Year: 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.

In the Annals of the Unsurprising…

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The 10 month long Pentagon study shows that the overwhelming majority of those serving in the military have no problem with repealing Don’t Ask, Don’t Tell:

“We are convinced the U.S. military can make this change, even during this time of war,” the Defense Department report concludes, noting that 70% of the tens of thousands of military personnel and family members surveyed predicted there would be “positive, mixed or no effect” from allowing gays and lesbians to serve openly.

This won’t stop Republicans from blocking a repeal though, because pandering to a small, but vocal, minority of bigots is how they play.

I Am So Glad I Dropped out of OFA

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What Bender Says, Barry!

I had a post a while ago titled, “I Am Glad that I Pulled My Email(s) from the OFA Mailing List, and the latest bit of lame ass political activism has me even more certain in my decision:

A decade of irresponsible spending led to a projected $1.3 trillion deficit that President Obama inherited upon taking office — putting America on an unsustainable fiscal course.

From Day One, this administration’s top focus has been growing the economy and putting Americans back to work — and that will never change.

The economy is growing again, yet all across America families and businesses have been tightening their belts. The President knows their government must do the same.

Yesterday, he announced a proposal to freeze pay for non-military federal employees for two years — a plan that will lead to $60 billion in savings over 10 years. It’s one of many tough choices the President has made to cut costs in the upcoming budget to begin to put our nation’s fiscal house in order. And it follows directly from this administration’s dedication to stretching federal dollars and reining in the long-term deficit.

Now, if you listen to some talk radio hosts or a few of the talking heads on cable news, you’ll hear a very different assessment of our fiscal policies. These voices ignore the irresponsibility of the past while pinning the blame for “reckless spending” solely on this administration. It would make a good fairy tale if it weren’t so dangerously untrue.

But these voices — as loud as they are — are spreading bunk. Cutting costs and spending responsibly has been a cornerstone of this administration’s record. And we need your help to get the truth out there.

Will you take a few minutes and write a letter to the editor today to set the record straight?

Yep, you got that right, OFA, the DNC run successor to the Obama campaign is asking its members to write letters to the editor supporting cutting the wages of janitors, teachers, law enforcement, and regulators, so that the Republicans can ask for tax cuts for people like the Koch brothers, they Who Must Not Be Named, and the rest of the undeserving rich.

I am so glad that I live in Maryland, because in 2012, if my state is in play, then the Republican has already won the race, so I am under no compunction to vote for him ever again.

F%$# the Federal Reserve

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The Federal Reserve, in response to repeated instances of wrongdoing and fraud by banks against mortgage owners, has decided to issue a new regulation gutting the right of rescission for fraudulent activities, citing “compliance costs”:

Hundreds of consumer, civil rights, legal services, community and labor groups and private and public interest attorneys representing homeowners, along with the coalition Americans for Financial Reform, urged the Federal Reserve Board to withdraw a proposed rule that would destroy a key legal tool to unwind illegal loans and avoid foreclosure.

“We are astonished that, with the nation facing its greatest foreclosure crisis since the Great Depression, the Board’s proposal would eliminate the single most powerful legal tool that homeowners currently have to stop wrongful foreclosures, the federal right to rescind an illegal loan,” said Margot Saunders, Counsel to the National Consumer Law Center.

Basically, what rescission says is that if the loan was fraudulent, then the contract is broken, the lender cannot foreclose, and all interest, penalties, and fees revert to the homeowner, though the lender is still due his principal………Eventually.

The Fed’s proposed new rule says that you can get rescission only after the principal has been repaid in full, essentially gutting that right, it allows for much larger misstatements by the bank as to the estimated monthly payments and in the total amount of the loan.

Additionally, they are proposing changed the rule on reverse mortgages that forbade issuers to require the purchase of another product as a condition for that loan, so now, so long as it is at least 10 days from the issuance of the reverse mortgage, it will be hunky dory, which has the AARP seriously pissed off.

This is egregious enough that the New York Times inveighed against this change in regulation.

I’m mad enough to agree with Ron Paul, and suggest that we shutter the Federal Reserve completely, or at least transform it from a quasi-private entity into one that is more responsive to politics.

Actually, my preferred position is to leave it in charge of monetary policy and money supply, and strip all regulatory powers from it, since it has shown itself to be completely unwilling and unable to create or enforce balanced regulations on the banks.

Bloody Typical

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So, in the face of GOP gains, largely on the back of the weak tea offered by Barack Obama on healthcare, and jobs, and pretty much everything, Barack Obama has decided that more capitulation to Republicans is in order:

President Obama is often blamed for not reaching out to Republicans. In truth, as Monday morning’s announcement that Obama wants to cut the pay of all federal employees illustrates, he has the opposite problem. Obama frequently proposes essentially Republican policies, which makes it impossible for him to use those ideas to buy Republican votes for bipartisan legislation.

(emphasis mine)

Note here that this already has John Boehner doing the victory dance, and suggesting that there should be a freeze on hiring new federal workers, which, unsurprisingly, would gut increased SEC enforcement, staffing the Consumer Financial Protection Bureau, etc.

I am beginning to think that this guy is a Republican Plant.

If not, I really want to play some high stakes poker with him.

The Big Picture on the Wikileaks Releases

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People are talking about potential damage from the recent release by Wikileaks of thousands of State Department Cables, and I think that they are missing the big picture here.

For all the chest pounding about how this is damaging, the reports this far are either not news (What, you mean Berlusconi parties and spends lots of money?), or more embarrassing than damaging (What, you mean that the Arabs hate the Iranians, as they hated the Persians for the past 3000 years).

The real issue here is that this is a natural consequence of over-classification.

Basically, since everything gets classified, and in the interests of communications between organizations, tens, if not hundreds of thousands of people get access, and they that most, if not all, of the data that passes in front of them is stuff that is either already public knowledge, or absolutely innocuous.

It makes people casual about restricted data, so they are more likely to mishandle it, or, as in the case with Wikileaks, they feel compelled to share it with 3rd parties because they feel that it should be public data.

The solution to this problem, and it will be one that the US state security apparatus will almost certainly eschew, is to classify less data, because tightening down on data more just makes the problem worse.

It’s Bank Failure Friday!!!! (2 days late)

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No bank failures this week, so the number of FDIC insured institutions remains at 149 (Full FDIC list here), and the number of closed credit unions remains at 15 (Full NCUA list here).


So, here is the graph pr0n with trendline (FDIC only):

I would note that are now at the point where the utility of the least squares trendline is diminishing, I don’t see the total number of closed banks getting anywhere near the 174 predicted by the line, though I do think that the final number will be north of 150.

I’m Beginning to Think That I am Too Reflexively Pessimistic On the Economy

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Admittedly, it is only one week, but this week’s jobless claims numbers are very good, 407,000 initial claims, the lowest in almost 2½ years, the 4 week moving average fell to 436,000, continuing claims fell by 142K to 4.18 million, and emergency claims fell by 262,000 to 4.66 million.

This is getting close to the level where we can actually start seeing some real recovery in the job market.

I still think that we will see a double dip as what remains of the stimulus runs out, but I am less confident of that than I was, for example, a few months agol.