Year: 2009

Geithner’s New Plan: Same Old, Same Old, Failure

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So, we now have a definitive leak of the features of Geithner’s plan to help the financial system, and it’s the same old, same old: The problem is not that the banks are insolvent, or that their assets are worthless piles of crap, it’s that the markets are just undervaluing them.

The basic provisions:

  • An auction of the big sh#@pile, which is a bad thing, because it only serves to expand taxpayer exposure.
  • The FDIC will lend about 85% of the money to buy this.
    • These FDIC loans will be non-recourse loans, which means that if those assets bought with that particular loan would be used to repay. Any further losses would be eaten by the taxpayer.
  • The Treasury will match, “the private money that each of the firms [4-5 investment firms hired by the Treasury, meaning Goldman and the rest of the usual suspects] puts up on a dollar-for-dollar basis with government money,” which means that the 15% that they have to buy to get the assets is now 7½%
  • The Treasury/Federal Reserve TALF lending program will be used to further expand lending to buy this toxic waste.

This is what Geithner has been pushing for a long time, some sort of program to overvalue assets at taxpayer expense, all while, “firmly against imposing any restrictions on pay for companies investing money in the rescue effort rather than receiving money from it,” except, of course, any participants in this are receiving federal money because of the subsidies.

Dean Baker notes that the that unlike Timothy “Eddie Haskell” Geithner and Lawrence “Shoggoth” Summers and their Evil Minions™, the current market values of the securities are probably accurate, because real estate prices remain 20% above the historical trend, and if houses fall another 20%, these mortgage backed securities now selling for 30¢ on the dollar, which are the very top tranches, would be near a dime on the dollar.

Paul Krugman correctly calls it, “an open invitation to play heads I win, tails the taxpayers lose,” policy, and Calculated Risk and Yves Smith are similarly disparaging, though John Cole is the one who best nails the situation:

The Illness- reckless and irresponsible betting led to huge losses
The Diagnosis- Insufficient gambling.
The Cure- a Trillion dollar stack of chips provided by the house.
The Prognosis- We are so screwed.”

Seriously, tag team of Geithner/Summers may very well be worse for the economy than Hank Paulson.

For your amusement, here is Rep Brad Sherman (D-CA) opening up a can of whup ass on the CNBC Wall Street apologists

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Boeing Unveils LO F-15

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It appears that Boeing is looking to extend the life of the F-15 Eagle with a technological update (also here and here) called the Silent Eagle.

The two most obvious changes are creating weapons bays in the conformal fuel tanks and the canted tails, though it is also reported that there is a fair amount of radar absorbent material (RAM) added, including a frangable gun cover that hearkens back to how armorers treated the guns in WWII.

There are apparently no radar blockers in the inlets, even though Boeing has extensive experience with them in the F/A-18 E/F, because of potential export issues.

This implies that Boeing has decided (correctly IMHO) that they have no chance of selling these to the USAF, who have eyes for nothing for the F-22 and F-35.

They are suggesting a $100m unit price, though it is not made clear in any of the articles as to whether this is unit price, or fly-away cost.

The implication is that $100m will be cheaper than the F-35 JSF, and perhaps this is less an exercise to sell more F-15s than it is to sell more F/A-18E/Fs by implying that the JSF will break 9 figures in cost.

If they are implying this, they are probably right. The JSF shows a lot of signs of cost escalation and schedule slippage.

Powerpoint courtesy of The DEW Line, video of missile actuator courtesy of Boeing.

Potential Rafale Sale to Libya

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It makes sense.

Khaddafi has signed a deal for 6 months exclusive negotiations for the Rafale.

This purchase actually makes sense for Libya, because they have a reasonable chance of being able to continue to operate the aircraft even in the face of an embargo by the US, such as the sort that grounded the Venezuelan F-16s, and the competitors, the Eurofighter Typhoon, and SAAB Gripen, both have significantly more US content.

This would be the first foreign sale of the Rafale, and I’m sure that the French foreign ministry and Dassault are both drooling at the prospect.

The Navy is Doing This Because the USAF Can’t Be Bothered

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After years of ground troops begging for something lower, slower, and with more short field capability, it is the US Navy that is considering a solution, the Super Tucano turboprop trainer configured for the light attack mission.

You could probably buy 50 of these aircraft for the price of one JSF, and it can loiter over the battle area for a much longer period of time, and spot things that the fast movers would miss.

Shades of the A-1 Skyraider, which wasn’t a USAF idea either.

Naval aviation is fighting it, because, well, has a propeller and all, but it looks like this will actually be used, because it’s what the guy on the ground needs.

Yadda, Yadda, Yadda

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Another flying car. This one from Terrafugia.

It appears to be very much on the “roadable plane” side of the roadable plane/flying car divide, and I rather expect that it will be like the rest: single digit production followed by an exit of the business.

In any case, here is a vid of their first flight.

It really appears to love the ground a lot, but that may be because of its relatively long wheel base relative to dedicated aircraft, requiring more force to rotate.

Worldwide War Pigs: Drop Tank IRST Tests Well For Supers

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About 1 ¾ years ago, I wrote about how Boeing was looking into putting an Infra-Red Search and Track (IRST) on the F/A-18 E/F Super Hornet by fitting it to the front half of a center-line drop tank.

Well, Boeing has completed successful flight tests on the system, which is supplied by Lockheed Martin Missiles and Fire Control*.

There hasn’t been an aircraft in the US inventory with an IRST for air-to-air since the F-14 Tomcat was retired, but Russian and European fighters have embraced this technology.

The advantages of going passive are real, though I would wonder about the reliability of the system under the very turbulent and vibration laden environment beneath the Super Bug.

My original post on this.

H/t Worldwide War Pigs

*Full disclosure, I worked at Lockheed Martin Missiles and Fire Control in the late 1990s.†
†Yes, I have worked everywhere. Maybe I can’t hold down a job, but more likely this has been my role as “technical hit man”, where you are parachuted in to take care of a specific need.

China’s Chengdu J-10 Modified

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It appears that there have been some upgrades and/or fixes to China’s Chengdu J-10 canard-delta fighter.

If you look at the top (newer) image it appears that an Infra-Red Search and Track (IRST) unit has been added just forward of the cockpit, and that the inlet has been modified from the original aircraft (bottom).

Douglas Barrie thinks that there may have been vibration or air flow instability issues with the original inlet, but it looks to me more like an attempt to reduce RCS in the forward aspect.

Or maybe it’s a buff with photoshop.

Oh Lord, Won’t You Buy Me a Mercedes Benz (Zimbabwe Edition)

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So it now appears that foul play has been ruled out in the Tsvangerai crash, and MDC official Roy Bennett has been released from custody.

That being said, Mugabe’s attempts to maintain his political power have gotten truly surreal:

On his first day as education minister in a government so broke that most schools were closed and millions of children idle, David Coltart said he got a startling invitation.

“Come and get your brand-new white Mercedes,” an official told Mr. Coltart, a veteran opposition politician, as President Robert Mugabe peered down from a portrait on the minister’s office wall.

The offer of an E-Class Mercedes to every minister in the month-old power-sharing government was vintage Mugabe, an effort to seduce his political enemies with the lavish perks he has long bestowed on loyalists.

(I would have offered him silver, or metallic blue, myself.)

I’m an optimist, and see this as a sign of weakness.

Mugabe had previously dismissed the MDC entirely, and how he is trying to bribe them.

Great Googly Moogly: Larry Summers Wants to be Fed Chairman

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It appears that Barney Frank and Chris Dodd have differences in the future course of regulation.

Specifically, Frank favors giving the Federal Reserve the job of managing “systemic risk” under any new regulations, and Dodd thinks that the Fed, with its history of unresponsiveness and opacity is ill suited to the task.

Well, it now appears that much of the smear campaign against Dodd may have come from Larry Summers, who would be first in line to be Federal Reserve chairman if Obama does not reappoint Bernanke, and so he went after Dodd in order to strengthen Frank’s hand in making the Fed the chief regulator.

I’m beginning to think that anyone who has “friend of Robert Rubin” on their resume should be barred from any position of authority.

Un-dirtyword-believable.

The Cemeteries of the World are Full of Indispensable Men*

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The former chief economist of the IMF has an Op-Ed in the New York Times, and he makes the point that removing the “geniuses” who created the problem has to be the first step of fixing the problem:

A.I.G. can hardly claim that its generous bonuses attract the best and the brightest. So instead, it defends the payments by arguing they’re needed to retain employees who are crucial for winding down transactions that are “difficult to understand and manage.” In other words, only the people who stuck the knife into the American International Group can neatly extract it for a decent burial.

There is no reason to believe this.

Similar arguments made during the 1997 Asian financial crisis, when currencies and stock markets collapsed in much of Southeast Asia, turned out to be a smokescreen to protect the executives who were partly responsible for the mess. Recovery from that crisis required Indonesia, South Korea and Thailand to close or consolidate banks. In all three countries, bankers protested, claiming that their connections with borrowers were critical to recovery.

…

The lesson of all this is that when insiders have broken a financial institution, the most direct remedy is to kick them out. Traders are hardly in short supply, and you don’t need to rely on the ones who made the toxic trades in the first place. Companies must always plan around the potential departure of even their star traders, or they are certain to fail. A.I.G. does not need to keep all of its traders, especially since it takes far fewer people to unwind a portfolio than to build it up.

The longer that we put this off, the worse it will be.

*Charles de Gaulle, a man not known for his own sense of personal dispensablity, coined this bon mot.

Cows…Barn Doors…And the US Government

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So, we have the government looking to legislation giving them the authority that the FDIC does when it shuts down banks for not bank entities, such as bank holding companies and hedge funds.

And in related news, the FDIC is looking for additional authority to acutally write regulations, a function which is currently does not have.

It has strong enforcement powers, but, “but only the Federal Reserve, Office of Thrift Supervision and National Credit Union Administration can write the regulation it enforces.”

It’s about time.