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Friday, April 13, 2012

Maybe financial fraud is the only "industry" we have left

Every time Barack Obama makes a few of the right moves, he does something to remind liberals (real liberals) of why they should hate him. If you haven't read Matt Taibbi on Obama's JOBS act, do so now. (Incidentally, JOBS is an acronym for "Jumpstart Our Business Startups.")
Ostensibly, the law makes it easier for startup companies (particularly tech companies, whose lobbyists were a driving force behind its passage) to attract capital by, among other things, exempting them from independent accounting requirements for up to five years after they first begin selling shares in the stock market.

The law also rolls back rules designed to prevent bank analysts from talking up a stock just to win business, a practice that was so pervasive in the tech-boom years as to be almost industry standard.
Let that sink in. Obama is scuttling protective regulations that were in place during the Bush years. Who's the "socialist" now?
There's just no benefit that the JOBS Act brings to an honest startup company. In fact, it puts an honest company at a severe disadvantage, because now it has to compete against other, less scrupulous companies that can simply make their projections up on the backs of envelopes.
The JOBS Act seems like it will invite a replay of the disastrous tech-stock bubble of the late nineties...
Obviously, this act will unleash all sorts of shadowy investment schemes. Remember Jonathan Lebed and his pump-and-dump flim-flammery? Though he had gained an unsavory rep even as a teenager, Lebed still managed to use no less a venue than FOX News to push his National Inflation Association scam.

The JOBS Act is designed to Lebedize the economy.

I don't think that's an unintended consequence. I think that's the idea.

Maybe the powers-that-be have given up on the notion of a sustainable and steady economy based on manufactured products. For perhaps a quarter-century now, we've been lurching from one absurd, artificial boom to another. Obama can't fix that. Even if the necessary radical solutions were politically possible -- and they were, for a brief period in 2009 -- this guy ain't no FDR.

The best Obama can hope for is to kick the can down the road. Hence, the JOBS Act: Let's clear the way for yet another variation of tulip mania. A new bogus boom. Let's pump some money into the economy and make people feel good for a few years.

If the Dems are very lucky, the boom will happen on Obama's watch and the inevitable bust will occur on a Republican's watch. That'll be good for the brand name.

The funniest aspect of the whole thing? JOBS Act defenders think we no longer need cops on the economics beat because we now have -- I'm trying not to laugh as I write this, even though holding it in is painful -- Facebook.

(Excuse me while I burst into a fit of Frank-Gorshin-as-the-Riddler hysterics.)
While soliciting investment funds online has triggered fears of fraudulent schemes, the law’s backers said the greater availability of information through social media sites like Facebook would allow would-be investors to conduct their own background checks, making it difficult for such schemes to succeed.
I like the response offered by War Is A Crime:
The SEC long ago abandoned its regulatory mandate. Under financial industry insider Mary Schapiro, it's in safe hands. Her job just got easier. The bill eliminates SEC reporting requirements for enterprises with annual revenues up to $1 billion.
Their business model is grand theft. They're crime families, not legitimate enterprises. They make money by stealing it. They wreck economies, communities, and households. Corrupt politicians let them. They're bribed to go along. As bad as things are, they're getting worse.
This country's structural problem remains: We don't make anything. Wall Street won't rebuild our manufacturing base. They say they will, but they won't. The Streeters would rather make quick, big bucks selling cleverly packaged pieces of blue sky.

We can't go back to a makin' stuff economy without government intervention, and such intervention goes against our programming.

Other nations understand what a country must do to claw its way into the front ranks. Toyota would still be making nothing but looms -- freakin' looms -- if the firm had never received massive backing from the Japanese government in the '50s and '60s. In the '50s, conventional thinkers in Japan were aghast at the government's insistence on investment in automobiles, since everyone knew that Asia would never produce a car that people in the west wanted to buy. Fortunately for the Japanese, that "wisdom" was ignored. That's how Toyota became what it became.

The same story applies to all the other successful Asian concerns making autos and electronics. They didn't attain success by trotting down Ayn Avenue.

Asia had a great advantage: Friedman, Rand and Hayek didn't live there and weren't much read there. Japan and South Korea were not constrained by ideological correctness; they could do whatever worked. If we really want to destroy China, we should airlift in a billion copies of Atlas Shrugged, the greatest psychotoxin yet designed by the mind of man.

(Hm. Maybe spooks employed by our rivals have covertly funded the Ayn-mania currently besetting this country...? That scenario would explain much.)

In today's America, libertarians control the propaganda. The undisguised intent of libertarianism is to transform this nation into history's largest failed state, allowing the wealthiest of the wealthy to buy up whatever is left at fire sale prices. That's what the oligarchs did to Russia; that's what our own oligarchs plan to do here.
Comments:
You would be right, except for arms manufacturing and defense contracting (often the same thing). Those industries are booming, big time. The USA supplies much of the rest of the world with state of the art weaponry (some of our allies are in on this gravy train as well, of course......but no one does it like the USA).


So still only two industries left.
 
I have a bare pittance invested in a few penny stocks. I recently watched one investment go down 50% in value when someone bought less than 50 cents worth of stock at half price.

When I complained to my brokerage house and asked them to file a complaint on my behalf with the SEC, they said they would not do it.

I can understand brokerage houses not wanting to get involved in the minutiae of their client's stocks. However, when a BLATANT attempt is made to manipulate a stock, and I would suggest that a less than 50 cent stock purchase that probably cost 7 to 10 dollars to make is a blatant attempt to manipulate a stock's overall value, then investors are going to get screwed.
 
By the way, EXCELLENT article title.
 
It's true that the Japanese didn't read Rand; they read Drucker and Deming.
 
It's true that the Japanese didn't read Rand; they read Drucker and Deming.
 
None of you understand.

Bankers are your masters. They are not your masters because they are better than you. They are your masters because they paid for it and it is the natural order of things. That is the underlying mindset. Thats what you are fighting with.

Right now, banking is not paying. The banks are pretty much bust regardless of what they say. They need vast handouts from the government to continue to function. The two biggest handouts are the implicit guarantee from Washington, and the monetary policy of the Federal Reserve, which has moved interest rates to a place where the owners of savings get zero return on their savings from banks who get to use the money. So pensioners and savers are now being screwed to pay banks. You pay 4.375 for 30 year mortgage money right now. The investor who buys that mortgage recieves 3.2% or so. The banks are borrowing overnight money from the Federal Reserve at 0.25%. And the Fed has promised not to move rates up till at least 2014.

Its still not enough money. Bankers without money are nothing. So they need a way to make money. Its true that this JOBS act will enable gross financial fraud. However thats not why it is being sponsored. Its because without it, the "normal" financial fraud of selling stocks like Pets.com or Enron is impeded. So you have massively reduced the fee income accruing to the banks.

They want to start this type of business back up again to replace the income lost from trading and sales. I suppose the best way of saying it is that they want to re-enable frauds that we tolerated in the past, but the legislation as it stands will enable a whole bunch of even more extreme fraud.

Remember this when you are tempted to invest in new deals over the next 5 years. Insiders will know which are the good ones and which are the bad ones. You wont. So best bet is to make sure you put no money into any of them.

If you dont like the game just dont play it. Its rigged. If you play you will lose.

Harry
 
Harry is absolutely correct--the game is rigged, has been rigged for quite some time.

Bill Black recently referred to the fraud and corruption in our financial system as 'green slime,' akin to the pink slime added to ground beef, a filler made from animal parts once used in dog food. Pink slime needs to be treated with ammonia to kill the bacteria. Green slime is loaded with similar toxic agents [think liars's loans and CDOs]. Or just think fraud. The JOBS act simply makes it easier to kick the can down the road, take as many investors for a ride as possible and call it good.

It has the blessings of the Government. On both sides of the aisle. And President Obama's big fat signature. We're being sold off--piece by piece by piece. And supporters compare this Administration to FDR's? What a cruel, cynical joke.

Joe's title is absolutely accurate: Financial fraud 'is' the only industry in town.

Peggysue
 
Grr, how annoying. Rolling Stone is oversized for my browser.
No matter how I resize the screen,I can't read the first word or two of each line in Taibbi's article. And it started out so promising, with his admitting he's an idiobot, yet again. I even tried a cached version, hoping it would be a screenshot or something I could read,but to no avail. If anyone knows where it's reproduced in full, please link. Thanks. I've only found excerpts thus far.
 
Joseph....have you heard of ALEC? Apparently they have been working for a long time to get "conservative" bills passed across the nation in concert...and their roots are Libertarian. They've just been outed and some corporations, such as Pepsi, quit funding them, while others still need pressuring...forgive me if you've already written about it. I may be having a premature senior moment not remembering anything about ALEC...they apparently are connected to the Stand Your Ground bill and are heavily involved in the disenfranchising "voter ID" bills.
 
Dakinkat has done some remarkably good work on ALEC. I can't recall if I have ever written about it -- you'd be surprised how much of my own stuff comes as a surprise to me these days!

I'm thinking of making a full-length documentary titled "LIBERTARIANS WANT TO KILL YOU."

Catchy...?

I'll really do it, if...

1. The project I'm working on proves profitable enough to buy a better camera.

2. I can score some good interviews (within the DC/Balmer area)...

3. There's an audience!

Do you have any ideas as to how I can make sure that such a thing gets in front of a goodly number of eyeballs?
 
Great post, especially for underlining that Facebook has become a structural part of modern 'advanced' negative-growth western capitalism in the narrow 'economic' sense as well as the broader 'economic' sense that includes the culture.

The young'uns think carrying trackers is cool. Can't be long before they all swarm in to get chip-implanted, shouting and pointing at people in the street who don't. (Invasion of the Bodysnatchers, for real).

Did you get that stuff about how mobile-phone users get tracked around the floors of supermarkets in the UK? No shit.

You should have a look at the company (now owned by HP) called 'Autonomy', and their research into fluid-dynamics-based social engineering.
 
On All Things Considered this evening in the All Tech Considered segment, a guest named Steve Blank (identified as a serial entrepreneur and adjunct professor at Columbia Business School) readily agreed that we are in a tech bubble. However, he also opined that tech bubbles are different from other sorts of bubbles and that this bubble will be great for the economy. Except, I suppose, for the poor saps caught on the wrong side of the bursting. I just hope they include a lot of Masters of the Universe this time. Take a listen or read the transcript at http://tinyurl.com/7eezasv.
 
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