Everything not forbidden is compulsory.
“Corruptissima re publica plurimae leges: The more corrupt the state, the more numerous the laws. — Tacitus, in his master historical work: The Annals of The Roman Empire.
Boy howdy, Publius!! who could have made a more spot on observation to the Americans about their rulers at this New Year’s Day, 2013, than that?? A brave man, unafraid to call a spade a spade, Publius Tacitus was critical of almost every actor he observed at Rome–finding -”the senators are cowards, the soldiers are greedy, the emperors are weak.” More detail on Tacitus follows:
Publius, Gaius, Cornelius Tacitus (56 AD – 117 AD) was a senator and a historian of the Roman Empire. The surviving portions of his two major works—the Annals and the Histories—examine the reigns of the Roman Emperors Tiberius, Claudius, Nero.Roman Senator Tacitus wrote about the Empire of Rome in his brilliant histories.
Today, at New Year, 2013, I think of him and wonder what he would make of the present condition of the United States, with specificity to financial corruption left altogether unchecked, in fact actively encouraged, at the highest levels of government and commerce. I ask this in most particular with respect to Mr. Jamie Dimon of, I think, the Morgan Stanley Trust Bank, New York City. What would Senator Tacitus make of Jamie?
My readers know Jamie well. I featured him in a note I wrote in May of what is, now, suddenly, last summer, 2012, reflecting my observations on the Panic of 2008.
In that note, I had a number of things to say about Jamie, among them this:
America is now a desolate, fearful place and all Americans know this with few exceptions. One such unenlightened is Mr. Jamie Dimon, a most upbeat fella of, I believe, the Morgan Stanley Trust, who the other day enthused that the US economy is doing so well that it is holding “a royal straight flush,” an allusion, I think, to poker card games in which such a flush is the best conceivable hand a man can draw—and no improvement is possible . I don’t know if Mr. Dimon was having a laugh or behaving swankishly on purpose to say such a thing, but I must ask him-how is it possible to say such a heartless thing with so many millions of his fellow citizens in poverty or just above that sad border and many millions more worry at night that they are next up for the bread lines? Shame on him!
Bygones being bygones, let us all now wish Jamie Dimon a Happy New Year—but then—that’s already guaranteed for you, isn’t it, Jamie?
Good morning citizens!!!—it’s New Year’s Day and our friends at The Daily Reckoning write us in their quoted note to us, cited in full until noted that I cease citation, just below, to bring cheer to all by saying to us:
Chances are, you’re a criminal. At least as defined by the state.
You might not be one of the 83,000 people who are sent to prison in the United States every single year… and you might not have run afoul of one of the 4,500 (and counting) federal statutes…but that doesn’t mean you’re off the hook…
There are still tens of thousands — if not hundreds of thousands — of additional laws, rules, regulations, writs, decrees, codes, charters, bylaws, edicts, mandates, ordinances, notices, requirements, rulings, precedents, injunctions, intrusions and assorted other meddling, do-gooder nanny statisms to catch you with your proverbial pants down.
(Ed. Note: Being caught with your pants down, variously known as “indecent exposure,” “public lewdness” and “public indecency,” may also be a crime, depending on where you’re reading this note.)
In many ways, we are fast approaching what author T.H. White, in his book, The Once and Future King, described as
It is quite impossible to know, much less abide by, all the rules and regulations on the books.
But if only that were the worst of it!
Not only must we fall in line behind laws we don’t — and cannot possibly — know, but the state issuing these cunning curtailments of our liberties also reserves the right to change and manipulate the rules of the game…often while the ball is still in the air. It might choose, for instance, to introduce a brand new law, one fitted out with special, retro-active powers. Or it might elect to reinterpret an existing law, a rereading, one invariably in its own favor. Alternatively, it might chose to simply ignore a law, again and almost always in service of its own benefit.
Telling the truth might, depending on the circumstances, get you rewarded a hundred million bucks…or an indefinite detainment without daylight or trial.
