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Sunday, March 31, 2013

Crude oil leaks in Arkansas suburb after ExxonMobil pipeline ruptures



An ExxonMobil pipeline rupture near Little Rock, Ark., Friday evening has resulted in a “major oil spill,” according to the Environmental Protection Agency -- and ignited further debate over the transportation of crude oil in the U.S.
Up to 10,000 barrels sprang from the pipeline, according to an incident report filed to the National Response Center by ExxonMobil early Saturday morning. Twenty-two residents were evacuated from their homes, according to a statement on the ExxonMobil website.
Mayflower, Ark., Chief of Police Bob Satkowski told Channel 7 News in Little Rock that those residents had to leave their homes because of health risks from the crude oil fumes and possible fires.
In a statement on the company website, ExxonMobil downplayed the environmental concerns, saying that the air quality doesn’t likely present a human health risk, “with the exception of high-pooling areas.”
KARK, an NBC affiliate station in Little Rock, reported that part of the pipeline runs through a water source that provides drinking water to nearly 400,000 residents in central Arkansas. The 20-inch wide pipeline goes through Lake Maumelle.
The pipeline, officially known as the Pegasus pipeline, transports heavy Canadian crude oil from Patoka, Ill. down to the Sunoco Logistics Nederland terminal in Texas, which feeds into Houston area refiners, according to the Exxon website. The pipeline, which can carry more than 90,000 barrels a day, was stopped Friday. ExxonMobil did not say when it would reopen.
EPA officials said the cleanup would be long and expensive, according to KARK. It was not reported who would pay for the cleanup.
The leak was first reported at 5 p.m. Friday, when someone called the National Response Center to report a drop in pipeline pressure.
Two hours later, a caller reported that there was a “significant amount of material release.” The caller said the oil leak lasted about three hours.
An updated report early Saturday said up to 10,000 barrels were discharged and that the product had been released “into flume pipes and into a pond, a tributary of Lake Conway.”
Friday’s spill prompted immediate response from critics of the proposed Keystone XL pipeline, which would transport about 800,000 barrels per day of Canadian crude oil to the Gulf Coast for refining.
Massachusetts Rep. Ed Markey took to Facebook to lash out against Canadian crude oil.
“This latest pipeline incident is a troubling reminder that oil companies still have not proven that they can safely transport Canadian tar sands oil across the United States without creating risks to our citizens and our environment,” Markey said. He is the top Democrat on the Natural Resources Committee.
“Tar sands oil is already the dirtiest, riskiest oil around, and should not be getting a free ride across America,” he continued. “It’s time that we recognize the real effects producing and burning this oil will have on our climate, and the real world damage it can cause when it is spilled in our neighborhoods.”
This has been a bad week for crude oil public relations. On Wednesday, according to Reuters, a train carrying crude oil derailed in Minnesota and spilled up to 30,000 gallons.
Last week, the Pipeline and Hazardous Materials Safety Administration recommended fining ExxonMobil Pipeline Company $1.7 million for how the company responded to a crude oil pipeline failure in the Yellowstone River in Montana.
The Mayflower spill may be 10 times more significant than the Montana spill, which leaked 1,509 barrels.
The 1989 Exxon Valdez spill poured 260,000 to 750,000 gallons into Alaskan waters.
These spills pale in comparison, however,to the 2010 Deep Water Horizon oil spill, the most significant oil spill in the U.S., which leaked 4.9 million barrels into the Gulf Coast.

Big depositors in Cyprus could lose up to 60 percent of savings

By Karolina Tagaris, Reuters

Major depositors in Cyprus's biggest bank will lose around 60 percent of savings over 100,000 euros, its central bank confirmed on Saturday, sharpening the terms of a bailout that has shaken European banks and saved the island from bankruptcy.

Initial signs that big depositors in Bank of Cyprus would take a hit of 30 to 40 percent - the first time the euro zone has made bank customers contribute to a bailout - had already unnerved investors in European lenders this week.

But the official decree published on Saturday confirmed a Reuters report a day earlier that the bank would give depositors shares worth just 37.5 percent of savings over 100,000 euros. The rest of such holdings might never be paid back. The toughening of the terms will send a clear signal that the bailout means the end of Cyprus as a hub for offshore finance and could accelerate economic decline on the island and bring steeper job losses.

Banks reopened to relative calm on Thursday after an almost two-week shutdown and the imposition of capital controls. The streets of Nicosia were calm on Saturday, filled with crowds relaxing in its cafes and bars.

There is no sign for now that ordinary customers in other struggling euro zone countries like Greece, Italy or Spain are taking fright at the precedent set by the bailout.

"Cyprus is and will remain a special one-off case," German Finance Minister Wolfgang Schaeuble, one of the architects of the euro zone's response to a debt crisis now in its fourth year, told German mass-selling daily Bild.

"The savings accounts in Europe are safe."

European officials have worked hard this week to stress that the island's bailout was a unique case - after a suggestion by Eurogroup chairman Jeroen Dijsselbloem that the rescue would serve as a model for future crises rattled European financial markets.

"Together in the Eurogroup we decided to have the owners and creditors take part in the costs of the rescue - in other words those who helped cause the crisis," said Schaeuble.

"Cyprus's economy will now go through a long and painful period of adjustment. But then it will pay back the loan when it is on a solid economic foundation."

Cypriot President Nicos Anastasiades said on Friday that the 10-billion euro ($13 billion) bailout had contained the risk of national bankruptcy and would prevent it from leaving the euro.

Cypriots, however, are angry at the price attached to the rescue - the winding down of the island's second-largest bank, Cyprus Popular Bank, also known as Laiki, and an unprecedented raid on deposits over 100,000 euros.

Etyk, a bank worker's union, called a rally outside parliament for Thursday to protest against potential job cuts and a hit on their pension funds.

North Korea: Nukes are our country's 'life'

NBC's Ian Williams reports on the latest tensions emanating from North Korea.
One of North Korea's top decision-making bodies is setting guidelines that call nuclear weapons "the nation's life" that won't be traded even for "billions of dollars,” The Associated Press reported.
The statement Sunday came after a plenary meeting of the central committee of the ruling Workers' Party attended by leader Kim Jong Un and other officials, the AP said.
It also followed a declaration on Saturday that it was entering a "state of war" with South Korea, the latest in a string of increasingly belligerent outbursts from the isolated state.
Sunday’s statement says nuclear weapons aren't "goods for getting U.S. dollars" or a "political bargaining chip." Outside analysts have said Pyongyang raises worries over its nuclear ambitions to spur nuclear-disarmament-for-aid talks, the AP said.

