Bond insurer FGIC has asked regulators to break it up into two separate divisions/a>, one which insures minicipal bonds, and the other that insures the structured finance deals (aka the big sh$#pile).
This is likely a reflection of their dire position following Moody’s down grade of them from AAA to A3.
UBS is saying that banks are at risk of an additional $203 billion in losses from the bond insurance crisis.
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Barry Ritholtz, of The Big Picture, rightly asks, “WTF? Feds Shutting Down Economic Data Site.”
He then suggests that, much like eliminating the release of the M3 Data, this was done because the data is inconvenient, and I agree.
Eliot Spitzer, current Governor of, and former Attorney General for, the state of New York, has an editorial today that says just that.
Not only did the Bush administration do nothing to protect consumers, it embarked on an aggressive and unprecedented campaign to prevent states from protecting their residents from the very problems to which the federal government was turning a blind eye.
Let me explain: The administration accomplished this feat through an obscure federal agency called the Office of the Comptroller of the Currency (OCC). The OCC has been in existence since the Civil War. Its mission is to ensure the fiscal soundness of national banks. For 140 years, the OCC examined the books of national banks to make sure they were balanced, an important but uncontroversial function. But a few years ago, for the first time in its history, the OCC was used as a tool against consumers.
In 2003, during the height of the predatory lending crisis, the OCC invoked a clause from the 1863 National Bank Act to issue formal opinions preempting all state predatory lending laws, thereby rendering them inoperative. The OCC also promulgated new rules that prevented states from enforcing any of their own consumer protection laws against national banks. The federal government’s actions were so egregious and so unprecedented that all 50 state attorneys general, and all 50 state banking superintendents, actively fought the new rules.
I don’t who care who wins the election in 2008. I want Eliot Spitzer to win the 2012 Presidential election as the Democratic nominee.
Read the whole thing
Contrary to complaints, we actually have a decent bit of detail here.
Generally it’s pretty good. Generally, it’s also pretty similar to Hillary Clinton’s too.
However, there is something else that I found both interesting and laudable, which accompanies his speech (H/T to the other Matthew for the catch), specifically a credit card bill of rights:
This is interesting for a number of reasons:
All in all, a solid B+ to my mind.
Once again, the draw by crayon libertarians at CNET get it wrong, and Harold Feld at TOTSF gets it right.
This is a change, and while it seems minor at least to the folks at CNET, it’s not.
Specifically, it ammends the FCC act of 1934 and adds a specific goal for the regulators at the FCC:
by adopting and enforcing baseline protections to guard against unreasonable discriminatory favoratism for, or degredation of, operators based upon its source, ownership or destination on the Internet.
In addition, this explicitly gives the FCC authority over “information services”, and eliminates the argument that the Telecommunications Act of 1996 stripped this authority.
Go read the whole post.
Consumer confidence sinks lower the RBC Cash Index falls to its lowest level since it was created in 2002, and consumer borrowing tumbles, rising at an annual rate of 2.1%, the lowest rate since April.
On a “beat my own drum” note, it’s nice seeing a real economist warning that the stimulus package is going to damage Fannie Mae and Freddie Mack by increasing the loan limits, and hence exposure. I warned about this yesterday, and it’s nice to see a real economist agree.
In high finance, it looks like there will be significant writedowns on the $160 billion of “pier” loans out in finance land.
Basically, a “pier loan” is a bridge loan for things like a private equity transaction where the banks cannot sell the debt, and hence it’s a “bridge to nowhere”, or a “pier”.
The average price for the most actively traded U.S. loans fell to 88.37 cents on the dollar this week, from 91.14 cents last month, according to S&P’s LCD. Prices have fallen from 100, or face value, last June.
This means that no one is interested in buying the loans, so they have to discount.
Finally, look at these charts on The Financial Ninja, and be very, very afraid.
More confirmation that the Cable companies will be the first ones up against the wall when the revolution comes.
In response to complaints to spoofing packets to break filesharing applications (and other applications too, like Lotus Notes), Comcast has rewritten its terms of service.
The short version is:
Our network sucks, and we can block your peer-to-peer connections — and everything else — for any or no reason. And since the FCC’s competition policy lets us operate with no competitors — where else are you going to go?
Additionally, Comcast’s terms of service have “conduct terms” that would make John Ashcroft proud.
Note to self: Check out Verizon Fios terms of service.
