Sunday, November 30, 2008

Barry, Barry, Barry...

The NYT's David Barstow dumps all over Barry McCaffrey.
One Man’s Military-Industrial-Media Complex

In the spring of 2007 a tiny military contractor with a slender track record went shopping for a precious Beltway commodity.

The company, Defense Solutions, sought the services of a retired general with national stature, someone who could open doors at the highest levels of government and help it win a huge prize: the right to supply Iraq with thousands of armored vehicles.

Access like this does not come cheap, but it was an opportunity potentially worth billions in sales, and Defense Solutions soon found its man. The company signed Barry R. McCaffrey, a retired four-star Army general and military analyst for NBC News, to a consulting contract starting June 15, 2007.

Four days later the general swung into action. He sent a personal note and 15-page briefing packet to David H. Petraeus, the commanding general in Iraq, strongly recommending Defense Solutions and its offer to supply Iraq with 5,000 armored vehicles from Eastern Europe. “No other proposal is quicker, less costly, or more certain to succeed,” he said.

Thus, within days of hiring General McCaffrey, the Defense Solutions sales pitch was in the hands of the American commander with the greatest influence over Iraq’s expanding military.

“That’s what I pay him for,” Timothy D. Ringgold, chief executive of Defense Solutions, said in an interview.

General McCaffrey did not mention his new contract with Defense Solutions in his letter to General Petraeus. Nor did he disclose it when he went on CNBC that same week and praised the commander Defense Solutions was now counting on for help — “He’s got the heart of a lion” — or when he told Congress the next month that it should immediately supply Iraq with large numbers of armored vehicles and other equipment.
Of course, it gets worse. Read on.

(H/t Attackerman)

Friday, November 28, 2008

Flash of recognition

These days, I don't listen to the radio much. For music, that is. I listen to plenty of news and radio shows - but the idea of rolling the dice on some music station in the hopes that some software algorithm and I will hit it off just seems like a waste of time.

Which means precious little new music makes it into my head these days. My sister in law forwards the occasional new band or song - but she's about my only regular vector for new culture.

Three years ago, I was listening to NPR and their house music critic was discussing some bands they felt were ones to watch. I remember pulling into my driveway - in my usual distracted state - and they critic was cycling through crap, crap, and - well, more crap.

I remember it was just me in the car and about the time I normally reach for the keys to switch things off - I heard this song.

And it rocked. Soaring lyrics. Rich, symphonic backgrounds.

One of those moments you just sit there and wait until the music is done with you.

They only played a verse or two - and the best I could remember was the the band had some slavic name. Totally struck out on the web search, couldn't spell the name right I'm sure. Rrrgh!

It had a name with something like 'votch' in the name. I tried a few variants, no luck. Frustrating as all hell. The internet, and iTunes - and I can't identify or acquire the music I wanted.

Couldn't let it go, though. My memory is pretty good, so when it fails, it gets really obstinate. Ironclad recollection of details that won't help me in a search engine. Maddening.

It's been rattling around my head for years - I ended up using 'votch' as part of the name of a clan of bad guys in my gaming campaign - couldn't do anything else useful with it.  Like a sliver in the mind. Rrrrgh!

Until last night. I'm watching TV at stupid o' clock in the morning and there's a commercial for (of all things) a video game.

And they're playing the song.
Hold your grandmother’s bible to your breast
Gonna put it to the test
You wanted it to be blessed
And in your heart
You know it to be true
You know what you gotta do
They all depend on you

And you already know
Yes you already know
How this will end
Sung by a man channeling Morrissey who's fronting some classically-trained gypsies.

At last.

Tuesday, November 25, 2008

Too small to fail vs. too big to be trusted

CJR's The Audit highlights an interesting fact of our current banking mess, courtesy of Washington Monthly:
According to FDIC data, the failure rate among big banks (those with assets of $1 billion or more) is seven times greater than among small banks. Moreover, banks with less than $1 billion in assets—what are typically called community banks—are outperforming larger banks on most key measures, such as return on assets, charge-offs for bad loans, and net profit margin.

One reason community banks are doing so well right now is simply that they never became too clever for their own good. When other lenders, including underregulated giants like Ameriquest and Countrywide, started peddling ugly subprime mortgages, community banks stayed away. Banking regulations prevented them from taking on the kind of debt ratios assumed by their competitors, and ties to their customers and community ensured that predatory loans were out of the question.
That isn't just little guy schadenfreude, either. That's just one byproduct of a useful symbiosis: a lender who protects the money they lend - also protects the consumers they lend to.

Small banks aren't inherently more virtuous than large banks - they just don't have the means to sidestep their financial obligations like the big boys. Damn good thing, too.

CJR is pointing out that the failing banks that were too big to fail are merging. So whenever and however we get out of this mess,  we run the risk of having fewer banks that are even bigger that their too big to fail predecessors.

Chittum's closer is dead on:
There’s a serious conversation that needs to take place about the consolidation in our economy—especially in finance. If something is too big to fail, it should be disassembled to the point where its collapse would no longer endanger the rest of us.
A-men.

Told you so

I believe that banking institutions are more dangerous to our liberties than standing armies. If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around the banks will deprive the people of all property until their children wake up homeless on the continent their fathers conquered.
-Pres. Thomas Jefferson, 1802
(H/t to Planet Money Blog)

Is this really happening?

With the total collapse of capitalism nigh, I'd like to take this moment to just say:

The new version of Cosmic Encounter looks SOoOooooo good.

I know what you're thinking:  

They're really releasing a new version of Eon's classic game of alien politics?
Yes! Or at least, it sure looks like it.

FF's website is listing components and showing visuals like they're really going to do this.


 
 

I mean - I've been burned before... (Avalon Hill, you are SO on my bad list) but the bits look good.

Stacking spaceships (smart). I'm betting the massive board in the picture won't be in the real set, but it looks like they've recognized that there's not much point in crowding things up.

Come December (Assuming I'm not living under an overpass, eating government-surplus horsemeat) I'm gonna score me a copy of this.

Whoo-hoo!

Monday, November 24, 2008

Naming rights

Hot on the heels of "We flew to Washington in private jets to beg for money" are Citigroup and AIG's latest examples of contempt for their situation: Naming rights contracts (H/t to 13th floor).

Citgroup is paying the NY Mets $400 million dollars over two decades to name their stadium.

And:
Citi isn't alone: Imploding insurance giant AIG is paying the British soccer team Manchester United $125 million for the privilege of having its logo appear on Man U's uniforms. That, despite the fact the firm is standing largely thanks to a $150 billion lifeline from the U.S. Treasury. 
Here's the best punchline on this I've seen so far:
"A friend of mine joked they should put 'US Treasury' on the front of their uniforms," said Steve Ellis of Taxpayers for Common Sense, a Washington, D.C.-based nonpartisan watchdog group which is outraged by the expenditures.

It depends on what you mean by sellling short

CJR has just a torrent of good bits out there today.
but the WSJ piece on Morgan Stanley is such a great illustration of the toxic effects of the Credit Default Swap. CJR just hits the high points, but even in those you see the tendrils of the CDS bursting through.

They're talking about short selling - hell, everybody is.
We keep hearing corp execs whine about short-sellers. They've managed to get regulation in place to prevent some of it

Not that it will help.

Short selling is this:
  • Company X is selling its stock at $3, and I belive it's going to tank.
  • I go to someone holding stock in Company X and say "Can I borrow 100 of your stock shares for 24 hours?"
  • An investor loans me the stock. (I owe an investor 100 shares of Company X)
  • Then I sell those 100 shares for $2.50 bucks each. (I have $250 bucks and still owe an investor 100 shares)
  • It's a bargain! People snap them up.
  • Then - my premonition comes true - and Company X's stock price falls to $2.
  • I snap up 100 shares at $2 a pop. (I have 100 shares with $50 left over)
  • I give the investor back their 100 shares and keep the $50.
Money for nothing.