Reveal to the public that the state murders unarmed journalists and opens fire on children from Apache helicopters, for example, and a brutal hell awaits you. Aid and abet the same state in its quest to confiscate private funds, knowing roughly one-fifth of government expenditures go to aforementioned military activity, and you may count your reward in the millions. So went the cases we examined in our “Tale of Two Bradleys” column back in September of last year.
Increasingly, this same legislatively schizophrenic state is choosing to reward incompetence and, when it is not busy punishing decency, ignore acts of wanton criminality.
Eric Fry pointed out as much in his column, “The Corzine-Dimon Syndrome”, first published in these pages back in May of 2012.
“To reward incompetent finance company CEOs with billion-dollar bailouts,” wrote Eric, “is to punish the employees and shareholders of the prudently operated finance companies that compete with the firms receiving bailouts.
“To refrain from investigating and/or indicting Jon Corzine for ‘disappearing’ $1.6 billion of client funds is to punish both the 38,000 M.F. Global customers who are still missing the money they did not deserve to lose and the 1,000 employees who lost paychecks they did not deserve to lose.”
When it comes to state-run justice, Fellow Reckoner, there’s no justice like “show” justice. Jon Corzine, Jamie Dimon and Bradleys Manning and Birkenfeld return in today’s installment of our Daily Reckoning Best of 2012 Series to help make this point.
The Single Best Reason to Feel Good About America’s “Collapse”
What could possibly be the good news about America’s next financial meltdown?
I urge you to watch this eye-popping video.
You’ll see why the years ahead could actually be the richest, happiest, and healthiest years of your life… not just in spite of the impending new financial crisis, but because of it.
If that seems strange to you, click here to see why for yourself.
The Daily Reckoning Presents
A Tale of Two Whistleblowers
By Joel Bowman
[This article originally appeared in the Daily Reckoning on Friday, September 14, 2012]
Justitia, the Roman goddess of Justice, is often depicted as a blindfolded figure, carrying in one hand a sword and, in the other, a set of measuring scales. The image is a conflation of characteristics taken from multiple goddesses; the blindfolded Fortuna (fate) of Rome, Hellenistic Greek Tyche (luck), and the sword-carrying Nemesis (vengeance). Justitia, commonly referred to as Lady Justice, is said to be blinded or “impartial” in administering her duties. She is supposed to have no masters, to serve no particular interest over another. Increasingly, however, Lady Justice appears to be doing the bidding of one very special interest: that of the United States government.
By way of illustration, let us observe the startlingly oppositional cases of two whistleblowers.
One was awarded $100 million from the United States Internal Revenue Service for revealing information to the government that was decidedly not in private citizens’ interest.
The other has been locked in a cage for 28 months, and counting, for revealing information to private citizens that was decidedly not in the government’s interest.
To one whistleblower, a fortune. To the other, the swift sword of vengeance.
What “brave services” did the former perform, and what “heinous crimes” did the latter commit, in order to earn their respective “just deserts”?
We begin with Bradley Birkenfeld, the UBS whistleblower who was this week gifted $104 million from the IRS for providing insider information that led to the forced disclosure of private banking information for over 4,500 American clients with deposits at Switzerland’s largest bank.
It is, at time of writing, the largest individual payment of its kind in the nation’s history.
IRS spokeswoman Michelle Eldridge confirmed the award and said in a statement: “The IRS believes that the whistleblower statute provides a valuable tool to combat tax non-compliance, and this award reflects our commitment to the law.”
“…the law as it serves the interest of the government,” Ms. Eldridge might have added.
The official IRS report went on to praise the courageous whistleblower for the extent to which he went in order to divulge his clients’ private records to the government: “The comprehensive information provided (by Birkenfeld) was exceptional in both its breadth and depth.”
UBS, Switzerland’s largest bank, was subsequently forced to pay a $780 million penalty as part of a deferred prosecution agreement. So far-reaching was the long arm of the US government’s law, in fact, that the Swiss government was forced to reform its bank secrecy laws.
