Prosecuting Wall Street

Why hasn't anyone on Wall Street gone to jail?

I've been thinking this as Fuel Fix has been doing a retrospective on Ernon

Related?

Krewe du Vieux 2009

Uncle Sam meets Fannie Mae
Krewe du Vieux is in the bag. Had a lot of fun. KDV and Krewe D'Etat are my favorites because of the bitingly satirical floats. KDV rolls past very fast, though. I guess mules are more reliable than tractors.

Voodoo Economics.

Sidney Torres gets KDV'd

Run on the Sperm Bank

Shave the Wetlands

Saw a few friends there. Here's Ray handing tons of cool stickers to Candice.

Maitri the loan shark has some cool beads.

Lots and lots of brass bands. Very cool

The crowd was mostly adults and it's a good thing. Imagine a little kid asking, "Daddy, why is there a giant penis walking down the street?"

The late, great Ashley Morris.

Rest of the Set here.

News and Notes - 22 November 2008

Watch them Squirm: Fox News abandons the mob it created. Along the same lines, check out their eviseration of the new South Park.

Pirates vs. Ninjas, NOLA-edition:


In local political news, did a crooked deal out Cazayoux?

Plummeting oil prices turn state surpluses into deficits. Remember the Stelly Tax Plan-Cuts? Well, they're back to haunt us, like the Times-Picayune warned.

Local judicial corruption exposed...in clerks suicide notes.

How bad is the economy getting? Over 100 applicants to a 7-Eleven job. Wait until after seasonal retail employment boom ends. It's not just the US anymore: Japanese elderly steal to make ends meet. A preview of what happens if we can't patch up Social Security? Also, what might economic collapse look like? The Boston Globe asks. Expect 4 areas to be hit the hardest: housing, education (which would normally boom during a normal recession), healthcare, and childcare.

Krugman describes how between now and January 20th could be the most dangerous time of the economic crisis.

China passes Japan as largest holder of US Treasuries. This will have a big effect on US foreign policy over the next 20 years.

Michigan police chief admits speeding tickets about revenue enhancement, not safety. Nice to see someone finally admit it. We'll see a rise in speeding tickets as municipalities take hits in property tax revenues.

Satirical edition of The New York Times. Don't miss the hilarious Tom Friedman spoof.

Gary Brecher writes the Bush Administration's obituary: Bush fought the wars and the wars won.

As newspapers make cuts, new watchdogs emerge. Fascinating look at a new model for civic involvement. Anyone have any opinions on Voice of San Diego? What does it say when the most thouroughly fact-checked news organ is Sports Illustrated? Don't miss Nate Silver's John Zeigler interview and Did Talk Radio Kill Conservatism?

Tennessee cutting $40 million in college spending while spending $10 million on an obsolete anti-filesharing system. Trying to stop college students from running Limewire more important than hiring 100 college professors is the height of stupidity. Way to go, Tennessee!

Mark Cuban got nailed on insider trading, but was it insider trading or political persecution? For reference, Martha Stewart was nailed less than 2 years after her misdeeds. Cuban was nailed 4 years after his alleged misdeeds. Is that even still within the statute of limitations? You only have to keep your tax documents for 3 years.

Debunking myths and truths about recycling.

And now, the happy thought of the day: imagine hundreds of these off the Louisiana coast.

Oh yeah, there is still a financial crisis going on

I know there was an election and everyone wants to know what the first puppy is going to look like, but there's also been that whole financial implosion thingy still going on.

Iceland labeled a terrorist country by Gordon Brown. Foreign businesses are fleeing Iceland like South Vietnam during the fall of Saigon and Brown's actions are only exacerbating the problem. All because they won't bail out British depositors (and add enough debt equal to 50% their GDP in the process).

In Nevada, 50% of mortgages are "underwater."

Speaking of underwater mortgage holders, "The Party that Wrecked America" gets a taste of their own medicine.

Naomi Klein: The Bush gang's parting gift: a final, frantic looting of public wealth. I still have The Shock Doctrine sitting on my shelf, unread. I've been meaning to read it, just haven't gotten around to it. I'll try getting to it by the end of the year.

Remember all that bailout money? Well, Wall Street appreciates your money. They'll be redistributing your wealth into big bonuses for themselves.

The most ominous new development in the financial meltdown is the Chinese slowdown. Chinese Officials Flee with Cash. I think it's a good thing China executes crooked politicians. Chinese factories closing by the tens of thousands. Very disturbing. Instead of orderly bankruptcies, the owners are burning the books, draining the remaining cash, and taking off for non-extradition countries in droves. The collateral damage from those actions is tremendous.

Links of the day - 10/21/08

Finance:
FBI struggles to handle Financial Fraud cases. 36% fewer case officers than 2001. Since then, we've had Enron, Worldcom, A.I.G., and a host of others.

Oil:
40% of Gulf of Mexico oil production STILL shut in due to Gustav and pals.

Second Bomb blast hits pipeline. Canadian terrorists? We all know how the last war with Canada went.

