Month: February 2008

How a Primary Attack Ad Should Be Done.

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If the one of the Democratic campaign wants to do a real attack ad, against a primary opponent, in a perfect world, it should fulfill the following requirements:

  • It should be the truth.
  • It should address a real concern of Democratic voters.
  • It should not be something that the Republicans can use against the target if they win the general.

So I was just kind of writing stream of consciousness, and came up with a Hillary Clinton attack ads against Barack Obama

I’d like to see what my readers think, and what ideas my readers have, so I am post dating this to Saturday Afternoon, to get comments.

On to the Ad:

(Cue sinister music, go with spot of gray on the screen, which will slowly pull back as the ad progresses and reveal itself to be a scary black and white picture of John McCain)
In 2002, John McCain said that the ads accusing Max Cleland, who lost one arm and both legs serving in the military, were “Worse than disgraceful”.

Now John McCain has hired Bo Harmon, the man behind that ad campaign as his national political director.

We know that the Republicans will be throwing every lie and slander they can find against the Democratic Nominee, and we know that Barack Obama has never been in a seriously contested election against a Republican.

Over the past 16 years, the Republican swift boaters came after Hillary Clinton with accusations of everything except eating puppies, and she’s still standing.

The stakes are too high this November to take an audacious chance with your primary vote.

I’m thinking of trying to put this up on Youtube, after I improve the copy a bit.

You will notice that this is a devastating ad, but it gives the Republicans nothing to use in the general.

Economics Update: Real Estate Edition

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Swiss banking giant UBS is looking at a $26.6 billion exposure to toxic mortgates, in addition to whatever hit that they might take on subprime, so these are A and alt-A mortgages. It reported a loss of $11 billion in Q4.

In the Dallas-Ft. Worth Metroplex, foreclosure postings are up 27%, effecting 13,000+ residences, an all time record. The scary quote is, “Out of the homes posted, at least 20 percent are underwater and probably more” .

And everyone’s favorite subprime whipping boy, Countrywide Financial, has had delinquencies rise to 7.47%. That’s about one out of every 14 loans that is delinquent, which is clearly unsustainable.

If banks had to consider this rate of delinquencies as a normal cost of business, mortgage rates would probably be in excess of 12% just to break even.

It now looks like Royal Bank of Scotland is the latest institution in line to see significant losses from mortgage backed securities.

Economics Update: Insurance Edition

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Bond insurer FGIC has asked regulators to break it up into two separate divisions/a>, one which insures minicipal bonds, and the other that insures the structured finance deals (aka the big sh$#pile).

This is likely a reflection of their dire position following Moody’s down grade of them from AAA to A3.

UBS is saying that banks are at risk of an additional $203 billion in losses from the bond insurance crisis.

Government Shutting Down Economic Indicators Website

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Due to budgetary constraints, the Economic Indicators service (http://www.economicindicators.gov) will be discontinued effective March 1, 2008.

Economic Indicators.gov is brought to you by the Economics and Statistics Administration at the U.S. Department of Commerce. Our mission is to provide timely access to the daily releases of key economic indicators from the Bureau of Economic Analysis and the U.S. Census Bureau.

You may link to the most recent release by clicking on the report name in the table below. You may also subscribe to our *free Subscription Service to have these files emailed or faxed directly to you as soon as they are released.

Barry Ritholtz, of The Big Picture, rightly asks, “WTF? Feds Shutting Down Economic Data Site.”

He then suggests that, much like eliminating the release of the M3 Data, this was done because the data is inconvenient, and I agree.

Last Deliveries of Bell AH-1Z Use New Build Airframes

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The US Marines have had two programs to upgrade their nearly Vietnam era helicopters.

The upgrades are known as the UH-1Y and the AH-1Z.

In addition to changes to avionics, these also involve upgrades to the engines and rotor systems.

It now appears tatt the the final 40 deliveries will be completely new airframes, as opposed to rebuilds.

From a FMS (foreign military sales) perspective, this means that Bell will be able to sell new build AH-1 helicopters with 4 bladed rotors, and modern T700 engines.

This is good news for Bell, which makes the AH-1 Cobra, and bad news for Boeing, which makes the AH-64 Apache, which is much larger and much more expensive to purchase and operate.

Much of the utility in an attack helo is in its sensors and fire control systems, and the AH-1Z will be very close to the AH-64 in those capabilities, as well as in weapons load, though it will not carry the hideously expensive Longbow radar system.

