Woah, she is one scary….I’m at a loss for a politically correct metaphor.
Author: Matthew G. Saroff
Economics Update
Well, the Federal Reserve cut the federal funds rate by 50 basis points (½%) as expected.
the Bank of China cut its rates too, for the 34d time in 6 weeks.
In response, the dollar dropped the most since 1998, (this article says since 1985) which is what is supposed to happen when you cut rates, people go elsewhere looking for higher rates of return.
Unfortunately, driving down the dollar is probably all it did. Below a certain level, the difference between the rate set and 0% (giving money away) becomes pretty immaterial, and I think that we are pretty close on this. That’s what my oft repeated phrase, “pushing on a string” means.
I would also note that the falling dollar pushed oil prices higher, which I’ll qualify, so as not to invoke the wrath of Dean Baker, since oil is dollar denominated, a falling dollar does not do anything directly, but it does effect the positions taken by traders in the oil futures market.
In any case, the monoliner insurers are back in the news, with Ambac wanting a capital infusion from the government, but MBIA saying that the money should instead go to assets that they insure. New York State Insurance Commissioner Eric Dinallo agrees with Ambac.
I think that MBIA’s proposal is a bigger bailout, since it means that they have less to pay on the sh^%pile without giving an ownership stake to the feds.
In any case, it looks like the Treasury and the FDIC are working to do MBIA’s bidding, with more signs of plans to buy bad mortgages.
BTW, here is a story to follow, the SEC is looking at tightening rules on credit rating agencies. The story I linked to has 2 ‘graphs, but when the details start coming out, this will be important.
The systemic failure of the ratings agencies is at the core of much of this problem.
Speaking of failures, the Treasury just bought $125 billion in stock in the big boys:
The report showed that the payments included $25 billion each to Citigroup Inc. (C, Fortune 500), JPMorgan Chase & Co. (JPM, Fortune 500) and Wells Fargo & Co. (WFC, Fortune 500) Bank of America Corp. (BAC, Fortune 500) received $15 billion andMerrill Lynch & Co. (MER, Fortune 500), which is being acquired by Bank of America, got $10 billion. Bank of New York Mellon (BK, Fortune 500) received $3 billion and State Street Corp. (STT, Fortune 500) of Boston got $2 billion.
Really about the only good news that I’ve heard today is New York GA Andrew Cuomo getting medieval on senior bank management:
NEW YORK (Reuters) – New York Attorney General Andrew Cuomo, who negotiated executive payment clawbacks by American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz) as it received a taxpayer bailout, warned nine banks receiving government money on Wednesday that using the funds for bonus payments may be illegal under state law.
….
“Specifically, corporate expenditures and payments, made in the absence of fair consideration of undercapitalized firms, may well violate NY Debtor and Creditor Law 274, which deems such payments illegal fraudulent conveyances,” Cuomo’s letter said.
Obama really needs to give this guy a senior post if he’ll take it.
No Comments on the Obama Ad
It was on, in the background, while I was feeding my son and helping him with my homework.
The reviews on MSNBC seem to be pretty good though.
The Funniest Essay on Somolia Ever
And it’s informative too.
The War Nerd is a national treasure.
Religion Gives Young Children Paralysis
Polio is spreading again, all because some ignorant superstitious whack job mullahs in Nigeriawent tinfoil hat on the UN’s polio eradication plan, and sabotaged it.
Sometimes I wonder if organized religion might be the single worst way to find the divine in the universe.
Waxman Joins Cuomo in Looking at Bank Exec Pay
He’s asking banks who have taken federal bailout money for detailed information on pay and benefits to senior officials.
Screw it. Nationalize them, and make senior executives GS-3s.
When Do We See the Frog Marches in Cuffs
America, Where It Pays to Fail
Not my title, rather it was the title from der Speigel, thankfully it’s in English.
