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Generational Dynamics Web Log for 24-Jan-2013
24-Jan-13 World View -- Furious Chinese spokesman blasts Philippines for seeking arbitration

Web Log - January, 2013

24-Jan-13 World View -- Furious Chinese spokesman blasts Philippines for seeking arbitration

Emails show evidence of Morgan Stanley fraud in financial crisis

This morning's key headlines from

Egypt's president Morsi opposes France's intervention in Mali

Mali - battle map for Wednesday (France 24)
Mali - battle map for Wednesday (France 24)

Egypt's president Mohamed Morsi says that he would have preferred a more "peaceful and developmental" approach to the crisis in Mali than France's military intervention:

"We do not accept at all the military intervention in Mali because it will fuel conflict in the region."

And, he certainly may be correct about that. However, he declared support for Algeria's retaliatory action against Islamist militants who took hundreds of hostages at a natural gas plant, resulting in the deaths of 37 workers. Morsi's statement may strain Egypt's ties with France, but according to one analyst Morsi had no choice, as the rift between secular and liberal forces in Egypt versus the Islamist government is widening. ""Coming down on the side of a European military power against an 'Islamist' regime — however brutal — could put him at risk of losing his political base." Global Post and France 24

Polio virus found in Cairo, blamed on Pakistan

For the first time since 2004, the polio virus has been found in Cairo, after it had been thought to be eradicated throughout Egypt. The World Health Organization (WHO) discovered the virus in sewage water found in parts of Cairo, though no cases of human infection have been reported so far. The strain of the virus found in Cairo is identical to a strain found in Pakistan. Pakistan's vaccination program has been opposed by the Taliban, who claim that it's a secret American plan to sterilize Pakistanis, to prevent the births of more Muslim children. This opposition has increased since the U.S. administration, in the process of bragging about having killed Osama bin Laden, revealed that a phony vaccination program was used to help establish the identity of bin Laden. In December, terrorists murdered nine health workers involved in the vaccination program in Pakistan. Pakistan has ordered the immunization of all children leaving the country, in an attempt to halt the spread abroad. Daily News Egypt and Express Tribune (Islamabad)

Furious Chinese spokesman blasts Philippines for seeking arbitration

An angry Hong Lei, spokesman from China's foreign ministry, blasted the Philippines for referring the dispute with China over the Scarborough Shoal in the South China Sea to the United Nations International Tribunal on the Law of the Sea (ITLOS). According to Hong:

"China has consistently opposed the Philippines’ illegal occupation ...

“We hope that the relevant country honors its promises, and ... does not take any action to complicate or expand the problem."

China criticizes actions that "complicate or expand" the problem. They'd like to keep things simple. They've stationed the military around the South China Sea, taken over islands that have historically belonged to other countries, announced that they would board and seize foreign ships that enter the South China Sea, and threaten war on an almost daily basis. The Chinese have learned their lessons well from Hitler's Nazi thugs. Philippine Star and Global Times (Beijing)

Cameron proposes referendum on Britain staying in EU

Britain's prime minister David Cameron finally gave his long-awaited speech on whether he thinks that Britain should remain in the European Union. There is an extremely vocal minority of people in his own party who are demanding that the question be put to a referendum vote. Cameron said that if he were re-elected in the next election, then he would call a referendum vote in 2018. In the meantime, he's demanding that Britain be exempt from certain rules that limit the control of immigration and that forbid any work week longer than 48 hours. However, other European leaders were caustically critical, calling it selfish, ignorant and dangerous. Germany's foreign minister said that "Cherry-picking is not an option." France's foreign minister said that it was as if Britain had joined a football club and then suddenly said "let's play rugby". Most of the criticism of Cameron was centered on the complaint that his speech would worsen the financial crisis by creating greater uncertainty in the financial markets. Reuters

Emails show evidence of Morgan Stanley fraud in financial crisis

Thanks to a case brought by a Taiwanese bank that lost hundreds of millions of dollars on toxic synthetic subprime mortgage-backed securities sold to them by Morgan Stanley, Morgan Stanley has been forced to release hundreds of pages of internal documents showing that their employees were well aware that the securities they were selling, typically rated "AAA", were in fact defective and would turn out to be almost worthless. The documents show a pattern of behavior by people across the bank. The toxic securities were packaged as a CDO called "Stack 2006-1," but e-mail messages show that bank employees suggested calling it "Subprime Meltdown," "Hitman," "Nuclear Holocaust," "Mike Tyson's Punchout," and the simple-yet-direct: "Shitbag." Even as early as October 2005, an e-mail message shows that the mortgage loans going into the toxic securities were troubled:

"The real issue is that the loan requests do not make sense. [For example,] a borrower that makes $12K a month as an operation manager of an unknown company — after research on my part I reveal it is a tarot reading house. Compound these issues with the fact that we are seeing what I would call a lot of this type of profile."

The really damning e-mail messages are from early 2007, when it was clear to everyone that the subprime real estate market was collapsing. Instead of ending the sale of these toxic securities, or at least warning investors of the danger, Morgan Stanley bankers doubled down on selling the fraudulent securities to investors, including the Taiwanese bank now suing them.

This is consistent with EXACTLY the point that I've been making for almost five years. Sales of these toxic securities skyrocketed in 2007, when it was becoming clear that the models on which they were based (that assumed that the real estate bubble would continue to grow forever) were catastrophically faulty. This is undeniable circumstantial evidence that the bankers were knowingly committing fraud.

This new collection of evidence from Morgan Stanley proves that this interpretation of the circumstantial evidence was exactly correct. And yet, the Obama administration has adamantly refused to investigate and prosecute the bankers who perpetrated these crimes. Eric Holder's Justice Dept. could easily have subpoenaed these same e-mail messages at any time and brought criminal charges, but they refused to do so because these bankers have been making huge campaign contributions to the Obama campaign. It makes me want to vomit.

I want to address the claim that all these bankers make -- that it was OK to defraud the investors in these toxic securities because they were "sophisticated investors." Just to take one example of what this means, I had a conversation with the CFO of Digimarc Corp. in August 2007, that I've previously written about. ("How Boomers and Generation-Xers brought about the dumbing down of Information Technology (IT)")

That CFO was a "sophisticated investor," but he told me that he kept things simple by only investing in AAA rated securities. We now know that banks like Morgan Stanley colluded with ratings agencies like Moody's to give toxic securities AAA ratings. So the fraud was specifically designed to target these sophisticated investors, who depended on people who turned out to be crooks. Pro Publica

House Republicans kick the can down the road

In a move that supports the "Kick the Can Theory," which says that Washington will never do anything but kick the can down the road, same as Greece and Europe, the House of Representatives passed a bill that will raise the debt ceiling for three months, until May (at which time it will undoubtedly be raised again). However, the bill contains a joke: Lawmakers will not get paid unless they pass a budget in the next three months. The reason that this is a complete joke is because even if they stop getting paid for a while, they'll just pass another law to get all their back pay plus interest. It's all a big joke. Ha, ha. The Hill

Hillary Clinton: 'What difference does it make?'

I really had to chuckle at Hillary Clinton's expressions of outrage at being questioned about the Benghazi coverup, when she angrily said:

"With all due respect, the fact is, we had four dead Americans–was it because of a protest or because of guys out for a walk one night and decided to go kill some Americans? What difference at this point does it make?"

Someone should have reminded her that she served as an advisor to the Democrats on the Senate Watergate coverup committee, and that nobody died at Watergate. Huffington Post

(Comments: For reader comments, questions and discussion, see the 24-Jan-13 World View -- Furious Chinese spokesman blasts Philippines for seeking arbitration thread of the Generational Dynamics forum. Comments may be posted anonymously.) (24-Jan-2013) Permanent Link
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