Everything is Rigged

Price fixing seems to be in vogue for Too Big To Fail megabanks.  Matt Taibbi at Rolling Stone weighs in on the most recent financial collusion amongst the big banks in "Everything is Rigged: The Biggest Price Fixing Scandal Ever."

Taibbi writes: "You may have heard of the Libor scandal, in which at least three - and perhaps as many as 16 - of the name-brand too-big-to-fail banks have been manipulating global interest rates, in the process messing around with the prices of upward of $500 trillion that's trillion, with a "t") worth of financial instruments. When that sprawling con burst into public view last year, it was easily the biggest financial scandal in history - MIT professor Andrew Lo even said it "dwarfs by orders of magnitude any financial scam in the history of markets.

That was bad enough, but now Libor may have a twin brother. Word has leaked out that the London-based firm ICAP, the world's largest broker of interest-rate swaps, is being investigated by American authorities for behavior that sounds eerily reminiscent of the Libor mess. Regulators are looking into whether or not a small group of brokers at ICAP may have worked with up to 15 of the world's largest banks to manipulate ISDAfix, a benchmark number used around the world to calculate the prices of interest-rate swaps.

Interest-rate swaps are a tool used by big cities, major corporations and sovereign governments to manage their debt, and the scale of their use is almost unimaginably massive. It's about a $379 trillion market, meaning that any manipulation would affect a pile of assets about 100 times the size of the United States federal budget. It should surprise no one that among the players implicated in this scheme to fix the prices of interest-rate swaps are the same megabanks - including Barclays, UBS, Bank of America, JPMorgan Chase and the Royal Bank of Scotland - that serve on the Libor panel that sets global interest rates."

Why and how did the manipulation of LIBOR and ICAP take place?  Taibbi answers:  "Dating back perhaps as far as the early Nineties, traders and others inside these banks were sometimes calling up the company geeks responsible for submitting the daily Libor numbers (the "Libor submitters") and asking them to fudge the numbers. Usually, the gimmick was the trader had made a bet on something – a swap, currencies, something – and he wanted the Libor submitter to make the numbers look lower (or, occasionally, higher) to help his bet pay off."

Austerity Bites: The Impact of Spending Cuts on Communities of Color

The University of Utah S.J. Quinney College of Law hosted a symposium in March 2013, entitled "Austerity vs. Growth: Lessons for the U.S. Economy."  While there, Professor Steven Ramirez delivered remarks entitled "Mythological Austerity," which he linked to yesterday.

Linked today is the presentation "Austerity Bites: Communities of Color and the Impact of Spending Cuts."  The argument herein suggests that austerity is never distributed equally across wealth levels.  Particularly, sequestration and austerity always seems to fall hardest and heaviest on those least able to afford it.

Mythological Austerity (Courtesy of the University of Utah)

Happy viewing!

http://www.ulaw.tv/videos/austerity-vs-growth-professor-steve-ramirez/0_mehvnw1r

My basic point is simply that Social security and Medicare have nothing to do with either the deficit or our national debt at this point. Entitlement reform makes sense but the real culprit is too big to fail banks and the Bush Tax Cuts (not to mention the GOP's ridiculous war in Iraq).

Bankers Above the Law II: Criminal Affirmance Runs Amok

Professor Mary Ramirez recently posted her University of Connecticut Law Review article on SSRN. It is available for free download.  Here is the abstract:

Recent financial scandals and the relative paucity of criminal prosecutions against elite actors that benefited from the crisis in response suggest a new reality in the criminal law system: some wrongful actors appear to be above the law and immune from criminal prosecution. As such, the criminal prosecutorial system affirms much of the wrongdoing giving rise to the crisis. This leaves the same elites undisturbed at the apex of the financial sector, and creates perverse incentives for any successors. Their incumbency in power results in massive deadweight losses due to the distorted incentives they now face. Further, this undermines the legitimacy of the rule of law and encourages even more lawlessness among the entire population, as the declination of prosecution advertises the profitability of crime. These considerations transcend deterrence as well as retribution as a traditional basis for criminal punishment. Affirmance is far more costly and dangerous with respect to the crimes of powerful elites that control large organizations than can be accounted for under traditional notions of deterrence. Few limits are placed on a prosecutor’s discretionary decision about whom to prosecute, and many factors against prosecution take hold, especially in resource-intensive white collar crime prosecutions. This article asserts that prosecutors should not decline prosecution in these circumstances without considering its potential affirmance of crime. Otherwise, the profitability of crime promises massive future losses.

The article does not include the deeply disturbing testimony of Attorney General Eric Holder that banks and criminals employed by banks are not subject to criminal procecustions on the same basis as ordinary citizens because that absurd testimony is too recent. Still, Holder's admission that some banks and their criminal employees are too big to jail certainly raises the importance and timliness of Professor Mary Ramirez' most recent installment seeking to restore balance to a ridiculously out of whack criminal "justice" system. 

What does it say about a society that rounds up young people of color by the thousands for relatively innocuous behavior while white collar criminals on Wall Street can crash global capitalism and corrupt the pinnacle of our economy with impunity? So much for any post-racial America.

The social construct of race still thrives in America and nowhere is this more obvious than in policies relating to incarceration.

The Re-Education of Barack Obama - Midwestern People of Color Legal Scholarship Conference

The Midwest People of Color Legal Scholarship Conference will be hosted by the Loyola Law School Chicago on April 19-21, 2013, and its theme is "The Re-education of Barack Obama."  After a divisive first term in office, the nation re-elected President Barack Obama despite a deep disaffect felt by both conservatives and progressives.  The Re-education of Barack Obama conference will seek to assess the policy victories and failures in the President's first term and will strive to provide progressive inspiration for second term policies and actions.  Professors and scholars of color from across the country will convene in Chicago and engage in this scholarly debate beginning on Friday, April 19th.

The program details are below:

MIDWESTERN PEOPLE OF COLOR LEGAL SCHOLARSHIP CONFERENCE

MWPOC

“The Re-Education of Barack Obama”

Loyola University Chicago School of Law

25 East Pearson Street, Chicago, IL

April 18-21, 2013

Schedule of Events

Thursday, April 18^th:

6:30-9:00 p.m.  Opening Reception, Loyola University Chicago School of Law

Video, State Senator Barack Obama, 1999 Speech Delivered at Loyola University

Friday, April 19^th:

8-8:50 a.m.  Continental Breakfast and Registration

8:50-9:00 a.m.  Welcome, Neil Williams, MWPOC

9:00-10:30 a.m.  Plenary Panel:  National Security and International Relations Policies

10:40 – 12:10 p.m.  Plenary Panel:  The War on Drugs and the Prison Industrial Complex

12:30 p.m.  Lunch

2:00-3:30 p.m.  Plenary Panel:  Capital Markets and Financial Regulation

3:40-5:05 p.m.  Plenary Panel:  Immigration Reform

5:15 – 6:00 p.m.  Concurrent Works in Progress

6:30 p.m. Dinner:  John Hancock Building, Signature Room at the 95^th

Saturday, April 20^th:

8-9:00 a.m. Continental Breakfast and Registration

9:00-10:30 a.m.  Plenary Panel:  Critical Supreme Court Cases

10:45 – 12:15 p.m.  Plenary Panel:  Effectiveness of the Affordable Care Act (ObamaCare) in

Eliminating Racial Health Disparities

12:30 p.m.  Lunch – Keynote Presentations, Ms. Janet Bell, Reflections on the Legacy of Derrick Bell; Professor Shavar Jeffries

2:00 – 3:30 p.m.  Concurrent Works in Progress

3:45 – 5:15 p.m.  Concurrent Works in Progress

5:30 – 7:00 p.m.  Concurrent Works in Progress

7:00 p.m.  Dinner: On Own

Sunday, April 21^st:

9-10:00 a.m.  Continental Breakfast

10:00-12 Noon  Roundtable:  Retrenchment:  Responding to the Law School Crisis

12 noon  MWPOC Business Meeting

1:00 p.m.  Adjourn

Catching Up On Links . . .

Several important stories have surfaced over the past several weeks, including:

A Failed Whale, And How To Fix It, by Alexis  Goldstein [The Nation]

Jamie Dimon, CEO JP Morgan

Describing JP Morgan CEO Jamie Dimon's role in the "London Whale" scandal that lost JP Morgan billions.  According to Goldstein:  "Even in the wake of the financial crisis, the bailouts and ongoing bank malfeasance, Washington has remained deferential to the financial industry. Regulators parrot the industry's talking points and use them as an excuse to water down important parts of the Dodd-Frank Wall Street Reform and Consumer Protection Act. And congressional representatives on both sides of the aisle continue to introduce bills to slowly gut Dodd-Frank.  What has JPMorgan Chase been doing while Washington is so dutifully doing its bidding? In the words of the stunningly comprehensive [Senate] subcommittee report [on the London Whale scandal], JPMorgan Chase 'manipulated models; dodged OCC oversight; and misinformed investors, regulators, and the public about the nature of its risky derivatives trading.' Lest you think this is all, rest assured that there is more: JPMorgan was also hiding losses and ignoring its own internal warnings that risk was increasing dramatically."

King Cotton's Long Shadow, by Walter Johnson [New York Times]
Answering the question of "What was the role of slavery in American economic development?"  According to Johnson:  "The most familiar answer to that question is: not much. By most accounts, the triumph of freedom and the birth of capitalism are seen as the same thing. The victory of the North over the South in the Civil War represents the victory of capitalism over slavery, of the future over the past, of the factory over the plantation. In actual fact, however, in the years before the Civil War, there was no capitalism without slavery. The two were, in many ways, one and the same."

Who Will Get the Real Mortgage Crisis Profits? by Peter Miller [Ourbroker.com]
Describing the massive profits housing giants Fannie Mae and Freddie Mac received in 2012, and wondering who will ultimately reap these rewards if Fannie Mae and Freddie Mac are privatized.

Inside the Belly of the Beast: Corrections Corporation of America and the Recession, by Hadar Aviram [California Correctional Crisis Blog]
Describing the business model of the private for-profit prison industry, particularly in recessionary times.  According to Aviram:  CCA institutions - of which it operates 67 and owns 49 - are located in 20 states and in DC (6 of their institutions are, at this point, vacant). After an initial period of time, population in its private institutions averages 89%. A minimum occupancy is often, albeit not always, mentioned in its contracts with the states to whom it provides services. The business model is structured around the concept of a "per-diem", that is, the state pays a price per-inmate-per-bed-per-day. . . .  Who are CCA's main customers? Well, the federal government, for one. Revenues from federal clients comprise 43% of CCA's total revenue for the years 2010 and 2011. But of the states that contract with CCA, California is a major contributor, providing CCA with 13% of its management revenue."


[photo courtesy of Steve Jurvetson, via Creative Commons]

GEO Group Stadium Naming Deal Fails

FAU Students Protesting GEO Group Naming Deal

When the GEO Group and Florida Atlantic University agreed to a $6 million football stadium naming deal in February 2013, neither GEO CEO George Zoley or FAU President Mary Saunders anticipated the incredible backlash that descended upon the private for-profit prison company (GEO) and the University.  Due to student protests, faculty opposition, national media attention being drawn to GEO's terrible record of human rights violations in its private prisons, and the quickly assigned nickname of "Owlcatraz" to the FAU Owls football stadium, GEO Group announced yesterday that it was withdrawing its pledged stadium naming donation.  In pulling its $6 million pledge, CEO Zoley released a self-serving statement blaming "distractions" as the reason that the pledge was being withdrawn.  Per Zoley:  "What was originally intended as a gesture of GEO's goodwill to financially assist the University's athletic scholarship program has surprisingly evolved into an ongoing distraction to both of our organizations."

The "surprising[] . . . distractions" to which Zoley refers include (a) student protests challenging FAU to reject the donation as hypocritical pointing out that GEO Group's profit base is derived almost entirely from human misery and suffering, (b) an overwhelmingly passed faculty resolution calling upon President Saunders to cancel the deal because GEO Group's "business practices do not align with the mission of the university," (c) a sit-in held in President Saunder's office by students, (d) a mocking national spotlight from Stephen Colbert's comedy/news show (suggesting that one of the problems of drawing attention to your business, is that people will pay attention to what your business actually does), and (e) community outrage protesting GEO's intimate affiliation with an institution of higher education.

As has been discussed in this blog space often, private prison companies are perversely incentivized to generate profit based on human misery through working to increase the incarceration levels of United States citizens and immigrants.  Private prison corporations pay dozens of millions of dollars to lobby legislators for harsher sentencing regimes, new crimes that require incarceration (AZ SB1070), and increasing prevalence of private prison contracts based on dubious claims of efficiency and cost savings.  Without providing any product or needed public good, GEO Group, the Corrections Corporation of America (CCA), and other private prison companies profit in two primary ways that are incredibly objectionable:

First, private prison companies contract with state and federal governments to warehouse U.S. prisoners and are paid in taxpayer funds on a "per bed" basis.  Essentially, taxpayer funds are being transferred from taxpaying citizens into the pockets of private prison company executives and shareholders for no recognizable good or service.  Almost all of the recent emerging evidence suggests that private prison companies run prisons LESS efficiently, LESS safely, and LESS cost effectively than do federal and state governments.  The Lake Erie Prison report just released finds that CCA is so profit driven, that the CCA- run prison at Lake Erie does not provide proper supervision of prisoners and that drug use and violence are rampant, both in an attempt to avoid costly prisoner lawsuits. 

Second, private prison companies exploit the labor of the prisoners in their care by entering into contracts with companies like IBM, Victoria's Secret, WalMart, and McDonald's for prisoners to work for pennies with the contractual rewards paid into the coffers of the private prison company (thus to shareholders and executives).  Prisoners are paid between $0 and $4 for the labor that they engage in sewing for Victoria's Secret, manufacturing for WalMart and McDonalds, with the fruit of their labor being paid to the prison company rather than to the prisoner.  Indentured servitude continues in our prisons in the United States and the GEO Group and CCA profit from these immoral activites.

Rendering of how GEO Group Stadium would have appeared

That both of these profit sources continue in the United States today is shocking.  That the students, faculty, and community at FAU recognized this appalling business model is heartening. The GEO Group's name will NOT adorn the football stadium at FAU.  It appears that "surprising[] . . . distractions" of massive protest are just beginning for the private prison industry.



 cross-posted on the Sports Law Blog

Criminal Justice in the 21st Century Symposium

The Journal of Civil Rights and Economic Development of the Ronald H. Brown Center at the St. John's School of Law will host a powerful event on Friday, April 5, 2013 entitled "Criminal Justice in the 21st Century: The Challenge to Protect Individual Freedoms, Civil Rights and Our Safety."  The event is free and open to the public beginning at 8:00 a.m. and will deal with criminal justice issues including prison policy, civil rights and civil liberties, and expanding prosecutorial and police power.

According to the event site:

"Criminal justice in the 21st Century confronts a combination of novel and familiar challenges. New technology and new legislation purport to redefine individual rights, such as the right to privacy or the right to bear arms, in the name of greater public safety. While the past decade boasted a record low number of reported crimes, prosecutorial and police power continues to expand. These issues raise a question of whether there is any legal,constitutionally sanctioned manner to balance individual rights and safety concerns.

This Symposium provides a balanced discussion about pertinent 21st Century criminal justice issues. It weighs broader societal interests, such as safety and public order, against individual interests, including civil rights and civil liberties, privacy and autonomy. This symposium confronts these difficult issues with an open, informed perspective that fosters dialogue with an end towards positing practical and effective solutions."

The event will take place at St. John’s School of Law, 8000 Utopia Parkway, Queens, NY 11439.