Sami Zubaida, who was on my dissertation committee at the University of London, penned this respectful obituary for the late Fred Halliday, a brilliant and important independent left intellectual.
Author Archives: sdiamond
The charge against Goldman Sachs that may really matter
As readers know I am somewhat sceptical of the basis of the claims against Goldman Sachs made by the SEC regarding their role as a market maker in a derivatives transaction with IKB and Paulson & Co. Both Paulson and IKB are big boys, more than capable of “fending for themselves” (as the Supreme Court put it in a leading securities law case).
But now a leading class action law firm claims that when Goldman failed to disclose that it had received a so-called Wells Notice from the SEC last summer it was concealing material information from investors and thus misleading them. A Wells Notice is an indication the SEC intends to charge a party with a securities law violation. It is an indication that the party has a last clear chance to settle or explain the situation to try to avoid charges. It seems clear Goldman was unwilling to settle with the Commission (though there is some indication the SEC did not want to settle) so when the SEC filed a complaint against the bank recently it led to a dramatic $10 billion loss in the firm’s market value.
The complaint charges that the firm misled the public into thinking things were just fine and dandy when it knew that was not the case. That would mean that the bank’s stock was trading at artificially high prices. Had the firm shared the news about the Wells Notice then Goldman shareholders could have made up their own minds whether to stick by Goldman. Instead, the law firm claims, Goldman went on a tear trying to convince everyone that everything was just fine and dandy. Goldman CEO Lloyd Blankfein claimed, absurdly, that Goldman was “doing God’s work.”
The problem here is that whether or not the SEC eventually prevails on the underlying charge there is little doubt the market has decided that Goldman’s reputation has taken a huge hit. And when you are a market maker – bringing buyers and sellers of securities together – reputation is everything.
Or, as they say in politics, it’s not the crime that matters, it’s the cover up.
Academic Notes
From time to time readers ask about my academic work. Here are some recent highlights:
I was interviewed recently for an article based in part on my new book, From Che to China, by, of all places, Inside Fashion, an industry magazine published in Hong Kong. An English language version of the article can be found here and a Chinese language version can be found here.
I was interviewed and quoted extensively in Dan Schwartz’s new book on Private Equity and Dan named me to his “Class of 2010 in Private Equity and Venture Capital.” A link to the text can be found here. My comments to Dan were largely based on a paper I completed recently on organized labor and private equity which can be found here. It will appear as a chapter in a book edited by Peer Zumbansen (York) and Cynthia Williams (Illinois) soon.
I will be presenting my work on the financial markets with economist Jennifer Kuan, a research fellow at the Stanford Institute for Economic Policy Research, at a conference on the current economic crisis to be held at the New School next week. You can learn more about the conference here. Jenny, in turn, will be presenting our paper at the Industry Studies Conference at the University of Illinois Chicago soon after that. You can learn more about that conference here. And you can access a draft of our paper here.
Anna Walentynowicz – Polish Solidarity Founder Dead in Russian Plane Crash
In a tragic loss for the movement for democratic rights, Anna Walentynowicz, whose sacking by a Polish shipyard in August 1980 sparked the formation of Polish Solidarity was among the dead in the plane crash in Russia today.
Solidarity was perhaps the most important example of the power of a democratic workers movement in recent memory. Its strike wave and organizing led eventually to the downfall of the Polish Stalinist regime and, in turn, helped lead to the fall of the Berlin Wall in 1989.
Walentynowicz was one of the great heorines of the 20th century who never lost her fierce independent streak. She was never afraid to speak up even to the top leadership of her own movement.
UPDATE: The Times has now run a much deserved obituary for Ms. Walentynowicz here.
Glover Urges Oscar Attendees to Boycott Hugo Boss
Nice to see some push back from actors to support the manufacturing sector.
Glover Urges Oscar Attendees to Boycott Hugo Boss | The Wrap.
What did John Yoo do wrong?
At the very least, John Yoo needs to re-think what it means to be a lawyer.
That is the minimal conclusion one reaches after reading the final report of the Office of Professional Responsibility of the Department of Justice and the final review of that report by the DOJ’s Assistant Deputy Attorney General David Margolis.
Margolis rejected the OPR conclusion that Yoo had engaged in intentional misconduct, but no one who reads both the report and the Margolis review letter can come away with anything other than a queasy feeling in their gut that someone like Yoo was advising the CIA during the early stages of the post-9/11 period.
As Margolis indicates, Yoo came to the position with his own personal view of expansive presidential power. He then used his position as a top legal advisor to the Executive Branch to assert that viewpoint.
As Margolis conceded:
“While I have declined to adopt OPR’s findings of misconduct, I fear John Yoo’s loyalty to his own ideology and convictions clouded his view of his obligations to his client and led him to author opinions that reflected his own extreme, albeit sincerely held, views of executive power while speaking for an institutional client.”
Yoo was asked by the CIA for legal advice about the use of interrogation techniques. Specifically, whether or not these would be considered torture and thus subject CIA officers to legal liability. The CIA was so concerned about this potential liability that it actually asked for “advance pardons” in case of future prosecutions.
In other words, the CIA was looking for a “Get Out of Jail Free” card and they asked John Yoo to provide them one.
Although it should have been perfectly clear to Yoo that his view of presidential power was not sufficiently well accepted to assure the CIA that they would not be held liable at some point in the future he nonetheless advised them that they could engage in tactics like water boarding.
When a lawyer is asked for advice about the law he is really being asked, as Oliver Wendell Holmes suggested, to predict what it is that a judge (or jury) is likely to do if they are asked to assess what happened. A lawyer’s client deserves no less.
CIA officers involved in the “war on terror” have already faced liability for their actions in Italy. It may only be a matter of time before they face prosecution in the United States.
When the CIA called Yoo they needed a lawyer. An ideologue answered the phone and sadly misled them. As a result it is likely that hundreds of people were needlessly and illegally harmed.
One wonders if the UC Berkeley Law Dean, Chris Edley, who has hidden behind John Yoo for several years will have the courage to respond appropriately. While Yoo cannot have his tenure revoked, there is nonetheless a need for other action to be taken here if only to put students at Berkeley on notice about the actual content of Professor Yoo’s behavior and ideology.
UC Berkeley’s conservative turn
Berkeley initiative launched on equity, diversity and inclusion…
Does Berkeley not know the concept of “diversity” in higher education was pioneered by conservative Supreme Court Justice Powell in order to promote his reactionary Jim Crow driven view of a permanently racially balkanized world?
Perhaps one is not surprised that the scions of global sweatshop operator Levi Strauss would be so interested in these ideas and so willing to throw money at them.
What has happened at Berkeley to the vision of Thurgood Marshall and Martin Luther King of a genuinely inclusive, color-blind and post-racial America? Surely the starting point for such a goal is for the state (and its agents like UC Berkeley) to stop using racial and other classifications that divide society?
Recall that it was the experience of Berkeley students in the civil rights movement, and in particular their participation in Freedom Summer in Mississippi, that gave Berkeley its permanent place in the pantheon of progressive politics when those same students led the Free Speech Movement on the Berkeley campus in 1964.
A sad day for my alma mater.
“The entire world is insolvent”
The financial instrument everyone loves to hate – Credit Default Swaps – are now flashing red when it comes to government debt. The worst offenders are the so-called “PIIGS” – Portugal, Italy, Ireland, Greece and Spain. But make no mistake, the big battleships like the US are in trouble, too. Note the uptick in the US CDS (the light blue line at the bottom – Greece is the dark blue line at the top) in the graph below.
Of course, recall that CDS were flashing red in advance of the credit crisis, too, yet were ignored by many.
And one persuasive blogger argues “the entire world is insolvent.”
The Greek Tsunami?
With a tsunami its not the first wave that counts, it’s when the water recedes and then ever so slowly a second wave approaches that the alarm bell should sound. It looks like it’s a small inconsequential shift in the tides, but then the water rushes towards the beach and all is lost.
That’s one reason to keep a close eye on the Greek events. Portugal, Ireland, Italy and Greece are all thought to have unsustainable debt levels leading to the need to impose austerity that in turn is feared will trigger social unrest.
A flight to safety causes the dollar to increase in value and undercuts the US recovery.
We are not out of this financial crisis by a long shot.
Yves Smith at Naked Capitalism points to the role of the investment bank everyone loves to hate in covering up the mess that was building up.
Alito breaks protocol of State of the Union
The President is wrong about the impact of the Citizens United Supreme Court decision – it is hard to imagine that it will unleash special interest groups, as if their role in our political process could get any worse.
But what was Justice Alito thinking when he shook his head and accused the President of misconstruing the Court opinion?
“Not true,” he mouthed visibly in response to the President as the Democrats sitting around him erupted in applause.
A judge, particularly a life tenured federal judge, knows that he sacrifices a certain amount of his right to freedom of speech when he is elevated to the bench. The place for Alito to express his opinion is in his written opinion, not during a state of the union speech by the President.
Ordinarily the Justices sit silently at the State of the Union as a visible symbol of the Court’s autonomy from the rough and tumble of American politics. That autonomy is fragile and yet is also the source of the legitimacy and power of our Supreme Court. Alito forgot that this evening and thus tore a small hole in that veil of legitimacy.
Perhaps it is time to dust off the requirement that a Justice serves for life only if he engages in “good behavior.”