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International trade agreements and big money bullying #OWS

The New York Times just put out an amazing and outrageous story, entitled Tobacco Industry Tactics Limit Poorer Nations’ Smoking Laws and written by Sabrina Tavernise.

In it she describes the bullying tactics of tobacco companies to small countries over their internal health regulations aiming to protect their citizenry from cancer. From the article:

In Africa, at least four countries — Namibia, Gabon, Togo and Uganda — have received warnings from the tobacco industry that their laws run afoul of international treaties, said Patricia Lambert, director of the international legal consortium at the Campaign for Tobacco Free Kids.

“They’re trying to intimidate everybody,” said Jonathan Liberman, director of the McCabe Center for Law and Cancer in Australia, which gives legal support to countries that have been challenged by tobacco companies. In Namibia, the tobacco industry has said that requiring large warning labels on cigarette packages violates its intellectual property rights and could fuel counterfeiting.

A few comments about this outrage, only tangentially mathematical:

  • This happens because, in order to protect companies from being taken over by foreign nations, and in the  name of free trade, it’s now possible for companies to sue countries directly. That’s what the tobacco industry is doing to small countries without the means to fight back.
  • This is exactly the kind of thing that some people like Yves Smith have warned the TPP is going to do with financial regulation and other stuff. So imagine large companies or industries suing the United States or other nations for regulation that would “harm trade” or “violate their intellectual property rights.”
  • In fact, it’s not going too far to say that the proliferation of these kinds of treaties are a serious threat to national sovereignty. Yves makes this case here.
  • Think about it this way. It’s kind of a supernational Citizen’s United, in that only companies and industries that have enough lawyer power can get their way. And many companies easily have more resources than many countries. Think about Facebook and Google and their lobbying efforts on behalf of data privacy laws in Europe already. Now think how that battle might look when it’s against Namibia.
  • Already, from the article, we saw that Uruguay was only able to fight back against Philip Morris because Bloomberg’s foundation helped them with the legal battle. And I’m glad Bloomberg helped, but if you count up all the money that will go to bullying and compare that to all the money available to help out the bullied, you quickly come to a sad conclusion.
  • Once again, we have to remember that the TPP is being negotiated in secret, among a bunch of nations many of whom claim to be democratic.
Categories: #OWS, rant

Occupy the SEC shows us all how to occupy

Today is a remarkably cold day in New York but that’s done nothing to dampen the spirits of the members and supporters of Occupy the SEC, which had a real influence on the final Volcker Rule, as reported by the Wall Street Journal and The Washington Post, among others.

I’m not saying the Volcker Rule is perfect – in fact Occupy the SEC gave it a C- grade overall. And it was maddeningly delayed. As I’ve mentioned before, Occupy the SEC sued the regulators for the delay, or tried to, but the judge found that they had no standing.

Even so, there’s a clear victory here for Occupy the SEC. The final rule, or at least its preamble, references Occupy the SEC’s public commenting letter 284 times. The rule could have been way worse, and probably would have been without OSEC’s contribution.

Just to get some idea of the other voices in this debate – i.e. the lobbyists – take a look at this graphic on access to the rule-writers by parties interested in influencing the final rule:

reg_volcker

I remember those guys in the early days of Occupy, meeting in the cold, drafty, and noisy chambers of 60 Wall Street after work and sitting in a circle going through the proposed Volcker Rule line by line. Nothing could have been more workmanline or hopeful. It was a great example of an Occupy group that was all work and no talk. People who wanted to talk just left them alone. I talked to them briefly about some risk model details for the rules because of my background in portfolio risk.

I even remember talking to them about the chances anybody would even read their letter, never mind take it seriously. They knew the rules, though, and the rules were that the regulators would have to read all the letters, although how seriously they took them was a different matter. They were doing it because they knew it was one of the best shots at having their voices heard. It was an incredible commitment to that ideal.

My conclusions:

  • Those guys are awesome.
  • Public commenting is a critical tool.
  • This wouldn’t have worked without a receptive set of regulators.
  • This is inspiring and will hopefully help my Occupy group, Alt Banking, plan our next project.
  • I particularly like the idea of report cards, which Occupy has created for regulation.
Categories: #OWS

What’s the best narrative for revolution?

Yesterday at our weekly Alt Banking meeting we had an extraordinary speaker, Merlyna Lim, come talk to us about social media and grass roots organizing.

Her story was interesting and nuanced; I won’t get everything down here. But there were quite a few sound byte takeaways I can express.

  • The organizing which culminated in the Arab Spring started way before Facebook or Twitter came to the region.
  • To a large extent social media has replaced chatting in the cafe, which we don’t do anymore.
  • But that’s actually a good thing, since many regimes are so oppressive they won’t let large groups of people hold regular meetings (and large can mean 5 or more).
  • Whereas social media is pretty good at energizing people to “get rid of their enemy” at a given critical moment, and mobilize on the street, it’s not that great at nuanced discussions for how to build something permanent and lasting afterwards.

