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Wednesday, August 28, 2013



Published in CommPRO.biz 2013.08.28

The Customer Is Not Always Right

Let’s review – America has been struggling to rise out of what has been called the Great Recession. A recession brought on by a systematic dismantling of safeguards that protected us for decades after the Great Depression. Engineered by lobbyists working for Wall Street banks and the super rich –the 1% of the 1%– this tearing down of the walls was not intended to cause a recession, just to allow those at the top to make more money.

The recession was an unintended consequence. The big banks had been buying up mortgages to create bundles that investors, pension funds and the like could stash away and collect interest on month after month. What could be safer, we all know real estate never loses value; it always goes up, right? Besides, the banks had these packages checked out; the credit rating services marked them AAA.

This new idea caught on like wildfire. Pretty soon the supply of mortgages wasn’t keeping pace with the need. So the banks pushed the mortgage brokers down the line for more and more mortgages. The brokers urged people to buy, coaching them and fudging the numbers when they didn’t qualify. The banks learned to pile the mortgages with the not-so-nice on the bottom. The rating services were overwhelmed. Under intense pressure from the banks to anoint the investment packages with top ratings, it appears that the services buckled. Soon packages the bankers were calling “Crap” were gaining AAA ratings and being sold by those same bankers to trusting customers.

To understand why the rating services would hang a AAA on what the bankers called “Crap,” we have to look at their business model. The banks asking for AAA ratings paid for them. The banks are the rating service’s customers. They feared that saying no to the banks would just send them to another rating service. They anointed the “Crap” AAA to keep the bucks coming through the door.

That’s pretty much what the Justice Department is saying that Standard & Poor’s did when they sued the rating agency for $5 billion. The DOJ and 14 states are suing S&P, the largest of the rating services. The other two, Moody’s and Fitch, are likely to be next. The $5 billion suit is moving through the California court of District Judge David Carter. S&P rated $4 trillion in various bank investment vehicles over the four years leading up to the collapse.

While S&P is facing the $5 billion lawsuit, keep in mind that the real bad guys are the handful of monster banks that put together the piles of crap and coerced an AAA out of the rating services. What’s more the same banks are back at it– gambling wildly secure in the knowledge that we will have to bail them out again when they stumble. We like to think that doing the right thing is easy. It’s not, what’s easy is taking that first step in the wrong direction

Thursday, August 22, 2013



Published in CommPRO.biz 2013.08.22

Greedy Hospitals

Nothing illustrates the runaway cost of medical care in America quite as starkly as the rush to build proton therapy centers. Hospitals and even private entities are racing to build these facilities that run better than $200 million bucks, $100+ million on the cheap. While it is true that for some cancers proton therapy shows real promise, the number of patients who might benefit is tiny. None are in need of this treatment at the emergency room level.

So why are hospitals across the land rushing to invest this kind of money when it doesn’t serve many patients? Well, it turns out that while there are only a few that can really benefit, there are lots of patients who can be convinced that this latest most-up-to-date medical gadget will help them. Patients that impartial studies show can be as effectively treated on existing proton radiation equipment at half the cost.

There is certainly a need for proton therapy. Studies show it is “Promising” for youngsters with rare tumors in their brain and on their spine. Its focused beam is not as likely as standard radiation to damage their tiny developing organs near the cancer. Beyond that, proton therapy has not been shown to be better than proton radiation. That has not stopped hospitals across America from rushing to sink hundreds of millions into proton therapy centers.

Nothing illustrates better why America spends more on healthcare than anybody and we still rank way down the list in almost every measurable. According to the World Health Organization we rank first in expenditures per-capita and 38th in outcomes. The latest (2008) per-capita number comes in at $7,538.00 and rising; close to double in the eight years following 2000. Growth in healthcare costs has slowed over the last two years; some see the effects of the Affordable Care Act -others see the recession. In either case we are still spending tons of money and not getting our money’s worth.

The proton therapy issue illustrates the cause perfectly. The Washington, DC – Baltimore area has three proton therapy centers on track at a cost of well over a half billion dollars. One in Baltimore is already under construction, a football field sized dome that will house a 90-ton machine. The docs there have offered to share their proton therapy monster with the docs in the Washington area just 40 miles away. Not a chance. Why? Could it be the estimate by one of the hospitals in DC that their proton center will generate nearly $16 million dollars a year in profits by the end of this decade?

Take a look at NY City; with a vastly larger population base they will have one proton therapy center, more than enough to meet the need. There, the NY State Hospital Review and Planning Council held the region to a single unit. In the Washington area two hospitals three miles apart and 40 miles from the proton therapy center in Baltimore, are adding unneeded and unnecessary treatment equipment. Disgusting! Ethically inexcusable.

Friday, August 16, 2013



Published in CommPRO.Biz 2013.08.16
 
Jamie’s Bad, Bad Month

Poor Jamie Dimon. These are defiantly not “Happy Days” for the Chase Bank chief and Fonzie wannabe with his 1970s retro ducktail hairstyle. With the cloud of the bank’s huge loss known as the “London Whale” looming over him and federal authorities issuing arrest warrants against two bank underlings involved in that loss – a loss much more likely the result of the culture of risk and greed Dimon has installed in the bank’s DNA –  it was bad enough.

Then an insider publication, Bank Director Magazine, released its 2013 “Bank Performance Scorecard.” The magazine has an outside independent organization rank banks on a broad scale of markers for its target audience as “An information resource for senior executives and directors of financial institutions.” It would have been an interesting “fly-on-the-wall” moment to see Dimon’s reaction when told that America’s biggest bank his bank came in 14th among all banks with assets north of $50 billion dollars.

You would think it would shake even an ego the size of Dimon’s to discover that his gargantuan bank came in way down a list with two regional banks a fraction of the size of Chase in the #1 & #2 slots. And Chase didn’t just lose in some of the markers, they lost in all of them. Actually almost all of the monster banks looked pretty anemic given the advantages they enjoy. With tons of free money from the Fed to gamble on anything they please, you would think they could trounce those regional banks. Makes you wonder what members of the monster bank boards of directors who read Bank Director are thinking. More important, what of the regulators we entrust to protect us against the economic impact of these too-big-to-fail banks, what are they thinking?

This study puts the lie to Eric Holder’s thinking that criminal charges against the top executives of these monster banks could threaten their stability and therefore our economy. It seems obvious that the executives of the smaller banks that led the Performance study outperformed the monsters; and that all these banks have executives in place who could easily replace those above them.

It is also obvious that it’s past time to literally cut these monsters down to size. It is past time to return the controls installed early in the 1930s that the bank lobby conned the Congress into removing; the controls that would have prevented the current recession. The monster banks are engaged in exactly the same nonsense that triggered this recession. Nonsense that threatens our economy and that the Bank Director study indicates is of little benefit to the bank’s shareholders.

The monster banks are a looming threat to every American. Arrogant bankers epitomized by Jamie Dimon lecturing members of Congress, flashing cufflinks with the Presidential seal, secure in the knowledge that his lobbyists have bought and paid for their support. It’s time to put an end to this ethically challenged era.

Wednesday, August 14, 2013



Published in CommPro.biz 2013.08.08

Anything Goes

The Monster Banks’ best investment over the last few decades has been the tens of millions they poured into the pockets of the Congress through their “K” Street lobbyists. It paid off, billions in profits that come right out of the pockets of every American. The bankers’ big score was the Financial Services Modernization Act of 1999, AKA the Gramm–Leach–Bliley Act (GLB) named for three members of our Congress who giggled all the way to their banks.

GLB gutted the Glass/Steagall Act; legislation written in the early 1930s limiting banks to the business of banking: taking deposits, making loans, supporting our economy. As a reward we agreed to insure the money of the bank’s depositors, so that should the bank go bust, the money you had in the bank would be safe (up to $10,000). GLB took down the fences, but left the taxpayers on the hook should the banks fail.

That and another gift from Congress, a law exempting Wall Street from gambling laws, opened the door to the crazy stuff that drove our economy off the cliff. The Monster Banks could use your deposits to bet on almost anything, always backed by America’s taxpayers. There are less than a dozen banks in this arena, the To-Big-To-Fail (TBTF) banks that we bailed out when the derivative fueled house of cards they created collapsed. Your corner neighborhood bank didn’t play this game. Unfortunately they suffered along with the rest of us, worse because the TBTF banks buoyed by gambling profits held a competitive edge. 

The TBTF Monster Banks are right back at it. Taking zero interest bucks from the Fed to gamble instead of investing in our economy. There’s a new game in town, commodities. Ten years ago the TBTF Banks got the Federal Reserve to set up a “Temporary” ruling allowing them to deal in commodities. When their mortgage game evaporated, the Monster Banks jumped into this marketplace. With all the free money at their disposal they bought grain and oil, even oil wells and tankers. They are into power, manipulating your electric bill, Enron redux.

Metals -steel, aluminum, copper- all commodity markets they can manipulate; a buck on a new car, a few pennies on a cell phone, a tenth of a penny on your soft drink can. Goldman Sachs, the mother of all TBTF Monster Banks, owns a couple dozen warehouses in Detroit full of aluminum bars. They shuffle them around from one warehouse to another in a dance that allows them to circumvent the law and jack up the cost of aluminum. Anything goes, ethics walks the plank.

The “Temporary” commodity games regulations expire next month. The Monster Banks are working hard to extend it. It better not happen. More important, we must get these banks out of the other gambling halls we have allowed them to create. We have to stop this nonsense and cut these big banks -quite literally- down to size. If we fail, it’s just a matter of time until we have to bail them out again.

Friday, August 2, 2013



Published CommPRO.biz 2013.08.01

Gaming The Farmer

Farming is no place for rubes. Most who produce our food are sophisticated way beyond anything their forefathers could have imagined. Farmers always had to have a wide range of skills to survive. Sadly that’s about all many did; it took just about everything they had just to survive. Today they are mostly well educated, hard-working folks; and like their forebearers, mixing common sense and a wide range of skills.

We recently read of a resourceful farmer who built a drone and equipped it to fly over his land mapping out the soil and crop conditions and feeding the data into his computer. He put it all together for less than the fee he had been paying for a single trip by a fixed-wing plane to scope out his farm. Better yet, he got instant info instead of waiting days for data from the aerial surveillance service.

It seems a shame that all this ingenuity and skill is being trumped when it comes to what farmers get for their crops. Commodity futures have long been how the producers and users of everything from rare metals to foodstuffs have protected themselves against flux in the market. It’s where the term “hedge” came from. In recent times the commodity markets have been invaded by the monster bankers and algorithmic traders. The combination that made a joke of the stock markets.

The monster banks take the interest-free money we give them to invest in the economy and speculate in commodities, derivatives and anything else where they can turn a quick buck. The algorithmic traders are doing the greatest harm to our farmers and jacking up the price of food we put on our tables. They have turned commodity markets into the same gambling halls stock markets have become.

In every gambling hall there are sure winners and sure losers. In commodities it’s the high-speed algorithmic traders and the monster banks who collect every time. It’s the farmers, the end users and the consumers who lose. A role of government is to act as a referee in situations like this. In a similar situation at the turn of the last century, 1905, a minor commodity scandal triggered a quick response. Teddy Roosevelt ordered a full investigation. The Congress passed laws to jail those who gamed the market. The Secretary of Agriculture declared, “We have no favorites.”

Hardly the case today. The monster banks have bought and paid for the Congress. Anything they want they get. The farmers and other commodity producers get the shaft, as do the end users and the consumers. There is an easy fix for this chaotic nightmare. There is no reason for anyone to be in these markets other than the producers and end users. Return the market structure to fit the needs of those for whom they were created. Boot the speculators. Do what government is there for. Do what’s fair, it’s the right thing to do, it’s “Ethics 101.”