Saturday, April 18, 2009

FASB Rule 159 and Bank Earnings/ Torture and the Imperial Presidency: Why are those Conservative Values?/

I did not want to comment about Citigroup's earnings until I had more time to evaluate the alleged profit claimed by this bank.  I saw some news stories that Citi logged a 1.6 billion dollar gain last quarter. Then there was a claim that reported earnings fell due to some accounting issue relating to the reset of the conversion price for an earlier convertible preferred share offering. You can decide for yourself whether Citigroup had any earnings once you consider the effect of FASB's Rule 159.

This rule allowed Citi to treat as income the fall in price of its debt compared to its par value, which added  2.4 billion to the bottom line. Can you find that in the earnings release? Was that really earnings?  An accountant considers it earnings and it apparently complies with GAAP.

But that does not mean that I have to consider it to be worth a single nickel. This is more pretend earnings, as in pretending that Citi actually bought back all of its debt at a huge discount to par value and retired it, which did not happen of course. Why did the debt fall so much in price?  Because Citi was in such bad shape that bond buyers wanted a lot of yield to compensate them for the risk. And under those circumstances, why would you treat as phantom income the difference between par value and market value of the debt, or creating income out of  being a lousy credit? A couple of articles in the press discuss this issue.

J P Morgan increased its profit by 638 million dollars from this adjustment. 

The S & P 500 has risen 28.5% since the March low. The Dow is still close to 22% below where it was a decade ago. In April 1999, the DJIA was hanging around 10,400. It closed Friday at 8131.33.  It will take another 74% gain for the DJIA to rise to its October 2007 peak. 

I am curious why certain news organizations refer to John Yoo, the author of the memos used as legal cover for unconstitutional and illegal acts by the Bush administration, as a conservative legal scholar. Yoo was basically arguing for an imperial Presidency, unfettered by any law, including the Geneva convention or any law passed by Congress, with the inherent ability to torture and to imprison without any due process, in furtherance of the President's role as Commander in Chief. John Yoo - Wikipedia, the free

Bush and Cheney were predisposed to accept those arguments and acted upon them. The conservative Supreme Court struck down as unconstitutional many of the actions sanctioned by Yoo and implemented by Bush, such as imprisoning a U.S. citizen indefinitely without a trial. 

My definition of conservatism is different from that advocated by Yoo, Bush and Cheney. A True Conservative would view torture as antithetical to all conservative values and would not advocate unrestrained power by a President or any other person acting on behalf of the state.

I am not surprised by the very large number of republicans who support even now such practices since they are not conservative. True Conservatives are a naturally skeptical lot, always suspicious of representations made by governmental officials, and a firm believer on restraints tied to the exercise of governmental power rather than advocating their unfettered exercise. When you cut to the essence of what Yoo advocated and Bush accepted, Yoo was basically an apologist and a shill for dictatorial powers in the hands of one person, and it is impossible for me to view that as consistent with conservatism. The Founding Fathers would hardly view such an expansive role of Presidential power as consistent with their carefully laid framework of checks and balances and restraints on the exercise of power by any one branch of government.  When the Constitution is read as an embodiment of true conservative values, what is most striking is the concern the Founding Fathers had with concentration of power in the state.

So power is dispersed, with checks and balances, and critical restraints were imposed on governmental action in the Bill of Rights.    

Watching a Cheney interview recently,  I was struck again about his disdain and contempt for laws and traditional American values embodied by the founders in the Bill of Rights, which are after all an expression of distrust of governmental power and are restraints on the government's interference with the exercise of individual liberty.

The conservatives in name only accepted anything that Bush and Cheney said about the U.S. never engaging in torture, and the claims made by them that valuable information was gained through the enhanced interrogation techniques sanctioned by the Bush administration. This would be done without question or any effort to secure any inconsistent information.

So the article in today's NYT would not be read or believed if someone mentioned it to them. The NYT ran a story today that Abu Zubaydah gave up everything he knew to FBI interrogators and others who did not torture him.   The administration then authorized torture to be used and no further information was given up by him, although he did beg for his life after being waterboarded and having his head slammed against a wall, along with other "enhanced" interrogations techniques like keeping him awake for 11 days and putting him in a box with insects, all practices the so-called conservatives refuse to label as torture while also maintaining that such practices "kept us safe", notwithstanding mounting evidence to the contrary. Department Memos on Interrogation TechniquesTales From Torture’s Dark World -

Other news organizations have done original reporting on this matter and found that torture did not yield any meaningful information, contrary to the assertions of Bush, Cheney and their apologists, though those who watch Fox are unlikely to hear about it. White House Watch - Nieman Watchdog

Bush and Cheney had also told the public that Abu Zubaydah was one of the top Al Queda leaders which also was not true.  He was basically a travel agent for Al Queda. But what can you say about people who would elevate an alcoholic taxi driver from Iraq named Curveball into a source for intelligence justifying the Iraq war Curveball and Madoff: I can not help but connect them Or accepting the opinion of a guy name Joe rather than our leading experts on the use of centrifuges to enrich uranium or relying on obviously forged documents about yellow cake in Niger. Accurate Information is Not a Side to an Issue/ W & the Housing Crisis/Lying Works In Politics 

 Accepting at face value virtually everything uttered by a member of your Tribe or repeated as the gospel by their sycophants at a "news" network, who are more publicists than journalists, is neither a conservative nor a liberal tenet, but simply something consistent with a willingness to be told what to think and believe, as well as a desire to hear only what you already want to believe is true  in order to confirm pre-existing opinions formed without accessing or evaluating all available information. I would have to say that I am not aware of a single journalist, or a natural blond, working for Fox.  

The torture memos are a matter of public record including the one that defined torture only when it results in death or permanent injury to a organ  NYTimes.comBybee memo - Wikipedia, the free Jay Bybee Would the U.S. prosecute for war crimes anyone who followed those dictates for our soldiers?  The answer is yes and we have done so. But apparently, what we expect of others is not something we expect of ourselves.  Now, are the Bush torture memos expressing a conservative American value or something else?  Many of those who wish to be called conservative are masquerading as such because a more accurate label for them would really sound less soothing to hear.  

At some point in the future, there may be the Jack Bauer kind of situation, where there is a imminent threat of a nuclear weapon detonating in a major city in thirty minutes and Jack is trying to get information about the location from an uncooperative witness with the time ticking before the next commercial. The President can pardon Jack if one of his enhanced interrogation techniques prove necessary in that scenario. I always knew there was a powerful minority in America that would quickly discard and disregard the Geneva convention and what some us still regard as traditional American values. I did not realize until the last few years that their numbers could be measured in the tens of millions.    

Possibly, and this is what I fear more than a terrorist organization based overseas, the greatest danger to our freedoms comes from within. 


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