Tuesday, January 23, 2007

Pulling on threads

Guambat oft entertains himself curiously following the search results that result from hits noted by Guambat's StatCounter hit-o-meter. Some threads are plain ridiculous, but most lead to interesting commentary, some germaine to Guambat Stew bits and others more tangential.

It gets kinda hard working these threads into new posts, or going back and editing old posts to include them (even finding the old posts that are relevant is tedious), so Guambat may make this item a recurring feature. What Guambat will do in this type of post is share some of those threads so that you, Dear Reader, can pull them yourself.

In this post at WRA Strategies & Observations, the blogger also tells the tale of Sam Zell, which Guambat mentioned just yesterday in the context of trying to understand the dynamics generated by the perception of too much liquidity. That blogger had this take:
Cash continues to spur increases in many markets. However, today's WSJ mentions in column one of the Money & Investment section that perhaps "Investors might not be pushing up prices for assets like art or high-yield bonds because they have so much cash. They might be seeking out more and more cash so they can push up prices while the going is good. Once they lose faith in an asset class they'll turn tail and all of that so-called liquidity will turn with them. That's what happened in the copper market . . . [with] the price of copper [falling] 39% since May."

"By the same token, all that cash doesn't seem to be pushing up prices for Florida condos or oil anymore. 'Liquidity is an ex-post justification for why markets are going up,' says Dresdner Kleinwort's strategist Albert Edwards. 'There's lots of liquidity around -- well, there always is until there isn't, and then it just disappears.'"
Guambat won't argue the toss, but notes that the only reason that investors can so easily chase up the price of any asset class is because of the cheap and abundant pool of available (to those in the loop) pool of cash. Still, point taken.

Another thread lead to this article at FT.com by Arne Alsin: The story brokers don’t want you to read. Arne Alsin is a portfolio manager for Alsin Capital and for the Turnaround fund. It is about how brokers like to plump up their income statements using your balance sheet:
This is a column that the brokerage industry does not want you to read. That is because it will embarrass them. Brokers don’t want you to know that they reap big profits by withholding important information from investors. Brokers don’t want you to know that they are the reason why shareholder voting has become a farce. And they don’t want you to know that they regularly and systematically discriminate between classes of investors.

The reasons for broker misbehaviour should come as no surprise. They misbehave because: (1) it is profitable; and (2) they can get away with it.

Brokers, as fiduciary agents, are supposed to act in the “best interests” of investors. But many brokers act in their own interests when they have an opportunity to generate more profits. Before I get to the cold, hard facts regarding the self-serving conduct of brokers, I will identify the root cause of the problem. That is, brokers wield too much power and influence.

There is no other asset class where brokers have such enormous power. A real estate broker or an auto broker, for example, is not able to lend your house or your car to someone else without your knowledge.

In the stock market, it happens every day. Brokers lend investor property to short sellers, often at annual yields in excess of 10 per cent, without notice to investors. After lending investor property, brokers have the gall to keep 100 per cent of the proceeds.

Broker lending of investor property generates $10bn a year for the brokerage industry. Because brokers are reluctant to share this booty, they wilfully and systematically discriminate between investors. They discriminate between those investors who have information and those who don’t have information.

Per the industry-standard hypothecation agreement, brokers are able to lend out investor property and secure high returns while putting none of their own capital at risk. So, all of the capital is put up by the retail investor; all of the reward goes to the broker.

The key to the ruse is this: keep the retail investor uninformed. Broker behaviour borders on the absurd in this regard. When a broker lends the shares of a retail investor to a short seller, who then sells the shares to someone else, the right to vote goes with the shares. To keep the loan a secret from the owners, brokers mail proxy voting materials to investors even when the broker knows that the shares have been lent to someone else.

The deceit is carried a step further. Even though the shares have been lent and the retail investor is not legally entitled to vote, brokers allow the investor to vote anyway. As a result, shareholder voting has become a farce. That is evident, in part, by rampant over-voting.

The common broker complaint – that it is too difficult to track shares for voting purposes – is a canard. That is because brokers already track shares pursuant to Internal Revenue Service rules.

Brokers track shares for tax purposes because they have to. They permit systematic violation of the “one share, one vote” rule because they can get away with it.
See, Unrepresentative Swill (Part 3)

Monday, January 22, 2007

Financial depth or in over our heads?

Guambat has heard much about liquidity of late, and has muttered about it himself, though not with any real understanding. Many folks seem to think that there is just too much of it sloshing around, "artificially" or "unnaturally" raising asset values, which means inflation worries for those looking for nasty genies in the bottle.

John Mauldin, for instance, notes in his latest emissive that there is just so much of it coming from pension funds looking for any kind of yield that yields will have to come down from historic "normal" levels.
When Sam Zell is selling, the rest of the investment world should take notice. Sometimes they do ring a bell. But that is not what we ask today. The more pertinent question is why would investors accept such low future returns? Do they really think there is something that Sam Zell is missing? And who are those masked men with the billions?

Sam Zell sent a Christmas card to his friends with a song called Capital Keeps Falling on My Head to the tune of Raindrops Keeps Falling on My Head. You can listen at http://www.yieldsz.com. It is really worth the time. I mean, you really need to listen. It is quite thought-provoking as well as a lot of fun.

"What lies ahead: we're old -- the western world is aging, we'll need income from our pension funds, where's it coming from? The yields we see won't fuel no party... And there's one thing I know -- To get things back to normal it's a long haul that's global. Yields won't improve 'til growth soaks up this liquid freefall. Capital keeps raining on my head. So much is out there that the world is out of whack. When will we see balance back? It's gonna be a long time 'til returns meet expectations. We need to be prepared for slim annuities..."

"Nothing's worrying me," is how B.J. Thomas ends the original version. That ending keeps playing in my head. Investors cannot be worried by much to look at real estate at 22 times projected future earnings. Or emerging market debt at little more than what you get for US government debt. Yields on all manner of investments have been compressed.

How? As Zell says, "Illiquid assets have been alchemized into currency in play competing for returns."

But the smartest guys in the room over at McKinsey reckon as how this is all a good thing. By their reckoning, the total global value of all financial assets is now, at the beginning of 2007, worth US$ 140 Trillion, which is more than three times total world GDP. That's unprecedented but not the good news.

The good news, according to McKinsey, is that this value for the world's financial assets will grow another fifty percent (yep, 50%) in the next three years! (to US$ 217 Trillion by the end of this decade - in 2010). And they don't seem to have any inflation worries whatsoever. Because, they say, this merely adds financial depth, and that is a good thing.
[T]he value of the world's financial assets now exceeds global GDP by a factor of three—an unprecedented degree of financial depth, which largely bodes well for the world's economies.

For the most part, deeper financial markets are beneficial because they are more liquid [is that a circular argument?], give borrowers better access to capital [hell, the banks are trying to give the stuff away; Japan doesn't even charge interest], and offer more efficient pricing and increased opportunities for sharing risk [with hedge funds invading every balance sheet or traded instrument to leverage up the risk].

Equities accounted for nearly half of the growth in global financial assets in 2005.... [D]ebt was the main contributor to overall growth in the global financial stock after 1993, but this development mainly reflected the decline in global equity market values in the late 1990's; 2005 was the third straight year when equities were the largest contributor to the growth of global financial assets.

In 2005 the surprise element in US debt markets was ... the rapid expansion in private-debt securities.... Within this category, morgage-backed securities gained the most, reflecting the strong US housing market [and the alchemy of turning illiquid assets into currency]. In addition, the issuance of US asset-backed securities hit a record, owing to high levels of home equity lending, which was then securities [by more of the same alchemy].
Guambat's head is buzzing so much by these desparate spins on the same story that he reckons his blowflies have moved on around to the front. All those folks are much more savvy and informed than Guambat could ever be, yet they don't see eye to eye.

Dear o me o my.

Flagging interest

Australian concert flag ban sparks anger by Rob Taylor
Fears of race clashes on Monday led organizers of Australia's biggest outdoor rock concert to bar fans from carrying the national flag, sparking a furious reaction from the country's prime minister and war veterans.

After fights between ethnic Croatian and Serbian fans outside the Australian Open tennis tournament last week and 2005 race clashes on Sydney's beaches, Big Day Out concert organizers said Australia's flag was a "gang color" which could incite hatred.

"It was racism disguised as patriotism and I'm not going to tolerate it," event producer Ken West told Australian newspapers.

Should the BDO Ban The Flag? by Andrew Tijs
Patriots froth at the mouth upon news that the Big Day Out are "discouraging" flag-wavers at the Sydney show.

Following racist incidents at last year's Sydney Big Day Out, the organisers have clarified that, while they're not "banning" the flag for this year, they are actively "discouraging" it.

Right-wing pundits and even the Prime Minister have criticised the Big Day Out's stance. The organisers specifically changed the Sydney slot in 2007 so that it didn't fall on its traditional Australia Day date. This was due to Cronulla-riot hangover violence at last year's event, including incidents where nationalists reportedly demanded that punters kiss the flag or get punched.

Understandably, the Big Day Out is a ticketed event and they may stipulate what gets brought onto the grounds. It's reassuring that an organisation with the profile of the Big Day Out has recognised the recent fascistic use of the national symbol.

Since there's no definitive way to tell the difference between nationalist knuckleheads and genuine music fans, banning the flag as a racist symbol is one way to reduce a divisive atmosphere. But alcohol is almost always a factor in these incidents, and it will be more effective to crack down on racist drunken louts, regardless of what they're waving.

Gimme shelter ('cause I can't afford to buy it)

Australian housing affordability slammed
Housing affordability in Australia is among the worst in the world....

[T]he release of the Annual Demographia survey rated every Australian city as "seriously" or "severely" unaffordable in a global study of 159 cities....

The Demographia Survey, released by the US-based Wendell Cox Consultancy, ... housing "unaffordable" when the median house price passes three times median household incomes.

Housing is "seriously unaffordable" when it passes four times median household incomes and "severely unaffordable" when it passes five times median household incomes.

Perth replaces Sydney as the least affordable city in Australia
The Housing Industry Association (HIA)/Commonwealth Bank Housing Affordability Index revealed affordability has dropped by 5.5% to 97.9 over the December quarter last year. This is the first time the index fell below the 100 mark since the measure was introduced in 1984. Over the last 12 months, affordability tumbled 15.5% as the full impact of three rate rises begins to bite.

An average first homebuyer now needs more than a third (30.7%) of their disposable income to service their mortgage - an increase of 1.7% compared to the September quarter. The monthly loan repayment needed on a typical home loan jumped by 6.3% to $2,332.

Affordability dropped across all metropolitan areas with ACT suffering the biggest decline. Affordability in the capital tumbled 7.9% amidst skyrocketing home prices. Sydney suffered a 4.7% decline while affordability in boomtown Perth fell 7.4% to 82.7, making the western city the least affordable in Australia.

"Cluster f--- of conflicts"

"A senior Macquarie Bank official
last night told the Herald
he could not believe
the "cluster f--- of conflicts" the bank faced
after then Alinta chairman John Poynton
approached Macquarie on January 2
to be involved in a management buyout (MBO)."

Macquarie Bank is the model of modern financial enterprise. But this little model has got it's little tit in a wringer this time, or so it might appear from reports. The Macquarie entanglement with Alinta just gets more smelly.

A lucrative business partnership has been blown up by conflicts of interest. Michael Evans and Stuart Washington report: Conduct Unbecoming
JOHN Poynton and Bob Browning were the swashbuckling corporate conquerors from the west. After a string of David-and-Goliath conquests, Alinta's chairman and chief executive were on a roll.

Nothing, it seemed, was out of reach for Poynton, the doyen of West Australian stockbroking, or Browning, the driven corporate chieftain who had transformed the one-time West Australian Government gas monopoly into the country's largest energy distributor.

Through a series of audacious deals, Alinta's market capitalisation has grown from $360 million when it listed in October 2000 to a giant with a market capitalisation of $6.7 billion.

And along almost every step of the way, Macquarie Bank stood in the background, counselling, advising and taking fees, fees, fees.

But late last year, Alinta's management hatched a deal that crossed the line. It was a deal that, if successful, would deliver Alinta's riches into the hands of a few key managers along with Poynton and Browning.

And it was a line crossed so arrogantly that Poynton felt he could remain seated alongside the new chairman, John Akehurst, as a director of Alinta when the deal was announced on January 9.

Browning, too, felt he could stay on as chief executive. And Macquarie Bank entertained ideas, however fleetingly, of smoothly working both sides of a transaction. Wrong on all counts.

Within days Poynton and Browning were gone. Macquarie Bank, meanwhile, was caught in its worst reputational bun-fight since buying Sydney Airport in 2002. And the broader business community was coming to terms with a dark side of boom-time markets: how shareholders' interests can be put behind the ambitions of managers; how investment banks can turn from friendly adviser to potential predator; how projects hatched in secrecy and hidden from the market can unfairly dent the chances of other bidders.

And, finally, in a particularly bitter lesson for Alinta, how a furore about conflicts of interest can strangle at birth private equity approaches and management buyouts.

Late last year, Browning was coming under pressure with the failure of a spin-off called Alinta Infrastructure Holdings, which he was forced to buy back.

Facing questions over the sustainability of Alinta's model and with private equity firms on a debt-fuelled binge all around them, Alinta's senior managers came up with one more deal: a management buyout.

As the unfolding events of the past fortnight have shown, the actions of Poynton and Browning's management team and Macquarie Bank have lifted the lid on the inherent conflicts of interest in management buyouts.

Management buyouts are nothing new. Travel agency Flight Centre and retailer Brazin are just two local companies whose management bought back the farm last year.

In both cases, the companies were underperforming and the shares sagging. And in both cases, a major shareholder offered to buy out the minority shareholders. For minority shareholders, an offer to buy out underperforming shares at a premium to current prices can appear attractive.

But in proposing a management buyout, a company's leadership is acknowledging its failure to generate shareholder returns for all shareholders.

And having admitted that, they offer to buy the company so it will work for their own pockets when they can't for everyone else.

Alinta - a well-performing company - added something new to the mix, with a buyout only made possible by a wall of money from a confluence of growing superannuation funds and debt-fuelled private equity houses.

"Traditionally most management buyouts are companies divesting, companies in trouble, subsidiaries of international companies that sell bits off, or it was getting closed down and management bought it," says Peter Chilton, an analyst with funds manager Constellation Capital Management.

"Traditionally management buyouts tend to be smaller, or as a result of something happening. In this case you have management of a listed company, picking the eyes out of a listed company - I think what you're seeing is a bit different."

The differences are layers of conflicts, in which managers' personal ambitions are pitted against the interests of major shareholders; and investment banks paid for services can suddenly appear on the other side of the fence.

Is there a conflict in a management buyout?

The short answer is yes. In a management buyout, dangerous conflicts exist as soon as managers turn their mind to buying the company, no matter how well motivated their actions may be.

"If you intend to make a bid for the company you are working for, there's nothing wrong with that, I guess, because it could be of benefit to all shareholders," says Chilton. "But you can only really do that by saying, from this day onwards, in making a decision to join a consortium, you're in a privileged position and you have to resign."

In the case of Alinta, it is arguable both Browning and Poynton fell at this first hurdle. On November 30, the management buyout team, headed by John Poynton and Bob Browning, informed the Alinta board they were considering a management buyout.

But even when their proposal, backed by Macquarie, was announced on January 9, Browning and Poynton took Alinta's can-do attitude to new and ridiculous heights, appearing somewhat surprised by a vitriolic market reaction and none-too-subtle suggestions they should resign.

Stuart Turner, senior analyst with Challenger Managed Investments, said on the day the deal was announced: "My very simple, very traditional way of understanding things is that a board appoints a managing director to run a company - not to cherry-pick assets out.

"I would have thought, prima facie, that the board … would view that he has actually exceeded his brief and the question is why he was not asked to resign."

The market got its message through: Browning went on January 11 and Poynton went on January 12.

In a letter to Alinta last Monday, the Australian Council of Super Investors representing managers of $240 billion in assets, underlined the point: "The position of the previous chairman and CEO continuing in their duties and responsibilities whilst developing the MBO proposal was untenable."

Do directors face a higher hurdle in management buyouts?

Again, the answer is yes - with implications for Browning and Poynton. Under the Corporations Act, there is a clear onus on directors to avoid conflicts, full stop. Not just "manage" them.

In a position paper released this week the Australian Institute of Company Directors (AICD) states: "Directors must not place themselves in a position where there is an actual or substantial possibility of a conflict between a personal interest or a duty owed elsewhere and the director's duty to act in the best interests of the company."

On the face of it, this does not allow directors the possibility of addressing major conflicts through other methods, such as disclosing them or managing them. In this respect Poynton, in particular, faces close scrutiny.

On the evening of January 2, Poynton called Robert Dunlop, Macquarie Bank's key Alinta adviser, telling him a management team was considering being part of a buyout and sought the bank's interest. This was after the board had appointed JPMorgan and Carnegie Wylie since November 30 as Alinta's management buy out adviser and another bank, Goldman Sachs JBWere, had been unsuccessfully working on a management buyout for about two months.

Macquarie Bank made it clear this week that Poynton played a key role, stating: "Macquarie was also advised that all of Alinta's directors had been aware of the MBO initiative for some time and were receiving independent advice."

It then emerged Poynton had been instructed by the board not to speak to Macquarie. The conflict of interest is about whether Poynton and Browning were working in the interests of shareholders - as they have an obligation to do under the Corporations Act - or whether they were furthering their own plans.

The chief executive of the AICD, Ralph Evans, said in relation to the position paper: "The most important principle in the Corporations Act is that directors must act in the best interests of the company. It's a very small phrase, but it encompasses an awful lot."

Why is Macquarie Bank in such hot water?

In addition to various Corporations Act provisions about conflicts of interest, financial services licensees face a tough conflict of interest regime introduced by the regulator in 2005.

This not only means the Australian Securities and Investments Commission can chase corporations and individuals under the Corporations Act when it perceives there have been breaches in conflict of interest matters - and it has indicated it is making inquiries on this front - but it also has the power to place conditions on financial services licensees.

ASIC said during the week the law "requires financial services licensees to manage conflicts of interest. Where ASIC identifies conduct it reasonably believes might step outside the boundaries of the law, it can and will act."

On January 2, Macquarie Bank said it would consider being part of the management buyout team if the offer was considered friendly.

But even if Poynton's assurances about acting with the full knowledge of the board were not all they were cracked up to be, Macquarie Bank was courting a disaster of its own making, finding itself in a textbook conflict of interest.

On one side, Macquarie had obligations as the long-term, trusted adviser to Alinta. Its duty was to act in the interests of Alinta shareholders.

But as soon as it started considering participating in a management buyout, it was placing itself in a situation in which it would owe obligations to the management buyout team, and, if it participated with its own equity, obligations to its own shareholders.
Events of the past week have proved Alinta saw this as a conflict of interest, and Macquarie Bank felt the full force of the disaster it courted when the independent board members sacked Macquarie Bank from all future advisory work on Tuesday.

No matter how well-meaning its participation in the buyout talks - and Alinta has subsequently sought to assure the market that Macquarie's intentions were nothing other than friendly - Macquarie had obviously crossed a line.

And it had failed to do the simplest thing: avoid the conflict altogether.

The policy statement on conflicts of interest for financial services licensees states: "There may be situations in which conflicts of interest arise that are confidential and even amount to 'inside information' under the insider-trading provisions … it may be the conflict needs to be avoided by, for example, declining to provide the affected service."

At no stage has Macquarie publicly acknowledged that it had an obligation first to its client by either refusing to accept the role or by defending the company against a buyout.

Animosity within the bank was directed at Poynton and Alinta, but also, tellingly, at Macquarie dealmaker Rob Dunlop, the long-time pointman in the lucrative Alinta-Macquarie relationship.

One senior Macquarie insider said this week: "You can't act for both sides. Rob Dunlop's been an idiot."
Do these conflicts raise other issues?

The furore has been a salutary corporate governance lesson for boards and managers turning their attentions to management buyouts. No matter the merits of the transaction posed by Browning and Poynton, it has been mired in such outrage that their proposal appears to be in danger of falling over altogether.

The controversy also has rocked confidence among major corporations in the roles and motives of large investment banks as trusted advisers.

Sure, there was a high degree of scepticism about investment banks beforehand. But watching a trusted adviser - with a high degree of confidential information - even toy with the idea of becoming a buyout participant has given executives across the country pause for thought.

Ian Ramsay, the director of the Centre for Corporate Law and Securities Regulation, said this week: "Company directors are being surprised by these sorts of developments. Where we operate in Australia is a pretty concentrated market - [the directors] are in a new world where the banks understandably look to draw in a maximum source of profits, beyond advisory into [equity] participation."

Awareness of this conflict is reflected in the approach of other investment banks.

A spokeswoman for Babcock & Brown, Kelly Hibbins, said the issue of conflicts, between the role of a bank's advisory business and a bank's own financial interests, was "one of the reasons we're not in third party advisory … we are migrating our business model away from third party advisory".

Another controversial issue raised by the imbroglio is the thorny issue of continuous disclosure to the market. Should the potential management buyout have been advised to the market on November 30, when the proposal was first embarked on? Or on January 2, when Poynton first approached Macquarie?

Or on January 8, when Macquarie informed the board of its interest? (The market was informed the next day).

Fund managers have a clear preference that they are told as early as possible. But that has not been a position taken by companies approached by private equity groups.

Coles and Qantas both came under fire for their disclosure after word leaked of work being done on buyouts.

So how do shareholders protect themselves against the conflicts of interest raised in management buyouts?

Obviously the heavy lifting done by the independent directors at Alinta over the past two weeks shows the importance of a strong board to act in shareholders' interests.

It also highlights the need for managers to understand their own responsibilities to the board and shareholders, and for advisers to be very clear about where their allegiances lie. But for the AICD's Evans, the conflict of interest issues boil down to a simple proposition.

"There's a very clear, simple principle you can keep in mind: You work for the interests of the company. As soon as that is in any way compromised you have got to think really carefully: do you want to put yourself in that situation - and probably you shouldn't."

MacBank bites back on Alinta conflicts by Michael Evans

MACQUARIE Bank has launched a blistering defence of its reputation in the conflict of interest furore over its former client Alinta, saying it may have been excluded from defending a proposed management buyout so it would remain eligible as a bidder in the event of a sale of the company.

A senior Macquarie Bank official last night told the Herald he could not believe the "cluster f--- of conflicts" the bank faced after then Alinta chairman John Poynton approached Macquarie on January 2 to be involved in a management buyout (MBO).

The official's comments come after the bank took a defiant stance yesterday on its role in the conflict of interest controversy, saying it was doing nothing wrong switching from Alinta's trusted adviser to a potential predator in a sale of the company.

Despite a fortnight of criticism in which it was sacked as Alinta's adviser, Macquarie said it did not feel obliged to rule itself out of a role in a buyout, despite being paid by Alinta shareholders as their adviser for five years.

"Macquarie has always believed and continues to believe that the potential conflicts of interest are capable of being appropriately managed with the informed consent of the Alinta independent directors," Macquarie said in a statement. The bank said it recognised the potential conflicts of interest when approached about the proposal.

"In accordance with the bank's strict compliance protocols, Macquarie executives sought legal advice in relation to all aspects of Macquarie's possible involvement with the MBO proposal, including potential conflicts of interest.

"Macquarie has always made clear that it would not progress any proposal to Alinta in connection with the MBO other than on a friendly basis with the agreement of the Alinta independent directors and in accordance with appropriate protocols agreed with the Alinta independent directors."

Asked to clarify if the legal OK applied to Macquarie's role as adviser or participant in a buyout, the Macquarie official said it applied to both. Investors have questioned Macquarie's attempts to switch sides in the transaction from a trusted adviser to a principal, given its privileged knowledge of the company.

Asked if Macquarie did not consider that a conflict, the Macquarie official said: "The conflict exists absolutely but we are capable of managing it with the informed consent of the client. We weren't pretending the conflict didn't exist."

Asked why the client would do that, the official said Alinta was pursuing a sales process promoting the best outcome for shareholders, including appointing JPMorgan and Carnegie Wylie instead of Macquarie on November 30 as advisers, given Macquarie is a major infrastructure assets owner.

It may have worked. The source said Macquarie was interested in Alinta's assets.

See, Unrepresentative Swill (Part 3)

Sunshine or cloudy

The Australian stock market is starting the week on yet another record-setting tear, today, and given the weighting of the banking sector, the banks have to participate to allow that to happen. Which raises some conjecture: is it cloudy or bright for the banks? Don't ask the folks at Melbourne's The Age:

Banks set to shine in 2007
January 10, 2007

Clouds on horizon for Australia's big banks
Marc Moncrief, Banking Reporter
January 18, 2007

Sydney councils pay private dicks to root (out) prostitutes

Not the kind of story that Guambat would normally post about, but the headline the story didn't get was just too enticing to pass up. Besides, it got ya lookin', didn't it? And a hattip to the PDN, Guam's favourite fish-wrap, which gives us this kind of news instead of the kind you'd want.

Sydney Councils Pay Detectives to have Sex with Prostitutes

Councils funding brothel spies By Sharri Markson
Nine councils across Sydney have forked out $25,000 in fees to private investigators over the past three years.

Now that's a lotta forkin'.

Wednesday, January 17, 2007

Take a walk in Memphis with Jeff

Guambat's family is from just north of Memphis. I don't now remember exactly how the order goes, but it is something like, take the road down the Halls through the Gates round the Curve to Ripley, to help you remember the names of the little towns where Guambat's parents grew up. It was farming country, and Guambat learned a thing or two about chopping cotton, planting corn, stealing watermelons and hauling sweet potatoes, and more than a thing or two about people and the South.

Some of Guambat's rellies made it off the farm. Most, actually. Farming, the way it's always been done in those parts, just couldn't make it in the modern world. A few moved up to the big smoke of Memphis and rose to high civil service ranks. Guambat was but wee when his memories of the place were made, and have become as faded as the old Brownie photos; or more so.

But Guambat remembers well the "colored only" and "whites only" signs on doorways, water fountains and the like, and despising the very thought. Guambat reckons that was not an entirely original response, but was planted and nourished by some of those people up through the Gates, down the Halls and round the Curve to Ripley.

Anyway, that was long ago and far, far away from anything that Guambat has ever been part of since. That was over a half-century ago. One giant leap for a man, but only one small step for mankind.

Until Guambat read Jeff Mathews' recent post. Jeff Mathews is an ascerbic observer of the financial world, an analyst and fund manager, and his blog is a regular read for Guambat, and Guambat is not making that up.

You would be invited to read Jeff's blog, but you are encouraged, admonished, begged, implored to read about his walk in Memphis. And I am not making that up either. Just click on this link and give it a read. Once you do, you'll know yourself I'm not making this up.

Then ya'll come on back, y'heah?

Pro boner

Guambat's Mom is on this one, along with most of the intelligent media, from acrosst the political spectrum.

Well, it’s official now: Deputy Assistant Secretary of Defense for Detainee Affairs Charles “Cully” Stimson has made himself a household name virtually overnight with a comment that is beyond idiotic.
Interviewed by Federal News Radio on the fifth anniversary of the opening of the Guantanamo Bay prison, Stimson said, “It’s shocking . . . The major law firms in this country . . . are out there representing detainees.”
Then the former Navy lawyer went so far as to suggest a boycott of those firms, noting, “when corporate CEOs see that those firms are representing the very terrorists who hit their bottom line in 2001, those CEOs are going to make those law firms choose between representing terrorists or representing reputable firms.”

Many of the nation’s largest law firms are defending detainees pro bono, including Wilmer Hale, Covington & Burling, and Pillsbury Winthrop. It’s what good, public-spirited law firms - and lawyers - do and have done since the very founding of this nation. It was, after all, John Adams who defended the British soldiers accused of killing Americans in the Boston Massacre. What is it about that long and proud tradition that Stimson doesn’t get?

Clueless ‘Cully’ Stimson
Even as venerable and conservative a news source as the Wall Street Journal gets it (but requires a ticket to read):

Mr. Stimson and the American Way By CHARLES FRIED
Defense Department official Charles Stimson showed ignorance and malice in deploring the pro bono representation of Guantanamo detainees by lawyers in some of the nation's leading law firms, and in calling on their corporate clients to punish them for this work.

That some of the law firms Mr. Stimson singles out represent large employers defending discrimination and disability suits, major corporations accused of price fixing, securities fraud and pollution is not because the right hand -- so to speak -- does not know what the left is doing, nor because these firms are major-league hypocrites. On the contrary, they act in the best traditions of the profession -- traditions that are ignored in today's China or Putin's Russia.

It is the pride of a nation built on the rule of law that it affords to every man a zealous advocate to defend his rights in court, and of a liberal profession in such a nation that not only is the representation of the dishonorable honorable (and any lawyer is free to represent any person he chooses), but that it is the duty of the profession to make sure that every man has that representation. So, for instance, it is only the ideologically blinded who would criticize the great John W. Davis for having presented the case for school segregation to the Supreme Court in Brown v. Board of Education....

All that can be said in explanation, if not mitigation, of Mr. Stimson's egregious statements is that he may have been led on by the extravagant rhetoric of ideologues at the other end of the spectrum, who regularly inveigh against law firms which make their living by defending corporate interests accused of abusing employees, consumers and the environment.

And the hapless Mr. Stimson may also have fallen victim to that lawyers' occupational disease, Acquired Conviction Syndrome. It is too bad that lawyers in this country feel bound not only to submit the best possible arguments for their clients -- virtuous or deplorable -- but also to stump for them in the press, before legislative bodies and in professional organizations. Debate in the American Bar Association and American Law Institute, for instance, has been degraded in recent years by their members carrying their representation of their clients' interest into fora in which their best independent expert judgment is asked for. How unfortunate that in this country we have plaintiffs' lawyers and defendants' lawyers, lawyers who represent only unions and others who represent only management. One looks with nostalgia at the British bar, where barristers will prosecute one day and defend the next.

It may just be that Mr. Stimson is annoyed that his overstretched staff lawyers are opposed by highly trained and motivated elite lawyers working in fancy offices with art work in the corridors and free lunch laid on in sumptuous cafeterias. But it has ever been so; it is the American way. The right to representation does not usually mean representation by the best, brightest and sleekest. That in this case it does is just an irony -- one to savor, not deplore.

It is no surprise that firms like Wilmer Hale (which represents both Big Pharma and Tobacco Free Kids), Covington and Burling (which represents both Big Tobacco and Guantanamo detainees), and the other firms on Mr. Stimson's hit list, are among the most sought-after by law school graduates, and retain the loyalty and enthusiasm of their partners. They offer their lawyers the profession at its best, and help assure that the rule of law is not just a slogan but a satisfying way of life.

Mr. Fried teaches at Harvard Law School.

One of the real heroes of the Guantanamo Bay saga, though, is lawyer and Marine Major Michael Mori. Not his client, mind you, but his client's lawyer. He is the real life version of what Tom Cruise characteristically got all wrong in "A Few Good Men". As a rugby player, Major Mori knows the importance of playing the ball, not the man.

Tuesday, January 16, 2007

Artful design

I'm sure this has dropped into other email boxes besides Guambat's, but the imagery is too magnificent not to share: The 10 best pix from The Hubble Spacetelescope:

The Sombrero Galaxy - 28 million light years from Earth - was voted best picture taken by the Hubble telescope. The dimensions of the galaxy, officially called M104, are as spectacular as its appearance. It has 800 billion suns and is 50,000 light years across.

The Ant Nebula, a cloud of dust and gas whose technical name is Mz3, resembles an ant when observed using ground-based telescopes. The nebula lies within our galaxy between 3,000 and 6,000 light years from Earth.

In third place is Nebula NGC 2392, called Eskimo because it looks like a face surrounded by a furry hood. The hood is, in fact, a ring of comet-shaped objects flying away from a dying star. Eskimo is 5,000 light years from Earth.

At four is the Cat's Eye Nebula, which looks like the eye of disembodied sorcerer Sauron from Lord of the Rings.

The Hourglass Nebula, 8,000 light years away, has a pinched-in-the-middle look because the winds that shape it are weaker at the centre.

In sixth place is the Cone Nebula. The part pictured here is 2.5 light years in length (the equivalent of 23 million return trips to the Moon).

The Perfect Storm, a small region in the Swan Nebula, 5,500 light years away, described as 'a bubbly ocean of hydrogen and small amounts of oxygen, sulphur and other elements'.

Starry Night, so named because it reminded astronomers of the Van Gogh painting. It is a halo of light around a star in the Milky Way.

The glowering eyes from 114 million light years away are the swirling cores of two merging galaxies called NGC 2207 and IC 2163 in the distant Canis Major constellation.

The Trifid Nebula. A 'stellar nursery', 9,000 light years from here, it is where new stars are being born.

Monday, January 15, 2007

Hey Starkist, tell 'em Nancy sends ya

Following on from The politics of textiles and tuna, is this:

Dems say wage bill soon will include U.S. territories
By The Associated Press

Fending off charges of favoritism, House Democrats said a minimum-wage bill passed last week will be changed to cover all U.S. territories — including American Samoa — before it reaches President Bush's desk.

House Speaker Nancy Pelosi, D-Calif., said she has instructed the House Education and Labor Committee to help change the bill. Her statement Friday followed accusations from Republicans a day earlier that American Samoa, which is not now covered by the $5.15-an-hour federal minimum wage, was not included in the law raising the federal pay floor to $7.25 an hour because StarKist has a large cannery in the island chain. StarKist is owned by Del Monte Foods, which has its headquarters in San Francisco, Pelosi's district.
The view from Kansas is this:

Once shielded, Northern Marianas Islands included in minimum-wage increases
By David Whitney

A week after they took control of Congress, the Democrats are already dismantling the work of disgraced and convicted lobbyist Jack Abramoff, beginning on the far side of the Pacific Ocean.

Low wages and easy immigration to the Northern Marianas from China, the Philippines and elsewhere drew cheap labor for foreign-owned factories. They were allowed to sell their low-cost clothing, shoes and other products with "Made in the U.S.A." labels duty-free in the United States.

The United States captured the islands from Japan during World War II and administered them under a U.N. mandate until 1978, when they became a U.S. commonwealth.

The Northern Marianas' 1976 Commonwealth Covenant with the U.S. government exempted the islands - the largest are Saipan, Tinian and Rota - from federal immigration and import laws. It also set a lower minimum wage in an effort to spur economic growth for the islands' 82,000 people.

"There will be a human toll to this," said Malinda Matson, chief of staff in the territory's Washington office. "A dollar-fifty in a year is too fast an increase. A lot of people are going to suffer. The only social program we have is food stamps."

"It's sad," said Rep. John Doolittle, R-Calif., once a close friend of Abramoff's and an ally in the fight against raising wages in the Northern Marianas. "This represents an aggressive attack on the people of the Northern Mariana Islands," Doolittle said. "Organized labor has had it in for the Northern Marianas for years. I just think it is unfortunate. This is one of our territories - and probably the most free-enterprise oriented and industrious. This is going to hurt them."

David B. Cohen, deputy interior secretary overseeing the territories, warned a Saipan Chamber of Commerce meeting on Jan. 5 that hard times are coming.

"Under the Democrats' proposal, the CNMI minimum wage will increase from $3.05 to $7.25 over a four-year period, jumping $1.50 in the first year alone," he said. "That could very likely result in a complete and immediate exodus of what's left of Saipan's garment industry."

Cohen laid part of the blame on Abramoff: "I am sure that a lot of people hear `Northern Mariana Islands,' scratch their heads and say, `Isn't that where Jack Abramoff is from?'"

Blocking efforts to raise the minimum wage and tighten immigration restrictions in the islands was a priority of former House Majority Leader Tom DeLay, R-Texas, who once called the Northern Marianas a "perfect petri dish of capitalism."

Doolittle, a lieutenant of DeLay, helped Abramoff renew a $100,000-a-month lobbying contract, then met regularly with his lobbying team to find ways to block changes and steer more money to the islands.

Now, in a city where Abramoff's name and game once opened doors, the Commonwealth of the Northern Mariana Islands can't get anyone to listen to its concerns, said Matson of the territory's Washington office, which last week lacked heat.

Matson said that when Abramoff was at the peak of his power, "there was a lot of lying going on." Changes favored on the islands to address legitimate concerns never made it to Washington, she said. A constant theme from Abramoff was that "horrible things are going to happen unless you give us more money," she said.

Guambat is on record as being critical of the garment factories on Saipan but nevertheless reckons however you look at it, this little dust-up is just politics. The US territories are, as they always have been, just unrepresented pawns. (You did know, did you not, that if you are a resident of a territory, even if you are a US citizen, you have no representative in Congress and you get no vote for President?)

The history of the US territories in the Marianas islands, including Guam, as a separate US jurisdiction from its neighboring and smaller Northern Marianas commonwealth, is long and best characterized as colonial. The administration of the islands for several centuries has been without more than patronizing regard to the local population but rather for the
overriding benefit of the colonial padrone.

The Marianas are geographically and historically an integral part of the Western Pacific Rim. They lack the resources to compete with their neighbors except in one vital aspect. They have a strategic importance to larger powers. And the colonial powers have always usurped that resource in an uneven "trade-off" for hand-outs for which the colonizers patronizingly believe the islanders should be ever grateful.

Saturday, January 13, 2007

Link identified

Guambat recently reported on a tax shelter fraud case primarily involving KPMG. More on that here.

One of the users of the tax shelter was, it now appears, a venerable association of Micronesian and US investors who have a long history of involvment in the development of the infrastructure of the Micronesian islands, including airlines and telecommucications.

It seems that the asscociation's accountant, who was reported as the Saipan "link", was involved in bringing the tax shelter to it, and that he failed to disclose to the association that he was receiving a fee for doing so.

Kiplinger reports on the latest details to be released:

Michael Grandinetti, a senior executive with the United Micronesia Development Association, entered his plea at a hearing before U.S. District Judge Thomas P. Griesa.

At the hearing, Grandinetti, 54 years old, said he lied to a prosecutor and an Internal Revenue Service agent when he told them in a March 2006 telephone call that he had disclosed to the UMDA's board of directors that he received secret side payments from a group of tax shelter promoters.

"The statement was not true and I knew it was not true," Grandinetti said prior to entering his plea.

Grandinetti faces up to five years in prison on the charge. Bail was set at $10,000.

Prosecutors have charged 16 former KPMG executives and two others with allegedly participating in a scheme that allowed wealthy individuals to avoid paying billions of dollars in taxes to the Internal Revenue Service. The case is tentatively set for trial in September.

A conspiracy charge was dropped against KPMG itself last month after the firm fulfilled the terms of its 2005 deferred prosecution agreement with the government, in which KPMG agreed to pay $456 million and admitted to fraudulent conduct in the design and marketing of certain tax shelters.

Grandinetti, a U.S. citizen, is a former certified public accountant and one-time partner at an unnamed large accounting firm, according to court documents. The unnamed firm isn't KPMG.

At Thursday's hearing, Grandinetti said tax-shelter promoters in the U.S., including one in Denver, suggested UMDA engage in tax-shelter transactions to avoid paying millions of dollars of Saipan corporate income taxes. Saipan is the capital of the United States Commonwealth of the Northern Mariana Islands.

He also admitted to agreeing to share in certain fees generated by the promoters as a result of UMDA's participation in the shelters.

UMDA participated in the tax-shelter transactions in tax years 1996 and 1997, according to court documents.

Grandinetti is the fifth person to plead guilty to criminal charges in the matter.

On Wednesday, Steven M. Acosta, a California accountant and insurance salesman, pleaded guilty to conspiracy, tax evasion and two courts of obstructing an investigation by the Internal Revenue Service. David Rivkin, a former KPMG tax partner, pleaded guilty to conspiracy and tax evasion last March.

Reuters and the NY Times are also following the story, the primary focus of which is on the massive US tax losses allegedly associated with the KPMG tax shelter boondoggle.

UMDA isitself an association, and its associates have come and gone over time and have included investors, entrepreneurs and politicians from throughout the Pacific and US. It appears that in the 1990s it had some significant relationships with Larry Hillblom and DHL. But its associates are spread wider.

"UMDA's principals Joseph Waechter, Michael Grandinetti, and Larry Hillblom"

"Joseph Weachter: Mr. Waechter, age 50, is the former President of DHL, the world's leading express and logistics company. After DHL he was the President and Chief Executive Officer of United Micronesia Development Association, Inc. (UMDA)."

And in this FCC fiing, some recent geneology is reported:
On September 20, 2006, Guam Cable Group, Inc. (“GCG”), Startec Global Operating Company (“Startec” or “Transferor”), and Guam Telecom, LLC (“GTL” or “Transferee”) (collectively, “Applicants”), filed an application, pursuant to section 63.04 of the Commission’s rules, requesting authority to transfer control of Startec’s 50 percent interest in GCG to GTL.

GCG, a Delaware corporation headquartered in Hagåtña, Guam, offers long distance services to business and residential customers in the Territory of Guam. Startec, a Delaware corporation, offers long distance services to residential customers nationwide. Startec owns fifty percent of the outstanding common stock of GCG.

GTL, a Delaware limited liability company headquartered in Dededo, Guam, offers domestic and long distance services to business and residential customers in the Territory of Guam. GTL is wholly–owned by MCV Guam Investments, LLC, a Delaware limited liability company. MCV Guam Holding Corp, a Guam corporation, owns 99.7 percent of MCV Guam Investments, LLC. In turn, MCV Guam Holding Corp. is wholly-owned by MCV Acquisition, LLC, a Delaware limited liability company. Seaport Capital Partners II, LP, a Delaware limited partnership, owns 89.9 percent of MCV Acquisition, LLC. United Micronesia Development Association, a U.S.-based investment entity, owns 8.3 percent of MCV Acquisition, LLC. CEA Investment Partners II, LLC, a U.S.-based limited liability investment company, is the sole general partner of Seaport Capital Partners II, LLC. Seaport Associates, LLC, a Delaware limited liability investment company, and CEA Seaport Holdings, LLC, a Delaware limited liability investment company, own 75 percent and 25 percent, respectively, of CEA Investment Partners II, LLC. The J. Patrick Michaels Family Trust, a U.S-based investment entity, holds the controlling interest in CEA Seaport Holdings, LLC. William Luby and James Collis, both U.S. citizens, are the managing members of Seaport Associates, LLC. The ultimate controlling ownership interests in GTL are thus held by the J. Patrick Michaels Family Trust, William Luby, and James Collis.
The California Public Employees’ Retirement System, a U.S-Based retirement administrator, owns 13.7 percent of Seaport Capital Partners II, L.P. Applicants state that there is no interest holder with a derivative interest in GTL of 10 percent or greater.
Applicants state that J. Patrick Michaels, Jr., Trustee of the J. Patrick Michaels Family Trust, holds a cognizable interest in CEA Capital Corp, which indirectly holds a controlling voting interest in Reserve Long Distance, Inc., a rural incumbent local exchange carrier providing voice and date services in Reserve and La Place, Louisiana.
Applicants state that William Luby and James Collis hold cognizable interests in Seaport Associates III, L.P., which indirectly holds a controlling voting interest in Everest Midwest, LLC, a competitive local exchange carrier providing voice and data services in the Kansas City metropolitan area.

Friday, January 12, 2007

So this is what it looks like when you're on the inside of a crusade

"This crusade, this war on terrorism, is going to take a while." President George W. Bush, Sept. 16, 2001.

A week after bin Laden's 9/11 terror king hit on New York in 2001, the Christian Science Monitor was already alert to a misguided missile counter attack:

Europe cringes at Bush 'crusade' against terrorists
By Peter Ford September 19, 2001

As Europeans wait to see how the United States is planning to retaliate for last week's attacks on Washington and New York, there is growing anxiety here about the tone of American war rhetoric.

President Bush's reference to a "crusade" against terrorism, which passed almost unnoticed by Americans, rang alarm bells in Europe. It raised fears that the terrorist attacks could spark a 'clash of civilizations' between Christians and Muslims, sowing fresh winds of hatred and mistrust.

"We have to avoid a clash of civilizations at all costs," French foreign minister Hubert Vedrine said on Sunday. "One has to avoid falling into this huge trap, this monstrous trap" which he said had been "conceived by the instigators of the assault."

[H]is earlier comments, declaring a war between good and evil, shocked Europeans. "Bush is walking a fine line," suggested Dominique Moisi, a political analyst with the French Institute for International Relations, the country's top foreign policy think tank. "This confusion between politics and religion...risks encouraging a clash of civilizations in a religious sense, which is very dangerous," he added.

A couple of years later, Shaun Carney revisited the Crusade in an opinion piece in Melbourne's The Age newspaper:

The Start Of Bush's Crusade
April 12, 2003

Last month, as the war on Iraq began, John Howard made his last prewar pitch to the Australian people, setting down the rationale for Australia's active military involvement. The chief reason, he said, was that terrorists who hated Western societies wanted weapons of mass destruction, that Saddam Hussein had these weapons and that eventually the Iraqi leader would supply them to terrorists.

As well - and this was a late addition to the arguments for engagement rolled out by Howard since late last year - Saddam was a monster who systematically oppressed and tortured his citizens, a people who deserved liberation.

To strengthen the security of Western nations through the removal of Iraq's weapons of mass destruction and the elimination of a tyrant: these were the goals. Since the statues of Saddam were toppled in Baghdad on Wednesday, the military adventure involving American, British and Australian troops seems to have developed into a straight-out righteous war of liberation. Chemical and biological weapons were clearly not a front-line instrument for the Iraqi forces; they were not used in the battlefield and none have yet been discovered by the conquering coalition troops.

The alleged or suspected links between Saddam and al-Qaeda that were said to compel the coalition aggression drifted from the foreground as the battle proceeded in the past three weeks.

Many questions and unresolved issues arise from this venture. If, with America, Australia is now on a crusade to export democracy, why have there been so many demands from pro-war advocates that the "left" or the "peace movement" apologise? Is this what our society is to be reduced to? Is sheer military power - the ability to kill other human beings efficiently and in large numbers - the measure by which our morals are to be determined and judged? If so, democracy is over, and in its place stands fascism.

Democracy is about allowing for a multiplicity of views, of tolerating differences of opinion. Once a government deploys troops, does that mean debate is automatically shut down, that we lose our democratic rights to discuss an issue because we all must "support" our fighting men and women - whatever "support" actually means?

The correctness and wisdom of the invasion of Iraq, conducted without a United Nations mandate, will not be known for several years. Setting aside the possibility of terrorist reprisals, the coalition nations now have the responsibility of creating an independent, democratic Iraq - potentially the greatest challenge facing the West since the end of the Second World War.

This is now a unipolar world, with one massive superpower that is determined to use its military and economic dominance to reshape the world, to make and unmake another nation. Of course, there will be no invasion of North Korea. Its weapons of mass destruction are too powerful, it is too close to China and Japan. So its people will just have to stay unliberated, oppressed and mistreated. The US-led export program for democracy has its limits.

What has just taken place in Baghdad and the deserts of Iraq, and in Washington and New York and London and Canberra, is that an open-ended crusade has begun - whether the participants want to believe that or not.

Of course, at least one participant was firmly and unabashidly of that belief. Hell, his top general was pointedly articulate about it:

The top soldier assigned to track down Bin Laden and Hussein is an evangelical Christian who speaks publicly of 'the army of God.'
October 16, 2003, Los Angeles Times, by Richard T. Cooper

The Pentagon has assigned the task of tracking down and eliminating Osama bin Laden, Saddam Hussein and other high-profile targets to an Army general who sees the war on terrorism as a clash between Judeo-Christian values and Satan.

. . . the former commander and 13-year veteran of the Army's top-secret Delta Force is also an outspoken evangelical Christian who appeared in dress uniform and polished jump boots before a religious group in Oregon in June to declare that radical Islamists hated the United States "because we're a Christian nation, because our foundation and our roots are Judeo-Christian ... and the enemy is a guy named Satan."

Discussing the battle against a Muslim warlord in Somalia, Boykin told another audience, "I knew my God was bigger than his. I knew that my God was a real God and his was an idol."

"We in the army of God, in the house of God, kingdom of God have been raised for such a time as this," Boykin said last year.

On at least one occasion, in Sandy, Ore., in June, Boykin said of President Bush: "He's in the White House because God put him there."

It took the sobering reality that America re-elected Bush for a second term for people to begin to openly discuss the disquiet that they had begun to feel about the theocratic fundamental Christian hijacking of the government of America following on from the fundamental Islamist hijacking of the planes on 9/11.

George Bush’s Religious Crusade Against Democracy:
Fundamentalism as Cultural Politics, by Henry A. Giroux August 4, 2004

Religion has always played a powerful role in the daily lives of Americans. But it has never wielded such influence in the highest levels of American government as it does under the Bush presidency. Moreover, the religious conservative movement that has come into political prominence with the election of George W. Bush views him as its earthly leader. As Washington Post staff writer Dana Milbank, puts it:

For the first time since religious conservatism became a modern political movement, the president of the United States has become the movement’s de facto leader–a status even Ronald Reagan, though admired by religious conservatives, never earned. Christian publications, radio and television shower Bush with praise, while preachers from the pulpit treat his leadership as an act of providence. A procession of religious leaders who have met with him testify to his faith, while Web sites encourage people to fast and pray for the president. [1]

Considered the leader of the Christian right, Bush is viewed by many of his aides and followers as a leader with a higher purpose. Bush aide, Tim Goeglein, echoes this view: “I think President Bush is God’s man at this hour, and I say this with a great sense of humility.” [2]

Bush has relentlessly developed policies based less on social needs than on a highly personal and narrowly moral sense of divine purpose. Using the privilege of executive action, he has aggressively attempted to evangelize the realm of social services. For example, he has made available to a greater extent than any other president more federal funds to Christian religious groups that provide a range of social services. He has also eased the rules “for overtly religious institutions to access $20-billion in federal social service grants and another $8-billion in Housing and Urban Development money. Tax dollars can now be used to construct and renovate houses of worship as long as the funds are not used to build the principal room used for prayer, such as the sanctuary or chapel.” [6] He also provided more than $60 billion in federal funds for faith-based initiatives organized by religious charitable groups. [7]

The two programs that Bush showcased during his January 2003 State of the Union speech both “use religious conversion as treatment.” [9] Bush has also created an office in the White House entirely dedicated to providing assistance to faith-based organizations applying for federal funding. Moreover, Bush is using school voucher programs to enable private schools to receive public money, and refusing to fund schools that “interfere with or fail to accommodate prayer for bible study by teachers or students.” [10] The Secretary of Education, Rod Paige, made it clear how he feels about the separation of church and state when he told a Baptist publication that he believed that schools should teach Christian values.

As Winnifred Sullivan, a senior lecturer at the University of Chicago Divinity School puts it, the conservative evangelical proponents of the faith-based initiative “want government funds to go to the kinds of churches that regard conversion as part of your rehabilitation. It’s a critique of secular professional social service standards.” [12]

Bush is not the only one in his administration who combines evangelical morality with dubious ethical actions and undemocratic practices. Attorney General John Ashcroft, a Christian fundamentalist who holds morning-prayer sessions in his Washington office, added another layer to this type of religious fervor in February of 2002 when he told a crowd at the National Religious Broadcasters Convention in Nashville, Tennessee that the freedoms Americans enjoy appear to have little to do with the men who wrote the US Constitution since such freedoms are made in Heaven. Ashcroft argues that, “We are a nation called to defend freedom–a freedom that is not the grant of any government or document but is our endowment from God.” [14] Without any irony intended, Ashcroft further exhibited his rigid Christian morality by having the “Spirit of Justice” statue draped so as to cover up her marble breasts....

See, In Christ we're thrust and The Sisters of Mercenary

But over five years has passed since Bush told us he would lead us on that Crusade. Has he changed his tune? Nope. This is what he had to say about that just a couple of days ago:
"The challenge playing out across the broader Middle East is more than a military conflict. It is the decisive ideological struggle of our time."

Bush’s War on Terrorism as a Religious Crusade: Religious Language & Connotations are Integral to Bush’s War & Tactics October 22, 2006 by PatriotBoy
President George W. Bush has received quite a bit of criticism for some of the religious language he has used in explaining or promoting his worldwide War on Terrorism. Critics have pointed out that this War on Terror is usually framed as a political struggle against antidemocratic and anti-liberal forces of extremism, not as a struggle between religions. Even supporters argue that America can ill afford to make enemies of all Muslims by acting as though the War on Terror were a war on Islam. For a variety of reasons, I think that the references to religion were not mere slips of the tongue, but rather may be indications that the real targets of this war are not the ones usually given by Bush and his administration.

First of all, claiming terrorism as a target fails because terrorism is a tactic rather than an ideology or a people. For all that a "war on terror" makes for a nice rhetorical flourish, you can’t eliminate a tactic — anyone who picks up a gun or bomb and makes demands becomes a terrorist, and that isn’t something which can ever be completely prevented.

Second, to the extent that actual terrorists are targeted, it's notable that the antidemocratic and anti-liberal aspects of their ideology are rarely singled out for criticism, except in bland slogans like, “They hate us because we’re free.” That’s only to be expected, as so many of Bush’s biggest supporters hold similar antidemocratic and anti-liberal beliefs. Some even go so far as to promote these beliefs by arguing that liberties must be restricted in America in response to foreign terrorism. If Muslim extremists can’t achieve their goals through bombs, domestic Christian extremists would like to achieve much the same goals through legislation.

The religion of those targeted by the Bush administration is not the only issue — the religion of those pursuing their war of aggression is an important factor as well. For many Americans, religion is political and politics is religious. They recognize no valid distinction between True Patriotism and True Religion, between the best political policies for America and the only valid religion for all human beings. Because of this, religious language will necessarily creep into political discourse — preventing it would require erecting a wall between religious theology and political ideology which simply cannot exist for them.

Theological beliefs structure, inform, and determine the course of political decision-making which can be difficult for more secularly-minded people to fully comprehend (even those who are themselves religious on a personal level). Thus any discussion of the War on Terror will necessarily include references to religion and religious terminology — not simply because religion is a motivating factor, but because these people cannot think in categories and concepts that are not religious in nature. Enemies are demonic, not simply mistaken or misguided. Wars are crusades because rather than having merely political causes, they are part of God’s agenda for humanity.

When Bush speaks about the War on Terror as a “Crusade,” he may be doing so because he really is targeting Islam and because he simply can’t avoid religious terminology. It appears, then, that we are being given a glimpse into the true workings of such people’s minds and we should not dismiss such evidence as irrelevant, unimportant, or “much ado about nothing.”

And so, Bush continues his Crusade, armored in the language of ideology -- make that ID-ology -- and in stubborn opposition to his best advice. The problem is, Crudader Bush is not a lone Don Quixote. He is the leader of the world's (current) economic-political superpower, which means the rest of us are dragged along like knights' serfs on his errand.

Thursday, January 11, 2007


U.S. says coins used to spy on contractors By TED BRIDIS
In a U.S. government report, it said the mysterious [Canadian] coins were found planted on U.S. contractors with classified security clearances on at least three separate occasions between October 2005 and January 2006 as the contractors traveled through Canada. It discovered Canadian coins with tiny radio frequency transmitters hidden inside.

The report doesn't suggest who might be tracking American defense contractors or why. It also doesn't describe how the Pentagon discovered the coins, how the transmitters might function or even which Canadian coins contained them.

Further details are secret, according to the U.S. Defense Security Service, which issued the warning to the Pentagon's classified contractors. The government insists that the incidents happened and that the risk is genuine.

Top suspects, according to intelligence and technology experts: China, Russia or even France -- all said to actively run espionage operations inside Canada with enough sophistication to produce such technology.

Experts were astonished about the disclosure and the novel tracking technique, but they quickly rejected suggestions that Canada's government might be spying on American contractors. The intelligence services of the two countries are extraordinarily close and routinely share sensitive secrets.

Harris said likely candidates include foreign spies who targeted Americans abroad or businesses engaged in corporate espionage. "There are certainly a lot of mysterious aspects to this," Harris said.

Experts said such tiny transmitters would almost certainly have limited range and could communicate with sensors no more than a few feet away, such as ones hidden inside a doorway.

Experts said hiding tracking technology inside coins is fraught with risks because the spy's target might spend it buying coffee or a newspaper. They agreed, however, that a coin with a hidden tracking device might not arouse suspicion if it were discovered loose in a pocket or briefcase.

"It wouldn't seem to be the best place to put something like that; you'd want to put it in something that wouldn't be left behind or spent," said Jeff Richelson, a researcher and author of books about the CIA and its gadgets. Canada's physically largest coins include its $2 "Toonie," which is more than 1 inch across and thick enough to hide a tiny transmitter. The CIA has acknowledged that its own spies have used hollow U.S. dollar coins to hide messages and film.

Of life or death

Putting the cartel before the hearse

Arnold Schwarzenegger's new individual-mandated health insurance plan for California has a lot of people talking, many trying to figure out who's conservative and who's liberal. For instance, Jonathan Cohn, writing in The NewRepublic, says, "If a Democrat proposed something like this, Republicans would have a field day, calling him a radical, a socialist, or worse." Arnie is, ov course, a Republican.

Cohen assesses the proposal:
Schwarzenegger had become enamored with the idea of using an "individual mandate" to achieve universal coverage--that is, requiring everybody to buy health insurance, typically from a private insurance company.

These sorts of individual-mandate proposals are not exactly new; they've been kicking around for as long as universal health care has. But they've gained currency in the last few years, thanks to some would-be reformers who believe an individual mandate would be preferable--politically, substantively, or both--to having the government insure people directly....

But while individual mandates may not involve creating whole new government programs--a point Schwarzenegger emphasized in his speech on Monday--they still require substantial government intervention in the free market. After all, simply requiring everybody to purchase insurance doesn't do any good if people can't buy the coverage. The government needs to make sure insurance companies actually sell policies to anybody who wants to buy them. It also needs to make sure poor people have enough money to pay for them. When proponents of individual mandates tout the idea, they frequently gloss over these facts. And when it comes time to put policy ideas to paper, they frequently forget about them altogether.

That's what makes Schwarzenegger's plan so striking, particularly given the source. He's proposing to do all of these things--and to do them in a way that might conceivably work. There's financial assistance for Californians who don't get insurance through their jobs but don't have money to buy coverage on their own, plus an expansion of Medicaid to cover more low-income Californians. There are also regulations that would prevent insurers from jacking up premiums, tinkering with benefits, or excluding people altogether for having pre-existing conditions.

Perhaps the most radical feature of Schwarzenegger's proposed insurance rules is a provision that would regulate "medical-loss ratios." An insurer's medical-loss ratio is the amount of money it spends on patient care, as opposed to overhead or profits. (Yes, the "loss" refers to the money spent on patients. Telling, isn't it?) Not surprisingly, the insurers that provide the best, most cost-effective care have traditionally been the ones with the highest loss ratios, since they're putting the most money into patient care. But thanks to the dysfunctions of the health-care market, those same companies often end up at a competitive disadvantage, because they are the ones that attract sicker beneficiaries--on whom it's more difficult to make money.

By establishing a minimum medical-loss ratio--Schwarzenegger proposed that it be set at 85 percent, higher than that of most commercial carriers--the governor's proposal would level the playing field, so that insurers would have incentives to pursue efficiency rather than trying to skim the healthiest beneficiaries from the market. In other words, it would encourage them to compete based on their ability to provide quality insurance, rather than their ability to game the system, as they do now.

The San Francisco Chron's staff writers, Tom Chorneau and Victoria Colliver, don't see cost minimizing aspects of the medical cost ratio as the most radical part. Rather, they think it is radical from its universal conscription. Folks in SF usually think drafty things are dodgy. They also reflect the feeling in the public that somehow the consumer will not or should not shoulder the expense of health care, as if there were some kind of free lunch (organic, vegan and gluten free, of course).

Concerns on governor's health care plan
Some advocates fear rising costs could be shifted to consumers

A mandate that all Californians have health care coverage -- and sanctions for those who don't -- are perhaps the most controversial aspects of Gov. Arnold Schwarzenegger's plan for extending health care to 6.5 million uninsured residents.

Administration officials said Tuesday that the mandate is needed to make sure insurance carriers have as big a pool as possible to spread the risk -- and the cost -- of care.

But consumers, labor unions and some leading Democrats in the state Legislature are concerned that the governor's plan puts too much of the risk for the rising cost of health care on the backs of individuals -- some of whom can least afford it.

Key to Schwarzenegger's plan for extending coverage is redirecting billions of dollars that are now spent subsidizing the care of the uninsured. Once all Californians are covered and getting regular care, he believes costs for everyone will fall.

Some consumer groups object to requirements that individuals have insurance without putting some cost controls on health care and ensuring that the coverage is meaningful.

Massachusetts has adopted a similar mandate, although enforcement will not begin until later this year. Failure to enroll in an insurance plan there would result in the state taking away a personal exemption on the tax return -- worth roughly $200; but penalties would increase to as much as $150 a month beginning in 2008.

Guambat has had the benefit of growing up in a socialized medical system. Guambat's father was a GI. All of Guambat's ills were attended to, at no cost to Guambat, by the US government. Guambat's choices may have been somewhat limited, but the care was perfectly adequate, or perfect enough, and the price was right. Guambat has always wondered why that kind of medical care was not extended to the greater civilian class.

And Guambat has also had the benefit of living Down Under in a land with BOTH socialized medical care and individually madated insurance. Every income earner in Australia pays 1.5% of their income, over and above and separate from income tax, to the Australian Medicare system. As well, there is a heavily "tax incentivised" private healthcare insurance program, generally along the lines, so it looks on its face, to the Massachusetts model. The premiums have ever only gone up and keep going up, faster than inflation. And the conditions of care in the public system always seem needy, with the standards in the private system more cosmetic than substantive.

Guambat has also known some very fine people who work their tails off as doctors and struggle for a living. And Mrs Guambat points out to Guambat what a fantastic lifestyle the Holliwood plastic surgeons on Dr. 90210 lead. Guambat just read a story some place in the last week as how the top medical student, admitted to practice, in the Philipines has emigrated to the US, where he will work as a nurse because the US will not recognize his scholarship or credentials. Doctors from India are driving cabs in Australia, or so you might believe. Nurses with decades of experience must not invade the professional province of the kid fresh out of med school. Teams of accountants back up each surgery. Some people are left to die in wards and some people are kept from dying in private rooms.

Guambat suspects that the health care industry, broadly speaking, including medical education, pharmaceutics, research, equipment, hospitals, etc., has managed to organize itself along the principal that care is secondary to profit. Whilst there are many good people struggling by to extend the best care they can with limited resources, the industry as a whole "operates" to increase the cost rather than increase the care. From pharmaceutical evergreening to laboratory kickbacks, the focus is on drawing more blood than stemming its flow.

Guambat percieves that medical insurance is simply a license for everyone to rort. Trying to get something for nothing or perhaps their "money's worth", patients lap up every possible entitlement. To get them in the system, insurance companies offer lifestyle extravagances, like gym memberships, rather than necessary care like dental work. Doctors order more lab tests than they need, with a look back over their shoulder at malpractice lawyers, knowing the insurance will pay. Even the legal profession is involved, since plaintiffs' lawyers long ago learned that insurance companies, if not doctors themselves, are easy pickings for contestable claims, and insurance defense lawyers learned that it is easier to pay up and pass along the premiums than fight. Every step along the way is perhaps rational in its own context, but the whole systems works to make health care delivery more expensive than it perhaps could be otherwise. It may be that the nation's economic health rests on the needs of an unhealthy populace.

The whole subject is just too big for a post, let alone for Guambat's mind to contemplate in one sitting, no matter how long Guambat sits. But one thing Guambat feels very strongly about is that there is some very big money being made in the health care system that could easily be diverted to where money needs to be spent, and nothing much if anything is being done in that regard. There is nothing in Arnie's plan that will address the fundamental issues, just add more money to a system that knows how to milk more and more of it. You'd think Microsoft ran it.

Guambat might sum up his feelings about the subject by pointing out that the privitization of retirement, what with IRAs, Keoghs, Superannuation plans and all the rest have done demonstrably more for the funds and financial planning industry than for the retirees, and Guambat feels that Arnie's grandiose plan will end up pretty much the same way, and that may be one reason why it is difficult determining political affiliation from where people stand on Arnie's scheme.