Month: December 2010

Economics Update

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We get the official numbers on Friday, but ADP’s private employment survey shows a 93,000 increase in private employment in November, which is the best number in about 3 years, though this alone is still a bit smaller than the natural growth in the labor market.

Also on the plus side, we have the Federal Reserve Board’s  Beige Book showing mild expansion, construction spending rising in October, and car sales for GM, Ford, and Chrysler up significantly in November.

On the so level, we have the Institute for Supply Management’s manufacturing index falling, but still showing slow growth.

On the minus side, we saw mortgage applications falling sharply last week.

Why Reaching Across the Aisle is a Stupid Idea

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Arizona Republican John Kyle has announced that he will not allow a vote on the START treaty unless the Democrats capitulate on tax cuts for people making more than $¼ million a year.

I am not disappointed by Kyle, I expect this behavior from post-Reagan Republicans. What does disappoint me is the behavior of Barack Obama, who continues to think that he can dazzle them with his awesomeness and reach across the aisle.

As my brother notes, “Since being ‘nice’ doesn’t work, a sane course might include not being nice….“

Well, This is a Surprise

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In the latest twist to the legal travails of Sergey Aleynikov, who is accused of theft of Goldman-Sach’s illegal market front-running high frequency trading software is now arguing that the code in question was open source, so there was no theft:

Sergey Aleynikov, who is accused of stealing Goldman Sachs’ source code used in high-frequency trading, argued that he was standing up to the investment bank’s proprietary claims on open-source code, not trying to steal private codes to use at a competing trading firm.

Mr Aleynikov, a former computer programmer at the bank, is accused of downloading proprietary code related to high-speed trading systems in June 2009 for use at a new job at a competing firm.

While this statement may actually be true, it does strike me as a rather low percentage defense.

Unfortunately, it also implies that we will not be getting any details on how the Vampire Squid and its Wall Street co-conspirators might actually be gaming the system with their co-located high speed trading systems during the trial.

Federal Reserve Releases Dodd-Frank Audit Results

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So they are out, they are voluminous, and I have neither the time nor the expertise to to review them all, I here is what I’ve seen in other people’s commentaries.

We see loans at absurdly low rates and self dealing, the Fed’s commercial paper program was dominated by European banks, and surprise, surprise, Goldman Sachs actually needed the aid that it claimed to only grudgingly accept.

The full Federal Reserve press release is after the break:

Press Release

Release Date: December 1, 2010

For immediate release

The Federal Reserve Board on Wednesday posted detailed information on its public website about more than 21,000 individual credit and other transactions conducted to stabilize markets during the recent financial crisis, restore the flow of credit to American families and businesses, and support economic recovery and job creation in the aftermath of the crisis.

Many of the transactions, conducted through a variety of broad-based lending facilities, provided liquidity to financial institutions and markets through fully secured, mostly short-term loans. Purchases of agency mortgage-backed securities (MBS) supported mortgage and housing markets, lowered longer-term interest rates, and fostered economic growth. Dollar liquidity swap lines with foreign central banks helped stabilize dollar funding markets abroad, thus contributing to the restoration of stability in U.S. markets. Other transactions provided liquidity to particular institutions whose disorderly failure could have severely stressed an already fragile financial system.

As financial conditions have improved, the need for the broad-based facilities has dissipated, and most were closed earlier this year. The Federal Reserve followed sound risk-management practices in administering all of these programs, incurred no credit losses on programs that have been wound down, and expects to incur no credit losses on the few remaining programs. These facilities were open to participants that met clearly outlined eligibility criteria; participation in them reflected the severe market disruptions during the financial crisis and generally did not reflect participants’ financial weakness.

The Federal Reserve is committed to transparency and has previously provided extensive aggregate information on its facilities in weekly and monthly reports. As provided by the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, transaction-level details now are posted from December 1, 2007, to July 21, 2010, in the following programs:

  • Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility (AMLF)
  • Term Asset-Backed Securities Loan Facility (TALF)
  • Primary Dealer Credit Facility (PDCF)
  • Commercial Paper Funding Facility (CPFF)
  • Term Securities Lending Facility (TSLF)
  • TSLF Options Program (TOP)
  • Term Auction Facility (TAF)
  • Agency MBS purchases
  • Dollar liquidity swap lines with foreign central banks
  • Assistance to Bear Stearns, including Maiden Lane
  • Assistance to American International Group, including Maiden Lane II and III

Additionally, discount window and open market operation transactions after July 21, 2010, will be posted with a two-year lag.

The data made available Wednesday can be downloaded in multiple formats, including Excel, at www.federalreserve.gov/newsevents/reform_transaction.htm. The Excel files allow users to search, sort, and filter the data for each program in multiple categories. The site also provides explanations of each program as well as definitions for the data elements.

In the case of broad-based facilities, details provided include the name of the borrower, the amount borrowed, the date the credit was extended, the interest rate charged, information about collateral, and other relevant credit terms. Similar information is provided for the draws of foreign central banks on their dollar liquidity swap lines with the Federal Reserve. For agency MBS transactions, details include the name of the counterparty, the security purchased or sold, and the date, amount, and price of the transaction.

The Root of the Irish Economic Problem

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So, they have cut a deal for the Irish to cut their own economic throats, but I think that all the commentary misses the big picture on the Republic of Ireland.

Before the boom, Ireland was a 3rd world country that happened to be a part of the EU.

At the height of the bubble, Ireland was a 3rd world nation that was part of the EU, and part of the Euro zone, which drove a speculative frenzy being driven by massive foreign cash flows.

It was still, and remains, a 3rd world nation that was a part of the EU.

To be fair, it might better be called a 2-¾ world nation, but still…..

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Never doubt the ability of Democrats to completely f%$# up the basic business of government. Remember the food safety bill that the Senate recently passed? Well it’s <a href=” />unconstitutional because it is a revenue bill that originated in the Senate, when the Constitution explicitly requires all revenue bills to originate in the house:

In what amounts to an epic constitutionality #fail, Senate Democrats may have blown their chances to see their food safety bill signed into law.

The U.S. constitution requires that any revenue-raising bill must originate in the House of Representatives. To honor this provision, the Senate often finds a discarded old House bill, strips it bare, and uses it as a “shell” and passes it back to the House.

They somehow forgot to do that this time.

Now House and Senate Democratic leaders are scrambling to figure out some procedural hocus-pocus that will allow them each to pass identical pieces of legislation before they leave for the holidays.

So our choice today is between the forces of evil and the gang that can’t shoot straight.

I Was Wondering When This Would Happen

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The deed recorder for South Essex, Massachusetts asking for an investigation of MERS to see if they illegally evaded recording fees for mortgage assignments:

“It’s a basic issue of fairness. MERS says that if you are a member of their club, you can avoid fees on assignments of mortgages forever. Those are fees that everyone else pays,” [deed recorder John] O’Brien said. “I’ve never before heard of a private company that has attempted to unilaterally take over such a public function as property recordation. Imagine if someone tried to do this with drivers licenses.”

Silly man, don’t you know?  The banksters don’t have to obey the laws!

Here is hoping that he gets his investigation, and he nails those bastards to the wall.

H/t Atrios.

Yeah, Barack Obama is Shutting Down the Revolving Door……

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Former White House Budget Director Peter Orzag is going to work for Citi’s investment banking income:

Citigroup Inc., recovering from its $45 billion bailout in 2008, is in advanced talks to hire former White House Budget Director Peter Orszag, people with knowledge of the matter said.

Orszag, 41, may take a job in the New York-based firm’s investment-banking division, the people said, declining to be identified because the discussions are private. An announcement may come as early as today, one of the people said.

I wonder what he did at the White House to get the back end payoff from Wall Street now, and I am not feeling hopey changey right now.

Quote of the Day

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Courtesy of Zach Carter:

So Paul Krugman’s prediction of zombie banks creating a drag on the economy has not come true. The reality is, in fact, much worse. Krugman foresaw zombie banks that didn’t lend due to capital concerns, preventing the recovery from getting off the ground. We’re seeing plenty of that, but we’re also seeing zombie banks actively prey on the economy through the foreclosure process in an effort to repair their balance sheets. The zombie banks aren’t just failing to boost the economy, they’re actively sabotaging it.

Go read the rest.

Wikileaks Founder Julian Assange Has Nothing to Fear from the CIA or FBI

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On the other hand, he would be worried about finding Polonium in his coffee, courtesy of the Russian FSB:

Yesterday, The Daily Beast reported that the National Security Agency is aware that the FSB — the post-Soviet KGB — is closely monitoring Wikileaks, though the U.S. has no “direct evidence” that the Russians are behind the days-long denial-of-service attacks that have brought down the Wikileaks website over and over again.

But why would the Russians care that much? In part, because Wikileaks founder Julian Assange has said that between the leaked cables and other information he got separately, high-level corrupt Russian officials should be worried. And some observers think that Assange’s efforts to expose corruption in Russia could be more harmful to his site and himself than exposing America’s secrets have been. One law enforcement source told The Daily Beast, “The Russians play by different rules,” adding that they would be “ruthless” in their attempts to stop him.

(emphasis mine)

Russian leaders don’t get worried, they get proactive, as in the subject of their concern ends up mailed to his family in a dozen parcel post packages, or they die mysteriously.