House Bill 145, which promotes a 15-point grading scale, passed its first reading in the House on Monday and has been referred to the Committee on Education K-12.
The proposed bill would mean higher grades for lower scores by changing the grading scale as follows:
A: 100 to 85 percent
B: 84 to 70 percent
C: 69 to 55 percent
D: 54 to 40 percent
F: Anything below 40 percent
The old scale was a 10 point scale, meaning students would need to score a 90 for an A, 80 for a B, etc. If passed, the new grading scale would go into effect for the 2019-20 school year.
* * *
Every school and student deserves an A, right? It’s their right! It’s racist otherwise.
During the past few days, Venezuela was suffering a major blackout that left the country in darkness. The crisis started on March 7 with a failure at the Guri hydroelectric power plant, which produces 80% of the country’s power. Additionally, an explosion was reported at Sidor Substation in Bolivar state.
Since then, the government has been struggling to solve the crisis with varying success.
President Nicholas Maduro says that the blackout is the reason of “the electric war announced and directed by American imperialism.”
According to Maduro, electrical systems were targeted by cyberattacks and “infiltrators”. He added that authorities managed to restore power to “many parts” of the country on March 8, but the restored systems were knocked down after the country’s grid was once again attacked. He noted that “one of the sources of generation that was working perfectly” had been sabotaged and accused “infiltrators of attacking the electric company from the inside.”
Communication and information minister Jorge Rodriguez described the situation as “the most brutal attack on the Venezuelan people in 200 years”. He also described the situation as the “deliberate sabotage” on behalf of the US-backed opposition.
In own turn, the US continues to reject claims accusing it of attempts to destabilize the situation in the country. Secretary of State Mike Pompeo even claimed that Washington and its allies would not hurt the “ordinary Venezuelans.” According to him, what’s hurting the people is the “Maduro regime’s incompetence.”
“No food. No medicine. Now, no power. Next, no Maduro,” Pompeo wrote in Twitter, adding that “Maduro’s policies bring nothing but darkness.” Unfortunately, the top diplomat did not explain how wide-scale economic sanctions imposed to wreck the country’s economic should help the “ordinary Venezuelans”.
The State Department attitude was expectedly supported by US-proclaimed Venezuelan Interim President Juan Guaido, who recently returned to country after an attempt to get more foreign support for US-backed regime change efforts. Guaido accused the “Maduro Regime” of turning the blackout during the night in a “horror movie” with his “gangs” terrorizing people.
Another narrative, which recently set the mainstream media on fire, is the alleged Cuban meddling in the crisis.
According to this very version of the event, “forces of democracy” were not able to overthrow the Venezuelan government because its political elite is controlled by Cuban intelligence services. President Donald Trump even said Maduro is nothing more than a “Cuban puppet.”
Taking account already existing allegations about the presence of Hezbollah and Russian mercenaries in Venezuela and an expected second attempt to stage US aid delivery provocation on the Colombian-Venezuelan border, it becomes clear that chances of US direct action to bring into power own political puppet are once again growing.
The February attempt to stage a provocation failed and make a final step toward a regime change by force failed after it was publicly revealed that the US-backed opposition was intentionally burning “aid trucks” to blame the Maduro government. Furthermore, the military backed Maduro, and the scale and intensity of protests across the country were not enough to paralyze the government.
The blackout in Venezuela was likely meant to bring the country into disorder and draw off army and security forces. Therefore, an attempt to stage a new provocation to justify a foreign intervention to overthrow the Venezuelan government could be expected anytime soon.
via ZeroHedge News https://ift.tt/2O1Zznk Tyler Durden
U.S.S. Zumwalt (DDG-1000), a 16,000-ton next generation guided-missile destroyer, left its San Diego homeport for its first “operational period at sea,” the U.S. Navy said in a March 8 statement.
The Navy said the milestone demonstrates the service’s commitment to advancing the lethality of stealth warships through cutting-edge technologies in combat systems, weapons, and engineering plant.
“Zumwalt is designed for stealth,” said Capt. Andrew Carlson, the ship’s commanding officer.
“This aids her role as a multi-mission surface combatant and improves the fleet commander’s options for delivery of naval combat power to meet the Navy’s emergent mission requirements.”
The ship was commissioned in October 2016. Following the commissioning, the Zumwalt was stationed in San Diego where advanced weapon systems were installed. According to the statement, the ship’s crew completed a post-delivery maintenance examination of the destroyer’s electronic, powerplant, and weapons systems before the departure.
“My crew has been looking forward to continued testing and operations at sea, leveraging the newly installed capabilities of this platform,” said Carlson. “Our primary focus is executing a safe underway, while building both competence and confidence in operating Zumwalt across the spectrum of naval warfare.”
U.S. Indo-Pacific Command snapped an image of the newly-commissioned @ZUMWALT_DDG1000 departing from San Diego late last week.
The Zumwalt is about 100 feet longer and 13 feet wider than the Arleigh Burke-class destroyer, is powered by two Rolls-Royce turbine generators capable of producing 78 megawatts (105,000 hp), and also has enough power to fire electrically-powered weapons.
Armed with 80 missiles in vertical launch tubes within the hull and two 155-caliber cannons, the vessel is expected to have directed-energy weapons once the technology matures.
While the Navy provided limited details on the vessels next stop, CTV Vancouver Island said the ship is scheduled to make a port call to Canadian Forces Base Esquimalt on Vancouver Island later this month.
“While the exact date of the ship’s arrival and duration of its stay remain closely guarded secrets of the U.S. Navy, the ship’s oddly angular design, stealth capabilities and state-of-the-art electric drive system are sure to attract the attention of naval watchers and neophytes alike,” read the report.
via ZeroHedge News https://ift.tt/2CdPVJK Tyler Durden
For over two years RussiaGate has accounted for a substantial proportion of all mainstream US media political journalism and, because US media have significant agenda-setting propulsion, of global media coverage as well. The timing has been catastrophic.
