Author: Matthew G. Saroff

Could Auto Bailout Trigger CDS Apocalypse?

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Because it appears that many of the credit default swaps (CDS) were written so that this might be the case

It’s this appointment of a government administrator to oversee automakers’ large expenditures and asset sales that has raised the possibility of a bankruptcy event for credit-default swaps, said Banc of America Securities analyst Glen Taksler.
He noted that the International Swaps and Derivatives Association, the trade group that acts as a standard-setter for credit-derivatives trading, says one trigger for a bankruptcy credit event is the appointment of an administrator, trustee or similar official to oversee all or most of an entity’s assets.

Once again, we see how financial “innovation” has created phony money at the cost of the real economy.

Is Cerberus Pulling a Scam on the Congress With Chrysler?

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I think that the most detailed analysis of this is by Dan Gerstein, who is a a political communications consultant, and was, “Communications director to Sen. Joe Lieberman (D-Conn.) and as a senior adviser on his vice presidential and presidential campaigns,” so we know that he’s a professional liar (that’s what a political communications consultant is), and that he associates with people with no sense of decency (Lieberman), so it should be read with that caveat, but his explanation of just how Cerberus is taking the taxpayer to the cleaners is the clearest and most concise explanation. (I’ll have alternate links below)

The issues:

  • Cerberus is chock full of Republican Party apparachicks, including Former Bush Secretary of the Treasury John Snow, who personally lobbied Hank Paulson to, “Salvage Cerberus’s investments in Detroit,” additional politically connected lobbyiests and corporate officers include:
    • Bush I VP Dan Quayle
    • Former Sen. John Breaux (a Dem, but very much a DINO)
    • Former Bush legislative liaison David Hobbs
    • Uber-Lobbyist Billy J. Cooper
    • Arnold I. Havens, a former general counsel of the Treasury Department
    • Christopher A. Smith, former chief of staff in the Treasury
  • Conservative estimates are the Cerberus manages somewhere around $30 billion, so they have the wherewithal to float a loan to Chrysler.
  • I think that the likely truth is that they don’t want to back Chrysler. They bought it from Mercedes Benz in the hopes of a quick sale to GM, classic flip and flee. Certainly the reports that they are trying for a quick sale to a Chinese auto manufacturer supports this.
  • A number of Congressmen, most notably Senator Grassley of Iowa, are demanding detailed information on the financial status of Cerberus, equity warrants being sort of like stock, but are not stock, since Chrysler is private.
  • They also have 51% ownership of GMAC, the auto lending firm spun off from GM, which means that they are getting taxpayer money twice.

On the bright side, what just passed requires Cerberus to put up equity warrants in exchange for the loans, equity warrants are kind of like stocks, but only for private firms, which have no stock.

Stephen Colbert is a Genius

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So, he shows Stephen Hayes from CNN, and says that for the economy, losing the auto industry would just be like losing a foot, but then he continues:

Right…it’s just a foot. If we had let the banking industry fail we would have lost our assholes.

2:50 on this vid

Your Daily Dose of Corruption

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Well, it now appears that Rep. Jesse Jackson Jr. is ‘Senate Candidate No. 5’ in l’affaire Blagojevich, which means that either someone on his staff was freelancing, or he is looking at prosecution too.

Also, the House Ethics Committee is expanding its investigation of Rep Charles Rangel, basically influence peddling, and feeding web design jobs to his son.

On the Republican side, FBI is looking into allegations that a Norm Coleman friend, Nasser Kazeminy, laundered money into Coleman’s pockets.

Update on the Sitdown Strike

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It appears that the owner may have been planning to shut down the plant and skip town for some time. It appears that, “company managed by the wife of Republic Windows and Doors owner Richard Gillman recently purchased an Iowa plant that manufactures similar products.”

Echo Windows and Doors was created two weeks ago and lists Sharon Gillman as its manager, according copies of records obtained by the Daily News from the Iowa Secretary of the State. According to Cook County property tax records, Sharon Gillman is Richard Gillman’s wife.

The couple purchased a $2.6 million Oak Street condo together in 2007, according to property records.

The Gillimans could not be reached for comment today. But this afternoon, Richard Gillman released a statement confirming the creation of the new company.

Also, Amy Zimmerman, who has served as Republic’s marketing director, is now listed as the contact on the newly registered echowindows.com domain name. She refused comment today.

As much as it pains me to say this, it may very well be that Bank of America is blameless in all this. The Gillimans may have set up a second company to find cheap non-union plant in Iowa, and then screwed up their credit line with BoA on purpose, so they could get out from under things like COBRA, owed vacation time, and other benefits.

In the mean time it appears that Chase, which had a 40% stake in Republic, is actually doing the right thing: it has pledged $400,000 to the employees there.

Still, this is getting weird, and if this is a scam by the Gillimans, and it looks increasingly so, there may very well be a criminal fraud case against them.

You Know that No One Will See See the Inside of a Cell

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Or even a few days paid suspension, but it’s pretty clear that Barry Cooper found some dirty cops in Odessa, TX.

He set up a house with surveillance equipment, and then put a couple of Christmas trees under grow lights, and 24 hours later, the police swore to probably cause to get a search warrant, and entered the house.

They are currently refusing to supply the affidavits, but it’s clear what happened: They illegally used infrared cameras looking for grow lights, and then lied to a judge to get a warrant.

Economics Update

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Well, now we have a report from MasterCard saying that gasoline consumption rose year over year for the first time since April, which I guess gives us an indication of just how quickly American consumers go back to their old ways when fuel prices fall.

In the meantime, Calculated Risk’s Credit Crisis Indicators have shown a bit of improvement, though with people taking negative interest to be in US treasuries, I’m not sure how reassuring that it.

In any case, it’s now clear that last week’s surge in mortgage applications was from people scrambling to lock in rates and this week, we have the application rate plunge, because this week’s applicants rushed to apply last week.

Meanwhile, consumer spending looks to post the biggest drop since just after Pearl Harbor, which is really pretty scary when you think of it.

And there won’t be much help on the export markets, with both China and Europe showing more signs of slowing themselves.

Which leads one to wonder when they will stop lending to us, because the U.S. budget deficit was $164.4 billion in November, up from $98.2 billion in November 2007.

Finally, we have oil rising on a Saudi supply cut, retail gasoline dropping for the 84th straight day, and the Dollar was mixed again today.

Defective Even by the Standards of Taser International

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Taser, International has always maintained that their little toy that should be treated as a lethal weapon is safe.

They even have studies to prove it.

Only, it turns out that their products do not meet the company’s own dubious standarsa:

A new study has found that the type of Taser stun gun used most by police officers can fire more electricity than the company says is possible, which the study’s authors say raises the risk of cardiac arrest as much as 50 percent in some people.

So, not only is their own science dubious, but their manufacturing processes are too.

Canada: Ignatieff to Lead Libs, and Chooses to Fold Like a Bad Poker Hand

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It now appears that the other contenders have bowed out of the running and Michael Ignatieff will be the new party leader.

In statements following this, he promptly showed that Steven Harper has his balls in a jar somewhere:

Ignatieff has cautioned against automatically trying to topple the minority Conservative government of Prime Minister Stephen Harper, a strategy that the party had contemplated only last week. Even so, a new Liberal leader is expected to move quickly in a drive to rebuild the party into a credible alternative to Harper’s Conservatives.

It appears that the fact that the Conservatives are on every media outlet in Canada screaming like scalded babies has made Mr. Ignatieff concerned that they might say something bad about him.

To paraphrase Josh Marshall, why would the voters believe that you can fight for them if you cannot fight for yourself.

Stephen Harper put out an austerity budget in the middle of a recession because he’s a lunatic. He tried to gut public campaign finance because he is a lunatic without scruples.

If you won’t work with this man, you will be his bitch.