Score: 1 for Big Brother. Score: 0 for private citizens. Score: $104 million for back-stabbing snitch.
There may or may not be a sequel to Birkenfeld’s story…but there is a notable prequel.
The world’s richest tattler was awarded his incredible payout only after serving time behind bars for (are you ready for this?) not snitching enough. Back in 2008, George W. Bush’s Justice Department decided to charge Birkenfeld with tax fraud and conspiracy after prosecutors claimed he had failed to disclose information on one of his biggest UBS clients, a California real estate developer. Birkenfeld and his lawyers at the National Whistleblowers Center denied the claim.
But whistleblowers that don’t blow whistles often find themselves on the losing end of criminal prosecutions…at least until they learn to blow the whistles loud and clear. In August of 2009, Birkenfeld found himself on the receiving end of a 40-month prison sentence. Once behind bars, Birkenfeld became a master whistleblower in no time at all.
So let’s not be too hasty in summoning the tiny violin quartet for poor Mr. Birkenfeld. The record IRS whistleblower payout he received this week equals approximately $2.6 million per month of his incarceration.
That’s pretty good work…if you’re comfortable with Faustian pacts.
Of course, not all whistleblowers are…which brings us to our second story, that of PFC Bradley Manning.
The 24-year old former Army intelligence analyst is accused of leaking the now-infamous “Collateral Murder” video, in which a US Apache helicopter crew gunned down two Reuters journalists, Namir Noor-Eldeen and Saeed Chmagh, and wounded several unarmed civilians, including children, during an attack in a public square in Eastern Baghdad, Iraq, back in 2007. You can view the shorter, WikiLeaks- edited footage here:
“You shoot. I’ll talk.”
In addition to the above footage, Manning is also accused of bringing to light documents that would eventually be compiled and released by Wikileaks as the Afghan War Diary, the Iraq War Logs, and a series of embarrassing US diplomatic cables.
The following quotes, taken from an online chat attributed to Manning, may, if he is indeed found to be the author, shed light on the young man’s frame of mind at the time:
“If you had free reign over classified networks… and you saw incredible things, awful things… things that belonged in the public domain, and not on some server stored in a dark room in Washington, DC…what would you do?” “God knows what happens now. Hopefully worldwide discussion, debates, and reforms… I want people to see the truth…because without information, you cannot make informed decisions as a public.”
“What would you do?” is indeed a chilling question, one that typically inspires in thinking individuals to whom it is addressed a moment of silence, of deep and prolonged contemplation. But let’s not use that as an excuse to silence the prosecuting side.
In a 2010 Pentagon briefing, then Defense Secretary Robert M. Gates, addressed the (wiki)leaked documents directly. His comments were instructive, both for their supreme arrogance…and for the importance (or more precisely, lack thereof) that Secretary Gates accorded the documents:
“Now, I’ve heard the impact of these releases on our foreign policy described as a meltdown, as a game-changer, and so on. I think those descriptions are fairly significantly overwrought. The fact is; governments deal with the United States because it’s in their interest, not because they like us, not because they trust us, and not because they believe we can keep secrets. Many governments — some governments — deal with us because they fear us, some because they respect us, most because they need us. We are still essentially, as has been said before, the indispensable nation… “Is this embarrassing? Yes. Is it awkward? Yes. Consequences for US foreign policy? I think fairly modest.”
For Manning’s alleged deeds, those of “fairly modest” consequences, the 24-year old has to date served 28 months behind bars, much of it enduring what the United Nations Special Rapporteur on torture, Juan Mendez, has described as “cruel and inhuman” treatment, including ten months of solitary confinement.
The Fifth Amendment of the United States Constitution stands guard against punishment without trial, as does United States Military Law. The Eighth Amendment expressly prohibits cruel and unusual punishment. The Uniform Code of Military Justice (UCMJ) promises soldiers fair treatment and a speedy trial.
In whose service do you stand, Lady Justice?
