Month: June 2009

Obama’s Weak Tea on Gay Rights

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So, Obama is extending ‘some’ federal benefits to gay partners, and as Pam Spaulding notes, it’s awfully meaningless and ill conceived.

First, as is noted in the New York Times, but buried in the last ‘graph, it’s not intended to be meaningful change:

But administration officials said the timing of the announcement was intended to help contain the growing furor among gay rights groups. Several gay donors withdrew their sponsorship of a Democratic National Committee fund-raising event next week, where Vice President Joseph R. Biden Jr. is scheduled to speak.

Further, it’s not even an executive order, but an administrative memorandum, so it expires when he leaves office.

It also does not cover health benefits, so what is left to cover? The only thing that comes to mind is relocation benefits.

And they are leaking the reasons to make clear that people don’t think that this is the start of a trend to support gay rights, it’s just a ploy to appease people before a fundraiser.

LBTG’s of America, welcome to under the bus, where supporters of government transparency, accountability for war crimes and torture for Bush and His Evil Minions™, and meaningful reform of the financial system were thrown months ago.

It’s not particularly comfortable here, and now it’s getting very crowded.

It’s Like Dick Cheney in Drag

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Yep, the Obama administration, and they are refusing to release visitor logs to the press:

The Obama administration is fighting to block access to names of visitors to the White House, taking up the Bush administration argument that a president doesn’t have to reveal who comes calling to influence policy decisions.

Despite President Barack Obama’s pledge to introduce a new era of transparency to Washington, and despite two rulings by a federal judge that the records are public, the Secret Service has denied msnbc.com’s request for the names of all White House visitors from Jan. 20 to the present. It also denied a narrower request by the nonpartisan watchdog group Citizens for Responsibility and Ethics in Washington, which sought logs of visits by executives of coal companies.

**sigh**

A Portrait of Regulatory Capture

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So the details of Obama’s regulatory plans for finance are leaking out, and the picture is not good.

The New York Times makes a big deal about how all the stake-holders were brought in and given a voice:

President Obama’s plan to reshape financial regulation, which he will unveil on Wednesday, is the product of weeks of meetings among government officials, financial experts, lawmakers, industry executives and lobbyists, many of whom were invited to help the White House draft the proposal.

…

In the last two weeks alone, the administration has heard from top executives from Goldman Sachs, MetLife, Allstate, JPMorgan Chase, Credit Suisse, Citigroup, Barclays, UBS, Deutsche Bank, Morgan Stanley, Travelers, Prudential and Wells Fargo, among others. Administration officials also discussed the president’s plan with the top lobbyists at major financial trade associations in Washington.

So we ave the wrong and incompetent (financial experts), and the criminal and corrupt (industry executives and lobbyists) brought into the big tent in order to make one big happy family on the legislation.

As a result, they get very little right, they just rearrange the deck chairs, giving the Federal Reserve, the least accountable and most culpable of the banking regulators an expanded role, and create a “council of regulators,” which will serve to do nothing. It will be where meaningful regulation goes to die.

We already have a model for regulation that works: Roosevelt’s regulatory regime set up during the Depression.

It worked until the mid-1970s when Jimmy Carter started, and Ronald Reagan pushed to excess regulation.

About the only rule you need to add to all that is the rule that any new financial instrument is illegal until approved by a regulatory agency.

People may complain that this curtails “innovation,” but “innovation” is what got us here.

Obama Getting Hammered on Selling Out Gays

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It’s got the Human Rights Campaign up in arms, finally.

They’ve been a captive of the Obama administration for some time, and it’s nice that they have found some guts.

What’s more it looks like people are bailing from the DNC’s very high profile $1000 a person gay fundraiser as a result.

Additionally, the New York Times blasted Obama on his call to defend the law, noting that Obama’s assertion that the DoJ was compelled to defend the statute is simply not true.

Economics Update

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It’s a day for mixed economic news, with credit card defaults rise hitting a record in May, which obviously bodes ill for consumer spending

On less personal metrics, Los Angeles and Long Beach port traffic was up over April, though it was still down year over year, and housing starts and housing permits jumped though much of this activity may simply be builders trying to beat the $8000 first time home buyer tax credit before it expires at the end of November.

Additionally, it looks like the financial markets are moving toward some instability, as the VIX, an index of market volatility, has moved above 30, which indicates a bumpy ride, and possibly a correction, in the markets.

Inflation is muted on both sides of the Atlantic, with last with wholesale prices inflation hitting only 0.2% in May, and inflation in the Euro Zone posting a 0% rate.

Meanwhile, continued comments by Russia about moving to an alternative reserve currency to the dollar pushed the dollar down, and that, along with the housing numbers, drove crude oil up for most of the day, though it settled down $0.15/bbl, basically treading water.

[late update]

US industrial output fell 1.1% in May, and the capacity utilization rate fell to 68.3%, the lowest number since records started being kept in 1967.

Swedes Don’t Understand the United States at All

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The Swedes have a society that I envy in a number of ways.

A social safety net, a policy of making contraception to teens 15 and above, and the latest case, the requirement that, “Sex education should form part of the curriculum for all adults attending Swedish for Immigrants (SFI) classes,” according to an official report given to the Minister for Health and Social Affairs.

This is a good policy. The idea of teaching people who may have come from very sexually repressive societies things like human sexuality, that clitoridectomy is wrong, and that homosexuality isn’t wrong, that women have the right to refuse sex to their husbands, contraception, etc.

Here is the part that had me spewing at my screen, though:

Milton said he thought it would be unnecessary for people from functioning democracies to sit through classes on sex education. He added however that finding a practical solution did not fall under his remit.

“Clearly people from the UK, US or Canada, for example, know these things already. But it can be sorted out on a case by case basis. It’s something that can be worked out locally,” he said.

While I cannot speak to the sexuality and sexual mores of either the Canadians or British, notwithstanding the, “no sex please, we’re British,” jokes, I find the idea that the United States, with the highest incidence of teen pregnancy, partner murder, etc. is somehow sexually enlightened as a society to be completely unsupported by reality.

Just ask Briston Palin.

Were US sexual mores more honest, and less punitive, we would be a far better place to live.

Now This is Good Policy

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The House Ways and Means Committee is considering generating additional $37 billion in additional revenue by removing the deductiblity of direct to consumer advertising for prescription drugs.

The Chairman, Charles Rengel is talking about it favorably, and I think it does good on a number of levels:

  • It generates more taxes.
  • It reduces the artificial demand for the new under patent prescription drugs that are frequently not much better than their predecessors.
  • It redirects sales efforts to the doctors, who are better equipped to weigh the merits.
  • It would likely make drug companies more amenable to moving their drugs to over-the-counter, where they could deduct the ads, saving everyone money.

New York State Senate Tied Again

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Senator Hiram Monserrate, he’s the one who slashed his girlfriend’s face, not the one who took thousands of dollars of illegal campaign contributions and laundered money
, has returned to caucusing with the Democrats, because the old Dem Senate leader has been replaced.

So, it’s a 31-31 tie, and there is no Lieutenant Governor to break the impasse, that was Paterson pre-Eliot Spitzer, and quorum is 32, and the Dems are refusing to enter the chamber.

This is also in court, and the judge is looking for a compromise here, and so is refusing to rule, but he’s being optimistic. He’s going to have to rule.

Economics Update

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Well, if you are looking for “green shoots”, the New York Fed Empire State Manufacturing Survey is not one of them, they got worse (see picture).

Additionally, the NAHB Builder Confidence fell a bit in June, from 16 to 15, with 50 being neutral, so that remains awful.

When one considers that delinquencies on commercial mortgage backed securities broke 2%, this is a state of mind that accurately reflects the reality out there.

Still, another measure of consumer confidence, this one from the University of Michigan, , which is marginally better, but still well below the 10 year average of 88.2.

We also have two relatively well known business have filed for bankruptcy reorganization, Six Flags amusement parks and the Extended Stay hotel chain.

Meanwhile, in Ireland, deflation has hit an annual rate of -4.7%, which is not surprising. There are a lot fewer dollars (Euros) chasing goods there, now that their bubble has popped.

Still, it appears that foreign investors are more confident about the future on a global level, as they have cut back on purchases of long term US securities, as the flight to safety slowed/reversed.

Meanwhile, we are starting to see some inflation from the recovery in oil prices, with import prices rising 1.3%, largely on oil, though they are down by 17.6% (!) year over year.

This has driven the price of retail gasoline up again, and are now up 63% for the year, though crude oil fell today.

The dollar was up, largely on statements by Russia that it should remain the world’s reserve currency.

Yes, I Know, Posting Has Been Light

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I went up to New York at noon on Friday, to be up in time for Shabbos for my nephew Shlomo’s wedding to Shira, and juxtaposed with that, the car charger for my Palm® Centro™ went South, and first thing Monday morning headed back to Baltimore, heading directly to work.

The wedding, held Sunday evening, was a lot of fun, with lots of (non-mixed) dancing, though, as always, my experience with very Orthodox life events, particularly those that are done to New York standards, is that I feel a bit like I’m in a room full of aliens.

As Shlomo hails from Memphis, the band rolled out an Elvis impersonator at one point.

Iran in Turmoil

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Steve Clemons, who knows about this stuff, has been talking to a number of his sources about what is going on in Iran, and that there is a real possibility of political assassination on both sides, along with levels of violence not seen since the early days of the Islamic revolution there.

Meanwhile, the Guardian is reporting that there are over 100,000 protesting the election in Terhran, despite it being banned by the Interior Ministry and that Iran’s “Supreme Leader”, Ayatollah Ali Khamenei has now ordered an investigation into allegations of vote fraud, which seems to be quite a climb down for him, as he certified Mahmoud Ahmadinejad’s victory only hours after the polls closed, as opposed to the 3 day period normally required.

Iranian Election Goes Pear Shaped

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There are some pretty good indications of vote fraud, at least according to Juan Cole.

He thinks that Mahmoud Ahmadinejad, who is in control of the Interior Ministry, massively juiced his vote at the expense of his nearest rival, Mir Hossein Mousavi.

Cole’s argument, and I find it persuasive, is that the vote tallies are almost completely lacking the regional, ethnic, and class divides that have heretofore been a fixture in Iranian elections.

The results appear to be a crude and hurried fraud, which may very well because clerical authorities expected Ahmadinejad to win outright, and were caught flat-footed.

F-15 Silent Eagle Video Pr0n

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More defense contractor puffery, but it appears that some countries have expressed a significant interest in the Silent Eagel low observability program, most notably South Korea.

Of interest is the fact that Boeing has some real concerns about the US Government export license process being used to sabotage their sales process:

As for the F-15SE versus F-35 on frontal stealth, Jones says what Boeing is looking for is an assurance from the U.S. government that all competitors will be set at the same level of RCS reduction. Let the battle begin.

The translation here is that they are concerned that the JSF will be allowed for export at levels of stealth that the F-15SE would not be, because the USAF has no interest in the program, and doesn’t want it competing with the F-35.

Obama Comes Out for DOMA

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Americablog. has the scoop.

Basically, an Obama DoJ appointee made motions in a court case challenging the Defense of Marriage Act, and while I guess that there is an obligation for them to defend statute, the filing invoked pedophilia, called gays freeloaders, and generally invoked every bigoted right-wing talking point out there.

On the stump, he condemned DOMA.

Even better, today is the 42nd anniversary of Loving v. Virginia.

I would not hold my breath on a repeal of Don’t Ask Don’t Tell.

I told you so after the whole Donnie McClurkin thing.

Banks Burnt on “Sure Fire” Credit Default Swaps

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The Wall Street Journal has the story of how a bunch of the large investment banks got burned investing in “sure fire” credit default swaps. (paid subscription required)

You get a copy of the article here.

This kind of crap is why naked credit default swaps should be banned.

This ain’t nothing but a bunco game, straight out of the Mel Brooks movie, and Broadway musical, The Producers.

Some quotes from the article, and my comments:

The trade, by Amherst Holdings of Austin, Texas, was particularly galling to the big banks because it turned what they believed was a sure-fire profit into a loss.

(all emphasis in quotes mine)

If the profit is “sure fire” it means that someone is engaging in deceptive activity.

Privately held Amherst says it acted in good faith trying to limit losses for clients, who had sold credit-default swaps on the securities. “We wouldn’t jeopardize our business and reputation by entering into an opportunistic trade knowing what the outcome would be,” said Amherst’s chief executive, Sean Dobson.

This is a shot across the bow of the banks on the other side, since this is exactly what the big investment banks intended.

So far the latest dust-up has been all words, in part, bankers say, because they are wary of attracting more regulatory scrutiny at a time when lawmakers are planning major reforms in the largely unregulated derivatives markets, long lucrative for banks. While the banks’ combined losses from the trade were in the tens of millions of dollars — modest by recent standards — they are the buzz of Wall Street as firms try to prevent a repeat of the episode.

Ban naked CDS contracts, and it will not repeat.

Traders can buy credit-default swaps on securities they don’t own. At one point, at least $130 million of bets had been made on the performance of around $27 million in securities, according to a person familiar with the matter.

This is the part where credit default swaps, called a “naked” CDS in industry parlance, become a 3 card Monte game, and not insurance.

This kind of shit happens, and when things fall apart, you end up with AIG owing 40 or 50 times the value of the asset in insurance payouts.

This is why, 263 years ago, parliament passed the Marine Insurance Act of 1746, which required that anyone wanting an insurance payout demonstrate an interest in the continued existence of the property.

We have known for over 2½ centuries, since the South Sea Bubble, that this sort of insurance is dangerous and does nothing but create opportunities to game the system.

The frightening part here is that this scam is completely legal

Here is how it works:

  1. Amherst Holdings sells credit default swaps on a bunch of bonds to J.P. Morgan Chase & Co.
  2. Amherst Holdings sells credit default swaps on a bunch of bonds to Royal Amherst Holdings sells credit default swaps on a bunch of bonds to Bank of Scotland Group PLC
  3. Amherst Holdings sells credit default swaps on a bunch of bonds to Goldman Sachs
  4. Amherst Holdings sells credit default swaps on a bunch of bonds to UBS
  5. Amherst Holdings sells credit default swaps on a bunch of Bank of America Corp.
  6. Amherst Holdings sells credit default swaps on a bunch of bonds to a bunch of other banks
  7. Premiums exceed the face value of the bonds by many times.
  8. Amherst Holdings takes some of the premiums, and gives this to Aurora Loan Services with instructions to buy and retire the bonds.
  9. The CDS contracts are now worthless, and Amherst Holdings has taken way more in premiums than it spent on the bonds.
  10. Collect underpants.
  11. Profit!

OK, it doesn’t actually involve underpants, but still.