Federal Reserve: banks have done little to change pay or limit risk

When you're in bed with an industry, what else should we expect? More of the same after supposedly voting for change is wearing painfully thin.

The Federal Reserve, six months into a compensation review of the country’s 28 largest financial companies, has found that many of the bonus and incentive programs that economists say contributed to the worst financial crisis since the Great Depression remain in place, according to people briefed on the examinations.

Officials have found, for example, that risk managers at several of the biggest banks still report to executives who have influence over their year-end bonuses and whose own pay might be constricted by curbing risk. In many cases, risk managers do not have full access to the compensation committee of the banks’ boards.

The review also revealed that banks tend to set similar bonus formulas for broad sets of employees and often do not adjust payouts to account for risks taken by traders or mortgage lending officers. Bank executives and directors, meanwhile, are often in the dark on the pay arrangements of employees whose bets could have a potentially devastating impact on the company.

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DOD memo accuses GOP Senate candidate Mark Kirk of partisan political activity while in uniform

Huffington Post:

If Kirk did indeed campaign while serving, as a newly released Department of Defense memo suggests, the offense would be punishable by up to two years of confinement and dishonorable discharge from the military.

The memo was released to the Nitpicker blog, which has played an instrumental role in investigating Mark Kirk's embellished military record. Kirk required the document, an "exception to policy" memo, in order to serve in the military while a member of Congress, which is illegal unless such an exception is issued.

Nitpicker reprints one portion of the memo, and highlights a particular phrase:

As a candidate for the vacant Senate seat in Illinois, Commander Kirk must complete the appropriate acknowledgment of limitations required for all candidates on active duty (DoDD 1344.10, paragraph 4.3.5.). Ordinarily this acknowledgment must be completed within 15 days of entering active duty. Because of the short period of active duty and concerns arising from his partisan political activities during his last two tours of active duty, Commander Kirk must complete this form prior to his entry on active duty.

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DOJ asks judge to 'defer ruling' in DADT case because of legislation that hasn't passed and doesn't repeal the law

This is why so many in the gay community are so increasingly ticked off at the Obama administration. Because the Obama administration is acting like the Bush administration. They're acting no better than the Family Research Council or the American Family Association. They continue to defend the discriminatory "Don't Ask, Don't Tell" law in court, and today they even outdid themselves.

The President's Justice Department had the temerity to tell the court that it shouldn't rule on the constitutionality of DADT because Congress was working on repealing DADT as we speak.

Of course, as I explained last week, Congress is doing no such thing. (And even if it were, the law hasn't passed yet, so it's moot.) What Congress is debating is legislation that would permit the repeal of DADT at some unspecified future date should the Secretary of Defense, the Chairman of the Joint Chiefs, and the President all agree that it should happen. There is no requirement that it ever happen, nor is there a requirement that the law be replaced with anything better. The Defense Department could still rewrite the regulations even worse than they are now.

So it really is the height of chutzpah for the Obama administration to basically mislead a federal court in defense of discrimination. President Obama doesn't have to defend at-gay laws in court, but he does anyway (of course, he ignores others laws he finds inconvenient, but not ones discrimination against gays).

Such a disappointment when an African-American president who campaigned on "change" defends laws that would have made George Wallace proud. Read More......

What's more important, the deficit or unemployment

A pair of dueling articles that show, I think, the tension between cutting the deficit and reviving the economy. It's never been terribly clear that it was wise to shift the focus away from the economy and on to the deficit until the economy has recovered (and that won't be for years). Unemployment is still near 10%, and just as Krugman and Stiglitz predicted, it isn't moving down very quickly in part because the stimulus was too small. Shifting attention away from unemployment, and towards deficit reduction, is all the more perilous because cutting the budget is, per se, an anti-stimulus.

I've never heard of a politician losing an election because the deficit was too high. I've heard of lots losing because of high unemployment. Read More......

Gulf oil 'cooks' birds and wildlife

Visit msnbc.com for breaking news, world news, and news about the economy

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Krugman revises his opinion on what's motivating the G20 economic ministers

A quick follow-up to yesterday's post about Paul Krugman and the "mad" G20 ministers. In a series of posts, Krugman has lately noted with dismay that the G20 economic ministers have publicly called for budget austerity in Europe, similar to what the deficit hawks here are calling for.

His view is that budget austerity now will kill the infant recovery, and he doesn't understand why the economic ministers are asking for it. His attempt at an explanation — they're crazy. That's it — the whole of his explanation. They're "mad." (For the full Krugman on this, see "Madmen in Authority").

Krugman now appears to have changed his mind. Madness is no longer the answer. In a new post, he offers that economists who are aggressively advising this course of action are motivated by … ready? … a fit of misplaced morality. Krugman:

What’s going on here? I don’t think you can resort to class-warfare arguments. What I think is happening is that we’re seeing the deep seductiveness, for many economists (and others), of taking what sounds like a tough-minded position in favor of inflicting pain on the economy — and the people who make up that economy.

Keynes knew all about this. Writing about the peculiar appeal of classical economics even in a world in which it had manifestly failed, he argued

That it reached conclusions quite different from what the ordinary uninstructed person would expect, added, I suppose, to its intellectual prestige. That its teaching, translated into practice, was austere and often unpalatable, lent it virtue.

Maybe. Krugman concludes:

[W]hat’s so striking is that in all three cases I’ve cited you had highly trained economists — that is, people who have spent their whole lives arguing in terms of carefully laid out models — making arguments that aren’t backed by any model I can see.

And may I say, I think that by giving in to the seductiveness of calls for pain, some of my colleagues are doing a lot of damage; at a time when we really need clarity of thought, they’re adding to the intellectual murk instead. [my emphasis]

Or maybe not. Consider — world-class academic economists, people who serve up reasons for those in power to act in certain ways, are now offering noticeably un-academic arguments why Europe should jump on the Pete Peterson bandwagon and stop feeding the new-born recovery, just when the recovery needs its next drink of milk. And the reason is — virtue?

Instead of settling for inexplicable reasons, let's look at a much more likely one — our old friend power. If big-time G20 economists are violating their oath of office (so to speak) to serve Shinola to their superiors and call it Wheetabix, they're not doing it on their own. The pressure can only be coming from one of two sources:

• The G20 ministers themselves, who want this analysis served to them; or


• The Pete Peterson Marching Band and Firing Squad, which wants to export the suffering to Europe as well.

Krugman is clearly struggling here, and I don't fault him. But his struggles are instructive. Again, he's asking the right question, and on the pages of the NY Times at that. But I think his blind spot is in not recognizing that the Venn diagram that maps "Those Who Are Hot-Shot Academics" and "Those Who Suck Up To Power" is not two separate circles. There's a huge overlap.

Just one indicator of that overlap: How often have you heard corporate necropolises (sorry, "multi-building cubicle warehouse spaces") called "campuses"? And how many university campuses have corporate "campuses" on them? Owners and owned.

This is just an observation — I still have no answers as to where the push is coming from, or why. What's in it for the G20 ministers if they kill the recovery? But the push is on indeed — thanks, Paul, for saying so — and the American disease is starting to metastasize.

As Krugman suggests, this will not end well — here or in Europe.

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Ike Skelton wants to keep DADT so 7-year-olds don't hear about 'the gays'

Senility should be a disqualifier for holding public office. Read More......

AP discovers a few problems with BP oil spill plan

Let's just say there was very little reality built into BP's disaster planning. I wonder if Steven Pearlstein is still impressed with BP. Once again, the GOP self-regulation theory is a failure. The Democrats would be wise to start getting a lot more aggressive about flogging this point because it's critical to how this disaster became a full scale disaster.

Professor Peter Lutz is listed in BP's 2009 response plan for a Gulf of Mexico oil spill as a national wildlife expert. He died in 2005.

Under the heading "sensitive biological resources," the plan lists marine mammals including walruses, sea otters, sea lions and seals. None lives anywhere near the Gulf.

The names and phone numbers of several Texas A&M; University marine life specialists are wrong. So are the numbers for marine mammal stranding network offices in Louisiana and Florida, which are no longer in service.

BP PLC's 582-page regional spill plan for the Gulf, and its 52-page, site-specific plan for the Deepwater Horizon rig are riddled with omissions and glaring errors, according to an Associated Press analysis that details how BP officials have pretty much been making it up as they go along. The lengthy plans approved by the federal government last year before BP drilled its ill-fated well vastly understate the dangers posed by an uncontrolled leak and vastly overstate the company's preparedness to deal with one.

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Sam Seder on border violence

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Half term governor tells Obama to give her a call about Big Oil

We know Palin can provide expert advise on quitting and failing to follow through, but I don't think that's what we need today.

Former Alaska Gov. Sarah Palin said President Barack Obama's acknowledgment that he hasn't directly spoken to BP's chief executive shows it "bodes well to have some sort of executive experience before occupying the Oval Office."

Then, in a Facebook posting Tuesday, she outlined her experience. And she urged Obama to contact experts, including those in Alaska, who have held oil companies accountable. In parts of this state, the effects of the Exxon Valdez disaster are still being felt 21 years after that massive oil spill.

"Give them a call," she wrote. "Or, what the heck, give me a call."

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Anonymous attack from White House on labor backfiring big time

The anonymous "senior White House official" who called Ben Smith last night to bitch about labor set off a firestorm. Last night, Greg Sargent had an excellent analysis of what the race meant:

No matter what you read about this, the Halter challenge was a show of force by the left. Period. If you don't belive that, ask yourself why Lincoln suddenly found herself backing a tough-on-derivatives proposal in the Senate, why Obama had to cut radio ads and robocalls to save Lincoln, and why Bill Clinton had to come into the state to instruct voters not to listen to unions in order to save Lincoln's hide.

It remains to be seen who on the left will lift a finger to help Lincoln from here on out. More on this tomorrow, but for now, it's clear that the Dem establishment threw its weight behind a candidate who polls show is less likely to win the general election -- and Dems may have just lost themselves a Senate seat.

Today, Greg compiled some of the reaction to the deliberate White House attack on labor (and it was deliberate. The "senior White House official called Ben.) The White House political team has created a political problem, something the geniuses over there seem quite adept at doing. Solving political problems, not so much. But, creating drama and screwing over allies, that's where Team Obama excels:

* Markos says labor and the left won't lift a finger to help Blanche Lincoln: "So say hello to Sen. John Boozman, the next senator from the great state of Arkansas."

* Jane Hamsher, on the anonymous White House official who urinated on unions for flushing $10 million "down the toilet":

Labor is not your bitch, and their money isn't yours to direct. They're supposed to take what, another six years of black eyes from Blanche Lincoln just because you say so? If their $8 million buys derivatives legislation and limits the damage that the Masters of the Universe can do to the world economy in the future, it's not only a bargain, it also means that a bunch of nurses and janitors have done more to rein in the banks than you and your entire pack of servile, visionless Wall Street lackeys has done since you took office.

* Before you conclude that the talk about derivatives is just empty Netroots chest-thumping, listen to Marc Ambinder:

Netroots pressure and labor pressure DID work. It DID force Lincoln to introduce a tougher derivatives bill.

* Jed Lewison is appalled by the self-defeating nature of the White House's insulting of labor, saying it's "weakening the Democratic coalition."

* The AFL-CIO goes public with its pushback against the White House. From union spox Eddie Vale, mocking the official's anonymity:

"My name is Eddie Vale of the AFL-CIO and I'm proud to fight for working families and I don't hide behind anonymous quotes."

That the White House political operation decides to start a fight with its allies when the President's approval rating is hovering around 46% - 47% is ridiculous. It's hard to convey just how clumsy and inept the White House political team is. And, don't forget, the leader of this mess, Jim Messina, is rumored to be the campaign manager for the reelection. Next year, he'll be asking for our help in the reelection and pretend that none of the slights ever happened.

It was a year ago this week when the Obama administration vociferously defended the Defense of Marriage Act (DOMA) with that infamous "incest and pedophilia" brief. The gay community was the really first the constituency to realize how badly we were going to be treated by our "fierce advocate." We often said we were the canaries in the coal mine. I think pretty much every other progressive constituency gets it now. Read More......

Tests confirm underwater plumes - Tony Hayward wrong again

Is he a liar or just dumb? Looking at the money that he's raking in plus the fact that he still holds his job tells me he's not a stupid person.

“The oil is on the surface,” Tony Hayward, BP’s chief executive, said last week. “There aren’t any plumes.”

Descriptions of the plumes from the two groups of scientists are filling in details of one of the most remarkable findings to come from the disaster: the realization that much of the oil in a deepwater blowout may remain below the surface.

The scientists say the plumes are not bubbles of oil, as many people have imagined them, but consist of highly dispersed or dissolved hydrocarbons. In some spots, enough oil is present to discolor the water, but in most places, water samples come up clear. Yet the dissolved hydrocarbons show up vividly on instruments, and they can be smelled in some samples.

“This so-called invisible oil, which people tend to have a hard time grasping, is detectable clearly using analytical methods,” said Ernst Peebles, a University of South Florida oceanographer who helped carry out the research.

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Wednesday Morning Open Thread

Good morning.

I stayed up late (for me anyway) watching election returns. Interesting night. Blanche Lincoln pulled out a victory in Arkansas. But, her prospects in November look dim.

It does seem odd that after hearing Lincoln won, the first instinct of a "senior White House official" was to pick up the phone to call Ben Smith in order to trash Labor for spending money against Lincoln:

A senior White House official just called me with a very pointed message for the administration's sometime allies in organized labor, who invested heavily in beating Blanche Lincoln, Obama's candidate, in Arkanas.

"Organized labor just flushed $10 million of their members' money down the toiled on a pointless exercise," the official said. "If even half that total had been well-targeted and applied in key House races across this country, that could have made a real difference in November."

That set off a firestorm on twitter.com and I'm sure we'll hear more about it. Apparently, the White House political team, which has a reputation for being clumsy, thinks it controls labor's political spending. Weird. And, yes, "clumsy" and "inept" are the words I hear most from people around town when describing that political operation at the White House, which is under the jurisdiction of Rahm Emanuel and Jim Messina. And, for the record, I don't think the exercise was "pointless." Incumbents aren't royalty. If they're not voting for with a constituency, that constituency should not only try, but has an obligation, to beat them. The NRA never backs away from a challenge like that -- and that's why they're powerful. The fear of a primary challenge keeps members in line.

The big money GOP candidates won in California: eBay's Meg Whitman for Governor and HP's Carly Fiorina for Senate. A teabagger won in Maine GOP Governor's primary. That should cause Susan and Olympia some consternation.

And, Harry Reid's opponent in November is Sharron Angle, who is the choice of the teabaggers. That was Reid's preferred opponent -- and he got it. His prospects for reelection improved markedly last night.

In non-political news, today, the President is meeting with Mahmoud Abbas, the President of the Palestinian Authority in the Oval Office. This comes at a time of rising tensions in the Middle East. Although, it seems like tensions are always rising there.

Okay...what's going on.. Read More......

Environmental groups question BP being listed in ethical stock listings

How any oil company made the list in the first place says a lot about how phony those lists can be. Delaying the review until the six month planned session is equally lame though not surprising.

Environmental groups are calling for BP's removal from stock market indices tracking socially and environmentally responsible companies.

The oil major, which is battling to contain the Gulf of Mexico spill, is listing on the FTSE4Good indices, which select companies based on their progress towards "environmental management", "climate change mitigation and adaptation" and other criteria. BP is also part of the FTSE4Good Environmental Leaders Europe 40 index, which lists European companies with "leading environment practices".

Greenpeace said BP's continued inclusion "beggars belief" and called on FTSE Group, the index compiler which also oversees London's FTSE 100 index of leading stocks, to remove the company in light of the Gulf of Mexico spill.

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Dutch prepared to move to right in election

The last government dissolved over Holland's participation in Afghanistan though that has not been the hot issue of the campaign. The driving issue has been about economics. Even though the new government will be to the center-right (not the far right), the European right is often to the left of the Democrats in the US. Europeans on the left who still adore Obama are often shocked to find out he's more conservative than the European right wingers such as Sarkozy on most issues. Also of note is how the center-right in Holland is being referred to as "liberals." The Guardian:

Dutch voters are expected to elect their first liberal prime minister in almost a century tomorrow in an election dominated by the age of austerity looming over Europe.

As in Britain and Germany, the liberals are tipped to prosper at the expense of the two big parties that traditionally command the centre-right and the centre-left in the Netherlands: the Christian Democrats (CDA) and Labour (PvdA).

Opinion polls indicate a triumph for the VVD, rightwing free-market liberals campaigning for swingeing public spending cuts, tighter rules on immigration and pragmatic scepticism towards the EU.

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Some R-rated Johnny Carson from 1974

Language is not safe for work:

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