Further convention center drag on the budget underreported in local news media

While NewsChannel5 reporter Heather Graf filed a puffed PR piece on the progress of construction of the Music City Convention Center and while the rest of the local news media was ignoring the shaky state of the demands the convention center is placing on the Metro budget, WPLN's Blake Farmer at least inquired after the implications of the recent market roller coaster for Metro finances.

While few are talking about this and the Courthouse is taking pains not to be too transparent about it, Mayor Karl Dean's 2010 blueprint to refinance debt in order to avoid raising taxes or cutting services is in limbo at best and in trouble at worst. Such is Metro's undue dependence of the vicissitudes of Wall Street and the Mayor's high-stakes risk of starting the single largest capital project in Nashville history with no safety net except the revenues that go to pay for the really unimportant stuff like police, parks and schools:

Turmoil in the financial markets has temporarily put the brakes on a bond refinancing by Metro Government. The city is trying to get a lower interest rate on roughly $100 million in bonds, originally used to pay for construction projects at parks and schools.

Metro Finance director Rich Riebeling says as a policy, the city must save at least 3.5 percent to justify refinancing any debt.

“It’s all subject to market conditions, and because of the volatility in the market right now with the stock market and interest rates, everybody kind of up in the air, we want to wait and sit back a week or two, see how it shakes out.”

And who doesn't feel more secure knowing that the Metro Finance Director has staked Nashville's financial security and Metro's delivery of services on Wall Street uncertainty? And all in the name of lavishing our resources on tourists and of doing the greatest good for the smallest number of nobles.


UPDATE: A commenter below asks about rumored plans to deal with budget shortfalls by cutting retail slated for the Korean Veterans Boulevard side of the new convention center. Can anyone confirm or deny?

Brooksley Born's warnings ignored by Clinton, Bush, & Obama at America's peril

Did you see Frontline tonight on the low level Washington bureaucrat who took on the White House titans to try to regulate the "dark market" derivatives of banking but lost? Her loss in 1998 became America's loss in 2007.

The entire Frontline episode can be seen after the jump.

12 Deregulatory Steps That Assured Our Economic Crisis

For those who would like to know what the federal government did as an accessory to Wall Street greed to melt our economy down, wallstreetwatch.org provides a dozen:

1. In 1999, Congress repealed the Glass-Steagall Act, which had prohibited the merger of commercial banking and investment banking.
   
2. Regulatory rules permitted off-balance sheet accounting -- tricks that enabled banks to hide their liabilities.
   
3. The Clinton administration blocked the Commodity Futures Trading Commission from regulating financial derivatives -- which became the basis for massive speculation.
   
4. Congress in 2000 prohibited regulation of financial derivatives when it passed the Commodity Futures Modernization Act.
   
5. The Securities and Exchange Commission in 2004 adopted a voluntary regulation scheme for investment banks that enabled them to incur much higher levels of debt.
   
6. Rules adopted by global regulators at the behest of the financial industry would enable commercial banks to determine their own capital reserve requirements, based on their internal "risk-assessment models."
   
7. Federal regulators refused to block widespread predatory lending practices earlier in this decade, failing to either issue appropriate regulations or even enforce existing ones.
   
8. Federal bank regulators claimed the power to supersede state consumer protection laws that could have diminished predatory lending and other abusive practices.
   
9. Federal rules prevent victims of abusive loans from suing firms that bought their loans from the banks that issued the original loan.
   
10. Fannie Mae and Freddie Mac expanded beyond their traditional scope of business and entered the subprime market, ultimately costing taxpayers hundreds of billions of dollars.
    
11. The abandonment of antitrust and related regulatory principles enabled the creation of too-big-to-fail megabanks, which engaged in much riskier practices than smaller banks.
    
12. Beset by conflicts of interest, private credit rating companies incorrectly assessed the quality of mortgage-backed securities; a 2006 law handcuffed the SEC from properly regulating the firms.
    

The appearance of trying to influence the value of stocks?

