Creditor-Media Matrix Manifesto

There will be no radical changes in the personnel of the present efficient staff. Mr. Charles R. Miller, who has so ably for many years presided over the editorial pages, will continue to be the editor; nor will there be a departure from the general tone and character and policies pursued with relation to public questions that have distinguished The New-York Times as a non-partisan newspaper — unless it be, if possible, to intensify its devotion to the cause of sound money and tariff reform, opposition to wastefulness and peculation in administering public affairs, and in its advocacy of the lowest tax consistent with good government, and no more government than is absolutely necessary to protect society, maintain individual and vested rights, and assure the free exercise of a sound conscience.

Adolph Ochs, upon purchasing the New York Times in 1896 - via A Tiny Revolution.

Visa my arsa

Obama makes a first, civilized step toward nailing the credit card companies - admirable sense and restraint - I'd have turned Cheney loose on them. The thing, though, is the asymmetry between credit corporations and individuals is merely a special case of a more general asymmetry between the large institutional corporation and the alleged human being in USia.

We have all been fucked for so long we do not know we are being fucked. Now that the corporations have generally, royally, providentially fucked themselves, perhaps we can, by a sort of vicarious osmosis of recirculation, dimly recall how fuckity fucked we are, have been, etc.

Dick and Dave and Dan and Herb minus Dave (and Dick)

David Moffett, featured in these motley pages some time ago, has deleted himself from Fred: WSJ

Freddie Mac CEO Will Resign

Freddie Mac's chief executive officer, David Moffett, announced his resignation from the U.S. government-backed mortgage company just six months after being installed in that post by the company's regulator as part of a rescue operation.

The McLean, Va., company offered no immediate explanation for the resignation, effective March 13, but said that Mr. Moffett "indicated that he wants to return to a role in the financial services sector." A spokeswoman for Freddie said that the decision was Mr. Moffett's and that his resignation wasn't sought by the company's regulator, the Federal Housing Finance Agency.

Though Mr. Moffett's title is CEO, his job in many ways is more akin to that of a chief operating officer because the FHFA is running Freddie under a legal procedure known as conservatorship. As the conservator, the regulator assumes all the powers of the board and shareholders and seeks to restore the company to financial health.

A person close to Mr. Moffett said his decision partly reflected "frustration" with a job offering little freedom of maneuver. "He's a private sector guy," this person said.

Mr. Moffett is not anomalous:

In January alone, three of Fannie's most experienced investment managers -- Ramon de Castro, Paul Norris and Mike Lebowitz -- defected to other companies. Freddie recently lost Gary Kain, who was the head of its investments and capital markets operations before joining a private equity firm. Freddie has had only an acting chief financial officer since September.

Mr. Lockhart, the regulator, has argued that government ownership has gone well and that mortgage-market conditions would be much worse if it hadn't happened. Without government backing, he says, Fannie and Freddie "would have had to pull back dramatically from the market, which would have accelerated the downward spiral." When he was asked about the prospect that the federal government soon will be calling the shots at many more major financial institutions, though, Mr. Lockhart said in a recent interview: "I sure hope not."

emerging backyard markets

An interesting idea -- local, not completely appetitive capitalism.

via jefftrexler, a reader of Gifthub. Do not know if Jeff is somehow related to W. Trexler Proffit in the story.

LanX would be for small- and medium-sized companies — like restaurants and clothing stores, for example — that aren't large enough to use venture capital or angel investors, let alone make it on the New York Stock Exchange or Nasdaq, Proffitt said.

As an investor, "you get a say but you don't get a controlling say," he said. more

Swapovia

I don't pretend to understand credit swaps, but this example, from today, made an impression:

NEW YORK, Sept 29 (Reuters) - The cost of protecting Wachovia Corp's (WB.N:Quote, Profile, Research, Stock Buzz) debt with credit default swaps fell on Monday after news that Citigroup (C.N: Quote,Profile, Research, Stock Buzz) was buying Wachovia's banking operations.

Wachovia's five-year credit default swaps fell to about 550 basis points, or $550,000 a year to protect $10 million of debt, from 25 percent in upfront payments plus $500,000 annually before the news, according to data from several dealers.

Does the WSJ grok the difference between investing and wagering?

Among the measures announced Friday, the Treasury temporarily extended insurance, similar to that on bank deposits, to money-market mutual funds and the Federal Reserve said it would buy commercial paper from the funds. The Securities and Exchange Commission, meanwhile, banned short-selling of 799 financial stocks -- a financial bet that they will fall in price -- for at least 10 days. And the Treasury said it -- along with mortgage giants Fannie Mae and Freddie Mac, recently taken over by the government -- would step up their purchases of mortgage-backed securities to help keep the housing market afloat.

The most ambitious part of the government plan is to create a new entity to purchase impaired assets from financial firms.

The Murdockal WSJ immediately loses track of the analysis, scratching its head over how it would work.

People like Ellen Brown are asking questions we are not hearing from the corporate media:

Treasury bills are the I.O.U.s of the federal government. We the taxpayers are on the hook for the Fed’s “enhanced liquidity facilities,” . . .. What’s going on here? Why not let the free market work? Bankruptcy courts know how to sort out assets and reorganize companies so they can operate again. Why the extraordinary measures for Fannie, Freddie and AIG?

The answer may have less to do with saving the insurance business, the housing market, or the Chinese investors clamoring for a bailout than with the greatest Ponzi scheme in history...

How's that, Ellen?

...the greatest Ponzi scheme in history, one that is holding up the entire private global banking system. What had to be saved at all costs was not housing or the dollar but the financial derivatives industry; and the precipice from which it had to be saved was an “event of default” that could have collapsed a quadrillion dollar derivatives bubble, a collapse that could take the entire global banking system down with it.

...snip...

“The point everyone misses,” wrote economist Robert Chapman a decade ago, “is that buying derivatives is not investing. It is gambling, insurance and high stakes bookmaking. Derivatives create nothing.” link

Add: Phil Gramm: uno, dos.

Markets are confabulations

For Citigroup's new leaders, the first task they confront will be sorting through these losses, and reassuring investors that no more bad news is coming . . . Jim Zarolli, NPR

• There is not a single democratic nation left on Earth though we are sold on that every day. repurpussing
• They're juking the stats. David Simon, via AKMA via Doc et al.
• For $600,000 I would write an inspiring moral biography for the devil himself. . . Gifthub

Prince replied that subprime losses aside, the company was doing pretty well. Zarolli

...all of the world's major financial institutions are intertwined through counterparty agreements in which they hedge their risk using derivatives sold to them by other banks. globeandmail

American Home on the Free Range Horse Nugget Manufacturing Pulsar

This year, as borrowers with adjustable-rate mortgages saw their monthly payments rise, more and more of them had trouble coping with the bills.

OK.

The first group affected were borrowers with low credit scores who received subprime loans from companies such as Countrywide Financial.

OhhhhhKeedokee.

Buuuuuuuuut soon, even borrowers with higher credit scores -- American Home's Alt-A borrowers -- started showing signs of strain. *

Ah, yes, the Alt-A's. What are Alt-A's?

Alt-A loans are issued to people with high credit scores, but the loans are considered riskier than prime loans because they require less documentation of income.

doh

One might think a lender would wish to document income rather than just go on the word of the borrower and his/her credit rating agency. Yet apparently it's entirely otherwise: Because some people have high credit scores, they submit less documentation.

...or is it,

Some people have high credit scores because they've lied to credit rating agencies (submitting less, or false, documentation), therefore American Homers assume more risk, and demand less documentation?

...or,

Some people have high credit scores because credit raters are under pressure to rate people upwards regardless, therefore we need no steenkin documentation?

...or,

We lenders will happily believe whatever tumid turds borrowers give us because Alt-A loans will cost them more than Primes, so more money for us?

The gap between the bureaucratic measuring process of credit rating (tracking one's past record of timely debt payments) and the promise of power to maintain that rating (credible guarantee of future income) is the barn door that allows enthusiastic USian Bullshit free range. Borrower, credit-rater, lender are just different parts of the same Intestinal organ. As conditions deteriorate, the energy to squeeze out ever more baroque arabesques of steaming piles has no choice but to rachet:

American Home's business model worked well when the housing market was booming. But when falling home prices led to record-high defaults and delinquencies on Alt-A loans, a company like American Home would feel pressure to continue increasing its loan volumes to maintain its standing with creditors, analysts said...

Kind of like Iraq -- the bigger the disaster, the more resources you need to fund the full faith and credit of your credibility.

"The market conditions in both the secondary mortgage market as well as the national real estate market have deteriorated to the point that we have no realistic alternative," said American Home Mortgage's chief executive Michael Strauss.

"The company employee base will be reduced from over 7,000 to approximately 750."

The market volunteered its own credit rating:

*Newsday