Back to Marx in a while:

But this is part of the unfortunate case:

Dec. 31 (Bloomberg) -- Bond dealers and hedge funds that fail to complete trades in Treasury securities face a penalty of as much as 3 percent on the proceeds of transactions, according to a Federal Reserve-backed industry code to be implemented in the next six months.

The plan, which strengthens official oversight of trading, will be unveiled as soon as Jan. 5, said Thomas Wipf, chairman of the Treasury Market Practices Group and the head of institutional securities group financing at Morgan Stanley in New York.

“It seems quite obvious that the Fed and Treasury cannot and will not accept the status quo for much longer,” Wipf said in an interview.

Demand for Treasuries is so great that investors are lending cash for next to nothing to obtain the securities as collateral through repurchase agreements, or so-called repos. The problem is market participants haven’t always delivered the bonds, causing “fails” to exceed $5 trillion at their peak, according to the New York Fed.

Because the penalties will be imposed across the government debt market, unregulated investors like hedge funds will be held to the same standard as banks and bond dealers. Failures impair trading in a range of debt markets, exacerbating the worst credit crisis in 70 years. The Treasury Department needs to keep the bond market working smoothly to meet the government’s financing needs, which may reach $2 trillion next year, according to Goldman Sachs Group Inc. economists.

Near Zero
The Fed this month lowered its target rate for overnight loans between banks to between zero and 0.25 percent. Rates on repos in the market for borrowing and lending government debt opened at 0.15 percent today for general collateral. Securities that can be borrowed at interest rates close to the Fed’s target rate are called general collateral.

“The fact that participants can choose to fail when low rates distort the incentives is unacceptable,” Wipf said.

The Treasury Market Practices Group, which the New York Fed helped assemble in 2007, includes managers, lawyers and compliance officers from bond dealers, banks and institutional investors.

Treasury Department and Fed officials take part in its discussions. The Fixed-Income Clearing Corp., a unit of the New York-based Depository Trust & Clearing Corp. that nets and settles government securities trades among bond dealers, will help enforce the penalties.

Impact of Low Rates

With interest rates so low, bond market participants have less incentive to solve settlement problems because they’re forgoing less return than usual on a failed trade.

The Practices Group, which released a draft of the guidelines in November, will also address margin requirements and conditions that would require cash settlement of failed trades. The recommendations also deal with trade netting, a method of consolidating trades that is an important part of untangling unsettled transactions.

“We appreciate the new policies and guidelines,” Treasury Assistant Secretary Karthik Ramanathan said in an e-mail to Bloomberg News on Dec. 29. When failed trades surged to a record in October, he put bond markets on notice that the Treasury would step in unless the industry took quick action.

“We clearly stated that private sector participants should take additional steps from a monitoring, compliance and supervisory perspective to ensure that settlement fails do not reach levels that impact financing markets,” Ramanathan said.

Lehman Aftermath

Treasury officials have voiced concern about failed trades since at least 2003. Fails climbed in the weeks following the Sept. 15 collapse of Lehman Brothers Holdings Inc. as demand for the relative safety of Treasuries increased.

Failures to deliver or receive securities rose to a record $5.311 trillion in the week ended Oct. 22. While the amount fell to $891 billion by Dec. 17, that’s still above the average of $165 billion before credit markets seized up in August of last year, according to Fed data dating to 1990.
“This is one of those issues that festered a while,” said Dino Kos, managing director at Portales Partners LLC, New York, and the former manager of open market operations at the New York Fed. “It’s time to stop dithering and get on with it.”

“Interest rates are essentially zero, and they’re going to stay here for a really long time,” Kos said. “Market efficiency will degrade with time if this situation is not addressed.”

Volumes Decline

Primary dealers’ average daily trading volume fell to $356.4 billion in the week ended Dec. 17, the smallest amount of government securities changing hands in about a year, according to Bloomberg data.

The Fixed-Income Clearing Corp. told customers last week that it expects to adopt the new policies in the second quarter of next year. Such a move would require approval by its regulator, the Securities and Exchange Commission.

FICC’s step puts dealers on the hook for all failed trades, giving them an incentive to pass the charges through to investors. In October, when fails peaked, members would have received net penalties of $110 million, with $14.8 million the biggest charge to a single firm, FICC said.
“A member will be responsible for the fails charge regardless of whether the fail to deliver was ultimately caused by the member’s non-FICC member counterparty,” the clearing group said in a note to members.

Hedge funds say they’re already affected by failed trades, noting fewer opportunities to trade with foreign investors reluctant to lend securities while fails are high.

“It’s a counterparty risk they just don’t want to take,” said Mark Spindel, chief portfolio manager at Potomac River Capital LLC, a Washington-based hedge fund that trades and invests in Treasuries.

Hedge funds doubled their share of U.S. bond trading to 30 percent in the 12 months through April 2007, according to the most recent data from Greenwich, Connecticut-based research firm Greenwich Associates.

http://www.bloomberg.com/apps/news?pid=20601087&sid=aJQOEPb4pCYg&refer=home

An unfortunate case(16)

“Well, one might say that because J.D., in virtue of his work, has command over who is to get paid, is therefore working in order to own.”
“Yes he does have command, but he is not working in order to own..”
“Well, but, in the sense that Marx is speaking, he is.”
“What sense is that?”
“The sense that is derived by virtue of his work or by its very nature in our society.”
“Stop right there. You’re assuming what you set out to prove.”
“How?”
“You’re stipulating a sense that makes you correct. I don’t have to stipulate any sense. I’m just talking about my case.You’re not talking about my case.”
“What? Of course I am. I’m talking about the case in virtue of what Marx says.”
“It’s the “in virtue of” that is the problem. I don’t have to talk about it that way to talk about it. The case stands on its own.”
“What?”
“Look, you started out with ‘one might say.’”
“Yes.”
“For my case, as I presented it, it is not an alternative, so I am not going to entertain it.”
“Umm.”
“And you certainly did not say I had to say it, because you offered no argument for that. Clearly there is none, for I don’t have to say it Marx’s way. In fact this case stood just fine on its own before Marx ever started writing. Your Marx did not discover something about it, he just twisted it a certain way.”
“Well…”
“Look, I could restate the case in biblical terms and call it a case of charity or helping others.”
“In terms of the opiate of the people.”
“So you say. I could also restate it in utilitarian terms, following Bentham or Mill or someone else, depending on what sort of act or rule utilitarianism I want to use.”
“Their’s is the philosophical foundation of the civil society that needs to be replaced.”
“So you say. I just talked about my case as it is, and did not let a political economy get off the ground with it.”

An unfortunate case(15)

What would Marx say about a case like this Madoff case? It is a case involving private property, so it is a case which has a presupposition that man produces only in order to own. From Writings of the young Marx on Philosophy and Society, p. 277., trans. Loyd D. Easton and Kurt H. Guddat, Anchor, 1967:

“It is the basic presupposition of private property that man produces only in order to own. The purpose of production is to own. It not only has a useful purpose; it has a selfish purpose. Man only produces in order to own something for himself…”

Look at how philosophy(here Marxian) ties into something complex like the Madoff case and tries to grab an entire hold on it, by saying it has a presupposition in virture of it being a case of private property.

If it can just pin that presupposition on the case, it can ignore the case, or treat it in some other manner to its liking, consistent somehow with the presupposition. What is packed into that presupposition so we can note consistency? We don’t know. We’d have to read on.

But we won’t.

Consider this case of a bidder and offerer:

“I’ll give you 45 dollars for it right now.”
“Make it 55.”
“50.”
“Done.”

Is there a presupposition in this case that the bidder has $50? Certainly. What is packed into the presupposition? Nothing. If the bidder has an empty pocket, then problems arise. But nothing is packed into the presupposition.

But here is Marx with a presupposition that has to be spelled out in pages and pages. Moreover, he has the power to say what is packed in. They are his terms: Alienation, objectification of immediate selfish needs, etc. The list goes on.

In the instant case, the bidder is either good for the money or not. He does not get to say what is packed into the presupposition. Either a trade is made, or the bidder is a liar or an incompetent who knows his pocket poorly. But there is nothing else to say. There is no expansion of a presupposition in either case.

How does philosophy get away with what it does and the first person(the bidder) does not? What is Marx good for? More pages. This is because no one cuts Marx off. He is simply writing in a study somewhere. No one ever approached him with a case like this:

“Who are you working for today, J.D?”
“My Aunt Janie.”
“So you want the check made out to her?”
“Right.”
“How about tomorrow?”
“Put that one in Johnny’s name.”

An unfortunate case(14)

Finally, a more detailed story emerges about this distraught fellow:

PARIS (AP) -- Rene-Thierry Magon de la Villehuchet saw his fortune and his loved ones' money disappear along with his clients' when he lost $1.4 billion he had invested with Bernard Madoff, the French financier's brother said.

Magon de la Villehuchet, 65, was found dead at his desk in New York on Tuesday, both of his wrists slashed and a bottle of pills nearby.

His brother said Magon de La Villehuchet invested virtually all his own funds, along with money from friends and family, with Madoff, who was arrested Dec. 11 and allegedly told FBI agents he had masterminded a $50 billion fraud.

Magon de la Villehuchet "invested his own fortune," up to several tens of millions of dollars, his brother Bertrand Magon de la Villehuchet told The Associated Press on Friday.

"He was totally ruined," and so was his business partner Patrick Littaye, Bertrand said in a telephone interview from his home on Paris' chic Place des Vosges.

"At first he thought he'd be able to get the money back. He was very determined. Gradually he realized he wouldn't be able to," Bertrand said.

"My brother was a man of simple tastes," Bertrand said. "He was a very modest man."

"A lot is being said about him, like that he flew in by helicopter to his chateau -- that's not true," said Bertrand, 74.

An avid sailor, the younger Magon de la Villehuchet had begun investing with Madoff "three or four years ago," his brother said.

"He trusted Madoff completely," Bertrand said. The two men had been introduced by Littaye, Rene-Thierry's partner in the fund he ran, Bertrand said. Rene-Thierry raised the money he placed with Madoff from friends and family, including his brother.

Bertrand said he's lost 20 percent of his savings in the scam, which he said was much less than what his brother lost.

Contrary to what some analysts say now, Bertrand said the returns on his investment with Madoff were not too good to be true.

"Over four years my gain was 17 percent, that's not crazy," he said.

The Frenchman's fund was among the biggest losers in the Madoff fraud, and one of a handful to get taken for more than $1 billion.

Other famous names reported to have lost their investment with Magon de la Villehuchet include L'Oreal cosmetic empire heiress Lilliane Bettencourt, listed by Forbes as the world's richest woman. Bertrand Magon de la Villehuchet said he couldn't confirm the names of any of his brother's investors outside the family.

Bertrand said he spoke with his brother almost every day. The last time they met was in Paris in October, Bertrand said.

Bertrand said he'll be joining class action lawsuits against Madoff and the Securities and Exchange Commission, Wall Street's regulator.

The Magon de la Villehuchet family traces the origins of its wealth to the 17th century, when Rene-Thierry and Bertrand's ancestors made a fortune in shipping, said Georges le Gorgeu, a local historian in Plouer-sur-Rance, the town in Brittany where the Magon de la Villehuchet family has owned a chateau for several hundred years.

The family was so rich and prominent that it loaned money to France's Sun King, Louis XIV, who ennobled them, le Gorgeu said. Many of Rene-Thierry and Bertrand's aristocratic ancestors died on the guillotine during the French revolution, le Gorgeu said.

Rene-Thierry, who was married and had one sister, spent every August at the chateau, his brother said. In recent years he'd invested a considerable sum to renovate the chateau and protect its archives, which date back to 1200, le Gorgeu said.

http://biz.yahoo.com/ap/081226/france_madoff_investor_suicide.html


Words don't go where this one went.

Who had the power here and did not use it? Stirling dug this up on the Agonist.

http://agonist.org/stirling_newberry/20081222/office_of_thrift_supervision_removes_regulator_over_indy_mac_fraud#new

What does a theory of power do with this? The regulator was weak and did not do his job. Aside from a payoff, of which there is no suggestion, what else is there to say?

An unfortunate case(13)

There are far too many theories of power. It is difficult enough to describe working relationships to see who has the power in them. Look again at the case of Madoff and this article from Bloomberg:

By David Scheer

Dec. 19 (Bloomberg) -- U.S. regulators, trying to unravel the breadth of Bernard Madoff’s alleged $50 billion fraud, have found evidence of misconduct stretching back to at least the 1970s, two people familiar with the inquiry said.

Madoff’s investment advisory business, where he allegedly operated the biggest Ponzi scheme in history, is now estimated to have had more than 4,000 customers, the people said, declining to be identified because the inquiry isn’t public. An advisory unit Madoff registered with the Securities and Exchange Commission claimed in a January filing to have no more than 25 clients. People familiar with the investigation said Dec. 14 he also ran a secret unregistered business.

The Madoff case is fueling efforts by President-elect Barack Obama and Congress to overhaul oversight of brokerages and investment advisers. The SEC will likely also examine whether hedge funds investing with Madoff performed the due diligence promised to clients, two people familiar with the agency’s concerns said.

“The key question to us is to find out why the SEC didn’t get into it more” before the scheme collapsed this month, House Financial Services Committee Chairman Barney Frank, a Massachusetts Democrat, said in an interview. “It’s clear we need to improve regulation, and that will be one of the major questions we will focus on early next year.”

SEC spokesman John Nester declined to comment.

Madoff’s attorney, Ira “Ike” Sorkin of Dickstein Shapiro in New York, wasn’t available to comment. In an interview yesterday, Sorkin said Madoff’s company is “cooperating fully with the government.”

Earlier Misconduct

The SEC, combing through records from Bernard L. Madoff Investment Securities LLC in New York, hasn’t developed a complete assessment of the earlier misconduct or determined how the alleged Ponzi scheme evolved, one of the people familiar with the case said. They also haven’t concluded how the scheme intertwined, if at all, with sales of unregistered securities targeted in a 1992 SEC lawsuit. Proceeds from those sales were invested with Madoff, who gave documents to an auditor in that case and wasn’t accused of wrongdoing, court records show.

Madoff was arrested Dec. 11 and charged with a single count of securities fraud. In court documents, prosecutors and the SEC said he admitted his investment advisory business was “all just one big lie.” He hasn’t entered a plea in the case.

SEC Chairman Christopher Cox said Dec. 16 the agency failed to act on “credible, specific” allegations about Madoff dating back at least to 1999. Madoff had kept several sets of books, and provided misinformation about his advisory business to investors and regulators, Cox noted.

Avellino & Bienes

In its 1992 lawsuit, the SEC claimed accountants Frank Avellino and Michael Bienes began raising money in 1962 and placing it with Madoff while promising investors returns of 13.5 percent to 20 percent, according to court documents obtained by Bloomberg. As of October 1992, their firm, Avellino & Bienes, had issued $441 million in unregistered notes to 3,200 people and entities, court papers say. They invested solely with Madoff, who opened his business in 1960.

Avellino and Bienes, who were represented by Sorkin, agreed in November 1992 to shut down their business and reimburse clients. Lee Richards, the court-appointed trustee over Avellino & Bienes, hired auditors Price Waterhouse to scrutinize the books of the firm, which operated as an unregistered investment company, according to the SEC.

Few Records

Price Waterhouse said Avellino & Bienes kept few records and asked Madoff to provide copies of account statements issued to the firm, which he did, court records show. Richards, who was named receiver for Madoff’s foreign units on Dec. 12, didn’t investigate Madoff while overseeing Avellino & Bienes, the records show.

Avellino didn’t return calls to his homes in New York, Florida, and Nantucket, Massachusetts. Bienes didn’t return a message left with his housekeeper.

Madoff’s case will be at the center of planned congressional hearings on reforming the SEC, a senior Senate official said this week, declining to be identified. Obama said yesterday the scandal “has reminded us yet again of how badly reform is needed when it comes to the rules and regulations that govern our markets.”

Any new rules may stir privacy concerns among clients of broker-dealers and money managers, said David Becker, a former SEC general counsel.

“It’s very easy to detect Ponzi schemes once we suspect that a Ponzi scheme exists. It requires confirming account balances with customers,” said Becker, who’s now in private practice at Cleary Gottlieb Steen & Hamilton in Washington. “However, customers don’t really like it when the federal government calls them up and asks them what’s in their account.”

http://bloomberg.com/apps/news?pid=20601087&sid=a.47mLdmtFTE

In an abstract sense, Obama and Frank have the power in the new government to, shall we say, “correct” the current regulatory shortfall in this case. But look what happened, at least as the article puts it so far, in the actual handling of the Madoff case in the past.

A couple of accountants appear to have been running a scheme, selling unregistered securities and taking the proceeds to invest in Madoff. Avellino and Bienes, the accountants, did this for thirty years, beginning in 1962 and closing the scheme in 1992. The article says that A&B reimbursed their clients upon dissolution.

With what? Madoff accounts would have been all that they had. They kept few records. The receiver relied on Madoff’s records since Price Waterhouse asked Madoff for them to clarify what A&B held. But PW did not question Madoff’s records, and the receiver did not investigate Madoff, as the article says.

So one scheme’s records propped up another here. Madoff propped up A&B. But was that clear at the time? Was there any reason to question Madoff’s records? Could PW have done it anyway? Public accounting firms may discover fraud in an audit, but their job is not to look for it. There are fraud specialists that do that. Generally they are not hired unless fraud is suspected. Could the SEC have entered in here? Was there reason for them to?

Sorkin is the attorney for both A&B and Madoff. Did he have any power in this case to effect the outcome? How about Price Waterhouse? Did it? How about the receiver? How about the SEC, which got the investigation started in the first place? They all had power to do certain things. It will not be clear whether any of this power mattered until much more comes to light.

So could a theory of power apply here? Possibly, but why not look at the way things worked instead? Look at how Obama’s remark falls flat, when seen from the point of view of how things worked here.

Repeating the last part of the article:

‘Madoff’s case will be at the center of planned congressional hearings on reforming the SEC, a senior Senate official said this week, declining to be identified. Obama said yesterday the scandal “has reminded us yet again of how badly reform is needed when it comes to the rules and regulations that govern our markets.”

‘Any new rules may stir privacy concerns among clients of broker-dealers and money managers, said David Becker, a former SEC general counsel.

‘“It’s very easy to detect Ponzi schemes once we suspect that a Ponzi scheme exists. It requires confirming account balances with customers,” said Becker, who’s now in private practice at Cleary Gottlieb Steen & Hamilton in Washington. “However, customers don’t really like it when the federal government calls them up and asks them what’s in their account.”’

Confirming a customer’s account balance in a Ponzi scheme is itself difficult. Even if you could call him up, he would give the balance that he was given by the scheme.

So Becker’s comment falls a little flat also.

What I am interested in is who has what power now in this fluid situation we have been witnessing in the economy and markets. And who by virtue of his power is likely to make matters worse, given the general lack of insight into just this Madoff case.

An unfortunate case(12)

The activity of organizing, as our new president is said to have done, has a good deal to it. In the previous stories, labor had been organized by the UEW. Shareholders of Madoff were not but are now being organized around litigations or poverty lines, or lines to pawn shops, etc. In their case an event has brought about their organization. In the case of the Republic workers, they organized prior to the event in question.

In various cases there are various principles of organization. A bus line is one order. A labor union is another. There is not much power or influence in the first. There can be quite a bit in the second.

Marx made quite a big to-do about the atomization of labor in his early work. Workers were separated from each other in the sense that they had little understanding of themselves as members of a group. They had to develop a class consciousness in order to organize to get better working conditions and pay. Ultimately, for Marx, this organization made for a classless society in which there was no private property.

Revolutionaries had to organize them, for they could see labor’s potential as a class, then still further, society as classless. Labor could not. ‘Labor could not’ is one of those “function” statements. The function of labor at the time of Marx was its work. A further function had to be shown it so it could do more than work. It needed to work in an organized fashion, not organized by management(or capital, as Marx saw it), but by itself, so it would have power.

Today, I see such confusion that I am not sure that there is a class that needs the self-awareness that comes from being organized. When I see a complete failure of every participant in one industry-mortgages- from borrower, to lender, to securitizer, to syndicator, to regulator, to money manager, etc., I fear this is a synecdoche for much more in other parts of our politic.

This is to say that corruption was so thorough in the industry that for some time people did not know what was going on, and events caught them by surprise. The truth has still to emerge, in many ways. Who made the loans, who approved them, how it was that accountants did not see "going concern" problems, etc. The questions are endless.

I think it may be same in other industries such as insurance, for example.

I’ve never known a revolutionary who sought truth. The ones I knew all sought power. But truth is what we need before we have effective change(and that with a lower case 'c'.)

I don't see much truth coming out of the current situation.

An unfortunate case(11)

That said, it would appear that SIPC intends to honor the small investor in the scam.

“Meanwhile, a federal judge on Monday threw a lifesaver to investors who may have been duped, saying they need the protection of a special government reserve fund set up to help investors at failed brokerage firms. U.S. District Judge Louis L. Stanton ordered that clients of Madoff's private investment business seek relief under a federal statute created to rescue cheated investors. Stanton also ordered that business be liquidated under the jurisdiction of a bankruptcy court and named attorney Irvin H. Picard as trustee to oversee that process. Stanton signed the order after the Securities Investor Protection Corporation asked that steps be taken to protect investors in the scheme, which has ensnared several major banks and prominent figures as victims and could result in as much as $50 billion in losses. Congress created the SIPC in 1970 to protect investors when a brokerage firm fails and cash and securities are missing from accounts. Funds can be used to satisfy the remaining claims of each customer up to a maximum of $500,000. The figure includes a maximum of up to $100,000 on claims for cash.”

http://wcbstv.com/business/madoff.ponzi.scheme.2.888036.html

An unfortunate case(10)

Another article from Labor Notes shows the difficulties in organizing labor at big box retailers.
http://labornotes.org/node/708
Note the importance of a prior community:
“To win in retail, unions must work with local communities, building new coalitions and joining existing ones. Particularly in immigrant communities, working with coalitions that are already organizing increases the visibility and credibility of a union organizing campaign.
Community coalitions can also help decrease the intense feelings of isolation and powerlessness with which many retail workers struggle. In addition, by involving the community in a campaign, unions can show the employer that they have the community’s support and respect.”

To organize shareholders is even more difficult. You’re entitled to a shareholder list, but you have to spend hours trying to contact them to explain how you want them to vote on an issue that is often esoteric, such as management compensation with its parachutes and options. You have to explain the work of boards and audit committees. You may find easy ears at institutions who already know the issues, but in many situations where institutional ownership is low, conviction is difficult to develop.

Management is also just as devious with shareholders as it is with labor. Its proposals are often unclear, written in abstract legal and management terms that are hard to tie to projections of results of proposed corporate change. A shareholder today can vote instantaneously by selling his shares, avoiding the hundred-plus page proposals of a force in opposition to management. If he is uncomfortable with one company, he can find others in the same sector that are not likely to be roiled by governance issues. The worker has no simple, similar exit strategy. He has, however, a more simple, concrete situation.

I believe labor will ultimately get a bit of an upper hand, if the economy stays sluggish, especially in cases in which shareholders have had their voices diminished by government investment and guarantees. Consider the commercial paper market. What might be the price of a U.S. Treasury guarantee of commercial paper?
Walmart had 9 Billion of such paper on 10/31/07, when the market was beginning to seize up. The new government has a pro-labor commitment. There may be unexpected quid pro quos in this context after its inauguration.

http://www.secinfo.com/d35n6.u5.b.htm

We are beginning to see this in subtle ways. Look at the tone of the articles on the two cases. Look as well at the result: immedate change in the case of the Republic workers and even sympathy from the bank. The arrangement between the bank and the company seems to have been set aside to provide the loans for severance and vacation pay. Here a property based arrangement has been set aside.

http://www.iww.org/en/node/4498

The Madoff investors, however, are either still rich or formerly rich, neither of which can be said of the Republic labor force. The courts will grind for them in a forum where property law is primary, for everyone there will be( or will have been )propertied.

Quite a family biz:

Dec. 17 (Bloomberg) -- Ruth Madoff, the 67-year-old wife of alleged fraud mastermind Bernard Madoff, is being investigated by U.S. regulators over whether she helped maintain secret records used in a $50 billion Ponzi scheme, a person familiar with the matter said.

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=accRgQ_2s29o

And on family, money, class and Palm Beach:

‘You’re Finished’
Ruth Madoff, who also has a master of science degree in nutrition from New York University, co-edited a cookbook in 1996 called “The Great Chefs of America Cook Kosher.” The book contains recipes for kosher dishes by well-known chefs, such as Daniel Boulud and Wolfgang Puck.
The couple has two sons -- Mark, 44, who graduated from the University of Michigan in Ann Arbor in 1986, and Andrew, 42, who graduated from the University of Pennsylvania in Philadelphia in 1988. The family was very close, according to a person who knows the Madoffs, and both boys went to work at their father’s firm after graduating from college. Madoff’s brother, Peter, also worked at the firm, as chief compliance officer.
Mark and Andrew have both lost millions of dollars, the person said, and they haven’t talked to their father since his arrest.
There are plenty of people in Palm Beach and elsewhere who would like to talk to Madoff, if only to find out how everything could have gone up in smoke.
“This town isn’t about class or culture,” said Laurence Leamer, a Palm Beach resident since 1994 and author of “Madness Under the Royal Palms: Love and Death Behind the Gates of Palm Beach,” which will be published in January. “This town is about money. Bernie was revered because he had money. If you lose your money, you’re finished.”

http://www.bloomberg.com/apps/news?pid=newsarchive&sid=aQv4Kmx.cs78

An unfortunate case(9)

Because of what is noted prior, it seems that it should be easier to organize workers; at least you can know them before you begin to organize them. But look at the effort to which WalMart has had to go to prevent union organization:

From a WalMart handbook:

“Staying union free is a full-time commitment. Unless union prevention is a goal equal to other objectives within an organization, the goal will usually not be attained. The commitment to stay union free must exist at all levels of management--from the Chairperson of the "Board" down to the front-line manager. Therefore, no one in management is immune to carrying his or her "own weight" in the union prevention effort. The entire management staff should fully comprehend and appreciate exactly what is expected of their individual efforts to meet the union free objective.... Unless each member of management is willing to spend the necessary time, effort, energy, and money, it will not be accomplished. The time involved is...365 days per year....”

Then the commentary from the 2004 Nation article:

“This admonition comes from a handbook Wal-Mart distributes to managers, and gives an idea of the passion and vision behind Wal-Mart's unionbusting project. The $259 billion retail behemoth that has become a defining feature of the American landscape has also profoundly altered labor politics, deploying ever more creative and ruthless tactics to suppress the right to organize, while driving down wages and benefits in the retail industry and beyond…”
‘It would be difficult to exaggerate the magnitude of this challenge. Wal-Mart's rhetoric is supported by diligent practice. The company screens out potential union supporters through its hiring process: In addition to excluding those with union histories, the company also administers personality tests to weed out those likely to be sympathetic to unions, and offers managers tips on how to spot such people.
The same handbook, which was given to management in a Wal-Mart distribution center in Greencastle, Indiana, urged managers to be wary of certain union-friendly types, including "the Cause-Oriented Associate," who in high school "led demonstrations against everything from 'red dye' to 'ban the bomb.' He once took a trip to India to visit his personal 'guru.'" Managers are also encouraged to avoid the "Overly-Qualified Associate...a Ph.D operating a grinding machine or a former accountant sweeping the floor.... This type of associate includes the associate who has formerly made substantially more money with other employers." ‘
http://www.thenation.com/doc/20040628/featherstone

WalMart wants to know its workers before its workers know its workers.

An unfortunate case(8)

Frauds of this kind are extraordinary. They bring people together who are generally not the biblically meek. Their suffering, largely financial, does not usually bring humility with it. Their money, after all, is what separates them from others, certainly from most of us who work for a living. They don’t have to do what we do. Or having already done it, they have retired well and don’t have to worry about getting a mere pension check and making sure there is enough to pay the bills.

There are some exceptions to this idea of separation by money in the articles cited: friends who were able to join an elite investing group, country club members in Florida who played golf together. Some camaraderie in money. Also some have been wiped out and are just beginning to worry about landing squarely in the middle class or worse, a kind of togetherness that they had not envisioned.

But most will tend to converge reluctantly. They do not know each other. And they’d rather not. In ordinary circumstances there’s no reason to. In our society, money is private.Why meet with others over it unless you have business with them? There is to be no storming of the Bastille here.

To have capital with Madoff is not like having a job at Republic. In the first case, you’re mostly an account number. In the second case, you will work side by side with someone.

There are relatively easy ways to organize those at Republic. There are people you know, who know each other, prior to losing work. If you want to call them a class, you can say more about them than that they work at Republic. You often know what they do. The cars they drive.What shift they work. You know children they may bring to company functions. There may be sports leagues in which they are involved. Etc.

The case of Madoff will have a class action lawsuit, a lead witness or two, who may get to know each other, the remainder will be in obscure recesses reading motions, if they follow their own cases, possibly showing up at trial if there is one. Capital generally does not bring people together the way work does.

Compare

“Did you ever know Old Man Jones?”
“Yeah, I worked with the guy on the T&P docks down below the underpass off Stemmons.”

with

“Did you ever know Old Man Jones?”
“Yeah, we had accounts at Smith Barney.”

Unless the latter means something like ‘I met him for coffee at the downtown office and watched the tape with him’, it is not clear what the remark could mean. If I memorized the telephone book and knew his street, address and phone number, would I know him? Neither more nor less than by knowing we had accounts at Smith Barney.

Prior to their loss there is no class of Madoffians. Why make one up? Post loss, the class of people invested at Madoff, if you want to call them that, will come to some knowledge of itself, largely as a list of names and addresses in an attorney’s office and on court documents. It will come to know itself in the press. However, it has little, if any, community to organize here. It is largely a collection of facts to be reported and tallied in various forums.

An unfortunate case (7)


This is turning into quite a case:

NEW YORK (AP) -- The list of investors who say they were duped in one of Wall Street's biggest Ponzi schemes is growing, snaring some of the world's biggest banking institutions and hedge funds, the super rich and the famous, pensioners and charities.

The alleged victims who sunk cash into veteran Wall Street money manager Bernard Madoff's investment pool include real estate magnate Mortimer Zuckerman, the foundation of Nobel laureate Elie Wiesel, and a charity of movie director Steven Spielberg, according to the Wall Street Journal.

Among the world's biggest banking institutions, Britain's HSBC Holdings PLC, Royal Bank of Scotland Group PLC and Man Group PLC, Spain's Grupo Santander SA, France's BNP Paribas and Japan's Nomura Holdings all reported that they had fallen victim to Madoff's alleged $50 billion Ponzi scheme.

The 70-year-old Madoff (MAY-doff), well respected in the investment community after serving as chairman of the Nasdaq Stock Market, was arrested Thursday in what prosecutors say was a $50 billion scheme to defraud investors. Some investors claim they've been wiped out, while others are still likely to come forward.

"There were a lot of very sophisticated people who were duped, and that happens a great deal when you've had somebody decide to be unscrupulous," said Harvey Pitt, a former chairman of the Securities and Exchange Commission, a regulator in charge of monitoring investment funds like the one Madoff operated.

The extent of the potential damage prompted a leading fund manager in London to lash out at U.S. regulators for failing to detect the fraud earlier.

"I think now it is very difficult for people to invest in things that are meant to be regulated in America, because they haven fallen down in the job," Nicola Horlick, the manager of Bramdean Alternatives, which has 9 percent of its funds invested in Madoff's scheme, told the British Broadcasting Corp.

"All through the credit crunch this has been apparent," Horlick added. "This is the biggest financial scandal, probably, in the history of the markets."

Among U.S. investors, the Boston-based Robert I. Lappin Charitable Foundation, a charity that financed trips for Jewish youth to Israel, sacked its staff after revealing that the money for its operations was invested with Madoff.

New Jersey Sen. Frank Lautenberg, one of the wealthiest members of the Senate, entrusted his family's charitable foundation to Madoff. Lautenberg's attorney, Michael Griffinger, said they weren't yet sure the extent of the foundation's losses, but that the bulk of its investments had been handled by Madoff.

Lautenberg's foundation handed out more than $765,000 to at least 100 recipients in 2006, according to the most recent listing on Guidestar, which tracks charitable organization filings.

The foundation helps support a variety of religious, educational, civic and arts organizations in New Jersey and elsewhere, and its contributions range from a gift of than $300,000 to the United Jewish Communities of MetroWest New Jersey to a $2,000 donation to a children's program at the Hackensack Medical Center.

Reports from Florida to Minnesota included profiles of ordinary investors who gave Madoff their money. Some had been friends with him for decades, others were able to invest because they were a friend of a friend. They told stories of losing everything from $40,000 to an entire nest egg worth well over $1 million.

They join a list of more powerful investors that have come forward, all worried about the extent of their losses. The roster of names include former Philadelphia Eagles owner Norman Braman, New York Mets owner Fred Wilpon and J. Ezra Merkin, the chairman of GMAC Financial Services, among others.

The Wall Street Journal, citing a person familiar with the matter, said Mortimer Zuckerman, the chairman of real estate firm Boston Properties and owner of the New York Daily News and U.S. News & World Report, had significant exposure through a fund that invested substantially all of its assets with Madoff...

On it goes.

http://biz.yahoo.com/ap/081215/wall_street_arrest.html

An unfortunate case(6)


“The case of Madoff is another unfortunate one. It is a rather long reach to tie this case with the prior case of Republic. But while each case is quite different, each speaks to a kind of failure in regard for property “

“A particular legal failure, specifically? “

“Not any specifically. Republic’s bank in the current climate suspended its own loan arrangement with the company so as to make people happy.”

“Ok.”

“In the Madoff case, regulatory agencies preferred to ignore warnings so as to make people happy.”

“What has property law to do with this?”

“In each case, something to protect property was set aside, a loan covenant in the first case, and antifraud provisions in the second.”

“The bank ignored what protected its property.”

“Yes, for political reasons.”

“While in the Madoff case the regulators ignored what protected investor property.”

“Yes, but in each case a kind of manufactured happiness was achieved, at the expense of property.”

“And so...”

“Just pointing out where we’ve headed in these cases.”



http://www.reuters.com/article/governmentFilingsNews/idUSN1346503320081213


http://www.nytimes.com/2008/12/13/business/13damage.html?em

http://www.bloomberg.com/apps/news?pid=20601087&sid=aSZMu0okayJU&refer=home

http://www.nytimes.com/2008/12/13/business/13fraud.html?_r=1&em


There are a lot of ways to look at the Madoff case, and the attorneys will be out in force to look at it. But no money will be found. Millions more will be spent in fees, this time to effect a false rage.

An unfortunate case(5)

While the organizer will not present a new reality whatever she says, this case may turn out to be paradigmatic in that others will follow that will cause loan covenants to wither. It will not matter that a company has to have certain financial ratios to continue as a performing debtor. These will take a back seat to labor arrangements. The company will be loaned the money to pay off its labor force. Then there will be one more "subprime" corporate loan on the books of a financial institution.

I rather think this case is just the beginning of a sea change.

An unfortunate case(4)

For some, the ugly case in Chicago is a paradigm case of the struggle between labor and capital. If it happened in the simpler case my employee and I would have parted ways, him unhappy over broken terms, possibly seeking a legal remedy. What elevates the first case to that of a paradigm?

Terms, to wit, ‘labor’ and ‘capital’ used with a certain conceptual agenda. They have to elevate what has been already elevated by U.S. labor law. Labor law governs the terms of ‘severance’ and ‘vacation pay’ which already apply to the hired workers. The organizer with the United Electrical Workers may keep the terms of the dispute within U.S. labor law, or she may move beyond to use terms to describe a struggle between labor and capital in a further sense.

Will she present a new reality in doing this? No. The situation will be no uglier than mine would be had I stiffed my employee. The harangue will simply be different.

This reference

http://www.usnews.com/blogs/capital-commerce/2008/12/09/the-scary-message-of-republic-windows-.html

is relevant since I am trying to figure out what the economic landscape will be going forward. These remarks, while somewhat right wing, note some of the risks of our current policy and end by citing Bill Gross, a leading financial Democrat.

An unfortunate case(3)

The IRS has a model for me called a Schedule C. It reflects no capital at all. It just asks me for my income and expenses. Do you want to say that it is implied that I have capital if I have a computer that I use? I just have a computer that I use, with or without the implication. If I depreciate it according to the IRS schedule, the IRS does not even call it a capital asset. It has a different code section for it, called Section 1231.

Does that matter here? No. If were called such, it is still the case that I’m not talking about tax rules here. I’m just using the IRS to show that one can proceed with my simple example without talking in terms of labor and capital.

The man that I have hired I’ve known for years. He and I are not friends, but I have known him and talked with him in a number of different contexts. He may say I did him a favor by hiring him in a time of need. I may or may not agree. I may say that he’s the one who did me a favor because I was able to more that double what I made with his help and was able to pay him a bonus for my good fortune.

Someone may want to stress the aspect of my situation by saying that my relationship with him is one of mutual favors. What a nice way of looking at it. Does it add anything to the original case? It adds a kind of feeling to it, but it does not change in any way the original account. My relationship with him consists in my hiring him and paying him for what he does on terms we agreed on.

An unfortunate case(2)

Consider a simpler case.

In a simpler case, I hire someone to help me process data. He and I agree on terms. He comes to work. All goes well. I pay him. He is my only employee.

Somehow in this situation, in some minds, I have become capital. He has become labor. Prior I was just working on my own. He was out of a job. I was neither labor nor capital.

Do not say that I was a sole proprietor who was both capital and labor. That confounds what was going on in terms of which I pay myself as labor and then get a return on capital which is also me. These terms say nothing here. I was just working for myself.

I realize people say this sometimes for accounting purposes, but it is not necessary to say this to understand what was going on before. In fact it clears nothing up. It just puts what I do into an accounting model that I don’t need here. I was just working on contract for people, selling my service as an accountant. Then I hired him to help me.

I realize people also may use an analysis of labor and capital for a Marxist purpose that also clears nothing up. I will say more about that later.

An unfortunate case(1)

The original story:


CHICAGO (AP) -- Workers laid off from their jobs at a Chicago factory have occupied the building and are demanding assurances they'll get severance and vacation pay that they say they are owed.

About 200 employees of Republic Windows and Doors began staging the sit-in in shifts this week after learning the plant was closing Friday.

Leah Fried (LAY'-uh FREED'), an organizer with the United Electrical Workers, says Republic failed to give 60 days' notice required by law.

Chicago police spokeswoman Laura Kubiak says police are aware of the situation and are patrolling the area.

Representatives of Republic Windows did not immediately respond Saturday to calls and e-mails seeking comment.
http://biz.yahoo.com/ap/081206/workers_takeover.html


A more fleshed-out version:

CHICAGO (AP) -- Workers who got three days' notice that their factory was shutting its doors have occupied the building and say they won't go home without assurances they'll get severance and vacation pay.

About 250 union workers occupied the Republic Windows and Doors plant in shifts Saturday while union leaders outside criticized a Wall Street bailout they say is leaving laborers behind.

Leah Fried, an organizer with the United Electrical Workers, said the Chicago-based vinyl window manufacturer failed to give 60 days' notice required by law before shutting down.

During the two-day peaceful takeover, workers have been shoveling snow and cleaning the building, Fried said.

"We're doing something we haven't done since the 1930s, so we're trying to make it work," she said, referring to a tactic most famously used in 1936-37 by General Motors factory workers in Flint, Mich., to help unionize the U.S. auto industry.

Fried said the company can't pay its 300 employees because its creditor, Charlotte, N.C.-based Bank of America, won't let them. Crain's Chicago Business reported that Republic Windows' monthly sales had fallen to $2.9 million from $4 million during the past month. In a memo to the union, obtained by the business journal, Republic CEO Rich Gillman said the company had "no choice but to shut our doors."

Bank of America received $25 billion from the government's financial bailout package. The company said in a statement Saturday that it isn't responsible for Republic's financial obligations to its employees.

"Across cultures, religions, union and nonunion, we all say this bailout was a shame," said Richard Berg, president of Teamsters Local 743. "If this bailout should go to anything, it should go to the workers of this country."

Outside the plant, protesters wore stickers and carried signs that said, "You got bailed out, we got sold out."

The Chicago-based Rainbow PUSH Coalition, a civil rights group, announced in a news release Saturday that Jesse Jackson planned to visit the workers Sunday morning to offer his support.

Larry Spivack, regional director for American Federation of State, County and Municipal Employees, Council 31, said the peaceful action will add to Chicago's rich history in the labor movement, which includes the 1886 Haymarket affair, when Chicago laborers and anarchists gathering in a square on the city's west side drew national attention after an unidentified person threw a bomb at police.

"The history of workers is built on issues like this here today," Spivack said.

Representatives of Republic Windows did not immediately respond Saturday to calls and e-mails seeking comment.

Police spokeswoman Laura Kubiak said authorities were aware of the situation and officers were patrolling the area.

Workers were angered when company officials didn't show up for a meeting Friday that had been arranged by U.S. Rep. Luis Gutierrez, a Chicago Democrat, Fried said. Union officials said another meeting with the company is scheduled for Monday afternoon.

"We're going to stay here until we win justice," said Blanca Funes, 55, of Chicago, after occupying the building for several hours. Speaking in Spanish, Funes said she fears losing her home without the wages she feels she's owed. A 13-year employee of Republic, she estimated her family can make do for three months without her paycheck. Most of the factory's workers are Hispanic.

http://biz.yahoo.com/ap/081206/workers_takeover.html?.v=9

Even if economics were better than the dismal science that it is, it would not account for fraud in the system. It assumes the numbers it reads are, on balance, true. That is possibly why Mr. Greenspan was shocked to find his model did not work.

http://www.reuters.com/article/newsOne/idUSTRE49M58W20081024

Today the news is not only flatly bad, but there is so much fraud you have no idea as to what is what. You cannot make a trade if you read financials to count on them.

I noticed in the mid 90s that my business(analyzing various bank frauds) was drying up. People were making so much money in the market they were like Jesus, forgiving the sins of the past(the old complex cons), throwing them over their shoulders. Redemption was afoot under all soles. One had to shake the dust off none.

Now all has fallen in a heap. The statutes of limitations will toll before the government will have time to sort most matters out. A maid has been indicted in Las Vegas.

Oct. 30 (Bloomberg) -- Eve Mazzarella was a Las Vegas success story. The high-school dropout and former housemaid moved to the Nevada city in 2000 from Seattle, got a certificate from the ABC Real Estate School and started selling houses in what would become the hottest market in the country.
In 2006, Mazzarella recorded sales of $13.8 million and made the National Association of Realtors' ``30 Under 30'' list, which names the best young agents in the nation. Mazzarella started her own company, Distinctive Real Estate & Investments Inc., in December 2003. She whipped around town in a Mercedes-Benz sport utility vehicle. She planned to build a three-story office building in Vegas's shabby downtown north of the Strip and preserve a historic house on the site by lifting it onto the roof.
Her competitors were impressed. ``She was an up and comer with a brilliant future,'' says Forrest Barbee, a broker at Prudential Americana Group, a Las Vegas agency where Mazzarella once worked.
The dream ended at about 5 a.m. on March 13, when federal agents smashed through the door of a stucco home on a quiet, grassy cul-de-sac looking for Mazzarella, 31, and her husband, Steven Grimm, 45, an erstwhile mortgage broker.
The day before, the U.S. Attorney for Nevada had indicted the couple on 6 counts of bank fraud, later revised to 13. Prosecutors say the pair recruited fake -- or ``straw'' -- buyers to apply for loans to purchase 227 properties worth $107 million. They told the straw buyers they would pay the mortgages. Then they skimmed thousands of dollars from each of more than 432 transactions, the indictment says, stashing the cash in 80 bank accounts.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aGYlBrRCgtq0&refer=exclusive


But the titans behind the industry? What about them?

