It is becoming increasingly clear that something needs to be done about the US Senate's "rule" which requires the consent of at least 60 senators to get just about any piece of legislation through. The filibuster (literally: "talking out a bill") does not appear in the constitution. Instead, it is a self-imposed decree which dates back to the founding fathers.
First, some background. As part of the Great Compromise at the Constitutional Convention, the House of Representatives was made to be the popular body representing the will of the people, while the Senate would protect small states and minority views. For more than a century, this meant that every senator had an unlimited right to speak, and ending debate to conduct a vote required approval of every member. Then, in 1917, President Woodrow Wilson wanted to get around a few senators filibustering his efforts to get America ready for World War I, so his supporters in the Senate adopted Rule 22, which allowed for an end to filibuster if two-thirds of the Senate members present agreed. Known as the “cloture rule,” it was changed in 1975 to allow three-fifths of the Senate to end filibuster. Thus we arrive at the magic number: 60.
For most of the country’s history, filibusters were few and far between. When they did occur, though, it was quite a spectacle. Senators from the filibustering party would stand up and talk for hours, even days on end, about completely irrelevant topics. They would tell tales from their childhood and read from the dictionary, just to kill time until the other party gave up or the session came to an end.
In recent times, however, the mere threat of a filibuster has become as powerful as a filibuster itself. So nowadays, instead of needing a group of determined senators to hold the floor by rambling for days, certainly not an easy task, all the opposition needs is 41 members on its side.
To be sure, some kind of check is needed against majority tyranny, and that is what the filibuster does in theory. But in modern practice, it has essentially given the minority veto power: all they need to do to kill any measure is disagree with it. And since Democrats retook control of Congress in 2006, Republicans have used the threat of filibuster far more than at any other time in history. It has become a part of the standard operating procedure. Aptly named the "party of no," the GOP has done everything in its power to delay and obstruct any kind of major legislative progress. The filibuster has become a serious threat facing effective governance.
Case in point: Last week, Republican Senator Richard Shelby of Alabama placed a unilateral "blanket hold" on seventy of President Obama's nominees for various positions in the federal government. He is blocking these qualified individuals, some of whom would work at vital national security posts at the Department of Defense, until he is sure that his home state of Alabama will get a lucrative $40 billion contract to build new aerial refueling tankers for the Air Force. And he wouldn't mind getting construction started in Huntsville on the FBI explosives lab he earmarked $45 million for back in 2007. Under the current filibuster rules, a supermajority of, you guessed it, sixty votes is required to lift the hold on each individual nominee, a tedious task to say the least. If something like this happened anywhere else outside the government, it would be called extortion.
Up until last week, the Democrats did have exactly sixty votes in the Senate. Why, then, couldn't they get anything done? Because it was difficult to get all sixty to agree on any one thing. There are variations along the left end of the political spectrum, after all. That was the issue when trying to pass health care reform: a handful of conservative Democratic senators had tremendous negotiating power and were able to delay voting until they got exactly what they wanted.
One thing the Republicans were quick to do recently was the swearing in of Scott Brown, their newly elected senator from Massachusetts, and the 41st member of their caucus. Thus, the count in the Senate is now 59-41, and there is even less chance of making progress.
So what can be done about it? Why hasn't there been a populist backlash against this clearly unreasonable legislative rule? For starters, the public needs to be informed. The latest study from the Pew Research Center found that only 26% of Americans know that it takes 60 votes to break a filibuster. If enough people demand action from their Senators, it is possible that the "rule" could be changed via a simple majority vote on the first day of the next session. It could also be changed through legislation now, but such a bill would, most likely, itself be filibustered.
A Dangerous Deal
Comcast, the nation's largest cable company, announced last week that it had reached an agreement to purchase a majority stake in NBC Universal from General Electric. The deal values NBC at $30 billion and creates a joint-venture media behemoth that is bad for consumers.
Under the terms of the agreement, Comcast will control not only the NBC broadcast network, which is currently fourth place in ratings amidst a deteriorating broadcast TV market, but more importantly it will have NBC's lucrative cable operations under its belt as well. These include CNBC, MSNBC, USA, Bravo, and SyFy, among others. (Broadcast networks are suffering from steep advertising losses, their only source of income, while cable networks make money from both advertising and the monthly subscription fee cable companies charge households).
The extent to which this consolidation will reduce competition is unimaginable. Comcast will own both sides of the court: content creation as well as content distribution. And it will be in a position where exercising anti-competitive actions greatly helps the bottom line.
It could begin charging competing cable companies more to distribute NBC shows, a cost that will likely be passed on to the public. Comcast's sports channel, Versus, would gain all of NBC's programming, including rights to NFL games and the 2012 Olympics, and could easily ruin ESPN by denying SportsCenter replay privileges to those events.
Then there's the matter of Hulu.
Hulu.com, a site that offers advertising-supported streaming of TV shows and movies, is partly owned by NBC Universal. There have been talks that Hulu will start charging for content soon, and under Comcast that is even more likely.
Comcast also provides internet and telephone service to millions of people, and thus the deal is a major setback for net neutrality (the principle that the Internet should remain free and open, and that content on the web should not be discriminated by internet service providers). Last year, Comcast was found guilty of deep-packet inspection, or closely monitoring users' online activities, and then selectively throttling down connections from services it didn't like, such as peer-to-peer file sharing. The story went like this: if Comcast provides cable television and internet to customers (and charges for both), why should they allow people to use the internet service to obtain television shows online? Comcast wants everyone to buy the television content from them, not get it from file-sharing sites. Now, with all of NBC's shows behind them, Comcast has even more incentive to restrict this access. The same logic applies to telephone service--let's just say that Comcast is not particularly fond of Skype.
It is important to note here that this merger is still subject to regulatory approval from the Federal Communications Commission, which will hopefully see the potentially harmful implications of this deal and move to prevent it from completing.
Image Credit: FreePress
Under the terms of the agreement, Comcast will control not only the NBC broadcast network, which is currently fourth place in ratings amidst a deteriorating broadcast TV market, but more importantly it will have NBC's lucrative cable operations under its belt as well. These include CNBC, MSNBC, USA, Bravo, and SyFy, among others. (Broadcast networks are suffering from steep advertising losses, their only source of income, while cable networks make money from both advertising and the monthly subscription fee cable companies charge households).
The extent to which this consolidation will reduce competition is unimaginable. Comcast will own both sides of the court: content creation as well as content distribution. And it will be in a position where exercising anti-competitive actions greatly helps the bottom line.
It could begin charging competing cable companies more to distribute NBC shows, a cost that will likely be passed on to the public. Comcast's sports channel, Versus, would gain all of NBC's programming, including rights to NFL games and the 2012 Olympics, and could easily ruin ESPN by denying SportsCenter replay privileges to those events.
Then there's the matter of Hulu.
Hulu.com, a site that offers advertising-supported streaming of TV shows and movies, is partly owned by NBC Universal. There have been talks that Hulu will start charging for content soon, and under Comcast that is even more likely.
Comcast also provides internet and telephone service to millions of people, and thus the deal is a major setback for net neutrality (the principle that the Internet should remain free and open, and that content on the web should not be discriminated by internet service providers). Last year, Comcast was found guilty of deep-packet inspection, or closely monitoring users' online activities, and then selectively throttling down connections from services it didn't like, such as peer-to-peer file sharing. The story went like this: if Comcast provides cable television and internet to customers (and charges for both), why should they allow people to use the internet service to obtain television shows online? Comcast wants everyone to buy the television content from them, not get it from file-sharing sites. Now, with all of NBC's shows behind them, Comcast has even more incentive to restrict this access. The same logic applies to telephone service--let's just say that Comcast is not particularly fond of Skype.
It is important to note here that this merger is still subject to regulatory approval from the Federal Communications Commission, which will hopefully see the potentially harmful implications of this deal and move to prevent it from completing.
Image Credit: FreePress
Creative Accounting
Citigroup, Bank of America, JP Morgan Chase, and Goldman Sachs all reported their first quarter results over the last several days and wowed analysts with better-than-expected numbers. Yippee! The banks are making money again, let's have a party! Not so fast... There was some sleight-of-hand in the earnings reports these banks released--let's just say they were a little sugar-coated.
Citigroup and JP Morgan took advantage of an accounting rule ("trick" is a better word to describe it) that allowed them to record a decline in the value of their debt as a profit. It sounds counter-intuitive, and it is, but it works like this: imagine that Citi has debt (bonds, which are essentially IOU's) that was once worth 100 cents on the dollar (full face value) but it is now trading at only 70 cents on the dollar due to the turmoil and uncertainty in the banking sector. When it comes time to report earnings, Citi can record that 30 cent difference between the face value of the debt and what it is trading at today as a profit, because, theoretically, they could buy back their own debt and retire it. Confusing, isn't it? But it allows Citi turn a $900 million loss into a $1.6 billion gain.
What happened with Goldman Sachs is even more remarkable. Goldman changed its reporting calendar from a fiscal year (which ended in November for them) to a calendar year (which begins in January). Thus, the entire month of December simply disappeared from their books, along with the $1.3 billion loss they incurred in that month--this allowed them to report a larger than anticipated $1.8 billion profit. To be fair to Goldman, I should mention that they were required to change to a calendar year because they became a bank holding company, but that doesn't mean that they didn't "conveniently" shift losses into December in order to look better.
Another thing that bolstered earnings was the fact that mark-to-market rules, which require banks to periodically revalue their assets based on what they are worth in the current market (hence "marking" to market), were substantially eased. Before, banks posted huge losses because they had to "write-down" the value of their real estate assets (e.g. mortgage-backed securities) as the housing market declined. This exacerbated the problem because banks were taking "artificial" losses that hadn't yet, and might not, occur. But investors pulled back anyway and the market continued to decline. The revised rules allow banks to mark their assets to levels they would be at in a more stable market.
It is clear that banks are doing everything they can to eek out a profit on paper as they try to regain that most precious of commodities: investor confidence. So these apparently "wonderful" reports need to be taken with a grain (or maybe a pound) of salt.
Citigroup and JP Morgan took advantage of an accounting rule ("trick" is a better word to describe it) that allowed them to record a decline in the value of their debt as a profit. It sounds counter-intuitive, and it is, but it works like this: imagine that Citi has debt (bonds, which are essentially IOU's) that was once worth 100 cents on the dollar (full face value) but it is now trading at only 70 cents on the dollar due to the turmoil and uncertainty in the banking sector. When it comes time to report earnings, Citi can record that 30 cent difference between the face value of the debt and what it is trading at today as a profit, because, theoretically, they could buy back their own debt and retire it. Confusing, isn't it? But it allows Citi turn a $900 million loss into a $1.6 billion gain.
What happened with Goldman Sachs is even more remarkable. Goldman changed its reporting calendar from a fiscal year (which ended in November for them) to a calendar year (which begins in January). Thus, the entire month of December simply disappeared from their books, along with the $1.3 billion loss they incurred in that month--this allowed them to report a larger than anticipated $1.8 billion profit. To be fair to Goldman, I should mention that they were required to change to a calendar year because they became a bank holding company, but that doesn't mean that they didn't "conveniently" shift losses into December in order to look better.
Another thing that bolstered earnings was the fact that mark-to-market rules, which require banks to periodically revalue their assets based on what they are worth in the current market (hence "marking" to market), were substantially eased. Before, banks posted huge losses because they had to "write-down" the value of their real estate assets (e.g. mortgage-backed securities) as the housing market declined. This exacerbated the problem because banks were taking "artificial" losses that hadn't yet, and might not, occur. But investors pulled back anyway and the market continued to decline. The revised rules allow banks to mark their assets to levels they would be at in a more stable market.
It is clear that banks are doing everything they can to eek out a profit on paper as they try to regain that most precious of commodities: investor confidence. So these apparently "wonderful" reports need to be taken with a grain (or maybe a pound) of salt.
What's in a Handshake? Not Much
At the Summit of the Americas in Trinidad today, President Obama was photographed shaking the hand of Venezuela's anti-American dictator, Hugo Chavez. He was smiling too! As you can imagine, the gesture set off heated debate.
US-Venezuelan relations have been tense for several years. Venezuela is an OPEC member and the fourth largest oil supplier to the United States (the Citgo gas station chain is Venezuelan). However, Chavez has criticized American trade and foreign policies, and he called George Bush the "devil," remarking that he could smell the "sulfur" at a podium where Bush had spoken the day before... Crime and corruption are rampant in Venezuela, and its economy is failing due to plummeting oil prices.
Former Vice President Dick Cheney criticized Obama's handshake, saying it portrayed Obama as "weak" and that it "set the wrong standard." Former House Speaker Newt Gingrich said that it bolstered "enemies of America."
The handshake has been blown way out of proportion--Obama was just being friendly and the gesture was, if anything, a new beginning in US-Venezuelan relations. "It's unlikely that as a consequence of me shaking hands or having a polite conversation with Mr. Chavez that we are endangering the strategic interests of the United States," the president said. I agree, it's really not a big deal, the media has just made it into one.
US-Venezuelan relations have been tense for several years. Venezuela is an OPEC member and the fourth largest oil supplier to the United States (the Citgo gas station chain is Venezuelan). However, Chavez has criticized American trade and foreign policies, and he called George Bush the "devil," remarking that he could smell the "sulfur" at a podium where Bush had spoken the day before... Crime and corruption are rampant in Venezuela, and its economy is failing due to plummeting oil prices.
Former Vice President Dick Cheney criticized Obama's handshake, saying it portrayed Obama as "weak" and that it "set the wrong standard." Former House Speaker Newt Gingrich said that it bolstered "enemies of America."
The handshake has been blown way out of proportion--Obama was just being friendly and the gesture was, if anything, a new beginning in US-Venezuelan relations. "It's unlikely that as a consequence of me shaking hands or having a polite conversation with Mr. Chavez that we are endangering the strategic interests of the United States," the president said. I agree, it's really not a big deal, the media has just made it into one.
The Scourge of Piracy
In the 21st century we live in a world of airplanes and hybrid cars, wireless internet and LCD screens. Yet piracy, something that plagued the Romans, is making headlines.
Piracy in Somalia has been on the rise in recent months. More than 60 ships have been attacked this year alone and hundreds of millions have been paid in ransom. In Somalia, a failed state with a failed economy, piracy represents a pretty good business model: take a couple of your friends and some AK-47's aboard a small fishing boat, row up to a cargo ship and fire a few shots, climb aboard (the crew is unarmed), take hostages and start negotiating a ransom. Most shipping companies will happily drop $3 million in cash via parachute to get back a ship with $100+ million of cargo on it. It's only logical. After picking up the money you row back to shore, divide it up, have a party, rinse, and repeat. The only thing you have to make sure of is avoiding American ships, because, you know, we don't negotiate with terrorists...
A group of four criminals forgot that last part and seized the Maersk Alabama, a US-flagged container ship. The ship's crew of 20 Americans was initially taken hostage, but they soon overpowered their captors. The Maersk's courageous captain then surrendered himself in exchange for his crew's safety and the pirates boarded a lifeboat with their hostage. Thus began an intense five day standoff in the Indian Ocean.
The pirates tried to hook up with a larger "pirate mothership" but that plan was thwarted when the US Navy, the world's most powerful, sent a couple of guided-missile destroyers and frigates into the area. On the third day Phillips attempted to escape but was recaptured. Finally, on Sunday, after an on-site Commander determined that Phillips' life was in "imminent danger" (the pirates had opened a latch on the covered lifeboat and had a gun leveled at him), US Navy SEAL snipers opened fire and with three remarkable shots killed the three pirates in the lifeboat (the fourth had previously been injured and surrendered).
So this time things ended without an innocent person's death, but not all standoffs have had similar results. A French military operation backfired recently when a hostage was killed as commandos attempted to storm a yacht hijacked by Somali pirates. It is becoming increasingly clear that something must be done about the scourge of piracy.
The sixty-something ships that were hijacked last year represent less than one-half of one percent of the 20,000 that pass through the area annually (the Gulf of Aden, which links the Suez Canal and the Red Sea to the Indian Ocean, is the shortest route from Asia to Europe and one of the world's busiest shipping lanes). So as a whole, ships are pretty safe. But more than 80 ships have been attacked so far this year alone and piracy is growing exponentially. A multinational task force of military ships have been patrolling the area, but at 1 million square miles it is near-impossible to cover all of it. Another solution, since we can't win at sea, would be to take the fight onto land. If the Somalian economy can be revived, would-be pirates would have less of an incentive to risk their lives to make money. Also, military convoys could be used for larger, slower ships that are more at risk of being attacked. Another possible answer has been arming the crews of these cargo ships, but that would present safety issues (oil tanker + spark from a gun = bad situation) as well as insurance problems and may lead to a more violent arms race between crews and pirates.
Piracy in Somalia has been on the rise in recent months. More than 60 ships have been attacked this year alone and hundreds of millions have been paid in ransom. In Somalia, a failed state with a failed economy, piracy represents a pretty good business model: take a couple of your friends and some AK-47's aboard a small fishing boat, row up to a cargo ship and fire a few shots, climb aboard (the crew is unarmed), take hostages and start negotiating a ransom. Most shipping companies will happily drop $3 million in cash via parachute to get back a ship with $100+ million of cargo on it. It's only logical. After picking up the money you row back to shore, divide it up, have a party, rinse, and repeat. The only thing you have to make sure of is avoiding American ships, because, you know, we don't negotiate with terrorists...
A group of four criminals forgot that last part and seized the Maersk Alabama, a US-flagged container ship. The ship's crew of 20 Americans was initially taken hostage, but they soon overpowered their captors. The Maersk's courageous captain then surrendered himself in exchange for his crew's safety and the pirates boarded a lifeboat with their hostage. Thus began an intense five day standoff in the Indian Ocean.
The pirates tried to hook up with a larger "pirate mothership" but that plan was thwarted when the US Navy, the world's most powerful, sent a couple of guided-missile destroyers and frigates into the area. On the third day Phillips attempted to escape but was recaptured. Finally, on Sunday, after an on-site Commander determined that Phillips' life was in "imminent danger" (the pirates had opened a latch on the covered lifeboat and had a gun leveled at him), US Navy SEAL snipers opened fire and with three remarkable shots killed the three pirates in the lifeboat (the fourth had previously been injured and surrendered).
So this time things ended without an innocent person's death, but not all standoffs have had similar results. A French military operation backfired recently when a hostage was killed as commandos attempted to storm a yacht hijacked by Somali pirates. It is becoming increasingly clear that something must be done about the scourge of piracy.
The sixty-something ships that were hijacked last year represent less than one-half of one percent of the 20,000 that pass through the area annually (the Gulf of Aden, which links the Suez Canal and the Red Sea to the Indian Ocean, is the shortest route from Asia to Europe and one of the world's busiest shipping lanes). So as a whole, ships are pretty safe. But more than 80 ships have been attacked so far this year alone and piracy is growing exponentially. A multinational task force of military ships have been patrolling the area, but at 1 million square miles it is near-impossible to cover all of it. Another solution, since we can't win at sea, would be to take the fight onto land. If the Somalian economy can be revived, would-be pirates would have less of an incentive to risk their lives to make money. Also, military convoys could be used for larger, slower ships that are more at risk of being attacked. Another possible answer has been arming the crews of these cargo ships, but that would present safety issues (oil tanker + spark from a gun = bad situation) as well as insurance problems and may lead to a more violent arms race between crews and pirates.
Chia Obama
"Can you grow one? Yes you can!"
That's the slogan being used to market the latest Chia collectible figurine, a bust of President Barack Obama. Chia founder Joseph Pedott, a Chicago native like Obama, says he was inspired to create the toy as a show of patriotism. A week after its launch, Walgreens pulled the item off its shelves because some people filed complaints and the retailer decided it wasn't appropriate for the company's "corporate image." However, you can still go buy it at chiaobama.com. Personally, I think it's harmless humor not intended to degrade the President or his race, but it is understandable why some people might take offense to it. See for yourself:
The Chia Obama comes in two facial expressions, "determined" (at left) and "happy."
That's the slogan being used to market the latest Chia collectible figurine, a bust of President Barack Obama. Chia founder Joseph Pedott, a Chicago native like Obama, says he was inspired to create the toy as a show of patriotism. A week after its launch, Walgreens pulled the item off its shelves because some people filed complaints and the retailer decided it wasn't appropriate for the company's "corporate image." However, you can still go buy it at chiaobama.com. Personally, I think it's harmless humor not intended to degrade the President or his race, but it is understandable why some people might take offense to it. See for yourself:
The Chia Obama comes in two facial expressions, "determined" (at left) and "happy."
North Korean Rocket Launch: Epic Fail?
North Korea defied international pressures and launched a long-range rocket over the weekend in an act that has been called "provocative" by State Department officials.
"North Korea broke the rules, once again, by testing a rocket that could be used for long-range missiles," President Obama said. "I urge North Korea to abide fully by the resolutions of the U.N. Security Council." After North Korea conducted a nuclear test in 2006 the UN Security Council passed a resolution that demanded it "not conduct any further nuclear test or launch of a ballistic missile." However, North Korea has said it did not violate the 2006 resolution, claiming it conducted a peaceful satellite launch, not a missile test.
Here's where it gets interesting: North Korea claims the "experimental communications satellite" is in orbit and is transmitting data, including patriotic songs. Kim Jong-il, Chairman of North Korea's National Defense Commission and Supreme Commander of the army (in other words, dictator), has expressed "great satisfaction" with the launch. But North American Aerospace Defense Command (NORAD) issued a statement to the contrary: "Stage one of the missile fell into the Sea of Japan. The remaining stages along with the payload itself landed in the Pacific Ocean. No object entered orbit.." I don't know who you're going to believe, but I'm going to go with NORAD...
An emergency meeting of the UN Security Council ended with no agreement, presumably because China, one of the 5 member nations that has veto power (along with the UK, US, France, and Russia) is a close ally and major trading partner of North Korea. China has called for "restraint" in addressing the North Korean situation while Japan, the only country the rocket flew over, and other member nations demanded "swift" action.
"North Korea broke the rules, once again, by testing a rocket that could be used for long-range missiles," President Obama said. "I urge North Korea to abide fully by the resolutions of the U.N. Security Council." After North Korea conducted a nuclear test in 2006 the UN Security Council passed a resolution that demanded it "not conduct any further nuclear test or launch of a ballistic missile." However, North Korea has said it did not violate the 2006 resolution, claiming it conducted a peaceful satellite launch, not a missile test.
Here's where it gets interesting: North Korea claims the "experimental communications satellite" is in orbit and is transmitting data, including patriotic songs. Kim Jong-il, Chairman of North Korea's National Defense Commission and Supreme Commander of the army (in other words, dictator), has expressed "great satisfaction" with the launch. But North American Aerospace Defense Command (NORAD) issued a statement to the contrary: "Stage one of the missile fell into the Sea of Japan. The remaining stages along with the payload itself landed in the Pacific Ocean. No object entered orbit.." I don't know who you're going to believe, but I'm going to go with NORAD...
An emergency meeting of the UN Security Council ended with no agreement, presumably because China, one of the 5 member nations that has veto power (along with the UK, US, France, and Russia) is a close ally and major trading partner of North Korea. China has called for "restraint" in addressing the North Korean situation while Japan, the only country the rocket flew over, and other member nations demanded "swift" action.
Conficker D-Day Passes, World Keeps On Turning
Conficker, the computer worm that threatened to bring down the internets yesterday, has now been termed a "dud." Also known as Downadup, Conficker has infected as many as 12 million PC's and was expected to receive its deadly final instructions on April Fool's Day. It didn't.
Conficker first began infecting computers late last year and surprised many security experts with its speed, infecting more than 1 million computers in less than 24 hours. Since then it was called a "ticking time bomb," capable of wreaking havoc at its creator's whim. Thus far, Conficker has not performed any malicious activity; it has only been "phoning home" awaiting further instructions. The media sensationalized Conficker, and anti-virus makers have been cashing in on the public's panic. The most important preventative measure people can take is installing the latest security patches and keeping their anti-virus programs updated. Like most other malware, Conficker is Windows-only.
Conficker may still be triggered and could cause harm in the form of a massive botnet, capable of attacking government or corporate networks. It could also be used for identity theft or to flood the internet with spam. Microsoft has offered a $250,000 reward for information about the worm's creator. Click here for a simple test to see whether or not you are already infected. To learn more about Conficker and how it works, check out the wiki.
Conficker first began infecting computers late last year and surprised many security experts with its speed, infecting more than 1 million computers in less than 24 hours. Since then it was called a "ticking time bomb," capable of wreaking havoc at its creator's whim. Thus far, Conficker has not performed any malicious activity; it has only been "phoning home" awaiting further instructions. The media sensationalized Conficker, and anti-virus makers have been cashing in on the public's panic. The most important preventative measure people can take is installing the latest security patches and keeping their anti-virus programs updated. Like most other malware, Conficker is Windows-only.
Conficker may still be triggered and could cause harm in the form of a massive botnet, capable of attacking government or corporate networks. It could also be used for identity theft or to flood the internet with spam. Microsoft has offered a $250,000 reward for information about the worm's creator. Click here for a simple test to see whether or not you are already infected. To learn more about Conficker and how it works, check out the wiki.
Comic Relief
Here’s some cartoons for April Fool's Day, you can decide if there’s any truth to them…
Troubled US Automakers Get One Last Chance
The Obama administration unveiled yet another rescue plan today, this time for the nation's struggling auto industry. Richard Wagoner, who has been at the helm of General Motors since 2000, was asked to resign as part of the deal.
"This is not meant as a condemnation of Mr. Wagoner, who has devoted his life to this company; rather, it’s a recognition that it will take a new vision and new direction to create the GM of the future," Obama said. To be fair, this does follow a basic truth in the corporate world: the guy in charge takes credit when the company is doing well but also takes the fall when it is not. In Wagoner's tenure, GM's shares have fallen more than 95%, and last fall he told Congress that the company had made some serious mistakes. After reading that last sentence a friend of mine commented: "That man deserves bonus!" It really is sad what things have come to...
As part of the new rescue plan, the government will provide GM "working capital" (money) for the next 60 days while it restructures. That is a final deadline which Obama was abundantly clear about: "the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company," he said.
The second part of the plan deals with Chrysler, which will partner with Italian automaker Fiat. Fiat will bring its "cutting-edge technology" to Chrysler in order to build "new fuel-efficient cars and engines here in America." Chrysler will have to finalize an agreement with Fiat within 30 days in order to receive another round of funding from the government.
Finally, the new plan will allow for government backing of the warranties of any GM or Chrysler vehicle purchased during this restructuring period. And Edward Montgomery, a former Deputy Labor Secretary, will become the first "Director of Recovery for Auto Communities and Workers."
The plan unveiled today seems to address all the majors problems ailing the country's domestic automakers. The question now is whether GM and Chrysler can fundamentally restructure, and quickly, after years of mismanagement. Shares of GM fell more than 25% on today's news.
"This is not meant as a condemnation of Mr. Wagoner, who has devoted his life to this company; rather, it’s a recognition that it will take a new vision and new direction to create the GM of the future," Obama said. To be fair, this does follow a basic truth in the corporate world: the guy in charge takes credit when the company is doing well but also takes the fall when it is not. In Wagoner's tenure, GM's shares have fallen more than 95%, and last fall he told Congress that the company had made some serious mistakes. After reading that last sentence a friend of mine commented: "That man deserves bonus!" It really is sad what things have come to...
As part of the new rescue plan, the government will provide GM "working capital" (money) for the next 60 days while it restructures. That is a final deadline which Obama was abundantly clear about: "the United States government has no interest or intention of running GM. What we are interested in is giving GM an opportunity to finally make those much-needed changes that will let them emerge from this crisis a stronger and more competitive company," he said.
The second part of the plan deals with Chrysler, which will partner with Italian automaker Fiat. Fiat will bring its "cutting-edge technology" to Chrysler in order to build "new fuel-efficient cars and engines here in America." Chrysler will have to finalize an agreement with Fiat within 30 days in order to receive another round of funding from the government.
Finally, the new plan will allow for government backing of the warranties of any GM or Chrysler vehicle purchased during this restructuring period. And Edward Montgomery, a former Deputy Labor Secretary, will become the first "Director of Recovery for Auto Communities and Workers."
The plan unveiled today seems to address all the majors problems ailing the country's domestic automakers. The question now is whether GM and Chrysler can fundamentally restructure, and quickly, after years of mismanagement. Shares of GM fell more than 25% on today's news.
Real Regulation At Last?
In testimony to the House Financial Services Committee today, Treasury Secretary Timothy Geithner detailed much needed financial regulatory reform that would set "new rules for the game." The lack of effective regulation in the financial industry has been cited as a major cause for the current crisis. The main points of the plan are as follows:
1. It would create a regulatory agency to oversee "systemically important" banks (large institutions whose collapse could bring down the entire economy e.g. AIG).
2. It would impose stricter capital requirements on these "systemically important" banks.
3. The government would be given authority to take over failing non-bank companies (such as AIG, an insurance company)--it can currently only take over banks.
4. It requires large hedge funds and private-equity firms to register with the Securities and Exchange Commission (SEC). Until now they have operated outside of government supervision.
5. It would establish a comprehensive framework of oversight and regulation for the derivatives market (derivatives are exotic financial instruments, thus far completely unregulated, that led to excessive risk-taking and massive losses--Warren Buffet has called them "financial weapons of mass destruction").
All I can say is, it's about time! If this kind of regulation had been in place, the current crisis could have been largely averted.
1. It would create a regulatory agency to oversee "systemically important" banks (large institutions whose collapse could bring down the entire economy e.g. AIG).
2. It would impose stricter capital requirements on these "systemically important" banks.
3. The government would be given authority to take over failing non-bank companies (such as AIG, an insurance company)--it can currently only take over banks.
4. It requires large hedge funds and private-equity firms to register with the Securities and Exchange Commission (SEC). Until now they have operated outside of government supervision.
5. It would establish a comprehensive framework of oversight and regulation for the derivatives market (derivatives are exotic financial instruments, thus far completely unregulated, that led to excessive risk-taking and massive losses--Warren Buffet has called them "financial weapons of mass destruction").
All I can say is, it's about time! If this kind of regulation had been in place, the current crisis could have been largely averted.
Hey Paul Krugman
Paul Krugman, the Nobel Prize winning Princeton economist and New York Times columnist, is well-known for his criticism of Obama's economic plans and analysis of the current financial crisis. He pretty much predicted this recession (and past ones). His name was being thrown around in the early days of the Obama administration as a possible nominee for some "economic adviser" position and even Treasury secretary, but he did not receive any, to the chagrin of many informed citizens. Johnathan Mann was one of those citizens and here is his response:
[via Rock Cookie Bottom]
[via Rock Cookie Bottom]
$1 Trillion Mess
"Cash for trash" wasn't alright six months ago under Hank Paulson, George Bush's Treasury secretary, and it certainly isn't alright now. But it is, with some minor adjustments, essentially the path the Obama administration went down today when it unveiled a long-delayed $1 trillion plan to buy troubled assets from financial institutions. The news sent the stock market soaring, with the Dow Jones industrial average gaining nearly 500 points.
The plan calls for the creation of a Public-Private Investment Program (PPIP) to finance the purchase of toxic assets such as mortgage backed securities. It is basically a huge taxpayer funded subsidy to purchase these assets. The fundamental mistake Treasury secretary Tim Geithner and the administration are making here is assuming that the assets or not really toxic, just "misunderstood." Due to this misunderstanding, they argue, the assets are incorrectly priced, or in some cases not priced at all because no one knows what they are worth. Let's face it: they are called "toxic" for a reason--it is because they're pieces of crap that Wall Street wizards churned out to make themselves rich and no one ever really knew what they were doing except that according to the models everything was just peachy.
Under the plan, the assets would be sold auction-style, with private investors bidding to set "appropriate" prices. The FDIC would then provide a loan to investors for 85% of the purchase price. Of the remaining 15%, the Treasury would provide 80% and private investors 20%. With all these government loans and guarantees, private investors end up paying only about 3% of the total price. Thus, by taking a relatively small risk, they stand to make considerable profits if the price of these assets increases, and if it doesn't, they simply walk away and leave the taxpayer holding the bag. It is a classic heads: investors win; tails: taxpayers lose scenario. As Paul Krugman puts it, "investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem."
While it may be true that the troubled assets are undervalued (maybe 30 cents on the dollar instead of 40 cents), they are certainly not worth face value, a price which was derived from the inflated housing bubble of years past. This plan will ultimately result in the government overpaying for toxic assets (a terrible deal for the American taxpayer). After all, investors have an incentive to bid up the price really high in the auctions, they only stand to gain from it.
A real solution is needed instead of this convoluted PPIP, a logical solution which goes at the heart of the problem and seizes banks that are in trouble (currently called "zombie" banks) instead of throwing more money at them. Euphemisms have been thrown around such as "preprivatization" and "receivership" but that solution is more commonly known as nationalization.
From left: Treasury Secretary Timothy Geithner, President Barack Obama, Federal Reserve Chairman Ben Bernanke, and FDIC Chairwoman Sheila Bair.
The plan calls for the creation of a Public-Private Investment Program (PPIP) to finance the purchase of toxic assets such as mortgage backed securities. It is basically a huge taxpayer funded subsidy to purchase these assets. The fundamental mistake Treasury secretary Tim Geithner and the administration are making here is assuming that the assets or not really toxic, just "misunderstood." Due to this misunderstanding, they argue, the assets are incorrectly priced, or in some cases not priced at all because no one knows what they are worth. Let's face it: they are called "toxic" for a reason--it is because they're pieces of crap that Wall Street wizards churned out to make themselves rich and no one ever really knew what they were doing except that according to the models everything was just peachy.
Under the plan, the assets would be sold auction-style, with private investors bidding to set "appropriate" prices. The FDIC would then provide a loan to investors for 85% of the purchase price. Of the remaining 15%, the Treasury would provide 80% and private investors 20%. With all these government loans and guarantees, private investors end up paying only about 3% of the total price. Thus, by taking a relatively small risk, they stand to make considerable profits if the price of these assets increases, and if it doesn't, they simply walk away and leave the taxpayer holding the bag. It is a classic heads: investors win; tails: taxpayers lose scenario. As Paul Krugman puts it, "investors will be ready to pay high prices for toxic waste. After all, the stuff might be worth something; and if it isn’t, that’s someone else’s problem."
While it may be true that the troubled assets are undervalued (maybe 30 cents on the dollar instead of 40 cents), they are certainly not worth face value, a price which was derived from the inflated housing bubble of years past. This plan will ultimately result in the government overpaying for toxic assets (a terrible deal for the American taxpayer). After all, investors have an incentive to bid up the price really high in the auctions, they only stand to gain from it.
A real solution is needed instead of this convoluted PPIP, a logical solution which goes at the heart of the problem and seizes banks that are in trouble (currently called "zombie" banks) instead of throwing more money at them. Euphemisms have been thrown around such as "preprivatization" and "receivership" but that solution is more commonly known as nationalization.
From left: Treasury Secretary Timothy Geithner, President Barack Obama, Federal Reserve Chairman Ben Bernanke, and FDIC Chairwoman Sheila Bair.
(A)rrogance (I)ncompetence (G)reed
The AIG bonus saga continues...
Yesterday, in an attempt to quell the populist outrage against the AIG bonuses, the House of Representatives overwhelmingly (328-93) approved a 90% tax on bonuses of employees of banks that received federal aid. It only applies to employees with family incomes of more than $250,000 who work for banks that received more than $5 billion in bailout money.
The constitutionality of the House's retroactive tax provision, which would affect bonuses awarded after Jan. 1, 2009, has come into question. Some have argued that, although the bonuses are despicable and outrageous, such an ex post facto law would be unconstitutional and illegal. Other experts have said that the bill may be lawful because numerous court rulings have upheld such provisions, particularly over short periods. Also, the bill does not target a specific company and applies not only to past bonuses but also to future ones.
On Wednesday, during his testimony in front of Congress, Edward Liddy, the CEO of AIG, said he has asked his employees to return some of their bonus money:
"I have asked the employees of A.I.G. Financial Products to step up and do the right thing," Mr. Liddy told lawmakers. "Specifically, I have asked those who received retention payments of $100,000 or more to return at least half of those payments."
Last night when President Obama appeared on the Tonight Show with Jay Leno, Leno equated Liddy's idea to robbing a bank and then telling the judge "Your Honor, I'm going to give you half the money back." I agree with Leno. These bonuses should never have been awarded, but now that they have, the government should pursue a legal avenue to recoup them, if possible. $165 million is a lot money but it is less than 0.1% of the $170 billion AIG has received. It is not worth it to unconstitutionally tax them and risk a US v. AIG court case which would only increase the public anger surrounding this mess. Besides, if the financial wizards that got these bonuses can successfully unwind AIG's toxic positions, as has been said, than 0.1% may just solve the problem.
President Obama with Jay Leno. It is the first time a sitting US president has appeared on a late-night talk show.
Yesterday, in an attempt to quell the populist outrage against the AIG bonuses, the House of Representatives overwhelmingly (328-93) approved a 90% tax on bonuses of employees of banks that received federal aid. It only applies to employees with family incomes of more than $250,000 who work for banks that received more than $5 billion in bailout money.
The constitutionality of the House's retroactive tax provision, which would affect bonuses awarded after Jan. 1, 2009, has come into question. Some have argued that, although the bonuses are despicable and outrageous, such an ex post facto law would be unconstitutional and illegal. Other experts have said that the bill may be lawful because numerous court rulings have upheld such provisions, particularly over short periods. Also, the bill does not target a specific company and applies not only to past bonuses but also to future ones.
On Wednesday, during his testimony in front of Congress, Edward Liddy, the CEO of AIG, said he has asked his employees to return some of their bonus money:
"I have asked the employees of A.I.G. Financial Products to step up and do the right thing," Mr. Liddy told lawmakers. "Specifically, I have asked those who received retention payments of $100,000 or more to return at least half of those payments."
Last night when President Obama appeared on the Tonight Show with Jay Leno, Leno equated Liddy's idea to robbing a bank and then telling the judge "Your Honor, I'm going to give you half the money back." I agree with Leno. These bonuses should never have been awarded, but now that they have, the government should pursue a legal avenue to recoup them, if possible. $165 million is a lot money but it is less than 0.1% of the $170 billion AIG has received. It is not worth it to unconstitutionally tax them and risk a US v. AIG court case which would only increase the public anger surrounding this mess. Besides, if the financial wizards that got these bonuses can successfully unwind AIG's toxic positions, as has been said, than 0.1% may just solve the problem.
President Obama with Jay Leno. It is the first time a sitting US president has appeared on a late-night talk show.
Outrage Against AIG
This has been all over the news lately and understandably so. American International Group, the world's largest insurer that has been bailed out four times by the government to the tune of nearly $200 billion, paid out $165 million in bonuses to its current (and former) employees.
AIG has said that it was contractually obligated to give the money and has received much criticism from just about every politician and talking head out there.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" President Obama remarked yesterday. He has asked Treasury Secretary Tim Geithner to "pursue every legal avenue to block these bonuses." At one point during the press conference, Obama coughed and quipped that he was "choked up with anger."
Senator Chuck Grassley (R-Iowa) was especially angry, saying that AIG executives should "resign or go commit suicide."
Their acts have been called "financial shenanigans" and a top White House economic advisor said that they deserve the "Nobel Prize for Evil." Clearly there is some well-deserved populist rage against the company, which is 80% owned by the US Government.
What's more, these bonuses were awarded specifically to employees of AIG's financial products division, the same guys that created exotic derivatives such as credit default swaps which caused this crisis in the first place. This is unconscionable and just plain wrong.
Several Congressmen have called on AIG to recoup or "claw back" the bonuses. Also, New York Attorney General Andrew Cuomo subpoenaed the firm and found out the following:
• The top recipient received more than $6.4 million;
• The top seven bonus recipients received more than $4 million each;
• The top ten bonus recipients received a combined $42 million;
• 22 individuals received bonuses of $2 million or more, and combined they
received more than $72 million;
• 73 individuals received bonuses of $1 million or more; and
• Eleven of the individuals who received "retention" bonuses of $1 million
or more are no longer working at AIG, including one who received $4.6
million.
Furthermore, the contracts under which AIG made the payments "contain a provision that required most individuals' bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before."
When will these guys get it? You can't hand out millions in bonuses to employees who ran your company into the ground. Here's a simple formula for them to follow: good performance = bonus; bad performance = NO BONUS. In other words: success = reward; dismal failure = no reward. It's really not that hard.
President Obama and Treasury Secretary Timothy Geithner at the White House on Monday.
Photo Credit: Doug Mills/NY Times
AIG has said that it was contractually obligated to give the money and has received much criticism from just about every politician and talking head out there.
"How do they justify this outrage to the taxpayers who are keeping the company afloat?" President Obama remarked yesterday. He has asked Treasury Secretary Tim Geithner to "pursue every legal avenue to block these bonuses." At one point during the press conference, Obama coughed and quipped that he was "choked up with anger."
Senator Chuck Grassley (R-Iowa) was especially angry, saying that AIG executives should "resign or go commit suicide."
Their acts have been called "financial shenanigans" and a top White House economic advisor said that they deserve the "Nobel Prize for Evil." Clearly there is some well-deserved populist rage against the company, which is 80% owned by the US Government.
What's more, these bonuses were awarded specifically to employees of AIG's financial products division, the same guys that created exotic derivatives such as credit default swaps which caused this crisis in the first place. This is unconscionable and just plain wrong.
Several Congressmen have called on AIG to recoup or "claw back" the bonuses. Also, New York Attorney General Andrew Cuomo subpoenaed the firm and found out the following:
• The top recipient received more than $6.4 million;
• The top seven bonus recipients received more than $4 million each;
• The top ten bonus recipients received a combined $42 million;
• 22 individuals received bonuses of $2 million or more, and combined they
received more than $72 million;
• 73 individuals received bonuses of $1 million or more; and
• Eleven of the individuals who received "retention" bonuses of $1 million
or more are no longer working at AIG, including one who received $4.6
million.
Furthermore, the contracts under which AIG made the payments "contain a provision that required most individuals' bonuses to be 100% of their 2007 bonuses. Thus, in the Spring of last year, AIG chose to lock in bonuses for 2008 at 2007 levels despite obvious signs that 2008 performance would be disastrous in comparison to the year before."
When will these guys get it? You can't hand out millions in bonuses to employees who ran your company into the ground. Here's a simple formula for them to follow: good performance = bonus; bad performance = NO BONUS. In other words: success = reward; dismal failure = no reward. It's really not that hard.
President Obama and Treasury Secretary Timothy Geithner at the White House on Monday.