How can you not love an article that starts like this:
More than 100 years ago, German sociologist Georg Simmel criticized the banks for being even bigger and more powerful than the churches. His chief complaint — that money is the new god of our times — is still heard today. If Simmel was right, and there are some indications that he was, his statement would have to be modified to suit today’s circumstances: Not all people pray to the same god.
Among the money worshippers, there are at least three faiths. First there are the Puritans, who patiently carry their money to the new churches, hoping that it will multiply. The average Chinese, for example, deposits 40 percent of his income in banks. What laudable discipline! Then there are the Pragmatists. They save and lend, but only in that order; their savings limit their boldness. This persuasion is especially prevalent in the Germanic countries, where the savings bank is the shrine.
Finally, we have the religious community of the Uninhibited, which is especially popular in the United States. Its adherents readily admit to intentional recklessness, wanton waste and omnipresent greed.
It’s amazing how much savage good writing we are seeing these days about American klepto-capitalism.
Iceland,Ukraine, Hungary to get IMF’d
Icelnad has gotten a deal for a $2 billion loan from the IMF. That’s about $6250.00 for every man, woman, and child on the island. They could not cut a deal with the Russians who, my wild-assed guess here, wanted some naval basing consideratins.
There are conditions, such as, “Iceland said it would use the funds to reintroduce a flexible interest rate regime and revise its financial regulation, particularly insolvency laws.”
What does that mean, for a start it means that Iceland’s central bank just raised rates to 18%.
As to the insolvency laws, my guess is that they were told to change the laws so that foreign investors are at the front of the line, and that those debts could not be discharged at all.
Iceland has just become 320,000 people working for foreign masters.
Ukraine is well along the way to the same fate, with the IMF demanding budget cuts in the middle of an economic downturn.
This is the sort of policies that created the Great Depression following the stock market crash.
There has also been a deal cut between the IMF and Hungary, but I don’t have details.
As I’ve said before, let’s see how free market fundamentalist the IMF goes on white people. I think that it will be far more gentle than it would be if the people were black, brown, or yellow.
The Christian Science Ending Daily Publication
Bummer. They have very good foreign coverage.
It looks like they are on their way to becoming a web-only news source.
Look for a Blowup in Mosul
It appears that Nouri al Maliki is looking at enforcing his Shia vision of Iraq on the city of Mosul, and the Kurds living there are not amused:
The Shiite-led government of Prime Minister Nuri Kamal al-Maliki is squeezing out Kurdish units of the Iraqi Army from Mosul, sending the national police and army from Baghdad and trying to forge alliances with Sunni Arab hard-liners in the province, who have deep-seated feuds with the Kurdistan Regional Government led by Massoud Barzani.
It looks like the US military will take no actions if a conflict breaks out.
Iraq, the gift that just keeps giving.
American Heros
Dozens Of Call Center Workers Walk Off Job In Protest Rather Than Read McCain Script Attacking Obama.
It’s not like these are people with a whole bunch of money to spare. They saw, they read the script, they found it vile beyond belief, and they did the right thing at considerable personal cost.
HRW Alleges Georgian War Crimes in South Ossetia
It’s a BBC radio broadcast (at link), but the money quote is:
Research by the organisation Human Rights Watch [HRW] ints to indiscriminate use of force by the Georgian military and the possible deliberate targeting of civilians.
Indiscriminate use of force is a violation of the Geneva Convention and serious violations are considered to be war crimes.
No big surprise here, this was obvious in the first few hours of the war, before, you know, the Russians eradicated the Georgian military.
It marks a turn around for HRW though. In the early days following the war, they accused the Russians of using cluster bombs….Until it was revealed that the physical evidence that they had was all ofS weapons.
