Year: 2008

The Nobel Prize Winner Sees the Big Picture

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Paul Krugman notes that it’s really very difficult to find meaningful differences between Bernard Madoff’s Ponzi scheme and business as usual in the financial markets:

The financial services industry has claimed an ever-growing share of the nation’s income over the past generation, making the people who run the industry incredibly rich. Yet, at this point, it looks as if much of the industry has been destroying value, not creating it. And it’s not just a matter of money: the vast riches achieved by those who managed other people’s money have had a corrupting effect on our society as a whole.

He is right when he says that, we are “looking at now are the consequences of a world gone Madoff.”

Bush to Make Emergency Auto Loans

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A quick look at the proposal, and it looks to be remarkably non-punitive.

Politico has the bullet points:

Binding Terms and Conditions: The binding terms and conditions established by the Treasury will mirror those that were voted favorably by a majority of both Houses of Congress, including:

  • Firms must provide warrants for non-voting stock.
  • Firms must accept limits on executive compensation and eliminate perks such as corporate jets.
  • Debt owed to the government would be senior to other debts, to the extent permitted by law.
  • Firms must allow the government to examine their books and records.
  • Firms must report and the government has the power to block any large transactions (> $100 M).
  • Firms must comply with applicable Federal fuel efficiency and emissions requirements.
  • Firms must not issue new dividends while they owe government debt.

Targets: The terms and conditions established by Treasury will include additional targets that were the subject of Congressional negotiations but did not come to a vote, including:

  • Reduce debts by 2/3 via a debt for equity exchange.
  • Make one-half of VEBA payments in the form of stock.
  • Eliminate the jobs bank.
  • Work rules that are competitive with transplant auto manufacturers by 12/31/09.
  • Wages that are competitive with those of transplant auto manufacturers by 12/31/09.
    • Note that wages here means all forms of current and past employee remuneration, or at least it does to Bush and His Evil Minions™,and so would have the effect of competing the Big 3 (Big 2½) with their large number of retirees against the transplants who have basically no retirees, which if strictly enforced, would mean not paying much more than minimum wage.
    • Note also that these are “targets”, and not “binding terms and conditions”, and so will be subject to some level of sanity.

In any case, meeting the terms has a deadline of March 30 of next year, which kicks everything to Obama.

I think that this is why Obama has said very little here, because if he were engaged, it would give Bush the cover to do something much worse.

Mark Felt Dead

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He was, of course, immortalized by Woodward and Bernstein as their source “Deep Throat who, as deputy director of the FBI, supplied and confirmed many of their stories.

He was 95.

He did a great service to the country, though it’s unclear what his motives were.

My guess would be that he was not interested in protecting the country, per se, but in protecting the bureau.

Economics Update

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The big news, the bail out, I’ve already discussed, though the fact that S&P has cut the ratings on 12 banks, Bank of America, Barclays Bank, Citibank, Credit Suisse, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan Chase, Morgan Stanley, Royal Bank of Scotland, UBS, and Wells Fargo, is not what I would call small news.

In any case, it appears that oil is down to $33.87/bbl, and the dollar is up.

I think that the announcement of the auto bailout strengthened the dollar, and as to oil, the world economy is still seizing up.

Retail gas was up above$1.67/gal today, so I think that we have hit bottom there.

Inouye Next on Cunningham Scandal Hit Parade?

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Interestingly enough, what should be one of the safest seats in the Senate may be at risk because of the perception of scandal.

In a situation that has macabre reflections on Ted Stevens, it appears that defense contractor Mitchell Wade has been cooperating extensively with authorities, and he has reportedly named 5 members of Congress, including Daniel Inouye, though it is unclear whether we are talking proximity, ethics issues, or actual violations of the law.

As Hawaii now has a rather popular governor, should this progress much further, the reelection of the senior Senator from Hawaii may not be a sure thing.

OK, Something Happened in Iraq

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There have been mass arrests throughout Iraqi government centered in the interior ministry. It was initially alleged that it was a coup attempt, but now it is alleged that they were all trying to reconstitute the now banned Baath party.

If those charges sound bogus, even more suspect is that the arrests were made by a unit that answers directly to the Prime Minister, Nouri al-Maliki

It appears that the US general who was the chief liaison with the Interior Ministry has been completely out of the loop, and he has no idea as to whether it will effect the attempts to bring the, “Sons of Iraq”, Sunnis recruited to fight Jihadists in various regions of Iraq into the law enforcement system.

I tend to agree with Robert Farley, who says that this is a power grab by Maliki, and considering his vociferous opposition bringing in the “Sons of Iraq”, my guess is that they will be shooting at Americans again.

Election Update

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OK, the Minnesota Supreme Court has ruled, and it’s confusing.

The Hill says that the court has ruled with the Coleman campaign, and The New York Times says that the ruling favors the Franken campaign.

Both the stories have the same basic synopsis of the ruling (quoting the Times here):

The court ruled that the Coleman and Franken camps, working with the Minnesota secretary of state and the Canvassing Board, must agree on a standard to decide which absentee ballots should be counted. It was unclear precisely how the inevitable disputes between the campaigns would be resolved.

So, if this means that all 3 (4?) parties for each vote, it sounds like a firm “no count,” but if it means that all of them need to establish a standard to which they agree, then I am unclear how that goes, except that, perhaps it ends up before the court again, because I do not expect the Coleman camp to reasonable.

In either case, the process is supposed to be hammered out by December 31 at 4:00pm CDT, which means that the votes would probably be tabulated on January 2….I think.

A more complete, if less definitive description of what is a confusing ruling is available at the Minnesota Independent.

The sticking point to me is whether they have to agree on process or each ballot. The latter leads to the campaigns attempting to game the votes by objecting to votes in areas unfavorable to them.

The court did have strong words for either campaign being unreasonable, but I do not know to what degree this will mean anything.

In fact, there is a part of me that thinks that the Minnesota Supreme Court kicked the can down the road with its decision, and they expect to deal with challenges in January.

In any case, in terms of the actual vote counting, Franken’s challenges having been supported at about twice the rate of Coleman’s challenges, and the counting of his challenges just started, and the current count from the Strib has Coleman up by 5, but Franken winning by 89 based on the challenge percentages, and that is without any of the absentee votes in question being counted.

New York Times Calls for Torture Special Prosecutor

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NOT ON THE TABLE! NOT ON THE TABLE!

It’s about time, and I approve of the idea of criminal investigations of wrongdoing by Bush and His Evil Minions™, but because there is no impeachment, the leadership in the House of Representatives and the Senate of both parties are accessories to the crime.

Because of this, we are never going to see a meaningful investigation of what happened in the Bush White House.

Even his opponents are hip deep in the muck that he created.

The only way that this gets to trial is through the mechanism of the International Criminal Court, but the US is never going to sign that treaty, and that is the only duly constituted party out there that has even the remotest possibility of discovering the truth and delivering justice.

This is Some Sweet Schadenfreude

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As both my readers are no doubt aware, there is in the financial world a large number of assets for which no regular market exists.

Regulations call them “Level 3 Assets”, but I call them “The Big Sh&$pile”, a term that I stole from Atrios.

Normally this means that if you want to sell them, it’s a laborious process to find a buyer and set a price, which differs from “Level 1 Assets”, like stocks, where you can fire up your PC and trade them online.

These days it means that there are no buyers at all, for these Byzantinely complex instruments that the financial whiz kids created, so they are, for intents and purposes, worthless.

Well, it now looks like employees of Credit Suisse will be getting pieces of The Big Sh&$pile instead of cash for bonuses this year:

Credit Suisse Group AG’s investment bank has found a new way to reduce the risk of losses from about $5 billion of its most illiquid loans and bonds: using them to pay employees’ year-end bonuses.

The bank will use leveraged loans and commercial mortgage- backed debt, some of the securities blamed for generating the worst financial crisis since the Great Depression, to fund executive compensation packages, people familiar with the matter said. The new policy applies only to managing directors and directors, the two most senior ranks at the Zurich-based company, according to a memo sent to employees today.

Talk about just desserts.

Me, I would also use them for severance packages for “the most senior ranks” of employees too, but I like to twist the knife.

Tin Foil Hat Time

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We have reports now that the Army War College is doing studies on the use of the military against US citizens during times of unrest.

A new report by the U.S. Army War College talks about the possibility of Pentagon resources and troops being used should the economic crisis lead to civil unrest, such as protests against businesses and government or runs on beleaguered banks.

“Widespread civil violence inside the United States would force the defense establishment to reorient priorities in extremis to defend basic domestic order and human security,” said the War College report.

The study says economic collapse, terrorism and loss of legal order are among possible domestic shocks that might require military action within the U.S.

Not surprising as the Posse Comitatus act has been whittled down to nothing over the past few years.

Obama Staffing Update

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Ron Kirk, US Trade Representative.

I would note that I’ve had some experience with the guy. I lived in Arlington while this guy was mayor of Dallas, and he is an unbelievably big corporate whore….Which, given the role of trade rep, may make him remarkably qualified for the post.

There is an open seat on the Federal Reserve, and Daniel Tarullo will be named for it.

Two interesting points here, he is not an economist, and he is a part of the Center for American Progress, which means that he has good liberal credentials.

Representative Hilda Solis (D-CA), Secretary of Labor.

She is probably one of the 10 most pro-labor members of Congress.