Chart of the Day

To follow up on my previous post, this chart from the Frum Forum via Mark Thoma:

Labor is getting the shaft, and all the conventional wisdom is that capital deserves the return.  Things will get worse before they get better.

Naked Capitalism Link of the Day

Today's link: America For Sale, by Dylan Ratigan:

As with mortgage securitizations, the conflicts of interest are intense. Pennsylvania nearly privatized its turnpike, with Morgan Stanley on multiple sides of the deal as both an advisor to the state and a potential bidder. As you'll see, these deals are often profitable because they constrain the public's ability to govern, not because they are creating value. For instance, private infrastructure company Transurban, now attempting to privatize a section of the Beltway around DC, is ready to walk away if local governments insist on an environmental review of the project. Many of them have clauses enshrining their monopolistic positions, preventing states and localities from changing zoning, parking, or transportation options.
While the trend is worldwide, privatization of public infrastructure only came to America en masse in the 2000s. It is worth discussing, because where it has happened it has sparked deep and intense anger. In Chicago, protests flared as Mayor Richard Daley pushed the privatization deal through. In Wisconsin, recent protests and counter-protests around controversial Governor Scott Walker revolved around, among other issues, the privatization of state medical services. In Ohio, a controversy is swirling around the political proposal to put the turnpike up for sale, while in Indiana, the state toll road has been in private hands since 2006 (upsetting the truckers who are paying much higher tolls).
The political organizing is intense - on the Republican side, conservative groups are aggressively driving it as a strategy for fiscal prudence. The American Legislative Exchange Council (ALEC), the influential think tank that targets conservative state and local officials, has launched an initiative called "Publicopoly", a play on the board game Monopoly. "Select your game square", says the webpage, and ALEC will help you privatize one of seven sectors: government operations, education, transportation and infrastructure, public safety, environment, health, or telecommunications.
On the Democratic side, the Obama administration has been encouraging Chinese sovereign wealth funds to invest in American infrastructure as a way to bring in foreign capital. It was Chicago Mayor and Democratic icon Richard Daley who privatized Chicago's Midway Airport, Chicago's Skyway road, and Chicago's Parking Meters. Out of office after 22 years, he is now a paid advisor to the law firm that negotiated the parking meter sale.

Privatizing public assets is always a losing deal for the taxpayers.  Ohio is still studying privatizing the Turnpike, and since Republicans believe taxes must always go down until they reach zero, they will continue to privatize assets to pay for those tax cuts:

Ohio might get several billion dollars if it leases the Ohio Turnpike, and the director of the state Department of Transportation says most of the money would go toward projects in the northern part of the state, where the 241-mile toll road is located.

Department of Transportation Director Jerry Wray is defending the idea of leasing the turnpike amid growing opposition from leaders in the region who worry that having a private operator for the roadway could create other problems, The Plain Dealer in Cleveland reported.

"I'm not here to pick on the turnpike," Wray said. "We are looking at what do we need to do to benefit the state, and this is an asset that has value to us that's not being leveraged."

Ohio lawmakers are working on the two-year state budget, and the Senate version would provide for the Legislature to guide the bidding process if the turnpike were sold or leased.

Republican Gov. John Kasich wants to lease the roadway but ensure the deal benefits Ohio, Wray said. He said Kasich would prefer a 30-year lease that includes a payment up front and a share of toll revenue each year, and the governor is hoping to get at least $2.4 billion from any lease deal.

I love that Jerry Wray uses the word leveraged.  That is such a private equity style word that translates to me as make a bunch of money by gambling.  Leveraged really means used as collateral to borrow against, but in the end, privatization means making private entities rich at the expense of taxpayers.  Don't let anybody tell you different.