Not Enough Bullets: A Continuing Series
Well, now that Merrill Lynch was forced to sell itself to Bank of America, some of it’s employees are feeling insulted by the retention packages offered:
The problem isn’t with high-flying producers bringing in at least $1.75 million in annual revenues. Those employees will most likely get 100 percent of their annual revenue as a retention bonus, spread out over seven years. The bad feelings are among those making less. A financial advisor producing $700,000 in revenues is being offered $175,000 in cash over seven years and a 25% growth bonus over three years. Manis says that same producer could get a lot more defecting to a competitor—”around $850,000 in cash on about a 9 year deal plus another $700,000 or so back end bonuses (after one to two years).”
Yeah, because so many investment banks are hiring so many people right now…..You have options.
Seriously, the unbridled sense of entitlement of these folks just buggers the mind.
These people are overpaid used car salesmen, and as has been shown over the past few months, their advice is less reliable than my cats, who at least don’t try to conceal their self interest.
In the mean time, RJ & Mckay, a financial services body shop has a video out to try and generate some recruiting fees:
The Greenspan Putz
No, it’s not a typographical error, it’s a great play on the concept of, “The Greenspan Put“
The indispensable Barry Ritholtz of The Big Picture found an article of that title by Alan Kohler:
As Alan Greenspan said in his testimony to Congress last night: “With … home prices rising, delinquency and foreclosure rates were deceptively modest. Losses were minimal. To the most sophisticated investors in the world, (mortgage securities) were wrongly viewed as a ‘steal’.”
Unsophisticated investors didn’t stand a chance.
Now the “steal” is going to work the other way. Mortgage securities vehicles everywhere are being liquidated because their risk is being repriced – in most cases dramatically, to the point where investors don’t want their money in them at all.
….
I am amused, though I would disagree with the characterization. A putz has a head.
This has been another episode of Yiddish vocabulary.
OK, Is This a Sign of the Apocalypse?
Republican Florida Governor Charlie Crist just extended early voting hours in Florida, from 8 hours a day, and 8 across the weekend, to 12 hours.
I’m not sure why he did it, I’ve heard reports of the McCain campaign saying that this will kill them in Florida.
I think that after hearing the 50th story about folks waiting for hours at early voting stations, Governor Crist either decided that lengthening the hours was the right thing to do, or he realized that there was significant political blowback from this.
Syria Blowback in Iraq
Well, we now have a “senior American official” saying that the raid on the Syrian villiage was a warning to Syria.
Some warning, the Iraqi cabinet was already feeling their oats enough to make further changes to the deal, despite US threats to shut down all US operations in Iraq, military and otherwise.
No one believes them, becauseleaving is too politically crushing to Bush and His Evil Minions™.
But as a result of the raid, which was condemned by the government of Iraq, and is looking at further changes in the status of forces agreement to prevent this in the future.
Heck of a job, Condi.
Why Oil Prices are Collapsing
Well, here’s another insight that I picked up at the by invitation only Stellar Parthenon BBS.
Triutumi pointed me to James Howard Kuntsler, and his explanation makes a lot of sense.
Basically, people who would ordinarily hold oil futures contract are selling them, because they have to answer margin calls on their other investments:
This means especially oil. I hope you’re enjoying the temporarily cheap prices at the gas pumps, because this is purely a function of the compressive deleveraging that is going on right now, as contracts and positions held in energy markets are being dumped by everybody and his uncle to raise cash to meet margin calls.
I’m still digesting his web site, but he is a savagely impressive writer.
Economics Update
OK, the markets went wild on the expectation that the Fed will cut rates tomorrow….I’m not impressed, truth be told….As I’ve said before, I think that the Fed is pushing on a string with interest rates.
What is or more interest is the fact that the Federal Reserve’s intervention in the commercial paper market has appeared to raise rates, rather than lower them. From Bloomberg:
Yields on commercial paper rose as the Federal Reserve began buying the debt directly from companies, showing the central bank’s efforts to unfreeze short- term credit markets have yet to take hold.
I think that the Fed is looking at a monetary solutiuon, when the solution is government legislation and government spending.
Still, this has not stopped GMAC from going in with the Fed’s commercial paper facility.
