Category Archives: Financial Archive

Summers: The Courage to Say Yes to Wall Street?

I am always glad when President Obama gives a good populist speech on economic issues. Unlike many folks both on the left and right, I believe that speeches and words do matter, and I’d always rather have Obama framing the message in a populist way. The irony, though, is that the hot rumor blazing through DC right now is that Larry Summers is about to be named as Obama’s pick for the Chair of the Federal Reserve. Larry Summers, the ultimate anti-populist. Larry Summers, the guy who helped pushed the bank deregulation bill that created these monstrous Too Big To Fail banks.


If the rumor is true, well … wow, that is depressing. It is hard to imagine a worse pick politically for Obama than Larry Summers. There are so many reasons that this is the wrong pick for that job that I will run out of time to write them all long before I stop thinking of new reasons to list. It’s not just that Summers is the poster child for banking deregulation. It’s actually the gender thing that has to top the list. The other leading candidate is achingly obvious: Janet Yellen is incredibly well-experienced, incredibly well-credentialed, and highly respected by policymakers and economists alike. And Obama is going to blow off this kind of woman, is going to blow off a perfect chance to make history by appointing the first woman Fed chief, so that he can appoint a man fired by Harvard for making sexist comments about women? Seriously, Mr. President?


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America's Emerging Housing Crisis

The current housing recovery may be like manna to homeowners, but it may do little to ease a growing shortage of affordable residences, and could even make it worse. After a recession-generated drought, household formation is on the rise, notes a recent study by the Harvard Joint Center on Housing Studies, and in many markets there isn’t an adequate supply of housing for the working and middle classes.


Given problems with regulations in some states, particularly restrictions on new single-family home development, the uptick in housing prices threatens both prospective owners and renters, forcing people who would otherwise buy into the rental market. Ownership levels continue to drop, most notably for minorities, particularly African Americans. Last year, according to the Harvard study, the number of renters in the U.S. rose by a million, accompanied by a net loss of 161,000 homeowners.


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SAC Capital pleads not guilty; reinsurance unit eyed

<span class="articleLocation”>Billionaire investor Steven A. Cohen’s hedge fund pleaded not guilty on Friday to insider trading charges in federal court, as questions also surfaced about the future of SAC Capital’s Bermuda-based reinsurance unit, SAC Re. Ratings company, A.M. Best Co., and the Bermuda Monetary Authority, which regulates insurers on the island, said they were monitoring developments one day after prosecutors charged the hedge fund and various affiliates with four criminal counts of securities fraud and one count of wire fraud.


A year ago A.M. Best gave SAC Re a top rating. But if the company were to cut its rating of the unit, which had $567.8 million in assets at the end of 2012, in the wake of criminal charges, people may shy away from doing business with the insurer, industry experts said. “Buyers of reinsurance from SAC Re will be on the phone with their brokers telling them to move out,” said Andrew Barile, an independent industry consultant. Buyers have plenty of choice in the reinsurance industry, experts said, adding it would be relatively easy to change companies.


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‘Dark Intellectual Property’: Why We Need a Kickstarter for Patents

You’ve heard of the “deep web,” the content that’s behind firewalls or paywalls or that’s otherwise un-indexable by search engines. You also may have heard of “dark social,” the vast trove of social traffic that’s invisible to most analytics programs. What you may not know about yet is “dark IP,” the intellectual property (IP) that remains on the shelf: undiscovered, unexplored, untapped.


Deep web, dark social, and dark IP all highlight the fact that our ability to catch so much in the net by dragging the surface (to use Mike Bergman’s analogy) actually still misses the invisible wealth of what lies beneath. But dark IP is different than the other hidden-depths knowledge since it’s also unfair. Because taxpayers paid for much of the research — whether basic understanding with long-term benefits or more applied research with shorter-term benefits — that now lies collecting dust on university shelves.


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Russian hackers got 160 million bank card numbers, but that wasn't worst part

Russian hackers infiltrated the corporate networks of some of the largest US corporations over a seven year period, stealing more than 160 million credit card numbers and hundreds of millions of dollars, the largest such scheme ever prosecuted in the US, said federal authorities unveiling the indictments Thursday. Targeting corporations that were specifically engaged in financial transactions, the hackers stole data that allowed them to reproduce fake cards they were able to sell or later use to withdraw money from ATM machines worldwide.


Among the 15 businesses allegedly hit by the four Russian and one Ukrainian hacker from August 2005 to July 2012: 7-Eleven, JCPenney, JetBlue, and Dow Jones. One of the Russians was also charged separately with hacking into the business-operation servers of the NASDAQ stock exchange from 2008-10 and manipulating data. But that hack did not reach the exchange’s trading platform where stocks are bought and sold, authorities said.


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Collateral Damage: QE3 and the Shadow Banking System

Rather than expanding the money supply, quantitative easing (QE) has actually caused it to shrink by sucking up the collateral needed by the shadow banking system to create credit. The “failure” of QE has prompted the Bank for International Settlements to urge the Fed to shirk its mandate to pursue full employment, but the sort of QE that could fulfill that mandate has not yet been tried.


Ben Bernanke’s May 29th speech signaling the beginning of the end of QE3 provoked a “taper tantrum” that wiped about $3 trillion from global equity markets – this from the mere suggestion that the Fed would moderate its pace of asset purchases, and that if the economy continues to improve, it might stop QE3 altogether by mid-2014. The Fed is currently buying $85 billion in US Treasuries and mortgage-backed securities per month.


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Analysis: What about the workers … and their share of income?

Nothing lasts forever but a global trend that set in 30 years ago shows no sign of ending: a steep rise in the share of income that goes to profits and a corresponding decline in labor’s slice of the economic pie. The imbalance, which is driven by technical change, the waning clout of unions and the rise of financial markets, raises issues that are primarily political.


At what point will public opinion decide that the pendulum has swung too far towards the owners of capital? Should taxes and transfers be tweaked to redistribute income more fairly? But the trend also feeds into an economic debate over the conventional assumption that modest wages are good for growth because they help productivity gains and hold down inflation. Jeff Madrick with the New America Foundation in Washington argues that low wages are restraining recovery from the Great Recession and were a root cause of the financial crisis that triggered it.


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Hating On The Welfare State While Pushing Taxpayer-Funded Vacations

A not insignificant portion of movement conservatism involves pundits and activists scamming credulous readers/viewers/donors out of their money. RedState’s Erick Erickson hawks transparently fraudulent “Instant Millionaire” schemes to his email list subscribers. Dick Morris raised funds for a super PAC which then turned around and funneled money right back to Dick Morris. Talk radio is saturated with ads for gold Krugerrands, survival seeds, food insurance, and other poor investmentsthat conservative talkers are paid handsomely to endorse.


The unchallenged king of right-wing swindling, however, is Newsmax. The conservative magazine is constantly spamming its subscribers with messages promoting “miracle drugs,” warnings from quack doctors hyping unproven therapies for dangerous medical conditions, and investment tips gleaned from the New Testament. A recent promotion from Newsmax, also blasted out by the conservative Christian Broadcasting Network (CBN), shows that the commitment to squeezing cash from gullible followers trumps even basic conservative ideology. The two anti-welfare-state media outlets are pushing their audience to take advantage of a “weird trick” to go on taxpayer-funded vacations and “add $1000 to monthly Social Security checks.”


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Former Senior Executive of ArthroCare Corp. Pleads Guilty in $400 Million Securities Fraud Scheme

A former senior executive of ArthroCare Corp., a publicly traded medical device company based in Austin, Texas, pleaded guilty for his role in a scheme to defraud the company’s shareholders and members of the investing public by falsely inflating ArthroCare’s earnings, announced Acting Assistant Attorney Mythili Raman of the Department of Justice’s Criminal Division and U.S. Attorney Robert Pitman of the Western District of Texas. The plea was taken under seal on June 24, 2013, and unsealed late yesterday.


John Raffle, 45, of Austin, pleaded guilty before U.S. Magistrate Judge Mark Lane in Austin to conspiracy to commit securities, mail and wire fraud and two false statements violations.  Raffle was the senior vice president of Strategic Business Units at ArthroCare, overseeing all sales and marketing staff at the company.  Raffle admitted that he and other co-conspirators falsely inflated ArthroCare’s sales and revenue through a series of end-of-quarter transactions involving ArthroCare’s distributors and that he and other co-conspirators caused ArthroCare to file a Form 10-K for 2007 and Form 10-Q for the first quarter of 2008 with the U.S. Securities and Exchange Commission that materially misrepresented ArthroCare’s quarterly and annual sales, revenues, expenses and earnings.  As part of his plea, Raffle agreed that his conduct and the conduct of his co-conspirators caused more than $400 million in losses to shareholders.


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The Rise and Fall of the DarkMarket

An organization called the DarkMarket sounds like something from Harry Potter, but the actual organization was more ominous than anything Voldemort could concoct. This group of cyber criminals peeked at over 2,500 members in 2008 and sold one another a variety of stolen information, from back account numbers to Social Security numbers to stolen login information. It also distributed hacking guides, viruses to use as blackmail leverage and even equipment to defraud card user.


The currency in this organization was the destruction of lives. Notice the word “was.” The FBI infiltrated and disbanded the DarkMarket in 2008. The physical market never existed, but there was a gathering of sorts: many site participants used the free Wi-Fi of an Internet café in England.The site took advantage of escrow payments to insure delivery and quality of goods. Administrators wanted to make transactions safe. Irony, anyone?


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