Author: Matthew G. Saroff

Economics Update

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Well, Calculated Risk has your daily inventory of interest ratescredit crisis indicators, and today, they are pretty neutral.

In Hank Paulson and His Evil Minions™ news, he has finally publicly eschewed the idea of buying distressed assets.

I think that the reason for this is that the sales price would either be so low that all of his Wall Street friends would be technically insolvent, or so high as to land his corrupt ass in jail, because the big sh$#pile is near worthless. That’s why there is no market. Wall street cannot handle the truth.

It also looks like he will start requiring some level of private capital to match any bailout money. My translation is that now that he’s bailed out his Wall Street friends, anyone else who wants money needs to work for it.

Of course none of this will do much for the economy, with estimates that holiday sales will drop 1%, the first decrease since 1985, and home values falling for the 7th straight quarter.

What we should be thinking about is not how to rescue Wall Street, but rather how to amputate it from out economy, because these parasites are on a path to destroy more than 10% of US GDP.

Speaking of parasites, it looks like GE capital just got the FDIC to insure $139 billion of their debt. It appears that, “GE’s finance businesses are able to seek FDIC debt coverage because its GE Capital subsidiary also owns a federal savings bank and an industrial loan company, both of which already qualify.”

Like I said, parasites.

In the mean time, recession worries drove oil down again today, to a 21 month low, and it appears that the world thinks that the UK is in worse shape than the US, because not only was the dollar up today, it hit a 6-year high vs. the pound.

If you are worried about a resurgent Russia though, you have less to worry about, with Russia easing up support on the Ruble, which promptly fell.

The War Nerd on Eastern Congo

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His only posts every few weeks typically, and when he covers conflict, there is a glee that is a bit unsettling (he admits it himself), but he knows and understands conflict, both on the tactical level and the social level, to a degree I have not seen elsewhere.

Case in point, his latest post on the ongoing conflict in eastern congo:

Every word, every disgusting damn word, of these BBC and Guardian stories is bullsh@#. actually makes me sick, listening to these stupid lies over and over. The reason Nkunda’s little army (estimates range from 5000 to 10000 men) advanced into Eastern Congo this week is that the Hutu gangs were getting a little too aggressive about jumping ethnic-Tutsi villages in eastern Congo, killing the men and kidnapping women and girls as sex slaves. Nkunda knows very well nobody else will protect the Tutsi, for the simple reason nobody ever has. So he went in to do it himself.

(expletives expurged mine)

Read the whole thing, because it’s a wonderful background on the whole region, Rwanda included, and it makes it clear that the continued operation of Refugee camps by the UN and NGOs long after it was clear that almost all of these people could return home without any major retribution is the real problem here, and not Nkunda.

Quoting again:

The rest fled into the forests of Eastern Congo. They’re the “refugees” that [BBC Reporter] Orla Guerin feels so sorry for: the frickin’ monsters who did their best to kill the whole Tutsi population of Rwanda in ninety days, like they were on one of those timed shopping sprees.

As I’ve said before, I lost most of my respect for the NGO’s, and much in the way of the UN’s refugee apparatus, when they signed off on running concentration camps for the ethnic Albanians in Kosovo.

If there were no refugees, they would not have a job, so they do their best to make sure that there are refugees.

Go read the whole thing.

Why Cap and Trade Sucks

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Because at the end of the day, it’s a tax, and it’s not just a tax, it’s a hard to regulate and administrate one, which means that folks like Goldman Sachs are going to look for ways to game the market to line their own pockets, and the money that they make will come out of taxpayer’s, or consumer’s pockets.

Case in point, Goldman Sachs, “Recently bought pieces of two carbon-offset companies, in the latest sign of investment banks’ interest in the area.”

The idea that somehow or other allowing mini-Wall Streets will create innovation and make things better is simply wrong. Look at what they did to home mortgages.

What this is really about is Ivy League alumni politicians and bureaucrats deciding on policies based on the best interests of their Ivy League alumni friends on Wall Street.

It is senseless and destructive tribalism, and no different than Sunni-Shia in Iraq, or Hutu-Tutsi in Rwanda.