In place of sustained media attention to the end of the human species from global warming, its even more imminent demise in nuclear warfare, or the further evisceration of democratic discourse in a society riven by historically unprecedented wealth inequalities and unbridled capitalistic greed, corporate media suffocate their publics with a puerile narrative of alleged collusion between the 2016 Trump campaign and Russia.
The RussiaGate discourse is profoundly mendacious and hypocritical. It presumes that the US is a State whose electoral system enjoys a high degree of public trust and security. Nothing could be further from the truth. The US democratic system is deeply entrenched in a dystopian two-party system dominated by the rich and largely answerable to corporate oligopolies; it is ideologically beholden to the values of extreme capitalism and imperialist domination. Problems with the US electoral system and media are extensive and well documented.
US electoral procedures are profoundly compromised by an electoral college that detaches votes counted from votes that count. The composition of electoral districts have been gerrymandered to minimize the possibility of electoral surprises. Voting is dependent on easily hackable corporate-manufactured electronic voting systems.
Even the results of campaigns are corrupted when outgoing regimes abuse their remaining weeks in power to push through regulations or legislation that will scuttle the efforts of their successors.
Democratic theory presupposes the formal equivalence of voice in the battlefield of ideas. Nothing could be further from the reality of the US “democratic” system in which a small number of powerful interests enjoy ear-splitting megaphonic advantage on the basis of often anonymous “dark” money donations filtered through SuperPacs and their ilk, operating outside the confines of (the somewhat more transparently monitored) ten-week electoral campaigns.
Regarding media, democratic theory presupposes a public communications infrastructure that facilities the free and open exchange of ideas. No such infrastructure exists. Mainstream media are owned and controlled by a small number of large, multi-media and multi-industrial conglomerates that lie at the very heart of US oligopoly capitalism and much of whose advertising revenue and content is furnished from other conglomerates.
The inability of mainstream media to sustain an information environment that can encompass histories, perspectives and vocabularies that are free of the shackles of US plutocratic self-regard is also well documented.
Current US media coverage of the US-gestated crisis in Venezuela is a case in point. The much celebrated revolutionary potential of social media is illusory. The principal suppliers of social media architecture are even more corporatized than their legacy predecessors. They depend not just on corporate advertising but on the sale of big data that they pilfer from users and sell to corporate and political propagandists often for non-transparent AI-assisted micro-targeting during ‘persuasion’ campaigns.
Like their legacy counterparts, social media are imbricated within, collaborate with, and are vulnerable to the machinations of the military-industry-surveillance establishment. So-called election meddling across the world has been an outstanding feature of the exploitation of social and legacy media by companies linked to political, defense and intelligence such as – but by no means limited to – the former Cambridge Analytica and its British parent SCL.
Against this backdrop of electoral and media failures, it makes little sense to elevate discussion of and attention to the alleged social media activities of, say, Russia’s Internet Research Agency. Attention is being directed away from substantial, and substantiated, problems and onto trivial, and unsubstantiated, problems.
Moreover, in a climate of manufactured McCarthyite hysteria, RussiaGate further presupposes that any communication between a presidential campaign and Russia is in itself a deplorable thing. Even if one were to confine this conversation only to communication between ruling oligarchs of both the US and Russia, however, the opposite would surely be the case. This is not simply because of the benefits that accrue from a broader understanding of the world, identification of shared interests and opportunities, and their promise for peaceful relations.
A real politik analysis might advise the insertion of wedges between China and Russia so as to head off the perceived threat to the USA of a hybrid big-power control over a region of the world that has long been considered indispensable for truly global hegemony.
Even if we address RussiaGate as a problem worthy of our attention, the evidentiary basis for the major claims is weak. The ultimate unfolding of RussiaGate discourse now awaits the much-anticipated report of Special Counsel and former FBI director Robert Mueller. Mueller’s indictments and investigations have to date implicated several individuals for activities that in some cases have no connection whatsoever to the 2016 Presidential campaign. In some other instances they appear to have been more about lies and obstructions to his investigation rather than material illegal acts, or amount to charges that are unlikely ever to be contested in a court of law.
The investigation itself is traceable back to two significant but extremely problematic reports made public in January 2017. One was the “Steele dossier” by former MI6 officer Christopher Steele. This is principally of interest for its largely unsupported allegations that in some sense or another Trump was in cahoots with Russia. Steele’s company, Orbis, was commissioned to write the report by Fusion GPS which in turn was contracted by attorneys working for the Democratic National Campaign.
Passage of earlier drafts of the Steele report through sources close to British intelligence, and accounts by Trump adviser George Papadopoulos concerning conversations he had concerning possible Russian possession of Clinton emails with a character who may as likely have been a British as a Russian spy, were instrumental in stimulating FBI interest in and spying on the Trump campaign.
There are indirect links between Christopher Steele, another former MI6 agent, Pablo Miller (who also worked for Orbis) and Sergei Skripal, a Russian agent who had been recruited as informer to MI6 by Miller and who was the target of an attempted assassination in 2018. This event has occasioned controversial, not to say highly implausible and mischievous British government claims and accusations against Russia.
The most significant matter raised by a second report, issued by the Intelligence Community Assessment and representing the conclusions of a small team picked from the Director of Intelligence office, CIA, FBI and NSA, was its claim that Russian intelligence was responsible for the hacking of the computer systems of the DNC and its chairman John Podesta in summer 2016 and that the hacked documents had been passed to Julian Assange and WikiLeaks. No evidence for this was supplied.
