Tuesday, June 30, 2009

Death of Bankruptcy Law

"The US Supreme Court on Tuesday cleared the way for Chrysler LLC to exit bankruptcy court, lifting a stay on its proposed sale to a group including Italy's Fiat SpA. ... But the order is a setback for a group of Indiana pension funds and others who maintained the government's heavy-handed treatment of creditors in the case could chill private lending to distressed firms and alter the rules of bankruptcy reorganizations. ... Thomas Lauria, a White & Case [W&C] lawyer who led the legal challenge, said his experiences in the past month 'cause me to ... directly raise the question as to whether our judiciary is today able to fulfill its constitutional mission, that is, to ensure that the rule of law prevails--particularly in the face of perceived crisis.' ... The brief stay imposed by the high court on the Chrysler transaction shocked the administration Monday, provoking concerns that the White House's approach to restructuring the two firms [Chrysler and GM] might have been built on faulty legal logic", my emphasis, Mark Anderson & Neil King at the WSJ, 10 June 2009, link: http://online.wsj.com/article/SB124453532783397365.html.

"A government lawyer labeled him a terrorist. A top adviser to Chrysler LLC called him ridiculous. ... Late Tuesday, the court turned down the attorney's 11th-hour appeal on behalf of some Indiana pension funds. But Mr. Lauria, whom friends and foes alike say is tenacious to a fault, is likely to remain a thorn in the side of the administration's automotive task force. A hodgepodge of General Motors Corp. bondholders have asked him to represent them in a challenge to GM's bankruptcy filing. ... When the court cleared the way for the Chrysler sale, Mr. Lauria said he was disappointed, and added: 'I think it's pretty interesting that you can have a transaction as big as this, that impacts parties' rights as broadly as this, and no matter how hard you try, you can't get a substantive review from an appellate court.' ... Mr. Lauria's notoriety grew when he appeared May 1 on a Detroit radio station and said the administration had 'directly threatened' one of his clients, Perella Weinberg, and would use the White House press corps to 'destroy' his client. The firm and the White House denied the allegation, and Mr. Lauria eventually stopped commenting on it. ... As for Mr. Lauria, he says his experiences of the last month 'cause me to worry that there is something very wrong with the system'," my emphasis, Jeffrey McCracken and Neil King at the WSJ, 10 June 2009, link: http://online.wsj.com/article/SB124459032127399999.html.

"Judge Robert Drain ordered Delphi to hold an auction and allow bids to challenge the government-brokered sale to Platinum Equity. ... The ruling is a victory for a group of hedge funds that stand to lose 80% or more of their about $2.5 billion in debtor-in-possession, or DIP financing. ... The Delphi case is the latest in a debate over the administration's attitude toward creditors' rights in bankruptcy court. The federal government has been criticized in the Chrysler and General Motors Corp. bankruptcies for upending bankruptcy tradition and harming senior lenders in order to complete a transaction. 'The rule of law and commerical rights of lenders cannot bend in the face of political forces,' said Marc Abrams, a lawyer at Wilkie Farr & Gallagher LLP representing a group of hedge funds, in court Wednesday. ... Virtually all of Delphi's remaining assets--including its Troy, Mich. headquarters--would be sold to Platinum Equity, a Beverly Hills, Calif.--based private equity firm specializing in distressed companies. ... Platinum Chief Executive Tom Gores said in a statement his firm is 'uniquely equipped' to steady Delphi. 'Struggling companies need partners with strong operational capabilities, a deep understanding or their business and a track record of creating real value,' he said. ... Lenders argues that Platinum is a puppet of the government, which needs Delphi to emerge from bankruptcy for its GM bailout to succeed. ... Delphi's plan calls for some DIP lenders, including the most sentior creditors owed about $2.5 billion, to receive 20 cents on the dollar for their loans. ... 'A DIP loan should be money good,' said Mr. Abrams, whose clients include Silver Point Finance LLC and Monarch Alternative Capital LP. 'It's the T-bill of a bankruptcy claim'," my emphasis, Peter Lattman at the WSJ, 11 June 2009, link: http://online.wsj.com/article/SB124466769259803489.html.

POTUS Obama apparently missed Harvard's bankruptcy law class, not knowing of the absolute priority doctrine. Our "constitutional scholar", Obama uses "faulty legal logic"? Never. These are the last days. I agree with a W&C lawyer. Imagine, Obama was "shocked". What a scholar. I wonder what Sonia Baby's opinion is of this case or Elizabeth Warren's.

Way to go Lauria! If you need help making Molotov cocktails, call. Wow, a "White Shoe" law firm partner, like one in W&C, throwing Molotovs. Next Lauria will quote Kropotkin. The US rule of law is collapsing. Book suggestions: No Contest, by Ralph Nader and Wesley Smith, 1998 and Main Justice, James McGee, 1997. Lauria, how does it feel to be unable to get a meaningful appellate review? Welcome to the real world.

Wow, another "white shoe" law firm sees POTUS Obama's contempt for the law. I await the aggrieved parties taking real action. Like having PE partners march around the White House. They can probably find veterans of 1968's Paris Days of Rage, if they need help in planning the demonstrations. Well Eric Holder, Columbia law grad, have you anything to say about this? Or will you have the army fire on the protestors like 1932's "bonus army"? Will we face a "Yeltsin Moment", like in 1991, when Russian troops refused to fire on old Boris? Stay tuned! I last commented on Delphi on 11 October 2008, link: http://skepticaltexascpa.blogspot.com/2008/10/delphi-update-3.html. See also my 27 August 2008 comments, link: http://skepticaltexascpa.blogspot.com/2008/08/delphi-plot-thickens.html.

More Hemlock, Please!

"In this heaven one met, face to face, the many concepts of jurisprudence in their absolute purity, freed from all entangling alliances with human life. Here were the disembodied spirits of good faith and bad faith, property, possession, latches, and rights in rem. ... Here one found a dialetic-hydraulic-interpretation press, which could press and indefinite number of meanings out of any text or statute, an apparatus for constructing fictions, and a hair-splitting machine that could divide a single hair into 999,999 equal parts and, when operated by the most expert jurists, could split each of these parts again into 999,999 equal parts", 35 Columbia Law Review 809, 809, "Transcendental Nonsense and the Functional Approach", (June, 1935) Cohen, Felix. "The corporation raised the objection that it could not be sued in New York. ... If a competent legislature had considered the problem of when a corporation incorporated in another State should be subject to suit, it would probably have made some factual inquiry into the practice of modern corporations in choosing their sovereigns and into the actual significance of the relationship between a corporation and the state of its incorporation. ... On the basis of facts revealed by such an inquiry, and on the basis of certain political or ethical value judgments as to the propriety of putting financial burdens upon corporations, a competent legislature would have attempted to formulate some rules as to when a foreign corporation should be subject to suit. ... It does not appear that scientific evidence on any of these issues was offered to the court. Instead of addressing itself to such economic, sociological, political or ethical questions as a competent legislature might have faced, the court addressed itself to the question, 'Where is a corporation?' .... Clearly the question of where a corporation is, when if incorporates in one state and has agents transacting business in another state, is not a question that can be answered by empirical observation. ... It is, in fact, a question identical in metaphysical status with the question which scholastic theologians are supposed to have argued at great length, 'How many angels can stand on the head of a needle'?", 810. "What right do we have to believe in corporations if we don't believe in angels? . ... The same manner or reasoning can be used by the same court to show that the Dodge Bros. Motor Corporation 'cannot' be sued in New York because the corporation (as distinguishd from its corps of New York employees and dealers) is not 'in' New York. Strange as this manner of argument will seem to laymen, lawyers trained by long practice in believing what is impossible, will accept this reasoning as relevant, material and competent", 811. They do. "Valuable as is the language of transcendental nonsense for many practical legal purposes, it is entirely useless when we come to study, describe, predict, and criticize legal phenomena", 812. Indeed. "Even in the most modern realms of legal development one finds the thought of courts and of legal scholars trapezing around in cycles and epicycles without coming to rest on the floor of verifiable fact", 814. "It would be tedious to prolong our survey: in every field of law we should find the same habit of ignoring practical questions of value or or positive fact and taking refuge in 'legal problems' which can always be answered by manipulating legal concepts in certain approved ways", 820. "It follows that a legal argument can never be refuted by a moral principle nor by any empirical fact", 821. "For it is well to note that the problem of eliminating supernatural terms and meaningless questions and redefining concepts and problems in terms of verifiable realities is not a problem peculiar to law", 822. "Any word which cannot pay up in the currency of fact, upon demand, is to be declared bankrupt, and we are to have no further dealings with it", 823. "In the study of primitive law, the functional approach raises to the fore the problem of incentives to obedience and the efficacy of those incentives, the techniques of law enforcement, and the relations of rivalry or supplementation between legal sanctions and other social forces", my emphasis, 831-2. "The vested interests of our law schools in an 'independent' science of law are undermined by every advance in our knowledge of the social antecedents and the consequences of judicial decision", 834.

The court was New York's Court of Appeals. If you read enough cases, you will see courts frequently avoid the issue at hand by renaming it. Epicycles? Like how the FASB is trying to hold SFASs 133 and 140 together? How would Cohen deal with today's Somali pirates? The CPA profession has emulated lawyers with a procession of "accounting courts", the CAP, APB, FASB, etc., It will not develop a theory to judge its work by, hence gets 1,060-page monstrosities like SFAS 133. There's a reason you can't talk to lawyers. It's not you, it's the lawyer. The lawyer is not trained to answer questions amenable to factual determination, i.e., he's a religious figure, a priest. See also my 22 December 2007 post: http://skepticaltexascpa.blogspot.com/2007/12/us-injustice-system-at-wrk.html.