Shoot Me Again, I’m Quoting Andrew Sullivan Now

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Read his opening ‘graph:

Some readers think my continuing attempt to expose all the lies and flim-flam and bizarre behavior of Sarah Palin is now moot. She’s history – they argue. Move on. I think she probably is history. Even Bill Kristol and his minions in the McCain-Palin campaign may not be able to resuscitate her political viability now. But even if she is history, she is history that matters.

That she is a disaster is certain. That she will fade back to well deserved obscurity is likely.

That this should have never happened in the first place is what needs to be examined.

The idea that Bill Kristol, a man who has nothing to recommend him except his parents, got her nominated as VP because he had a crush on her after meeting her at the governor’s mansion while on an Alaska cruise for conservatives is frightening.

That the media treated her as something other than a joke compounds the terror.

That the media is now actively participating in her rehabilitation leads one to despair.

Shoot Me, I’m Quoting Racist Nutbag Ron Paul

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He wrote a commentary on CNN.com:

Now, in light of the election, many are asking: What is the future of the Republican Party?

But that is the wrong question. The proper question should be: Where is our country heading?

(emphasis mine)

I don’t believe that it is particularly likely that they will ask that question though, because it is a 2nd cousin to asking, “What is best for the country,” and movement conservative Republicans don’t ask that question with regard to governance, because governance, and the government are evil in their minds.

A Clarification on the 50 State Strategy Post

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It appears the the contracts were all written to expire at the end of November, and this may simply be an administrative screw up of, well, Democratic Party proportions.

If contracts are written this way at the DNC, so as not to encumber a successor chair, this is completely whack. There should be a 4-8 week overlap, so that you do not have a vacuum while the new guy is finding his feet.

Original post here.

Michael Steel as Head of the RNC?????

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Excuse me while I clean what I was drinking from the screen.

It appears that former Maryland Lieutenant Governor and US Senate candidate Michael Steele is looking to chair the RNC.

There is no way to put this delicately.

Michael Steele is stupid….Mind bogglingly stupid….I mean comparing stem cell research to the Holocaust in front of the Baltimore Jewish Council stupid.

I think in terms of raw brain power, he’s probably not that stupid, but it’s clear that he is so convinced of his own wit and genius, that he cannot help but make it worse.

He may not actually be stupid, but he has a penchant for doing stupid things that buggers the mind.

If he gets the post, I’m going to need to take up a collection for the popcorn.

Bailout II: Bail Harder

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Not my hed, but rather Paul Keil’s, who is reporting that Paulson is disparately looking to get the second half of the 700 billion bailout in his hands, so that he can benefit his Wall Street cronies before someone honest, or Larry Summers, ends up in charge of the Department of the Treasury:

In order to keep tabs on how the Treasury Department is handling the $700 billion bailout, Congress split up the payments. The first $350 billion is dwindling fast. $250 billion was set aside to buy stakes in the nation’s banks (here’s our tally of where that’s going) and yesterday $40 billion went to AIG as part of its renegotiated bailout.

That only leaves $60 billion. The Treasury has not even begun implementing its original plan, to purchase troubled mortgage assets. And with a number of major American institutions — General Motors, GMAC, bond insurers, insurance companies, etc. — pushing for their share of the bailout, that figure is likely to run out soon. Before it does, Treasury Secretary Henry Paulson will be forced to return to Capitol Hill for the second helping. Such a journey is proving increasingly “likely,” the Wall Street Journal ventures.

IMNSHO, if he comes back to congress, he should not be allowed to take a piss without a Congressional staffer looking over his shoulder.

Lieberman Watch

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The dynamics of the whole thing seem to be interesting. We had Obama’s statement (which I see as correct, he is President elect, and should give the Senate its due) where he said that it was a Senate matter, and now the Clintons are denying that they were making calls supporting Lieberman.

Also, we have reports that Schumer and Durbin Lieberman removed as head of the Homeland Security Committee, and since Schumer raised a lot of money for the incoming Senators, this may be a big factor.

