And maybe I said “I told you so” then? Forgive me. But we still haven’t gotten to the point where we actually do something about federally insured big banks gambling with derivatives.

Investopedia defines a derivative:

… a security whose price is dependent upon or derived from one or more underlying assets. The derivative itself is merely a contract between two or more parties. Its value is determined by fluctuations in the underlying asset. The most common underlying assets include stocks, bonds, commodities, currencies, interest rates and market indexes. Most derivatives are characterized by high leverage.

Got that? I prefer Warren Buffett’s more succinct definition: “I view derivatives as time bombs, both for the parties that deal in them and the economic system; derivatives are financial weapons of mass destruction.”

Certainly Buffett’s definition better explains the news report that JPMorgan Chase, the nation’s largest and most profitable bank, confirmed on May 10 that it had suffered a $ 2 billion loss on credit derivative bets, mainly by a trader colorfully named the “London Whale” in its Chief Investment Office. This was less than a month after Chase CEO Jamie Dimon had branded a Bloomberg News report that there was a major problem with derivatives in his London Office as “a complete tempest in a tea pot.” After the announcement of the gigantic loss, Dimon said, “in hindsight, the new strategy was flawed, complex, poorly reviewed, poorly executed and poorly monitored.”

Uh-huh. And haven’t we heard that before? This was just the latest example of the high profile financial disasters caused by the use and promotion of derivatives. Remember when the very prosperous Orange County of California decided to dabble in derivatives and ended up in bankruptcy in 1994? Or when a derivatives trader at Barings, the oldest merchant bank in London, ran up $ 1.3 billion in losses in 1995 and put the 200-year-old firm out of business? And of course you remember when Long Term Capital Management had to be bailed out by the Federal Reserve in 1998 after $ 3.5 billion in bad derivative bets.

I could easily cite others, but let’s jump to 2008 when derivatives hit the really big time and were complicit in the failures of Bear Stearns, Lehman Brothers and AIG, claimed their first country — Iceland — as a victim, and very nearly brought down all of the world’s financial markets.

Derivatives are involved in the present Greek economic crisis, a crisis that once again threatens the world’s economy. Last February, German Chancellor Angela Merkel talked about the use of credit default swap derivatives by the Greek government to hide its deteriorating economic situation from the rest of the Eurozone. “Credit-default swaps,” she said, “where you insure your neighbor’s house just to destroy it and make money from it, that’s exactly what we have to curb.” “Surely,” said former Fed chair Paul Volcker, “the recent revelations about the use (and abuse) of complex derivatives in obscuring the extent of Greek financial obligations reinforces the need for greater transparency and less complexity.”

That’s exactly right. No one is calling for a ban on derivatives trading. Even Warren Buffett’s companies use derivatives. They have legitimate uses in risk management. What is so abundantly clear is that the lack of transparency in derivatives trading, and the sheer complexity that is a by-product of that lack of transparency, really can make them “financial weapons of mass destruction.”

Volcker, of course, is the author of the Volcker Rule in the 2010 Dodd Frank Wall Street Reform Act, which would restrict trading by federally insured banks for their own accounts, called proprietary trading. But the Dodd Frank legislation, now 22 months old, kicked the can down the road to regulatory agencies on hundreds of issues involving its implementation. And, as always, the devil is in the details.G iven the intensity of Wall Street lobbying to stop regulation, it is no surprise that rules are being postponed. A September 2011 study by Duke Law School professor Kimberly Krawiec found that 93 percent of the meetings with the regulatory agencies responsible for implementing the Volcker Rule were with representatives of financial institutions. If anything, that percentage has become higher since last September. Want to bet on a really effective interpretation of the Volcker Rule?

Here’s a depressingly ironic coincidence: On the same day JPMorgan Chase announced its derivatives loss, the Commodities Future Trading Commission announced that, after almost two years of study, it was going to have to postpone a decision on derivatives until Dec. 31, 2012.

Believe me. I’m not looking forward to my next “I told you so” column.

Ted Kaufman is a former U.S. Senator from Delaware. Please visit www.tedkaufman.com for more information. This piece first appeared in the Wilmington News Journal.

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Oligopoly pricing of necessary goods

Most Americans realize oil prices have very little to do with supply and demand. The oil industry is controlled by oligopolies. These “cartels” control the price of oil and gas. Gasoline is largely an inelastic good, meaning most Americans can’t get by without it. So the price of gas is easily influenced by both OPEC and by large domestic refiners of gasoline in the U.S.

But what about products that are not a vital necessity? Could prices of elastic goods be legally fixed by a small cartel of big retail companies working with a monopoly? You bet! Let’s look at an example.