It said Pyongyang will also increase work to build up the economy. Kim has made fixing the moribund economy a focus.
On Thursday the U.S. sent two nuclear-capable bombers to South Korea, where they dropped inert munitions in a military exercise. The flight sparked an angry response from the North, which declared on Friday that it was preparing rockets aimed at American bases in South Korea and the Pacific.


 


Tucson shooting: Major findings in Loughner files

March 27, 2013 9:58 am


Documents released Wednesday provide new insight into how the Tucson shooting rampage occurred and the motivations behind gunman Jared Loughner.
One of the main themes to emerge was the increasingly erratic behavior of Loughner, perhaps summed up best by his father as he told investigators: He “just doesn’t seem right lately.”

A look at some of the major findings so far today:

LOUGHNER

The gunman was polite and cooperative with authorities who were holding him the afternoon following his morning shooting rampage. The conversation as Loughner sat in restraints in an interview room was mainly small talk. Little was said over the four hours. Loughner asks at one point if he can please use the restroom and says “Thank you” when allowed. At another point he complained that “I’m about ready to fall over.”

GUNMAN’S MOTHER

Loughner’s mother, Amy, described his run-ins with authorities, his use of marijuana and cocaine, his journals and his increasingly erratic behavior. She also says the parents took a shotgun away from Loughner after he was kicked out of a community college and tested him for drugs because his behavior was so strange.

GUNMAN’S FATHER

Randy Loughner said his son became increasingly difficult, and it was a challenge to have a rational conversation with him. “I tried to talk to him. But you can’t, he wouldn’t let you,” he said “Lost, lost, and just didn’t want to communicate with me no more.”

MENTAL ILLNESS

Despite their son’s increasingly bizarre behavior, Loughner’s parents never sent him to get help. Randy Loughner said that his son had never been diagnosed with a mental illness. Had he seen a doctor, the detective asked. “No,” replied the father. The parents were also asked about any journals or writings that Loughner kept. The father said they were written in an indecipherable script.

DISABLING HIS CAR

Loughner’s parents “noticed that Jared was not acting quite right … and believed it was to have started when he was kicked out of Pima Community College for a YouTube video he had created.”
Randy Loughner said his son had become “more and more distant from them and he would not communicate with Mr. Loughner about much of anything.”
Randy Loughner became so concerned about his son’s behavior that he “began to disable Jared’s Nova … to prevent Jarred from being able to drive anywhere at night.”
However, the night before the shooting, Randy Loughner did not disable the car and heard his son drive away at 6 a.m. Jared Loughner returned home an hour or two.
When Randy Loughner heard his son pull up, “he looked outside of his front window and saw Jared take what appeared to be a black backpack out of the trunk of his Nova.”

CHRISTINA’S BELONGINGS

Christina-Taylor Green’s parents asked for their daughter’s clothing, earrings and iPod Touch to be returned. Deputies returned the earrings as well as images from the iPod Touch. They gave the family a disc with the electronic files and 8x10 printouts of the photos.

GOING TO THE SCENE

Loughner went to a convenience store immediately before the shooting and had the clerk call a cab for him. As he waited for the car, he was pacing inside and outside the store and went to the bathroom three or four times. The employee said that as Loughner was waiting for the cab, he looked up at a clock and said, “nine twenty-five, I still got time.”

TRAFFIC STOP

Loughner was pulled over earlier in the day for a traffic violation by a wildlife agent. He inched toward the intersection, then drove through the red light while making eye contact with the agent in the rearview mirror. He cried and said, “I’ve just had a rough time,” and then composed himself, thanked the agent and shook his hand after he was let go with a warning. The agent asked Loughner again if he was OK, and Loughner said he was going home.

THE SCENE

Giffords intern Daniel Hernandez helped tend to his boss after she was shot in the head. In an interview, he described the chaos: “She couldn’t open her eyes. I tried to get any responses for her. Um, it looked like her left side was the only side that was still mobile. Um, she couldn’t speak. It was mumbled. She was squeezing my hand.
“I did some training as a Certified Nursing Assistant and as a phlebotomist, um, when I was in high school. So I knew that we need to see if she’s got a pulse. She was still breathing. Her breathing was getting shallower. Uh, I then lifted her up so that she wasn’t flat on the ground against the wall,” he said.

GUNS

Loughner bought a 12-gauge shotgun in 2008, but his parents took it away from him after he was expelled from college and administrators recommended that any firearms be taken away. The shotgun was the only gun his parents knew Loughner owned.

AMMUNITION

On the day of the mass shooting, Loughner tried to buy ammunition at a Walmart on La Cholla Boulevard.A store clerk thought he was acting so odd and erratic that he decided to lie and tell Loughner the store was out of stock.
Loughner bought the ammunition he wanted at another Walmart store on Cortaro Road.
Earlier that week, Loughner had told a Walmart employee that he tried to enlist in the Army and that he believed Americans are brainwashed by the government.

CARING FOR GIFFORDS

A firefighter described how he cared for Giffords after arriving at the scene. “You’d ask her to grab your hand and she would grab your hand,” he said. He and paramedics rushed her to the hospital in an ambulance, giving her oxygen and an IV.

THE ENCOUNTER

Hernandez described how constituents and other people were lining up to see Giffords, and he was helping people sign in. He recalled handing Loughner a clipboard. “The next thing I hear is someone yell, ‘gun,’” he said.

LOUGHNER FRIEND

One-time Loughner friend Zachary Osler was an employee at a store where Loughner later bought a Glock handgun before the shooting. Osler was questioned about seeing Loughner shopping inside, sometime before Thanksgiving. He describes an awkward encounter with his former friend. “His response is nothing. Just a mute facial expression. And just like he, he didn’t care.” Osler told investigators he had grown uncomfortable with Loughner’s personality, “He would say he could dream and then control what he was doing while he was dreaming.” Osler says Loughner never mentioned Giffords to him.Osler talking about Loughner in high school: “Weird kid. He'd say weird things. Talk about weird things like how he consciously dreams while he’s awake.”
“I do know he tried to join the Army at one point. And they did mental evaluations on him. And they didn’t accept him.”
Osler said when he learned that Loughner was the suspect in the shooting, “my jaw just dropped. And I was like I know this person. Why he would do it? What would his motive be? If he had people help him? I do not know.”

