and weave and hope for the best. And I think those days are behind us." In a statement put out by Barclays, the firm claimed, "We have an obligation to our shareholders, customers, clients and employees to defend ourselves against unreasonable allegations and demands. Barclays will vigorously defend the complaint and seek its dismissal at the earliest opportunity." Again, a skeptical person like myself might think that Barclays is really saying that they would rather take their chances with Trump's DOJ rather than settle today. That seems like a pretty good bet right now.

The Times has another article about Goldman Sachs (GS) and its involvement in the massive money-laundering and embezzlement scheme that went on at the 1Malaysia Development Fund (1MDB). Goldman has not been directly implicated in the fraud but it raised billions of dollars for 1MDB, earning enormous fees. These transactions were apparently tracked and signed off on by Goldman's president at the time, Gary Cohn. 1MDB apparently funneled much of this money into the personal bank accounts of prominent Malaysians and those connected to the government. Malaysia has a history of corruption so it should not come as a great shock that its development fund would be misused. Now, Goldman purely provide the vehicles for supposedly sophisticated investors (one of the most misleading terms on Wall Street) to invest in the fund. But, considering that the president of Goldman was tracking and signing off on these deals, you would think that Goldman might have done some due diligence on these investments. Goldman, of course, claims it believed the money was going into legitimate Malaysian development and investment projects. And it is clear that at least one Goldman executive abetted the scheme. Tim Leissner, the Goldman banker for 1MDB, wrote a letter on Goldman stationery that allowed a close associate of Malaysia's prime minister to transfer $3 billion to a Swiss bank account, alleviating the concerns of that Swiss bank and it lawyers. Leissner was fired by Goldman when the existence of that letter was revealed. Now a skeptical person like myself would wonder whether Mr. Leissner would write a letter like that without getting some sort of approval, especially when he knew that the president of Goldman was tracking the 1MDB deal. Unsurprisingly, Gary Cohn has been chose by Donald Trump to be the director of the National Economic Council and his top legal adviser. A skeptical person like myself might think that this article will be the last we will hear about Goldman's involvement with 1MDB.

Finally, there is an article that describes the ultimate Wall Street world of "heads I win, tails you lose" - hedge fund fees. The story describes how hedge funds inflate their returns by leaving out the management fees when they tout those fabulous returns. And example of this is a hedge fund that announced returns of 20.5% in the four years the fund was doing business. When you are getting less than 1% interest on savings, that sounds like a pretty fantastic return. In fact, that is hardly spectacular, especially when you realize the S&P 500 gained around 67% in the same period (that S&P gain was, of course, driven by Donald Trump's presidential candidacy). But even that mediocre 20% return is misleading because it does not include the funds 1.5% management fee and 16% cut of any gains. When including those fees, the actual returns come to about 5.7%, which is not much better than earning that pitiful 1% every year for four years. So, about three-quarters of this hedge fund's gain went to its managers as opposed to its investors. More importantly, the managers only share in the gains, they have no share in the losses. Those losses are strictly borne by the sophisticated investors (there's that term again) who invest in the fund. In addition, this fund's fees are actually below the normal 2% fee and 20% of the gain. It's a nice racket if you can convince enough people to give you their money.

In the story about Goldman Sachs, there is this one paragraph, "The 1MDB case has become a signature campaign in the global effort by prosecutors to crack down on kleptocracy and the relative ease with which the superwealthy move their money beyond the oversight of government authorities." If US authorities are really looking to clamp down on kleptocracy, there is plenty of work to do right here in the USA. And with Trump himself and most of his cabinet as beneficiaries of our existing kelptocracy, it is going to take a brave and powerful prosecutor to do anything to stem the tide for the next four years. But maybe that kind of bravery and power won't be necessary. Larry Kudlow, Trump's potential head of the Council of Economic Advisers, (not to be confused with the National Economic Council), assures us that, once they have stolen enough money from us, "Wealthy folks have no need to steal or engage in corruption".

Tuesday, December 27, 2016

Trump's Closing Of His Foundation Is Just Like His Other Bankruptcies

It is really a shame that the media keeps on making it impossible for Trump and his family to continue to do good work through their foundations and charitable activities. After all, the brazen selling of access and self-dealing is almost exactly what Hillary Clinton did with the Clinton Foundation while she was Secretary of State, if you take away that fact that Clinton was never shown to be selling access and never engaged in self-dealing, despite what the mainstream media was determined to imply during the election. Because Trump is so concerned about making sure he has no conflicts of interest before he assumes the Presidency, he has decided to close the Trump Foundation. Trump put out a statement saying, "The Foundation has done enormous good works over the years in contributing millions of dollars to countless worthy groups ... However, to avoid even the appearance of any conflict with my role as President I have decided to continue to pursue my strong interest in philanthropy in other ways." He later tweeted, "I gave millions of dollars to DJT Foundation, raised or recieved millions more, ALL of which is given to charity, and media won’t report!" Besides his inability to spell correctly, the tweet is just another misleading statement from Trump. He hasn't contributed a dime to his foundation since 2008 and many of the contributions listed have turned out to be fictitious. Other donations went to Trump himself or were used to pay off Trump's own personal liabilities, both clear violations of law.