Naked Capitalism Link of the Day

Today's link: U.S. Chamber's Tom Donohue tells Atlanta Rotary how business is faring in D.C., at the Saporta Report.  Yves said to read the last few paragraphs, and it was worth it:

Surprisingly, Donohue did advocate for tax increase. “I do want to increase the federal gas tax,” he said. “We haven’t done that in 18 years.”
Because vehicles have become so much more fuel efficient, drivers — including truckers — have been paying about half of what they used to pay in gasoline taxes. More revenue is needed to properly maintain the nation’s roads and highways. Donohue proposed increasing the gas tax by 5 cents a year for four years.
To those who would oppose such a gas tax increase, Donohue’s message was simple. “Don’t pay it,” he said. “Stay home.”
For much of his talk, Donohue was quite critical of the Obama administration. But he did praise the work that Jeffrey Immelt, CEO of GE (General Electric), is doing as head of Obama’s economic advisory panel.
In one of the funnier moments during his Rotary talk, Donohue was asked if Congress was going to raise the debt ceiling.
Yes, it will be raised, Donohue answered, mainly because the country can not afford to not pay its bills. To those newly-elected representatives who say they aren’t going to raise the debt ceiling and will shut down government, Donohue said the U.S. Chamber has its own message: “We’ll get rid of you.”
He then went on to praise U.S. House Speaker John Boehner for his Congressional leadership.
“He’s growing into his shorts,” Donohue said. “He’s put on his big boy pants.”

I think it is interesting that he is pushing a gas tax increase.  I would assume the construction companies who support the U.S. Chamber would like to see some work.  But even better is the warning to the Tea Party that if they cut off government spending to businesses and contractors, they will be defeated.  This should be fun to watch.  In other words, vote for tax cuts and decreased regulation, but don't take the money the government spends with us.

Will Greece Be Like Lehman?

Some are speculating about money market mutual funds breaking the buck:

Lending weight to the fears of another Lehman crisis, regulators are warning that in such a situation, even super-safe money market funds may not provide the risk-free refuge they proclaim to offer.
According to a recent report by Fitch, as of February, 44.3 percent of prime money market funds in the United States were invested in the short-term debt of European banks. Some of those institutions, like Deutsche Bank and Barclays, do not have dangerous Greek exposure. But some of those funds also hold shares of French banks like Société Générale, Crédit Agricole and BNP Paribas, which do have significant Greek bond holdings — about 8.5 billion euros, or, in the case of BNP and Société Générale, about 10 percent of their Tier 1 capital.
This month, the president of the Federal Reserve Bank of Boston, Eric S. Rosengren, warned that the large share of European banks in American money market fund portfolios posed a Lehman-like risk if, in the wake of a default in Europe, panicky investors took their money out all at once.
“Money market mutual funds have the potential to be impacted should there be unexpected international financial problems emanating from Europe,” he said in a speech at Stanford.
The idea that European banks, not those in the United States, would take a hit if Greece defaulted, has sustained a view that such a crisis might be containable. But according to a recent analysis by The Street Light financial blog, this misses the point. It will be American banks and insurance companies that will have to make the lion’s share of default insurance payments to European institutions if Greece fails.

That would make this slowdown into another freefall.  I'm afraid this time taxpayers will take the damage yet again, but hopefully it doesn't cause a complete meltdown.  If taxpayers socialize more bank losses, bank profits ought to be confiscated whenever there are any.

Today's Financial System

Via Ritholtz, South Park nails the finance sector:

Naked Capitalism Link of the Day

Today's link, The Banking Emperor Has No Clothes, by Simon Johnson at the NYT:

In a major speech earlier this week to the American Bankers Association’s international monetary conference, Treasury Secretary Timothy F. Geithner laid out his view of what went wrong in the financial sector before 2008, how the crisis was handled 2008-10 and what is needed to reform the system. As chairman of the Financial Stability Oversight Council and the only senior member of President Obama’s original economic team remaining in place, Mr. Geithner’s influence with regard to the banking system is second to none.

Unfortunately, Mr. Geithner’s speech contained three major mistakes: his history is completely wrong, his logic is deeply flawed, and his interpretation of the Dodd-Frank reforms does not mesh with the legal facts regarding how the failure of a global megabank could be handled. Together, these mistakes suggest that one of our most powerful policy makers is headed very much in the wrong direction.
On history, Mr. Geithner places significant blame for the pre-2008 excesses on Britain and other countries that pursued light-touch regulation. This is reasonable – though surely he is aware that the United States has led the way in lightening the touch of regulation, at least since 1980. A senior British official retorted immediately, “Clearly he wasn’t referring to derivatives regulation, because as far as I can recollect, there wasn’t any in America at the time.”

In the midst of the meltdown, when Obama appointed Geithner, I wasn't sure what to make of the move.  The stock market rallied when he was announced, which was extremely rare at the time, and it was clear that Geithner had been a major player during the roller coaster ride in September, October and November.  I didn't realize how big of a bank whore he was.  This was by far the worst appointment Obama made, with maybe the possible exception of Larry Summers.  Paul Volker would have been 10 times better in my opinion, as he would have taken a big stick to the big banks, who really need busted up.  When placed in contrast to Obama's decision to retain Robert Gates at Defense, the appointment of Geithner is dark, dark night to Gates' brilliant sunshine.  Geithner really needs to move on to some highly-paid Wall Street job, where he can steal from the outside instead of helping banks steal from the inside.  His decision to pay Goldman Sachs in full for their bets on AIG was indefensible, and in a well-run society would get him fired from any post.

Ayn Rand vs. Christianity

Via mistermix at Balloon Juice, the American Values Network tries to highlight the anti-Christian beliefs of Ayn Rand.  Again, I find that her justification of selfishness and hatred of government are what draws so many Christian conservatives to her "literature," even though it attacks their belief in Jesus.  So long as they can feel that God is rewarding them for their "hard work" and "brilliance," they can likewise believe that God is punishing those who the government tries to help out, because they are shiftless and lazy.  It is a pretty good gig, believe Jesus will save you, even as you ignore His Gospel teachings.



Mark Silk isn't comfortable with the video's approach:

It's not difficult to make the case that the Ryan budget plan has a lot more in common with Rand's teachings than Jesus'. Yet there have been devout Christians in the past who have embraced draconian social policies towards the poor. Call me prissy, but I'd have been happier if the video traded less heavily in guilt by association with an anti-Christian atheist.

I think that in the end, it is appropriate to question why Christians support the radical Republican cuts to social spending. The thing to remember is that many of the conservatives or libertarians who support drastic cuts to social spending don't consider themselves Christians, or just believe that private charity can take care of the needs of the people. They will always be able to justify slashing the social safety net to put more money in their pockets. This video won't change that.

Joseph Welch vs. Joe McCarthy

June 9, 1954, the end of the cultural and political influence of Tailgunner Joe McCarthy:

On June 9, 1954, the 30th day of the Army-McCarthy Hearings, McCarthy accused Fred Fisher, one of the junior attorneys at Welch's law firm, of associating while in law school with the National Lawyers Guild (NLG), a group which J. Edgar Hoover sought to have the U.S. Attorney General designate as a Communist front organization. Welch dismissed Fisher's association with the NLG as a youthful indiscretion and attacked McCarthy for naming the young man before a nationwide television audience without prior warning or previous agreement to do so:

Until this moment, Senator, I think I have never really gauged your cruelty or your recklessness. Fred Fisher is a young man who went to the Harvard Law School and came into my firm and is starting what looks to be a brilliant career with us. Little did I dream you could be so reckless and so cruel as to do an injury to that lad. It is true that he will continue to be with Hale and Dorr. It is, I regret to say, equally true that I fear he shall always bear a scar needlessly inflicted by you. If it were in my power to forgive you for your reckless cruelty I would do so. I like to think that I am a gentle man but your forgiveness will have to come from someone other than me.

When McCarthy tried to renew his attack, Welch interrupted him:

Senator, may we not drop this? We know he belonged to the Lawyers Guild. Let us not assassinate this lad further, Senator. You've done enough. Have you no sense of decency, sir? At long last, have you left no sense of decency?

McCarthy tried to ask Welch another question about Fisher, and Welch cut him off:

Mr. McCarthy, I will not discuss this further with you. You have sat within six feet of me and could ask – could have asked me about Fred Fisher. You have seen fit to bring it out. And if there is a God in Heaven it will do neither you nor your cause any good. I will not discuss it further. I will not ask Mr. Cohn any more questions. You, Mr. Chairman, may, if you will, call the next witness.

The gallery erupted in applause.

Naked Capitalism Link of the Day

Today's link: The Times' Andrew Ross Sorkin Gives Goldman a Rubdown, at Rolling Stone:

First of all, I have asked Goldman about the “Big Short” multiple times, as have other reporters,  and this is the first I’m hearing about $5 billion in long bets in "other parts of the company." I believe in that magical $5 billion about as much as I believe in the mythical private-sector hedges against AIG Goldman claimed to have. You might remember those – they were the reason Goldman claimed it didn’t actually need the $12.9 billion in public money it got through the AIG bailout, because it would have been paid off by private hedges anyway had the government not bailed out AIG. Goldman took the $12.9 billion of the public’s money anyway, however, but not because it needed it – no, sir!
When Lloyd coughed up that bit about the AIG hedges in testimony before Levin last year, there wasn’t a person in Washington who didn’t know it was bullshit. I have a similar feeling about these new numbers Goldman is offering, as do most of the sources of mine who saw the Sorkin piece today. “WTF seriously?” wrote one lawyer friend of mine. “Did Lloyd send ARS a letter from his Mom verifying the data?”
But hey, let’s be generous, and say that it’s all true. Does it mean jack shit? Does it have anything to do with anything?
Absolutely not. How much money Goldman did or did not make shorting mortgages in 2007 dulls not one iota the main charges in the report, which are that Goldman management saw that it was overexposed to mortgages in late 2006 and decided to get out from under them by dumping them on unsuspecting clients, then lying to those same clients about that, and then finally betting against them.

Goldman made a fortune at the expense of everyone else, and when their bets with AIG weren't going to get paid because AIG was insolvent, the U.S. government stepped in and gave Goldman 100 cents on the dollar for those bets.  Excuse me, the taxpayers that Goldman had already screwed gave them 100 cents on the dollar.  It's a pretty good gig if you can get it.  But having your former CEO as Treasury Secretary helps.  Then again, I don't think Geithner ever worked at Goldman, but it sure seems like he did, or he wants to.

Naked Capitalism Link of the Day

Today's link: Texas Still Has It's Rustlers, and Men in White Hats Chasing Them, at the NYT:

Still, you can trust your mother, but cut the cards. That is why the 15,000-member cattle raisers association, founded in 1877 by a band of rustler-weary ranchers, has 29 special rangers, including Mr. Dumas, all with the power of arrest, all wearing guns and white hats. Using sophisticated databases (including a file of more than 100,000 registered brands) and plain common sense (checking cow pies for tire tracks), these rangers investigate thefts of livestock and property and inspect millions of cattle a year.
The rangers have the respect of cattle rustlers; they know this because a rustler said so. A few years ago, they helped to pen Jerome Heath Novak, a clever, clean-cut cattle rustler from a proud ranching family in Brazoria County who was so audacious in his nighttime thefts that he even stole livestock from Nolan Ryan, the baseball legend and Texas icon. He was caught only after taking to auction a stolen calf with a distinctive barbed-wire scar, which someone noticed.
Before being sent to prison, a remorseful Mr. Novak, then 27, sat down with rangers to help them understand the mind of the cattle rustler. He confessed to not liking sale barns with motion lights or people living on site, and said he avoided ranches and sale barns that had the cattle raisers association’s blue membership sign on display.

Well, some things never change.  It was a little chilling back in 2008 when there were reports out of Kansas where people were going to grain bins and stealing semi loads of grain.  There are just some things I would expect not to get stolen, and grain from the bins was one of them.