Although the hacking allegations have become largely uncontested articles of faith in the RussiaGate discourse they are significantly reliant on the problematic findings of a small private company hired by the DNC. There is also robust evidence that the documents may have been leaked rather than hacked, and by US-based sources.
The fact that the documents revealed that the DNC, a supposedly neutral agent in the primary campaign, had in fact been biased in favor of the candidature of Hillary Clinton, and that Clinton’s private statements to industry were not in keeping with her public positions, has long been obscured in media memory in favor a preferred narrative of Russian villainy.
Why then does the RussiaGate discourse have so much traction? Who benefits?
First, RussiaGate serves the interest of a (1)corrupted Democratic Party, whose biased and arguably incompetent campaign management lost it the 2016 election, in alliance with with (2)powerful factions of the US industrial-military-surveillance establishment that for the past 19 years, through NATO and other malleable international agencies, has sought to undermine Putin’s leadership, dismember Russia and the Russian Federation (undoubtedly for the benefit of western capital) and, more latterly, further contain China in a perpetual and titanic struggle for the heart of EurAsia.
In so far as Trump had indicated (for whatever reasons) in the course of his campaign that he disagreed with at least some aspects of this long-term strategy, he came to be viewed as unreliable by the US security state. While serving the immediate purpose of containing Trump, US accusations of Russian meddling in US elections were farcical in the context of a well-chronicled history of US “meddling” in the elections and politics of nations for over 100 years. This meddling across all hemispheres has included the staging of coups, invasions and occupations on false pretext in addition to numerous instances of “color revolution” strategies involving the financing of opposition parties and provoking uprisings, frequently coupled with economic warfare (sanctions).
A further beneficiary (3)is the sum of all those interests that favor a narrowing of public expression to a framework supportive of neoliberal imperialism. Paradoxically exploiting the moral panic associated with both Trump’s plaintive wailing about “fake news” whenever mainstream media coverage is critical of him, and social media embarrassment over exposure of their big data sales to powerful corporate customers, these interests have called for more regulation of, as well as self-censorship by, social media.
Social media responses increasingly involve more restrictive algorithms and what are often partisan “fact-checkers” (illustrated by Facebook financial support for and dependence on the pro-NATO “think tank,” the Atlantic Council). The net impact has been devastating for many information organizations in the arena of social media whose only “sin” is analysis and opinion that runs counter to elite neoliberal propaganda. The standard justification of such attacks on free expression is to insinuate ties to Russia and/or to terrorism.
Given these heavy handed and censorious responses by powerful actors, it would appear perhaps that the RussiaGate narrative is increasingly implausible to many and the only hope now for its proponents is to stifle questioning. These are dark days indeed for democracy.
via ZeroHedge News https://ift.tt/2F970Xa Tyler Durden
Michael Avenatti and Stormy Daniels – the porn actress who alleged she had an affair with President Donald Trump – have severed ties.
In the last year, the duo rose to become household names in their fight against Trump, dominating cable news shows for months and taunting the president in interviews.
For posterity, let’s look back at Avenatti and Daniels track-record: (via The Hill)
Avenatti represented Daniels, whose legal name is Stephanie Clifford, in lawsuits that she filed against President Trump and Michael Cohen, the former personal attorney to Trump.
Daniels sued Trump and Cohen to void a nondisclosure agreement stemming from an alleged 2006 affair between Daniels and the president. Daniels was paid ahead of the 2016 election to keep quiet about the affair. A judge threw out the lawsuit this month, ruling that it was irrelevant because she had not been held to the terms of the agreement.
Daniels also filed a defamation suit against both men.
But the writing was on the wall that clouds were forming over Stormy and Michael’s ‘relationship’:
In November, Daniels told the Daily Beast that Avenatti had filed a defamation case against Trump “against my wishes” and alleged that he refused to give her an accounting of the funds collected by her supporters, would not tell her how the money was spent or how much was left in the crowdsourced legal defense fund.
So Avenatti was 0 for 3 in his representation of Daniels, which is maybe not a total surprise, as AP reports, before Avenatti began representing Daniels in February 2018, he was virtually unknown outside of the California legal community. But in months, he had become known as a no-holds-barred lawyer with a media style parallel to Trump’s. Avenatti had toyed with a 2020 presidential run, but ultimately ruled that out. He’s also been involved in some of America’s biggest cases in the last year, including representing dozens of parents whose children were separated from them at the U.S. border as a result of the Trump administration’s immigration policies. More recently, he’s been representing women who said they were sexually abused by R&B star R. Kelly.
Daniels has not done quite so well, turning her hand to stand-up most recently…
The question is who fired whom? The answer is actually simple:
Stormy Daniels tweeted at 1112am that “I have retained Clark Brewster as my personal lawyer and have asked him and his firm to review all legal matters involving me.”
I have retained Clark Brewster as my personal lawyer and have asked him and his firm to review all legal matters involving me. Upon completion of Mr. Brewster’s review and further consultation with me, I anticipate Mr. Brewster will serve as my primary counsel on all legal issues
And Michael Avenatti quickly responded at 1123am claiming that “on February 19, we informed Stormy Daniels in writing that we were terminating our legal representation of her for various reasons that we cannot disclose publicly due to attorney-client privilege… This was not a decision we made lightly and it came only after lengthy discussion, thought and deliberation, as well as consultation with other professionals,” he added. “We wish Stormy all the best.”
So why did Avenatti not – in all his any-publicity-is-great-publicity-and-I-may-still-run-for-President blufftardism – relay his severing ties with Daniels in February?
Bloomberg’s White House correspondent Jennifer Jacobs has the answer – straight from the horse’s mouth (as it were): “To an audience of women at The Wing in DC, she says her ex lawyer, Michael Avenatti, pulled the old “you can’t fire me, I quit” trick.“
“Yes,” Stormy Daniels says when asked if she and her new attorney are planning new legal action.