Unfortunately, the Trump Foundation can not shut down until New York Attorney General Eric Schneiderman finishes his investigation of the foundation. Perhaps he thought he could pull the same trick that Betsy Devos used with the PAC she ran that blatantly violated election law - just shut it down and refuse to pay any penalties because the entity no longer exists. Too bad for Trump that won't work with his foundation.

Trump may try to sugar-coat this closure by claiming he is just eliminating a conflict of interest. But the reality is that this is just another Trump failure. It is equivalent to his casino bankruptcies, Trump University, and various other Trump brands that have bitten the dust. The Trump Foundation was just another fraudulent scheme that had run its course.

Monday, December 26, 2016

Jeff Sessions Ignorantly Thinks Civil Forfeiture Is Just Fine

Following up on my prior post about the creative use of "booking fees" that police and municipalities and even banks use to profit from simply an arrest, regardless of whether the charges are dropped or the person arrested is actually acquitted of the crime, the Washington Post had an opinion piece on Friday that highlighted the incredible abuse of civil forfeiture. The story focuses on a family in Pennsylvania whose son was arrested for selling drugs at a location that was not their house. But that didn't stop the city of Philadelphia from trying to seize the $350,000 home that they owned outright. The family felt the full weight of the Kafka-esque process of civil forfeiture. The property can be seized on merely the suspicion that it was involved in a crime. The owners have the burden of proving that it was not. Prosecutors advised the family that they did not need a lawyer during the process, a pretty egregious oversight considering they were at risk of losing their house. Prosecutors also proposed "deals" that bear a resemblance to extortion by suggesting that the owners could sell the house and split the proceeds with the government. If the owners missed a hearing, forfeiture could be declared instantaneously in their absence. Thankfully, the Institute for Justice came to the family's defense and saved their house from forfeiture.

Civil forfeiture continues to be an abusive and seemingly unconstitutional process that has nevertheless been accepted as a valid practice by government and, incredibly, the courts. And the new administration is not likely to do anything to stop this practice and may even expand it. Jeff Session, the nominee for Attorney General, made his feelings about civil forfeiture clear during Senate Judiciary hearings in 2015. According to Sessions, "[T]aking and seizing and forfeiting, through a government judicial process, illegal gains from criminal enterprises is not wrong."  Sessions continued by saying that it should be as easy for "government to take money from a drug dealer than it is for a businessperson to defend themselves in a lawsuit" and government "should not have a burden of proof higher than in a normal civil case." Of course, there is no "judicial process". Property can be seized even if the owners have not been charged with a crime and based only on a suspicion, rather than any determination from a court. In a normal civil case, the burden of proof lies with the government; in forfeiture it lies with the defendant. Sessions continued to display his ignorance by adding his belief that "95 percent" of civil forfeiture case involve nothing more than people who have "done nothing in their lives but sell dope." That would be news to the family in Philadelphia who probably worked quite hard to get to a place where they owned their house outright. But ignorance is considered a requirement to become a Trump cabinet member.

It's ironic that Sessions used the example of business in civil suits as the reality is that businesses and their owners have far more rights than those who have been charged with civil forfeiture. In fact, they have far more rights that many Americans when it comes to ignoring the law with impunity and getting away with it - just take a look at Uber. The granting of constitutional protections in the form of corporate personhood that began in the late 1800s had led to a situations where corporations enjoy many, if not arguably more rights, than individuals while bearing none of the responsibilities that come with citizenship.  And it has added to the incredible erosion of our democracy.

Police And Banks Find New Ways To Steal From Us

The NY Times has a story today about the common practice that municipalities are using to "charge" people they arrest a "fee", regardless if those charges are dropped or if the defendant is found not guilty. The article specifically focuses on Ramsey County in Minnesota where a young man had the $46 in his pockets "confiscated" when he was arrested. The charges were later dismissed but the county kept a $25 "booking fee" and returned the remaining $21 on a debit card. Simply converting the debit card to cash, however, cost the man an additional $7.25. First, there was a maintenance charge of $1.50 per week which kicks in 36 hours after the card is issued. Then there was a $2.75 charge of using an ATM to withdraw a portion of the balance on the debit card. Finally there was a $1.50 charge to check the balance on the card and an additional $3 charge to transfer that balance to a bank account. So, an arrest that did not result in a subsequent charge cost the man $32.25, with that many going to the county and an unnamed bank. Such is the presumption of innocence these days in this country.

