Month: October 2008

Economics Update

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I think that the first story is a real biggie, the Insurance Bureau at the Financial Supervisory Commission of Taiwan has forbidden Insurance companies in that nation* from buying mortgage backed securities from the GSEs, Fannie Mae, Freddie Mac and Ginnie Mae.

The scare quote of the article is, The FSC has not only limited insurance company exposure to Fannie, Freddie and Ginnie bonds and mortgage-backed securities, but has decided that existing credit ratings are meaningless.“

Taiwan is not huge in relation to world GDP, but it’s a lot bigger than Iceland….We may be seeing the first furtive steps toward an exit that will likely end in a stampede.

If I’m wrong about a stampede away from US securities, it’s clear that there
is a stampede away from hedge funds…Makes sense, why pay these guys something like 20% when they are losing money.

In the real world or ordinary people and work, the weekly US jobless claims were worse than forecast, 478,000. The standard caveat about this being a noisy metric applies.

I would be remiss in not noting that the 4 week moving average fell, to 480,250 from 484,750.

BTW, it looks like the credit crunch is not near over, because very little let up on interest rate spreads. (H/T Calculated Risk.)

For what it’s worth, Oil prices were up a bit, because there are indications that OPEC might actually make a small supply reduction stick amongst its members.

The thing that really scares me is the fact that Washington Mutual’s Credit Default Swaps will be sold at 57¢ on the dollar, and this is considered a relief to investors.

Even scarier is the little note at the bottom that losses in the Lehman debacle, when investors got 8¢ on the dollar ended up losing less money than expected, because it was a small group who all sold in a big circle to each other.

What happens when one of the members of this circle jerk goes down in flames?

*Or whatever the frack the Taiwan’s status is right now.

They are Lucky that they are White Folk

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Because we now have a report that Iceland is going to accept an IMF bailout in the amount of $6 billion, about $18,740.10 per person living there, and about 1/2 of the island’s GDP.

Luckily for them, they are white, because the “strict measures” to be demanded by the IMF will be along the lines of, “a stipulation that Iceland quickly deleverage its three nationalized banks Kaupthing, Landsbanki and Glitner.”

If they were more darkly complected, you would likely see things demanded like a reduction of the minimum wage, the abolition of free primary schooling, the abolition of the government health care system, higher sales taxes and lower income taxes to favor investors, the sale of public utilities to foreign investors, a roll back of labor rights and employment protections, and aggressive measures to depress domestic consumption at because it would theoretically benefit exports.

BTW, that the last one is called creating poverty, which is fine for the n*gg*rs, but just wouldn’t do for the pale skinned blue eyed folk.

Countrywide, the Gift that Keeps on Giving

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Well, it looks like one of my predictions, that Citi CEO Ken Lewis would be shown to be a complete moron to take on the corrupt and insolvent mortgage lender Countrywide Financial is turning out to be true.

Cases in the point: Countrywide, and thus Citi is being sued over accusations it blackballed appraisers who gave accurate assessments of property values, and Illinois Department of Financial and Professional Regulation just forbade them from making new loans in the state for the foreseeable future.

Just in Case You Were Wondering How Frozen Up The Credit Markets Are

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They are now finding that companies in bankruptcy cannot ginf debtor-in-possession and exit financing (DIP loans), which are used to provide cash to companies in reorg.

Debtor-in-possession, or DIP, financing is essential for the lawyers, layoffs and other restructuring necessary for a company’s rebirth. Exit financing is used when a company “exits” reorganization. Banks have been eager to take part in this market because the loans are the first to be paid back and command high interest rates.

(emphasis mine)

This is about as safe as a loan can be. Even if the reorg fails, you are at the head of the line for liquidation, and the interest rates are very good, and people are still unwilling to lend.

Not Enough Bullets, Regulation Edition

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Even after the government bailout, AIG is still lobbying to relax regulations on its business:

When the U.S. took control of failing mortgage titans Fannie Mae and Freddie Mac, it prohibited them from lobbying. But it hasn’t banned the practice at AIG, a huge insurer that is still 20%-owned by public shareholders.

AIG is currently working to ease some provisions in a new federal law establishing strict oversight of mortgage originators, according to state regulators. The law requires that originators be licensed by the states, and that they supply comprehensive information so state regulators can track their activities.

To quote Bruce Cockburn, “If I had a rocket launcher, some son-of-bitch would die.”

Jury Out on Uncle Ted

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Let’s be clear about this: the facts as they exist really should be enough to send him down the river for bribery, but it’s easier to show that he took, and did not report gifts.

We have disinterested parties like a contractor testifying that Veco specifically told a contractor to avoid sending a 13 grand bill:

Mr. Paone said Mr. Allen told him to “eat” the final bill and suggested that he “should look at it as a political contribution.”

Mr. Paone said he never alerted Sen. Stevens to the incident because he was concerned it would be “business suicide” to cross Mr. Allen, who was a powerful businessman in Alaska.

We also have his friend who managed the renovations of his chalet that Stevens never asked for a bill or invoice.

Stevens should not be a particularly sympathetic figure, what with his claiming that if anything was done wrong, it was his wife who screwed up, and his decision, because no lawyer in his right mind would put him up there, which showed, as Dana Milbank says:

Ted Stevens once told his Senate colleagues that he’s “a mean, miserable SOB.” Yesterday, he set out to prove it.

(See also here, here, here, and here)

Considering the degree to which the reports all agree that he was contemptuous, evasive, and just plain awful as a witness, I have to conclude that his testifying was Stevens’ and not his Attorney’s idea.

In closing arguments, the prosecutor got to the most damning evidence in the case, the fact that Stevens acknowledged what he was doing could get him into legal trouble.

