The Return Of The Inquisition: Do You Confess?

Authored by Simon Black via SovereignMan.com,

In 279 BC, the vast army of King Pyrrhus of Epirus was met by Roman forces at the Battle of Asculum in southern Italy, in what would be one of the costliest military engagements of ancient history.

Pyrrhus fancied himself the second coming of Alexander the Great and believed that he was a descendant of Achilles.

Many of his peers and contemporaries believed Pyrrhus to be the greatest military commander of all time.

His exploits were legendary. And when he set sail for Italy in 280 BC, the Romans did not underestimate him.

The Battle of Asculum was decisive. Pyrrhus actually won the battle; but in defeating the Romans, he lost so many of his men that his army was practically broken.

Pyrrhus purportedly said of his victory, “If we are victorious in one more battle with the Romans, we shall be utterly ruined. . .”

This gave rise to the term “Pyrrhic victory,” which refers to a win that’s incredibly costly.

Pyrrhus also tried his hand at diplomacy with Rome, sending one of his ablest statesmen to the capital to negotiate peace with the Roman Senate.

The emissary was not successful. But he reported back to Pyrrhus that Rome’s Senate was incredibly impressive– “an assembly of kings” comprised of its noblest citizens.

And he was right. In the early days when Rome was still a republic, its Senate was a highly revered institution that stood for wisdom, dignity, and virtue.

They were far from perfect. But the men who served in the Senate during the early republic were heavily responsible for building the most advanced civilization the world had ever seen up to that point.

Needless to say, times changed. Within a few hundred years, the Senate had become a corrupt joke, filled with venal criminals, weak sycophants, and mediocre minds.

I couldn’t help but think of this analogy yesterday watching the Inquisition of Brett Kavanaugh.

If you’re living under a rock (or reading this letter many years from now), Brett Kavanaugh has been nominated to serve as a Justice of the United States Supreme Court. This requires that he be confirmed by the Senate.

Recently a woman emerged who accused Kavanaugh of sexually assaulting her when they were all teenagers, several decades ago.

This is tantamount to accusing the man of a crime.

But rather than treat this as any other criminal matter in which the authorities would investigate the evidence to determine if charges are warranted… or the case is put to a court and jury to decide… the once-hallowed halls of the US Senate have been turned into an embarrassing circus that shines a giant spotlight on the deep social divides in the Land of the Free.

The whole charade is a horrible offense to the basic principles of justice in which a person is presumed to be innocent until proven guilty.

When it comes to claims of sexual assault, however, the man is automatically deemed guilty … and the accuser praised for her courage and bravery before the veracity of the assertion is ever deliberated.

Senator Maize Hirono of Hawaii recently stated, “Not only do women like [Kavanaugh’s accuser], who bravely come forward, need to be heard, but they need to be believed.”

By definition this is neither fair nor impartial, and turns the entire process into a Kangaroo Court… which is what the Senate has become.

At a certain point yesterday, one Senator introduced multiple pieces of evidence on behalf of the accuser, including ‘expert reports’ that justify her inability to remember details from the assault.

This is truly bizarre.

These Senators are playing the role of judge in this matter. It seems impossible to do this while simultaneously acting as advocate for the accuser.

Another Senator sat smugly and sanctimoniously, leering down at Brett Kavanaugh and demanding explanations about code words for beer and flatulence that date back to Kavanaugh’s high school days.

The fact that a United States Senator would actually consider this important evidence is an utter embarrassment.

Another disgusting perversion of justice is that the United States Senate actually felt compelled to negotiate with the accuser about when/how she would testify.

For example, the accuser wanted to prohibit certain questions, control who could/could not ask questions, determine the order of witness testimony, etc.

This is simply NOT how the justice system is supposed to work.

Accusers must face the accused in a court of law and submit to cross-examination, following the same rules that everyone else has to follow.

No one is supposed to get special treatment. That’s the point. And it is through this process that the truth is eventually discovered.

It’s not that I don’t believe the accuser. It’s entirely possible that she’s telling the truth.

