An Even Better Way to Get Money Out of Politics

By Joe Firestone

A couple of weeks ago, I posted on a simple solution to the problem of getting money out of politics. I said then:

If the election you’re voting in is virtually a two candidate contest, then vote for the candidate, who, in combination with her/his supporters spends the least amount of money. In a virtual multi-candidate contest, do the same thing.
That’s the proposal, in its simplest form. Its objective is to reverse the current race to the bottom in buying elections by ensuring that there would be a powerful incentive to start a race to the top to raise and spend as little money as possible in campaigns. That incentive is that if you spend too much you lose, pure and simple.
The other rationale for the rule is that the person who raises and spends the least amount of money for a campaign, will generally be the person who is “less bought” by wealthy people, financial interests, and large corporations. Eventually, if the rule took hold it would no longer be said of the Congress that “the banks own the place.”

I cross-post at a number of sites, and at Daily Kos I received a comment from “Musial,” which being of a certain age, engaged me immediately. The comment advised me to read the “money outta politics” solution, which “Musial” felt was superior to my own. It says:

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The Most Dishonest Number in the World: LIBOR

By William K. Black

The FDIC has sued 16 of the largest banks in the world plus the British Bankers Association (BBA) alleging that they engaged in fraud and collusion to manipulate the London Inter-bank Offered Rate (LIBOR).  BBA called LIBOR “The most important number in the world.”

LIBOR is actually many numbers that depend on the currency and term (maturity) of the loan.  The collusion involved manipulating most of these rates.  A vast number of loans and derivatives are priced off of these “numbers.”  Estimates of the notional dollar amount of deals affected by the collusion range from $300-550 trillion in deals manipulated at any given time.  The LIBOR frauds began no later than 2005 and continued through 2011.

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Risk managers should learn from the mistakes of others

Bill Black has just received unsolicited praise for his book about control fraud theory from one of the most credible sources possible.  Vincent Kaminski was Enron’s (honest and exceptionally skilled) top risk officer.  His positive, but ultimately futile, role at Enron is discussed in all the best books about that classic example of an accounting control fraud.  Kaminski has just written that:

“There is one particular book I wish I had read in the early days of my business career, which would have saved me and the firms I worked for a lot of money.

The book, entitled The best way to rob a bank is to own one: how corporate executives and politicians looted the S&L industry, was written by William Black, associate professor of economics and law at the University of Missouri-Kansas City. It is based on his experience as a regulator of savings and loans (S&L) institutions during the S&L crisis of the 1980s and early 1990s. Within its pages, Black introduces the concept of ‘control fraud’ – effectively, a very simple recipe for great riches and limited civil and criminal liability.”

NEP thanks Energy.net and Risk.net for their kind permission to reprint the excerpt of Mr. Kaminksy’s post that was originally posted on 12 March 2014.

Bitcoin’s Evolution toward Self-Destruction

By Dan Kervick

John Gapper, writing in the Financial Times, argues that Bitcoin enthusiasts need to grow up, and that Bitcoin itself needs to grow out of its obsessive adolescence. He writes in the aftermath of last week’s Newsweek story purporting to identify Bitcoin’s creator, and following the recent collapse and bankruptcy filing of the Mt. Gox Bitcoin exchange. In regard to the first event, which has sparked an outburst of hysterical resentment from the Bitcoin community, Gapper writes:

The hysteria undermines Bitcoin’s chances of graduating from a hobbyists’ obsession to a mainstream technology. You cannot challenge fiat currencies and disrupt the global payments industry while reacting to any uninvited scrutiny like an adolescent whose parent has opened the bedroom door without knocking. It does not work that way.

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NEP’s Bill Black’s Presentation at UMKC’s TedX

In the spirit of ideas worth spreading, TEDx is a program of local, self-organized events that bring people together to share a TED-like experience. At a TEDx event, TEDTalks video and live speakers combine to spark deep discussion and connection in a small group. These local, self-organized events are branded TEDx, where x = independently organized TED event. The TED Conference provides general guidance for the TEDx program, but individual TEDx events are self-organized.* (*Subject to certain rules and regulations)

Utopia, Dystopia and the Future of Work

By Dan Kervick

There has been a lot of discussion recently about the pace of automation and the impact of technology on the future of work. Many purport to see the dawning of a new robot future in which many, perhaps most, of today’s jobs will be performed by machines. This line of thought tends to spin off into one of two alternative directions, one bright and one dark: The brighter view is a kind of techno-utopianism that looks forward to a future in which formal human employment has become less important to our society, and in which we will all enjoy lives of fulsome leisure based on an equitable sharing of our robot-manufactured abundance. The darker outlook is a species of techno-dystopianism driven by fear of mass unemployment and the growth of a burgeoning and struggling underclass of unemployed former workers, displaced and excluded from the economic mainstream of their societies, and surviving on whatever handouts and pittances the economy’s owners are willing to give them to keep them docile.

Both of these contrasting visions of our robot future, however, share the idea that automation will lead to an overall reduction of formal human employment. While I suppose both futures are possible, we might ask why this shared vision has become so popular. After all, modern economies in the technologically developed world have seen tremendous growth in both wealth and productivity in recent centuries, but have generally managed to create many new forms of employment to replace the older forms as they were reduced, or as they disappeared altogether. Why shouldn’t this process continue indefinitely?

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The Financial Sector Is the Greatest Parasite in Human History

By Ben Strubel

Before I begin this article want to make the point that what I’m about to say doesn’t apply to everyone in the industry. While the average mutual fund, broker, wealth manager, and hedge fund charges high fees and delivers poor results it doesn’t apply to everyone. I know lots of good, honest hedge fund managers that charge reasonable fees. I know lots of wealth managers that act in their client’s best interest and don’t gouge them on fees. Unfortunately these are the exceptions rather than the rule.

Over the past year or so, the issue of rising income inequality in the United States (and even worldwide) has come front and center. Most of what I’ve read has focused on wages, union membership, unemployment, taxation, government subsidy, and executive pay issues.

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The Oppressive Free Lunch

By J.D. Alt

alt-lunchTrying your best to balance the Federal Budget with a limited number of Tax Dollars—and doing so while visibly displaying great compassion for your fellow citizens in the hope they might reelect you—requires some very special thinking skills. These unique skills of rational analysis and gentle compassion were on display recently when Congressman Paul Ryan gave a speech to the Conservative Political Action Conference laying the ground work for his forthcoming efforts to cut the deficit by “reforming” the welfare system.

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Trying to Hold a Serious Discussion about Ethics and Control Fraud with Deal Book via Twitter

By William K. Black

Twitter allows one to spread certain concise statements exceptionally quickly, but it is a vain effort to hold a serious and nuanced discussion via Twitter.  I offer my twitter exchanges with two of Deal Book’s financial reporters on the subject of the New York Times story discussing the Manhattan DA’s indictment of the former leaders of the failed Wall Street law firm Dewey & LeBoeuf as an example.

The indictment alleges facts that if true would demonstrate that they were running the firm as an accounting control fraud for several years before it collapsed.

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Deal Book Thinks Lawyers’ “Cardinal Rule” is to Advise CEOs how to Defraud with Impunity

By William K. Black
(Cross posted at Benzinga.com)

Overview and Background

The New York Times’ “Deal Book” continues its ethics-free treatment of the ethical collapse of the leaders of many of our most elite firms related to finance. Matthew Goldstein’s*  March 6, 2014 article is entitled “4 Accused in Law Firm Fraud Ignored a Maxim: Don’t Email.”

The article is about the indictment charging the leaders of one of finance’s leading law firms – Dewey & LeBoeuf – with securities fraud and larceny.

“The indictment paints a portrait of a law firm being run like a criminal enterprise. Mr. Vance said his office had already secured guilty pleas from seven other people who once worked for Dewey.”

Deal Book refuses to recognize control fraud even when the indictment describes a control fraud.  The indictment does not “paint a portrait of a law firm being run like a criminal enterprise.”  The indictment describes a criminal enterprise led by the partners controlling Dewey & LeBouef.  Deal Book still can’t bend its mind around the fact that seemingly legitimate firms make the best “weapons” for fraud.

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