To an audience of women at The Wing in DC, she says her ex lawyer, Michael Avenatti, pulled the old “you can’t fire me, I quit” trick. pic.twitter.com/5TplYzsC0K
The State of Oregon is on the precipice of “solving” its housing shortage with state-wide rent control . It would be the first state to do so. The policy is being sold as a way to make housing more affordable in a state where three of its cities, Eugene, Portland, and Salem, are ranked among the forty most expensive housing markets on the planet.
To understand how Oregon’s housing solution will harm those it hopes to help, consider the rental market modeled below. The State is not interfering in the voluntary transactions between landlords and tenants. Supply and demand efficiently allocate 100 rental units at $1500 per month.
The red line represents the demand for rentals. The height of point 1 gives the rent the richest renter is willing to pay ($2500). The height of point 2 gives the rent the poorest renter is willing to pay (under $500). The height of the equilibrium (black point) gives the rent a person of average income is willing to pay ($1500).
The blue line represents the supply of rentals. Since some landlords have mortgages and some do not, some units are in large complexes and some are single units, and some complexes have lots of amenities and some have few, this line represents a queue that sorts rentals from least to most expensive to finance and maintain. The rental at point 1 costs its landlord $500 to maintain and finance, while the unit at point 2 costs its landlord over $2500 to finance and maintain.
Regarding the first rental, its landlord and tenant both benefit from the transaction. The tenant thinks he got the better end of the deal because he is willing to pay $2500 but only pays $1500. The landlord thinks she got the better end of the deal because she is was willing to accept $500 but gets paid $1500. Both sign the lease because both parties are winners in trade.
All 100 rented units represent win-win transactions. The tenants were willing to pay rents in decreasing order from $2500 to $1500 but each only pays $1500 per month. Relative to the landlords, they all feel like they got the better end of these deals. The pink triangle measures this great feeling. On the other hand, landlords collect $1500 from each tenant but were willing to accept rents in increasing order from $500 to $1500. Relative to their tenants, they feel like they got the better end of these deals. The blue triangle measures this great feeling. Thus, all parties in these trades are winners.
Some renters have been priced out of the market. They populate the faded section of demand. During high school, I was one of them. I wanted to fly the coop but could not afford to do so. Others included in this group are perhaps older workers with low job skills or singles just out of college and looking for first jobs. These folks, if subletting is illegal, find apartments in nearby low-rent markets. Their exit from this market is why the lower section of demand is faded.
Housing laws can adversely impact rents and apartments. An Oregon zoning law shrinks the areas where apartment complexes can be constructed. This decreases supply, raises rents, and reduces the number of available units.NYC restricts subletting. That reduces supply and raises rents. Since renters would have had a room in the absence of subletting restrictions, the restrictions result in higher demand as more people search for rooms. That pushes rents up too. In the absence of all restrictions, markets will find creative ways to solve housing shortages. For example, prior to zoning laws, early Americans turned their homes into boarding houses or residential hotels, which are not unlike the no-frills rooms listed on Airbnb.
When rents get too high, rent control becomes popular among politicians who are either wanting to do the right thing or are shopping for votes. The figure below shows what happens when government sets rental rates (the green line). At the imposed rent, the people who populate the demand line between points 3 and 4 reenter this market to look for apartments. This is why that section of demand is no longer faded. Since the financing and maintenance expenses of the rental units on supply between the blue point and point 3 exceeds the legislated rent, the landlords take these units off the market (e.g., they get listed on Airbnb instead). Thus, the rent ceiling reduces the number of units to 50 but increases the number of people in the market to 150. If subletting is illegal, unsuccessful apartment seekers live in cars or on streets as they wait for tenants to vacate.
Recall that demand represents a queue with the richest renter on the left and the poorest on the right. With the rich owning homes, the upper middle class populates the line between points 1 and 2, the lower middle class populates the line between 2 and 3, and the poor populates the line between 3 and 4. Since the upper middle class are willing and able to pay more than the lower middle and poor classes, they have the most impressive applications or can afford the largest bribes. Thus, the renters with the 50 highest incomes get the 50 apartments that are offered in the market. Those in the lower middle class, who had apartments prior to rent control, are now without homes. The poor were not homeless prior to rent control, as they had low-rent units in nearby neighborhoods. But now they are homeless.
Though rent control is sold as a policy that is intended to help the poor, it induced homelessness among the poor and lower middle classes. It also increased the spoils of trade accruing to renters with the highest incomes. Their spoils increased from what it was prior to rent control (the light pink area) to what is after rent control (the light and dark pink areas).
The consequences of rent control are well understood by economists, from one end of the political spectrum to the other. Given this rare consensus in economics, it is surprising that states like Oregon are on the verge of voluntarily wrecking their housing markets.
via ZeroHedge News https://ift.tt/2TzpsBf Tyler Durden
ICE officers who supported President Trump during the 2016 election are growing frustrated with the lack of follow through on border-related promises, reports the Washington Times‘ Stephen Dinan.
In particular, Trump’s promise to end the practice of arresting migrants, giving them court dates and then letting them go free (known as “catch-and-release”) has not only failed to pan out – it’s gone into “overdrive” according to the Times.
Instead of rounding up criminals who are in the United States illegally, Immigration and Customs Enforcement officers say they are being underutilized for mundane tasks – such as “opening the doors on vans to release immigrants already caught by Border Patrol agents.” Agents with the Border Patrol – a separate law enforcement agency from ICE – reportedly don’t fill out their own paperwork to open the doors because “the agency’s leaders don’t want to be part of catch-and-release.”
“Hundreds of man hours are wasted each day at a time of crisis on the border,” reads a Monday letter to President Trump from the National ICE Council – the union which represents ICE officers.
