The Government Investigates U.S. Torturers (the Spanish Government, that is)

Rachel Maddow has been calling for it, along with Jonathan Turley, the constitutional lawyer and MSNBC pundit. What is it? The prosecution of those responsible in the Bush administration for giving a flimsy legal basis for the torturing of thousands of "enemy combatants". Finally, there is going to be an investigation as reported in the New York Times, but it doesn't emanate from the Obama administration. The preliminary moves towards prosecution are coming from Spain.

A Spanish court has taken the first steps toward opening a criminal investigation into allegations that six former high-level Bush administration officials violated international law by providing the legal framework to justify the torture of prisoners at Guantánamo Bay, Cuba, an official close to the case said.

The case, against former Attorney General Alberto R. Gonzales and others, was sent to the prosecutor’s office for review by Baltasar Garzón, the crusading investigative judge who ordered the arrest of the former Chilean dictator Augusto Pinochet. The official said that it was “highly probable” that the case would go forward and that it could lead to arrest warrants.

Clash of Titans

I can feel the swollen monster push of two clashing forces; they're not quite against each other but not quite for. That would be the giant "too-big-to-fail" (TBTF) firms versus Geithner, the Treasury Secretary with his new plan to rein in the companies that dragged the world down into Depression 2.0 and rage-filled violence, at least in Europe.

LONDON — Tempers are flaring across Europe as the economic pain deepens and more people lose their jobs.

On Wednesday, the suburban Edinburgh home of RBS’s ex-chief was damaged.

Just ask Fred Goodwin, the former chief executive of the ailing Royal Bank of Scotland, whose house and car were vandalized early Wednesday. Or Luc Rousselet, the manager of a 3M factory in France, who was barricaded in an office for a second day by workers demanding better severance packages for 110 employees who are being laid off. Or Luc Rousselet, the manager of a 3M factory in France, who was barricaded in an office for a second day by workers demanding better severance packages for 110 employees who are being laid off.

American financial wizards who thought up securitization as a vehicle of greed and convinced themselves (or else didn't care about the consequences-who looks that far ahead?) that the process eliminated risk,actually promoted risk and brought down the houses of cards that was the mighty financial sector. The pile of leverage they created burst. It destroyed trust, killed the credit market, shut down perfectly good companies that couldn't roll over their debt, raised the unemployment numbers like a bottle rocket and drove people from their homes into tents, like the Hoovervilles of the Great Depression. (Isn't it funny how it probably will no longer be known as the Great Depression, just as the Great War just became World War I, one in a series), I quote from yesterday's NY Times:

As the operations manager of an outreach center for the homeless here [Fresno, CA], Paul Stack is used to seeing people down on their luck. What he had never seen before was people living in tents and lean-tos on the railroad lot across from the center.

“They just popped up about 18 months ago,” Mr. Stack said. “One day it was empty. The next day, there were people living there.”

Geithner proposed a new plan to regulate the behemoths. The market is down today. When he unveiled his TALF-on-steroids plan the other day, the market climbed over 400 points. The bold-faced names behind Obama's economic steerage are Wall Street-friendly (Larry Summers, Tim Geithner himself) and the market responds like an EKG. Give us the taxpayer-backup on the worthless ("toxic") securities and we love the thought we'll make trillions. Tell us we have to be reined in and we growl, chomping off big pieces of common equity. Who's running the show, anyway?

Forget the Bread Line, Now It's The Job Fair Line

Floyd Norris, a business columnist for the New York Times, sternly lectured us in his column today that we should grasp the reality of our lost trillions and permanently shrunken economy with attendant extinction of jobs and adapt to a new downwardly trending lifestyle

Okay, I've done that. I'm an intelligent, articulate, multitasking professional with a powerful academic and business background. By August 2007, I knew the economy was going to take a disastrous fall. I took all of my money out of equities and put it in Treasuries. I paid down my debt. I predicted company deleveraging and the shedding of jobs, because cutting labor is the quickest and easiest way to cut costs. I became a consultant, paid for my own health insurance, and tried to adapt to any contingency. I knew how to maximize value without investing capital. Yet I still lost consultant jobs, one after another.

I've had to make plenty of socioeconomic and psychological adjustments to my downward spiral. All I want is hope for new employment. I need and love to work.