One other thing I wanted to mention was Merlyna’s work on Mohamed Bouazizi, the Tunisian street vendor who self-immolated after getting into a dispute with a police officer.

The original story that got people mobilized in Tunis and out on the street, was that the police officer was a woman, that she slapped him, and that he was a college educated street vendor. It turns out these were white lies – he never finished high school, the police officer may have been a man, and there was probably no slap – but they built a narrative that people really loved. Merlyna wrote a paper about this available here if you want to know more.

That brings us to the question of why this particular framing was so appealing. Merlyna put it this way: plenty of other people had self-immolated under similar circumstances in Tunisia in the past 6 months alone. But they didn’t start a revolution because they were just very poor and didn’t have this story with extra (made-up) humiliating details. Killing yourself because you are frustrated at not having enough to eat just isn’t as compelling.

It reminds me of this Bloomberg View piece I’ve been chewing on for a couple of week, written by Peter Turchin and entitled Blame Rich, Overeducated Elites as Our Society Frays. He studies conditions for revolution as well, and claims that having a large unemployed but highly educated population – the “lawyer glut” we’re seeing today – is asking for trouble. From his article:

Elite overproduction generally leads to more intra-elite competition that gradually undermines the spirit of cooperation, which is followed by ideological polarization and fragmentation of the political class. This happens because the more contenders there are, the more of them end up on the losing side. A large class of disgruntled elite-wannabes, often well-educated and highly capable, has been denied access to elite positions.

Food for thought. Does one have more sympathy for people whose foodstamps have been recently cut or for someone who got a law degree and can’t find a job? Or is the real outrage when both happen (or at least are said to happen)? Personally, and this is maybe because I’ve been reading Jonathan Kozol’s Savage Inequalities, I’m not as worried about the lawyer.

Categories: #OWS, musing

Protest JP Morgan at noon on Wednesday #OccupyJPM #OWS

I’m looking forward to protesting in front of JP Morgan with my #OWS Alt Banking group this Wednesday at noon. The exact location is 270 Park Avenue, near 48th Street.

It’s part of a “Week of Action” being put together by a broad coalition of activist and labor groups here in New York. The overall theme of the week is to try to communicate to New Yorkers, in this time of transition from Bloomberg to de Blasio, that we can effect positive change in our city. The theme of the day on Wednesday, at least for us, is to “be in the know,” which makes it a bit more positive than other protests we’ve been part of.

I think this makes sense. There’s so much widespread distrust and hatred of the big banks at this point that I feel like Occupy’s role has gone from provoking people to be outraged to provoking people to be hopeful. Hopeful about the fact that things could be a whole lot better than this, if we work together.

Anyhoo, we spent yesterday planning the action, and made some signs. Here’s one based on an idea we borrowed from Alexis Goldstein from her recent twitter war with JPMorgan:

alexis

and here’s a sign we’ll hold up while playing a “rigged game” with props:

rigged_game

I also made a sign that referenced the London Whale and the risk model, but someone said we might need to give people a copy of our recent book, Occupy Finance, just to understand that sign. Sigh.

The facebook page is here, please share it with people who may be able to join us Wednesday!

Categories: #OWS, finance

Debunking Economic Myths #OWS

Yesterday in Alt Banking we were honored to have Suresh Naidu visit us to talk about and debunk economic myths.

The first myth, and the one we spent the most time on, is the idea that people “deserve” the money they earn because it is an accurate measure of their “added value” to society.

There are two parts of this, or actually at least two parts.

First, there’s the idea that you can even dissect the meaning of one person’s value. And if you can, it’s likely a question of a marginal value: what does our society look like without Steve Jobs, and then with him, and what’s the difference between the two worlds? As soon as you say it, you realize that such a thought experiment is complicated, considering the extent to which Steve Jobs’ journey intersected with other people’s like Steve Wozniak and a huge crowd of Chinese workers.

If you think about it some more, you might conclude that the marginal value of a single person is impossible to actually measure, at least with any precision, and not just because of the counterfactual problem, i.e. the problem that we only have one universe and can’t run two parallel universes at the same time. It’s really because any one person succeeds or fails, or more generally contributes, within a context of an entire culture. Even Mozart wrote his symphonies within a cultural context. In another context he would have been a kid who hums to himself a lot.

Second, there’s the assumption that people who earn a lot of money are actually adding value at all. This isn’t clear, and you don’t need to refer to formally criminal acts to make that case (although of course there are plenty of rich people who have committed criminal acts).

In many examples of super rich people, they got that way through not paying for negative externalities like polluting the environment, or because they had control of the legal mechanisms to reap profits off of other peoples’ work. Not technically illegal, then, but also not exactly a fair measure of their added value.

