QE2

I don't see how Bernanke and Geithner can keep a straight face when they argue that the Fed's quantitative easing (QE2) isn't being intentionally done to devalue the dollar.  That's a bit too cute for me.  Intentional or not, that's the effect it's going to have, and it's not credible for either of them to say that they weren't aware that a devaluation would occur and that it's just being done to boost growth.  Printing $600 billion dollars is going to devalue the U.S. dollar.  As a fuck you to China for being so intransigent on its managed devaluation of its currency  I do rather enjoy QE2.  Now both the U.S. and China are effectively devaluing their currencies while at the same time pretending not to.  And this is also a bit of a fuck you to Germany, whose austerity minded politicians and bankers are horrified by QE2. 

An Abomination

I'm pretty jaded at my age, but Glenn Beck stating he's going to reclaim the civil rights movement on the Lincoln Memorial on the anniversary of Martin Luther King's famous "I have a dream speech" blows my mind.  Beck believes the civil rights movement has become "an abomination."  I almost vomited in my morning coffee when I read that whopper.  A delusional, divisive, white Mormon is going to redeem the civil rights movement?  How, by claiming it for white people?  The man's stupidity is only outdone by his audacity.  How many black people do you think you'll see at his rally?

High on Hayek

Too many conservatives confuse Hayek's insight that the government can never have enough information to properly fix prices with the proposition that the government can never successfully intervene in the economy.  The latter proposition simply isn't true.  There are many reasons to be wary of government intervention, but it is not a given that such intervention is bad.

Failure's Success

The Economist grudgingly admits in its latest issue that Obama's government takeover of GM worked.  The allegedly nonpartisan Congressional Budget Office reports that Obama's stimulus package saved jobs and prevented the economy from contracting.  Yet ideologically straight jacketed conservatives, who offer no economic prescriptions except the exact same ones that got us into this mess, oppose any new form of stimulus or government intervention in the economy.  The economic indicators of late, which reflect the fact that Obama's stimulus is wearing out, do not bode well for the U.S. economy.  Yet any hope of a new stimulus bill, or any creative solution to this crisis, does not exist.  All we get are the same tired mantras from the opposition about cutting taxes, deficits, and the role of government.  The exact same rigid ideologies we were battered with as we careened into this current crash.    

Hallowed Bullshit

Just who consecrated Ground Zero?  What do you really mean when you say it's hallowed, sacred ground?  Aren't you just really saying it's an exclusive Christian cemetery and everyone else can go fuck themselves?  How can a concept like hallowed sacred ground even be intelligible without the prism of religion?  How can you argue with a straight face that this really isn't about religion but is about sensitivity to sacred ground?  The hallowed and the sacred are meaningless outside the religious context. 

Sensitivity and the Constitution

Apparently sensitivity is the new arbiter of Constitutional rights.  The opponents of the Burlington Coat Factory Mosque claim they aren't religious bigots who oppose religious freedom and private property rights.  They're just sensitive to the feelings of an abstraction known as the 9/11 families, who allegedly are offended by the proposed building of a Muslim community center near Ground Zero.  As a New York gubernatorial candidate put it, "it's not about religious freedom, it's about ideology."  (I paraphrase). This was in the context of proposing to seize the land where the Cordoba Institute wants to build its community center using eminent domain.  This is quite a contortion on how Constitutional rights are usually protected by our courts.  Normally the courts enforce the free exercise of religion and private property rights against those who are offended by them.

Allowing for sensitivity to be the arbiter of constitutional rights means shredding the Constitution.  If I'm offended by you carrying a gun in a bar in Arizona, can I now tell you to go elsewhere?  If I don't like what you write, can I now tell you to print it elsewhere?  Likewise with due process, equal protection, universal suffrage etc etc.  If you don't understand the fundamental fact that the Bill of Rights protects the minority from what offends the majority then you don't understand our Constitution. You know nothing about the Know Nothings, as has been said.  I don't buy for one minute that this is not about Constitutional freedoms and is really all about people's feelings.  The fascist overtones to this whole debate are disturbing. 

Blaming Each Other

I learned to practice matrimonial law in the Bronx. So I don't really give a fuck if the New York State legislature has finally decided to join the rest of the country in instituting no-fault divorce. Go ahead and say you want a trial on divorce grounds anywhere in the greater NYC area. You'll be within your legal rights, but you've just pissed off the judge. Congratulations on upsetting the primary person who controls your client's fate.

Divorce grounds in New York rarely affect the distribution of marital property. When they do it's usually in some sort of extreme circumstance that there's little doubt about. Otherwise, grounds merely aggravate everything and waste time. The First and Second Departments, the New York State trial court jurisdictions that cover NYC and environs, effectively don't even allow you to present evidence on the issue of grounds. Good luck proving archaic legal concepts like adultery or constructive abandonment (refusal of one spouse to have sex with the other for a year) without being able to present evidence. The judiciary in NYC, by fiat, effectively abolished fault divorce years ago because it’s an impediment to efficient dispute resolution. Arguing divorce grounds in a New York State Court is at your client's peril.