Monday, June 29, 2009

Not Again

"Now regulators are letting private equity [PE] firms, which invest in all kinds of companies, control banks. The worry: [PE] will pillage the banks' resources to fund their other operations or investments. ... Back then [during the Depression] several banks failed when owners diverted resources to prop up other holdings like retailers and manufacturers. ... Critics fear [PE] firms--which collectively own hundreds of companies--will succumb to the same temptation as bank owners in the '30s. 'If I've got a bank, and I have a business that's going down, where do you think the bank funding is going?' says Rochdale Securities bank analyst Dick Bove", Peter Carbonara at BusinessWeek, 15 June 2009.

We learn nothing. I saw S&Ls prop up real estate investments about 30 years ago. Amazing. That PE firms can buy banks amazes me. As Yves Smith at Naked Capitalism would say, is pillaging bank resources a bug or a feature?

Tax Shelter Indictments

"Denis Field, who was chairman and chief executive of BDO Seidman from 1999 through late 2003, and before that led the firm's national tax practice, was charged with 22 counts in Federal District Court in Manahattan. Prosecutors are investigating the web of banks, law firms, accounting firms and investment boutiques that sold questionable tax shelters to wealthy individuals from the late 1990s through recent years. ... The indictments are the largest crackdown on tax shelter promoters since mid-2005, when the accounting firm KPMG reached a $456 million agreement with prosecutors and admitted to wrongdoing over its work with questionable shelters", Lynnley Browning at the NYT, 10 June 2009, link: http://www.nytimes.com/2009/06/10/business/10tax.html.

A BDO partner showed me one of these shelters in 1999. I told him I didn't think it had substance despite what BDO's national office thought. So it goes.

The SEC's Moibus Strip

"The inspector general of the [SEC] is investigating allegations that enforcement staff engaged in misconduct in connection with the insider trading case filed last fall against Mark Cuban", Kara Scannell at the WSJ, 2 June 2009, link: http://online.wsj.com/article/SB124388446870873295.html.

We'll see where this goes. I last posted on the Cuban case on 29 November 2008, link: http://skepticaltexascpa.blogspot.com/2008/11/sec-v-cuban.html.

Sunday, June 28, 2009

Appraisal Problems

"Appraisals are becoming one of the biggest obstacles for Americans trying to sell their homes, refinance their mortgages or tap into home-equity credit lines. ... Now, some people in the mortgage business--and some borrowers--say the pendulum has swung too far the other way. ... Lenders burned by huge losses from defaults are now pressing appraisers to be more conservative. And appraising itself is more difficult with home prices fluctuating rapidly and transactions few and far between in some markets; sale prices from a few months back may no longer reliably indicate the value of nearby homes. ... In some cases, lenders are requiring that appraisals be based on sales closed within the past three months rather than the prior six-month norm, appraisers said. Some lenders are also asking for comparisons with at least one sale in the past 30 days. ... Fannie and Freddie agreed to the code last year after New York Attorney General Andrew Cuomo accused them of failing to ensure that appraisers were shielded from pressure to inflate their estimates", James Hagerty and Ruth Simon at the WSJ, 9 June 2009, link: http://online.wsj.com/article/SB124450388959795613.html.

I think the Home Valuation Code of Conduct will change little in the appraisal world. CPAs have had ethical standards for decades. So?

Yves Smith (YS) has a related 24 June 2009 post at her Naked Capitalism, link: http://www.nakedcapitalism.com/2009/06/low-appraisals-blamed-for-keeping.html. YS attacks the Bloomberg story for "industry-cheerleading". The WSJ also does this.

Wait Listed by Jail-7

"California spent the past two decades making criminals pay ever-higher prices for their misdeeds, with stricter enforcement and stiffer sentences. Now, the high price of housing its inmate population has the cash-strapped state looking to dump thousands of future convicts into crowded local jails. ... The governor wants to change sentencing guidelines so that offenders who commit such low-level felonies as auto theft or drug possession could be charged only with misdemeanors--allowing them to serve sentences in county jails instead of state prisons. ... Changing sentencing guidelines would eventually steer 20,000 inmates away from state prisons to county jails, Mr. Schwarzenegger estimates. California's county jails now hold about 80,000 inmates, according to the state Department of Corrections and Rehabilitation. ... Local governments are hurting for money as badly as the state is--with some of the pain coming as a result of reduced state funding. Many have cut budgets for their own local jails and detention facilities. ... The state spends $10 billion a year on its 33 prisons, which house about 160,000 inmates", Bobby White at the WSJ, 13 June 2009, link: http://online.wsj.com/article/SB124485349609411619.html.

That waiting list for jail grows daily. $10 billion, 160,000, or $62,500 per inmate year. My idea: let California send 'em all to Harvard. Just think how "diverse" Harvard will be then. It will be Harvard's answer to Mao's 1966 Cultural Revolution. It's a good deal for Harvard too. California can give each one a "full tuition, room and board scholarship". Harvard currently costs $49,000 a year. Then when Harvard's full, the Governator can send the remaining inmates to Princeton, Yale, Stanford, you get the picture. If Harvard wants to "cherry pick" this crew, it can offer reduced rates, in effect scholarships, to get the more "desireable" inmates.

Saturday, June 27, 2009

NY BigLaw Good News

"In his two years as chairman of White & Case [W&C], the venerable Wall Street law firm, Mr. [Hugh] Verrier had already laid off 70 young lawyers and shuttered offices in Bangkok, Dresden and Milan. He had watched top partners flee to competitors and suffered a depressive 2008 holiday party at Cipriani's, which had half the budget of the prior year's $500,000 event--a Neroesque fete at the United Nations with fireworks and a band. ... It announced that 200 more lawyers would lose their jobs, nearly 1 in 10 at the firm over all--and not just young associates with everything in front of them, but some million-dollar-a-year ones, like himself, the ones with twin mortgages, kids in private school and no Plan B. ... At the root of the law-firm crisis, legal experts say, is the credit crisis, which has pulverized the need for traditional practice areas like structured finance, mergers and acquisitions and private-equity transactions, the very things that have always kept a high gleam of polish on the city's whitest shoes. ... Founded in 1901 by Justin D. White, a Cornell graduate who married a banking heiress, and George B. Case, who is said to have invented the squeeze play on the baseball field at Yale, [W&C] is--or was--the quintessential gentleman's firm. It was built not only on the grubstake--a possibly apocryphal $500--of its founders, but also on their close relationship with Henry P. Davison, a plutocrat philanthropist who helped create the Federal Reserve. ... Verrier denied that McKinsey had convinced him of the need for making layoffs. ... Verrier said he saw the storm approaching shortly after he took control in 2007, and considered three options, in consultation with a group of core partners: Do nothing, which risked the firm's survival; couch layoffs as decisions based on poor performance; or own up to the crisis and bid large numbers oif lawyers a harsh but needed goodbye", Alan Feuer, 7 June 2009 at: http://www.nytimes.com/2009/06/07/nyregion/07law.html.

Crisis? Demand TARP funds! Crisis solved. Couch layoffs? Hmm. Is that what W&C normally tells its clients sued for wrongful discharge, i.e., just make stuff up. He "saw the storm approaching". Was Verrier short banks which were not W&C clients?

Keeping Regulators Honest?

"The nation is about to make two momentous policy choices about the future of our financial system. One will be made by the president, the other by the Supreme Court. Both decisions involve the proper roles for state and federal regulatory autjority, and both have far-reaching consequences. Yet the country seems barely aware of the issues, or the stakes involved. ... The Obama administration will shortly announce its own restructuring plan. It should take a fresh approach by including a significant role for the states. This is necessary to maintain checks and balances and protect consumers from predatory lending and other abusive practices. ... State supervision also fosters thousands of community and regional banks that provide diversity and stability to our financial system. ... A single federal regulator would tend to focus on the largest institutions to the detriment of smaller ones. ... The second big issue involves the ability of states to enforce valid laws already on their books", Richard Neiman (RN) at the WSJ, 5 June 2009, link: http://online.wsj.com/article/SB124416180649887399.html.

RN, New York bank superintendent ignores the most important reason to have multiple bank regulators: the more regulators you have, the more difficult it is to capture all of them.

Friday, June 26, 2009

Ladies Choice

"With no eligible women in his village, Zhou Pin, 27 years old, thought he was lucky to find a pretty bride whom he met and married within a week, following the custom in rural China. ... Thanks to its 30-year-old population-planning policy and customary preference for boys, China has one of the largest male-to-female ratios in the world. Using data from the 2005 China census--the most recent--a study published in last month's British Journal of Medicine estimates there was a surplus of 32 million males under the age of 20 at the time the census was taken. ... Now some of these men have reached marriageable age, resulting in intense competition for spouses, especially in rural areas. It also appears to have caused a sharp spike in bride prices and betrothal gifts. ... Areas with more men than women, the study notes, also have low spending rates--suggesting that many rural Chinese may be saving up for bride prices. ... As in other parts of the country, village customs dictate the groom's family pay the bride's family a set amount--known as cai li--while the bride furnishes a dowry of mostly simple household items. ... The neighbors each paid 40,000 yuan in cai li. On Jan. 28, all these brides vanished, leaving the villagers reeling", original italics, my empahsis, Mei Fong, at the WSJ, 5 June 2009, link: http://online.wsj.com/article/SB124415971813687173.html.

China's bride market shows rising prices allocate scare resources. Look at our Ivy League Chickens, my 22 December 2008 post, link: http://skepticaltexascpa.blogspot.com/2008/12/ivy-league-chickens.html. Unlike our kidney market, link above. The market presents new opportunities. Instead of creating asset backed securities, Goldman Sachs (GSG) can securitize cai li loans. With "former" GSG executive Henry Paulson on tap, GSG should lock this market up. Rural China may become a preferred vaction spot for mate-starved Washington, DC ladies. As bride prices rise, Chinese farmers with low hurdle rates will prefer girl babies. Be patient. This will work out.

