Naked Capitalism on the Volcker Rule

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Volcker Rule: Swiss-Cheesed or Beefed Up?

Posted: 21 Apr 2014 09:20 PM PDT

By Gerald Epstein, Professor of Economics and a founding Co-Director of the Political Economy Research Institute (PERI) at the University of Massachusetts, Amherst. Originally published in Intereconomics 2014, Leibniz Information Centre for Economics

When President Obama’s fortunes were tanking in the winter of 2010, he needed a way to come out punching at the bankers again in order to gain some more momentum on financial reform—and with the voters. So he turned to an unlikely “populist” symbol—Paul Volcker, former head of the Federal Reserve System from the 1980s, who had been widely reviled, especially on the left, for his anti-inflationary crusade and high interest rate policy at that time. Volcker’s policy raised unemployment to dizzying heights, resulted in thousands of bankruptcies, and ushered in the Third World debt crisis that left much of South America in economic ruin for a decade or more.

But as a sign of how crazy U.S. politics had become and how far economic discourse had shifted to the right in the ensuing 30 years, Paul Volcker had become a voice of relative sanity in the fight over financial reform in the wake of the Great Financial Crisis of 2007-2008. Obama called a press conference with Volcker at the front and Timothy Geithner, Obama’s Treasury Secretary who had been very unenthusiastic about significant financial reform, slightly behind and with a scowl on his face. The conference announced Obama’s support for “the Volcker Rule,” which was to be included in the Dodd-Frank Financial Reform bill that was under development and the subject of furious debate in Washington—and that ultimately became law in the summer of 2010.

The problem with the Dodd-Frank bill is that it passed along responsibility for the complex “rule-making” process to five federal regulators, who were tasked with writing the fine details governing the implementation of the financial reform law. By design on the part of the banks, this rule-making process gave the Wall Street lobby an open playing field to obstruct, gut, and re-write the financial reform. Consequently, it was not until December 2013, a full year after the original deadline, that the actual detailed wording of the Volcker Rule was finalized. Moreover, most of it will not be implemented until 2015 or 2016, six years after passage of the Dodd-Frank legislation.

Why so much time? The answer: the banks hate the Volcker Rule and have invested millions of dollars in lobbying and buying off politicians and their staff members to delay and water down the measure. This presents us with an important question: Had the rule been so thoroughly Swiss-cheesed by the banks that it had too many holes to be of any value? Or does it still have enough substance to make the financial system safer and more socially productive?

The Volcker Rule, whose details were developed by Democratic Senators Jeff Merkeley of Oregon and Carl Levin of Michigan, called for an end to “proprietary trading” by banks that had access to taxpayer bailout funds if they got into trouble. Proprietary trading is defined as activities in which banks put their own capital at risk to profit from changes in asset prices and movements in interest rate spreads, rather than from interest or fees from providing services for their customers. The logic behind the Rule is that if financial institutions want to engage in risky, speculative activities, they should not put taxpayer resources at risk. Those activities should be left to hedge funds and other similar institutions, leaving banks to engage in activities that are socially beneficial, such as providing useful credit to businesses, households and governments.

The Rule also called for strict regulations to end conflicts of interest between these banks and their customers, such as had occurred in the run-up to the crisis when Goldman Sachs sold complex securities to customers—even though it knew that they were likely to crash in value—while at the same time taking out large bets that these securities would fail, without informing their customers that they had done so. Such conflicted activities were part and parcel of the highly complex and risky deals that the large banks engaged in that greatly contributed to the financial crisis and that the Volcker Rule was designed to prevent. In short, the Volcker Rule was meant to separate boring banking supported by taxpayer safety nets from highly risky and speculative banking that, in theory, had no such support: a sort of “Glass-Steagall lite.”

But even as the Dodd-Frank wording was still being developed, the banking lobby sprang into action. They were able to get importance exceptions written into the law for “market making” and “hedging.” In the ensuing battle, the tireless defenders of the Volcker Rule, including Sens. Merkely and Levin as well as poorly funded public interest groups such as Americans for Financial Reform (AFR), Better Markets, and Occupy the SEC, tried to keep these exceptions as narrow as possible, while the bankers tried to blast them open as far as they possibly could.

In terms of market making, the banks argued that they needed to have holdings of securities on their books in order to have them available to sell to (and buy from) their customers. If they did not accumulate these securities, then they could not provide needed liquidity to their customers and this would harm financial markets and the economy. The Merkely-Levin writeup of the Volcker Rule allowed banks to hold inventories based on the expected short-term demand of their customers, which should have been adequate to provide the needed liquidity. This issue of defining market making was of great interest to the banks. Writers at Bloomberg estimate that market making provides more than $40 billion a year in revenue to the Wall Street banks.

Defining hedging, the second exception, was also crucial. Banks could claim that their holding of risky securities were simply designed to hedge or offset some other position that the bank had to take on behalf of customers, so as to reduce the overall risk assumed by the bank. In other words, they could hide massive amounts of proprietary investments by the bank, claiming they were simply hedges. And in fact, the banks were winning this fight until the JP Morgan “London Whale” scandal broke in 2012, in which JP Morgan lost over $6 billion engaging in risky proprietary bets that they claimed were “hedges.”

At this point, the regulators were forced to take a tougher stance on hedging by defining it more narrowly and requiring more documentation in order to limit proprietary trading masquerading as “portfolio hedging.” In the final rule, banks are required to match their holdings closely with the positions they are hedging and also to report data to regulators on these positions on a timely basis.

Furthermore, the rule requires the CEOs of the banks to attest that their bank has a framework in place to identify and prevent proprietary trading. This language was watered down from what Paul Volcker had suggested, namely that CEOs should verify that no illegal proprietary trading was taking place, period. Another key feature of the final language reflected the understanding that unless incentives at Wall Street banks are changed, no amount of verbiage will prevent illegal proprietary trading from taking place. Accordingly, the final language prohibits traders from receiving payments based on profits from illegal proprietary trading.

Still, the vast amounts of money the banks put into lobbying paid off handsomely in other respects. The bankers organized European politicians to fight against Volcker prohibitions on the proprietary holding of sovereign debt and strict regulations on foreign-based subsidiaries of banks with activities in the United States. These resulted in some key exemptions on proprietary trading in certain assets and for certain foreign-related banking entities. The banks were also able to broaden the rules to some extent that allow them to invest in hedge funds. Still, many of the large Wall Street banks have been spinning off hedge fund operations in order to create a bit more distance between themselves and these funds.

So what is the ultimate verdict on the battle over the Volcker Rule? It is still too soon to tell. While many press reports claimed that the rule passed by the regulators in December was “much tougher” than had been expected, Goldman Sachs saw its stock price actually climb by 1.2 percent on the day the new rules were announced.

Of course, this is not the end of the fight. Much of the interpretation and enforcement of the rules was left to the regulators. And the banks, which have already threatened to sue the regulators over aspects of implementation, will continue to lobby as long as they can. The supporters of financial reform, such as AFR, Better Markets, and some key regulators, will need a lot of help from citizens to keep these issues on the front burner and to remain vigilant. You can bet that the bankers will.

 

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The Rich Get Richer

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Jim Hightower on Paul Ryan

Paul Ryan’s New Budget Proposal Is the Same Joke He Told Us Before

In the latest round of attacks on accessible health care for all, the GOP causes public upchuck over same old, same old.

Photo Credit: Gage Skidmore / Wikimedia Commons

My guess is that Rep. Paul Ryan, the Republican Party’s highly touted budget guru, doesn’t have a very tight grip on the concept of irony.

Otherwise, why would he choose April Fools’ Day to release the latest version of what the GOP intends to do to federal programs (and to the people who count on them) if it takes total control of Congress? But there he was on April 1, declaring with a straight face that, “We [Republicans] believe that we owe it to the country to offer an alternative to the status quo. It’s just that simple.”

Sure it’s simple. He just Xeroxes the same stale budgetary flimflams that he always puts out, even though the public keeps upchucking at the sight of them. Ryan’s “alternative” to the status quo is taking Americans back to the harsh days before there were any programs to help unemployed, elderly, sick, and other people in need.

Ryan envisions turning Medicare into a privatized “WeDon’tCare” program. He wants to outright pull the plug on the new health care law that just extended coverage to millions of people, replacing it with, uh, nothing.

The Wisconsin Republican’s budget scheme also slashes job training, education, infrastructure repairs, medical research, public broadcasting, the arts, and pretty much anything else that regular people need.

Still, he claims that he’s “helping” — in an ideological, Republicany way. For example, Ryan explains that whacking food stamps “empowers recipients to get off the aid rolls and back on the payrolls.”

What payrolls, you ask? That’s not my problem, says the guy drawing $174,000 a year and a gold package of benefits from the government he pretends to despise.

Yeah, let ‘em eat right-wing ideology. I wish it were all an April Fools’ joke. But Ryan’s joke is on us.

Jim Hightower is a national radio commentator, writer, public speaker, and author of the new book, “Swim Against the Current: Even a Dead Fish Can Go With the Flow.” (Wiley, March 2008) He publishes the monthly “Hightower Lowdown,” co-edited by Phillip Frazer.

Humor: The Borowitz Report

Rick Perry Hopes Combination of Wearing Glasses and Not Talking Will Make Him Seem Smarter

rick-perry-glasses.jpgAUSTIN, Tex. (The Borowitz Report)—With an eye toward a Presidential run in 2016, Rick Perry, the Texas governor, is hoping that a two-pronged strategy of wearing glasses and not speaking will make him appear smarter to voters, aides to the Governor confirmed today.“After the 2012 Republican primary, we knew that we needed to solve what we called the Governor’s smartness problem,” said Harland Dorrinson, an aide to Perry. “The fix that we came up with was glasses, but, as it turned out, that was only half the solution.”

After outfitting Perry with designer eyewear, aides sent him on the road to reintroduce himself to voters, but the response, Mr. Dorrinson said, was underwhelming: “The problem was, he was still talking.”

A round of focus groups convinced aides that only through a combination of wearing glasses and not emitting any sounds could Perry overcome voters’ initial impressions of him.

At a recent political stop in San Antonio, the newly minted Governor Perry was on display, wearing his glasses and gesticulating expressively while saying nothing for thirty minutes.

“Our focus groups show people no longer know what Rick Perry is thinking,” said Mr. Dorrinson. “That’s a huge improvement.”

Get news satire from The Borowitz Report delivered to your inbox.

Photograph: Bill Clark/CQ Roll Call/Getty

Naked Capitalism: No Fault General Mills

General Mills Opens New Frontier in Denying Consumers Right to Sue: Just Use Its Products

Posted: 17 Apr 2014 01:47 AM PDT

We have just moved beyond an event horizon as far as the corporate version of neo-feudalism is concerned. Remember that one of the salient qualities of feudalism was that the nobility had far more rights than the peasants.

By contrast, one of the hoary old notions of jurisprudence is equality before the law. That doesn’t serve our corporate-overlords-in-the-making too well. Subverting jurisprudence over time via inculcating pro-business thinkings through the law and economics movement apparently isn’t good enough for them; they want even higher odds of favorable outcomes. One of them is sneakily getting customers to relinquish their right to sue via getting them to agree to be subject to binding arbitration.

This requirement has long been in place as a condition of getting a securities brokerage account. Although it is difficult to prove, many securities brokerage customers feel that they don’t get the restitution which they deserve through this process (and one might cynically observe that that is a feature, not a bug). Some arbitration forums have been so clearly biased as to lead attorneys general to sue. For instance, as described by Martin & Jones:

The Minnesota Attorney General recently sued the National Arbitration Forum (“NAF”), contending that NAF committed fraud and engaged in false advertising and deceptive trade practices by intentionally misrepresenting its independence and neutrality and by hiding its ties to the debt collection industry. Soon after the case was filed, NAF agreed to a settlement, the terms of which included a requirement that NAF stop accepting all future consumer arbitrations.

The Attorney General’s lawsuit and others recently filed against NAF demonstrated that NAF was anything but the neutral, unbiased forum it represented itself to be. The lawsuits exposed the following: (1) NAF actively concealed the fact that it was owned and managed by the same New York hedge fund which also owned the three largest debt collection law firms which had claims decided by the NAF; (2) NAF helped creditors draft claims to be filed against consumers or referred them to debt collection law firms which would then file arbitration claims against the consumers before the NAF; (3) NAF solicited business from creditors by touting arbitration before the NAF as a less costly and more effective debt collection tool than the courts; and (4) NAF instructed arbitrators how they should rule with respect to certain claims and denied assignments to arbitrators who found against repeat business filers.

In other words, arbitration forums can all too easily become privatized kangaroo courts. And even when generally well-run arbitration panels have serious shortcomings in process,challenging the results of arbitration due to arbitrator bias rarely succeeds.

Heretofore, binding arbitration clauses have been limited to cases where a consumer enters into a contract with a service provider, such as a credit card issuer or a cell phone company. But General Mills is trying to prohibit consumers from suing based on penny-ante benefits and even mere contact. From the New York Times:

General Mills, the maker of cereals like Cheerios and Chex as well as brands like Bisquick and Betty Crocker, has quietly added language to its website to alert consumers that they give up their right to sue the company if they download coupons, “join” it in online communities like Facebook, enter a company-sponsored sweepstakes or contest or interact with it in a variety of other ways…

Instead, anyone who has received anything that could be construed as a benefit and who then has a dispute with the company over its products will have to use informal negotiation via email or go through arbitration to seek relief, according to the new terms posted on its site.

Yves here. Since when is liking a product a benefit to the consumer??? It’s a benefit to the merchant. That alone gives you an idea of what an overreach this is. Back to the article:

“Although this is the first case I’ve seen of a food company moving in this direction, others will follow — why wouldn’t you?” said Julia Duncan, director of federal programs and an arbitration expert at the American Association for Justice, a trade group representing plaintiff trial lawyers. “It’s essentially trying to protect the company from all accountability, even when it lies, or say, an employee deliberately adds broken glass to a product.”…

Companies have continued to push for expanded protection against litigation, but legal experts said that a food company trying to limit its customers’ ability to litigate against it raised the stakes in a new way.

What if a child allergic to peanuts ate a product that contained trace amounts of nuts but mistakenly did not include that information on its packaging? Food recalls for mislabeling, including failures to identify nuts in products, are not uncommon.

“When you’re talking about food, you’re also talking about things that can kill people,” said Scott L. Nelson, a lawyer at Public Citizen, a nonprofit advocacy group. “There is a huge difference in the stakes, between the benefit you’re getting from this supposed contract you’re entering into by, say, using the company’s website to download a coupon, and the rights they’re saying you’re giving up. That makes this agreement a lot broader than others out there.”

And it turns out that the reason General Mills is so keen to shield itself from litigation is that it has repeatedly engaged in deliberately dishonest product labeling, and apparently intends to keep up this profitable form of consumer fraud:

Last year, General Mills paid $8.5 million to settle lawsuits over positive health claims made on the packaging of its Yoplait Yoplus yogurt, saying it did not agree with the plaintiff’s accusations but wanted to end the litigation. In December 2012, it agreed to settle another suit by taking the word “strawberry” off the packaging label for Strawberry Fruit Roll-Ups, which did not contain strawberries.

General Mills amended its legal terms after a judge in California on March 26 ruled against its motion to dismiss a case brought by two mothers who contended that the company deceptively marketed its Nature Valley products as “natural” when they contained processed and genetically engineered ingredients.

“The front of the Nature Valley products’ packaging prominently displays the term ‘100% Natural’ that could lead a reasonable consumer to believe the products contain only natural ingredients,” wrote the district judge, William H. Orrick.

So here’s a simple answer. Don’t buy anything made by General Mills. And encourage everyone you know to do the same. This is a list of their brands:

8th Continent
Betty Crocker
Big G Cereals
Bisquick
Bugles
Cascadian Farm
Cheerios
Chex
Forno de Minas
Frescarini
Fruit Snacks
Gardetto’s
Gold Medal
Green Giant
Häagen-Dazs
Hamburger Helper
Jus-Rol
Knack & Back
La Salteña
Latina
Lloyd’s
Lucky Charms
Muir Glen
Nature Valley
Old El Paso
Pillsbury
Pop Secret
Progresso
Totino’s/Jeno’s
Trix
V. Pearl
Wanchai Ferry
Wheaties
Yoplait/Colombo

Please circulate this post widely. Thanks!

 

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Jim Hightower

US Postal Service selling out workers and … America

You know what America needs? More jobs, that’s what.

Not Walmart-style “jobettes,” but real jobs, stable ones with a good salary and benefits, union jobs so workers have a say in what goes on, jobs that have strong protections against discrimination. A job you could make a career, do useful work, take pride in it, earn promotions, and be respected for what you do.

Believe it or not, there is at least one place where such jobs still exist. But – and you really aren’t going to believe this – those in charge are pushing like hell to eliminate them, turning positions that ought to be a model for American job growth into just another bunch of jobettes. The place? Your local post office.

Right-wing government haters in Congress, along with the corporate executives now sitting atop the US Postal Service, claim that in order to “save” this icon of Americana, they must decimate it. These geniuses are privatizing the workforce, selling off the invaluable community facilities, and shrinking services. Hello – the workers, facilities and services are what make the post office iconic and give it such potential for even greater public use.

Their latest ploy is a “partnership” with Staples, the big-box office supply chain. In a pilot program, 82 Staples outlets have opened “postal units” to sell the most popular (and most profitable) mail products. Rather than being staffed by well-trained and knowledgeable postal workers, however, the mini-PO’s will have an ever-changing crew of Staples’ low-wage, temporary sales clerks with weak performance standards and no public accountability.

Cheapening postal work might be good for a few profiteers like Staples, but it will diminish postal service – and it’s exactly the wrong direction for America to be going. For info and action go to www.apwu.org.

“Staples Plucks Postal Jobs,” www.labornotes.org, January 27, 2014.

The psychic pain borne by the rich

One thing about the tea party Republicans in Congress is that they do know who butters their biscuits. Several have recently rushed forward with an anguished plea in defense of Wall Street barons, CEOs, and billionaires: “Stop the vilification of wealthy people,” is their cry.

A crusade to protect pampered plutocrats from having to hear the public’s scornful words about them is not likely to draw much support from… well, from the public. Still, it is true that being a 1 percenter is not an easy burden to shoulder. Yes, they do have money and power, but don’t you see, they never have enough. If your sense of self-worth is tied up in your net worth, then what if your net is comparatively small?

It’s important for us riff-raff to realize that there are the rich – and then there are THE RICH. The relativity of status within the 1 percent creates enormous stress, even feelings of wealth inadequacy. They’re constantly thinking: “Is his bigger than mine?” Imagine if you had to live with that!

Perhaps you didn’t know, but the average household income for the 1 percent as a whole is a mere $1.26 million a year. Okay, that’s rich, but it’s not RICH. For that honorific, you have to step it up many notches and climb into the elite class of the richest one-tenth of 1 percenters. Their average household wealth is $6.37 million a year. Now that’s money.

Yet, it’s not enough. Those elites are looked down on by an even thinner slice of net worthies: The royal class of the richest one one-hundredth of 1 percenters. This is the stratosphere where the richy-richiest of THE RICH dwell, making ends meet on an average household income of $31 million a year.

Come on, people, have some feeling for the psychic pain of those who’re struggling to keep up with the one one-hundredths of 1 percent. It’s a tough world up there.

“Even Among the Richest of the Rich, Fortunes Diverge,” The New York Times, February 11, 2014.

 

 

Naked Capitalism on Reining in High-Frequency Trading

SEC Is Kinda Thinking About Doing Something About High Frequency Trading

Posted on April 15, 2014 by

Before you get too excited about the notion that the SEC might actually be saddling up to Do Something about high frequency trading, the agency has roused itself to issue a leak….that it is pondering launching a limited trial to address all of one practice.

I’m not making this up. From the Wall Street Journal:

SEC officials, including some commissioners, are considering a trial program to curb fees and rebates they say can make trading overly complex and pose a conflict of interest for brokers handling trades on behalf of big investors such as mutual funds.

At issue are “maker-taker” fee plans, which pay firms that “make” orders happen—often high-frequency trading firms that specialize in trading strategies designed to capture payments. The plans charge firms that “take” trades—typically big investment firms looking to buy or sell a chunk of stock or hedge funds making bets on short-term price swings.

The trial program would eliminate maker-taker fees in a select number of stocks for a period to show how trading in those securities compares with similar stocks that keep the payment system.

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Now let us consider the rather awkward position the SEC finds itself in. It sat by as the NYSE and Nasdaq allowed HFT firms to co-locate servers so as to get advantaged access to orders. The exchanges were eager to play ball because the high frequency traders paid for this privilege. And the fig leaf is that while FINRA, Wall Street’s self regulatory body, has a rule against brokers front-running their clients, the high frequency traders aren’t acting as brokers. As the New York Times noted:

There is no small paradox in the stock exchanges profiting by selling access to information that can be used for something that looks an awful lot like front-running, while Finra enforces a rule prohibiting brokers from doing the same thing.

Now unless the high frequency trading furor dies down quickly (which it might, scandals can sometimes have a short half life), we are likely to have Congressional hearings and the SEC will have to explain itself.

The SEC is almost certain to contend that it not only does take l’affaire high frequency trading seriously, it’s been moving with all deliberate speed. As a Bloomberg story pointed out last week:

The SEC took its first deep dive into HFT in January 2010, before many other enforcement agencies had waded into the debate. As part of a broad review of market structure, it examined how brokers route the electronic orders of speed traders and questioned whether that put other investors at a disadvantage. The report elicited more than 400 comment letters from banks, exchanges, retail brokerages, and large institutional investment firms.

Yves here. Notice how all of nothing happened? That means the SEC ran into such a thicket of competing interests that it didn’t see an easy path forward. And mind you, later that year, the flash crash took place. But the SEC has yet to implement any measures to prevent a recurrence.

Now here is the beautiful part:

The trick for regulators is finding ways to prevent abuses without blocking high-speed firms that actually benefit investors…

The problem is that the SEC doesn’t have all the data it needs. In 2012 the agency spent $2.5 million on a surveillance system named Midas (Market Information Data Analytics System) that collects information from all 13 public exchanges in the U.S. This essentially gives the SEC the same view of the market that many speed traders have. It doesn’t, however, give it a picture of the whole market. Only about 70 percent of trades happen on public exchanges; the rest take place offline, either inside large wholesale brokerages that match buy and sell orders internally or in private trading venues called dark pools. To see that activity, the SEC needs a much more powerful system that can track the life of every stock quote, order, and trade…

In 2010, White’s predecessor, Mary Schapiro, approved a project to build such a system to funnel terabytes of information every day into one massive feed that regulators could monitor. Called the consolidated audit trail (CAT), the system would allow the SEC to conduct detailed forensic analysis and weed out abuses. The contract for the huge project, which will cost more than $1 billion, still hasn’t been awarded. The SEC estimates that CAT won’t be finished until 2016.

One billion dollars? For a ginormous data feed to gather info on the 30% of the market the SEC does not see now? And given how most IT initiatives go, this “one data feed to rule them all” project could easily come in vastly over budget.

The SEC’s annual budget is $1.3 billion. As much as HFT is an important issue, this is a grossly disproportionate expenditures. As a management consultant, I’ve regularly had to do studies in OTC markets where we had access to only a teeny slice of market data compared to what the SEC had. You don’t need perfect information to make decisions. You can get it via sampling and qualitative assessments for an itty bitty fraction of this $1 billion price tag.

So what this really says is either the SEC is unwilling to act and is playing the Penelope game*, of making action dependent on a task that will never get done, or it is genuinely unwilling to walk into a political minefield, and so will make a proposal only if it has incontrovertible data. Needless to say, I’m leaning toward the first theory.

Now that isn’t to say that the practice the SEC has roused itself to take interest in is unimportant. The Wall Street Journal notes:

Fund managers and others concerned about the negative effects of maker-taker recently held a series of private meetings with SEC Chairman Mary Jo White and other staff members to push for its elimination, according to people familiar with the meetings. Among those who met with the SEC was Jeffrey Sprecher, chief executive of IntercontinentalExchange Group Inc., which owns the New York Stock Exchange; representatives from fund manager T. Rowe Price Group Inc; and representatives from RBC Capital Markets, a unit of the Royal Bank of Canada….

Maker-taker has come under a harsh spotlight in recent years, with big investment firms, academics and exchange executives saying it can hurt long-term investors and skew brokerage-firm incentives.

A primary criticism is that the fees pose a conflict for brokers, who might choose to route an investor’s order to an exchange with the goal of earning a payment, not to get the best deal for the client.

A recent study by finance professors Robert Battalio and Shane Corwin at the University of Notre Dame and Robert Jennings at Indiana University found stockbrokers appear to routinely route client orders to markets that provide the best payments. The study found that can saddle investors with worse results than if the brokers hadn’t factored in the payments, and that such trades are “unlikely to be consistent with the broker’s responsibility to obtain best execution” for investors.

Even so, the Journal stresses that White has only indicated she is sympathetic to the calls to eliminate maker-taker, but has not made any decision. And thinking about launching a trial looks a lot like a way to slow-walk any action.

So it looks like the SEC will have its pat answers if it is put under the Congressional hot lights: it takes all the public concerns seriously, it has been soliciting input from all the concerned parties. It’s even about to launch a project!

Don’t buy it. Remember, after the 1987 crash, President Reagan authorized a study within ten days and had an analysis and recommendations, know as the Brady Commission Report, two months later. The data gathering is admittedly more difficult due to the opaque nature of some of the market, but having no point of view on high frequency trading nearly four years after the flash crash should be seen as an indictment of the SEC’s seriousness and competence.

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*Remember the wife of Odysseus held off her suitors by saying she’s marry one of them once she finished weaving a burial shroud for her father, which she unravels every night.

The Numbers on Rising Inequality

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Saved for posterity, the study of Emmanuel Saez (UC Berkeley) and Gabriel Zucman (LSE and UC Berkeley) can be found here:

Rising Inequality

Naked Capitalism: BP and the Rape of the Gulf

Fourth Anniversary of Gulf Oil Spill: Wildlife Is Still Suffering from Toxic Cover Up

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Posted on April 13, 2014 by

Cross-Posted from Washington’s Blog.

BP and the Government Decided to Temporarily Hide the Oil by Sinking It with Toxic Chemicals … The Gulf Ecosystem Is Now Paying the Price

As we noted at the time, and on the first (and here), second and third anniversaries of BP’s Gulf oil spill, BP and the government made the spill much worse by dumping toxic dispersant in the water in an attempt to to sink – and so temporarily hide – the oil.

In addition, adding dispersant makes oil 52 times more toxic than it would normally be.

EPA whistleblowers tried to warn us about the oil spill dangers

Gulf toxicologist Susan Shaw told us last year:

Covering up the [Gulf] oil spill with Corexit was a deadly action … what happened in the Gulf was a political act, an act of cowardice and greed.

(60 Minutes did a fantastic exposé on the whole shenanigan.)

And the cover up went beyond adding toxic dispersant. BP and the government went so far as hiding dead animals and keeping scientists and reporters away from the spill so they couldn’t document what was really happening.

As the National Wildlife Federation (NWF) notes in a new report, the wildlife is still suffering from this toxic cover up.

NWF reports:

Some 900 bottlenose dolphins of all ages—the vast majority of them dead—have been reported stranded in the northern Gulf between April 2010 and March 2014. In 2013, bottlenose dolphins were found dead or stranded at more than three times average rates before the spill. In 2011, dead infant or stillborn dolphins were found at nearly seven times the historical average and these strandings have remained higher than normal in subsequent years. NOAA has been investigating this ongoing wave of bottlenose dolphin strandings across the northern Gulf of Mexico since February 2010, before the Deepwater Horizon rig exploded. This is the longest period of above-average strandings in the past two decades and it includes the greatest number of stranded dolphins ever found in the Gulf of Mexico. In December 2013, NOAA published results of a study looking at the health of dolphins in a heavily-oiled section of the Louisiana coast. This researchers found strong evidence that the ill health of the dolphins in Louisiana’s Barataria Bay was related to oil exposure.

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Dolphins in Barataria Bay showed evidence of adrenal problems, as has been previously reported in mammals exposed to oil.4 Barataria Bay dolphins also were five times more likely than dolphins from unoiled areas to have moderate-to-severe lung disease. Nearly half the dolphins studied were very ill; 17% of the dolphins were not expected to survive. The study concludes that health effects seen in Barataria Bay dolphins are significant and likely will lead to reduced survival and ability to reproduce.

NWF found many other species have also been harmed by the dispersant-oil mixture:

Roughly 500 stranded sea turtles have been found in the area affected by the spill every year from 2011 to 2013. This is a dramatic increase over the numbers found before the disaster. Other teams of scientists have reported negative impacts of oil on a number of species of fish, including tuna red snapper and mahi-mahi. As we have learned from previous spills far smaller than the 2010 event, it has taken years to understand the full effects on the environment. In some cases, recovery is not complete even decades later. Twenty-five years after the Exxon Valdez spill in Prince William Sound, clams, mussels, and killer whales are still considered “recovering,” and the Pacific herring population, commercially harvested before the spill, is showing few signs of recovery. [One of the main ingredients in Corexit - 2-butoxyethanol - was also used in the Valdez spill] … the full scope of the Deepwater Horizon disaster on the Gulf ecosystem will likely unfold for years or even decades to come.

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The Atlantic bluefin tuna is one of the largest fish in the Gulf, reaching average lengths of 6.5 feet and weighing about 550 lbs. A single fish can sell for tens of thousands of dollars.… The Deepwater Horizon rig exploded while the April-May breeding season in the northern Gulf was underway. In 2011, NOAA researchers estimated that as many as 20% of larval fish could have been exposed to oil, with a potential reduction in future populations of about 4%.

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A more recent study shows that a chemical in oil from the spill can cause irregular heartbeats in bluefin and yellowfin tuna that can lead to heart attacks, or even death. The effects are believed to be particularly problematic for fish embryos and larvae, as heartbeat changes could affect development of other organs. The researchers suggest that other vertebrate species in the Gulf of Mexico could have been similarly affected. Scientists found that four additional species of large predatory fish—blackfin tuna, blue marlin, mahi-mahi and sailfish—all had fewer larvae in the year of the oil spill than any of the three previous years.

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The Deepwater Horizon spill occurred during the blue crab spawning season, when female crabs were migrating out of estuaries into deeper waters of the Gulf to release their eggs.

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[Reports indicate problems with crabs.] Blue crabs provide evidence of oil tainting Gulf food web. 2. Alabama Local News. 2013. Blue crab stock declines are concern for Gulf Coast fishermen. 3. Houma Today. 2013. Locals say blue crab catches plummeting. 4. Louisiana Seafood News. 2013. Lack of Crabs in Pontchartrain Basin Leads to Unanswered Questions. 5. Tampa Bay Times. 2013. Gulf oil spill’s effects still have seafood industry nervous. 6. Presentation at the 2014 Gulf of Mexico Oil Spill & Ecosystem Science Conference. The Effects of the Deepwater Horizon Oil Spill on Blue Crab Megalopal Settlement: A Field Study.

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Marine life associated with the deep sea corals also showed visible signs of impact from the oil. In a laboratory study, coral larvae that had been exposed to oil, a chemical dispersant, and an oil/ dispersant mixture all had lower survival rates than the control larvae in clean seawater.

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According to a recently published federal report, oyster eggs, sperm and larvae were exposed to oil and dispersants during the 2010 oil spill. Oil compounds known as polycyclic aromatic hydrocarbons (PAHs) can be lethal to oyster

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In the fall of 2010, even after the Macondo well was capped, oyster larvae were rare or absent in many of the water samples collected across the northern Gulf of Mexico.

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There are nearly 1000 known species of foraminifera in the Gulf of Mexico. These small marine creatures form part of the base of the marine food web, serving as a food source for marine snails, sand dollars and fish. Previous research has shown that these sediment-dwelling microorganisms are sensitive to oil damage. Rapid accumulation of oiled sediment on parts of the Gulf floor between late 2010 and early 2011 contributed to a dramatic die-off of foraminifera. Researchers found a significant difference in community structure and abundance during and after the Deepwater Horizon event at sites located from 100-1200 meters deep in the Desoto Canyon, nearly 100 kilometers south-southwest of Pensacola, Florida. Deep sea foraminifera had not recovered in diversity a year and a half after the spill.

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Killifish, also known as bull minnows or cockahoe, are prized bait fish and play an important role in the Gulf food web..…This species has been extensively studied in the aftermath of the disaster because of its abundance and its sensitivity to pollution. Oil exposure can alter the killifish’s cellular function in ways that are predictive of developmental abnormalities, decreased hatching success and decreased embryo and larval survival. In 2011, Louisiana State University researchers compared the gill tissue of killifish in an oiled marsh to those in an oil-free marsh. Killifish residing in oiled marshes showed evidence of effects even at low levels of oil exposure which could be significant enough to have an impact at a population level. Additional research has found that four common species of marsh fish, including the Gulf killifish, seem to be avoiding oiled areas. These behaviors, even at small scales, could be significant within marsh communities, leading to changes in food web dynamics.

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In the aftermath of the spill, a number of fish, including red snapper, caught in Gulf waters between eastern Louisiana and western Florida had unusual lesions or rotting fins. University of South Florida researchers examined red snapper and other fish and determined that their livers contained oil compounds that had a strong “pattern coherence” to oil from the Deepwater Horizon spill.… An analysis of snapper populations in the Gulf that was done between 2011 and 2013 showed an unusual lack of younger snapper. Further research found a significant decline in snapper and other reef fish after the spill. Small plankton-eating fish, such as damselfishes and cardinalfishes, declined most dramatically but red snapper and other larger reef fish also declined.

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Seaside sparrows live only in coastal marshes, where they are common year-round residents. Oil from the Deepwater Horizon spill remains in some marshes, putting seaside sparrows at continued risk from direct oiling, contaminated or reduced food supplies, and continued habitat loss. In 2012 and 2013, seaside sparrows in Louisiana salt marshes were found to have reductions in both overall abundance and likelihood to fledge from the nest. Because these birds are not aquatic, exposure to oil would likely come from incidental contact on the shore or from eating oil or bugs and other creatures that have oil in their systems. Other studies have shown a significant decrease in the insect population in oiled marshes, which could be reducing prey availability for seaside sparrows.

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Roughly 700 sperm whales live year-round in the Gulf’s deep waters off the continental shelf…. A researcher at the University of Southern Maine has found higher levels of DNA-damaging metals such as chromium and nickel in sperm whales in the Gulf of Mexico compared to sperm whales elsewhere in the world. These metals are present in oil from the spill. Whales closest to the well’s blowout showed the highest levels.

Nothing has changed … indeed, the U.S. has let BP back into the Gulf. And BP is going to drill even deeper … with an even greater potential for disaster.

It’s not just BP … or the Gulf. Giant banking and energy companies and the government have a habit of covering up disasters – including not only oil spills, but everything from nuclear accidents to financial problemsinstead of actually fixing the problems so that they won’t happen again.