Fault divorce is just not worth it. A fight over grounds is brutal because it's all about who is to blame. It focuses the parties on the past and impedes the speedy, equitable and efficient distribution of assets so important to our capitalist society. Every other section of NY divorce law is about moving forward. Alimony. Child Support. Equitable Distribution of Assets. What to do with the retirement funds. None of these issues comes near raising the animosity that a grounds fight can engender even though a grounds fight rarely affects the distribution of property.

Nonetheless, in New York you still have to statutorily plead grounds when initiating a divorce. Furthermore, NOW maintains that taking away grounds removes valuable negotiating leverage for the woman when it comes to alimony and property distribution because it allows the woman to keep the divorce from going forward without her consent as to grounds. But the reality is that if you want to get a divorce in NY you can. The number of times that a NYS court has refused to grant a divorce on the issue of grounds can be counted on one hand. And even if NOW is right, there are better ways to prevent the moneyed man from walking away with everything in a divorce than utilizing the sclerotic concept of fault. Making sure low income women have access to counsel is one way. Excellent organizations like inMotion help with this cause. The equitable powers of the judge is another way, as most judges I’ve appeared in front of won’t easily allow an unfair distribution of marital assets.

Moreover, NOW ignores the fact that abusive husbands readily use divorce grounds as another way of tormenting their spouses. These type of men enjoy assigning blame to their spouses one more time. It’s another form of control for them. Invariably when you explain to your client what the husband is alleging as grounds for the divorce your client becomes furious. “He’s saying what?! That liar!” Etc. etc. You then spend the rest of the meeting with your client explaining to your client the various grounds, their ability to counterclaim under any of them, and how it's going to piss off the judge and have no real affect on maintenance or equitable distribution. You waste valuable time dwelling on a shattered past. Contested divorces are by nature acrimonious, and one should do everything reasonable to calm the passions on both sides, especially actions that don't affect the distribution of marital assets. I fully support the New York State’s legislatures attempts to join the rest of the states and move our state’s divorce law into the 21st century.

Youngstown Steel Pensioners

WSJ editorial board is jerking apoplectic about Obama having his hands in BP's pockets to take all that hard earned cash belonging to pensioners.  Echos of Youngstown Steel.  All of a sudden an editorial board that constantly argued for unbounded presidential powers in the face of national emergencies during the Bush years believes in limits to the President's emergency powers.  An unfettered President is o.k. in a war against phantoms but not when the Gulf of Mexico is destroyed along with the livelihoods of all those dependent on it.

Actually, I agree with the WSJ editorial board that Obama doesn't have the legal right to make BP suspend its dividend payment.  But he doesn't need it, he's got the practical power to force BP to pay into an escrow account.  He can revoke all of BP's oil leases, ban it from doing business with any U.S. government entity, and make its life regulatory hell.  Let's not give short shrift the Department of Justice and the Securities and Exchange Commission, institutions well practiced in shaking big corporations down.  Obama has plenty of legal weapons in his arsenal, even if he doesn't have the technical right to prevent BP's dividend payments.

As for all the poor pensioners, this is just another object lesson on why diversifying your retirement portfolio is so important.  Shut up before I go over there and start dumping oil in the English Channel.

Afghan Gold

The new and improved graveyard of empires, now with untold hoards of commodities!  Who will gain this treasure?  Who can afford to?  Afghanistan has no mining infrastructure or tradition so any victor faces a large capital and temporal investment before any profit.  Years of blood before any gold.  And now that commodities are involved resource hungry China is going to get further involved in one of its border states.   We can also look forward to another gigantic plague of corruption upon the Afghani people as the extractive industries are riddled with a culture of bribery and kickbacks, to say nothing of the Afghani government.

Mass Primary Hysteria

Our colleague Titivil makes a good point regarding all the media hyperventilating over how today's primaries will gauge the "mood" of the voters.  How can a noun as amorphous and variegated as "Voters" be said to have a mood?  How can a convenient abstraction like the word "Voters" have a subjective mental state usually only attributed to individuals?  The answer is that they don't, but to speak as they do is a convenient reductionist metaphor that allows us to speculate as to a state of affairs that otherwise we'd have difficulty speaking about at all.  But when speaking in metaphors, remember that while they are useful for getting at the truth they are at base lies.  A metaphor is a qualitative attribution to something that doesn't actually have that quality.  Which is why politicians of all idiocies love them.

Wall Street's Obligations to Main Street

Looks like the banks are making it tough for Fannie & Freddie Mac to exercise their rights under their Master Loan Purchase Agreements ("MLPAs") requiring the big banks buy back any bad loans the big banks sold to Fannie & Freddie.  And with good reason, as the big bank repurchase liabilities could be massive.

To understand what's going on here, and how the big banks' repurchase obligations potentially represent large off balance sheet liabilities for these banks, you need a little background on how loans are bundled into Mortgage Backed Securities, or "securitized."  First, there's the originator of the actual mortgage loan.  The originator is the entity that gives a mortgage to an individual or business.  The originator decides if an applicant meets its loan criteria and handles the paperwork for the original loan.  The originator then bundles any given number of mortgages together and then sells them, usually to a special purpose vehicle, known as the "sponsor/seller," of a mortgage backed securitization.  The sponsor/seller then sells the loans to what is known as the "Depositor" who then sets up a common law trust that issue certificates sold by an underwriter to investors.  The certificates generally entitle the holder to a share of the interest and principal payments in the loans underlying the trust.  Sound complicated?  It is.  But you don't need to understand the intricacies of mortgage backed securitization to understand the massive liabilities involved, you just need to know a few simple things.

First, because the originators were selling the loans they originated they had little incentive to issue creditworthy loans because after the loan was sold the originator no longer carried the loan liability on its books.  This allegedly resulted in fraudulent or negligent loan originations to mortgagors unable to actually meet their loan obligations unless property values continued to climb.  And as we all know, property values fell off a cliff and people were stuck with homes they couldn't sell except for less than what they paid for them and a tsunami of defaults occurred.

Second, the sponsor/sellers often originated loans themselves, or repackaged loans purchased from originators, and sold them to other entities like Freddie and Fannie Mac.

Third, Fannie and Freddie Mac are government sponsored entities, guaranteed by U.S. taxpayers, that massively, some say foolishly, buy mortgages and MBS in order to provide liquidity to the mortgage market in a government directed effort to promote home ownership.

Fourth, every major investment bank set up entities along the whole mortgage securitization spectrum to capitalize on this market.

Fifth, when bundle of loans are sold between these entities, they are usually governed by MLPAs, which contain a repurchase obligation on the part of the seller to the buyer if there is a breach of the specified representations or warranties in the MLPA.

It's these repurchase obligations that give rise to the potentially massive liability.  If banks were issuing as many bad loans as some people say and the data seems to indicate, then it stands to reason that Fannie and Freddie, and by extension the American taxpayer, bought a lot of bad loans from the big banks.  And the big  banks are likely required under the terms of their MLPAs to buy them back from Fannie or Freddie.  But then the big banks would take a massive hit to their balance sheets.  So they're lawyering up instead, because it's probably cheaper to spend a millions of dollars on lawyers then it is to buy back the loans.  So once again America saves Wall Street, and Wall Street thumbs its nose at America.

What Happened to Alan Dershowitz?

I've been annoyed by Alan Dershowitz's knee jerk defense of all things Israeli for the last few years, but I've generally chalked it up to the sclerotic effects of aging upon a once supple mind. But today's sophomoric Huffington Post piece on the IDF flotilla raid earns the booby prize for nationalistic preening. If I'd turned in such a conclusory piece of legal reasoning to a partner at my firm I'd get the ax. A summer associate is capable of better reasoning. Talk about black and white thinking. The Law of the Sea is nowhere near as simplistic as Dershowitz makes it out to be. No lawyer worthy of the name makes such bald conclusions regarding the legality of something as complicated as the IDF's seizure of the Gaza Flotilla on the High Seas. I don't purport to be any expert on the issue, but I certainly wouldn't write a hack piece like Dershowitz's without doing at least a bit of legal research. No one has ever cited Dershowitz as an expert in admiralty jurisdiction, but his pomposity blinds him to his ignorance of the subject matter. For a different take on the legality of the IDF's actions, and some interesting debate in the commentary, check out this link.

IDF Storms Ship, Kills Civilians While Shooting Self in Foot

Been busy of late in corporate lawyer world defending weakling multinational investment banks against the depredations of pension funds, but the Israeli Defense Forces' ("IDF") ham handed raid on the Gaza Flotilla roused me from my dogmatic stupor by sheer force of its stupidity.

First, we all know that the phrase "military intelligence" is oxymoronic, but what idiot at the IDF or the Israeli government authorized this raid? Did it not occur to the geniuses behind this raid that a disproportionate show of military force in international waters against people armed with sticks and knives is exactly what the publicity hungry activists wanted? Most people weren't paying attention to the Gaza blockade but every sentient news reader is now. And how many people would have paid attention if you'd just let the ships dock but you prevented them from unloading, or some other less ostentatious approach? Instead we've been treated to a display of Israeli dick swinging followed by Israeli self defensive whining now that people justifiably want to cut that dick off. Which brings us to point two.

Second, the reason no one except the obtuse buys the IDF's self defense justification for their homicides is because it's ludicrous. This was a white flagged ship in international waters attacked by commandos from one of the fiercest and accomplished armies in the world. The flotilla didn't try to board any Israeli vessels on the high seas, it was the other way around. If anyone was acting in self defense, it was the flotilla, not the armed to the teeth IDF.

Finally, how long can the Israelis kid themselves that they're not treating the Palestinians in the same despicable ways that the Jews have been treated for centuries throughout the world. Talk about losing you moral compass.