Month: March 2010

I’m Famous!

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I just got a letter to the editor published to the Financial Times.

Happy dance time.

Basically, it’s about something that I’ve written many times; that there should be a requirement for insurance like financial products to have insurnace like regulations, such as the 260+ year old requirement that you cannot take out insurance on somethting that it is not yours to lose.

Of course, I understand that this actually does not mean much in the greater scheme of things: People get LTE’s published all the time.

Of course, I don’t have what the conquoring Roman general had, a slave whispering in his ear that fame is fleeting, but I do have a cat with a piece of bacon that has been taped to it.

The Next Senator from Illinois Will Be a Republican

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First, the Dems nominated a guy, Alexi Giannoulias, whose family made its money from the dodgy Broadway Bank, and he was its loan officer during the bubble years.

And now, we have this:

Boston Blackie’s owner hit with bank fraud charges

Nick Giannis a big financial supporter of Alexi Giannoulias

March 11, 2010
By RUMMANA HUSSAIN, ABDON M. PALLASCH and FRANK MAIN Staff Reporters

On the same day Senate hopeful Alexi Giannoulias tried to shift the spotlight off his family’s struggling bank and onto his opponent’s bank ties, police arrested a major Giannoulias contributor and customer of the family bank as he tried to flee the country ahead of check-kiting charges.

Nick Giannis, owner of the Boston Blackie’s restaurant chain, was caught at the Canadian border with his Greek passport as he was being driven by a man believed to be an employee, sources said.

And it should be noted that one of the reasons that he got the Democratic nomination was that he is a close friend, a basketball buddy, of Barack Obama, though there was not, to the best of my knowledge any endorsement made during the primary.

This is Literally the American Taliban

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It appears that there is a group of Talibaptists in Amarillo, Texas who have decided to spend their time engaging in a concerted program of harassment and intimidation directed at the local swingers club.

I could lambaste them, but PZ Myers does so well at the above link that it’s not necessary.

I would note that their targets, in addition to swingers and strip clubs, includes:

  • Buddhists.
  • Moslems.
  • Unitarian Universalists
  • Shriners (the Masons)
  • The Local Episcopal Church
  • Earth Day
  • Breast Cancer Awareness Day

And of course:

  • Rock and roll

Unsurprisingly, the local Sheriff’s department has been unwilling to respond to this, though, according to the Texas Monthly, the state troopers have been actually doing their job after a fashion.

He’s Just Not That Into You

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It looks like Democrat Chris Dodd has dumped Republican Bob Corker in his efforts to create financial reform, and has announced that he will be releasing a Corker-less proposal on Monday:

Senate Banking Committee Chairman Christopher Dodd said he will release his version of legislation to overhaul financial rules, signaling that talks on a compromise with Republican Bob Corker have collapsed.

Dodd, a Connecticut Democrat who had been negotiating with Corker since last month, will release his proposal March 15 and hold a committee meeting to consider changes in two weeks, according to a statement released today.

“I have been fortunate to have a strong partner in Senator Corker and my new proposal will reflect his input and the good work done by many of our colleagues,” Dodd said. “Our talks will continue and it is still our hope to come to agreement on a strong bill all of the Senate can be proud to support.”

Note that he did not mention Richard Shelby, the ranking Republican on the committee, which I think was a deliberate snub; Shelby refused to do anything even approaching good faith.

I am not certain of the dynamics.

It could be that he realized that Corker was actually just trying to delay, that there were unbridgeable differences, or that the recent stories on how Bob Corker was doing the bidding of his campaign donor payday lenders skeeved him out.

My guess is that, at it’s core, Dodd did not want to spend any more time making the bill worse for just one Republican vote.

Senate Majority Leader’s Wife & Daughter in Accident

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They were rear ended by a semi-truck, and the injuries are described as serious but not life threatening:

Both Reid-Barringer and Reid were wearing seatbelts and were transported to Inova Fairfax Hospital in Falls Church. The driver of a 1997 Jeep Grand Cherokee and the driver of a 2007 Chevrolet Cobalt, also involved in the crash, were transported to the hospital with non-life threatening injuries.

“Mrs. Reid has a broken nose, broken back and broken neck. Lana has a neck injury and facial lacerations. Both Mrs. Reid and Lana are conscious, can feel their extremities, and according to doctors their injuries are non-life threatening,” Jon Summers, a spokesman for Sen. Reid (D-Nev.), said in a statement late Thursday afternoon.

One note here: Wear your damn seatbelts.

It’s Bank Failure ……… Thursday???

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OK, we have a bank shut down today, a day before the normal Friday closures, and it makes 27 for the year, LibertyPointe Bank, of New York, NY.

I would note that the trend line moved down a bit, because we added one to the sample, but 6 to the number of days, and we are trending around 3 a week. There will be a more meaningful pic tomorrow.

