Month: May 2009

More Info on the Georgia Mutiny

No Comments

Well, I asked for background on the Georgian mutiny, and I just got it.

This wasn’t a coup attempt. This was a mutiny in the classic sense of the term, with an armored brigade (!) being ordered to take action against peaceful demonstrators, and the commander, Colonel Mamuka Gorgiashvili, with, one assumes, at least the tacit the consent of his subordinates refused to deploy against peaceful protesters.

He defied orders and remained in barracks.

This is probably significant, the state security apparatus has been a bulwark of Saakashvili rule, but it is by no means an attempt to disrupt the NATO maneuvers or a coup.

It’s Official, the “Stress Test” Was Just Theater

No Comments

We are getting reports now of what Timothy “Eddie Haskell” Geithner’s stress test has determined, and it’s clearly not reality.

Bank Needs
Capitalization		 Amount
Bank of America Yes $34 B
Wells Fargo Yes $15B
Citigroup Yes $5B
Morgan Stanley Yes $1-2B
Goldman No

MetLife No

JP Morgan Chase No

Bank of NY Mellon No

American Express No

Capital One No

BB&T No

This is a damn joke.

You have one “oh my God” number, for Bank of America, and it’s about 50% of their market cap, but Citi, which is clearly in much worse shape is somehow better capitalized by a factor of 6.

This is simply not true, even after BoA’s disastrous acquisition of Merrill Lynch and Countrywide.

Also note this joint statement from the Treasury Department, Federal Reserve, FDIC, and Office of the Comptroller of the Currency, which, to my untutored eye, appears to say that they are going to go with their cockamamie scheme to claim that capital is increased by swapping preferred for common stock.

It’s an accounting trick, and what’s more, it’s one where the taxpayer has just taken a second haircut.

They are making great theater by pretending to talk tough and giving a month for the banks that need to to present a plan to raise capital, and 6 months to have this plan in action, but it’s all a lie, since the plan may very well be, “suck on this, taxpaying rubes”.

I disagree with former IMF chief economist Simon Johnson’s analysis, which is that they are selectively leaking to create confusion in order to keep people from looking at whether the test was too hard on the banks.

I think that his analysis is incomplete. The “stress test” begins and ends with public relations. It’s a sham, and it has always been a sham, intended to show that the government was serious about reigning in the big banks, without actually engaging in the necessary actions, like seizure of insolvent institutions that would actually be required for it to work.

Economics Update

No Comments

Surprise, surprise, the press is noticing that foreclosures are no longer just some sort of phenomenon effecting poor people who got subprime loans:

Chuck Dayton put down a quarter of the $950,000 purchase price when he bought his house in Newport Beach, Calif., in 2004. He was making $500,000 a year with his drywall company and he expected home values to keep rising.

Then the mortgage market collapsed, new construction stopped and builders no longer needed his services. Dayton, 43, went into default four months ago because he couldn’t afford payments on the three-bedroom home, located within a block of the Pacific Ocean. He hopes his lender will agree to sell the seven-year-old house for less than he owes to avoid a foreclosure.

This is then followed by a a number of refis to take out equity, and a negative amortization loan.

A bubble market, with toxic products feeding the frenzy. No wonder Zillow dot com just completed a survey showing that ¼ of home owners are under water.

Even those who followed the old rules, 20% down and 30 year fixed, ended up buying into the appreciation story, with refinancing and exotic mortgages creeping into their home values.

And while fear fear has temporarily put a halt to the worst excesses, the declining job market, continues to mean that these people will stay under water.

The most recent reports, private ones from payroll check processor ADP, and the rather Dickensianly named outplacement firm Challenger, Gray & Christmas, don’t show a turnaround, though in a classic bit of journamalism, the fact that private sector employment fell by 491,000 is somehow good news.

Meanwhile in currency, the dollar weakened slightly, largely on uncertainty about both what the ECB will do the Euro rate, and the results of the banking stress test (more on that later).

In energy, both oil and natural gas were up, oil to a 5 month high, and the largest single day increase for natural gas in 2 months.

Stress Test Leaks: BoA In Trouble, Whither Citi?

No Comments

Well, the rumors are out there, and the latest is that the test will report that Bank of America needs $34 billion in additional capital.


Bank of America 3 Month Share Price

(By way of context, BoA is trading at about $11½ with a market cap of $74 billion, which means that it needs to sell new shares roughly equivalent to half of its outstanding ones in order to properly capitalized by the standards of Timothy “Eddie Haskell” Geithner’s Treasury Department.

Note, of course that this is based on their so called “worst case” stress test, which is already more optimistic than what we have seen in the past 3-4 months.


Citi 3 Month Share Price

That being said, if the numbers are bad for BoA, they must be truly horrific for Citi, which is generally considered to be in the worst shape of the big 19 banks, which has been trading at about $3½, with a market cap of 19.2 billion, and if they need to raise anything near to 30 billion, they will be back in penny stock land for good.

I would also note that if these numbers are accurate, and they might not be, I think that the indications are that the stress test was conceived to make sure that everyone “got a gold star,” which would make reality even more alarming.

(click pictures for full size)

It Ain’t the Crime, It’s the Coverup

No Comments

Barack Obama promised that the people who engaged in torture at the CIA would not be subject to prosecution, but it appears that this guarantee will not apply to people who actively destroyed evidence of torture:

When president Obama decided to release the Bush-era Justice Department’s interrogation memos last month, he tried to calm an anxious CIA by publicly declaring that operatives who “reasonably” relied on them would not face criminal prosecution. But agency officials still have plenty to worry about. Despite Obama’s assurances, a Justice Department special counsel is quietly ratcheting up his probe into a closely related subject: the CIA’s destruction of hundreds of hours of videotape showing the waterboarding of two high-value Qaeda suspects. At the same time, a Senate panel is planning the first public hearing dealing with CIA interrogations, including testimony from a star witness: Ali Soufan, the former FBI agent who vigorously protested the questioning of one of the detainees, terror suspect Abu Zubaydah.

….

You can see my old post on this here.

Interestingly, these tapes were destroyed when both Congressional investigators, and a Federal Court Judge were demanding information of this sort.

While no one may go to jail for the torture, it is likely that some people, Michael Hayden, Porter Goss, and Jose Rodriguez who was the director of the CIA’s operations directorate.

In a way, this might be better, because their defense against torture is protected by the OLC memos, as flawed (garbage really) as they are, but they did not receive an OLC memo to obstruct justice and destroy evidence.

There is a Context in Georgia

No Comments

But I am not sure what it is, so the report of a tank battalion mutinies in Georgia is concerning, but I do not know what it means.

I still believe that the Russians have thoroughly penetrated the Georgian state security apparatus, so I don’t see this as being part of a Russian backed coup. It would have been more extensive and better organized if it had.

It is likely, however, that the Russians were aware of what was going on before the Georgians, and certainly they view the events with no small amount of schadenfreude, but I think that whatever happened here had a lot more to do with what is going on in Georgia than with Russia.

That being said, I have yet to see anyone, anywhere give more specifics than, there was a mutiny, and the Georgians accused the Russians.

Perhaps there is something to be found on Georgian or Russian language sites, but I can’t read either tongue.

My guess would be that there are elements in the Georgian military not happy with the NATO exercises, but that is only a very uninformed guess.

Former Bush Officials Work to Soften Ethics Report on Interrogations – washingtonpost.com

No Comments

It looks like the Justice Department’s ethics report on the torture memo authors will not recommend a criminal investigation, but it will recommend disciplinary action by the local bar associations, and this has Bybee, Yoo, and Bradbury are doing the level best to use whatever connections they have to make the report milder.

I do hope that this will bet both of them disbarred, but I think that a criminal investigation is really in order, but these folks are merely the sociopaths (Yoo) and careerists (Bybee and Bradbury) who could be reliably counted on to ignore the law in drafting the memos.

We need to work this up the chain, which will doubtless expose obstruction of justice by higher-ups.

For the good of the country, Cheney and Rumsfeld need to spend the rest of their natural lives in jail, so that people inside the DC Beltway stop thinking that rules do not apply to them.

Senate Democrats Define “Loyal Democrat”

No Comments

Well, Arlen Specter just got pwn3Ð (owned) by the Democratic Senate caucus, which denied him seniority.

I don’t blame Specter for the joke about wanting Coleman to win, but the idea that he would get full credit for his seniority rankled the people who were a few years behind him, and then on Sunday he said that he would not be a loyal Democrat on MTP.

Notwithstanding Harry Reid’s reported promise that Specter would keep his seniority, the Democratic caucus had other plans on this.

I am not sure who is more amused by this, Republithugs, or Democrats.

Ummmm….It’s a Fracking Joke!

No Comments

In an interview in New York Times Magazine, Arlen Specter is quoted as saying that he supports Coleman in the Minnesota Senate race.

Here is the full context:

Q: With your departure from the Republican Party, there are no more Jewish Republicans in the Senate. Do you care about that?

A: I sure do. There’s still time for the Minnesota courts to do justice and declare Norm Coleman the winner.

Q: Which seems about as likely at this point as Jerry Seinfeld’s joining the Senate.

A: Well, it was about as likely as my becoming a Democrat.

It’s a joke….It’s not a good one, but it’s a joke.

As a comedian, well, he’s no Al Franken…..Come to think of it, as a Senator, well, he’s no Al Franken….

Economics Update

No Comments

Well, here’s a big surprise, credit card delinquencies are up.

Truth be told, this is a lagging indicator, seeing as how closely it is tied to unemployment.

I would note that so called “marginally attached workers,” which is workers who are still looking for work, but are no longer looking hard enough to be counted, has risen significantly, see pic.

Then again, remember the increase in construction spending I mentioned yesterday?

Private construction spending actually fell slightly in March so the increase I was stimulus spending.

Also, note that the Institute for Supply Management’s index of non- manufacturing businesses, basically a measure of activities in the services, fell in April, albeit at a slower pace than the past few months, so you can decide whether the glass is half full or half empty.

We have another retailer filing bankruptcy, this time Chapter 11 reorg,
Filene’s Basement.

Here’s one for nostalgia’s sake, another monoliner insurer has been downgraded, Fitch cuts Assured Guaranty from AAA to AA, which means that their insurance, which basically leases out their credit rating, is done.

We have more evidence of credit loosening though, with the
LIBOR falling below 1% for the first time ever for overnight interbank loans.

I’m not sure if this is confidence in banks, or confidence in government bailouts though.

In currency, the dollar gained vs the Euro, largely on the expectation of an ECB rate cut, which in turn is based on the largest drop in European producer prices in over 20 years.

Oil is down on reports of large inventories.

Why Primary Arlen Specter?

No Comments

Because he’s just switched parties, and he is already running against the Democratic party, when he said, “No. And you misquote me, David. I did not say I would be a loyal Democrat. I did not say that. And last week, after I said I was changing parties, I voted against the budget because the budget has a way to pass health care with 51 votes, which undermines a basic Senate institution to require 60 votes to impose closure on key issues. …I did not say I am a loyal Democrat,” on Meet the Press this Sunday.

Arlen Specter has been, and continues to be, primarily all about Arlen Specter.

It should be noted that there has already been some pushback on Specter by the Senate Democrats, who are angry enough about Harry Reid’s promise that Specter be given his full seniority that the Senate Majority Leader was forced to backtrack from that promise, instead saying that the status of Specter’s seniority is up to his colleagues.

Airbus, Boeing Open Rotor Ideas Diverge

No Comments

It appears that both while Boeing and Airbus are looking at “open rotor technology:, they are moving in different directions (paid subscription required), with Boeing focusing on an on-wing tractor propeller, and Airbus looking at a fuselage mounted pusher propeller. (shown)

Seeing as how air flows the same way on both sides of the Atlantic, the questions is what the differences are in their requirements.

Based on my rather uneducated gut, my guess is that a pusher system, at least one with a the tails arranged as shown would be quieter, because the tail structure masks the prop noise to a degree, and that the tractor propeller on the wing would be more efficient, because the it would be in less turbulent air.

Additionally, the airflow over the wing from the puller props might marginally improve short field performance.

Any thoughts?

I Hope that They Are Lying

No Comments

the Chrysler creditors, the ones who pushed the automaker into Chapter 11, are claiming that the White House threatened the reputations of the firms involved in order to get them to accede to their demands

In an interview with a Detroit radio host, Frank Beckmann, Mr. Lauria said that Perella Weinberg “was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under threat that the full force of the White House press corps would destroy its reputation if it continued to fight.”

I hope that the WH was threatening to destroy the reputations of the firms involved.

Shame is a legitimate tactic to coerce cooperation, though the idea that Obama would use the, “full force of the White House press corps,” is absurd on its face.

Now to start playing hardball with Goldman Sachs.

Obama to Go After Offshore Tax Havens

No Comments

This is actually a very good idea, see also here.

Of course, you will hear a lot of hand wringing about “free trade,” and “global competitiveness,” but the real reason that there will be objections is because these folks believe that only the little people pay taxes.

Personally, I would go further, and label the worst of them as money laundering nations, which is what they are, and forbid US banks from doing business with them.

Getting Old

No Comments

OK, so I am now firmly in my late 40s, and I’ve been putting my glasses on my forehead for close work for about a year, and it’s time for me to get a new prescription, and I got bifocals.

Presbyopia catches up with us all.

In any case, the lenses are of the no line variety, and I’m still adjusting (I think that they may have gotten my left (dominant) eye wrong.

Economics Update

No Comments

We have some good news in real estate, with pending sales of existing homes posting their first back to back increase in almost a year, and construction rose unexpectedly.

Note however, that the pending homes sales numbers are for homes going into contracts, and has been diverging from closings lately, largely because of financing issues.

I’m a bull, and Yale economist Robert Shiller, of the famed Case-Shiller real estate index, is somewhat bearish too, saying that the improvements in real estate are “fragile”.

Sometimes, markets pause for a breath on the way down, just as they do on the way up.

That being said, the lending situation does seem to be loosening up, as spreads are falling, which means that money is cheaper.

Still, banks are predicting more loan losses from the economy contracting according to a Federal Reserve report.

Meanwhile the generally good news has driven oil up, on the expectation of increased demand, and driven the dollar down, as people leave the safe haven of the $US.

L’Affaire Harman: In Which a Journalist Accuses the Bush Administration of Law Abiding

No Comments

I’ve been following this for some time, and now we have a credible explanation from Laura Rosen as to why a further investigation might have been quashed by Alberto Gonzales, that you did not break the law until Dick Cheney and His Evil Minions™ told you to break the law:

3. Did Goss no longer have authority to certify the FISA Warrant when the call in question happened? The Time 2006 magazine piece on Harman coming on the radar in the Aipac case says that the tapped conversaation in question in which the possible alleged-by-some quid pro quo occurred was in “mid 2005.” A former intelligence official familiar with the matter told me that Goss had certified a FISA warrant to target Harman based on that intercepted communication, but didn’t know exactly what time it had occurred.

But a former intelligence community source tells me that DCI Goss no longer legally had the authority to certify FISA warrants at all beginning January 1, 2005 when the law creating the Office of the Director of National Intelligence went into effect. So if Goss did try to certify a FISA warrant to target Harman in 2005, sources tell me that would be unkosher at best, and legally suspect. That authority was no longer in the Director of Central Intelligence’s hands and had gone to the Director of National Intelligence.

(Emphasis original)

The idea that the Bush White House was paranoid about various players pursuing their own agendas is not hard to believe, since both paranoia and ignoring the law was SOP for them, and they would naturally assume that everyone else would do the same.

On a note regarding the coverage of the coverage, it gets more interesting.

BTD at Talk Left notices that Jeff Stein who broke the Harman wiretap story for CQ, threw a hissy fit over suggestions that he was spoon fed self-serving leaks from Porter Goss’s staffers when he was in Congress and the CIA, aka the “Gosslings”.

Of note is that he complains about Ron Kampeas at JTA, and Laura Rosen at Foreign Policy magazine, but studiously ignores Zachary Roth at TPMMuckraker, who actually lists the most prominent “Gosslings”:

  • Patrick Murray
  • Jay Jakub
  • Michael Kostiw
  • Merrell Moorhead

Who are a veritable rogues gallery of weirdness, as Roth makes clear when he notes that, “It says something about this crew that perhaps the best-regarded of them [Michael Kostiw] had his career derailed for shoplifting pork products.”

Stein does not deny that they are his sources in his rant, and given his studious avoidance of the article that names the “Gosslings” even while not outing them, it certainly reasonable to conclude that one of his major sources, and more likely most of his major sources for his initial story, are these “Gosslings”.

That being said, the problem with what appears to be ass covering and political vendettas is that there appears to be no way that they can all lose.

As Atrios notes when he rightly excoriates Harman for her new found discovery of the potential for abuse of surveillance, there are no good guys here:

The absurdity is obvious. Dirty f@#$ing hippies like me were horrified at the illegal warrantless wiretapping program and general expansion of the surveillance state in part because of the potential for political abuse (frankly, given the rubber stamp FISA court and rubber stamp Congress what other point would there be?). Jane Harman and her pal Joe Klein heaped scorn on dirty f@#$ing hippies for such crazy views. Harman gets caught up in what appears to be a perfectly legal wiretap not aimed directly at her, though the release of the details of it might be evidence of the kind of political abuse possible in any surveillance program. Suddenly Harman is a staunch defender the right of People Like Jane Harman to not be wiretapped.

(@#$ mine)