Damn….Always happens when I’m offline for Shabbos.
Must be FDIC policy to only close banks on Fridays after close of business.
This time, it’s The Columbian Bank and Trust, Topeka, KS.
Category: regulation
A380 Separation Distance Reduced
One of the concerns about the A380 is that it is a large plane, and wingtip vortices grow as an aircraft does, so separation standard was established to prevent trailing aircraft from being destabilized by the these phenomena.
Airbus thought the standard was was excessive, and following tests, the standards have been relaxed, from, “6nm separation for a heavy aircraft such as the 747, 8nm for medium or small aircraft in the A320 category and 10 nm for light category aircraft,” to 4nm, 5nm, and 6nm, the same as a Boeing 747.
Grob Aerospace Files Bankruptcy
The delays in certification and testing, along with a backer pulling out, have resulted in them filing for reorganization as they attempt to complete their all-composite Jet program, the SPn.
Fed Chairman Calls for More Financial Regulation
He was vague on specifics, but described the need in a speech at the Fed’s economic symposium.
I agree that more regulation is needed, but I do not agree with what appear to be his suggestions.
Bailout should not be what is done when an institution is too big to fail, that creates perverse incentives. Nationalization, where investors and share holders are wiped out to the greatest degree possible should be.
Additionally, I would modify anti-trust law to add “too big to fail” to the reasons for a breakup.
Finally, I believe that the complex secularization mathematics should be severely restricted.
All that “innovation” in the financial markets has gotten us the mess that we are in now.
Bush Still Pushing to Have Your Daughter Carry Her Rapist’s Baby
As I mentioned in an earlier post, see my earlier post, All Your Uterus Are Belong to Us, Bush and His Evil Minions&trade are determined to make sure that Abortion will be unavailable, even if it is legal.
So, they are pushing ahead with a modified plan now, and they have changed the definition, so that contraception is no longer abortion, but it still allow a doctor to refuse to give birth control information to a woman, for example.
These folks are more like the Mullahs in Iran than they admit.
Public Company Accounting Oversight Board Ruled Constiturional
This is a victory in the fight against the Peter Pan accounting that has gotten the financial markets into so much trouble.
The U.S. Appeals Court for the District of Columbia Circuit ruled that the board did not violate the separation of powers clause.
OK, Maybe I was Wrong to Dismiss the Oil Speculation Theories
I’ve been dismissive of accusations that speculation is responsible for most of the oil price run up.
I have always suggested that arbitrage might cause excessive volatility, but have been dubious on the idea that speculators are responsible for most, or even much, of the current oil price run up.
Unlike electric power, where one can shut down a plant to juice the market, you can’t hide all that oil, you have to pay to put it somewhere
Well, the CFTC just discovered that Vitol, a company that thought to primarily be in the business of hedging oil for large consumers, like Southwest Airlines, to save costs, has been aggressively holding huge amounts of futures contracts as a speculative investment too, at one point holding about 11% of all trades on the New York Mercantile Exchange (Nymex).
So the CFTC now pegs the percentage of speculative, i.e. non-consuming, trading at around 81% of volume.What’s more the CFTC found out about this by mistake.
I still believe that the primary cause of the run-up was supply and demand lines crossing, but with this level of speculation, and this level of leverage, it’s reported that Vitol could have purchased over $8 billion in oil futures for less than $1 billion, it’s possible that there were issues of excess volatility and over-shoot on the price of oil.
FTC Institutes New Regs Requiring Written Opt-In for Robo-Calls
This, of course, will effectively kill the odoriferous putrescence that is robo-calls.
By December, all Robocalls must have a key or voice activated opt-out, and by the following September, robo-calls are prohibited, unless the marketer has “the prior express written agreement of the recipient to receive such calls.”
Prior business relationships have been eliminated as an exception, though medical calls related to HIPAA, and calls by non-profits to members have an exception, though the latter requires automated opt-out.
Note that political campaigns can still inundate you with robo-calls though.
Banks Object to Credit Card Regulation
There’s a big surprise, they want to continue to treat their customers like garbage.
This bill is pretty mild:
- Requires 45 days’ notice of interest rate increases
- prohibits companies from changing the terms of the contract at any time for any reason, so called “Universal Default”.
- Makes issuers mail billing statements 25 days before the due date, instead of the current 14-day minimum.
- Require that payments be applied to all balances proportionally, as opposed to the lowest (often introductory) rate first.
But even this very weak tea is too much for the banks.
Ratings Agencies Begin to Upgrade Government Bonds
For years, corporate debt has been rated higher than equivalent government debt, and once the monoliner insurers started to implode, municipalities realized how much of a racket it was, with the ratings agencies using a stricter standard, so that the government debt had to use insurers where the rater’s brother-in-law worked.
Took long enough, and I’m sure that the fact that various Attorneys General were looking into this, and that there was a bill in congress, had nothing to do with the change.
Comcast to Throttle Web Access During Times of Heavy Use
In response to a spanking from the FCC regarding throttling users based on applications 24-7, Comcast will start throttling heavy internet users during times of high network utilization, which is what they should have done in the first place.
There now, that wasn’t so hard, was it.
Their real problem, of course, is an architecture that is inadequate, but we know what cable companies do when there is a choice between screwing the customer, and fixing the real problem.
Business as Usual for Bush and His Evil Minions™
It looks like they are appointing F. Chase “Jabba” Hutto III to the post of assistant secretary for policy and international affairs at the energy department, who is described as, “one of the oil and gas industry’s key points of contact for energy and environmental issues.”