Naked Capitalism Link of the Day, Saturday catch-up

Saturday's link, Private equity debt cycle is wobbling again, at the Financial Times:

At the end of 2008, private equity firms were contemplating $506bn in deal loans that had to be repaid by 2015. By the end of May, 59 per cent of that had been dealt with by means of repayments, defaults and extensions, according to figures from S&P’s Leveraged Commentary and Data. KKR, to take one example, has refinanced about 55 per cent of the $75bn of debt it has on the companies in its US portfolio.
Moreover, the “CLO” machine that financed as much as 70 to 80 per cent of the feverish buying last time around began to rev up once more. May saw a steady stream of new collateralised loan obligations, the structured financing vehicles that financed buy-outs the last time round. Indeed, May was the heaviest month for such issuance since September 2008, the month the financial world came crashing down with the implosions of Lehman Brothers and AIG. Some analysts expect CLO issuance to total $10bn this year, more than double last year’s $4bn issuance, LCD notes.
All the buy-out firms that paid too much for the companies they acquired and put too much debt on them have reason to be grateful that CLOs exist, since they made the buy-out boom possible. In most cases, managers of the CLOs cared little for the credit fundamentals of the firms in which they invested and cared a lot about yield and fees.
Because they were just happy to clip coupons and collect fees, these managers were willing accomplices when the private equity owners came to them for deals to extend the debts of their companies. At the same time, high-yield funds and bank loan funds were also happy to refinance deal debt, given the sizeable inflows. (emphasis mine)
Things may be about to change, however. Returns in high-yield and leveraged loans continue to be attractive compared with everything else. Absolute rates to finance leveraged buy-outs are lower than they were when KKR and TPG bought the Texas utility in the first place and the terms the banks are quoting mean that financing for deals is even more attractive than it was the last time round. Indeed, until this week, technicals in the larger market have appeared strong.

That portion in the bold accounts for almost all of the investment bank problems which led to the Great Recession.  For so-called masters of the universe, they were extremely short-sighted.  These people have no credibility with me, they are massively overpaid, and are a general drain on productive society.

Naked Capitalism Link of the Day

Today's link: Mysterious fund allows Congress to spend freely, despite earmark ban, at CNN:

Roughly $1 billion was quietly transferred from projects listed in the president's defense budget and placed into the "transfer fund." This fund, which wasn't in previous year's defense budgets (when earmarks were permitted), served as a piggy bank from which committee members were able to take money to cover the cost of programs introduced by their amendments.
And take they did.
More than $600 million went to a wide number of projects, many of which appear to directly benefit some congressional districts over others.

Well, that is quite the surprise.  Next, we'll find out that college football players receive money and perks from boosters.

What Jim Tressel Had To Notice

Mark Titus, OSU basketball bencher and Club Trillion founder (h/t Cubs dad):

While I don’t really know anything about the whole tattoo ordeal, I’m almost certain that there was something shady going on with the car dealer.  In fact, as the news of the free tattoos and sold merchandise or whatever came out, I kept telling my family how funny it was that they were getting busted for tattoos and gold pants when I was pretty sure they had been getting serious discounts on cars for years. Again, I have no “inside information” and really only know what the general public knows.  But it doesn’t exactly take top notch detective skills to figure this one out.  Anyone who spent any time on Ohio State’s campus while I was there could tell you that there were an unusually high volume of brand new Dodge Chargers driving around on campus, and just about all of them had tinted windows and rims on the outside with Ohio State football players behind the wheel on the inside.  Now, I understand that there’s a chance these guys all paid the same price for their cars that normal citizens like you and I would pay, and I honestly hope that they did.  But my intuition has told me for years that something is off.  I’m not sure how much the monthly scholarship checks the football team got were for, but when I was on my basketball scholarship for my first two years at Ohio State, I was only given $1,100 a month.  That might sound like a lot of money at first thought, but you have to realize that these checks had to cover the monthly cost of rent, utilities, food, gas, entertainment, tattoos, trips to the strip club, bottles off the top shelf, weed, hookers, blow, and – on top of all of that – child support.  I wouldn’t necessarily say I struggled to pay all my monthly bills, but as you can imagine, I sure as hell never had enough of a cushion to afford a $400 monthly car payment either.

I'm sure Jimmy T would be shocked, just SHOCKED, to find out that all those nice new cars in the parking lot at practice weren't being paid for by the players whose homes he'd visited to recruit them.  As I said before, a friend of mine told me about Lorenzo "stylin' in his Benzo" Styles when he was playing in the mid-90's.  This couldn't have been something new.  Of course, Titus's post brought all the idiot Ohio State loons out of the woodwork for telling them the sky's blue (well, when it isn't raining).  But everybody in Ohio who happens to not be a Buckeyes fan knows how that works.  There's two reasons that OSU moved past Notre Dame for most hated college football team in the country: they win, and their so-called fans are obnoxious idiots.  Congratulations, you're #1 (and a big #2).

Naked Capitalism Link of the Day

Today's link: How gas drilling contaminates your food, at Salon.com:

"For sustainable agriculture, fracking is a disaster," says Jaffe. The gas rush started in the South and West, but has spread to the East and now affects 34 states. Under much of West Virginia, Ohio, Pennsylvania, and New York lies a 400-million-year-old geographic formation called the Marcellus Shale. Although estimates vary, the shale may hold 50 trillion cubic feet of recoverable natural gas, enough to meet New York State's needs for 50 years. To see what fracking can do to food production, Jaffe has only to look at what has happened to some of his colleagues in nearby Pennsylvania, where the first fracked well came into production in 2005, and where there are now more than 1,500.
Last year, the Pennsylvania Department of Agriculture quarantined 28 cattle belonging to Don and Carol Johnson, who farm about 175 miles southwest of Jaffe. The animals had come into wastewater that leaked from a nearby well that showed concentrations of chlorine, barium, magnesium, potassium, and radioactive strontium. In Louisiana, 16 cows that drank fluid from a fracked well began bellowing, foaming and bleeding at the mouth, then dropped dead. Homeowners near fracked sites complain about a host of frightening consequences, from poisoned wells to sickened pets to debilitating illnesses.

I wouldn't be surprised if environmental concerns over fracking may be a bit overstated, but drillers need to be responsible for and recover the fracking fluids.  The potential to contaminate water supplies is great, and must be addressed.  I must say that I'm glad I'm not over the Marcellus Shale.  Somebody else can make the money for mineral rights and royalties, I don't want to take the risk associated with the potential pollution.

RIP Mark Haines

I think we need more people saying stuff like this:

Unfortunately, too many people make the argument which isn't supported by facts, and they get away with it. (h/t Ritholtz)

Naked Capitalism Link of the Day

Today's link: Public Schools Increase Fees Charged To Students, at the Wall Street Journal:

Budget shortfalls have prompted Medina Senior High to impose fees on students who enroll in many academic classes and extracurricular activities. The Dombis had to pay to register their children for basic courses such as Spanish I and Earth Sciences, to get them into graded electives such as band, and to allow them to run cross-country and track. The family's total tab for a year of public education: $4,446.50.
"I'm wondering, am I going to be paying for my parking spot at the school? Because you're making me pay for just about everything else," says Ms. Dombi, a parent in this middle-class community in northern Ohio.
Public schools across the country, struggling with cuts in state funding, rising personnel costs and lower tax revenues, are shifting costs to students and their parents by imposing or boosting fees for everything from enrolling in honors English to riding the bus.
At high schools in several states, it can cost more than $200 just to walk in the door, thanks to registration fees, technology fees and unspecified "instructional fees."

This is a pretty sad state of affairs.  The public school system made this country great.  I can understand the conservative case that teachers and administrators are highly compensated.  That came about because of economic growth in the 1990's allowed public sector pay to grow while private sector pay stagnated.  But much of the budget shortfalls results from tax cuts to make states more "competitive."  I hate to tell you, but poor education won't make us more competitive.  The schools featured in the Wall Street Journal article are fairly well-off suburban schools, where parents can afford add-on fees.  Other areas aren't so lucky.  The Republican policy over the past thirty years has been to slowly cut back on the levelling effect of taxation by centralized government, putting more on the backs of local officials.  That works great for their constituents in wealthy suburban areas, but screws folks in rural and inner-city areas.  It also boosts property values in the suburbs, while cutting them in the other places.  Those are features, not bugs.  Not too many people in the inner-cities vote for Republicans, and folks in the rural areas will, even if Republicans come to town and burn down their schools.  Got to cling to the religion and guns, ya know.

