Cub fan creates an everlasting Hell

Maybe only White Sox fans can fully understand the irony of a Cub fan mausoleum in which they can place their cremains upon death. The morbidity and gallows humor that surrounds the Cubs franchise permeates every business venture associated with it. Baseball is supposed to be a hopeful and happy endeavor, the American pastime, but leave it to the Northsiders to find some opportunity in death.

These losers relish their loserdom, so a cemetary is the natural extension to this tragic team.

It fits... I just wish I had thought of this.

Earth Day Rant: what about kids?

With the knowledge that our carbon economy is destroying the ice caps, this year we have more reason than ever to embrace the Earth Day sentiment, so I did the Nature.org carbon footprint calculator... and, no surprise, I'm one of the worst offenders on the planet when it comes to leeching carbon into the atmosphere and having a general lack of regard for conservation.

I spew out nearly 40 tons of CO2 per year which is 7X the world's average and much more than the US average of 27 tons. The questionnaire covers such topics as how much I drive, the size of my house, my recycling habits and whether I eat organic food and meat. The lowest I can get my carbon level is 9.6 by following all their recommendations of becoming a vegetarian, never traveling by plane, and always driving a hybrid car, etc.

Here's my problem with this and all such carbon footprint calculators: they never ask how many offspring you have. The number of progeny an individual produces definitely would increase the amount of carbon used by the family for energy and other things, assuming the kids lived in Western civilization. Kids will eat meat, need clothes and heat, and some day they will likely drive cars and travel in airplanes and have kids of their own. Yet, none of this is taken into account when figuring someone's carbon footprint versus an individual who has never procreated.

In fact, my personal score improves if my wife and I were to have 2 kids living in our house instead of just the two of us. Using this twisted logic, a guy my age with six kids in my smallish house and using my car would actually be considered to be saving the planet with his lifestyle!

I fully understand the compelling urge to reproduce; we are all the result of the natural process of evolution that has selected out the most successful reproducers. Our limbic systems are hard-wired to make more of us. But let's just realize that these kids will all spew carbon into the atmosphere for 80 years and they will likely have kids themselves who will do the same and this should be factored into the carbon footprint calculation. It's eery how scientists, journalists, conservationists and citizens of every stripe never see this huge discrepancy with footprint calculations and happily go along thinking that if they cart around their passel of a dozen kids in a hybrid Escape then all is well. (Pets, too, generally eat meat and require heat and shelter, although to a much lesser extent than children.)

Where's the little pie wedge labeled "kids"

Although I do not have children, nor have I adopted Third world kids to live a frothy Western lifestyle, and I will never have grandkids or great grandkids to melt whatever remains of the Arctic ice cap and exterminate the polar bears or drown the residents of the Maldives, I do see the immense joy that parents exhibit and appreciate that procreation is not really negotiable. Humans will continue to populate this planet until this planet cannot hold any more of us, and we will continue to justify this even as the last of the remaining large mammals becomes extinct and climate change irrevocably alters our habitat.

Although I pump 40 tons of carbon into the atmosphere every year and remain the scourge of Nature.org and every other so-called conservation group, I know my destructive planetary onslaught, unlike most everybody else's, will end in a mere 40 years...

..so, I'll take an extra long, extra hot, shower to celebrate Earth Day.

TEA Party makes no sense

Taxed Enough Already (TEA) Parties were staged all over the country with promises to repeat these protests again and again.  I admit that I hardly pay attention to the wingnuts now that they have been relegated to background noise as the adults try to fix the problems of the last eight years, but this phenomenon has penetrated my medulla oblongata.

What are they protesting?  Increased taxes?  The current budget bill calls for reduced overall federal taxation.   Reduced means less, BTW.   Are they complaining about the increased spending? Then why don't they call it Spending Enough Already (SEA) Party?  Just sayin'.

Is the TEA party based on the original Tea Party movement from the 1770's?   If so, then it is not consistnet with the same argument which was taxation without representation.  These nutjobs have representation, they just lost the election.  That's what a republican democracy is all about.

Obviously some other factors are at work with this well-organized movement, and I smell corporatism disguised as populism.  We have the puppetmasters (Armey and Gingrich) whipping up the ignoramuses again with some new faux outrage.  I guess abortion, prayer in schools and gun rights just can't get them elected anymore. 

Obama is wrong. Period.

Nobody covers this better than Glenn Greenwald.  Olbermann has been issuing scathing criticism of President Obama's reinforcement of the policy of the previous administration regarding civil liberties.  In fact this infringement is being extended by President Obama so that it now includes a prohibition of citizens' rights to pursue damages in court. 

The Olbermann videos in the above link need to be watched, especially the second one with Jonathan Turley, a respected Constitutional attorney.  Any honest person must recognize the travesty implicit in this governmantal abrogation of our rights as citizens.  

Suffice to say that I read Greenwald every single day and I cannot understand how any responsible citizen cannot garner valuable argument from him.  Although I may not always understand his theses or agree with his opinion, Greenwald is one of the most articulate voices from the left, and in this case he is spot on with his defense of civil liberties and his discomfort with the current administration policies.

The Rhyminig of Historical Rhetoric

Cartoon from the Chicago Tribune, 1934.

And you thought Limbaugh and Beck thunk up all that bile on their own!!  

(h/t barry ritholtz)

Why GM should be Euthanized

I guess this is what you get when government tries to bully industry into a "good" idea: a really really bad idea  Hummer is being retro-fitted into making segways.

