Already The Government Has Found Its Next Big Shakedown

Just a short week ago, the Second Circuit finally clamped down on the government's biggest ongoing shakedown of industry, the so-called "off label marketing" restrictions of the FDA.  That one had netted them well over $10 billion in fines over the last decade for conduct that now appears to have been completely legal all along, indeed protected by the Constitution.  Well, now that that one is gone, what is going to replace it?

Already we know!  This morning virtually every news source had the story:  British banking giant HSBC settled with Federal authorities after an investigation of so-called "money laundering."  According to Reuters:

HSBC Holdings Plc agreed to pay a record $1.92 billion in fines to U.S. authorities for allowing itself to be used to launder a river of drug money flowing out of Mexico and other banking lapses.

Mexico's Sinaloa cartel and Colombia's Norte del Valle cartel between them laundered $881 million through HSBC and a Mexican unit, the U.S. Justice Department said on Tuesday.

$1.92 billion -- that's real dough!  Only a couple of the off-label drug prosecutions reached that level.  So what is this thing about "money laundering" enforcement?

Those at all familiar with the area will already know that the term "money laundering" is the government's catch phrase employed to give an air of sleaziness to the perpetrators and legitimacy to itself; but "money laundering" enforcement has little to do with the "laundering" of money, whatever that is, and everything to do with the government's forced enlistment of the banks into spying on the citizenry in all financial transactions.  The field was created by the so-called Bank Secrecy Act of 1970 (which should more appropriately have been called the Bank Non-Secrecy Act, since it requires reporting to the government on private financial transactions).  As amended through today, the Bank Secrecy Act requires banks to collect identification information on each client and to report to the government on any transactions deemed "suspicious," whatever that means.  If the government so asks, the bank is not allowed to tell the customer that he is being spied on, and indeed, it is a crime to tell the customer.

Sometimes this is sold to the public as part of the war on terror.  That is nonsense, since acts of terrorism do not require large amounts of money (see, e.g., 9/11).  Almost all "money laundering" enforcement is really about the Drug War, and as you can see from the above quote, that's what this one against HSBC is about.

So how is money laundering enforcement doing at winning the war on drugs?  Well, according to this article from Marijuana Business News, the U.S. marijuana market is estimated to be approximately $100 billion annually -- approximately the same size as the market for "brewed beverages," i.e., beer and ale.  OK, maybe that's an exaggeration and it's only $50 billion.  How much of that money finds its way into the U.S. banking system?  I have my answer:  ALL OF IT!

The fact is that money laundering enforcement doesn't put the slightest dent in the drug business.   We have allowed the government to deputize the banks to spy on us all 24/7 behind our backs to enable an exercise in total futility.  How do those devious drug dealers manage to evade all the spying?  Well, here is a great article from the Wall Street Journal in 2007, reporting on the activities of two functionaries of a Colombian drug kingpin.

At 8:50 a.m.  on March 15, 2006, Luis Saavedra and Carlos Roca began going from bank to bank in Queens, New York, depositing cash into accounts held by a network of other people, according to law-enforcement officials.  Their deposits never exceeded $2,000.  Most ranged from $500 to $1,500.  Around lunchtime, they crossed into Manhattan and worked their way up Third Avenue, then visited two banks on Madison Avenue.  By 2:52 p.m., they had placed more than $111,000 into 112 accounts, say the officials, who reconstructed their movements from seized deposit slips.  Confederates in Colombia used ATM cards to withdraw the money in pesos, moving quickly from machine to machine in a withdrawal whirlwind, the officials say.  "The organization at its height was moving about $2 million a month," estimates Bridget Brennan, Special Narcotics Prosecutor for New York City.

These two guys were caught by the luck of a tip by an informant.  Meanwhile, if you think the banks can do anything effective to stop this, you are just kidding yourself.  Despite endless costly efforts at "money laundering" compliance, any given bank takes in anywhere from tens of millions to billions of dollars annually in "drug money," otherwise known as small amounts of cash.  So every few years the Feds will come around and shake down each bank for a some millions or billions of dollars.  Dare anyone tell them that the Drug War is effectively over?

The Worst United States Senator

OK, there are a lot of candidates for that title.  But can anyone beat the appalling senior Senator from New York, Charles "Chuck" Schumer?

With its large financial and business community, New York still ranks among the wealthiest states, even after decades of decline relative to the other states caused by uncompetitive state and local taxes.   New York is home to large numbers of high income earners, given the numbers of professionals in fields like banking, law, accounting, entertainment, and so forth.  According to data from the Tax Foundation, over 3.6% of New York tax filers reported AGI above $200,000 in 2009, compared to an average of around 2.5% for the other states; and the disparity is undoubtedly greater at the highest incomes.

Because our Federal income tax structure is progressive, it is inevitable that New York (and the other high income states, like California, New Jersey and Connecticut) will pay disproportionately more Federal income tax than lower-income states.  Our former senior Senator, Moynihan, published regular reports demonstrating that New York sent far more money to Washington than it got back. 

Our current senior Senator, Schumer, needless to say, has discontinued these reports.  They would reflect badly on you-know-who.  Where does he stand on increasing income taxes?  Why, of course, he is leading the charge.  From the New York Times of October 9, 2012:  "Schumer Shakes Up Deficit Talks With Call to Raise Taxes on the Rich."

Why would the senior Senator from one of the wealthiest states lead the campaign for disproportionately higher taxes on his own constituents?  Not because it is the interest of his constituents or of New York State as a whole. The opposite -- because it is the personal interest of Schumer to centralize as much money as possible in Washington and then make himself into a godfather passing out the goodies to grateful special interests in return for campaign contributions, fealty and votes.

And he makes no secret that this is what he is doing.  Go to his web site and go through the endless lists of minor handouts that he has passed out to one special pleader after another.  The latest include handouts for historic buildings in Schenectady and Rochester, a few hundred thousand dollars for something called a "job engine" at a college in Poughkeepsie, and on and on.  Nobody could possibly figure out how much all these are worth, but without a doubt we are paying double to triple for what we get back.  How can that be a good thing?  It's all about campaign contributions and getting Chuck Schumer's name in the headlines as often as possible.

There's no level of economic destructiveness to which he will not lower himself.  At the "New York" section of his web site we have one after another protectionist measure to hobble foreign competition for the benefit of some particular New York industry: a "silicon metal" producer in Niagara Falls, two furniture makers, a candle maker in Syracuse, apparel makers in New York City, and on and on.  Does he not know that the internationalization of world commerce is what drives New York's main economic engine?  It doesn't matter -- no campaign contributions, no headlines in that.

And how about agricultural subsidies?  Surely, Schumer must realize that New York is among the most highly urbanized states, and expenditures of taxpayer moneys on agricultural subsidies are a big net loss for his constituents.  Well, no. Here is the Agriculture section of his website, bragging about obtaining one minor benefit after another on behalf of the small number of New York farmers.  He even brags about helping the dairy industry by keeping dairy prices up!  Does he realize that that represents a major burden on poor mothers trying to buy milk for their children?  Doesn't matter; their votes are already securely bought.

Charles Schumer is the purest symbol of what is wrong with the United States Congress.  The entire New York press eats out of his hand, parroting his brain-dead press releases and never doing the math to conclude that this is all a huge net loss to us.  Will anything change next time he is up for election?

Fiscal Cliff Cognitive Dissonance

All the political talk is of the so-called "fiscal cliff" -- the combination of pending tax increases and spending cuts scheduled to take place on the first of the new year absent action by Congress.

But does Congress have any real ability actually to take on spending cuts?  Even as they are supposedly discussing that subject, everyone who is suffering any bit of downside in life is asking for a bailout from Washington, and the punditocracy reacts to those requests as if of course they will be fulfilled, no matter the cost.  Let's look at a partial current list.

Housing

The bailout of Fannie and Freddie cost the Federal taxpayers some $188 billion just a few years ago, according to the Wall Street Journal here.  Supposedly those black holes are winding down over the next several years.  So did the government learn its lesson and get out of the business of guaranteeing essentially every mortgage issued?  Of course not.  They just transferred that function over to another agency, the FHA.  How's that going?  Well, needless to say, they "need" a bailout.  According to the Washington Post on November 18, when Fannie and Freddie started shrinking:

The FHA’s portfolio swelled to more than $1 trillion. Critics charged that the FHA lacked the capital and managerial capacity to handle this massive expansion and that the resulting losses would end up costing taxpayers billions — accusations that the agency repeatedly dismissed as exaggerated.  Right now the critics are starting to look pretty prescient.

Already the FHA has had losses, leaving it with some $16 billion of negative net worth, according to the Post.  But that's just the start:

Indeed, the FHA’s predicament is worse than the $16.3 billion figure suggests. If interest rates remain low, more high-quality loans will be refinanced out of the FHA’s portfolio, leaving the agency with the dregs. 

This could easily turn into a one hundred billion dollar problem, or maybe two.  Does Congress have any ability to say no?  According to the Post, "an FHA bailout may be inevitable."  You probably thought that Congress had a say in the appropriation of money, but in the new world, bailouts are just "inevitable."
 Student loans

Now that outstanding student loan debt has gotten to the magic threshold of $1 trillion, it must be time for a bailout there too.  Representative Hansen Clarke, Democrat of Michigan, has introduced the Student Loan Forgiveness Act to wipe most of that clean.  College Insurrection predicts that this bailout will consume most or all of the tax increases that President Obama is demanding in the fiscal cliff negotiations.  Maybe -- but don't they know about all the other bailouts that they "must" pay for? 

Hurricane Sandy

After the governors of New York, New Jersey and Connecticut put in demands for the Federal government to pay to make everything perfect again after the big storm, the Obama administration has now made its request for funding to Congress:  $60.4 billion.  Oh, that's also about the same amount as the projected first year revenue from the Obama tax increases.  It's also pretty much the same amount as the figures so far demanded by the governors of the three affected states -- amounts which I have previously shown are wildly excessive.  But don't worry, the Senators from New York and New Jersey immediately came forward to say that this is just a start and we're going to want a lot more.  

In a joint statement, Sens. Charles E. Schumer (D-N.Y.), Kirsten Gillibrand (D-N.Y.), Robert Menendez (D-N.J.) and Frank R. Lautenberg (D-N.J.) said the request “doesn’t cover all of New York and New Jersey’s needs” but does cover “a large percentage. We believe this will be the first of several supplementals that will be necessary as our states’ needs become more clear, and we look forward to working with the White House on those as well,” the senators said in the statement.

Detroit, etc.

Meanwhile the City of Detroit is running out of money and may miss payroll some time in the next few weeks.  What's the answer?  Obviously, a bailout from Washington.  From Red State:

[Detroit] City Councilwoman JoAnn Watson is demanding America give the city bailout bacon to erase Detroit’s $200 plus million deficit as a quid pro quo for Detroit’s overwhelming presidential election support of Obama.

OK, $200 million is chump change in this game, but it is also only the beginning.  And if Detroit gets its bailout, how far behind will be Illinois, and then California?  I can safely predict that within this next Obama term, all of those entities, and many more, will be in Washington demanding their bailouts.

There's nothing actually real about the deficit negotiations in Washington until someone realizes that this is just not possible.

They Think We Control The Weather By Using Less Electricity

Meteorologist Art Horn, writing at ICECAP, has a collection of quotes from political leaders who have somehow convinced themselves that we can control the weather by using less electricity or driving less or otherwise restricting our lives.

President Obama (at the 2012 Democratic convention):

More droughts and floods and wildfires are not a joke. They’re a threat to our children’s future. And in this election you can do something about it.

Secretary General Ban Ki-moon of the United Nations: on November 12, 2012:

Finally, let me say we all know the difficulties in attributing any single storm to climate change. But we also know this: extreme weather due to climate change is the new normal. This may be an uncomfortable truth, but it is one we ignore at our peril.

Even Mayor Bloomberg of New York (on November 1):

Our climate is changing. And while the increase in extreme weather we have experienced in New York City and around the world may not be the result of it, the risk that it might be, given this weeks devastation, should compel all elected leaders to take immediate action.

Here's the key paragraph of Horn's article at ICECAP:

In all of the above statements the implied or stated method for controlling the weather is to reduce emissions of carbon dioxide. The thinking, if you want to call it that, is this. Reducing the amount of carbon dioxide in the air from 0.04% of the atmosphere to some arbitrary amount, say 0.03% or the level at the beginning of the industrial revolution in 1850, will somehow bring the weather back to “normal”. This reduction would be a whopping 0.01%. They have no idea how this reduction will actually change the weather back to how it should behave but they are sure it will work. They are so sure that they believe we should dismantle everything that has provided us with reliable, affordable energy up to this point and try something new. The EPA is already working hard to close the coal companies

Well, it's not just Obama, Ban and Bloomberg.  The list of those in power who believe that we can control the weather by restricting human activity would appear to include almost all European heads of state (Vaclav Klaus of the Czech Republic has been an exception), and in the U.S., not only the EPA, but also the Supreme Court (see Massachusetts v. EPA).

How's the evidence for that going?  From wattsupwiththat today:

A problem: nearly one third of CO2 emissions occurred since 1998, and it hasn’t warmed

Here's the chart of temperatures since 1979 (from satellites, as compiled by Remote Sensing Systems available at climate4you):

Anybody can see that the peak was in 1998 and that it's downhill from there.  I thought in science you make a hypothesis, and then if the evidence contradicts the hypothesis you must abandon it.  At what point must we declare this hypothesis disproved?  Anyway, our politicians don't seem to think that evidence has anything to do with the question.

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Things Are Not Necessarily What They Seem

In human affairs, people do not necessarily say what they mean, and things are not necessarily what they seem to be at first impression.  Here are three things that are related by these measures; see if you agree.

The Shoeless Homeless Guy

It started with a story in the NY Post on November 29:  A kindly New York cop came upon a shoeless homeless guy in Times Square on a cold night, and went and bought the guy a pair of warm boots with his own money.  A tourist took a picture of the gift and the picture and the story then went viral. 

A few days later, the story wasn't quite what it had seemed at first impression.  Here's a report from the Daily News of December 3.  The homeless guy, Jeffrey Hillman, wasn't homeless at all.  He lives in the Bronx in an apartment paid for by Federal Section 8 vouchers.  He also had a rather substantial income from two founts of government benefits, Veterans' Benefits and Social Security Disability.  And then, just a few days after the generous gift of the shoes, he emerged back in Times Square in bare feet again! 

So what is actually going on here?  I can't rule out the possibility that he is just  completely deranged, but there is rather obvious alternative hypothesis, which is that the begging is a lot more lucrative with bare feet.  If that hypothesis is correct, then the gift of the shoes, and the publicizing of the gift, are not a kindness at all.  Instead, they are a mortal threat to the poor man's source of discretionary income.  Well, maybe people will forget soon enough and he can go back to his regular gig.

The People's Daily Gets Taken In By The Onion

The Weekly Standard (and others) have been having a great time with the story:  The satirical newspaper The Onion runs a ridiculous article naming North Korean dictator Kim Jong Eun the "Sexiest Man Alive."  The story is picked up the the People's Daily, official organ of the Chinese Communist Party, and reported with complete credulity, including no less than 55 pages of photographs.

What conclusion to draw?  Here is the take of the Scrapbook at the Weekly Standard:

[T]he editors of the People’s Daily Online read English and must surely have seen the Onion’s Sexiest Man Alive feature fully in context with other Onion features. And yet they seem to have taken it entirely at face value, and seen it not for the obvious joke that it is but a rare Western compliment to the dictator of a Chinese client state.

I don't think so.  I think it is very difficult for us in the West to comprehend what it is like to live in a world where no one is allowed to speak their mind.  But let's try to imagine.  To work at the People's Daily, you must always present the facade that you believe everything about the Party Line and all words out of your mouth must evidence that belief.  Everyone knows that the Party Line is ridiculous in a thousand respects, but no one must ever give the slightest hint of what they are thinking.  If they give such a hint, they are immediately gone.  Their career totally depends on maintaining the facade.

The line people who selected the article from the Onion to highlight were sharp and knew English well.  I think they knew exactly what they were doing, and were playing a clever prank on their superiors and/or their censors., who are likely to be humorless people with a weak grasp of English.  In a world where the line people must mouth pieties all day and never crack a smile, they would now burst into a fit of giggling as soon as they had a moment outside the eyes of their watchers.

But, you protest, this couldn't be right because they wouldn't take the risk that the major media in the West would catch them and subject the Party to ridicule.  Perhaps, but now imagine the goings on in the People's Daily news room after the Weekly Standard article.  Everyone must pretend not to know about it!  They all must go about their business as if nothing has happened and not say a word or, God forbid, crack a smile.  For the superiors or censors to criticize the line people who created the article would be to admit that they themselves were idiots and subjected the Party to ridicule.  Won't happen.  And the superiors and censors are highly enough placed and have enough clout to maintain their own position; except, of course, if they admit that they subjected the Party to ridicule, in which case they are gone.

They do understand our satire, but can't admit it.  But we do not understand theirs.  I do not necessarily think it's a flaw on our part to not understand what it must be like living under thought control, but we need to make the effort.

The Federal Bar Council Lunch

On the day before Thanksgiving the Federal Bar Council held its annual lunch at the Waldorf Astoria Hotel grand ballroom.  In attendance (along with myself and several colleagues as well as many private practitioners) were the large majority of Federal judges in the area, and most current and former Unites States Attorneys and Assistant U.S. Attorneys.  These are the best and the brightest of the legal community, a who's who of well-known names.

Our table was on the balcony, and as I sat looking out over that large room of a couple of thousand people, I was wondering, has any one of them actually ever spoken out against the drug war?  Many may question the orthodoxy in their own mind, but you'll never find it out by talking to them, because fealty to the drug war is the only way to get a job in the U.S. Attorney's office or on the Federal bench.  So every one of them conforms.  I guess they view it as a small price to pay for the lucrative career advancement.  It's not as bad as working for the People's Daily, but also not so entirely different.

Does Anyone On The Left Realize That The Jig Is Up?

Today Roll Call and TPM report (via PowerLine) that a large coalition of left-of-center groups is planning a meeting on December 10 in Washington to advance a strategy to weaken or eliminate the filibuster in the Senate. The groups in question include various labor unions (Communications Workers of America, United Auto Workers), environmental groups (Sierra Club, Greenpeace), anti-poverty campaigners (NAACP), and so forth. Presumably the concept is that with less ability of the Republicans to obstruct legislation in the Senate, these groups will be better able to move their legislative agendas toward enactment.

Well, what are the legislative agendas of these organizations? It takes minimal searching to figure out that the agendas in question come, in the aggregate, to some combination of (1) use Federal spending to fix the people's problems, (2) use Federal coercion and subsidies to make the environment perfect, and (3) use Federal coercion to enhance the power of labor unions.

As just a few examples, here we have the AFL-CIO blog criticizing the Romney-Ryan proposed budget that would "cut nutrition assistance, early childhood education and job training and end Medicare as we know it." Here is an editorial from the recent issue of the NAACP's magazine urging a vote for Obama because of the issues of "Social Security, health care, college affordability" - presumably seeking to preserve and enhance Federal funding for all of the above. Here we have the Sierra Club's web site "Goals" page, setting forth goals of "Beyond Coal," "Beyond Oil," and "Beyond Natural Gas." So they must be in favor of nuclear? No, they're against that too. Well, that pretty much eliminates all the options that don't require Federal subsidy, but no problem, there's an infinite supply of that. Meanwhile, the latest "climate" talks continue in Doha, Qatar, with the leading proposal to "save the planet" being that the developed countries commit to an annual transfer of $60 billion to the undeveloped countries. How exactly will that save the planet? It doesn't matter. Just keep drawing on the infinite credit card.

What is the thought process? One hypothesis is that they've seen the (fake) Federal deficit numbers of about $1 trillion per year, and they've seen Obama's proposal to raise $1.5 trillion by tax rate increases on the high earners, and they think that represents a solution because they haven't figured out that the $1.5 trillion number is a ten-year number and therefore does not represent a solution to the problem but barely a dent. Is there another hypothesis? Maybe just that Federal capacity to borrow, spend and print money is infinite. Plenty of other sovereigns in the past have fallen into that delusion.

And by the way the real deficit number if you include a reasonable accrual for all the insurance obligations of the government is more like $8 - 10 trillion per year, and you couldn't raise that by seizing all the income of all the high earners and the entire middle class as well.

The jig is up. When are they going to figure it out? (Same question applies to the Republicans, who should be saying this every day.)