BTW, the Fed is doing something else, currency swaps with other central banks, most recently the Central Bank of New Zealand, though it has set up similar arrangements with Australia, Canada, and Japan too.
It’s supposed to help maintain liquidity, but I have no clue how this works. Anyone want to explain this to me?
What I do understand is the Federal Reserve going into the commercial paper market in the US. Ge just borrowed $5 billion from the fed.
Of course, even there, there is stuff that I don’t get, like why is the Federal Reserve starting to buy foreign commercial paper?
In any related news, the Treasury is looking at extending the bailout to privately held banks, though one wonders how they get a meaningful equity stake, as Bush Paulson and His Evil Minions™ had promised for any direct aid.
I’m not sure if this is working, as is noted at Calculated Risk:
- 3 month treasuries are essentially unchanged.
- TED spread is marginally better.
- The two year swap spread is a bit worse.
Of course, that is just the world of banking. In the real world, the perceptions are actually worse, with the Conference Board’s measure of Consumer Confidence hitting the lowest reading ever recorded, dropping to 38 from September’s 61.4
This graph (click for full size), courtesy of Calculated Risk, of the Case Shiller numbers and makes a good counterpoint to the most recent housing data, also from Calculated Risk, and it is rather grim.
Short form, house prices are retrenching in a major way, and I would expect significant overshoot on the way down:
- The Composite 20 index is off 20.3% from the peak.
- The Composite 10 is off 17.7% over the last year.
- The Composite 20 is off 16.6% over the last year.
In energy, oil has continued to fall rapidly, and I think that I have finally come across a good reason for this, which I will cover in a separate post.
And In An Emergency, Your Lobbyist Can Be Used as a Flotation Device*
I’ve written about efforts to allow free wireless connectivity access to what is called “White Spaces”, bits of spectrum allocated to over the air TV, but not used.
It has been proposed that these spaces be used for unlicensed devices, much in the same way that WiFi works now.
The difference is that the ranges and penetration of the signals are much greater.
Well, there are two groups lobbying very hard against this, the broadcasters, who have their channels allocated from this spectrum, and the wireless microphone industry, who use the white spaces illegally, and have done so for years.
Since the FCC tests showed that there was no problem with interference with TV stations, the prototypes did the necessary, “sense and avoid,” of occupied space, there isn’t a problem there, so my take is that their opposition is because they think that they “own” this space, and they think that there may be a way to monetize the space, so they have enlisted wireless microphone users: (quoting Harold Feld on
For a good background on all this, check out Harold Feld at Wetmachine.com):
I gotta admire the broadcasters (as represented by their trade orgs, the National Association of Broadcasters (NAB) and the Association for Maximum Service Television (MSTV)). Even with the facts completely against them, they never give up trying. Sadly, they all too often succeed through a combination of heavy duty lobbying power (what politician doesn’t suck up to his or her local broadcaster?) and the fact that most decision makers don’t know squat about engineering and regard the whole thing as black magic. Heck, it worked to hamstring low-power FM (LPFM) radio, despite a subsequent independent government report showing the broadcaster interference claims were unsubstantiated bologna.
But embracing radio pirates by proposing to expand the availability of wireless microphones in the broadcast white spaces for their political allies and tacitly agreeing to amnesty for illegal wireless microphone users? Even I never thought they would go that far.
He also notes that the US military uses the technology in question for protection of their troops in life threatening situations.
In any case, it looks like the broadcasters have brought in the big guns,† a Megachurch Preacher Rick Warren and Dolly Parton to claim that, white space devices will “will create an unnecessary interference in the worship services of hundreds of thousands of churches across the country,” according to the preacher man, and may have a, “direct negative impact” on Dollywood, the Grand Ole Opry, and “9 to 5: The Musical.”
You are illegally squatting on a public resource already, Ms. Parton.
*Pun most certainly intended.
†Yeah, this pun is intended too.