Month: October 2008

Why David Frum is Crapping his Pants

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So, David Frum just wrote an article in the Washington Post throwing John McCain’s presidential bid overboard, suggesting that all Republican Party efforts should be directed towards the Congress, particularly the Senate, so as to prevent a filibuster proof majority.

He notes, correctly, that the RNC is the only place where the ‘Phants are raising good money, and that they are wasting it on his doomed campaign.

He’s concerned about how a “conservative free” management of the financial meltdown will be handled, and he wrings his hands over the, “fierce new anger among many liberal Democrats,” by which he means that their refrain is, “Thank you sir, can I have another.”

But then, he gets to the bit where he actually really gives a damn:

Unchecked, this angry new wing of the Democratic Party will seek to stifle opposition by changing the rules of the political game. Some will want to silence conservative talk radio by tightening regulation of the airwaves via the misleadingly named “fairness doctrine”; others may seek to police the activities of right-leaning think tanks by a stricter interpretation of what is tax-deductible and what is not.

(emphasis mine)

Between punditry on fox, and his think-tank gigs, he is afraid that he will actually have to work for a living.

I guess that trumps ideology for him.

I incorporated a 501(c)3 tax exempt org, it was, and is, a completely bogus registration, though it is technically legal and in accordance with all laws and regulations. (no names here, I don’t want do give them grief*) It puts on SF conventions, and running a SF convention should not get tax exempt status, with deductible contributions (In truth, it went 501(c)3 for the cheap mailing rates anyway).

Neither should the right wing pundit full employment welfare programs, like the AEI, where David Frum works. They are playthings of rich people who never had to work for their money, and want to manipulate public policy for their benefit.

They are not charities, they are lobbying organizations.

*And I don’t want to give them anything else. Any contact between me and this organization is very bad for me, which I suppose is more of a reflection on me than it is on them.

Economics Update

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Well, the Federal Reserve cut the federal funds rate by 50 basis points (½%) as expected.

the Bank of China cut its rates too, for the 34d time in 6 weeks.

In response, the dollar dropped the most since 1998, (this article says since 1985) which is what is supposed to happen when you cut rates, people go elsewhere looking for higher rates of return.

Unfortunately, driving down the dollar is probably all it did. Below a certain level, the difference between the rate set and 0% (giving money away) becomes pretty immaterial, and I think that we are pretty close on this. That’s what my oft repeated phrase, “pushing on a string” means.

I would also note that the falling dollar pushed oil prices higher, which I’ll qualify, so as not to invoke the wrath of Dean Baker, since oil is dollar denominated, a falling dollar does not do anything directly, but it does effect the positions taken by traders in the oil futures market.

In any case, the monoliner insurers are back in the news, with Ambac wanting a capital infusion from the government, but MBIA saying that the money should instead go to assets that they insure. New York State Insurance Commissioner Eric Dinallo agrees with Ambac.

I think that MBIA’s proposal is a bigger bailout, since it means that they have less to pay on the sh^%pile without giving an ownership stake to the feds.

In any case, it looks like the Treasury and the FDIC are working to do MBIA’s bidding, with more signs of plans to buy bad mortgages.

BTW, here is a story to follow, the SEC is looking at tightening rules on credit rating agencies. The story I linked to has 2 ‘graphs, but when the details start coming out, this will be important.

The systemic failure of the ratings agencies is at the core of much of this problem.

Speaking of failures, the Treasury just bought $125 billion in stock in the big boys:

The report showed that the payments included $25 billion each to Citigroup Inc. (C, Fortune 500), JPMorgan Chase & Co. (JPM, Fortune 500) and Wells Fargo & Co. (WFC, Fortune 500) Bank of America Corp. (BAC, Fortune 500) received $15 billion andMerrill Lynch & Co. (MER, Fortune 500), which is being acquired by Bank of America, got $10 billion. Bank of New York Mellon (BK, Fortune 500) received $3 billion and State Street Corp. (STT, Fortune 500) of Boston got $2 billion.

Really about the only good news that I’ve heard today is New York GA Andrew Cuomo getting medieval on senior bank management:

NEW YORK (Reuters) – New York Attorney General Andrew Cuomo, who negotiated executive payment clawbacks by American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) as it received a taxpayer bailout, warned nine banks receiving government money on Wednesday that using the funds for bonus payments may be illegal under state law.

….

“Specifically, corporate expenditures and payments, made in the absence of fair consideration of undercapitalized firms, may well violate NY Debtor and Creditor Law 274, which deems such payments illegal fraudulent conveyances,” Cuomo’s letter said.

Obama really needs to give this guy a senior post if he’ll take it.

America, Where It Pays to Fail

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Not my title, rather it was the title from der Speigel, thankfully it’s in English.

How can you not love an article that starts like this:

More than 100 years ago, German sociologist Georg Simmel criticized the banks for being even bigger and more powerful than the churches. His chief complaint — that money is the new god of our times — is still heard today. If Simmel was right, and there are some indications that he was, his statement would have to be modified to suit today’s circumstances: Not all people pray to the same god.

Among the money worshippers, there are at least three faiths. First there are the Puritans, who patiently carry their money to the new churches, hoping that it will multiply. The average Chinese, for example, deposits 40 percent of his income in banks. What laudable discipline! Then there are the Pragmatists. They save and lend, but only in that order; their savings limit their boldness. This persuasion is especially prevalent in the Germanic countries, where the savings bank is the shrine.

Finally, we have the religious community of the Uninhibited, which is especially popular in the United States. Its adherents readily admit to intentional recklessness, wanton waste and omnipresent greed.

It’s amazing how much savage good writing we are seeing these days about American klepto-capitalism.

Iceland,Ukraine, Hungary to get IMF’d

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Icelnad has gotten a deal for a $2 billion loan from the IMF. That’s about $6250.00 for every man, woman, and child on the island. They could not cut a deal with the Russians who, my wild-assed guess here, wanted some naval basing consideratins.

There are conditions, such as, “Iceland said it would use the funds to reintroduce a flexible interest rate regime and revise its financial regulation, particularly insolvency laws.”

What does that mean, for a start it means that Iceland’s central bank just raised rates to 18%.

As to the insolvency laws, my guess is that they were told to change the laws so that foreign investors are at the front of the line, and that those debts could not be discharged at all.

Iceland has just become 320,000 people working for foreign masters.

Ukraine is well along the way to the same fate, with the IMF demanding budget cuts in the middle of an economic downturn.

This is the sort of policies that created the Great Depression following the stock market crash.

There has also been a deal cut between the IMF and Hungary, but I don’t have details.

As I’ve said before, let’s see how free market fundamentalist the IMF goes on white people. I think that it will be far more gentle than it would be if the people were black, brown, or yellow.

Look for a Blowup in Mosul

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It appears that Nouri al Maliki is looking at enforcing his Shia vision of Iraq on the city of Mosul, and the Kurds living there are not amused:

The Shiite-led government of Prime Minister Nuri Kamal al-Maliki is squeezing out Kurdish units of the Iraqi Army from Mosul, sending the national police and army from Baghdad and trying to forge alliances with Sunni Arab hard-liners in the province, who have deep-seated feuds with the Kurdistan Regional Government led by Massoud Barzani.

It looks like the US military will take no actions if a conflict breaks out.

Iraq, the gift that just keeps giving.

HRW Alleges Georgian War Crimes in South Ossetia

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It’s a BBC radio broadcast (at link), but the money quote is:

Research by the organisation Human Rights Watch [HRW] ints to indiscriminate use of force by the Georgian military and the possible deliberate targeting of civilians.

Indiscriminate use of force is a violation of the Geneva Convention and serious violations are considered to be war crimes.

No big surprise here, this was obvious in the first few hours of the war, before, you know, the Russians eradicated the Georgian military.

It marks a turn around for HRW though. In the early days following the war, they accused the Russians of using cluster bombs….Until it was revealed that the physical evidence that they had was all ofS weapons.

Not Enough Bullets: A Continuing Series

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Well, now that Merrill Lynch was forced to sell itself to Bank of America, some of it’s employees are feeling insulted by the retention packages offered:

The problem isn’t with high-flying producers bringing in at least $1.75 million in annual revenues. Those employees will most likely get 100 percent of their annual revenue as a retention bonus, spread out over seven years. The bad feelings are among those making less. A financial advisor producing $700,000 in revenues is being offered $175,000 in cash over seven years and a 25% growth bonus over three years. Manis says that same producer could get a lot more defecting to a competitor—”around $850,000 in cash on about a 9 year deal plus another $700,000 or so back end bonuses (after one to two years).”

Yeah, because so many investment banks are hiring so many people right now…..You have options.

Seriously, the unbridled sense of entitlement of these folks just buggers the mind.

These people are overpaid used car salesmen, and as has been shown over the past few months, their advice is less reliable than my cats, who at least don’t try to conceal their self interest.

In the mean time, RJ & Mckay, a financial services body shop has a video out to try and generate some recruiting fees:

The Greenspan Putz

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No, it’s not a typographical error, it’s a great play on the concept of, “The Greenspan Put“

The indispensable Barry Ritholtz of The Big Picture found an article of that title by Alan Kohler:

The Greenspan putz

…

As Alan Greenspan said in his testimony to Congress last night: “With … home prices rising, delinquency and foreclosure rates were deceptively modest. Losses were minimal. To the most sophisticated investors in the world, (mortgage securities) were wrongly viewed as a ‘steal’.”

Unsophisticated investors didn’t stand a chance.

Now the “steal” is going to work the other way. Mortgage securities vehicles everywhere are being liquidated because their risk is being repriced – in most cases dramatically, to the point where investors don’t want their money in them at all.

….

I am amused, though I would disagree with the characterization. A putz has a head.

This has been another episode of Yiddish vocabulary.

OK, Is This a Sign of the Apocalypse?

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Republican Florida Governor Charlie Crist just extended early voting hours in Florida, from 8 hours a day, and 8 across the weekend, to 12 hours.

I’m not sure why he did it, I’ve heard reports of the McCain campaign saying that this will kill them in Florida.

I think that after hearing the 50th story about folks waiting for hours at early voting stations, Governor Crist either decided that lengthening the hours was the right thing to do, or he realized that there was significant political blowback from this.