But as this case has not been deliberated objectively through the normal due process that is guaranteed by the Constitution, no one can reach a valid conclusion.

Yet there are countless legions of people, including United States Senators, who have already made up their minds, like the Inquisition demanding, “Do you confess?”

And that’s the saddest part – this manner of Inquisition… trial by social media… has now been condoned and advanced by the United States Senate, an institution whose members have ALL taken a solemn oath to support and defend the Constitution which they are now violating in the worst way.

Clearly the Senate is no longer an assembly of kings… but a brood of bickering, immature weaklings.

(The only resilience displayed has been from the accused and accuser, both of whom have had to endure insane public scrutiny.)

There’s obviously an agenda here.

Perhaps some Senators are trying to win points with the #metoo movement for the upcoming elections.

Or they’re intentionally blocking Kavanaugh simply because he is a Trump nominee.

Whatever their reasons, they may be victorious in achieving their desired outcome.

But it will be a Pyrrhic victory… for it will come at the expense of establishing a dangerous new standard that destroys the most important principles of Justice.

And to continue learning how to ensure you thrive no matter what happens next in the world, I encourage you to download our free Perfect Plan B Guide.

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NorCal Apple Store Robbery Crew Nets Over $1 Million In iBooty 

California’s Attorney General Xavier Becerra announced Thursday that authorities had busted a robbery scheme targeting Apple stores across 19 counties. 

Seventeen people have been indicted in the scheme, which saw over $1 million in Apple merchandise stolen across the state, from far northern Butte couinty all the way to San Diego. 22 law enforcement agencies are involved in the investigation. 

Seven unnamed individuals connected to the scheme were arrested in Oakland on Tuesday, according to Becerra’s office, while another suspect, Kenneth Martin Jr. of Oakland is in custody in Sonoma County around an hour north. Nine other suspects remain at large

Surveillance videos show several groups of hooded suspects running into stores and grabbing Apple devices from display cases. In an August 29th incident, suspects made off with over $35,000 in merchandise. 

The San Luis Obispo Police Department initiated the investigation following a series of thefts from Apple stores. Local law enforcement agencies from the following counties have assisted in the investigation: Alameda County, Butte County, Contra Costa County, Fresno County, Kern County, Los Angeles County, Marin County, Monterey County, Orange County, Placer County, Riverside County, Sacramento County, San Bernardino County, San Diego County, San Francisco County, San Mateo County, Santa Clara County, Sonoma County and Ventura County.

Attorney General Becerra has filed charges for conspiracy to commit grand theft against the individuals in Fresno, Santa Clara, and Alameda Counties. –oag.ca.gov

Police in Roseville, California arrested several suspects earlier this month, taking into custody Juwan Potter, 20, Melvin Barlow, 21, and Quincy Carter Jr., 21, according to CBS Sacramento. They are currently being held in the South Placer County Jail on suspicion of robbing the Applie Store in Roseville’s Westfield Galleria mall.

“Organized retail thefts cost California business owners millions and expose them to copycat criminals. Ultimately, consumers pay the cost of this merchandise hijacking,” Becerra said in a statement. “We will continue our work with local law enforcement authorities to extinguish this mob mentality and prosecute these criminals to hold them accountable.

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Beijing Bows To US Pressure: China Top Refiner Halves Iranian Oil Imports

Submitted by OilPrice.com

China’s top refiner Sinopec is halving its oil imports from Iran as of September, bowing to pressure from the United States, which is seeking to bring Iranian oil exports down to zero with the sanctions returning in November, Reuters reported on Friday, quoting people familiar with the issue.

Sinopec will reduce its imports from Iran to around 130,000 bpd, based on Reuters calculation on the prevailing supply contracts between the Chinese company and the National Iranian Oil Company (NIOC).

China has previously stated that it would not stop buying Iranian oil despite U.S. efforts to have the Iranian exports down to zero. But Beijing is also said to have agreed not to increase its oil purchases from Iran. Iran, for its part, is keen to keep its single biggest oil customer – China – when U.S. sanctions on Iranian oil exports kick in.