Perry Mason's Last Case

"Sonia Sotomayor's (SS) ascent to the nation's highest court began in a Bronx housing project, fed by Nancy Drew, inspired by Perry Mason and encouraged by her hardworking mother. ... She got her first taste of the law as she buried herself in Nancy Drew books, but it was an episode of Perry Mason [PM] that provded the defining moment in Sotomayor's childhood. Watching the camera settle on the judge at the end of an episode, she immediately realized that 'he was the most important player in that room,' [SS] said in a 1998 interview", Larry Newmeister, at the Houston Chronicle, 27 May 2009, link: http://www.chron.com/disp/story.mpl/ap/washington/6441301.html.

"Jeffrey Deskovic heard a TV talk show host announce Preident Obama's nomineee for the Supreme Court last month, and his mind raced. That name; he remembered that name. He emerged from bed and riffled through the boxes of motions, appeals and letters he had accumulated in the 16 years he spent in a New York prison for rape and murder he did not commit. ... The court denied the request because the paperwork had arrrived four days late. ... Deskovic spent six more years behind bars, until DNA found in the victim not only cleared him, but connected another man to the crime. ... Habeas corpus petitions are rarely granted. ... A 2007 report by Vanderbilt University Law School and the National Center for State Courts, for example, showed that out of 2,384 randomly selected habeas corpus petitons filed by state prisoners in noncapital cases in 2003 and 2004, only seven had been granted", Fernanda Santos, 10 June 2009 at http://www.nytimes.com/2009/06/10/nyregion/10dna.html.

I don't know what PM, 1957-66, show SS watched, but it was a show I didn't. PM's first episode was aired 21 September 1957 at 7:30 PM in New York on CBS, Channel 2. I was hooked, seeing about 267 of the 271 shows made. What did I see? A PM judge was the room's least important person. Who or what was most important? An abstraction, the TRUTH. PM judges were "truth-seekers". I estimate the typical PM judge made six evidentiary rulings, thus I saw about 1,600 "PM bench" rulings, disagreeing with about three of them. PM judges knew their Wigmore, backwards and forwards! I once read, "The most intelligent people discuss ideas. Less intelligent people discuss facts. The least intelligent people discuss people". SS is a member of the last class. Full disclosure: My father was an attorney and pointed out obscure PM features 99+% of its viewers missed. As he said many times, "Number One, you can learn more about how to practice law by watching three episodes of Perry Mason, than spending three years at Harvard Law School". To which I would respond, "Father, you only say that because you didn't attend Harvard Law School". About 30 years ago, I concluded my old man was right having met many Harvard and Yale Law School grads who can't think and don't know the law. I do not want SS confirmed. She's an intellectual lightweight. The "evidence" of SS's intellect is her Ivy League degrees. So? PM link: http://www.perrymasontvshowbook.com/

Earle Stanley Gardner (ESG) created PM. He was a Ventura County, California criminal defense attorney from 1921 to 1933, a real lawyer. ESG even represented Chinamen in the 1920s. Here's an ESG story. He defended about 20 Chinese laundry owners accused of various misdemeanors. ESG awaits trial. He hears the various arresting policemen testify. Chinaman 1 did this. Chinaman 2 did that, etc., etc., ad nauseaum. ESG asks one question of each arresting officer, pointing, "Is that the man you arrested on XXXXX date"? With a yes, ESG said, "no further questions". When the prosecution rested, ESG moves to dismiss all charges. The judge asks why? ESG says, "incorrect identification". The judge asks, "How do you know? Each officer clearly identified the defendant when you pointed". ESG responds, "Precisely". The judge, "Go on". "About two weeks ago I had each Chinaman change laundrys with another Chinaman. So the Laundry 1's owner ran Laundry 2, 2's owner 3, etc. Believing the police figure 'all Chinamen look the same', I figured the cops would go to the laundries incognito, each to refresh his recollection before trial. They did. Now Chinaman 1, stand. Which laundry do you own, 1 or 2?". Pandamonieum breaks out. The DA is furious, the cops are stunned. ESG says, "I can have each Chinaman testify as to which laundry he owns, and where he was last week and produce dozens of witnesses as to the switch". All 20 Chinaman stand and on cue and face the judge, who says, "All charges dropped". This happened in about 1922 or 1923. Yeah, the PM judge was the most important person in the room. Sure. That's how it's done, "commit and confront". Book suggestion, The Art of Cross Examination, by Francis Wellman, 1904. A classic. A gem. Imagine, you don't even have to go to law school to read it.

Some day make the time, go to an appellate court and listen to cases being heard. You may be shocked with the questions you frequently hear. Many times when judges cannot comprehend a case's substantive issues they find a procedural basis to decline to rule. Note to SS, no PM judge would have made your ruling. The PM judge would have said, "I'm interested in this. I'll allow it. Proceed Mr. Mason". What show did you watch as a kid? I have long thought 99+% of habeas corpus petitons were denied. We recently had a doozy of a Fifth Circuit ruling in such a case. A beaut. Why did our "wise Latina Judge" ruled as she did? Most likely: she saw the defendant's name was not "Jesus DeJesus" and thought, "Privileged white male. Let him rot". This case stinks. It's a "mini Duke Three". SS, may Raymond Burr return from the great beyond and smite you down for defiling his alter ego's name.

Thursday, June 25, 2009

Obama's Halo Slips

Robert Kagan writes, "President Obama likes to see himself as a pragmatist, but in foreign policy he is proving to be a supreme idealist of the Woodrow Wilson variety. ... We will see whether Barack Obama, the most Wilsonian president in a century, fares better", Washington Post, 7 June 2009.

Wow. That appeared in Wapo! I referred to Wilson before, on 30 July 2007, 6 February and 14 September 2008 and 16 February 2009, links:

No One is This Stupid, I Think

"Even before the mystifying Kim Jong Il took power in 1994, the outside world was trying mightily to figure out how the North Korean regime works. ... None of that offers much hope for change. North Korea is already the world's most isolated country; the idea that Kim Jong Il's regime even cares if its isolation 'deepens' is dubious at best. ... The fundamental notion underlying US diplomacy with Pyonyang since the Clinton era--a hawkish detour under George W. Bush notwithstanding--is that the North can be bribed. ... But following its latest test, the assumption that North Korea [NK] will be ultimately willing to negotiate away its nuclear program is under new scrutiny", my emphasis, Bill Powell and Stephen Kim at Time, 8 June 2009.

I never thought the US could bribe NK. If serious, we had to destroy NK's nuclear sites. What is mystifying here? In about 1964 Chairman Mao Zedong told the USSR China was the world's only country that could lose 300 million people in a war and still win. NK is of this mentality. NK doesn't care if it is isolated. I don't believe for a second Clinton thought NK could be bribed into doing anything. He and Bush just played "kick the can" with NK for 16 years and now we are where we are.

Yves Smith on "C"

Yves Smith (YS) has a 5 June 2009 post at her Naked Capitalism citing a WSJ piece about Citigroup and Sheila Bair's recent comments about it. I have believed "C" insolvent for at least two years, the Fed's recent "stress test" results notwithstanding. Here's a link: http://www.nakedcapitalism.com/2009/06/fdic-keen-tto-ciits-rating-change.html.

YS writes, "inquiring minds wonder whether the Journal has been spun a tad, since the piece also make clear that the bank believes Bair is overreaching. ... The reason I have some sympathy for the FDIC is that the US has violated the best practices playbook for dealing with troubled banks. ... [T[he article spends even more time on the turf war charge, which makes it sound as if the FDIC is significantly, if not primarily motivated by the desire to make a land grab". I got this sense of the story too. Here are some of my prior comments about "C" 24 June, 7 and 17 July 2008, 7 January 2009:


Wednesday, June 24, 2009

Asarco Followup-6

"Grupo Mexico SAB [GMSA], Mexico's largest mining company, said Tuesday it is offering $2.9 billion in a new reorganization plan to take its US copper unit, Asarco LLC, out of Chpater 11 bankruptcy, where it has languished sincce August 2005. ... A unit of [GMSA] said Tuesday that the company's $2.9 billion offer is worth $500 million more than a competing plan from Vendanta Resources PLC, which Asarco's current management prefers. [GMSA] and Vendanta are vying for the support of Asarco's creditors. ... In the decade since the acquisition, [GMSA] has been accused of looting Asarco by slicing off the US unit's rich assets in Peru. Critics claim the company later forced Asarco into bankruptcy, before parties alleging environmental damage by the US copper giant could receive funds to clean up dozens of contaminated sites across the West. ... The court ordered [GMSA] to restore more than $6 billion in stock and dividends to Asarco. [GMSA] is appealing the order", Joel Millman at the WSJ, 3 June 2009, link: http://online.wsj.com/article/SB124395852762977397.html.

GMSA's nonsense never stops. Now GMSA apparently figures it can buy its way out of a $6 billion judgment and get Asarco too, all for $2.9 billion. I say again, GMSA should not be permitted to bid here. Further, the US DOJ should extradite its officers from Mexico to try them here under 18 USC 152. That the DOJ hasn't is another DOJ disgrace. My last post on Asarco was on 15 April 2009, link: http://skepticaltexascpa.blogspot.com/2009/04/justice-for-asarco.html.

UK Monkey See, UK Monkey Do

"In a bid to shore up confidence in the UK banking system, the Financial Services Authority disclosed details of how it expects banks to test that they hold enough capital. ... The FSA said it has 'greatly increased' its use of stress tests over the past eight months as part of an effort to ensure banks can absorb losses during a severe economic downturn. The regulator said it won't, however, publish the results of its stress tetsts. ... Some observers said the announcement should help reassure investors and lenders that UK banks are sound, especially as the tests are viewed by some as stricter than those conducted in the US. 'The additional detail on stress tests provided by the FSA, using tougher parameters than those revealed in the US, should help to build confidence in the banking sector,' said Marcus Sephton, head of regulatory services at KPMG in the UK", Adama Bradbery and Laurence Norman at the WSJ, 29 May 2009.

