It looks like the EU leaders are heading down the same path that they did after reforms failed the first time, they are pressuring Ireland for a second referendum.
Their policy appears to be, “If the vote goes against you, change the rules”.
Month: June 2008
Monoliner MBIA Playing Chicken With Regulators
Yves Smith notes that monoliner bond insurer MBIA, after raising over a billion dollars through an equity offering, is refusing to transfer the proceeds from its holding company to its insurance subsidiary.
It appears that they are doing this because senior executives are paid by the holding company, and not the insurers.
One wonders then, why regulators, in this case Eric Dinallo, the New York State insurance commissioner, aren’t doing something about this, and the answer is blackmail:
The risks associated with the vast, unregulated market for credit default swaps played a crucial role in the bailout of Bear Stearns. Now these financial instruments are taking center stage in another Wall Street drama: whether regulators will let MBIA, the big bond insurance company, renege on a promise to shore up a crucial unit with $900 million in capital.
MBIA has written $137 billion in swaps, which are privately traded insurance contracts that let people bet on companies’ financial health. Most of these contracts stipulate that if MBIA’s bond insurance unit becomes insolvent or is taken over by state regulators, buyers can demand payment immediately.
But if that were to happen, MBIA would have far less money to pay policyholders and owners of municipal bonds backed by the company. So the swaps give MBIA significant leverage over Eric R. Dinallo, the commissioner of the New York State insurance department, who wanted the company to bolster its insurance unit with the $900 million in cash.
As the old saying goes, “If you owe the bank $1000, the bank owns you. But if you owe the bank $1,000,000, you own the bank.”
I’m thinking that perhaps a better solution for New York State regulators might be to find a way to arrest senior management at MBIA, as it appears that their capital raising was clearly fraudulent.
Senate Polling Numbers
In Maine, we have Susan Collins(R) fading, she is now leading Tom Allen(D) by 49%-42%, but any incumbent below 50% is in trouble, and not so long ago it was something like 52-39.
The one that surprises me though are the numbers for Mississippi, where the kinda-sorta incumbent* Roger Wicker(R) is behind Ronnie Musgrove(D) 46%-47%.
I would not expect that in Mississippi.
*Wicker has been in the Senate for only a few months, he was appointed to replace Lott when he retired to become a lobbyist .
This Much Schadenfreude Should Be Illegal
Chuch Prince, former CEO of Citi who was fired for their losses that resulted from the collapse of the housing market, is now unable to find a buyer for his house .
Prince’s five-bedroom Tudor-style house in Greenwich, Connecticut, has been on the market for six months. He has cut the price by $300,000 to $5.85 million, according to the property listing.
It appears that he paid $4.48M for the house in 2003, so one wonders why he isn’t lowering the price more.
Maybe he has a 2nd mortgage on it…..heh.
Public Ownership of Our Communications Infrastructure: It Just Works Better.
Harold Feld, a specialist in telco and spectrum issues with an eye toward public access, points me to an interesting bit of information, that while the UK, with its largely free market (by Europe’s standards) broadband market place lags behind the rest of Europe, the town of Nuenen, population 7500, provides its residents with 100mbs connectivity, with triple play access (internet, phone, TV) for €39/month (about $60), on a municipally owned network.
What’s more:
If a community-funded ISP sounds like a wacky European socialist plot, consider this: OnsNet generated an operating profit of about €1 million on revenues of €4 million in the past financial year – and that’s after a massive upgrade in which it wired the entire community with dual-fibre capability. What has your ISP done for you lately?
Faster, better, and cheaper than what you can get in the UK, where they require that the last mile wiring and internet service must be separate, which in turn is faster, better and cheaper than what you can get in the US, where the only rule is maximize the next quarter’s profits.
The idea that an unregulated market in broadband to the home creates innovation is simply wrong. We have had nearly 20 years of this policy now, starting with ISDN, and the US has the worst broadband service in the industrialized world.
The goal of a company is to make a profit, and the easiest way for incumbents to make profit is to create barriers to entry, not by providing better of cheaper service.
No Bid Contracts
Well, it looks like the Iraqi oil ministry, likely on the advice of the American advisers who work there, have cut some deals with some oile companies for field maintenance
Exxon Mobil, Shell, Total and BP — the original partners in the Iraq Petroleum Company — along with Chevron and a number of smaller oil companies, are in talks with Iraq’s Oil Ministry for No-Bid Contracts to service Iraq’s largest fields, according to ministry officials, oil company officials and an American diplomat.