Well, almost. If the price didn't drop - I still owe the investor back their shares. Having sold at $2, I have to buy 100 shares at $3 a pop. I lose $100.
If the stock goes up in value - I'm really screwed.

The new regs stopped something called naked short selling - which is shorting a stock without having closed the deal to borrow shares first. This shorthands the up-front transaction.
  • I sell 100 shares of company X for $2.50 - and having agreed to the transaction, I'm asked to provide the shares.
  • I don't - but I say "I'll get you those shares as soon as I can."
  • At some later time, I get those shares and get them to the buyer.
  • If I can't- the buyer can walk and no money changes hands.
Assuming everyone's behaving themselves - this is a fast way to get a trade done.
When people aren't behaving themesleves - it can be a way to screw with the market.

For example:
  • I loudly announce to the world I'm shorting 2,000 shares of Company X!
  • Investors get the impression something is wrong at Company X and begin selling.
  • I get buyers for the shares I offer, but since I'm doing a naked short - I tell the buyers to wait until I get them.
  • They wait, the shares keep dropping and I fail to deliver the shares.
  • The buyers walk - no money changes hands - but my naked short just helped Company X's stock lose value.
This is evil - and rightly regulated.

Stopping the naked short forces short sellers to risk their money - which will engage their natural aversion to losing money. Yes, they can still take positions that screw people. But since they can get screwed by going short on healthy companies, the market will eat the fools and the smart investors will make money on companies that are overvalued.

Then there's the Credit Default Swap. This is the nuclear weapon of short selling.

A high value bond transaction is insured up to its full value by someone who does not hold the bond.

I pay a small premium for a CDS on a billon dollar bond that I think will fail. It's not my bond and (absent my buying a CDS) it failing would normally not affect me.

Since I did pay for a CDS (say $10 million annually) if it fails, I get a billion dollars.

That's just sick.

Let's say that premium is paid out in installments over the year (by quarter, let's say) and I buy the CDS on the billion dollar loser right before it tanks.

I've paid $2.5 millon dollars in CDS premium - and now somebody owes me $1 billion US.

Really sick.

Yes, if the loser bond manages to stay afloat, I keep paying CDS premium (and wasting money) - but I can stop paying - cancel the CDS - at any time.

My risk is nowhere near the $1 billion I stand to get paid if the bond fails and I can (and probably would) start shorting the bond issuer's stock to help make that company fail.

Meaning - if I feel Company X not looking so good, the normal course of action would be to get out of their stock with caution.
Now, with the CDS - I buy CDS's against bonds they've issued - then LOUDLY shout to the heavens that I have to short Company X because I understand their forthcoming balance sheet is going to suck.

I don't just bail out anymore - I take out insurance and try to damage as much as I can on the way out.

That's unbelievably sick.

And that kind of betting is why this mess we're in is so massive.

The skinny on Citi

NYT's Floyd Norris writes a great summary of what's going on (and not going on) with Citigroup - and the larger mess as well.

Here's a great bit on the Fed backing Citi's assets:
...not all the details ha[ve] been worked out. The assets in question — described by the government as “loans and securities backed by residential real estate and commercial real estate, and their associated hedges” — must be valued at current market value before the guarantee kicks in, but the government and the bank have yet to agree on those values.

That phrase “associated hedges” captures the fact that Citigroup, like many others, had sought to insure itself against losses with a variety of transactions, including the purchase of insurance, only to learn that the losses were overwhelming those who had promised to pay.
Worth a read.

All bets (should be) off

I love this.

People like Steve Eisman will hate this - but I love it.

Chris Whalen (writing on The Big Picture) is pointing out that the total tonnage of Credit Default Positions out there is horrifyingly huge. Then he makes the logical deduction on what can be done about it.
Start with the $50 trillion of so in extant CDS.

Assume that as default rates for all types of collateral rise over next 24-36 months, 40% of the $50 trillion in CDS goes into the money.  That is $20 trillion gross notional of CDS which must be funded.

Now assume a 25% recovery rate against that portion of all CDS that goes into the money.

That leaves you with a $15 trillion net amount that must be paid by providers of protection in CDS.  And remember, a 40% in the money assumption is VERY conservative.  Could easily be 60-70%.

Q: Does anybody really believe that the global central banks and the politicians that stand behind them are going to provide the liquidity to fund $15 trillion in CDS payouts?  Remember, less than 10% of these positions are actually hedging exposure.  The rest are speculative.

My answer is that we pay the hedge positions at face value, but the specs get pennies on the dollar of the face of CDS.  And the specs should take the pennies gratefully and run before the crowd of angry citizens with the torches anbd pitchforks catch up to them.
Exactly.

If you're using a CDS to legitimately hedge against money you have personally committed - your CDS keeps its value. You risked principle, and paid to protect it - your principle is protected. Or at the very least, you're last in the "who gets screwed" line.

If you just bet that bond X will default and paid a pittance in CDS premium - you do NOT get the full value of somebody else's principle in a buy out.

You get practically nothing, or nothing - and shut the hell up about it.

The world simply does not have the money to pay out on betting vehicles like CDS - somebody has to get screwed - and my vote is for people who were buying fire insurance on burning houses they didn't own.

They get screwed first.

Oh, and the guys who let them buy that insurance? - you're up next.

In the loop

I realize there is a glut of jokes about how irrelevant Pres. Bush seems these days, but I'll just share these two headlines:
  • Sun Nov 23, 2008 4:56pm EST
    White House says unaware of any Citigroup rescue talks

    ABOARD AIR FORCE ONE (Reuters) - White House spokeswoman Dana Perino said on Sunday she knew of no talks going on between banking giant Citigroup and the federal government for financial aid.

  • Mon Nov 24, 2008 8:06am EST
    U.S. rescues Citi with $20 billion capital

    NEW YORK (Reuters) - The U.S. government has bailed out Citigroup Inc, agreeing to shoulder most of the potential losses on $306 billion of high risk assets and inject $20 billion of new capital, in its biggest rescue of a bank yet.

Sunday, November 23, 2008

Ready on day one

No, not Obama - his stimulus package.
ABC is reporting that Congress will try to have it ready for signing on January 20, 2009.
Looks like Stein's not the only one freaking out.
(H/t TPM)
I'm with Josh Marshall on this one:
This is really going to be a titanic struggle. It would be fascinating, even fun to watch it unfold if it weren't that all our futures depended on the result.

Stein vs. Cavuto

(H/t to digby, of course)

Here's a rather surprising exchange between two avowed conservatives (well, okay an avowed conservative and Neil Cavuto, who merely plays one on tv) over what kind of bailout needs to be done.



Stein (who, yes I realize can be comically wrong in print) is advocating for a full blown, massive stimulus package - and is willing to shout down Cavuto to do it.

Stein: We need to bail out the auto companies, we need to have a massive stimulus package. This economy is about to fall off a cliff.

[snip]

Cavuto: Going the other way and spending like crazy will somehow get us over the guilt that stems from [not intervening in] the [great] depression?

Stein: It's not guilt. It's keeping people alive, Neil.
Watching Stein's and listening to the urgency in his voice makes me think he's spent the last few days staring into the abyss. He's freaking out.

Good news, Detroit

Bloomberg's saying the Fed is weighing options to save Citigroup
Citigroup Inc. and U.S. regulators are in talks to limit the bank’s potential losses on more than $100 billion of toxic assets after the stock’s plunge last week sparked concerns about the company’s fate, four people familiar with the matter said..
[snip]

The holdings that may be guaranteed are a portion of the $400 billion pile of mortgages, bonds, auto loans and corporate loans that Chief Executive Officer Vikram Pandit pledged in May to shed within three years, the two people said. While the amount to be covered under the plan is under discussion, the talks are focused on about $100 billion to $200 billion of the assets, they said.
“If anybody’s too big to fail from the financial system’s point of view, it’s Citi,” said Brian Barish, president of Cambiar Investments LLC in Denver, which manages about $6 billion and doesn’t own Citigroup stock. “The government doesn’t need to be in this to make money. If they lose a few bucks on this, but save the system, it’ll be worth it.”

I'd bet the fix was always in for the big three getting their cash. But if the Fed is going to save Citi to the tune of over a hundred billion in loans/guarantees/what have you - they'd be hard pressed to justify not throwing a measly 25 billion to some automakers.

I mean, at this point - $25 billion dollars is chump change.

Democracy index

I'd read an article by Heather Gerkin awhile back that finally sank in - particularly this part that she added on the Election Law Blog:
I have recently proposed that we create a Democracy Index, ranking states and localities based on how well they run elections. Without good data on how the election system is performing, voters learn that there's a problem only when an election is so close that the outcome is in doubt and reporters devote the time necessary to investigate what actually happened. That's a bit like measuring annual rainfall by counting how often lightning strikes. The Index would help us assess the problems that occur routinely, before they cause what Rick Hasen has called an "electoral meltdown." Moreover, it would allow voters to reward strong performance. Right now, voters lack the information they need to differentiate between a bullet dodged and a well-run system ...
Makes an awful lot of sense to me.

Rather like a public-facing rating system for restaraunt cleanliness. We assume the place we go to is decent - but we have no information to base that on.

Underachievers thrive on that kind of a system. My sister used to tell me horror stories of her ride alongs with restaurant inspectors. After she was done, I asked her what happened to the places that were bad, but not bad enough to be shut down.

She laughed. "They keep doing what they're doing. After all, from their perspective - they passed."

I imagine there are any number of localities that are teetering on the edge of failure - waiting for a close election to burst into the news.

It'd be nice if they were in the spotlight before the next election, no?

Saturday, November 22, 2008

Blot doesn't seem like the right word, congressman

...I think the word you're looking for is homicide.

(via DoDBuzz)
It must be the worst nightmare of every CIA director — the agency ignores its own rules and regulations and kills innocent Americans, and then the people in charge of the operation lie to Congress and cover up what happened.

The nightmare has apparently come to life and it became public today when Rep. Pete Hoekstra (R-Mich.) announced that a report by the CIA’s own inspector general found that agency officers apparently ignored standing rules and regulations governing when they could shoot at aircraft in the drug war in Latin America. The lapses led to the death of at least 10 innocent civilians, Hoekstra said, including two Americans, Veronica “Roni” Bowers and her daughter, Charity, in April 2001. They were missionaries in Peru heading home when the CIA ordered a Peruvian Air Force jet to shoot down their plane. The shoot down was part of a joint U.S.-Peruvian anti-drug program that began in the mid-1990s. CIA officers worked with Peruvian pilots to spot planes believed to be carrying illegal drugs.

“It is a blot, a dark stain, a sad day for CIA,” Hoekstra told reporters this morning. “The CIA knew about repeated serious issues with this program, but took no corrective actions, which could have prevented this needless tragedy. Making matters worse, the inspector general found continuous efforts to cover the matter up and potentially block criminal investigation.”
Killing your own because you couldn't be bothered to spare them.

Worse than a blot, I think.

Friday, November 21, 2008

Adu-lation

Freddy gets his first goal for the US men's team.


Good on him. Nice to see hard work pay off.

Scoreline - November 19, 2008
USA: 2
Cooper 54'; Adu 69'

Guatamala: 0

Better still was Guatemala being sent home. Awww.... poor widdle no-hope team. Maybe 2014 will work out for you. Who wants a cookie?

Altidore? Stud, again. Donovan? Jozy called, he's in your spot.

Pity Citi

CJR's Ryan Chittum is betting Citigroup is about to have one of those seismic events that makes everyone change their stationary.
Weighing down [Citigroup's] shares has been the Treasury Department's decision last week not to buy troubled assets from banks. Citigroup's balance sheet includes battered securities and loans that many investors hoped could be offloaded to the government.
What's sad is that Citigroup has already gotten billions from the government - so it's not like Paulson changing tactics stiffed them. You wonder how many troubled assets they have - and just how troubled they are.

Thursday, November 20, 2008

Whoa

Attorney General Collapses During Speech

Attorney General Michael B. Mukasey collapsed during a speech Thursday night and was taken to the hospital after he failed to regain consciousness. There was no immediate word on his medical status.

Mr. Mukasey, 67, who took over as attorney general one year ago after the resignation of Alberto R. Gonzales, was giving a speech on national security to members of the Federalist Society, a conservative legal affairs group, when he lost consciousness at about 10:20 p.m.

Around midnight, a Justice Department spokesman said in a statement that Mr. Mukasey was “conscious, conversant and alert.”
Late Edit: In the (impossibly unlikely) event that anyone is getting news from this site. Mukasey's doing better now. Nothing to see here folks - Move along.
(Via TPM)

A win for the end user

(Via the NYT)

A number of retailers and manufacturers have a gift for holiday shoppers: product packaging that will not result in lacerations and stab wounds.

The companies, including Amazon.com, Sony, Microsoft and Best Buy, have begun to create alternatives to the infuriating plastic “clamshell” packages and cruelly complex twist ties that make products like electronics and toys almost impossible for mere mortals to open without power tools.

Impregnable packaging has incited such frustration among consumers that an industry term has been coined for it — “wrap rage.” It has sent about 6,000 Americans each year to emergency rooms with injuries caused by trying to pry, stab and cut open their purchases, according to the Consumer Product Safety Commission.
Long overdue.

Justice delayed - but justice nonetheless

Federal Judge orders the release of five Guantanamo prisoners

When you're looking for a handout

You should probably not step out of a private jet first:
Dana Milbank of the Washington Post twists the knife into the carmaker CEOs, who were busted in Congress yesterday for flying their corporate jets to Washington to ask for a government handout. They couldn’t even “jet-pool” as one congressman mockingly suggested.
It must be hard to be shameless when there's so much to be ashamed of.

While I honestly have no idea if the economy will get worse or better if the Big Three get $25 billion dollars - it is damn near impossible to tell the difference between the undereachieving, undeserving suits that cratered the auto industry - and those who cratered the financial sector.

Wall Street banks got their handout and now we will be treated to an endless parade of corporations whose balance sheets could use a cash infusion.

The corporate titans are long overdue for their share of the suffering - and even if all they have to do is sell their collectible car museum so they can keep the private island, I think I'm not alone in thinking that their employers could find better things to do with the millions they pay these schmucks.

(H/t to TPM and CJR)

For Detroit, when it rains, it pours

(Via the NYT)
Representative Henry A. Waxman of California ousted Representative John D. Dingell of Michigan from his post as chairman of the influential Committee on Energy and Commerce on Thursday, giving President-elect Barack Obama an advantage in his plans to promote efforts to combat global warming.

By a vote of 137 to 122, House Democrats ended Mr. Dingell’s nearly 28-year reign as his party’s top member on the committee. Besides installing a committed environmentalist as head of the energy committee, the outcome also removes one of the auto industry’s best friends from a key leadership post.

Looking forward to those hearings....

Tuesday, November 18, 2008

Mark your territory

My new cube-neighbor, RM, unpacked yesterday. I suppose they're not truly my new neighbor - they'd been relocated there weeks ago - but the boxes are gone, so it's now official.

In CorpWorld - changing desks is a highly choreographed affair. Some time before the appointed day, you will receive Moving Instructions. These will inform you of a range of time when you can expect Moving Boxes to arrive in your work area. You are to use these boxes to pack up your desk by such-and-such date. You must label your things, lest they be delivered to God Knows Where.

Tape (essential to this task) is neither mentioned, nor supplied. Despite this, with a fair amount of scrounging, on the appointed day at the appointed hour - Personal Belongings have been duly boxed up and are sitting on your old desk. Sometime between now and tomorrow morning, they will be picked up by unseen forces and delivered to your new desk.

Then you unpack. Or, if you are RM - you don't.

Totally understand. Work is a bigger deal, and really - half the crap I have at work could vanish and I'd never miss it. I'm literally surrounded by weeks worth of discarded paper in three inch stacks.

RM lets their stuff sit in boxes - until they need something. Boxes get opened, one at a time until there's a row of cardboard boxes yawning open like post-industrial flora.

Again, like I have anything to say on this. My place is a pit that threatens to spill out onto the floor with every breeze or tremor.

So, yesterday - RM has at last had it with the state of things. Boxes are emptied, flattened and discarded. The resulting stuff is sorted, stacked up, filed and vanishes into drawers and cabinets.

RM's desk is spotless.

In contrast, my desk looks like it's been carpet-bombed with 11x17 paper.

That tears it - I grab everything I haven't touched in weeks and ball it up into a torso-sized mass and fling it into the recycle dumpster.

I do this three times. Then I pitch all the empty beverage containers. Put pens in drawers, stack notepads. Take down stuff I'd taped to the wall for some reason.

It's feeling good. For the first time in months, I can see all of my desktop. No longer the crappiest desk in the pod! Whoo-hoo!

-------------------

This morning, I'm in late. I'm rushing to make a 9am meeting - and down the hall I see BD. BD's my other neighbor. They're the one whose desk was always clean.

BD looks like he's seen a ghost. Asks how I'm doing, in an overly-restrained way.

I'm good, running late. Gotta go. He leaves.

Odd. I get to my desk and it hits me. Our fourth pod-mate, V, was laid off while BD was out.

BD just walked into a pod with three clean desks.

Whoops.

I find BD, "Just cleaning up."

They grin. "Had me goin' there."

I go back to my desk, unstack some paper, and scatter a few things.

To whom it may concern: Someone still works here.

Monday, November 17, 2008

Gramm: My bad

Phil Gramm in the NYT defends himself against charges that he helped author the current financial crisis.

The author and chief advocate of the Commodities Futures Modernization Act has a lot of 'splaining to do. The Times piece brings some weight to the suggestion that Gramm was an eager deregulator of the financial sector.

Here's the priceless bit on credit default swaps (although it's a crying shame it was not a direct quote):
Mr. Gramm says that, given what has happened, there are modest regulatory changes he would favor, including requiring issuers of credit-default swaps to demonstrate that they have enough capital to back up their pledges. But his belief that government should intervene only minimally in markets is unshaken.
Gosh, Phil - you mean that people pledging to cover losses with money they don't have sounds risky?

Wow, only eight years too late to do any good. Thanks for nothing, Phil.

(H/t CJR)

Saturday, November 15, 2008

My hero

They ought to play this in an endless loop in the office of Starbuck's CEO until the madness stops:



Yes! Dammit! You cannot re-brand words like medium and large!

I forbit it!!!

Friday, November 14, 2008

Down goes Freddie, again

Via WaPo:
The government is expected to inject $14 billion into Freddie Mac, the mortgage finance company under federal control, after it reported today that it lost $25 billion from July through September.

The losses were due to substantial charges the company took on the falling value of mortgage securities and growing number of people who fell behind or defaulted on their mortgages. The company more than doubled the amount of money it reserves to cover future losses. In addition, it wrote down the value of tax credits it was unlikely to use.

The numbers are astounding. The company's losses, when combined with those since the housing downturn started, eviscerate nearly all the company's earnings over the past decade.
Looks like all those scary number's we've all been seeing are the thin end of the wedge.

You are safe

In the morning I get up. I go down and out on the porch and get the paper. I look at the obituaries. And if I'm not there, I go in and have a cup of coffee.
-George Burns quoting Patrick Moore
N called last night.

This is news because - as a rule - N does not call my house.

N is a former co-worker who changed departments back when CorpWorld had strongly implied that people would be let go in the near future.

People were, and N was not. Very likely because they changed departments.

Now, N is being let go. They have called me to see if I'm on the list. I'm in my kitchen, getting the Boy his bedtime drink. I don't know of any list, or a new round of layoffs. I don't know anything.

N knows the following:
  • N is being laid off.
  • N was contacted by phone.
  • N can stay on until the middle of next month
  • A current co-worker of mine, Y, has also been laid off.
N is surprisingly calm about the whole thing. I'm positively useless to them at this point. What do you say to a person? I have little help to offer, but I'd do practically anything to help them.

I say that. I offer to be a reference for them, wish them good luck.

It's so inadequate for the situation, but at this point I have two freight trains running through my head at the same time.
  • N and Y are out of work - what the hell are they going to do? N's spouse works, but Y's spouse can't because our immigration laws are so impossibly stupid. In this job market, what the hell are these people supposed to-

  • Where the hell is my cell phone? Do I have a voice mail from my account rep? Email from my supervisor? More to the point, am I on the freaking list??
Land line in hand, I go to check my cell. N thanks me - I thank them and wish them luck. They vanish.

No messages. I go upstairs and relate the happy scenario to E before bolting back down to check email.

Nothing.

I email my account rep: WTF?? What have you heard?

It's after 8:30, so I'm unlikely to get anything at all-

My rep emails me back in twelve minutes: You are safe.

Just those three words. At this point, I'll take what I can get, but the obvious questions have no answer. For how long? How do they know?

Those questions bounce around in my head until I manage to pass out.

---------------

This morning, I get another sudden team meeting from the boss.

Everyone meet me in an hour.

That's never good. The boss shows up and makes small talk until the rest of the group shows up. This is the worst part by far.

There is an twenty-ton, radioactive elephant sitting in the room - and we're talking about hobbies.

The boss drops the bomb. Y is getting let go. Also SR and V. They mention N, since N used to be part of our group.

The boss says the party line: they hope this will be it for staff cuts. But they said that last time, too.

At this point the only things we know for certain are things we don't like. I opt for the first opportunity to get out of the meeting before people start asking questions the boss can't answer. I like the boss, but when it comes to questions about people's financial future - there are only two kinds of answers:
  • Answers you are absolutely positive of, and

  • "I cannot answer that for certain."
The boss is too nice to be that blunt - and it's clear they are miserable at having to do any of this - but more questions will prolong the agony without adding info.

Out the door, back to work.

I need a cup of coffee.

Thursday, November 13, 2008

It could be a documentary

...but it's the Onion:

Should the Government Stop Dumping Money Into a Giant Hole?



(H/t The Big Picture)

Wednesday, November 12, 2008

Playing to lose

(H/t E)

The author of Liar's Poker has written another scathing apprasal of Wall Street and the current economic disaster. He adds another interesting piece of the subprime puzzle.

He does it by following the story of one Steve Eisman.

By way of introduction, here's Eisman's partner Daniel Moses describing him:
He put a fine point on the absurdity they saw everywhere around them. “Steve’s fun to take to any Wall Street meeting,” Daniel says. “Because he’ll say ‘Explain that to me’ 30 different times. Or ‘Could you explain that more, in English?’ Because once you do that, there’s a few things you learn. For a start, you figure out if they even know what they’re talking about. And a lot of times, they don’t!”
So Eisman's out in inevstment land - he's made his bones dealing with subprime lenders and other financial bottom feeders - and starts noticing things that are a bit odd:
At the end of 2004, Eisman, Moses, and Daniel shared a sense that unhealthy things were going on in the U.S. housing market: Lots of firms were lending money to people who shouldn’t have been borrowing it. They thought Alan Greenspan’s decision after the internet bust to lower interest rates to 1 percent was a travesty that would lead to some terrible day of reckoning. Neither of these insights was entirely original. Ivy Zelman, at the time the housing-market analyst at Credit Suisse, had seen the bubble forming very early on. There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.”
and then:
By the spring of 2005, [Eisman's employer] FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why.
and then:
Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision.
What he's talking about is the Credit Default Swap.
The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.
The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’ 
CDS means you pay less, and get paid more to bet against bonds you think are going to fail.