Monopoly/oligopoly pricing of luxury goods

During the regular basketball season, the NBA Pass costs a bit under $ 200 to see all of the games in the U.S. A slightly less expensive version allows you to follow all the games of your five favorite teams.

Wiki.answers.com says “there is no official number, but probably around millions” of NBA fans exist. You can be sure that $ 200 per fan is pretty important to both the NBA and the broadcast companies that get a piece of that fee.

The National Basketball Association (NBA) is a trade association similar to OPEC. Unlike OPEC, the NBA can set a monopoly price because, as it reminds viewers before each game, it owns the exclusive “intellectual property rights,” i.e., the copyright, to all of the broadcasts of games played by teams that belong to the Association. Federal law and the courts protect the NBA’s right to fix the price.

You know the NBA Pass is monopoly-priced because all telecommunications services in the U.S. offer the NBA Pass for the same fee. Pay it, and the ardent fan can watch games on TV, a mobile device, or their computer. That’s great!

What’s wrong with monopoly/oligopoly pricing?

What’s bad about the NBA Pass? The whole point of cable/satellite media was to open up the market for telecommunications broadcasts from outside one’s local viewing area. This is exactly what the NBA Pass is curtailing.

You may not be able to find basketball games you want to see because the NBA Pass exists. I can’t speak for all the services offering this Pass, but here is what the DirectTV package I have does to get its customers to buy the NBA Pass.

In its search directory for TV programs, DirectTV only lists its NBA Pass stations. During the regular season, DirectTV doesn’t list basketball games on TNT, ESPN, or NBA TV, three stations included for free in most cable packages.

Finding a basketball game in a haystack

Why would DirectTV do this? Oligopolies are not as free as monopolies to gouge customers on price. The NBA can set an exact price for its exclusive Pass each month, but not so the broadcast companies. Media customers can, and often do, switch from one provider, or from one kind of media to another. Telecommunications companies themselves foster this kind of behavior by offering low prices to new customers.

For this reason, DirectTV can’t and doesn’t force viewers to buy an NBA Pass. It simply makes most of the basketball games offered via stations included in its cable packages invisible in its program directory.

By accident I discovered that if a non-Pass-holder is on an NBA Pass station as a game begins, DirectTV might search for a free cable station that also offers the same game. But, if you want to pre-record a game or make sure it’s on, you’ll need to go to the Internet, get your team’s schedule, then scroll through DirectTV’s channel guide for the scheduled times of each game you want to see.

Think this is a trivial issue? Get your wallets ready, sports fans. Your $ 199 NFL (National Football League) Sunday Pass is coming this summer! What’s next? Golf? The Olympics? Baseball?

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One can only imagine the endorphins pumping across the world’s trading desks. The king of the hill, JPMorgan, has seen its killer trade — reputed to entail multiple hundreds of billions of credit default swap notional amount — go the wrong way, and now they need to reverse out of their position before the stink gets worse. The loss of two billion dollars announced a week ago grew by a billion in a week, and clearly the fire sale is not over.

Faced with a public relations fiasco, Jamie Dimon let his long-time, trusted lieutenant, Ina Drew, take the fall. Meanwhile, Iksil — the trader that amassed the positions that have been a topic online since early April — cannot be let go because he is the one that understands the billions and billions of complex derivative contracts that now need to be unwound. It must be quite a spectacle on derivatives trading desks around the world. It is get-back time, and in that world no one takes any prisoners.

As the hedge funds continue to circle in the water, feeding off of JPMorgan’s exposed balance sheet, Dimon’s friends on Capitol Hill have been quick to come to his defense. House Financial Services Committee Chairman Spencer Bachus (R-AL) was quick to minimize the importance of one loss, whatever its size, while across the aisle President Obama lauded Dimon‘s bona fides and JPMorgan as “one of the best-managed banks there is.”

Politicians jumping to Jamie Dimon’s defense are missing the point. This is not about a single trade or one loss. Iksil, whose nicknames “Voldemort” and the “White Whale” (think Ahab’s nemesis, not a fat Frenchman) should give a hint as to his industry reputation, and now that the hedge funds have tasted blood JP cannot get out until the counterparties are good and ready. That the loss is still growing simply means that they are not ready to let go.

But if JP’s counterparties have Bruno by the balls, so too does Dimon have a firm grip on the nation’s political leadership. Last week on Meet the Press, Jamie Dimon described himself as still a Democrat, but just barely. Once a prominent Obama supporter, Dimon is one of many across the finance community who feel that they have been unfairly tarred for cratering the global economy.