Analysts have so far assumed that China will keep buying Iranian oil and be pretty much the only certain meaningful customer of Iran, because the other major buyer, India, is even more hard-pressed by the United States to wind down purchases from Tehran.

Sinopec – listed in Hong Kong, but more importantly, also in New York – is now facing direct pressure from the United States to curtail Iranian oil imports.

According to one of Reuters’s sources, U.S. officials visited Sinopec in Beijing in August and demanded steep reductions of oil imports from Iran.

“This round is completely different from last time. Then it was more of a consultative tone, but this time it’s almost like an ultimatum,” the source told Reuters.

Last month, Chinese refiners and oil traders were said to have started to switch to using Iran-owned tankers for almost all their crude oil imports from Tehran, in order to keep Iranian oil flowing to China.

But shipping and insurance sources told Reuters on Friday that Iran faces difficulties in insuring its own ships because western re-insurance firms are quitting their Iranian businesses.

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Iraqi Model Gunned Down In Baghdad Amid Flurry Of Female Activist Assassinations

Iraqi Instagram model Tara Faris was killed by unidentified gunmen in Baghdad on Friday, according to local media reports cited by RT. Hers is the latest in a string of murders across the country targeting female activists; in each case, extremist groups are the main suspects.

She was reportedly shot and killed while in her car in a Baghdad neighborhood.

Model

Iraqi

Faris, who was one of the most popular Iraqis on Instagram with 2.7 million followers, got her start as a beauty pageant contestant in 2015. She was born in 1998 to an Iraqi father and a Lebanese mother.

Iraqi

She had lived in Europe for a time before returning to Iraq, living in Erbil and Baghdad. Her murder is the latest in a string of assassinations which have targeted women, with some speculating that religious extremists could be behind the attacks.

Earlier this week, a female activist who helped organize protests in Iraq’s southern city of Basra was shot dead by masked gunmen.

Faris’ killing is the latest sign that – as one Twitter user put it – “women are not safe in Iraq”.

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Former Employer Sued Third Kavanaugh Accuser For Sexual Harassment Allegations

By Andrew Kerr of The Daily Caller

The woman who charges she was gang-raped at a party where Supreme Court nominee Brett Kavanaugh was present, Julie Swetnick, had a lawsuit filed against her by a former employer that alleged she engaged in “unwelcome, sexually offensive conduct” towards two male co-workers, according to court documents obtained by The Daily Caller News Foundation.

WebTrends, a web analytics company headquartered in Portland, filed the defamation and fraud lawsuit against Swetnick in Oregon in November 2000 and also alleged that she lied about graduating from Johns Hopkins University.

Swetnick alleged Wednesday that she was gang raped at a party where Kavanaugh was present in the early 1980s. Kavanaugh has vehemently denied the allegation.

Swetnick is represented by Michael Avenatti, the lawyer for porn star Stormy Daniels, who claims she had an affair with President Donald Trump.

WebTrends voluntarily dismissed its suit after one month. Avenatti told The Daily Caller News Foundation that the case was ended because it was “completely bogus.”

Swetnick’s alleged conduct took place in June 2000, just three weeks after she started working at WebTrends, the complaint shows. WebTrends conducted an investigation that found both male employees gave similar accounts of Swetnick engaging in “unwelcome sexual innuendo and inappropriate conduct” toward them during a business lunch in front of customers, the complaint said.

Swetnick denied the allegations and, WebTrends alleged, “in a transparent effort to divert attention from her own inappropriate behavior … [made] false and retaliatory allegations” of sexual harassment against two other male co-workers.

“Based on its investigations, WebTrends determined that Swetnick had engaged in inappropriate conduct, but that no corroborating evidence existed to support Swetnick’s allegations against her coworkers,” the complaint said.

After a WebTrends human resources director informed Swetnick that the company was unable to corroborate the sexual harassment allegations she had made, she “remarkably” walked back the allegations, according to the complaint.

