Month: May 2009

So, Just How Were We Better Than Saddam?

It’s far far worse than I imagined.

When I wrote about Bush rape rooms, I cited Scott Horton, who detailed only rape by instrumentality, but the reality is that we are talking full genital rape here, including the rape of a boy:

At least one picture shows an American soldier apparently raping a female prisoner while another is said to show a male translator raping a male detainee.

What’s more the Telegraph‘s source on this is unimpeachable:

Detail of the content emerged from Major General Antonio Taguba, the former army officer who conducted an inquiry into the Abu Ghraib jail in Iraq.

Allegations of rape and abuse were included in his 2004 report but the fact there were photographs was never revealed. He has now confirmed their existence in an interview with the Daily Telegraph.

Maj Gen Taguba, who retired in January 2007, said he supported the President’s decision, adding: “These pictures show torture, abuse, rape and every indecency.

We also know that Barack Obama lied when he talked about this:

Mr Obama seemed to reinforce that view by adding: “I want to emphasise that these photos that were requested in this case are not particularly sensational, especially when compared to the painful images that we remember from Abu Ghraib.”

I don’t think that he could say that you have pictures of a boy and a woman being raped, in additional to the forcible stripping of a woman detainee to humiliate her, any honest description would be almost as inflammatory as the pictures themselves, but saying that they are “no big” will make him less credible the next time something like this comes up.

More Economic Journamalism

Remember when I was talking about economic journamalism on durable goods orders?

Well Bloomberg gets the story right, with U.S. Economy: Durable-Goods Orders Hover Near Lowest Since 1996, but Reuters (U.S. April durable goods orders post biggest gain in 16 months), and CNBC (Durable Goods in Surprise Jump; Jobless Claims Dip), both get it very, very wrong.

Let’s roll the Bloomberg story for what is going on:

Orders rose 1.9 percent in April after a 2.1 percent drop in March that was more than twice as large as previously estimated, the Commerce Department said in Washington. Meanwhile, the Labor Department said 6.79 million people are collecting jobless benefits, and another report showed new-home sales were lower than forecast in April.

(emphasis mine)

OK, this looks like a 1.9% bump, which is a significant bump, but Bloomberg covered this as low numbers.

Why is this correct, and Reuters and CNBC wrong?

That phrase, “more than twice as large as previously estimated,” is why it is wrong.

As Reuters notes a few ‘graphs down:

However, March orders were revised sharply lower, falling 2.1 percent from the previously reported 0.8 percent decline.

So, we are comparing initial estimates for April with revised numbers for March.

If you were to compare apples to apples, you would have 1.9%-2.1%-(-0.8%), or 1.9%-2.1%+0.8%, or a growth of 0.6% comparing apples to apples.

In fact, you get a lot of this out of the government statistic machine, and it’s faithfully echoed by the press.

You have a number that is an improvement over the last month’s (revised) numbers, and it’s really good news…..And then, a few weeks later it’s revised down, and the new figures for the next month come out, and they look really good compared to the downwardly revised previous figures.

Rinse, lather, repeat.

Pakistani Supreme Court Rules that Nawaz Sharif Can Hold Office

He had been banned from office by the Supreme Court some months ago, on the basis of the trumped up charges that Musharraf charged him with post coup, but since then, the Musharraf appointed chief justice has been replaced by Iftikhar Muhammad Chaudhry, who had been removed by the general, and whose whose reinstatement was the subject of massive protests, ruled that the charges in question were bogus.

There should be no short term political impact, but it is clear that Sharif is more popular than the current president, Asif Ali Zardari, who is seen as both ineffective and remarkably corrupt even by the standards of Pakistani politics, and it is likely that he would win when an election is held.

Abolish the U.S. Office of Thrift Supervision

There they are, “cutting red tape,” 2 senior OTS officers, and 2 bank lobbyists.

The inspector general has issued a report, and we now know that the OTS approved or directed banks to backdate captital contributions in order to make the institutions that they regulated appear in better shape than they were.

And now these jokers are letting leveraged buyout experts buy into small community banks, despite the best efforts of the FDIC and the Federal Reserve has closed, allowing.

There is talk of regulatory fixes, and one is to prevent banks from forum shopping, so that agencies compete in this way to get more money from fees.

Doing away with the OTS would be a good start.

Auto Industry Update, GM Bankruptcy Imminent Edition, the Sequel

It looks like some of the larger bondholders have blinked, and have agreed to a slightled debt for equity swap.

Even so, GM’s bankruptcy now seems a foregone conclusion.

It’s the Credit Default Swap doing this. There are too many players out there who bought the debt cheap along with an under-priced CDS to hedge the risk, and so have no incentive not to burn the house down.

