This week in The Institutional Risk Analyst, we feature a comment from veteran journalist Sol Sanders on the festering situation in Tunisia and the entire Muslim world. A version of this piece ran in The Washington Times. As Americans celebrate the life of Martin Luther King Jr., we should remember that most nations in the world are not free. In many cases, the oppressor regimes are clients of Washington -- or a radical regime created as a reaction to western colonial rule. Anti-western Islamic fundamentalism is the new fascism, make no mistake, but it has its roots in the development of oil in and around the Persian basin a century ago.

Since the turn of the last century, the nations of Europe, the US and Japan used oil-fired warships and armies to impose a colonial veneer over many societies around the world. This alien administrative structure created the superficial appearance of western style democracy and modernity, as Sanders describes in Tunisia, but now these facades are crumbling into the chaos of reactionary medievalism. Once again we see that entropy is a very useful model for understanding the physical world. In politics and finance, we go from chaos to stability and back again.

From Caracas to Tunis to Delhi to Hong Kong, citizens of the so-called emerging world, which include some of the oldest societies on the planet, are trying to understand who they are after a century and more of Western military and cultural hegemony. As America gradually withdraws militarily from the world under the pressure of fiscal constraints, that process is likely to accelerate and become even more violent. But what American could ever argue that other people do not have the right to freedom and self determination, even by force of arms?

In many nations of the world a new civil rights leader, say a woman in Iran or Tunisia or Saudi Arabia fighting the oppression of Islamic fanatics, would immediately be greeted with a imprisonment, torture or worse. Dr. King was the leader of a non-violent movement, but one that was built upon the bodies of thousands of black men and women murdered as they fought for liberty. That struggle against bigotry and hate ultimately claimed King's life as well. He was gunned down at a motel in Memphis in 1968, but not before he seized the conscience of a nation. Yet in many other countries around the world, a liberal reformer such as Dr. King would never be allowed to exist.

Attorney General Eric Holder said last week at a Justice Department commemoration of Martin Luther King that efforts to bring tolerance and peace are more powerful than attacks on public officials like Representative Gabrielle Giffords (D-AZ). We agree. Whether you are talking about suicide bombers in Iraq or crazed assassins in AZ or TN, the response of the US and the other civilized nations of the world to violence and intolerance should be to reaffirm our commitment to individual freedom and the rule of law.

The Most Sued Companies in America

Before we get to our feature, below is a table we assembled after last week's comment on the number of lawsuits facing the largest banks to show some of the most sued companies in the US during 2010. The data is taken from PACER and shows all of the federal lawsuits entered for the parties shown during the calendar year. Most of these cases involve the named party as defendant. These totals include some double counting for multiple parties and do not include state court lawsuits that have not been removed to federal court.

Generally speaking, large corporation will remove a state court litigation to federal court if possible to do so. Big companies think that federal court is a superior venue for a defense, but the trial lawyers we know don't mind either way. And corporate defense lawyers, who work by the hour, never mind a procedural fight over a "good removal." For a purely domestic litigation within a state, removal to federal court usually is not an option. Generally removal from state court to federal requires either (1) diversity of domicile among the parties and/or (2) a question of federal or Constitutional law.

Total Federal Litigation

 

Party	2010	2009	2008	2007
Ally Financial/GMAC	768	826	430	236
Apple Computer	7	13	14	12
Bank of America	3,285	2,569	1,196	775
Bridgestone	134	1,188	697	172
British Petroleum	52	5	14	6
Citigroup	447	607	682	346
Ford Motor	470	1,562	2,571	780
General Electric	9,359	12,356	20,498	3,887
General Motors	299	1,817	2,524	2,331
Goldman Sachs	180	115	105	79
Goodyear	4,989	14,393	13,330	2,661
JPMorgan	1,150	1,149	471	275
Morgan Stanley	261	405	273	236
Toyota Motor	1,873	154	185	158
US Bancorp	59	74	19	25
Wal-Mart	1,672	1,765	1,452	1,538
Wells Fargo	3,092	2,428	1,413	969

Notice that some of the industrial companies 0n the list, including Ford (F), Bridgestone, Goodyear Tire (GT), General Electric (GE) and General Motors (GM) have large numbers of asbestos litigations in some years, forcing the totals up. About 99% of the lawsuits shown for GT in 2009 and 2008, for example, come from asbestos claims. Of note, all lawsuits involving asbestos filed in state or federal courts now are transferred to a specially designated federal court in PA for discovery on and settlement of valid claims.

The totals for British Petroleum (BP) may look low given the scale of the disaster following the oil spill in the Gulf of Mexico last year. But remember that many of the claims against BP are being made in state courts along the Gulf. Even though a foreign corporation, BP is considered domestic corporation in the US states where it does business.

The totals for the financials are obviously impressive, especially compared with 2008, but also illustrate the different business models. Notice that the banks with the biggest mortgage exposure, Wells Fargo (WFC), Ally Financial/GMAC and Bank of America (BAC) have the highest totals. And these are not asbestos cases kiddies, which typically get settled for less than $10,000 in pre-trial settlements, but rise to more than $1 million in settlement costs if they go to trial.

Notice too that Citigroup (C), JPMorgan (JPM), Goldman Sachs (GS) and Morgan Stanley (MS) all have significantly lower litigation totals than do BAC and WFC. And even US Bancorp (USB), which does have large exposure to securitizations, has managed to keep its litigation profile the lowest of all large banks. Again, remember that these banks are facing many more state court claims involving foreclosures and other matters that will not be removed to federal court.

Follow the Money No. 49: Charting the Arab dark
By Sol Sanders

Imagine two lines on a graph - one zigs and zags, another rises rapidly. They could represent two current unsettling world currents. The first would chart U.S. efforts to eradicate Islamic terrorists, on Afghanistan and Iraq battlefields but also a wider intellectual war against political Islam from Casablanca to Zamboanga. The second would trace a rising tide of embittered frustration leading to seduction of young Muslims -- not excluding their progeny in the West - by fanatics, and, ultimately terrorists.

The mid-January rioting in Tunisia [just over 10 million, the size of California] which overthrew Zine El Abidine Ben Ali, the country's only second chief executive ruling since 1987, dramatizes the contest. Seen in the mid-50s at independence as one of the more progressive ex-colonial countries, and although maintaining a 5% domestic growth rate and higher rates of literacy than most Muslim states, the regime sank into a swamp of political repression and corruption.

With more than half its population under 30, increasing unemployed youth want more. It remains to be seen who will come out on top in Tunis. But across North Africa - from Egypt to Morocco - underground religious Muslim opposition festers. Alas! in Tunisia, as elsewhere, the Iranian mullahs' total corruption and Saudi Arabian hypocritical lifestyle notwithstanding, the Islamicists' appeal is growing. It promises puritanical reform and return to a nonexistent paradisiacal past under a Muslim caliphate [theocracy] as alternative to bad copies of Western government.

Meanwhile, whether Vice Pres. Joe Biden returns from his Afghanistan, Pakistan and Iraq survey - and cheerleading -with new solutions, there's increasing skepticism of Gen. David Petraeus' Afghanistan strategy. And with mounting U.S. domestic problems, it will be hard to keep building on the sacrifice of young lives and more than $1 trillion already spent since 9/11 on the worldwide war against terrorism.

The argument over how to win asymmetrical wars against fanatical opponents is raging again. The danger in COIN [counter-insurgency warfare] expounded by Gen. Petraeus is an old American intellectual heresy, scientism. The 19th century philosopher [founder of modern psychology] William James warned against over-intellectualizing. Dr. James' counsel applies to guerrilla warfare. For in the nature of things, insurgencies are particularistic.

There's little commonality among the Moros [whom Gen. "Black Jack" Pershing brutally crushed] in the southern Philippines at the turn of the 20th century, the Vietcong in the Mekong Delta in Vietnam in the 1960s, the Tupamaros on the streets of Montevideo, Uruguay, in the 1970s, or al Qaeda in Afghanistan in 2011. These movements built on specific local conditions. Any formula for combating insurgencies must do likewise. Yes, vacuous "counterinsurgency" generalizations can be formulated: the army should not steal the peasants' chickens. But learning the ins and outs of Pakistan-Afghanistan frontier Hatfields and McCoys is essential - taking time and patience, not handbooks trying to apply the scientific method to social issues.

For war is not only cruel and brutal but probably the most inefficient human activity since the first caveman hit the second caveman over the head with a club. The weapons are increasingly more sophisticated. But the human animus remains the same. For every sophisticated multidisciplined approach to villagers caught between intimidation by both sides, there have been exponents of brute force. [A cynical old Vietnam War saying: "Grab their ____, and their hearts and minds will come."] That's the rationale, perhaps, for U.S. drone attacks on terrorist leaders in Pakistan with grim fallout of civilian casualties, providing a political football for local politicians who hypocritically supply intelligence for the kills.

Almost 10 years ago - one wonders if current "politically correct" discussion of Islam would tolerate it now - a UN commission led by noted [if mostly exiled] Arab intellectuals searched for causes of Araby's backwardness. Initiated before the 9/11 attacks, they predicted 280 million people in the 22 Arab countries would grow to as many as 459 million by 2020 but emphasized their isolation. Arab translations in the last thousand years, it noted, were only what Spain translates in just one year. Yet there are Arab bestsellers, often obscurantist screeds on the Koran, the word of Allah that no critic is permitted to challenge.

Emigrants from burgeoning North African [along with South Asians, Muslim and Hindu, West Indians and Africans] have drifted willy-nilly into Western Europe searching for livelihood in these last decades of its enormous prosperity. But daily incidents from the Netherlands, Germany, France, Belgium and even Scandinavia, demonstrate that counter intuitively, the second and third generations have failed to assimilate. Most European leaders including German Chancellor Angela Merkel now admit "multiculturalism" - leaving migrants to fend for themselves in their own ghettoes off welfare state handouts - has not succeeded. But the gap of willful ignorance now is too often replaced by misplaced tolerance of premodern horrors - discrimination against women, "honor killings", child marriage, etc., etc. Defensiveness about European traditions and posturing to understand "basic issues" is condescending and as useless as the former disregard.

Somehow, some way, American and Western information and propaganda must find a way to bridge that gap or face new explosions when the two lines on our fictitious graph collide.

Questions? Comments? info@institutionalriskanalytics.com

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