Social Media Machinations Of the Financial Press

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A piece of Orwellian obfuscation by one Tom Sykes at Daily Kos *(see note at the bottom of this post) goes into the file, rip-roaring propaganda:

“I want to be clear on something up front. I think hedge-funds are a menace and should be outlawed. I think Goldman Sachs is a criminal conspiracy and its whole leadership should be indicted.

There are plenty of commentators, like Paul Krugman in the New York Times today and Matt Taibbi in his article in Rolling Stone, that have done great reporting on Goldman and on hedge funds.

But what we’re seeing is how a really odious character named Patrick Byrne is trying to hijack this issue…”

My Comment:

Byrne hijacked Taibbi? The liberals busted Goldman Sachs and naked short-selling and the hedge funds?

Aren’t Goldman Sachs and the hedge-funds the money men who funded the whole left-establishment..and wasn’t it people on the right libertarian side who busted them, and in fact called the whole financial crisis?

The libs were on the case only in 2008 when everyone was on the case and you’d have to have been blind not to notice.

This kind of revisionism makes me question the impetus behind the Rip Van Winkle awakening  of the MSM on the financial crisis.

Either it shows that the MSM can’t see what’s going on in front of its collective nose, which argues that its working hypotheses are wrong (the kinder interpretation), or it shows rank dishonesty (the truer interpretation, likely).

I’d go with the first interpretation, only the hatchet job the press keeps doing on anyone from the other side of the political spectrum suggests that the second interpretation is the right one.

As I’ve repeated ad nauseum, Taibbi seems to have lifted my Goldman Sachs piece of 2006 (Money Week) as well as a bunch of other articles written in 2007-2008 (see ABOUT) . You can read it on the net and then go back and see what Taibbi wrote, only about three years after I did. (He probably pinched stuff from at least one other person as well). You will also see that I wrote more than half-a-dozen articles on Goldman after that in 2006 and 2007 (check this site). In 2008, everyone began writing about Goldman. I figure someone at Rolling Stone got worried that the population was beginning to wake up to which side really had the goods, and decided to co-opt the issue before their intellectual ineptness was too evident.

Otherwise, I’m hard pressed to explain why they don’t think they need to source and attribute correctly. They can’t all be such intellectual charlatans? Right?

As for naked short selling, Byrne has been waging that campaign since 2005.…and some others on the right, even before him. Even people who don’t think there’s an NSS hedge-fund-media conspiracy involved have long ago conceded that NSS is a problem (see this Motley Fool piece from 2005), and that it’s difficult to figure out what’s really going on, because the DTC/SEC, for example, won’t/can’t release the figures needed to assess the situation.

(Now, why would anyone think conspiracy when there’s stone-walling going on…)

Matt Taibbi basically borrowed Byrne’s argument. And having taken the argument, the establishment is now trying to discredit the person who made it first (see Ritholtz here and here, even before the Facebook brouhaha).

It’s not irrelevant that in coming to his conclusions, Ritholtz cites only the very same journalists whose credibility is shot by the evidence of their collusion with hedge-funds. That is certainly a bizarre way to report on a topic.

Mind you, this should not be taken to be an endorsement on my part of Byrne’s business practices or accounting, about which I know only what I have read. And that of course has mostly been written by his critics and critics of the NSS thesis, like Dow Jones reporter, Carol Remond.

But Remond, despite her reputation as a respected reporter on penny-stock scams, is seriously compromised in her reporting on this issue because of alleged collusion with hedge funds.

I say alleged, to be on the safe side, but to my eyes the evidence is convincing.

On the other hand, Overstock has repeated accounting problems that its foes argue are the real reason for its NSS campaign.

How serious these problems are is hard to say.

Of the two accountants who routinely denounce Byrne’s business practices in multiple postings that take up a remarkably (and suggestively) disproportionate space on their blogs, one, Sam Antar, has been convicted of one of the most extensive cases of embezzlement in recent history. Antar also claims the mantle of reformed felon without any evidence that restitution of the embezzled funds took place. He escaped prosecution only by turning in his own family. This is not a confidence-builder. Actually, there’s some evidence of further wrong-doing involving one Barry Minkow that’s also posted on the Deep Capture blog. Antar and Mankiw are practicing greenmail, according to this piece.

(Its author uses the term loosely. Greenmail, in recent US financial history, is what Michael Milken is infamous for – a type of corporate raid. And Milken is one of the central villains in the Deep Capture story of the corruption of Wall Street. Since I researched this period for a book I was planning to write on Goldman Sachs, I’m conversant enough with the subject to say with some confidence that Byrne is on the right track on this).

The other accountant who criticizes Byrne, Tracy Coenan, seems to be another ally of  Antar and equally over- concerned with the accounting problems of Overstock, to the neglect of other companies.

Yet these are the only two accounting experts I see cited by Weiss.

Could there be other things wrong with Overstock?

Perhaps.

I have no way of knowing. But what I do know doesn’t so far make me think the problems are related in any way to the thesis of Deep Capture. The accounting errors don’t seem especially egregious, compared to the rest of what is going on in the market that the reform movement that Byrne spearheads is trying to tackle.

So is Deep Capture’s work discredited because of Byrne’s alleged and real problems?

No.

Overstock could very well be mismanaged and Byrne could be guilty of accounting shenanigans. That has nothing whatsoever to do with the extensive, indeed, mind-boggling, ties between supposedly neutral financial reporters and the hedge-funds that Deep Capture report on. The evidence the site has collected is shocking and undercuts any defense of the neutrality of the reporters in question (Bethany McLean, Remond, Weiss, Herb Greenberg, Roddy Boyd, etc).

To return to the media manipulation story.

After Taibbi put the two stories on Rolling Stone, Goldman and Penson came out and shot them down.

Taibbi, strangely, for a supposed target of Goldman and for all his righteous indignation over NSS, vanishes on the latter subject (NSS) and retracts parts of the former.

So what happens?

The entire Goldman argument gets reduced to “Goldman corrupted the regulators,” which works very well if you want more government and more regulators (and we are not fundamentalists on either subject). The good part of that from the point of view of the MSM is that that lets them displace the outrage on one or two figures (Rubin, for example), while using GS as a whipping-boy to funnel off popular rage from any effective overhaul/criminal prosecution, as well as to deflect it from the evidence of conspiratorial criminal activity.

(Yes, there are conspiracies, Virginia, and often the ones protesting loudly that they don’t exist are part of them…unwittingly or not).

Take this piece at Business Insider by Ritholtz, which sets up the boundaries of establishment discourse, with Taibbi and Gasparino at either end. What it does is to  come down roughly “midway”  between the two in a way  that conveniently does nothing to change the centrist liberal establishment discourse.

(At least, that’s my take).

Now, Taibbi comes from a well-established media background, with a father who was an NBC TV man.

It’s hard to believe he doesn’t know the ethics and etiquette of sourcing. In fact, it’s downright impossible.

We’d have to conclude that

1. He was tasked with co-opting the stories for political or national security reasons.

2. Or lacks journalistic integrity, a deficiency fairly rampant these days….

3. Or wants to protect the left-liberal establishment on the issue….

4. Or some combination of the above.

Note:

*Tom Sykes is apparently a sock-puppet created by Gary Weiss, the former Forbes and Business Week reporter, at least, according to the considerable evidence amassed at Deep Capture.

Note: I have sent several mob/corruption-related articles to the Deep Capture team and consider myself a supporter of their research, which I’ve tried to link and forward to others, as well as to more generally publicize. I don’t think that prevents me from assessing the merits of their claims objectively. I don’t, for example, condone any social engineering attacks on social media sites like facebook, no matter what the legal status of such attacks is. Frankly, the work Deep Capture is doing on market/media corruption is too important for its members to get into such unworthy activities. Nor do I think bringing in personalities, family members, or even private networks of journalists is particularly important or even necessary. The point is not whether a journalist talks to or is friendly with another journalist….or even hedge-fund. The point is whether their work is significantly biased by the friendship and whether they disclose the friendship and attempt to correct for it. I appreciate a number of left and liberal writers, even when I disagree with them, because I find them intellectually honest and reasonably objective (complete objectivity being impossible as well as unnecessary). That’s not a very high standard to demand now, is it?

Weapon Of Resistance: The AK-47

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C. J. Maloney in Lew Rockwell:

“Who says that God has no sense of humor, if a rather dark one, when He gives for us the ironic fact that of all the forms of political organization that humans herd themselves into there has been none more reactionary, bloodthirsty, or political than Stalinism, and that’s the one which gave us the cheap to produce, lethal, and amazingly low maintenance AK-47. Besides corpses and vodka, the AK-47 was the only thing communist Russia was ever able to mass-produce.

“A guerilla army in today’s world needs little more than an ample supply of AK-47s, something to believe in, and the support of those around them to be unconquerable. That’s all. And Mikhail Kalashnikov, God bless him, has put that ability in the hands of people from one end of the earth to the other.

“Alexander Hamilton wrote in The Federalist No. 29 that should the federal government ever turn despotic it “can never be formidable to the liberties of the people while there is a large body of citizens, little, if at all, inferior to them in discipline and the use of arms.” If every American family had an AK-47 hanging on the wall over the 46″ wide-screen plasma, that’d force enough to give any army pause.

“So next May Day, assuming you remember it at all, take a moment to honor the memory of the millions slaughtered over the lethally stupid idea of communism, but give a nod to God’s great mercy, to His mysterious way that willed that very same idea to birth the AK-47. It gave to the working masses the ability to defend themselves from the more virulent strain of politicians; it is the sword of the common man. Of all the firearms yet dreamed up by mankind, it is the automatic for the people.”

Barack Obama: The Looks That Kill

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Insightful piece by Mary Rizzo in The Palestine Chronicle on the triumph of style over substance in the career of Barack Obama:

“In Afghanistan at least one hundred innocent civilians were killed by a few men flying US Air Force planes, and this was not an isolated attack, it is simply one that had been reported. This act, when done by the Republicans, was immediately condemned by those who consider themselves to be “anti-war”. The complaints never seemed to last longer than a few days and they had no practical efficacy whatsoever, but the feeling was that it was wrong, it was putting America in a worse position and that one should protest, not really for the Afghanis or Iraqis, but for the sake of the image of the USA. All of this has simply faded out because their man, the charming and attractive Obama is doing it, and his narrative of the Good War, they believe, is going to be enough to do the trick.

Certainly, there is nothing new about the utilisation of rhetoric and image to make effective propaganda. What would really be sad is if those who identify with Obama because of his attractive image identified with all the hypocrisy he represents, and the lack of awareness that he is as imperialistic and as warmongering as any president before him, none excluded. If looks could kill, they probably will.”

A Million Hits On Gaza

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From Ramzy Baroud:

Check out this short film (in English and Arabic) about my latest book: My Father was a Freedom Fighter: Gaza’s Untold Story (Pluto Press; Palgrave Mcmillan, 2010). The book is available at Pluto Press (UK) and Amazon

A Promotional Film about Gaza Launches New Book’s Worldwide Awareness Campaign

FOR IMMEDIATE RELEASE – PLEASE CIRCULATE WIDELY

SEATTLE/TORONTO/LONDON – A promotional short film for a new book on Gaza is being released worldwide today, days before the official book launch in the U.K., to commemorate the first anniversary of the Gaza massacre – Israel’s so-called Operation Cast Lead, which killed and wounded thousands in Gaza a year ago.

Told from the perspectives of the refugees, My Father Was a Freedom Fighter: Gaza’s Untold Story is heralded as an incomparable chronicle of the history of the Gaza Strip, and has been endorsed by leading intellectuals and academics.

The book’s author, Ramzy Baroud, was born and raised in a refugee camp in the Gaza Strip. He was witness to much of Gaza’s tumultuous history. “Gaza’s story is the most fascinating story there is, yet somehow it’s reduced to a few simple, redundant, and misleading clichés that barely grab attention anymore,” Baroud said. “I am determined to challenge and change that. Thanks to courageous publishers like Pluto Press, and the dedicated efforts of many talented individuals out there, we shall together change the ways the Gaza story is told.”

The short film, carrying the name of the book, is being released on YouTube, in both English and Arabic versions. The film will also be broadcast on a number of TV stations around the world. The filmmakers and book author are calling on readers and activists around the world to ensure the widest possible dissemination of Gaza’s untold story, by reading and helping to promote the book, and by encouraging others to watch the film at YouTube, through sharing the film with friends, family, and colleagues – with an aim to reach a million views at YouTube.

The “A Million Hits on Gaza” film-sharing movement at YouTube is just the beginning of a worldwide campaign to raise awareness of the book, and of Gaza’s untold stories and history, a campaign that will also include readings, book tours, the screen adaptation of the book into a feature film, and various educational, grassroots, community, and international film festival screenings of the completed feature film.

The promotional short film was created in a matter of days, with zero budget, by a team of artists in Canada and the U.K. that included filmmakers Paul Lee and Cathy Gulkin, editor and screenwriter George Kaltsounakis, composer and jazz musician Gilad Atzmon, and with the collaboration of writer and journalist Hani Yared (who helped with the translation and the preparation of the Arabic version of the film).

The book is now available through the Pluto Press website (www.plutobooks.com), and also through Amazon.com. Beginning March 2010, the book will be distributed in the United States by Palgrave Macmillan, which is promoting the book as a ‘trade title.”

To view the film in English, click here:

http://www.youtube.com/watch?v=9K2VpARDkzw

To view the film in Arabic, click here:

http://www.youtube.com/watch?v=y0NSpmrMZ4w

To purchase the book from Pluto Press, visit: www.plutobooks.com

Or click here:

http://www.plutobooks.com/display.asp?K=9780745328812&

To purchase the book at Amazon, visit: www.amazon.com

Or click here:

http://www.amazon.com/My-Father-Was-Freedom-Fighter/dp/0745328814/ref=sr_1_1?ie=UTF8&s=books&qid=1260802483&sr=8-1

For more information, reviews, book tours, visit www.ramzybaroud.net, or e-mail: info@ramzybaroud.net



Check out this short film (in English and Arabic) about my latest book: My Father was a Freedom Fighter: Gaza’s Untold Story (Pluto Press; Palgrave Mcmillan, 2010). The book is available at Pluto Press (UK) and Amazon.

SEC’s Own Accounting Is Deficient

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Apparently, the SEC, top regulator of financial fraud, isn’t up to snuff keeping its own financial books…
We don’t say it’s cooking its books, but it sure looks like if someone wanted, they could cook them quite easily, according to this report at law.com:

“The GAO found that the SEC “did not have effective internal control over its financial reporting as of Sept. 30, 2009.”
As part of its mission, the SEC is charged with enforcing strict financial disclosure rules for public companies. Apparently, it is less adept at policing itself.
For example, the GAO reported that SEC’s general ledger system allows unauthorized personnel to view, manipulate or destroy data, and that “serious unauthorized activity” may remain undetected.
Until the SEC fixes these problems, the GAO found, the SEC can’t be sure “1) its financial statements, taken as a whole, are fairly stated; 2) the information the SEC relies on to make decisions on a daily basis is accurate, complete, and timely; and 3) sensitive data and financial information are appropriately safeguarded.”
Nor could the SEC “provide evidence that it monitored controls over its payroll exception reports to ensure payroll transactions were recorded accurately and timely.”
While the GAO did credit the SEC with producing statements that were “fairly stated in all material respects,” it flagged “six significant deficiencies” for FY 2008 and 2009.

The six areas are:

• information security;
• financial reporting process;
• fund balance with Treasury;
• registrant deposits;
• budgetary resources;

My Comment:

Translated, those six problem areas amount to this:
No one can really be sure if or when

1. Someone steals information from the SEC
2. Something is wrong in the SEC’s accounts
3. How much money the SEC has with the Treasury
4. How much money the SEC takes in
5. How the SEC is doing on an ongoing basis

Chew on that…

Harvard Paper Suggests SEC Favors Big Firms

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Now I’m waiting for the Harvard Law paper that says that if you jump off a cliff, you tend to fall downward not up…

August 11, 2009

Harvard Law and Economics Discussion Paper No. 27

Abstract:
Recent financial collapses have focused policymakers’ attention on the financial industry. To date, empirical studies have concentrated on corporate issuer activity, such as securities offerings and class actions. This paper makes a first step in studying SEC enforcement against investment banks and brokerage houses. This study suggests that the SEC favors defendants associated with big firms compared to defendants associated with smaller firms in three ways. First, SEC actions against big firms are more likely to involve exclusively corporate liability, with no individuals subject to any regulatory action. Second, the SEC is more likely to choose administrative rather than court proceedings for big-firm defendants, controlling for types of violation and levels of harm to investors. Third, within administrative proceedings, big-firm employees are likely to receive lower sanctions, notably temporary or permanent bars from the industry. To explain this gap, the paper first investigates whether big-firm violations are qualitatively different from small firms’ violations, but finds no support for this. This paper next explores two hypotheses that could explain a systematic bias in enforcement patterns: that constraints in bureaucratic resources weaken the SEC’s negotiating position towards big firms, and that SEC officials favor prospective employers.”

IPCC Chief Pachauri Central To Cap-and-Trade Scam

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From Mish Shedlock:

“The crux of the scheme is this: European steelmakers have threatened to leave the EU for India, eliminating the jobs of thousands of workers in the process, unless the EU grants the steelmakers free carbon credits worth hundreds of millions of dollars.

Eurofer, a European trade group, is at the center of the scheme. The web of the plot, however, weaves in not only several companies, but also the United Nations’ climate change chief:

* Among its members, Eurofer represents two EU steelmakers, Corus Redcar and ArcelorMittal, each of which has ties to India as well as to Rajendra K. Pachauri, the Indian industrial engineer who has been chairman of the U.N. Intergovernmental Panel on Climate Change, or IPCC, since 2002.

* Eurofer appears to have coordinated a threat to the European Union Greenhouse Gas Emission Trading System that its steelmakers would move their operations from the EU to India unless the EU cap-and-trade exchange issued them – at no cost – carbon emissions permits worth hundreds of millions of dollars.

* Once the bureaucrats in Brussels acquiesced, Corus Redcar and ArcelorMittal maneuvered to cash in windfall profits from the EU carbon permits given them at no cost.

* Additionally, Corus Redcar has now announced a decision to close operations in Great Britain nonetheless and relocate its steelmaking activities to India in order to gain additional U.N. carbon credits.

Ironically, EU and U.N. officials who might have thought requiring cap-and-trade permits would operate as “protection racket” in which EU companies need to buy carbon credits to continue operations, have now found themselves on the losing end of the reverse scheme.

In the final analysis, the winners are the European Union corporations willing to play hardball with the European Union Greenhouse Gas Emission Trading System, and the losers are the EU middle class workers that are held hostage in the scheme.”

Facebook Charged With Violating Federal Laws

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As I blogged earlier, Facebook’s policies and settings are themselves a problem, misleading users and indeed, abusers. It’s now being charged with violating federal privacy laws:

“Ten privacy organizations filed a complaint against Facebook Inc. to the Federal Trade Commission Thursday, arguing that recent changes to the social-networking company’s privacy policies and settings violate federal laws.

The complaint, spearheaded by the Electronic Privacy Information Center, or EPIC, was triggered by changes Facebook made in November and December. Those changes included recommending people set more of their information to be public rather than visible only to friends and treating new information, like a person’s gender and lists of friends, as “publicly available information” that Facebook may share with software developers who build services for Facebook users.

The complaint asks the FTC to investigate the practices and to require Facebook to restore previous privacy settings that allowed people to choose whether to disclose personal information.

A Facebook spokesman saidit “discussed the privacy program with many regulators, including the FTC, prior to launch and expect to continue to work with them in the future.”

The complaint is the latest sign of how privacy—or at least consumers’ perceptions about it—remains a problem for Facebook.”

Wall Street: The Crematory Of Capitalism

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Bill Cara:

“Independent traders know as a fact that Humungous Bank & Broker (HB&B) research analysts are biased and unaccountable. We also know they give short-term tips to their firm’s proprietary traders and sales people that are at odds with their longer-term published opinions. These unfair practices are permitted because the fundamental conflict of interest structure of the securities industry is permitted.

Today the Wall St Journal has reported that FINRA (the Financial Industry Regulatory Authority) has launched a broad inquiry into how up to a dozen Wall Street firms disseminate stock ratings and research. Important questions are being asked.

On August 24 this year, WSJ informed the public of how Goldman Sachs analysts were tipping their traders with info that differed from published reports. These regular meetings were called “trading huddles”. At the time, I called it insider trading, which is criminal.”

My Comment:

A reader commented earlier that “insider trading” is a big yawn as a story  (for the latest insider trading arrest, see this case, of an ex-banker from Lazard, a relatively small case, admittedly)

Someone might come to that conclusion only if their knowledge of the practice were abstract and based on theoretical debate on the subject. But anyone who knows the history of the capital markets over the last 30 years or so knows that a big part of the story is that investment (merchant) banks turned into traders by the end of the century and that their proprietary trading became more important to them than their retail clients or customers. I’ve written about this in relation to Goldman Sachs, which was the most egregious (because it was the most powerful) of the lot.

Insider trading is essentially a failure of banking as a profession, with professional ethics. There is a fiduciary responsibility to shareholders (in the case of a company) and of clients (in the case of banks).  Conflict-of-interest is a problem in every other work place. Why not here?

Besides conflict-of-interest, insider trading involves an explicit fraud on the client.

That’s in addition to the crime of fractional brokering, as someone cleverly puts it. (This is quite different from fractional banking. Due to the confusion of language that lets banks perform both safe holding and investing functions at once, fractional banking is legal).  On the other hand, “fractional brokering,” which is what naked shorting and “fails-to-delivered” amount to, is illegal.

Unfortunately, the professional financial reporters seem too myopic to understand the gravity of the problem, our self-involved “gonzo” journalists (yes you, Matt Taibbi) are too politically-driven to explain it correctly, and right now I’m too disgusted by the intellectual dishonesty of the media to take the trouble to make the argument on the web and see it lifted by all and sundry with nary a link or footnote, let alone verbal acknowledgment.

As Cara points out correctly (and safely, since he’s in Canada), Wall Street and the American capital markets have become a joke, and a substantial part of the financial media still doesn’t seem to realize it’s the punchline.

That gives me no pleasure to say. For years, I defended American business to my foreign friends, claiming that Americans at least held to standards, regulations, and transparency requirements higher than theirs (meaning, Indian and non-Western).

Behind all the glitz “America” still operated somewhere, I argued.

The Marxists and communists who called the whole thing a charade and a lie didn’t quite get it, I was sure. The values of the American republic would prevail. Once most money-managers and businessmen were alerted to what was going on in the markets, I fully expected that their outrage would be enough to stem the rot. I saw CEOs stepping up to the plate and doing their duty, when the future of their own (rather than someone else’s) children was at stake.
That was four and a half years ago, when I first began researching the markets.

In retrospect,  I see I was incredibly naive.The rot goes deep.

Those are somber thoughts to have around Christmas time. But perhaps not inappropriate. If you recall, in the Christmas story, gold (or should I say, gld?) and frankincense were only two-thirds of the offering. The other third was myrrh. Myrrh is a resin whose oil, I read here, is used for embalming and whose incense is used by penitents at funerals and cremations.

That must be the bitter scent I smell rising from the capital markets.

Peterson Gives Away A Billion

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Having cast aspersions on Pete Peterson’s Blackstone Group in the pages of this blog, I am obliged to point out this article on his charitable giving. It implies that most of the money earned from Blackstone will be given to the Peterson Foundation, which I’ve blogged about before.

“Ultimately, I decided to commit $1 billion to the Peter G. Peterson foundation—the vast majority of my net proceeds from Blackstone. Why so much? Kurt Vonnegut once told a story about seeing Joseph Heller at a wealthy hedge-fund manager’s party at a beach house in the Hamptons. Casting his eye around the luxurious setting, Vonnegut said, “Joe, doesn’t it bother you that this guy makes more in a day than you ever made from Catch-22?” “No, not really,” Heller said. “I have something that he doesn’t have: I know the meaning of enough.” I have far more than enough.”

Read more at “Why I’m Giving Away More than One Billion Dollars,” Pete Peterson, Newsweek, May 30, 2009