Author: Matthew G. Saroff

Hmmmmm….An Interesting Factoid about the Iran – US Conflict

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According to the Washington Post’s David Ignatius :

He said the Iranians had recently captured several dissident Iranian operatives who had been recruited by U.S. military officers inside Iraq and then sent into Iran. The Iranians, whose intelligence network inside Iraq is pervasive, surveilled the meeting, then followed the agents across the border and seized them.

So, the Iranians know that we are attempting to insert spies, saboteurs, and garden variety terrorists from Iraq, but they have the Iraqis so penetrated that they when we plan something before we do it.

Sounds an awful lot like Vietnam, where about 35% of the intelligence officers there were working for the North.

At some point, they will catch an American, and put him on TV.

Israel and Iran and an Air Strike

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Not gonna happen, because, as Tony Karon says, if they were seriously considering a strike at this time, they would not be telegraphing preparations.

Of course, he gets to quote an interview he did with Christopher Wallace, aka Biggie Smalls/the Notorious B.I.G, “On the streets, when someone is telling anyone who’ll listen that they’re going to kill you, you don’t have to lose any sleep over it. You’re not going to hear about beforehand when the real killer comes.”

I’m jealous.

Economics Update

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It’s a pretty slow day news wise, because everyone is waiting on the ECB’s decision on interest rates, and the latest unemployment numbers.

That being said, both Oil and gasoline hit new records, and the dollar is mixed.

Of more interest is, and some alarm, is that the the National Employment Report from Automatic Data Processing shows that 79,000 private sector jobs were lost in June, worse than the expected 40K jobs, and the worst number since 2002.

We also have factory orders rising, which sounds like good news, until you look closer and realize it’s all energy costs.

My First Reaction Was to Say, “Barack Obama Can Kiss My Shiny Metal Ass”

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Because when he talks about expanding Bush’s faith based initiative, it seems to me that he is giving the imprimatur of bipartisanship to what has been a disgraceful, and anti-constitutional, spoils system for Republican supporting churches.

It’s a little better when one looks into it though.

The organizations will not be allowed to discriminate, as they can under the Bush program, at least for federally funded work:

“If you get a federal grant, you can’t use that grant money to proselytize to the people you help and you can’t discriminate against them — or against the people you hire — on the basis of their religion,” Mr. Obama said. “Federal dollars that go directly to churches, temples and mosques can only be used on secular programs.”

Needless to say, the Talibapitsts are freaking about this, because they think that the right to discriminate is what makes them “distinctive”.

I would note that Obama’s statement seems to allow discrimination, just not with public funds. I disagree with this.

Religious groups should held to the same standard as the secular organizations if they take public money.

Iranians Sick of Ahmadinejad Too

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While Iranian President Mahmoud Ahmadinejad is the most prominent Iranian leader, it’s also true that he actually has very little role in foreign policy.

It now appears that officials who are involved in Iranian foreign policy are telling him to STFU, with Ali Akbar Velayati, a top foreign policy adviser to supreme leader Ayatollah Ali Khamenei, saying that, “Iranian officials must avoid making ‘provocative’ statements”, and Foreign Minister Manouchehr Mottaki saying that the EU proposals on Uranium enrichment were “constructive”.

There are more adults in the various executive branches of Iran than there are in the US White House.

UBS Experience the Joys of Email

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Specifically, regulators in Massachusetts have obtained emails showing that UBS was pushing auction rate securities even as it believed that the market was in trouble.

They were aggressively selling these to individual consumers, even while their corporate clients were bailing, because they did not want to be left hold the bag.

It’s called, “putting lipstick on a pig”:

This e-mail was released as part of a civil suit brought against UBS by William Galvin, secretary of the Commonwealth of Massachusetts. He says UBS misled investors by saying that auction-rate securities were as safe as cash in order to keep these arcane bonds off their own books. Among the other e-mails uncovered:

From Joel P. Aresco, chief risk officer for the Americas, Nov. 15: “What measures are being taken to reduce this exposure? [to auction rate securities”

From David Shulman, Dec. 11: “I am pushing every angle here to move product.”

I hope that someone is going to go to jail over this.

The Coming Mortgage Litigation Tsunami

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I believe that I’ve covered it before in passing, but this is, I believe, the first court case in which a court has canceled a loan for deceptive practices.

They plaintiffs thought that they had gotten a loan that was fixed for the first 5 years, but rates went up after the first year:

The Andrews filed the case seeking class action status; and in early 2007, U.S. District Judge Lynn Adelman ruled that the bank had violated the Truth in Lending Act, or TILA, and that thousands of other Chevy Chase borrowers could join them as plaintiffs.

The judge transformed the case from a run-of-the-mill class action to a potential nightmare for the U.S. banking industry by also finding that the borrowers could force the bank to cancel, or rescind, their loans. That decision was stayed pending an appeal to the 7th U.S. Circuit Court of Appeals, which is expected to rule any day.

The lawsuits filed by attorneys general in California, Florida, and Illinois use much the same theory.

It’s based on the 1968 Truth in Lending Act, which requires clear disclosures of terms, and allows for, “rescission, or termination, of a loan and the return of all interest and fees when a lender is found in violation.”

Needless to say, the banks are freaking, though I would ask why any ethical mortgage banker would have anything to fear.

This one’s going to the Supreme Court, where I expect them to rule in a 5-4 split, that only little people have to follow the law.

We Learned Torture from the Chinese Communists

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This is lovely. Now we know were Bush and His Evil Minions™ got their torture ideas:

The military trainers who came to Guantánamo Bay in December 2002 based an entire interrogation class on a chart showing the effects of “coercive management techniques” for possible use on prisoners, including “sleep deprivation,” “prolonged constraint,” and “exposure.”

What the trainers did not say, and may not have known, was that their chart had been copied verbatim from a 1957 Air Force study of Chinese Communist techniques used during the Korean War to obtain confessions, many of them false, from American prisoners.

(emphasis mine)

So, we used the torture that the Chinese did to our soldiers. That is so delightful.

I would also note that this torture was never intended to get useful information. It was intended to extract false propaganda statements, such as the one that the North Vietnamese extracted from John McCain when he was a prisoner of war.

What I Mean by “Pushing on a String”

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Rich Toscano, talking about mortgage rates, gives us this little bit of chart fun:

If you take a look, you will notice that the 30 year fixed and 1 year ARM rates change very little relative to the Federal Funds rate as charged set by the Federal Reserve.

It comes down to the fact that the lenders are interested in how interest rates effect them, and even if the rates are low today, they may be higher tomorrow.

If interest rates are 9%, and you have a 30 year fixed mortgage at 6%, you will not be a happy camper.

Thus, you don’t cut all that much when the Fed sets rates really low, because you have to look forward many years.

The 1 year ARM is a bit more amenable to the interest rate cuts, but only a little, since they typically have a limit to how much the rates will go up over time, and you can end up behind the same 8-ball.

This is why the drastic rates cuts instituted by Bernanke aren’t working. People do not believe this to be a long term sustainable solution, so they are not willing to issue cheaper loans.

Hence the term pushing on a string.

Shorter Financial Industry Response

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So, it appears that the financial services industry is now objecting to pricing assets on their balance sheets at market value, because it makes their balance sheets look pretty sick.

Let’s be clear on this: these companies bought a bunch of highly complex financial instruments, ones that they themselves did not understand, and now no one is willing to buy this toxic waste at anything even remotely near to face value.

Stephen Schwarzman, the co-founder of the Blackstone Group, thinks that the accounting rule, FAS 157, which requires that you place your investments on the books at fair market value, is too high a standard, and that,”the rule is accentuating and amplifying potential losses.”

What is amplifying the rule is traders and senior executives dealing in pixie dust, because they got a commission for doing so.

Note that SOME companies have been doing mark to market for a long time:

But Goldman Sachs proved why FAS 157 works: Goldman has been marking its books to market for years, and as a result, its risk officers were able to hold back its go-go traders from making bad bets when everyone else was throwing their chips last year into the subprime game.

Will no one rid me of these turbulent brokers?

More Allegations that Dutch JSF Competition is a Fig Leaf

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‘Besluit voor JSF is allang genomen’, or you can read the English translation here.*

While the dutch have attempted to get Eurofighter, Dassault, and SAAB to bid in competition, the problem has always been that they are currently throwing a lot of money at the F-35 JSF that won’t be coming back to them if they buy another aircraft.

They’ve sunk $800 million into this, and unless costs spiral completely out of control, I’d put that at 45%, they are stuck with the plane.

*I don’t speak a word of Dutch. I read a synopsis and used Google to translate the original.