The artist who created Wall Street’s famed “Charging Bull” statue sued Random House and the authors of a recently released book on the collapse of investment bank Lehman Brothers over their use of an image of the bull.
Wait, you mean you can’t do that . . . ?
Dow Jones Excerpt:
On Wednesday, artist Arturo Di Modica filed a lawsuit in U.S. District Court in Manhattan, alleging the book, “A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers,” uses an unauthorized image of the bull on its dust jacket.
The nearly 7,000-pound sculpture was placed unannounced in front of the New York Stock Exchange in 1989 and was soon moved to Bowling Green in lower Manhattan, where it has been on “temporary” display for 17 years. It has become a popular stop for tourists.
Di Modica has previously said he was inspired by the 1987 stock market crash to create a sculpture “that would encourage young people to rebound and help put American business back on track.” He registered a copyright on the bull in 1998 and has previously brought legal action over the unauthorized use of the bull’s image.
His Web site proclaims Di Modica “sculptor of the world famous bronze ‘Charging Bull’” and promises to soon have a “Charging Bull Gift Shop,” a 360-degree view of the sculpture and other features related to the bull.
My Superagent/Lawyer, Lloyd Jassin, emails me: “It’s a teachable moment. Pig parody = transformative fair use, i.e., a socially productive use looked upon favorably by copyright law. Used for a different purpose than original. Bull cover = infringement.” (see this on Fair Use)
Thank goodness for Derivative Works copyright rules! The pig pull is obviously protected as Parody.
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Some nice words about Bailout Nation in today’s WSJ, as the first of several suggested beach readings:
“Heading into August, beaches and books beckon. While it’s nice to curl up with a page-turning, mind-free thriller, this summer of our great recessionary discontent might be a good time to bone up on things finance and investing.
There’s certainly been plenty of news in the past several months, and many books have come out to chronicle all that has gone awry with the economy and the markets.
So, here’s a short reading list that includes current items as well as a few classics:
“Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy” by Barry Ritholtz.
Mr. Ritholtz is a financial commentator who has drawn a large following to his blog, The Big Picture (ritholtz.com). Several people have written books about the current crisis, but Mr. Ritholtz succeeds in laying out all that transpired in easy-to-understand language. If you want to know how we got into this mess and what might still be coming, this is the book for you.”
Source:
… And Dave Has His Book List
DAVE KANSAS
WSJ, July 26, 2009
http://online.wsj.com/article/SB124856712152681467.html
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One of my Pet Peeves: The Payola business models at Moody’s Investors Services, Standard & Poor’s and Fitch Ratings – meaning the debt securities underwriters pay them for ratings — is unchanged in Obama’s Treasury Department reforms. All they want is some more disclosures and a few restrictions.
A certain Congressman is now convinced these measures are inadequate; Here is the FT:
Credit rating agencies would face a raft of new disclosure rules and restrictions but would not be forced to overhaul their business models under proposed US legislation sent to Congress on Tuesday.
The plan by the US Treasury is aimed at reducing conflicts of interest at rating agencies, boosting the regulatory authority of the US Securities and Exchange Commission over the agencies and reducing the financial system’s reliance on credit ratings.
But critics said the plan, an element of the Obama administration’s broader financial regulatory blueprint, fell far short of what was needed. The proponents of an overhaul of ratings agencies charge that they overlooked the risks of investing in complex, “structured” securities linked to risky mortgages, many of which carried triple A stamps of approval.
Barney Frank, head of the chairman of the House financial services committee, on Tuesday endorsed measures that would overturn requirements that require the use of the credit ratings agencies.
“There are a lot of statutory mandates that people have to rely on credit rating agencies. They’re going to all be repealed,” he told Reuters. (emphasis added)
Barney Frank vs Geithner & Summers. Let’s hope BF is tougher than he looks . . .
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Source:
US rating agencies escape overhaul
Joanna Chung and Aline van Duyn
FT, July 22 2009
http://www.ft.com/cms/s/0/ad5625dc-764e-11de-9e59-00144feabdc0.html
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Barry Ritholtz: The Real Price of Life in Bailout Nation
by Cait Murphy | May 29, 2009 |
In his just-published book, Bailout Nation, quant researcher and the popular blogger behind The Big Picture Barry Ritholtz argues that major players in the U.S. economy have become far too accustomed to letting the U.S. government pay for their mistakes. The result is moral hazard run riot — at substantial cost not only to the taxpayer but also to the competitiveness of the American economy.
In Ritholtz’s view, regulators should only help to keep businesses honest and create the correct incentives, not act to prop up asset prices nor cover the bets of companies that got it wrong. (Under the Ritholtz rules, Long Term Capital Management, for one, would have been allowed to sink.) An economy in which businesses do not have to accept the consequences of their actions, up to and including failure, Ritholtz says, is bad for business.
Here Ritholtz discusses why no company or institution should be considered “too big to fail,” who deserves the most blame for our current predicament, and the long-term consequences of all this government intervention.
What is the most common misconception about the crisis?
That this was a perfect storm of unexpected and unavoidable events. Not true. This was the inevitable result of a series of decisions made by CEOs, bankers, and regulators. A lot of the damage that was done, the actors did to themselves. Lehman Brothers and Bear Stearns, for example, wanted maximum mortgage exposure and wanted to leverage up to do it. They weren’t killed by a series of unfortunate events; they committed suicide.
Is there any company or institution that’s too big to fail?
In a moment of panic, it can look that way. But if you calm down and think about it, why couldn’t, say, AIG, have been allowed to fail? What made AIG important as a company was the insurance side, and that part is OK. AIG could have been split between its insurance operations and what was really a parallel, unregulated, financial operation. I don’t see any reason at all to bail out the latter, which has no value and made its own bad bets.
As for Citigroup, I don’t see why it could not have been told to go through a structured, organized bankruptcy process — fire the CEO, wipe out the shareholders, and sell the toxic debt for whatever you can get for it. Then you have a healthy banking situation again. Similarly for Bank of America, if you are dumb enough to buy Countrywide and overpay for Merrill Lynch, why should you be saved? As I see it, [Treasury Secretary] Henry Paulson and [Federal Reserve Chairman] Ben Bernanke were and are trying to save the banks, but it is not the banks that need to be saved — it’s the banking system. There should be no sacred cows. Too big to fail is a myth.
What is the most surprising thing you learned while researching this book?
That Lehman Brothers could have been saved. Warren Buffett went to Dick Fuld and said, “I’m willing to give you couple of billion dollars on these terms.” Fuld turned him down, and so Lehman died. Buffett invested in Goldman Sachs instead.
Which of the many bailouts you discuss in your book was the most misguided?
Oh, gosh, there are so many. Chrysler in 1980 sort of set the stage. Then there’s AIG and the way JP Morgan talked a naive Fed into giving it $29 billion to take Bear Stearns — that was just horrific. But if I had to pick, I’d say Alan Greenspan’s bailout of the stock market after the crash of 2000. I know that this is not what people think of as a typical bailout, but it qualifies. The run-up in stock prices had been a classic spree, and when you go on a binge, you are supposed to suffer the hangover. Greenspan would not let that happen. Instead, the Fed cut rates to historically low levels and then kept them there for years. The only plausible reason for this is that he was bailing out investors. And the result, of course, was to create moral hazard, in the form of reckless speculation. This was the start of all the subsequent trouble.
So how much responsibility do you think Alan Greenspan ultimately bears for our current mess?
Historically, during the recessions of the ’50s and ’60s, the Fed brought interest rates down to very low levels for very brief periods of time — a couple of weeks or months. Greenspan did something unprecedented, lowering them below 2 percent for three years, and down to 1 percent for more than a year. This had enormous repercussions: higher commodity costs, the spiral in home prices, the mad scramble among bond managers for yield.
Second, the Fed was charged with regulating the banking industry, and it didn’t. Mortgage companies were allowed to lend to anybody regardless of ability to repay, and the mortgage shops didn’t care as long as they could sell [the loans] to Wall Street. So as I see it, the Fed caused the problem, and then, as the disease was spreading, it allowed the disease to go untreated.
Who bears more responsibility for the financial crisis, Republicans or Democrats?
The Republicans controlled Congress from 1994 to 2006 and the White House from 2000 to 2008. But it was a Democrat, Bill Clinton, who signed the repeal of the Glass-Steagall Act, which prohibited bank holding companies from owning other financial firms, and the Commodity Futures Modernization Act (CFMA), which removed derivatives and credit default swaps from regulatory oversight. Both parties kept Alan Greenspan at the Fed, and it was Democrats who passed the Troubled Asset Relief Program (TARP); most Republicans were against it. So this was a bipartisan snafu, but not a 50-50 one; I’d say 60-40, with Republicans bearing more of the blame because they had more responsibility. The best way to assess it is that a lot of the Republican free-market philosophy was made worse by the Democratic reaction to it, of saying, let’s throw a few hundred billion dollars at the problem.
You make the case that being bailed out has become an expectation — one that is harmful to the U.S. in the long term. How can this dynamic be changed?
You have to put the fear of God into bondholders and corporate executives, so that when they screw up, they know they will have to pay for it. One good way to start would be to claw back some of the more outrageous executive compensation packages. It would scare the crap out of executives in the future if they see some big names have to cough up gains based on phantom profits. The principle is simple: You cannot expect to book profits that are ephemeral — practically fraudulent — and expect to keep the gains. You don’t get to live in a 47-room mansion in Greenwich when you helped bring about the end of the global financial system.
Notice how differently the partnership-based institutions did, like private equity and venture capital firms. They didn’t get involved in the subprime [lending] insanity, and none of these blew up. Their risk management approach was different because the partners all bore the consequences of their own actions — it was not the problem of shareholders or, ultimately, taxpayers.
What would you do if you were Ben Bernanke right now?
Make sure that lending is performed in a way that borrowers show that they have the ability to repay the loans they are contracting. I’d reinstate Glass-Steagall and overturn the CFMA, and reduce the amount of leverage allowed. Basically, I’d say that depository banks cannot be casinos; I would make that part of banking a boring, low-risk, low-return business.
What has been the effect of all these bailouts on ordinary Americans?
Every time there is a foreclosure, that brings down property values in the neighborhood. At the same time, a lot of people were priced out during the crazy housing boom. In addition, the deficits that we as a nation have incurred by these bailouts are enormous; our grandkids are going to be paying this. And because we’ve used so much money for these bailouts, our options to do other things — build parks, cut taxes, or whatever — is being limited.
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“The total potential federal government support could reach up to $23.7 trillion.”
-Neil Barofsky
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Yesterday, we noted that the 23 Trillion dollar bailout was a “WTF number.”
The statement above really turns on your definition of the word “Support” — this is not the actual costs, but more of a measure of the total guarantees, loans, indemnifications and credit extended in all of the bailouts.
Floyd Norris takes it apart — in detail — and reveals more hyberbole than actual expense, noting that number given in Congressional testimony “was vastly overblown.”
Key factors to getting to 23 trillion:
• It includes estimates of the maximum cost of programs that have already been canceled or that never got under way.
• It assumes that every home mortgage backed by Fannie Mae or Freddie Mac goes into default, and all the homes turn out to be worthless.
• It assumes that every bank in America fails, with not a single asset worth even a penny.
• And it assumes that all of the assets held by money market mutual funds, including Treasury bills, turn out to be worthless.
• It would also require the Treasury itself to default on securities purchased by the Federal Reserve system.
• Every dollar invested by the government in banks would have to become worthless
• The banks would have to default on securities guaranteed by the F.D.I.C.
• All the collateral posted by the banks to get loans from the Fed would also have to become worthless.
Bottom line: In reality, we are unlikely to get anywhere near that number . . .
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Source:
Big Estimate, Worth Little, on Bailout
FLOYD NORRIS
NYT, July 20, 2009
http://www.nytimes.com/2009/07/21/business/economy/21bailout.html
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This is a WTF number:
“U.S. taxpayers may be on the hook for as much as $23.7 trillion to bolster the economy and bail out financial companies, said Neil Barofsky, special inspector general for the Treasury’s Troubled Asset Relief Program.
The Treasury’s $700 billion bank-investment program represents a fraction of all federal support to resuscitate the U.S. financial system, including $6.8 trillion in aid offered by the Federal Reserve, Barofsky said in a report released today.
“TARP has evolved into a program of unprecedented scope, scale and complexity,” Barofsky said in testimony prepared for a hearing tomorrow before the House Committee on Oversight and Government Reform.
Costs include $2.3 trillion in programs offered by the Federal Deposit Insurance Corp., $7.4 trillion in TARP and other aid from the Treasury and $7.2 trillion in federal money for Fannie Mae, Freddie Mac, credit unions, Veterans Affairs and other federal programs, he said.
Wow. Hard to believe . . .
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Source:
U.S. Rescue May Reach $23.7 Trillion, Barofsky Says
Dawn Kopecki and Catherine Dodge
Bloomberg, July 20 2009
http://www.bloomberg.com/apps/news?pid=20601087&sid=aY0tX8UysIaM
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HOW FAST WILL WALL STREET BE RETURNING TO PRE-1982?
World Affairs Monthly
http://worldaffairsmonthly.com/printfriendlybyid.php?id=1259
If you are willing to scour through the facts and events of the past several years, if you are more inclined to honesty than dishonesty, then you might pick up a copy of Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy (John Wiley & Sons, New Jersey). The author is Barry Ritholtz (with Aaron Task), and we will have to admit that they have made a serious effort at cataloguing, meticulously cataloguing, what has been happening on Wall Street. They try to be pretty honest and blunt, and by and large they are. I know that Nouriel Roubini is a crank, so I admit I was put off by his prominent endorsement of the book. But Bill Fleckenstein writes the Foreword, so I was impressed. Fleckenstein is a good guy, and a very serious and honest professional. Ritholtz’s book is a realistic appraisal of the true state of affairs: we are indeed getting bailed out, but the elite Wall Street cabal is getting 99% of this bailout.
Wall Street fraud has gone mainstream – just as it went mainstream in the 1920s. Nothing much changes, except the actors. This time around, the media was and is a major player in the scam. What is amazing is that scammers, in the media, in the Federal Reserve, on Wall Street, dominate the events and the crimes. There are days when I just cannot control my laughter. Things have gotten very much out of control in the United States. “Capitalism” is getting exploited for all its worth. Ritholtz tells the story. Ritholtz is a hard worker, he is diligent, and I commend his efforts to tell the truth.
I recently called up (for the second time) Ritholtz to see if he would discuss his book and Wall Street. In 2006 or so Ritholtz understood that something serious was coming – he then turned bearish. His instincts are sound and impressive. He likes to tell the truth, and he is a likeable guy, and moreover he is the author of a popular financial blog called The Big Picture.
Most people are naïve and stupid, so this makes the scamming pretty easy. The Ritholtz book is, as I have said, a pretty good catalogue of the scamming operations. Thank goodness for the internet. Without the internet, the scammers would be enjoying impunity.
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From a friend on the Hill:
Good news today. Some of you have noted that it is somewhat outrageous for the Treasury to privately price and sell warrants back to the banks that got TARP money instead of doing an open auction that will fetch the best price for the taxpayer. The Congressional Oversight Panel claims that the currently used secret process returns only 66 cents on the dollar to the taxpayer.
Mary Jo Kilroy, a freshman Democrat from Ohio, introduced a bill (HR 3232) to compel an open auction of these warrants with six cosponsors: Brad Sherman, John Boccieri, Betty Sutton, Jackie Speier, Marcia Fudge and Alan Grayson.
All of these members except Brad Sherman are in their first or second term in Congress, and all are Democrats. Sherman was the leader of the little noted but important ‘skeptics caucus’ that attempted to stop the $700B bailout in September.
There is also a hearing on the TARP warrant repayments on Wednesday. Many of you don’t have faith in Congress, but there are lots of crosscurrents and sometimes people here do show leadership.
Information on the bill is below.
Source:
PROFIT Act to Make Taxpayers, Transparency Priority in Bank Bailout Payback
July 16, 2009 4:21 PM
http://kilroy.house.gov/2009/07/profit-act-to-make-taxpayers-transparency-priority-in-bank-bailout-payback.shtml
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