When all of this rights itself what is the economy going to look like? Mr. Roubini says the government involvement in autos will be temporary. Just like with the banks. Listen to this clip:

http://finance.yahoo.com/tech-ticker/article/138879/Roubini-Bail-Out-the-Automakers-But-Only-on-These-Conditions...?tickers=F,GM,%5EDJI,%5EGSPC,TEN,TRW,GT

Why should it be? What is the incentive for Mrs. Pelosi or the President to give up the power?

As Task writes:
“The appointment of a "car czar" is clearly a touch(sic) subject but Roubini says those worried about moral hazard and issues like free enterprise are fighting the last war.”

Indeed.

A quasi philosophical note.

When I say things are bad today am I ignoring a fact vs. value distinction? There is the fact that today employment is falling precipitously and there is the judgment that it is bad. But I did not need to make the distinction when I made the comment about the current business climate. Someone who wants to question whether the current situation is bad might want to make the distinction and say that falling employment is not bad, or not necessarily bad, or something along that line. I don’t know how he would go about with this conviction.

If he did, we would likely have a basic disagreement in judgment about this situation. We could argue about it. At that point there might be a debate. But about what? The judgment, clearly, if there is anything to talk about.

I am not talking about people who are bears on Wall Street, perennial shorts, who like it when things get bad. They still know when things are bad. There are bulls on Wall Street who tout their positions by saying that things have gotten so bad they cannot get any worse, so it is a great time to buy. They know when things are bad.

But someone who does not see that things are bad is a puzzle. Maybe he’s one of those who is waiting for God to provide. If he is, at least he knows there is need of provision. Maybe he has some sort of economic theory that recasts the facts. A Marxist might say that the proletariat comes together in solidarity in times like these, so that is some sort of good. But neither entertains what I’m talking about. Neither one would be inclined to correct the current situation, nor would he be suitable to talk to regarding what ought to be done, or what I should do in my business.

Once again, there is the person who disputes in the way of Donovan in The Drifter and the Academician(June 7, 2007) That was a case in which an argument went on over whether something was a case of evil. It was a pointless debate, in its way. Donovan, the academician, was someone who would not acknowledge a case of evil under any circumstance. He had a theoretical objection to talking that way.

If here one does not see the difficulties in people losing their jobs on a broad scale, he and I probably have nothing to talk about. Other than a pointless argument like the one in the dialogue, there is nothing to come of our talking.

Another case is of one who knows nothing about the economy. He may be a child, hearing of hard times for the first time. He may have to be shown the force of the judgment with remarks such as ‘when people lose their jobs they have no money for basics like food and shelter and they don’t get to go to ball games.’

He knows it’s bad when he hears the bit about ball games. That is how he learns about the economy, whether or not he goes to Harvard later in life.

On another limb:

I ended my last post saying this “I tend to take what is happening today much more seriously, because it is more serious.”

Is there room for a debate on this? Do I have to be an economist to have a position here? When I see the business news today, whether it is in the Houston Chronicle or the Wall Street Journal, it is bad.

I lived through 1987, and it was not all that bad. 1988 ushered in no recession. Not many businesses shut down around me. I had one client who lost a bundle in the market on paper. But he got it all back.

Do I need to resort to a theory to make it good or bad? Here are the autoworkers:


DETROIT (AP) -- Worried about their jobs and warned that the cost of failure could be a depression, hundreds of leaders of the United Auto Workers voted overwhelmingly Wednesday to make concessions to the struggling Detroit Three, including all but ending a much-derided program that let laid-off workers collect up to 95 percent of their salaries.

http://biz.yahoo.com/ap/081203/meltdown_autos.html

Is there any theory here? I don’t see one. The news is just flatly bad.

I have nothing to say about how the market will trade going forward. What has that got to do with this, anyway?

“Well the market is not pricing this as bad. It went up today.”
“It did, indeed.”
“Well then, it must be ok.”
“Your account did not shrink today. Is that what you’re telling me?”

I have nothing to say about fitting this into a Keynesian or other explanation. What has that got to do with this, anyway?

“Well, Maynard Keynes said….”
“He did, indeed.”
“And he explains how we got here.”
“He does? He explains systemic fraud?”
“What?”
“That is what I read in the papers.”

1987 was similar to 2008 in that the dollar had fallen some 40% against a basket of currencies. It did roughly that earlier this year. But it continued to drop into 1988, as opposed to the major rally today in the dollar over the past few months.

So we have another difference emerging. The dollar has rallied, whereas it fell before.What does this mean? Other than windy speculative accounts I can offer nothing. But a currency that has run so prominently in different directions must give one pause.

Yesterday, an official recession was pronounced. As noted prior, no recession occurred until 1991.

Yet certain trading features of the 1987 Dow, notably measures of volatility, have been roughly the same as those today. In each case the lack of autocorrelation in pricing was an indication of fear. Fear of what? In the first case, the trading of 1987 did not price a coming recession, for there was not one. In the case today it seems to have priced a coming recession, one that has just officially, in this time of Advent, come.

So in this regard, it is not clear what to make of the similar price action.

Back in 1987, there were few bank failures, but there were many to come. The S&L crisis was nascent. So the pricing of 1987 could have been in advance of that crisis. Today there has already been a broad failure of financial institutions, and a broad failure of central bank efforts to compensate for them. Perhaps there was uncertainty then and is now over similar situations.

But that is a stretch. A much worse situation exists today than was to exist for the FDIC and the FSLIC to deal with going into the late 80s and early 90s. There was never a question of systemic failure at that time.

http://en.wikipedia.org/wiki/S%26L_Crisis

It turned out that the pricing in 1987 was of little concern for the long haul. The markets recovered in spite of the S&L crisis, if indeed that was the problem at all foreshadowed in 1987. Is there reason to think they will recover as promptly today?

Today is a much graver situation by virtually any measure. There are many more financial institutions failing. State governments are failing. The automakers are failing. Wall Street no longer has any large investment banks that are independent of the FDIC. Commerce has come to a virtual standstill in overseas shipping. The large iron ore shipping volume from Australia to the Far East that was done last year is seriously diminished. This does not even mention the home and commercial mortgage problems.

I don’t know how the markets will price this. Perhaps it has all been priced. However, to look at the situation as though it were business as usual seems somewhat cavalier. Since, at this point, I cannot point to parallel facts at each time to assign an explanation for the pricing, I tend to take what is happening today much more seriously, because it is more serious.