(emphasis mine)
No bid contracts…says it all.
Economics Update
Weekly unemployment claims fell 5000 to 381,000 from the week before, though predictions had been for 375,000. It’s noisy, but the number is still too damn high, even if the leading indicators are up for the 3rd straight month (though not by much).
I would be more concerned that the Philadelphia Business Outlook Survey by the Federal Reserve went down when the experts predicted an improvement. (As Philly goes, so goes the nation’s economy, at least that’s how the Fed sees it).
Energy news was generally good though. Oil dropped because the Chinese are going to stop subsidising retail gasoline and diesel purchases, which should reduce demand considerably, and retail gasoline prices fell for the 3rd day in a row to $4.073 a gallon.
For some reason, the dollar fell too, though conventional wisdom would say that it should have risen.
On a day to day basis, there is more noise than data, you get a better picture on (at least) a weekly look.
In any case, I would not be hoping for a quick real estate turn around. Mortgage rates just hit a 9 month high, and all indications are that it will go higher, particularly since Triad Guaranty’s mortgage insurance subsidiary is shutting down, which is the first time that I’ve heard about a mortgage insurer shutting down.
If this becomes more common, it will force mortgage rates up, and home sales and prices further down.
But it wouldn’t be fair for me to talk about insurers without talking about the monoline insurers, who are insolvent, but still have AAA ratings from the agencies…at least from some of the agencies.
Ambac Financial, the second largest of the monoline insurers, is terminating its contract with Fitch Ratings, because Fitch dropped their ratings.
They are the 4th monoliner to drop a ratings agency because they don’t like the truth, and it screams out for meaningful regulation.
MacReady: Any way we can we fix it? Garry: It’s “gone”, MacReady*
You know the obscene profits that the investment banks earned 2004-mid 2007? Half of it has now been lost.
42 months of obscene profits, and 21 of them have vanished in a puff of smoke.
Those guys really earned those multimillion dollar bonuses, huh?
*It’s my 2nd favorite movie of all time.†
†My favorite movie is Kurasawa’s Seven Samurai.
Zimbabwe Update
Things are not looking good there.
First, we have Mbeki visiting Zimbabwe, and my best guess would be that he told Mugabe that he was doing just fine. Certainly Mbeki’s visit did nothing to prevent Mugabe from expelling a UN human rights official.
It increasingly appears that the Jacob Zuma, who is under investigation for corruption, is the only leader in the ANC who is showing moral authority. This time, he’s saying that the runoff has been tainted by Mugabe’s actions.
Assuming he stays out of jail, Zuma should succeed Mbeki shortly, which would be to the benefit of everyone in sub-Saharan Africa.
It is also worth noting that Kenyan Prime Minister Raila Odinga, himself no stranger to stolen elections, has called on Mugabe to step down.
Finally, we have the continuing problem of violence by the opposition’s skulls against ZANU-PF batons and pipes. The mayor of Harare and 4 MDC activists bodies were found bludgeoned to death.
When You Think That They Can Go No Lower
They continue to surprise…in a bad way.
Everyone’s poster child for mercenaries, Blackwater USA, is now asserting that they bear no culpability for a plane crash in which their under trained and reckless employees killed US soldiers when they crashed into a mountain top in Afghanistan because the law of the land there is Sharia, and “Sharia law does not hold a company responsible for the actions of employees performed within the course of their work.
Thats right, they are trying to apply religious law to a civil suit.
I have an idea. Let’s send Eric Prince to Afghanistan to stand trial there.
Vichy Dems Capitulate on FISA
That’s the word according to the NY Times.
What’s more, it looks like they will be funding Bush’s war at the same time.
Damn.
Huck Foyer.
Afghanistan Gets Hot
Following the massive Taliban prison break, we are seeing intense combat through the south of the country.
If half the troops in Iraq were there, we’d be doing much better.
Israel and Hamas Truce Starts Today
As always, I am pessimistic regarding the likelihood of this turning out well…..It’s the Middle East.
Clinton and Obama to Hold Fundraiser
Hillary Clinton is not being half hearted in her support for Obama, as some people *cough* MSNBC *cough* suggested that she would be.
She is tying him in with her donor base at this meeting.
Baltimore Mayor Sheila Dixon’s House Raided
I was wondering when this shoe would drop.