POSSESSIONS

In Loughner’s left front pocket were two magazines for a Glock, both fully loaded. In his other front pocket was a foldable knife with about a 4-inch blade. In his back right pocket, he had a baggie with some money, a Visa credit card and his Arizona driver’s license. He was wearing a black beanie, a black hoodie-type sweatshirt, khaki pants and Sketchers shoes, reports show.

WITNESS

A witness described seeing an ominous-looking man in his early 20s wearing a backpack near the shooting scene. The witness later described recognizing Loughner as the same person from photos on the news.

Banks Still Too-Big-To-Fail: Six Things The Fed Must Do

We can’t solve problems by using the same kind of thinking we used when we created them.
Albert Einstein

At a news conference last Wednesday, Ben Bernanke, the chairman of the Federal Reserve, conceded that the problem of too-big-to-fail is “still here”.  If new rules and international cooperation did not solve it, he said, “additional steps” will be needed. Chairman Bernanke didn’t say what “additional steps” he has in mind. Since neither Dodd-Frank nor conclaves of central bankers are getting the job done, let’s give the chairman some help, by pointing out six things the Fed must do.

Abandon nostalgia for a world that no longer exists

 

Let’s start with some popular non-starters. Simon Johnson, former chief economist of the International Monetary Fund, and a Professor of Entrepreneurship at the M.I.T. Sloan School of Management, writes in the New York Times writes that  “the clearest possible statement of how to think about the modern financial system – and make it less risky” lies in a speech by Richard Fisher, president of the Federal Reserve Bank of Dallas, entitled “Ending Too Big To Fail.”
Fisher argues that “the largest financial holding companies be restructured so that every one of their corporate entities is subject to a speedy bankruptcy process, and in the case of the banking entities themselves, that they be of a size that is ‘too small to save.’ …The downsized, formerly too-big-to-fail banks would then be just like the other 99.8 percent [of banks], failing with finality when necessary—closed on Friday and reopened on Monday under new ownership and management in the customary process administered by the FDIC.”
The world that Fisher yearns for—a banking system composed of small banks that are easy to regulate: closed down on Friday and reopened on Monday under new ownership and management—was a comfortable cozy world for regulators that existed for many decades. It was one in which the central bankers were unquestionably in charge. The problem is that that world no longer exists.
There is no way that the Fed is going to be able to slice a bank like JPMorgan Chase [JPM] with 260,000 employees operating in sixty countries in a multitude of different businesses, or a bank like Citigroup [C] with 200 million customer accounts in 160 countries and processing $3 trillion in transactions every day,  into sets of small, independent, easily monitored entities that can be closed down on Friday and reopened on Monday with scarcely a ripple on the surface of the financial ocean. Fisher’s world no longer exists. There is no way it can be re-created. Efforts to re-create it will be counter-productive.

Don’t apply linear solutions to complex problems


The Fed should thus observe the first lesson in coping with complexity: the principle of obliquity. Efforts to impose linear thinking on complex situations typically lead to the opposite of what is intended. Where explicit articulation of a goal will result in the complex environment pushing back in the opposite direction, an oblique approach will often be more effective.
The banks may be too big, but an effort by the Fed to break them up by direct action is likely to have the opposite effect, for a number of reasons. First, there is no consensus that size is the issue. Even a liberal critic like Nobel-Prize winning economist, Paul Krugman, has argued that size isn’t the problem. Second, even among those who think that size is the issue, there is no consensus on how big is too big. Third, studies suggest that larger banks are more robust in coping with crises. Fourth, all the financial crashes have been sparked by problems in smaller financial institutions, not big banks. Finally, the financial sector will exploit all the preceding issues in a furious counter-action that would end up discrediting the Fed if it were to launch an explicit effort break up the big banks.

Reinventing central banking: from inspections to managing complexity


Historically, banking regulators have always worked as a secretive bureaucracy, working quietly behind closed doors, concealing problems from the public, so as to avoid the kind of panic that might aggravate the very problem they are trying to avert, and issuing their unchallengeable decisions with imperial force: “This bank will close” and “That bank will stay open.”
The approach of secret inspections and controls is no longer adequate to cope with the forces of “innovation” that have been unleashed by the modern financial sector. The inspectors are always several steps behind the “innovators” aka rogues, such as the London Whale.
As my colleague Richard Straub points out, we need to keep in mind Albert Einstein’s dictum:  “We can’t solve problems by using the same kind of thinking we used when we created them.” To solve today’s problems, the Fed has to think differently.

The Fed’s most powerful and most under-used tool: knowledge

 

Although the conventional wisdom is that the Fed has done all it can to resuscitate the economy by pumping money into the banking system and hold down interest rates, the reality is that the Fed has barely begun to use one of its most powerful tools: knowledge. Knowledge can mobilize the forces the marketplace to achieve the Fed’s ends.
Whatever one might think about the policy approach of the Fed, few have ever questioned its professionalism. The problem is that the professionals have been largely keeping this expertise to themselves, instead of sharing it with investors who can also act on it. Instead of having a few inspectors trying to catch up with rogues like the London Whale, we need millions of investors with the knowledge to follow what is going on and to act on the consequences.
Investors have the power and the smarts to shift their money out of JPMorgan Chase if it behaves recklessly. The sanctions of the marketplace are swift and decisive—if the right knowledge is available. There are six things the Fed must do to enable this to happen.

1.      Expose the banks’ hidden $5 trillion in derivatives assets

For starters, stop letting the big US banks hide half their assets off their balance sheets—some $5 trillion in derivative assets, according to a recent report from the Milken Institute, That happens now because “generally accepted accounting principles” in the US (GAAP) allow banks to conceal trading in derivatives. Other countries follow International Financial Reporting Standards (IFRS) rules which would require those derivative assets to be included on bank balance sheets.


