Goldman's Success: Put Down Those Pitchforks [View article]
Goldman Sachs Loses Grip on Its Doomsday Machine: Jonathan Weil
Commentary by Jonathan Weil
July 9 (Bloomberg) -- Never let it be said that the Justice Department can’t move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.
Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov.
Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.
It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”
How could somebody do this? The precise answer isn’t obvious -- we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t need a Goldman Sachs doomsday machine to manipulate markets, of course. A false rumor expertly planted using an ordinary telephone often will do just fine. In any event, the judge rejected Facciponti’s argument that Aleynikov posed a danger to the community, and ruled he could go free on $750,000 bail. He was released July 6.
Market Manipulation
All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?
Here’s some of what we do know. Aleynikov, a citizen of the U.S. and Russia, left his $400,000-a-year salary at Goldman for a chance to triple his pay at a start-up firm in Chicago co- founded by Misha Malyshev, a former Citadel Investment Group LLC trader. Malyshev, who oversaw high-frequency trading at Citadel, said his firm, Teza Technologies LLC, first learned about the alleged theft July 5 and suspended Aleynikov without pay.
‘Preposterous’ Charges
Aleynikov’s attorney, Sabrina Shroff, told the judge at the bail hearing that Aleynikov never intended to use the downloaded material “in any proprietary way” and that the government’s charges were “preposterous.”
Goldman isn’t commenting publicly about any of this, though it seems the bank’s bosses want us to believe there’s no need to worry. On July 6, Dow Jones Newswires quoted a “person familiar with the matter” saying this: “The theft has had no impact on our clients and no impact on our business.” Note that this person was so familiar with Goldman that he or she spoke of Goldman’s clients as “our clients” and Goldman’s business as “our business.”
By comparison, last Saturday, while most Americans were enjoying the Fourth of July holiday, Facciponti was in court warning of looming threats to Goldman and the financial markets.
“The copy in Germany is still out there,” the prosecutor said, according to an audio recording of the hearing. “And we at this time do not know who else has access to it and what’s going to happen to that software.”
Secret Software
“We believe that if the defendant is at liberty, there is a substantial danger that he will obtain access to that software and send it on to whoever may need it,” Facciponti said. “And keep in mind, this is worth millions of dollars.”
By “millions,” it’s unclear if that would be enough to match Goldman Chief Executive Lloyd Blankfein’s $70.3 million compensation package for 2007. Or perhaps millions means thousands of millions, otherwise known as billions.
Facciponti said the bank told the government that “they do not believe that any steps they can take would mitigate the danger of this program being released.” He added: “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.” All Aleynikov would need to get the code from the German server is maybe 10 minutes with a cell phone and an Internet connection, Facciponti said.
Judge’s Ruling
The hole in Facciponti’s argument was that the government offered no evidence that Aleynikov had tried to disseminate the software during the month prior to his arrest, after he downloaded it and had left his job at Goldman. That’s the main reason the judge, Kevin N. Fox, cited in ruling Aleynikov could be released on bail.
“We don’t deal with speculation when we come to court,” Fox said. “We deal with facts.”
Meantime, it would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways, too. Oh yes, and could the bank be a bit more careful about safeguarding its trading programs from now on? Hopefully the government is asking the same questions already.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Bank Earnings: Revenues Falling, Losses Rising [View article]
Very good article. Where are all the talking heads on tv doing their research? I see mostly cheerleaders for Goldman Sachs.
"...For the last decade most of the “growth” in the U.S. economy has been nothing more than under-reported inflation..." And that's why deflation becomes necessary.
Jon Stewart Takes on Goldman Sachs [Video] [View article]
Let's face it. Goldman Sachs gives more money to Democrats than Republicans because Republicans are by ideology already supportive of 'free-market' business. Giving money to the Republicans is like preaching to the converts. The Democrats, historically, are the adversaries of Big Business -- so they are also the ones who need to be bought. The Republicans are already bought, ideologically.
Unwise to Tax the Rich to Pay for Health Care [View article]
I don't disagree with everything you say. I think America has taken many steps in the right direction to become a great society – we just need to take some more. And falling back on old myths won’t necessarily help us get there, especially considering the more savage world into which we are heading, which has been brought upon us by the excesses of the corporate greed. I am not an anti-capitalist – I voted for Reagan gladly; and I voted for every republican candidate since Reagan UNTIL I voted for Obama last year. Why did I vote for Obama? Because it became increasingly obvious to me that the lead capitalists in the world (led by Greenspan and the Goldman Sachs ilk and others) had destroyed the global economy out of short-sighted greed and an inability to police themselves, a willingness to sacrifice the future through an insatiable lust for more wealth, more property, and more power today.
We are heading in to a major global depression (death of the world) because we’ve idealized an imbalance between individual freedoms to exploit economic opportunities and societal limits on criminal selfishness and corporate law-breaking. This imbalance seems destined to flow into an opposite imbalance, that of too much social restraint on individual enterprise. That seems to be how history works.
If you have an interest in my development of these themes, you can look at a draft of the book I’m writing “Turn Out the Lights’ at the web address below which looks at the metaphysical causes of economic/social cycles. The view of this book is that history manifests in day and nights; days represent an expansion of debt/credit and of rational energy, enterprise, creation, negentropy (higher levels of organization); nights represent a contraction of debt/credit, deflation, entropy (higher levels of disorganized energy) and the replacement of individual dreams with group destiny.
I also agree that the great society does favor individual freedoms. But, in terms of health care, which we are discussing, we also have a situation today wherein bubbles have driven up prices of health-care to a point that families can't afford to get sick, even if they have insurance; and businesses can no longer afford health insurance as a benefit for employees because the insurance cartel (insurance companies, doctors, pharmaceutical companies) – and their adversaries, the malpractice lawyer cartel, a factor but a less significant factor-- have pumped up the price of medical services so that they are no longer sustainable, and must collapse.