Republican Bob Corker was Mayor of Chattanooga where they landed the new Volkswagen plant currently under construction.  He is also one of the most powerful Senators on the Hill. Is calling a Volkswagen competitor "toast" ethical for such an influential leader with ties to VW? Could it be or appear to be an attempt to influence the value of stocks of both Chrysler and VW? Shouldn't a U.S. Senator be more circumspect and thoughtful in his comments about financial conditions of industry?

Maybe the Wall Street bubble boy missed the memo

Matt Taibi dresses down another self-entitled commodities trader about the real world that most of us live in:

Out in the real world, when your company burns a house down, you're not getting paid by that client. It's only on Wall Street, where the every-man-for-himself ethos is built into an insanely selfish and greed-addled compensation system, that people like you expect to get paid in a bubble -- only there do people expect their performance bonuses no matter how much money the shareholders lose overall, no matter how many people get laid off after the hostile takeover, no matter how ill-considered the mortgages lent out by your division were ....

Only a person with a habitually overinflated sense of self-worth could think he deserves a $700,000 retention bonus, even if it has to be paid by taxpayers, when in reality no one "deserves" that much money. It may be that some people do get paid that much, but most people who make that much money have enough sense to realize their cushy lifestyles are an accident of fate, of birth, of class, not something that is "supported" by some unwritten natural law of compensation ....

Thanks to a completely insane, horribly skewed set of societal values that puts a premium on greed and severely undervalues selflessness, communal spirit and intellectualism -- values that make millionaires out of people like you and leave teachers and nurses, the people who raise your kids and clean your parents' bedpans, comparatively penniless -- you made a lot of money.

Good Question

David Sirota wants to know why Barack Obama fired an automobile CEO, but invites bank CEOs to the White House for photo ops.

Prolonging the Inevitable on Wall Street and Making Things Worse for Main Street

U. of Texas government/business relations professor James Galbraith predicts dire consequences ahead with Obama's current trajectory of helping banks buy toxic assets:

When a bank's insolvency is ignored, the incentives for normal prudent banking collapse. Management has nothing to lose. It may take big new risks, in volatile markets like commodities, in the hope of salvation before the regulators close in. Or it may loot the institution -- nomenklatura privatization, as the Russians would say -- through unjustified bonuses, dividends, and options. It will never fully disclose the extent of insolvency on its own.

The most likely scenario, should the Geithner plan go through, is a combination of looting, fraud, and a renewed speculation in volatile commodity markets such as oil. Ultimately the losses fall on the public anyway, since deposits are largely insured ....

The oddest thing about the Geithner program is its failure to act as though the financial crisis is a true crisis -- an integrated, long-term economic threat -- rather than merely a couple of related but temporary problems, one in banking and the other in jobs.

Can of Whup Ass

In his inimitable style, Matt Taibbi underscores why a few weeks of righteous anger at the corporate bozos should not be lumped in comparisons with decades of greed:

People are pissed off about this financial crisis, and about this bailout, but they're not pissed off enough. The reality is that the worldwide economic meltdown and the bailout that followed were together a kind of revolution, a coup d'état. They cemented and formalized a political trend that has been snowballing for decades: the gradual takeover of the government by a small class of connected insiders, who used money to control elections, buy influence and systematically weaken financial regulations.

The crisis was the coup de grâce: Given virtually free rein over the economy, these same insiders first wrecked the financial world, then cunningly granted themselves nearly unlimited emergency powers to clean up their own mess. And so the gambling-addict leaders of companies like AIG end up not penniless and in jail, but with an Alien-style death grip on the Treasury and the Federal Reserve ....

The mistake most people make in looking at the financial crisis is thinking of it in terms of money, a habit that might lead you to look at the unfolding mess as a huge bonus-killing downer for the Wall Street class. But if you look at it in purely Machiavellian terms, what you see is a colossal power grab that threatens to turn the federal government into a kind of giant Enron — a huge, impenetrable black box filled with self-dealing insiders whose scheme is the securing of individual profits at the expense of an ocean of unwitting involuntary shareholders, previously known as taxpayers.

The stark reality of our condition is that those who should be suffering in the ruling class are not. They've insulated themselves against risk and harm, and the insulation includes the workforce and taxpayers. Terrorists didn't have to fire a shot to threaten representative government. It is crumbling from within, thanks to the influence purchased by Wall Street.

Patently Ridiculous Spin at the WSJ

In the same article that states that bankers acknowledge that the Bush administration looked up to and admired Wall Street, the Wall Street Journal reports that the Obama is looking to tamp down populist resentment against callous bankers who keep credit markets closed in order to make friends with the financial industry (note: I'm not advocating that we return to the credit bubble days that got us in this mess, but freeing up sane credit for customers and infrastructure would be nice).

What's the problem with that you say? Banks were unwilling to open credit markets under a previous administration that venerated Wall Street. Banks are unwilling to open credit markets under an administration that initially tried to take a tougher stand. The problem is that it doesn't matter whether the banks have a kinder and gentler administration or not. They're only going to pass along the bailout largess from the government when they have first satiated their own desires, and then when they are good and darn well ready to do so (unless, of course, a bigger power calls their bluff).

Now that the media and the Obama administration are in reaction formation to the banks' hard line against popular resentment, both look like they're going to soften to the bluff rather than hold a line. The chance for real reform and regulation of our broken financial system looks as remote to me now as it did under Wall Street-friendly Dubya; and today's historic rise in the stock market counts neither as reform nor regulation.

What do the peasants on Main Street know about running a financial system?

CNBC anchor demonstrates why those embedded in Wall Street culture assume that you require them more than they require you:

So much for mea culpa and come to Jesus

So, Jim Cramer did not authentically and honestly take the high road on the Daily Show? He was "brought up" that way and believes "all of us" should try harder? "All of us" did not mislead TV audiences on Bear Stearns or Lehman Brothers stock, Jim. "All of us" do not pimp stocks by any means necessary, Jim. The only thing I need to "try harder" to do is question CNBC without giving it a second thought.

Arbitrary and Capricious Insurance

What sets millionaires apart from slumdogs:  insurance companies respond to some catastrophes by embracing legal obligations to contracts with the former; they respond to other catastrophes by shunning their legal obligations to contracts with the latter. 

Jim Cramer Just the Stock-Picker Tip of Business Journalism's Tainted Iceberg

Last Friday on The Newshour, two journalists tried to use CNBC stock picker Jim Cramer, who did not have the best week last week, as a foil and distance their brand of business news from CNBC's notorious reputation for unreliable stock market coverage. The guy from Business Week maintained that they wrote critical stories on the financial sector rather than merely hawking financial stocks. The syndicated columnist agreed and complained that when newspapers act as "a voice in the wilderness" nobody pays attention, so they give up.

Leave it to the Columbia U. professor, whose academic journal is monitoring journalists. For him the problem boils down to one of power:

There were good stories about warning about housing bubbles, also good stories about dangerous mortgage instruments, consumer-type stories.

But I think, when you look back at the record, you'll see that confronting powerful institutions about their lending practices, not to mention Wall Street, was inadequate.

"Washington Mutual is using creative retail approach to turning the banking world upside down," Fortune in 2003. "Sachs Appeal: Goldman Sachs has Emerged from the Market Bust as a Trading Colossus," Forbes, 2007. You could really pick any number of these stories.

And what you're looking at there are stories that aren't really warnings, but, in fact, is the opposite. They're basically saying, hey, these institutions are all clear.

I thought that the academic put journalism's problem in a larger context than that of the journalists, who were strictly focused on cherry-picking counter-examples to CNBC's coverage and complaining about how hard critical reporting is. Of course it is. If it weren't it would not matter so much.

Exactly what are they hanging on to again?

Treasury-picked AIG Chairman Edward Liddy did not just defend $100 million in bonuses to go to the London office that brought the insurance company to its knees at the very precipice of bankruptcy because they were contractual. He actually had the nerve to defend them by saying that they need the big bonuses to retain that big talent they have over there in London. Only in laissez faire la-la land can you justify hanging on to the big talent that you got your company sacked by paying them extra for nearly getting your company sacked.

Bailing Out Peter to Subsidize Paul

The details on the financial black hole that AIG's London hedge fund betters are pulling us down:

Visit msnbc.com for Breaking News, World News, and News about the Economy

Merrill Lynch is bullshit on America

Your "free" market at work for you: Merrill Lynch traders lost hundreds and hundreds of millions of profits on trades at extraordinary risk. Merrill hid word of those trades from its new parent company, Bank of America, and then paid $3.6 billion in bonuses based on performance as of December 8, 2008. Merrill lost $13.8 billion in the fourth quarter of 2008. Those are free market values for you. If you are wealthy enough you can perform badly and still get a bonus.

Bank of America was forced to ask for a second infusion of government bailout capital to cover the Merrill losses, which at least one BoA official reportedly treated cavalierly.

Yet, we are supposed to believe that the bankers and investment firms would be just fine if regulators leave them alone.

The Keepers of Realism in Fantasyland

Josh Marshall underscores the disconnect between media talking heads and financial crisis. I laughed out loud when the journalist told the economists that he is "accosted at cocktail parties" (that's right: cocktail parties!!) for investment advice, and asks them what he can tell his accosters. That the journalist would attempt to move them away from the brutal facts of the economic crisis to "constructive" and "actionable" stock tips for investors is truly ironic. Again, the reality he's keeping is that of elite cocktail parties where the movers and shakers magically conjure wisdom on how to get out in front financially and refuse to listen to any doomsday scenarios. Most of the rest of the doldrummed world will not operate according to cocktail-party logic.

At The Same Time Bling of America Was Asking for More Fed Bailout, It Was Approving Payment of Dividends to "Preferred" Stockholders

This news just makes my taxpayer's blood boil. How in the hell can already bailed out Bank of America afford to pay "preferred" dividends (which get paid before stockholders get their dividends) while they are begging for billions more in bailout capital to subsidize their foolish purchase of Merrill Lynch?

Matthew Goldstein prescribes the proper antidote:

why shouldn’t [BofA] be forced to cut its outlays to the bone first? After all, analysts are saying even banks with relatively healthy balance sheets, like Wells Fargo, may have to trim their dividends. As of right now, BofA, even after cutting its dividend in half in October, still boasts a hefty payout of 32 cents a share. Even at that reduced amount, the dividend is equal to the sum the bank was paying shareholders in 2003. When the bank slashed the dividend in October, it said the move would save it about $1.4 billion a quarter in badly-needed capital. By that math, eliminating the dividend altogether would say about $2.8 billion in capital a quarter. The bank declined to comment.

Of course, they declined to comment because right now the federal government is funneling them money with no strings attached. Why draw more critical attention to their gold digging?

Economists Caught with Their Pants Down

It appears that the academic field of economics is neither a hard nor an exact science:

Some [economists] warned of a housing bubble, but almost none foresaw the resulting cataclysm. An entire field of experts dedicated to studying the behavior of markets failed to anticipate what may prove to be the biggest economic collapse of our lifetime. And, now that we're in the middle of it, many frankly admit that they're not sure how to prevent things from getting worse.

As a result, there's a sense among some economists that, as they try to figure out how to fix the economy, they are also trying to fix their own profession.

I've taken heat here in the past from an academic economist who argues that my musings on economic relationships have little to do with what he does in the field of economics. If the Boston Globe writer's analysis is on target, it seems that his field has little to do with reality, because economists assumed that practical economic questions were answered. In a crisis, practical matters count as so much more than abstract games.

Cavalcade of Capitalists: Brentwood Investor Charged with Embezzling $9 Million from Clients

Under the pretense of investing client money in high yield securities, Brentwood entrepreneur, Michael Park allegedly "misappropriated the funds to subsidize his lifestyle and to finance a mortgage business that he owned and controlled" while lying to them that their investments were growing as much as 25%.

The U.S. Securities and Exchange Commission had filed complaints against Park based on New Deal Securities Acts that were passed in response to the 1929 stock market crash and the Great Depression.

I'm sure the free market could have just ironed all of this out for the victimized Brentwood investors, about like I believe that a Brentwood businessman is at high risk of actually getting 20 years for white-collar crimes: not so much.