Author: Matthew G. Saroff
It’s Bank Failure Friday!!!!
And here they are, ordered, and numbered for the year so far.
- 1st American State Bank of Minnesota, Hancock, MN
Only one bank failuer this Friday, so the trend line is down a bit:
I will note that this early in the year, individual weeks make a bigger difference, so the trend line should not be considered to have any great predictive characteristics.
On Science
It’s somewhat profane, but very true:
Snowpocalypse
Click for full size
Just starting at about 3:00pm
At about 5:00pm
We’re getting somewhere between 12 and 28 inches of snow, probably more than 20 inches.
People around here are freaking, but having spent 6 years in Alaska, and about 12 years in New England during and after college, so for me, it’s just, “Meh.”
No driving for at least the first half of tomorrow, but it’s really not that big a deal.
It will be a mess for a day or so, it ain’t the end of the world
Dodd Says that Financial Reform Has Stalled
I’m shocked, shocked to find that gambling is going on here!
There is probably an element of truth to Chris Dodd’s claim that he cannot come to an agreement with Senate Republicans on financial reform:
The chairman of the Senate banking committee said Friday that efforts to reach a bipartisan consensus on sweeping legislation to overhaul the nation’s financial regulatory system had “reached an impasse,” but he said he intends to move forward even without Republican support.
For the second time since November, talks have stalled between Sen. Christopher J. Dodd (D-Conn.) said ranking Republican Sen. Richard Shelby (Ala.). Both men have expressed interest in reaching a consensus on a wide-ranging bill that would revamp regulation of the financial services industry. But after months of negotiation, they have yet to overcome a key hurdle: the proposed creation of a consumer protection regulator to focus on mortgages, credit cards and other such financial products.
The part that is suspicious, and the reason that I’m inclined to believe that he has lost interest in reform now that he is no longer running for reelection, is that he is going all Claude Rains on the fact that Republicans are not negotiating in good faith.
We’ve seen this phenomenon over and over again: Republicans do not negotiate in good faith until you have something that would kill them politically to vote against.
First you jam them up, then you twist their arm, and then maybe, just maybe, they will agree to be cooperative as you move their head toward the toilet bowl.
Court Case Against the Patenting of Genes Progresses
I originally wrote about this in May, and my position then is what it is now, that you patent inventions, not discoveries, and that the counter argument, “discovering is hard work,” is a load of crap.
The case law is clear that, “a product of nature is unpatentable unless it is sufficiently different to become a patentable ‘composition of matter.'”
In any case, the litigation, put forward by a number of civil liberties and scientific organizations, is now making arguments before the judge:
Federal court hearings continued Tuesday on a lawsuit that could transform biotechnology in the United States by eliminating gene patents.
The case hinges around the claims of Utah-based Myriad Genetics on BRCA1 and BRCA2, a pair of genes closely linked to breast and ovarian cancer. Myriad “owns” the genes, and says its patents make it possible to profit on diagnostic tests. The company argues that if you remove the patents, the tests — indeed, commercial biotechnology as we know it — will vanish.
Myriad is, from the perspective of an engineer, not a patent attorney, dammit,* full of crap.
Their tests for the gene are still protected, it’s just that alternative, and better test methods for the gene that they discovered will be able to compete.
Fundamentally, IP law is about the public good, as it says in the Constitution, “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries,” [where “discoveries” means “invention”, hence the reference to “inventors”, it gets complex],
My guess is that if Myriad had been a bit less hard assed about their patents, they have absolutely refused to license to anyone for any purpose, this case would probably have never come up.
As it stands now, they are literally killing people, and this makes them a thoroughly unsympathetic defendant.
I can’t imagine this not ending up at the Supreme Court though.
*I LOVE IT when I get to go all Doctor McCoy!!!
Economics Update
I already posted on the job numbers on their own, so otherwise, this is slow news day.
What we have is a continuing retrenchment by consumers as they pay down their debt. Consumer credit has fallen for the 11th straight month.
Meanwhile, in energy and currency, the continued fall in non-farm payrolls drove crude oil lower, while the problems in the EU with Greece, etc. pushed the dollar higher.
Blankfein Buys a Clue
Well, it appears that he is a bit less arrogant than his ilk, as Goldman Sachs CEO Lloyd Blankfein year bonus was just $9 million, with none of it in cash, a far cry from the reports of $100 million:
Goldman Sachs stunned many in the Wall Street community Friday by awarding chief executive Lloyd Blankfein $9 million as his year-end bonus, far less than many were anticipating, and none of it in cash.
It was in restricted stock.
My guess is that there are some back channel deals, and the whole idea of a “just $9 million” being an exercise in frugality is odd, but he recognizes that there is a very real problem, and he is taking actions to immunize himself, as well as the vampire squid,* from some of the treats of regulatory and legislative action, so credit where is due.
My guess would be is that he got some security and buy-out guarantees that are worth a lot more, in exchange, but those are crafted so as not to show up headline.
Additionally, this may be a big “f%$# you” to his competitors, who now have to explain why they got bigger bonuses with less performance.
*Alas, I cannot claim credit for this bon mot, it was coined by the great Matt Taibbi, in his article on the massive criminal conspiracy investment firm, The Great American Bubble Machine.
Sanity in Maryland Lege
Well, Maryland Delegate Emmett Burns put forward a bill to forbid the state from recognizing same-sex marriage, but it was defeated on Wednesday.
I would note that Maryland already recognizes marriages that are illegal in the state but conducted elsewhere, most notably common-law marriages. This tradition may have helped opponents of the bill.
Insert South Carolina Joke Here
No, this is not The Onion.
You have a Lt. Governor who thinks that nutritious lunches for poor children is like feeding strays, a governor who has forever ruined the idea of hiking the Appalachian trail, and is now asking for the stimulus money that he refused, and now the South Carolina lege has passed a law requiring that people who wish to overthrow the United States government pay a fee and get a license for the privilege:
Terrorists who want to overthrow the United States government must now register with South Carolina’s Secretary of State and declare their intentions — or face a $25,000 fine and up to 10 years in prison.
The state’s “Subversive Activities Registration Act,” passed last year and now officially on the books, states that “every member of a subversive organization, or an organization subject to foreign control, every foreign agent and every person who advocates, teaches, advises or practices the duty, necessity or propriety of controlling, conducting, seizing or overthrowing the government of the United States … shall register with the Secretary of State.”
There’s even a $5 filing fee.
By “subversive organization,” the law means “every corporation, society, association, camp, group, bund, political party, assembly, body or organization, composed of two or more persons, which directly or indirectly advocates, advises, teaches or practices the duty, necessity or propriety of controlling, conducting, seizing or overthrowing the government of the United States [or] of this State.”
The interesting thing here is that it appears to me that this definition might very well apply to any number of the more rabid Confederate heritage groups.
The members of the South Carolina legislature had better find someone to cut their meat, because if we allow them to handle knives, it will get very ugly.
[on edit]
It appears that the definitive word on the state was made in 1860, following the vote for secession, by Congressman James Petigru, “South Carolina is too small for a republic and too large for an insane asylum.”
Bipartisanship This!
Richard Shelby is now placing holds on all Obama nominations he doesn’t think that the Obama administration is being friendly enough to Airbus/Northrop-Grumman on the tanker deal, and because they have not started constructed an FBI lab that he cut an earmark for in his district:
According to the report, Shelby is holding Obama’s nominees hostage until a pair of lucrative programs that would send billions in taxpayer dollars to his home state get back on track. The two programs Shelby wants to move forward or else:
– A $40 billion contract to build air-to-air refueling tankers. From CongressDaily: “Northrop/EADS team would build the planes in Mobile, Ala., but has threatened to pull out of the competition unless the Air Force makes changes to a draft request for proposals.” Federal Times offers more details on the tanker deal, and also confirms its connection to the hold.
– An improvised explosive device testing lab for the FBI. From CongressDaily: “[Shelby] is frustrated that the Obama administration won’t build” the center, which Shelby earmarked $45 million for in 2008. The center is due to be based “at the Army’s Redstone Arsenal.”
(emphasis mine)
Seriously, you cannot negotiate with these clowns.
Bipartisanship needs a plan B.
I would suggest stress positions, waterboarding, extreme sleep deprivation, and enforced nudity.
It’s Been a Weird Year for the Auto Industry
Play them off, Jon Stewart
With the recall of more than 6½ million to repair a sticky accelerator pedal, Toyota’s sales fell by 47% from December, and 16% year over year, which was enough for both Ford and GM outsell to outsell the Japanese car firm.
Of course, we now know that it’s not just accelerator pedals, but also the brakes on its Prius hybrid, where it appears to be a software issue that creates unsteady breaking in the interplay between regenerative and mechanical braking.
It may not be any consolation to the Toyoda family, but Ford just rolled out a software update for its hybrid vehicles:
Ford Motor Co. announced Thursday that it will ask owners of its Ford Fusion Hybrid and Mercury Milan Hybrids sedan to bring their car into their Ford dealer to replace software that operates the car’s braking system.
While the cars maintain full braking ability, Ford said, drivers may occasionally experience a strange feeling in the brakes under certain circumstances.
So the latest problems may be an artifact of the move to “drive by wire” technologies for hybrid vehicles, you pretty much have to, because managing the battery/engine balance cannot be done manually by the driver.
In any case, the juxtaposxition of glitches in software and automotive hardware, it seems appropriate to invoke the proven to be false by Snopes joke:
At a computer expo (COMDEX), Bill Gates reportedly compared the computer industry with the auto industry and stated: “If GM had kept up with the technology like the computer industry has, we would all be driving $25.00 cars that got 1,000 miles to the gallon.”
In response to Bill’s comments, General Motors issued a press release (by
Mr. Welch himself) stating:
If GM had developed technology like Microsoft, we would all be driving cars with the following characteristics:
- For no reason at all, your car would crash twice a day.
- Every time they repainted the lines on the road, you would have to buy a new car.
- Occasionally, executing a manoeuver such as a left-turn would cause your car to shut down and refuse to restart, and you would have to reinstall the engine.
- When your car died on the freeway for no reason, you would just accept this, restart and drive on.
- Only one person at a time could use the car, unless you bought ‘Car95’ or ‘CarNT’, and then added more seats.
- Apple would make a car powered by the sun, reliable, five times as fast, and twice as easy to drive, but would run on only five per cent of the roads.
- Oil, water temperature and alternator warning lights would be replaced by a single ‘general car default’ warning light.
- New seats would force every-one to have the same size butt.
- The airbag would say ‘Are you sure?’ before going off.
- Occasionally, for no reason, your car would lock you out and refuse to let you in until you simultaneously lifted the door handle, turned the key, and grabbed the radio antenna.
- GM would require all car buyers to also purchase a deluxe set of road maps from Rand-McNally (a subsidiary of GM), even though they neither need them nor want them. Trying to delete this option would immediately cause the car’s performance to diminish by
50 per cent or more. Moreover, GM would become a target for investigation by the Justice Department.- Every time GM introduced a new model, car buyers would have to learn how to drive all over again because none of the controls would operate in the same manner as the old car.
- You would press the ‘start’ button to shut off the engine.
Everything old is weird again.
The Employment Numbers
Click for full size
H/t Calculated Risk
Employment Population Ration, h/t Calculated Risk
Part time involuntarily, h/t Calculated Risk
Worst recession since WWII, h/t Calculated Risk
Temp hiring, which is a leading indicator, is improving, h/t Calculated Risk
Birth/death model, h/t Daily Reckoning
Well, the good news is that the unemployment rate fell to 9.7%. The bad news is that non farm payroll fell by 20,000, while analysts had forecast an increase of 5,000.
Unemployment falling is therefore entirely the result of people, most notably white women, having stopped looking for work, so I would not call it a good thing.
The fact is that long term unemployment, people who have been unemployed for more than 26 weeks,* has hit 4.1% of the civilian workforce, an all time record.
Barry Ritholtz digs a bit deeper, and finds positive data points:
- The household survey shows an increase, and the household survey covers small business missed by the business survey.
- Temp employment increased, and temp hiring leads full time hiring, assuming that companies don’t go “permatemp”.
- I would note that I have anecdotally observed this when I call “job shops” about contract work. Things to seem to be picking up, hence 2 interviews (1 in person and 1 phone) in the past 2 weeks, as versus 1 (phone) interview in the prior 6 months.
- Part-time for economic reasons (underemployed) fell sharply (3rd graph from top)
As I noted yesterday, there was a big change in the “birth/death” adjustment, (bottom graph) and the adjustment appears to me to be more of an exercise in political number manipulation than a reasonably applied statistical technique.
In any case, if you scroll down on the full BLS report, they talk about the adjustment:
Table A presents revised total nonfarm employment data on a seasonally adjust-
ed basis for January through December 2009. The revised data for April 2009
forward incorporate the effect of applying the rate of change measured by the
sample to the new benchmark level, as well as updated net business birth/death
model adjustments and new seasonal adjustment factors. The November and
December 2009 revisions also reflect the routine incorporation of additional
sample receipts into the November final and December second preliminary
estimates. The total nonfarm employment level for March 2009 was revised down-
ward by 902,000 (930,000 on a seasonally adjusted basis), or 0.7 percent. The
previously published level for December 2009 was revised downward 1,390,000
(1,363,000 on a seasonally adjusted basis).
So they were off by over 1 million in December … Oopsie.
You can see Bloomberg’s interactive page on the effects here.
*Full disclosure, this set includes yours truly, who has been out of work for about 30½ weeks.
New Mayor in Baltimore
Sheila Dixon’s resignation as Mayor of Baltimore became effective yesterday, and she was sentenced to probation by the judge, while she was replaced by City Council President Stephanie Rawlings-Blake as mayor.
As to my take on this: Dixon appeared to be an effective mayor, but she was always small scale corrupt, it seemed that every 2-3 years, you had her getting caught putting relatives on the payroll or steering work to firms that employed her friends and relatives.
As to Ms. Rawlings-Blake, she has always seemed kind of a non-entity, somebody who is where she was because her father, the late Howard “Pete” Rawlings, was a major power in Maryland politics.
Well, seeing as how we have what could be one of the largest blizzards on record for the area rolling in on us, she gets a baptism by fire.
Just in Case You are Wondering
Click for full size
Lazard HQ, Let’s bring pitch forks and torches,
30 Rockefeller Center, New York City, NY
Well, one of the older investment banks out there, Lazard Ltd. formed in 1848, just declared a profit in the 4th quarter.
Wait, no, they didn’t they had a loss.
Why did they have a loss? Because they decided that they had to issue yet another round of indefensible bonuses to their staff:
What should have been a profitable quarter a Lazard Ltd. turned into a surprising loss due to the investment bank paying its people big bonuses.
The firm doled out $616 million in compensation and benefits to about 2,300 employees last quarter, or more than triple the amount handed out in the same period in 2008. It was a consequence, Lazard said, of a decision to pay more bonuses in cash and accelerate some deferred cash awards from a prior year. But so great was the firm’s generosity that compensation costs overwhelmed quarterly revenues and resulted in a net loss of about $55 million for the fourth quarter. The charges also almost wiped out full-year profits.
Lazard Chief Executive Kenneth Jacobs, who took over from the late Bruce Wasserstein last fall, argued that he had no choice but to pay his people to protect and build the franchise. Lazard was one of the few major Wall Street firms to avoid government bailout assistance.
“[Our compensation policies] should enhance our competitiveness and drive shareholder value,” Mr. Jacobs said, in a prepared statement. “Our goal is to grow annual compensation expense at a slower rate than revenues.
(emphasis mine)
Note the comment about shareholder value. Lazard has been publicly held since 2005, but what the f%$#, just screw the share holders.
BTW, their goal, “to grow annual compensation expense at a slower rate than revenues,” that means that their goal is to make a profit …………… some day …………… in the indeterminate future …………… because compensation is pretty much their only expense, ex- renting some office space, and pay a few licensing fees.
They are spending over ½ million an employee:
For all of 2009, Lazard had $11 million in earnings, down sharply from the prior year’s $196 million. Total compensation costs for all of 2009 were a little over $1.3 billion, or an average $565,000 per employee.
Mr. Jacobs’ remarks about pay come a day after Morgan Stanley CEO James Gorman promised to rein in compensation this year at his firm. At Morgan Stanley, compensation ate up 62% of revenues last year. At Lazard, it was 72%. Typically, half of Wall Street revenues go out in compensation.