Upsidetrader said it best: "Here's me in the new GM PUMA on my way to a business trip in Chicago. I will arrive on July 2, 2011, but boy do I feel good about myself. "

Why doesn't govt just tax gas and let the market place figure out the technology.  Who's going to buy this piece of crap?    A corporate attorney on his way to meet with a venture capitalist group?  A neurosurgeon rushing to make that 7:30 am craniotomy?  Bankrupt seniors have $5K for a golf cart to knock around the trailer park?

Get real.  Good-bye, GM.  It's just sad to see you go out with such a lack of dignity.

Two ideologies on the economy

Jim Nussle, former OMB Director under George W. Bush, was on CNBC criticizing the Democratic approach to the current economic recession.  He applauded David Walker's rheotoric against deficit spending an went on to say that we should get out of this recession "the way we always do."

He likened the current leadership to a drunk at the bar and said that Europe "lectured America on the ills of socialism."  Really.  I think what happened is that leaders in Europe pointed out that they already have the social safety nets that the US needs to fund and put in place wiht universal health care the main objective.

Nussle said that we need to promote business and employment, but he failed to admit that health care costs are the fastest rising cost to empployers and the major barrier to increasing employment (or limiting layoffs in the recession) for small business.

The fact is that under Republican control we spent like drunks too, the only difference is that the expense went to unncessary and mismanaged war.  Just think what the trillion dollars would have done for American schools and health care over the last decade.

Now we have a global depression lurking at the door due to a deflationary cycle.  We have twoideologies from to choose. Spend money or save money.  Obama, Bernanke and Congress have opted for the former as a way to stimulate the economy by creating jobs.

Imagine the alternative.  Let's not spend any money and let's balance the federal budget over the next 24 months.  Unemployment, now at 10% on it's way to 12%, would rise precipitously to 15 or 20%.  This would likely shatter the already structurally damaged economy.  Reduced consumption would further reduce industrial production which would lead to more layoffs, and the vicious cycle would continue.  This is exactly what happened during the last deflationary recession which was called the Great Depression.

During the 1930's the conomy was not as global and stimulation could be immediately accomplished by putting dollars in peoples' pockets which would go to domestically manufactured products and increased domestic industrial production.  Today many of those dollars would go overseas for consumer products, so the approach has to be nuanced.   Obama's plan is such a plan.

The proposed plan is three-fold: 1) Direct stimulation and immediate spending.  This is accomplished by increasing unemployemnt insurance, direct payments to individuals and lower home mortgage rates.  The advantage is that money is pumped into the economy immediately, the disadvantage is that much of the money goes overseas for imported consumer products.

2) The second part is Keynesian government-funded programs such as infrastructure rehab, transportation projects, education improvemnt, job training and health care funding.  The advantages are that this spending leads  to predominantly domestic stimulation and is value-added with increased long term economic growth coming from a better educated and healthier human resources as well as improved roads and factories for increased efficiency.  The huge disadvantage to this part of the plan is that it takes 18 to 24 months to implement and by then the economy could past the point of rescue.

This potentially has the greatest long term effect and I would argue that if --- IF-- the previous administration and Congress had been alert and proactive and had avoided the huge Keynesian spending in Iraq, we could have diverted those funds to our own domestic spending, which would have given us universal health care, free college education for all and improved and light rail inevery city.  Very regrettable indeed.

3) The third part of the plan is tax cuts, especially for small businesses and middle income people.  Reduces federal tax revenues in the short term, but potentially increases economic growth in the intermediate and long term.

For my money, I would rather spend less and emphasize the needed infrastructure and health care spending, but unfortunately we need immediate stimulus too.  Obama's plan is as close to perfect as it gets. One-third is devoted to each of the three parts of the plan.  We are indeed in bad straits and nobody knows if such enormous spending will work.  The deficit projections are daunting and rely on a large and quick turn-around in GDP.  If it fails, and it may, then we are destined for possible disaster.

But doing nothing is assured disaster.

David Walker and Medicare Advantage

"We want Medicare Advantage to save us money."  David Walker, Comptroller General of the US, on CNBC this morning.

Whoever said that Medicare Advantage was supposed to save us money?  Walker is the guy who goes on 60 Minutes every 6 months or so to tell us all that Medicare and Social Security are going to bankrupt the nation and lead to Armageddon.  We're putting the bill on our kids' credtit card, yada, yada, yada.  

He was doing his shtick with his emotion very well articulated, as usual, this morning.  Today he mentioned how the Medicare Advantage programs are costing the system instead of saving money as they were supposed to do.

Wait a minute.  Who said the Medicare Advantage (MA) program was supposed to save the Medicare system money?  We've known for quite a while that MA plans cost the beneficiary a monthly fee that really adds no value on a population basis, and the costs to the Medicare pool are also increased.  It's a twofer for the insurance industry.

I'm not busting Walker's chops on this, but let's call it like it is.  MA is a boondoggle that was designed by the insurance industry in order to get their grubby hands on public funds, something they have been wanting to do ever since publicly funded health took hold.  In fact, insurance executives brag to shareholders that their MA plans add dollars to the company's balance sheet, and these are dollars that are unavailable to patient care.

Medicare is designed to be comprehensive.  The amount paid in premiums to an insurance company for MA plan is split with much of the total going to further administrative expense.  

Insurance companies tout their ability to screen doctors and monitor quality, which is really cose for limiting choice to the lowest cost providers.  The quality standards within the Medicare system are the highest in the industry and private insurers do not add any value to the product offered.  

Medicare is in financial trouble.  Costs are spiraling upward with increasing enrollment and health care costs.  Having private insurers ladle off some fat was okay when we were solvent, but this is one boondoggle that needs to be removed.  If folks can pay hundreds per month for a private plan, then perhaps they should be paying more for the basic Medicare.

The fact is, the vast majority of MA customers would be better off just banking the premiums and paying out of pocket for additional care and copays.

Economics and the Avoidance of Armageddon

My open letter to the Anti-pundit, who sent references without any adjoining opinion or discussion.  I'll assume he wanted to solicit my opinion, so here it is.  I welcome a response and discussion.

Items in question:

Greenwald:  http://www.salon.com/opinion/greenwald/2009/04/04/summers/index.html

Moyers and Black: http://www.dailykos.com/storyonly/2009/4/4/716394/-Moyers-drops-bailout-bomb-on-Obama

Ritholtz on AIG: http://www.ritholtz.com/blog/2009/04/aig-before-cds-there-was-reinsurance/#more-22986

I read the references that you sent.  Black is correct in maligning the marriage between Washington and Wall Street, but he acts like this is something new.  In fact, going all the way back to Alexander Hamilton, we've had corruption at the highest levels of finance and govt.  And I would say it's even worse in other types of govt models like Communism (Russia is the obvious example, but also we see it in Cuba) and monarchies (QE1 had a stranglehold on the financial system of the world; feudal lords were also an obvious example).

I'm not saying it's okay, just saying that money and power will always get married.  Greenwald implies that a new President can change the status quo in 90 days and that is unrealistic.  While I agree with the sentiment, I can appreciate the practicality of keeping the system intact for now.  There is also a marriage between the educational system and the financial world with the brightest students pursuing careers on Wall Street because that is where the money is.  Sure, there are exceptions like Krugman and Romer and Geithner, who are lifetime academics, but they are rare exceptions.  Romer is chair of Obama's CEA after all.  Geithner is a career govt official.

For the president to ignore Sunmers' and Rubins' input would be lunacy.  We also assume that Obama is blindly following the advice of one side of the debate which is not necessarily true. 

Black made the analogy of a plane wreck and bemoaned having the pilots who crashed the plane lead the investigation.  To use his analogy, I would say we are still cleaning up the debris on the runway and seeing if there are any survivors. Any investigation I have seen so far, such as with the Congressional hearings, has devolved into inane political posturing by the representatives.  I cannot figure out who is the dumber, Maxine Waters or Michelle Bachmann.  Even Barney Frank, who is hailed as the smartest guy on Finance in Washington, seems to have a very superficial understanding of the crisis for someone who has been involved with the issue for 2 decades.  

To wax philosophical for a moment, money is the property of the federal reserve-- they print it and control how much is in circulation.  We can accept it as a payment for the labor and goods we provide, but no law says you are required to do this.  The resolution of this crisis may require the devaluation of dollars at some point, but that point has not come yet, at least not in relationship to other currencies and commodities-- which is after all the only practical way of valuing a currency.   The federal reserve is a quasi private organization of banks and we can only loosely control its management.  Each of us has to make a determination of our value to society and we can choose to accept or reject the offer made.  (Ask John Galt.)   

Black and Greenwald and Moyers have a lot of bile for the status quo and the way it is being handled, and I can appreciate their skepticism and frustration.  But, they offer no alternative solutions.  In September, we approached the edge of the abyss and we successfully backed away.  Not everyone appreciates how close we were to financial Armageddon.  This is not to say that we should not or could not have seen it coming.  Economists like Taleb and Roubini and Ritholtz and many others have been railing about it for years (and reading Ritholtz since 2006 has likely saved me tens of thousands of dollars), although each one of them have intimated in various venues that they had no idea it would unwind so quickly.  Even a semi-coherent non-professional could figure out that lifestyles were out of hand:  entire subdivisions of $500,000 homes were built on speculation, total household debt is 100% of GDP, our trade imbalance is increasing exponentially, federal budget deficits are rising due to wasteful unnecessary war.  And so on.  It has taken us 25 years to reach this point.

I would also comment that as bad as this situation still is, look at the bright side.  It is being managed without bloodshed, revolution or massive dislocations in peoples' lifestyles (so far).  Just look to 40 years ago when a similar (I would even say less severe) crisis occurred in China.  What was the solution?  The Cultural Revolution orchestrated by the Party slaughtered 35 million people.  Or look to the Wiemar Republic in 1933.  After several years of crushing Depression, they elected Hitler as Chancellor whose solution was to exterminate a third of the population and start a world war where 50 million people died.  I hope we have learned from the past enough to avoid such extreme outcomes, but there is no guarantee.

Today we have safety nets: Medicare, Social Security, unemployment insurance, etc.  The crisis will not inundate everyone all at once. That is why we pay our taxes for 20 years and whine that it's not worth it, then all of a sudden, it is worth it.  That's the wisdom of FDR and Ike and like minded progressives.

Ritholtz points out that before AIG developed CDS', we had reinsurance.  I would add that we also had portfolio insurance, S&L shenanigans, internet bubbles, tulip bubbles, etc.  The financial industry has a long history of creating "products" that are designed to bilk us out of our hard-earned labor and the history likely goes back to the first Cro-magnon man selling ink to write on cave walls in France.  As dour as Ritholtz has been for the last several years, I think it's only fair to point out that he has recently called for people to get back into the market and invest in stocks.  I tend to agree with Ritholtz that someone at AIG intended to commit fraud; he's the lawyer and I'll defer to his professinal opinion.

So, bad economic conditions can have dire consequences and calling for a complete takedown of the status quo would have a plethora of unintended consequences, mostly bad.  The solution must be practical.  My opinion is that Obama is handling the greatest economic crisis in 80 years with unbelievable aplomb.  I have no idea if it will have a better or worse outcome than we had in the 1930's or 1917 or the 1870's, and neither does anyone else.  I do know that ignoring the problem, castigating individual banks, calling for massive large bankruptcies, allowing unemployment to reach 25%, being vindictive and wasting time putting the pilots on trial while the passengers are burning to death... all should be options that off the table.

Black and Moyers seem to think that we should dismantle the reserve banking system by 9:00 am next Tuesday.  Is that really in the best interest of the working man?  There will be plenty of time for Waters and Bachmann to make political hay, but let's clean up the runway first.

Ex-Bush diplomat: North Korea is (another) Bush failure...

Of course North Korea (DPRK) launched a ballistic missile.  This is one of the most telegraphed provocations to date.  They have launched before, they have said they would do it again, they had placed the weapon on the platform on display for all the world to see via Google Earth (at left).  It's been an ongoing situation for at least five years.

The threat to the United States is not immediate and, in fact, is only theoretical.  Even under perfect circumstances, the Taepodong missile could barely reach Hawaii from North Korea.  The real threats are that DPRK would destabilize Asian allies, or more worrisome, that the economically challenged regime would sell the technology to Iran or terrorist groups that are hell-bent on attacking us or our allies.

This situation will require astute diplomacy since China has been the enabling big brother to Kim Jong Il and would not be thrilled with US military action on the peninsula.  Yesterday, before the launch had taken place, John Bolton* (at right), who served as the US Ambassodor to the UN under George W. Bush, was interviewed by Greta Van Susteren of Fox News on this very topic. 

Bolton opined yeaterday: 

The fact is, I don't think the Obama administration knows much what to do. I think their reaction will be in the U.N. Security Council. I think that's going to be entirely inadequate. North Korea, by launching this rocket, is already violating several Security Council resolutions, so I don't think they pay much attention to what happens in New York.

[Note: Obama has said that the act is a violation of UN resolutions and that he will engage our allies in the region.]

   

And when pressed for an answer on what should be done, Bolton added:

 I don't think the U.N.'s going to do much of anything. I think it's very unlikely they'll get a stiff sanctions resolution. The sanctions that were imposed in 2006, when North Korea tested missiles and a nuclear device, obviously haven't not stopped them.

I think the real pressure has to be applied on China, which gives North Korea 80 to 90 percent of its energy and a substantial amount of its food and other humanitarian needs. China's got the capability to stop this nuclear program. We've just never applied adequate pressure to them.

And then... change of subject.

So there you have it.  Bush's own ambassodor admits, 1) this incident is a threat to US interests, 2) China needs to be engaged on the issue, 3) the Bush administration "never applied adequate presure."  We do not know exactly what President Obama will do in this situation, but if history is a guide we do know what President Bush would do.  After the North Korean missile launch in 2006, Bush did... nothing.  He ignored it, did not engage China or the UN or garner adequate allied pressure on the regime... which I suppose is better than the alternative plan which would have been to attack and invade Australia.

Thank you, Mr. Bolton, you may now drift back into the obscurity which you so richly deserve.  (And the next time you get the urge to take an ad hominem swipe at the current administration which is charged with cleaning up the shitstorm left by your previous boss, please just STFU).

*It is also importatnt to note that Bolton has been a lifetime critic of the UN, not of any specific policy of the UN mind you, but rather of the entire notion of an institution of United Nations.  So, in effect, Bush's appointment of Bolton was really just giving the finger to the UN.

My prediction:  Right wing pundits will immediately wet their pants and then they will busily voice all their inane fears and empty concerns and feel the need to tell us how they are "scared" and "worried"... yada, yada, yada.  Count how many times you see or hear those words on websites and Fox news in the coming week.

Martin Feldstein and one problem with CNBC

Martin Feldstein, the conservative Harvard economist who was chair of Reagan's CEA and currently serves on Obama's Recovery Advisory Board, was on CNBC criticizing the administration proposal to limit charitable tax deductions.  

He categorically stated that such a proposal would reduce the amount of charitable giving.  The problem is that he's an academic economist, so I would ask, where's the reference?  Sure, the president argued the opposite point over the weekend saying that the state of the general economy is a better indicator for charitable giving than tax deduction status.  Both men failed to cite an objective study as evidence.

Perhaps this is a problem with economics as a supposed science, and perhaps that is the part of the primary cause of the horrific boom and bust cycles we see.  A high profile academic can go on national business TV with fairly sophisticated viewers and spout his opinion without any compulsion to make his case with a substantive argument or reference.

In medicine, even the least academic practitioner in the most rural locale, speaking to the least sophisticated patient, would likely be able to cite two or three studies published in national referee journals to support placing the patient on the most basic antibiotic or blood pressure medicine.  

So why can't we get a little more rigorous in dealing with the financial crisis that ate the world?

(Also, Feldstein sat on the AIG board that reviewed their financial products; do you think Joe Kernan could broach that important part of his resume during the interview?)

GM: "Thank you"

GM's new CEO made some prepared remarks this morning on CNBC and he thanked the Automotive Task Force for their work and President Obama for his confidence.  He seemed very sure in the "plan" and its execution...   blabbity, blabbity, blab.

He forgot something.  He forgot to thank the US taxpayers.  With all due respect, I would never have invested in GM stock or bonds, and have not driven a GM since the 1978 Malibu I drove 20 years ago which was a piece of crap.  