I’m wondering if the FDIC is waiting to roll up a sh%$mess of banks tomorrow, or if this is some peculiarity of the New York State banking department, which executed the closure.

Another Shoe to Drop in Real Estate

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The FDIC is planning to auction off some the assets that it has accumulated, and that has the banks worried that this will force many of them into insolvency, because it will set a market price for the sh%$ that is on their books:

A Federal Deposit Insurance Corp. plan to auction more than $1 billion in assets seized from failed banks next month, including a loan to build a W Hotel in Atlanta, may trigger writedowns that weaken lenders nationwide.

Almost half of the loans were originated by Silverton Bank N.A., whose collapse last May was the biggest in Georgia history. Community banks that joined Silverton in providing $80 million for the 237-room hotel and condominium complex, as well as backing for 39 other projects, could be forced to write down their stakes to reflect sale prices.

What is going on here is that because the FDIC will be auctioning off assets, as it is required to do by law, these illiquid assets, and this will assign a fair market value to said assets.

Banks and other institutions who have maintained the illusion of solvency by using some variant of mark to myth model will therefore have to reassess the value of these assets on their books, pushing some, perhaps many, of these institutions into bankruptcy.

Rumsfeld To Face Lawsuit Over Torture

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The case here is very simple, contractors at Shield Group Security reported illegal arms sales and smuggling by the firm to US authorities.

When the fled to the US Embassy, they were then taken into custody and tortured by the US Army, using techniques that Rumsfeld specifically authorized.

U.S. District Judge Wayne Andersen has ruled that their lawsuit can proceed.

The principle here is fairly simple: You can sue a police officer for brutality or false arrest, but not a prosecutor for deciding to pursue a case.

In this case Rumsfeld specifically authorized brutality.

Here’s hoping that Rummy spends his remaining days in penury.

Felix Salmon Has A Talk with Treasury Officials

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And determines that they are still the banks bitches, working for them, rather than the citizenry.

In truth, Mr. Salmon did not say that Geithner and His Evil Minions™ see themselves as nothing more than a way to support the banksters, but that is the basic take away that I see here:

Well done to Shahien Nasiripour, who did the best job of anybody, at the Treasury blogger meeting yesterday, at getting Treasury’s officials to commit news. Specifically, he asked about Sheila Bair’s sensible idea that mortgage principal write-downs can help keep homeowners in their homes while also maximizing the value of the mortgage to the issuing bank. And he was told, quite clearly, that Treasury has been talking to Bair about this idea, and that if it makes sense at the bank level, it probably makes sense at the federal level, too, as part of the HAMP program to make mortgages affordable.

Except that once the meeting was over, its main architect, Treasury flack Andrew Williams, emailed Nasiripour to walk that particular idea back, saying that Treasury was NOT (his all caps) going to do anything “major” in terms of principal write-downs, and that any moves in that direction would be no more than “tweaks”.

………

It seems to me that insofar as Treasury has a problem with principal write-downs, that’s clearly a function of the fact that it’s worried about the consequences for banks’ balance sheets. We’re prosecuting a muddle-through strategy right now, where the government artificially props up house prices by providing substantially all of the mortgage finance in the country, in the hope that with economic recovery will come enough of a natural rebound in house prices to let the government slowly remove its support without them falling dramatically again.

(emphasis mine)

Unless the Treasury is banking on 6% inflation a year for the next 8 or 9 years, this is not going to happen.

House prices are still over valued, whether you use price to income, or rent to own (and rents are dropping too), and we are not going to see a recovery until house prices

This is complete regulatory capture, pure and simple.

Economics Update

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Yeah, I know, It’s no longer daily. A new job does that, and it’s de rigeur on Thursday, because that’s when the unemployment data comes out.

In this case, it’s down 6k to 642K, but the 4 week moving average rose 5,000 to 475,500, and continuing claims, which I am no longer a part of were flat at 4.56 million.

Basically, dropping jobless claims don’t mean rising employment until some point below 400K a week, so don’t get your hopes up.

BTW, not getting their hopes up is what small businesses are doing right now, with the National Association of Independent businesses’ index of small business optimism falling to the 2nd lowest level ever recorded, and the Manpower Survey of hiring managers was down slightly, though their Asian numbers were somewhat improved.

In real estate, foreclosure rose by “only” 6% year over year, leading to paroxysms of prodigious positivism by the Panglossian press, but it means that foreclosures are still rising.

Meanwhile, in China, they are freaking out over their inflation levels, which have risen to a 2.7% annual rate (merciful heavens, get me the smelling salts).

Actually, if the PBC raises rates to reign in inflation, I don’t see how they could keep their peg against the dollar, because higher rates push just about any currency up.

But Note: Strident Does not Mean Crazy

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Case in point, Alan Grayson, and his Public Option Act, which require the Secretary of HHS to set up a medicare buy-in at cost.

It’s only 4 pages long, and I’d love to see it hit the floor, because it would seriously jam-up the ‘Phants and the Blue Dogs.

H/t C&L.

Full press release after break.

GRAYSON INTRODUCES PUBLIC OPTION ACT
Bill Opens Up Medicare To Anyone Who Can Pay For It

March 9, 2010

Washington, DC

Congressman Alan Grayson, D-Fla., today introduced a bill (H.R. 4789) which would give the option to buy into Medicare to every citizen of the United States. The “Public Option Act,” also known as the “Medicare You Can Buy Into Act,” would open up the Medicare network to anyone who can pay for it.

Congressman Grayson said, “Obviously, America wants and needs more competition in health coverage, and a public option offers that. But it’s just as important that we offer people not just another choice, but another kind of choice. A lot of people don’t want to be at the mercy of greedy insurance companies that will make money by denying them the care that they need to stay healthy, or to stay alive. We deserve to have a real alternative.”

The bill would require the Secretary of Health and Human Services to establish enrollment periods, coverage guidelines, and premiums for the program. Because premiums would be equal to cost, the program would pay for itself.

“The government spent billions of dollars creating a Medicare network of providers that is only open to one-eighth of the population. That’s like saying, ‘Only people 65 and over can use federal highways.’ It is a waste of a very valuable resource and it is not fair. This idea is simple, it makes sense, and it deserves an up-or-down vote,” Congressman Grayson said.

In keeping with the “Grayson style,” the bill is clear and concise. It is only four pages. You can read the bill here.

Remind Me, Once Again

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As I have said many times, if you live by one rule, it should be never piss off Jon Stewart.

Here he takes on Liz Cheney:

Ms. Cheney is pathetic really: She has no accomplishments of her own, and she knows that if her Daddy gets close to anything even vaguely resembling a fair and full accounting, the gravy train which gets her gigs of Fox News ends.

Ms. Cheney, you are an even more pathetic excuse for a human being than you father is; at least he did something himself to be where he is, while you, much like your fellow nepotism affirmative action baby and Keep America Safe stalwart William Kristol, have done nothing but make currency of your family name.

Headlines that Take the Starch Out of Your Shorts

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Beijing studies severing peg to US dollar.

Truth be told, the hed is a bit alarmist: The Chinese are talking about starting to talk about allowing the Yuan to appreciate a bit:

China’s central bank chief laid the groundwork for an appreciation of the renminbi at the weekend when he described the current dollar peg as temporary, striking a more emollient tone after months of tough opposition in Beijing to a shift in exchange rate policy.

Zhou Xiaochuan, governor of the People’s Bank of China, gave the strongest hint yet from a senior official that China would abandon the unofficial dollar peg, in place since mid-2008. He said it was a “special” policy to weather the financial crisis.

“This is a part of our package of policies for dealing with the global financial crisis. Sooner or later, we will exit the policies.”

Pretty weak tea,* actually, and I think that everyone, even the PBC realizes that the current peg is unsustainable, and my guess, based on absolutely nothing, is that they are talking about talking because it’s a way to kick the can down the road.

*Pun not intended.†
†No, really, it was unintentional.

Europe Moves To Ban the Naked CDS

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Everyone says it’s like insurance, only with insurance, at least since 1746, it has been illegal to take out insurance on anything that you do not have, “an interest in the continued existence of the insured property,” but anyone can take out a Credit Default Swap (CDS) on anything.

All they need to do is find a counter-party.

Well, this may be coming to an end, since European regulators are looking at taking steps to forbid the practice:

José Manuel Barroso, European commission president, said it was “not justified” to buy credit default swaps “by unseen interventions on a risk, on a purely speculative basis”. Photograph: Vincent Kessler/Reuters

The European commission announced moves today to shore up the euro and ward off market pressure on Greece by considering a ban on complex derivatives allegedly being used to undermine the single currency.

The draconian move suggested by José Manuel Barroso, commission president, follows a joint campaign by the German chancellor, Angela Merkel, and the French president, Nicolas Sarkozy, for a prompt clampdown on credit default swaps (CDS).

I’m sure that Timmy “Naked CDS is Essential for Price Discovery” Geithner hates this, but who cares what he thinks: The only reason he’s still Secretary of the Treasury is because Barack Obama knows that the Republicans would filibuster his successor out of spite.

OK, Eric Massa is Nuts

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OK, look at the video, and it’s clear that this guy has some very real problems.


That being said, Massa’s vote against the House healthcare bill was from the left, he felt that it was too weak, and so the idea that the Obama administration in general, and Rahm Emanuel in particular, might have a personal interest in taking him down.

There is nothing more than Rahm likes than cock punching DFH’s,* and so I am reasonably certain that he’s high-fiving over this development, but the talk of a conspiracy I is premature.

I can see how Rahm might be inclined to do this, I just don’t think that he did.

As I have said before, I think that too many Dems remember the Mark Foley, and when this came up, the Democratic leadership did the smart thing.

*Dirty F%$#ing Hippies.