If the FSA's stress tests mean anything, the FSA could have helped us in the US. How? By calling the Fed's tests inadequate. Sure. And KPMG UK will say that too. Given KPMG US audits Citigroup. Sure. These tests, not to be disclosed will be another sham.

Tuesday, June 23, 2009

Krugman Exposes Himself

"Suddenly it seems as if everyone is talking about inflation. Stern opinion pieces warn that hyperinflation is just around the corner. And markets may be heeding these warnings: Interest rates on long-term government bonds are up, with fear of future inflation one possible reason for the interest-rate spike. But does the big inflation scare make any sense? Basically, no--with one caveat I'll get to later. And I suspect that the scare is at least partly about politics rather than economics. ... It's important to realize that there's no hint of inflationary pressures in the economy right now. ... Deflation, not inflation, is the clear and present danger. ... Some claim that the [Fed] is printing lots of money, which must be inflationary, while others claim that budget deficits will eventually force the US government to inflate away its debt. ... So is there any reason to think that inflation is coming? ... All of this raises the question: If inflation isn't a real risk, why all the claims that it is? ... But when it comes to inflation, the only thing we have to fear is inflation fear itself", my emphasis, Paul Krugman (PK) at the Houston Chronicle, 30 May 2009.

Come on PK, you're a smart guy. What gives? Is this your best "Timmy Boy" imitation? My guess: you are giving Zimbabwe Ben (ZB) a justification to monetize more debt. Did you give your old Princeton buddy, ZB the "secret handshake" which means, "run those presses"? Stop. ZB doesn't need any encouragement! PK, if you are short gold and will hold that short for the next ten years, I will believe you believe what you wrote.

Understand the Law-2

"In tribal times, there were the medicine men. In the Middle Ages, there were the priests. Today, there are the lawyers. For every age, a group of bright boys, learned in their trade and jealous of their learning, blend technical competence with plain and fancy hocus-pocus to make themselves masters of their fellow men. For every age, a pseudo-intellectual autocracy, guarding the tricks of its trade from the uninitiated, runs, after its own pattern, the civilization of the day. ... There is no separation of powers where the lawyers are concerned. There is only a concentration of all government power--in the lawyers. ... Of all the specialized skills abroad in the world today, the average man knows least about the one that affects him most--about the multitudinous things that lawyers call "The Law", Forum and Century, Vol. 103, No. 3, page 109, Sept. 1939, "The Law is the Bunk", Rodell, Fred. "Briefly, The Law is carried on in a foreign language. Not that it deals, as do medicine and mechanical engineering, with physical phenomena and instruments which need special words to describe them, simply because there are no other words. On the contrary, law deals almost exclusively with the ordinary facts and occurences of everyday business and government and living. But it deals with them in a jargon which completely baffles and befoozles the ordinary literate man who has no legal training to serve him as a trot", 110. "But try to pin down a lawyer, any lawyer, on 'jurisdiction' or 'proximate cause'; or 'equitable title'--words which he tosses off with authority and apparent familiarity and which are part of his regular stock in stock-in-trade. If he does not dismiss your question summarily with, 'You're not a lawyer; you wouldn't understand,' he will disappear into a cloud of legal jargon", 110-1. "For the lawyers' trade is a trade built entirely on words. And, so long as the lawyers carefully keep to themselves the key to what those words mean, the only way the average man can find out what is going on is to become a lawyer or, at least, to study law, himself", 111. "The legal trade, in short, is nothing but a high-class racket. It is a racket far more lucrative and more powerful and hence more dangerous than any of those minor and much-publicized rackets, such as ambulance chasing or the regular defense of known criminals, which make up only a tiny part of the law business and against which the respectable members of the bar are always making speeches and taking action. ... Furthermore, the lawyers--or at least 99.44 per cent of them--are not even aware that they are indulging in a racket. ... Like the medicine men of tribal times and the priests of the Middle Ages, they actually believe in their own nonsense. This fact, of course, makes their racket all the more insidious", 113. "If the nonlawyers ever do catch on, Lord help the lawyers", 114.

When Fred Rodell wrote this, in 1939, he was a Yale Law School professor. This shows why POTUS Obama is lost in the foreign policy and military affairs realms. He can't conceive that there are people in the world who don't care what he says, only if he is willing and capable of hurting them if they do not follow POTUS Obama's wishes. More dangerous than lawyers today are investment bankers.

Monday, June 22, 2009

Obama in Cairo

"Why should the president of the [US] address the 'Muslim world', as Barack Obama will do in Egypt this Thursday? What would happen if the leader of a big country addressed the 'Christian world'? ... There is no 'Christian world' to address because Christianity has become a private religion of personal conscience. ... What does it mean, though, to address the 'Muslim world'? ... Muslim religious authority is exercised ad hoc. The quasi-animist Islam of Sumatra and the Wahhabi Islam of Saudi Arabia have about as much in common as Midwest Methodists and Nigerian Pentecostals. ... No denomination of Islam will abandon its pretensions at official status, and all aspire to world power. ... To address this aspiration is to breathe life into it. For an American president to validate such an aspiration is madness. America is not at war with Islam, unless, that is, Islam were to take a political form that threatens America's global interests. ... And if the [Arab-Israeli issue] is religious in origin, what specifically makes the conflict religious? If it really were the case that the Israelis and the Palestinian Arabs are fighting over religious matters, then the theological Muslim position is the one represented by Hamas in Palestine and Hezbollah in Lebanon, namely that a Jewish state on territory once held by the ummah (Muslim community) is an outrage to Islam and never can be accepted. ... Excluding the unlikely possibility that Obama will declare himself to be a Muslim and claim religious authority in matters affecting Muslims everywhere, [ordering Muslims to accept the existence of the state of Israel] that is not going to happen in Cairo this Thursday. ... As a matter of national interest, many Muslim-majority countries may seek peaceful and even friendly relations with the Jewish state, irrespective of what the dictates of Islamic theology might be. Rather than addressing nations with national interest, though, Obama is addressing Muslims, over the heads as it were of the majority-Muslim nation states. ... No Muslim religious authority in Asia or Africa can or will rule that Islam can tolerate a Jewish state in Palestine with its capital in Jerusalem. ... A gauge of the absurdity of an American president addressing 'the Muslim world' was the difficulty in finding a venue for Thursday's speech. ... There is a way to rescue the situation, which I now propose to Obama in good faith: change the venue to New Delhi. ... Muslims around the world should look to India as an example of moderation and co-existence. Of all the available bad choices, Obama has taken the worst. It is hard to imagine any consequence except a steep diminution of American influence", original italics, my emphasis, Spengler, 1 June 2009, at: http://www.atimes.com/atimes/Middle_East/KF02Ak05.html.

War Story 1. In 1991 I was at the home of a friend of a friend. Coincidentally, the friend and every person in the room but me was Moslem. Someone commented about a newspaper story which criticized the Pope. They were amazed when I said we can print such stuff here. We have no blasphemy laws. Each of the six or seven Moslems present was a college graduate and US citizen. Still they thought we have blasphemy laws. I suppose they're correct when it comes to criticizing his Obamaness. War Story 2. Shortly after 9/11 in 2001, I ate in an Iranian restaurant on Ventura Boulevard in Encino, CA. I had eaten there about once every three weeks for about three years before 9/11. I liked eating there. The proprietor comes to me, almost in tears and says, "we're not terrorists. We're peaceful. We mean no harm". I looked at him and said, "we're not you. We're not barbarians here. Stop projecting what you believe would happen to Americans in Iran if the situation was reversed. No one can fortell the future. But I'll bet with 99% certainty, that nothing will happen to you, nor will anyone burn this restaurant down. Wait six months. See. This is not Iran. This is not Saudi Arabia". And so the proprietor's amazement, nothing happened! I referred to the Islamic Brezhnev doctrine on 13 December 2008, link: http://skepticaltexascpa.blogspot.com/2008/12/americocentric-projection.html. I love Spengler, but disagree that Obama chose the worst venue. He could have gone to Tehran and alienated the Sunni world. Worse, he could have gone to Karbala in Iraq, a Shiite Holy site.

Selling a Swindle

"What cannot be disputed, however, is the financial bailout's biggest loser: the American taxpayer. The US government, led by the Treasury Department, has done little, if anything, to maximize returns on its trillion-dollar, taxpayer-funded investment. ... For the ten largest TARP investments made in 2008, totalling $184.2 billion, Treasury received on average only $66 worth of assets for every $100 invested. ... Economist Dean Baker, co-director of the Center for Economic and Policy Research in Washington, suggested to TomDispatch in an interview that the opaque and complicated nature of the bailout may not be entirely unintentional, given the difficulties it raises for anyone wanting to follow the trail of taxpayer dollars from the government to the banks. '[Government offiicials] see this all as a Three Card Monte, moving everything around really quickly so the public won't understand the truth that this really is an elaborate way to subsidize the banks,' Baker says, adding that the public 'won't realize we gave money away to some of the richest people.'," my emphasis, Andy Kroll (AK), at The Nation, 26 May 2009, link: http://www.thenation.com/doc/20090608/kroll/print.

AK, an intern at the left-leaning Nation's got it. I even agree with Baker. "Feature, not bug". Shades of Yves Smith.

Sunday, June 21, 2009

Ken Lewis, Whistleblower?-2

"Big banks were hoping billions in dollars in future revenue would help them fill the capital holes found in the government's stress tests earlier this month. Now the [Fed] is limiting how much of that performance can be counted, according to people familar with the situation. The Fed's action of forcing Bank of America Corp. [BofA] to come up with billions in capital from other sources, these people said. ... The move by the Fed, which began notifying banks last week, has deepened tensions over the stress tests, which are intended to help steady the banking industry and shore up confidence in the financial system. ... But some bankers are complaining privately the government is changing the stress-test process arbitrarily. ... Fed officials were surprised by the [BofA's] statements, believing they had been clear that such projections wouldn't be allowed as part of the bank's capital-raising plan, according to people with knowledge of the discussions. Since then, [BofA] has been told that it won't be allowed to count the entire projections toward its capital needs, which the bank viewed as a changing of the rules, these people said", my emphasis, Dan Fitzpatrick at the WSJ, 28 May 2009.

I don't believe one word the Fed said. I conclude it wants to discredit the BofA's management and will do anything to that end. Arbitrarily? Surprised? I don't believe this.

Old School Banker

"When Peter Fitzgerald was in the US Senate, he refused to vote on any bill that was banking-related. He wouldn't even take part in the debate. ... Fitzgerald's family was so immersed in the banking world--his three brothers own seven small banks among them--that he felt he had to recuse himself from all banking matters that came before the Senate. ... In hindsight, it's a shame that Fitzgerald stayed on the sidelines as the nation's banks engaged in high-risk behavior. He claims that if he had immersed himself in banking matters, his political enemies would have accused him of pursuing policies that benefitted his family. ... One of Chain Bridge's hallmarks is Fitzgerald's refusal to allocate more than 55% of his deposits to loans. ... Peruse the first-quarter earnings releases that have gone out in the past couple of weeks, and you'll see that banks are now touting their loan-to-deposit ratios. ... Launching a bank in this economy may sound insane, but star bank analyst Meredith Whitney has been saying since last year that the timing couldn't be better. ... Gerald Fitzgerald, Peter's father, always emphasized to Peter and his brothers that it wasn't safe for a bank to allocate more than half its deposits to loans. ... In the 1960s that point of view was the conventional wisdom. Between 1960 and 1980, however, the loan-to-deposit ratio [LDR] for US banks rose from 51% to 85%, according to FDIC data. ... By the time Fitzgerald started recruiting for Chain Bridge in 2007, the consensus about [LDRs] had changed so radically that most of the folks Fitzgerald interviewed thought he was nuts. ... 'Well, those bankers weren't in the business in the early '90s, and they certainly weren't around in the early '80s. They were behaving as though we'd never have another recession.' Most banks are so illiquid right now that they have to borrow money to meet withdrawals, he says: 'You can see right there why they had the credit crunch.' ... 'The reason we got into this situation is in part that people didn't care what their bank's balance sheet looked like because their accounts were FDIC-insured,' says Fitzgerald. By not allowing more banks to fail, and more good banks to gain market share, Fitzgerald believes the government is creating a banking system that ensures the survival of the not-so-fit at the expense of the fit. 'They've only closed about 50 banks,' Fitzgerald says of the banking regulators. 'During the S&L crisis of the '80s and '90s, we closed about 1,300 banks. ... Today the banker-turned-senator-turned-banker thinks the major problem with the Obama administration's approach to the recession is the misguided belief that stimulating the economy and fixing the banking system are compatible goals. 'They're not,' says Fitzgerald, who contends that banks need to be making fewer loans, not more. Fitzgerald is particularly critical of the Office of the Comptroller of the Currency for not requiring banks to keep some of their deposits and assets in liquid investments. 'The OCC will not get after them,' says Fitzgerald, 'That's because the OCC wants to banks to support President Obama's stimulus program and lend as much as possible.' OCC deputy comptroller Timothy Long counters that the regulator does take liquidity risk seriously", my emphasis, Jon Birger at Fortune, 25 May 2009.

I remember at Chicago our recent grads complained about going to "practical banker school", and being taught aim for 50% LDRs, not to exceed 60%. In 1984, when the Continental Illinois National Bank failed, it had a 96% LDR. That US banks' 2007 LDR reached 113%, shows how recklessly banks were run and how poorly the OCC supervised them. If we continue to permit fractional-reserve banking, we need more Fitzgeralds than Pandits.

Saturday, June 20, 2009

Geithner, Steve Forbes Two?

"US Treasury Secretary Timothy Geithner, in a speech here [Beijing] Monday, touched on a contentious subject, urging China to move toward a more flexible exchange-rate regime. 'Greater exchange-rate flexibility will... encourage resource shifts to support domestic demand, and provide greater ability for monetary policy to achieve sustained growth with low inflation in the future,' Mr. Geithner said in a speech at Peking Univeristy, where he studied Chinese in the summer of 1981. Allowing the yuan to rise would be an important sign that China is serious about boosting domestic demand, economists say. ... 'Strengthening domestic demand will strengthen China's ability to weather future fluctuations in global supply and demand,' Mr. Geithner said. ... US pressure on China to boost its domestic demand--and Washington hopes, buy more US goods--isn't new, but has taken on an increased urgency as the damage from the financial crisis had left the world with fewer sources of growth. Mr. Geithner on Monday urged China to improve its health-care and social-security programs--which could reduce households' need to save-- and move to more market-based interest rates and prices", my emphasis, Andrew Batson & Maya Randall at the WSJ, 2 June 2009.

"If a person lives long enough, he can watch everyone forget everything they learned. ... [Fed] Chairman Ben Bernanke thinks he can hold down US long-term interest rates by purchasing mortgage bonds and US Treasuries. Sixty years ago the [Fed] understood that this was an impossible feat. ... Since Fed Chairman Bernanke announced his plan to purchase $1 trillion in mortgage and Treasury bonds in order to help the housing market with low interest rates, interest rates have risen. When will the Fed remember that printing money does not lower long-term rates. ... Treasury Secretary Geithner is another economic incompetent. He told China that he stood for a 'strong dollar,' but that China should let its currency appreciate relative to the dollar, which, of course, would mean a weaker dollar. He simultaneously told China that their investments in US Treasury bonds were safe. His Chinese university audience, being economically literate, laughed at Geithner", Paul Roberts (PR), 3 June 2009, at: http://vdare.com/roberts/090603_illiteracy.htm.

If China let the yuan rise, which I favor, does Timmy Boy (TB) realize that will increase US interest rates? Did TB forget he must sell about $1.8 trillion in debt in the next 12 months? TB, explain how will "exchange-rate flexibility ... [help] achieve sustained growth". Imagine, TB wants China to adopt Social Security and Medicaid-type programs. Don't we have a $62 trillion actuarial deficit arising from those? TB apparently accepts all the Keynesian fallacies. TB likes "market-based interest rates" for China, but not apparently the US. TB must have studied in the Steve Forbes economics school, my 15 November 2008 post, link: http://skepticaltexascpa.blogspot.com/2008/11/forbes-capitalist-fool.html. China can control the quantity of yuan or the yuan-dollar exchange rate. Not both.

I agree with PR.

DeGaulle Returns

"Maybe the fact that central banks, banks and governments around the world are acting like monetary idiots explains why gold is shooting up in price; or maybe that it is going up in price explains why there is such a new interest in gold; or maybe it just explains why people are as disrespectful of the dollar, as I am. ... Even more telling, I think, is when [Jim Willie] reported, 'The Germans have demanded all of their gold held in custodial accounts inside the [US] to be returned to German soil.' He admits, 'The story is not public, but details have come to me from a private source close to the action.' But if I know Germans, and I don't, they are not going to sit around waiting for America to steal their gold, if indeed there is any left after the criminally incompetent [Fed] and Treasury encumbered thousands of tonnes of gold by leasing it out. ...Interestingly, he adds, 'The Germans have also given counsel for Dubai to demand all of their gold held in custodial accounts inside London to be returned to Dubai, where a new gold trading center will spring up. In my view, THIS IS THE BIGGEST NEWS FOR GOLD THIS ENTIRE YEAR.'," my emphasis, original capitals, The Mogambo Guru (TMG), 31 May 2009 at http://www.atimes.com/atimes/Global_Economy/KE30Dj01.html.

I agree with TMG. The Germans are apparently following Charles DeGaulle (CD). In 1965 CD "sent the French Navy across the Atlantic to pick up $150-milllion worth of gold", Joel Bowman, 13 November 2007, at: http://www.howestreet.com/articles/index.php?article_id=5079. At $35 per ounce, a price the Treasury said would never increase, that was 4,286,000 ounces, worth $4.2 billion today. I remember. "Gold 'does not change in nature,' DeGaulle announced in that 1965 speech, as if he was telling the world something it didn't already know. '[Gold] can be made either into bars, ingots, or coins ... has no nationality [and] is considered, in all places and at all times, the immutable and fiduciary value par excellence.' ... Back in the 1950s and '60s, world governments could simply stroll up to the [Fed], tap on the 'Gold Window', and swap their unwanted dollars for gold. ... Now the world must accept the dollar and nothing else besides. So far, so good. But the scam will only work up until the moment that it doesn't". Indeed.

Friday, June 19, 2009

Peter Schiff on California

Peter Schiff has a 30 May 2009 post advising Obama not to bail out California. I could have written it, link: http://www.lewrockwell.com/schiff/schiff24.1.html.

Educational Heresy

"The Obama Administration's munificence toward state and local public schools ($100 billion in stimulus funds, including a $5 billion slush fund to try to figure out 'what works') is bringing out of the woodwork the usual array of miracle workers with cures for whatever ails us educationally. ... Fortunately, America's leading social scientist recently published a short, lucid book of his charateristic judiciousness laying out a roadmap for fundamental reform of schooling: Real Education: Four Simple Truths for Bringing America's Schools Back to Reality. ... [Charles Murray] demonstrates four simple truths and their profound implications: 'Ability varies, Half of the children are below average, Too many people are going to college, America's future depends on how we educate the academically gifted'. Tracking, for instance. Why humiliate the worst students and bore the best students by clumping them in the same classroom? But tracking has been out of fashion ideologically since the late 1960s, in large part because it tends to lead to racial segreation within schools. ... Showing little evidence of having read the book he excoriated [The Bell Curve, 1994], Obama demanded more government spending on social programs that would benefit his political bases: blacks and social workers. ... Obama could appoint Charles Murray his Senior Advisor on Education", original italics. Steve Sailer (SS), 25 May 2009 at: http://vdare.com/sailer/090524_obama.htm.

Suppose Obama had read the Bell Curve? Could he comprehend it? I doubt it. SS's "four points" were debated during 1957-58's "Sputnik panic". Hyman Rickover said much of this then. SS sees Obama's bases as my "Teacher-Educationalist-Social Worker" complex (TESWC). Murray as education advisor, John Bolton at State, Joe Jett at Treasury. Now that's a cabinet even Andy Jackson might be happy with.


"Modern man has developed nuclear weapons. But even more devastating, he has developed birth control pills and television. ... He has created doctrines of entitlement and freedom, offering food stamps and free medicine for the masses. And now the relationship between the advanced countries and the 'developing world' can be described in the words of Louis Veuillot, 'When I am the weaker, I ask for my freedom, because that is your principle; but when I an the stronger, I take away your freedom, because that is my principle.' Here is the predator at work, even in the midst of civilization (in the overturning of civilization", JR Nyquist (JRN), 22 May 2009 at http://www.financialsense.com/stormwatch/geo/pastanalysis/2009/0522.html.

"Obama's knowledge of World War II is laughably simplistic--and I admit to laughing my head off when I heard his comment about Austrian as a language. Europe blushed. ... Question: Does Obama, holder of diplomas from Harvard and Columbia, think Hitler spoke Austrian too, or does he think Hitler was born in Germany? Think about it liberal Democrats. ... In more recent times, it appears that Obama is using a radical gay activist's blog to make history talking points too. Or at least he repeats blogger Andrew Sullivan's precious view that the conservative Winston Churchill won World War II without using torture!", Ben-Peter Terpstra, 24 May 2009 at: http://www.americanthinker.com/blog/2009/05/planet_obama_where_hitler_spoke.html.

"We all have hopes and dreams. And then there is reality, which demands our attention and our respect. America has been living in a dream world for almost twenty years, somehow managing to evade reality--social, economic and international. The process of economic unraveling is our pecuniary punishment for evading reality. Destructive war has been, and will be again, our national punishment. ... 'I don't believe that anybody in the administration thinks that there is a crisis,' said US Defense Secretary Robert Gates. While the entire world sees a crisis, while North Korea threatens to re-ignite the Korean War, President Obama and Secretary Gates fall back on hopes and dreams. The President hopes that China will discipline its errant North Korean child. ... This is the same Robert Gates who publicly warned that unless the [US] repairs its nuclear weapons infrastructure the US nuclear deterrent could become 'unreliable' by the end of this year. Gates' real concerns have little to do with the proliferation of North Korean nukes. What troubles him is the deconstruction of America's nukes. The nuclear genie left the bottle long ago. What else is new? ... As government revenue shrinks the administration borrows trillions to 'stimulate' the economy. Interest rates have been lowered, loans are being encouraged. The cause of our economic ailment is supposed to be the cure. Meanwhile, the cheapest weapon of defense--our nuclear arsenal--is no longer worth funding. In fact, it is viewed as immoral and questionable (as something from our reactionary past). ... What has protected the US mainland for the last six decdes is no longer in vogue. Our protection will be found in diplomacy, in promises set down on pieces of paper; promises made by foreign governments. ... Nuclear weapons cannot be un-invented. This has nothing to do with the Cold War. And besides, the Cold War never ended. It continues today, whether we acknowledge it or not", JRN, 29 May 2009, at: http://www.financialsense.com/stormwatch/geo/pastanalysis/2009/0529.html.

"In the same sense that Toni Morrison claimed Bill Clinton was our first black president, Barack Obama could be thought of as another groundbreaker: our first female president. He displays every trope of femininity more than any female 'who could ever be elected in our children's lifetime' (to borrow Morrison's phrase about Clinton). ... Obama is filled with sensitivity (one might even say, empathy), he would rather talk then fight, is highly (yet selectively) compassionate and to top it all off, he has a finely tuned sense of fashion. BO attempts to collaborate with Europeans, South Americans, Muslims and nearly everyone else except the citizens of red state America. ... In addition, Obama has surrounded himself with women in most important security and foreign policy positions in his adminsitration. While some might choose to describe BO as our first metrosexual President, the clincher is that, consistent with all outward appearances, the Obama administration fights like a girl. ... With the arsenal of the world's sole remaining superpower avaliable to him, Obama sounds more like the UN Secretary general scrambling for the best euphemism to downplay each situation than a serious stateman with the greatest military and economic might on the planet to back him up. No matter what other qualities our bellgerent enemies might have, they are definitely men of action. ... I'm just grateful that Obama had the good sense to bow to the Saudi King at the G20 summit in London., At least he didn't curtsey", original italics, my emphasis, Ralph Alter (RA) 5 June 2009 at: http://www.americanthinker.com/2009/06/our_first_female_president.html.

"Barack Obama's speech in Cairo is one of the most bizarre orations ever made by an US president, not a foreign policy statement but rather something invented by Obama, an international campaign speech, as if his main goal was to obtain votes in the next Egyptian primary. ... The first problem is that Obama said many things factually quite untrue, some ridiculously so. ... The interesting question is whether Obama consciously lied or really believes it. I'd prefer him to be lying, because if he's that ignorant than America and the world is in very deep trouble. ... An Associated Press headline reads, 'Obama's Islam Success Depends on Israel.' Is the entire 'Muslim World' just waiting for Israel to stop building a few thousand apartment units a year before deciding that America is great, reform is needed, and moderation wise", Barry Rubin, 5 June 2009 at http://www.gloria-center.org/Gloria/2009/06/speaking-flattery-to-power.html.

"In his speech last week in Cairo, President Obama proclaimed he was a 'student of history.' But despite Barack Obama's image and an Ivy League-educated intellectual, he lacks historical competency, in areas of both facts and interpretation. ... The Americans didn't free [Auschwitz or Treblikna]. ... [Obama] began, 'I know that I don't look like the Americans who've previously spoken in [Berlin].' He apparently forgot that for the prior eight years, the official faces of American foreign policy in Germany were Secretaries of State Colin Powell and Condoleezza Rice. ... In the recent Cairo speech, Obama's historical allusions were even more suspect. Almost every one of his references was either misleading or incomplete. ... But the great colonizers of the Middle East were the Ottoman Muslims, who for centuries ruled with an iron fist. ... Obama also insisted that 'Islam has a proud tradition of tolerance. We see it in the history of Andalusia and Cordoba during the Inquisition.' Yet the Spanish Inquisition began in 1478; by then Cordoba had long been re-conquered by Spanish Christians, and was governed as a staunchly Christian city. ... Obama also stated: 'For centuries, black people in America suffered the lash of the whip as slaves and the humilitation of segregation. But it was not violence that won full and equal rights.' With all due respect to our president, this assertion is not fully accurate. The only thing that ended slavery in the [US] was the Civil War, which saw some 600,000 Americans--the vast majority of them white--lost in a violent struggle to ensure that nearly half the country would not remain a slave-owning society", Victor Hanson, at National Review, 11 June 2009.

Yes, JRN, I remember Ahmed Ben Bella, my 6 February 2008 post: http://skepticaltexascpa.blogspot.com/2008/02/woodrow-wilson-upside-down.html. As for the principle, this is Prophet's (PBUH) operating principle. In Mecca he was conciliatory. He raised an army and was warlike in Medina. As the Prophet (PBUH) said, "Deception is the essence of warfare". What is it we fail to understand in the West?

Let's look at some Obama stories. During the campaign "He" said "His" grandfather liberated Auschwitz. I remarked to a buddy of mine, "Obama's an ignoramus. Auschwitz was in Poland. It was liberated by the Russians". My buddy said, "You're the idiot. Obama spoke the truth". I said, "how"? My buddy, "Obama's grandfather was a member of the Red Army". Ouch. Obama once said he campaigned in all "57 states". I thought, "Fool. Are you a Heinz ketchup salesman? In my day, we had to memorize all the states, their capitals and place them on a map. Admittedly, it was easier then. There were only 48 states in those days. Recently three bloggers ascribed a different significance to Obama's "57 states" remark, noting the Organization of Islamic Countries (OIS) has 57 members. Ergo, Obama is confused, not realizing he is president of the US, not the OIS. Ohhh.

My best take on Obama: he is a spoiled child.

I first thought of Obama as a metrosexual after the arugula incident. Watching him bow to the Saudi King I thought, "He should ask the King if the King prefers a Japanese or Russian-style kowtow". Yes, Obama "fights like a girl". Why didn't Michelle accompany "Him" on his recent trip? Because when "He" asked Michelle to wear a chador in the King's presence, Michelle said, "what's the matter with you girl? I can whup the King easily". Then for emphasis she hit BO with a left hook, flooring him. I think. From the Samurai warriors' code, "Action is distilled intent". BO can talk. Humphrey Bogart in the "Maltese Falcon", 1941, BO ain't. Hey Don King, you have an opportunity here, Michelle v. The Saudi. 12 Rounds in Vegas. I like it. What's the morning line on Michelle?

Quoted without comment.

Who does Obama think TE Lawrence fought against and with in 1917? Which country did the UK get the Palestine Mandate from in 1920? POTUS Obama don't know nuttin'.

Thursday, June 18, 2009

India and Nukes

"Since World War II, US military dominance has underpinned the Asia-Pacific region's properity and relative peace. So it's cause for concern when one of America's closest allies sees that power ebbing amid unstable nuclear regimes such as Pakistan and North Korea and the expanding military power of China. In the preface to a sweeping defense review released Saturday, Australian Defense Minister Joel Fitzgibbon writes: 'The biggest changes to our outlook ... have been the rise of China, the emergence of India and the beginning of the end of the so-called unipolar moment; the almost two-decade-long period in which the pre-eminence of our principal ally, the [US], was without question.' ... But without sustained US defense spending and focus on the Asia-Pacific, it's unclear which nation will ulitmately dominate the region--and that could have profound effects on security and trade. ... In response to this outlook, Canberra is retooling its defense. It is doubling the size of its submarine fleet to 12 from six and buying about 100 Joint Strike Fighters, three destroyers and eight frigates", Editorial at the WSJ, 8 May 2009.

"Once, India was part of the problem. ... 'A stable, unitary Pakistan is in our interest,' says G. Parthasarathy, former Indian ambassador to Pakistan. And a Pakistan torn apart from the inside is an existential threat to a new India defined by an economic awakening and with a recently forged alliance with the US. ... India's election result gives President Barack Obama a pretext to drop his strange reluctance thus far to engage New Delhi, which got on famously with his predecesssor. After all, most of the worst-case scenarios in Pakistan (including nuclear war) involve South Asia's leading power. Start with Pakistan's nukes. From the Indian vantage point, Pakistani assurances, echoed by US leaders, about the security of the arsenal are worth little to nothing. Imagine the Taliban, another extremist group or rogue elements of the Pakistani military get their hands on one or more of the country's nearly 100 warheads. Then what? ... Compounding concerns are what Indian and US officials believe are ongoing Pakistani efforts to enlarge and modernize its nuclear arsenal, including by developing plutonium warheads, as well as to improve delivery systems. The Chinese, who share Islamabad's dislike of India, 'help us upgrade,' says a Pakistani official. That only serves to heighten Indian anxieties. ... But potentially more worrisome are signs of radicalization in the Punjab. Contagion in this traditionally moderate and most populous Pakistani province could encircle Islamabad and bring instability to India's borders. ... Team Obama wants India to draw down along the frontier and give Pakistan's military cover to shift forces westward against the Taliban. Back have come lectures from Indians about Pakistan's superior force strength on the border. India won't take orders from Washington lightly", my emphasis, Matthew Kaminski, at the WSJ, 22 May 2009.

Our actions are not being ignored by Iran or the Arab world either.

Does Obama think India is Israel? "Obama ... [has a] strange reluctance thus far to engage New Delhi". Hmm. Obama & Co., don't seem to like Netanyahu's Israel either. Hmm. How dare those damn Kaffirs, Hindus, not accept "Pakistani assurances" at face value. After all, Obama & Co. vouch for them. Suppose India withdrew say 100,000 troops from near the Pakistani border. Would Pakistan then redeploy its troops to fight the Taliban? I think not.

Citigroup-SEC Scam

"Citigroup Inc. is in the early stages of negotiating with the [SEC] to settle an investigation into whether it misled investors by not properly disclosing the amount of troubled mortgage assets it held as the market began to implode in 2007, people familiar with the matter say. ... At the heart of the crisis have been questions about the value of assets on the books of financial firms, as investors increasingly became distrustful of firms' own estimates and regulators began examining measurement methods and disclosures. ... The SEC also is considering bringing cases against individuals related to disclosure of mortgage assets, including top executives, people close to the situation say. ... Citigroup also disclosed for the first time that it held US subprime-mortgage assets totalling $55 billion--including $43 billion that hadn't been highlighted Oct. 15. ... It isn't clear what civil charges, if any, the SEC would bring against Citigroup or other financial firms, or whether the agency will seek to reach settlements with multiple firms simultaneously", Susan Pulliam and Randall Smith at the WSJ, 28 May 2009.

The SEC wonders "what civil charges, if any, [it] would bring against Citigroup". Forget about this. Make a referral to the SDNY US attorney. The SDNY US Attorney brought criminal charges against Craig Gile at Citigroup's behest over $2 million, my 25 June 2008 post, http://skepticaltexascpa.blogspot.com/2008/06/citigroups-joe-jett.html. And the SEC wonders about bringing civil charges? It's time to close the SEC's enforcement division. Those morons have time to look at two SEC staff lawyers over a few thousand dollars in unreported stock trades and here are billions not properly accounted for.

Wednesday, June 17, 2009

The Education Mystery

"Here is my nominee for the biggest mystery: the decline and fall of public school education. Don't agree? Give me a minute and I'll convince you. ... Simultaneously, over the last 70 years, literacy has fallen, SAT scores have fallen, American competitiveness has fallen, and the general knowledge or ordinary citizens has fallen. Teenagers graduate from high school who can't read their diplomas; the country now has 50,000,000 functional illiterates. I recently saw on television that the wealthiest, most sucessful country in the world--that would be us--hovers around 18th internationally on reading, and 25th in science. ... It's as if I told you that an ordinary man consumed 5000 calories a day and lost weight. So this, I submit, is the greatest mystery in our history. But why have our educators allowed this decline to take place? Or is 'allowed' a trick word, and they have actually abetted this failure? ... What we see in education makes sense only if we assume that our educators have an agenda we don't know about, or that they are malevolent, or both. ... Here is my deduction: that those at the top of the Education Industrial Complex, since the time of John Dewey, have been collectivists first, and educators second. The goal of creating an educated child was too often superceded by the goal of creating a cooperative child", Bruce Price, 27 May 2009 at: http://www.tcsdaily.com/printArticle.aspx?ID=052609A.

I have said things like this since I was in high school. In reading this piece I thought of Dewey and Lenin. Lenin said, "Give us the child for eight years and it will be a Bolshevik forever".

OTS Ignores Fraud

"High-level Office of Thrift Supervision officials played a direct role in allowing thrifts to inappropriately backdate capital contributions, federal inspectors said Thursday, even though such moves allowed firms to report misleading financial results. ... In two cases, including IndyMac Bank, which later failed, OTS management specifically directed or authorized the backdating. ... In three further cases, the agency allowed a thrift's backdating to remain after discovering it. ... In only one of the six cases did the OTS direct the thrift to reverse the transaction", my emphasis, Michael Crittenden at the WSJ, 22 May 2009.

When would backdating be appropriate? Were any of these thrifts audited? Did their CPAs find this? If not, why not? Did these transactions violate the books and records provisions of the Foreign Corrupt Practices Act? Will anyone get indicted over this? IndyMac was audited. Its last filed proxy showed it paid E&Y $6.2 million in 2007. Well, E&Y, what did you look at?

Tuesday, June 16, 2009

Obama's Tax Grab-2

"Accenture Ltd. is seeking to become the latest company to switch tax-haven locales. On Tuesday, the consulting and outsourcing firm said its board of directors had unanimously approved switching the company's place of incorporation from Bermuda to Ireland. The move comes amid a crackdown on tax havens by the Obama administration and congressional Democrats, who are targeting companies with substantial US operations that are incorporated in tax havens like Bermuda to lower their overall tax burden. ... In a trend that has gained momentum over the past six months, numerous US companies are reincorporating from tax-friendly locations like Bermuda and the Cayman Islands to Switzerland and Ireland, in an effort to cope with what are expected to be significant changes in how the US taxes multinational corporations. ... But [Accenture's] board didn't consider moving Accenture to the US. 'What shareholder would ever vote to incorporate in a country that taxes your world-wide income?' the [Accenture] person asked", Jesse Drucker at the WSJ, 27 May 2009.

Tim Geithner take note.


"It's a white-collar worker's nightmare: giving a presentation that gets you fired. It happened to the chief financial officer of Motorola this year. And the lawsuit he filed afterward offers an unusual peek into dysfunctional relationships at the top of a major company. Motorola has gone so far as to claim it fired the CFO 'for cause'--a term often reserved for suspected embezzler--while the former executive says he was canned for blowing the whistle. ... Paul Liska, 53, walked into a board subcommittee meeting Jan. 28 and fired a broadside at the Schaumburg, Ill.-based company's ailing cell phone division. ... Not all of Liska's presentation can be seen in the public records accompanying his lawsuit. Some parts have been blotted out by Motorola so as not to reveal business secrets. Liska and the company declined to comment for this story, citing the litigation. ... Five hours later, Greg Brown, who shares the chief executive title with [Sanjay] Sha, told Liska he was being replaced as CFO. 'Paul, you fired a shot heard around the world,' he said, according to Liska. ... Motorola says he knew he was on the way out, and he tried to set himself up as a whistle-blower who was being fired for speaking out. ... On Feb., 20, Liska filed a 'retaliatory discharge' suit. Two weeks later, the company said in a regulatory filing that Liska had been fired for cause, a potentially career-killing term, and the fight became public", my emphasis, Peter Svensson at the Houston Chronicle, 24 May 2009.

Five hours later? Case closed. Motorola pay up. Hey SEC, where are you on this? Did you already visit Motorola's offices with a subpoena for Liska's personnel file and all board of directors minutes for the last six months? If the SEC finds Motorola's Brown is lying, will he be indicted for securities fraud? Will the Labor Department intervene in this case? Will Dudley Do-right save Nell Fenwick? Stay tuned.

Monday, June 15, 2009

Witkov's Modest Proposal

"Many American today believe certain illegal vices in our society should be decriminalized, taxed, and regulated. The most popular of these vices include marijuana smoking, prostitution, and all forms of gambling. ... Unfortunately, when it comes to lowering taxes and helping the downtrodden, the best-laid government plans seem to fall short of expectations. However, there is one vice, one small illegal indiscretion, that, if decriminalized would solve all our problems. The [US] needs to decriminalize the victimless crime known as counterfeiting. ... Universal counterfeiting could be the entitlement program that ends all other entitlement programs and sets us free", Harold Witkov (HW), 22 May 2009 at http://www.americanthinker.com/2009/05/time_to_legalize_counterfeitin_1.html.

Welcome aboard HW, I first suggested this about 25 years ago. Positively Swiftian.

A Nation of Banks

Jonathan Weil, 27 April 2009, notes, "The spectacle of Ben Bernanke and Henry Paulson running roughshod over Kenneth Lewis and his minions at Bank of America Corp. raises a pivotal question for all Americans: Is the US a nation of laws, or a nation of banks", link: http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aXHVu97lAGjs

Price Watergate-5

"Hyderabad's Central Prison is no country club jail. ... Behind its hulking, metal-studded door live more than 900 men, held for crimes like pick-pocketing and murder. Then there are the two accountants. ... But Satyam's independent auditors, two partners from the Indian office of [PWC], say they are innocent and remain in prison, charged with multiple offenses, including dishonesty, cheating, falsification of accounts and using forged documents. ... In an interview in the prison's dim, noisy, concrete visitor's hall this week, the accountants said they were scapegoats for a system that failed to catch years of wrongdoing. 'I've been 31 years in this profession, and I have never seen auditors being booked.' said Subramani Gopalakrishnan, one of the jailed auditors and the founder of the [PWC] office in Hyderabad. ... [PWC] audited Satyam's books worldwide from 2001 until the company's founder, B. Ramaliga Raju, confessed in January that he had been manipulating the accounts for years and that more than $1 billion in cash on the balance sheet did not exist. ... [PWC], facing numerous shareholder class-action suits and investigations, is under intense pressure to prove that its partners were not complicit. But a preliminary report from India's Central Bureau of Investigation accuses the auditors of 'consciously' overlooking accounting irregularities and 'knowingly' certifying inflated and falsified data. In a petition for bail for the partners, [PWC] said that the government had 'no material or iota of evidence to even remotely suggest' that the partners 'had any knowlege' that Satyam documents were falsified. .. 'The whole world believes that preventing and detecting fraud is my responsibility,' [Srinivas Talluri] yelled through the wire fence. 'No concerns were ever brought to us by anyone.' He said he 'could not imagine'; the company would forge depository receipts, or balances on fake bank letterheads. Banks in India are not required to give balances directly to auditors, he added", my emphasis, Heather Timmons, 29 May 2009 at the NYT, link: http://www.nytimes.com/2009/05/29/business/global/29prison.html.

This is laughable. At best these two "auditors" should get an "ostrich instruction" if tried in a US Federal District Court. That they apparently chose not to get bank confirmations is their and PWC's problem. I think this admissible "res gestae" showing consciousness of guilt. Let the trier of fact decide. This has been US practice for about 60 years. Is PWC one firm"? Well PCAOB, did you know Indian chartered accountants don't get bank confirms? If not, why not? If CPA audits cannot detect material frauds, who needs them? This case seems to be PWC's world-wide declaration of incompetence, or worse. PWC, you should be ashamed of yourself. You, who does litgation support work, should know: fraud is inferred from acts. Fraud is rarely if ever "proven" through direct evidence. Anyone using PWC's litigation support services, take note. Apparently PWC don't know nuttin'. Has PWC world-wide seminars for its partners who audit SEC registrants? Did PWC mention US v. Simon, 425 F2d 796 (2d Cir., 1969)? I realize it's a 40-year old case, but in it, a Big 87654 CPA went to prison. He was a partner in Lybrand, Ross Brothers & Montgomery, a PWC predecessor. One reason fraud is as common as it is, is CPAs and attorneys are rarely indicted for aiding and abetting fraud. "Could not imagine"? What about "professional skepticism"? My last Satyam post was on 22 April 2009, link: http://skepticaltexascpa.blogspot.com/2009/04/satyam-and-pwc.html. I once saw this in a case, "to aver that an act is fraudulent is to aver a matter of law, not a matter of fact". The same act may be fraudulent or negligent. The difference is: intent.

Sunday, June 14, 2009

SEC Temper Tantrum

"The [SEC] imposed tough new rules on stock trading by employees, following an investigation into the trading of two veteran enforcement lawyers. The rules will, for the first time, prohibit staff from trading shares of companies under SEC investigation regardless of whether employees have personal knowledge of the investigation. Staff will also be required to have their brokers supply trading statements so that ethics officers can confirm that employess reports are accurate. ... The report didn't name the two [SEC] employees. The [WSJ] has identified them as veteran SEC lawyers Glenn Gentry and Nancy McGinley. ... 'Oh yuckola!' Ms. McGinley wrote in a 2007 email, according to the report, when SEC rules blocked her friend from making a trade. ... The SEC has come under fire for missing risky transactions at big Wall Street firms during the boom years and failed to catch confirmed Ponzi schemer Bernard Madoff, among other things. Ms. McGinley's lawyer, Adam Augustine Carter, confirmed that his client is the subject of a probe and said she did nothing wrong. ... The lawyer said those trades took place either before any SEC investigation started, or after the investigation was 'publicly disclosed and widely discussed in the press.' ... The two were active stock traders compared with others at the agency, officials say, and they filled out most of the required paperwork, though with some lapses. For example the SEC report said, Mr. Gentry failed to file forms for three stock transactions. The inspector general also found that both failed to report certain cases where they earned more than $200 in income, as rules require", my emphasis, Kara Scannell at the WSJ, 23 May 2009.

This looks like an SEC witch hunt designed to derail an investigation of significant malfeasance somewhere else.The SEC complains of limited resources, yet looks at these two lawyers. As little as a $200 a trade profit might be at stake. Is $200 Lloyd Blankfein's daily cigar bill? This case illustrates one of the SEC's many failings, an emphasis on form filling while ignoring subsantive issues. SEC "ethics officers"? Hahahahahaha, the Mogambu Guru would say. Three transactions. Wow. Did any of them show even a $1,000 profit? I cite a maxim of jurisprudence, California Civil Code Section 3533, "The law disregards trifles". David Kotz, SEC IG, study up. What did you learn at Cornell Law School anyway?

California Death Watch-3

"The [US] has been an empire in decline since the 1970s. As has been the case with every other declining world power in history, there are a variety of reasons for this decline, which is why there are no straightforward solutions for reversing it. ... Since the states are explicity barred from coining money but the federal government is expressly permitted to do so, it is obvious that the only constitutional money is gold and silver coin, regardless of what government employees have subsequently decided. ... The expansion of the voting franchise has exacerbated the problems created by the switch to a monetary system more susceptible to manipulation. ... The expansion of the franchise to include many parties historically denied the vote has had the inevitable, and expected, effect of permitting society's non-productive members voting themselves the right to obtain wealth transferred from society's productive members. ... While history shows that a moderate amount of wealth redistribution is sustainable, it increasingly tends to indicate that democratic equalitarianism rapidly increases that amount to unsustainable levels. ... Immigration and the entry of middle-class women into the labor force are closely related to each other and to the redistribution issue, because as American women elect to work and cease to replace themselves by having at least 2.1 children each, the pyramid scheme of wealth redistribution requires an ever-increasing number of immigrants to delay collapse. ... It is no coincidence that California, which has historically been a leader with regards to women's sufferage, immigration and female labor force participation, is the first US state to find itself on the verge of insolvency. ... Forces which take decades to fully realize their impact must be permitted to play themselves out. ... Rather than lamenting the national mistakes of the past, Americans who value freedom, liberty and prosperity would do well to look to the possibilities of the post-American future", my emphasis, Vox Day (VD), 25 May 2009 at: http://www.worldnetdaily.com/index.php?pageId=99055.

"California is facing economic failure resulting from years of a liberal legislature pursuing a liberal version of utopia. The liberal utopia has become the Forgotten Man's hell. California has been at the forefront of many trends on America including a tax revolt that led to Proposition 13. Is it time for a repeat? ... The plan was inadequate and the 22% of the voters who saw fit to vote saw through the charade of the ballot initiatives for what they were--which was a band aid to cover the twin cancers of structural tax deficiencies and partisan politics masquerading as thoughtful dialog. The Golden State has lost its luster. California ranks 48th out of 50 in business tax climate according to the Tax Foundation. Only the beacons of limited government found in New York and New Jersey scored lower than California. ... Capital and jobs are mobile and will seek the best returns. California receives 50% of its personal income tax revenue from 1% of the tax filers. Businesses are not expanding in California--or they are leaving the state. ... The bad news for Nevada is that Californians are migrating to Nevada to seek a better future. There goes the neighborhood. ... California's budget for K-12 education was $42.1B in 2007/2008 up from the 2002/2003 budget of $28.8B. During the period from 2002 to 2005 (sorry, the CA Dept. of Education has not posted K-12 statistics more recently than 2005), the California K-12 population has risen 1%", Alan Aronoff (AA), 26 May 2009 at: http://www.americanthinker.com/2009/05/california_a_failed_state.html.
"Folks, California is the biggest example of the famous canary in the coal mine theory ever. ... California is certainly getting toxic budgetary news. It is killing the economy and all that this once-vaunted state had to offer in the way of education and environment, making it the envy of the world. ... 'The proportion of immigrant-headed households using at least one major welfare program is 33 percent, compared to 19 percent for native households. ... Immigrants and their US-born children account for 71 percent of the increase is the uninsured since 1989.' ... How long will this madness continue? ... I predict that as matters get worse--and they surely will--Californians and all Americans will finally wake up to the fact that unchecked immigration, wanton use of the public trough and loss of expected public services will cause a revolt by voters", Donald Collins (DC), 7 June 2009 at: http://www.vdare.com/collins/090606_immigration.htm.

Yes VD.

Yes AA.

Yes DC.