Bush Administration is “Predatory Lenders’ Partner in Crime”

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Eliot Spitzer, current Governor of, and former Attorney General for, the state of New York, has an editorial today that says just that.

Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.

Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.

In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.

I don’t who care who wins the election in 2008. I want Eliot Spitzer to win the 2012 Presidential election as the Democratic nominee.

Read the whole thing

Coast Guard Stops Payments to Eagle Eye UAV Program

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The US Coast Guard has shelved the Eagle Eye UAV Program.

It appears that Bell, the manufacturer of the aircraft, billed it as being nearly ready for production, and it clearly is not.

First flight, which is yet to occur, was supposed to be in 2006.

Yet another clusterf$%# associated with the Coast Guard’s Deepwater program, and another nail in the coffin for the Lead System Integrator (LSI) concept of government contracts.

It looks like the USCG will be going with an existing system.

House of Saud Threatened UK With Terrorist Attacks If Bribery Was Investigated

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The Guardian is reporting that the House of Saud threatened to help terrorists if the British government continued to investigate the bribes paid to Saudi Prince Bandar.

Saudi Arabia’s rulers threatened to make it easier for terrorists to attack London unless corruption investigations into their arms deals were halted, according to court documents revealed yesterday.

Previously secret files describe how investigators were told they faced “another 7/7” and the loss of “British lives on British streets” if they pressed on with their inquiries and the Saudis carried out their threat to cut off intelligence.

Prince Bandar, the head of the Saudi national security council, and son of the crown prince, was alleged in court to be the man behind the threats to hold back information about suicide bombers and terrorists. He faces accusations that he himself took more than £1bn in secret payments from the arms company BAE.

It should be noted that one of Bandar’s nicknames is “Bandar Bush”, because he is considered a sort of virtual member of the Bush clan by the family.

One of the future goals of any future US administration should be the removal from power of the House of Saud, and the imprisonment of those who held the reigns of power.

Economics Update

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Note that this has been, for whatever reason, a busy news day, so this does not include news related to real estate or to the bond insurance crisis. Those will be posted later.

We have downward pressure on the dollar, because additional Fed rate cuts are anticipated.

Basically, the thought is that Fed rate cuts lead to lower interest rates, which make the dollar less attractive, because rates of return are less.

If I had the money, I would bet against this, because, as the latest rate cuts have showed, the Fed can no longer move rates down. We are in a Japan style liquidity trap.

We also have a type of investment that I have never heard of before, auction rate securities, which were sold as being as liquid as cash. They work by regularly re-auctioning the securities on a fairly frequent basis, allowing for people to sell easily, and for the rates to adjust to suit market conditions.

These are now becoming increasingly illiquid, with thousands of auctions failing, and Goldman Sachs refusing to let investors withdraw money from their investments when auctions fail to attract buyers.

UBS has notified its 8200 US brokers that it will not support these securities if the auction fails either.

FWIW, Paul Krugman has a very good editorial, even by his own ordinarily high standards, describing what is going wrong, and the consequences of this failure in terms that a layman like me can understand.

Related is the news that Citigroup is suspending withdrawals from its CSO Partners hedge fund.

In terms of the real economy, as opposed to high finance, we have the New York Federal reserve reporting that its Empire State Manufacturing Index fell nearly 21 points, from +9.03 in January to -11.72 in February. It was expected to fall, but only to +5.75.

The Financial Times is reporting that banks are being advised to walk away from the private equity deals that they are funding, because the penalties are far lower than the potential losses.

This would stop private equity buyouts in their tracks.

US Air Force Intent on Committing Suicide

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Gen. Bruce Carlson, chief of Air Force Materiel Command, told a group of reporters Wednesday that the Air Force will figure out a way to buy 380 F-22s, despite the fact that the Pentagon – through the Office of the Secretary of Defense (OSD) – has capped the number of Raptors to be procured at 183.

What is first obvious is that is engaging in insubordination by giving a press conference saying that he will find a way to subvert the decisions of a superior in his chain of command, and he should be fired immediately.

This is far more brassy, and far more public than anything MacArthur did to Truman.

That being said, if he gets his wish, he will destroy the USAF as a fighting unit.

Flight International’s Stephen Trimble does the numbers, and gets an additional 20 F-22s a year at $150 million an aircraft gets another $3 Billion a year over the next 10 years.

Based on my experience with military contracting, I’d double that number when operational expenses, the inevitable cost overruns, and gold plated block improvements are added.

To do this, I think that you need to slash personnel, and cancel pretty much every other program, the F-35, the KC-X, the next gen bomber, the next gen freighter, etc.

You will also have to reduce the existing inventory to cut costs and to reflect the fact that you don’t have enough people to keep the stuff running

Obama’s Presents Economic Plan

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Contrary to complaints, we actually have a decent bit of detail here.

  • Payment for program by elimination of upper class tax breaks and ending Iraq war.
    • My comment: I still think that you need more, at least a thorough review of the Byzantine system of tax credits and deductions to get enough money.
  • A National Infrastructure Reinvestment Bank, spending about $60 billion over the next decade repairing infrastructure.
    • My comment: Good, but we probably need to spend more. Unsure of the amount that states would have to match. Also, should include a similar amount for mass transit and/or freight rail, both of which save energy, etc..
  • Ending tax breaks for moving jobs overseas.
    • My comment: This one has almost become a cliche, but there are also programs that subsidize this in the US that need to be addressed (Ex/Im bank comes to mind).

Generally it’s pretty good. Generally, it’s also pretty similar to Hillary Clinton’s too.

However, there is something else that I found both interesting and laudable, which accompanies his speech (H/T to the other Matthew for the catch), specifically a credit card bill of rights:

  • Ban Unilateral Changes: Currently, credit card companies can unilaterally change the terms of a credit card agreement at any time for any reason with only a 15-day notice to the consumer. Barack Obama will ban these unilateral changes in credit card agreements unless companies have obtained written consent from consumers and have followed the rules and terms of the agreement.
  • Apply Interest Rate Increases Only to Future Debt: Credit card companies often apply increased interest rates to both new debt incurred by the cardholder, as well as previously incurred debt. Barack Obama will require increased interest rates to apply only to future credit card debt, and not to debt incurred prior to the increase.
  • Prohibit Interest on Fees: Credit card companies often charge interest on transaction fees, such as late fees or paying a bill by telephone. Barack Obama will prohibit credit card issuers from charging interest on transaction fees.
  • Prohibit “Universal Defaults”: “Universal defaults” are a practice in which a credit card company raises an individual’s interest rate based on failure to pay a different creditor on time. Barack Obama will prohibit this practice.
  • Require Prompt and Fair Crediting of Cardholder Payments: Barack Obama will require credit card issuers to apply payments first to the credit card balance with the highest rate of interest and to minimize finance charges.

This is interesting for a number of reasons:

  1. It’s very good policy.
  2. This is a proposal where there is actually a loser, the credit card issuers, which is a change from his typical proposals where the policy is not a zero sum game.
  3. This is actually a fairly specific refution of the Washington DC/DLC/Milton Friedman orthodoxy that financial services need to be completely deregulated in order to provide maximum benefit. This may be more important than the first two in revealing his attitude on such matters. Much of the credit crunch today is due to the repeal of Glass-Steagel, which was driven by this ideology.

All in all, a solid B+ to my mind.

Economics Update

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Well, we have Bernanke and Paulson acknowledging that the economy is in trouble, but denying that there will be a recession in 2008.

The thing is, we are already in a recession. Let’s seem consumer spending is flat, with a false increase being driven by increasing food and fuel prices, and the growth rate is less than the real inflation rate.

In bond insurance, we have NY governor Elliot Spitzer saying that the Monolininers have 4-5 business days to recapitalize, or they will lose their AAA ratings, and regulators will have to, “have to step in and separate bond insurers’ municipal businesses from their more troubled structured finance units”.

Bet that offer from Warren Buffet does not look so awful now.

In mortgage loans, banks are lobbying hard to put off their bad investment choices on the US tax payers, which is not surprising, considering that house prices took their biggest quarterly drop ever, a national median price drop of 5.8% in Q4 of 2007.

Annually, that comes to about 23%/year.

The credit crisis is extending further, with delinqencies in assets backed by auto loans surging.

The Trade deficit fell in 2007, for the first time since the 2001 recession.

More Evidence that Destroyed Evidence Will Prevent Fair Trials at Gitmo

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It appears that tapes of interviews and torture interrogations were routinely overwritten, in defiance of a court order.

Not only does cast a pall over the Guantanamo show trials, it may make it impossible to hold a trial in a real court as a result.

The cynic in me believes that this was the intent. Screw it up so badly that the only alternative is a Kangaroo court.

Look at Saddam Hussein’s trial. How you run such an unfair trial, when the defendant was so plainly guilty, is completely beyond me.