George Will, hardly a communist, wrote about this same thing, saying that one of the main reasons GM went bankrupt was because of rising medical costs guaranteed to workers. Japanese companies are at an advantage because their government provides universal healthcare for its citizens and the businesses don't have to deal with it. Will writes:
--GM says health expenditures -- $1,525 per car produced; there is more health care than steel in a GM vehicle's price tag -- are one of the main reasons it lost $1.1 billion in the first quarter of 2005. Ford's profits fell 38 percent, and although Ford had forecast 2005 profits of $1.4 billion to $1.7 billion, it now probably will have a year's loss of $100 million to $200 million. All this while Toyota's sales are up 23 percent this year and Americans are buying cars and light trucks at a rate that would produce 2005 sales almost equal to the record of 17.4 million in 2000.
In 1962 half the cars sold in America were made by GM. Now its market share is roughly 25 percent. In 1999 the Big Three -- GM, Ford, Chrysler -- had a 71 percent market share. Their share is now 58 percent and falling. Twenty-three percent of those working for auto companies in North America now work for companies other than the Big Three, up from 14.6 percent just five years ago.
The Big Three have cut 130,394 North American hourly and salaried workers since 2000, while the "transplants" -- foreign automakers with American assembly plants -- have added 27,183. In the first quarter of 2005 the Big Three operated 64 assembly plants, down from 70 in five years, during which time the transplants' factories have increased from 19 to 23, with more coming.
GM says its health care burdens, negotiated with the United Auto Workers, put it at a $5 billion disadvantage against Toyota in the United States, because Japan's government, not Japanese employers, provides almost all health care in Japan. This reasoning could produce a push by much of corporate America for the federal government to assume more health care costs. This would be done in the name of "leveling the playing field" to produce competitive "fairness." --
Universal health-care would not be such a big issue to me IF the medical cartel had not inflated their costs to the point of making their services unaffordable and even crippling for the society and for American business. Health.com reports that about 60% of American bankruptcies are caused by medical emergencies:
-- (Health.com) — This year, an estimated 1.5 million Americans will declare bankruptcy. Many people may chalk up that misfortune to overspending or a lavish lifestyle, but a new study suggests that more than 60% of people who go bankrupt are actually capsized by medical bills. Bankruptcies due to medical bills increased by nearly 50% in a six-year period, from 46% in 2001 to 62% in 2007, and most of those who filed for bankruptcy were middle-class, well-educated homeowners, according to a report that will be published in the August issue of The American Journal of Medicine.
“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” says lead author Steffie Woolhandler, MD, of the Harvard Medical School, in Cambridge, Mass. “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.” --
In no other developed country in the world does this happen, in the name of the 'free market system'. My argument is that it is foolish to allow the 'free market' ideology to allow the medical cartel to inflate healthcare prices so that they bankrupt the society, American business, and enrich only insurance companies, doctors and drug companies. Healthcare has long been a knee-jerk republican issue, like abortion, gun-ownership, school-prayer…as if continuation of the American dream was dependent upon the enrichment of doctors and insurance companies at the expense of everyone else.
Dave Schuler writes about inflation in the health-care sector:
-- From 1965 to 1981 national expenditures on health care more than doubled from $201 billion to $507 billion in real 2009 dollars. Most of the increase in costs in healthcare can be explained by three factors: increased utilization, particularly immediately after the enactment of Medicare and Medicaid during the period 1965-1972, higher prices, particularly during the period 1972-1981, and inflation. Most of the increases after 1981 can be explained by inflation alone.
In the period 1965-1972 use increases accounted for 45.8% of the increase in healthcare spending and price increases accounted for 45%. In the period 1965-1972 57.5% of the increase in spending for physician services can be accounted for by price increases and 32.2% accounted for by increased utilization.
Hospital expenses and physician services account for the majority of healthcare costs and both of those are other words for people’s incomes. Rent, insurance, equipment, and so on are a pittance by comparison with wages as components of both of those.
Here’s my alternative explanation for what has happened to healthcare costs. In the immediate aftermath of the enactment of Medicare and Medicaid in 1966 there was an increased utilization of healthcare. That is what was supposed to happen: old people and poor people were supposed to get more healthcare. In a fee for services environment, the model that prevailed at the time and still has considerable force, that means that physicians and hospitals made significantly more money. Their incomes increased. When utilization levelled off (as should also have been expected) they continued to increase their incomes by raising prices. They had become accustomed to increasing incomes.
In the late 1970’s and early 1980’s the increasing healthcare expenditures capturing of such a quickly rising proportion of the federal budget finally caught the attention of the Congress and a number of steps were taken to slow the increase. But the harm had mostly been done. A high cost basis had been built into healthcare, healthcare was a major component of total GDP, and inflation alone (of which rising healthcare costs are one of the largest components) was enough for healthcare costs to grow unsustainably.
I am not blaming healthcare providers for acting this way. I believe it was a natural human response and they responded as anyone else would have under the circumstances.
However, it means that simple cost control won’t achieve what we need to accomplish. The primary components of healthcare costs are hospital costs and physician services which comprise the majority of costs, insurance administrative costs which comprise something like 30% of costs, pharmaceutical costs which comprise something like 10% of costs, and other factors which comprise very small proportions of the whole. All of these costs are other words for wages, somebody’s income. Healthcare costs are high because wages in the sector are high. --
I would much rather have the forces of deflation drive down the price of healthcare to a point that hard-working Americans can again afford to get sick and recover without being bankrupted. Now they can’t. I do believe that the deflation we’ve entered (the night-cycle) WILL eventually save us from inflated salaries and pricing in health-care. Until this happens, we need a combination of actions, including taxes on the rich, and government-sponsored health-care system. If our founding fathers were alive today, I have no doubt they would not support a system that rewards very few and impoverishes so many. The Founding Fathers may have called the Bill of Rights to be God-given...the right to free speech was clearly 'man-given' as an interpretation of values they assumed an all-just divine being would expect of man. In my mind the right to affordable medical treatment is also a right an all-just divine being would expect a great society to provide.
The Day-Cycle inflates the bubbles; the Night-Cycle deflates the bubbles. The Day-Cycle favors the Rich; the Night-Cycle favors the Poor.
I am not a perennial socialist. I believe we need less socialism and more individual risk and entrepreneurialism during the energy-expansion Day-Cycles and more socialism during the deflationary bubble-popping Night Cycles when group survival becomes much more difficult and the cost of this difficult must be shared more abundantly by those who benefited the most during the less-regulated Day-Cycle of bubble inflation.
The great society helps those in need especially during a time of crisis. A great society develops its soul -- as well as business acumen, military skills, scientific genius, practical expertise. The great society generates the Donald Trumps and the Bill Gates – but also the Albert Einsteins, the Johannes Bachs, the William Shakespeares….entrepre... are only part of the picture.
On Jul 17 04:22 PM Keltorttruth wrote:
> Quite simply, I can not disagree with you more. The incentive of > individual properity creates the drive to produce at the most efficient > and effective possible levels if it is understood that others have > the same right to the same freedoms by following the same set of > unchanging rules - fair competition drives innovation. When one > introduces a government competitor who plays by a completely different > set of rules which are highly slanted in the government's favor, > that drives individuals away from taking risk and investing in their > beliefs. > > In my opinion, a great society is one where the individual, to as > large an extent as possible, determines his/her own outcome. This > leads to people taking risks on ideas/products/franchi... - basically > anything entreprenuerial. When these ideas work, they often lead > to mass hirings of those who may not have the ideas or the capital > to pursue their ideas but who can help implement the ideas. The > pursuit of individual betterment has the side effect of dragging > others up along with it b/c they can compensate others when their > ideas work. > > Everyone working for the benefit of everyone only ensures that very > little potential job-creating, real productivity increasing capital > risking will take place. If I'm only allowed to earn the same as > the guy next to me, why on earth would I put one extra ounce of effort > into my job? Why would I even think about taking any sort of risk > with my capital? You propose a very slippery slope. Maybe you think > 55% of one's income is not too much; maybe the next guy thinks 65% > is not too much (and maybe even you after you've had time to grow > comfortable with the previous level) and on and on it goes. Where > does it stop and who decides? The point is that the guiding principle > you seem to believe in rings of pure communism which you seem to > imply is a the hallmark of a "great society" - sounds like Utopia > to me. My guiding principle, and the guiding principle our forefathers > used to take a dramatic risk in breaking away from the Brits and > their "confiscatory" 12.5% tax rate is the right of the individual > to pursue life, liberty and the pursuit of happiness. They went > as far as to call these rights God given, not government given as > you would suggest. > > There are plenty of places in this world for your ideaology, I just > don't want America to transform into one of them. > > On Jul 17 02:10 PM Michael Clark wrote:
Did We Nationalize Banks, Or Did They Nationalize Us? [View article]
It's not too late to nationalize them. Obama won't do it. But as the facts get out, anger at the financial ruling class is going to make them much more vulnerable politically. (Paulson made $400 million from GSachs. Of course he's going to defend them.)
Excellent article. I'm living in Vietnam now. We get Chinese products over here. CHEAP dvds of American movies for instance. May 1/3 actually work. Electronics are terrible. China is the future of the world. PLEASE! Counterfeit nation.
Jon Stewart Takes on Goldman Sachs [Video] [View article]
So, Jon Stewart is what ruined America. I thought it was the mentality of the thieves at Goldman Sachs that ruined America. America's greatness comes from its values of freedom and equality, not from its values to cheat and steal and look out for number one.
On Jul 17 09:39 AM Ferdinand E. Banks wrote:
> So guttermouth Jon Stewart in in the economics business now, is he. > Hmm. I wonder if the American people will ever be able to figure > out that it's Jon Stewart and his trashy ilk that stand in the way > of making the US what it was or should be.
Exactly. Time to send in the investigators and clean up the system. Goldman-Sachs is the Las Vegas casino owner. Some make money -- most don't. I don't have any problem with a company being smart and skilled at trading. But they apparently are running ahead of the markets with their high-speed computer trading system -- front running. Time to break them down and sell their parts in the open market.
On Jul 15 10:38 AM conceptwizard wrote:
> Goldman makes money every time all the time because they control > the direction of the market. This is becoming more common knowledge, > just recently an employee of theirs that left stole software that > GS accused him through the FBI of quote "being able to control the > markets" through high speed trading. They of course did not want > this technology to fall into the wrong hands, of course feel that > theirs are the right hands. Nothing was said otherwise, and GS are > not under investigation. > Their oil trading floor is another proof in the pudding with their > ability just by sheer volume to sway the market price on oil. In > my mind they cannot lose, and this is not BS it is criminal. Because > in the markets someone has to win and someone has to lose. So if > they win all the time then of course we lose. > > On the housing issue, it is common place now to expect the Obama > will do what is in the ultimate best interests of the banks. The > banks in this scenario keep the upside of the investment, and now > have switched the liability issues into revenues streams. That is > why the Treasury department has called the top 25 mortgage firms > to the meeting table. Obama's plan will make us beholden to the Financial > Warlords in everyway, we will be debt ridden, renters with no jobs > and low incomes, with weekly hours down to 33 per week and average > wages dropping. America is about to change into a serfdom.
Unwise to Tax the Rich to Pay for Health Care [View article]
Erik: Where is it stated that the ownership of slaves is no longer a right? Where is it stated that women have the right to vote? Whre is is stated that black Americans have the same rights as white Americans?
In the legislation passed by the congress and signed in to law by the President of the U.S. That is how our democracy works. Rights are granted by law -- the will of the people .
ALL our rights come from the mutual consent of the democratic process. (Sometimes you support these rights; and sometimes you don't.) But that is how 'rights' are granted -- they are not handed down from God -- or from some other providential source. When Ron Paul is saying health care is not a right -- he is just stating his opinion.
The government has a right to draft the poor boys and girls into the military who fight our wars for freedom and the spread of democracy and the triumph of capitalism and old money families. But the government doesn't have a right to provide these same poor people with reasonably priced health care? I think this is the crux of the argument. If the rich want the poor to fight and die so that they can keep their money -- and expand their system of capitalism in the world -- then they have to give something back. If not, let Paulson's children, and Greenspan's children, and Bernanke's children, and Bush's children fight the next war, without the help of those families they feel are disposable.
On Jul 17 11:05 AM Erik B. wrote:
> @LeoTheDog > > Where is it stated that health care is a right of citizenship in > America? > > "As Senator and doctor Mr. Ron Paul so pleasantly reminds us the, > "constitution only guarantees citizens 'life, liberty and (the right > to) keep the fruits of my labor.'" > > Anyone who is following this debate should watch this interview with > Senator Paul: > > finance.yahoo.com/tech... > > Yeah, and your honorable Senator, like the rest of them, are happy > to collect their lifetime health care benefits while at the same > time chirping about it not being a right for the average citizen. > A very untenable position I believe.
Unwise to Tax the Rich to Pay for Health Care [View article]
Reactionary: I can at least smile at your username.
You say health-care is not a right. I say it is. The right to bear arms is not God-given -- it's given by men in society. The right of free speech is not God-given -- it's given by men in society. The right to vote is also not God-given -- it's given by men in society. ALL of our rights are given by our fellow-men (ancestors, in this case) since public opinion decided these 'rights' were important for a great society. How do we define a 'great society' -- I'm assuming you would like to live in a great society, and have history judge America as being a great society. Sink or swim? Dog-eat-dog? Are these the values of a great society? Do we care about our neighbors, or only about ourselves? Can America really become a great society with the philosophy that 'its every man for himself and God against all'? Do you think we MUST have prisons full, murder, rape, and robbery a contagion? Does a great society value only the accumulation of money by individuals? Are there other values that would help develop our sense of humanity. My parents generation knew their neighbors and cared about them. This all changed in my generation. Me-me-me: nothing else matters. Is this blind egoism what makes a great society?
On Jul 17 08:14 AM Reactionary wrote:
> Health care is not a right, and it is not an unlimited resource that > all can enjoy to the fullest. It. Can't. Happen. Let the market > allocate resources to this, and let the chips fall where they may. > We need less government intervention in health care, not more. If > the all-glorious State wants to help, then let them get some much > needed and long overdue tort reform going. That will do more good > than anything else they can hope to accomplish. > > All these leftist crying out for other people's money in order to > grant the wishes of the "poor" always fall back on the same crap. > They cry out how wonderful lovely taxes pay for schools, the military, > roads, etc, creating the impression that every desire is of equal > merit and public interest. Those also happen to be the first items > cut when leftists need some more money to hand out to the nonproductive > who keep them in power. Liberals are running public education into > the ground. They cut the military every chance they get. An irrationally > large "stimulus" package meant largely for infrastructure has either > been handed out to cronies or left unspent until the next election > cycle to buy more votes. Don't listen to their mewling. They are > a pack of theives. > > The worst problem is that any government run health system will be > terrible. Quality of care will plummet. Rationing based on the > whims of social engineers will be the rule. Anybody claiming "better > outcomes" in Europe and Canada is either uninformed or a deliberate > liar. Those who say how inexpensive it is don't mention the fact > that you can't spend money when there is nothing to spend it on - > health care certainly is cheaper when there's no MRI or CT scanner > to pay for. Besides - what government program has EVER cost anything > close to what it was budgeted for? This will cost at least double > the estimate - count on that. They also fail to mention that virtually > every new medical device and drug (yes, including those few drugs > that actually work) are funded by US consumption. If the US goes > commie on health care, innovation will HALT, because no government > will pay for research. Price controls in those countries leaves > the development burden on the shoulders of the American public - > yet another handout to the ungrateful Eurotrash and Canadians. Further, > the smart kids will avoid medicine and go into more rewarding fields > of work. Many of us will be stuck with the dregs of the third world > "medical schools" that we now have the freedom to avoid in a free > market. > > This will not end well.
Rail Traffic, Another 'Reality' Indicator, Is Down [View article]
Thank you for the reality check. The stock market has no reality to it. The financial community cheerleaders have very little sense of reality. China is now living with Rosey Scenario. Give me something I can hold on to. Thank you.
Washington's Dilemma: This Isn't a Recession, It's a Collapse [View article]
Being born and raised in Wyoming, I'm sure there will be complaints about her citizens having to help carry California's burden. Wyomingites don't much like California anyway. But isn't that what it means to be a country? We can stop being a country, we can withdraw into our own state, into our own country, into our own town, into our own black, into our own house, into our own family, into ourselves. That's what sleep is, I think. That's also what depression is -- financial depression, and its companion, economic depression. Let's look out for #1. That leads to the dark ages.
I believe we are heading into the dark ages. I don't think it is anyone's fault really. It's a process of history: we expand in daylight; we contract in nightlight. We are contracting. We are becoming more and more provincial -- more isolated atoms in the landscape.
That is why protectionism is inevitable. It's the same process and philosophy: take care of your own.
On Jul 14 03:51 AM Steven Hansen wrote:
> i suspect you are correct that at some politically motivated point, > the federal government will step up and bail out the states. they > will want the states to work their damnest in the meantime to correct > the shortfall by as much as possible. > > why should the citizens of wyoming be on the hook because california > does not want to cut its services to save money? whatever happens, > there will be a backlash from the states who do not need help.<br/>
Unwise to Tax the Rich to Pay for Health Care [View article]
Pay by what one can afford to pay. Those who would allow their poor cousin to die because they have no money and are sick need to check to see where they have misplaced their soul. Yes, the mind can argue ANYTHING, and convince itself it is right. But the soul KNOWS what is right. All you Christians arguing with Saint Paul that those who don't work (there are millions in that category now, who don't work even though they want and need to work) should check the words of the founder of the religion, who counseled sharing and generosity, not the Stalinist disciple.
It would be an utter tragedy in Bill Gates and Warren Buffet had to pay a bit more in taxes. Yes; no question about it. At least Gates and Buffet have demonstrated that they have a soul. What about the Walmart family? They can pay more without disturbing anything in their life except a line in their accountant's spreadsheet.
On Jul 16 05:41 PM bricki wrote:
> Depends on how you define 'fair share'. Is it fair to tax the income > of somebody at a poverty level at the same rate as Bill Gates of > Warren Buffet? That's what a 'fair share' of 50% of the income paying > 50% of the taxes implies. > > We don't do that in this country, thankfully, but we do have a pretty > flat tax rate structure right now. The argument for that is that > it rewards the successful, and thereby grows the economy as a whole > benefiting all. The problem with that is that we haven't been getting > that benefit and now the economy is a mess. > > This is why there is sympathy for increasing the progressiveness > of the tax structure.
Goldman's Success: Put Down Those Pitchforks [View article]
Commentary by Jonathan Weil
July 9 (Bloomberg) -- Never let it be said that the Justice Department can’t move quickly when it gets a hot tip about an alleged crime at a Wall Street bank. It does help, though, if the party doing the complaining is the bank itself, and not merely an aggrieved customer.
Another plus is if the bank tells the feds the security of the U.S. financial markets is at stake. This brings us to the strange tale of Goldman Sachs Group Inc. and Sergey Aleynikov.
Aleynikov, 39, is the former Goldman computer programmer who was arrested on theft charges July 3 as he stepped off a flight at Liberty International Airport in Newark, New Jersey. That was two days after Goldman told the government he had stolen its secret, rapid-fire, stock- and commodities-trading software in early June during his last week as a Goldman employee. Prosecutors say Aleynikov uploaded the program code to an unidentified Web site server in Germany.
It wasn’t just Goldman that faced imminent harm if Aleynikov were to be released, Assistant U.S. Attorney Joseph Facciponti told a federal magistrate judge at his July 4 bail hearing in New York. The 34-year-old prosecutor also dropped this bombshell: “The bank has raised the possibility that there is a danger that somebody who knew how to use this program could use it to manipulate markets in unfair ways.”
How could somebody do this? The precise answer isn’t obvious -- we’re talking about a black-box trading system here. And Facciponti didn’t elaborate. You don’t need a Goldman Sachs doomsday machine to manipulate markets, of course. A false rumor expertly planted using an ordinary telephone often will do just fine. In any event, the judge rejected Facciponti’s argument that Aleynikov posed a danger to the community, and ruled he could go free on $750,000 bail. He was released July 6.
Market Manipulation
All this leaves us to wonder: Did Goldman really tell the government its high-speed, high-volume, algorithmic-trading program can be used to manipulate markets in unfair ways, as Facciponti said? And shouldn’t Goldman’s bosses be worried this revelation may cause lots of people to start hypothesizing aloud about whether Goldman itself might misuse this program?
Here’s some of what we do know. Aleynikov, a citizen of the U.S. and Russia, left his $400,000-a-year salary at Goldman for a chance to triple his pay at a start-up firm in Chicago co- founded by Misha Malyshev, a former Citadel Investment Group LLC trader. Malyshev, who oversaw high-frequency trading at Citadel, said his firm, Teza Technologies LLC, first learned about the alleged theft July 5 and suspended Aleynikov without pay.
‘Preposterous’ Charges
Aleynikov’s attorney, Sabrina Shroff, told the judge at the bail hearing that Aleynikov never intended to use the downloaded material “in any proprietary way” and that the government’s charges were “preposterous.”
Goldman isn’t commenting publicly about any of this, though it seems the bank’s bosses want us to believe there’s no need to worry. On July 6, Dow Jones Newswires quoted a “person familiar with the matter” saying this: “The theft has had no impact on our clients and no impact on our business.” Note that this person was so familiar with Goldman that he or she spoke of Goldman’s clients as “our clients” and Goldman’s business as “our business.”
By comparison, last Saturday, while most Americans were enjoying the Fourth of July holiday, Facciponti was in court warning of looming threats to Goldman and the financial markets.
“The copy in Germany is still out there,” the prosecutor said, according to an audio recording of the hearing. “And we at this time do not know who else has access to it and what’s going to happen to that software.”
Secret Software
“We believe that if the defendant is at liberty, there is a substantial danger that he will obtain access to that software and send it on to whoever may need it,” Facciponti said. “And keep in mind, this is worth millions of dollars.”
By “millions,” it’s unclear if that would be enough to match Goldman Chief Executive Lloyd Blankfein’s $70.3 million compensation package for 2007. Or perhaps millions means thousands of millions, otherwise known as billions.
Facciponti said the bank told the government that “they do not believe that any steps they can take would mitigate the danger of this program being released.” He added: “Once it is out there, anybody will be able to use this, and their market share will be adversely affected.” All Aleynikov would need to get the code from the German server is maybe 10 minutes with a cell phone and an Internet connection, Facciponti said.
Judge’s Ruling
The hole in Facciponti’s argument was that the government offered no evidence that Aleynikov had tried to disseminate the software during the month prior to his arrest, after he downloaded it and had left his job at Goldman. That’s the main reason the judge, Kevin N. Fox, cited in ruling Aleynikov could be released on bail.
“We don’t deal with speculation when we come to court,” Fox said. “We deal with facts.”
Meantime, it would be nice to see someone at Goldman go on the record to explain what’s stopping the world’s most powerful investment bank from using its trading program in unfair ways, too. Oh yes, and could the bank be a bit more careful about safeguarding its trading programs from now on? Hopefully the government is asking the same questions already.
(Jonathan Weil is a Bloomberg News columnist. The opinions expressed are his own.)
To contact the writer of this column: Jonathan Weil in New York at jweil6@bloomberg.net
Bank Earnings: Revenues Falling, Losses Rising [View article]
"...For the last decade most of the “growth” in the U.S. economy has been nothing more than under-reported inflation..." And that's why deflation becomes necessary.
Jon Stewart Takes on Goldman Sachs [Video] [View article]
Jon Stewart Takes on Goldman Sachs [Video] [View article]
www.newsmeat.com/ceo_p...
Unwise to Tax the Rich to Pay for Health Care [View article]
We are heading in to a major global depression (death of the world) because we’ve idealized an imbalance between individual freedoms to exploit economic opportunities and societal limits on criminal selfishness and corporate law-breaking. This imbalance seems destined to flow into an opposite imbalance, that of too much social restraint on individual enterprise. That seems to be how history works.
If you have an interest in my development of these themes, you can look at a draft of the book I’m writing “Turn Out the Lights’ at the web address below which looks at the metaphysical causes of economic/social cycles. The view of this book is that history manifests in day and nights; days represent an expansion of debt/credit and of rational energy, enterprise, creation, negentropy (higher levels of organization); nights represent a contraction of debt/credit, deflation, entropy (higher levels of disorganized energy) and the replacement of individual dreams with group destiny.
www.hoalantrangallery....
I also agree that the great society does favor individual freedoms. But, in terms of health care, which we are discussing, we also have a situation today wherein bubbles have driven up prices of health-care to a point that families can't afford to get sick, even if they have insurance; and businesses can no longer afford health insurance as a benefit for employees because the insurance cartel (insurance companies, doctors, pharmaceutical companies) – and their adversaries, the malpractice lawyer cartel, a factor but a less significant factor-- have pumped up the price of medical services so that they are no longer sustainable, and must collapse.
George Will, hardly a communist, wrote about this same thing, saying that one of the main reasons GM went bankrupt was because of rising medical costs guaranteed to workers. Japanese companies are at an advantage because their government provides universal healthcare for its citizens and the businesses don't have to deal with it. Will writes:
--GM says health expenditures -- $1,525 per car produced; there is more health care than steel in a GM vehicle's price tag -- are one of the main reasons it lost $1.1 billion in the first quarter of 2005. Ford's profits fell 38 percent, and although Ford had forecast 2005 profits of $1.4 billion to $1.7 billion, it now probably will have a year's loss of $100 million to $200 million. All this while Toyota's sales are up 23 percent this year and Americans are buying cars and light trucks at a rate that would produce 2005 sales almost equal to the record of 17.4 million in 2000.
In 1962 half the cars sold in America were made by GM. Now its market share is roughly 25 percent. In 1999 the Big Three -- GM, Ford, Chrysler -- had a 71 percent market share. Their share is now 58 percent and falling. Twenty-three percent of those working for auto companies in North America now work for companies other than the Big Three, up from 14.6 percent just five years ago.
The Big Three have cut 130,394 North American hourly and salaried workers since 2000, while the "transplants" -- foreign automakers with American assembly plants -- have added 27,183. In the first quarter of 2005 the Big Three operated 64 assembly plants, down from 70 in five years, during which time the transplants' factories have increased from 19 to 23, with more coming.
GM says its health care burdens, negotiated with the United Auto Workers, put it at a $5 billion disadvantage against Toyota in the United States, because Japan's government, not Japanese employers, provides almost all health care in Japan. This reasoning could produce a push by much of corporate America for the federal government to assume more health care costs. This would be done in the name of "leveling the playing field" to produce competitive "fairness." --
Universal health-care would not be such a big issue to me IF the medical cartel had not inflated their costs to the point of making their services unaffordable and even crippling for the society and for American business. Health.com reports that about 60% of American bankruptcies are caused by medical emergencies:
-- (Health.com) — This year, an estimated 1.5 million Americans will declare bankruptcy. Many people may chalk up that misfortune to overspending or a lavish lifestyle, but a new study suggests that more than 60% of people who go bankrupt are actually capsized by medical bills. Bankruptcies due to medical bills increased by nearly 50% in a six-year period, from 46% in 2001 to 62% in 2007, and most of those who filed for bankruptcy were middle-class, well-educated homeowners, according to a report that will be published in the August issue of The American Journal of Medicine.
“Unless you’re a Warren Buffett or Bill Gates, you’re one illness away from financial ruin in this country,” says lead author Steffie Woolhandler, MD, of the Harvard Medical School, in Cambridge, Mass. “If an illness is long enough and expensive enough, private insurance offers very little protection against medical bankruptcy, and that’s the major finding in our study.” --
In no other developed country in the world does this happen, in the name of the 'free market system'. My argument is that it is foolish to allow the 'free market' ideology to allow the medical cartel to inflate healthcare prices so that they bankrupt the society, American business, and enrich only insurance companies, doctors and drug companies. Healthcare has long been a knee-jerk republican issue, like abortion, gun-ownership, school-prayer…as if continuation of the American dream was dependent upon the enrichment of doctors and insurance companies at the expense of everyone else.
Dave Schuler writes about inflation in the health-care sector:
-- From 1965 to 1981 national expenditures on health care more than doubled from $201 billion to $507 billion in real 2009 dollars. Most of the increase in costs in healthcare can be explained by three factors: increased utilization, particularly immediately after the enactment of Medicare and Medicaid during the period 1965-1972, higher prices, particularly during the period 1972-1981, and inflation. Most of the increases after 1981 can be explained by inflation alone.
In the period 1965-1972 use increases accounted for 45.8% of the increase in healthcare spending and price increases accounted for 45%. In the period 1965-1972 57.5% of the increase in spending for physician services can be accounted for by price increases and 32.2% accounted for by increased utilization.
Hospital expenses and physician services account for the majority of healthcare costs and both of those are other words for people’s incomes. Rent, insurance, equipment, and so on are a pittance by comparison with wages as components of both of those.
Here’s my alternative explanation for what has happened to healthcare costs. In the immediate aftermath of the enactment of Medicare and Medicaid in 1966 there was an increased utilization of healthcare. That is what was supposed to happen: old people and poor people were supposed to get more healthcare. In a fee for services environment, the model that prevailed at the time and still has considerable force, that means that physicians and hospitals made significantly more money. Their incomes increased. When utilization levelled off (as should also have been expected) they continued to increase their incomes by raising prices. They had become accustomed to increasing incomes.
In the late 1970’s and early 1980’s the increasing healthcare expenditures capturing of such a quickly rising proportion of the federal budget finally caught the attention of the Congress and a number of steps were taken to slow the increase. But the harm had mostly been done. A high cost basis had been built into healthcare, healthcare was a major component of total GDP, and inflation alone (of which rising healthcare costs are one of the largest components) was enough for healthcare costs to grow unsustainably.
I am not blaming healthcare providers for acting this way. I believe it was a natural human response and they responded as anyone else would have under the circumstances.
However, it means that simple cost control won’t achieve what we need to accomplish. The primary components of healthcare costs are hospital costs and physician services which comprise the majority of costs, insurance administrative costs which comprise something like 30% of costs, pharmaceutical costs which comprise something like 10% of costs, and other factors which comprise very small proportions of the whole. All of these costs are other words for wages, somebody’s income. Healthcare costs are high because wages in the sector are high. --
I would much rather have the forces of deflation drive down the price of healthcare to a point that hard-working Americans can again afford to get sick and recover without being bankrupted. Now they can’t. I do believe that the deflation we’ve entered (the night-cycle) WILL eventually save us from inflated salaries and pricing in health-care. Until this happens, we need a combination of actions, including taxes on the rich, and government-sponsored health-care system. If our founding fathers were alive today, I have no doubt they would not support a system that rewards very few and impoverishes so many. The Founding Fathers may have called the Bill of Rights to be God-given...the right to free speech was clearly 'man-given' as an interpretation of values they assumed an all-just divine being would expect of man. In my mind the right to affordable medical treatment is also a right an all-just divine being would expect a great society to provide.
The Day-Cycle inflates the bubbles; the Night-Cycle deflates the bubbles. The Day-Cycle favors the Rich; the Night-Cycle favors the Poor.
I am not a perennial socialist. I believe we need less socialism and more individual risk and entrepreneurialism during the energy-expansion Day-Cycles and more socialism during the deflationary bubble-popping Night Cycles when group survival becomes much more difficult and the cost of this difficult must be shared more abundantly by those who benefited the most during the less-regulated Day-Cycle of bubble inflation.
The great society helps those in need especially during a time of crisis. A great society develops its soul -- as well as business acumen, military skills, scientific genius, practical expertise. The great society generates the Donald Trumps and the Bill Gates – but also the Albert Einsteins, the Johannes Bachs, the William Shakespeares….entrepre... are only part of the picture.
On Jul 17 04:22 PM Keltorttruth wrote:
> Quite simply, I can not disagree with you more. The incentive of
> individual properity creates the drive to produce at the most efficient
> and effective possible levels if it is understood that others have
> the same right to the same freedoms by following the same set of
> unchanging rules - fair competition drives innovation. When one
> introduces a government competitor who plays by a completely different
> set of rules which are highly slanted in the government's favor,
> that drives individuals away from taking risk and investing in their
> beliefs.
>
> In my opinion, a great society is one where the individual, to as
> large an extent as possible, determines his/her own outcome. This
> leads to people taking risks on ideas/products/franchi... - basically
> anything entreprenuerial. When these ideas work, they often lead
> to mass hirings of those who may not have the ideas or the capital
> to pursue their ideas but who can help implement the ideas. The
> pursuit of individual betterment has the side effect of dragging
> others up along with it b/c they can compensate others when their
> ideas work.
>
> Everyone working for the benefit of everyone only ensures that very
> little potential job-creating, real productivity increasing capital
> risking will take place. If I'm only allowed to earn the same as
> the guy next to me, why on earth would I put one extra ounce of effort
> into my job? Why would I even think about taking any sort of risk
> with my capital? You propose a very slippery slope. Maybe you think
> 55% of one's income is not too much; maybe the next guy thinks 65%
> is not too much (and maybe even you after you've had time to grow
> comfortable with the previous level) and on and on it goes. Where
> does it stop and who decides? The point is that the guiding principle
> you seem to believe in rings of pure communism which you seem to
> imply is a the hallmark of a "great society" - sounds like Utopia
> to me. My guiding principle, and the guiding principle our forefathers
> used to take a dramatic risk in breaking away from the Brits and
> their "confiscatory" 12.5% tax rate is the right of the individual
> to pursue life, liberty and the pursuit of happiness. They went
> as far as to call these rights God given, not government given as
> you would suggest.
>
> There are plenty of places in this world for your ideaology, I just
> don't want America to transform into one of them.
>
> On Jul 17 02:10 PM Michael Clark wrote:
Did We Nationalize Banks, Or Did They Nationalize Us? [View article]
The Dark Side of Chinese Manufacturing [View instapost]
Jon Stewart Takes on Goldman Sachs [Video] [View article]
On Jul 17 09:39 AM Ferdinand E. Banks wrote:
> So guttermouth Jon Stewart in in the economics business now, is he.
> Hmm. I wonder if the American people will ever be able to figure
> out that it's Jon Stewart and his trashy ilk that stand in the way
> of making the US what it was or should be.
Housing Bubble, The Sequel [View article]
On Jul 15 10:38 AM conceptwizard wrote:
> Goldman makes money every time all the time because they control
> the direction of the market. This is becoming more common knowledge,
> just recently an employee of theirs that left stole software that
> GS accused him through the FBI of quote "being able to control the
> markets" through high speed trading. They of course did not want
> this technology to fall into the wrong hands, of course feel that
> theirs are the right hands. Nothing was said otherwise, and GS are
> not under investigation.
> Their oil trading floor is another proof in the pudding with their
> ability just by sheer volume to sway the market price on oil. In
> my mind they cannot lose, and this is not BS it is criminal. Because
> in the markets someone has to win and someone has to lose. So if
> they win all the time then of course we lose.
>
> On the housing issue, it is common place now to expect the Obama
> will do what is in the ultimate best interests of the banks. The
> banks in this scenario keep the upside of the investment, and now
> have switched the liability issues into revenues streams. That is
> why the Treasury department has called the top 25 mortgage firms
> to the meeting table. Obama's plan will make us beholden to the Financial
> Warlords in everyway, we will be debt ridden, renters with no jobs
> and low incomes, with weekly hours down to 33 per week and average
> wages dropping. America is about to change into a serfdom.
Seven Notes on the China Wildcard [View article]
Unwise to Tax the Rich to Pay for Health Care [View article]
Where is it stated that the ownership of slaves is no longer a right? Where is it stated that women have the right to vote? Whre is is stated that black Americans have the same rights as white Americans?
In the legislation passed by the congress and signed in to law by the President of the U.S. That is how our democracy works. Rights are granted by law -- the will of the people .
ALL our rights come from the mutual consent of the democratic process. (Sometimes you support these rights; and sometimes you don't.) But that is how 'rights' are granted -- they are not handed down from God -- or from some other providential source. When Ron Paul is saying health care is not a right -- he is just stating his opinion.