Norris is wrong to say that most of us, the "poorer", those losing their jobs, their homes and their equity on an escalating basis, are in denial. We're somewhere mired in the 5 stages of grief: denial, anger, bargaining, depression and acceptance.

In Susan Dominus's article, also in today's Times, illustrates this perfectly with a quote from one Arthur Bernstein, a recruiter from Bramson ORT College who manned a booth at a NYC job fair yesterday where the line for applicants wound its way down a cold, dreary street way before it opened at 11 am. He was trying to drum up students but many of the attendees thrust their resumes at him, hoping for a position.

"This situation," he said to no one in particular, "is really sick."

I got news for you, Floyd. Out here we know the score. It's in DC and Wall Street, those overlapping bubbles, that permanent denial lives on. That's where lifestyles haven't changed even though these are the people responsible for all the destruction. Robert Rubin and Larry Summers blocked the regulation of derivatives during the Clinton administration, yet they've come back to oversee the collapse. Politicians whose hands are in the pockets of financial lobbyists shred any rules that might interfere with permanent employment. They are millionaires. They have free health care. They have large pensions and golden parachutes. The financial institutions are on government life support which allows them to continue their lavish lifestyles.

I hear a lot of heated rhetoric but I don't see any strings attached or iron-clad laws passed against fraud and criminality. The credit rating agencies that gave out the triple-A ratings to the worthless mortgage-backed securities because they were paid by the issuers are still in charge of rating trillions of dollars worth of assets. They are also rewarded for failure.

The overlapping bubbles of DC and finance are sociopathically reinforcing: they are grandiose, and narcissistic without a shred of remorse. And they wonder why there is populist rage. Rage that is nonpartisan.

I am a strong writer. I wanted to be an investigative journalist like Sydney Schanberg or Seymour Hersch, but the Internet with its insatiable desire for free written content (except for consumerreports.com) and its ability to destroy income for dead tree media leaves few openings for someone to make a living. Does Arianna Huffington pay enough for the Huffington Post to do great primary reporting? Or does the Post steal content from other sources ("not stealing, merely aggregating")? Are we in a drive to the bottom, where writers will have to offer the lowest bid for their services? The NY Times used to pay $750 for an op-ed piece. Now it pays $300.

Is labor in a race to the bottom? Will the taxpayer pay private equity and hedge fund firms to take toxic waste off the banks' hands, thus subsidizing systemic risk and perverse incentives? Is the Pope Catholic?

The Financial System's Maze to Defeat You

I don't have automatic bill paying through my bank because I don't trust banks. My last bank, Washington Mutual, failed. Many people had great difficulty extricating themselves from their automatic bill paying with WaMu, and as a consequence, their bills remained unpaid until they were way past due.

I pay the old way: writing a check, putting it in an envelope, and pasting on a stamp (now 42 cents, will be 44 in May). Generally I send out it out days before it's due. For instance, I paid for my el cheapo, desperation bid Daily News subscription on 3/5/09. Due date 3/8. Because they didn't get it until 3/10, they sent out a past due invoice immediately. My check was cashed 3/12. In other words, there is no way to pay bills on time the old-fashioned way. Yet if you trap yourself with automatic bill paying through a possibly zombie bank, you may get hung up with the over-burdened FDIC (527 banks on the watch list and counting) and the difficulty extricating yourself.

The Post Office is cutting back one day a week and raising the cost of its first class stamps in order to remain in business. Those measure impair its service. On the other hand, banks are failing and wise heads say don't connect your account with your creditors.

So what happens? If you have an arbitrage thinking financial company, they will dart out a past due notice with late fees and finance charges eagerly attached without a breather. There's no way they can lose. They're betting against the post office and you can't prove them wrong. I mean, the Daily News is telling me they got my check a week after I mailed it. Imagine what Bank of America could do to leverage the calendar? Their BoA credit card is the only one I use. I have a large credit line and I've invested the card with sentimental value (it's granted through my alma mater). And BoA is first out of the gate. The instant my check leaves my burning fingers, BoA has cashed it. I don't know how they do it. Maybe they've cracked the time-space continuum.

I try not to use my credit card at all. I'm not going to pay extra and risk my credit score. How does this system of logic help stimulate the economy?

Things Are Looking Up

Today I traveled into Nueva York and sat in Starbucks on 78th Street & Lexington Avenue, an area rife with young urban professionals. A young man was next to me anchored to his notebook with a cell clamped on his ear. He was talking to someone about trying to eke out a living and how he was going to be there until 5. He didn't sound happy. After signing off, he hunched over his screen and pecked.