This joker was accused of telling people that he would not grant contracts to people who supported Democrats, and then claimed it was a joke, and now it’s claimed that he, “demanded that the Philadelphia Housing Authority transfer a $2 million public property to a developer at a substantial discount, then retaliated against the housing authority when it refused to do so, a recent court filing alleges.”
This is business as usual for Bush and His Evil Minions&trade.
Dr. Krugman comments on the redefinition of high speed internet penetration. It’s now considered complete in a zipcode if one person gets over 200 kb/s.
So Bush is declaring “Mission Accomplished” on broadband, which is, once again, a lie.
However, I disagree with Krugman on the problem.
It’s not, “the failure of US policy to create effective competition”, it is a lack of regulation.
The incumbent providers are not spending money on upgrading the infrastructure because it is not to their business advantage to upgrade the infrastructure.
It is more profitable, and requires less capital, to put up barriers to other entrants into the field.
Europe and Japan with their state owned telecommunications monopolies, and their highly regulated wireless infrastructure are kicking our butt, because the market does not work in this area.
And one is the American wireless user, because whoever won, and the FCC has not announced a winner yet, will pay $4,713,823,000, more than the $4,600,000,000 required by the FCC in order for open access rules to apply.
The FCC has not announced a winner, and the bidders themselves are technically still gagged, but my guess is that it was not Google. They were willing to bid to win, but they were more interested in getting the open access, and why spend $113,823,000 more than the minimum to get that.
Of course, considering my record on predictions…..
Yes, this is the Cramer of “Mad Money”, and yes, he is generally to the right of Atilla the Hun, he supported Alan Keyes in 2008, and at a speech at Bucknell University, he condemned laissez fair politics:
“Do not be fooled by the sirens of laissez faire,” he told a packed audience at Bucknell University’s Weis Center for the Performing Arts in the continuing national speakers series, “The Bucknell Forum: The Citizen & Politics in America.”
“Ever since the (President) Reagan era, our nation has been regressing and repealing years and years worth of safety net and equal economic justice in the name of discrediting and dismantling the federal government’s missions to help solve our nation’s collective domestic woes,” he said. “We call it deregulation … a covert attempt to eliminate the federal government’s domestic responsibilities.”
When Jim Cramer is forced to come to his senses, you know something is whack.
It appears that bidders on the C-Block spectrum are colluding to keep the bid price low enough to eliminate open access rules.
Though $8.66 billion has been raised in 12 rounds by the auction so far, it still has a long way to run before it loses steam — more than 1000 separate bids were submitted in Tuesday’s closing round. The D block still has plenty of time to attract more bidders, particularly as the price of the C block and other regional licenses escalate. (For complete auction results see the FCC’s Auction 73 page)
Such escalation, though, appears to be exactly what the C-block participants are bent on preventing. The C-block bidders slowed down their pace Tuesday, taking turns bidding on the license every other round. That not only prevented the license from crossing the $4.6 billion reserve threshold, it also served to knock down the minimum bids required to take the lead in consecutive rounds. According to the FCC’s rules, the minimum bid falls each round a license fails to attract a new bidder. The strategy has definitely slowed down the momentum of C-block bidding, but even at the rate of one bid every other round, the license will clear the reserve ceiling in the next two days. To secure the top bid in Wednesday’s open Round 13, a participant will have to pony up $4.29 billion.
Also the Block D auction seems to be stalling, my guess is that this is a result of Cyrene Call corruption issues. This block is supposed to be shared with public safety agencies, with said agencies having complete control in an emergency, and to be open access.
Once again, I would direct you to Harold Feld’s “Tales of the Sausage Factory”, here, and here, with a backup from Morningstar and News.com.
The short story is as follows, a company was formed, Frontline, to bid on the portions D block auction.
Frontline actively lobbied for the partnership with public safety agencies, and based its entire business model on such a network.
The idea was that whoever built the network would then sell access at a discounted basis to the public safety community. Any spare capacity would then be sold to the commercial wireless industry.
Frontline was expected to bid for 10 megahertz of spectrum, which would give the winner a national license with which they could build a next-generation wireless broadband cellphone and communications network.
…
O’Brien also told Frontline that in addition to negotiating for public safety agencies, Cyren Call intended to become the “monopoly buyer” of broadband service on the network once it was complete.
Under this arrangement, Frontline would be obliged to negotiate with Cyren Call when discussing terms of how the network would be built, and then be forced to sell the bulk of the access to Cyren Call once it was up and running.
OK, this seems straightforward, if a bit involved, but the FCC added something else, “In order to ensure the winner of the D-block license cooperates with the public safety community, the FCC rules say if it is deemed the licensee wasn’t negotiating in “good faith” it could be forced to forfeit more than $100 million and lose all rights to the spectrum it had acquired.”
But the FCC gave no direction as to what it meant. So it was completely vague.
It gets worse, Cyren Call, an organization set up by Morgan O’Brien (the Billionaire who founded Nextel) was negociating “on behalf of the public safety community”, but it is clear that his end goal was that he be the one of control of this spectrum, and so he was throwing around outrageous demands, such as a $500 million dollar fee.
He deliberately scared off Frontline’s investors so that he could be in control, despite the fact that he was representing the public safety providers and had a fiduciary responsibility to them.
I don’t know his name, but the person known as “the Scanner” is one of them.
He has an ingenious proposal for dealing with the issue of bailing out financial institutions that are drowning in the “Big Sh%$pile”.
Here’s my proposal. I offer it at no charge to any member of Congress, presidential candidate or editorial writer willing to bear the calvary of getting the stink-eye next time at Harry Cipriani. If it becomes necessary to bail out the monoliners to prevent a depression, there will be terms. For once, the highly-paid beneficiaries of a taxpayer-financed bailout will not get off scot-free.
Congress shall specify that no bailout will take place unless and until (a) every bailed out monoliner and (b) every financial institution holding a bailed-out policy certifies that its employees have voluntarily agreed to accept a 25% federal income tax surcharge on every dollar earned above $200,000 for a period of 5 years. A young hotshot earning $300,000 would see $25,000 added to his tax bill. An elder pulling down $1 million would owe an extra $200,000. Since some of the biggest Wall Street multinationals are policyholders, and since this would apply to every one of their employees over $200,000, we could be talking about a lot of people and a lot of money. It could even go some way towards making the bailout pay for itself.
Politically, it’s a winner. Fiscally, it’s sound. It’s extraordinarily well-targeted to precisely the assholes who got us into this mess in the first place. John Edwards: Have your staff contact me through the comments box.
My only difference would be that I would go for a higher surcharge, perhaps something like 50%.
Get your mind out of the gutter, this is about the Senate is looking at tuitions exploding as university endowments skyrocket.
It’s a legitimate question. The US government spends billions sending students to increasingly expensive colleges and universities, but these same not for profit institutions are amassing increasingly large endowments as they hike costs for the students.
As Richard Vedder noted, there is a whole lot of excess going on in higher education.
The example that he gives is Whitman College at Princeton, a residence hall that, “cost $388,571 per room unit, nearly identical to what Donald Trump spent on his luxury resort Ocean Club Panama.”
The explosion in college costs started during the Vietnam War, where the alternative to college was combat, and it has continued unabated for the next 40 years, helped along by collusion among the top schools in tuition and financial aid.
Simply expanding student loan and grand programs make this worse. Regulation is needed to ensure that the managers educational institutions don’t take the money and build monuments to their own egos.
Martin Wolf, a columnist and editor for the Financial Times, is calling for regulations regarding the remuneration of banking executives.
Basically, he sees the current pay structures of banking, with enormous bonuses for short term results, as being a major factor in the current banking/credit crisis.
Further, he sees banking as an industry with an amazing talent for, “privatising gains and socialising losses.”
He says, “My attitude to the banking industry is not a prejudice. It is a ‘postjudice’.”, or to be translated into more prosaic language, he learns from the mistakes he observes, and prior behavior colors his attitude towards the industry.
It is the nature of limited liability businesses to create conflicts of interest – between management and shareholders, between management and other employees, between the business and customers and between the business and regulators. Yet the conflicts of interest created by large financial institutions are far harder to manage than in any other industry.
That is so for three fundamental reasons: first, these are virtually the only businesses able to devastate entire economies; second, in no other industry is uncertainty so pervasive; and, finally, in no other industry is it as hard for outsiders to judge the quality of decision-making, at least in the short run. This industry is, in consequence, exceptional in the extent of both regulation and subsidisation. Yet this combination can hardly be deemed a success. The present crisis in the world’s most sophisticated financial system demonstrates that.
Basically, he is saying that these institutions are immature and short sighted in outlook, but they possess the ability to destroy the output of the most of the rest of society, and so they need aggressive regulation.
Word up.
This might also be titled, “Management victims who really need to join a union”.
You know, after 10 years of thinking of IBM as the antiChrist, I had finally replaced them with Microsoft, but this story has me reevaluating.
If they are not the antiChrist, they are at least a minor minion of Chtulhu.
As often happens, companies sometimes get spanked for not paying overtime to its workers, usually for being stupid. It happened to IBM, and they had to pay $65 million in back pay, and they reclassified about 7600 workers as “non-exempt”, meaning qualifying for overtime pay.
IBM took another step too, they cut the base pay of these workers by 15%.
If you do the math, they have to work 45 hours to earn what they previously made at 40.
And economists wonder why the average American is not satisfied with our “wonderful” economy.
BTW, I think you could make an argument that this is illegal retaliation. Talk to a class action lawyer.
Well, Harold Feld ads some fact checking to MPAA claims that, “40% of industry loses from internet piracy could be traced to file sharing at universities.”
LEK Consulting Services, which did the research for the MPAA, has now released its methodology, and based on their own numbers, the file sharing through university computing services is about 3%.
They used this study to justify attempts to use legislation to coerce universities to lock down their networks in very expensive ways, and to make the penalties for such activities worse than murder.
*No offense intended to Jackals.
According to “reliable sources”, Ben Bernanke thinks that the downturn will be very severe, and that’s why there was the very large, unscheduled rate cuts.
Additionally, as reported by Calculated risk the market is expecting another 50 basis point rate cut at the regular meeting next week.
This would leave the Fed at a 3% discount rate, and I think that beyond that point, they are pushing on a string. Monetary controls of the economy are pretty much at their limits now.
In the real estate world, Merrill Lynch is saying that nationwide U.S. home prices could decline 25% to 30% over the next three years.
I think that they are optimistic.
Then we have student loan giant Sallie Mae reporting a $1.6 billion quarterly loss, which raises the obvious question, “How the hell do you lose money on GSLs?” These are government guaranteed loans, and the fact that borrowing costs have shot up so much that they cannot profit on them is …ominous.
There are indications that Bank of America’s deal to buy Countrywide may be getting into trouble. At least that what the market is saying, literally. BoA is offering the equivalent of $7.1058, but Countrywide is trading at $5.54.
This spread is a measure of the market’s opinion that the deal won’t actually be consummated, this spread implies that “there is roughly a 77.9 percent consensus among Wall Street’s risk arb desks and their hedge fund brethren that the deal goes through at the agreed upon terms. That also means that more than 22 percent of risk arbitrageurs don’t think the deal will go through”.
You also have Capital One taking a major earnings hit, both from the closing of its GreenPoint Mortgage arm, and from higher credit card losses.
Finally, you have talks between New York Insurance Superintendent Eric Dinallo and major US banks about a bailout of bond insurers. There is an implication that there will be some sort of government involvement, if not outright government sponsorship of such a bailout.
St. Louis Archbishop Raymond Burke calling for Rick Majerus, the St. Louis University basketball coach, to be disciplined for making a campaign appearance for Hillary Clinton and expressing support for Roe v. Wade.
This is not a priest, this is not a professor in the divinity department, this is a freaking BASKETBALL COACH.
I understand that St. Louis University is a Catholic school, but demanding that employees who have absolutely nothing to do with the religious mission of the school have to toe their political is outrageous, particularly given this:
Last year, St. Louis U. celebrated a legal victory that affirmed it is not controlled by the Catholic church or by its Catholic beliefs.
The Missouri Supreme Court agreed with the school in handing down a decision that the city of St. Louis did not violate state and federal constitutions by granting the university $8 million in tax increment financing for its new arena.
Opponents of the $80 million arena sued the school in 2004, halting construction.
The Missouri Constitution prohibits public funding to support any “… college, university, or other institution of learning controlled by any religious creed, church or sectarian denomination whatever.”
The debate came down to two words: “control” and “creed.” Does the guiding mission of a Catholic university align with the specific system of religious faith espoused by the Catholic church? And if so, does that system of faith control the actions of the university?
In a 6-1 decision, the court said SLU “is not controlled by a religious creed.”
As I recall*, Rush Limbaugh’s cousin, Stephn N. Limbaugh, Jr. serves on this court, and had been nominated by Bush to the U.S. District Court for the Eastern District of Missouri.
Hmmm….I guess that Rush is the smart one of his family…Scary thought.
*And by, “As I recall”, I mean checking the Wiki.