Accounting principles that allow half of the assets of the banks to be hidden are unacceptable. It is time that US banks are required to adopt International Financial Reporting Standards (IFRS) rules and make full disclosure of their assets in derivatives. Much of the rest of the world does it. Why not the US?
This would have another salutary effect: it would reveal the true book-to-market ratios of the banks. The ratios of all the biggest banks, except for Wells Fargo, are less than 1.0. In other words, Wall Street is saying: the big banks would be worth more broken up, than they are in their current form. If the banks’ accounts included their derivative assets, the correct book-to-market-value ratios would be very much less than 1.0, thus increasing the pressure of market forces to break up these banks, which are too big, not only for society but for the good of their own shareholders.

Memo to the Fed: A principal cause of the 2008 meltdown was regulatory inaction when commercial banks were keeping over half of their assets off balance sheets. Dodd-Frank does nothing to change this. The global derivatives market is now 30 percent larger than it was in 2008, and that much more dangerous. It is a dereliction of the Fed’s duty to permit this hiding of derivative assets to continue. Bringing accounting practices up to international standards is a minimal first step.

2.      End the banks’ deceptive accounting practices

As The Atlantic pointed out last December, “At the heart of the problem is a worry about the accuracy of banks’ financial statements.” The Atlantic took apart the Wells Fargo’s [WFC] 2011 annual report. On the surface the accounts appear to be about a traditional kind of bank, with income divided into the usual three categories: “interest income” (i.e. traditional banking), “non-interest income” (i.e. services) and “other” (i.e. presumably an unimportant category of minor residuals).

Department of Deceptive Terminology: When The Atlantic dug into the details the 2011 annual report of Wells Fargo, it found that the reality was very different.
  • The term “interest income” sounds like innocuous traditional bank lending. It’s not. When you read on, you find that “interest income” includes almost $1.5 billion from “trading assets”; and another $9.1 billion results from “securities available for sale.”
  • The term “non-interest income” sounds like customer fees. It’s not. “Non-interest income” includes $1 billion in “net gains from trading activities” and another $1.5 billion is income from “equity investments.”
  • In Wells Fargo’s report, the income category “other” sounds like a minor insignificant detail. It’s not. It amounted to $6.6 billion of Wells Fargo’s income in 2011, or more than a third of Wells Fargo’s income. It would take an extremely diligent reader another fifty pages to discover that the bank derives that most of the “other” income is again from “trading activities.”

Department of missing information: Information on critical aspects of Wells Fargo’s activities is missing.
  • Economic hedging” might be benign or not. Is Wells Fargo’s “economic hedging” like buying straightforward insurance? Or was it more like speculation—what the London Whale at JPMorgan did? Wells Fargo’s annual report provides no information.
  • Collateralized debt obligations (CDOs)”: There is no full disclosure of what Wells Fargo is doing in collateralized debt obligations (CDOs)—the derivatives that led to the 2008 meltdown. Instead there is just a brief but alarming reference at the bottom of page 164: “In 2011, we incurred a $377 million loss on trading derivatives related to certain CDOs.” Once upon a time, a loss of this magnitude would have been headline news. Now, it’s hidden from view. Worse: there is no way of knowing how much of this is going on at the bank or how much risk is involved.
  • Customer accommodations” is another innocent-sounding category on which Wells Fargo made more than $1 billion in 2011. How did it make so much money merely by helping customers? Later in the report, we learn the truth. Customer accommodation consists of “security or derivative transactions conducted in an effort to help customers manage their market price risks and are done on their behalf or driven by their investment needs.”
  • The risks from trades: The Atlantic asks: “How much risk is the bank actually taking on these trades? For which customers does it place a requested bet, then negate its risk by taking an exactly offsetting position in the market, so that it is essentially acting as an agent simply taking a commission? And for all these trades, what risk is Wells Fargo taking on its customers? Many of these bets involve the customers’ promises to pay Wells Fargo depending on how certain financial numbers change in the future. But what happens if some of those customers go bankrupt? How much money would Wells Fargo lose if it “accommodates” customers who can’t pay what they owe?” We simply don’t know.
When relevant accounting information is systematically missing, the issue goes beyond missing information: it turns into something else: deceptive accounting.
Kevin Warsh, a former Federal Reserve Board member appointed by George W. Bush, says woeful disclosure is a major problem. “Investors can’t truly understand the nature and quality of the assets and liabilities. They can’t readily assess the reliability of the capital to offset real losses. They can’t assess the underlying sources of the firms’ profits. The disclosure obfuscates more than it informs, and the government is not just permitting it but seems to be encouraging it.”

Memo to the Fed: The continuation of deceptive accounting practices is a dereliction of the regulators’ duty to the public. In collaboration with the SEC and OCC, the Fed should expose these practices for what they are and require the banks to present non-deceptive information to investors. Banks that don’t comply should be classified by the OCC as “unsatisfactory management”. The SEC should reject submissions that continue these deceptive practices.

3.      Expose the continuing use of special purpose entities

Of particular concern is the re-emergence of “special-purpose entities” i.e. the infamous accounting devices that Enron employed to hide its debts. These deals were called ‘off-balance-sheet’ transactions, because they did not appear on Enron’s balance sheet. They have now re-emerged, even in Wells Fargo, under the new name of “variable interest entities”. The Atlantic calls them “an even lower circle of financial hell” than proprietary trading. The article likens variable interest entities to “a horror film, which the special-purpose entity has been reanimated… The problem is especially worrisome at banks: every major bank has substantial positions in VIEs.”
As of the end of 2011, Wells Fargo, the “extremely safe bank”, reported “significant continuing involvement” with variable-interest entities that had total assets of about $1.5 trillion. The ‘maximum exposure to loss’ that it reports is much smaller, but still substantial: just over $60 billion, more than 40 percent of its capital reserves. The bank says the likelihood of such a loss is ‘extremely remote.’ As The Atlantic comments: “We can hope.”
Worse: “Wells Fargo… excludes some VIEs from consideration, for many of the same reasons Enron excluded its special-purpose entities: the bank says that its continuing involvement is not significant, that its investment is temporary or small, or that it did not design or operate these deals. (Wells Fargo isn’t alone; other major banks also follow this Enron-like approach to disclosure.)… The presence of VIEs on Wells Fargo’s balance sheet ‘is a signal that there is $1.5 trillion of exposure to complete unknowns.’”