On the platform at Grand Central, I noticed two gigantic Norwegian Gray rats scampering around the tracks. They looked happy and well-fed. Not gloomy like the humans present. They chased each other in a knotty arrangement around the tracks jumping skillfully over the third rail.

Meanwhile, the train was coming. Everyone moved back from the edge of the platform in unison to prevent some stranger from pushing them down onto the tracks to give the train a better shot at them. This hadn't happened in a long time but it was threaded into the DNA of every subway rider. Someone will take a dislike to you and shove you off the platform. In fact, every NY Post headline was a part of you, throbbing, directing your unconscious responses. Ignore anyone who is talking loudly. Silently suffer the Mariachi clamor. Step over the crumpled faceless homeless man covered in newspapers lying across the seats.

Don't pay attention to that man talking to himself in the corner. But the problem is, now you can't tell anymore if he's schizo or talking on the phone. Technology has altered our assumptions about reality. Either this guy is crazy and on the lower strata of society, or he's a busy executive (ha! This is Depression 2.0!) multitasking.

The glorious panoply of colorful immigrants, brown, yellow, green, red, white, were all plugged into their iPods. The etiquette of the subway used to insist that no one make eye contact. Now there was no need to enforce the rules. No one was even aware of anyone else.

Follow The Money

The Times ran an editorial today about the monster that is the American Insurance Group and the now-tired phrase, "Too Big To Fail". Not only did the Treasury throw more money at AIG, they loosened the restrictions on their prior bailout attempts.

In a joint statement with the Federal Reserve on Monday, the Treasury justified the move, saying that “the potential cost to the economy and the taxpayer of government inaction would be extremely high.”

That’s a textbook rationale for any bailout. What no one is saying — the Bush folks wouldn’t, and the Obama team seems to have taken the same vow of Wall Street omertà — is which firms would be most threatened by an A.I.G. collapse. The Treasury and the Federal Reserve noted in their statement that A.I.G. is a “significant counterparty to a number of major financial institutions.”

That means that by enabling A.I.G. to avert bankruptcy proceedings, the taxpayer is also bailing out — whom exactly?

Sorkin writes about AIG in his column too, only he is more of a man to toe the Wall Street party line. He drones on about the unspoken catastrophe that will occur should AIG collapse:

In the United States, A.I.G. has more than 375 million policies with a face value of $19 trillion.

If policyholders lost faith in A.I.G. and rushed to cash in their policies all at once, the entire insurance industry could falter.

How we got here is a well-worn tale that others have detailed extensively: A.I.G. used its triple-A rating from the insurance part of its business to run a huge casino that then overwhelmed the entire business.

He disposes of the colossal piracy examined in great extent by his colleagueJoe Nocera, in three words. Two if you count "well-worn" as one. Joe is asking the same question as the editorial: Who is really getting bailed out in the AIG fiasco?

Sorkin pretends that it's the good ole insurance policyholders. He cries, if the U.S. doesn't step in, there will be a run on all that $19 trillion worth of insurance, and the little old lady won't get a deal anywhere else. What he doesn't mention is that nothing will prevent a run on policies in any case, especially if policyholders are leery about the government's plan working. The plan seems to be pour as much money down the bottomless pit of human greed.

Andrew, Andy Boy, don't pretend it's the taxpayers. It's those goddamned counterparties. And who are they? No transparency at all. Are they European hedge funds? Or Goldman Sachs itself, whose CEO Lloyd Blankfein sat in on the original Fed-AIG transfusion plan, and from whom came Hanky Panky Paulson? Haven't all these parties profited hugely from AIG's coy leveraging of its Triple-A rating? If they have (and certainly that can be looked into, I hope) then they should shoulder some (if not all) of the losses. If we, the taxpayers, have to participate forcibly in lemon socialism, why can't they participate in some of the losses? If that kind of deal, that the profiteers must commit to some loss, shakes the foundation of our financial system, then we truly are doomed. Because there has to be a tipping point.

At least Sorkin admits that the Treasury should have taken over 100% ownership. For a man who speaks well of Wall Street (and it is reciprocated--remember, the WSJ tried to lure him away when Rupert first took over the helm) that was a hard thing to claw out of his throat.