01 September 2014

Arbitration is a Corrupt Fraud

This little story of the corruption that is a feature, not a bug, of the arbitration process has made it to the New York Times:
Five years ago, Sean Martin, a registered representative at Deutsche Bank Securities in New York, saw something troubling on his trading desk.

A few of his colleagues, he said, were letting preferred hedge fund clients listen in on confidential market commentary by the firm’s analysts before their views were made public. He alerted his superiors and was almost immediately given a negative review, a first in more than 10 years at the firm, he said. His bosses also removed him from the group he’d been working with and cut his compensation.

Mr. Martin, who continues to work at Deutsche Bank, said he believed that he was being punished for reporting misconduct and took the one avenue of redress that was open to him. In August 2012, he brought an arbitration case against the firm, contending retaliation and asking to recover his lost earnings. As is typical in the financial industry, his employment contract required that any dispute between him and his employer go through private arbitration, not the courts. Mr. Martin’s matter is being heard by three arbitrators associated with the Financial Industry Regulatory Authority, a self-regulatory organization that operates the largest dispute resolution forum in the securities industry.

But Mr. Martin’s experience with arbitration, both he and his lawyer say, has raised questions of fairness in the process. The three-member panel hearing his case has barred him from testifying about certain crucial aspects of what he saw at Deutsche Bank and disallowed the introduction of documents that bolster his claims. This led his lawyer to conclude that the panel was not interested in specifics of the behavior at the heart of his accusations — and to ask a state court to step in.

“When I filed this arbitration, I expected that Finra would resolve the dispute between Deutsche Bank and me in a fair way,” Mr. Martin, 41, said in a statement provided by his lawyer. “I was surprised and disappointed when the arbitrators refused to listen to important parts of what I wanted to say and rejected or redacted my exhibits. I can’t see how a dispute can be fairly resolved if one party is not even allowed to tell their side.”

………

“How can a panel of arbitrators for the regulator justify not hearing evidence of wrongdoing?” asked Robert Kraus, a partner at Kraus & Zuchlewski in New York, who represents Mr. Martin. “It is completely upside-down.”

………
But Mr. Kraus, worried that his client would not get a fair hearing, last week filed a motion in New York State Supreme Court asking to stay the arbitration hearings. Arguments are on the docket for Wednesday in Manhattan. If the judge grants Mr. Kraus’s request, the court will hear arguments on whether the arbitrators should be removed.

………

Mr. Kraus said he did not take the decision lightly to file his request with the court. He said he’s had success in other Finra arbitrations over the years but that this case was different.

“Unlike other hearings where you question a ruling here and there, these arbitrators repeatedly excluded evidence that lies at the heart of our case,” Mr. Kraus said. “From time to time, you get these panels that go off the rails, and then the question is how do you remedy that?”
This is not surprising.

The private arbitration system is inherently corrupt.

The continued employment of arbitrators is dependent upon satisfaction the firms, and not the employees of customers, so their rulings invariably favor the big corps, at the expense of due process for the little guys.

31 August 2014

This is Rich

King Abdullah, the ruler of Saudi Arabia, is warning that ISIS/ISIL/IS will go after the west nest, so they should engage in aggressive military action:
King Abdullah of Saudi Arabia has warned that the West will be the next target of the jihadists sweeping through Syria and Iraq, unless there is "rapid" action.

"If we ignore them, I am sure they will reach Europe in a month and America in another month," he said in remarks quoted on Saturday by Asharq al-Awsat daily and Saudi-backed Al-Arabiya television station.

"Terrorism knows no border and its danger could affect several countries outside the Middle East," said the king who was speaking at a welcoming ceremony on Friday for new ambassadors, including a new envoy from Saudi ally the United States.
While I am sure that some of the members of ISIS might eventually turn their attentions to the west, but they will be turning their eyes to toward Mecca, Medina, and Riyadh.