Still, all this has GM playing the turd in the punchbowl in Europe, where it
made a surprise demand for an additional €300 million payment on the sale of its Opel division, and at this point, the Germans are beginning to suspect that the US Treasury is trying to pull this money from Germany to the US:

German leaders expressed frustration with the United States Treasury, citing inadequate guarantees that European assets would be protected from the likely bankruptcy filing in American courts and that German money would be used only for Opel.

There is also the issue that EU regulators are looking to see if the loan guarantees offered are an illegal state subsidy.

Meanwhile, Ford’s former parts division, Visteon, and Metaldyne have both filed for bankruptcy, and I think that this likely going to get worse, not better.

Economics Update

Initial and Continuing Claims, Courtesy of
Calculated Risk

So, the new unemployment claims numbers are out, and they are still bad, though a bit better, 623,000, down 13,000 from the last week, and the 4-week moving average fell 3K to 626,750.

That being said, the continuing claims were 6,788,000, up 110K, to yet another record, so layoffs may be slowing, but so is hiring.

My take: this is more businesses are running out of people to lay off than it is the economy improving.

On the other side of the pacific, Japanese retail sales rose, but the consensus is that this is a temporary blip, not a trend.

Reinforcing my “dead cat bounce” view is the fact that durable goods orders remain near a 13 year low. (There is also some very bad financial journalism around this story, which I will get to separately)

Meanwhile, in real estate new home sales rose even as prices continued their fall, and if you look at the sales there is a huge portion which are distressed properties, short sales or foreclosures.

It’s why we are seeing more stories about how there are No “move-up” buyers, selling their old house and upgrading.

There is very little equity for such a move currently, and with mortgage rates continuing their upward path, and delinquencies and foreclosures rising sharply, they broke another record in first quarter, I don’t see any signs of a real rebound in the sector.

Meanwhile, I wonder how much the relaxation of the credit crunch involves the rest of our economy. The metrics involving inter-bank lending show signs of a thaw, but US commercial paper fell to its lowest level in 8 years.

This is largely non-bank lending, and it’s absolutely comatose.

Menqhile in currency and energy, the dollar dropped, and the Yen dropped more/a>, on the (not really that) good durable goods numbers and unemployment figures, while oil was up on OPEC’s announcement of no production boosts.

Right Wing Priest Uses Schism to Cover Up Embezzlement

Well, now we know what’s driving at least some of the Schism in the Episcopal Church over the ordination of gays, some of the right wing priests are taking the money and running:

The conservative Colorado Springs pastor who broke away from the Episcopal Church to form a new Anglican congregation in May 2007 now is accused of stealing $291,000 from Grace Church and St. Stephen’s Parish.

When Armstrong left the Episcopal Church, he said the split was over theological differences, such as his opposition to gay marriage and the church’s ordination of openly gay clergy.

But Colorado Episcopal Diocese officials countered that they believed Armstrong, who had been Grace’s pastor for 20 years, had left to escape reckoning for embezzlement uncovered by diocesan officials. The diocese notified police of its suspicions in May 2007.

I think that we’ll find a lot more of this, but I am a bit of a cynic on such things.

Regulatory Arbitrage

Remember the PPIP program, where the US government is going to subsidize the purchase of financial toxic waste in an attempt to clear out banks’ balance sheets?

Well, Sheilah Bair just said that banks will not be allowed to purchase their own toxic assets, which is a good thing, as it it turns the program into little more than a corrupt subsidy program to shake down the taxpayer…..Make than an even more corrupt subsidy program to shake down the taxpayer.

If you had told me 18 months ago that the most responsible member of Obama’s economic team would be a Bush holdover, I would have wanted whatever it was that you were smoking.

H/T Calculated Risk.

Sestak to Challenge Specter in Primary

TPM has broken the story that Rep. Joe Sestak intends to challenge Arlen Specter in the Pennsylvania Senate primary:

Rep. Joe Sestak (D-PA) is privately telling supporters that he intends to run for Senate, TPMDC has confirmed.

It appears that all that is left is discussions with his family, who I figure are pretty much onboard, or it would not have gone this far.

I think that the family thing is largely a smokescreen for him pulling out if Rahmbo (Barack) pushes too hard.

This is an interesting race. Sestak is by no means a particularly liberal Congressman, but his pressure has already pushed Specter closer to the Democratic mainstream.

I support his bid for a number of reasons:

  • Spector is a weasel, and a primary challenge will force him to appeal to the Democratic Party base, particularly to labor.
  • Spector is a weasel, and even if he weren’t this “clearing the decks” for incumbents is bad for the party and for the nation. It creates a sense of entitlement among incumbents.
  • Specter is a weasel.