My take is that she likely did something wrong, though whether it rises to the level of a major crime, I don’t know, because she has a long history of nepotism and favors for friends and relatives, see here and here, and she has done this repeatedly.
It should be an interesting few months.
U.S. Pins Car Boming on Sadr Groups
This assertion is highly suspect. The idea that Sadr’s Mahdi militia, a Shia militant group, and one which has no history of things like this, just bombed a market in a Shi’ite neighborhood…
I call bull sh@#.
“Dollar Bill” Jefferson to Run for Re-election
William Jefferson (D-LA), who was found with $90,000.00 in his freezer, and has since been indicted, is running for another term.
This is an embarrassment.
“There is no longer any doubt that the current administration committed war crimes.”
So says retired Antonio Taguba, who oversaw the review of the Abu Ghraib scandal, and was then forced out when the report told the truth, in the introduction to the report from Physicians for Human Rights on torture under US detention, which uses, among other things, the roadmap of scars on its victims:
Neither the Bush administration nor the Pentagon commented on the unpublished report yesterday. President Bush has repeatedly said he does not condone torture and allows interrogation techniques that are aggressive but legal.
The report challenges that contention with a detailed physical and psychological profile of each of the former detainees. In two of the cases, the medical investigators had access to the subjects’ recent medical records. All 11 men were given pseudonyms for their protection, according to the report.
The doctors found that “Kamal,” an Iraqi in his late 40s held from September 2003 until June 2004 at Abu Ghraib, has a lesion near his right ear that is “consistent with a healed cut from a sharp-edged instrument,” according to the report. He also had another wound by his left ear, described as “a healed puncture injury” that matches “Kamal’s description of being stabbed with a screwdriver in his cheek by a soldier,” the report states.
Psychologically, “Kamal’s clinical presentation, reported history of abuse, and the result of psychological testing support the presence of several psychiatric diagnoses,” including depression, a panic disorder, and post-traumatic stress disorder, according to the report.
A subject named “Amir,” an Iraqi in his late 20s held in Abu Ghraib prison from August 2003 to January 2005, “showed signs of rectal tearing that are highly consistent with his report of having been sodomized with a broomstick,” the report found.
“Yasser,” another Abu Ghraib detainee in his mid-40s, had scars on his thumbs and irregularities in the contours of his tongue, according to the report. The medical team concluded that the damage supports his contention that his American captors subjected him to electric shocks.
The problem here torture always follows the soldiers home. The people who were ordered to to this will come home, and many of them will end up in law enforcement, where they will do the same to someone who they think is not sufficiently respectful at a traffic stop.
The only answer is accountability at the very highest levels. By this, I do not mean that it stops at Rumsfeld. Bush and Cheney need to spend most of the rest of their lives in jail.
Tanker, Oh Tanker
The G.A.O. has ruled against the Air Force on Boeing’s protest, which probably means a rebid.
I’m kind of surprised. After Boeing bribed the Pentagon acquisition officer, I figured that they would have handled this better.
I also figure that when you chose the plane that is:
- Already flying.
- Just as cheap.
- Offloads more gas further away from base.
- Has a contracting team with a better record of being on time and on budget.
That it’s tough to screw up the process.
Needless to say, Boeing is doing a happy dance about all of this.
The GAO language is fairly strong, which means that a recompete is almost certain.
If Obama’s folks have any guts, they will have proxies demagogue the hell out of this against McCain, who killed the original corrupt deal.
Economics Update
Well, I’d be worried if I had to job search, because about 1/3 of employers surveyed by the Business Roundtable expect layoffs in the next 6 months.
Needless to say oil heading back up, and the dollar heading down would indicate that those 1/3 of executives surveyed are being prudent, even if retail gasoline prices fell for the 2nd day in a row, which hasn’t happened in quite a long time.
Currency gets even more interesting when one realizes that the Chinese Yuan has gained 20% vs the dollar since it’s been allowed to “kind of sort of float” against the dollar by pegging to a basket of currency, it’s gone from 1 Yuan= $0.1208 to 1 Yuan=$0.1453.
What’s more, it looks like a strong Yuan may be the only way for the Chinese to keep their inflation down, by cooling off exports and lowering the cost of imports, particularly food and fuel, so they may continue to take actions to strengthen their currency, essentially exporting their inflation to us.
Real estate continues to suck too, with mortgage application volume falling last week and the Architecture Billings Index dropping two points.