They are looking at establishing a Caliphate, and driving out apostasy and corruption as their first order of business, and the House of Saud is a good place to start.

Considering the fact that, until recently, the House of Saud was ISIS's most important patron, I'm thinking that taking the Saudi's advice is not in our best interest.

Bummer

The Rams just cut Michael Sam. He performed well in the preseason, but the Rams simply had too many defensive linemen:
The St. Louis Rams have released defensive end Michael Sam, the first openly gay player selected in the NFL draft.

Sam, a seventh-round draft choice, had been battling undrafted rookie Ethan Westbrooks for a final roster spot. Westbrooks was one of nine defensive linemen to make the team.

Sam thanked the Rams for the opportunity in a series of tweets after the team made the announcement.
I still expect him to play for some team this season.

30 August 2014

The More We Know About Pot, the Better it Looks

Note that I do not know the extent of the statistics, but the fact that states with legal marijuana have a 25% lower opioid overdose rate bears further investigation:
States that allow legal use of medical marijuana have lower rates of fatal overdoses from prescription medications.

A new study published in JAMA Internal Medicine found the 13 states where medical marijuana is legal had 24.8 percent fewer annual opioid overdose mortality rates.

The results indicate alternative treatments may be safer for patients suffering from chronic pain, researchers said.

About 60 percent of all deaths from opioid overdoses happen in patients who have legitimate prescriptions, and the number of patients who are prescribed opioids for non-cancer pain has nearly doubled over the last decade.

Deaths were nearly 20 percent lower in the first year after a state legalized medical marijuana and 33.7 percent lower five years later.
Clearly, the answer to this is to tighten restrictions on opioids, and we need to ditch all those medical marijuana programs.

Our drug policies are wasteful, destructive, and stupid.

Deep Thought

29 August 2014

The Stupid, It Burns Us!!!!!

Rather unsurprising, the source of the stupid is the ultimate neocon legacy hire, William Kristol:
Bill Kristol wants to bomb first and figure it out later. News at ten.

During a Monday interview with Laura Ingraham on the ongoing situation in Iraq, the Weekly Standard founder discussed his desire to forgo national debates and simply bomb ISIS forces immediately.

………

After mimicking his fellow talking heads who suggest that perhaps it’s best to have a national debate before using military force, Kristol then said: “What’s the harm of bombing [ISIS] at least for a few weeks and seeing what happens? I don’t think there’s much in the way of unanticipated side effects that could be bad there. We could kill a lot of very bad guys.”
Why is this guy not flipping burgers for a living?

Jared Bernstein Calls for Dropping Reserve Currency Status for the Dollar in the New York Times

His argument is rather similar to the one that I have, that the dollar's status as a reserve currency artificially inflates the value of the currency, along with contributing to the excessive financialization of our economy, but the fact that a former Obama staffer is doing it in the Times is significant:
There are few truisms about the world economy, but for decades, one has been the role of the United States dollar as the world’s reserve currency. It’s a core principle of American economic policy. After all, who wouldn’t want their currency to be the one that foreign banks and governments want to hold in reserve?

But new research reveals that what was once a privilege is now a burden, undermining job growth, pumping up budget and trade deficits and inflating financial bubbles. To get the American economy on track, the government needs to drop its commitment to maintaining the dollar’s reserve-currency status.

………

In 2013, America’s trade deficit was about $475 billion. Its deficit with China alone was $318 billion.

Though Mr. Austin doesn’t say it explicitly, his work shows that, far from being a victim of managed trade, the United States is a willing participant through its efforts to keep the dollar as the world’s most prominent reserve currency.

………

Note that as long as the dollar is the reserve currency, America’s trade deficit can worsen even when we’re not directly in on the trade. Suppose South Korea runs a surplus with Brazil. By storing its surplus export revenues in Treasury bonds, South Korea nudges up the relative value of the dollar against our competitors’ currencies, and our trade deficit increases, even though the original transaction had nothing to do with the United States.