To put a finer point on it, despite the media feeding frenzy surrounding Voldemort’s personal Black Swan event (Nicholas Taleeb’s now-famous phrase for things that can’t go wrong, until they do) comments from our nation’s capital remain measured, almost fawning. Democrats and Republicans have fallen over each other to praise Dimon as America’s Greatest Risk Manager notwithstanding JPMorgan’s contretemps. Dimon’s reputation grew out of the ease with which JPMorgan navigated the financial crisis, though some have suggested that Dimon’s predecessor as CEO, Bill Harrison, deserves a fair share of the credit. Harrison, apparently, minimized the bank’s exposure to exotic mortgage derivatives and handed Dimon a pretty clean balance sheet when Dimon arrived on the scene as CEO in 2006.

While some of the adulation garnered by Dimon may well be warranted, it is likely that most of the politicians uttering the hosannas have no idea what risk management is. It may be that what we are actually watching is a not very subtle food fight between our two political parties for campaign cash. Simply stated, this is not about Dimon’s management skills, rather it is about his wallet.

Over the past two decades, the financial services sector has been the most generous source of political money, and that money has been up for grabs. For decades, the Republican Party was the party of Wall Street. That singular identity ended during the Clinton administration, which was determined to lure Wall Street’s lucre across the aisle. While Clinton and the Democrats grabbed the golden ring, the price for the nation was steep: the Financial Services Modernization Act of 1999 and the ensuing Commodity Futures Modernization Act of 2000 that together laid the groundwork for the financial services world as we know it, and as the world came to experience it in the global financial meltdown of 2008. During the last presidential cycle, according to OpenSecrets.org, the financial sector remained far and away the largest source of political contributions, with 54 percent going to Democrats, while this time around — in the wake of industry anger over Dodd-Frank reforms — the tide has turned and 77 percent of that money is gracing Republican coffers.

Could it be that Chairman Bachus was quick to rise to the defense of JPMorgan because that bank has been the leading source of contributions to his campaigns over the course of his career? Could it be that President Obama is treading lightly on the issue because to date he appears to have lost his edge with two of his largest financial supporters from 2008 — Goldman Sachs and JPMorgan — who according to OpenSecrets.org are the two largest sources of contributions to the Romney campaign?

It is getting boring reading about how the events of the past week — to say nothing of the past decade — suggest why our banks should be smaller or risk trading functions separated from traditional commercial banking. Democrats that continue to believe that we can regulate our way out of this either don’t want to give up their share of the money or simply lack imagination. Banks should be smaller so they can fail with the regularity with which small banks do fail. JP’s oft-repeated argument that their nearly one hundred trillion dollars derivatives book is book-matched and therefore does not constitute a systemic risk to the financial system is disingenuous at best and simply dishonest at worst.

Lost in the endless — and endlessly self-serving — arguments is the fact that commercial banking is essential to the economy, and thus is supported by numerous institutions including the FDIC and the Fed — and that the integration of investment banking and commercial banking (a brainchild of Dimon’s mentor Sandy Weill) has brought little to no demonstrable value to commercial banking’s core societal function, while bringing much to the investment banking world — massive bonuses, a bottomless supply of free capital and the socialization of trading risk.

Both Jamie Dimon and our nation’s political leaders face the same fundamental problem: As risky as the status quo might be, no one can afford to give it up. For Jamie Dimon, derivatives trading is a gravy train that has underpinned JPMorgan’s profitability, regardless of the larger threat it may entail, while for our political leaders major contributors are an irreplaceable constituency always for sale to the highest bidder.

But don’t worry about Bruno Iksil. Whether Jamie Dimon finds he has to let him go, or figures out a way to keep him, he will be fine. There will always be a market for a proven derivatives trader, particularly one with the moniker of the true master of the universe. He will not be tainted by this trade, no matter what the final damage turns out to be, or at least not for long. After all, take a look at his new boss who took over from Ina Drew. He was formerly a trader at Long-term Capital Management.

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Not surprisingly, I’m not the only one getting ignored because of my inexperience, and the rejections can be downright vicious. Just last week, Kate called me in tears after attending a media conference with well-known industry bigwigs. After spending months anxiously anticipating meeting her professional heroes, she couldn’t have been more disheartened on the day of the event. Noting that she had been working in the industry for less than a year, most executives simply refused to engage in conversation with her, and the ones that did spoke to her in a condescending, suspicious manner that made her “feel like a kid who was inconveniencing a gathering of distinguished adults.” She flew home categorically disillusioned.

As a proud supporter of the young, I was disgusted at the extent to which she was repeatedly shunned for, essentially, being too inexperienced. Yes, young and ambitious people with bright eyes and open hearts need to learn to accept the cold shoulder of established industry gatekeepers, even when it seems like the only goal of the latter is to prevent new ideas and innovation bubbling to the surface of their tired companies and low-growth industries. But a line needs to be drawn between not fully engaging with the inexperienced (painful, but understandable) and making them feel like they’ve committed a crime with their lack of knowledge and years under their belt (not okay, ever).

More importantly, though, I’m disheartened at the response — at how those with limited experience beef up resumes, wear expensive suits, use industry jargon liberally, name-drop awkwardly, and generally try to paper over cracks in an effort to mask inexperience and appeal more to bosses, investors, or interviewers. Why are we playing dancing bear in the circus of the experienced? Everyone knows that you don’t have “deep expertise in retail” when you’re only three years out of grad school. Trying to sound more experienced than you are is a flawed strategy, so you need to change the way you compete.

Instead of forging the impression of experience, I’d rather we turn the tables and use our inexperience as an advantage in the organizations we work for and the companies we start. In other words, we need to start playing to our strengths.

Being inexperienced means you’re not shackled with decades of service in a narrow vertical and the accompanying entrenched biases and relationships. You have natural qualities to offer that companies spend millions of dollars per year in training budgets trying to replicate in their most senior executives. You question long-held assumptions, cross-pollinating your projects with outside ideas. You don’t have to pander to the person who did you a favor all those years ago, and more generally, you don’t have social capital within your organization to protect. This means you’re pretty free from some huge barriers to innovation: sunk costs, self-interest, and bias. That sense of freedom and independence leads you to think that hitting that stretch goal is possible, which makes achieving it more likely. You tend to think of new solutions quickly, refuse to compromise yourself out of existence, and are a native end-user of technologies that could blow existing business models to bits. All this amounts to at least two things: 1) The best organizations should wage wars for people like you, and 2) you can stop looking for opportunities to appear to be adding value. Instead, you can actually add value.

If those nagging self-doubts return, don’t look up to role models for inspiration; look around at your peers for evidence. Writing Passion & Purpose showed me how countless young people have impacted the world in incredible ways, and how they’re doing this in public, private, and nonprofit sectors, across industries, within established organizations and in their own companies. Most importantly, they’re making a difference in industries that they haven’t spent the better part of their lives in. You can join them.

Inexperience doesn’t equal ineptitude, and we need to stop treating young professionals like second-class citizens. To those of you who think that your inexperience is a chronic disadvantage, stop. Don’t let anyone confuse your inexperience in performing a task with an inability to perform it. Instead, be encouraged and seize the opportunity to remain humble, play to your advantages, and show the world you can do better.

This post was originally published on HBR.org.

For more by Daniel Gulati, click here.

For more on emotional intelligence, click here.

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Looking to boost its startup scene, Nova Scotia put out a worldwide call for companies focused on clean technology. Through Innovacorp, a Crown corporation that invests in early stage companies, Nova Scotia offered more than $ 300,000 in funding and services to lure a promising clean tech startup to its shores.

“We thought, ‘Why not just throw open the doors to the world and see what happens,’ ” recalled Mr. Rankin, Innovacorp’s investment manager and organizer of the Nova Scotia CleanTech Open. “It was a bit of a long shot and a bit of an experiment, but one that was based on the thesis that this is a really great place to build a company.”

Mr. Rankin became the CleanTech Open’s “chief salesman,” responsible for promoting the contest and drumming up quality submissions. Initially, there was concern about what the contest would actually yield.

“To be honest, we didn’t know what was going to show up,” he said. “The most difficult part was getting the message out from little Nova Scotia. Entrepreneurs are notoriously difficult to find in your own backyard, let alone in backyards all over the world.”

Innovacorp promoted the competition by sponsoring international clean tech conferences, and by tapping the C100, a network of Canadian technology entrepreneurs largely based in Silicon Valley.

It also secured some distinguished judges to grade its applicants. The five-person judging panel included Danielle Fong, a clean tech entrepreneur who, at age 17, started a PhD at Princeton.

The other judges were Patrick Keefe, Innovacorp’s vice-president of investment; Matthew Nordan, vice-president of Venrock, the venture capital arm of the Rockefeller family; Daniel Marchand, chief executive of the Canadian Renewable Energy Fund; and Mr. Rankin.

A native of Nova Scotia, Ms. Fong is the co-founder and chief scientist at LightSail Energy, a Berkeley, Calif.-based tech company. On her website, she called the CleanTech Open “remarkable not only for being in my home province, but also for its amazing quality, rigor, and prize money.”

Despite his initial concerns, Mr. Rankin received 65 submissions for the clean tech contest. Applications arrived from the United States, Europe, the Caribbean, China and across Canada. Half were from within Nova Scotia.

The submissions were whittled down to a shortlist of 10 startups, including companies from the U.S., Canada, Serbia, the Netherlands and Denmark. For two days in February, the finalists gathered in Halifax and made their pitch to Ms. Fong and the other judges. There was a wide range of ideas: from lighting technology to electric vehicles.

In the end, even with the contest’s international focus, a local company nabbed the top spot.

“Wow, I’m slightly in awe,” said Mather Carscallen after his startup was crowned the winner at a formal announcement in late April.

His two-year-old company, SABRTech Inc., is developing technology designed to make algae a sustainable source of biofuel. Mr. Carscallen, a PhD student at Dalhousie University in Halifax, said the oil from algae can be refined into a biofuel replacement for gasoline and diesel.
Mr. Carscallen said the algae material used in biofuel production is essentially “a giant bucket of green slop that smells like a rotting compost heap.

“Despite the smell and its unappealing look, it is a beautiful little organism that provides a vast majority of the ecosystems on this plant with an energy source,” he said.

“Why not use that same energy source to fuel our cars and our trucks? And even further, why not use that same energy source, which nature has perfected over billions of years, to fuel every single plane across the globe? That’s our dream.”

The use of biofuels would significantly reduce the amount of emissions produced by the aviation industry. Many airlines — Lufthansa and Porter Airlines among them — have experimented with different biofuel blends. But there is a problem: Biofuels are significantly more expensive than their fossil fuel cousins.

Mr. Carscallen said his goal is to drastically boost the production and harvesting of algae, while lowering the costs. Only when it is mass-produced can algae be used to fuel the global aviation sector, he said.

By winning the CleanTech Open, Mr. Carscallen secured more than $ 300,000 in cash, seed investment and in-kind business services. Those resources will be used to build and test a prototype of his technology. If all goes to plan, SABRTech will have a production plant for mass-producing algae up and running within two to three years.

Such success would help put Atlantic Canada on the “global map” for clean tech development, Mr. Carscallen said.

“When you think of this industry you don’t think immediately of the Atlantic region,” he said from his lab in Herring Cove, near Halifax. “It’s time for the Atlantic provinces to step up and show that we have a lot of innovative technology.”

And there could be more.

Mr. Rankin said Innovacorp is in talks with a handful of companies from the CleanTech Open. “We developed a pipeline of companies that we know are interes

From:Financial Post | Business » Entrepreneur

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We were introduced through colleagues at Sustainable Brands, a conference Raj is speaking at this June. As we’d both attended several SB shows over the years, our chat naturally started with the metamorphosis of CSR reflected in the yearly events.

“I’ve seen sustainability evolve from being a bolt-on risk mitigation tool to something built into the company, to part of a company’s DNA” Raj reflected. “I see the Method model, where CSR is baked into the company charter, as the next step.”

To Raj, the beauty of SB is that you get to meet with companies along the entire continuum of CSR at the show. So no matter if you’re starting out, or have a mature CSR program, there’s always someone there you can learn from or collaborate with.

This talk about the evolution of CSR provided a natural segue to Raj’s speaking topic at SB.

Wal-Mart is unveiling a pilot program in closed-loop retail, which — if successful — would definitely put the company at the leading edge of CSR thinking.

Closed loop is a simple concept with dramatic implications. Our current retail system is set up to sell new products, which are used and then disposed of — very much a linear (and inefficient) process.

Closed loop implies that once products are used and ready to be jettisoned, they can in fact be reconditioned and brought back into the sales loop. This would enable each item to stay in circulation much longer before finally being thrown away.

Wal-Mart has chosen electronics as the area of focus for its closed loop exploration. But the concept works equally well in other retail areas. Raj’s panel partners at SB include Patagonia and eBay — two companies that have partnered to create the common threads clothing exchange.

Closed loop hybrids are also finding success. Concepts like car sharing, for example, are proving the business case for maximizing usage of underutilized products, effectively slowing consumption of new vehicles.

The point is, a few years ago, an innovation like closed loop retail or product sharing would have been laughed off the boardroom table. Timing, it seems, is everything.

“You need to time innovation to the readiness of your market” said Raj. “Wal-Mart was a pioneer in building eco-efficiency and eco-innovation into the business. Each innovation built on the last, and each was laser-focused on our mantra of saving customers money.”

So it seems it isn’t just the consumer who needs to be primed for the release of a new innovation — the company culture needs to be acclimatized to the new thinking as well.

“It’s definitely moving us along a continuum. The exciting part is, it’s helping us as a company stay fresh and innovative, as it helps our society figure out how to survive, and thrive, in a changing world. We’re giving people what they want, in a different way.”

A way that seems perfectly timed, I’d say.

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As companies created profiles on sites like Facebook and Twitter, customers found they could put their gripes on blast for the whole world to see, forcing an entirely new dynamic in business communication, one that many companies are still struggling to master.

In a recent study from American Express, 17% of respondents said they used social media for customer service in the last year, and 80% of them said they didn’t complete a purchase because the service was unsatisfactory. Another study from Conversocial showed some brands are taking as long as 50 hours to respond to questions asked online. That’s business they’re just giving away.

Finally, in our Social Media Shorthand segment, we’ll take a look at content curation.

Missed last week’s episode about online ads? Check it out here.

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For its part, Wall Street’s view of Obama has certainly “evolved” since 2008 when Wall Street bankers seemed to have fallen in love with Obama.

As New York Times reporter Nicholas Confessore recently wrote:

“By the beginning of the year, it had… become obvious to many on Wall Street that Obama’s campaign was going to take a populist turn. Some bankers believed that the administration’s strategy was to talk tough in public and play damage control in private, and they were sick of playing along… One former supporter, [hedge fund manager] Dan Loeb, compared Obama to Nero… Stephen A. Schwarzman, a founder of [private equity firm] Blackstone, said that an Obama proposal to raise taxes on “carried interest” [which taxes hedge fund and private equity managers like Schwarzman and Mitt Romney at 15% instead of 35%]… reminded him of ‘when Hitler invaded Poland in 1939.’

‘I think it’s an unfixable relationship,’ one Democrat involved in planning the March 1 [New York Obama] fundraisers told me this spring. ‘They hate him. They really, really do.’”

Having contributed more money to candidate Obama in 2008 than to John McCain or Hillary Clinton — and having been rewarded by a President Obama who largely protected their interests — Wall Street banks and hedge funds now seem determined to throw Obama under the bus and contribute the overwhelming majority of their massive campaign funds to one of their own, former Bain Capital Chairman Mitt Romney and Republican super PACS run by the likes of Karl Rove.

It’s not enough for Wall Street that President Obama appointed a pro-Wall Street economic team led by Tim Geithner and Larry Summers. It’s not enough that Geithner successfully lobbied Sen. Chris Dodd to remove a provision from the 2009 stimulus bill banning bonuses to bank executives whose financial institutions were bailed out by the Federal government. It’s not enough that the Obama administration insured that the Dodd Frank financial reform bill was relatively weak — the Obama administration lobbied Democrats in Congress to vote down amendments that would have limited the size of Too Big to Fail banks or that would have reinstituted the Glass-Steagall Act, which for half a century separated federally insured commercial banks from investment banks that could gamble trillions of dollars in the global financial casino. It’s not enough that in 2010 Obama allowed all of the Bush-era tax cuts — including those for the richest Americans — to be extended. It’s not enough that the Obama administration allowed bank lobbyist to delay the implementation, and water down the regulations, in the already weak Dodd Frank bill. It’s not enough that in the past 3 years under Obama’s presidency, the Dow is up over 60% and corporate profits have soared, increasing the wealth of the top 1% while the income of the rest of America stagnates.

No. Wall Street has already gotten what it wanted from Obama — a president who, in the wake of the financial meltdown of 2008, would deflect the pitchforks of angry Americans. Now Wall Street is treating Obama like a cheap hooker. They paid their money, got their services, and they’re ready to send him back out on the streets.

In its infinite greed, the moderate, centrist Barack Obama who saved their butts is no longer enough for most of Wall Street. It believes it can use its wealth — further unleashed by the Citizens United decision allowing unlimited contributions to super PACS — to install one of its own, private equity multi-millionaire Mitt Romney, in the White House, someone who promises to repeal even the modest regulations of Dodd Frank and to insure that millionaires and billionaires won’t pay a single dime more in taxes from their untold fortunes.

So Obama has a choice. He can continue to talk like a bit of a populist in public and send emissaries to Wall Street in private to assure the bankers and hedge fund managers that they have nothing to fear from him, in the hope that Wall Street will continue to send campaign cash his way as insurance in case he gets reelected.

Or Obama can take a cue from FDR’s landslide 1936 reelection campaign, in which FDR proclaimed,

“We know now that Government by organized money is just as dangerous as Government by organized mob.

Never before in all our history have these forces been so united against one candidate as they stand today. They are unanimous in their hate for me — and I welcome their hatred.”

He can then propose a program to make the big banks Small Enough to Fail, without their failure so threatening the economy that the taxpayers will again have no choice but to bail them out when the next financial bubble bursts. This includes:

• Call all his top regulators — the Treasury Secretary, the Fed Chairman, the Comptroller of the Currency, the head of the SEC, the head of the Securities Futures Trading Commission, the head of the FDIC — into the Oval Office and make it clear that he expects regulators to promptly promulgate regulations that strongly enforce the letter and spirit of the Dodd-Frank act, including the strongest possible version of the Volker Rule closing loopholes that might allow federally insured banks to engage in anything that looks or smells like proprietary trading.

• Call for the passage of a new Glass-Steagall Act which will cleanly separate federally insured commercial banks from risky investment banks. As JPMorgan Chase’s massive trading losses on recent hedges (which may not have violated the Volker Rule) shows, Wall Street banks will inevitably find loopholes in something as complex as the Volker Rule, whose proposed regulations run thousands of pages. KISS = Keep It Simple Stupid. If you want to gamble in the global financial casino, you can’t take federally insured deposits, and vice versa.

• Break up Too Big To Fail banks. Call for the passage of the Brown-Kaufman Amendment (which the Obama administration previously opposed) that would limit the size of any single bank to 10% of the total insured deposits in the banking system.

• Call for real principal relief for underwater homeowners and use all of the tools already at the disposal of the executive branch to bring this about.

• Unleash the Justice Department and SEC to civilly and criminally prosecute bankers who gamed the system and caused the 2008 financial crash.

• Place a 0.1% tax on all financial transactions. This would, as former Clinton Labor Secretary Robert Reich points, out, bring in more than $ 250 billion over 10 years while slowing speculators and reducing the wild gyrations of financial markets.

There’s nothing really radical about this kind of program. It’s in the clear tradition of the New Deal which saved capitalism from its own worst excesses. The Dallas Fed, one of the most conservative branches of the Fed, recently called for breaking up the biggest banks in order to make capitalism safer, a call which was joined this week by the President of the St. Louis Fed.

Wall Street would of course freak out and pour even more millions into Romney’s campaign and super PACS. But with Wall Street already hating him, Obama can’t win the money war with Wall Street, anyway.

What he can win is the popular war for the hearts and minds of the American people. Americans hate Wall Street and they hate the bankers who were bailed out by taxpayers and put the money in their pockets in continue multi-million dollar bonuses. Obama can make clear in his campaign that he stands with the American people and not with Wall Street who is funding Mitt “Mr 1%” Romney’s campaign to put one of their own in the White House.

Either Obama can continue to privately suck up to Wall Street behind the scenes in the hope of competing for their campaign cash, acting like a battered housewife who keeps doing her husband’s bidding in the futile hope that he’ll stop beating her. Or he can become the actual populist reformer that Wall Street fears him secretly to be. He can channel his inner FDR and welcome the hatred of organized money in the name of standing up for the American people.

From:The Blog

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The bomb is your failure to be clear about, or even consider, ownership of the business connections represented by social media platforms such as Facebook, Twitter and LinkedIn. A couple of ongoing lawsuits, which I discuss in my presentations on the legal issues in social media, are examples of the trouble that you can avoid with a little attention.

In both cases, former employees (one was even the former owner) thought the social media networks (one on Twitter, the other on LinkedIn) built while at their old jobs belonged to them personally. The former employers thought differently. It wasn’t the tweets, posts, pictures, etc. that mattered; rather the issue was ownership of the network, the extensive base of active business connections — fans, followers, friends, whatever — represented by the accounts.

Since the employees had a hard time understanding how their “personal” accounts could be company property, litigation ensued. Now legal fees are piling up, and valuable time that could be spent on the real work of running a business is instead being spent applying old legal principles to the new and constantly evolving world of social media. Neither case has yet reached any definite conclusions, and even if they do, they will be limited by their facts and the laws in their states.

What is clear is that, under some circumstances, a Twitter or LinkedIn account that might appear to be personal may actually belong to the employer. That means a “personal” Facebook profile or Pinterest board, you name it, could likewise be company property. I’m not saying that result is right or wrong. I am saying that having the employee and employer agree upon ownership beforehand is infinitely better than going to court to determine it later.

Truly personal social media isn’t the concern, though companies should have policies on when such personal activities can take place while at work or using company property. Many business people (me included), however, promote their companies through their “personal” social media. Some companies, likewise, instruct their employees in coordinating “personal” social media for business purposes. In the same vein, subordinate employees often maintain the “personal” accounts of some high-profile employees.

If any of those situations sounds even vaguely familiar, or if you just want to be certain, it’s time to invest some thought and energy (and a little bit of legal fees) in the development of a policy that distinguishes the rights of the employee from those of the employer.

That process should solve at least part of the issue. Even when ownership of the account is clear, the actual use of the account could still create problems. In a future post I will tackle another potentially explosive issue: non-compete and non-solicitation agreements in a highly connected digital world.

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Nine bills that would roll back the derivatives reforms created in the wake of the financial crisis are moving in Congress. These proposals, most of which have already passed in committee, have been put forth in the name of furthering the competitiveness of U.S. companies and creating jobs for Main Street. These are quite brazen claims, since deregulating derivatives arguably did more to harm economic competitiveness and job creation than anything Congress has done for a very long time.

Here is the history, in brief: At the end of the Clinton administration, financial derivatives were relatively new and sat in a regulatory netherworld. In practice, they were not regulated. But they bore all the hallmarks of traditional futures, which by law must be traded on regulated exchanges.

Federal Reserve Chairman Alan Greenspan and successive Treasury Secretaries Robert Rubin and Lawrence Summers (a trio Time magazine dubbed The Committee to Save the World) argued that financial derivatives investors were too “sophisticated” to require oversight. Regulating derivatives would “cause the worst financial crisis since World War II,” Summers claimed.

In 2000, with the passage of the Commodity Futures Modernization Act, Congress established a regulation-free haven for financial derivatives. Derivatives soon became a petri dish for the growth of financial risk-taking, especially relating to the housing market.

In rough terms, derivatives dealers sold hundreds of billions of dollars worth of quasi-insurance policies (called credit default swaps) on mortgage-backed securities to holders of the securities. The illusion of protection provided by these insurance policies helped create a voracious appetite on Wall Street for mortgages to bundle into securities. This, in turn, led mortgage originators to adopt laughably low underwriting standards, causing housing prices to soar to unsustainable levels.

When reality intervened and mortgages defaults began occurring in droves, holders of defaulted mortgage-backed securities submitted claims to the providers of their credit default swap “insurance policies” (primarily American International Group, or AIG), only to learn that AIG could not make good on its promises. The absence of supervision of derivatives had permitted AIG to amass risks well in excess of its resources — and thereby put the entire economy in grave jeopardy.

AIG’s inability to pay its counterparties threatened to cause a ripple effect of institutional failures that could have thrown the economy back into the Stone Age. A $ 700 billion taxpayer-funded bailout was ordered up to prevent a total collapse of the financial system. Regular Americans were left to suffer through the deepest recession since the Great Depression.

Experts agree with the essence of the summary above. Each of the members of The Committee to Save the World, for instance, has recanted his advocacy for a laissez-faire approach to derivatives. Rubin now says he even favored regulation when critical decisions were being made in the late 1990s, but that “very strongly held views in the financial services industry in opposition to regulation were insurmountable.”

Which brings us to the present: The Dodd-Frank Wall Street Reform and Consumer Protection Act instituted a series of commonsense reforms, including requirements for derivatives trades to occur on designated exchanges. This key provision would ensure that prices are transparent and that a centralized clearing agency guarantees the credit worthiness of trading participants. This is how stocks and futures have been traded since the reforms of the 1930s. But because more money can be made trading on opaque, unsupervised markets, Wall Street objects to this reform. Once again, its leaders are attempting to subject Washington, and the country, to an insurmountable force.

Of the bills seeking to punch holes in Dodd-Frank, a few are comically ridiculous — and dangerous. One, H.R. 3283, cedes regulatory authority to foreign governments for the overseas activities of U.S. firms. Ask yourself, when was the last time Congress advocated submitting to foreign control of anything? Only Wall Street’s influence could convince lawmakers to favor such a thing.

Another bill is the cleverly titled Swaps Bailout Prevention Act. It does the opposite of what its title suggests. It would repeal Dodd-Frank’s prohibition against bailing out of major derivatives participants and, thus, allow federally insured banks to remain major derivatives players.

Last week brought news that JPMorganChase, the nation’s largest bank, suffered losses of at least $ 2 billion — which may climb above $ 4 billion — on bets on credit default swaps, the same scourge that led to the 2008 crisis. More alarming, the bank’s losses came on positions that may have been as high as$ 100 billion, meaning that a slight change in conditions had potentially enormous implications. This is exactly why derivatives, which financier Warren Buffett presciently labeled financial weapons of mass destruction in 2003, require vigilant public oversight.

The JPMorgan episode may be the warning that Congress needs to return to its role of protecting the public rather than coddling the banks. But it also raises a question: How many times does a lesson have to be taught before it is learned?

Taylor Lincoln is research director for Public Citizen’s Congress Watch division. @Public_Citizen.

From:The Blog

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