Memo to Miami Herald: Need story on our losses on Stuyvesant Town

Where’s the Miami Herald on this story? Referring to the fiasco now two years old with the Florida State Board of Administration and the way it lost money – taxpayers’ money that was supposed to be held in close and careful trust for pension funds, hospitals and the like.

This blog has been mad as hell and not standing for it any more for some time with main focus on Jeb Bush and his well-paid gig with Lehman Brothers after he left the governor’s office, whereupon Lehman went belly-up and the Lehman investments Jeb pushed on us became worthless.

There’s another famous episode, however, that’s now maturing to Florida’s detriment, and I don’t see it properly explicated in the Herald. It surfaced in New York early this week when Tishman Speyer caved on the $5.4 billion developments at Stuyvesant Town and Cooper Village. This cost Florida $250 million plus spare change amounting to millions, and you can read about it in the Jacksonville newspaper. But not in the Herald.

Is this a political decision, or is the Herald’s financial investigative staff overwhelmed?

Anyway, we need to have the Herald nag the perpetrators until they lay out their roles in this. And they are Charlie Crist and Jeb Bush. Meanwhile, you can read about it in the Jacksonville paper and in the New York Times today, which is looking at how the Democrat Andrew Cuomo is getting tons of campaign money from real estate interests, including Tishman.

A recent post on this topic can be found at this link. Or look up Jeb Bush on the tags list on the right.

Who's after our banks? "Lowlife grave dancers."

It was one of those below-the-fold stories on the front page of the NY Times about some unfathomable business thing, but the time was late and I decided to read it anyway. Despite the headline: "As Investors Circle Ailing Banks, Fed Sets Limits." And despite the dateline: "Cainsville, Mo."

Good decision. There about in the middle of the story was a note that the same business vulture was circling Florida's own BankUnited, which is in deep trouble.

Even better was to plow to the end of the story and get the kicker (we old hacks know the last lines often are the second-best thing in a long story): It quoted J. Christopher Flowers, who's desperately rich and desperate to get much richer:

He has estimated his banking empire will one day earn at least a 35 percent return on banks it has bought in the United States. “I find it to be an extraordinary time to invest,” he said.

He was even more blunt when he spoke to an industry group in New York earlier this year. “Lowlife grave dancers like me will make a fortune,” he predicted.

Suddenly, I'm dubious that this is going to turn out well for the rest of us. A few of the super-rich of the world will do great for themselves, and we will think that we're doing better as the stock markets claw back a fair amount of what they've lost, and we'll lose resolve to make our economic system work better. And in a decade or so J. Christopher Flowers and his gang of hedgers will be too big to fail but failing anyway, and there we go again.

That story was on p. 1 of Wednesday's Times. On Thursday the Times had an editorial on the same topic, urging the Obama administration and the Fed not to relax rules about who can run banks. The editorial also said:

If you’ve had a nagging feeling that the banking mess is a colossal raw deal for taxpayers, consider the suspicion confirmed.

When they're bold enough to call themselves lowlife grave dancers, I'd say, Yes, raw deal for us.

Here are some more links on this topic, some rather technical.

Source: Two main bidding groups for BankUnited - South Florida Business Journal:

Confessing here that I hadn't paid much attention to BankUnited. I note now that its shares go for about a quarter these days. There's a commenter after the SoFla Business Journal article who says, "Folks in South Florida are so asleep there has not even been a run on the bank deposits."

Next is a newswire item from March 10 when BankUnited didn't file its reports to the SEC as required, and NASDAQ said it wasn't in compliance with rules to be listed.

Now excuse me please. The secretary of the treasury has an op-ed in the Times, and I'm going to read it to stave off the nightmares that otherwise would be disturbing my rest.

Tim Geithner and Jeb Bush in the same scandal-plagued blog post

Is there a label for “read this and weep?” That’s the category for this Truthdig story about a scandal reported in the Wall Street Journal. It’s about the NY Federal Reserve Bank and the crony way they do business with a wink at the rules.

As the piece asks, where is the outcry? Is there silence because Timothy Geithner is one of the actors in this scandal and it’s not PC to tarnish his name? The reason given for his falling in line was that it would help find a successor for him at the New York Federal Reserve as he became secretary of the treasury. Pretty lame.

If this isn’t rolled out and fixed somehow, a few years down the line we’ll see how rich Geithner gets when he leaves government work and returns to the world of private finance. This falls into a category I call the delayed bribe.

And speaking of that, there’s an article on the bottom of p. 1 of the Miami Herald business section today that got my steam up.

Faithful readers will recognize one of my hobbyhorses – the role that Jeb Bush played in the ripoff of Florida’s money-market fund when Lehman Brothers went bankrupt. To summarize, while he was governor Lehman was permitted to sell its junk to the money-market-like fund where local governments can park money until needed to pay police, fire, schools, staff, construction – you know, all the stuff we expect from government.

According to the Herald article, it cost Florida $300 million when Lehman went south. By then, Jeb Bush was a consultant to Lehman raking in an amount I’d like to hear from his lips or accountants.

Here's a link to one of my early posts on this, with numerous links therein to background on this little-known fiasco. Well, it's about only a couple hundred millions of dollars -- not the billions and trillions that we're used to.

If you look down into the comments of the Herald story you’ll find what I posted there this afternoon. I reproduce below in case it’s been whited out.

Oldest first Newest first Most-recommended first Least-recommended first

• 

LarryThorson wrote on 05/06/2009 04:05:53 PM:

I'd appreciate this article more if it pointed out that former Gov. Jeb Bush became a consultant to Lehman brothers after leaving office. And that he had ushered Lehman's junk into the Florida state money-market fund when he was governor. I call his lucrative employment with Lehman a delayed bribe. If Jeb came to a pizza parlor in my town on a listening tour, and I got to the microphone, I'd ask how much Lehman paid him, and when he's giving it to the ripped-off Florida treasury.

Let's think again of how Jeb and Lehman cost Florida bigtime

In Wednesday's NY Times, this article:
New Jersey Sues Over Its Lehman Losses - DealBook Blog - NYTimes.com
served as a reminder of how Florida got ripped off in the same way. Has Florida sued? Not mentioned in the article, though California was cited as having sued before New Jersey.

Where are we? Why no suit?

New Jersey is out $180 million thanks to the collapse of Lehman. Florida also lost many millions, though a light search doesn't reveal how much. There is an interesting similarity between Florida and New Jersey, in that both states had a board of officials supposedly overseeing the operation of the fund -- like the money market funds we ordinary citizens have been forced to use by our friendly banks -- where revenue was parked until needed by local governments to pay their staff and other obligations. In Florida it's the State Board of Administration. New Jersey calls it the State Investment Council. Here's a quote from the Times story about that board:

State Senator Joseph Pennacchio, a Republican who has been critical of both Lehman and the State Investment Council, told The Times in an interview that it made sense to sue. But he also called for legislative hearings into the council’s investment practices and said that the council included three former Lehman executives and the wife of a former Lehman executive.

“That raises our level of suspicion and cynicism about the whole deal,” Mr. Pennacchio told The Times. “It makes sense to go after Lehman. But we also want to know if people on the council did things they should not have done.”

I'd like to know the same kind of stuff about our Florida counterpart. It's deeply suspicious because Jeb Bush was on that board and then when he left the governor's office he became a well-paid consultant to Lehman.

Jeb, are you refunding your bonuses?

It took many of us to Luxembourg

This obit in Tuesday's NY Times raised memories. 1975 was the year I flew Icelandair to Europe, trying to save money. Today we may only know Iceland as the first country to be bankrupted by the meltdown of 2008. I remember later trips to Iceland when the brilliance of the national seafood cuisine was on display every meal.

Now, on that 1975 trip, did I save any money? One problem was that Luxembourg, where those planes landed, was not any kind of a destination, so the traveler had to pony up more money to get anywhere. Where I was going was the Greek islands, and the train would take me all the way to Athens to board the ferries.

Coming back, time was short -- not enough to ride the train to Luxembourg, so I had to buy a one-way ticket on the Luxembourgish airline to get there. The travel budget was quite thoroughly broken. Even worse was that American Express multiplied instead of dividing when it converted the currency mishmash of Lux francs and dollars and Greek what? drachmas, and the Amex bill the next month was over $27,000. That took a while to straighten out.

Memorable line from the obit of the Icelandair boss Sigurdir Helgason: " ... usually landed late."

Foreclosure crisis and local action: Report from Miami Gardens

This morning an email came in from Andre Williams, a city councilman in Miami Gardens, about what he and his city are doing to combat the foreclosure crisis while the government in Washington flails about. Mr. Williams: today you're a guest blogger. Keep up the good work. Readers: click on the links he provides, and you'll be wiser and more motivated.

Here's his email:

I hope you had a happy Thanksgiving. Thanks for all of your hard work on behalf of the Democratic party in South Florida. As you may know, I am a proud Democrat and a hard working and productive City Councilman in Miami Gardens, the largest African American city in the state with a population of 115,000. We were very active with organizing the vote in our city for President-elect Obama.

I wanted to share some exciting, substantive news with you and the rest of our Democratic colleagues about the work that I am doing on behalf of our residents which has captured the attention of TIME magazine and our local media. I believe it is a great story the party can tell about one of its local elected Democratic officials.

TIME magazine continues to follow our extraordinary efforts in Miami Gardens to provide assistance to our residents facing foreclosure. This is the link to the most recent article: http://www.time.com/time/business/article/0,8599,1860879,00.html.

The magazine has followed me for the past several months to chronicle my efforts to engage lenders on behalf of our residents who are in jeopardy of losing their home. The magazine's first article may be found here: http://www.time.com/time/nation/article/0,8599,1826970,00.html.

Local television and print media has also taken an interest in our work: http://video.nbc6.net/player/?id=284936 and http://www.sfltimes.com/index.php?option=com_content&task=view&id=2051&Itemid=1.

While federal assistance has been largely inadequate, we are committed to saving as many homes as we can from foreclosure in Miami Gardens.

Regards,

André L. Williams

Councilman

City of Miami Gardens

Thankful for small things, like the Miami Herald business page

You may think I'm not having much of a Thanksgiving when I say I'm thankful for this piece in today's Miami Herald Investors wary of state pool - Business - MiamiHerald.com. I'm far more thankful for many other things including the feast coming later this afternoon. But for the moment I'm happy and thankful that I'm not the only one worried about health of the Florida state money market fund for local governments and their agencies.

Yes, faithful readers, this dense story is back, and I'm still wondering why Jeb Bush hasn't been called on the carpet over this one. This blog has hacked away on this story (a link here to a post a year ago, too prescient by far in predicting the global financial crisis that is falling into Barack Obama's lap), trying to keep the questions alive:

• Why did Jeb Bush let crappy Lehman Brothers investments sneak into the fund backing up our school boards and police departments?
• Why did Jeb Bush become a well-paid consultant to Lehman after leaving the governor's office two years ago?
• Why hasn't he been called on the carpet? (Oh, sorry, already posed that one.)

So, yes, thank you, Miami Herald for keeping the story alive, though I'd appreciate your putting Jeb's name in it as one of the causitive agents in this rip-off of public money. Next time, huh?

As the Herald's story started:

Last fall, a state investment fund in which counties, cities and other local agencies parked extra cash temporarily was the largest in the country, at $26.1 billion.

There was a big run on that fund and it's now down to $5.7 billion, the Herald reports, and agencies can't pull all their money out anymore. Why? Because some of the investments are still crap. Thanks, Jeb. Were you planning to run for any other office anytime in this century?

Finally starting to understand what went wrong on Wall Street

If you comprehend that the crisis on Wall Street stems from decisions made decades ago, it's acceptable that it takes a couple months to start reading how it happened. In detail, I mean, with names of players and companies and officials, and dates when things happened, and narratives on the march of events.

So here are two freshly available links to aid in understanding this crisis:

• The End of Wall Street's Boom - National Business News - Portfolio.com
• Sunday NY Times article focused on Citigroup

Together they may be an hour or more of reading.

There's some summary available in today's NY Times, where the (former?) billionaire Tom Friedman features both long articles in his column. Thank you, Tom, for tipping us to two good things to read. But as usual, Friedman, who's not so rich nowadays, gets some of it wrong -- he starts off his catalog of blame with the poor people who "had no business" taking a mortgage for more house than they ought to have. You won't get that impression from reading the articles. Both put the blame on the highest levels of American finance.

The first article is by Michael Lewis, whose name rings from the 1980's as the author of "Liar's Poker," his book about his years as a Wall Street analyst. Who's to blame? "Wall Street had built a Doomsday machine," is one quote from Lewis that stood out to me.

The Sunday NY Times article blamed failure to police risk for the issues that have put Citigroup in the spotlight as the latest "too big to fail" company to be on the brink of collapse. One problem involved a senior trader and a senior risk manager who were great pals who spent much free time together. One example was said to be a fishing trip that ended with them "stuck on a lake after their boat ran out of gas."

Well, indulge me a moment. That reminded me of a little joke I heard 15 years ago in my previous life as an AP reporter, then based in Germany. I was attending a G-7 financial conference in Frankfurt along with George Soros and Larry Summers and many others, and Rudiger Dornbusch, economics prof at MIT, told this story to illustrate how hard it may be to get bankers to learn from mistakes:

Two bankers fly to Maine in a light bush plane to hunt moose. The pilot lands them in a remote place and says he'll be back in a week to get them, and they can bring out only one moose. They kill two moose, however, and when the plane returns, they convince the reluctant pilot to take off with both carcasses. The plane takes off, falters and crashes.

The bankers survive. Dazed, one asks, "Where are we?"

"Three hundred yards from where we crashed last year," the other banker replies.

We are being educated to believe that we can let Rubinomics creep back in to the highest rank of government supervision of the financial world. Have they learned, Summers, Rubin, etc.? Or will they take the chance of another moose and ...

The GOP Doesn’t Want the White House

By guest blogger David Cooper

Because of the last twenty-six years of insane economic policy, rightfully known as Reaganomics, the worst crisis in the financial markets since the Great Depression is now upon us. The Bush plan, as expressed by the Secretary of the Treasury, Henry Paulson, seemed to be the knee-jerk reaction of an administration now wholly owned by corporate interest; give $700 billion of taxpayer dollars, (borrowed money of course) to the billionaire Wall Street fat cats with no congressional oversight, and do it now. Surprisingly, it appears that the Republicans in Congress were as disturbed as the Democrats were by this proposal, resulting in what seems to be a bipartisan consensus. Both sides apparently agree that any transfer of the people’s money to Wall Street should include stringent oversight and should include middle class America. However, any bailout, if indeed one is actually necessary (an argument not discussed here), should not just include Middle America, it should heavily favor middle class working Americans. As of yet, it does not appear that either side has gone far enough in demanding protection for average Americans who are also in crisis. The justification for a bailout of the American Middle Class over that of the corporatists on Wall Street can be found in history.

In an October 8, 1931 article in the New York Times, titled “Real Estate Men on Hoover Plan,” the proposal to bail out the markets and to “liquidate frozen bank assets” was discussed. Real estate investor Joseph P. Day, while cheerleading for the Hoover plan, said, “President Hoover’s financial plan is a step in the right direction towards making real estate investment more liquid.” These are the exact arguments made by Paulson last week when he said, “The credit and capital markets are frozen up,” and, “the market’s liquidity is all clogged up.” Hoover also said, “The fundamentals of the economy are strong.” Sound familiar? Hoover’s bailout of Wall Street did not work. Banks continued to fail as the mega-wealthy of the day, largely responsible for the crisis, walked away unscathed.

We saw a bailout of commercial banks in the early 1980’s that was a result of banks, awash in petro-dollar revenues, packaging those revenues into often risky loans to emerging economies in Latin America. With inflation and interest rates of the period on the rise, borrowers began to default creating a crisis.[1]

On October 19, 1987, Alan Greenspan had to inject huge amounts of cash, (liquidity) into the Stock Market to prevent a crash.[2]

Then there was the Savings and Loan crisis in the 80’s that was the result of the deregulation and merger madness at the beginning of the “Reagan Revolution.” The cost was $250 billion.

In 1991, Citibank was in crisis, again because of the deregulation allowing banks to get into the “gambling” business on Wall Street, this time speculating in junk bonds. With the stock hovering at $2 a share, Greenspan eventually arranged a deal with Saudi billionaires to keep Citibank liquid because “they were too big to fail.” As a result, the Saudi’s ended up owning almost 10% of this American institution.[3]

In 1995, there was the bailout of the Mexican Peso to backstop US bond holders who bought Mexican high-yield debt after Mexico deregulated their financial system when they signed on to NAFTA. Once again, Alan Greenspan and Robert Rubin would arrange a bailout with $50 billion in treasury funds.[4]

In 1998, it was the Long Term Capital Management (LTCM) bailout to prevent the collapse of the hedge fund, a favorite investment vehicle for the mega-wealthy.[5] The bailout bought the wealthy, connected, investors the time needed to get out with favorable terms.

The common denominator of all these bailouts, and the reason they are temporary fixes, is that there is nothing structural, legislatively, that changes the behavior of these financial institutions, and nothing in it for the most adversely affected; the middle class. This is a demonstration of the political power these corporations hold over our government that has created an entitlement mentality on Wall Street. They want deregulated free-for-all capitalism while they are looting our treasury, and corporate welfare when they collapse, at the same time denying average Americans any protections or help that they routinely get, calling that Socialism. It’s the reason that these corporate bailouts will continually fail. We have seen a dozen bailouts of Wall Street corporations in the last twenty years alone. Until regulation such as the Glass-Stiegel Act (that was dismantled by John McCain’s chief financial advisor, Phil Gramm, when he was in the Senate)[6], is reinstated these bailouts will continue, and become more and more costly. Glass-Stiegel provided a wall between commercial banks and Wall Street and was enacted because of the horrors of the Great Depression.

Two very good plans on structural changes in regulation that should be included in the bailout bill, which would prevent perpetual bailouts in the future, have been put forth by:

Economist, Dr. Dean Baker, “Progressive Conditions for a Bailout,”[7] and

Robert Reich, former Secretary of Labor, “What Wall Street Should Be Required to Do, to Get A Blank Check From Taxpayers.”[8]

The Political Calculus for 08

Since the American memory span is a short one, at least politically, the current financial crisis will dominate the remaining five weeks of the presidential race at the near total exclusion of the disastrous prior eight years. It is looking like the GOP does not want the White House and are in fact willing to give it to Barack Obama. This is not a prediction, but rather an observation of what their current thinking may be, based on current events. The Wall Street bailout plan, at least in its original form as it was rolled out last week, seems to be an attempt by the Bush administration to simply “buy” six weeks of time. They have to know that even if it works, which is unlikely based on history, the cost will take a terrible toll on the economy for the foreseeable future. In addition, they certainly do not want the house of cards that is our current economy, which they created over the past two decades, to completely unravel in the last couple of months of a two-term Republican president. Since this is going to be a massive problem for the next president, they are undoubtedly asking themselves if putting a Democrat in the White House is the worst thing that could happen for them. I submit that they are concluding it is not.

Also consider that if they can keep the Democratic advantage in Congress within a reasonable number, they can continue to thwart any meaningful change the Democrats attempt. Since the Democrats took control in January of 2007, after 14 years of Republican control, we have seen the Republicans in the 110^th Congress filibuster more legislation in the Senate than any other session in modern history. To get legislation to the floor, if a senator filibusters, requires 60 votes to end a filibuster; therefore, the Republicans only need 41 votes in the Senate to block legislation. As the economy continues to go south, and if they can attach the Democrats to a bailout that turns out to be nothing more than a band-aid, they can run in 2010, and 2012, against the “Democrat Great Depression of 09,” or at the very least, a poor economic outlook blamed on the Democrats.

There is also a better than even chance that tin here will be a push to return Jeb Bush to Florida politics in 2010, setting up a presidential run 2012. (As De Niro said in “Goodfellas,” “I heard some things,” and I’ll leave it at that). This is all just speculation of course. Anything can happen between now and November, and trying to predict 2010, or 2012 is next to impossible. Having said that, I am of the belief that the GOP does not want the presidency this time because they expect that the economy, as bad as its been the last eight years, is entering into an extreme downward spiral, which may be unstoppable, and will accelerate throughout 2009, and they may very well be right. Especially if this bailout of Wall Street is nothing more than a temporary placebo as was the case in 1931, as well as the other bailouts discussed above. For that reason the fight will not end when Obama is sworn in on January 20^th; the real fight will be just beginning.

David Cooper

September 27, 2008

Sources:

---

[1] http://www.iht.com/articles/2005/09/19/news/ROILMONEY.php

[2] http://www.washingtonpost.com/wp-srv/business/longterm/blackm/plunge.htm

[3] http://www.financialsense.com/editorials/turk/2008/0317.html

[4] http://query.nytimes.com/gst/fullpage.html?res=990CEEDE1F3AF936A25754C0A963958260

[5] http://www.cato.org/pubs/briefs/bp-052es.html

[6] See the Gramm-Leach-Bliley Act of 1999.

[7] http://www.ncpolicywatch.com/cms/2008/09/22/progressive-conditions-for-a-bailout/

[8] http://robertreich.blogspot.com/2008/09/what-wall-street-should-be-required-to.html

David Cooper is the author of “Absolute Despotism: How the Bush Administration’s False Realities Led to the Dismantling of Civil Liberties, the Destruction of Democracy, and Perpetual War.” Now available at: www.AbsoluteDespotism.com Contact at: AbsoluteDespotism@bellsouth.net

Blame the rich for the subprime crisis

Thanks to Joy Reid for the tip on this one.

Do we remember how Eliot Spitzer was found out? Oh, yeah, his bank turned him in. Finally, herein, a possible reason. And why the poor and minorities should not be blamed for the subprime crisis.




Some say we don't have a subprime mortgage crisis. It's a subprime economy crisis.