Photo Credit: Doug Mills/NY Times
No More "Enemy Combatants"
Shortly after taking office, President Obama signed an executive order to close the controversial prison at Guantanamo Bay within a year. Today, the Obama administration announced that it would no longer designate Guantanamo detainees as "enemy combatants," a Bush-era policy that denied suspected terrorists basic rights and allowed the government to hold them indefinitely without criminal charges.
In a filing yesterday in Washington, the Justice Department submitted a new standard for the government's authority to hold detainees at the Guantanamo Bay Detention Facility. According to the document, persons can be detained only is there is "substantial support" that they "planned, authorized, committed, or aided" the 9/11 attacks or if they supported Al-Qaida or the Taliban.
"As we work towards developing a new policy to govern detainees, it is essential that we operate in a manner that strengthens our national security, is consistent with our values, and is governed by law," said Attorney General Holder. "The change we've made today meets each of those standards and will make our nation stronger."
The new standard does not rely on the President's authority as commander-in-chief but rather on authority given by Congress and international laws, including the Geneva Conventions. The status of each of the approximately 240 detainees at Guantanamo will be reviewed and the government's policy may be "refined."
This is a historic move by the Obama administration. It is signaling a break from President Bush's contentious policies that received much criticism from human rights activists. Finally, we have a President that is doing things lawfully and knows right from wrong. By the way, Obama has also ordered an end to harsh interrogation techniques and told the CIA to close its network of secret military prisons around the world.
But, as with anything else in the world, there are critics here too. The ACLU has said that the new policy, although narrower, is still "too broad" and will still allow the government to hold suspects indefinitely.
Anyway, it is a step in the right direction. Maybe a small step, but a step nonetheless.
In a filing yesterday in Washington, the Justice Department submitted a new standard for the government's authority to hold detainees at the Guantanamo Bay Detention Facility. According to the document, persons can be detained only is there is "substantial support" that they "planned, authorized, committed, or aided" the 9/11 attacks or if they supported Al-Qaida or the Taliban.
"As we work towards developing a new policy to govern detainees, it is essential that we operate in a manner that strengthens our national security, is consistent with our values, and is governed by law," said Attorney General Holder. "The change we've made today meets each of those standards and will make our nation stronger."
The new standard does not rely on the President's authority as commander-in-chief but rather on authority given by Congress and international laws, including the Geneva Conventions. The status of each of the approximately 240 detainees at Guantanamo will be reviewed and the government's policy may be "refined."
This is a historic move by the Obama administration. It is signaling a break from President Bush's contentious policies that received much criticism from human rights activists. Finally, we have a President that is doing things lawfully and knows right from wrong. By the way, Obama has also ordered an end to harsh interrogation techniques and told the CIA to close its network of secret military prisons around the world.
But, as with anything else in the world, there are critics here too. The ACLU has said that the new policy, although narrower, is still "too broad" and will still allow the government to hold suspects indefinitely.
Anyway, it is a step in the right direction. Maybe a small step, but a step nonetheless.
Madoff Goes To Jail
More than 100 spectators crammed into the federal court in Manhattan today as Barnard Madoff, the financier accused last year of running a $50 billion Ponzi scheme, pleaded guilty to all 11 counts leveled against him, including securities fraud, money laundering, and perjury.
"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," Madoff said. "When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult, and ultimately impossible, and as the years went by I realized that my arrest and this day would inevitably come."
A Ponzi scheme, also called a "pyramid" scheme, is one in which early investors are paid off by money taken from later ones. No actual investments are made, and fraudulent statements are sent to clients detailing their nonexistent assets. It works well for some time, but eventually all such schemes crumble under their own weight as new money cannot be brought in fast enough to pay older clients. When the stock market began tanking late last year, Madoff's clients, like many others, wanted to withdraw their money and the scheme quickly unraveled.
There was applause in the courtroom when the judge revoked Madoff's $10 million bail and ordered he be sent directly to jail. Documents revealed that the fraud was actually larger than originally thought, at $65 billion. His assigned federal inmate number is 61727054.
Bernard Madoff, right, arriving at Manhattan federal court today. (AP Photo)
"I am actually grateful for this opportunity to publicly comment about my crimes, for which I am deeply sorry and ashamed," Madoff said. "When I began the Ponzi scheme I believed it would end shortly and I would be able to extricate myself and my clients from the scheme. However, this proved difficult, and ultimately impossible, and as the years went by I realized that my arrest and this day would inevitably come."
A Ponzi scheme, also called a "pyramid" scheme, is one in which early investors are paid off by money taken from later ones. No actual investments are made, and fraudulent statements are sent to clients detailing their nonexistent assets. It works well for some time, but eventually all such schemes crumble under their own weight as new money cannot be brought in fast enough to pay older clients. When the stock market began tanking late last year, Madoff's clients, like many others, wanted to withdraw their money and the scheme quickly unraveled.
There was applause in the courtroom when the judge revoked Madoff's $10 million bail and ordered he be sent directly to jail. Documents revealed that the fraud was actually larger than originally thought, at $65 billion. His assigned federal inmate number is 61727054.
Bernard Madoff, right, arriving at Manhattan federal court today. (AP Photo)
Obama Sees "Great Opportunity" In Crisis
In his weekly internet address to the nation, President Obama urged the American people to "discover great opportunity in the midst of great crisis."
"That is what we can do and must do today. And I am absolutely confident that is what we will do," Obama said.
The work week ended with a dismal report showing that 651,000 more Americans had lost their job in the month of February. That brings the unemployment rate to 8.1%, a level not seen in more than 25 years.
On Thursday during the first-ever "Health Care Summit" he held at the White House, Obama promised "comprehensive health care reform by the end of this year." The American health care system is currently the most expensive in the world ($2.5 trillion a year) and still leaves more than 46 million people uninsured.
"That is what we can do and must do today. And I am absolutely confident that is what we will do," Obama said.
The work week ended with a dismal report showing that 651,000 more Americans had lost their job in the month of February. That brings the unemployment rate to 8.1%, a level not seen in more than 25 years.
On Thursday during the first-ever "Health Care Summit" he held at the White House, Obama promised "comprehensive health care reform by the end of this year." The American health care system is currently the most expensive in the world ($2.5 trillion a year) and still leaves more than 46 million people uninsured.
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