"Massive" find was bypassed by Exxon. In one of the deepest, most technically challenging drilling feats in industry history, Freeport, et. al. seem to have hit a big find. In July, this would have been all over the news. Now, hardly a peep. It could be the biggest domestic oil find (4 billion barrels?) in over a decade, but that's no guarantee it will ever see production. First off, even with the best technology, you need more than 1 appraisal well to judge the economics of a reservoir. This has already been one of most expensive holes ever dug by man. Drilling 2 more will be even more costly. Second, the oil might not flow right. Deep wells tend to have flowrate problems, which was one of the reasons that Jack #2's good flowrates was such a big deal a few years ago. Thirdly, the economics might not make sense at today's prices. I doubt the project will work with $50 a barrel oil. Probably not even $60 a barrel. All that being said, this appears to be one hell of a find.

Transportation:
Graphical depiction of GM/Chrysler Merger.

A modern day WPA will save the economy. From Wired. Strident call for infrastructure reconstruction from the next administration. High on the list should be a national, electrified rail system starting with this one in California. Oh yeah, and Cat 5 Levees for New Orleans.

Jalopnik DOTS: 1966 Chevy Pickup. Classic truck sitting on the street in the land that rust forgot. Probably a straight six and a three on the tree.

Politics:
Keith Olbermann's high school history teacher just passed away. Look at what found in 1991:


Early Obama voters meet with hecklers, slashed tires. Also, possible voting machine problems? We'll have to see.

Hedge Fund Manager calls it quits

Jeffery, you have a new hero:

Today I write not to gloat. Given the pain that nearly everyone is experiencing, that would be entirely inappropriate. Nor am I writing to make further predictions, as most of my forecasts in previous letters have unfolded or are in the process of unfolding. Instead, I am writing to say goodbye.

Recently, on the front page of Section C of the Wall Street Journal, a hedge fund manager who was also closing up shop (a $300 million fund), was quoted as saying, "What I have learned about the hedge fund business is that I hate it." I could not agree more with that statement. I was in this game for the money. The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government. All of this behavior supporting the Aristocracy, only ended up making it easier for me to find people stupid enough to take the other side of my trades. God bless America.

There are far too many people for me to sincerely thank for my success. However, I do not want to sound like a Hollywood actor accepting an award. The money was reward enough. Furthermore, the endless list those deserving thanks know who they are.

I will no longer manage money for other people or institutions. I have enough of my own wealth to manage. Some people, who think they have arrived at a reasonable estimate of my net worth, might be surprised that I would call it quits with such a small war chest. That is fine; I am content with my rewards. Moreover, I will let others try to amass nine, ten or eleven figure net worths. Meanwhile, their lives suck. Appointments back to back, booked solid for the next three months, they look forward to their two week vacation in January during which they will likely be glued to their Blackberries or other such devices. What is the point? They will all be forgotten in fifty years anyway. Steve Balmer, Steven Cohen, and Larry Ellison will all be forgotten. I do not understand the legacy thing. Nearly everyone will be forgotten. Give up on leaving your mark. Throw the Blackberry away and enjoy life.

So this is it. With all due respect, I am dropping out. Please do not expect any type of reply to emails or voicemails within normal time frames or at all. Andy Springer and his company will be handling the dissolution of the fund. And don't worry about my employees, they were always employed by Mr. Springer's company and only one (who has been well-rewarded) will lose his job.

I have no interest in any deals in which anyone would like me to participate. I truly do not have a strong opinion about any market right now, other than to say that things will continue to get worse for some time, probably years. I am content sitting on the sidelines and waiting. After all, sitting and waiting is how we made money from the subprime debacle. I now have time to repair my health, which was destroyed by the stress I layered onto myself over the past two years, as well as my entire life -- where I had to compete for spaces in universities and graduate schools, jobs and assets under management -- with those who had all the advantages (rich parents) that I did not. May meritocracy be part of a new form of government, which needs to be established.

On the issue of the U.S. Government, I would like to make a modest proposal. First, I point out the obvious flaws, whereby legislation was repeatedly brought forth to Congress over the past eight years, which would have reigned in the predatory lending practices of now mostly defunct institutions. These institutions regularly filled the coffers of both parties in return for voting down all of this legislation designed to protect the common citizen. This is an outrage, yet no one seems to know or care about it. Since Thomas Jefferson and Adam Smith passed, I would argue that there has been a dearth of worthy philosophers in this country, at least ones focused on improving government.

Capitalism worked for two hundred years, but times change, and systems become corrupt. George Soros, a man of staggering wealth, has stated that he would like to be remembered as a philosopher. My suggestion is that this great man start and sponsor a forum for great minds to come together to create a new system of government that truly represents the common man's interest, while at the same time creating rewards great enough to attract the best and brightest minds to serve in government roles without having to rely on corruption to further their interests or lifestyles. This forum could be similar to the one used to create the operating system, Linux, which competes with Microsoft's near monopoly. I believe there is an answer, but for now the system is clearly broken.

Lastly, while I still have an audience, I would like to bring attention to an alternative food and energy source. You won't see it included in BP's, "Feel good. We are working on sustainable solutions," television commercials, nor is it mentioned in ADM's similar commercials. But hemp has been used for at least 5,000 years for cloth and food, as well as just about everything that is produced from petroleum products. Hemp is not marijuana and vice versa. Hemp is the male plant and it grows like a weed, hence the slang term. The original American flag was made of hemp fiber and our Constitution was printed on paper made of hemp. It was used as recently as World War II by the U.S. Government, and then promptly made illegal after the war was won. At a time when rhetoric is flying about becoming more self-sufficient in terms of energy, why is it illegal to grow this plant in this country?