In March of 2011, 295 members of the academic legal community signed a statementprotesting Manning’s detainment “under degrading and inhumane conditions that are illegal and immoral.”
One month later, a petition to end the isolation of Manning garnered half a million signatures…in a single week. Public pressure mounted. Eventually, Manning was relocated from Quantico to Fort Leavenworth, KS.
The very day he was moved, President Obama was attending a breakfast fundraiser. Apparently seeing no need to wait for the outcome of Manning’s (still) pending trial, Obama told a group of protesters who confronted him at the junket, “He [Bradley Manning] broke the law.”
Legal experts have called into question Obama’s “verdict,” raising concerns the nation’s Commander-in-Chief and highest-ranking military officer may have exercised “undue command influence” in his pretrial declaration of guilt.
Has Lady Justice’s blindfold become her gag?
The government’s message reads loud and clear: Whistle only the approved tune, at the approved time and against the approved enemy.
It is truly as Voltaire observed: “To learn who rules over you, simply find out who you are not allowed to criticize.”
for The Daily Reckoning
No one thought this could ever happen in America…
Argentina did it in 2008. France and Ireland did it in 2010. And Portugal did it just last year. All told, more than $88 BILLION worth of personal retirement funds were confiscated to pay off government debts.
But that can’t happen in America, right? Guess what — it already has.
And if Congress has its way, it could happen again…
See what they’re planning in this alarming new video.
The Daily Reckoning Presents
The “Corzine-Dimon Syndrome”
By Eric Fry
[This article originally appeared in the Daily Reckoning on Tuesday, May 15, 2012]
On its best days, the American judicial process is a blindfolded Lady Justice — prosecuting the truly guilty and exonerating the truly innocent. On its worst days, it is a Water Wiggle — whirling around unpredictably, without any apparent connection to guilt, innocence, Constitutionality or the proportionality of alleged crimes to one another. On good days, guilty parties go to prison; innocent parties do not. On very good days, innocent parties do not even have to go to the trouble of hiring a lawyer and showing up in court. Law enforcement agencies correctly decide to spare them the burden (and potential agony) of proving their innocence before a judge or jury. On bad days, the exact opposite occurs. Innocent parties go to prison, while guilty parties do not. On very bad days, guilty parties do not even have to go to the trouble of hiring a lawyer and showing up in court. Law enforcement agenciesincorrectly decide to withhold charges and spare guilty parties the burden (and potential agony) of defending their guilt before a judge or jury.
Once you string enough bad days together, you get a Water Wiggle — a “system” of law enforcement that investigates and prosecutes alleged crimes capriciously, unfairly and disproportionately. You get a system, for example, that:
1) Prosecutes Hall of Fame pitcher, Roger Clemens, for injecting performance-enhancing drugs into his own body, but does not prosecute a single investment banking executive for fraudulently injecting mortgage-backed securities into the US financial system.
2) Tasers-to-death a Mexican national for sneaking into the US to find work, but provides billion-dollar bailouts to finance company executives whose extreme incompetence causes thousands of individuals to lose their jobs. (Bring us your tired, huddled masses so that we can beat them to death).
3) Threatens to shut down porn film studios for failure to comply with “condom laws,” but turns a blind eye to Wall Street’s serial financial rape of the US taxpayer.
4) Fires a 5-year employee of Wells Fargo for shoplifting when she was a teenager, but does not bother to prosecute M.F. Global’s former CEO, Jon Corzine, for allowing (or causing) $1.6 billion of client funds to disappear from the firm he controlled.
In other words, once you string enough bad days together, you get a “system” that punishes minor crimes and rewards major crimes…consistently. You get a system that punishes entrepreneurial initiative by rewarding cronyism.
To reward incompetent finance company CEOs with billion-dollar bailouts, for example, is to punish the employees and shareholders of the prudently operated finance companies that compete with the firms receiving bailouts.
To refrain from investigating and/or indicting Jon Corzine for “disappearing” $1.6 billion of client funds is to punish both the 38,000 M.F. Global customers who are still missing the money they did not deserve to lose and the 1,000 employees who lost paychecks they did not deserve to lose.
To continuously intervene on behalf of politically connected incompetence and sociopathy is to invite the kinds of corruption, recklessness, cronyism and criminal negligence that ruins innocent lives and destroys entire economies.
The US is sprinting down this very path…as last week’s “surprising” $2 billion loss at J.P. Morgan Chase illustrates. Morgan’s egomaniacal CEO, Jamie Dimon, described the furor over the trading loss as a “tempest in a teapot.”
Maybe so, but based on subsequent disclosures about the reckless trading that produced this loss, Dimon looks like a teapot in a tempest — clueless and overwhelmed.
The only surprise about this announcement was that the loss wasn’t $4 billion…or $40 billion. But let’s give it some time. Morgan’s expert traders might still get there.
There’s a direct connection, Dear Reader, between the trading losses at JP Morgan and the conspicuous non-prosecution of Jon Corzine. In fact, there’s a term for this connection. It’s called “moral hazard.”
Most parents understand the term. They understand that the best way to raise a socially dysfunctional brat is to give him a candy bar every time he whines for something, and to give him a $20 bill every time he bullies a classmate. And yet, incredibly, the Federal Reserve, Treasury and Congress are doing exactly that. They are creating a generation of “spoiled brat” bankers.
Just three years after the depths of the 2008-9 Credit Crisis, Wall Street’s power brokers remain as remorseless as ever, as self- entitled as ever and, therefore, as fearless as ever. That’s not a good thing.
Three years after a crisis that nearly toppled the US financial sector, JP Morgan is playing the same old games…as if nothing had changed. The official chitchat from Washington and Wall Street about “risk” and “regulation” has changed quite a bit since 2008, but Wall Street’s behavior is just as deplorable and dangerous as ever.
As the chart above shows, the “gross market value” and “gross credit exposure” of global OTC interest rate derivatives has jumped to its highest levels since 2008. If you don’t understand what these data points mean, don’t feel bad, Jamie Dimon doesn’t seem to get it either. (But if you’d like to understand what these data points mean, check out this report from the Bank for International Settlements).
The only thing you really need to know about the global derivatives market is that risk exposures are increasing, not decreasing. JP Morgan’s balance sheet tells the tale. According to Morgan’s latest quarterly report, the firm was a net seller of credit protection — to the tune of about $206 billion, up from $116 billion as of Dec. 31. In other words, it nearly doubled its risk exposure. Morgan calls this speculation “hedging.” Unfortunately, it is hedging without a hedge, which is the same thing as speculating.
The newly “retired” Chief Investment Officer of JP Morgan, Ina Drew, was supposed to be hedging other exposures at the firm. But hedging is not supposed to produce billion-dollar losses. That’s why it’s called “hedging.”
“[Ina Drew’s] position over the years has always been around hedging,” explains Dina Dublon, a former JPMorgan CFO who worked with Drew for 22 years, “but hedging for profit as opposed to hedging just to counter losses.”
Ah yes…“hedging for profit”…also known as “speculating.”
“The sheer size of this trade,” says Barry Ritholtz, editor of the Big Picture and recurring speaker at the annual Agora Financial Investment Symposium in Vancouver, “makes it far more accurate to describe this as speculation than hedging. The loss was the tell. A true hedge would have been offset by the underlying position that was being hedged — so any loss should have been insignificant. Even a minor correlation error should not lead to a $2 billion hit.
“If we are going to define this trade as a hedge, then there is no other conclusion to reach except that everything at a huge bank is a hedge. And once you define everything as a hedge, well then, nothing is a hedge.”
In other words, Dear Reader, nothing has changed since 2008. Absolutely nothing. The only reason Dimon is around to lose $2 billion of the shareholder’s capital in 2012 is because the federal government (i.e., we taxpayers) bailed him out in 2008.
Therefore, Dimon understands the rules of this rigged game very well. He knows he can conduct mega-billion-dollar speculations because he knows that JP Morgan could never bankrupt itself, no matter how recklessly it conducts its business. The US central planners would not allow it. Morgan could build bonfires with $100 bills in front of all its branches every night, and it still would not be able to burn through the federal government’s commitment to keeping it alive.
Jamie Dimon, along with the rest of the coddled Wall Street predators, knows he is just as free to jeopardize the US financial system as he was in 2008. He and his counterparts at Goldman and elsewhere are just as free to place their monstrous heads-I-win- tails-you-lose bets with non-consenting US taxpayers as they were in 2008. No one will stop them.
Vibrant economies and civilized societies rely on law and order. And law and order relies on a foundation of fairness — a basic understanding that bad things are bad and good things are good. But when the powers of government begin to affirm that bad things are okay and good things are irrelevant, all hell breaks loose.
If America is to regain her former glory, she must first regain the integrity to prosecute criminality, no matter how many politicians know the criminals on a first-name basis…and she must regain the courage to let incompetent capitalists fail so that competent capitalists can arise to take their place.
If America is to regain her former glory, she must regain the integrity to prosecute guys like Jon Corzine and the courage to let guys like Jamie Dimon fail.
***I here cease to quote from our friends at the Daily Reckoning and thank then as always for their insight and courtesy.
As for Jamie Dimon and his pals, I repeat here again what I wrote to my disciples, now, suddenly last, summer, 2012 in my plea for a new United States Industrial Policy:
I am told that others have proposed somewhat similar policies, among them, Senator Bradley of New Jersey and we can afford no pride of authorship here. All details and competent ideas for the swift implementation of this plan will be welcomed from all quarters. Senator Bradley was insufferable when here at Washington. His implicit lamentation, “I am the only Holy Nun in the whore house” is a song, when sung more than once, that renders the singer simply insufferable. The lamentation suggests this line of query “Why, Holy Sister, do you live in a whore house?” “Do you expect to convert the girls?”
At events, everyone atones for his sins one way or the other and Senator Bradley now clips bonds in Wall Street at, I think, The Allen and Company, likely close by our friend Mr. Jamie Dimon. I hope that when they get together, Senator Bradley does not recite a similar lamentation to our friend Jamie respecting what it is like to work in the whore houses of New York. Jamie would feel aggrieved I am sure, holding his precious royal straight flush, to hear such a lamentation. In fact, on hearing Bradley say such a thing, Jamie might just see his royal flush deformed into aces over eights, called, I think, in poker card games, a dead man’s hand—a far more apt analogy to the American economic condition than is Jamie’s royal flush. But, there’s good news from Wall Street here! The remarkable atonement of Senator Bradley follows on what must have been a true Epiphany, in that I read he has penned a book that, I think, calls for an emergency industrial policy of a sort advocated here. His help in this enterprise is very much appreciated.
So, on this New Year’s Day, 2013, let’s have a straight up conversation with Jamie and the boys. Here’s the message: The thing is guys, the Americans are an inherently decent and amenable people. But even the Americans have their limits. The Americans are now past those limits as we enter New Year, 2013. The Americans will tolerate, even cheerfully entertain, a fair amount of graft and corruption as long as their government and commercial sector provide fertile fields in which the citizen can toil, prosper and feed his family in honest fashion.
What the citizens will not tolerate, for any appreciable amount of time, is the lack of such fertile fields for the citizen to toil in to feed his family, taken in addition to the orgiastic excess of blatant, public, corruption of the sort annotated in this note of mine which includes the, similar, New Year’s message of admonition taken in citation here from The Daily Reckoning.
The message here Jamie is that you will be permitted wide latitude to rape and plunder. Just do not over do it. If you over do it, people will rise up and take away all of your toys. You will be a most unhappy fella when that happens. The Americans don’t want that to have to do that, Jamie. The Americans want you and your pals to have a very Happy New Year, 2013, with many more to come!! Just gear down on the excess, Jamie!! Just gear down, sonny boy.