Or, of course, if they worked in finance, they might have made money by keeping stuff incredibly complicated and opaque while providing liquidity to the credit markets. It’s not clear that such work has added any value to society, or if it has, whether it’s balanced the good with the bad.

Some observations about this myth that were brought up include:

  1. There’s a deep belief in “the markets” at work here which is rather cyclical. The market values you more than other people which is why you’re paid so well for whatever it is you do. Other people who have less to offer the market are get paid less. Anyone who doesn’t have a job doesn’t deserve a job since the market isn’t offering them a job, which must mean they are adding no value.
  2. There are exceptions where people add obvious value – caretakers of our children for example – but aren’t paid well. This is because of a different mechanism called supply and demand. For whatever reason supply and demand isn’t at work at high ends of the market.
  3. Or maybe it is and there’s really only one possible person who could do what Steve Jobs did. Personally I don’t buy it. And I chose Steve Jobs because so many people love that guy, but really he’s one of the best examples of someone who might have had a unique talent. Most rich people are generically good at their job and not all that unique.
  4. It’s mostly the people that benefit from the market system that believe in it. That kind of reminds me of the marshmallow study, or rather one of the many re-interpretations of the marshmallow study. See the latest one here.
  5. It’s patently difficult to believe in the market system if you consider a lack of equality of opportunity in this country due to extreme differences in school systems and the like. I’m about to start reading this book which explains this issue in depth.
  6. For other evidence, look at Pimco’s Bill Gross’s recent confessions about being born at the right time with easy access to credit.
  7. The unequal access of opportunities in this country is becoming increasingly entrenched, and as it does so the myth of the market giving us what we deserve is becoming increasingly difficult to swallow.
Categories: #OWS, finance

#AskJPM and public shaming #OWS

I don’t usually shill for companies but this morning I’m completely into how much of a circus my Twitter feed became yesterday when JP Morgan Chase’s PR team decided to open up to the public for questions. You can see from the immediate replies how this was going to go:

Screen Shot 2013-11-14 at 6.49.22 AM

The questions asked which were tagged with #AskJPM are stunning and constitute a well-deserved public shaming of JP Morgan.

My friend and co-occupier Alexis Goldstein was absolutely killing it on Twitter, as usual. Here’s just a snippet from her feed:

Screen Shot 2013-11-14 at 6.52.57 AM

See also Dave Dayen’s choice question:

Screen Shot 2013-11-14 at 6.54.38 AM

Needless to say the Q&A was canceled, but not until the #AskJPM hashtag went viral in an amazing way. See more examples here and here.

Update: Watch #AskJPM tweets read by Stacy Keach live on CNBC!!

Categories: #OWS, finance, news

You are not a loan: Rolling Jubilee eradicates $15,000,000 worth of debt #OWS

This is super cool. Occupy Wall Street’s Strike Debt group has bought up almost $15 million dollars worth of mostly medical debt which was owned by 2,700 people across 45 states and Puerto Rico. They used donations they’ve been collecting over the last year. There’s more information about this action in this Guardian piece.

Here’s what I like about this. By freeing people of medical debt in particular, which is the biggest cause of bankruptcy filings, it emphasizes the lie of the “moral sin” often associated with crushing debt.

In other words, instead of imagining poor and debt-ridden people as lazy and glibly unable to keep their promises, the Rolling Jubilee action bestows a much-needed act of compassion for some of the millions of the unlucky people in this country caught in a dysfunctional health and credit system.

And while it’s true that it is making a small dent in the debt problem, in dollars and cents terms, I think the Strike Debt’s debt action, and its Debt Resistors’ Operation Manual, has made huge strides in how people think about debt in this country, which is tremendously important.

Student-You-Are-Not-A-Loan

Categories: #OWS, finance, news

Alan Greenspan still doesn’t get it. #OWS

Yesterday I read Alan Greenspan’s recent article in Foreign Affairs magazine (hat tip Rhoda Schermer). It is entitled “Never Saw It Coming: Why the Financial Crisis Took Economists By Surprise,” and for those of you who want to save some time, it basically goes like this:

I’ll admit it, the macroeconomic models that we used before the crisis failed, because we assumed people financial firms behaved rationally. But now there are new models that assume predictable irrational behavior, and once we add those bells and whistles onto our existing models, we’ll be all good. Y’all can start trusting economists again.

Here’s the thing that drives me nuts about Greenspan. He is still talking about financial firms as if they are single people. He just didn’t really read Adam Smith’s Wealth of Nations, or at least didn’t understand it, because if he had, he’d have seen that Adam Smith argued against large firms in which the agendas of the individuals ran counter to the agenda of the company they worked for.