These kind of fees are not unusual in certain areas of the country. In Colorado, some towns get nearly one-third of their revenue from fees like this. Kentucky charges for the costs of incarceration regardless of whether the case is dropped or the defendant is found guilty. And similar methods added to the anger of residents in Ferguson, Missouri that fueled the riots over Michael Brown's shooting. These booking and incarceration fees are just another extension of the outrageous use of civil forfeiture, which is also abused by police across the country. Needless to say, these fees provide a healthy incentive for police to abuse their arrest powers and the pressure from municipal governments to ensure and increase this flow of revenue is also intense.

The young man in Ramsey County is fighting these charges all the way to the Supreme Court. As his lawyer says, "Revenue-starved local governments are increasingly turning toward fees like Ramsey County’s in order to bridge their budgetary gaps. But the unilateral decision of a single police officer cannot possibly justify summarily confiscating money. Providing a profit motive to make arrests, gives officers an incentive to make improper arrests." Unfortunately, lower courts have dismissed his claim that these fees did not violate his right to due process, saying that the fees involved were "relatively modest". As a dissenting judge pointed out, those modest fees add up to half a day's work under the current minimum wage and are close to what is allocated to feed a person for a full week under the food stamp program. For many Americans, those fees are hardly modest. According to the brief by Ramsey County, "Municipal services come at a cost." Indeed they do, and the process for paying those costs is called taxation, something that is an anathema to so many these days. And that taxation is done via consent of the governed, not by extorting innocent citizens who have little resources to defend themselves. As Kevin Drum says, "I've heard all the arguments about due process and civil vs. criminal and so forth, and not a single word of it strikes me as anything but an obvious sham. And yet courts—all the way to Supreme Court—and judicial agencies—all the way to the Department of Justice—accept them without blinking." It is simply a license to steal.

But it is not just the police and the municipalities who are stealing here. It is also the bank who has this sweetheart deal with Ramsey County that potentially allows it to collect over $7 for very debit card issued by the county. It would be nice to know the name of this bank and what kind of process the county went through in order to choose that bank as its debit card issuer. I'm sure there was something in it for both sides. These nickel and dime fees have been a staple among banks for decades and the prime example is the fraud at Wells Fargo which the bank was able to keep hidden for nearly a decade because the fraud usually involved smaller amounts of money and targeted poorer people who would be less capable of pursuing the bank.

There is really no difference between what is happening in Ramsey County and the petty extortion by police that is common in authoritarian countries and banana republics. Back in the day, when I was visiting Moscow, I heard stories of police stopping cars at random and essentially extorting money from the drivers to avoid a ticket, or worse, for the driver, regardless of whether there was a traffic violation or not. This is no different. In fact, you could say it's actually worse. The corruption in Moscow was widespread and the money probably flowed up the chain of command. It was certainly institutionalized. But it was not codified into law. In fact, I'm pretty sure that it was against the law in Russia. In Ramsey County and in America, this kind of theft from innocent people is not only institutionalized but has essentially been codified by the courts. Such is the state of democracy in America these days.

Astrophotography Adventure - Crater Gassendi

Earlier this month, there were actually a couple of clear nights in a row, so I took some photos of the same area of the Moon's terminator on consecutive nights. The idea was to capture a crater on the terminator the first night and then the same crater one night later in order to illustrate how quickly the view changes due to the angle of the sun. As it turned, Crater Gassendi turned out to be the perfect illustration. Here are a couple of photos on night one:

Gassendi is the crater whose outline you can make out on the top left, with a peak just visible in the middle and a smaller crater that interrupts its northern (or upper) wall. The crater with the visible central peak in the top center is Balliadus and the similar but slightly large crater on the middle right is Tycho. The US lunar lander Surveyor 7 landed just north of Tycho's northern rim back in 1968 and is still there. Here are a couple of closer images of Gassendi, still on night 1:


Now take a look at Gassendi, Balliadus, and Tycho the next night:

And a closer view of Gassendi:

It's a great example of how the higher angle of sunlight flattens the features and why viewing and photographing the terminator of the Moon provide a better illustration of its spectacular features.

Photos Details:

Scope: Starblast 4.5
Camera: iPhone 6 using NightCapPro with low ISO boost on
Magnification: 100x; 10mm eyepiece with 2x Barlow

Sunday, December 25, 2016

Natural weekends - Happy Holiday!

 As you can see above, it is a clear, cold, and frosty morning here on the creek. But everyone wants a white Christmas, so let's go back into the archives from last winter and pretend it is: