Thursday, May 28, 2009

Anytime you see a majority opinion written by Scalia, run

"All candidates are different from one another. It depends on the issues. I can see Obama being better on some domestic issues than McCain and I can see McCain taking on a military contract that Obama wouldn't, like Boeing. The point is, these candidates, whatever is in the recesses of their conscience and intellect, are homogenized by the corporatization of our government."

—Ralph Nader, August 06, 2008

In other words, in many ways the Obama Adminstration is stuck in the ruts left by the Bush Administration. Case in point:

AP, courtesy of Truthout.org:

Court: Suspects Can Be Interrogated Without Lawyer

by: Jesse J. Holland | Visit article original @ The Associated Press

photo
Justice Antonin Scalia and the Supreme Court's conservatives succeeded yesterday in overturning a ruling that mandated the presence of a lawyer while a defendant is being questioned by police. (Photo: AP)

Washington - The Supreme Court on Tuesday overturned a long-standing ruling that stopped police from initiating questions unless a defendant's lawyer was present, a move that will make it easier for prosecutors to interrogate suspects.

The high court, in a 5-4 ruling, overturned the 1986 Michigan v. Jackson ruling, which said police may not initiate questioning of a defendant who has a lawyer or has asked for one unless the attorney is present. The Michigan ruling applied even to defendants who agreed to talk to the authorities without their lawyers.

The court's conservatives overturned that opinion, with Justice Antonin Scalia saying "it was poorly reasoned."

Under the Jackson opinion, police could not even ask a defendant who had been appointed a lawyer if he wanted to talk, Scalia said.

"It would be completely unjustified to presume that a defendant's consent to police-initiated interrogation was involuntary or coerced simply because he had previously been appointed a lawyer," Scalia said in the court's opinion.

Scalia, who read the opinion from the bench, said the decision will have "minimal" effects on criminal defendants because of the protections the court has provided in other decisions. "The considerable adverse effect of this rule upon society's ability to solve crimes and bring criminals to justice far outweighs its capacity to prevent a genuinely coerced agreement to speak without counsel present," Scalia said.

The Michigan v. Jackson opinion was written by Justice John Paul Stevens, the only current justice who was on the court at the time. He and Justices David Souter, Stephen Breyer and Ruth Bader Ginsburg dissented from the ruling, and in an unusual move Stevens read his dissent aloud from the bench. It was the first time this term a justice had read a dissent aloud.

"The police interrogation in this case clearly violated petitioner's Sixth Amendment right to counsel," Stevens said. Overruling the Jackson case, he said, "can only diminish the public's confidence in the reliability and fairness of our system of justice."

The Obama administration had asked the court to overturn Michigan v. Jackson, disappointing civil rights and civil liberties groups that expected President Barack Obama to reverse the policies of his Republican predecessor, George W. Bush.

The Justice Department, in a brief signed by Solicitor General Elena Kagan, said the 1986 decision "serves no real purpose" and offers only "meager benefits." The government said defendants who don't wish to talk to police don't have to and that officers must respect that decision. But it said there is no reason a defendant who wants to should not be able to respond to officers' questions.

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Thursday, May 21, 2009

The fraud of the Bank Run Scare

Where the case is made that it would have been better, cheaper, and less inflationary for the government to simply print money to replace the missing funds of failed banks rather than bail them out.

Dean Baker in Guardian.uk:

Was the bank bailout necessary?

Saving zombie banks supposedly prevented financial collapse. But would letting them fail really have been so bad?

US Treasury secretary Timothy Geithner says that we don't need to bail out the banks anymore based on the results of his stress tests. We should follow up quickly on his assessment and start shutting the special Fed lending facilities enjoyed by the banks, the FDIC loan guarantee programme and the AIG slush fund.

However, given the hundreds of billions that have already gone out the door, it is still worth asking whether this bailout was necessary. The argument made by many economists was that it would cost taxpayers more money to do an FDIC-type takeover of banking behemoths like Citigroup and Bank of America than the tens of billions handed over to keep them afloat. In their story, the taxpayer bailout of bank stockholders, bondholders and top management was an unfortunate side effect.

While the next step in this argument is a calculation of the cost of a bite-the-bullet now approach versus a handout-and-wait strategy. With the right assumptions, the handout-and-wait strategy can be shown to come out on top, so we really were just helping ourselves when we gave hundreds of billions of dollars to the bankers that wrecked the economy.

But this calculation not only requires a very specific set of assumptions, it also requires some really bad logic, a commodity supplied in abundance by nation's top economists. The economists claimed that killing the zombie banks would cost more money because it would effectively set in motion a bank run.

The argument goes that people would withdraw money even from insured deposits. The result would be that the government would suddenly be liable to make good on all the banks' deposits, which could easily exceed the value of their assets by more than $1tn. The economists argued that it was better to have costly bailouts than to deal with a massive collapse.

To see the fallacy in the economists' logic, suppose that the banks' depositors gathered together $1tn in cash. Suppose they accidentally set the cash on fire and burnt it up so that $1tn in cash no longer existed.

What if the government then stepped in and replaced the lost money. However, instead of borrowing money in the bond market, it simply printed up another $1tn in cash. In this case, there is no greater debt burden on the government in the future, since the $1tn has no interest costs.

Nor is there any threat of inflation as a result of the printing up an additional $1tn. The newly minted $1tn simply replaced $1tn that was destroyed. There is no more money in circulation as a result of this printing than there had been before the big fire.

In short, replacing the $1tn destroyed by the fire imposes no real cost on the government at all. (If this all sounds a little too fast and loose, it is. If we let the depositors suffer their $1tn loss, then the rest of us would be richer as a result. The depositors would have less claim on the economy's output, leaving more for the rest of us.)

How does this relate to the great bank heist of 2008-2009? It's very simple. If we actually got the scary bank runs described by the leading economists, then the Fed could just print the money needed to make the depositors whole. This additional money would not add in any real sense to the government's debt burden. We would just be replacing money that had effectively disappeared with new money. This would impose no additional interest costs, nor would it increase the threat of inflation.

The great benefit of going this route is that it would not use taxpayer dollars to reward the bankers executives who got us into this mess, and the bondholders and stockholders who were foolish enough to trust them with their money. We could honour all guaranteed deposits while allowing the bondholders and stockholders to enjoy the full fruit of their risk-taking. In other words, they would get wiped out, which is what is supposed to happen in a capitalist economy.

We would also replace the bank executives with more competent people, who presumably would work for much lower pay. As quickly as possible the banks would be restructured and then sold back to the private sector. That is the way things are supposed to work in a market economy.

In short, there were really no legitimate horror stories, at least from the taxpayers' side. The horror stories were only horror stories for the bank executives and their bondholders and shareholders. The economists who missed the housing bubble helped to deceive the public yet again and steer more taxpayer dollars in the pockets of this wealthy clique.

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Sunday, May 10, 2009

Texas bank demolishes high end subdivision in California

World Socialist Web Site:

Bank demolishes new Southern California homes, citing low profit-potential

By Shannon Jones
8 May 2009

Home razingThe bank-ordered razing of a new housing development in Victorville, California, highlights the bankruptcy of the profit system under conditions of the deepening recession and growing social misery.

Texas-based Guaranty Bank has decided to have 16 homes destroyed in the desert community because the estimated $1 million cost to complete them was more than it could make selling them. Four of the luxury homes, priced in the $280,000-350,000 range, were already finished, and the others were in various stages of completion. The estimated cost of the demolition was over $100,000.

According to a report in the Los Angeles Times, the median new home price in San Bernardino County, where Victorville is located, is $160,000, down 43 percent in one year. Banks foreclosed on 236,000 homes in California in 2008.

A video of the demolition was broadcast on You Tube. According to the report, the bank has another 20 California homes slated for demolition in Temecula, about an hour and a half to the south.

Work began on the development in 2007, before the full impact of the bursting housing bubble hit Southern California. Construction stopped last summer, and the bank took back the property from the developer in December 2008 through foreclosure.

According to a report in the May 7 Wall Street Journal, thousands of construction projects across the United States lie idle. It cites New York-based Real Analytics Inc., “which estimated that there were 3,929 distressed commercial properties across the US as of March 31—a 55 percent jump since Dec. 31, 2008.”

According to one research firm, some 250 residential developments have been halted in California, comprising over 9,300 homes.

The Journal points to environmental and health concerns over the growing number of abandoned or idle construction sites. In the case of the project demolished in California, Guaranty Bank justified the action on the grounds that it wanted to create a “safe environment” by preventing squatters from taking over the homes.

A spokesman for Guaranty Bank told the San Jose Mercury News, “The current economic environment requires difficult decisions be made by the government, by banks and by individuals. We made the difficult decision to return the site to a safe, clean and undeveloped state keeping in mind the best interests of the community and our shareholders.” The bank indicated that once the demolition is completed the property will be put back on the market.

One Victorville city official defended the bank’s decision, saying, “It just didn’t pencil out for them. They’d have to spend a lot of money to turn around and sell the houses. They just made a financial decision to demolish them.”

The demolition of the houses shocked many. Ron Willemsen, the president of Intravaia Rock and Sand, the company that handled the demolition, told the LA Times, “It’s a waste of a lot of resources and perfectly good construction.”

The federal Office of Thrift Supervision recently cited Guaranty Financial Group, the parent of Guaranty Bank, for “unsafe and unsound banking practices.” It faces a May 21 deadline to improve its capital ratios or face merger or liquidation. Guaranty has loaned large amounts to home developers and has foreclosed on many projects. Regulators are putting pressure on the bank to come up with a plan to dispose of foreclosed properties.

The decision of Guaranty Bank to destroy brand new homes based on economic calculation points to the destructive irrationality of an economic system based on private ownership and production for profit.

It calls to mind the events of the 1930s, when, in the midst of the Depression, the Roosevelt administration had farmers plough under cotton crops, leave fields fallow and slaughter hundreds of thousands of hogs, to artificially raise agricultural prices by decreasing supplies. This under conditions where millions of people were malnourished.

As in the Great Depression, the products of labor are being destroyed as need mounts. Currently there are some 4 million vacant homes in the US, 3 percent of the total housing stock. Yet the number of so-called economic homeless is on the rise across the United States.

A report titled “The New Homeless” on allgov.com notes, “Tent cities and shelters from California to Massachusetts report growing demand from the newly homeless.” The city of Sacramento, California, recently closed down a tent city after it attracted national media attention. In January, the National Alliance to End Homelessness predicted the economic crisis would force 1.5 million people into homelessness over the next two years.

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