In any case, I have added the “Draft Sestak” fund campaign to my Act Blue Page.

Our Economic Masters are Completely Insane

A profile of Brooksley Born, who ran the CFTC, and warned of the risks that unregulated derivatives posed in the market, has a profile in the Washington Post, which calls her the, “Cassandra of the Derivatives Crisis”.

I’ve related this story before, but this anecdote just shows how completely delusional Mssrs. Greenspan, Rubin, and Summers were:

Born’s baptism as a new agency head in 1996 came in the form of an invitation. Federal Reserve Chairman Alan Greenspan — routinely hailed as a “genius,” the “maestro,” the “Oracle” — wanted her to come over for lunch.

Greenspan had an unusual take on market fraud, Born recounted: “He explained there wasn’t a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him.”

This made no sense to her. She’d spent much of the 1980s defending clients caught up in a vast conspiracy by two wealthy brothers, Nelson and William Hunt, who duped investors while trying to corner the world silver market.

“After all,” Born said, looking back, “I’m a lawyer, and I think the existence of fraud prohibitions is critically important.”

But Greenspan was insistent, she said.

Finally, he said, “Well, Brooksley, I guess you and I will never agree about fraud.” (Greenspan did not respond to requests for comment. Daniel Waldman and Michael Greenberger, both top aides of Born’s, were briefed on the lunch at the time and independently confirmed Born’s recollection of the conversation.)

(emphasis mine)

Seriously, this is beyond ideological. This is quite literally completely detached from reality, and Alan Greenspan was viewed as a genius of unparalleled proportion at that time.

Economics Update

So, it looks like the ratings agencies are beginning to do their job.

Of course, this is at absolutely the worst possible time for the economy, because it means that Standard & Poor’s is considering downgrading a large portion of the best quality commercial mortgage backed securities (CMBS):

As much as 90 percent of so-called super senior commercial- mortgage backed bonds sold in 2007 may be affected as the ratings firm changes how it assesses the debt, New York-based S&P said today in a report. About 25 percent of the bonds sold in 2005, and 60 percent of those sold in 2006 may be cut.

(emphasis mine)

This, among other news, is driving rates up on CMBS, though rising rates on treasuries, despite the best efforts of the Fed to hold rates down are a contributing factor.

Basically, people believe that we will be seeing higher interest rates in the near future, which drives rates up, particularly longer term rates, which is why the spread between the 2-year and the 10-year treasury have hit a new record.

It’s why mortgage rates are on the rise, driving down new mortgage applications.

In other banking news, the FDIC’s problem bank list is now more than 300, the highest number in fifteen years.

Meanwhile in energy and currency, oil is up on Saudi statements that the world economy can “handle” $75-$80/bbl oil, and the dollar rose on concerns about bad housing data.

Zimbabwe Update

Well, it’s been about a month, so it’s time for another update on Zimbabwe.

Basically, things are still screwed up, and it’s all thanks to little Bobby Mugabe.

While, the IMF is offering technical assistance to the government again, most of the potential donor nations are unwilling to provide aid until the see evidence that the government has gotten it’s sh%$ together.

The lofty phrase used is, a “Commitment to economic stabilization, restoration of the rule of law, respect for property and human rights, and freedom of expression,” but it basically comes down to the fact that everything that ZANU-PF touches becomes a miasma of corruption and incompetence.

What they are really saying is that Reserve Bank of Zimbabwe governor Gideon Gono has got to go, after creating the hyperinflation that made multi-trillion $Z banknotes necessary, and also the stealing from private accounts.

Finance minister Finance minister Tendai Biti has accused the RBZ of operating illegally, and he’s probably right.

Meanwhile Gono has complained to Prime Minister Morgan Tsvangirai about the “attacks” against him.

Dude, in any sane world, a the word to describe a central banker who engineered a 516,000,000,000,000,000% inflation rate, prices doubling every 2 days or so, would be unemployed.

Just be glad that they are not trying to throw you in gaol…Yet.

Gono is where he is because he is a ZANU-PF loyalist who manages to create enough money to keep the ZANU-PF cabal satisfied.

This has led various aid agencies to take measures to avoid the government, and government agencies when distributing aid.

The MDC has called for his removal, see here and here, and have called for international intervention to remove him, see here, here, here, and here.

This has, of course, upset the delicate sensibilities of ZANU-PF officials, and Mugabe has dug his heels in on this too, probably because he needs him to, “pay the entourage.”

What a damn mess.