In July, one month after the alleged incident, Swetnick took a leave of absence from the company for sinus issues, according to the complaint. WebTrends said it made short-term disability payments to her until mid-August that year. One week after the payments stopped, WebTrends received a note from Swetnick’s doctor claiming she needed a leave of absence for a “nervous breakdown.”

The company said it continued to provide health insurance coverage for Swetnick, despite her refusal provide any additional information about her alleged medical condition.

In November, the company’s human resources director received a notice from the Washington, D.C. Department of Unemployment that Swetnick had applied for unemployment benefits after claiming she left WebTrends voluntarily in late September.

“In short, Swetnick continued to claim the benefits of a full-time employee of WebTrends, sought disability payments from WebTrends’ insurance carrier and falsely claimed unemployment insurance payments from the District of Columbia,” the complaint states.

Swetnick allegedly hung up the phone on WebTrends managers calling to discuss why she applied for unemployment benefits, according to the complaint. She then sent letters to WebTrends’ upper management, detailing new allegations that two male co-workers sexually harassed her and said that the company’s human resources director had “illegally tired [sic] for months to get privileged medical information” from her, her doctor and her insurance company.

WebTrends also alleged that Swetnick began her fraud against the company before she was hired by stating on her job application that she graduated from John Hopkins University. But according to the complaint, the school had no record of her attendance.

An online resume posted by Swetnick makes no reference to John Hopkins University. It does show that she worked for WebTrends from December 1999 to August 2000.

It’s unclear what transpired after the complaint was filed against Swetnick. One month after WebTrends filed the action, the company voluntarily dismissed the action with prejudice.

The complaint against his client was “[c]ompletely bogus which is why it was dismissed almost immediately,” Avenatti told TheDCNF in an email. “The lawsuit was filed in retaliation against my client after she pursued claims against the company.”

WebTrends did not respond to multiple requests for comment.

In March 2001, three months after WebTrends dismissed its action, Swetnick’s ex-boyfriend, Richard Vinneccy, filed a restraining order against Swetnick, claiming that she threatened him after he ended their four-year relationship.

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Dramatic Footage Captures Tsunami Crashing Into Heavily Populated Indonesian Coastline

The massive 7.7 magnitude earthquake that shook the Indonesian island of Sulawesi unleashed a tsunami that destroyed property along the island’s Palu region. 

Amid the chaos, a stunning video of the tsunami’s impact on the coastline was uploaded to social media. The footage shows hundreds of people running for their lives as pandemonium erupts.

In another part of the video, water can be seen crashing towards the Baiturrahman Mosque and the Palu Grand Mall.

Officials said that waters have receded and details of casualties haven’t been released. A separate tsunami hit another city, Donggala.

Officials said houses were swept away and multiple families were reported missing. Communications in central Sulawesi were knocked out and rescue officials are having trouble reaching people. Officials expect to have more information in the coming days.

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Kunstler: The Fog Of Bad Faith

Authored by James Howard Kunstler via Kunstler.com,

There’s a lot to unpack in the national psychodrama that played out in the senate judiciary committee yesterday with Ford v. Kavanaugh. Dr. Ford laid out what The New York Times is calling the “appalling trauma” of her alleged treatment at the hands of Brett Kavanaugh 36 years ago. And Mr. Kavanaugh denied it in tears of rage.

Dr. Ford scored points for showing up and playing her assigned role. She didn’t add any validating evidence to her story, but she appeared sincere. Judge Kavanaugh seemed to express a weepy astonishment that the charge was ever laid on him, but unlike other questionably-charged men in the grim history of the #Metoo campaign he strayed from his assigned role of the groveling apologist offering his neck to the executioner, an unforgivable effrontery to his accusers.

The committee majority’s choice to sub out the questioning to “sex crime prosecutor” Rachel Mitchell was a pitiful bust, shining a dim forensic light on the matter where hot halogen fog lamps might have cut through the emotional murk. But in today’s social climate of sexual hysteria, the “old white men” on the dais dared not engage with the fragile-looking Dr. Ford, lest her head blow up in the witness chair and splatter them with the guilt-of-the-ages. But Ms. Mitchell hardly illuminated Dr. Ford’s disposition as a teenager — like, what seemed to be her 15-year-old’s rush into an adult world of drinking and consort with older boys — or some big holes in her coming-forward decades later.

For instance, a detail in the original tale, the “locked door.” It’s a big deal when the two boys shoved her into the upstairs room, but she escaped the room easily when, as alleged, Mark Judge jumped on the bed bumping Mr. Kavanaugh off of her. It certainly sounds melodramatic to say “they locked the door,” but it didn’t really mean anything in the event.

Ms. Mitchell also never got to the question of Dr. Ford’s whereabouts in the late summer, when the judiciary committee was led to believe by her handlers that she was in California, though she was actually near Washington DC at her parent’s beach house in Delaware, and Mr. Grassley, the committee chair, could have easily dispatched investigators to meet with her there. Instead, the Democrats on the committee put out a cockamamie story about her fear of flying all the way from California – yet Ms. Mitchell established that Mrs. Ford routinely flew long distances, to Bali, for instance, on her surfing trips around the world.

Overall, it was impossible to believe that Dr. Ford had not experienced something with somebody — or else why submit to such a grotesque public spectacle — but the matter remains utterly unproved and probably unprovable. Please forgive me for saying I’m also not persuaded that the incident as described by Dr. Ford was such an “appalling trauma” as alleged. If the “party” actually happened, then one would have to assume that 15-year-old Chrissie Blasey, as she was known then, went there of her own volition looking for some kind of fun and excitement. She found more than she bargained for when a boy sprawled on top of her and tried to grope her breasts, grinding his hips against hers, working to un-clothe her, with his pal watching and guffawing on the sidelines — not exactly a suave approach, but a life-changing trauma? Sorry, it sounds conveniently hyperbolic to me.

I suspect there is much more psychodrama in the life of Christine Blasey Ford than we know of at this time. She wasn’t raped and her story stops short of alleging an attempt at rape, whoever was on top of her, though it is apparently now established in the public mind (and the mainstream media) that it was a rape attempt. But according to #Metoo logic, every unhappy sexual incident is an “appalling trauma” that must be avenged by destroying careers and reputations.

The issues in the bigger picture concern a Democratic Party driven by immense bad faith to any means that justify the defeat of this Supreme Court nominee for reasons that everyone over nine-years-old understands: the fear that a majority conservative court will overturn Roe v. Wade – despite Judge Kavanaugh’s statement many times that it is “settled law.”

What one senses beyond that, though, is the malign spirit of the party’s last candidate for president in the 2016 election and a desperate crusade to continue litigating that outcome until the magic moment when a “blue tide” of midterm election victories seals the ultimate victory over the detested alien in the White House.

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Housing Market Rolls Over As Mortgage Rates Hit Seven Year High

The 30-year fixed-rate mortgage rose for the fifth consecutive week to 4.72%,  a high not seen since April 28, 2011 when it was 4.78%. The average 15-year rate rose to 4.16% from 4.11%, Freddie Mac said in a said in a statement on Thursday.

According to nationalized company, among the reasons listed for the continued rise in rates are: the robust economy, rising Treasury yields and the anticipation of more short-term rate hikes caused mortgage rates to move up.

Of course, the “robust economy” and higher rates are now turning against new homebuyers, as the highest rates in years make purchases of a home prohibitively costly to new buyers. The latest confirmation of the slowdown in housing came earlier today when the NAR reported that pending home sales declined to the lowest level in 7 months. Late last week, Bank of America went so far as to call the top in the US housing market in a note in which the bank urged clients to “call your realtor,” as the peak in home sales has been reached and “housing is no longer a tailwind.” It also confirmed what we wrote back in July in “Housing Market Headed For “Broadest Slowdown In Years.

“Interest rates are rising because the economy is getting better,” said Greg McBride, chief financial analyst at Bankrate.com. “But the rising interest rates can start to take a toll on borrowers after a point. In the mortgage market, we’re starting to reach that point.”

Those potential homeowners who are hoping for conditions to change will have to wait: borrowing costs will continue rising throughout the year, with 30-year fixed rates hitting 5 percent before 2019, according to Danielle Hale, chief economist for Realtor.com. The 30-year average was 3.83 percent a year ago.

“Although this will take some of the pressure off home prices, it will come at the expense of home sales, which are already struggling,” Hale said, confirming that housing is now rolling over and what happens next could be ugly, if the events of 2007 are any indication.

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Why Dodd-Frank Is A Protection Racket For Banks

Authored by Edward Kane via INETEconomics.org,

Ten years after the crisis, financial regulation leaves taxpayers holding the bag for banks’ safety net…

Regulation is best understood as a dynamic game of action and response, in which either regulators or regulatees may make a move at any time. In this game, regulatees tend to make more moves in pursuit of safety-net subsidies than regulators can or do make to stop them. Moreover, regulatee moves tend to be faster and more creative, and to have less-transparent consequences than the moves that regulators make. 

In modern times, banking crises have occurred when managers pursued concentrated risks that made their institutions increasingly vulnerable, but generated a series of substantial and long-lasting safety-net subsidies until things finally went south. As I explore in my new INET working paper, such subsidies can prove long-lasting because the regulatory cultures of almost every country in the world today embrace—in one form or another—three strategic elements:        

  1. Politically-Directed Subsidies to Selected Borrowers: The policy framework either explicitly requires—or implicitly rewards—institutions for making credit available to favored classes of borrowers at a subsidized interest rate. In recent crises, subsidized loans to homeowners played this role. However, the next crisis may feature loans to current and former students, pension funds, and state and local entities;       

  2. Subsidies to Bank Risk-Taking: The policy framework commits government officials to offer on subsidized terms explicit and/or implicit (i.e., conjectural) guarantees of repayment to banks’ depositors and other kinds of counterparties engaging in complex forms of bank deal making;        

  3. Defective Monitoring and Control of the Subsidies: The contracting and accounting frameworks used by banks and government officials leave no paper trail. They are careful not to make anyone directly accountable for reporting or controlling the size of these subsidies in a conscientious or timely fashion. 

Taken together, the first two elements of the subsidization strategy invite commercial and investment banks to use the safety net to extract wealth surreptitiously from ordinary taxpayers. To keep subsidy-generating leverage high, the bulk of the subsidies banks receive are promptly paid out to top managers and to shareholders in the form of dividends and share repurchases. The rest is shifted forward and backward: mostly to large creditors and politically favored borrowers, but a few dollars might be reserved for like-minded academic researchers and community groups. 

Favored borrowers are primarily blocs of voters (such as would-be homeowners) regularly courted by candidates for political office and traditional sources of outsized campaign support (such as bankers, landlords, builders, and realtors). Ferguson, Jorgensen, and Chen (2017) define a comprehensive concept of the “spectrum of political money” that captures a number of indirect and subtle ways that bankers (especially) put money into a politician’s pocket or election campaign. The direct ways include director’s and speaking fees, book contracts, jobs for family members, and stock tips, plus of course campaign contributions. Indirect channels comprise threatening to support an opponents’ campaign or laundering donations through law firms, charitable foundations, think tanks, community groups, and public-relations firms. 

The third piece of the framework minimizes regulators’ exposure to blame when things go wrong. Gaps in the reporting system make it all but impossible for outsiders—particularly the press—to hold supervisors culpable for violating their ethical duties. These gaps prevent outsiders from understanding—let alone monitoring—the true costs and risks generated by the first two strategies. Few politicians and regulators want to subject the intersectoral flow of net regulatory benefits to informed and timely debate.

This weakness in accountability exists because the press is often content with regurgitating the content of agency press releases and because accounting systems do not report the value of regulatory benefits as a separate item for banks and other parties that receive them. In modern accounting systems, the capitalized value of regulatory subsidies is treated instead as an intangible source of value that, if booked at all (as it usually is in acquisitions), is not differentiated from other elements of what is called an acquired bank’s “franchise value.” 

Of course, some of the subsidy is offset by tangible losses that politically influenced loans eventually force onto bank balance sheets and income statements. Although officials resist the idea, creating an enforceable obligation for regulators to estimate the ebb and flow of the dual subsidies in transparent and reproducible ways would be a useful first step in getting them under control. This would make it easier for watchdog organizations in the private sector to force authorities to explain whether and how these subsidies benefit taxpayers.

But Hasn’t the Dodd-Frank Act Changed All This?

The Dodd-Frank Act (DFA) is best understood as a collection of policy measures designed to weave its way respectfully through different industry lobbyists’ self-absolving alternative theories of the crisis to incorporate a (sometimes lame) treatment of the forces featured in each of them. What I find ironic in this massive and allegedly comprehensive legislation is that the particular problems that the banks’ testimony stressed all point to the interaction of the pair of implicit subsidies that my narrative highlights. 

These subsidies are hidden in the systems used: (1) to finance housing investments on the one hand, and (2) to finance payouts from the US financial safety net on the other. In turn, the norms that make these subsidies durable are rooted in a generalized breakdown in professional ethics that the DFA does not treat at all. The professions of government service, accounting, financial management, credit rating, mortgage banking, derivatives broker-dealer making, and government regulation all have explicit or implicit codes of practice that (wink, wink) members of the profession are expected to follow to prevent client, user, or societal abuse and to preserve the integrity of that profession. In some countries and professions (especially medicine), violations of particular standards that impose predictable harm on other parties become a matter for law enforcement. So (I believe) it should be in finance. 

Focusing Only on Bank Capital is a Loser’s Game 

It is fiendishly difficult for incentive-conflicted leaders of regulatory agencies to control firms that capital markets perceive to be macroeconomically, politically, or administratively too difficult to close and unwind. For such megabanks, the Basel approach of setting capital requirements only against what have become well-understood and easily measurable exposures is massively inadequate. To mimic the methods by which private counterparties keep the other side’s opportunities for weaseling out of losses under control, capital requirements have begun to introduce small capital surcharges designed to increase both with an institution’s size and with the opacity of its deal making. But further reform legislation passed in 2018 benefits giant banks in two ways: by doing nothing new to rein in their ability to command safety-net subsidies when they are in distress and by expanding access to these subsidies for their custody activities. As always, an unreformed and elitist justice system continues to grant megabankers near-impunity for forcing the safety net—rather than their stockholders—to finance their firms’ deepest risk exposures. 

Managers of temporarily well-capitalized banks are pressuring regulators to let them use dividends and stock repurchases to distribute as much of their current earnings as they can. Worse yet, regulators add their blessing to bankers’ bullsh*t claim that this is okay because low current levels of safety-net subsidies mean that safety-net subsidies are safely under control. While it is true that the value of safety-net guarantees is relatively low at U.S. megabanks today, this is because safety-net subsidies recede as a bank begins to build up its capital even a little. But the dialectical process I have outlined explains that, contrary to Adamanti and Hellwig (2013), increased capital requirements and incentive-conflicted stress tests cannot keep taxpayers’ loss exposure in megabanks under control for long. Whatever the level of capital requirements, the taxpayers’ stake increases when and as (notice I do not say if) bankers find new and better ways to hide leverage, tail risk and distress from their supervisors. 

In principle, stress tests can compensate for some of the weaknesses in the design and implementation of capital requirements But in practice, stress tests focus narrowly on only a few very-specific scenarios. Because neither capital requirements nor stress tests measure taxpayer risks appropriately, stress tests merely add an overlay of bullsh*t to the perseverance of the citizenry’s hard-to-shake belief in the supervisory process. In any case, it looks as if regulators have stopped using these tests to assess the volatility of taxpayers’ stake in large banks. Beginning this year, the Fed appears to have repurposed the tests as a way to provide supervisory cover for captured regulators to permit the megabanks to use share buybacks and dividends to pay out enough of their accumulated profits to drive their safety-net subsidies up again.