Ah, the female. The evil female plant -- marijuana. It gets you high, it makes you laugh, it does not produce a hangover. Unlike alcohol, it does not result in bar fights or wife beating. So, why is this innocuous plant illegal? Is it a gateway drug? No, that would be alcohol, which is so heavily advertised in this country. My only conclusion as to why it is illegal, is that Corporate America, which owns Congress, would rather sell you Paxil, Zoloft, Xanax and other additive drugs, than allow you to grow a plant in your home without some of the profits going into their coffers. This policy is ludicrous. It has surely contributed to our dependency on foreign energy sources. Our policies have other countries literally laughing at our stupidity, most notably Canada, as well as several European nations (both Eastern and Western). You would not know this by paying attention to U.S. media sources though, as they tend not to elaborate on who is laughing at the United States this week. Please people, let's stop the rhetoric and start thinking about how we can truly become self-sufficient.

With that I say good-bye and good luck.

All the best,

Andrew Lahde

Saint Lahde?

Couple of Subprime Chain Letters

I work in a fairly conservative office and get forwarded all sorts of political emails that are total crap. I try to rebut them the best I can and then publish them to show what people are reading. Click the spam tag to see some of the ones I've gotten in the past.

Here's the first one forwarded to me:
So, tell me, who do you think is responsible for the current financial mess we are? I can tell you that the Democrats have at least an equal share in the blame. Contract [sic] to what Nobama wants you to believe, it is not all Bush and McCain’s fault.

Fannie Mae Eases Credit To Aid Mortgage Lending

By STEVEN A. HOLMES
Published: September 30, 1999

In a move that could help increase home ownership rates among minorities and low-income consumers, the Fannie Mae Corporation is easing the credit requirements on loans that it will purchase from banks and other lenders.

The action, which will begin as a pilot program involving 24 banks in 15 markets -- including the New York metropolitan region -- will encourage those banks to extend home mortgages to individuals whose credit is generally not good enough to qualify for conventional loans. Fannie Mae officials say they hope to make it a nationwide program by next spring.

Fannie Mae, the nation's biggest underwriter of home mortgages, has been under increasing pressure from the Clinton Administration to expand mortgage loans among low and moderate income people [emphasis in original] and felt pressure from stock holders to maintain its phenomenal growth in profits.

In addition, banks, thrift institutions and mortgage companies have been pressing Fannie Mae to help them make more loans to so-called subprime borrowers. These borrowers whose incomes, credit ratings and savings are not good enough to qualify for conventional loans, can only get loans from finance companies that charge much higher interest rates -- anywhere from three to four percentage points higher than conventional loans.

''Fannie Mae has expanded home ownership for millions of families in the 1990's by reducing down payment requirements,'' said Franklin D. Raines, Fannie Mae's chairman and chief executive officer. ''Yet there remain too many borrowers whose credit is just a notch below what our underwriting has required who have been relegated to paying significantly higher mortgage rates in the so-called subprime market.''

Demographic information on these borrowers is sketchy. But at least one study indicates that 18 percent of the loans in the subprime market went to black borrowers, compared to 5 per cent of loans in the conventional loan market.

In moving, even tentatively, into this new area of lending, Fannie Mae is taking on significantly more risk, which may not pose any difficulties during flush economic times. But the government-subsidized corporation may run into trouble in an economic downturn, prompting a government rescue similar to that of the savings and loan industry in the 1980's.

''From the perspective of many people, including me, this is another thrift industry growing up around us,'' said Peter Wallison a resident fellow at the American Enterprise Institute. ''If they fail, the government will have to step up and bail them out the way it stepped up and bailed out the thrift industry.''

Under Fannie Mae's pilot program, consumers who qualify can secure a mortgage with an interest rate one percentage point above that of a conventional, 30-year fixed rate mortgage of less than $240,000 -- a rate that currently averages about 7.76 per cent. If the borrower makes his or her monthly payments on time for two years, the one percentage point premium is dropped.

Fannie Mae, the nation's biggest underwriter of home mortgages, does not lend money directly to consumers. Instead, it purchases loans that banks make on what is called the secondary market. By expanding the type of loans that it will buy, Fannie Mae is hoping to spur banks to make more loans to people with less-than-stellar credit ratings.

Fannie Mae officials stress that the new mortgages will be extended to all potential borrowers who can qualify for a mortgage. But they add that the move is intended in part to increase the number of minority and low income home owners who tend to have worse credit ratings than non-Hispanic whites.

Home ownership has, in fact, exploded among minorities during the economic boom of the 1990's. The number of mortgages extended to Hispanic applicants jumped by 87.2 per cent from 1993 to 1998, according to Harvard University's Joint Center for Housing Studies. During that same period the number of African Americans who got mortgages to buy a home increased by 71.9 per cent and the number of Asian Americans by 46.3 per cent.

In contrast, the number of non-Hispanic whites who received loans for homes increased by 31.2 per cent.

Despite these gains, home ownership rates for minorities continue to lag behind non-Hispanic whites, in part because blacks and Hispanics in particular tend to have on average worse credit ratings.

In July, the Department of Housing and Urban Development proposed that by the year 2001, 50 percent of Fannie Mae's and Freddie Mac's portfolio be made up of loans to low and moderate-income borrowers. Last year, 44 percent of the loans Fannie Mae purchased were from these groups.