This slow motion decrease in civil society will continue as long as nobody calls the Republicans on this.  Scott Walker, John Kasich, Mitch Daniels and other tyrants are cutting the burden on the wealthy and decreasing services for the working and middle classes.  Paul Ryan proposed getting rid of all taxes on dividends, capital gains, interest and estates.  In other words, if you already have money, don't work, that way you don't pay any taxes.  That goes directly against Republican claims to incentivize work by lowering taxes.  The consequences of this plan are that normal people, who don't have great wealth, won't be given the opportunities of a better life which were given to their parents.  One of the good things which came out of the Depression was a genuine feeling that those with more would help those with less.  That altruism has been eroded by the Republican campaign to teach selfishness as a virtue.  Ayn Rand would be proud, nearly half of the country espouses her vile philosophy of cruelty.

Eight Men Out

Speaking of the movie, here's the trailer.  It doesn't show the scoreboard I was talking about, but it is a reminder of a great movie.



Also, the Reds won more games that season, and would have won that Series even if the Sox were on the up-and-up. Throwing the series was just a good explanation for Sox fans as to why they lost.

Update: You can see a glimmer of crazy in Charlie Sheen in this clip.

Give Us More Prosecutions on Wall Street

This op-ed says it well:

It is sound public policy to encourage workers to save for retirement, instead of relying on the promise of a defined benefit pension from an employer that may ultimately disappear, but contributions-defined pensions simply can't work without a stock market that generates returns that follow the growth of corporate profits.
Americans expect carnivals and casinos to be stacked against them -- gambling is entertainment, and losses are expected -- but capital markets are where the nation's savings are supposed to be put to best uses, drive growth and create opportunities for the next generation.
These days, too much money and talent are directed to financial engineering -- efforts to design the next complex derivative -- and not enough is going into physics and real engineering: designing electric cars, new materials, and products and services that will define U.S. global competitive success and prosperity for the next 25 years.
The carnival culture on Wall Street is attracting too many young people to business schools to study economics and finance, instead of pursuing physics and engineering. That's why the best business schools are overwhelmed with applicants from Connecticut and California, while engineering colleges depend on students from China and Asia, who will then return home to compete with American businesses.
Increasingly, venture capital and stock investors look abroad for the best returns, and this deprives small and moderate sized U.S. companies of capital needed to expand and invest in new ideas and create jobs.
The Wall Street casino has misdirected what capital is invested in the U.S. During the boom of the last decade, America overinvested in housing and underinvested in industry by persuading investors to purchase bonds that funded "creative mortgages" to folks who could not afford the 4,000-square-foot homes purchased with them, and to otherwise prosperous Americans who foolishly purchased second and third homes as investments.
All proved poor bets. As the mortgage meltdown continues, consider how much more competitive the U.S. economy would be today -- and how many more good-paying jobs Americans would have -- had those homes never been built and that money been invested in new technologies and expanding sound enterprises.

I couldn't agree more.  Please ask yourself what actual value these traders on Wall Street provide to earn their outrageous salaries and bonuses.  I can only see that they are skimming larger and larger percentages of the economic pie by various schemes and hidden charges.  Are they doing anything which is productive, or are they looters?  I am surprised that Randian believers seem to support these guys taking so much without doing anything productive.  Her heroes were engineers and industrialists who did important things, not the leeches, or in the words of Matt Taibbi, vampire squids, who take their percentage from other people's work.  The fact that bankers have operated much in the same way as carnies, but on a grossly larger scale, only makes it worse.  Just because a guy wears a $3000 suit, it doesn't mean he's not a grifter.

More On Stupid Competition Amongst States

Richard Longworth (h/t the Dish):

This competition is not new, but it seems to have heated up since 2009, when Kansas passed a law that lets companies relocating to the state keep 95 percent of their employee withholding tax for up to 10 years. This has lured several companies to move from Kansas City, Missouri, to Kansas City, Kansas (known locally as KCK) and its suburbs, bringing several hundred jobs with them. Stung by the moves, the Missouri KC has offered multi-million-dollar packages to keep firms, like the National Association of Insurance Commissioners and AMC Entertainment, from decamping to the Kansas side.
Top Corporate Leaders Urge Governors to Stop Poaching Neighbors’ Businesses, Kansas City Star, April 11, 2011
Businesses Stand to Gain Most in Rivalry of States, New York Times, April 7, 2011
Kansas and Missouri aren't the only Midwestern states raiding each other's watermelon patches. The governors of Wisconsin, Illinois and Indiana, which would seem to share a common economy, have been squabbling over which state has the lowest taxes, to the point that Indiana and Wisconsin have posted billboards on their state lines urging Illinois companies to flee north or east, as the case may be (presumably passing en route all those Democratic legislators from Indiana and Wisconsin who hid out in Illinois to avoid having to vote for objectionable legislation back home.)
In Kansas and Missouri, all this has reached the point that even businesses in the two KCs, which presumably could benefit from these bribes, have told their two states to grow up. Seventeen leading businessmen from both sides of the border sent an open letter to Kansas Gov. Sam Brownback and Missouri Gov. Jay Nixon, urging them to voluntarily "agree to a bilateral halt" in this "economic border war."
Nixon responded positively. Brownback basically told the businessmen to go jump in the Missouri River. This probably has something to do with the fact that, so far, Kansas has been winning most of these battles. 

Republicans have staked their political future on being able to prove that lower taxes mean more jobs, so they have to go around slashing taxes and spending, and then bribing businesses to move to their state, preferably from a higher tax state.  Unfortunately, this means cuts to primary, secondary and higher education, cuts to local governments and public safety, cuts to libraries and cuts to infrastructure spending.  Those are all long-term investments to improve the work force and the livability of the state which are being cut.  The short-term payoff of new jobs (taken from a neighboring state) might get a politician reelected or allow him to move to higher office (failing up, as it were), but come time those incentives expire, the business will start shopping for more incentives, possibly in a state which is willing to undermine long-term investment for short-term job growth (see Sears).  This is a failing strategy for all but the companies, and even they are undermining the long-term workforce quality where they move to.  When businesses are requesting that it stop, you know it has gone too far. 

Who Owns U.S. Debt?

Robert Reich says rich Americans (via Mark Thoma):

Forty years ago, wealthy Americans financed the U.S. government mainly through their tax payments. Today wealthy Americans finance the government mainly by lending it money. While foreigners own most of our national debt, over 40 percent is owned by Americans – mostly the very wealthy.

This great switch by the super rich – from paying the government taxes to lending the government money — has gone almost unnoticed. But it’s critical for understanding the budget predicament we’re now in. And for getting out of it.  

Over that four decades, tax rates on the very rich have plummeted. Between the end of World War II and 1980, the top tax bracket remained over 70 percent — and even after deductions and credits was well over 50 percent. Now it’s 36 percent. As recently as the late 1980s, the capital gains rate was 35 percent. Now it’s 15 percent.

Not only are rates lower now, but loopholes are bigger. 18,000 households earning more than a half-million dollars last year paid no income taxes at all. In recent years, according to the IRS, the richest 400 Americans have paid only 18 percent of their total incomes in federal income taxes. Billionaire hedge-fund and private-equity managers are allowed to treat much of their incomes as capital gains (again, at 15 percent).

He doesn't have any solid numbers here as to what the wealthiest own, because I'm sure a lot of that debt is held by mutual funds and pension funds.  I would guess most wealthy Americans have fairly small holdings in Treasuries as a percentage of their portfolios.  Regardless, he gets the chance to repeat a lot of numbers which can use repeating. In the meantime, Paul Krugman points out that Paul Ryan is again calling for lower taxes on the wealthy to create growth.  I still want Paul Ryan to explain where all the growth is from the Bush tax cuts.  The fact of the matter is that the wars in Iraq, the Bush tax cuts and the Great Recession are most responsible for the deficits we are currently running.  Throw in Medicare Part D, and you have the Republicans as primarily responsible for the mess we are in.  CBPP points that out again.