Most commentators argue that U.S. megabanks are safer now that they were in 2007- 2008. But that is a superficial test. A more-important and unasked question is: For how long? Figure 1 tells us that the process of rebuilding megabanks’ leverage-driven tail risk by means of dividends and stock buybacks is already getting underway.

Figure 1: 2018 POST-CCAR SHAREHOLDER PAYOUTS FORECASTED FOR SELECTED US MEGABANKS AFTER STRESS TESTS

Equally worrisome, bank information systems do not even try to track taxpayers’ stake in banking firms and the regulatory, supervisory and justice systems remain focused on disciplining banks, rather than bankers.

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US Evacuating Consulate In Iraq, Citing Threats From Iran

On Friday the State Department announced it is evacuating all non-essential personnel from the US consulate in Basra, Iraq.

The drastic move comes after a month of heavy anti-Iran and anti-Iraqi government protests that have gripped the southern city, which has led to sectarian rioting and the burning of Shia militia buildings, as well as the torching of the Iranian consulate early this month. During the first week of September the US embassy in Baghdad’s green zone also came under attack by mortar fire, which US officials and military analysts blamed on Iran-backed militias. 

Secretary of State Mike Pompeo cited threats from Iran as the reason for ordering the Basra consulate evacuation, and in a separate statement a senior US official confirmed to CNN that the “ordered departure” was due to “security threats from Iran.” 

Protesters in Basra torched Iraqi government buildings in early September. Image source: AFP

“US Embassy Baghdad will continue to provide consular services to US citizens in Basra,” the State Department said in its statement. It also issued an updated travel advisory for Iraq noting the removal of non-essential staff in the city. 

    Pompeo explained the evacuation order further as, “Threats to our personnel and facilities in Iraq from the Government of Iran, the Islamic Revolutionary Guard Corps Quds Force, and from militias facilitated by and under the control and direction of the Quds Force leader Qasem Soleimani have increased over the past several weeks.”

    Pompeo further noted that “there have been repeated incidents of indirect fire from elements of those militias directed at our Consulate General in Basrah and our Embassy in Baghdad, including within the past twenty-four hours.”

    The US Consulate in Basra, view from within the security perimeter:

    US Consulate Basra, Image source: US Consulate Basrah/Facebook

    “I have advised the Government of Iran that the United States will hold Iran directly responsible for any harm to Americans or to our diplomatic facilities in Iraq or elsewhere and whether perpetrated by Iranian forces directly or by associated proxy militias,” the Secretary of State said. 

    A number of Iraqi cities exploded in anti-government protests in the first week of September, which had strong sectarian element as largely Sunni demonstrations demanded the end of Iranian influence on the Baghdad government and the retreat of Shia Iran-backed militias.

    But also amidst the early September protests ten pro-Iran Shia militias in the country had published a statement vowing to expel foreign troops and advisers by force if they didn’t immediately leave Iraq. 

    “We will deal with them [foreign troops in Iraq] as occupying forces, and we will use our legitimate rights by employing all possible means to force them out of the country,” the Iraqi factions warned, adding that foreign troops were “in their sights”. The statement also alleged an “Anglo-American-led dirty and dangerous conspiracy to impose a devilish coalition” on the people of Iraq which seeks to weaken the government and make Baghdad a puppet of Brett McGurk, who is the White House appointed special envoy for the anti-ISIL coalition. 

    Meanwhile in a speech given before Friday worshipers in Tehran Iranian officials issued threats against the United States military, and laid down “red lines” against US allies Saudi Arabia and the United Arab Emirates. Iran has blamed the US and its Gulf allies for sponsoring a terrorist attack on a military parade in the southwest city of Ahvaz last Saturday which killed 25, including IRGC personnel among the victims. 

    “If America does anything wrong, their bases around Iran would not remain secure,” Ayatollah Mohammadali Movahedi Kermani was quoted as saying by Mizan news agency while leading Friday prayers in Tehran

    And simultaneously the Fars news agency quoted Brigadier General Hossein Salami, deputy head of the IRGC, as saying in reference to the Saudis and Emirates: “If you cross our red lines, we will surely cross yours. You know the storm the Iranian nation can create.”

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