Year: 2009

Am I The Only Person Left Not Applying for TARP Money?

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Because it’s beginning to feel like my geek days in high school*, when I though that I was the only virgin among the 1200+ students at Woodrow Wilson High School, because we have yet more people scrambling for TARP money.

First, we have major insurance companies getting major commitments of money:

The Treasury yesterday granted preliminary approval for some of the nation’s largest insurance companies to receive capital infusions under the government’s Troubled Assets Relief Program, Treasury spokesman Andrew Williams said.

Recipients are Hartford, Prudential, Allstate, Ameriprise, Lincoln National and Principal Financial Group, he said. The insurers notified yesterday are among hundreds of financial institutions in the pipeline “that are being reviewed and funded as appropriate on a rolling basis,” Williams said.

In addition we have YRC Worldwide, one of the largest trucking firms in the world, applying for bailout money to shore up its underfunded pension plan.

They are a big player, over 20%, in the “less-than-truckload” market, where loads amongst multiple customers are consolidated onto one truck.

How do I get my hands on some free money? I gotta start me a bank……I’ll pay myself just $500,000 a year, along with a $½ million bonus.

*I was more than just a geek. I wasn’t just a wargamer who played Dungeons and Dragons, but I founded the wargaming club at the school. I was the king of the geeks.

Talk About the Odd Couple

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By which I mean Representative Ron Paul, Libertarian icon, and Senator Bernie Sanders, socialist are have both submitted bills calling for a full audit of the books of the Federal Reserve System, both the board, and the 12 regional banks.

I think that their motivations are different, Paul has long opposed the Fed because it sees it as an unwarranted intrusion by the government into the market, and Sanders sees it as being a tool of the big banks, but knowing what the Fed is doing would be a good thing, for everyone but Federal Reserve members.

Note that there is a general bipartisan consensus towards opening up the fed, as evidenced by the Senate’s passage of a bankruptcy reform bill with an amendment that expands oversight of the Federal Reserve.

I think that it’s clear that the role of the Fed in the current crisis shows that its role should be significantly restricted. I understand why there needs to be an institution which is insulated from political winds to manages monetary policy, but in their roles of bank regulator and bank rescuer, this “insulation”, is a level of opaqueness that does not serve society.

Pelosi Says that CIA Is Lying

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I’m inclined to agree, since, as I have already noted, both Senators Rockefeller and Graham confirm her account of CIA briefings.

In any case, Nancy Pelosi has upped the ante now, and she has specifically called the CIA out as liars:

At a contentious news conference Thursday, Mrs. Pelosi said that during the 2002 briefing, “we were told that waterboarding was not being used.” Mrs. Pelosi acknowledged that as the top Democrat on the House Intelligence Committee, she was briefed on Sept. 4, 2002, about waterboarding, a form of simulated drowning that critics, including President Barack Obama, call torture. But she said CIA officials told her and other lawmakers only that the Justice Department had concluded the procedure was legal.

This is interesting, because it may force Obama, whether he likes it or not, to put his support behind an investigation of the torture issue, as opposed to his desire to cover it up put it behind us.

It would be amusing if ‘Phant attacks on Pelosi end up precipitating a full investigation of this matter.

Hank Paulson and His Evil Minions&trade Strong Armed the Banks into Taking TARP

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And, BTW, Paulson’s Evil Minions™ include the then president of the Federal Reserve Bank of New York, one Timothy “Eddie Haskell” Geithner.

Judicial watch is a bunch of nuts right-wing, or maybe they are a bunch right-wing of squirrels who collect nuts, but every now and then amongst their nuts (FOIA requests) they turn up a gem, and this time, it appears to be a doozy.

Basically, they have the memos about the initial TARP, and it is clear from them that Hank Paulson told the banks that they had no choice about letting the US government buy equity in them(See also here and here):

“We don’t believe it is tenable to opt out because doing so would leave you vulnerable and exposed. If a capital infusion is not appealing, you should be aware your regulator will require it in any circumstance,” the document said, citing Paulson talking points.

One of the things of interest here (see the Scribd Window) is that Hank Paulson’s chief of staff did not know who the “big 9 banks” were….The Secretary of the Treasury‘s chief of staff did not know who the big 10 banks were?

Great googly moogly.

Treasury CEO Talking Points v1

Note that the Scribd link is from Market Ticker, who also notes that according to AIG President Edward Liddy, the Federal Reserve insisted that all Credit Default Swaps at 100¢ on the dollar (CSPAN video Link at about 2:25:00)

The Smoking Gun For Dick Cheney

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And no, this is not from the Smoking Gun, it’s from The Daily Beast, and it’s a big one.

Specifically, Robert Windrem, formerly a senior investigative producer with NBC News, has uncovered information that the office of the Vice President specifically requested that the a senior Iraqi official be waterboarded so as to extract a statement that Saddam Hussein and Osama bin Laden were in league and cooperating on terrorism:

At the end of April 2003, not long after the fall of Baghdad, U.S. forces captured an Iraqi who Bush White House officials suspected might provide information of a relationship between al Qaeda and Saddam Hussein’s regime. Muhammed Khudayr al-Dulaymi was the head of the M-14 section of Mukhabarat, one of Saddam’s secret police organizations. His responsibilities included chemical weapons and contacts with terrorist groups.

…

In his new book, Hide and Seek: The Search for Truth in Iraq, and in an interview with The Daily Beast, Duelfer says he heard from “some in Washington at very senior levels (not in the CIA),” who thought Khudayr’s interrogation had been “too gentle” and suggested another route, one that they believed has proven effective elsewhere. “They asked if enhanced measures, such as waterboarding, should be used,” Duelfer writes. “The executive authorities addressing those measures made clear that such techniques could legally be applied only to terrorism cases, and our debriefings were not as yet terrorism-related. The debriefings were just debriefings, even for this creature.”

Duelfer will not disclose who in Washington had proposed the use of waterboarding, saying only: “The language I can use is what has been cleared.” In fact, two senior U.S. intelligence officials at the time tell The Daily Beast that the suggestion to waterboard came from the Office of Vice President Cheney. Cheney, of course, has vehemently defended waterboarding and other harsh techniques, insisting they elicited valuable intelligence and saved lives. He has also asked that several memoranda be declassified to prove his case. (The Daily Beast placed a call to Cheney’s office and will post a response if we get one.)

(emphasis mine)

This isn’t about a ticking time bomb. This isn’t about ongoing plans. This is a request to torture someone until they say something that benefits you politically.

Can we put him on trial now?

Yes, I know that OVP does not necessarily equal Dick Cheney, but we also know that his office would not make such a request without his tacit or explicit approval.

Great Google Moogly!

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So, I go off to hear the Franklin High School strings festival, which includes stuff from Franklin Middle, where my daughter goes, and plays violin, in addition to Timber Grove and Chatsworth elementary schools, and when I get back, all hell has broken loose.

Looks like about ½ dozen things developed.

Go figures.

Schadenfreude: That is Not a Natural Skin Color Edition

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It looks like former Countrywide Mortgage CEO Angelo Mozilo is going to be sued by the SEC for, “insider trading and failing to disclose to shareholders the risks the company was running”.

At this point, it appears to just be a civil suit, but it appears to me that this is the first step toward a criminal prosecution.

Needless to say, this is a development that puts me in a Nelson Munz state of mind.

The SEC cannot put Mozilo in jail, but a separate federal criminal probe of Countrywide, begun last year, is continuing, one of the people familiar with the SEC case said.

…..

The agency’s staff also is recommending fraud charges against other former Countrywide officials, according to one of the people familiar with the probe, who was not authorized to discuss it publicly and spoke on condition of anonymity.

In the old days, following the excesses of the 1920s, one of the big players did his jail time, and spent the rest of his life earning a modest living running a farm.

If that were to happen to people like Mozilo and Miliken, it would be a good thing, because it would deter those who would be like them.

Another Day, Another Obama Backdown on a Campaign Promise

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So now Barack Obama is saying that they just don’t have the votes to pass the Employee Free Choice Act (EFCA):

President Barack Obama said there aren’t enough votes in the Senate to pass “card-check” legislation sought by labor unions and only a revamped measure would have a chance getting through Congress.

“There may be areas of compromise to get this bill done,” Obama said today a town hall meeting in Rio Rancho, New Mexico, outside Albuquerque.

Suck it up man!

You are the President of the United States of America! Your job is to find the votes for this.

He thinks that by not pushing this, he’ll get cooperation from the ‘Phants healthcare or his other initiatives. He’s wrong.

And, BTW, I am sick and tired of all these people claiming that he’s playing some sort of ten dimensional chess, he’s not.

He figures that labor has no where else to go, so he will not work for them.

US Looking at New Regulations on Finance Industry

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I find this hard to believe, coming as it does from Timothy “Regulatory Capture” Geithner, but we now have reports that the Treasury is looking at new regulations on bank executive compensation, with the appropriate squeals of protest from the pigs who get the pay and bonuses.

There is also a proposal to regulate derivative trading by requiring that most of them be traded on open and transparent markets, as opposed to the “black pools” in the shadow banking system.

Additionally they are looking to implement a reporting system on these trades based on the “Trace” system on bond prices, which halved the spreads between buy and sell prices that banks charged to purchasers by about ½.

Now, if they could only remember the lessons the Marine Insurance Act of 1746, and require that people who buy insurance, including swaps, must have a material interest in the underlying asset.

Unfortunately, Geithner, Summers, and Their Evil Minions™ still have their heart set on making the Federal Reserve the “systemic risk regulator, which is bad for a number of reasons:

  • The Fed has been captured by Wall Street.
  • There is no accountability at all, with its members appointed to very long terms by Congress, or by the banks themselves.
  • The organization is opaque and secretive.

My guess is that these proposals are going to be half measures designed to forestall real change, but I’m a pessimist realist.

Credit Card Reform May Relax Rules for Retailers

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Specifically, the bill in the Senate is likely to contain regulations that would relax the regulations on retailers for charging to use credit and debit cards:

The law allows merchants to charge less for using cash, but card companies’ contracts with retailers can make it difficult. Merchants say they’re required to post two prices on every product if they want to charge more for credit card use, and that the credit card price be more prominent. Retailers can face penalties if they don’t.

The legislation would allow discounts for debit cards and ban retaliation against retailers who charge less for transactions that don’t involve credit cards. [merchants and credit-card costs]

“The extra charges the establishment has to pay for the use of a credit card are kind of hidden inflaters in the cost of the product,” said Sen. Richard Durbin (D., Ill.), who is pushing the measure with Sen. Christopher Bond (R., Mo.).

Needless to say, the banks and other credit card issuers are aggressively lobbying against this.

Your Liberal Media

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You may have heard a minor media sh%$storm about an OMB report that says that global warming is a farce, and that it will wreck the economy.

Only the report is not a report, it’s just a collection of various opinions from other agencies that the OMB passes on without comment, and it’s just one comment.

And the comment, it came from the Small Business Administration’s Office of Advocacy, an office whose only job is to lobby for small businesses, and which has no professional staff, only political appointees.

In this case, the political appointee in question was Joseph Johnson, a former member of the Mercatus Center at George Mason University, which is another right wing funded front. See also here if you can stomach a Glen Beck video.

Needless to say, this did not prevent the New York Times from mindlessly echoing all the spin (also here), along with the rest of usual suspects.

Of course, it took a bunch of couple DFH* bloggers at The Atlantic and Media Matters about a half day to get to the bottom of this, but our main stream media?

Not so much.

*Dirty F%$#ing Hippy.

Financial Innovations Did Not Create Capital

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I’m Not Seeing Capital Growth (Blue Line)

And look over here, all those derivatives? They are not hitting the real world, they are just trading amongst themselves, and generating commissions, but, “it is a revealing indicator that the non financial companies for whom these products were prescribed did not themselves use them.” Imagine that.

One of the alibis presented by those who created the current crisis in the financial system is that this innovation made capital more available, and hence increased economic growth.

So Adam S. Posen and Marc Hinterschweiger take a look at this theory, and they discover that there are no facts to back up this hypothesis:

….

But not every innovative product is safe, let alone productive. Unlike pharmaceuticals, aerospace, and a host of other technical fields, financial innovations have been allowed to proliferate unscrutinized and untested for safety or effectiveness. Yet the negative spillovers on the public at large from faulty financial engineering and toxic products have now been clearly demonstrated to be enormous. In particular, there is some solid evidence that the most recent batch of financial innovations was used in manners inconsistent with their labeling, and not only had terrible side effects, but did not even yield the advertised benefits.

….

Between 2003 and 2008, US gross fixed capital increased by about 25 percent, a reasonable number during an economic expansion, but hardly a boom. During the same five-year period, the global amount of over-the-counter (OTC) derivatives increased by 300 percent, while derivatives held by the 25 largest US commercial banks rose by 170 percent.

The reality is that people were not aiding capital formation of the “real” economy, they were creating products that would best allow them to feather their own nests.

In other words, this world of innovation was actually an exercise in personal selfishness.

There is a word for this, capitalism, and the same capitalism that creates a hybrid car also gives us the crack dealer and the stock broker, and the crack dealer harms far fewer people.

Terrorist Training Camp Found in Imperial, California

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It appears that the Explorer Scouts are training their members in weapons use and military tactics.

OK, they are not. It’s training for law enforcement, and to my mind, probably very bad training for law enforcement, because, with its emphasis on military style assaults for for things like simulated bus hijackings, it contributes to an increasingly militarized mind set for what should be peace officers.

Additionally, if this were not run by the Explorer Scouts, a Co-Ed division of the Boy Scouts, but instead by the Islamic Community Center of Imperial California (Where the story is reported from), how long would before an ambitious prosecutor would charge them all with running a “terrorist training camp.”

What’s more, he would probably win the case.

Economics Update

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So, initial jobless claims rose 32,000 637,000 (seasonally adjusted) worse than expected, the four-week moving average rose by 6,000 to 630,500, and continuing claims rose by 202,000 to a record 6.56 million.

Meanwhile producer prices rose unexpectedly by 0.3%, indicating that, perhaps, the inflation genie is not as firmly in the bottle as one would hope.

Meanwhile, in real estate, office rents in London have fallen to 1991 levels, as a combination of overbuilding and the implosion of “The City”, the UK Wall Street have driven down rents.

We are seeing the same thing in retail space, with rents falling and concessions increasing, at such high profile locations as Rodeo Drive, 5th Avenue, Bond Street, and the Champs Elysees.

It’s no wonder then, that commercial and multi-residential mortgage loan originations have fallen sharply. (top pic)

Also, the HousingWire has a good picture on the surge in foreclosures that I noted yesterday. (bottom pic)

Neanwhile, energy and the dollar seem to be at odds with each other, with oil up today, it appears on the belief of a recovery, and the dollar also up, on economic insecurity.

Go figure.

Not Enough Bullets: Chrysler/Fiat

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It appears that Fiat may be the employer of record for senior management, and that they will then be “seconded” to Chrysler in order to skirt pay limitations at bailed out firms. (See also here)

In the long run, the real answer is confiscatory taxes at higher levels of remuneration.

Figure bumping the tax rate by 1% at $250K/year and at each $250K break point, with a limit of 85% at income in excess of $13¼ million a year, or 90% at 14½ million a year.

This crap needs to stop. These executives are overpaid by the standards of the world, they will be making more than the Chairman of Fiat, which is taking them over, and they do not deliver value.

The problem is not excessive salaries for senior executives at bailed out firms, it is excessive salaries, period, full stop.

It is theft from the shareholders and the less well remunerated employees, and it is corrosive to society.

Auto Update

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First, let’s be clear that the domestic auto makers problems are not just incompetent management. No one is making money selling cars right now, not even Toyota, which posted its first quarterly loss in 59 years, $7.74 billion in the quarter ending in March, and, as the picture shows, is looking at more losses in the future, while Nissan posted a $2.4 billion loss.

Of course, the sight of GM executives frantically selling stocks as a trading window opened to allow them to sell their stocks without insider trading concerns.

They are also sending terms of sale sheets to the dozen or so bidders for the Saturn brand brand. It’s primarily the sale of a dealer network and brand, rather than a sale of designs or factories.

Meanwhile, across the pond, Fiat is still negotiating a deal to buy GM’s Opel division, and most of this is about how much can be extracted from the German government.

At the nexus of the two failed auto makers, both GM and Chrysler will be cutting dealers, which makes sense, and it’s the urban dealers that will see most of the cuts, which, surprise means that minority owned dealerships will see it landing them.

Same old, same old.

In any case, it now appears that the 2 month bankruptcy is a fiction, with media reports that the bankruptcy will take 2 years, though the sale of assets to the new operating company should be finished well before this.

Meanwhile, Ford, which saw the storm coming, and accumulated cash to weather it, is now looking to sell 300 million shares of common stock in order to fund the Voluntary Employee Beneficiary Association (VEBA) that it negotiated with the UAW.

Finally, we have Ferrari threatening to pull out of Formula One because they do not like the new rules, most particularly the £40 million budget cap, which is intended to make more teams competitive.