So, under the normal and customary rules, half the gross revenue, you know, before expenses goes to an already overpaid staff, but it’s not enough for the vampire squids smaller cousins.
Congress needs to change laws to allow shareholders to truly hold managers accountable.
I’m also wondering if shareholders have grounds for a suit here, since it’s pretty clear that management is ignoring them, and the well being of the company, in its decisions.
A ½ Step
It looks like there is increased momentum in the Senate for raising the tax rate on big bonuses for bailed out firms
Senators Barbara Boxer and Jim Webb proposed a 50 percent tax on 2009 bonuses above $400,000 at any firm that has received more than $5 billion in government assistance.
The senators said they had not yet gathered broad support for the proposal, and neither sits on the tax-writing Senate Finance Committee, which would likely have to take up the bill. A 35 percent tax on bonuses at bailed-out companies was proposed last year by the leaders of the Finance Committee, Democrat Max Baucus and Republican Charles Grassley, but it has not been acted on.
I call it a half step, because in order to fix this, it needs to apply to a lot more people than that, and to apply to all income.
The marginal tax rate for people earning more than about $5 million a year should be north of 75%.
I don’t care if it’s Lloyd Blankfein, A-Rod, or Lady Gaga, let’s raise their taxes.
Carly’s Ad Gets Even Weirder
Remember yesterday?
I noted how awful Carly Fiorina’s latest ad was.
Well, it gets even weirder.
The ad syncs nearly perfectly with a Pink Floyd tune, I think that it’s “Animals”.
I think that on her campaign staff is seriously f%$#ing with her and laughing all the way to the bank:
In the News of the Unsurprising
The soon to be ex-wife of South Carolina Governor Mark “Hiking the Appalachian Trail” Sanford says that he refused to promise fidelity in his wedding vows:
South Carolina first lady Jenny Sanford recalls how she made the “leap of faith” to marry husband Gov. Mark Sanford even though the groom refused to promise to be faithful, insisting that the clause be removed from their wedding vows.
“It bothered me to some extent, but … we were very young, we were in love,” she said in an exclusive interview with Barbara Walters to air on “20/20” Friday. “I questioned it, but I got past it … along with other doubts that I had.”
Sanford and her marriage were thrust into the national spotlight in June 2009 when her husband admitted that he had been secretly visiting his longtime lover in Argentina instead of hiking the Appalachian Trail, as he had told his staff.
Imagine that.
On the brighter side, I imagine that he learned how to Tango.
Oh Crap.
The Federal Reserve has announced that it is terminating its Term Asset-Backed Securities Loan Facility (TALF) at the end of March.
Basically, the Fed buys bonds secured by loans at sub market rates, in order to keep interest rates low.
Well, now that this program is starting to wind down, we are starting to just how much rates will climb when government support is withdrawn, and it ain’t pretty:
The end of a Federal Reserve program that helped unlock credit markets is spurring sales of asset- backed bonds with relative yields five times wider than on debt secured by car loans.
The expiration of the Fed’s Term Asset-Backed Securities Loan Facility is driving companies to sell bonds tied to loans that would otherwise require higher yields. Borrowers are offering bonds backed by subprime auto loans, mortgage-servicing payments and assets that have proved hard to sell after the worst credit seizure since the Great Depression.
They are talking about auto loans, where the spread (It’s not clear, but I think that this is in comparison to treasuries) for TALF instruments is 0.35% and for non-TALF it is 1.75%.
If the end of the TALF results in anything like a 1% increase in mortgage rates, home sales fall off the cliff again, and they fall hard, because for the same payment, you have about 11% less in home prices, and people buy houses on the basis of monthly payment, not price.
Obama Goes to “National Prayer Breakfast”
So, he showed up to the little bit of Christian Dominionism run by “The Family”, though he did condemn the “kill the gays” bill in Uganda.
I have no word yet on whether the Ugandan genocidal manics David Bahati, author of the Ugandan “Kill the Gays” bill, and Ugandan Ethics and Integrity Minister James Nsaba Buturo, one of its chief supporters, were in attendance, though they had intended to until this entire thing blew up.
I also think that any politician who associates with “The Family” to any degree is doing this country a great harm.