The government has a right to draft the poor boys and girls into the military who fight our wars for freedom and the spread of democracy and the triumph of capitalism and old money families. But the government doesn't have a right to provide these same poor people with reasonably priced health care? I think this is the crux of the argument. If the rich want the poor to fight and die so that they can keep their money -- and expand their system of capitalism in the world -- then they have to give something back. If not, let Paulson's children, and Greenspan's children, and Bernanke's children, and Bush's children fight the next war, without the help of those families they feel are disposable.
On Jul 17 11:05 AM Erik B. wrote:
> @LeoTheDog
>
> Where is it stated that health care is a right of citizenship in
> America?
>
> "As Senator and doctor Mr. Ron Paul so pleasantly reminds us the,
> "constitution only guarantees citizens 'life, liberty and (the right
> to) keep the fruits of my labor.'"
>
> Anyone who is following this debate should watch this interview with
> Senator Paul:
>
> finance.yahoo.com/tech...
>
> Yeah, and your honorable Senator, like the rest of them, are happy
> to collect their lifetime health care benefits while at the same
> time chirping about it not being a right for the average citizen.
> A very untenable position I believe.
Unwise to Tax the Rich to Pay for Health Care [View article]
You say health-care is not a right. I say it is. The right to bear arms is not God-given -- it's given by men in society. The right of free speech is not God-given -- it's given by men in society. The right to vote is also not God-given -- it's given by men in society. ALL of our rights are given by our fellow-men (ancestors, in this case) since public opinion decided these 'rights' were important for a great society. How do we define a 'great society' -- I'm assuming you would like to live in a great society, and have history judge America as being a great society. Sink or swim? Dog-eat-dog? Are these the values of a great society? Do we care about our neighbors, or only about ourselves? Can America really become a great society with the philosophy that 'its every man for himself and God against all'? Do you think we MUST have prisons full, murder, rape, and robbery a contagion? Does a great society value only the accumulation of money by individuals? Are there other values that would help develop our sense of humanity. My parents generation knew their neighbors and cared about them. This all changed in my generation. Me-me-me: nothing else matters. Is this blind egoism what makes a great society?
On Jul 17 08:14 AM Reactionary wrote:
> Health care is not a right, and it is not an unlimited resource that
> all can enjoy to the fullest. It. Can't. Happen. Let the market
> allocate resources to this, and let the chips fall where they may.
> We need less government intervention in health care, not more. If
> the all-glorious State wants to help, then let them get some much
> needed and long overdue tort reform going. That will do more good
> than anything else they can hope to accomplish.
>
> All these leftist crying out for other people's money in order to
> grant the wishes of the "poor" always fall back on the same crap.
> They cry out how wonderful lovely taxes pay for schools, the military,
> roads, etc, creating the impression that every desire is of equal
> merit and public interest. Those also happen to be the first items
> cut when leftists need some more money to hand out to the nonproductive
> who keep them in power. Liberals are running public education into
> the ground. They cut the military every chance they get. An irrationally
> large "stimulus" package meant largely for infrastructure has either
> been handed out to cronies or left unspent until the next election
> cycle to buy more votes. Don't listen to their mewling. They are
> a pack of theives.
>
> The worst problem is that any government run health system will be
> terrible. Quality of care will plummet. Rationing based on the
> whims of social engineers will be the rule. Anybody claiming "better
> outcomes" in Europe and Canada is either uninformed or a deliberate
> liar. Those who say how inexpensive it is don't mention the fact
> that you can't spend money when there is nothing to spend it on -
> health care certainly is cheaper when there's no MRI or CT scanner
> to pay for. Besides - what government program has EVER cost anything
> close to what it was budgeted for? This will cost at least double
> the estimate - count on that. They also fail to mention that virtually
> every new medical device and drug (yes, including those few drugs
> that actually work) are funded by US consumption. If the US goes
> commie on health care, innovation will HALT, because no government
> will pay for research. Price controls in those countries leaves
> the development burden on the shoulders of the American public -
> yet another handout to the ungrateful Eurotrash and Canadians. Further,
> the smart kids will avoid medicine and go into more rewarding fields
> of work. Many of us will be stuck with the dregs of the third world
> "medical schools" that we now have the freedom to avoid in a free
> market.
>
> This will not end well.
Rail Traffic, Another 'Reality' Indicator, Is Down [View article]
Washington's Dilemma: This Isn't a Recession, It's a Collapse [View article]
I believe we are heading into the dark ages. I don't think it is anyone's fault really. It's a process of history: we expand in daylight; we contract in nightlight. We are contracting. We are becoming more and more provincial -- more isolated atoms in the landscape.
That is why protectionism is inevitable. It's the same process and philosophy: take care of your own.
On Jul 14 03:51 AM Steven Hansen wrote:
> i suspect you are correct that at some politically motivated point,
> the federal government will step up and bail out the states. they
> will want the states to work their damnest in the meantime to correct
> the shortfall by as much as possible.
>
> why should the citizens of wyoming be on the hook because california
> does not want to cut its services to save money? whatever happens,
> there will be a backlash from the states who do not need help.<br/>
Unwise to Tax the Rich to Pay for Health Care [View article]
It would be an utter tragedy in Bill Gates and Warren Buffet had to pay a bit more in taxes. Yes; no question about it. At least Gates and Buffet have demonstrated that they have a soul. What about the Walmart family? They can pay more without disturbing anything in their life except a line in their accountant's spreadsheet.
On Jul 16 05:41 PM bricki wrote:
> Depends on how you define 'fair share'. Is it fair to tax the income
> of somebody at a poverty level at the same rate as Bill Gates of
> Warren Buffet? That's what a 'fair share' of 50% of the income paying
> 50% of the taxes implies.
>
> We don't do that in this country, thankfully, but we do have a pretty
> flat tax rate structure right now. The argument for that is that
> it rewards the successful, and thereby grows the economy as a whole
> benefiting all. The problem with that is that we haven't been getting
> that benefit and now the economy is a mess.
>
> This is why there is sympathy for increasing the progressiveness
> of the tax structure.