If you think about individuals inside the banks, in other words, then their individual incentives explain their behavior pretty damn well. But Greenspan ignores that and still insists on looking at the bank as a whole. Here’s a quote from the piece:

Financial firms accepted the risk that they would be unable to anticipate the onset of a crisis in time to retrench. However, they thought the risk was limited, believing that even if a crisis developed, the seemingly insatiable demand for exotic financial products would dissipate only slowly, allowing them to sell almost all their portfolios without loss. They were mistaken.

Let’s be clear. Financial firms were not “mistaken”, because legal contracts can’t think. As for the individuals working inside those firms, there was no such assumption about a slow exhale. Everyone was furiously getting their bonuses pumped up while the getting was good. People on the inside knew the market for exotic financial products would blow at some point, and that their personal risks were limited, so why not make systemic risk worse until then.

As a mathematical modeler myself, it bugs me to try to put a mathematical band-aid on an inherently failed model. We should instead build a totally new model, or even better remove the individual perverted incentives of the market using new rules (I’m using the word “rules” instead of “regulations” because people don’t hate rules as much as they hate regulations).

Wouldn’t it be nice if the agendas of the individuals inside a financial firm were more closely aligned with the financial firm? And if it was over a long period of time instead of just until the bonus day? Not impossible.

And, since I’m an occupier, I get to ask even more. Namely, wouldn’t it be even nicer if that agenda was also shared by the general public? Doable!

Mr. Greenspan, there are ways to address the mistake you economists made and continue to make, but they don’t involve fancier math models from behavioral economics. They involve really simple rule changes and, generally speaking, making finance much more boring and much less profitable.

Categories: #OWS, finance, modeling, rant

Yves Smith and Dean Baker discuss the Trans Pacific Partnership #OWS

Last night I watched this interview by Yves Smith and Dean Baker on billmoyers.com. I recommend it for everyone interested in learning about the secret “free trade” agreement currently under negotiation between the U.S. and a bunch of other countries which touch the Pacific Ocean.

The interview will explain why “free trade” is in quotes, because it’s really more about protecting corporate interests and extending patents than about reducing obstacles to trade:

As a member of Alt Banking, I’m particularly outraged by the financial regulation part of the treaty, which sound like a race to the bottom in terms of common laws between the countries. But probably the worst part of the treaty is related to pharmaceutical protectionism.

Near the end of the interview there’s an appeal, involving a monetary award, for people on the inside to come out and show the world exactly what the contents of the treaty contain. The award is sponsored by WikiLeaks and is crowdsourced: it currently stands at $61,252. So you can add to it if you want to sweeten the pot.

Categories: #OWS, finance, news

Someone explain to me how accountants think about Capital Appreciation Bonds (#OWS)

Book Club

Yesterday we had a great discussion in our Alternative Banking Book Club about municipal financing, based on the sixth chapter in our book Occupy Finance called A Civics Lesson: Wall Street Feasts on the Commons. The conversation was kindly led by Tom Sgouros, a policy analyst and author from Rhode Island, which seems to be a hotbed of super terrible muni financing.

It was explained that shady deals in muni finance is all over the map, from price fixing in municipal bond deals, which is corruption strictly on the side of the big banks who finance the town’s deals to accounting tricks, where it takes the collusion of town officials to enter into shady and inappropriate contracts.

The thing I’d never really understood until yesterday was how people used Capital Appreciation Bonds to play tricks with their accounting, and specifically with their town’s debt limits.

Context around muni financing

A little more context, although I’m no expert (experts, please add details or correct me if I’ve misrepresented anything). Please also read the chapter, which is excellent and much broader.

First of all, by “municipalities” we mean towns and cities (actually, states and counties, too, not to mention water authorities, economic development agencies, school departments, and all the rest of the “not-federal-not-corporate”). So a town needs to borrow money for something, maybe to pay its workers, maybe to build something or maintain its roads. It borrows money from investors by issuing a muni bond, and the big banks help set that up. Investors invest in these bonds because they have special tax treatment, because they rarely default, and because they want to support their local communities.

But as you can imagine, the big banks have much more expertise on what kind of prices to expect and the level of sophistication it requires to do due diligence, and then if you add into that mix the fact that local town officials are often temporary, ignorant, and desperate, we get a toxic environment. There are lots of examples of this problem, and often they are covered up by the local towns because of associated embarrassment, complicity, and shame. Seriously, it’s awful, and we only hear about some of them like in Detroit and Stockton, when things are incredibly awful. Matt Taibbi has done an amazing job chronicling this stuff.

Anyhoo, with that backdrop, you can imagine that there are bad situations handed to town officials when they enter office, and they are confronted with a major league problem: they need to come up with money now to pay something basic like school teachers or firemen, but there’s no cash. And plus there’s a debt limit which they’re already pushing up against.

Zero coupon

Enter the Capital Appreciation Bond (CAB). It’s a zero-coupon bond, which is already weird. For most muni bonds, towns regularly – quarterly or annually – pay interest or so-called amortizing sums, very much as an individual homeowner might pay monthly for their mortgages, where most of it goes to interest but every month a little bit of the principal is paid off too.

But for CABs, you get some money now and you pay nothing at all until it’s due, at which point you pay it all back at once.

Very very long term debt

You may have even forgotten about it by then, though, because the second weird thing about CABs is that the loans are often very very long term – as in 30 or 40 years. So, given the nature of the set-up and the nature of compound interest, you can end up paying something like 7 times the original amount after that much time.

For example, we see a school district like San Mateo in California borrowing $190 million recently that, when the bond comes due, will owe $1 billion. And it’s widespread in California: according to this article, 200 California school and community college districts issuing these bonds will end up paying 10 to 20 times more than they borrowed.

Accounting practices and CABs

That brings me to the third weirdest property of CABs, namely how they look on balance sheets for accounting purposes.

Namely, and here I need to confess that I’ve been a very bad accounting student, the towns only have to write the original loan down on the balance sheet as a liability, not the eventual pay-out. This is in contrast with other kinds of very similar zero-coupon bonds where you have to write down the eventual payment you will owe, not the amount you start with.

Someone please explain this discrepancy in the field of accounting!! It makes no sense to me. If the cash flows are the same for two different kinds of bonds, how do you get to account for them differently?

Conclusion

In any case, the consequences of this accounting trick are real. In particular it means that, for desperate town officials trying to pay their workers, or even shady town officials trying to get away with stuff, CABs are very attractive indeed, because it looks kind of innocuous and their overall debt limits don’t get breached even though they’ve essentially sold the future of the town to a big Wall Street bank. Plus they won’t be in office when that bill comes due, and they might well be dead.

Some California officials are trying to make CABs illegal or at least restricted, and some states like Michigan and Ohio have already passed laws against them. But given how much money they make for big banks, there are serious headwinds for reasonable rules.

Categories: #OWS, finance

It’s a good day to join a revolution #OWS

I’m too angry today to dole out advice.

Instead I think I’ll join a revolution. This one, that Russell Brand is talking about.

Categories: #OWS

Occupy for a Fair and Living Wage #OWS

I wanted to mention an important action that’s happening today at 5:00pm in Herald Square (34th Street and 6th Avenue) in case you are nearby and can join us.

The action is focused on raising the minimum wage. It was planned by OccuEvolve in conjunction with other Occupy groups, including Alternative Banking which made a bunch of signs this past weekend, in solidarity with the 75th Anniversary of the passing of the minimum wage law. The idea is to demand raising the minimum wage to at least 15 dollars a hour.

For a little context, here’s a chart showing the history of the U.S. Federal minimum wage since it began:

History_of_US_federal_minimum_wage_increases

 

Many states have their own minimum wage laws that are either higher of lower than the federal law, and some cities have even more local minimum wages as well. Since federal law supersedes state law, I’m going to assume these guys are just behind recent increases in federal rates. Here’s a picture of the state-by-state minimum wage landscape:

stateminwage

 

I’ve never done the math on how it would be even close to possible to live on an hourly wage of $7.25 but it’s clearly not possible to, say, budget for emergencies even in the most frugal of approaches.

That general fact is embedded in this Bloomberg Businessweek article which argues that Walmart is subsidized by taxpayers and is a drag on growth. The article refers to a report put out by the Democratic staff of the U.S. House Committee on Education and the Workforce entitled The Low-Wage Drag on Our Economy: Wal-Mart’s low wages and their effect on taxpayers and economic growth. It contains this excerpt:

While employers like Wal-Mart seek to reap significant profits through the depression of labor costs, the social costs of this low-wage strategy are externalized. Low wages not only harm workers and their families—they cost taxpayers.

Here’s a graphic showing which big employers are the worst culprits:

minimumwage_infographic_aug21

Let’s demand better tonight at 5:00pm in Herald Square.

 

Categories: #OWS

Disorderly Conduct with Alexis and Jesse #OWS

Podcast

So there’s a new podcast called Disorderly Conduct which “explores finance without a permit” and is hosted by Alexis Goldstein, whom I met through her work on Occupy the SEC, and Jesse Myerson, and activist and a writer.

I was recently a very brief guest on their “In the Weeds” feature, where I was asked to answer the question, “What is the single best way to rein in the power of Wall Street?” in three minutes. The answers given by:

  1. me,
  2. The Other 98% organizer Nicole Carty (@nacarty),
  3. Salon.com contributing writer David Dayen (@ddayen),
  4. Americans for Financial Reform Policy Director Marcus Stanley (@MarcusMStanley), and
  5. Marxist militant José Martín (@sabokitty)

can be found here or you can download the episode here.

Occupy Finance video series

We’ve been having our Occupy Finance book club meetings every Sunday, and although our group has decided not to record them, a friend of our group and a videographer in her own right, Donatella Barbarella, has started to interview the authors and post them on YouTube. The first few interviews have made their way to the interwebs:

  1. Linda talking about Chapter 1: Financialization and the 99%.
  2. Me talking about Chapter 2: the Bailout
  3. Tamir talking about Chapter 3: How banks work

Doing Data Science now out!

O’Reilly is releasing the book today. I can’t wait to see a hard copy!! And when I say “hard copy,” keep in mind that all of O’Reilly’s books are soft cover.

Categories: #OWS, data science, finance

Occupy the SEC, Dodd-Frank, and who has standing in financial regulation #OWS

A bit more than a week ago Akshat Tewery came to my Occupy group to discuss his chapter in the book we wrote called Occupy Finance [1].

Akshat is a member of Occupy the SEC [2] and came to talk to us about a short history of financial regulation, and how impressively well things worked in the middle of the last century, when Glass-Steagall was in effect and before it was gamed.

One thing he mentioned in his fascinating hour-long lecture was this lawsuit which I hadn’t heard about. Namely, Occupy the SEC sued the Federal Reserve, SEC, CFTC, OCC, FDIC and U.S. Treasury over not doing their jobs, specifically for the delay in finishing and implementing the Volcker Rule.

You see, Dodd-Frank is a law, and the Volcker Rule, which is supposed to be something like a modern Glass-Steagall act, is part of it. But the law just outlines the rules, and the regulators are supposed to actually turn that law into regulations which they then implement.

There was a deadline for that, and it has passed. So Occupy the SEC sued to make those guys get the job done.

And guess what? The judge found that they didn’t have standing to sue. I’m no lawyer but from what I can understand this means they were deemed not sufficiently relevant to the implementation of Dodd-Frank. They didn’t have enough skin in the game, in other words. Because they’re just, you know, citizens who care about having a functional regulatory environment. Not to mention taxpayers who have bailed out the banks and want to avoid continuing doing that.

That begs the question, who has skin in the regulation game? Answer: banks being regulated. So only those guys can complain to the courts about the regulation. And obviously their complaints will be different from Occupy the SEC’s complaints.

It seems like whenever I look around I see examples like this, where there are people getting away with crappy policies or even crappier deeds because it has a negative effect, but that negative effect is so dispersed that most people don’t have enough “standing” to sue or to even effectively quantify how they’ve been affected.

And I guess this is the land of class-action lawsuits, but that doesn’t seem sufficient. It really seems like there needs to be legal representation for taxpayers somehow. Who is looking out for the average non-insider? Who is keeping tabs on overall systemic risk? In an ideal world that would exist inside the regulators themselves, but we all know it’s not that ideal.

1. We’re out of copies, but if you don’t have a copy of Occupy Finance but you want one, go to our IndieGogo campaign and donate $10 and you’ll get a copy of the book as a thank you.

2.  Which, if you don’t know, consists of an amazing and wonky group of occupiers who write public commenting letters on financial regulation. Their Volcker Rule comments have made quite an impression on regulators, but they’ve also written numerous amicus briefs on various issues as well. Keep an eye on their work on their webpage.

Categories: #OWS, finance

Are PayDay lenders better than banks? #OWS

Sometimes my plan of getting up super early to write on my blog fails, and this is one of those days. But I’m still going to ask you to read this article from the New Yorker written by Lisa Servon and entitled, “The High Cost, For The Poor, Of Using A Bank.” Here’s a key passage, but the whole thing is amazing, and yes, I’ve invited her to my Occupy group already:

To understand why, consider loans of small amounts. People criticize payday loans for their high annual percentage rates (APR), which range from three hundred per cent to six hundred per cent. Payday lenders argue that APR is the wrong measure: the loans, they say, are designed to be repaid in as little as two weeks. Consumer advocates counter that borrowers typically take out nine of these loans each year, and end up indebted for more than half of each year.

But what alternative do low-income borrowers have? Banks have retreated from small-dollar credit, and many payday borrowers do not qualify anyway. It happens that banks offer a de-facto short-term, high-interest loan. It’s called an overdraft fee. An overdraft is essentially a short-term loan, and if it had a repayment period of seven days, the APR for a typical incident would be over five thousand per cent.

It makes me wonder whether, if someone did a careful analysis with all-in costs including time and travel, whether PayDay Lenders are not actually a totally rational choice for the poor.

Categories: #OWS, finance, modeling, news

Indiegogo campaign for 2nd edition of Occupy Finance is up! (#OWS)

October 14, 2013 Comments off

Many of you have probably already received copies of Occupy Finance. Here’s my personal evidence, for which I was nearly arrested in the post office (who knew you’re not allowed to take pictures in the post office? not me.):

Occupy_Finance_USPS

We’re hoping you loved your book, or if you haven’t gotten a copy yet, that you’d like to get one soon.

The thing is, we’re very nearly out of copies, and plus there was a missing page and a few other typos for which we have forgiven ourselves, since we got it out in time for September 17th, but which we were happy to fix.

Our plan, if we manage to raise enough money (hopefully $3500), is to print a few thousand more copies (hopefully 5,000) and distribute them to places like libraries and bookstores, not to mention to any people we hear of who want to read the book. We’d prefer to raise money for the printing and then give them away over selling them, since we’d like anyone who wants one to have one regardless of their financial situation.

So here’s the Indiegogo page, and I hope you’ll go take a look and send it to your friends who might be interested in contributing. It features our favorite street performer and Action Committee Head Marni, which for this campaign we refer to as our “Indie GoGo Girl”. She does a really fantastic job explaining our goals in the campaign video, located here. You may also know her as the money bunny, she’s kinda famous. She also has a law degree.

moneybunny

The starting donation is $10, and if you’ve already given money to our group, don’t feel like I’m asking you a second time (I don’t wanna be like that!) but just go ahead and tell your friends about us. Thanks!

Also feel free to share the shortlink on twitter or what have you: http://tinyurl.com/occfinindie

Categories: #OWS

“The only thing we really learned from the S&L scandal was how CEO’s should lawyer up”

The title of today’s piece is a quote from economist Chris Thornberg in a Reuters interview I found a couple of days ago.

It’s almost 15 minutes long, and the first couple of minutes are concerned with the housing market, which he has strong opinions on and I don’t, but then he moves on to financial regulation, the question of accountability, municipal bankruptcies, and whether economists suck at their jobs, subjects I care about a lot.

It’s a super interesting interview, and I’m planning to mail Thornberg a copy of Occupy Finance soon. Even though he serves on the advisory board of hedge fund Paulson & Co, he agrees with lots of people who come to Alternative Banking on many issues.

A few examples of what he’s talking about for those of you without 15 minutes to spend on him.

Regulation

He talks about how Dodd-Frank is collapsing in on itself through extensive watering-down and lobbying, and how negotiations over how much “skin in the game” is required around securitization is the death knell of that process.

He talks about how the overall system is under-regulated and not being made accountable. He claims that, instead of trying to draw lines in the sand, we should try to attack the skewed incentives. A lot of people got very rich doing very bad things, he says, and the continued existence of those messed-up incentives will encourage a whole new generation to do the same.

For example, bonuses shouldn’t be given on how many loans you push out into the market but how they perform. We should be able to clawback money, which is to say pull back money from someone who’s done something bad. After all, he points out, Dick Fuld and Angelo Mozilo as men who became filthy rich from doing bad things and are now “untouchable”.

Washington

He also points out that D.C. never went through a recession because of money coming in through lobbying. His top two priorities to improve our system would be:

  1. To simplify the tax code, both corporate and personal. There too many special interests. Get rid of complexity and make it more progressive.
  2. Political reform. We like to say the Chinese are “one-party state”. But are we really two-party? We have very little “choice” especially if you take into account the gerrymandering. California is doing a good job reforming here.

Municipal Bankruptcies

Next, he moves onto municipal emergencies in Detroit, Stockton, and San Bernadino. All three city bankruptcies pose the fundamental decisions: what is the sanctity of public pensions? State laws generally insist that pensions be paid.

The issue here is, says Thornberg, that federal bankruptcy laws trump, not state law. So the relevant federal judge can say “too bad” to the contract, and the pensioners will be forced to take a cut like all the other debtholders.

Lawyers in the know think pensions are gonna go, and that precedent for this kind of thing is being established in these three cities in the very near future.

Economics

The Reuters interviewer addressed the issue that, generally speaking, economists missed the oncoming crisis. Does that mean there’s something wrong with economics?

Thornberg: “Professors don’t get published writing papers about the current economy – nobody cares about that.”

He claims that, yes, economists should be more on top of day-to-day stuff, but he claims that the critique misses the broader point, which is that everyone needs to be a better economist. He claims it is a social science which tries to address why people do what they do. And although economists would like to think of it as a mathematical science, they’re wrong to do so.

His advice: don’t listen to economists on TV. Educate yourself and know your source. It’s amazing how much stock we put into economists working for, say, the National Association of Realtors who get paid to say good things like, “it’s a good time to buy and sell a house!”

Categories: #OWS, finance

Book Club for Occupy Finance (#OWS)

September 19, 2013 5 comments

We in Alternative Banking are pretty proud of our book Occupy Finance, and we’re planning on having a book club associated with it.

The idea is for the author of each chapter to come and lead a discussion about the subject in that chapter. We expect the feedback to improve the topic and be incorporated into the 2nd edition of the book.

Where: The book club will meet from 2-3pm on the Sundays mentioned below, before the regular Alternative Banking meeting, in Room 402 or 409 of the International Affairs Building of Columbia University at Amsterdam and 118th.

