- Your Options: To Serve… Or Be Served
Authored by StraightLineLogic's Robert Gore via The Burning Platform blog,
There are three ways for a person to obtain something of value from another person: receive it as a donation, steal it by force or fraud, or exchange for it. It’s not much of an oversimplification to say that the advance of civilization has hinged on its movement from the first two methods to the third. The right to exchange, and the right to promise as part of a future exchange—the right to contract—are now taken for granted, but those rights are delicate and a whole complex of rights, assumptions, and obligations are subsumed by them. Their intellectual foundations are being undermined as the equality of rights implicit in contract and exchange gives way to a regressive inequality of rights: servitude.
The essence of exchange is choice; it’s voluntary. Both parties have the choice of whether or not to transact, and neither will do so unless they subjectively value what they receive more than what they give up. That is not to say that there will be equality of resources, bargaining power, or negotiating skill between the parties, or that they will be equally happy with their bargain, only that both parties have the same choice to accept or reject the proposed transaction. Exchange embodies that equality of rights between parties, but not an equality of outcomes.
The right to exchange implicitly assumes that parties are the best judges of their own interests, and that such determinations will be respected by both the parties and those outside the transaction. The rights to exchange and contract are individual rights, and the obligation to fulfill one’s side of the bargain an individual obligation. A collective entity such as a business can contract and exchange, but either the members of that entity have agreed that they will, collectively, do so, or have, by their membership in that entity, recognized implicitly or explicitly the right of those directing the entity to do so.
The concept of a social contract is a contradiction in terms. With whom does a society contract? An entity cannot contract with itself. The notion has come to mean acceptance by the governed of the government, whatever its form. However, individuals have no choice to opt out of the collective entity known as society, as they would any other voluntarily chosen entity they joined, and the social contract supposedly binds not just those who were part of the society when the contract was made, but future generations. Thus, the term social contract wrongly connotes voluntary choice of an institution whose establishment has always been the product of chance and force, and has no meaning at all for the unborn who will nevertheless be compelled to live under the government so established.
Exchange evokes hostility because it is a private decision in which the resulting agreement excludes everyone but the two parties, and it increases, by their own evaluations, their wellbeing. As it increases wellbeing, a rational government will do all it can to protect the rights of its citizens to contract and exchange for any licit purpose. However, a government relegated to protecting private contracts and exchange is a government subjugated; there is no opportunity for the exercise of coercive power. When contracts are breached, the government’s role is adjudication and remedy, not coercion. Even that role is unessential; parties can agree beforehand to nongovernmental dispute resolution.
Nobody goes into government to refrain from exercising power. Governments ban certain contracts and exchanges, or dictate their terms in the name of regulation. They are humanity’s most rapacious and regressive institution; they arrogate to themselves the right to legally engage in theft. Outlawing or regulating certain exchanges furthers larceny as well; enforcement offers opportunities for extortion and accepting bribes.
Historically, there has been a virtually straight line relationship between the share of activity within a society demarcated by voluntary contract and exchange and the progress made by that society. Voluntary exchanges and the private choices they incorporate are, by definition, made only when they enhance wellbeing. Once a government “escapes” the subjugation of enforcing private agreements and choices, they constrict the scope of such agreements and choices and extract value by force, that is, involuntarily, from the citizenry. Notwithstanding the delusions and lies of their many proponents, constricting choices and theft cannot further progress, they only retard, stop, or reverse it.
Neither the relationship between donor and recipient nor between thief and victim is that of equals. The proper characterization for both is servility: recipients begging donors for donations and victims implicitly or explicitly begging thieves to spare some of their property or their lives. If a truth serum could be administered to ensure an honest answer, perhaps no single question would be more psychologically revealing than whether a person prefers relationships of servility or equality. A preference for the former is the most accurate marker for sociopathy available, and is not a bad one for psychopathy, either.
So runs the sociopathic, psychopathic scam known as government. The productive are robbed and just enough is doled out to the beggars to keep them quiescent and voting correctly. The rest lines the pockets of the sociopaths and psychopaths, the “served.” This can be the only result when exchange is replaced with theft and begging as the basis of social and commercial interaction. Collectivist hostility to exchange stems not from its misattributed flaws, but from deep-rooted psychological hostility to a process that involves free choice and confers equally to both parties the option not to engage in it. Exchange presumes that individuals are capable of directing their own lives, and protecting the freedom to contract and exchange enshrines that autonomy. Freedom, exchange, and equality of rights under the law are inseparable.