………

But while more balanced trade might raise prices, there’s no reason it should persistently increase the inflation rate. We might settle into a norm of 2 to 3 percent inflation, versus the current 1 to 2 percent. But that’s a price worth paying for more and higher-quality jobs, more stable recoveries and a revitalized manufacturing sector. The privilege of having the world’s reserve currency is one America can no longer afford.
It's really nothing new, but the fact that it's Mr. Bernstein and the New York Times does appear to indicate that this idea is gaining currency.

About f%$#ing time.

Europe is About to Go Pear Shaped

Both the Europeans and the Ukrainians are going to have a long ans cold winter.

While it is clear that the hostilities between the Ukraine and Russia would put a crimp in gas supplies, it turns out that the current billing dispute is almost certainly going to be a bigger problem.

You see, the Ukrainian Government has taken the dispute to arbitration, and any deal that they might cut with the Russians could be used against Gazprom in that proceedings:
But let’s not get into that again today. In the slipstream of the talks this weekend in Minsk between Putin and Poroshenko, a precious little detail seems to have escaped the western press entirely. But I think all our fine journalists will soon have to address it.
You may remember that in an earlier phase of the dispute between Ukraine and Russia (not to be confused with the Kiev vs rebels fight), no agreement was reached on the payment of a $4.5 billion gas bill that Russian Gazprom said was overdue from Ukraine’s Naftogaz. And Gazprom demanded pre-payment for any future gas deliveries to Ukraine.

Kiev, instead of paying the bill, claimed Russia had overcharged it for the already delivered gas, by $6 billion, going back to 2010. And brought its argument before the Arbitration Institute of the Stockholm Chamber of Commerce.

Now maybe, just maybe, someone in the Kiev camp should have paused right before that moment, and consulted with their western backers in Brussels and Washington. Perhaps not so much Washington, but Brussels for sure, and Berlin. And Athens. Rome. Prague. Warsaw.
ou see, a pending case before the Arbitration Institute of the Stockholm Chamber of Commerce can apparently take 12-15 months to resolve. And perhaps Europe doesn’t have that much time. Which is what Putin hinted at at a press-op he did after the weekend Minsk talks. What it comes down is that even if Russia wanted to accommodate Ukraine, it can’t. On strictly legal terms, nothing political.

What’s more, Gazprom had already paid Naftogaz in advance for the use of Ukraine pipelines, but the payment was returned. And that can have grave consequences not just for Kiev, but for almost all of Europe. Lots of countries get their gas through these pipelines.

It looks like the EU, and especially Germany, has started to smell – potential – trouble:
EU Suggests Russia, Ukraine Sign Interim Gas Agreement
The E.U. has suggested an interim agreement on the gas supplies between Russia and Ukraine without waiting for a Stockholm arbitrary court decision, E.U. Energy Commissioner Gunther Oettinger said in a news conference following his meeting with Ukrainian President Petro Poroshenko late Tuesday Two cases are before the Stockholm court, but the hearings will take 12-15 months, which is too long, while Europe needs an interim solution for this winter, Oettinger said In June, Russian gas giant Gazprom switched Ukraine off gas over the unpaid debt and filed a $4.5 billion suit to the Stockholm arbitration court. Later, Kiev reciprocated by sending a suit to the court against Gazprom for making Ukraine overpay $6 billion for gas since 2010, setting too high prices in its contract.
The Russian Legal Information Agency has this:
Putin: Naftogaz Suit Against Gazprom Axes Discount For Ukraine
The fact that Ukraine’s Naftogaz has invoked arbitration proceedings against Gazprom prevents Russia from giving Ukraine a gas price discount, President Vladimir Putin said in Minsk where he met with Ukrainian President Petro Poroshenko. “We cannot even consider any preference solutions for Ukraine since it pursues arbitration,” Putin said. “Russia’s possible actions in this sphere could be used against it in the court. We couldn’t do it even if we wanted to.” After Gazprom switched to a prepayment system for gas deliveries to Ukraine on June 16, Naftogaz turned to the Arbitration Institute of the Stockholm Chamber of Commerce. Naftogaz wants Gazprom to cut the price for gas and to get back $6 billion that Ukraine has allegedly overpaid since 2010.
Gazprom in turn is seeking to recover Ukraine’s $4.5 billion debt for gas deliveries. Putin said Russia offered a compromise solution during the talks held before Gazprom switched to the prepayment scheme. “We reduced the price by $100,” Russian President said. Gas talks between Russia, Ukraine and the European Union went on from April to mid-June. Kiev said it would not repay its $4.5 billion debt unless Russia agreed to supply gas at a lower price. Russia offered a discount, but Ukraine turned down the offer. Russia then said it would only resume gas supply talks after Ukraine paid off its debt.
More signs of German nerves are here in a piece from the European Council on Foreign Relations – I kid you not, they exist -, along with a nice but curious admission:

Has Germany Sidelined Poland In Ukraine Crisis Negotiations?
As Germany takes over leadership of the European Union’s efforts to solve the Ukrainian crisis, Poland is questioning the motivations and strategies behind Berlin’s new diplomatic activism. The initiatives of German Foreign Minister Frank-Walter Steinmeier and Chancellor Angela Merkel are being followed closely in Warsaw – and often with mixed feelings. Is Berlin trying to mastermind a compromise with Russia on Moscow’s terms, ignoring Kyiv’s vital interests? And as Poland is increasingly edged out of the conflict resolution process, has Berlin-Warsaw co-operation on EU Ostpolitik broken down?
As an aside, if I were trying to make sure that there wasn't someone actively trying not to be a turd in the punchbowl in negotiations with Russia, I would sideline Poland as well.

The (historically justified) political culture of Poland, and many other former Warsaw Pact nations is such that they are more driven a desire for payback than a realistic evaluation of their long-term interests.
Poland was, along with France and Germany, one of the countries that orchestrated the political shift in Ukraine in February. Since then, Warsaw has played a central role in forging a bolder EU response to Russia’s aggression and in providing meaningful assistance to the Ukrainian government. However, as the conflict has worsened, Warsaw has become less visible as an actor in crisis diplomacy. Polish Foreign Minister Radek Sikorski was not invited to join his German, French, Russian, and Ukrainian counterparts in the negotiations on conflict resolution held in Berlin in early July and early August. Before Ukrainian President Petro Poroshenko and Russian President Vladimir Putin agreed to meet at the Customs Union summit in Minsk on 26 August, the idea had been floated of holding another high-level meeting in the “Normandy format” of France, Germany, Russia, and Ukraine.
Kiev is either so high on the EU, US and NATO support it was promised, or so desperate over its latest battlefield losses, that it goes for all on red, probably thinking, and probably rightly so, that the western press will swallow anything whole. Tyler Durden:
Ukraine Accuses Russia Of Imminent Gas Cut-Off, Russia Denies, Germans Anxious
So much for the Russia-Ukraine talks bringing the two sides together as even Germany’s Steinmeier could only say it’s “hard to say if breakthrough made.” Shortly after talks ended, Ukrainian Premier Yatsenyuk stated unequivocally that “we know about the plans of Russia to cut off transit even in European Union member countries,” followed by some notably heavy-on-the-war-rhetoric comments. The Russians were quick to respond, as the energy ministry was “surprised” by his statements on Ukraine gas transits and blasted that comments were an “attempt at EU disinformation.”
Here’s what Putin said at the press op after the talks:

Answers To Journalists’ Questions Following Working Visit To Belarus
Currently, we are in a deadlock on the gas issue. You see, this is very serious matter for us, for Ukraine and for our European partners. It is no big secret that Gazprom has advanced payment for the transit of our gas to Europe. Ukraine’s Naftogaz has returned that advance payment. The transit of our gas to European consumers was just about suspended. What will happen next? This is a question that awaits a painstaking investigation by our European and Ukrainian partners.
We are fulfilling all the terms of the contract in full. Right now, we cannot even accept any suggestions regarding preferential terms, given that Ukraine has appealed to the Arbitration Court. Any of our actions to provide preferential terms can be used in the court. We were deprived of this opportunity, even if we had wanted it, although we already tried to meet them halfway and reduced the price by $100.
The ball is squarely in the western court. Of course many will think and hope that Russia will give in because it needs the revenue, but the problem with that is it could cost the country too much (admittedly, that’s not the only problem). $6 billion to Ukraine for starters, then potentially many more billions on future deliveries to Kiev, and then there’s the rest of its contracts with two dozen or so European nations.

From a legal point of view, this may not be about what Moscow wants to do anymore, but about what it can. The Arbitration Court case may have tied its hands. And unless Europe wants a cold winter, it must seek a solution. Putin, who holds degrees in both judo AND law, understands this. But he didn’t set this up. Western and Kiev hubris did. Certain people got first too pleased with, and then ahead of, themselves.
BTW, I also learned another reason that the Russians do not like the EU deal, it has the effect of severely curtailing Russian exports to the Ukraine:
Putin pointed to another rather difficult but highly interesting legal ‘technicality’ as well, which involves Ukraine moving closer to the EU economically:

We once again pointed out to our partners – both European and Ukrainian partners – that implementation of the association agreement between Ukraine and the EU carries significant risks for the Russian economy. We have shown this in the text of the agreement, directly pointing to specific articles in that agreement. Let me remind you that this concerns nullifying Ukraine’s customs tariffs, technical regulations, and phytosanitary standards.

The standards in Russia and Europe currently do not correspond. But, as you recall, the most classic example is the introduction of EU technical regulations in Ukraine. In that case, we would not be able to supply our goods to Ukraine at all. We have different technical standards. And according to the European Union’s standards, we will not be able to supply our machine-building products there, or any industrial goods. If that happens, we cannot accept Ukrainian agricultural production goods in our territory, because we have different approaches to phytosanitary standards. We feel that many problems would occur.

If we do not achieve any agreements and our concerns are not taken into account, then we will be forced to take measures to protect our economy. And we explained what those measures would be. So our partners must weigh everything and make corresponding decisions.
So, even the EU actions, which were far less bellicose than those of the US State Department, begin to look more and more like a deliberately hostile act, even without considering the traditional Russian paranoia and xenophobia.

I think that Putin considers this a nearly existential threat to Russia, and he is responding accordingly.

H/t naked capitalism.

BTW, just to throw some more fuel on the fire, the Ukrainian PM just announced he will pursue NATO membership:
On Aug. 29, the Ukrainian prime minister said he will pursue NATO membership for his nation by asking parliament to overturn a law banning foreign alliances.

Separately, the NATO secretary general said Russia is undertaking direct military operations designed to destabilize the Ukraine—and that NATO will “fully respect” any change in the Ukraine’s non-aligned status. He made the comments today after an extraordinary meeting of the NATO-Ukraine Commission held at the Ukraine’s request.

………

“The Ukrainian government is submitting a bill to parliament on the abolition of the non-aligned status of the Ukrainian state and on the resumption of Ukraine’s course towards NATO membership,” Prime Minister Arseny Yatsenyuk said in an announcement.

Ukrainian law forbids the nation from forming alliances that would economically or politically entangle the country with the Russian Federation. Overturning this law would remove any legal barriers from Ukraine joining NATO, a goal which the alliance has said it supports.
This is stupidly and provocative.

We are going to see a war in Europe in the next few years, the only question is whether it will be cold, or hot.

Linkage Vid


The Who, Won't Get Fooled Again, live, 1978: