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Thursday, September 27, 2012

Solomon Dwek Sentencing Set

Admitted bank fraudster Solomon Dwek, a man who was described by federal district court judge Jose Linares as a "consummate fraudster and an extremely cunning liar," is scheduled for sentencing Thursday, October 18th at the federal courthouse in Newark, NJ.

Dwek's plea agreement states that the federal government will recommend a sentence of between nine and 11 years for Dwek.  Customarily, the government and the defendant both agree not to appeal any sentence within a previously agreed-upon range, but federal judges have wide latitude to depart from both the government's recommendations in the plea agreement and the federal sentencing guidelines.

Church Shows Moral Leadership, Right or Wrong

People of faith are not required to be silent on issues of moral import -- or be silent in political advocacy -- as a condition to enjoy the free exercise of religion.  But those who oppose or disagree with such statements from religious leaders often couch their political opposition in the cloak of the dubious principle that political opinions by those religious leaders somehow violate the principle of separation of church and state.

Earlier this week, Newark's Roman Catholic Archbishop John Myers issued a letter to all church congregants urging them to consider issues of "vote in defense of marriage and life."  The Newark Star-Ledger editorial this morning criticizes the Archbishop for an improper intrusion of the Church into politics with what it charges is an implicit endorsement of Mitt Romney.

The Catholic Church and Archbishop Myers are showing moral leadership, whether you or I or anyone else agrees with the Church's position.  It is the role of the Church -- and of other religions -- to advocate on moral issues in line with its teachings.  Religions are not politicians running for office and should not decide moral positions based on polling.  If people want to advocate certain positions, they should talk to their elected representatives.  Any religion that does so will abdicate its moral authority and, soon, lose its followers.  

The typical objection to religious leaders' opining on moral issues is that such speech is a violation of the principle of separation of church and state. But the Constitution only precludes the establishment by the state of an official religion (in what's called the "Establishment Clause").  That had meaning in the day of the Constitution's writing, because most colonists fled their native countries and came to America, not for economic opportunity, but to flee religious persecution of religious minorities who disagreed with the official religions of their kingdoms.  The First Amendment core constitutional rights of freedom of religion and freedom of speech are not mutually exclusive.   

Incidentally, isn't it funny that we don't read about major newspapers calling on Islamic leaders to repudiate shari'a?  It seems these arguments about religions being backwards and "not responsive" to the community are reserved only for Christians, and the Roman Catholic Church in particular.

Eric Dixon is an investigative and corporate lawyer in New York and New Jersey.

Wednesday, September 26, 2012

Is NYC Letting You Die To Harvest Your Organs?

People worried about the dreaded "death panels" making decisions about who does and does not get certain potentially life-saving medical care under ObamaCare (aka the Patient Protection and Affordable Care Act) should look at New York City, where a new state lawsuit 

Are New Yorkers being allowed -- or encouraged -- to die so that medics can harvest their usable body organs for others?

Is life-saving medical care being withheld?

Are New York City medics and doctors picking winners and losers?

The answers to these appalling questions are yes, according to a bombshell, sickening lawsuit filed in New York County (Manhattan) State Supreme Court and reported here in today's New York Post.

The lawsuit alleges that medics are trained to convince next of kin to consent to the organ harvesting.  It is easy to see how financial motivations and inducements to medics can be used to achieve the goals of this program, and how the human greed factor can result in medics abusing the implicit trust of their medical position -- that they are medical professionals whose professional judgment can be trusted -- to convince families that their relative (or friend) will not survive, that life-saving treatment is not worthwhile, when the reality may be that the patient can (and should) survive if properly treated.  But as the lawsuit alleges, about 20% of all patients declared brain-dead still show signs of brain activity, indicating at least some potential of survivability and recovery.

I earlier broke the story of New York City's controversial pilot organ-harvesting program with my report on December 1, 2010, and the story was picked up on and subsequently reported on by Jerome Corsi of
Eric Dixon is a New York investigative and corporate lawyer who routinely investigates public policy issues. Mr. Dixon is also on the board of directors of the independent, non-profit financial think tank the Financial Policy Council.

Evita Christie? How Fining Leakers Shows Fear

New Jersey Governor Chris Christie last week conditionally vetoed a state budget measure and suggested that the bill be resubmitted with the revision of the institution of a $10,000 fine on any person found to have released state tax data without proper authorization.  Chris Christie has unwittingly and shockingly taken a page out of the playbook of Argentina's current President, Christina Fernandez.

As the finance news press has only recently begun to report, Fernandez's Argentinian federal government fines economists up to $107,000 for publicly disagreeing with economic data released by the government. Fudging economic data -- or trying to suppress its release -- destroys confidence in any government-released data and will encourage capital to flee to more transparent locales.  My sources tell me that Argentina's capital class has already been moving capital out of that country and investing in hard assets abroad.

The Argentinian example is a cautionary tale for American legislators and state and local leaders, as well as for investors in public utility or state or local bond offerings. The flow of verifiable, credible financial information will be discouraged -- and this is the intent -- by such repressive moves as punitive fines.  More troubling is the signal from such policies that the government ought not to be trusted with its released figures.  It is one thing for Americans to question the methodology of the federal government's labor statistics.  It is quite another for Americans, and particularly the investing community, to openly question the genuineness of reported data, but this circumstance is now sure to happen.

 How an ostensibly conservative Governor (Conservative? Are you kidding me?) could propose this with a straight face or sound mind is, well, mindboggling.

Tuesday, September 18, 2012

Defaults To Hammer New Jersey, Northeast Housing Prices

A new report out today indicates that housing defaults are exploding in New Jersey, following a trend (first spotted by analyst Keith Jurow and reported by him at a recent Financial Policy Council event and subsequently by me on this website) of increasing mortgage defaults in New York City and Long Island.

Data from Mortgage Bankers shows that more than one of every eight homes in New Jersey (12.7%) is in serious delinquency, meaning that the borrower is more than 90 days past due on the mortgage. This is the second highest rate in the nation, and is 1.3% higher than the 2011 rate. New Jersey's current default rate now trails only Florida at 17.5% (which is down 1.2% from its 2011 rate). These defaults will ultimately represent homes hitting the for-sale market when the servicing banks decide it's time to cut losses and realize something salvageable on their investment.

This overhang of housing stock supply should cap housing prices, if it doesn't cause a significant decline in housing prices because the supply of for-sale homes may far exceed the market demand for them. This could indicate that -- far from a housing price recovery as predicted by other industry pundits -- a substantial decline in housing prices in New York City, Long Island and New Jersey is on its way.

This Bloomberg News report states that New Jersey has the second-worst serious delinquency rate in the nation. The report further indicates that the pipeline of delinquencies (and predictable, ensuing price depression) is serious in the states of New York, Connecticut, Maine and Pennsylvania.  These states are all judicial foreclosure states, meaning the courts must approve bank foreclosures.

Eric Dixon is a New York lawyer and strategist and a member of the Board of Directors of the financial think tank the Financial Policy Council.

Wednesday, September 12, 2012

The Mugging Of The American Middle Class

If you're in the "middle class" and feeling that some Democrats view you as nothing more than a free money machine, look at how "the rich" are feeling in France.

 Tax hikes proposed on "the rich" in France (75% rate on income over about US$1M) are making "the rich" feel hunted down. Consider the following quote: “There is a real growing feeling that ‘the rich’ are being hunted down in France at the moment,” said Bernard Grinspan, managing partner of the Paris office of Gibson Dunn, the law firm. “They are being stigmatized and this is encouraged from the top. A number of people left before the election and more since, especially people in the private equity world. Entrepreneurs are very worried.” (Here's the link to the full article on CNBC.)

Most working Americans are at risk from this sentiment. All you need to do to be at risk from this dangerous mentality is to be perceived as having more than the next guy. Or, as some of the horrible rhetoric claimed, you just need to be perceived as not having earned what you have.

When your ability to keep what is yours depends on the acknowledgment and acceptance by someone else -- someone else who envies you and covets everything you have (i.e., the typical mugger or criminal) -- you will lose what you have when the first greedy, selfish person crosses your path. This class warfare was echoed here recently at the Democratic National Convention.

If you have a job -- for the moment -- and a house, the Democrats have some terms for you. A sucker. A patsy. A mark.

Eric Dixon is a New York lawyer and political strategist.

Saturday, September 8, 2012

Business Owners Risk Everything, Aren't Risk-Takers

The simplistic, lowest-common-denominator quality of much American political discourse has claimed another principle. Republicans and the entrepreneur / small business class have taken to referring to themselves as "risk-takers." That is literally true; they are taking risks. But the phrase is a mistake because it evokes undesirable negative images. A winning campaign avoids this.

To 80% of the American population "risk-taking" conjures the image of unshaven, ne'er-do-well men, reeking of liquor or cheap beer, going to the racetrack and throwing $100 on horse number 5 with the 20-1 odds of winning. Gambling is what it sounds like. The better phrase and actually more accurate: Business owners are "at risk." They risk everything if their business goes under. They risk loss of investment, loss of credit rating, loss of reputation and -- and this latter point often goes ignored -- loss of confidence. This is much different from being a risk-taker.

Although business owners take risks, that does not mean that they are reckless or negligent; often they are the opposite. But political rhetoric has a way of getting mangled in an age where every syllable gets a snide remark. Republicans, conservatives and the crowd resisting the Obama Administration's drive to bring us on an involuntary death march to serfdom would do well to learn to pick phrases evoking sympathy and compassion instead of other phrases evoking recklessness and the sense of deserving what one gets if one takes a foolish risk and loses the bet. Until then, this poor choice of phraseology will show why Republicans have a habit of snatching defeat from the jaws of victory.

Eric Dixon is a New York corporate and investigative lawyer, political strategist and business consultant.

Fantasy Island on Housing: Denying Inevitable Housing Crash

Keith Jurow has recently reaffirmed his prediction of a significant price drop in residential real estate in the New York City metropolitan area. As you can tell from the many comments, some of the response has been vitrolic and hostile. But Keith is right on the fundamentals.

Some readers have dug up prior articles purporting to show that Keith's "predictions" -- which he has highly qualified -- have been wrong. Perhaps the timing was off, and if so that is a result of externalities such as, but not limited to, government manipulation of the monetary supply through "quantitative easing." The fundamentals of the market have been clear, and they are clearly bad. There are external factors which can delay the price drop, but those factors don't change any of the fundamentals which still must be addressed. The day of reckoning is inevitable. In fact, we are closer to the cliff.

The banks have delayed foreclosing on defaulting borrowers and may continue to do so, but it is folly to assume they will continue to do so indefinitely because that requires the servicing banks to agree to hold money-losing assets on their books indefinitely. Banks will act to maximize their profits, not to prop up the housing market long enough so some homeowners can sell while they can still make a profit. Anyone notice the refi boom? The banks are making handsome profits generating current fee income which is covering up the dry future income stream from once-productive properties now in default/foreclosure. While banks are choosing not to foreclose, it is folly to think that banks will continue to willingly lose money. These homes will move off their books, either through foreclosures or short sales. This supply will hit the market, and most likely will do so all at once because once the banks decide to monetize these unproductive assets (the homes), there is no reason for the banks to delay dumping them on the housing market. Contentions to the contrary are merely wishful thinking. The banks will do what is in the banks' interest, not what is in the interest of certain homebuyers who dream of selling at fantasy prices at 2005 levels.

But just pause to think about the possibility of rising interest rates and unavailability of credit (on reasonable terms or at all). These factors can cause "monthly affordability" -- the metric upon which banks rely to decide the loan principal amount they will offer -- to plunge. Anything affecting the availability of credit, when housing is an asset class in which purchases are credit-dependent, will threaten a price drop. An increase in interest rates from 4% to 8% -- a rate we had in 2000 -- is not outlandish by any measure. Such an increase by itself (without addressing the oversupply which is indicated by all the data forming the basis for Keith's article) would reduce offered mortgage amounts in line with reduced monthly affordability calculations. I calculate that offered loan amounts would drop by half, and assuming the same down payment is required and offered, sale prices could drop by 40%. (This is a simple back of the envelope calculation; do it yourself and see.) When most homebuyers need bank financing to buy, an interest rate spike or credit crunch must lead to a significant price drop.

Thursday, September 6, 2012

New York City 50% Home Price Drop Predicted

Home prices in New York City and Long Island are predicted to drop by as much as 50% over the next three years, according to the latest updated analysis from real estate analyst Keith Jurow.

I have previously written at length about the problems continuing in the real estate market.  Keith Jurow has found evidence of the magnitude of delinquencies and defaults in the seven-county downstate New York City metropolitan area.  One wonders if the same trend is occurring in New Jersey (which is also a judicial foreclosure state like New York).

I am on the board of directors of a nonprofit financial think tank the Financial Policy Council.  Dr. Jurow spoke before the FPC in June and provided much of this information (which has since been updated).  I urge readers and opinion leaders to consider not only attending, but sponsoring, future FPC events in order to access cutting edge or breaking information from top economic, business and political leaders.

Eric Dixon is a New York corporate and investigative attorney currently consulting on a major litigation involving a Too Big To Fail bank.  

Wednesday, September 5, 2012

Bastille Woman Michelle Obama: Sack the Rich

A sitting President can be charged with the publicly offered words and actions of his spouse, particularly when the First Lady Michelle Obama addresses the nation as she did last night at the Democratic National Convention.  Her words send many chilling messages to that part of American society that is not supported by or dependent on the government.  If you work in or, heavens forbid, you own a business in the private sector -- watch out!

WHAT SHE SAID: “For Barack, success isn’t about how much money you make, it’s about the difference you make in people’s lives.”

WHAT HER MESSAGE IS:  This is rationalizing being poor, the better with which to make the poor "settle" for and accept their status. Far from a liberating message, this is a message of control and condescension. She may just as well have said, "You can do without. You don't need that."  

I will do something very rare, and ask you to trust me on this point.  I know from personal experience that people who say these things fully intend to take what you have.  Getting you to believe you need less -- or nothing at all -- makes it easier for you to surrender what you have, what you've earned. Make no mistake about it; this is about taking things from you after duping you into dropping your guard.

WHAT SHE SAID:  “And he [Barack Obama] believes that when you’ve worked hard, and done well, and walked through that doorway of opportunity, you do not slam it shut behind you. You reach back and you give other folks the same chances that helped you succeed.”

WHAT HER MESSAGE IS: Unmistakable demonization of the "successful." The statements accuse the successful of having forgotten others, of having welshed on their obligations.  The message to the successful: You owe us.  Michelle Obama further implies that anyone you perceive to be "better off than you" has done something to you to deny you a chance or opportunity. The statements imply that everyone who is successful is a greedy predator whose success has come at your expense. These statements are a mild form of the type of rhetoric that, in undeveloped foreign countries, is used to incite "the street" to riot, plunder assets and, indeed, to kill.

WHAT SHE SAID: "[Our families] believed in that fundamental American promise that, even if you don't start out with much, if you work hard and do what you're supposed to do, then you should be able to build a decent life for yourself."

WHAT HER MESSAGE IS: A decent life? The message is that this is all you need, all you should aspire to, that your expectations and aspirations should be modest. This is of the same sentiment as "you don't need much."  It gets worse. See the next passage.

WHAT SHE SAID: "We learned about dignity and decency -- that how hard you work matters more than how much you make -- that helping others means more than just getting ahead yourself."

WHAT HER MESSAGE IS:  Michelle Obama destroys the connection between one's effort and one's expectation of reward.  According to her, hard work does not need to be rewarded, and in fact is its own reward. This is not just troubling; it is insulting -- and no group is more exploited and insulted by this sentiment than the hardworking poor. Michelle Obama told the nation that no matter how hard you worked and how much you sacrificed, there should be -- no, there is no connection between that work and your reward.  In essence, she is sending the message that you do not -- you cannot -- earn what you make, no matter how hard you work.

Few expressions can dampen or destroy the work ethic more effectively. This is a Marxist, collectivist view, and I have resisted using this terminology. Until now.

Michelle Obama also repeated the implication that the successful are greedy, selfish and inconsiderate.  These are all code words and phrases designed and intended to stoke the fires of class envy, jealousy and rage.

WHAT SHE SAID: “If farmers and blacksmiths could win independence from an empire, if immigrants could leave behind everything they knew for a better life on our shores, if women could be dragged to jail for seeking the vote, if a generation could defeat a depression, and define greatness for all time, if a young preacher could lift us to the mountaintop with his righteous dream and if proud Americans can be who they are and boldly stand at the altar with who they love, then surely, surely we can give everyone in this country a fair chance at that great American Dream.”

WHAT HER MESSAGE IS: Not everyone has a fair chance to succeed. The prior passage provides the context. The overall message is that you were not given a fair shake, and it's the fault of the "successful."  Now, go grab those pitchforks!

But the very worst...

WHAT SHE SAID: "We learned about honesty and integrity, that the truth matters, that you don't take shortcuts or play by your own set of rules, and success doesn't count unless you earn it fair and square."

WHAT HER MESSAGE IS: The most dangerous section of Michelle Obama's speech. The implications are: (1) the successful are dishonest, or criminal; (2) society is rigged so that the "game" is unfair and those who are successful are either breaking the rules or taking advantage of an unfair system; and (3) putting aside the first two implications, those who are successful just aren't earning it, so the fruits of their success aren't theirs and are there for us to take.

Think back to the Middle Ages and images of European castles, with high, virtually impenetrable walls and surrounded by moats. Those devices were physical barriers meant to protect their residents from invasion and total plundering (not to mention physical crimes).  

Michelle Obama -- aka, Marie Obamanette -- only needed to cry, "To the Bastille!" 

The scariest implication: Michelle Obama's husband is the Leader of the Free World and runs, among other things, the Department of Justice. President Obama has appointed people with Michelle Obama's worldview to run the Department of Justice and given them the power to allocate and use limitless government resources to investigate and prosecute you, using a wide expanse of intrusive, vague, contradictory and sometimes unconstitutional laws.  When these people have this worldview, the zeal to pursue and effect desired outcomes -- i.e., imprisonment of their targets -- and only the courts to act as a check on their power, the "successful" may become very, very wary.

Eric Dixon is a New York corporate and investigative attorney, business consultant, and political strategist and advisor.