Month: March 2009

OK, More Wheels Within Wheels

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We now have Barney Frank calling for laws giving resolution authority for systemically important firms, which means FDIC style receivership powers to, “take over and unwind the businesses of big non-bank companies”, which could apply to bank holding companies like Citi and BoA, as well as their banks, and Peter Boone and Simon Johnson (the former chief IMF economist who is calling for kicking the corrupt banking elites out) are suggesting that are suggesting that this is exactly what Geithner’s plan is.

Honestly, I do not think that the White House is sandbagging the Congress and the public over this.

As I have said before, past is prelude, and for Geithner and Summers to sign off on such a thing would run completely counter to their entire professional lives.

I hope that I am wrong, but I fear that I am not.

I, for One, Welcome Our New Robot Overlords

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Honda has developed a EEG based controller for its Asimo robot.

It’s currently has a, “90% success rate at recognizing and then carrying out four commands,” so the capability for “mind reading” is really pretty rudimentary, but it is of interest.

Of course, it is only a matter of time before our robot friends become our robot masters, and this technology is used to monitor and punish us, so it’s the end of humanity.

On the bright side, if our new lords and masters look like the bottom picture, it will take some of the sting off the soulless regime which will soon dominate our existence.

Noting that the date has flipped to April 1, let me state that the story is not an April Fools gag, though obviously I am milking the news for laughs.

Kenneth Lewis Dead Pool

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I’ve kind of thought that the Obama administration’s ouster of Rick Wagoner was primarily a political ploy, but it has created a new question, with people asking why him, and not people like Bank of America’s CEO Kenneth Lewis, whose purchases of Countrywide and Merrill Lynch seem to be ample reason for his firing.

I’m hoping that someone in the White House actually intended this effect.

I don’t generally subscribe to the “Barack Obama has a plan, but it’s too subtle for us to see right now,” thing, but it does seem to me that, intentionally or not, the stage has been set for the firing of a bank president at one of the 5 or so banking giants out there.

It would be the a good thing to do, it would put the fear of God in these “masters of the universe.”

The reason that I am fingering Kenneth Lewis is that the other likely bank to be so target is Citi, but CEO Charles Prince was already forced out and replaced by Vikram Pandit, and BoA is the next sickest bank on the list.

Additionally, Lewis has been unrepentant in his attitude, continuing to (over) use the private jet, and chafing at the TARP restrictions, all while maintaining that he will send back the money “real soon now.”

The final reason for my suggesting that he might be forced out, in addition to my visceral dislike of him, is that he, and his bank, have aggressively lobbied against the EFCA (card check) legislation, and now directly calling for his ouster, which means that Obama picks up some labor credibility without having to go to the mat for the EFCA.

Wanna Put Social Security in the Stock Market?

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Because that’s what the Pension Benefit Guaranty Corporation (PBGC), the government insurance fund for defined benefit retirement programs, did last year, just before the stock market crashed.

The reason given by the Bush Evil Minion™ Charles E.F. Millard was that the PBGC needed better returns to shore up its trust fund, because of all the companies going bankrupt and welshing on their pension obligations.

It may be true that they actually bought into the idea that they could get better returns, even in a stock market that was clearly overvalued and with an economy already shocked by the housing cost, but my money is that the real reason was that it was an election year, and they saw the signs of a stock market drop, and they wanted to push some money into the market quickly in order to keep everything afloat until after the election.

In either case, it should be noted that the PBGC’s trust fund is like a drop in the ocean compared to that of Social Security, and if they thought that it could effect the markets, just imagine what the multi-trillion Social Security fund would do.

In fact, it’s so large, that it would drive the stock market up upon being invested in the market, and when a large population cohort started to retire, it would drive it down, giving the Baby Boomers that wonderful “buy high, sell low” feeling.

Our Man in Afghanistan

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Hamid Karzai, whose incompetence and corruption is such that he is now appealing to the most backward of religious impulses, because there is no other reason to vote for him, has just signed into law a measure that legalizes marital rape:

In a massive blow for women’s rights, the new Shia Family Law negates the need for sexual consent between married couples, tacitly approves child marriage and restricts a woman’s right to leave the home, according to UN papers seen by The Independent.

Hamid Karzai, yet another gift that keeps on giving from Bush and His Evil Minions™.

Bankruptcy Updates

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The Department Store Chain Gottschalks twill be filing for liquidation, and mall developer General Growth Properties has managed to put off bankruptcy, for a while at least.

I think that it is likely that GGP will go chapter 11, at which point, Thomas Friedman, whose wife is a Bucksbaum, the family that owns the developer, may have to downsize his lifestyle….I’m so sad for him (not).

Finally, the Sun-Times Media Group has filed for bankruptcy, and before you start wringing your hands over how these are dark days for newspapers, note that Conrad Black and His Evil Minions™, most notably David Radler, looted the company, and have gone to jail for doing so.

In a way, it’s a microcosm of what is wrong with the news business: Bankers take over from journalists, generate fantastic profit margins by destroying journalism at these institutions through draconian cuts, and then they walk away, leaving bleached bones.

What Chris Said

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Chris Bowers, that is

There is a special election in the 20th congressional district of New York tonight. I hope the Democrat, Scott Murphy, wins. However, I am also frustrated that Murphy has received nearly $360,000 on Act Blue from around 2,000 donors. Given that Murphy has made it clear that he will attempt to join the Blue Dogs if he wins the election, the progressive small donor world should not have given him a single dime.

We–participants in blog and email list small donor fundraising efforts–have to completely stop raising money for Blue Dogs. We should not give a single cent to any current member of the Blue Dog coalition. We should not give any money at all to any candidate who refuses to rule out joining the Blue Dogs once in Congress. If we hope to improve Democratic behavior in Congress, this break has to be as public and as thorough as possible.

Agreed.

Scott Murphy may be the very best we can get in that district, and if that is the case, then liberal campaign contributions are better spent elsewhere.

I would “embrace and extend” his message, and include the corporatist “New Democratic Caucus” on the list of people that we should not contribute to.

This goes double for folks in safe Dem districts, which NY-20 is not, Republicans have a registration advantage there, but why pay for someone who will, when the going gets tough, shoot down your agenda?

But I still want Murphy to win, I just won’t give him my money or time.

Economics Update

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Note: Red denotes contraction, and yes, this is scary.

I guess that the lede is that the consumer confidence numbers are out, and that they remain near record lows, at 26, just one point above the all time low reported in February.

If that were not enough, we now have a survey indicating that consumer spending may fall by $1 trillion after the recession is over (by way of perspective, the US total GDP is about $14 trillion) according to the AlixPartners Long-Range Economic Outlook Survey.

That’s a 7% haircut on GDP, exclusive of the secondary effects, closed stores, warehouses, etc., once the economy recovers…..Great googly moogly!

In the meantime, I don’t think that a whole bunch of people will be tapping their home equity, as the Case-Shiller home price indices show a 19% drop in home prices, though it appears that defaults are abating, as private mortgage insurers saw defaults, and claims, fall in February, the first decrease since June, 2008.

Additionally, 2nd home sales fell in 2008, down to 30% of total home sales, from 40% in 2005, and more of these buyers are paying cash, which implies that a lot of the contraction in this market is an inability to find mortgages.

In terms of the general state of the economy, the Restaurant Peformance Index is showing the 16th straight month of contraction (h/t Calculated Risk), and the Philadelphia Fed State Coincident indices have shown a decline in all 50 states (pdf), for both the past month and the past three months (again h/t Calculated Risk).

Meanwhile, we have an indication that the Bank of England is looking at significant inflation, they have adjusted their pension investments to account for it, so I think that they expect the £ Sterling to fall, and inflation to increase in the UK.

In any case, we now have the chief economist for the OECD suggesting that the Federal Reserve would take aggressive action against a precipitous fall in the dollar, and work to maintain its position as a reserve currency.

I think that this is more an attempt to talk up the dollar than anything else, because protecting the dollar would, over the long term at least, require higher interest rates, which would have the economy collapsing like overcooked broccoli.

In any case, the dollar was down today, largely because the flight to safety yesterday following Obama’s announcement that GM and Chrysler were on notice is now over.

Oil was up too, though it’s still a bit under $50/bbl.

I’m So Happy With Obama’s DNC Chair

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You know, Tim Kaine, who Obama hand picked as head of the Democratic National Committee, who just signed a bill creating “Choose Life” license plates in Virginia, and has promised to support a bill banning state funding of embryonic stem cell research in the state.

I guess that throwing pro-choice advocates to the wolves is Obama’s way to “reach out to the right.”

Thanks a lot, Barack, for foisting this tool on the Democratic Party.

Reid Is Looking to Fold Cram Down Provisions

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Reid is now saying that he might drop cram down provisions from the housing bill if it threatens passage of the whole package.

Basically, this means that he is going to kill it, because everyone who wants it gone now knows that they can get it dropped by whining.

Seeing as how this was the law until about 1993, the effect on interest rates are minimal, and it’s the only way to renegotiate a mortgage that has been sliced and diced until it has hundreds of owners, cramdown is the single best thing that can be done to help with the current financial meltdown.

New York State to Institute “Temporary” Millionaire’s Tax

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Governor Paterson had been opposed to such taxes, suggesting that it would lead the wealthy to leave the state, but has not capitulated to progressives in the state, who were opposed to the draconian cuts in services that a “no-tax” solution would have required.

Even with this increase, 8.97% from 6.85% for income over $½ million, the top tax rate in New Jersey, is higher, and in any case, if people want to leave New York because it’s too expensive, they already have.

Nice to know that the political forces in New York State who work for the other 99% of the population can actually get meaningful change….for 3 years at least, as the tax is temporary….for now.

An Interesting Development in Autism Spectrum Conditions

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It appears that there is a genetic link between nicotine addiction and autism, in the neurexin-1 gene, which creates an excess of neurexin-1 beta protein, which aids in nerve cells linking up with nicotine like substances to neuro receptors, in people addicted to nicotine.

It turns out that the levels of the protein, and the gene, are deficient in some people on the Autism spectrum.

It raises some interesting questions, though at this point I would be very cautious, and I think that a first step would be to compare smoking and non smoking populations of people on the spectrum.

The fact that quack physician Jeff Bradford has apparently already started putting nicotine patches on his patients should not be viewed as significant by anyone except, perhaps, for malpractice lawyers.

Giving small children nicotine is an invitation to injury or death, because a nicotine overdose can kill someone very quickly.

H/T A Photon In The Darkness.

Now We Know Why Banks Were Profitable Last Month

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Because, using our tax dollars, AIG settled its accounts with the big banks at 100% on the dollar, even while they are refusing to pay on deals with smaller players.

So, not only are we funneling money to the big 5 banks through the TARP, and the TALF, and various Fed facilities, we are also shoveling money in through the back door by way of AIG’s Financial Products Division.

I now have a tough choice….Should I go long in pitchforks, or torches?

Big 3 (Big 2½) Update

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So, the White House does not like GM’s or Chrysler’s reorganization plans, and has given GM 60 days, and Chrysler 30 days to come up with a better plan.

What’s more, they demanded, and got General Motors’ CEO Rick Wagoner’s resignation, and pretty much demanded some sort of alliance deal between Fiat and Chrysler.

The obvious question here is, “Why is the government insisting on Wagoner’s resignation, and not Bank of America’s Kenneth Lewis’s resignation?

In terms of Chrysler-Fiat, it appears that they have come to an agreement on a “framework” for their deal.

One wonders if this deal involves a haircut for Cerberus, which it should.

Economics Update

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I’ll be going into the automotive news elsewhere, so this is pretty short.

First the Celtic Tiger Kitten has been taken to the vets to be neutered, as S&P lowers Ireland’s rating from AAA to AA+.

Ireland played the “cheap labor with good access to markets” game, and lost to former eastern bloc nations, and played the real estate and building game, which everyone lost.

In the housing market, we have defaults on FHA insured mortgages rising with 7.46% of the loans being 90+ days overdue, in foreclosure, or bankruptcy, up from 6.16% at this time last year.

This means that there is still a lot of inventory out there that has yet to hit the market.

In energy, the concerns over the US auto manufacturers has driven oil below $50/bbl, because nothing says short oil supply like house sized SUV, and the same concerns about the economy have driven the dollar up as traders head for safety.