The letter was sent just hours before the Senate Homeland Security and Governmental Affairs Committee voted to approve Mr. Trump’s pick, Ronald D. Vitiello, to be the new director of ICE.
Committee Chairman Ron Johnson waved a copy of the ICE Council’s letter during the vote and called the accusations “troubling.”
“We’re going to get to the bottom of this,” he told reporters afterward.
In the letter, the ICE Council said its president, Chris Crane, personally told Mr. Trump about the situation in a January meeting, and the council was disappointed nothing has been done. –Washington Times
“You frequently speak publicly of the great public safety work ICE is doing under your leadership. To be direct Mr. President — the rhetoric doesn’t match reality and we hope that this letter shows you the complete and total nonsense that is really taking place under the Trump Administration on the southern border,” reads the letter – which comes after some 160,000 migrant children and families have been intercepted at the border over the last five months alone.
While most of them have been arrested by the Border Patrol, around 10-15 percent of those detained are encountered by Customs and Border Protection officers.
Homeland Security responds
Responding to the National ICE Council, the Department of Homeland Security said: “We have repeatedly sounded the alarm with Congress as resources are being stretched across DHS as agencies work to contain this historic surge,” adding “ICE and CBP are fully engaged on a coordinated response and continue to update Congress on the challenges faced by our agents and officers at the border.”
ICE officers countered that while Congress could change some of the big policies, the “utter nonsense” decision to make ICE come along for the van rides is something Homeland Security could stop on its own.
The ICE Council said officers are being taken from terrorism task forces, fugitive operations and the Criminal Alien Program to do paperwork and van-opening.
One field team reported being moments from arresting felons, only to be told to back off. That wasn’t as high a priority as opening the van doors, or filling out the Border Patrol’s paperwork, the letter says.
Mr. Crane said one ICE office in Texas spends perhaps a third of its manpower facilitating CBP’s catch-and-release.
The ICE officers blamed both Homeland Security Secretary Kirstjen Nielsen and Mr. Vitiello, a former Border Patrol agent who’s been serving since last June as acting director at ICE. –Washington Times
Meanwhile, Vitiello was approved by the Homeland Security Committee to become a full director in a 7-5 vote on Monday evening, however he still must pass through the Judiciary Committee for an eventual floor vote.
via ZeroHedge News https://ift.tt/2EWzfaf Tyler Durden
In the aftermath of the greatest financial calamity since the Great Depression, then–chief of staff for the Obama administration Rahm Emanuel made the call for aggressive action to prevent a recurrence of the meltdown of 2008.
Although the U.S. government’s system of checks and balances typically produces incremental reform, Emanuel suggested that during times of financial upheaval, the traditional levers of powers are often scrambled, thereby creating unique conditions whereby legislators could be pushed in the direction of more radical reform. That’s why he suggested that we should never let a crisis go to waste. Ironically, that might be the only pearl of wisdom we ever got from the soon-to-be ex-mayor of Chicago, one of those figures who otherwise embodied the worst Wall Street-centric instincts of the Democratic Party. But give Rahm props for this one useful insight.
But we did let the crisis of 2008 go to waste. Rather than reconstructing a new foundation out of the wreckage, we simply restored the status quo ante, and left the world’s elite financial engineers with a relatively free hand to create a wide range of new destructive financial instruments.
To cite some examples, consider the case of the UK, where England’s local councils have taken on significant risk via structural financial products known as “LOBO loans” (lender option borrower option). Financial blogger Rob Carver explains how they work:
“[Let’s] say I offer to lend you £40 and charge you 3% interest for 5 years. Some other guy comes along and offers you the same deal; but the twist is he will have the option to ask for his money back whenever he likes.
“You wouldn’t borrow money from him because it’s clearly a worse deal. …
“Suppose he sticks to his guns but as a concession he will lend you the money at only 2.9% interest. Would you take that? What about 2.5%? 2%?”
What Carver is describing here is the so-called “teaser”: a seductively low starting interest rate that is sufficiently attractive to induce the buyer to take on the LOBO in the first place. It’s designed to entice someone away from fixed interest rate borrowing (which at least has the virtue of being constant and therefore more readily predictable). The seductive quality of the teaser is that one’s borrowing costs might appear “cheaper” than the higher initial fixed-rate costs offered by the Public Works Loan Board (PWLB), a wing of the government. But the troubles become more apparent with the passage of time.
What happens if and when rates unexpectedly move up? In general, as Carver notes, having to suddenly repay your loan when interest rates have risen to 4 percent is the worst possible time for you. It’s akin to taking away the umbrella the minute it starts to pour. Worse, the authority is likely locked into a contract that typically has a lifespan of 40-70 years. (And who can forecast with any degree of certainty the trend of interest rates over that sort of time span? It makes the whole notion of buying an instrument on that premise to be speculative in the extreme.) Banks have the option of raising rates at their discretion, and although the councils are able to opt out of their contract, they will pay huge penalties if they seek to renegotiate or exercise that option to opt out.
So there’s a huge negotiating imbalance built into the contract, and the likely upshot is that the local council ends up paying more in interest charges over the course of the loan. How much more? According to an activist group, #NoLOBOs (created to help housing authorities combat the impact of these instruments), “a substantial number of housing councils are facing 7-9 % interest rates, which is more than twice the current rate of lending at the PWLB.” And in many instances, the municipalities have been burdened with these higher borrowing costs at a time when additional funding from the national government has been cut back, so they are confronted with a double whammy on both sides of the balance sheet.
What was initially sold as a means to manage risk, then, ultimately metamorphoses into a recipe for financial fragility, especially when it occurs at the municipal level with institutions that don’t have the capacity to create new currency (as a federal authority can do). The “teaser” becomes a poison pill. This means a local authority (or level of government that is a user, rather than issuer, of currency) can go bust.
“There is around £18bn worth of private sector loans on councils’ books, according to figures from the Department for Communities and Local Government. … [A]round £15bn of these are Lobos.
“Annual sales to local authorities regularly topped £1bn in the run-up to the financial crisis and peaked at £1.5bn in 2007, before crashing to £600m a year later and then dwindling to nothing in 2012.”
Their revival since 2012 has resulted in hundreds of millions of pounds being skimmed from struggling town hall budgets, which were hit by the double whammy of these toxic instruments, along with austerity-imposed cutbacks from the national government. One particularly egregious example was the cash-strapped town of Newham, which had £398m of exposure to LOBOs back in 2014. Faced as well with cutbacks from the national Tory government, the local council was forced to remove financial support from a homeless hostel, “leading to the eviction of a group of single mothers to save £41,000,” reported British publication Private Eye.
Here’s another disaster waiting to happen: Globally, financial markets today are seeing a rebirth of “collateralized loan obligations” (CLOs), instruments broadly similar to the “collateralized debt obligations” (CDOs), which helped to blow up the financial system in 2008. CDOs were asset-backed instruments, a “blended” security comprised of risky mortgage-backed bonds and much of the rest from theoretically safer tranches. The theory underlying them was that the lower the investment quality, the higher the compensating yield, but in reality most turned out to be toxic junk. What distinguishes CLOs from their CDO “cousin” is that instead of repackaging mortgages, subprime and otherwise, CLOs repackage corporate loans, and consumer credit, such as car loans.
Unfortunately, in yet another instance of lessons unlearned from 2008, the collateralized loan obligations, like the CDOs, have virtually non-existent investor protection, “with over 70 percent lacking any covenants that would allow monitoring of financial condition and early intervention to manage problem borrowers. This exacerbates the risk of higher losses,” argues Satyajit Das, a former banker who first identified the risks to financial stability posed by these kinds of instruments back in 2008. In fact, Das elaborates, “relative to mortgages, [CLOs] typically are made up of fewer and larger loans, which increases concentration risk. Leveraged loans are highly sensitive to economic conditions and defaults may be correlated, with many loans experiencing problems simultaneously.” Which intuitively makes total sense: during a slowdown, virtually all economic activity slows down, whether that be housing, car sales, or consumer borrowing. Diversification of risk is therefore more apparent than real.
In an environment of prevailing low interest rates (and, hence, lower yields from conventional instruments), debt investors have been told (again) that they can enhance their portfolio returns, through these higher-yielding CLOs, while mitigating risk simply by diversifying. In theory, the risk is dispersed, but in practice, as Das has pointed out, if you’re simply diversifying different kinds of financial excrement, the end result is more likely to be insolvency for the whole instrument. A common theme is that in spite of the disastrous performance of these instruments during the market crash, many of the underlying loans today still lack standard provisions to protect lenders, such as reporting and requirements to maintain certain income and asset levels. Consequently, more toxic junk is being passed around the system like a hot potato. Last one holding the potato loses.
Given the scale of issuance, all major financial institutions are likely to be left holding these bags. CLOs, notes Das, have been growing at a rate of around $100bn a year for the past decade, and total levels outstanding now approach the size that existed in the CDO market by the time of the 2008 crisis. As the cycle has matured, the quality of the assets of the loans has diminished, and the borrowers have become increasingly leveraged.
This follows a classic pattern of a typical borrowing cycle, as credit structures move from relatively stable “hedge financing” (where the underlying units can meet payment commitments out of income flow) to “Ponzi” finance (borrowing simply to pay interest on the interest), a process originally outlined by the economist Hyman Minsky. Based on the relatively benign conditions of the recent past, both borrowers and lenders are lulled into a false sense of security and increase their respective risk profiles accordingly. Minsky was by no means the only economist whose work has become associated with manias, panic and crash. He built his analysis on the shoulders of analysts of the Great Depression, such as Irving Fisher, John Maynard Keynes, and John Kenneth Galbraith. But what distinguishes Minsky’s scholarship is that he focused it on the “upward” source of the financial instability, as opposed to its disastrous denouement. In relation to today’s CLO market, the parallel is that the decade-long period of stability in the aftermath of 2008 (in reality, faux stability achieved through the injection of trillions of dollars in public sector bailouts) has again given the users a stream of data providing the illusion that leverage is safe.
Rather than respond to each financial meltdown by seeking to curb the activities that led to the crisis in the first place, the sheer ongoing dominance of our financial sector has ensured that policy has merely worked to bail out the big players, and do everything to keep the rigged casino of the economy in their favor. Thus, financial institutions continue to concoct increasingly esoteric and opaque financial instruments that they market to less financially sophisticated counterparties.
Let’s roll back the tape to a few financial crises ago, from the early 1990s. At that time, Bob Citron, the Orange County treasurer, bankrupted his county via leveraged investments he made in structured notes (i.e., customized notes designed to fit the investment wishes and opinions of particular institutional buyers). If you tailor an exotic instrument to fit your investment outlook, you’d better know what you’re doing and appreciate the downside risks. Customization entails a level of financial expertise that Citron later conceded he did not fully possess. He was a sitting duck in a sea of sharks (to mix metaphors). Citron made a bet on the direction of interest rates (he bet they would stay low, which was wrong). As a result of his miscalculation, by 1994 Orange County’s investment portfolio began hemorrhaging hundreds of millions of dollars, ultimately going broke. Without conceding any liability, ultimately Merrill Lynch paid out $400m in penalties to settle the case.
That was an early warning signal, which unfortunately remained unheeded, as it was followed in quick succession by the Asian financial crisis in 1997, the bankruptcy of Long-Term Capital Management and the concomitant Russian debt default in 1998, the dot.com bust, and finally the complete seizure of the global financial system by 2008. Each time, a common foolhardy notion was the idea that higher levels of reward could be achieved without any corresponding increase in risk. All of this occurred against a backdrop of deregulation, minimal transparency and inadequate market supervision.
If you thought the near-breakdown of the global economy in 2008 was enough to make global policymakers and regulators rethink their persistent accommodation of financial innovation and deregulation, think again. Regulators have continued to accommodate this complexity, rather than minimizing it. Complex financial systems beget yet more complex (and ultimately ineffective) regulation. It is better to simplify the system in order to improve the quality of the regulation and the ease of oversight (which the complexity is designed to avoid).
Unfortunately, that’s not what our policymakers have done. Instead of redesigning the system, the monetary authorities have simply inserted themselves in the chain of intermediation that included an ever-evolving variety of books of business without actually considering whether there were too many weak links in the credit chain in the first place. Rather than shorten or redesign the economy’s credit structures, and curb the risks accordingly, central banks instead have simply acted as the ultimate guarantors in a supply chain from money-like instruments to longer-term and riskier credit. Absent any kind of sanction for undertaking more systemically dangerous activities, our policymakers have therefore made the same mistakes that were made in the early 2000s: they are establishing perverse ongoing incentives that increase risk, punishing the timid (prudent?) with low returns. It’s a classic illustration of Gresham’s Law, whereby bad money drives out good.
So here we go again. No less a figure than Claudio Borio, the chief economist of the Bank for International Settlements central, who warned of the dangers of a synchronized housing bubble well before the 2008 crisis, is again sounding the alarm about a recurrence. The crash gave us a chance to downsize finance and restrict its ability to wreak comparable havoc on the economy going forward. Instead, we let the crisis go to waste, which almost certainly means a nasty sequel to 2008 facing us in the near future.
This article was produced by Economy for All, a project of the Independent Media Institute.
via ZeroHedge News https://ift.tt/2HfO8rJ Tyler Durden
Rep. Alexandria Ocasio-Cortez (D-NY) suggested that Wells Fargo was “involved” in the caging of migrant children because the bank used to finance private prison companies CoreCivic and Geo Group.
“Mr. Sloan, why was the bank involved in the caging of children and financing the caging of children to begin with?” the freshman House Democrat and economics major asked Wells Fargo CEO Timothy Sloan.
“Uh, I don’t know how to answer that question because we weren’t,” Sloan replied.
“Uh, so in finance — you, you were financing and involved in financing of debt of CoreCivic and Geo Group, correct?” she shot back.
To which Sloan replied: “For a period of time, we were involved in financing one of the firms — we’re not anymore and the other. I’m not familiar with the specific assertion that you’re making, but we weren’t directly involved in that.”
“OK, so these companies run private detention facilities run by ICE, which is involved in caging children, but I’ll move on,” AOC retorted.
Of note, Wells Fargo was prominently featured in a November 2016 report along with nine other banks for lending CoreCivic and GEO Group $444 million and $450 million respectively during the Obama administration – the same period of time during which a a photo of caged children misattributed to the Trump administration was taken.
Wells Fargo and other banks have decided to reevaluate their lending activities to private prisons amid controversy over the Trump administration’s immigration policies.
Ultimate liability
AOC then shifted gears, asking Sloan if Wells Fargo should be involved in paying for environmental cleanup if a bank-financed oil project such as the Dakota Pipeline were to leak.
“So hypothetically, if there was a leak from the Dakota Access Pipeline, why shouldn’t Wells Fargo pay for the cleanup of it, since it paid for the construction of the pipeline itself?” asked AOC – suggesting that the pipeline is “widely seen to be environmentally unstable.”
Sloan looked a bit puzzled, replying: “Again the reason we were one of the 17 or 19 banks that financed that is because our team reviewed the environmental impact and we concluded that it was a risk that we were willing to take.”
Socialist Rep. Alexandria Ocasio-Cortez (D-NY) asks Wells Fargo CEO Timothy Sloan: “Hypothetically, if there was a leak from the Dakota Access pipeline, why shouldn’t Wells Fargo pay for the clean up of it?”
In an interview with the Washington Post yesterday, House Speaker Nancy Pelosi announced that she opposed the impeachment of President Trump. This comes shortly before Mueller’s investigation into Trump-Russia collusion is expected to wrap up.
“I’m not for impeachment,” Pelosi told the Post.
“This is news. I’m going to give you some news right now because I haven’t said this to any press person before. But since you asked, and I’ve been thinking about this: Impeachment is so divisive to the country that unless there’s something so compelling and overwhelming and bipartisan, I don’t think we should go down that path, because it divides the country. And he’s just not worth it.”
The response to Pelosi’s remarks has been swift and strong.
“Wrong!”exclaimed MSNBC’s Russiagate con man Malcolm Nance via Twitter. “What the hell is wrong with the @SpeakerPelosi Congress that they absolve themselves of their duty! Nothing is criminal anymore?! Trump can do and say like a dictator as he pleases? All of his crimes are OK even if you see them? This requires a public outcry. #Disgraceful”
“I like Speaker Pelosi but this is NOT the right approach,” tweeted Michael Avenatti of Stormy Daniels fame. “If Trump has committed impeachable offenses, he must be charged and he must face a trial in the Senate. Would the Repubs take this approach? Hell no! And this is why we get outplayed.”
“Sorry, Madam Speaker,” tweetedEsquire’s Charles P Pierce. “If you really believe the president* is an unprecedented threat to the Constitution, your oath demands that you begin the process to remove him. It’s your job.”