Here’s the schedule:

Occupy Finance Book Club Schedule

The Real Life Impact of Financialization on the 99%
  Sept. 22 –
  Financialization and the 99%
  Sept. 29 – 
  How Banks create money … and keep it
How we got here
  Oct. 6 – 
   Bailout: It didn’t work, it’s still going on, it’s making things worse
  Oct. 13 – 
  A short history of the principal legislative failures that caused the
  crisis and make another one likely
  Oct. 20 – 
  Securitization in plain English – CDOs, CDSs and Magnetar
  Oct. 27 – 
  The Dirty Dozen, 12 legal outrages
  Nov. 3 – 
  New Civics: Feasting on the Commons
Things to do
  Nov. 10 – 
  Old Bankers’ Tales … and Why to Reject Them
  Nov. 17 – 
  New Civics: Feasting on the Commons
  Nov. 24 – 
  Resources: thinking outside the corporations
If you want to be on the mailing list for Alt Banking, please write to Alt.Banking.OWS@gmail.com and make that request.
Categories: #OWS, finance

Awesome press for Occupy Finance #OWS

September 18, 2013 13 comments

Yesterday was pretty amazing, in spite of the fact that we realized a page was missing from the book. The missing page, which was supposed to be between pages 38 and 39, is available here.

UPDATE: the online version of Occupy Finance is now complete.

Hey, but it’s still a great book, and we got lots of fantastic press. Here’s the list so far:

  1. FT Alphaville with Lisa Pollack
  2. NPR with Margot Adler
  3. Bloomberg with Matt Levine
  4. New York Times with William Alden
  5. Daily Kos with medicalquack

We also got a nice mention on occupy.com and a preview from member Jerry Ashton on his Huffington Post blog.

Thank you guys!

And readers, if you really want a copy of the book, send me email with your address. Our group meeting this Sunday will consist of an envelope-stuffing party. My email address is on my “About” page.

Woohoo!

Categories: #OWS, finance

Happy Birthday, Occupy Wall Street! #OWS

September 17, 2013 17 comments

Hey, what are you doing for the 2nd anniversary of the occupation of Zuccotti Park?

I know what I’m doing, namely going down to the park and handing out hundreds of copies of my occupy group’s new book – now on scribd!!. Here’s a ridiculous gif of the pile of books that came from the printer yesterday with my kindergartner posing by it (you might need to click on it to see the animation!!):

Someone isn't shy.

Someone isn’t shy.

I’m also planning a small speech at 10:15am, which I’m still writing. I’ll post it here later. here it is:

Thank you for coming
Thank you for occupying
I am here today to announce a birth
The birth of a book
It’s called “Occupy Finance”
We wrote it
we are Alternative Banking

Who are we?
We are a working group of Occupy
we first met almost two years ago
we have been meeting ever since
we meet every Sunday afternoon
at Columbia University
our meetings are totally open
we want you to come

We discuss the financial system
we discuss financial regulation
we discuss how lobbyists destroy regulation
we discuss how Obama destroys regulation
we discuss what we can do to help
how we can make our opinions known
how we can make the system work for us
the 99%

Last year we had a project
The 52 Shades of Greed
we came here to Zuccotti Park
we gave out hundreds of packs of cards
they explained the financial system
they called out the criminals
they called out the toxic ideas
and the toxic instruments
and the toxic institutions
that started this mess

This year we’ve come back
with another present to share
it’s a book we wrote
it’s a book for all of us
it explains how the financial system works
and how it doesn’t work
it explains how the system uses us
how the bankers scam us all
how the regulators fail to do their job
how the politicians have been bought

Why did we write this book?
we wrote it for you
and we wrote it for us
we wrote it for anyone
who wants to know
how to argue against
the side of greed
the side of corruption
the side of entitlement

let me tell you something
some people call us radicals
but listen up
when the top 1%
capture 95% of the income gains
since the so-called end
of the recession,
when more than half the country thinks
that we didn’t do enough
to put bankers in jail,
when the median household income
has gone down 7.3% since 2007,
when the actual employment rate
is 5% below 2007,
when the jobs that do exist are crappy
when we get paid with prepaid debit cards
that nickel and dime us all
then what we demand is not radical
it is only a system that works
we are asking for a just system
we are asking for a fair system
we are asking for an end to too-big-to-fail
we demand banks take less risk
with our money
and we are asking lawmakers
to stop banks
once and for all
from scamming people because they are poor

Please join us
we want you to come
you don’t need to be an expert
we started out as strangers
who wanted to know how things work
we have become friends
we have become allies
we have made something
out of our curiousity
and out of our hard work
and we are here today
to share that with you
and to ask you to join us
please join us
happy birthday to us!
Thank you!!

Categories: #OWS, finance, news
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