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What Cooked the World's Economy?
by: James Lieber, The Village Voice
Editors Note: While I fervently disagree that THIS is the CAUSE of the collapse, and I have outlined my analysis in various posts on Conspireality, THIS issue is the NEXT big wave and a major challenge to recovery.. I am of the opinion that the simple solution is just wipe it all… The trillions leveraged is all vapor money. Just say "poof". You paid big money in these highly suspectfinancial instruments, too bad, you wasted your money. But we definitely SHOULD not give a penny to banks who intend to use the bailout to pay off these credit swaps…
While the numbers are staggering, this really is no where near as tangibly devastating as the housing crash and credit freeze. That is the first thing that HAS to happen. The GOVERNMENT HAS TO GET CREDIT back on the street. And if the banks won't do it, let them fail. They provide so little real tangiblevalue to society or the economy in the service they offer, much like the insurance companies. Better yet, send them, to jail for criminal negligence. I could go on much further on this but I will save it for another post…
It wasn't your overdue mortgage.
It's 2009. You're laid off, furloughed, foreclosed on, or you know someone who is. You wonder where you'll fit into the grim new semi-socialistic post-post-industrial economy colloquially known as "this mess."
You're astonished and possibly ashamed that mutant financial instruments dreamed up in your great country have spawned worldwide misery. You can't comprehend, much less trim, the amount of bailout money parachuting into the laps of incompetents, hoarders, and miscreants. It's been a tough century so far: 9/11, Iraq, and now this. At least we have a bright new president. He'll give you a job painting a bridge. You may need it to keep body and soul together.
The basic story line so far is that we are all to blame, including homeowners who bit off more than they could chew, lenders who wrote absurd adjustable-rate mortgages, and greedy investment bankers.
Credit derivatives also figure heavily in the plot. Apologists say that these became so complicated that even Wall Street couldn't understand them and that they created "an unacceptable level of risk." Then these blowhards tell us that the bailout will pump hundreds of billions of dollars into the credit arteries and save the patient, which is the world's financial system. It will take time – maybe a year or so – but if everyone hangs in there, we'll be all right. No structural damage has been done, and all's well that ends well.
Sorry, but that's drivel. In fact, what we are living through is the worst financial scandal in history. It dwarfs 1929, Ponzi's scheme, Teapot Dome, the South Sea Bubble, tulip bulbs, you name it. Bernie Madoff? He's peanuts.
Credit derivatives – those securities that few have ever seen – are one reason why this crisis is so different from 1929.
Derivatives weren't initially evil. They began as insurance policies on large loans. A bank that wished to lend money to a big, but shaky, venture, like what Ford or GM have become, could hedge its bet by buying a credit derivative to cover losses if the debtor defaulted. Derivatives weren't cheap, but in the era of globalization and declining American competitiveness, they were prudent. Interestingly, the company that put the basic hardware and software together for pricing and clearing derivatives was Bloomberg. It was quite expensive for a financial institution – say, a bank – to get a Bloomberg machine and receive the specialized training required to certify analysts who would figure out the terms of the insurance. These Bloomberg terminals, originally called Market Masters, were first installed at Merrill Lynch in the late 1980s.
Subsequently, thousands of units have been placed in trading and financial institutions; they became the cornerstone of Michael Bloomberg's wealth, marrying his skills as a securities trader and an electrical engineer.
It's an open question when or if he or his company knew how they would be misused over time to devastate the world's economy.
Fast-forward to the early years of the Clinton administration.After an initial surge of regulatory behavior in favor of fair markets, especially in antitrust, that sort of behavior was abandoned, and free markets triumphed. The result was a morass of white-collar sociopathy at Archer Daniels Midland, Enron, and WorldCom, and in a host of markets ranging from oil to vitamins.
This was the beginning of the heyday of hedge funds. Unregulated investment houses were originally based on the questionable but legal practice of short-selling – selling a financial instrument you don't own in hopes of buying it back later at a lower price. That way, you hedge your bets: You cover your investment in a company in case a company's stock price falls.
But hedge funds later diversified their practices beyond that easy definition. These funds acquired a good deal of popular mystique. They made scads of money. Their notoriously high entry fees – up to 5 percent of the investment, plus as much as 36 percent of profits – served as barriers to all but the richest investors, who gave fortunes to the funds to play with. The funds boasted of having genius analysts and fabulous proprietary algorithms. Few could discern what they really did, but the returns, for those who could buy in, often seemed magical.
But it wasn't magic. It amounted to the return of the age-old scam called "bucket shops." Also sometimes known as "boiler rooms," bucket shops emerged after the Civil War. Usually, they were storefronts where people came to bet on stocks without owning them. Unlike their customers, the shops actually owned blocks of stock. If customers were betting that a stock would go up, the shops would sell it and the price would plunge; if bettors were bearish, the shops would buy. In this way, they cleaned out their customers. Frenetic bucket-shop activity caused the Panic of 1907. By 1909, New York had banned bucket shops, and every other state soon followed.
In the mid-'90s, though, the credit-derivatives industry was hitting its stride and argued vehemently for exclusion from all state and federal anti-bucket-shop regulations. On the side of the industry were Federal Reserve Chairman Alan Greenspan, Treasury Secretary Robert Rubin, and his deputy, Lawrence Summers. Holding the fort for the regulators was Brooksley Born, who headed the Commodity Futures Trading Commission (CFTC). The three financial titans ridiculed the virtually unknown and cloutless, but brilliant and prophetic Born, who warned that unrestricted derivatives trading would "threaten our regulated markets, or indeed, our economy, without any federal agency knowing about it." Warren Buffett also weighed in against deregulation.
But Congress loved Greenspan – a/k/a "the Maestro" and "the Oracle" – and Clinton loved Rubin. The sleepy hearings received almost no public attention. The upshot was that Congress removed oversight of derivatives from the CFTC and preempted all state anti-bucket-shop laws. Born resigned shortly afterward.
Soon, something odd started to happen. Legitimate big investors, often with millions of dollars to place, found that they couldn't get into certain hedge funds, despite the fact that they were willing to pay steep fees. In retrospect, it seems as if these funds did not want fussy outsiders looking into what they were doing with derivatives.
Imagine that a person is terminally ill. He or she would not be able to buy a life insurance policy with a huge death benefit. Obviously, third parties could not purchase policies on the soon-to-be-dead person's life. Yet something like that occurred in the financial world.
This was not caused by imprudent mortgage lending, though that was a piece of the puzzle. Yes, Fannie Mae and Freddie Mac were put on steroids during the '90s, and some people got into mortgages who shouldn't have. But the vast majority of homeowners paid their mortgages. Only about 5 to 10 percent of these loans failed – not enough to cause systemic financial failure. (The dollar amount of defaulted mortgages in the U.S. is about $1.2 trillion, which seems like a princely sum, but it's not nearly enough to drag down the entire civilized world.)
Much more dangerous was the notorious bundling of mortgages. Investment banks gathered these loans into batches and turned them into securities called collateralized debt obligations (CDOs). Many included high-risk loans. These securities were then rated by Standard & Poor's, Fitch Ratings, or Moody's Investors Services, who were paid at premium rates and gave investment grades. This was like putting lipstick on pigs with the plague. Banks like Wachovia, National City, Washington Mutual, and Lehman Brothers loaded up on this financial trash, which soon proved to be practically worthless. Today, those banks are extinct. But even that was not enough to cause a worldwide financial crisis.
What did cause the crisis was the writing of credit derivatives. In theory, they were insurance policies for investors; in practice, they became a guarantee of global financial collapse.
As insurance, they were poised to pay off fabulously when these weak bundled securities failed. And who was waiting to collect? Well, every gambler is looking for a sure bet. Most never find it. But the hedge funds and their ilk did.
The mantra of entrepreneurial culture is that high risk goes with high reward.But unregulated and opaque derivatives trading was countercultural in the sense that low or no risk led to quick, astronomically high rewards. By plunking down millions of dollars, a hedge fund could reap billions once these fatally constructed securities plunged. Again, the funds did not need to own the securities; they just needed to pay for the derivatives – the insurance policies for the securities. And they could pay for them again and again. This was known as replicating. It became an addiction.
About $2 trillion in credit derivatives in 1989 jumped to $8 trillion in 1994 and skyrocketed to $100 trillion in 2002. Last year, the Bank for International Settlements, a consortium of the world's central banks based in Basel (the Fed chair, Ben Bernanke, sits on its board), reported the gross value of these commitments at $596 trillion. Some are due, and some will mature soon. Typically, they involve contracts of five years or less.
Credit derivatives are breaking and will continue to break the world's financial system and cause an unending crisis of liquidity and gummed-up credit. Warren Buffett branded derivatives the "financial weapons of mass destruction." Felix Rohatyn, the investment banker who organized the bailout of New York a generation ago, called them "financial hydrogen bombs."
Both are right. At almost $600 trillion, over-the-counter (OTC) derivatives dwarf the value of publicly traded equities on world exchanges, which totaled $62.5 trillion in the fall of 2007 and fell to $36.6 trillion a year later.
The nice thing about public markets is that they act as canaries that give warnings as they did in 1929, 1987 (the program trading debacle), and 2001 (the dot-com bubble), so we can scramble out with our economic lives. But completely private and unregulated, the OTC derivatives trade is justly known as the "dark market."
The heart of darkness was the AIG Financial Products (AIGFP) office in London, where a large proportion of the derivatives were written. AIG had placed this unit outside American borders, which meant that it would not have to abide by American insurance reserve requirements. In other words, the derivatives clerks in London could sell as many products as they could write – even if it would bankrupt the company.
The president of AIGFP, a tyrannical super-salesman named Joseph Cassano, certainly had the experience. In the 1980s, he was an executive at Drexel Burnham Lambert, the now-defunct brokerage that became the pivot of the junk-bond scandal that led to the jailing of Michael Milken, David Levine, and Ivan Boesky.
During the peak years of derivatives trading, the 400 or so employees of the London unit reportedly averaged earnings in excess of a million dollars a year. They sold "protection" – this Runyonesque term was favored – worth more than three times the value of parent company AIG. How could they have not known that they were putting at risk the largest insurer in the world and all the businesses and individuals that it covered?
This scheme that smacks of securities fraud facilitated the dreams of buyers called "counterparties" willing to ante up. Hedge fund offices sprouted in Kensington and Mayfair like mushrooms after a summer shower. Revenue from premiums for derivatives at AIGFP rose from $737 million in 1999 to $3.26 billion in 2005. Cassano reportedly hectored ever-willing counterparties to "play the power game" – in other words, gobble up all the credit derivatives backing CDOs that they could grab. As the bundled adjustable-rate mortgages ballooned, stretched home buyers defaulted, and the exciting power game became about as risky as blasting sitting ducks with a Glock.
People still seem surprised to read that hedge principals have raked in billions of dollars in a single year. They shouldn't be. These subprime-time players knew how to score. The scam bled AIG white. In mid-September, when it was on the ropes, AIG received an astonishing $85 billion emergency line of credit from the Fed. Soon, that was supplemented by another $67 billion. Much of that money, to use the government's euphemism, has already been "drawn down." Shamefully, neither Washington nor AIG will explain where the billions went. But the answer is increasingly clear: It went to counterparties who bought derivatives from Cassano's shop in London.
Imagine if a ring of cashiers at a local bank made thousands of bad loans, aware that they could break the bank.They would be prosecuted for fraud and racketeering under the anti-gangster RICO Act. If their counterparties – the debtors – were in on the scam and understood that they didn't have to pay off the loans, they could be charged, too. In fact, this scenario played out at subprime-pushing outlets of a host of banks, including Washington Mutual (acquired last year by JP Morgan Chase, which itself received a $25 billion bailout); IndyMac (which was seized by FDIC regulators); and Lehman Brothers (which went belly-up). About 150 prosecutions of this type of fraud are going forward.
The top of the swamp's food chain, where the muck was derivatives rather than mortgages, must also be scrutinized. Apparently, that is the case. AIGFP's Cassano has hired top white-collar litigator and former prosecutor F. Joseph Warin (profiled in the 2004 Washingtonian piece, "Who to Call When You're Under Investigation!"). Neither Cassano nor his attorney responded to interview requests.
AIG's lavishly compensated counterparties were willing participants and likewise could be considered for prosecution, depending on what they knew. Who were they?
At a 2007 conference, Cassano defined them as a "global swath" that included "banks and investment banks, pension funds, endowments, foundations, insurance companies, hedge funds, money managers, high-net-worth individuals, municipalities, sovereigns, and supranationals." Abetting the scheme, ratings agencies like Standard & Poor's gave high grades to the shaky mortgage-backed securities bundled by investment banks such as Goldman Sachs and Lehman Brothers.
After the relative worthlessness of these CDOs became clear, the raters rushed to downgrade them to junk status. This occurred suddenly with more than 4,000 CDOs in the first quarter of 2008 – the financial community now regards them as "toxic waste." Of course, the sudden massive downgrading raises the question: Why had CDOs been artificially elevated in the first place, leading banks to buy them and giving them protective coloring just because the derivatives writers "insured" them?
After the raters got real (i.e., got scared), the gig was up. Hedge funds fled in droves from their luxe digs in London. The industry remains murky, but some observers feel that more than half of all hedges will fold this year. Not necessarily a good sign, it seems to show that the funds were one-trick ponies living mainly off the derivatives play.
We know that AIG was not the only firm that sold derivatives: Lehman and Bear Stearns both dealt them and died. About 20 years ago, JP Morgan, the now-defunct investment bank, had brought the idea to AIGFP in London, which ran with it. Seeing the Cassano group's success, Morgan jumped in with both feet. Specializing in credit default swaps – a type of derivative triggered to pay off by negative events in the lives of loans, like defaults, foreclosures, and restructurings – Morgan had a distinctive marketing spin. Its "quants" were classy young dealers who could really do the math, which of course gave them credibility with those who couldn't. They abjured street slang like "protection." They pitched their sophisticated swaps as "technologies." The market adored them. They, in turn, oversold the product, made huge commissions, and wounded Morgan, which had to sell itself to Chase, becoming JP Morgan Chase – now the country's biggest bank.
Today, the real question is whether the Morgan quants knew the swaps didn't work and actually were grenades with pulled pins. Like Joseph Cassano, such people should consult attorneys.
Secrecy shrouds the bailout. The 21 banks that each received more than $1 billion from the Fed won't disclose how, or even if, they're lending it, which hardly quells fears of hoarding. The Treasury says it can't force disclosure because it took only preferred (non-voting) stock in exchange for the money.
If anything, the Fed had been less candid. It stonewalls requests to reveal the winners (mainly banks and corporations) of $1.5 trillion in loans, as well as the securities it received as collateral. A Freedom of Information Act (FOIA) suit to obtain this information by Bloomberg News has been rebuffed by the Fed, which insists that a loophole in FOIA exempts it. Bloomberg will probably lose the case, but at least it's trying to probe the black hole of bailout money. Of course, Barack Obama could tell the Fed to release the information, plus generally open the bailout to public eyes. That would be change that we could believe in.
As for Bloomberg, its business side, Bloomberg L.P., has been less than forthcoming. Requests to interview someone from the company – and Michael Bloomberg, who retains a controlling interest – about the derivatives trade went unanswered.
In his economic address at Cooper Union last spring, Obama argued for new regulations, which he called "the rules of the road," and for a $30 billion stimulus package, that now seems quaint. In the OTC swaps trade, the Bloomberg L.P.'s computer terminals are the road, bridges, and tunnels for "real-time" transactions. The L.P.'s promotional materials declare: "You're either in front of a Bloomberg or behind it." In terms of electronic trading of certain securities, including credit default swaps: "Access to a dealer's inventory is based upon client relationships with Bloomberg as the only conduit." In short, the L.P. looks like a dominant player – possibly, a monopoly. If it has a true competitor, I can't find it. But then, this is a very dark market.
Did Bloomberg L.P. do anything illegal? Absolutely not. We prosecute hit-and-run drivers, not roads. But there are many questions – about the size of the derivatives market, the names of the counterparties, the amount of replication of derivatives, the role of securities ratings in Bloomberg calculations (in other words, could puffing up be detected and potentially stop a swap?), and how the OTC industry should be reported and regulated in order to prevent future catastrophes. Bloomberg is a privately held company – to the chagrin of would-be investors – and quite private about its business, so this information probably won't surface without subpoenas.
So what do we do now?In 2000, the 106th Congress as its final effort passed the Commodity Futures Modernization Act (CFMA), and, disgracefully, President Clinton signed it. It opened up the bucket-shop loophole that capsized the world's economic system. With the stroke of a presidential pen, a century of valuable protection was lost.
Even with that, the dangerous swaps still almost found themselves subjected to state oversight. In 2000, AIG asked the New York State Insurance Department to decide if it wanted to regulate them, but the department's superintendent, Neil Levin, said no. The question was not posed by AIGFP, but by the company's main office through its general counsel, a reminder that not long ago, AIG was a blue chip with a triple-A rating that touted its integrity.
We can't know why Levin rejected the chance to regulate the tricky trade. He died in the restaurant at the top of the World Trade Center on the morning of 9/11. A Pataki-appointed former Goldman Sachs vice president, Levin may have shared other Wall Streeters' love of derivatives as the last big-money sure thing as the IPO craze wound down. Or maybe he saw swaps as gambling rather than insurance, hence beyond his jurisdiction. Regardless, current Insurance Superintendent Eric Dinallo told me, "I don't agree with his answer." Maybe the economic crisis could have been averted if Levin had answered otherwise. "How close we came …" Dinallo mused.
Deeply occupied with keeping AIG, the parent company, afloat since the bailout, Dinallo saw the carnage that the swaps caused and, with the support of Governor Paterson, pushed anew for regulatory oversight, a position also adopted by the President's Working Group (PWG), which includes the Treasury, Fed, SEC, and CFTC.
But regulation isn't enough to stop a phenomenon called "de-supervision" that occurs when officials can't, or won't, oversee a market. For instance, the Fed under Greenspan had authority to regulate mortgage bankers and brokers, the industry's cowboys who kicked off this fiasco. Because Greenspan's libertarian sensibilities prevented him from invoking the Fed's control, the mortgage market careened corruptly until the wheels came off. Notoriously lax and understaffed, the SEC did nothing to limit investment banks that bundled, pitched, and puffed non-prime mortgages as the raters cheered. It's doubtful that any agency can be relied on to control lucrative default swaps, which should be made illegal again. The bucket-shop loophole must be closed. The evil genie should go back in the bottle.
Will Obama re-criminalize these financial weapons by pushing for repeal of the CFMA? This should be a no-brainer for Obama, who, before becoming a community organizer in Chicago, worked on Wall Street, studied derivatives, and by now undoubtedly knows their destructive power.
What about the $600 trillion in credit derivatives that are still out there, sucking vital liquidity and credit out of the system? It's the tyrannosaurus in the mall, the one that made Henry Paulson, the former Treasury Secretary who looks like Daddy Warbucks, get down on his knees and beg Nancy Pelosi for a bailout.
Even with the bailout, no one can get their arms around this monster. Obviously, the $600 trillion includes not only many unseemly replicated death bets, but also some benign derivatives that creditors bought to hedge risky loans. Instead of sorting them out, the Bush administration tried to protect them all, while keeping the counterparties happy and anonymous.
Paulson has taken flack for spending little to bring mortgages in line with falling home values. Sheila Bair, the FDIC chief who often scrapped with Paulson, said this would cost a measly $25 billion and that without it, 10 million Americans could lose their homes over the next five years. Paulson thought it would take three times as much and balked. Congress is bristling because the Emergency Economic Stabilization Act (EESA) could provide mortgage relief – and some derivatives won't detonate if homeowners don't default. Obama's nominee for Treasury Secretary, Timothy Geithner, could back such relief at his hearings.
The other key appointment is attorney general. A century ago, when powerful trusts distorted the market system, we had AGs who relentlessly tracked and busted them. Today's crisis is missing, so far, an advocate as dynamic and energetic as the mortgage bankers, brokers, bundlers, raters, and quants who, in a few short years, littered the world with rotten loans, diseased CDOs, and lethal derivatives. During the Bush years, white-collar law enforcement actually dropped as FBI agents were transferred to antiterrorism. Even so, according to William Black, an effective federal litigator and regulator during the 1980s savings-and-loan scandal, by 2004, the FBI perceived an epidemic of fraud. Now a professor of law and finance at the University of Missouri-Kansas City, Black has testified to Congress about the current crisis and paints it as "control fraud" at every level. Such fraud flows from the top tiers of corporations – typically CEOs and CFOs, who control perverse compensation systems that reward cheating and volume rather than quality, and circumvent standard due diligence such as underwriting and accounting. For instance, AIGFP's Cassano reportedly rebuffed AIG's internal auditor.
The environment from the top of the chain – derivatives gang leaders – to the bottom of the chain – subprime, no-doc loan officers – became "criminogenic," Black says. The only real response? Aggressive prosecution of "elites" at all stages in this twisted mess. Black says sentences should not be the light, six-month slaps that white-collar criminals usually get, or the Madoff-style penthouse arrest.
As staggering as the Madoff meltdown was, it had a refreshing side – the funds were frozen. In the bailout, on the other hand, the government often seems to be completing the scam by quietly passing the proceeds to counterparties.
The advantage of treating these players like racketeers under federal law is that their ill-gotten gains could be forfeited. The government could recoup these odious gambling debts instead of simply paying them off. In finance, the bottom line is the bottom line. The bottom line in this scandal is that fantastically wealthy entities positioned themselves to make unfathomable fortunes by betting that average Americans – Joe Six-Packs and hockey moms – would fail.
Black suggests that derivatives should be "unwound" and that the payouts cease: "Close out the positions – most of them have no social utility." And where there has been fraud, he adds, "clawback makes perfect sense." That would include taking back the ludicrously large bonuses and other forms of compensation given to CEOs at bailed-out companies.
No one knows how much could be clawed back from the soiled derivatives reap. Clearly, it's not $600 trillion. William Bergman, formerly a market analyst at the Chicago Fed in "netting" – what's left after financial institutions pay each other off for ongoing deals and debts – makes a "guess" that perhaps only 5 percent could be recouped, which he concedes is unfortunately low. Still, that's $30 trillion, a huge number, more than 10 times what the Fed can deploy and over twice the U.S. gross domestic product. Such a sum, if recovered through the criminal justice process, could ease the liquidity crisis and actually get the credit arteries flowing. Not everyone would like it. What's left of Wall Street and hedge funds want their derivatives gains; so do foreign banks.
A tangle of secrecy, conflicts of interest, and favoritism plagues the process of recovery.
Lehman drowned, but Goldman Sachs, where Paulson was formerly CEO, was saved. The day before AIG reaped its initial $85 billion bonanza, Paulson met with his successor, Lloyd Blankfein, who reportedly argued that Goldman would lose $20 billion and fail unless AIG was rescued. AIG got the money.
Had Goldman bought from AIG credit derivatives that it needed to redeem? Like most other huge financial traders, Goldman has a secretive hedge fund, Global Alpha, that refuses to reveal its transactions. Regardless, Paulson's meeting with Blankfein was a low point. If Dick Cheney had met with his successor at Halliburton and, the very next day, written a check for billions that guaranteed its survival, the press would have screamed for his head.
The second most shifty bailout went to Citigroup, a money sewer that won last year's layoff super bowl with 73,000. Instead of being parceled to efficient operators, Citi received a $45 billion bailout and $300 billion loan package, at least in part because of Robert Rubin's juice. While Treasury Secretary under Clinton, Rubin led us into the derivatives maelstrom, deported jobs with NAFTA, and championed bank deregulation so that companies like Citi could mimic Wall Street speculators. After he joined Citi's leadership in 1999, the bank went long on mortgages and other risks du jour, enmeshed itself in Enron's web, tanked in value, and suffered haphazard management, while Rubin made more than $100 million.
Rubin remained a director and "senior counselor" at Citi until January 9, 2009, and is an economic adviser to Obama. In truth, he probably shouldn't be a senior counselor anywhere except possibly at Camp Granada. Like Greenspan, he should retire before he breaks something again, and we have to pay for it. (Incidentally, the British bailout, which is more open than ours and mandates mortgage relief, makes corporate welfare contingent on the removal of bad management.)
The third strangest rescue involved the Fed's announcement just before Christmas that hedge funds for the first time could borrow from it. Apparently, the new $200 billion credit line relates to recently revealed securitized debts including bundled credit card bills, student loans, and auto loans. Obviously, it's worrisome that the crisis may be morphing beyond its real estate roots.
To say the bailout hasn't worked so far is putting it mildly. Since the crisis broke, Washington's reaction has been chaotic, lenient to favorites, secretive, and staggeringly expensive. An estimated $7.36 trillion, more than double the total American outlay for World War II (even correcting for inflation), has been thrown at the problem, according to press reports. Along the way, banking, insurance, and car companies have been nationalized, and no one has been brought to justice.
Combined unemployment and underemployment (those who have stopped looking, and part-timers) runs at nearly 20 percent, the highest since 1945. Housing prices continue to hemorrhage – last fall's 18 percent drop could double. Holiday shopping fizzled: 160,000 stores closed last year, and 200,000 more are expected to shutter in '09. Some forecasts place eventual retail darkness at 25 percent. In 2008, the Dow dropped further – 34 percent – than at any time since 1931. There is no sound sector in the economy; the only members of the 30 Dow Jones Industrials posting gains last year were Wal-Mart and McDonald's.
Does Obama's choice for attorney general, Eric Holder, have the tenacity and will to tackle the widest fraud in American history? Parts of his background don't necessarily augur well: He worked on a pardon for Marc Rich, the fugitive billionaire tax evader once on the FBI's Most Wanted List whom Clinton cleared. After leaving the Clinton era's Justice Department, Holder went to work for Covington & Burling, a D.C. firm that represents corporate heavies including Big Tobacco. He defended Chiquita Brands in a notorious case, in which it paid a $25 million fine for using terrorists in Columbia as security. Holder fits well within the gaggle of elite D.C. lawyers who move back and forth between government and defending corporate criminals. He doesn't exactly have the sort of résumé that startles robber barons.
Can Holder design and orchestrate a muscular legal response, including prosecution and stern punishment of top executives, plus aggressive clawbacks of money? There seems little question that he has the skill, so the decision on how aggressive the Justice Department will be is up to Obama.
Holder could ask for and get well-organized FBI white-collar teams. The personnel hole caused by shifts to antiterrorism would have to be more than filled to their pre-9/ll staffing if the incoming administration decides to break this criminogenic cycle rather than merely address it symbolically.
Black contends that aggressive prosecution would be good for the economy because it may help prevent cheating and fraud that inevitably cause bubbles and destroy wealth. The Sarbanes-Oxley law passed in Enron's wake, for instance, is supposed to make corporations now keep the kinds of documents necessary to assess criminality. Whether the CEOs, CFOs, and others who controlled the current frauds will do so is another matter.
"Don't count on them keeping records for long," Black warns. "It's time to get out the subpoenas."
2 Responses to "What Cooked the World's Economy?"
I agree that it is important to hold those who engaged in wreckless criminal behavior accountable. If someone is guilty of bad judgement, that's one thing, but there are those who willingly defrauded and broke the law. If they get away with it without penalty, there is no reason they will not repeat the crimes in the future, and there is little to dicourage future crimes.
I would still maintain that the crisis was brought about by debt creation, and also by over spending by the government, so I do not believe the answer is to do more of the same.
It seems to me that the bailout of the banks is just so that they can continue to create additional debt. I would allow the free market, without government intervention right what is wrong and the economy will return to function properly. The biggest responcibility the government has now is not to bail out the criminals but to hold them accountable.
This article is indeed full of useful information. I agree with SOME of the article writers conclusions and draw a few of my own.
Derivatives are not going to cook the world's economy in spite of the massive amounts of money involved. The main problem still is mortgages and other loans for which the house or other security, was overvalued due to a classic "bubble" situation; and are now resuming their true values in relationship to income and GDP. This is a serious problem, as actual monetary value, which had been artificially "created" as the assetts rose in value and people borrowed against that value, is now in the process of being destroyed. There are enough trillions involved, to "cook the world's economy".
Derivatives, though, never had any inherent value as an assett like a house or a security or a share. They are like an insurance policy or a bet. We could add up the value of all the world's insurance policies and it would be higher than the $600 trillion value estimated for derivatives. A hypothetical event involving that that all insurance policies had to be paid out on, would be a similar catastrophe to all derivatives having to be paid out on; ignoring, of course, the destruction of assetts that required the insurance policies to be paid out on.
An even better analogy, is the gambling industry. If they suddenly and miraculously had to pay out on long odds on all bets placed with them simultaneously, they would of course be broke, and the people who had placed the bets would not get to collect their winnings. This is exactly what should happen with derivatives. I agree completely with the article writer that it is immoral and illegal that taxpayers money be used to pay out on these gambles. I agree too that prosecutions are in order if there was collusion between the dealers and/or the financial institution management; and the "counterparty" to the derivative.
But the net effect on the world economy is close to neutral, as what happens is that a whole lot of money gets transferred from some players in the system to some other players in the system. Sure, some have lost and some have won; but unlike with assett value bubbles, there has not suddenly been a whole lot of monetary value just evaporate. The "winners" have to do something with the money they have won. That is another question that the article writer should be asking, besides who these "winners" are: what are these "winners" doing with the money? Then we will see what part of the world's economy is being stimulated at the expense of those who have been on the losing end of the gambles, which includes of course the investors in the financial institutions that have collapsed. Of course, they might be buying gold…….
These investors were in all likelihood enjoying the handsome returns that resulted from the derivatives trade; therefore there is an element of morality in the risk factor coming back to bite them now. I think the article writer is too willing to prejudge fraudulent intentions on the part of the derivative dealers. Every level of this morass involved people acting perfectly knowingly on the assumption that house prices can never fall; the writers of subprime mortgages, house buyers, speculators, the bundlers of "CDO"'s and other securities; the purchasers of those securities; and the sellers of the derivatives and credit default swaps that were an "insurance" against the failure of those securities.
The only people in this whole process who laid their money on the line in a calculated gamble that there was a bubble about to burst, are the people who BOUGHT the derivatives as fast as the industry created them. The article writer is absolutely correct in insisting that the identity of these people become known. But even so, prosecution may not be justified.
These people are "guilty" of being able to assess a fake economic boom over which almost everybody else had lost their heads; note that there was no lack of warnings concerning this situation from hundreds of experts of which Ron Paul is merely a well-known example. Such people can hardly be blamed for taking the attitude that, "oh well, if you won't listen to me, don't blame me for making a pile on the side out of my superior wisdom".
Others will have kept their thoughts to themselves and quietly profited. I am picking that George Soros and John Paulson will be among the big winners. If Ron Paul and Peter Schiff and Paul Kasriel and Nouriel Roubini and the hundreds of other people we refused to listen to have profited from our stupidity, so be it. Another possibility is that clever "sovereign" operators such as the Chinese or the Saudis or the Russians are involved, perhaps even as a form of war on the USA.
The fact that Henry Paulson went down on bended knees pleading for the money to pay some of these "counterparties" out, gets one thinking.


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Your Clothes
Step 1: Gather all the garments you anticipate needing. Then put half of them back. Select clothes in the same color family, packing more tops than bottoms. For a five-day trip, you'll likely need five shirts, two pairs of slacks or jeans, and one skirt, says Kathleen Ameche, author of The Woman Road Warrior ($15, amazon.com). The average 22-inch check-in bag fits roughly two pairs of jeans, three sweaters, two dresses, and five shirts.
Step 2: Choose knits, wools, and cottons. These fabrics tend to resist wrinkles and are versatile (some garments can do double duty, like yoga pants that moonlight as pajamas).
Step 3: Roll softer garments and fold stiffer ones. Underwear, T-shirts, jeans, cotton pants, and knitwear won't wrinkle when rolled tightly, says Judy Gilford, author of The Packing Book ($13, amazon.com). Stiffer fabrics, such as starched cotton shirts, blazers, dressy pants, and skirts, should be carefully folded.
Step 4: Arrange rolled items in the bottom of the bag. Think of your suitcase as a three-layer cake. The suitcase is the icing; the rolled items make up the first layer.
Step 5: Place folded garments next. For your (cream filling) middle layer, start with the longest items, like skirts and slacks. Stack the garments on top of each other, alternating waists with hems. Position the pile flush with the suitcase, draping leftover fabric over the opposite end. (This conserves space since thick waistbands won't be piled on top of one another.) Wrap the draping ends of the pile into the center. Next, lay collars of shorter items, like shirts, at the hinge with the ends over the handles. Fold the collars and ends over once and fold the arms in.
Related: Beach Vacation Packing Checklist
Step 6: Cover the pile with a dry-cleaning bag. It's like Botox for your clothes. Because of the bag's slippery surface, folded clothes don't stay in one place long enough for creases to set. Easy upgrade: Place a bag between each layer of clothing. To get to a certain layer easily, simply pull the ends of the bag up on either side.
Step 7: Top the pile with the clothes you'll need first. Anything goes with your top layer―a bathing suit or pajamas.
Step 8: Snake belts around the perimeter of the bag. This cradles your three layers.
Your Shoes
Step 1: Follow the rules of three. Consider one casual sandal or loafer, sneakers, and an evening shoe to be your holy trinity. "Because of their shapes and heels, shoes take up the most room," says Marybeth Bond, author of 50 Best Girlfriends Getaways ($16, amazon.com). Wear the heaviest pair and pack the other two.
Step 2: Stuff shoes with sunglasses and electronics chargers, says Anita Dunham-Potter, a cruise columnist forMSNBC.com.
Step 3: Slip shoes into one-gallon-size resealable bags. Then set them along the sides of the bag, says Gilford.
Your Beauty Products
Step 1: Opt for travel-size multitaskers. Choose a tinted moisturizer that serves as foundation, a soap, and shampoo in one, and wipes that clean hands and face. (If you're flying with a carry-on, check current regulations for liquids at tsa.gov.)
Step 2: Fill empty bottles with your favorite brands. Evelyn Hannon, creator of journeywoman.com, a travel-advice website, swears by Japonesque's Gotta Go Weekend Travel Bag ($20, amazon.com). A mere four inches high by four inches wide, it's stocked with eight clear containers for lotions, contact-lens solution, and the like. Fill them three-quarters full. "The storage department on a plane is not pressurized, so items filled all the way to the top will overflow," says Bond, who learned that the hard way when a sample of Pepto-Bismol exploded all over her clothes.
Related: 7 Great Pieces for Summer Travel
Step 3: Protect your belongings from ugly mishaps. Denise Boyd, a flight attendant for JetBlue, slips socks over her coarsely bristled brushes that "can tear into clothes and cause snags."
Step 4: Group similar products in sealed resealable bags. Designate one sack for your cosmetics, one for your hair products, and one for skin-related items. Tuck the bags in the side corners of your suitcase or in a zippered outside pocket.
Your Jewelry
Stow inexpensive pieces in a seven day plastic pillbox. Or store them in a 35-millimeter film container lined with tissue. If you must take precious gems, wear them during your travels to reduce the risk of loss or theft, suggests Gilford.
Related: How to Save on a Trip to Europe
Your Breakables
Wrap fragile items in sturdy clothing. Place them in the center of your bag surrounded by a buffer, says Laura McHolm of NorthStar Moving, a Los Angeles–based company that relocates 5,000 people (and their precious porcelain) each year. If you're carting liquor bottles, secure them in the bottom center of your bag.
Your Dirty Laundry
Shrink it. Jessica Ellis, a graphic designer who travels between New York City and Chicago every other week, piles clothing into Eagle Creek Pack-It Compressor bags ($10 to $26, rei.com). "Zipper them, and they take out 80 percent of the volume." Warning: This can have wrinkly consequences, so if the clothes don't yet require laundering, lay them flat and place fabric-softener sheets between them. Consider your fresh-smelling clothes a welcome-home present.
This article originally appeared on RealSimple.com
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subset: commoncrawl


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One day, not long from now, it will be hard to remember what worried people so much about gay and lesbian couples committing themselves to marriage. And, when that day comes, President Obama's remarks last week about how, "personally," it was "important for me to go ahead and affirm that I think same-sex couples should be able to get married" will seem mild and obvious. That is not to diminish the importance of his statement. It's just to note that same-sex marriage is a historical inevitability—and what people say about it now, for and against, will be seen in that light.
If you grew up in the nineteen-sixties and seventies, it was quite possible to know adults then who said things like "I'm all for civil rights. But marriage between Negroes and whites? I don't know." You might have been utterly baffled, but there it was. In 1968, the year after the Supreme Court struck down Virginia's anti-miscegenation law, in Loving v. Virginia, seventy-two per cent of Americans disapproved of marriage between whites and non-whites, and only twenty per cent approved. When Margaret Rusk, the eighteen-year-old daughter of Secretary of State Dean Rusk, married a black man, Rusk offered to resign to save the Johnson Administration from embarrassment. (Johnson did not take him up on it.) Interracial couples faced stares, ostracism, discrimination in housing and employment, and a common theory that they were pathological. In 1965, the Times had reported on a psychiatrist who avowed that "deep-seated psychological sicknesses of various sorts underlie the 'vast majority' of marriages between white persons and Negroes." Three years later, the Times Magazine cited the career setbacks that "the white husband in an interracial marriage" could expect. He should not hope to "become head of A.T. & T. or I.B.M.," though he might "find a rewarding niche in those fast-expanding areas in which his marital status would not be a matter of vast concern—in the entertainment industry, for instance, or in editorial work." In addition, it was "typical" for interracial couples to forgo having children, out of fear of the hardships they would suffer.
Yet by 1978 thirty-six per cent of Americans thought that interracial couples should be free to marry—a number that continued to grow—and younger people were among the most likely to think so. Younger people are more approving of same-sex marriage, too. In poll after poll, the biggest divide on the issue is generational. A 2011 Gallup poll was the first in which at least half of Americans supported same-sex marriage. Fifty-three per cent were in favor, but among those between the ages of eighteen and thirty-four the number rose to seventy per cent. That's why marriage equality is a historical inevitability. The divide is a matter not of life stages but of generations: people generally do not become more conservative on this issue as they get older. The era they grow up in shapes them permanently. If you are under thirty-five, you are more likely to have come of age knowing people who were openly gay—or at least to have seen them on TV—and less likely to get the arguments against gay marriage.
And, quite honestly, what is there to get? No one has shown that allowing same-sex couples to marry undermines heterosexual marriage—or, indeed, discovered any plausible mechanism by which it would do so. Connecticut, Massachusetts, New York, Vermont, New Hampshire, and Iowa—the states that, along with the District of Columbia, currently recognize same-sex marriage—have not seen plummeting marital rates, or any other damaging social fallout. If the rationale for denying marital rights is that marriage is supposed to be an institution that promotes procreation, then what about infertile or deliberately childless or elderly couples, whom no one would prevent from marrying? If society has a stake in promoting family stability, gay and lesbian parents should be allowed to marry.
Still, the politics aren't easy—last week was a reminder of that. On Sunday, as Obama put it, Vice-President Joe Biden got "a little bit over his skis," announcing on "Meet the Press" that he was "absolutely comfortable" with gay couples marrying. On Monday and Tuesday, Obama was quiet on the subject, while calls for him to clarify his "evolving" position mounted. Also on Tuesday, voters in North Carolina approved an amendment to the state constitution banning same-sex marriages and civil unions. And, on Wednesday, the Administration hastily arranged an interview with ABC's Robin Roberts, in which the President caught up to his second-in-command and declared his own support for same-sex marriage—a change of heart that some sources reported he was planning to declare this week on "The View," but which Biden's comments accelerated. (On Thursday, as if to highlight the moral drama of the moment, the Washington Post reported that Mitt Romney, who opposes same-sex marriage, had bullied a gay teen-ager at his prep school.)
Every state that has considered a ballot measure barring gay marriage has, like North Carolina, approved it, and though the margins are narrowing they remain wide. (In North Carolina, the margin was more than twenty per cent.) Such measures are helped by the fact that older people are more likely to vote and that turnout is often low (in North Carolina, it was thirty-four per cent), and by the focussed motivation of socially conservative voters. Interracial marriage would not have been approved by ballot measure, either. Because majorities do not usually vote to protect the rights of minorities, it is up to elected representatives—and, more often, the courts—to insure those rights.
There are four same-sex marriage lawsuits making their way toward the Supreme Court now. Perry v. Brown, the challenge to California's Proposition 8, is the most ambitious and, perhaps, the least likely to succeed—at least, in its broadest aim, of establishing a national right to marry for gay couples. Gill v. Office of Personnel Management, Windsor v. United States, and Pedersen v. Office of Personnel Management—three challenges to the Defense of Marriage Act, the baldly discriminatory statute that the Obama Administration has instructed its Justice Department to stop defending—have a stronger chance. These cases seek fair treatment for the hundred thousand same-sex couples who are legally married in their own states but whose marriages are not recognized by the federal government. As a result, they face the loss of insurance benefits for spouses of federal employees and members of the armed services, tax and Social Security disadvantages, and so on—in addition to the insult of being defined as second-class citizens for reasons that it would be hard to classify as anything other than prejudice.
There will be more legal challenges, too, because people will continue to want what they want and deserve what they deserve: the freedom to love whom they love and to have that love accepted. In 1956, the Supreme Court declined to take a case challenging interracial-marriage laws; by 1967, it had to. And, eventually, the Court will do the right thing on same-sex marriage, just as the President did last week. As in the Loving decision, the Court will reaffirm that the "freedom to marry has long been recognized as one of the vital personal rights essential to the orderly pursuit of happiness by free men." And it will finally uphold that freedom for gay and lesbian Americans. ♦


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From the desk of Laurel Ann Nattress:
Please help us welcome authors Gail McEwen and Tina Moncton in celebration of the release of their new novel, The West Yet Glimmers, the third book in their Lord & Lady Baugham series.
Originally inspired by Jane Austen's classic, Pride and Prejudice, the series started as a "what if" variation of the classic and then developed into a new story with its own unique plot and characters. I read the first book in the series, Twixt Two Equal Armies, and enjoyed it.
Writing three books is an incredible accomplishment, but I was even more in awe of how two writers who lived on two different continents could collaborate and write together. I asked the ladies to share their story and a bit about their latest novel, The West Yet Glimmers.
Book Three of the Lord and Lady Baugham Series
After a successful honeymoon and much procrastination, Lord and Lady Baugham bow to the inevitable and fulfill their obligation to travel to Cheshire and his lordship's family seat of Cumbermere. What they find is a neglected and unloved estate where old grudges fester and current rivalries breed, but in their efforts to breathe life into the crumbled house and the grounds, Cumbermere Castle proves to be a more than formidable adversary. A chance discovery thwarts their intentions to leave as soon as possible, revealing a family mystery that turns back the clock and forces them both to deal with the past as well as their future together.
The Art of Ping Pong
Hi, Gail and Tina here! Laurel Ann has graciously invited us to contribute a blog article to talk about what we do, and why and how we do it.
The 'what we do' part is easy. We are the writing team responsible for the Lord and Lady Baugham Stories – Twixt Two Equal Armies, Love Then Begins, and the recently-reviewed-on-Austenprose, The West Yet Glimmers.
The 'why we do it' is equally simple—we have fallen in love with our characters and their story and we can't help ourselves.
And then when people ask us, 'how is it to write as you do, together?' the answer is really also very simple, it's the best thing in the world! Sure there are plenty of other things to do with our time, and the truth is, we often get caught up in those other, urgent matters—family, school, work, life. This can go on for a while, but if too much time passes, the itch to write goes painfully unscratched and we find ourselves looking around and wondering why we're feeling so cranky.
We previously blogged about how we met through the wonders of the internet and a mutual love of Jane Austen: To Begin our Posting with the Beginning of our Posting… but the simple most important thing is that, in finding each other, we were both blessed with just the perfect writing partner. And by perfect we mean someone who shares a passion for the same things— interesting and well-crafted side characters, finding out who and what the Baughams are through writing about them, attention to research and getting to know your subject, whether it's Regency time policing, seaside holidaying or the geography of London—as well as each of us bringing our own special traits to this common experience: Tina has a muse that lives on a commuter train, Gail's muse hides in the shower. Tina is relentless in her insistence on historical accuracy, while Gail is like a dog when it comes to meticulous read-through. On top of everything, we are both quite hopeless when it comes to incessant editing, re-writing and second guessing of a draft. It's a wonder we ever manage to finish anything!
Some things, however, we don't want to put "The End" to. Case in point: our latest book, The West Yet Glimmers. Originally, the story of Holly Tournier and Lord Baugham was not supposed to go beyond the meeting, the courtship (if you can call it that) and the inevitable risky plunge into married life together—the story of Twixt Two Equal Armies. But when we got that far, we realized it was not enough. "We should be careful never to imagine, that the wedding-day is the burial of love, but that in reality Love Then Begins…" It was true! We weren't finished with them by a long shot! We wanted to know more, write more and follow them as a married couple on their road together, because by that time, we knew them well enough to understand that their road would by no means be smooth or perfect, but would be terrific fun to explore.
And that is where the art of Ping Pong comes in to play! Actually, that's how we've done most of the dialogues we've written and much of our writing and plotting, as well as this blog post. We send the text back and forth, adding and perfecting, playing around and, best of all, surprising the receiving party with a new twist or turn that takes the characters and story onwards and upwards and beyond what we could possibly achieve on our own. As with all games, there are a few rules. Okay, one rule: There's no room for ego in tandem writing. If your partner in the game changes something you wrote, moves it around or even removes it completely, don't let yourself feel injured or put upon. Because 99% of the time, she's improved upon it. And, in the case of that 1%, don't be afraid to speak up and say "I really liked that bit. Can't we keep it?" She will usually see the error of her ways and comply. (Does that count as another rule? Or maybe it's a promise?)
We keep each other accountable, give slack when life gets in the way of progress, or a kick in the pants when it's just laziness or complacency holding one or the other of us down. We inspire one another. We are great friends. And we think we make a pretty good team.
That's the art – and the fun! – of Ping Pong.
It was a shared love for Jane Austen and a fascination with the world she so vividly portrayed in her novels that brought the international writing team of Gail McEwen and Tina Moncton together. Meeting on an internet chat board devoted to Miss Austen, they soon discovered, despite living on opposite ends of the globe, they had quite a bit in common—not the least of which was a mutual frustrated passion for writing—and what began as a virtual acquaintance quickly blossomed into a true friendship.
When they began to experiment with writing together, they chose a path somewhat different than might be expected from such ardent fans. Rather than explore the what-if's and variations possible within Austen's existing works and much loved characters, Moncton and McEwen introduced two new players to navigate the Regency world of Pride and Prejudice alongside Elizabeth Bennet and Mr. Darcy. This experiment was so successful and satisfying that it led to an entire series of P&P companion books.
Gail is a married mother of four and grandmother of two. In real life she lives in a small mountain community in California, works in accounting and still wonders how an English major ended up in the unexciting world of numbers and calculations. Tina is a married mother of three. Her real life is in the metropolitan area of Helsinki, Finland and though she would rather make her living out of writing about Lord and Lady Baugham, she works in the equally idealistic world of non-profit NGO's. You can find Gail and Tina at their blog: Two Perfect Scheming Wenches; or contact them on the Meryton Press Facebook page.
- The West Yet Glimmers: Lord and Lady Baugham Stories, by Gail McEwen & Tina Moncton
- Meryton Press (2012)
- Trade paperback & eBook (312) pages
- Genre: Regency Romance, Historical Romance
Austenprose is an Amazon affiliate. Cover image, book description, guest blog, and authors bios courtesy of Meryton Press © 2012; text Laurel Ann Nattress © 2012, austenprose.com. Updated 13 March 2022.


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John Day Fossil Beds - Painted Hills Unit
Painted Hills is one of the three units of the John Day Fossil Beds National Monument, located in Wheeler County, Oregon. It totals 3,132 acres (1,267 ha) and is located 9 miles (14 km) northwest of Mitchell, Oregon. The Painted Hills are listed as one of the Seven Wonders of Oregon. Painted Hills is named after the colorful layers of its hills corresponding to various geological eras, formed when the area was an ancient river floodplain.
The black soil is lignite that was vegetative matter that grew along the floodplain. The grey coloring is mudstone, siltstone, and shale. The red coloring is laterite soil that formed by floodplain deposits when the area was warm and humid.
An abundance of fossil remains of early horses, camels, and rhinoceroses in the Painted Hills unit makes the area particularly important to vertebrate paleontologists.
20150412johndayfossilbedspaintedhills01122015AprilColorColorfulJohn Day Fossil Beds National MonumentLandscapeNorth AmericaOregonPacific NorthwestPainted HillsPainted Hills UnitScenicSpringUnited StatesViewWheeler County
All images copyright © by William McCrossan / FayledVisionPhotography.com


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Crystal Journey Votive Brazilian Amber
Once you experience Crystal Journey Candles votives, you will no longer believe that all votives are the same. There is no mystery behind the success of Crystal Journey Candles votives. The votive candles are made from highly refined waxes so pure that they are considered food grade, wicks constructed from cotton and paper and essential oil blends.


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Donna Bray of HarperCollins's Balzer + Bray imprint preempted North American rights, in a two-book deal, to the YA novel Tease by debut author Amanda Maciel, who is an editor at Scholastic. In the book, a high school junior faces criminal charges for bullying after a classmate commits suicide. Tease is set for summer 2014, and the second book will be a stand-alone novel. Holly Root at Waxman Leavell Literary brokered the deal.
Miriam Juskowicz at Amazon Children's Publishing's Skyscape imprint acquired world English rights (excluding Canada), and Lynne Missen at Razorbill/Penguin Canada acquired Canadian rights, in a three-book deal for Megan Crewe's Earth & Sky, a romantic SF adventure about a girl who discovers that visitors from beyond the stars have been altering Earth's history, and she teams up with an alien rebel to save the world as she knows it. Publication will begin in fall 2014. Josh Adams at Adams Literary was the agent.
Kathy Landwehr of Peachtree Publishers has acquired two nonfiction projects by Cynthia Levinson. Watch Out for Flying Kids! spotlights teens who soar over cultural, religious, and political boundaries in two nonprofit children's circuses – an urban-suburban circus in St. Louis, and an Arab-Jewish circus in Israel. The second book, Fault Lines in the Constitution will be co-written with Levinson's husband, Sanford Levinson, and will look at the many flaws in the U.S. Constitution, some of the consequences of those flaws, and the ways that some state constitutions offer thoughtful alternatives. The first project (Watch Out) is tentatively scheduled for spring 2015. Erin Murphy of Erin Murphy Literary Agency did the deal for world rights.
Shana Corey at Random House has bought U.S., Canadian, and open market rights to Funny Pages: Recess!, a graphic anthology edited by Jennifer L. Holm, Matthew Holm, and Jarrett J. Krosoczka. The recess-themed comic anthology is geared to early readers and pays tribute to the classic Sunday comics of the past. It will contain original stories, popular and new characters, recess ninjas, superheroes, and secret clubs. Holm, Holm, and Krosoczka provide contributions to the collection, as well as Dav Pilkey, Raina Telgemeier, Dan Santat, Gene Yang, Ursula Vernon, and Eric Wight. Publication is scheduled for July 2014.
Steve Geck at Sourcebooks Jabberwocky has acquired an all-new poetry treasury by writer and editor Charlotte Zolotow, called A Charlotte Zolotow Collection of Seasonal Poetry. It will be published in 2015, on the 100th anniversary of the author's birth. As a children's book publisher, Zolotow has worked with some of the leading figures in the industry, including Paul Zindel, Mary Rodgers, Laurence Yep, Paul Fleischman, and Francesca Lia Block. Sourcebooks Jabberwocky will also be reissuing a picture book by Zolotow, A Tiger Called Thomas in fall 2014, with new illustrations. Edite Kroll of the Edite Kroll Literary Agency brokered the deal.
Alyson Day at HarperCollins Children's Books has acquired world English rights to two untitled picture books by Garth Stein, to be illustrated by R.W. Alley. The books star Enzo, the hero of Stein's bestselling novel for adults, The Art of Racing in the Rain, and its middle-grade adaptation Racing in the Rain. The picture books are scheduled for fall 2014 and fall 2015. Jeff Kleinman of Folio Literary Management did the deal for Stein, and Emily van Beek of Folio Jr./Folio Literary Management negotiated the deal for Alley.
Victoria Wells Arms at Bloomsbury has signed Caldecott Honor artist Betsy Lewin to illustrate Lori Mortensen's Mousquerade Ball, in which an unexpected, uninvited guest makes for an unforgettable black-tie gala. Publication is set for 2016; Holly McGhee of Pippin Properties did the deal for Lewin, for world rights.
Mary Lee Donovan at Candlewick has acquired two full-color illustrated chapter books by cartoonist and illustrator Juana Medina; they are the first titles Medina will both write and illustrate. The stories are based on Medina's experiences growing up in Bogotá, Colombia, and focus on Latina heroine Juana as she navigates life and elementary school. The first of the two still-untitled books is slated for publication in fall 2016. Gillian MacKenzie of the Gillian MacKenzie Agency brokered the deal.
Kari Sutherland at HarperTeen has bought North American rights to screenwriter Victoria Aveyard's debut novel, The Red Queen, which is set in a fantasy world where society is divided by the color of blood. It features a 17-year-old who, to save her family, must assume the role of a long-lost princess while secretly aiding a revolution. The novel was pitched as Graceling meets The Selection; it will be published in winter 2015. Suzie Townsend of New Leaf Literary and Media was the agent.