TPM is now confirming that
the full Democratic caucus will vote on his remaining DHS chair, and so this makes Chris Bowers’ whip count interesting reading.

I don’t think that Dems should eject Lieberman from the caucus, but he should not be a chairman, with subpoena power, of anything beyond the knitting committee.

Is the Fifty-State Strategy Dead?

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Chris Bowers says pobably yes, with a follow up.

Pertinent quotes:

….

And, confirming earlier reports, the nearly 200 locally based organizers who form the core of the fifty-state strategy have all been fired….

….Further, Rahm Emanuel has long been the most outspoken opponent of the fifty-state strategy, and now he is Obama’s Chief of Staff. So really, given the amount of say Emanuel will have over this, kiss the fifty-state strategy goodbye.

…

People inside the DNC are telling me that the program is not dead. This doesn’t surprise me, because it is a popular program and I imagine that many of the remaining staffers at the DNC are committed to the program. At the same time, all of the organizers–who were chosen by local state parties–have been fired. That effectively kills the program, no matter the messaging and commitment of the remaining staffers. (emphasis mine)

…

Update: I’ve seen in the comments that many people think Obama is replacing “Deaniacs” with his own people. That is a failure to understand how the fifty-state strategy works. The DNC organizers were all chosen by the local state parties, not by Dean. Now, the idea that you fire a bunch of locally chosen people, and then send “your own” people back to those local areas, is absurd. The new people will be reviled, and unable to function with the local parties. No one is being replaced. The program is being terminated. 200 community organizers just got fired by Obama’s campaign. How ironic. (emphasis original)

I actually disagree with some of the analysis.

I don’t think that the “Rahm Emanuel and His Evil Minions™” are behind this. I think that this is really a part of the character of Barack Obama and his campaign.

I have never seen a more highly disciplined campaign at a national level, and they are, and I mean this is a good way, serious control freaks.

The 50 state strategy was a policy of sending money to the local state parties, and allowing them to choose their people as local organizers. It was the “them” and the “their” which made the program work, I hope that the Obama administration is not moving away from that.

Spocko Says…

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That we should forgive and forget the Republicans, just like the victorious powers in WWII forgave the war crimes of the Axis powers and saw no need for judicial activity.

It’s snark, and marvelous snark, and I’ll just leave you with this:

Remember, nobody is a villain when they are doing what they feel is right for the country. This isn’t like the movies where a short bald “Dr. Evil” laughs and holds the world ransom for 700 billion dollars.
__________

To attack them now, after we have won, isn’t helpful. Why?

One warning…Not only should you avoid drinking anything before reading, you should empty your bladder too….It’s that funny.

Update on Syrian Nuclear Reactor

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Well, it now appears that the IAEA found traces of enriched Uranium at the alleged Syrian nuclear reactor site.

It appears that I was wrong, I figured that it was beyond their level of nuclear infrastructure to even try.

On a related note, officials at the IAEA are seriously pissed off at whoever leaked the above data, because they see it as, “an effort to prejudge the agency’s conclusions.”

Basically, it appears that the source of the contamination is not clear:

The particles retrieved from some environmental swipe samples were of processed uranium — which could include the enriched version that in large quantities would fuel power plants or bombs, not of raw uranium ore, they said.

Such traces, they said, could have been carried to the site inadvertently on scientists or workers or on equipment trucked in. Syria has one declared atomic site, a research reactor.

A remote source could resemble a finding made in a long IAEA investigation of Iran’s secretive nuclear program.

Bomb-grade uranium particles found by IAEA sleuths there were assessed to have come with used equipment obtained from Pakistan, not from any undeclared domestic production facility.

Economics Update

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Well, it’s a bank holiday, so it’s a little bit slow, but the fact that American Express is filing to become a bank holding company, so that it can take part in the Federal Reserve’s sh&%pile for cash program.

My guess would be that they are seeing their default rate going up, and that they can’t find anyone to buy the debt.

In retail, General Growth Properties, the 2nd largest mall operator in the US, said that it may file for bankruptcy protection, and National Wholesale Liquidators filed for bankruptcy.

In other impending bankruptcies, option ARM lender Downey Savings and Loan just said in it’s 10Q that it cannot see a way to avoid being taken over by the Office of Thrift Supervision.

Most of the interest rate indicators were unavailable today because of the holiday, but the LIBOR (the L stands for London) was down a bit again today.

Also from that little island off the coast of France, retail and home sales are heading south quickly there too.

The joys of Anglo-Saxon capitalism, I guess.

In any case, there is no joy in Mudville, if by Mudville you mean the real estate market, so Fannie Mae and Freddie Mac have instituted a new program to modify mortgages to minimize foreclosures.

I still think that bankruptcy changes are the best solution here.

In any case, the impending recession drove oil to a 19 month low, and drove the dollar up, as people tend to flee to the dollar in bad times.

Falling oil is also absolutely killing the Ruble, which appears to be on the brink a devaluation.

The, “He’ll Take Our 401(k)” Myth

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You’ve probably seen the email….Somehow, I mercifully missed screaming that “Bqrack Obama will take your 401(k)/403(b) to finance something….Not quite sure what….Maybe an arms for hostages swap, but that seems to be Republican foreign policy.

Not surprisingly, this is complete crap. Generally the finger is pointed at Education and Labor Committee Chairman George Miller (D-CA) for this scheme, and there are two very small grains of truth.

The first is that Miller he wants to regulate, not take 401(k)s, specifically, he’s talking about reigning in fees, which will mean, of course, lower fees, but also mean less aggressively managed portfolios, because aggressively managed portfolios are more expensive, since aggressively managing anything takes resources.

In the long run, since stuff like S&P 500 funds beat actively managed funds, particularly when fees are taken into account, this would be a good thing, as people who lose their retirement in Emu farms generally run screaming for a taxpayer bailout.

The second grain of truth is that Teresa Ghilarducci has this pet program that she touted as a witness at the hearing: that 401(k) holders be allowed to voluntarily trade in their 401(k)s for a so called, “Guaranteed Retirement Account”. She also suggests that in the long term the pre-tax income features of 401(k)s be abolished and be replaced with a retirement plan with guaranteed payout (which sounds an awful like what social security already is).

It’s guaranteed benefits, as opposed to guaranteed asset, a return to the pensions of old.

I’m not sure of her concept, though on the face of it, it seems to be a better one than the Chilean model, where broker fees, and the market depressing effects of large population echelons end up leaving people with far less than they anticipated.

Of course the real conundrum of defined asset retirement plans is the equation that if you die young, you win.

Erdogan’s Is Right

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It appears that Turkish Prime Minister Recep Tayyip Erdogan is at loggerheads with his business community over whether to go to the IMF for aid.

Erdogan does not want to deal with the IMF, and the moneyed elites do:

“We will not cast our tomorrows into darkness by bowing to IMF demands in such a time of crisis,” Erdogan said on Oct. 26, accusing the IMF of seeking to “squeeze Turkey’s throat” by curbing needed spending programs.

That is a pretty good definition of what the IMF does, at least what it does to non-white countries. You can be sure that the strictures on recents IMF loans to Ukraine, Hungary and Iceland would be far less punitive than anything that Turkey would get, even though, by all standards, Turkey has cleaned up its act over the past few years, culminating in paying off the IMF in 2005.

What is going on here is what Naomi Kline outlines in The Shock Doctrine. Times are bad, so Turkey must return to economic policies that are in reality colonialism with a polite veneer.

One need only look at Malaysia in the Asian financial crisis, which did better because it refused IMF money and directives:

Malaysia stood out as a country that refused IMF assistance and advice. Instead of further opening its economy, Malaysia imposed capital controls, in an effort to eliminate speculative trading in its currency. While the IMF mocked this approach when adopted, the Fund later admitted that it succeeded. Malaysia generally suffered less severe economic problems than the other countries embroiled in the Asian financial crisis.

The long term solution is to tax or otherwise restrict foreign denominated loans because they always result in a crisis in which foreign powers dictate the shape of a local society.