He’s a pro pollution wingnut who started off doing oppo research.
Lovely.
Draft Beer Not People
I began my drinking college career before the universal 21-year-old drinking age, it was 20 in Massachusetts, and it did not interfere with my drinking at all, so I approve of the efforts by over 100 college presidents to lower the drinking age to 18 (the Amethyst Initiative).
They believe that the current regime leads to unsafe habits and binge drinking, and I agree.
My observation, and I was at college through the transition, is that the change in the law did not make for safer drinking, or a reduction in drinking and driving.
Fannie and Freddie Have No Clothes
Or more accurately, negative net worth to the tune of something on the order of -$50 Billion each.
The only thing keeping them solvent is their banking of losses against future taxes.
They are going to fail….It’s that simple.
The only question is how, and who gets hosed.
H/t Barry Righoltz.
Pension Benefit Guaranty Corp. Doubles Down
As has been known for some time, the Pension Benefit Guaranty Corp. (PBGC) is underfunded as a result of pension obligations that it has had to assume over the past few years, and now its management is looking toward a more aggressive, and hence riskier, investment strategy.
It was 75% to 85% bonds and 15% to 25% in stocks, and it’s going to 45% stocks, 45% bonds, and 10% in “alternative investments”.
Alternative investments? What’s that, rare coins?
I’m a bear by nature, but to me it looks like this has EPIC FAIL written all over it.
Nope, No Conflict of Interest Here
Morgan Stanley is advising the Treasury Department on a possible bailout of Fannie and Freddie, but conginuing to underwrite salse of their debt.
Un-dirtyword-believable.
Economics Update
Today has actually been a good news day, with US industrial production increasing by 0.2% in July, though one should remember that inflation is 0.8%, the the consumer sentiment index rose in Augst, though July was a 28 year low, and the New York Fed Manufacturing Index rose. (no qualifiers on this one, it really appears to be good news)
Good news on all my standard metrics too, oil down, gas down, and dollar up.
Inflation is the fly in the ointment, as Dean Baker notes, because the increased inflation means that the 3rd quarter will almost certainly be a contraction.
I would, however be remiss if I did not note that commodity prices are falling very sharply, which may bring moderation in inflation in the coming months.
In the economic scandals section, we have Wachovia joining the parade of banks and investment houses settling on auction rate securities, to the tune of $5.5 billion.
In the “It should be a scandal,” category, we have S&P deciding not to downgrade MBIA and Ambac, even though anyone with two brain cells to rub together knows that the monoliner insurers are junk
I would also note that I’m wondering if we will see a Peso rally, because Mexico’s central bank just increased rates for the 3rd straight month.
And The Onion is a national treasure:
Republicans Cranking Up Voter Suppression Machine
It’s simple, “The Republican Party, Because N*gg*rs Shouldn’t Vote™“
Was the Fix in on Bear Stearns?
This is weird. A week before Bear imploded, someone bought $1.7 million worth of put options, 5.7 million at $30 and 165,000 shares at $25, expiring in a week.
The thing was, when he placed the put options, Bear was trading at $62.97.
Which meant that the only way that he could win was if the stock fell by more than 50% in a week:
“Even if I were the most bearish man on Earth, I can’t imagine buying puts 50 percent below the price with just over a week to expiration,” said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. “It’s not even on the page of rational behavior, unless you know something.”
…
John Olagues, who started trading options 30 years ago, said he has never experienced anything like it. Olagues, who runs a New Orleans consulting company called Truth in Options, also manages more than $1 million for a client who had a stake in Bear Stearns, which plummeted 94 percent in value on March 17. The drop prompted Olagues to start poring over options trading records and call officials at the CBOE.
“In just one tick, the company’s share price lost nearly all its value, a steeper drop than Enron’s right before its de- listing in 2001,” said 63-year-old Olagues, referring to the bankruptcy of Houston-based energy trading company Enron Corp. “I’ve never seen a stock perform like that in my life.”
Olagues, who was an options market maker at the Pacific Exchange and then the CBOE from 1976 to 1984, said he knows all about so-called time decay, implied volatility, arbitrage and the complexities of options trading. The former all-conference pitcher at Tulane University, who started Truth in Options in 2003, said he has found options transactions that convince him Bear Stearns was the victim of insider trading.
“I would stake my reputation on that,” he said.
But will anyone go to jail? Of course not. Jails are for little people.
Economics Update
Well, we are now seeing reports that the FDIC is going to have to raise premiums to cover losses from bank failures.
They should have started last year.
Meanwhile, the Chinese economy is showing signs of significant inflation, with China’s wholesale prices rising 10% year over year in July.
The problem here is that the obvious solution, the central bank raising interest rates, will server to further weaken the dollar, which will drive their exports down….Catch 22.
Meanwhile, it appears that Morgan Stanley has problems, because Moody’s just cuts its credit rating to A1 from Aa3 because of losses in the mortgage market.
Interestingly enough, even though Georgia and Russia are in something very close to a war, and the Georgian pipeline is a crucial link for Europe, oil is down, largely on the Iranians agreeing to a new round of negotiations on their Uranium enrichment program.
Gasoline is down again, for the 25th day in a row.
The dollar rose today, probably as a result of concerns about the conflict between Georgia and Russia, which tends to send money fleeing to the relative safety of the US dollar.
And in the, “Funnier if it weren’t so true” department: