Blog Archive

Monday, November 24, 2014

Jamais Vu: The New Ford Facade, Now With The New Problematic Transmission

"People love their cars. Each one is a special individual with a heart and soul under the hood. We spend so much time, experience so much, and go so many places with our automobiles that they rival the family house pet for time and attention. The character, personality, and even the name, brand, and color are crucial if one has to choose. Used cars begin like work horses and evolve into something more. Either we keep them because they are reliable or because we want our moneys worth in repairs.

Today, the industry is under tremendous pressure to drastically change the automobiles we are all familiar with and trade them in for electric or alternative fuel-powered vehicles without the Internal Combustion Gasoline Engine and tons of rubber and steel. Can we make the transition in America from beefy SUV's and pick-ups? Or sleek roadsters to fuel-efficient basic transportation? Will the new cars stand up against the bumpers of larger vehicles in a crash? Many are simply waiting to see what happens to them first.


The days of Grandpa's Station Wagon are through, that much is certain.  Still, in Grandpa's Day there were some elegant solutions. For Urban Dwellers the electric streetcar ferried many across town. In Science Fiction, cars were supposed to have been flying or gliding along clean plastic highways in the 21st century. No one believed in the year 2014 we would still be burning fossil fuels using the same basic designs. Surely, Artificial Intelligence has more applications than Anti-Lock brakes.

Entire cities are organized solely upon the automobile and trucking. Even rural life depends exclusively upon the transportation and distribution of goods and services on the road. As post World War infrastructure decays and is abandoned it seems an opportune time to introduce high speed rail systems and reorganized urban communities and enclaves designed for more pedestrians, bicyclists, and lighter traffic. Yet, Rush Hour continues to be grid-locked SUV's, idling with air conditioners on attempting to filter out the exhaust, inching along on the highway to home. In some cities like Washington DC the commute becomes excruciating hour upon hour trapped in vehicles listening to angry white men on the radio every working day and night. Was this what the forefathers envisioned? No.

Transition into the future is not automatic but it must occur. It is known in private, denied in public, and resisted everywhere: Change. So, if you can read this know that feeling of jamais vu, the familiar seems unfamiliar, the very opposite of deja vu you experience, is the past slipping slowly into the future. Maybe the steering wheel feels different today or you attempt to enter the wrong car tomorrow. Perhaps the way is strange and darker than you remember: THAT wasn't there yesterday. And what ever happened THERE? Look briefly into the rear view mirror and keep your eyes on the road ahead. Whatever you do, keep driving. "

Sunday, November 23, 2014

Lake Tomahawk, Wisconsin and Elaine McCarthy

My review - Edit review
An excellent first hand history of Lake Tomahawk, WI, celebrating 100 years in 2014, preserving the voices of Town elders in 1994 and 1995 onward; many of whom have passed on as Elaine did recently. I had the privilege of working with Ms. McCarthy personally a few years ago digitizing the many cassette tapes she had used to produce the exhaustive transcripts in the Book. We wanted to insure their preservation and use as Audio book material, possibly, for those who cannot see well. The Interviews from my Home Town include my deceased father and my 95 year old Aunt whom tragically had lost the ability to see well. As I promised Elaine, I retained the digitized Copies on my Computer for future use, whether for Publication and or for Archival preservation on a more accessible Media. Thank you so much Ms. Elaine McCarthy for your efforts and the love you showed genuinely and generously. This Book will always be a real authentic treasure in my Library!

Bibliographic information

Thursday, November 20, 2014

Swift Gamma-Ray Burst Mission Marks Ten Years of Discovery | NASA

Swift Gamma-Ray Burst Mission Marks Ten Years of Discovery | NASA

DelanceyPlace.com - Last Call: The Rise and Fall of Prohibition by Daniel Okrent

In today's encore selection -- from Last Call: The Rise and Fall of Prohibition by Daniel Okrent. Adolphus Busch, the brewer who was one of the grand personalities of 19th century America, had a cannon fired every time he returned from a trip. His leadership within the brewery industry put him at the forefront of many campaigns in the decades-long battle against prohibition laws:

"The most forceful advocate of the brewers' anti-Prohibition campaign was the most accomplished man in the industry, Adolphus Busch. The youngest of twenty-one children of a prosperous Rhineland merchant, Busch immigrated to the United States in 1857, went into the brewery supply business, and in 1861, at twenty-two, married Lilly Anheuser, the daughter of one of his customers. (The familial bond did not lack for fur­ther adhesive, as Adolphus's brother Ulrich married Lilly's sister Anna.) Adolphus soon took over the management of his father-in-law's company and in time appended his surname to it.

"Busch was a genuine visionary. Where others saw brewing as a fairly straight- forward enterprise, he saw it as the core of a vertically integrated series of businesses. He built glass factories and ice plants. He acquired railway companies to ferry coal from mines he owned in Illinois to the vast Anheuser-Busch factory complex sprawled across seventy acres of St. Louis riverfront. (A local joke: St. Louis was 'a large city on the [banks of the] Mississippi, located near the Anheuser-Busch plant.') Busch got into the business of manufacturing refrigerated rail cars and truck bod­ies that could be used not just by breweries but also by such substantial customers as the Armour meatpacking company. He paid one million dol­lars for exclusive U.S. rights to a novel engine technology developed by his countryman Rudolf Diesel, and for $30,000 purchased the painting of Custer's Last Stand that, with the Anheuser-Busch logotype prominently appended, would soon grace the walls of thousands upon thousands of saloons. In 1875 Busch produced thirty-five thousand barrels of beer; by 1901, his annual output -- primarily of a light lager named for the Bohe­mian town of Budweis -- surpassed a million barrels. ...

"Adolphus had a potent personal aura. He spoke five languages, built palaces for himself and his wife in St. Louis, Pasadena, Cooperstown, and Wiesbaden, and traveled in a style appropriate for the monarch he was. Whenever Adolphus and Lilly returned from a trip to their home at Num­ber One Busch Place (situated right on company property in St. Louis), brewery employees fired a cannon. Coupled with his company's preemi­nence in the industry, his grand manner enabled him to dominate indus­try councils. This became especially clear in 1903, when he helped craft an agreement, eventually signed by nine breweries, to fund a committee 'promoting anti-prohibition matters in Texas,' one of Anheuser-Busch's largest markets.



"When some brewers expressed an unwillingness to con­tinue underwriting the committee's activities, Busch argued, 'It may cost us millions and even more,' he wrote, 'but what of it if thereby we elevate our position?' He concluded his appeal by offering another $100,000 of Anheuser-Busch support for the Texas campaign, money that would help fund such 'anti-prohibition matters' as paying the poll taxes of blacks and Mexican-Americans who were expected to vote for legal beer, purchasing the editorial support of newspapers (according to an internal report, 'We have sent checks in advance, and the average country editor, struggling to make a living, hates to return checks'), and engaging in some rather more mysterious activities. In 1910, after the brewers' political agent in east-central Texas was able to undo a dry victory in Robertson County, he explained that he had engineered the reversal through means that 'are best not written about.'

"Busch's motives went beyond the merely pecuniary: 'Besides losing our business by state-wide prohibition,' he wrote during the Texas battle, 'we would lose our honor and standing of ourselves and our families, and rather than lose that, we should risk the majority of our fortunes.' It was the sort of call to arms that inspired both employees and competitors, and that led to something of a national festival in 1911, when Adolphus and Lilly's golden anniversary was marked by celebrations in thirty-five cities. A similar nationwide outpouring of respect and love from the brewing industry occurred two years later, when Adolphus Busch died, at the age of seventy-four, from cirrhosis of the liver."


Last Call: The Rise and Fall of Prohibition
Author: Daniel Okrent
Publisher: Scribner a division of Simon Schuster
Copyright 2010 by Last Laugh, Inc

Pages 31-33

If you wish to read further: Buy Now


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About Us

Delanceyplace is a brief daily email with an excerpt or quote we view as interesting or noteworthy, offered with commentary to provide context. There is no theme, except that most excerpts will come from a non-fiction work, mainly works of history, are occasionally controversial, and we hope will have a more universal relevance than simply the subject of the book from which they came.

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Wednesday, November 19, 2014

DelanceyPlace.com - Drunk Tank Pink: And Other Unexpected Forces That Shape How We Think, Feel, and Behave; by Adam Alter

Today's selection -- from Drunk Tank Pink by Adam Alter. Gloomy days help us think more deeply and clearly:

The same mental haze that sets in after weeks on a summer vacation muddles the mind from one sunny day to the next. This might seem outrageous claim -- that sunnier days bring on a mental stupor -- but it's a claim that's backed with real-world evidence. In one study, social psychologists sprang a surprise memory test on shoppers who were leaving a small magazine shop in Sydney, Australia. Before the shoppers entered the store, the researchers placed ten small ornamental objects on the store counter -- four plastic animals, a toy cannon, a piggy bank, and Matchbox cars.

"After leaving the store, the shoppers were asked to remember as many of the ten items as possible, and to also pick the ten items from a list of twenty that included the ten correct items and ten new items. The researchers conducted the experiment on fourteen different days across a two-month period, between 11:00 a.m. and 4:00 p.m.; some of those days were clear and sunny, whereas others were cloudy and rainy. The shoppers recalled three times as many items on the rainy days as on the sunny days, and they were approximately four times as accurate when identifying the ten objects from the longer list of twenty items.


The researchers explained that gloomy weather hampers our mood, in turn makes us think more deeply and clearly. Humans are biologically predisposed to avoid sadness, and they respond to sad moods by seeking opportunities for mood repair and vigilantly protecting themselves against whatever might be making them sad. In contrast, happiness sends a signal that everything is fine, the environment doesn't pose an imminent threat, and there's no need to think deeply and carefully.

"These contrasting mental approaches explain why the shoppers remembered the ten trinkets more accurately on rainy days; the rainy days induced a generally negative mood state, which the shoppers subconsciously tried to overcome by grazing the environment for information that might have replaced their dampened sad moods with happier alternatives. If you think about it, this approach makes sense. Mood states are all-purpose measurement devices that tell us whether something in the environment needs to be fixed. When we're facing major emotional hurdles -- extreme grief, an injury that brings severe pain, blinding anger -- our emotional warning light glows red and compels us to act. For most of the time we sail smoothly through calm waters, allowing much of the world -- including small trinkets on a store countertop -- to pass by unnoticed."



Drunk Tank Pink: And Other Unexpected Forces That Shape How We Think, Feel, and Behave
Author: Adam Alter
Publisher: Penguin Books
Copyright Adam Alter 2013
Pages 219 - 220

If you wish to read further Buy Now




If you use the above link to purchase a book, delanceyplace proceeds from your purchase will benefit a children's literacy project. All delanceyplace profits are donated to charity.
Red

About Us

Delanceyplace is a brief daily email with an excerpt or quote we view as interesting or noteworthy, offered with commentary to provide context.  There is no theme, except that most excerpts will come from a non-fiction work, mainly works of history, are occasionally controversial, and we hope will have a more universal relevance than simply the subject of the book from which they came. 

To visit our homepage or sign up for our daily email click here
To view previous daily emails click here.
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Monday, November 17, 2014

NY Times: The Opinion Pages | Contributing Op-Ed Writer; Inequality, Unbelievably, Gets Worse by Steven Rattner

The Opinion Pages | Contributing Op-Ed Writer

Inequality, Unbelievably, Gets Worse

Continue reading the main story
THE Democrats’ drubbing in the midterm elections was unfortunate on many levels, but particularly because the prospect of addressing income inequality grows dimmer, even as the problem worsens.

To only modest notice, during the campaign the Federal Reserve put forth more sobering news about income inequality: Inflation-adjusted earnings of the bottom 90 percent of Americans fell between 2010 and 2013, with those near the bottom dropping the most. Meanwhile, incomes in the top decile rose.

Continue reading the main story

Declining Incomes, But Not at the Top

Percent change in median family income, 2010-2013.

All U.S. families

Figures are change in median pretax income in each percentile range. Adjusted for inflation.
Source: Federal Reserve

Perhaps income disparity resonated so little with politicians because we are inured to a new Gilded Age.

But we shouldn’t be. Nor should we be inattentive to the often ignored role that government plays in determining income distribution in each country.

Here’s what’s rarely reported:

Before the impact of tax and spending policies is taken into account, income inequality in the United States is no worse than in most developed countries and is even a bit below levels in Britain and, by some measures, Germany.

However, once the effect of government programs is included in the calculations, the United States emerges on top of the inequality heap.
Continue reading the main story

Doing Less to Redistribute Income

The U.S. ranks favorably in the Gini coefficient, a measure of inequality — until taxes and government transfers are factored in. Then, among these countries, it is the worst.
*Transfers include programs such as Social Security, unemployment insurance, food assistance and housing allowances.
Source: Janet Gornick, Luxembourg Income Study, 2013
That’s because our taxes, while progressive, are low by international standards and our social welfare programs — ranging from unemployment benefits to disability insurance to retirement payments — are consequently less generous.

Conservatives may bemoan the size of our government; in reality, according to the Organization for Economic Cooperation and Development, total tax revenues in the United States this year will be smaller on a relative basis than those of any other member country.
Continue reading the main story

Bottom of the Heap

U.S. tax revenues, as a percent of G.D.P., are the lowest of O.E.C.D. countries.
Includes taxes and user fees collected by all levels of government.
Source: Organization for Economic Cooperation and Development
And income taxes for the highest-earning Americans have fallen sharply, contributing meaningfully to the income inequality problem. In 1995, the 400 taxpayers with the biggest incomes paid an average of 30 percent in taxes; by 2009, the tax rate of those Americans had dropped to 20 percent.
Continue reading the main story

The Low American Tax Burden

Effective tax rates on gross income of $100,000 in 2012.
Source: KPMG
Lower taxes means less for government to spend on programs to help those near the bottom. Social Security typically provides a retiree with about half of his working income; European countries often replace two-thirds of earnings.

Similarly, we spend less on early childhood education and care. And another big difference, of course, is the presence of national health insurance in most European countries.
Continue reading the main story

Low-Vacation Nation



Source: Center for Economic and Policy Research
To his credit, President Obama has succeeded in keeping income disparities from growing even wider, by such measures as by forcing tax rates on the wealthiest Americans up toward fair levels.
Meanwhile, on the programmatic side, among the many meritorious aspects of the much-maligned Affordable Care Act are its redistributionist elements: higher taxes on investment income and some health care businesses are being used to provide low-cost or free health care to a projected 26 million Americans near the bottom of the income scale.

But much more can and should be done — like raising the minimum wage nationwide and expanding the earned-income tax credit (a step supported by Republicans).

Helping those in the middle, whose incomes have been battered by globalization, will be harder and take longer. Expanded training programs and better education should be the centerpiece of any strategy to improve the lives of the middle class. A more robust economic recovery will also help the middle class, as will pro-growth policy initiatives like investment in infrastructure.

Critics from the right argue that doing more to level the income pyramid would hurt growth. In a recent paper, the International Monetary Fund dismissed that concern and suggested that a more equal distribution of income could instead raise the growth rate because of the added access to education, health care and other opportunities.

While some believe that the recent elections will stimulate both parties to make progress on the mound of challenges, in my view, that’s a bit of a fantasy. But we can’t stop talking about the problem of inequality, because then there really would be no hope.

NY Times: The Opinion Pages | Op-Ed Columnist When Government Succeeds by Paul Krugman

The Opinion Pages | Op-Ed Columnist


When Government Succeeds





Continue reading the main story

The great American Ebola freakout of 2014 seems to be over. The disease is still ravaging Africa, and as with any epidemic, there’s always a risk of a renewed outbreak. But there haven’t been any new U.S. cases for a while, and popular anxiety is fading fast.

Before we move on, however, let’s try to learn something from the panic.

When the freakout was at its peak, Ebola wasn’t just a disease — it was a political metaphor. It was, specifically, held up by America’s right wing as a symbol of government failure. The usual suspects claimed that the Obama administration was falling down on the job, but more than that, they insisted that conventional policy was incapable of dealing with the situation. Leading Republicans suggested ignoring everything we know about disease control and resorting to extreme measures like travel bans, while mocking claims that health officials knew what they were doing.

Guess what: Those officials actually did know what they were doing. The real lesson of the Ebola story is that sometimes public policy is succeeding even while partisans are screaming about failure. And it’s not the only recent story along those lines.

Here’s another: Remember Solyndra? It was a renewable-energy firm that borrowed money using Department of Energy guarantees, then went bust, costing the Treasury $528 million. And conservatives have pounded on that loss relentlessly, turning it into a symbol of what they claim is rampant crony capitalism and a huge waste of taxpayer money.

Defenders of the energy program tried in vain to point out that anyone who makes a lot of investments, whether it’s the government or a private venture capitalist, is going to see some of those investments go bad. For example, Warren Buffett is an investing legend, with good reason — but even he has had his share of lemons, like the $873 million loss he announced earlier this year on his investment in a Texas energy company. Yes, that’s half again as big as the federal loss on Solyndra.

The question is not whether the Department of Energy has made some bad loans — if it hasn’t, it’s not taking enough risks. It’s whether it has a pattern of bad loans. And the answer, it turns out, is no. Last week the department revealed that the program that included Solyndra is, in fact, on track to return profits of $5 billion or more.

Then there’s health reform. As usual, much of the national dialogue over the Affordable Care Act is being dominated by fake scandals drummed up by the enemies of reform. But if you look at the actual results so far, they’re remarkably good. The number of Americans without health insurance has dropped sharply, with around 10 million of the previously uninsured now covered; the program’s costs remain below expectations, with average premium rises for next year well below historical rates of increase; and a new Gallup survey finds that the newly insured are very satisfied with their coverage. By any normal standards, this is a dramatic example of policy success, verging on policy triumph.

Continue reading the main story

One last item: Remember all the mockery of Obama administration assertions that budget deficits, which soared during the financial crisis, would come down as the economy recovered? Surely the exploding costs of Obamacare, combined with a stimulus program that would become a perpetual boondoggle, would lead to vast amounts of red ink, right? Well, no — the deficit has indeed come down rapidly, and as a share of G.D.P. it’s back down to pre-crisis levels.  

Continue reading the main story

The moral of these stories is not that the government is always right and always succeeds. Of course there are bad decisions and bad programs. But modern American political discourse is dominated by cheap cynicism about public policy, a free-floating contempt for any and all efforts to improve our lives. And this cheap cynicism is completely unjustified. It’s true that government-hating politicians can sometimes turn their predictions of failure into self-fulfilling prophecies, but when leaders want to make government work, they can.

And let’s be clear: The government policies we’re talking about here are hugely important. We need serious public health policy, not fear-mongering, to contain infectious disease. We need government action to promote renewable energy and fight climate change. Government programs are the only realistic answer for tens of millions of Americans who would otherwise be denied essential health care.

Conservatives want you to believe that while the goals of public programs on health, energy and more may be laudable, experience shows that such programs are doomed to failure. Don’t believe them. Yes, sometimes government officials, being human, get things wrong. But we’re actually surrounded by examples of government success, which they don’t want you to notice.

Saturday, November 15, 2014

Rolling Stone - The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare; Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking By Matt Taibbi | November 6, 2014




The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare

Andrew Querner
Chase whistle-blower Alayne Fleischmann risked it all.

Meet the woman JPMorgan
Chase paid one of the largest fines in American history to keep from talking
By Matt Taibbi | November 6, 2014

She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn't take it anymore.

"It was like watching an old lady get mugged on the street," she says. "I thought, 'I can't sit by any longer.'"

Fleischmann is a tall, thin, quick-witted securities lawyer in her late thirties, with long blond hair, pale-blue eyes and an infectious sense of humor that has survived some very tough times. She's had to struggle to find work despite some striking skills and qualifications, a common symptom of a not-so-common condition called being a whistle-blower.
Related
The Vampire Squid Strikes Again


Fleischmann is the central witness in one of the biggest cases of white-collar crime in American history, possessing secrets that JPMorgan Chase CEO Jamie Dimon late last year paid $9 billion (not $13 billion as regularly reported – more on that later) to keep the public from hearing.

Back in 2006, as a deal manager at the gigantic bank, Fleischmann first witnessed, then tried to stop, what she describes as "massive criminal securities fraud" in the bank's mortgage operations.

Thanks to a confidentiality agreement, she's kept her mouth shut since then. "My closest family and friends don't know what I've been living with," she says. "Even my brother will only find out for the first time when he sees this interview."

Six years after the crisis that cratered the global economy, it's not exactly news that the country's biggest banks stole on a grand scale. That's why the more important part of Fleischmann's story is in the pains Chase and the Justice Department took to silence her.

She was blocked at every turn: by asleep-on-the-job regulators like the Securities and Exchange Commission, by a court system that allowed Chase to use its billions to bury her evidence, and, finally, by officials like outgoing Attorney General Eric Holder, the chief architect of the crazily elaborate government policy of surrender, secrecy and cover-up. "Every time I had a chance to talk, something always got in the way," Fleischmann says.

This past year she watched as Holder's Justice Department struck a series of historic settlement deals with Chase, Citigroup and Bank of America. The root bargain in these deals was cash for secrecy. The banks paid big fines, without trials or even judges – only secret negotiations that typically ended with the public shown nothing but vague, quasi-official papers called "statements of facts," which were conveniently devoid of anything like actual facts.

Jamie Dimon (Photo: Bloomberg/Getty)

And now, with Holder about to leave office and his Justice Department reportedly wrapping up its final settlements, the state is effectively putting the finishing touches on what will amount to a sweeping, industrywide effort to bury the facts of a whole generation of Wall Street corruption. "I could be sued into bankruptcy," she says. "I could lose my license to practice law. I could lose everything. But if we don't start speaking up, then this really is all we're going to get: the biggest financial cover-up in history."

Alayne Fleischmann grew up in Terrace, British Columbia, a snowbound valley town just a brisk 18-hour drive north of Vancouver. She excelled at school from a young age, making her way to Cornell Law School and then to Wall Street. Her decision to go into finance surprised those closest to her, as she had always had more idealistic ambitions. "I helped lead a group that wrote briefs to the Human Rights Chamber for those affected by ethnic cleansing in Bosnia-Herzegovina," she says. "My whole life prior to moving into securities law was human rights work."

But she had student loans to pay off, and so when Wall Street came knocking, that was that. But it wasn't like she was dragged into high finance kicking and screaming. She found she had a genuine passion for securities law and felt strongly she was doing a good thing. "There was nothing shady about the field back then," she says. "It was very respectable."

In 2006, after a few years at a white-shoe law firm, Fleischmann ended up at Chase. The mortgage market was white-hot. Banks like Chase, Bank of America and Citigroup were furiously buying up huge pools of home loans and repackaging them as mortgage securities. Like soybeans in processed food, these synthesized financial products wound up in everything, whether you knew it or not: your state's pension fund, another state's workers' compensation fund, maybe even the portfolio of the insurance company you were counting on to support your family if you got hit by a bus.

As a transaction manager, Fleischmann functioned as a kind of quality-control officer. Her main job was to help make sure the bank didn't buy spoiled merchandise before it got tossed into the meat grinder and sold out the other end.

A few months into her tenure, Fleischmann would later testify in a DOJ deposition, the bank hired a new manager for diligence, the group in charge of reviewing and clearing loans. Fleischmann quickly ran into a problem with this manager, technically one of her superiors. She says he told her and other employees to stop sending him e-mails. The department, it seemed, was wary of putting anything in writing when it came to its mortgage deals.
"I could lose everything. But if we don't start speaking up, we're going to get the biggest financial cover-up in history."

"If you sent him an e-mail, he would actually come out and yell at you," she recalls. "The whole point of having a compliance and diligence group is to have policies that are set out clearly in writing. So to have exactly the opposite of that – that was very worrisome." One former high-ranking federal prosecutor said that if he were taking a criminal case to trial, the information about this e-mail policy would be crucial. "I would begin and end my opening statement with that," he says. "It shows these people knew what they were doing and were trying not to get caught."

In late 2006, not long after the "no e-mail" policy was implemented, Fleischmann and her group were asked to evaluate a packet of home loans from a mortgage originator called GreenPoint that was collectively worth about $900 million. Almost immediately, Fleischmann and some of the diligence managers who worked alongside her began to notice serious problems with this particular package of loans.

For one thing, the dates on many of them were suspiciously old. Normally, banks tried to turn loans into securities at warp speed. The idea was to go from a homeowner signing on the dotted line to an investor buying that loan in a pool of securities within two to three months. Thus it was a huge red flag to see Chase buying loans that were already seven or eight months old.

What this meant was that many of the loans in the GreenPoint deal had either been previously rejected by Chase or another bank, or were what are known as "early payment defaults." EPDs are loans that have already been sold to another bank and have been returned after the borrowers missed multiple payments. That's why the dates on them were so old.

In other words, this was the very bottom of the mortgage barrel. They were like used cars that had been towed back to the lot after throwing a rod. The industry had its own term for this sort of loan product: scratch and dent. As Chase later admitted, it not only ended up reselling hundreds of millions of dollars worth of those crappy loans to investors, it also sold them in a mortgage pool marketed as being above subprime, a type of loan called "Alt-A." Putting scratch-and-dent loans in an Alt-A security is a little like putting a fresh coat of paint on a bunch of junkyard wrecks and selling them as new cars. "Everything that I thought was bad at the time," Fleischmann says, "turned out to be a million times worse." (Chase declined to comment for this article.)

When Fleischmann and her team reviewed random samples of the loans, they found that around 40 percent of them were based on overstated incomes – an astronomically high defect rate for any pool of mortgages; Chase's normal tolerance for error was five percent. One mortgage in particular that sticks out in Fleischmann's mind involved a manicurist who claimed to have an annual income of $117,000. Fleischmann figured that even working seven days a week, this woman would have needed to work 488 days a year to make that much. "And that's with no overhead," Fleischmann says. "It wasn't possible."

But when she and others raised objections to the toxic loans, something odd started happening. The number-crunchers who had been complaining about the loans suddenly began changing their reports. The process she describes is strikingly similar to the way police obtain false confessions: The interrogator verbally abuses the target until he starts producing the desired answers. "What happened," Fleischmann says, "is the head diligence manager started yelling at his team, berating them, making them do reports over and over, keeping them late at night." Then the loans started clearing.
Related
Chase's Twitter Gambit Devolves into All-Time PR Fiasco


As late as December 11th, 2006, diligence managers had marked a full 33 percent of one loan sample as "stated income unreasonable for profession," meaning that it was nearly inevitable that there would be a high number of defaults. Several high-ranking executives were copied on this report.

Then, on December 15th, a Chase sales executive held a lengthy meeting with reps from GreenPoint and the diligence team to examine the remaining loans in the pool. When they got to the manicurist, Fleischmann remembers, one of the diligence guys finally caved under the pressure from the sales executive. "He had his hands up and just said, 'OK,' and he cleared it," says Fleischmann, adding that he was shaking his head "no" even as he was saying yes. Soon afterward, the error rate in the pool had magically dropped below 10 percent – a threshold that itself had just been doubled to clear the way for this deal.

After that meeting, Fleischmann testified, she approached a managing director named Greg Boester and pleaded with him to reconsider. She says she told Boester that the bank could not sell the high-risk loans as low-risk securities without committing fraud. "You can't securitize these loans without special disclosure about what's wrong with them," Fleischmann told him, "and if you make that disclosure, no one will buy them."

A former Olympic ski jumper, Boester was such an important executive at Chase that when he later defected to the Chicago-based hedge fund Citadel, Dimon cut off trading with Citadel in retaliation. Boester eventually returned to Chase and is still there today despite his role in this affair.

This moment illustrates the most basic element of the case against Chase: The bank knowingly peddled products stuffed with scratch-and-dent loans to investors without disclosing the obvious defects with the underlying loans.

Years later, in its settlement with the Justice Department, Chase would admit that this conversation between Fleischmann and Boester took place (though neither was named; it was simply described as "an employee . . . told . . . a managing director") and that her warning was ignored when the bank sold those loans off to investors.

Photo: Illustration by Victor Juhasz

A few weeks later, in early 2007, she sent a long letter to another managing director, William Buell. In the letter, she warned Buell of the consequences of reselling these bad loans as securities and gave detailed descriptions of breakdowns in Chase's diligence process.

Fleischmann assumed this letter, which Chase lawyers would later jokingly nickname "The Howler" after the screaming missive from the Harry Potter books, would be enough to force the bank to stop selling the bad loans. "It used to be if you wrote a memo, they had to stop, because now there's proof that they knew what they were doing," she says. "But when the Justice Department doesn't do anything, that stops being a deterrent. I just didn't know that at the time."

In February 2008, less than two years after joining the bank, Fleischmann was quietly dismissed in a round of layoffs. A few months later, proof would appear that her bosses knew all along that the boom-era mortgage market was rotten. That September, as the market was crashing, Dimon boasted in a ball-washing Fortune article titled "Jamie Dimon's SWAT Team" that he knew well before the meltdown that the subprime market was toast. "We concluded that underwriting standards were deteriorating across the industry." The story tells of Dimon ordering Boester's boss, William King, to dump the bank's subprime holdings in October 2006. "Billy," Dimon says, "we need to sell a lot of our positions. . . . This stuff could go up in smoke!"

In other words, two full months before the bank rammed through the dirty GreenPoint deal over Fleischmann's objections, Chase's CEO was aware that loans like this were too dangerous for Chase itself to own. (Though Dimon was talking about subprime loans and GreenPoint was technically an Alt-A pool, the Fortune story shows that upper management had serious concerns about industry-wide underwriting problems.)
The ordinary citizen who is the target of a government investigation cannot pick up the phone, call the prosecutor and have his case dropped. But Dimon did just that.

In January 2010, when Dimon testified before the Financial Crisis Inquiry Commission, he told investigators the exact opposite story, portraying the poor Chase leadership as having been duped, just like the rest of us. "In mortgage underwriting," he said, "somehow we just missed, you know, that home prices don't go up forever."

When Fleischmann found out about all of this years later, she was shocked. Her confidentiality agreement at Chase didn't bar her from reporting a crime, but the problem was that she couldn't prove that Chase had committed a crime without knowing whether those bad loans had been sold.

As it turned out, of course, Chase was selling those rotten dog-meat loans all over the place. How bad were they? A single lawsuit by a single angry litigant gives some insight. In 2011, Chase was sued over massive losses suffered by a group of credit unions. One of them had invested $135 million in one of the bank's mortgage--backed securities. About 40 percent of the loans in that deal came from the GreenPoint pool.

The lawsuit alleged that in just the first year, the security suffered $51 million in losses, nearly 50 times what had been projected. It's hard to say how much of that was due to the GreenPoint loans. But this was just one security, one year, and the losses were in the tens of millions. And Chase did deal after deal with the same methodology. So did most of the other banks. It's theft on a scale that blows the mind.

In the spring of 2012, Fleischmann, who'd moved back to Canada after leaving Chase, was working at a law firm in Calgary when the phone rang. It was an investigator from the States. "Hi, I'm from the SEC," he said. "You weren't expecting to hear from me, were you?"

A few months earlier, President Obama, giving in to pressure from the Occupy movement and other reformers, had formed the Residential Mortgage-Backed Securities Working Group. At least superficially, this was a serious show of force against banks like Chase. The group would operate like a kind of regulatory Justice League, combining the superpowers of investigators from the SEC, the FBI, the IRS, HUD and a host of other federal agencies. It included noted anti-corruption- investigator and New York Attorney General Eric Schneiderman, which gave many observers reason to hope that finally something would be done about the crimes that led to the crash. That makes the fact that the bank would skate with negligible cash fines an even more extra-ordinary accomplishment.

New York Attorney General Eric Schneiderman (L) speaks whille Attorney General Eric Holder listens during a news conference at the Justice Department on January 27th, 2012. (Photo: Mark Wilson/Getty)

By the time the working group was set up, most of the applicable statutes of limitations had either expired or were about to expire. "A conspiratorial way of looking at it would be to say the state waited far too long to look at these cases and is now taking its sweet time investigating, while the last statutes of limitations run out," says famed prosecutor and former New York Attorney General Eliot Spitzer.

It soon became clear that the SEC wasn't so much investigating Chase's behavior as just checking boxes. Fleischmann received no follow-up phone calls, even though she told the investigator that she was willing to tell the SEC everything she knew about the systemic fraud at Chase. Instead, the SEC focused on a single transaction involving a mortgage company called WMC. "I kept trying to talk to them about GreenPoint," Fleischmann says, "but they just wanted to talk about that other deal."

The following year, the SEC would fine Chase $297 million for misrepresentations in the WMC deal. On the surface, it looked like a hefty punishment. In reality, it was a classic example of the piecemeal, cherry-picking style of justice that characterized the post-crisis era. "The kid-gloves approach that the DOJ and the SEC take with Wall Street is as inexplicable as it is indefensible," says Dennis Kelleher of the financial reform group Better Markets, which would later file suit challenging the Chase settlement. "They typically charge only one offense when there are dozens. It would be like charging a serial murderer with a single assault and giving them probation."

Soon Fleischmann's hopes were raised again. In late 2012 and early 2013, she had a pair of interviews with civil litigators from the U.S. attorney's office in the Eastern District of California, based in Sacramento.

One of the ongoing myths about the financial crisis is that the government is outmatched by the legal talent representing the banks. But Fleischmann was impressed by the lead attorney in her case, a litigator named Richard Elias. "He sounded like he had been a securities lawyer for 10 years," she says. "This actually looked like his idea of fun – like he couldn't wait to run with this case."

She gave Elias and his team detailed information about everything she'd seen: the edict against e-mails, the sabotaging of the diligence process, the bullying, the written warnings that were ignored, all of it. She assumed that it wouldn't be long before the bank was hauled into court.
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Instead, the government decided to help Chase bury the evidence. It began when Holder's office scheduled a press conference for the morning of September 24th, 2013, to announce sweeping civil-fraud charges against the bank, all laid out in a detailed complaint drafted by the U.S. attorney's Sacramento office. But that morning the presser was suddenly canceled, and no complaint was filed. According to later news reports, Dimon had personally called Associate Attorney General Tony West, the third-ranking official in the Justice Department, and asked to reopen negotiations to settle the case out of court.

It goes without saying that the ordinary citizen who is the target of a government investigation cannot simply pick up the phone, call up the prosecutor in charge of his case and have a legal proceeding canceled. But Dimon did just that. "And he didn't just call the prosecutor, he called the prosecutor's boss," Fleischmann says. According to The New York Times, after Dimon had already offered $3 billion to settle the case and was turned down, he went to Holder's office and upped the offer, but apparently not by enough.

A few days later, Fleischmann, who had by then moved back to Vancouver and was looking for work, was at a mall when she saw a Wall Street Journal headline on her iPhone: JPMorgan Insider Helps U.S. in Probe. The story said that the government had a key witness, a female employee willing to provide damaging testimony about Chase's mortgage operations. Fleischmann was stunned. Until that moment, she had no idea that she was a major part of the government's case against Chase. And worse, nobody had bothered to warn her that she was about to be effectively outed in the newspapers. "The stress started to build after I saw that news," she says. "Especially as I waited to see if my name would come out and I watched my job possibilities evaporate."

Fleischmann later realized that the government wasn't interested in having her testify against Chase in court or any other public forum. Instead, the Justice Department's political wing, led by Holder, appeared to be using her, and her evidence, as a bargaining chip to extract more hush money from Dimon. It worked. Within weeks, Dimon had upped his offer to roughly $9 billion.

In late November, the two sides agreed on a settlement deal that covered a variety of misbehaviors, including the fraud that Fleischmann witnessed as well as similar episodes at Washington Mutual and Bear Stearns, two companies that Chase had acquired during the crisis (with federal bailout aid). The newspapers and the Justice Department described the deal as a "$13 billion settlement," hailing it as the biggest white-collar regulatory settlement in American history. The deal released Chase from civil liability. And, in what was described by The New York Times as a "major victory for the government," it left open the possibility that the Justice Department could pursue a further criminal investigation against the bank.

But the idea that Holder had cracked down on Chase was a carefully contrived fiction, one that has survived to this day. For starters, $4 billion of the settlement was largely an accounting falsehood, a chunk of bogus "consumer relief" added to make the payoff look bigger. What the public never grasped about these consumer--relief deals is that the "relief" is often not paid by the bank, which mostly just services the loans, but by the bank's other victims, i.e., the investors in their bad mortgage securities.

Moreover, in this case, a fine-print addendum indicated that this consumer relief would be allowed only if said investors agreed to it – or if it would have been granted anyway under existing arrangements. This often comes down to either forgiving a small portion of a loan or giving homeowners a little extra time to pay up in full. "It's not real," says Fleischmann. "They structured it so that the homeowners only get relief if they would have gotten it anyway." She pauses. "If a loan shark gives you a few extra weeks to pay up, is that 'consumer relief'?"

The average person had no way of knowing what a terrible deal the Chase settlement was for the country. The terms were even lighter than the slap-on-the-wrist formula that allowed Wall Street banks to "neither admit nor deny" wrongdoing – the deals that had helped spark the Occupy protests. Yet those notorious deals were like the Nuremberg hangings compared to the regulatory innovation that Holder's Justice Department cooked up for Dimon and Co.

Instead of a detailed complaint naming names, Chase was allowed to sign a flimsy, 10-and-a-half-page "statement of facts" that was: (a) so short, a first-year law student could read it in the time it takes to eat a tuna sandwich, and (b) so vague, a halfway intelligent person could read it and not know anyone had done anything wrong.
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The ink was barely dry on the deal before Chase would have the balls to insinuate its innocence. "The firm has not admitted to violations of the law," said CFO Marianne Lake. But the deal's most brazen innovation was the way it bypassed the judicial branch. Previously, federal regulators had had bad luck with judges when trying to dole out slap-on-the-wrist settlements to banks. In a pair of celebrated cases, an unpleasantly honest federal judge named Jed Rakoff had rejected sweetheart deals worked out between banks and slavish regulators and had commanded the state to go back to the drawing board and come up with real punishments.

Seemingly not wanting to deal with even the possibility of such a thing happening, Holder blew off the idea of showing the settlement to a judge. The settlement, says Kelleher, "was unprecedented in many ways, including being very carefully crafted to bypass the court system. . . . There can be little doubt that the DOJ and JP-Morgan were trying to avoid disclosure of their dirty deeds and prevent public scrutiny of their sweetheart deal." Kelleher asks a rhetorical question: "Can you imagine the outcry if [Bush-era Attorney General] Alberto Gonzales had gone into the backroom and given Halliburton immunity in exchange for a billion dollars?"

The deal was widely considered a good one for both sides, but Chase emerged with barely a scratch. First, the ludicrously nonspecific language surrounding the settlement put you, me and every other American taxpayer on the hook for roughly a quarter of Chase's check. Because most of the settlement monies were specifically not called fines or penalties, Chase was allowed to treat some $7 billion of the settlement as a tax write-off.

Couple this with the fact that the bank's share price soared six percent on news of the settlement, adding more than $12 billion in value to shareholders, and one could argue Chase actually made money from the deal. What's more, to defray the cost of this and other fines, Chase last year laid off 7,500 lower-level employees. Meanwhile, per-employee compensation for everyone else rose four percent, to $122,653. But no one made out better than Dimon. The board awarded a 74 percent raise to the man who oversaw the biggest regulatory penalty ever, upping his compensation package to about $20 million.
"The assumption they make is that I won't blow up my life to do it. But they're wrong about that."

While Holder was being lavishly praised for releasing Chase only from civil liability, Fleischmann knew something the rest of the world did not: The criminal investigation was going nowhere.

In the days leading up to Holder's November 19th announcement of the settlement, the Justice Department had asked Fleischmann to meet with criminal investigators. They would interview her very soon, they said, between December 15th and Christmas.

But December came and went with no follow-up from the DOJ. She began to wonder: If she was the government's key witness, how was it possible that they were still pursuing a criminal case without talking to her? "My concern," she says, "was that they were not investigating."

The government's failure to speak to Fleischmann lends credence to a theory about the Holder-Dimon settlement: It included a tacit agreement from the DOJ not to pursue criminal charges in earnest. It sounds outrageous, but it wouldn't be the first time that the government used a wink and a nod to dispose a bank of major liability without saying so publicly. Back in 2010, American Lawyer revealed Goldman Sachs wanted a full release from liability in a dozen crooked mortgage deals, while the SEC didn't want to give the bank such a big public victory. So the two sides quietly agreed to a grimy compromise: Goldman agreed to pay $550 million to settle a single case, and the SEC privately assured the bank that it wouldn't recommend charges in any of the other deals.

As Fleischmann was waiting for the Justice Department to call, Chase and its lawyers had been going to tremendous lengths to keep her muzzled. A number of major institutional investors had sued the bank in an effort to recover money lost in investing in Chase's fraud-ridden home loans. In October 2013, one of those investors – the Fort Worth Employees' Retirement Fund – asked a federal judge to force Chase to grant access to a series of current and former employees, including Fleischmann, whose status as a key cooperator in the federal investigation had made headlines in The Wall Street Journal and other major media outlets.

Photo: Spencer Platt/Getty

In response, Dorothy Spenner, an attorney representing Chase, told the court that Fleischmann was not a "relevant custodian." In other words, she couldn't testify to anything of importance. Federal Magistrate Judge James C. Francis IV took Chase's lawyers at their word and rejected the Fort Worth retirees' request for access to Fleischmann and her evidence.

Other investors bilked by Chase also tried to speak to Fleischmann. The Federal Home Loan Bank of Pittsburgh, which had sued Chase, asked the court to force Chase to turn over a copy of the draft civil complaint that was withheld after Holder's scuttled press conference. The Pittsburgh litigants also specified that they wanted access to the name of the state's cooperating witness: namely, Fleischmann.

In that case, the judge actually ordered Chase to turn over both the complaint and Fleischmann's name. Chase stalled. Later in the fall, the judge ordered the bank to produce the information again; it stalled some more.

Then, in January 2014, Chase suddenly settled with the Pittsburgh bank out of court for an undisclosed amount. Months after being ordered to allow Fleischmann to talk, they once again paid a stiff price to keep her testimony out of the public eye.

Chase's determination to hide its own dirt while forcing Fleischmann to keep her secret was becoming more and more absurd. "It was a hard time to look for work," she says. All that prospective employers knew was that she had worked in a department that had just been dinged with what was then the biggest regulatory fine in the history of capitalism. According to the terms of her confidentiality agreement, she couldn't even tell them that she'd tried to keep the bank from committing fraud.

Despite it all, Fleischmann still had faith that the Justice Department or some other federal agency would make things right. "I guess I was just a trusting person," she says. "I wasn't cynical. I kept hoping."

One day last spring, Fleischmann happened across a video of Holder giving a speech titled "No Company Is Too Big to Jail." It was classic Holder: full of weird prevarication, distracting eye twitches and other facial contortions. It began with the bold rejection of the idea that overly large financial institutions would receive preferential treatment from his Justice Department.

Then, within a few sentences, he seemed to contradict himself, arguing that one must apply a special sort of care when investigating supersize banks, tweaking the rules so as not to upset the world economy. "Federal prosecutors conducting these investigations," Holder said, "must go the extra mile to coordinate closely with the regulators who oversee these institutions' day-to-day operations." That is, he was saying, regulators have to agree not to allow automatic penalties to kick in, so that bad banks can stay in business.
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Fleischmann winced. Fully fluent in Holder's three-faced rhetoric after years of waiting for him to act, she felt that he was patting himself on the back for having helped companies survive crimes that otherwise might have triggered crippling regulatory penalties. As she watched in mounting outrage, Holder wrapped up his address with a less-than-reassuring pronouncement: "I am resolved to seeing [the investigations] through." Doing so, he added, would "reaffirm" his principles.

Or, as Fleischmann translates it: "I will personally stay on to make sure that no one can undo the cover-up that I've accomplished."

That's when she decided to break her silence. "I tried to go on with the things I was doing, but I just stopped sleeping and couldn't eat," she says. "It felt like I was trying to keep this secret and my body was literally rejecting it."

Ironically, over the summer, the government contacted her again. A new set of investigators interviewed her, appearing to have restarted the criminal case. Fleischmann won't comment on that investigation. Frustrated as she has been by the decisions of the higher-ups in Holder's Justice Department, she doesn't want to do anything to get in the way of investigators who might be working the case. But she emphasizes she still has reason to be deeply worried that nothing will be done. Even if the investigators build strong cases against executives who oversaw Chase's fraud, Holder or whoever succeeds him can still make the whole thing disappear by negotiating a soft landing for the company. "That's the thing I'm worried about," she says. "That they make the whole thing disappear. If they do that, the truth will never come out."

In September, at a speech at NYU, Holder defended the lack of prosecutions of top executives on the grounds that, in the corporate context, sometimes bad things just happen without actual people being responsible. "Responsibility remains so diffuse, and top executives so insulated," Holder said, "that any misconduct could again be considered more a symptom of the institution's culture than a result of the willful actions of any single individual."

In other words, people don't commit crimes, corporate culture commits crimes! It's probably fortunate that Holder is quitting before he has time to apply the same logic to Mafia or terrorism cases.

Fleischmann, for her part, had begun to find the whole situation almost funny.

"I thought, 'I swear, Eric Holder is gas-lighting me,' " she says.

Ask her where the crime was, and Fleischmann will point out exactly how her bosses at JPMorgan Chase committed criminal fraud: It's right there in the documents; just hand her a highlighter and some Post-it notes – "We lawyers love flags" – and you will not find a more enthusiastic tour guide through a gazillion-page prospectus than Alayne Fleischmann.

She believes the proof is easily there for all the elements of the crime as defined by federal law – the bank made material misrepresentations, it made material omissions, and it did so willfully and with specific intent, consciously ignoring warnings from inside the firm and out.

She'd like to see something done about it, emphasizing that there still is time. The statute of limitations for wire fraud, for instance, has not run out, and she strongly believes there's a case there, against the bank's executives. She has no financial interest in any of this, no motive other than wanting the truth out. But more than anything, she wants it to be over.

In today's America, someone like Fleischmann – an honest person caught for a little while in the wrong place at the wrong time – has to be willing to live through an epic ordeal just to get to the point of being able to open her mouth and tell a truth or two. And when she finally gets there, she still has to risk everything to take that last step. "The assumption they make is that I won't blow up my life to do it," Fleischmann says. "But they're wrong about that."

Good for her, and great for her that it's finally out. But the big-picture ending still stings. She hopes otherwise, but the likely final verdict is a Pyrrhic victory.

Because after all this activity, all these court actions, all these penalties (both real and abortive), even after a fair amount of noise in the press, the target companies remain more ascendant than ever. The people who stole all those billions are still in place. And the bank is more untouchable than ever – former Debevoise & Plimpton hotshots Mary Jo White and Andrew Ceresny, who represented Chase for some of this case, have since been named to the two top jobs at the SEC. As for the bank itself, its stock price has gone up since the settlement and flirts weekly with five-year highs. They may lose the odd battle, but the markets clearly believe the banks won the war. Truth is one thing, and if the right people fight hard enough, you might get to hear it from time to time. But justice is different, and still far enough away.
From The Archives Issue 1222: November 20, 2014