The change in policy also comes at the same time that HUD is investigating allegations of racial discrimination in the automated underwriting systems used by Fannie Mae and Freddie Mac to determine the credit-worthiness of credit applicants.

Here's my response to that email:

Yes, Democrats had a role to play, but it's not just subprime mortgages that are going under. It's also prime mortgages. Sure, there was pressure by Clinton, but there were still regulations in place to keep Fannie and Freddie from taking unqualified mortgages. It's way too complicated to pin the blame on Clinton with 1 sentence from an 8 year old newspaper article to change that.

Here's the crux of the entire financial crisis: you own suprime mortgages. I own subprime mortgages. It's also failing prime mortgages. Those mortgages got bundled up into Mortgage-Backed Securities called Structured Investment Vehicles (SIV's). Those SIV's got bought and sold over and over and now everyone owns some. I'll bet you a dollar that somewhere in your 401(k) is a good chunk of mortgage-backed SIV's. Furthermore, because the SIV's dressed up and supposedly you could still get the real estate behind the vehicle if the mortgage failed, the investment vehicle was supposedly safe. They were rated as "safe" investment vehicles. Had they beed labeled as "speculative," all but a handful of investors would have shunned them and we wouldn't have gotten into this mess in the first place. THAT is the real cause of the financial crisis. Selling chiecken shit, but calling it chicken salad.

Also, if it were the fault of minorities not paying their mortgages, why are the hardest hit areas in Las Vegas suburbs, Cleveland, OH and Boca Raton, FL?

Guess when the most mortgage backed securites were sold? 2005. When did the housing market peak? 2005. Those are simple facts.

If you want to learn more, I'd recommend reading either Paul Krugman with the New York Times (very good at breaking complex problems into easy to understand components) or The Cunning Realist (cunningrealist.blogspot.com). I think you'll like the Cunning Realist. He's a lifelong Republican, but he's a "Republican for Obama"-type. I think you'll like his style and all.

Here's the second email:
Click through this.
Attached is an excellent PowerPoint showing the history behind the current financial crisis and failure of Fannie Mae. Democrats continue to point to the Bush administration but there is a much deeper story.

Subject: Fannie Mae

WISE WORDS FOR THE SEASON

During this political season let's be reminded of these wise words:

· You cannot help the poor by destroying the rich.

· You cannot strengthen the weak by weakening the strong.

· You cannot bring about prosperity by discouraging thrift.

· You cannot lift the wage earner up by pulling the wage payer down.

· You cannot further the brotherhood of man by inciting class hatred

· You cannot build character and courage by taking away people's initiative and independence.

· You cannot help people permanently by doing for them, what they could and should do for themselves.

ABRAHAM LINCOLN

Here is a quick look into 3 former Fannie Mae executives who have brought down
Wall Street.

Franklin Raines was a Chairman and Chief Executive Officer at Fannie Mae.
Raines was forced to retire from his position with Fannie Mae when auditing
discovered severe irregularities in Fannie Mae's accounting activities. At the
time of his departure The Wall Street Journal noted, " Raines, who long defended
the company's accounting despite mounting evidence that it wasn't proper, issued
a statement late Tuesday conceding that "mistakes were made" and saying he would
assume responsibility as he had earlier promised. News reports indicate the
company was under growing pressure from regulators to shake up its management in
the wake of findings that the company's books ran afoul of generally accepted
accounting principles for four years." Fannie Mae had to reduce its surplus by
$9 billion.

Raines left with a "golden parachute valued at $240 Million in benefits. The
Government filed suit against Raines when the depth of the accounting scandal
became clear. http://housingdoom.com/2006/12/18/fannie-charges/ . The Government
noted, "The 101 charges reveal how the individuals improperly manipulated
earnings to maximize their bonuses, while knowingly neglecting accounting
systems and internal controls, misapplying over twenty accounting principles and
misleading the regulator and the public. The Notice explains how they submitted
six years of misleading and inaccurate accounting statements and inaccurate
capital reports that enabled them to grow Fannie Mae in an unsafe and unsound
manner." These charges were made in 2006. The Court ordered Raines to return
$50 Million Dollars he received in bonuses based on the miss-stated Fannie Mae
profits.

Tim Howard - Was the Chief Financial Officer of Fannie Mae. Howard "was a
strong internal proponent of using accounting strategies that would ensure a
"stable pattern of earnings" at Fannie. In everyday English - he was cooking the
books. The Government Investigation determined that, "Chief Financial Officer,
Tim Howard, failed to provide adequate oversight to key control and reporting
functions within Fannie Mae,"

On June 16, 2006, Rep. Richard Baker, R-La., asked the Justice Department to
investigate his allegations that two former Fannie Mae executives lied to
Congress in October 2004 when they denied manipulating the mortgage-finance
giant's income statement to achieve management pay bonuses. Investigations by
federal regulators and the company's board of directors since concluded that
management did manipulate 1998 earnings to trigger bonuses. Raines and Howard
resigned under pressure in late 2004.

Howard's Golden Parachute was estimated at $20 Million!

Jim Johnson - A former executive at Lehman Brothers and who was later forced
from his position as Fannie Mae CEO. A look at the Office of Federal Housing
Enterprise Oversight's May 2006 report on mismanagement and corruption inside
Fannie Mae, and you'll see some interesting things about Johnson. Investigators
found that Fannie Mae had hidden a substantial amount of Johnson's 1998
compensation from the public, reporting that it was between $6 million and $7
million when it fact it was $21 million." Johnson is currently under
investigation for taking illegal loans from Countrywide while serving as CEO of
Fannie Mae.

Johnson's Golden Parachute was estimated at $28 Million.



WHERE ARE THEY NOW?

FRANKLIN RAINES? Raines works for the Obama Campaign as Chief Economic Advisor

TIM HOWARD? Howard is also a Chief Economic Advisor to Obama

JIM JOHNSON? Johnson hired as a Senior Obama Finance Advisor and was selected
to run Obama's Vice Presidential Search Committee


IF OBAMA PLANS ON CLEANING UP THE MESS - HIS ADVISORS HAVE THE EXPERTISE - THEY
MADE THE MESS IN THE FIRST PLACE. Would you trust the men who tore Wall Street
down to build the New Wall Street ?


McCain or Obama? Stay updated on coverage of the Presidential race while you browse - Download Now!

Note- I'll get around to uploading the attached Powerpoint later.

Here's my response to that email:
First off, Lincoln never said one word of that. Those quotes ("The 10 Cannots") are by Rev. William John Henry Boetcker.

As far as the 3 individuals you claim are Obama "advisors," well, that's also false:
http://www.snopes.com/politics/obama/fanniemae.asp

One of them was briefly on the VP search team before resigning. The other two have no known link to the Obama Campaign.

If you want a list of "who to blame" here's a start:
http://www.huffingtonpost.com/2008/10/12/economic-dishonor-roll-vi_n_134018.html

Don't get too hung up on subprime mortgages. They are only a small slice of the mortgage-backed securities going under. Remember that a subprime mortgage was one that DIDN'T qualify to be purchased by Fannie/Freddie. The areas that are hardest hit by the mortgage crisis (Las Vegas, Boca Raton, Cleveland) were NEVER hotbeds of subprime loans. Also, AIG's failure was a result of financial derivatives, not mortages. There's more to this.

The reason Republicans get blamed is simple: they were in power when the bubble burst. The most mortgage-backed securities were sold in 2005. Housing prices started to fall in 2005. In 2005, Republicans controlled majorities in the House, the Senate, 6 out of 9 Supreme Court appointments, and, of course, the Presidency. Those are all basic facts that we can all agree on. Had it been Democrats holding at least some of those offices, it would be a different story. Why does that matter? The Chairman of the Federal Reserve is appointed by the President and confirmed by Congress. Same with the head of the Securities and Exchange Commission. Congress is in charge of overseeing the management of Freddie and Fannie, along with the FHA (Executive Branch). The courts review shareholder lawsuits. All of these organziations have 1 basic job: make sure that Wall Street doesn't sell chicken shit and calling it chicken salad. They can sell risky investments, but they have to call it risky investments. Had the risks of mortgage-backed securities been properly labeled, none of this would have happened.

Part of the reason the market is now partially recovering is Republicans have abandoned their "government is always the problem, the private sector is always right"mentality. I'm not saying the opposite is true, but there are cetain things (roads, bridges, schools, police, the military, consumer protection, Wall Street regulation) that are necessary funcions of any government.

Newsweek had an in-depth article about the questionable housing deals by both candidates:
http://mobile.newsweek.com/detail.jsp?key=33060&rc=top&p=0&all=1

From Keating and McCain to Obama and Rezko, Americans of all walks of life tried to get rich off the housing bubble with money borrowed from the Chinese.

If you want to know more about what really caused this mess, start reading either The Cunning Realist (a lifelong Republican blogger) or Paul Krugman (who won a Nobel Prize in Economics yesterday).

-Clay

Wall Street Gets Blue Balls

HOLD ON TO YOUR TOUPEES! This has been a wild ride.

I honestly wonder how necessary Bush's first economics speech was. The situation was that much worse than it was 6 months ago. Did someone just lean over and tell him that for the first time? I wonder if part of the sharp fall is because of him panicking the markets.

Fuld gets punched in the face and AIG execs party at taxpayer expense. Here's the receipt. Oh yeah, and they're now getting even more taxpayer money. When will the criminal prosecutions and asset forfeiture proceedings start?

For some historical perspective, here's an article from the Chronicle of Higher Education focusing on the Panic of 1873. Probably a lot more applicable to today's crisis than the Great Depression.

Oyster runs us through some numbers. Speaking of numbers, what would it take to close the markets?

UPDATE- Now that I've bitch-smacked delicious into working, I'll post a few more links.

The Candidates Own Questionable Real Estate Deals. From McCain and Keating to Obama and Rezko and also the Veeps, crooked real estate deals have infected the system.

Bethany McLean, author of "The Smartest Guys in the Room" takes on the crisis. She basically said that all the wonderful post-Enron reforms suggested were never acted upon, prime among them were shareholder rights and revamping corporate board composition. I read that book and was just floored about how blatantly evil those guys were. Fucking granny in the ass, the death star, the list goes on and on. Also, had it not been for one incident when Bush was running for Governor in Texas, Ken Lay would probably be our Secretary of Treasury right now.

Alan Greenspan bets the system's stability on traders not being greedy. Dumb fuck. I want a refund on your book. The whole book talks about the joy of the free market and about how he had to bailout the free market when it got out of control. He's half Adam Smith, half Karl Marx.

International take on the bailout. After the US went around forcing other countries to implement "shock therapy" responses to economic crises, the US does the exact opposite.

The national debt clock runs out of digits. They've got a new board on order, but until then, the $ sign is replaced by a 1.

----
*Title Also, who knew the bronze Wall Street bull was anatomically correct?

Foreclosure Alley

Shocking video. Personalizes the tragedy.

Great Editorial Cartoon on Paulson Bailout

(click here to view)

Ed Stein Rocky Mountain News Sep 24, 2008 EditorialCartoonists.com

H/T to First Draft

Email by Congress-critter about the economic crisis

Here's an email allegedly sent by an anonymous congressman about the subprime mess. I doubt a congressman wrote it, but a legislative aid, I'd believe. Judge for yourself:

Paulsen and congressional Republicans, or the few that will actually vote for this (most will be unwilling to take responsibility for the consequences of their policies), have said that there can't be any "add ons," or addition provisions. Fuck that. I don't really want to trigger a world wide depression (that's not hyperbole, that's a distinct possibility), but I'm not voting for a blank check for $700 billion for those mother fuckers.

Nancy said she wanted to include the second "stimulus" package that the Bush Administration and congressional Republicans have blocked. I don't want to trade a $700 billion dollar giveaway to the most unsympathetic human beings on the planet for a few fucking bridges. I want reforms of the industry, and I want it to be as punitive as possible.

Henry Waxman has suggested corporate government reforms, including CEO compensation, as the price for this. Some members have publicly suggested allowing modification of mortgages in bankruptcy, and the House Judiciary Committee staff is also very interested in that. That's a real possibility.

We may strip out all the gives to industry in the predatory mortgage lending bill that the House passed last November, which hasn't budged in the Senate, and include that in the bill. There are other ideas on the table but they are going to be tough to work out before next week.

I also find myself drawn to provisions that would serve no useful purpose except to insult the industry, like requiring the CEOs, CFOs and the chair of the board of any entity that sells mortgage related securities to the Treasury Department to certify that they have completed an approved course in credit counseling. That is now required of consumers filing bankruptcy to make sure they feel properly humiliated for being head over heels in debt, although most lost control of their finances because of a serious illness in the family. That would just be petty and childish, and completely in character for me.

I'm open to other ideas, and I am looking for volunteers who want to hold the sons of bitches so I can beat the crap out of them.

I wonder why he's so hesitant about the bill. Could it have something to do with this?

Cunning Realist comes out hard against the bailout. In terms of legal prosecution, nothing should be off the table right now. No private or public sector official, elected or appointed, should be immune. Impoverishment via legal fees? Yes, please.

It looks like Obama and some key Dems are rejecting the bailout proposal. Very interesting to see how this develops. There's still plenty we don't know about the crisis that hasn't been made public, but if Obama comes out explicitly against this proposal, I have a hard time believing it will pass.

UPDATE- Made a few changes after I first posted this. Also, does this mean Goldman and Morgan Stanley are kaput? We shall see.

I wonder: What is Bernanke up to this weekend...

All of the interesting stuff that's happened with the subprime mess and related fallout has happened on the weekend. I wonder what Bernake is up to this weekend...

If you're still trying to figure out what is going wrong and why, here's an excellent FAQ by the authors of Freakonomics.

The Fed is conduction a scare campaign against the Senate to get their bill passed as quickly as possible. With as few questions as possible.

Krugman comes out hard against the proposed bailout. There is no quid-pro-quo for the taxpayers. Without nationalizing failing firms before handing them loads of cash, what's going to happen, especially if it doesn't work? Also, there's no real attempt at accountability for the army of liars, tricksters, and greedy bastards that started the whole mess. Nothing to discourage the next mess.

Here are a few of my personal thoughts on the issue:
* I STILL don't know what a derivative is and how the derivative market works. I consider myself a fairly bright person and I've been researching it, but I still don't get it. I have a strong suspicion most of the people involved don't get it, either. The whole mess should either be shut down, or regulated to the point of driving out everyone except those that really know what they're doing (if those people even exist).
* A government bailout of the size they're talking about is going to light a fire under the commodity markets. Inflation, here we come! $6 gas, brought to you by the fat fucks on Wall Street! If only people would make the connection between the dollar and commodity prices...
* The political implications of this mess are MASSIVE. The Democratic coalition could be torn asunder. What I find interesting are 2 main factors: mortgage holders and gasoline consumers. Both constitute huge voting blocks. If politicians do too much to help out mortgage holders, they'll drive down the dollar and drive up the price of gas. If politicians let companies fail, the price of gas will plummet (stronger dollar + fewer consumers (less demand) = lower prices),* BUT they'll have a lot of angry foreclosed homeowners beating down there door. This is a lose-lose situation for politicians and I don't see a single one that has any inkling of what they're in for.

If anyone is going to anything about the subprime mess and it's related dominoes, the first step has got to be holding people accountable. That means jail time and confiscated assets for investment bankers, mortgage brokers, traders, "liar loan" applicants, etc. All of those people, though, are big contributors. Don't hold your breath. It looks like the lesson of this bubble will be to those that avoided it: participate in the next one, because you'll be paying for it whether you like it or not.

UPDATE- Wow, I knew energy prices would explode, but this is ridiculous. $25 a day is too much instability. They had to pause trading because the price was going up too fast! $6 gas on the way, thanks to Hank Paulson. And to think we could soon be back to $3 or $2.75 a gallon soon without the intervention...

Economy loses a wheel, but keeps rolling along, somehow

I've been silent on economics lately. There's been plenty going on, though. Even my mom is starting to get the subprime thing is pretty big. And subprime is only the beginning...

The big headlines:Merril Lynch gets bought by Bank of America at firesale price, Lehman Brothers bit the dust, and Washington Mutual is looking for a buyer. Maybe a Chinese buyer.

Speaking of China, this is the "biggest economic adjustment in 30 years". Wonder how many commies buried in the prisons of the most capitalist country on earth are saying, "Told ya so!" And then they get put on bread and water again in their prison.

Lehman Brothers failed at the delight of quite a few people. Fuld, the CEO, has been getting murdered in the press and deservedly so. An employee set up a potrait of Fuld in the lobby of the building for people to write on for $1. Some of the comments are classic. Both the NY Times ("Need a Job? $17,000 an Hour. No Success Required.") and the government of Argentina ("Argentina to Lehman: Worry about yourself") decided to rip Fuld a new one.

4 people who predicted the subprime crunch. There are plenty more than 4, but that's a start. What do these 4 people have in common? Not to be too mean about it, but all 4 have faces only a mother could love. Louisiana's Richard Baker (of the Baker Plan) is one of the 4.

An interesting report out of S&P: Pressure builds on America's AAA debt rating. They would never have the balls to do it, though. They'd be called financial-terrorists, hunted to the ends of the earth and sent to Gitmo never to be seen or heard from again. But if they did downgrade the US's bond rating...

And now, to close with: The Next Bubble: Pessimism. Published last week. Great timing. Good for a laugh.

Lifestyles of the Famous and Subprime...

One of the interesting things about the subprime mess is who is being affected and the ripple effects. I've noticed a few interesting people have been snagged...

...like Congresscritter Laura Richardson. Anyone wonder how that will figure into her upcoming votes?

How can a brother make it on $120 million?

Evander Holyfield is also having some troubles.

Look who could use a visit from the Publisher's Clearinghouse:

Ed McMahon gets in a jam. An expensive young trophy wife and contributed to his financial troubles. I guess those trophy wives get expensive... James Howard Kunstler would have no sympathy for one of the people who sold America on the religion of unearned wealth.

Economics news of note - 12 Dec 2007

One of the big questions about the subprime mess (and going all the way back to Enron) is, 'Where are the bond rating agencies?'

Well, here they come. S&P has downgraded hundreds of SIV's [Structured Investment Vehicles]. SIV's are bundled debt packages that frees up capital for other uses. Or at least, that's the idea. SIV's were used by Enron as part of their scheme to keep a bunch of debt off the books. It's also one of the things that makes the subprime mess so dangerous. The subprime loans were packaged up, shipped off and nobody know who holds them now.

As company priorities Shift, fewer get AAA debt rating. As companies take on more risk and put emphasis on meeting quarterly goals instead of long term survivability, only a handful of companies still have AAA bond rating by all the credit agencies. As of this article's publishing, here's the list:
Automatic Data Processing, Berkshire Hathaway, ExxonMobil, General Electric, Johnson & Johnson, Pfizer, Toyota, UPS, Northwestern Mutual Financial Network

Income servicing debt [Chart]. Here's a chart that you can scare people with. Remember, consumer spending by those in this chart is a scarily large part of the global economy.

Alexander Hamilton's America. Skip past the first third or so of the article to get to the good stuff.

Now and Forever. Paying for Iraq. Youngsters who were just starting high school when the U.S. invaded Iraq are in college now. Their children, yet unborn, will be called on to fork over tax money to continue paying for the war. More from Vanity Fair.

Morgan Stanley Issues Report Entitled, "Recession Coming." Blunt and to the point.

No one biting in buyer's market. "In a buyer's market, YOU should be BUYING!!!"

News Buffet

News buffet is open. All you can eat.

LifeStraws. A year supply of potable water in your pocket. I've heard the new version even eliminates the iodine aftertaste. This is the sort of down to earth engineering we need much more of. A great emergency preparation measure. Just imagine the suffering in Africa and elsewhere a few million of these could alleviate. They're cheap to produce and relatively easy to distribute. I'd imagine they could have saved quite a few lives in the aftermath of Katrina.

A lot of politicians are praising ethanol as the solution to Global Warming/Dependence on Foreign Oil (pick your party line). Ethanol: Dangerous Delusional Bullshit. WSJ article on Ethanol. I like the quote, "Ethanol is for drinking, not driving." There's an important distinction to make, though: current forms of corn-based ethanol are wasteful, while sugarcane-based ethanol has been viable for at least a decade. The most positive scientific report I've seen on corn based ethanol has it as a slightly positive EROI (energy return on investment). I'd say the majority, though, say it's either a wash or a waste. Nothing any politician says will ever override The Second Law of Thermodynamics.

Sugarcane-based ethanol, however, is economically viable and was part of how Brazil (along with major investments in offshore oil and energy conservation) became energy independent. What makes sugarcane-based ethanol so great is you get to use the bagasse from the crop. Given Louisiana's large sugarcane industry, there are some real business opportunities here.

CNN: The Corrupt News Network. Kudos to the LA Times. Remember, it was CNN that gave you the steaming pile of dog poop that was Crossfire (which also gave the world Tucker Carlson). Fox News, to a larger degree than some people seem to think, is more of an evolution of CNN than an out of the blue creation by Rupert Murdoch.

Speaking of Fox News, they give the smackdown to Rove on his historical revisionism on the leadup to Iraq. The blind squirrel finds yet another nut. I've noticed some actual quality journalism on Fox News every once in a blue moon. I'm thinking Fox News, being a business first and a propaganda outlet second, might be hedging it's bets on a Democratic 2008 Tidal Wave.

91% of Americans think they'd have a higher quality of life in Canada. They're forgetting about 1 thing: WINTER! Well, if Global Warming takes hold, I just might move to southern Canada and be happy.

Ending Famine, Simply by Ignoring the Experts - New York Times. Don't listen to the Chicago Boys if you want to feed your country.

politics: My generation(18-24) needs to take the election back from their genertion (65+). Interesting discussion on Reddit.

Apple hits record 6.81% market share with indications that might be low. I'm a proud member of that 6.81% for almost 6 years now and no regrets.

The battle for brainpower. King Abdullah of Saudi Arabia, the country that sits on 25% of the planet's oil, knows that oil is not his country's future. That's why he's spending $12.5 billion to found a graduate research university, which he'll endow with $10 billion - as big an endowment on day one as MIT has built in 142 years. The point of this project, on a grand scale even by Saudi standards: to attract the best researchers in science and technology.

Nigeria has more oil than any other African country but can't keep the lights on because of violence and corruption. Sad, but true.

"This time, market players seem truly horrified — because they’ve suddenly realized that they don’t understand the complex financial system they created." Krugman on the Subprime mess. How bad could the subprime mess get? Well, one could look at Detroit's Housing Apocalypse for a real nightmare scenario. $250 for a house. Estimated note of $1.

More financial news here. US Citizens thinking about leaving the US and more on the subprime mess. A good quote: “With someone like HSBC throwing in the towel, going for transparency… it makes Citi and the other parties look conspiratorial at this point if they don’t ‘fess up and do that.”

Financial News of Note

Countrywide gets $50 Billion bailout from the taxpayers via cash advances on transactions with the Federal Loan Bank. From what Krugman is saying, it seems like a quasi-governmental institution is fronting Countrywide cash on future transactions, which, while not quite a bailout, is almost certain to blow up in taxpayer's faces. One things for sure, though, the subprime mess isn't going away anytime soon. The few companies that saw the subprime debacle coming, are reaping handsome rewards. 1,000% ROI. Hedging against subprimes is now the most profitable single trade of all time. Oh yeah, and remember kidies, you can't call talk about the probability of a recession. You've got to talk about kumquats

New Orleans' top 10 most powerful people and Fortune's 25 Most Powerful People in Business. Some of the bios are way too kind on the executives. For example, Wal-Mart is about to head down the shitter because their entire business model (the "warehouse on wheels") is based off cheap diesel fuel. That's going to kill Wal-Mart, not bad PR for employing slave cheap labor.

Oh yeah, speaking of companies in trouble for outdated business models, Vista, what was supposed to be Microsoft's breadwinner for earnings for the next 40 quarters just got rated as one of the 10 worst tech products of all time. Look who else made the list. Ouch.

If the US was populated with nothing but Macroeconomics professors, this would be the trial of the century.

Tidewater staying in New Orleans. They can say whatever they want, but the real reason they're sticking around is bulk cargo, which depends heavily on a combination of barges, the Intracoastal Waterway, and specialized loading/unloading facilities, is booming big time and guess where the biggest bulk cargo port in the world is.

Time to end the Petrodollar? "The dollar is like the Microsoft Windows of the oil world," said Tertzakian - Now that's a quote that doesn't inspire much confidence! Uncoupling oil from the dollar could infect the rest of the economy like the subprime debacle has.

Warren Buffet calls for return of Estate Tax. Tax my heirs! "Dynastic wealth, the enemy of a meritocracy, is on the rise. Equality of opportunity has been on the decline. A progressive and meaningful estate tax is needed to curb the movement of a democracy toward plutocracy." Is that Warren Buffet talking or Che Guevara? It's actually sort of sad that things have gotten so bad that even the filthy rich are starting to complain about the rich/poor gap.

Naomi Klein lays out how to vaccinate against the Shock Doctrine. Her book in next on my reading list. Right now I'm still working on "The Smartest Guys in the Room" and "The Black Swan."

RIAA continues to sue college students, except at Harvard. Afraid of their big, bad checkbooks? Don't worry, RIAA. Harvard would never make that bad an investment. H/T to Instapundit.

Retire on minimum wage. Actually. Pretty interesting story, except for the ending. A lot of economists say that remittances have done more to alleviate poverty in developing nations than all the foreign aid and World Bank programs combined.

Rich citizens can't escape our poor public infrastructure. Don't enjoy that $25,000 desert too much: if you're lucky, it's full of salt because the cooks only know how to follow directions, not innovate. If you're unlucky it's full of roach droppings because the cooks are too poor to care about cleaning the kitchen.