As exchange dies, the nation founded in revolution and independence descends into docile servility. Equality of rights under the law, a difficult but not impossible goal, gives way to a deluded and malignant drive for equality of outcomes. Exchange, contract, and freedom are inconsistent with equality of outcome. In order for voluntary exchange to occur, both parties must have something to exchange, which implies both parties have produced something and either retained it or exchanged it for something else of value. Productive ability is not equally distributed. Nor is the ability to benefit from exchange; some are better at it than others.
Spurious promises of equal outcomes implicitly rely on begging, theft, and the coercive power of the sociopathic, psychopathic scam. There has never yet been a government in which the government, especially ones devoted to “equality,” did not become, in Orwell’s words, “more equal” than its begging and enslaved citizenry. Keep that in mind the next time you hear a blowhard bastard bloviating bromides about the beauty and nobility of “service.” You’re to be served… as the next course.
- Forget Chinese Commodity Speculators, Meet North America's "Moms-and-Millennials" Oil Day-Traders
We showed you the "bored" Chinese workers who traded commodity futures for excitement – Now, it's time to meet North America's oil day-traders… moms-and millenials.
The recent volatility in crude oil has gotten the attention of people who do not list trading as their day job, but are randomly attempting to day trade oil anyway the WSJ reports.
Take for example Erika Cajic, a 45-year old full-time parent who took a shot at trading oil via UWTI.
When Erika Cajic woke before dawn one morning in early May and read that wildfires were breaking out in an oil-producing region of Alberta, she sat down on the family room couch with a cup of hot chocolate and her laptop and bought shares of an investment linked to crude.
The 45-year-old full-time parent of two in Mississauga, Ontario, like many investors, reasoned that the production outages would drive up the price of oil. By buying the VelocityShares 3x Long Crude Oil exchange-traded note, she tripled down on her hunch, as the product uses derivatives that aim to rise and fall at triple the daily change in oil.
Within about four days, she estimated she made about 500 Canadian dollars (US$384) on those trades after converting from U.S. dollars.
“The swings are gigantic lately,” she said of the product, known by its ticker UWTI, and the other energy products she has traded in recent months.
For Matt Krasnoff, an employee of LinkedIn, he just keeps his trades displayed on Yahoo Finance on his computer screen during the day and monitors his trades at work.
“I just thought, let’s throw a couple of hundred dollars in it…and try it out,” said Matt Krasnoff, 26, of New York, who bought shares of UWTI last year after hearing about it from a friend. “I just enjoy the risk and the thrill of the market in general.”
Mr. Krasnoff works at LinkedIn Corp. in New York and keeps a list of his investments displayed on Yahoo Finance on his computer screen during the day. He said he typically invests in technology companies that he is familiar with and reads articles about the industry and watches Twitter to stay up to date.
He ditched UWTI within a few months of trying it, after he lost money. “It was outside of the realm of what I knew…the last straw was realizing that I wasn’t informed enough,” he said.
Now, he says, he is going to stick to investing in what he knows, like tech.
CME estimates that crude oil has been its second most traded contract among retail investors this year after the S&P – such investors make up about 10% of the daily trading volume said Mark Omens, executive director of retail sales at CME.
Frederick Bailey, of Savannah, Georgia is inbetween jobs so he figured he would put some money into UWTI in January as crude broke $30 a barrel. Although at least Bailey had some dealings with ETF's in the past.
Frederick Bailey, 59, of Savannah, Ga., said he put a modest amount of money in UWTI in January as crude broke below $30 a barrel and rode it higher as oil prices rebounded. Mr. Bailey, who said he is between jobs, once worked at banks that dealt with exchange-traded funds.
Mr. Bailey also visits online chatter sites talking about oil, such as StockTwits, where one poster this week wrote: “…once again the crude been rude to this dude.”
It also appears that millennials in their spare time at their parents house are also fans of day trading crude oil and related products on their smart phone.
Grant Heimer, a 25-year-old in Dallas, trades stocks as a hobby and learned about commodity exchange-traded products from his friends last year, he said.
An energy-industry software consultant who studied finance in college, he has traded oil and natural-gas exchange-traded products a few times using a smartphone app called Robinhood.
“Oil just seemed to make a lot of sense to me,” said Mr. Heimer. He has never held a position longer than five days and still has most of his portfolio in stock investments. Most of his oil trades made money, he said, but not all.
“I’m not careless,” said Mr. Heimer. “It’s a very appealing thing to do for somebody like me who’s OK with a small risk and a short amount of time.”
Archna Jagtiani started trading on her own after the market came back after the crisis but her account had not recovered. She once traded exchange traded products but now trades futures, with a holding period of 15 minutes.
Archna Jagtiani, a 42-year-old who lives in the Chicago suburbs, started trading after the financial crisis. “After 2010 when the market was up…my account had not come back and I was just paying fees,” she said. “It’s better this way. I cannot blame anybody if I lose money.” She said she spends her days trading and tutoring kids in math after the market closes.
Ms. Jagtiani used to trade oil exchange-traded products, but a few months ago switched to buying and selling oil-futures contracts because of the quirks of holding some oil exchange-traded products for a long period of time.
“If oil goes from $43.50 [a barrel] to $43.70, you’ve made a hundred bucks,” she said of oil futures, which she holds for intervals as short as 15 minutes.
* * *
Well, while we're not saying that the "professionals" do any better, we suspect that the 'passive day-trading' as a hobby may not be the best idea for those looking to preserve any discretionary income that may be left over after paying the monthly bills.
- Oregon Senator Warns – Government Is Dramatically Expanding Its Hacking & Surveillance Authority
Submitted by Mike Krieger via Liberty Blitzkrieg blog,
The Patriot Act continues to wreak its havoc on civil liberties. Section 213 was included in the Patriot Act over the protests of privacy advocates and granted law enforcement the power to conduct a search while delaying notice to the suspect of the search. Known as a “sneak and peek” warrant, law enforcement was adamant Section 213 was needed to protect against terrorism. But the latest government report detailing the numbers of “sneak and peek” warrants reveals that out of a total of over 11,000 sneak and peek requests, only 51 were used for terrorism. Yet again, terrorism concerns appear to be trampling our civil liberties.
– From the post: More “War on Terror” Abuses – Spying Powers Are Used for Terrorism Only 0.5% of the Time
Ron Wyden, a Senator from Oregon, has been one of the most influential and significant champions of Americans’ embattled 4th Amendment rights in the digital age. Recall that it was Sen. Wyden who caught Director of National Intelligence, James Clapper, lying under oath about government surveillance of U.S. citizens.
Mr. Wyden continues to be a courageous voice for the public when it comes to pushing back against Big Brother spying. His latest post at Medium is a perfect example.
Here it is in full:
Shaking My Head
The government will dramatically expand surveillance powers unless Congress acts
Last month, at the request of the Department of Justice, the Courts approved changes to the obscure Rule 41 of the Federal Rules of Criminal Procedure, which governs search and seizure. By the nature of this obscure bureaucratic process, these rules become law unless Congress rejects the changes before December 1, 2016.
Today I, along with my colleagues Senators Paul from Kentucky, Baldwin from Wisconsin, and Daines and Tester from Montana, am introducing the Stopping Mass Hacking (SMH) Act (bill, summary), a bill to protect millions of law-abiding Americans from a massive expansion of government hacking and surveillance. Join the conversation with #SMHact.
What’s the problem here?
For law enforcement to conduct a remote electronic search, they generally need to plant malware in?—?i.e. hack?—?a device. These rule changes will allow the government to search millions of computers with the warrant of a single judge. To me, that’s clearly a policy change that’s outside the scope of an “administrative change,” and it is something that Congress should consider. An agency with the record of the Justice Department shouldn’t be able to wave its arms and grant itself entirely new powers.
Let’s get into the details
These changes say that if law enforcement doesn’t know where an electronic device is located, a magistrate judge will now have the the authority to issue a warrant to remotely search the device, anywhere in the world. While it may be appropriate to address the issue of allowing a remote electronic search for a device at an unknown location, Congress needs to consider what protections must be in place to protect Americans’ digital security and privacy. This is a new and uncertain area of law, so there needs to be full and careful debate. The ACLU has a thorough discussion of the Fourth Amendment ramifications and the technological questions at issue with these kinds of searches.
The second part of the change to Rule 41 would give a magistrate judge the authority to issue a single warrant that would authorize the search of an unlimited number?—?potentially thousands or millions?—?of devices, located anywhere in the world. These changes would dramatically expand the government’s hacking and surveillance authority. The American public should understand that these changes won’t just affect criminals: computer security experts and civil liberties advocates say the amendments would also dramatically expand the government’s ability to hack the electronic devices of law-abiding Americans if their devices were affected by a computer attack. Devices will be subject to search if their owners were victims of a botnet attack?—?so the government will be treating victims of hacking the same way they treat the perpetrators.
As the Center on Democracy and Technology has noted, there are approximately 500 million computers that fall under this rule. The public doesn’t know nearly enough about how law enforcement executes these hacks, and what risks these types of searches will pose. By compromising the computer’s system, the search might leave it open to other attackers or damage the computer they are searching.
Don’t take it from me that this will impact your security, read more from security researchers Steven Bellovin, Matt Blaze and Susan Landau.
Finally, these changes to Rule 41 would also give some types of electronic searches different, weaker notification requirements than physical searches. Under this new Rule, they are only required to make “reasonable efforts” to notify people that their computers were searched. This raises the possibility of the FBI hacking into a cyber attack victim’s computer and not telling them about it until afterward, if at all.
A job for Congress?—?not the Justice Department
These changes are a major policy shift that will impact Americans’ digital security, expand the government’s surveillance powers and pose serious Fourth Amendment questions. Part of the problem is the simple fact that both the American public and security experts know so little about how the government goes about hacking a computer to search it. If a victim’s Fourth Amendment rights are violated, it might not be readily apparent because of the highly technical nature of the methods used to execute the warrant.
It is Congress’ job to make sure we do not let the Executive Branch run roughshod over our constituents’ rights. That is why action is so important: this is a policy question that should be debated by Congress. Although the Department of Justice has tried to describe this rule change as simply a matter of judicial venue, sometimes a difference in scale really is a difference in kind. By allowing so many searches with the order of just a single judge, Congress’s failure to act on this issue would be a disaster for law-abiding Americans.
When the public realizes what is at stake, I think there is going to be a massive outcry: Americans will look at Congress and say, “What were you thinking?”
By failing to act, Congress is once again demonstrating that it is not just useless, it’s also dangerously corrupt and incompetent.
- China Warns The World: America Is The "Greatest Threat To Peace & Stability"
It is no secret that the relationship between the United States and China has been strained for quite some time. Earlier this month when the US sailed its guided missile destroyer the USS William P. Lawrence within 12 nautical miles of Chinese-occupied Fiery Cross Reef, it ended in China scrambling of two fighter jets and three warships to shadow the destroyer and convince it to leave the area.
The US admitted that it sailed the USS William P. Lawrence by the disputed island in order to "challenge excessive maritime claims" made by China. In turn, China had this to say about the US effort: "This action by the U.S. side threatened China's sovereignty and security interests, endangered the staff and facilities on the reef, and damaged regional peace and stability."
As the US meddles in the South China Sea disputes, China has been increasingly vocal about its displeasure, and that came out very directly in recent comments made on Thursday.
The United Nations is getting ready to rule on a maritime dispute between China and the Philippines, and in discussing that potential ruling Yang Yujun, spokesman for the Ministry of National Defense (MND) said at a briefing that US involvement in these types of disputes is the greatest threat to the region.
From Russia Today
On Thursday, China said that it would not recognize the UN verdict on the issue, unless China’s claims are honored.
“No matter what kind of ruling the Court makes, China will not accept nor recognize the adjudication,” Yang Yujun, spokesman for the Ministry of National Defense (MND) said at a briefing. “This is China’s right conferred by the international laws. By doing so we are actually abiding by and observing the international laws.”
The tension is being exacerbated even further by a continuously growing American presence in the region, whose many allies also lay claims to the islands. China has called the US involvement in the dispute the “greatest” threat to the region.
“Certain countries outside the region frequently show its military strength in the South China Sea area and this is actually the greatest threat to peace and stability in the region. We urge them to stop stirring up a storm in a teapot and stop sowing seeds of discord so as to maintain peace and stability in the South China Sea, which conforms to the common interests of all parties,” Yang said.
Yang went on to say that "in essence, the root cause for security hazards and potential accidents in the air and at sea between China and the US is the long term, large-scale and frequent close-in reconnaissance activities against China by the US military vessels and aircraft."
The statement made by Yang sums up perfectly what we have been saying for quite some time now. The more the US provokes China, and Russia for that matter, the likelihood of international incident increases. Of course, maybe that's what the United States has been after all along.
- Disillusioned Democrats & The Demise Of Democracy In America
It doesn’t seem so long ago when an ambitious political couple holding preteen Chelsea Clinton by the hand was moving from the governor’s mansion in Little Rock, Arkansas, to the august quarters of the White House in D.C. A young Democratic president had just defeated Ronald Reagan’s heir, Papa Bush, and a prophetic populist with a Texan twang, Ross Perot, in the colorful presidential fray of 1992.
Was Bill Clinton then a young Democratic president, Kennedy-style, we now ask… or was he Scoundrel Willy cloaked in smart, glittering and deceitful-wear? For all the economic and social success attached to the two-term Clinton presidency, much of it could be easily reexamined and clarified using more appropriate historical light, as time has passed, should we dare revisit the causal variables, as well as the results, from published but never critically analyzed small-print statistics. A micro-analysis of key employment statistics would certainly taint and modify much of the highly touted, yet unmerited, success showered on a charismatic and articulate Bill Clinton.
In fact, if a bottom line were to be made of Bill Clinton’s eight years in office, we could rationally claim that the Democratic Party had metamorphosed during this period into a new, and previously fictionalized, semi-compassionate wing of the Republican Party. In fact, Clinton’s demo-republicanism had renounced and replaced the heritage of FDR’s New Deal, and also Lyndon Johnson’s Great Society… by deregulating Wall Street; also incarcerating millions, destroying welfare, and taking on globalization (NAFTA) without plan or recourse, creating the beginning of the end for much of America’s economic middle class. [We should add that the larger household income achieved during the period did come in great part from a very large increase in two-income families. Also, technological change and deregulation scrambled the employment dynamics which did result in the creation of 22 million new low-wage service jobs (mostly) which did mask the forced-exit of living-wage jobs, also extrapolating erroneous conclusions on the economy’s future… a future now present with a sadder, much different face.]
A short generation from the time Bill Clinton was installed as president has not only transformed young Chelsea into a mother, but also has transformed a principled party of advocacy for the least-favored lower and middle classes into the Republican-lite political entity that it is today. The Clinton-glue, present and accounted for during the two Obama terms, is still holding together an established mafia-clan of self-serving older politicians, a cadre of committed leaders that keep the rank-and-file in the Black and Latino communities/organizations walking the line at election time.
America lived much of the 1990’s dancing to the wind ensemble of Alan Greenspan’s clarinet and Bill Clinton’s saxophone; the incredible duet comprised of a talented con-man, Bill Clinton, and an inarticulate gobbledygook-mumbler, Alan Greenspan – more adept at pleasing the occupant of the White House than providing sound economic advice on global economics. An uncanny combination of two musicians playing the wrong long-term economic notes!
Amazingly, here we find ourselves in this United States of America less than six months from another presidential election with the likely prospect of electing a Weimar-worthy, anti-establishment savior, Donald Trump; or having as the sole alternative, at least for now, of calamitous Hillary and the prospect of a continuing, in-your-face, painful and shameless behavior towards much of America’s Bill-betrayed working class.
Oops! Did Hillary just say that, as president, she would knight Bill as her economic czar? Obviously, bad judgment is a gene that neither Wellesley College nor Yale Law School can modify.
Bill Clinton’s demo-republicanism, not even a generation old, may be coming to an abrupt end as justified political anger, and (unfortunately) unjustified bigotry, artfully combines to deal Donald Trump a winning hand. Hillary Clinton’s continuous courtship with bad judgment is sure to betray her during the summer campaign, even against a narcissist lowbrow such as Donald Trump.
So much for a revitalization of the Democratic Party and its return to its progressive roots; the last politico-masochistic act by the current demo-republican leadership is likely to take place at the convention in Philadelphia, as Bernie Sanders is permanently put to rest, or hypnotized/drugged to accept Hillary as a lesser demonic prospect to occupy the Oval Office. And that will spell disaster for the short-lived, Clinton-created, demo-republicanism. So much for Bernie’s idealized revolution!
Democracy in America, we ask: is it our destiny, or political curse, to have to choose between the lesser of two evils at election time? Why? Are we terminally incapable of acknowledging a fundamental truth: that democracy will never take hold until we change the undemocratic process that keep us in chains… and learn to govern ourselves, selflessly, for the welfare of all?
- Clinton Foundation Snafu: Video Footage Catches FBI Probe Suspects Arriving At Hillary's House
Recently we reported that Virginia governor Terry McAuliffe was under investigation by the FBI and prosecutors from the Justice Department's integrity unit regarding donations to McAuliffe's campaign during his time as a board member of the Clinton Global Initiative. Specifically, investigators were scrutinizing a $120,000 donation McAuliffe received from Wang Wenliang, a Chinese businessman, who was also a donor to the Clinton foundation, pledging $2 million.
While the details of the case are still evolving, being that US election law prohibits foreign nationals from donating to federal, state or local elections McAuliffe immediately went on the offensive early on in order to distance himself from the situation by saying "I wouldn't know the man if he sat in the chair next to me."
Ironically, Wang may have literally sat in the chair next to McAuliffe on many occasions. The Daily Mail has obtained footage that shows the two men entering Hillary Clinton's residence off D.C.'s Embassy row as they attended a fundraiser on September 30, 2013.
Not only did the two men attend the same fundraiser at Hillary's house, TIME reports that the McAuliffe and Wang had interacted at least three times, and that it was McAuliffe himself who invited Wang to the Clinton fundraiser. TIME also goes on to say that according to McAuliffe's attorney James Cooper, the focus of the investigation is not on the Wang donations, but questions over foreign sources of personal income and whether the governor lobbied on behalf of foreign interests without registering as a foreign agent.
Virginia Gov. Terry McAuliffe invited the Chinese businessman whose donations to him have been named as a focus of Justice Department investigators to a 2013 fundraiser at Hillary Clinton’s personal Washington, D.C., residence.
Wang Wenliang, a Chinese national with U.S. permanent residency, briefly shook Clinton’s hand at the Sept. 30 event, a representative for Wang told TIME. An American company controlled by Wang made a $60,000 contribution to McAuliffe’s campaign three weeks before the fundraiser. Less than a month later, a separate Wang company pledged $500,000 to the Clinton Foundation, the first of several donations that eventually totaled $2 million.
The fundraiser was one of at least three interactions between Wang and McAuliffe, according to the businessman’s representative. McAuliffe initially told reporters this week he could not remember ever meeting Wang, though he later clarified that his staff had informed him of several likely meetings. “I did no deals,” McAuliffe said Wednesday in a radio interview. “I would not know the man if he sat in the chair next to me.”
The relationship between McAuliffe and Wang has been under scrutiny since CNN reported that the FBI and Justice Department’s public integrity division were investigating McAuliffe. Among the donations that were of interest to investigators, according to CNN, were a total of $120,000 in contributions to McAuliffe from a company controlled by Wang. Foreigners with permanent residency in the U.S. are allowed to make donations to campaigns under U.S. election laws, and corporations are allowed to make direct donations in Virginia.
James W. Cooper, an attorney at Arnold and Porter who has been hired by McAuliffe, told reporters Wednesday that Justice Department officials had told him the focus of investigation was not the Wang donations, but questions over foreign sources of personal income and whether the governor lobbied on behalf of foreign interests without registering as a foreign agent. Cooper said that the Justice Department told him there had been no findings of wrongdoing by the governor.
In a statement to TIME, the Justice Department declined to clarify the investigation’s focus. “As a matter of policy, the department generally neither confirms nor denies whether a matter is under investigation,” Justice Department spokesman Peter Carr told TIME.
Cooper also went on to say "all of this income is from the governor's time as a private citizen and the businessman who did deals that were well publicized around the world. So the fact that he had foreign income was not remarkable."
According to Wang's representative, a second meeting between McAuliffe and Wang took place in the state capital of Richmond after McAuliffe's election to discuss an expansion of a soybean export agreement between Wang and the state. A third meeting occurred at a dinner in Washington organized by former South Carolina governor Jim Hodges, who has registered as a federal lobbyist for one of Wang's companies.
While it's unclear exactly where all of this tangled web leads, we eagerly await the end result of the investigation which will detail at best another case of crony capitalism, and at worst yet another case of flat out corruption.
- "People Who Live In Glass White Houses…"
- Bank of America's Winning Excuse: "We Didn't Mean To"
Authored by Jesse Eisinger via ProPublica.org,
Back in the late-housing-bubble period, in 2007, Countrywide Home Loans, which was then the largest mortgage provider in the country, rolled out a new lending program. The bank called it the “high-speed swim lane,” or HSSL, or, even more to the point, “hustle.” Countrywide, like most mortgage lenders, sold its loans to Wall Street banks or Fannie Mae and Freddie Mac, two mortgage giants, which bundled them and, in turn, sold them to investors. Unlike the Wall Street banks, Fannie and Freddie insured the loans, so they demanded only the ones of the highest quality. But by that time, borrowers with high credit scores were getting scarcer, and Countrywide faced the prospect of collapsing revenue and profits. Hence, the hustle program, which “streamlined” Countrywide’s loan origination, cutting out underwriters and putting loan processors, whom the company had previously deemed not qualified to answer borrowers’ questions, in charge of reviewing loan applications. In practice, Countrywide dropped most of the conditions meant to insure that loans would be repaid.
The company didn’t tell Fannie or Freddie any of this, however. Lower-level Countrywide executives repeatedly warned top executives that the mortgages did not fulfill the requirements. Employees changed data about the mortgages to make them look better, sometimes increasing the borrower’s income on the forms until the loan looked acceptable. Then, Countrywide sold them to the mortgage giants anyway.
At one point, the head of underwriting at Countrywide wrote an alarmed e-mail, with a list of questions from employees, such as, does “the request to move loans mean we no longer care about quality?”
The executive in charge of the decision, Rebecca Mairone, replied, “So – it sounds like it may work. Is that what I am hearing?”
To federal prosecutors—and to a jury in Manhattan—the hustle sounded like fraud. And in 2013, Bank of America, which had by then taken over Countrywide, was found liable for fraud and later ordered to pay a $1.27 billion judgment to the government.
But this week, the 2nd U.S. Circuit Court of Appeals looked at that judgment and asked this question: If a entity (in this case, a bank) enters into a contract pure of heart and only deceives its partners afterward, is that fraud?
The three-judge panel’s answer was no. Bank of America is no longer required to pay the judgment.
The Bank of America case was a rare outcome in the collapse of the financial system: a firm whose actions had contributed to the crisis was held to account by a court of law. The U.S. Attorney’s Office for the Southern District of New York, which brought the case in 2012, used an ingenious strategy, charging the bank under a law dating from the savings-and-loan crisis of the late 1980s, called Financial Institutions Reform, Recovery and Enforcement Act, or FIRREA. And the government actually identified a human being, Rebecca Mairone, claiming she defrauded Fannie and Freddie. Though it was a civil action, rather than a criminal one, the case actually went to trial—unusual in this day and age—and the jury found Bank of America and Mairone liable. (The 2nd Circuit panel’s ruling reversed a finding of fraud against Mairone and tossed out a million-dollar ruling against Mairone.)
The appellate-court panel accepted the main facts as described by the government. It acknowledged that Countrywide intentionally breached its contract but ruled that it had not engaged in fraud.
The ruling, written by Richard C. Wesley, a George W. Bush appointee, was unanimous, with another Bush appointee and an Obama appointee voting in favor. “What fraud … turns on, however, is when the representations were made and the intent of the promisor at that time,” Judge Wesley wrote. If the fraud is based on “promises made in a contract, a party claiming fraud must prove fraudulent intent at the time of contract execution; evidence of a subsequent, willful breach cannot sustain the claim.”
The government hadn’t set out to prove Countrywide’s intentions—honorable or otherwise—of Countrywide at the moment it signed the contracts with Fannie and Freddie. Consequently, the court ruled that the government had not provided sufficient evidence for its contentions. “The government had zero evidence of affirmative misrepresentations at the time of the bad conduct,” Samuel Buell, a law professor at Duke University and the author of the forthcoming book “Capital Offenses: Business Crime and Punishment in America’s Corporate Age,” says. But to other legal scholars, the ruling seemed nonsensical. “Is the idea that a good state of mind initially can insulate you from fraud later on?” Brandon Garrett, a professor of law at the University of Virginia and the author of “Too Big To Jail: How Prosecutors Compromise with Corporations,” asked. “That would be a very strange and troubling doctrine.” He added, “It almost seems like the 2nd Circuit fell victim to a lawyer’s trick.”
For U.S. Attorney Preet Bharara, the court’s ruling is yet another setback in his corporate-crime efforts. In 2014, the 2nd Circuit overturned one of the office’s major insider-trading cases, throwing the law in that area into disarray.
It’s tempting to read something personal into these rulings. Courts often view themselves as a check on what they see as prosecutors responding to the pitchfork-wielding mob. In the 1990s, the 2nd Circuit overruled several high-profile Wall Street prosecutions brought in the ’80s by Rudolph Giuliani, who had been the Southern District’s U.S. attorney. Now it is doing the same to Bharara, who (as Jeffrey Toobin wrote in The New Yorker recently) has antagonized the bench, and is viewed by some as overly aggressive and arrogant. The ruling also bolsters the argument, so often heard from prosecutors, that they didn’t bring many big cases after the financial crisis because the laws required an evidentiary standard that couldn’t be met. “We thought it would be unfair to bring it as a criminal case, and therefore properly and fairly used our discretion to bring it as a civil case, but we thought it was clearly fraudulent," one former prosecutor familiar with the case said. The ruling, this person says, is “extraordinary and dispiriting.”
The relentless criticism of its post-financial-crisis crackdown has taken a toll on regulators. “This is a perfect example of how everyone thinks it is so easy to bring financial-crisis cases, but it isn’t,” the former prosecutor says. “The Court of Appeals didn’t agree, and now they’ve undone a major, major case tried before a jury. We get criticized for timidity in taking on financial-crisis cases, but the appeals court clearly viewed us as too aggressive. So maybe everyone who rails about the failures to bring financial-crisis cases needs to understand that there is a legal system, and what seems so obvious to them, is in fact not.”
The ruling does not affect the many multibillion-dollar settlements that the government has reached with most of the top financial firms for mortgage abuses. The parties entered those settlements voluntarily. Settlements are highly unsatisfying as a matter of justice. Companies and their defense attorneys complain that the government extorts them out of unreasonable sums because they have no choice but to negotiate, while the public feels companies are not held accountable, punished only by being compelled to write checks that have little effect on their bottom line.
After this ruling, the government may be even less willing to fight it out in court. Worse, it may have less leverage with companies when trying to extract penalties and fines in settlement negotiations over misconduct allegations. The court has provided companies with a new piece of ammunition: the ability to argue that their deliberate misconduct was not actually fraud.
- Another Bubble Has Burst: The Miami Luxury Condo Market Is A "Ticking Timebomb"
Last year we warned that the luxury condo market in Miami was cooling down, and we also noted that one of the mail culprits was the fact that foreign buyers (especially Brazilians) were seeing their buying power crushed by the appreciating dollar.
Today, the bubble has officially burst and the Miami luxury condo market is a complete trainwreck. There are 3,397 condominiums available in the downtown Miami area, and at current prices it is estimated that it would take 29 months to sell those. A strong US Dollar has continued to force South American investors to unload recently built condos, adding inventory to an area where 8,000 units are under construction and nine towers have already been completed since 2013.
Purchases from January through April fell 25 percent from the same period in 2015, and average prices have fallen 6 percent on a per-square-foot basis according to Bloomberg.
And prices will continue to slide…
"The problem is that investors are no longer buying, and now they're going to be looking to sell. And what buyers are going to replace those other than vulture buyers looking for deals." said Jack McCabe, a housing consultant based in Deerfield Beach, Florida.
During this latest construction boom, projects required cash deposits of as much as 60 percent, and contract cancellation had stiff penalties. Due to this, some investors have been able to cover costs as they wait to sell by renting the condo's out, but that isn't a viable option for everyone either, as apartment vacancies have been on the rise as well.
"The ticking time bomb is based on rental rates. When some of the foreign investors sitting on the sidelines have to dig into their pockets and subsidize renters, that's the fuse that will lead to a correction." said Peter Zalewski, owner of real estate development tracker CraneSpotters.
Or said another way, will accelerate the current correction.
Even billionaires are dumping their property in Miami. Apollo Global Management founder Leon Black, Ken Griffin, and former Saks CEO Stephen Sadove all have units on the market. Sadove has even lowered his asking price by almost 11 percent to $12.95 million – that unit may be there a while.
Andrew Stearns of StatFunding.com, which provides residential mortgages for foreign nationals, pointed out that of 14 new Miami towers, the share of resale listings range from 7 percent at MyBrickell tower to 40 percent at 400 Sunny Isles.
"The concern is we're in a price-discovery phase, and the prices people are trying to get for their condos is a lot higher than the market will bear." Stearns said.
A lot higher indeed. A slide from a recent StatFunding.com presentation shows a snapshot of just how underwater some of these condos are at the present time.
It's also worth noting, that from the same slide deck, Stearns shows that 22% of new units built since 2012 are for sale, and at the current sell-through rates there is a 126+ month supply!
* * *
The note at the bottom of that last slide from Andrew Stears sums everything up perfectly: As additional resale inventory is added to the market, the market could get frightening.
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