They can even be your own bonds, or bonds you helped set up.

While I'm sure this is an oversimplified scenario - variations of this undoubtedly are possible:
  • Firm A presses Mortgage broker to bundle as many loans as possible into Mortgage Backed Security X
  • Firm A then buys MBS X and bundles it into Collateralized Debt Obligation Y
  • Firm A then sells CDO Y to as many people as it can
  • Firm A then buys Credit Default Swap ZZ on its own CDO
  • Firm A then buys Credit Default Swap ZA on its own CDO
  • Firm A then buys Credit Default Swap ZB on its own CDO
  • Firm A then buys Credit Default Swap ZC on its own CDO
Now, Firm A is on the hook for the value of CDO Y once, but is insured against its value four times over.

CDO Y is worth 5 billion dollars and if it fails Firm A loses up to 5 billion. But if it does fail, Firm A gets paid up to 20 billion dollars.

Money for losing. The triumph of capitalism.

Read the whole story

Want a piece of the pie?

(Via Taxpayers for Common Sense with a H/t to E)
Got a pen? Taxpayers for Common Sense has obtained the application needed to get a piece of the bailout pie. We’re all for streamlining and paperwork reduction, but at only two pages long, it’s shorter than some credit card applications. And you could get up to $25 billion. Don’t worry about oversight. Since the Inspector General position for the bailout requires congressional confirmation, the spot hasn’t been filled. Nor has a joint House-Senate special oversight committee.

Monday, November 10, 2008

Priceless

Jen's birthday present to me for the past two years has been a night of babysitting. That's pretty much cemented her sainthood status in my book.

E and I don't get out. To an almost freakish degree.

The boy's approaching kindergarten age – and we've never hired a babysitter. Thus far it's been only friends and family and I'm not sure how eager we are to change that. Lord knows we need to get out on our own, but increasing the number of people who are paid to hang out with my kids is not something I look forward to.

Nor is trusting their lives to some teenager I barely know.

But Jen's offer allows me to sidestep that larger discussion once again and enjoy an evening with E. It's probably the most obvious thing in the world to say, but children are a great way to not have conversation with other adults.

In our most recent gathering of friends – I barely got any discussion time with out of town friends I haven’t seen for a year. Get the boy off the computer, settle this or that squabble, keep them out of the basement, etc.

What talk that does happen centers around the kids to the point where I'm convinced I am the least interesting person on the face of the planet. Mind you, this is with people who are making an effort to come over and chat with me.

So the person that I live with – spend practically every waking moment at home with - gets this all the time.

An embarrassing amount of time can pass without E and I having a real conversation.

So going out is a colossally big deal. And E and I are seriously out of practice. A few weeks ago one of our kid's teachers generously offered to have our kids over for an evening and E and I fumbled our way through dinner and killing time. Honestly, we could have been back to pick up the kids in a hour, but we figured we should walk around the restaurant for awhile just so our teacher doesn't think we're freaks.

And conversation is hard – there are so many things we have to do. Household and kid logistics are the easy subjects – but there's a reason there's a backlog. They're bummers. Stuff you avoid most nights becomes more annoying when you bring it up on your one night out.

Last time out was like that – this time, I'd vowed to do things differently.

And I did. This time, I completely forgot about it.

Right up until E asked me about dinner reservations for the evening.

Huh, what's this evening?

Fail.

----------

E's been jonesing to go to this new taproom. Predictably, they're closed for dinner – so we're on to plan B.

Plan B fails in turn, so we book reservations for an Italian place we've done before. First time I was there, I had what was arguably the best pasta dish I've had in my life: a shrimp puttanesca that ignited my enduring love for that sauce.

The second time, I ordered an orichetta dish with rapini that was the worst dish I've ever paid top dollar for. It was unbelievably bitter – to the point where I should have just sent it back. But I didn't. Why? I've asked myself that dozens of times. No idea.

Not this time. The way I see it, these people owe me a meal.

We beat the dinner rush, so the place is almost deserted. I'm wondering if this place is hurting since the economy has everyone spending defensively.

Coffee, wine.

I see the rapini dish is still on the menu. If it was always as bad as the stuff I had, it would have left the menu by now. I should have sent it back.

E and I chat about the menu – and how odd it is to be out. We each opt for a half order of pasta followed by an entrée. With our kitchen remodel/landscaping biting huge chunks out of our finances – I'm doing the Visa ad in my head as I scan the (entirely a la carte) menu.
Pizza for the Jen and the kids: $40.
Drinks: $15
Pasta courses: $20
-I'm not even at the entrées and I'm feeling remorseful.

I focus on the Visa tagline: enjoying a free evening with your spouse...

Yes, dammit – we've earned an evening out. And there's no way we're going to cheap out.

Entirely.

I'll get pasta and a NY strip, but no dessert (so there!). We order and E and I try to shake off our perpetual kid-induced funk and be ourselves.

About the time I think we'll fail at this – our table explodes.

Seriously. A full on detonation of something in the middle of our table.

Completely against my will, I scream: "Whoa!!!"

Reality reasserts itself. E and I and are sitting in our booth. Our table is strewn with fat chunks of broken glass. The working part of my memory informs me that something has fallen on our table.

Judging by the horrified expression of a waitress next to us – she made this happen.

Apparently, she was walking by with something held high overhead – which collided with the lamp above our booth. As heavy lamp fixtures everywhere do, it plummeted straight down into the middle of our table.

We take stock. No obvious injuries. E and I feel fine, but we're covered with glass.

Our water glasses have been obliterated. Most of the lamp's remains are in the middle of the table – our wine glasses have survived to hold the rest of it.

The bartender is at us in an instant with a garbage can and towels. He says (loud enough for the waitress to hear) Well, THAT'S a first in my bartending experience.

We clear out of our booth while our server starts with Are you okay? are you shaken up?


Honestly, we feel fine. We hit the bathroom to shake off the bits of glass and check for injuries – no cuts or marks.

They've prepared a new booth for us, it's got fresh wine, water and coffee. Our server is asking us again Are you okay?

I have two simultaneous responses to this:

Verbal: I didn't have my mouth open, so I'm good.

Mental: Guess I'm orderin' dessert!

-----

Having a light fixture almost land on you does wonders for the dining experience. I recommend trying it when you can.

The service is faster, the food is lovingly and artistically presented - and you are regularly visited by waitstaff who assure you that everything is on the house.

And- broken glass is a great icebreaker. E and I forgot house logistics and headaches and enjoyed each other's company for the rest of the meal. E's risotto was great – I loved my steak. I savored it, as opposed to my usual method of inhalation.

And yes, dessert. Tirimisu and chocolate gateau with cranberry ice cream.

Better still, coffee with E and the time to enjoy both.

Yeah, today it's back to the grind. The contractor's coming by to see if the ant damage to our house is structural. I'm reading ominous corporate memos about cost cutting measures – and open enrollment is up soon for my annual benefit renewal---

But screw that. I'm smiling thinking of having a great night out with E.

We gotta do that more often.

Acting like grown ups

(Via CJR)

Steve Kroft interviewed the Obama campaign immediately after the win.

I love this bit:
Kroft observes that “so many people..said ‘You’re not going to be able to elect a black man president of the United States..that had to be part of your equation in planning this campaign,” campaign manager David Plouffe replies:
No, honestly, you had to take a leap of faith in the beginning that the people would get by race. And I think the number of meetings we had about race was zero. Zero. We had to believe in the beginning that he would be a strong enough candidate that people of every background and race would be for him. The only time we got involved in a discussion of race was when people asked us about it. It was a fascination of the news media.
The Obama campaign got past the issue by being past the issue.

AIG OMG III

So AIG's bailout is now going to cost more. Having been announced as an $85 billion dollar bailout, it has since balooned over $100 billion.

Now, AIG's bailout is going up to $150 billion dollars - and their loan terms are being extended. Plus, their interest rates have been cut by 2/3rds.

Clearly, paying 8.5 interest on taxpayer loans was just too hard for them. Every subprime borrower in America? Feel free to ask for that deal in your next bankruptcy hearing.

Money keeps disappearing into AIG - under the new plan taxpayers will own 79.9% of the equity AIG has - and we still have little understanding of what this giveaway is doing, or how it works.

It's not a giveaway, it's just a loan... Yes, but these loans are guaranteed by collateral that has yet to be disclosed.

Per Yves Smith - the orginal loans were collateralized against everything AIG had, so these additional loans are collateralized by....?

Bloomberg has picked up the ball on this and is suing the fed to disclose what collateral exists for the many loans it is forcing consumers to make.

I'm with CJR and Dean Starkman:
We hope a second suit on AIG comes soon.

AIG's central role in the Credit Default market means their implosion will do serious damage to financial firms who are tied to them.

While a true picture of where the tottering firms are at may do even more damage - you would think we'd be better off understanding what is actually wrong before we start sending our money on suicide missions.

Saturday, November 08, 2008

Coming to a town near you

Planet Money and the New York Times hit another one out of the park with A Tale of Intertwined Misery, a thorough portrait of how the financial meltdown is reaching into the lives of everyday people.

The intro got my attention - it's about a school district in Wisconsin that invested in a synthetic CDO. They have lost millions - millions they never had.

It's brutal.

The new wrinkle to me was farther downstream from the disaster in Kenosha - something about municipal bonds.

Here's the nickel tour:

Municipalities issue bonds to raise money to build schools and such.

Municipal bonds are usually a good bet - but for investors to feel extra secure, these bonds are insured by private companies. If the municipality defaults, the investor is made whole by municipal bond insurance.

This insurance is plan B for the investors, but is plan C for the municipalities. Their plan B is something called a liquidity bank. Liquidity banks buy the muni bonds when no one else does. It allows the city or town to issue the bonds and get the money at once, even if selling the bonds takes awhile.

Naturally, there's a problem. The issuers of muni bond insurance have invested in (you guessed it) subprime mortgage backed securities. Everyone's doing it! and now the credit rating agencies are downgrading these insurers because of fears they can no longer cover the policies they've issued.

Bond investors (particulary those in the throes of a financial meltdown) are not at all happy about investing in muni bonds backed by insurers who are having their credit rating downgraded.

Unhappy investors vote with their wallet, and cash out - or refuse to buy.

Which means the cities and towns who issued these bonds are onto their plan B - the liquidity bank. Some municipalities have all their issued bonds in liquidity banks - and that means the interest rates are now higher, and the payoff term is shorter.

Pay more, faster.

Municipalities will pay their bills - but they will do what cities and towns have been doing for years when they need money and can't use bonds:

They'll raise taxes.

And that'd be how subprime loans written by crooks to people you've never met will take money out of your wallet.

Listen to to the whole show.

Friday, November 07, 2008

Jacob Goldstein: phoning it in

Ryan Chittum gets in a good shot on a Wall Street Journal piece:
Here’s a “who cares?” story in the Journal’s A section:
There will be at least 14 medical doctors in the 111th Congress, an addition of two seats from the current session, according to the American Medical Association.
I’m pretty sure there were other, more interesting press releases to rewrite yesterday.
Zing!

Thursday, November 06, 2008

Palin 2012? The Dems should be so lucky

(Via CJR)
New reporting delivers thrilling behind-the-scenes details to reveal the real Sarah Palin, and it’s a hoot!
Palin didn’t know the countries involved in NAFTA! And that Africa was a continent! She refused coaching for the Couric interview! She opened the door in a towel! She went off the talking points when she brought up Bill Ayers! The vetting process was “truncated”!

This is a heavy dose of gossip, and watching Fox News’s Carl Cameron deliver his report on The O’Reilly Factor, you cannot help but notice his glee. His juicy tidbits were previously held in his off-the-record vault, until the election was over. Now, he’s free to spill.
Oh my.

And I'm not just talking about Palin.

Carl Cameron tells you that he "wishes he could have reported this stuff earlier," but it was off the record.

Carl "I'm a journalist" Cameron - what a tool.

Soul searching

If some disturbed individual were to plot my political posts on this blog – They could be forgiven for thinking that I'm a bomb-throwing lefty.

But the common thread (in my head, at least) was a belief that the administration of the past eight years was dangerously incompetent.

I have moved left – but not that far. I began my political involvement as a clueless disciple of the Reagan bandwagon. In the beginning, I was for him because he won, because he was good on television, and for very little else.

Regan thumped his chest to cheering crowds: "Tear down this wall!!" and we all felt good about America. Then came PATCO, and I applauded his audacity. Then came Grenada, and I cheered our flattening of a few hundred ill-equipped Cubans.

U-S-A! U-S-A!

It felt good to be associated with a winner. And Reagan kept winning.

When Iran/Contra broke out, I defended Regan's actions long and loud. Not because he was right – but because he was my guy. Ollie North was entertaining and I watched him unabashedly admit his actions and dare congress to do something. When congress did nothing – I was happy. My guy won.

That was pretty much the depth of my political thinking back then. A few unexamined allegiances – strongly held.

I remember a few cracks in the dam while watching (of all people) Lou Reed expressing his opinion on the Iran/Contra. Reed was not eloquent, but he pointed out the obvious fact that laws were broken. For some reason – that was the first time that really got through. This wasn't some grandstanding politician, this was just some idiot musician making sense.

We have rules, they were broken. The rules should be enforced – or else why have them at all?

Reagan turned to Bush I and I was a bit warier – but given the cartoonish figures on the left- there was little danger I'd leave the fold. Bush's forgettable domestic policies were overshadowed by a masterfully orchestrated Gulf War.

Bad guy attacked [country I'd barely heard of]. We drew a line in the sand and said we'd drive him out.

I waved the flag, and lustily denounced the wanna-be hippies carrying peace signs and chanting "no blood for oil."

Of course blood for oil, dammit. I still believe that.

The Gulf War wasn't going to be any f-ing Vietnam, I told anyone who would listen. There are no bambies in this one – just an army in the field that we are going to annihilate.

And we did. Better still, we came home in triumph. The highway of death bothered some people, but not me. When you make war, you make war. Killing combatants is the point. I thought then (and still do) that we should have allowed VII Corps to smash the Republican Guard before pulling the plug on the whole affair – a lot would have been different.

But, as far as I was concerned, it was an unsullied triumph.

The "mother of all press conferences" is still a memory that makes me smile.

For once, we kicked ass. We were the good guys.

Hooray for us.

I distinctly remember a Newsweek ticker blurb with a notional Pres. Bush addressing the Democrats: Look upon my poll numbers and despair…

He was a winner. And he was my guy.

-for about a year and a half.

I remember the precise moment I stopped being a loyal Republican. The GOP National convention, August 1992.

You had the economy skidding off the road and some southern governor comes along and tells everyone he's going to fix it. And the people were buying.

Pres. Bush was behind in the polls and needed to take the reins hard. Show his mettle in the face of a national and political crisis. I'd been digging into the details of what I could understand and tuned into the convention to watch the GOP knock one out of the park.

Instead, they gave me two words: Family Values.

