Five Dots from Cabbie to Billionaire

Sometimes the lines connecting dots are so overwhelmingly bold and darkly obvious that, despite knowing better, I find myself concentrating too much on the dots and not the lines. At any rate, I did a segment for the Alonya Show on RtTV this afternoon that covered four dots of financial dislocation. As I left the studio in a cab, a fifth dot appeared:

In Los Angeles, traveling eastward on Santa Monica Boulevard, you pass the mansion-laden enclave of Beverly Hills on your left, and a less ornate stretch of police and office buildings on your right. While we were driving, the driver revealed a mark of inequality, seemingly secret and trivial, and yet so significant.

“See that,” he gestured to a sprawling, perfectly manicured estate. “People that order a taxi from there to the airport, pay a flat rate of $30.  But over there,” he points to my right, “you’re on the meter. Forty-five bucks.”  

He shook his head, “They make 100 times more in those homes than what other people make. You tell me why the people with all the money get the cheaper fare.”

The answer was the line connecting the dots of the show I’d just taped.  They reap the benefits, because they make, or buy, the rules. A half an hour earlier, Alonya and I had discussed four other dots.

The first was an FT piece that noted there had been no new bank applications in the United States in 2011, after only 3 in 2010.  What does this mean? It means that it’s cheaper to acquire a bank with FDIC and Fed assistance, than to start a small one. Not only that, smaller banks can’t even raise the capital required to stake out a physical location. This, while mega-banks sprout like weeds on the corner of every block, capturing spacious street-front property, rolling out expensive signage, and able to negotiate better rents for their bulk presence. It is a sign of the small being crushed by the large; a situation whose side-effects include removing choice from citizens, who are left paying collusively high fees for ATM and banking services, at omnipresent, federally subsidized institutions.

The second dot was the excellent video, accompanying a petition, that Public Citizen just released called Breaking up is Hard to Do – aimed at Bank of America (but that could equally have been addressing any member of the too-big-to-fail contingent.) Alonya asked me what I thought of the video. I replied, “It’s not going to happen.” (These goliaths will remain joined at the commercial and speculative hip.) Not because it shouldn't, but because...

Our regulatory and legislative systems have been supremely indulgent of these behemoths. Here and there, the big banks emerge from settlements with fines for fraudulent practices, but it doesn’t make a dent in the risk they can manufacture, or the size to which they can grow. The Federal Reserve has ultimate regulatory authority over the big banks, and under Chairman Ben Bernanke, used that authority to approve, not reject mergers, to facilitate a cheap money party to fuel, what would otherwise have been insolvent financial giants, and to allow those same giants to re-funnel their subsidies back to the books of the Federal Reserve as excess reserves that gross .25% interest per year. Separately, the tepid Dodd-Frank Act gets watered down more each day. But even at its ‘strongest’ inception state, it didn’t break up the banks, nor reduce the risk they pose our global economy. Bank of America holds 35% MORE derivatives today than before the fall of 2008.

The third dot had to do with a billionaire index that Bloomberg created.  It provides a closer to daily tracking of the wealth of the world’s 20 most ostentatiously wealthy.  I don’t really know what to say about that.  But, whoever gave the internal go-ahead to that monstrous showcase of inequality should have perhaps included a location-tracker, so people could send their daily heart-felt awe and congratulations.

The fourth dot was the income gain of the top 1% vs. the 99% over the past year. The fact that the top 1% captured 93% (basically almost all) of the growth demonstrates that the inequality gap isn’t just widening; it’s accelerating. The more one has, the greater the cushion to soften economic Depressions. It was no different going into the 1930s Great Depression as illustrated in my novel, Black Tuesday. If you’re living paycheck to paycheck, you feel each oppressive drop of an increase in health care, education, childcare, food, energy and utilities costs. If your income isn’t growing in tandem, you are comparatively falling further down an economic hole. This accelerated income-rise-to-the-top is one more sign that when the media and Washington say we’re in an economic recovery, they have an ultra-myopic definition of who constitutes ‘we’, and it’s not the majority of the population.

That’s why there’s an Occupy Movement. As I wrote on behalf of the compelling book, "The economic elite vs. the People," “Occupy Wall Street has coalesced across towns, cities, and countries. It represents people of every race, age, and disposition as the only meaningful opposition to a winner-take-all financial system that extracted untold wealth from the global population to puff up the personal portfolios of elite executives with impunity. And until a more equitable society and system prevail, the Occupy movement is not going anywhere.” (See the rest on www.ampedstatus.com)

All these dots and lines project a gamed world, where it is not sweat or merit that propels people forward, but connections and power and pedigree. Which brings me back to my cabbie friend.  As he dropped me off, he offered this morsel of wisdom, “Things won’t change until we’re all paying the same fares. At least, that’s a start.” 

Greg Palast’s Vultures’ Picnic and Why we Occupy: My Review

Last week, I had the privilege of attending New York Times Bestselling author, Greg Palast's talk (hosted by KPFK and Brad Friedman of “Brad Blog”) about his latest book, Vultures’ Picnic: In Pursuit of Petroleum Pigs, Power Pirates, and High-Finance Carnivores.

Palast is as intense and engaging in person as he is gripping and illuminating in his no-nonsense prose. His impeccable wit, biting humor, and startling facts provide a level of hard-core journalism that every 'non-Vulture' must pay attention to. The manner in which he ferrets out, and exposes, pertinent information about untold stories behind the world’s most heinous Vulture attacks is reminiscent of the kind of old-school journalism dying amidst the sad onslaught of 24/7 hour media stories about the Kardashians, sprinkled with 'real news' stories about bipartisan playground fights.

His energy is infectious. His indignation is compelling. His data are irrefutable – and so damn far-reaching.

Against the backdrop of over 4200 nationwide arrests (and counting) of the Occupy Wall Street movement’s protesters in a twisted policy of jail the student / hail the bankers, Palast eviscerates the idea that the 99% must have a physical location or pat ‘bumper-sticker’ demand sound bite in order to be viable.

“Why do we Occupy?” he asks, animated, beneath his signature fedora. 

Vultures’ Picnic answers that question in dramatic detail and biting whodunit monologue and dialogue, the kind that could easily fill a riveting Mission Impossible film where Tom Cruise ricochets into the lairs of the bad guys to save the world from the big bad oil company. Yet all of Palast's and his team’s findings are shockingly true and infinitely more visceral. Palast and his team get everywhere. 

In Chapter Three, “Pig in the Pipeline,” Palast dines with Etok (‘one bad-ass Eskimo’) inside a whale-carcass. He discovers the extent to which BP (which dumped a quarter million gallons of crude into the tundra via the BP/Alaska pipeline, blessed by the drill-baby-drill mentality in the minds of Sarah Palin and Barack Obama alike) faked pipeline safety reports. Meanwhile, the firm’s oil spillage is displacing the polar bear population to such an extent that there are campaigns to find them new homes.

In Chapter Five, “The Cheese Smelled Funny So We Threw It in the Jungle,” Palast journeys through the Ecuador rain forests, and traverses the river – not in a riverboat, but in a ‘dug-out log with a hand-carved paddle’ - searching for Emergildo Criollo, who is ‘a con man, a trickster'– according to a Chevron lawyer. Palast finds that Chief Criollo was a rag-tag famer, whose life has been turned upside down by Chevron. He tells Palast the extent of Chevron’s destruction, unviewed by the mainstream media. As Palast writes, “The miles of slithering contamination here in the Amazon made the Gulf Coast look like Kew Gardens.” Indeed, Chevron tried to stab BP in the back to deflect attention from its own shameful practices. Meanwhile, Criollo's three-year old went swimming in the oil-slicked waters, began to vomit blood, and died quickly. His other son died slowly, of cancer.  Chevron tried to shirk responsibility – as in yeah, maybe it’s the oil’s fault – but can you prove it’s our oil? And yes, Palast can – with real reports – pointing to the shredding of documents – in other words, with real evidence of obstruction of justice.

Palast also provides personal anecdotes, including recounting some of his own family history before describing a surprise, heart-warming standing ovation at the bequest of Martin Luther King III during a 40^th anniversary Civil Right dinner in Birmingham, Alabama where, Palast adds, with inimitable wryness, he  ‘got a seat at the back.’

Palast exposes a plethora of criminals killing nature and people, the folly of President Obama’s holier-than-though attitude about a corrupt African leader buying $150,000 diamond-encrusted ties funded by an American businessman, and the Teflon nature of the men that ‘cage’ votes, like Federal Prosecutor Tim Griffin, to capture elections.

Our world is warped, and the Vultures’ Picnic takes place on the carcasses of the human population – whether in financial terms by ripping off small towns, pension funds and mortgage holders, or through the slaughtering of forests, sea-life, animals, and village children. Why do we Occupy ? Because we can’t let the Vultures continue gorging themselves at our expense. 

Palast has not only pushed the envelope of investigative journalism, but the very media with which books  - including e-books--are read. For Vultures’ Picnic is not just a book - incorporating extensive footage of his interviews and supporting documentation for his findings - it is an amazing multi-media experience complete with a how-to-be-Sherlock-Holmes-yourself tutorial mixed in. Vultures’ Picnic is an eye-opening, heart-pumping, mind-blowing experience that should not, MUST not, be missed.

Another MF Global / Goldman Puzzle Piece: Rule 606: Order Flow

As we await the results of a probe into MF Global and its missing clients’ funds that will no doubt be conducted with the same tactical zeal with which authorities across the country arrested over 4000 Occupy Wall Street protestors it’s interesting to note another component of the MF Global - Goldman Relationship. Beyond the past-leadership of Goldman Sachs by former MF Global head, Jon Corzine, and fact he was brought to the helm by former Goldman buddy, Christopher Flowers, there was also a nice little execution business-sharing going on between the firms. An examination of those transactions, each less than $200,000 , could be illuminating.

Under Rule 606 (formerly SEC Rule 11Ac1-6), as part of its strategy to rely on the companies it is supposed to be regulating to reveal whatever part of their hand they want to, the SEC requires a quarterly report  from brokerage firms on  their order-routing services. Specifically, the report covers ‘non-directed’ orders, or ones that customers haven’t specifically requested go through a particular vendor for execution.  The report has four sections: one each for securities listed on the New York Stock Exchange, The Nasdaq Stock Market, the American Stock Exchange and 'Other' exchange-listed options, and indicates the venues most often selected.

So, according to MFG's third quarter non-directed routing report, guess what vendor showed up prominently? Yep - Goldman Sachs Execution and Clearing LP.

Of course, not all information must be disclosed, and, as MFG notes in its report “statistics capture only a portion of MFG order flow” and “do not create a reliable basis on which to assess whether MFG or any other trading venue has satisfied its duty of best execution. “ But sill.

On the NYSE (the body taken public by former Goldman Sachs co-President, John Thain), the order flow of non-directed customer orders less than $200,000 (or 69.1% of total orders) mostly went through Goldman Sachs Execution and Clearing LP. (SGMA) The entity executed 46.4% of total non-directed orders including 58.4% of limit and 37% of ‘other’ orders.  The rest of the NYSE orders went through the Nasdaq, Knight Direct and NYSE ARCA.

On the Amex, non-directed orders of $200,000 or less comprised 23.24% of all orders, of which 31% went through Goldman, including 29.5% limit and 32.2% ‘other’ orders.

Of the orders that went thought the Nasdaq, 94.8% were under $200,000. Of those, 70.4% limit and 40.3% other, went directly through the Nasdaq. Goldman executed 12.1% of the limit, and 8.1% of the other orders.

The reports, as per the SEC being useless, don’t include the trade volume represented by these percentages, yet, for the most part, when MF Global didn’t execute directly its non-directed client orders through an exchange, it used Goldman. There may be some interesting – and co-mingled – 'missing' transactions that slipped in there. Just saying.