Wrong! What the hell is wrong with the @SpeakerPelosi Congress that they absolve themselves of their duty! Nothing is criminal anymore?! Trump can do and say like a dictator as he pleases? All of his crimes are OK even if you see them? This requires a public outcry. #Disgraceful. https://t.co/7m3lElzP5n
The House’s most virulent Russiagater, however, sang a different tune.
“If the evidence isn’t sufficient to win bipartisan support for this, putting the country through a failed impeachment isn’t a good idea,” said Congressman Adam Schiff told CNN yesterday.
As you might expect, those voices in alternative media who’ve been voicing skepticism of the Russiagate narrative since the beginning have been having a ball with this one.
“BREAKING: The Democrats’ Congressional leadership is realizing that their two-year Russia conspiracy theory is not going to pan out,” tweeted journalist Aaron Maté, who has been in my opinion the single most lucid Russiagate critic for a long time now.
“If Trump is literally controlled by Putin to the point where Trump is forced to act in the best interests of Russia *at the expense of the US* – which has been the prevailing claim not of Dem fringes but its mainstream – how can it be morally justified not to impeach him???” tweeted journalist Glenn Greenwald in response to Pelosi’s comments.
How indeed? Pelosi’s comments go completely against the narrative that mainstream Democrats have been selling America for over two years now, and this close to the Mueller report amount to a rejection of that narrative. Her statement is a tacit admission that she knows Russiagate is bullshit, has always been bullshit, and will continue to be bullshit.
Anyone who actually believed Putin controls Trump, Trump subordinates US interests to Russia, and that Trump conspired with a foreign adversary to win an election – as Schiff has spent 2 years screaming he’s seen *conclusive* evidence for – would have a duty to try to impeach: https://t.co/ihPBI3ZOBG
“Is it possible that Putin has something on Pelosi?” Greenwald joked.
“Or perhaps Democratic politicians and their media allies have been knowingly feeding the party base and cable viewers unadulterated, deranged, unhinged bullshit that they now can’t carry through on with the power in their hands because it was all self-serving, manipulative dreck? Anyone who has ever believed Trump is controlled and blackmailed by Putin to the point that Putin makes Trump treasonously sacrifice America’s interests for Russia’s — and there are a lot of you — should be marching in fury in the streets over Pelosi’s refusal to impeach Trump.”
But, of course, they will not. There will be no protest against Pelosi’s opposition to impeachment because those who would lead it know there will never be any evidence that could possibly lead to a bipartisan willingness in the Senate to remove him from office.
Anyone who’s paid close and intellectually honest attention to the Russiagate circus has known since the beginning that Trump was never going to be impeached for a treasonous conspiracy with the Russian government, despite the endless fantasies inflicted upon the blinkered Maddow muppets day after day after day for over two years now. Back in 2017 I said that “Mueller will continue finding evidence of corruption throughout his investigation, since corruption is to DC insiders as water is to fish, but he will not find evidence of collusion to win the 2016 election that will lead to Trump’s impeachment,” because it was obvious to anyone who knew anything. And that has proven to be the case with uninterrupted consistency.
If those who have been driving the Russiagate conspiracy theory really believed what they’ve been pushing, they would be up in arms at Pelosi’s remarks. Instead, we see responses like Russiagate grifter Bill Palmer publishing a hilarious article titled “Nancy Pelosi is playing rope-a-dope with Donald Trump on impeachment”, explaining that her remarks were actually a brilliant 57-D chess maneuver designed to “play this Trump fool like fiddle.”
“Instead, by answering the question in this manner, Pelosi accomplishes two things,” says the Palmer Report, where sitting US senators and top Harvard law professors go for the important updates they need to continue fueling Russia hysteria in America.
“First, she manages to put off the question until she and her allies have managed to carve Donald Trump up. Second, she’s messing with him. She just insulted him by saying he’s not worth the trouble of impeachment. Pelosi is looking to bait Trump into publicly feuding with her over the question of impeachment. That way it’ll be Trump introducing the concept, not her. And that’ll serve to help put the impeachment process on the right track. Just don’t call it ‘impeachment’ quite yet.”
So that tells you a bit about where the Russiagaters are at today.
This all comes out, by the way, at the same time as a new Wall Street Journalreport that Trump once attempted to personally cajole German Chancellor Angela Merkel into ceasing to buy gas from Russia out of fear that “it will make Europe’s largest economy excessively reliant on Russian energy.” Hardly the behavior you’d expect from a Putin puppet, but then neither are the rest of the many, many other actions that this administration has taken against the interests of Moscow.
As Democratic elites back off impeachment & collusion after pushing it for 2 years, perhaps voters will conclude they’ve been misled. And perhaps a backlash will benefit the wing of the party those same elites have used the Trump-Russia hype to ward off: the actual progressives.
It is right and appropriate that those few voices on the left who’ve been sharply critical of Russiagate from the beginning are now taking some time to gloat at and mock its peddlers with increasing scorn. The centrists who chose to spend more than two years forcing everyone’s energy into this blatant psyop which escalated a cold war against a nuclear superpower were wrong, and the leftists who objected to it were right. Trump’s term is more than halfway over, and Russiagaters chose to suck all the oxygen out of the room for this brainless, fruitless, worthless endeavor instead of allowing space for progressive reform and for criticism of Trump’s actual pernicious policies from the left. And they did it on purpose.
Mock the Russiagaters. Mock them ruthlessly, and never, ever let them forget the horrible thing that they did. Never stop making fun of them and reminding them how stupid and crazy they acted during this humiliating period of American history. And never stop using it as a weapon against them. They were wrong, so they should not be leading the way on what passes for America’s political left today. Skepticism was the only appropriate response to Russiagate in a post-Iraq invasion world, and those on the left who made that appropriate response should be treated with infinitely more respect and deference than those who did not.
They were wrong, we were right, and now even Nancy Pelosi is all but admitting it. Never let them forget it.
* * *
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