Thursday, July 19, 2012

"Biggest Scandal in the World Right Now" may reach 'Burgh in Revenge of the Swaptions *-UPDATED with Daily Show segment

Remember that nasty business involving allegations over the "swaptions" that are bought and sold between the Water and Sewer Authority and its bankers?

Thanks to the LIBOR scandal (which comes capitalized for your edification and pleasure) it's back in the frying pan.

The biggest scandal in the world right now has nothing to do with sex or celebrities. It's about an interest rate called LIBOR, or the London Interbank Offered Rate...

LIBOR, as it turns out, is the rate at which banks lend to each other. And more importantly, it has become the global benchmark for lending...

So literally hundreds of trillions of dollars around the world, all these deals, are based on this number. Now we find out this number might be a lie. At least one bank was tampering with that number for their own profit. (NPR Planet Money, July 6 '012)

It sounds as though we as bond option swaptionistas were a candidate to have gotten damaged by either side of the LIBOR chicanery coin, i.e. before, during and after the financial crisis:

If Barclays traders managed to get the rates higher before the financial crisis, as they requested, then consumers suffered...

When the rate was going down during the crisis, consumers might have gotten better deals on their loans. But that doesn't mean we should celebrate. A lot of cities and pension funds and transportation systems had money in LIBOR based investments. They would have made a lot less money if LIBOR was manipulated down. The City of Baltimore, for instance, is suing and claims to have lost millions of dollars in the manipulation. (NPRPM, July 9, '12)

So here is the exchange locally:

In an email to Jim Good, the authority's new executive director, city Controller Michael Lamb said the authority's variable-rate bond transactions in 2007 and 2008 generated "significant exposure" to market manipulation by Libor [sic] participants. He said Mr. Good should "immediately seek board approval to retain counsel to pursue all possible recoveries against those involved."

That email drew a testy reply from Scott Kunka [KOON'-ka], city finance director and authority treasurer, who said the authority had no exposure to Libor, which is shorthand for London Interbank Offered Rate. He said the authority's variable rates are based on another index, the Securities Industry and Financial Markets Association, and he accused Mr. Lamb of raising undue alarm about authority finances.

Mr. Lamb fired back with another email in which he said the authority's variable interest-rate payments are based on overall market conditions. If manipulation of the Libor artificially inflated rates of the other association, he said, the authority paid too much.

"Your hesitance to pursue any recovery on behalf of the rate-payers you represent is disturbing to say the least," Mr. Lamb said. (P-G, Joe Smydo)

EDITORIAL COMMENT: If we are truly lucky, Mike Lamb will turn out to be right and PWSA will get to claw back some of its cash and debt -- and it needs all the money it can get right now. As a bonus if he's right, the story might evolve into a great lens through which to determine if any politicians seem anxious to protect local crony financial industry middlemen. But first we would need to see more dots connected on one side, and continued entrenchment on the other. If "transparency" starts to pop up as a keyword, bet on excitement.

SPECIAL TO TREASURER DIRECTOR KUNKA: What about yield compression? Surely, that's enough to salvage the connection between LIBOR and SIFMA-based swaptions? Maybe? Herm...

Wednesday, July 18, 2012

Judge: Jurors Must Imagine "Ideal, Objective Police Officer" to Weigh Charges of Misconduct

US District Judge Gary L. Lancaster promised eight sitting jurors, "You will understand the rule of law that will govern your decision," and began instructing them at a trial that will determine whether three City police officers were guilty of false arrest, excessive force or malicious prosecution in a 30-month old incident in the city's Homewood Brushton neighborhood.

Later, attorneys both for plaintiff Jordan Miles and for each of the three defendant officers utilized their opening statements to ape and embellish the judge's lesson, even as they began spinning conflicting tales about the night in question.

MORE: P-G, CP, Trib, HuffPo, J4J

Judge Lancaster told the eight jurors that in order to determine the merits of the False Arrest charge, they will first have to decide whether the officers acted with "Reasonable Suspicion" in stopping and searching Mr. Miles, and then whether they had "Probable Cause" for making an arrest.

The judge also stressed that the jurors must weigh all the "objective evidence", not "subjective" evidence based on what may have been in the three officers' minds. They were instructed to "conjure an image of an ideal, objective police officer" in determining whether the defendants had Reasonable Suspicion and Probable Cause.

Finally, Judge Lancaster told the jury they are to weigh which side's story is buttressed by the "Preponderance of evidence" -- objective evidence is what matters over all else, he repeated -- such that it "tips the scales."


Mr. Miles' attorney emphasized the unmarked, undercover, tinted-window nature of the "99 Car" officers used to patrol the neighborhood, their alleged abruptness in stopping in front of Mr. Miles in the street and pouring out of the vehicle, the size and ferocity of the officers, and their demands for drugs and money.

He presaged evidence of the plaintiff's bruising and injuries, records of a telephone conversation taking place immediately before the interaction, and statements made during Miles criminal trial and during concurrent investigations as evidence.

Later, two attorneys for two of the three police defendants (court adjourned at 4:45) raised and emphasized the topic "credibility" on many occasions when speaking of the jury's duty to identify weighty evidence.

These attorneys presaged evidence including details of the training which local and state police officers receive on the use of force, on the "continuum of control" and in responding to "levels of resistance." They also recalled the high levels of crime and danger prevalent in the Homewood Brushton area, for which it is the officers' mission to be "pro-active" in such areas.

On the subject of the Malicious Prosecution charge, one officer's attorney told the jury that after a witness living at the home near which the encounter took place "changed her story," the district magistrate "just threw the case [against Mr. Miles] out" of criminal court. After shrugging broadly and moving on to describe thrown elbows and donkey kicks at the incident in question, the implication by the attorney was clear that the jury ought to believe that the District Magistrate erred -- and that Mr. Miles really ought to have been found guilty of resisting arrest as well as aggravated assault against the officers.

Tuesday, July 17, 2012

Downtown's Jaunty Hat, and other Good Things About Zoning

Kudos to Rugby Realty, C&C Lighting Factory and the rest of the gang, which surprised all of Pittsburgh all of a sudden with an endearingly lovely piece of skyline artwork.

The standard colors are a modest, precocious spectrum of pastel; it distracts the eye pleasantly from the assertively gothic UPMC, Federated Investors and other corporate insignias surrounding it from many vantages, it expands upon a fundamentally interesting public service in forecasting weather; and we can experiment and play with it.

The Comet assumes that in the morass of City of Pittsburgh zoning classifications, the new display is classified or would be classified as "art" -- and is simply an expansion and enhancement of a pre-existing and conforming art use, or a pre-existing legal nonconforming use that is art or arty enough. Maybe we shouldn't assume, but it seems likely.

The tricky thing about these lighting projects is, there is a history of them being used by the electronic advertising and signage industries as legal and quasi-legal "precedent." The City Zoning Code is a list of rules, but it's not perfect and it has to be interpreted by a Zoning Board, if not actual judges. Mark my words -- industry will one day soon point to that corner of Downtown and assert that it already is comfortable with digitally delivered excitement and a "Times Square" affect, and claim a right that might otherwise be forbidden or otherwise dependent.

If the industry get an edge because of this Gulf Tower project, good for them. Nice field goal. There continue to be enough distinctions between artwork, advertising signs, business identification signs and "electronic message signs" in the code to prevent mutually assured personal mental hygiene and good taste meltdown -- and again, C&C's vision turned out to be thoughtful and stylishly transcendent.

I still have my fingers crossed that the Gulf Tower's Peregrine falcons will find a comfortable home elsewhere in the Golden Triangle. We are trying to retain a core of hip young families in the area! Perhaps Buncher Co. might be prevailed upon to install a cavernous perch, as it may have to rotate and pile its vision high up onto its side.

Monday, July 16, 2012

Monday: the Dynamics That Are at Play

Over the weekend we thought, "Come Monday we will just go ahead and blog about the War of Five Mayors."

Cue real life and real challenges hitting everybody in the face.

An accurately headlined Post-Gazette story on the Jordan Miles situation is DOUBLE-PLUS MUST-READ. A couple of dry excerpts:

About 11 p.m. on Jan. 12, 2010, [officers] were acting on a tip of drug dealing near a church on Tioga Street. According to Agent Bush's account, Officer Saldutte saw someone near 7940 Tioga and said, "Let's check that guy out. Let's see what he's doing."

The officers said they drove near Mr. Miles and ordered him to take his hands out of his pockets, which he did. They asked him whether he lived at 7940 Tioga, and he said no. They asked him why he was there, but he walked away, then ran, they said, and Officer Saldutte saw a bulge in his jacket.

The officers told Agent Bush that they yelled, "Pittsburgh police, stop!" Officer Saldutte said he jumped out of the car and gave chase, as Mr. Miles fell on the ice, hitting his face on the sidewalk. (P-G, Rich Lord)

It was thereafter, it is said, things got messy.


Monica Wooding, who lived at 7940 Tioga, then came out and told the officers that she did not know Mr. Miles, they told Agent Bush. At a later preliminary hearing, though, Ms. Wooding told the judge that she knew Mr. Miles well, contradicting the police account of her statements at the scene. Charges against Mr. Miles of aggravated assault, loitering, resisting arrest and escape were dismissed. (ibid)

FBI Agent Sonia Bush was / is the lead investigator in this case from Indiana County, and was involved in this case involving a parole officer in North Huntington.

Not to be made irrelevant, the Tribune-Review runs material which perhaps better emphasizes the extent of the polarization and seething frustration enveloping this trial.

If the Comet had to guess what this civil trial is going to mean in the long view of history, its guess would be, "not much". Local civil authorities are certainly swiveling their heads in some correct directions, and the black communities as always find copious ways to admit of shared responsibility for the overall picture.

But the long march of history is punctuated by incidents of this seemingly intractable conflict -- crashing and wearing on us like the tides. It would be nice for something somewhere to give -- to be able to envision sustainable beneficial adjustments coming down the pike. For all sides to grimace, lock eyes, hail Zoltan and forge something that will outlast us and surprise others. The Comet however does not yet see evidence of the requisite dispassion and empathy in the requisite quarters to seriously consider that as a likelihood.

"Learning" is like good looks, or making money. You either use it or you lose it.


In any event, back to lighter fare.

This is obviously what's happening in the mayor's race:

The above particular numbers should be taken with pinches of salt, and they are six months old besides. But somewhere in the ether there are numbers -- and if we could see them, they'd certainly look something vaguely like that.

Also reported as part of the "fun exercise in speculative politics" at that time:

Fistfuls of salt.

But let's say you're buying it.

There would be two (2) and exactly two (2) rational courses of action for the candidates representing the "75%ers" -- that is, as if all three of them: the Auditor General, the Member of Council and the Controller; were not already brain-addled by that potent cocktail of narcissism and magical thinking which calls itself, "This is my time."

Strategy 1: The three challengers campaign actively and openly if a bit obliquely against each other through Thanksgiving. Through Christmas if they must. Then they spend the holidays and the first smidgen of January 2013 looking over some new independent, credible numbers or other data set -- and whomever happens to be in 2nd place by that time, the field amiably coalesces behind that candidate.

Odds of Seeing Strategy 1: Unlikely.

Strategy 2: One of those three candidates unilaterally drops out of the contest, and spiritedly endorses one of the two remaining challengers. Pending a brief public conversation which lasts perhaps only through Groundhog Day, a coalescing will develop around that endorsed candidate regardless.

Odds of Seeing Strategy 2: Significantly more likely. Because as we just stated -- at that juncture, the coalescing will happen regardless. The odd man out in that situation would certainly have to look to his sins.

For the night is dark, and full of terrors.

Fallback Position for the 75%ers in the event of Critical Rationality Failure among All Seasoned Challengers: "Option E". Second fallback: Option G, aka "The Full-On Circus".

Odds of Rationality Failure: Always reasonably high.