Auto Industry Update, GM Bankruptcy Imminent Edition

Well, it looks like GM could not get enough of the bond holders to agree to the deal. The deadline passed without the requisite 90% buy-in.

My guess is that a lot of the speculators who purchased this debt at around 10¢ on the dollar had already purchased Credit Default Swaps (CDS) on the face value, so they had no incentive to settle.

This is yet another example of how the complex derivatives and swaps system is broken.

The UAW has been far more accommodating, with the CAW cutting a deal in the great white north, and the UAW cutting a deal down here, which I guess is the great uninsured south.

Meanwhile, the Obama administration apparently already has the bankruptcy “i”s dotted and “t”s crossed, so we may see a filing sooner, rather than later.

It looks like the new GM will be 70% government owned, though there are many sources saying that they will take no role in how the company is run.

This is bullsh#@….Not the government ownership, but the constant assertion that when the taxpayer buys a company, that they should have no voice whatsoever in how that company is run.

Government ownership should have 2 goals:

  • An unwinding of this ownership sooner, rather than later with terms favorable to the taxpayer.
  • An active involvement in the operation of the concern, to ensure that it is run for the long term benefit of the taxpayer.

The idea that the government should have no say in things like, location of manufacture, executive compensation, etc. when the taxpayer owns the firm is simply stupid ideological crap.

Meanwhile, there are a number of bids for GM’s Opel division, and Fiat is by no means the front-runner there.

Economics Update

The economic press is touting the fact that consumer confidence hit an 8 month high.

More accurately, they are touting that the jump from 40.8 to 54.9, is the biggest in 6 years….Only, of course, the index is bench marked such that 1985=100, so the number is still crappy.

It’s the same as the Chicago Bank of the Federal Reserve’s April National Activity Index, which is up (Yay!), but this does not mean expansion, it means contraction, just not quite so fast (Awww!).

You know, maybe we can wait to call a recovery until we have a month where the year over year Case-Shiller housing price index does not fall by 18.7%.

Consumers will not spend under these circumstances, and the economy, which is/was 70%+ consumer spending, will not recover.

In any case, be glad we aren’t German, and not just because that means that we aren’t German, because Germany’s GDP fell by 3.8% for the quarter and 6.7% year-over-year, as their export driven economy sputtered.

Meanwhile, in energy and currency land, oil was up on the consumer confidence figures, and the dollar rose as people freaked over the DPRK conducting another nuke test.

If I could predict the actions of the North Koreans, I would make a killing on the futures markets.

Sotomayor for Scotus

Obama has chosen Sonia Sotomayor to replace David Souter on the Supreme Court.

I don’t have enough legal knowledge to know her qualities as a jurist, but from what I’ve read, notwithstanding some “what about some white guys whining” from TNR, is that she is a first rate legal mind and is qualified for the court.

I have some concerns:

  • I believe that some of the members of the supreme court should come from some other walk of life than federal judge. Until 20-30 years ago, that was the case, with justices being governors (Earl Warren), William O. Douglas (SEC Chairman), Felix Frankfurter (Academic and Solicitor General), Hugo Black (Senator), Robert H. Jackson (Attorney General), Thurgood Marshall (Chief Council of the NAACP), etc.
  • Her age and health. At 54, she is a bit older than Republican nominees, and she is a type I diabetic, which likely shaves a decade off her life expectancy.

I think that getting some non-judges on the court, and getting some younger appointees, would be a very good thing for the Dems.

Additionally, I think that the Ivys are overrepresented on the court, but Barack Obama, Harvard Law, is not likely to be the guy who does this.

Reading Between the Lines: FDIC Assessment

Props to Margaret Chadbourn at Bloomberg, who sees a change in policy and recognizes its significance.

Specifically, she notes that the FDIC will be assessing an emergency assesment on banks in order to shore up their insurance fund, and she sees a real change in policy:

U.S. banks will pay an emergency fee based on their assets to rebuild the Federal Deposit Insurance Corp.’s reserves, putting a greater burden on large banks to replenish the fund amid the fastest pace of failures since 1994.

The FDIC voted 4-1 today to impose a fee of 5 cents per $100 of assets, excluding Tier 1 capital, backing away from a proposal of 20 cents per $100 of insured deposits. Local bankers said the fee on deposits could erase more than half their 2009 earnings. The fee will rebuild the fund that started the year at $18.9 billion, the lowest since 1994’s first quarter.

(emphasis mine)

Fees have traditionally been assessed on deposits, not assets, but the problems with bank failures, particularly among the giant banks are dodgy asset problems, so it serves to hit the big banks harder, who are less well capitalized on the basis of deposits.

It adds cost to risk, and it is a significant, and I hope permanent, change.