Memo to the Fed: Do your job: expose these activities for what they are and require full continuous disclosure.

4.      Expose the banks’ role in the real economy

Chairman Bernanke has made job growth the Fed’s top priority for the first time in its 100-year history. The New York Times reports: “At his news conference last week, he spoke about the issue in personal terms. Asked when he last had spoken to an unemployed person, he said that one of his own relatives was out of work.  “I come from a small town in South Carolina that has taken a big hit from the recession,” Mr. Bernanke said. ‘The last time I was there, the unemployment rate was about 15 percent. The home I was raised in had just been foreclosed upon. I have a great concern for the unemployed, both for their own sake but also because the loss of skills and the loss of labor force attachment is bad for our whole economy.’”
Chairman Bernanke is thus very conscious that the Fed’s strategy of shoveling money into the banking system has yet to have much positive effect the real economy. The banks are better off. The big firms’ profits are up. The top executives are sitting pretty. But the real economy in which most people work is still struggling.
Why might that be? Could it that when even conservative banks like Wells Fargo make around two-thirds of their income from trading and derivatives the best minds in the banks are deployed, guess where? In trading and derivatives.
When I read JPMorgan’s own report on the London Whale, I was struck, not just by the arrogance and the errors, but also by the quantity and quality of brainpower being deployed in socially useless activities, i.e. managing billions of dollars or gambling on an obscure stock index. Just imagine what this talent could accomplish if it was deployed on expanding opportunities and reducing risk for the real economy?
Have not these big banks become similar to those Mafia families that had a legitimate business as a mere front (such as commercial banking) while their real business was out the back: gambling (derivatives trading)? Doesn’t the FED have a responsibility to track and make explicit to the public what proportion of these banks’ efforts are engaged in promoting the real economy and how much is devoted to socially-useless gambling? Isn’t “making money from money” without connection to the real economy what has been the cause of major financial crashes in the past?

Memo to the Fed: Monitor and publish an index tracking the proportion of effort devoted by the big banks to the real economy.

5.      Help expose the theory that causes the problems

Why have the banks lost sight of their primary function of expanding opportunities and reducing risk for an ever wider circle of citizens and enterprises and turned themselves into a vast gambling casino of no social value to society? The story is a complex one, but a principal thread is the idea that became prevalent in the early 1980s: “The object of a firm is to maximize shareholder value, that is, to make money for the firm.”
In the ensuing single-minded search for profits, banks started pursuing what are known as “bad profits”. These practices were not illegal, but they were not in the best interests of customers or society, and included price gouging, gaming the system, toll collecting, zero-sum trading and excessive compensation.


At first, these “bad profits” were achieved through practices that were shady but not strictly illegal. But in due course, the temptations became too great and the “bad profits” turned into practices that were illegal, including price fixing of LIBOR, abuses in foreclosure, money laundering of drug dealers and terrorists, assisting tax evasion  and misleading clients with worthless securities.
Beyond banking, the goal of maximizing shareholder value has also had disastrous economic consequences. It has ended up having the opposite effect of what was intended. Paradoxically, the goal of maximizing shareholder value has resulted in lower shareholder value in the medium term. Returns on assets and invested capital are in steep and steady decline, as Deloitte’s study of 20,000 US firms from 1965 to 2011 shows (the Shift Index).
The bottom line is that the shareholder value theory hasn’t worked, even on its own terms. In banking, shareholder value has not only led the banks into activities of dubious social benefit, of great risk to society, loss of trust and eventually illegality. What is important for today’s discussion is that it also had high opportunity cost for the banks. Pursuing profits has distracted banks from their true social purpose of reducing risk and increasing opportunities for an ever wider circle of citizens and enterprises. Innovation has been taking place in banking, but not in a way that provides sustained benefits for either the banks or society.

Memo the Fed: Help expose the false theory that has led to such disastrous economic consequences. Help document its origins. Track its impacts. Publish research comparing the financial results for shareholders of banks that pursue shareholder value and banks that pursue delighting customers profitably.

6.      Shift the Fed’s thinking from inspection to enablement

The Fed must shift its own thinking from a 20th Century perspective of secret inspection and controls to a 21st Century modality of open information and enablement. Basic change happens, not when vested interests are defeated, but when different strategies are used to pursue those interests. The Fed can play a major role in facilitating this change in mindsets and attitudes.
Dani Rodrik makes the case in a terrific article, “The Tyranny of Political Economy” that the trick in getting difficult political change is persuading the elites that it’s in their own interests. In effect, banks would be more profitable for shareholder and for the economy if they systematically pursued adding profitably value for customers, rather than pursuing short-term profits for themselves. The fact that that the smaller regional banks are more profitable on average than the big banks already proves the point.
The Fed needs to help persuade the leadership of the big banks their future depends on growing the real economy, not on hanging on to the illegitimate way they are making profits today. It must help show that while it may take more effort in the short term but it will eventually increase their power, wealth and prestige.
The Fed can encourage these forces in the financial sector by focusing its research on these key issues and sharing its knowledge with the world.

Other more difficult actions

There are other actions that might help if successful, but these would be much more difficult and much less likely to be successful.

a.      Break up the big banks:

As noted above, direct action is likely to be counter-productive. It would waste precious reputational capital in a battle which it would in the end lose.

b.      Measure the subsidies to the big banks

Governor Fisher, Simon Johnson and others are intrigued by measuring the exact subsidy that the big banks enjoyed, apparently in the hope that if the exact figure were known, it would help spur action on too-big-to-fail. The realization of that hope isn’t obvious. First, the exact figure will always be an estimate and estimates will inevitably differ depending on the assumption. Even if it were known exactly, it would still raise all the above issues of what to do about it.

a.      Smash the Dodd-Frank logjam

A massive and well-funded counter-campaign is under way by the financial sector to prevent the Dodd-Frank regulations from ever being completed, let alone taking effect. The disgraceful story is brilliantly documented in article by Haley Sweetland Edwards in the Washington Monthly. It’s horrifying reading, but it’s not obvious what the Fed can do to intervene. More on that shortly.

And read also:

'I love you, too': Cardinal Dolan says Catholic Church must embrace gays and lesbians

Gabriel Bouys / AFP - Getty Images file
U.S. Cardinal Timothy Dolan attends a mass at the St Peter's basilica before the papal conclave in this March 2013 file photo.

Prominent U.S. Cardinal Timothy Dolan acknowledged Easter Sunday that the Catholic Church needs to forge a better relationship with the gay and lesbian community.

“We gotta do better to see that our defense of marriage is not reduced to an attack on gay people,” Dolan said. “And I admit, we haven’t been too good about that. We try our darndest to make sure we’re not anti-anybody.”
Dolan, the charismatic Archbishop of New York, made his comments on ABC’s “This Week” nearly one week after the U.S. Supreme Court heard arguments for and against Proposition 8, California’s gay marriage ban, and the Defense of Marriage Act, the 1996 law that blocks federal recognition of gay marriages.
Dolan called for a more conciliatory approach to gay and lesbian Catholics who may feel alienated by Church doctrine, which is traditionally opposed to homosexuality.
“The first thing I’d say to them is, ‘I love you, too, and God loves you, and we want your happiness,’” he said.
But Dolan added that he wasn’t sure how Catholic leaders should conduct better outreach to homosexuals.
“I don’t know. We’re still trying. We’re trying our best to do it. We got to listen to people,” Dolan said. “Jesus died on the cross for them as much as he did for me.”
Despite the appeal for inclusiveness, Dolan said the Church is unlikely to reverse their position on same-sex marriage.
“Sexual love … is intended only for a man and woman in marriage, where children can come about naturally,” he said.

Senators: Immigration deal close, not complete

Congressional Democrats are saying a comprehensive immigration deal is in sight, but Republicans are cautioning that any talk of a deal is premature. NBC's Kristen Welker reports.
With the caveat that negotiators still need to review and agree on legislative language, two key Senate lawmakers said Sunday that a deal on a comprehensive immigration reform bill is close but not complete after a breakthrough in talks between business and labor groups this weekend.
"With the agreement between business and labor, every major policy issue has been resolved on the Gang of Eight," said Democrat Sen. Chuck Schumer, one of the eight Senate leaders working on the legislation, during an interview on NBC's Meet the Press.
Noting that the group has pledged not to come to a final agreement until legislative language is finalized, Schumer said he is "very, very optimistic" that the group of lawmakers will have a deal by next week.
Republican Jeff Flake of Arizona, also a member of the Gang, agreed that lawmakers will be focused on the exact wording of the bill.
"We've still got a ways to go in terms of looking at the language and making sure that it's everything we thought it would be," Flake said on NBC. "But we're closer, certainly."
Another member of the group, Republican Sen. Lindsey Graham of South Carolina, said on CNN that negotiators have a 'conceptual' agreement.
"It’s got to be written up," he said. "We haven’t signed off; there’s a few details yet. But conceptually, we have an agreement between business and labor, between ourselves. It has to be drafted. It will be rolled out next week"
After the Chamber of Commerce and the AFL-CIO reached an agreement on the parameters of a guest worker program -- one of the main holdups in the negotiations -- Republican Sen. Marco Rubio warned that reports of an overarching Gang of Eight deal were "premature."
Schumer said Sunday that Rubio's statement did not indicate any kind of disagreement within the Senate group.
"As Senator Rubio correctly says, we have said we will not come to final agreement until we look at all the legislative language, and he's correctly pointing out that language hasn't been fully drafted," Schumer said. "There will be little kerfuffles but I don't think any of us expect there to be problems."
Rubio, the son of Cuban immigrants whose biography and conservative credentials make him a key GOP voice on immigration, also wrote in a letter to Senate Judiciary Committee Chairman Patrick Leahy and again in a press statement early Sunday that proponents should not rush the legislation to passage.
"Arriving at a final product will require it to be properly submitted for the American people’s consideration, through the other 92 senators from 43 states that weren’t part of this initial drafting process," Rubio said. "In order to succeed, this process cannot be rushed or done in secret.”
Flake echoed that sentiment Sunday, pledging that the draft legislation will be amended in the Senate Judiciary Committee process and on the Senate floor.
"There will be input, there should be input," Flake said. "It will make it a better product."
Schumer rejected the notion that Rubio could break from the Gang of Eight over concerns about the process.
"He is protecting some of the things that he thinks are very important in the bill, but I don't think that will stand in the way of any final agreement," Schumer said. "I think we're all on track."
Calling Rubio is "extremely important" to the bipartisan coalition, Flake said he's confident that the Gang of Eight will remain united.
"I think that we'll stick together as a Gang," he said. "And I hope that we can pull some Republicans our way. I think a number of them are with us already."


Loughner behaved erratically before Giffords shooting, newly released records show


Mar. 28, 2013
Newly-released documents reveal that the parents of Jared Loughner took away his gun, before he shot then-Congresswoman Gabrielle Giffords and killed six other people. 2,700 pages of documents were released Wednesday.


Posted by Aaron Blake on March 27, 2013 at 3:57 pm

Reporters in Arizona are combing over about 2,700 newly released records related to the assassination attempt against then-Rep. Gabrielle Giffords (D-Ariz.) in January 2011.

The Pima County Sheriff’s Department released the records for the first time Wednesday, providing more information about the tragedy that claimed the lives of six and wounded 13.

The Arizona Daily Star is live-blogging its findings here.

According to news reports, these are among the key findings so far:
* Convicted shooter Jared Lee Loughner’s parents say Pima College officials asked that they take away Loughner’s shotgun because of his increasingly erratic behavior, but that he never received the mental health evaluation they recommended when he was expelled.

* His father, Randy, told police: “I tried to talk to him. But you can’t. He wouldn’t let you. … Lost, lost and just didn’t want to communicate with me no more.”

* Loughner was pulled over on the morning of the shootings for running a red light, but he was not cited. (It had previously been reported that Loughner was pulled over.)

* Loughner’s mother believed that he was using methamphetamine and insisted that he be tested, but the test came back negative. And Loughner’s father disabled his car so that Loughner couldn’t leave at night.

Updated 4:22 p.m.: Giffords has responded to the release of the documents:
“The details released today regarding the shooting in Tucson reaffirm what this country already knew: The mentally disturbed young man who shot me and murdered six should never have had access to a gun. No one piece of legislation will end all gun violence, just like no one piece of legislation would have prevented the Tucson shooting. However, I hope that commonsense policies like universal background checks become part of our history, just like the Tucson shootings are. Our communities will be safer because of it.”

Collection: Jared Loughner

Photos, videos, interactives and documents regarding the Jan. 8 Tucson shooting and the trail of Jared Loughner.


Photos: Sentencing of Jared Loughner

Jared Loughner for sentenced in U.S. District Court in Tucson for the shootings on Jan. 8, 2011, at the Safeway at Ina and Oracle that left six dead and more than a dozen wounded.


Loughner forensic report

A forensic report filed by psychologist Christine Pietz on Jared Loughner. The report was written in April.


Loughner Pleads Guilty to Ariz. Shooting

Jared Lee Loughner agreed Tuesday to spend the rest of his life in prison in connection with his deadly shooting rampage in Tucson, Ariz. Last year. His plea enables him to avoid a trial that could have meant the death penalty. (Aug. 7)


Photos: Loughner pleads guilty to Tucson shootings

Jared Lee Loughner pled guilty to 19 counts in U.S. District Court on Tuesday, Aug 7, for the Tucson shootings that left six dead and 13 injured in Jan. 2011.


Loughner plea agreement




Interactive: Key events in the case against Jared Loughner

An interactive timeline is updated with Tucson shooting suspect Jared Lee Loughner's guilty plea.


Loughner's latest appeal

Jared Lee Loughner's attorneys filed this appeal, their third on the issue of forced medication, on Aug. 30.


Prosecution's latest appeals-court filing

Federal prosecutors laid out the latest permutation of the arguments they've been making for months in this document filed Friday at the Ninth U.S. Circuit Court of Appeals.


Judge's Sept. 20 order in Loughner case

U.S. District Judge Larry A. Burns ordered today that Jared Loughner must appear at a re-scheduled hearing.


Prosecutors' response to defense on subpoenas

On Wednesday, prosecutors said the defense has only itself to blame for the revelation of their subpoenas.


Prosecution motion on subpoenas

Prosecutors filed this motion Aug. 11, arguing Jared Loughner's defense team had violated rules on issuing subpoenas.


Defense response to motion on subpoenas

Defense attorneys criticized prosecutors in this Aug. 18 filing on the subpoenas issue.


Loughner defense subpoenas

A motion filed by federal prosecutors on Aug. 11 shows that Jared Loughner's defense team is seeking birth and death records for his ancestors.


Loughner's latest appeal

Late Wednesday, attorneys for Jared Lee Loughner again appealed his forced medication with anti-psychotic drugs by prison staff.


Loughner records

Pima Community College released records today related to Jared Lee Loughner.


Video: Judge rules prison can forcibly medicate Loughner

A federal judge ruled Wednesday that the Tucson shooting rampage suspect can be forced to continue taking anti-psychotic drugs, rejecting a plea by defense attorneys that the decision by prison doctors merited more scrutiny. (June 29, 2011)


Loughner's attorneys' motion

Jared Loughner's attorneys filed a motion Saturday to prevent federal prison officials from forcibly medicating Jared Loughner.


Judge rejects "one-sentence" motion

On Thursday, Judge Larry A. Burns slapped down the "one-sentence" defense motion filed May 27 as inadequate and untimely.


Defense request for advance notice

On May 27, Jared Loughner's defense attorneys asked for Judge Larry A. Burns to notify them before Loughner is administered anti-psychotic drugs.


PDF: Pima College emails regarding Jared Lee Loughner

(File is 20 MB. May need extra time to download.)


Defense filing

Defense attorneys said Monday they don't need to question the psychologist and psychiatrist who evaluated Jared Lee Loughner's competency.


Prosecution filing

Federal prosecutors agreed there was no need to call Jared Loughner's mental-competency evaluators to testify.


Document 199 in Loughner case




Document 193 in Loughner case




Burns' order to seal

U.S. District Judge issued this "order to seal" in U.S. District Court today, Monday May 16.


Sonora Behavioral Health statement




PDF: Loughner search warrant




PI's letter to Loughner neighbors

This is the letter that private investigator Chuck Jordan wrote to a cross-street neighbor of the Loughners. I'm posting this after he asked in comments that I post it in its entirety.


Loughner Charged With Murders of Judge, Aide

Federal prosecutors on Friday announced new charges against Jared Loughner, the suspect in the attempted assassination of Rep. Gabrielle Giffords, accusing him of killing six people and wounding 13 others. (March 4)


49-count indictment against Loughner




Video: Released video of Jared Lee Loughner at Pima Community College

The video, released by Pima Community College to the Los Angeles Times and KOLD-TV following a public records request, was cited in campus police records as among the reasons administrators suspended Loughner in September following a series of outbursts and incidents that disrupted classes a…


Timeline: Jared Lee Loughner

A timeline of shooting suspect Jared Lee Loughner's movements and actions. Source: Pima County Sheriff's Department.


Loughner police reports, other documents from Pima Community College

Police reports and other official documents from Pima Community College about Jared Loughner.


Federal charges in Giffords shooting case (PDF)

The United States Attorney for the District of Arizona, Dennis K. Burke, announced today that his office filed a federal complaint against Jared Lee Loughner. The complaint was signed by Magistrate Judge Michelle Burns in Phoenix. Loughner is suspected of shooting U.S. Representative Gabrie…


Loughner video: 'Hello'

My introduction to the channel!


Loughner video: 'How To: Your New Currency!'




'Introduction: Jared Loughner'




Loughner video: 'How To: Mind Controller'

Here's the unedited text from Jared Lee Loughner: If you're editing of every belief and religion reaches the final century then the writer for every belief and religion is you. You're editing of every belief and religion reaches the final century. Thus, the writer for every belief and re…


Arizona Governor Jan Brewer Responds to Shooting of Congresswoman Gabrielle Giffords

Congresswoman Gabrielle Giffords of Arizona was shot in the head Saturday morning while speaking with constituents outside a grocery store in Tucson, AZ. The gunman killed at least five people and wounded several others. Governor Jan Brewer remarked on the congresswoman and their personal r…


President Obama on the Arizona Attack and Rep. Giffords

The President denounces the attack on Congresswoman Gabrielle Giffords and others in Tucson, Arizona, and express his hope and prayers for all of the victims and their families.


Giffords in Critical Condition Following Attack

Rep. Gabrielle Giffords, D-Ariz., was shot in the head and an aide killed Saturday when an assailant opened fire in an area where the lawmaker was meeting with constituents in Tucson. (Jan. 8)


Audio slide show: Mass shooting on Jan. 8, 2011

A look back at the tragic days in Jan., 2011.

Photo gallery: Tucson shooting victims

The victims of the mass shooting at Safeway at Ina and Oracle on Jan. 8, 2011.




Collection: Jan. 8 shooting aftermath


Here are multimedia, video, audio, PDFs and other files related to the Jan. 8, 2011, shootings of U.S. Rep. Gabrielle Giffords and others.
 

A look back at the tragic days in Jan., 2011.


Photo gallery: Tucson shooting tragedy, Day 1

U.S. Rep. Gabrielle Giffords was wounded and a federal judge, John Roll, was among six killed in a shooting at Ina and Oracle.


Photo gallery: Tucson shooting tragedy, Day 2

Photo coverage of events and developments on the day after the shooting of Rep. Giffords and the deaths of six people.


Photo gallery: Tucson shooting tragedy, Day 3

Photo coverage of events and developments surrounding the shooting of Rep. Giffords and the deaths of six people.


Photo gallery: Community Mass for shooting victims

"Mass for the Healing of Our Community, Remembrance of Those Who Have Died, and for the Consolation of All Victims and Their Families" at St. Odilia's Catholic Church on Paseo del Norte, north of Ina on Tuesday night. Also, images from Interfaith service held at Catalina United Methodist Church.


Photo gallery: Funeral of nine-year old Christina-Taylor Green

The funeral of Christina Taylor Green was held Thursday, January 13, 2011 at St. Elizabeth Ann Seton Catholic Church. Green was killed in the shooting tragedy Saturday, January 8, 2011.


Photo Gallery: Funeral of Federal Judge John Roll

The funeral for Federal Judge John Roll was held Friday, January 14, 2011. Roll was one of the six people killed January 8, 2011.


Photo Gallery: President and First Lady Obama visit Tucson

President and First Lady Obama visit Tucson Wednesday, January 12, 2011 for a memorial service "Together We Thrive: Tucson and America" to honor the victims of Saturday's mass shooting.


Slain Ariz. Judge Mourned, Giffords Improves

As hundreds gather to remember slain Judge John Roll, killed in a shooting rampage in Tucson, Ariz., doctors say U.S. Rep. Gabrielle Giffords continues to improve, showing more response as she recovers from being shot. (Jan. 14)


Doctors: Giffords Making "Significant Strides"

Doctors say Rep. Gabrielle Giffords is making significant strides in her recovery, and is now responding to more complex commands. Giffords' chief of staff, Ron Barber, is being discharged today after he was wounded in the shootings. (Jan. 14)

911 calls (tape 2) - the Giffords shootings

911 calls related to the shootings of U.S. Rep. Gabrielle Giffords and others.

911 calls (tape 3) - the Giffords shootings

911 calls related to the shootings of U.S. Rep. Gabrielle Giffords and others.

911 calls (tape 1) - the Giffords shootings

911 calls about the Jan. 8, 2010, shootings of U.S. Rep. Gabrielle Giffords and others.

Audio: sheriff's radio after Giffords shooting

Here is law enforcement radio for the first few minutes after the shootings of U.S. Rep. Gabrielle Giffords and others.


Video: Doctor: Rep. Giffords breathing on her own

Doctors in Tucson, Arizona, say Rep. Gabrielle Giffords is now breathing on her own and that they remain hopeful. But they caution recovery from this point forward will depend on her. (Jan. 11)


Video: Congress prays for Rep. Gabrielle Giffords

Members of Congress gather on the steps of the U.S. Capitol to honor Arizona Rep. Gabrielle Giffords, who was shot in Tucscon Saturday. As AP's Jerry Bodlander reports, they're also rethinking their own security. (Jan. 10)

Audio: Calls to 911 after the Giffords shooting

Clips of 911 calls courtesy of the Pima County Sheriff's Department

Video: Giffords is able to communicate, respond

A surgeon at the University Medical Center in Tucson, Ariz., says Rep. Gabrielle Giffords is able to communicate. The gunshot went through the left side of her head and that surgeons worked to reduce pressure from swelling in the brain. (Jan. 9)
 

Dupnik discusses the shooting of Giffords, Roll

Pima County Sheriff Clarence Dupnik gives an account of the shooting.

Rep. Gabrielle Giffords, D-Ariz., was shot in the head and an aide killed Saturday when an assailant opened fire in an area where the lawmaker was meeting with constituents in Tucson. (Jan. 8)


Emergency Responders Talk About Ariz. Shooting

Emergency officials who went to the scene of the shooting of Rep. Gabrielle Giffords and 18 others are talking about their response one week after the rampage in Arizona. (Jan. 15)

Live chat transcript: Shooting of Rep. Giffords

This live chat will incorporate your comments, links to the Star's latest developments, and Twitter posts.

An acquaintance of Jared Loughner calls 911

One of suspect Jared Lee Loughner's acquaintances calls 911 after the shootings of U.S. Rep. Gabrielle Giffords and others on Jan. 8, 2010.


Loughner police reports, other documents from Pima Community College

Police reports and other official documents from Pima Community College about Jared Loughner.


Obama speaks at 'Together We Thrive: Tucson and America'

President Obama makes his first official visit to Tucson on Jan. 12, 2011, for a tribute service at McKale Center for the victims of a mass shooting the weekend before.

Share and view tributes to shooting victims

View and sign the memorial guest book for those killed in the attack on U.S. Rep. Gabrielle Giffords. Also, read more about the victims.


Gallery: Tucson shooting on newspaper front pages across the country, world

Front pages of different newspapers' coverage of the Giffords shooting

Interactive: Timeline of Gabrielle Giffords' recovery

An interactive timeline charting congresswoman Gabrielle Giffords' recovery from injuries sustained in the Jan. 8 shootings.