Now I have been forced to make a big investment in GM against my better judgement... and he forgot to thank me.  But what else should we expect from the Entitled Class?

GOP leaders should give their paychecks back

Whatever happened to the idea of the loyal opposition?  There used to be a time in Western civilization when politics thrived with competing thoughts and themes.  Newt Gingrich presented his Contract with America in 1993 which included a big serving of welfare reform flavored with his trademark condescension.  But welfare reform took hold and eventually won the Republicans the house in 1994 and arguably saved the US a few pennies on the margin.

I never thought I'd look back to those as the good ol' days.

The job of the opposition party is to offer opposing plans.  The international economy is at the precipice due largely to shenanigans in the US' capital markets, confidence is reeling, every type of debt is skyrocketing, unemployment and every economic metric is the within spittin' distance of the worst in history, and what do the Republicans have to offer?

They decry the large deficits in Mr. Obama's budget, but fail to present a viable alternative.  Sure they have broad general principles-- low taxes, cut spending, solve the crisis-- but the specifics are sorely lacking.

The fact is that the US entitlement system dictates almost half the budget outlays as non-discretionary spending, and another 40% or so goes to military spending which is tied up in two failing foreign wars, thus leaving the part of the budget that can be cut vanishingly small.  Add to these issues the reduced tax revenues from increased unemployment, lowered tax rates and the lack of capital gains over the last 12 months, and you have all the makings of a  spiraling uncontrolled budget deficit.

The Republicans know all this on some level, and I can understand why they would harumph at the President's current budget since it contains a lot of programs that are anathema to the Republican platform of small government and self-reliance.  So let's see what the loyal opposition can offer instead. 

I was not the only one waiting with baited breath for the "Republican budget alternative" that had been promised today, and I was not the only one who was disappointed.  Boehner and Cantor embarrassed themselves by going before the cameras with nothing to offer after excoriating the President over the last few weeks.  Furthermore, they let their country down.  If not working on economics and budgeting, then what have they been doing lo these past 64 days? Maybe the Republican leadership should give their paychecks back, or donate them to the starving AIG executives.

   

Good ideas would be nice, and the President strikes me as someone who would give any ideas some consideration.   To a person, critics of the administration are fresh out of viable alternatives to anything that has been done so far.  Even the usually disgruntled Nouriel "Dr. Doom" Roubini admits the Geithner Plan represents the best plan among very poor choices.

Mr. Gingrich is back on the scene, still with the same trademark condescension, but his only point of argument is to stir up dissension by warning that Obama is yearning for a "dictatorship" ,   which, coming from someone who is voluntarily signing up for the Papacy , seems like an odd complaint.

Frankly, I could not imagine what this nation would be like had McCain and Palin won and Phil Gramm was Treasury Secretary, but I do know that we'd at least have a loyal opposition. 

 

AIG Bonuses and the Age of Entitlement

Jake DeSantis, a trader in the Financail Products division of AIG, tendered his whiney resignation in today's NYT claiming to be a victim because he is being denied his $750,000 bonus.

Diane Brady of Businessweek offers a point-by-point takedown of the unapologetic mindset of entitlement portrayed in the piece.

My additional comment:

The average neurosurgeon in NYC makes $425,000, which seems like a reasonable ceiling for an executive paper pusher at a failed insurance company. 

Bachmann brings the stupid

Michele Bachmann from Minnesota uses her 5 minutes to jam in as much evidence as possible to show why she should not be in Congress, let alone on the Financial Services Committee.  To wit, Rep. Bachmann:

1. Does not understand the legislative process regarding legislative authority granted to the Treasury.

2. Does not know that the provision for the Federal Reserve was in the 20th century and not "the Constitution."

3. Needs the issue of "financial stigma" explained to her (remember, she sits on the financial services committee).

4. Needs an explanation regarding the authority of the Treasury to close banks versus insurance companies (remember again, she sits on the financial services committee).

6. Claims ignorance of the committee rules regarding time alottment provisions.

That averages out to more than one shit-for-brains idiotic comment per minute-- makes Maxine Waters look like a piker.

But I do like the stylish Sarah Palin/librarian glasses.  Nice touch.

Cheney gets pwned on 60 Minutes

In my view, Mr. Obama gives the final word. Any further rebuttal in this debate of the management of terror suspects should be done with Mr. Cheney under oath and preferable indicted.

Who knows Finance better than Suze?

See what she thinks of the financial meltdown.

I cannot disagree with her.

AIG and the Crisis: Links to Learn

1.  Matt Taibbi's must-read in the Rolling Stone.

2.  Washington Post's Carol Loomis series:  Investigating AIG: The Washington Post

Part I: The Beautiful Machine
Part 2: A Crack in the System
Part 3: Downgrades and Downfalls

3.  And Behind Insurer’s Crisis, Blind Eye to a Web of Risk,  GRETCHEN MORGENSON

(h/t Barry Ritholtz)

Fire!

From Barry Ritholtz:

This from a friend of mine. There is lots of anger out there.

When a fireman sees a house on fire, he sounds an alarm, dons his turnout gear, bravely rescues the occupants and puts out the fire.

When an investment banker sees a house on fire, he quietly sells the burning house short, uses the proceeds to buy a larger house for himself and, when someone suggests that his taxes be raised to help the homeless, he rails against the dangers of socialism.

Obama's Masterstroke on Iran:

Appeal to the Iranian moderates to attempt to undermine the extremist leadership.  

The word is that Obama, unlike the previous US president, is extremely popular among the Iranian people

which has put Ahmedinajad on tenterhooks. In his recent castigation of the US, Ahmedinajad was still invoking 

George W. Bush to garner anti-American sentiment. With addresses like the one below, I wonder how long

the Iranian moderates will continue to buy into the extremist leadership's bullshit.

Stock market sentiment read...

Today, I asked my good friend Barry Mylo what he thought of the stock market and, since he has always been tuned into the capital markets from his perch in midtown Manhattan, did he think it was time to maybe tiptoe back into the stock market.  Here is his missive:

Tony,

OK, so here it is another Friday, this time at the end of a "winning" week, but we are still flirting with the November lows and assuming that the most recent shitstorm is just short-sellers wreaking havoc when the reality is that nobody is buying into this Ponzi scheme any more.

You want some sentiment? I'll give you some sentiment: I'm pretty much done. The only thing that has worked for months is yellow and white metal that has no inherent value or dividend and is mined to the detriment of helpless indigenous people throughout the world.

I hate go all Hobbes and Malthus here, but the world economy is fucked up beyond all repair with no end in sight. Dow 5000? Shit, try Dow ZERO. Name one company that deserves my investment.

To quote Jon Stewart:
"These Wall Street guys were on a Sherman's March through their companies financed by our 401ks and all the incentives of their companies were for short-term profit. And they burned the fucking house down with our money and walked away rich as hell and you guys knew that that was going on."

Their minions who commentate on CNBC defend the sanctity of the "contracts" that have allowed executives to steal taxpayers' hard-earned money so they can ski Europe and travel the world on their yachts.

You want my portfolio? Here it is: Cash, gold, silver, Spam, firewood and ammo-- not necessarily in that order.

Signed, Barry

Thank you, Barry.  I knew I could count on your unvarnished opinion.  

My question to myself:  Should I fade this, or not?

This is not whining about bonuses...

Listening to CNBC this morning and the topic of the AIG bonuses came up yet again for the 50th time in the last 24 hours.  I hesitate to comment, but feel compelled because of the not-so-subtle defense by the business media.  The arguemtn is that the high salaries are necessary in order to keep the talent on Wall Street in order to clean up the mess.  This whole "talent" thing is outrageous.  I know "talented" neurosurgeons and ob/gyns who seem to scrape by on a tenth of what the 15th administrative VP of some failed bank or a salesman at an insurance company makes.  And there are tens of thousands of these executives who make millions.  The average ob/gyn in New York state (to compare more accurately with NewYork bankers who argue about the higher cost of living) makes $174,000 per year, probably works 60 hrs week, on-call 10 times per month, top of their HS and college class, 12 yrs training post-college, no real income until age 33, etc.  I'm not whining, just pointing out what it takes to make $174,000 here in the real world.  That's a lot of money.  

But a bank executive with 2 or 3 years of post-college education can make six figures by age 26 and millions before the average physician has gotten his or her first paycheck.  They need a come to Jesus moment here.  These negligent executives are now govt employees and where are they going to go?  Back to med school?

The world was supposedly on the brink of destruction last fall and these AIG asshats were gaming the system to make sure their bonuses were not canceled... after all, they have "talent.".  And the destruction was directly-- directly-- related to their activities and decisions and "talent."  The bill had to be passed RIGHT NOW, or else... and the whole time the taxpayers were being played.

The government did not ask to take on all this debt, they were compelled to do it by the guys that drove the economic truck into the mud.  In fact, it smacked of extortion at the time, but now it's clearly apparent that the government was played by all this "talent" on Wall Street.

OK, not all the financial executives were complicit or at fault, I understand that item.  But let's look at the other industry that I know well.  Despite growing a practice by 6-8% in volume every year, physician salaries peaked 10 years ago in real dollars and have dropped versus inflation.  Beginning about 2004, real reimbursement levels have declined every year while overhead (mostly employees' health insurance-- how much do health insurance executives make?) has increased dramatically.  Regardless of competetence or "talent", doctors have almost universally taken salary cuts.  Furthermore, the current economic downturn has put a freeze on educational expense and bonuses at our particular institution.  No more conferences for employed physicians!  Is the downturn the fault of physicians in Michigan?  Hardly, but it seems we have made more of a sacrifice (however small) than the AIG executives!  And that say nothing for the millions of folks who have lost jobs over this.

Is the law to tax executive pay Constitutional?  No, it's an ex post facto bill of attainder and will likely wither away into the mist.  So all the media elite on CNBC can settle down and sleep soundly tonight knowing that their buddies on Wall Street are not going to have their precious bonuses taxed to death.  I don't fault Congress for calling attention to this issue even though it smacks of populism and does nothing to directly address the current crisis.

The fact is that it will take time, perhaps a generation, to burn through all this bad debt that has accrued.  Wall Street "talent" will have to acclimate to a different paradigm.  If you want to make millions of dollars, you won't be doing it with taxpayer money so you better learn a real talent like solving a real problem or performing a real service and not just dreaming up some bogus financial "product" that the world does not need.

Will Israel run Obama's foreign policy?

By all appearances, President Obama has bowed to the pro-Israel lobby and supporters of AIPAC and he has forced Charles Freeman to step down from consideration to head the National Intelligence Council.

Glenn Greenwald notes:  

In the U.S., you can advocate torture, illegal spying, and completely optional though murderous wars and be appointed to the highest positions.  But you can't, apparently, criticize Israeli actions too much or question whether America's blind support for Israel should be re-examined...

...Does anyone doubt that it's far more permissible in American political culture to criticize actions of the American government than it is the actions of the Israeli Government?   Isn't that rather odd, and quite self-evidently destructive?

Nobody is better than Greenwald on this issue.  I.F. Stone reincarnated.

For the record, the opposing view is presented by Jeffrey Goldberg.

Mortgages and morality

Alright get ready for a long post because this involves morality, economics, the stock market, my college education, mortgages and, just to make it complete, Google.

Let's go backwards and start with Google, which has a "Reader" that has changed my web surfing over the last couple years by compiling all the website feeds that I follow and I can sort them under various headings such as "trading" (Eric, Teresa Lo and Upsidetrader among others), "economics" (Barry and Macroman among others), "politics" (Glenn Greenwald, Rude Pundit, TPM among others), "news" (BBC, CNN, etc), "culture" (Vanity Fair, TED themes) , "sports" (White Sox, Bears, ESPN, what else is there?) and "science"(National Geographic, Evolutionblog, among others).  This makes following the 60 or so blogs on my list much easier.  Then there is the "fun" category for blogs from which I derive soem entertainment, but really fit no specific category, and Megan McArdle fits that description.  I used to put her in the "economics" category, but she really does not deserve that status, so now she is relegated to the merely "fun"  heading along with other brain candy like Strange Maps and Sarah Sizzle.

I can't remember when I began reading McArdle's posts, but the fact that she went to my old college was surely part of the attraction.  Her MBA is from University of Chicago and I figured she might be able to better explain the Milton Friedmanist ideology that I somehow never grasped during my undergraduate years on that campus.  Another ersatz ideologue, David Brooks from the NYT, was in my class and while I don't specifically remember him from the Political Order and Change curriculum, the meandering and erudite memories of discussing Burke and Hobbes three decades ago often rushes back to me whenever I weave my way through one of Brooks' columns.  Both Brooks and McArdle have been a disappointment and make me even more sure that transferring to the University of Illinois after two years was the correct choice.

Fast forward to this week:  McArdle discusses the moral imperative attached to paying off one's mortgage and her thesis is that folks who walk away from underwater mortgages are an affront to her well-honed protestant work-ethic and destroying the moral fabric of western civilization. She compares walk-away foreclosures to returning a used barbeque grill bought with a credit card.

McArdle takes issue with a criticism of a CNBC show that explores a specific case of "Felix" who calls in to Carmen Wong Ulrich's (how's that name for purposefully extolling your polyglot heritage?) show and asks for advice about his underwater mortgage.  He bought a home for $700,000 with a $300,000 down payment and now the home has decreased in value and is worth only $350,000 and he owes $400,000, and felix wonders if he should foreclose onthe house.  Poor Felix was castigated by the on-air personalities for threatening to shirk his "moral" obligation to honor the mortgage.  He is willing to walk away from his $300,000 investment in order to avoid losing even more on the home.  McArdle joins the pile-on with her own brand of insane logic and complete unknowledge of law and morality, despite her expensive scholastic pedigree.

Here's the problem with the legal line of reasoning which was pointed out in the comments section of her blog: mortgages in most, if not all, states are non-recourse loans which is much different than credit card debt.  If you do not pay your credit card, the law states that banks can garnish your wages, attach your assets and even force you into bankruptcy.  Mortgages are not covered by such onerous laws and thus there is no recourse for walking away from a mortgage other than losing any equity accumulated in the property.  If there is only negative equity, then a borrower would certainly be justified in handing the keys over to whichever idiot banker owns their mortgage.  Thus the second stanza of Mr. Franklin's admonition, neither a borrower nor a lender be.  

A home mortgage is really just a two clause contract: #1) The borrower agrees to pay the mortgage at a certain interest rate over a certain number of years.  #2) If the buyer does not fulfill the conditions of #1, then the lender may take possession of the property.

Banks know the law and they know the implications of accepting crappy mortgages on depreciating assets and I'm sure there is some reason for the different laws, and I will even go so far as to say that the non-recourse nature of these laws somehow benefits the banks over the borrowers. More loans would be taken, more homes would be built and lenders could more easily take that (usually) appreciating asset in foreclosure.  For decades mortgage lenders have enjoyed the simplicity of taking over foreclosures without going through arduous bankruptcy litigation; after a homeowner pays 15 years worth of mostly interest on a thirty-year loan, they lose their job at GM and the bank gets the house... the entire house, which has likely doubled in value and had been "paid-off" years ago anyway.  Simple and clean.  That worked well when houses always appreciated in value and homeowners were required to put 10% down.  That's the reason J.P. Morgan had the biggest estate on Long Island and Angelo Mozillo could afford all that skin tanning lotion.

But banks got sloppy and started accepting mortgages on property that was decreasing in value. Investors accepted the ratings of these securtized loans that were packeaged and sold as products, even thought the ratings agencies had huge conflicts of interests.  Neither banks nor investors did the proper due diligence when allocating assets, so now they want to shame mortgagees like Felix into paying more for the home than it is worth... when he clearly has no legal obligation to do so.

For some odd reason, the years McArdle spent at the midwest's greatest bastion of higher learning has not necessarily honed her critical thinking and has apparetnly prepared her only for carrying the water for the moneyed investor class.   Such humorous reasoning is why Megan McArdle is in the "fun" section of my Google Reader.  

McArdle and Wong Ulrich broach this aspect of morality into the mortgages debate, this idea that borrowers like Felix have a moral obligation to the bank.  Does he?  The contract is a clear statement of the legal obligation, but does the mortgage holder have a further obligation, a moral obligation, to the bank or his neighbors or society in general?  I would posit that Felix' primary moral obligation is to the well-being of himself and his family, and that may not include paying more for a house than it is worth.  Felix needs to weigh the advantages and disadvantages of paying another $400,000 for a property that is worth only $350,000 and decide if things like his credit rating, his lost downpayment and having to move his family to another place (rented, since not even an idiot banker would dare give him another mortgage now) are worth the extra cost. But moral obligation to the bank ot "the house" has nothing to do with it.  I'm not even sure that anonymous owners of an amalgamated asset back security qualify as a moral agents, and if they do, it's far far down on the list of priorities for Felix.

Yes, the deflationary "economic crisis" sucks.  No matter how wealthy or poor you may be, you will likely be affected in some way by the unwinding of the massive debt with which our society has encumbered itself.  Only those with no debt and a stable job will come out relatively unscathed.  If only one culprit could be named, my guess is that the ratings agencies would be near the top of any poll, with banks and investment houses who should have done some due dilly close behind.  The Felixes of the world bear some responsibility, but certainly not the brunt, and certainly a lot less moral obligation than the lenders.  After all, he was merely trying to buy a primary residence for his family-- not an investment property or a flipped-house-- in a housing market that was pumped up with years of easy money which increased the cost the all housing, rented or purchased.  Felix is surely going to lose a significant amount of his life savings regardless of his decision.  I find it extremely odd that TV commentators and educated bloggers are so willing to take off after one of the victims in this sordid drama.

Britain looks at US war crimes, why can't we?

http://www.salon.com/opinion/greenwald/2009/03/08/mohamed/index.html

Your tax dollars hard at work: Gaza edition

http://andrewsullivan.theatlantic.com/the_daily_dish/2009/03/gaza.html

When should we fix health care?

On CNBC today and the Sunday morning talk shows one of the memes was that President Obama should "slow down" and tackle "social issues like health care" after the current economic crisis.

The problem is that health care is not a social issue, it's an economic issue.  It's a small business issue, a big business issue, a personal finance issue...and it doesn't wait.  Every single day people without insurance are getting care and either flirting with bankruptcy and passing along the expense of that care to paying people.  Really.

We really do not have the luxury of tackling the banking crisis just to make sure the stock portfolios of Newt's "investor class" friends do not suffer any more before we go after the fundamental nuts and bolts issues of this economy.

Health care is a right in this nation whether you like it or not.  If someone gets sick, they get treatment.  If they have chest pain it's usually more cost-effective to have them seen by a physician before they have a grabber that lands them in the ICU on a ventilator, but if they have no insurance they'll take their chances.   

I don't trust that people will make the right decisions about their health and how to pay for it.  Many would rather go without insurance and buy a new flat screen TV with the money, and chance it.  I mean, heck, I'm healthy, what could possibly go wrong? 

Solution: Payroll tax for everyone who doesn't have a private policy, and everyone gets insurance.   Tax the crap out of tobacco and alcohol, too. The unemployed get Medicaid.  The insurance plans cover the gamut of usual and customary care.  Solved.

Newt Gingrich gets his colonoscopy without sedation.

Newsflash: Gingrich's friends don't like Obama

Newt Gingrich is the most articulate of the loyal opposition, and he's fairly inarticulate on this class warfare issue.

On MTP yesterday, Newt says that the investor class "doesn't trust" the Obama administration. Oh, but they trusted all their buddies who ran the economy into the ground.  I would think that someone who is smart enough to have a lot of money is also smart enough to know who destroyed the stock market and the job market.  

I'm all for conservatism and accountability; too bad we don't have any in this society.

It's time to do something

Paul Krugman makes a couple excellent points critical of the Obama administration's handling of the the banking crisis.  If there are insolvent banks, then announce it, nationalize them and let's move on.

Gerry Seib makes the case that while most of Mr. Obama's constituency may not be investd in the stock market, the continuous draining of wealth from our capital markets is doing irreparable harm.  Broad market indices are down over 10% since Obama has taken office and are now down to 1997 levels.  Financial stocks are down 50% since January 1st !!!

Glenn Greenwald is critical of the Obama administration's use of anonymity to float controversial ideas, which has been a cynical tactic of previous administrations, and has factored into the Treasury Department's lack of a plan in the current crisis.

I realize that if President Obama had come in on day one and nationalized two of the world's largest banks we would have heard from the "I told you so" crowd about his socialist agenda, but at some point a president needs to do the right thing.  The stock market is suffering from the broad brush being used to paint all financial institutions as bankrupt.  Surely at least one bank is solvent, no?

Thursday, Northern Trust (NTRS) of Chicago announced that it will pay back the TARP  funds it received in order to remove the constraints placed on its operations.  Regardless, the stock dropped over 3% since that announcement.

The 'stress tests' that have been floated by Treasury to answer these questions about which banks are solvent need to be completed, like,  yesterday.  If all banks have engaged in destructive leveraging of assets and are inoperable as going concerns, then stockholders and taxpayers have a right to know as soon as possible.  If only some of the nation's banks are insolvent, then likewise we need to have that information.

By any measure Mr. Obama has accomplished a lot in his first 50 days as we all know how much has been neglected the last eight years, but I find it disheartening that Mr. Obama has spent an inordinate amount of time discussing how he will decrease home mortgage deductions while ignoring the lack of transparency in the capital markets.  The ongoing damage to the credibility of the stock market is real and long-lasting; do you really think Joe Sixpack is coming back to his 401(k) after this disaster? 

As Krugman intimates, dithering time is over.