I've forgotten how many conversations I've had about that moment, but I recall my initial reaction was "What the f*ck? We have real problems and you idiots want to play house?"

The more I listened the more convinced I was that the GOP had lost its mind. Buchanan disgraced himself and his party – and everyone in the hall loved him for it.

I remember thinking "This? This is who you are?" and I was certain Bush was going to lose.

The wanna-be hippies would have their day – and (In my mind at least) perhaps the GOP would learn something.

I held my nose and voted for Bush anyway.

When that southern governor marched onto the stage, it was hard not to smile for him. Well played, Bill. It was the economy, and Bush was stupid.

The following years found a few more reversals: Homophobia, for example. It was the classic reason, too: someone I knew came out of the closet. Once I realize that hating gay people involved hating a real person that I knew – it was like, "wow, that's really stupid."

I was always pro-choice – from the first moment I understood the issue, so here I was: a rule-of-law, pro-gun, pro-choice, pro-military, fiscal conservative, who thought gays should be treated fairly.

Political discussions with self identified republicans became awkward. Why? Because they were total @ssholes. At least the ones who were politically active.

I had joined a group of interns for the state legislature - and made the mistake of going with my party. I was decidedly in the minority and my fellow interns asked my why on earth I would work for a republican. "Because I am a republican," I'd say, and then I'd get the same look they'd give this guy I'll call Red.

Red was the loud republican intern – one of three (including me) and he was a colossal @ss. An empty headed, knee-jerk ideologue who spoke like someone force fed him talking points every morning.

He supported the death penalty for children as young as 11, believed that democrat was a fancy name for subversive. There was no debate with him, there was just war. His minion was no better.

Talking to either of them was like lighting a stick of dynamite. They would always get around to shouting at you.

I've always been opinionated, and I know I talk a lot – but I genuinely enjoy a debate, because both sides can learn things.

Red did not enjoy debating, or learning – he enjoyed pissing people off with his "zingers." The problem was, most of the time, he was demonstrably wrong. Whenever someone would point out a factual inaccuracy – he'd change the subject, usually by insulting someone.

The most intelligent conversations I had about politics were with the democratic interns – who were generally well informed, and fun to talk to. We worked the issue over good – but we could disagree and keep the discussion going. Minds didn't change much – but it was genuinely enlightening.

The same could not be said of the College Republicans I tried to deal with. They were not partisan, they were militant. People you genuinely thought might be unstable. I was not welcome (I was pro-choice and thought gay people were human beings) nor did I feel any desire to be welcome.

(Now, I know there are plenty of rational folk out there who self identify as conservative who are nothing like Red or the whackjobs I met in the College Republicans – but you have to wonder what is going through their minds when they see their party wildly cheering something like Pat Buchanan's culture war speech.)

Despite my shift on some social issues, I could not bring myself to vote for Clinton. Vestigial loyalties, or what have you, I simply could not do it.

Whitewater was not the issue – the more I looked into Whitewater, the less I believed there was anything there.

Nor was it Paula Jones.

[The Paula Jones suit was an abomination of a Supreme Court ruling. A sitting president should not be sued over conduct that occurred prior to their assuming office. You wanna sue them after they leave office? Fine. But the nation's business comes before your petty crap.]

When Lewinsky arrived on the national stage – I was just appalled by how arrogant Clinton was. Stonewalling at every turn. Denying everything and then walking it back, parsing it down and eventually admitting conduct that he'd denied under oath.

Perjury. A felon in our White House.

Yes, the GOP was out for blood. This was a partisan witch hunt – but Clinton gave the GOP all the excuse they needed when he lied in his deposition. If he fesses up, there's still a scandal, but no crime.

Clinton chose perjury – then acted as if his newfound parsing of words was his intention from the beginning.

I didn't buy it – and was praying that he would go down in flames. As the Democrats had too many seats in the Senate and no one willing to break ranks – there was no conviction. Some call it a principled stand – I thought of it as cronyism.

Yes, Clinton presided over a lot of good things – but I won't forgive him for perjury.

Then came G.W., a man who simply cannot be as foolish as he comes across on TV – but sounded an awful lot like Red to me. Empty headed phrasings, with no substance behind it.

I recall his "Compassionate Conservatism" slogan – which bombed, and (a week later) its laughable sequel "A reformer with results."

The only thing that had changed in that week was the slogan. There had been no reform, no results – but that was the slogan, and it was a full court press.

G.W. started with one thing going for him: name recognition. He quickly acquired a second – uncritical repetition of everything he said.

At the time, I remember looking into the "Texas Miracle" that Bush brought to schools when he was governor. Virtually any independent analysis of the program showed it to be:
  • teach students how to take a test,
  • test them
  • rejoice at how well they take the test.
Never mind the fact that they are still tanking on standardized national tests. If at first you can't succeed, change the metric of success.


About as transparent fraud as you could manage, but its success was touted endlessly from the stump and from the networks.

I did not believe this man. His most impressive accomplishment – from my perspective -was beating Ann Richards – and I didn't see that as a reflection of his intellect. I had never heard of Karl Rove – but even then people were talking about the brass knuckles approach his side favored.

I remember McCain in the 2000 primary – I really wanted him to win the nomination. Here was a guy talking sense – advocating for campaign finance reform, speaking out against corporate giveaways. Him, I respected.

Bush II was just another mouthpiece.

Brass knuckles politics won the day for the mouthpiece – and I've yet to see any of the leadership qualities his loyalists cite so often.

The most damning example of this was 9/11.

Bush goes into a photo op knowing that a jetliner has flown into the World Trade Center, and not much else.

In the middle of his photo op – he is told that "A second plane hit the second tower. America is at war."

-and he just sits there until his photo op is done.

Why?

Because he is waiting for someone to tell him what to do next.

You think Rudy Giuliani would have stayed put if Andy Card had told him the same thing?

Fast forward to Katrina: Bush sitting in a briefing that tells him that the levies are overflowing and things are going to get worse.

Bush just sits there until the meeting is over. No leadership. No action. Just a guy filling a chair.

That's what we've had for the past eight years. An ill informed reactionary, steeped in and surrounded by the ideology of...

..of what, exactly?

While Bush's most ardent apologists call themselves conservative – I cannot fathom why they would associate themselves with the policies of the last eight years.

This president
  • Has spent more on government, not less.
  • Has made government larger, not smaller.
  • Has allowed the government to torture,
  • Has authorized spying on American citizens
  • Has centralized power in a "unitary executive"
  • Has asserted his right to ignore statues he disagrees with
  • Has commuted the prison sentence of a subordinate convicted of felonies performed while a member of his administration.
  • Has vastly expanded the role of secret (and therefore unaccountable) law
  • Has personally intervened in the health care decision of his citizens
And on and on and on….

Glenn Greenwald made a scathing point about how anytime conservatism fails, conservatives claim that what failed wasn't true conservatism.

I'd agree with part of that – Conservatives cannot wash their hands of the disaster they now find themselves in. Too many were willing participants to now pretend that G.W. was some kind of aberration. He WAS conservatism for eight years, and nobody on either side of the aisle did much to change that.

Nor did republicans learn much from G.W.'s failure either. Witness Sen. McCain's breathtakingly tin-eared campaign of the last year.

Here was a man who eight years ago could lay claim to being a maverick. But to get the nomination for 2008 he adopted the mannerisms and tactics of G.W. and Rove.

Had he not done so, it is unclear that he would have gotten any kind of support from the GOP base.

Which leads to the question – who are these people in the GOP base, anyway? And how do they compare with people who believed there was a point to conservatism besides holding on to power?

If the GOP is going to re-group – you wonder if they can save anything if "The Base" is still calling the shots.

Catering to that base is what ruined McCain. A man who could have led the GOP out of the wilderness instead took the bullet for their mistakes.

It's a terrible waste of a man who could have been great.

I don't excuse McCain - he did choose that path, but I wonder if the GOP faithful who laid the path have learned anything.

And I'm not talking about tactics.

Tuesday, November 04, 2008

Blissfully anticlimactic

E has dubbed it so. And thank the powers that it was so.

The only drama left is whether or not Obama makes it to 370.

Obama was the statesman, so petty gloating and hectoring is left to the bloggers.

So, allow me to address the current resident of 1600 Pennsylvania Ave.:

Get the hell out of our White House, you pin-headed schmuck. You and your wingnut administration aren't running things anymore.

NBC, ABC - you are tools

NBC and ABC are calling Pennsylvania for Obama.

Here's the data they're sharing to back that up:

ABC:

NBC:

SoooOOoo, what are they basing this on?

I hate the networks.

Follow the money

Dean Starkman's caught Bloomberg spouting the company line for Goldmann Sachs ("AIG going under would not have lost us money...") - and then nicely supplies Bloomberg's other, earlier article pointing out that the AIG bailout did spare Goldmann some pain...
Sept. 29 (Bloomberg) — As much as $37 billion from federal bailout loans to American International Group Inc. has gone to investment banks including Goldman Sachs Group Inc., the firm Treasury Secretary Henry Paulson used to run.
So the US Government is bailing out AIG, and AIG was providing cover for these guys:
Merrill was the biggest underwriter of CDOs in 2004 with $15.9 billion and the second-biggest underwriter in 2005 with $27 billion when AIG was the most active in writing credit default swaps, according to Asset-Backed Alert, a trade magazine.

Citigroup was the biggest underwriter of CDOs in 2005 with $27.1 billion, rising from $7.1 billion the year before. Goldman was fifth both years with $13.1 billion and $7.3 billion in 2004.
All three of these turkeys are getting capital injections from the Fed, and they their underwriter is being propped up as well.

You wonder if we'll ever get to see the true extent of their position when things hit the fan.

When good people do nothing

(via the BBC)
A young woman recently stoned to death in Somalia first pleaded for her life, a witness has told the BBC.

[snip]

Human rights group Amnesty International says the victim was a 13-year-old girl who had been raped.

Initial reports had said she was a 23-year-old woman who had confessed to adultery before a Sharia court.
And there were witnesses...
The witness says she was forced into a hole, buried up to her neck then pelted with stones until she died in front of more than 1,000 people.
And attendant nurses...
According to Amnesty International, nurses were sent to check during the stoning whether the victim was still alive. They removed her from the ground and declared that she was, before she was replaced so the stoning could continue.

Monday, November 03, 2008

Destroying the fabric of democracy

(via the American Prospect)
In many of the states, such as Indiana and Nevada, where fraudulent voter registration forms have been turned in, local laws mandate that ACORN refrain from destroying completed forms, no matter how fraudulent they appear. As a result, ACORN turns in all forms, even in states where that isn't required, according to spokesman Brian Kittenring. ACORN says it labels problematic forms in order to help local election officials weed out bad forms.

[snip]

ACORN claims that it fires employees who consistently file fraudulent forms, but ACORN is compelled to turn forms in anyway. "We label and identify them with problematic card cover sheets. Our interpretation of the law is that we turn all of these in; it would be so much easier if we could just throw away Mickey Mouse," says Kittenring. In a Nevada affidavit ACORN claimed it was firing workers at a rate of 10 per week.
While I would certainly not suggest that ACORN doesn't have their problems, it seems to me that narratives of wholesale fraud that ignore realities like those mentioned in this story are tailoring reality to their worldview.

I'll have the chicken

David Sedaris on undecided voters:
I look at these people and can’t quite believe that they exist. Are they professional actors? I wonder. Or are they simply laymen who want a lot of attention?

To put them in perspective, I think of being on an airplane. The flight attendant comes down the aisle with her food cart and, eventually, parks it beside my seat. “Can I interest you in the chicken?” she asks. “Or would you prefer the platter of shit with bits of broken glass in it?”

To be undecided in this election is to pause for a moment and then ask how the chicken is cooked.
(H/t to tristero)

Banks robbing

CJR's Ryan Chittum pegs the reason I blame lenders for bad loans:
It comes down to this: there’s a massive information disparity between the two sides at the mortgage table. The banks and brokers knew damn well that the people they were putting in these houses couldn’t pay them off if the market turned (and whether or not they thought the market would utterly collapse as it has, these financial types know a market always turns). But they didn’t care because they knew they could unload their dirty deeds on some sucker running a pension or hedge fund via the magic of the mortgage-backed securities and collateralized-debt obligation markets.
[snip]
This isn’t to mention the outright criminality on the part of the brokers (and yes, the crimes go all the way up the chain to the banks, Wall Street, and the credit-ratings firms—but that’s a somewhat separate story) that was rampant in the boom years. Fudging people’s incomes or conning them into refinancing or giving them ARMs they didn’t want. Want to know the extent of the shadiness? This Wall Street Journal investigation from late last year found that at the peak of the boom, 61 percent of those who got subprime mortgages likely qualified for much lower cost prime loans. Did those home buyers put themselves into higher-cost subprime notes or were they deceived into them? Guess.
Think of the last time you signed mortgage papers. How good did you feel about your understanding of what you were agreeing to?

My first closing - I had an attorney (based on some good advice from chickpea) which helped - but the fact is, I didn't understand what was going on - I had to rent a brain that did.

Having an attorney is no guarantee of safety either - any attorney (mine included) could be undone by expansive readings of terms or contingency language that "won't come into play" but somehow does.

I've since refinanced, sold my old house and bought new one. All without an attorney. In those transactions, I was trusting to the expertise of my lender.

My lender was a credit union - so I wasn't dealing with some fly by night broker - but the point is: I took the risk of trusting my lender. I trusted them to look out for my interest as they looked out for their own.

So long as the lender cares about the loan they are making - this isn't a huge risk.

Lots of people did what I did, not realizing that their lenders had no interest in the loan's future, and therefore no interest in their customer.

Yeah, dumb decisions were made by borrowers, but dumb decisions like that should never make it to a closing.
"The No. 1 reason we're in this crisis is the deterioration of underwriting of mortgage loans...What has made it worse is the lack of transparency in disclosures of the exact nature of assets both on and off the books. We need a clearer description of what potential exposures are out there."
-Susan Bies, a Federal Reserve Board governor from 2001 to 2007.
I still remember sitting in an Ameriprise office with a man who purported to be a financial advisor telling me that I should refinance my home's fixed interest rate loan into an adjustable rate loan. The advisor's name was Kingsley, and he assured me that by the time interest rates climbed past my current rate, I'd have sold my house.

He was too slick to be trusted, and E and I were far too cautious to go to an adjustable rate. We had a decent fixed rate and were not interesting in a re-fi, so there was never any risk of us jumping.  But I'm thinking there were plenty of people out there who got sold junk loans by guys like Kingsley.

People who trusted their financial experts and are now missing payments wondering what the hell happened.

Circle of friends

(Via The Big Picture and Bloomberg, emphasis mine)
Outstanding credit-default swaps, derivative contracts used to hedge or speculate on a company's debt, would grow to $62 trillion from $631 billion in 2001. While the swaps spread risk, as intended, they also helped spread fear. Ninety percent of the trades were concentrated in the hands of 17 banks, according to the Federal Reserve Bank of New York. That left them exposed to losses if one failed, as Lehman Brothers did in September, and contributed to the unwillingness to lend to each other that's at the center of the recent credit squeeze. 
That's quite the tight knit group of risk takers, no?

I'd love to know if that 90% applies to just the number of transactions or the total value of the trades.

At this point, you wonder if there's a greater risk to the market if the firms do come clean with their exposures. How scarier can their books be?