Econintersect: Every day our editors collect the most interesting things they find from around the internet and present a summary "reading list" which will include very brief summaries (and sometimes longer ones) of why each item has gotten our attention. Suggestions from readers for "reading list" items are gratefully reviewed, although sometimes space limits the number included.
This feature is published every day late afternoon New York time. For early morning review of headlines see "The Early Bird" published every dayin the early am at GEI News (membership not required for access to "The Early Bird".).
Wall Street’s Bloomberg Radio program, "Bloomberg Law," interviewed two U.S. professors yesterday morning on "the potential return of the Glass-Steagall Act." Bloomberg noted that discussion of the 1933 act was kicked up in the presidential campaign, and "Glass-Steagall has received even more support" after the Wells Fargo affair, "renewing calls to either reinstate the act or break up the banks altogether."
Cornell University Law School’s Robert Hockett answered the question: What do people advocating Glass-Steagall’s return expect to accomplish? Hockett cited three other functions accomplished, in addition to the common understanding that Glass-Steagall protected depository (commercial) banks from the exposure to risk from affiliation with investment banking. The law limits access to cheap funding which some "high-roller Wall Street firms" get. It also would limit the complexity of the banks, enhancing "governability" of the banks by management and regulators; the debacle at Wells Fargo is an example of what happens when banks are too complex, he said. Lastly, the law has a political economic function as well: to render banks less gigantic, and thus less able to write their own regulations, and so remove the fox from the chicken coop.
Asked by Bloomberg about the Federal Reserve’s recent call for restoring part of Glass-Steagall, Wayne State University professor Peter Henning called the Fed’s proposal "Glass-Steagal lite," essentially a proposal to restore the Volcker Rule, and increase its power to curb the size of the banks. Henning raised the absurdity of "banks" like Goldman Sachs owning warehouses of commodities.
Over the next few days we will be mailing out 250,000 copies of a booklet. The booklet will shed some truthful light on what really happened to cause the UBB explosion, and how horribly broken our American judicial system has become. The entire booklet is also available on my website at donblankenship.com.
The final appeal motion for reversal of my misdemeanor conviction was filed September 6. Legal motions are always long and complex, but basically the appeals court is being asked to decide whether it is a federal crime to have a few less miners at a coal mine than Assistant United States Attorney Steve Ruby (Ruby) believes the mine should have. The 4th Circuit Court of Appeals in Richmond, Virginia will hold a public hearing regarding my appeal on October 26.
Essentially I am in federal prison because Ruby believes that the UBB mine should have had a few more miners, and that not having those miners caused safety violations to occur. Violations written by the Mine Safety and Health Administration (MSHA) as “non-willful” civil violations, which Ruby says were “willful” criminal violations because more miners would have prevented many of them. The appeals court will decide whether having less miners (how many less Ruby did not say) than Ruby thinks were needed is a federal crime.
The appeals court is aware that Ruby’s belief that more miners will prevent “non-willful” mine safety violations is belied by the facts. The Harris mine which is the most comparable mine to UBB in the United States had approximately 35 more miners and received greater than 200 violations more than UBB. Additionally, Alpha added miners to the Massey Mines near UBB after it acquired Massey, and violations increased.
Mixed Verdict for Donald Blankenship, Ex-Chief of Massey Energy, After Coal Mine Blast (The New York Times) Donald L. Blankenship, whose leadership of the Massey Energy Company was widely criticized after 29 workers were killed in the Upper Big Branch mine in 2010, was convicted Thursday of conspiring to violate federal safety standards, becoming the most prominent American coal executive ever convicted of a crime related to mining deaths. But in a substantial defeat for the Justice Department, the verdict, announced in Federal District Court here, exonerated Mr. Blankenship, Massey’s former chief executive, of three felony charges that could have led to a prison term of 30 years. Instead, after a long and complex trial that began on Oct. 1, jurors convicted Mr. Blankenship only of a single misdemeanor charge that carried a maximum of a year in prison. See Donald Blankenship Sentenced to a Year in Prison in Mine Safety Case.
Upper Big Branch - Never Again (YouTube) This documentary, released by Don Blankenship, looks at the forensic evidence from the Upper Big Branch Mine disaster that occurred on April 5, 2010 and its implications. Can we make coal mining safer? The purpose behind the Upper Big Branch - Never Again documentary is to review forensic evidence from the Upper Big Branch Mine disaster that occurred on April 5, 2010. The film seeks to start a public discussion about the need for cooperation among the mining industry, government and mining experts to improve mining safety. Analyzing forensic evidence from tragedies like the explosion at Upper Big Branch and adopting innovations and technology developed by coal companies could bring improvements to mine safety. Don Blankenship is concerned that improvements in mine safety will not be made as long as the geological characteristics of mines and mine disasters are not fully investigated.
Manchin: I was duped into mine film (Politico) Sen. Joe Manchin (D, WV) is slamming a documentary about the Upper Big Branch mining disaster for featuring him, saying the filmmakers “lied to my face” about the intent of the video. Manchin said:
“Adroit Films, the propaganda firm behind this shameful documentary, never disclosed to me the intent of this film. They lied to my face and told me this documentary was focused on mine safety, an issue I have been committed to since the Farmington Mine disaster that killed my uncle and 77 miners.”
Berlin pursues discreet talks with U.S. officials on Deutsche Bank (Reuters) The German government is pursuing discreet talks with U.S. authorities to help Deutsche Bank (DBKGn.DE) secure a swift settlement over the sale of toxic mortgage bonds, according to sources in Berlin. Until now, German officials have played down their role in the standoff, saying it is up to Deutsche to work out a deal with the U.S. Department of Justice (DOJ), which is demanding up to $14 billion to settle claims the lender mis-sold mortgage-backed securities before the financial crisis. But government officials in Berlin, speaking on condition of anonymity, told Reuters they hoped to facilitate a quick deal that would buy Deutsche Bank time to regain its footing. One senior government official told Reuters there was "contact at all levels" between German and American officials.
Where Does the Hate Come From? (Spiegel Online) In its report on the state of German unity, which was celebrated on Monday, the government warned that Eastern Germany's xenophobia represents a danger to social harmony. No matter where it takes place, xenophobia can be dangerous for its victims, whether in East or West. But the government in Berlin has identified a greater danger in Eastern Germany -- one that threatens society as a whole. Thehatred of refugees is widespread in Germany (although only among a minority), but it seems particularly prominent in the eastern half of the country. There are several reasons for that, and many of them stem from life under communism -- and unfulfilled expectations afterwards.
Russia suspends nuclear agreement, ends uranium research pact with United States (Reuters) Russia further curtailed its cooperation with the United States in nuclear energy on Wednesday, suspending a research agreement and terminating one on uranium conversion, two days after the Kremlin shelved a plutonium pact with Washington. The Russian government said that as counter-measures to the U.S. sanctions imposed on Russia over Ukraine, it was putting aside a nuclear and energy-related research pact with the United States. It also said it was terminating for the same reasons an agreement between its nuclear corporation Rosatom and the U.S. Department of Energy on feasibility studies into conversion of Russian research reactors to low-enriched uranium.
Russia prepares citizens for NUCLEAR WAR with the West and builds huge underground shelters in Moscow (Mirror) The country’s media and officials have claimed America wants to launch an attack on Russia because of its intervention in Syria. Officials announced on Friday underground shelters had been built which could provide shelter for Moscow’s 12 million people in the event of an attack. A headline in Zvezda, a defence ministry TV channel last week read: “schizophrenics from America are sharpening nuclear weapons for Moscow”. Tensions remain high between Russia and America over the devastating civil war in Syria.
Other Scientific, Health, Political, Economics and Business Items of Note - plus Miscellanea
Do Rising Rates Imply falling Stocks?(J.P.Morgan Guide to the Markets, As of September 30, 2016) In a low rate environment rising rates correlate to rising stocks. For 10-year treasuries above 4% the correlation becomes negative.
Opinion: Trump's 1995 return shows good tax policy at work (Megan McCardle, Bloomberg View, SFGate) See also next article. This is essentially a response to the John Hempton (who has contributed to GEI) post (Some comments on the New York Times story about Donald Trump's tax returns) which we have discussed in recent days. McCardle correctly discusses the very good tax policy that allows large losses in earned income to be averaged over a number of years against other more normal income (which is what Trump did) and for averaging out occasional windfall income years when there are other low income years (which is not what Trump did, at least in the case of his 1995 return). The question raised by Hempton was the possibility that Trump illegally "parked bonds" which he had bought at near total discount, using hidden corporations, to avoid having to recognize cancelled debt as income,which could have happened if the bonds had been presented by owners in bankruptcy court. Hempton is not raising this question as a casual observer: He is the former "resident expert on tax avoidance working for the Australian Treasury". McCardle addresses that question by dismissing it. She said (quoting "tax professionals"): "...the IRS would treat this sort of structure just as it would if a third party had forgiven the debt." That is exactly the point. The assumption that the IRS would have detected this illegal subterfuge is exactly the point in question. Was Trump (or his legal/financial staff) clever enough to have hidden this? This is another reason Trump's tax returns should be made public - to resolve this issue. The IRS may have no ability to revisit tax years this far in the past due to statute of limitations in the law.
Art of the Steal: This Is How Trump Lost $916M and Avoided Tax (The Daily Beast) Written by David Cay Johnson who has contributed to GEI. He says the review made here was done after consulting with two leading tax law professors. Johnson indicates the accounting arrangements used by Trump were a lot more complex than just the illegal "debt parking" questioned by John Hempton (see preceding article). Johnson refers to a previous discussion of badges of fraud on Trump’s 1984 income-tax returns. Donald Trump's tax returns would indeed be a distraction for the presidential campaign. The complexity is such that many years of research would likely be necessary to do thorough analysis.
Labor share of income and corporate margins are negatively correlated.
Profit margins ALWAYS decline before a recession but time lag is quite variable.
Labor share of income ALMOST always rising before a recession (exception - 1958).
Labor share of income ALMOST always rises during at least part of a recession (exceptions - 1970, 2001).
Profit margins were between 4% and 7% 1947-2003.
Profit margins were between 7.5% and 10% 2005-2016, except for 19 months of the Great Recession (late 2007- early 2009).
Labor share of income was greater than 55% most of the time from 1953 - 2003.
Labor share of income was less than 55% most of the time 1947-1952 and 2003-2016.
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