That pretty much shoots down the argument that it was an “innocent mistake”.

Of course, considering how badly the prosecution has handled this, I get the sense that the judge wants to slap them silly for good cause, there are no guarantees,

In any case, the jury is deliberating now.

Weekly Zimbabwe Update

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The short version is that everything is screwed up and the deal is collapsing.

There is, however some good news, which is that after Mbeki’s latest visit, the SADC has defacto taken him out of the process, because both sides have asked the SADC to intervene directly, as opposed to through Mbeki, in what Tsvangerai calls “Tsvangirai slams Mugabe’s dialogue of the deaf.”

This really should help things move along, because Mugabe no longer has a biased ally at the negotiating table, though actually holding the meeting may be problematic, because Tsvangerai cannot travel to the meeting until he is
given a passport by the government.

As a result of all this, we have warnings of new sanctions from the US and EU.

Both the MDC and Botswana have made calls for a new election, though one wonders how much of that is gamesmanship at the negotiating table.

Of course, nothing involve Zimbabwe would be complete without some truly bizarre machinations, in this case the accusation by the MDC that the deal that was formally signed was changed from what was negotiated, specifically:

  • an increase to the number of non-constituent senators issued to the Mutambara faction;
  • changes to a clause stating that a replacement for vice prime minister cannot be a non-constituent MP;
  • changes to the agreement that parties would jointly consult each other on the appointment of ambassadors and other key government officials.

How I Spent My Summer Vacation

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OK, my 6 week stint of unemployment, actually.

More accurately, this is about the fact that I started an old/new job.

I returned to work at a medical device manufacturer after an 11 months away.

I literally went back to my old cube, and my old phone was there, along with notes from when I was last there and my old voice mail was still active, complete with a message from January of this year, though I still had to wait a bit for my computer login to be created.

It says less about the ebb and flow of employment there than it does about the quality of my cube.

There is a big honking column in the middle of it, which makes it less than desirable.

It will be nice not to be working military (too much dealing with Generals complaining about the colors of power point slides) and nuclear power (the more know, the less I like industry. Cleaning up when you are done generating power is too damn expensive).

Why We Love the Rude Pundit

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The Rude Pundit nails it again:

  1. Barack Obama must be an anarcho-syndicalist because he believes in the power of unions.
  2. Barack Obama must be a Whig because he believes in the government’s role in building infrastructure and education.
  3. Barack Obama must be a Gaullist because he believes in regulating banks.
  4. Barack Obama must be a neo-Aristotelianist because he was a community organizer.
  5. Barack Obama must be a Dadaist because cow.

Making a Bad Situation Even Worse

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It looks like Hank Paulson and his bully boys at the US Treasury will be actively encouraging banks to merge with government money.

So, because some banks have to be bailed out, at taxpayer expense, because they are too big to fail, we should have even more really big banks, because it benefits the guys that Secretary Paulson plays golf with.

Well, it appears that some Senators have not viewed this development positively, and they just sent Paulson a “Whiskey Tango Foxtrot” letter regarding this.

Economics Update

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In war, it is said that amateurs talk tactics, while professionals talk logistics.

It may be the case with financial crises too, which makes the
FDIC decision to sign a lease for a lot of office space in Southern California very interesting.

Of course, the tactical developments, like investors taking losses in excess of 90% on complex financial instruments attached to Lehman and Iceland is still interesting, even if just a tactical development.

In currency, the dollar has hit a 2 year high on concerns of a coming recession.

I think that this is temporary. People are fleeing to the dollar in times of trouble out of habit which is not justified by the reality.

In any case, recession fears pushed oil to a 16 month low.

BTW, here is a very nice primer on the financial crisis:

Not Enough Bullets, Bloddy Kraut Edition

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Well, the Germans have a bailout plan, one they developed after stiffing the rest of the Euro zone, and now they have been browbeaten into softening pay limitations of their bailout package by bank executives making noises about not accepting state aid.

It was to be a hard pay limit of €500,000 ($666,000), but that was too much for the upper failed management at the failed banks to accept.

Where is my revolver.

Sarah Palin’s Clothing Bill, and the Big Picture

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While the comment of a Talking Points Memo commenter about Palin and the GOP dropping over $150,000.00 of campaign funds on her cloths and bling is amusing, “If Sarah Palin’s $150,000 wardrobe had a life of its own, it would get a tax cut from a President Obama,” it misses the big picture.

We have to remember that she also accepted per deim payments intended for away from home expenses for times when she was at home, which should have the IRS coming after her, and her bilking the state out of over $21,000.00 for travel expenses for her children.

This is not about Sarah Palin. It is rather about movement conservatism, of which Sarah Palin is, at least until after election day, a sterling example.

Movement conservatism is by its nature corrupt.

Basically, these people read too much Ayn Rand, or more accurately they took it too seriously, because any amount or Ayn being read is too much.

Because of this these people believe that the government, and government service to be inherently evil, and so they enter into service to do what they believe to be evil.

The only reason for them to enter government service is money and power, and they believe that they are owed these little bits of corruption, whether it be Palin’s per deim or Stevens’ house renovations, because they are doing something so awful.

Me Bad

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I have been talking politics, and have neglected to mention two races in our back yard:

  • Frank Kravotil running for Congress in MD-1
  • Jennifer Dougherty, who is running for Congress in MD-6

Kravotil is running against Fred Flintstone (he is positively antediluvian), Andy Harris, who defeated the moderate (when it didn’t count) Republican in the primary, and Dougherty is running against Roscoe Bartlet, who…Well….He lives up to the name “Roscoe”.

In any case, they ar both on Matthew Saroff’s Act Blue Page.

Show them some love.