OK, More Wheels Within Wheels

We now have Barney Frank calling for laws giving resolution authority for systemically important firms, which means FDIC style receivership powers to, "take over and unwind the businesses of big non-bank companies", which could apply to bank holding companies like Citi and BoA, as well as their banks, and Peter Boone and Simon Johnson (the former chief IMF economist who is calling for kicking the corrupt banking elites out) are suggesting that are suggesting that this is exactly what Geithner's plan is.

Honestly, I do not think that the White House is sandbagging the Congress and the public over this.

As I have said before, past is prelude, and for Geithner and Summers to sign off on such a thing would run completely counter to their entire professional lives.

I hope that I am wrong, but I fear that I am not.

Banks are Now Walking Away From Houses

It looks better on their balance sheets to evict the residents, and then put off foreclosure.

As a result of this problem, a Cleveland nonprofit has taken the banks to court as a public nuisance, and they have won the first round of litigation, which puts the decision in the hands of the local housing court, as opposed to federal court.

This is Not An April Fools Joke

It looks like one Republican may actually vote for Obama's budget.

Of course, it's Rep. Joseph Cao (R-La.), who beat William "Dollar Bill" Jefferson in the general election after he was indicted for corruption.

Of course, the district that elected him went 74% for Barack Obama, and he is probably still hearing complaints about allow Eric Cantor to twist his arm into voting against the stimulus.

I, for One, Welcome Our New Robot Overlords

Honda has developed a EEG based controller for its Asimo robot.

It's currently has a, "90% success rate at recognizing and then carrying out four commands," so the capability for "mind reading" is really pretty rudimentary, but it is of interest.

Of course, it is only a matter of time before our robot friends become our robot masters, and this technology is used to monitor and punish us, so it's the end of humanity.

On the bright side, if our new lords and masters look like the bottom picture, it will take some of the sting off the soulless regime which will soon dominate our existence.

Noting that the date has flipped to April 1, let me state that the story is not an April Fools gag, though obviously I am milking the news for laughs.

Special Election in NY 20 Too Close to Call

The margin is significantly less than the number of absentee ballots, and possibly smaller than the number of provisional ballots, so a final count may be weeks off, and then there will be the challenges.

IIRC, the provisional and absentee ballots will be counted in about 2 weeks.

Kenneth Lewis Dead Pool

I've kind of thought that the Obama administration's ouster of Rick Wagoner was primarily a political ploy, but it has created a new question, with people asking why him, and not people like Bank of America's CEO Kenneth Lewis, whose purchases of Countrywide and Merrill Lynch seem to be ample reason for his firing.

I'm hoping that someone in the White House actually intended this effect.

I don't generally subscribe to the "Barack Obama has a plan, but it's too subtle for us to see right now," thing, but it does seem to me that, intentionally or not, the stage has been set for the firing of a bank president at one of the 5 or so banking giants out there.

It would be the a good thing to do, it would put the fear of God in these "masters of the universe."

The reason that I am fingering Kenneth Lewis is that the other likely bank to be so target is Citi, but CEO Charles Prince was already forced out and replaced by Vikram Pandit, and BoA is the next sickest bank on the list.

Additionally, Lewis has been unrepentant in his attitude, continuing to (over) use the private jet, and chafing at the TARP restrictions, all while maintaining that he will send back the money "real soon now."

The final reason for my suggesting that he might be forced out, in addition to my visceral dislike of him, is that he, and his bank, have aggressively lobbied against the EFCA (card check) legislation, and now directly calling for his ouster, which means that Obama picks up some labor credibility without having to go to the mat for the EFCA.

Wanna Put Social Security in the Stock Market?

Because that's what the Pension Benefit Guaranty Corporation (PBGC), the government insurance fund for defined benefit retirement programs, did last year, just before the stock market crashed.

The reason given by the Bush Evil Minion^™ Charles E.F. Millard was that the PBGC needed better returns to shore up its trust fund, because of all the companies going bankrupt and welshing on their pension obligations.

It may be true that they actually bought into the idea that they could get better returns, even in a stock market that was clearly overvalued and with an economy already shocked by the housing cost, but my money is that the real reason was that it was an election year, and they saw the signs of a stock market drop, and they wanted to push some money into the market quickly in order to keep everything afloat until after the election.

In either case, it should be noted that the PBGC's trust fund is like a drop in the ocean compared to that of Social Security, and if they thought that it could effect the markets, just imagine what the multi-trillion Social Security fund would do.

In fact, it's so large, that it would drive the stock market up upon being invested in the market, and when a large population cohort started to retire, it would drive it down, giving the Baby Boomers that wonderful "buy high, sell low" feeling.

Our Man in Afghanistan

Hamid Karzai, whose incompetence and corruption is such that he is now appealing to the most backward of religious impulses, because there is no other reason to vote for him, has just signed into law a measure that legalizes marital rape:

In a massive blow for women's rights, the new Shia Family Law negates the need for sexual consent between married couples, tacitly approves child marriage and restricts a woman's right to leave the home, according to UN papers seen by The Independent.

Hamid Karzai, yet another gift that keeps on giving from Bush and His Evil Minions^™.

Bankruptcy Updates

The Department Store Chain Gottschalks twill be filing for liquidation, and mall developer General Growth Properties has managed to put off bankruptcy, for a while at least.

I think that it is likely that GGP will go chapter 11, at which point, Thomas Friedman, whose wife is a Bucksbaum, the family that owns the developer, may have to downsize his lifestyle....I'm so sad for him (not).

Finally, the Sun-Times Media Group has filed for bankruptcy, and before you start wringing your hands over how these are dark days for newspapers, note that Conrad Black and His Evil Minions^™, most notably David Radler, looted the company, and have gone to jail for doing so.

In a way, it's a microcosm of what is wrong with the news business: Bankers take over from journalists, generate fantastic profit margins by destroying journalism at these institutions through draconian cuts, and then they walk away, leaving bleached bones.

What Chris Said

Chris Bowers, that is

There is a special election in the 20th congressional district of New York tonight. I hope the Democrat, Scott Murphy, wins. However, I am also frustrated that Murphy has received nearly $360,000 on Act Blue from around 2,000 donors. Given that Murphy has made it clear that he will attempt to join the Blue Dogs if he wins the election, the progressive small donor world should not have given him a single dime.

We--participants in blog and email list small donor fundraising efforts--have to completely stop raising money for Blue Dogs. We should not give a single cent to any current member of the Blue Dog coalition. We should not give any money at all to any candidate who refuses to rule out joining the Blue Dogs once in Congress. If we hope to improve Democratic behavior in Congress, this break has to be as public and as thorough as possible.

Agreed.

Scott Murphy may be the very best we can get in that district, and if that is the case, then liberal campaign contributions are better spent elsewhere.

I would "embrace and extend" his message, and include the corporatist "New Democratic Caucus" on the list of people that we should not contribute to.

This goes double for folks in safe Dem districts, which NY-20 is not, Republicans have a registration advantage there, but why pay for someone who will, when the going gets tough, shoot down your agenda?

But I still want Murphy to win, I just won't give him my money or time.

Economics Update

Note: Red denotes contraction, and yes, this is scary.

I guess that the lede is that the consumer confidence numbers are out, and that they remain near record lows, at 26, just one point above the all time low reported in February.

If that were not enough, we now have a survey indicating that consumer spending may fall by $1 trillion after the recession is over (by way of perspective, the US total GDP is about $14 trillion) according to the AlixPartners Long-Range Economic Outlook Survey.

That's a 7% haircut on GDP, exclusive of the secondary effects, closed stores, warehouses, etc., once the economy recovers.....Great googly moogly!

In the meantime, I don't think that a whole bunch of people will be tapping their home equity, as the Case-Shiller home price indices show a 19% drop in home prices, though it appears that defaults are abating, as private mortgage insurers saw defaults, and claims, fall in February, the first decrease since June, 2008.

Additionally, 2nd home sales fell in 2008, down to 30% of total home sales, from 40% in 2005, and more of these buyers are paying cash, which implies that a lot of the contraction in this market is an inability to find mortgages.

In terms of the general state of the economy, the Restaurant Peformance Index is showing the 16th straight month of contraction (h/t Calculated Risk), and the Philadelphia Fed State Coincident indices have shown a decline in all 50 states (pdf), for both the past month and the past three months (again h/t Calculated Risk).

Meanwhile, we have an indication that the Bank of England is looking at significant inflation, they have adjusted their pension investments to account for it, so I think that they expect the £ Sterling to fall, and inflation to increase in the UK.

In any case, we now have the chief economist for the OECD suggesting that the Federal Reserve would take aggressive action against a precipitous fall in the dollar, and work to maintain its position as a reserve currency.

I think that this is more an attempt to talk up the dollar than anything else, because protecting the dollar would, over the long term at least, require higher interest rates, which would have the economy collapsing like overcooked broccoli.

In any case, the dollar was down today, largely because the flight to safety yesterday following Obama's announcement that GM and Chrysler were on notice is now over.

Oil was up too, though it's still a bit under $50/bbl.

I'm So Happy With Obama's DNC Chair

You know, Tim Kaine, who Obama hand picked as head of the Democratic National Committee, who just signed a bill creating "Choose Life" license plates in Virginia, and has promised to support a bill banning state funding of embryonic stem cell research in the state.

I guess that throwing pro-choice advocates to the wolves is Obama's way to "reach out to the right."

Thanks a lot, Barack, for foisting this tool on the Democratic Party.

Reid Is Looking to Fold Cram Down Provisions

Reid is now saying that he might drop cram down provisions from the housing bill if it threatens passage of the whole package.

Basically, this means that he is going to kill it, because everyone who wants it gone now knows that they can get it dropped by whining.

Seeing as how this was the law until about 1993, the effect on interest rates are minimal, and it's the only way to renegotiate a mortgage that has been sliced and diced until it has hundreds of owners, cramdown is the single best thing that can be done to help with the current financial meltdown.

New York State to Institute "Temporary" Millionaire's Tax

Governor Paterson had been opposed to such taxes, suggesting that it would lead the wealthy to leave the state, but has not capitulated to progressives in the state, who were opposed to the draconian cuts in services that a "no-tax" solution would have required.

Even with this increase, 8.97% from 6.85% for income over $½ million, the top tax rate in New Jersey, is higher, and in any case, if people want to leave New York because it's too expensive, they already have.

Nice to know that the political forces in New York State who work for the other 99% of the population can actually get meaningful change....for 3 years at least, as the tax is temporary....for now.

Strange Days: Quoting Andrew Sullivan Again

He makes the point that Dick Cheney is confessing to war crimes in the process of justifying his role in committing them.

Sullivan is correct. Dick Cheney's justification of his own actions, and his condemnation of Barack Obama's position, make it clear that he knowingly broke both US and international law.

This is Not the Onion

AIG director named to Obama tax task force.

For all I know, Martin Feldstein, who has been on the AIG board is a good person, certainly, I have come across generally favorable reviews of his works.

That being said, the atmospherics here are unbelievably stupid.

My Head Hurts.

An Interesting Development in Autism Spectrum Conditions

It appears that there is a genetic link between nicotine addiction and autism, in the neurexin-1 gene, which creates an excess of neurexin-1 beta protein, which aids in nerve cells linking up with nicotine like substances to neuro receptors, in people addicted to nicotine.

It turns out that the levels of the protein, and the gene, are deficient in some people on the Autism spectrum.

It raises some interesting questions, though at this point I would be very cautious, and I think that a first step would be to compare smoking and non smoking populations of people on the spectrum.

The fact that quack physician Jeff Bradford has apparently already started putting nicotine patches on his patients should not be viewed as significant by anyone except, perhaps, for malpractice lawyers.

Giving small children nicotine is an invitation to injury or death, because a nicotine overdose can kill someone very quickly.

H/T A Photon In The Darkness.

Now We Know Why Banks Were Profitable Last Month

Because, using our tax dollars, AIG settled its accounts with the big banks at 100% on the dollar, even while they are refusing to pay on deals with smaller players.

So, not only are we funneling money to the big 5 banks through the TARP, and the TALF, and various Fed facilities, we are also shoveling money in through the back door by way of AIG's Financial Products Division.

I now have a tough choice....Should I go long in pitchforks, or torches?

Big 3 (Big 2½) Update

So, the White House does not like GM's or Chrysler's reorganization plans, and has given GM 60 days, and Chrysler 30 days to come up with a better plan.

What's more, they demanded, and got General Motors' CEO Rick Wagoner's resignation, and pretty much demanded some sort of alliance deal between Fiat and Chrysler.

The obvious question here is, "Why is the government insisting on Wagoner's resignation, and not Bank of America's Kenneth Lewis's resignation?

In terms of Chrysler-Fiat, it appears that they have come to an agreement on a "framework" for their deal.

One wonders if this deal involves a haircut for Cerberus, which it should.

Economics Update

I'll be going into the automotive news elsewhere, so this is pretty short.

First the Celtic Tiger Kitten has been taken to the vets to be neutered, as S&P lowers Ireland's rating from AAA to AA+.

Ireland played the "cheap labor with good access to markets" game, and lost to former eastern bloc nations, and played the real estate and building game, which everyone lost.

In the housing market, we have defaults on FHA insured mortgages rising with 7.46% of the loans being 90+ days overdue, in foreclosure, or bankruptcy, up from 6.16% at this time last year.

This means that there is still a lot of inventory out there that has yet to hit the market.

In energy, the concerns over the US auto manufacturers has driven oil below $50/bbl, because nothing says short oil supply like house sized SUV, and the same concerns about the economy have driven the dollar up as traders head for safety.

Quote of the Day

ROTFLMAO!!!

There are two novels that can change a bookish fourteen-year old's life: The Lord of the Rings and Atlas Shrugged.

One is a childish fantasy that often engenders a lifelong obsession with its unbelievable heroes, leading to an emotionally stunted, socially crippled adulthood, unable to deal with the real world.

The other, of course, involves orcs.

Too true.

Not sure of the source, it's been floating around the innertubes.

Democratic Candidate Takes Lead in Special Election to Replace Gillibrand

Honestly, even with the new poll numbers, this is a heavily Republican distract, so I my guess would be that the Republican has the advantage, particularly given the low turn out in special elections, so I would expect the 'Phant to win in this Tuesday's election.

In either case, Jim Tadesco (R), and Scott Murphy (D) contest is much closer than the district's fundamentals would suggest.

Patents Reveal Shap of Northrop Grumman Bomber

Rather unsurprisingly, Northrop Grumman's design for the "Next Generation Bomber" (NGB) looks rather a lot like the cranked kite concept that has been floating around for some time.

Among other things, it's supposed to provide much lower drag, and better high altitude performance than the original B-2, giving improved range, though some of the additional range appears to be at the expense of weapons load: word is that payload is in the 20,000 pound range, or about ½ that of its predecessors.

There is an additional interesting bit of information in another Northrop-Grumman patent application, which shows the aircraft with a mustache.

Given the stealth requirements for the aircraft, and the fact that it will generally be operating at high altitude at relatively high mach numbers, the obvious conclusion is that this is a retractable canard, much like the Tu-144 Charger and the Mirage Milan. (in the latter, the retractable canards were actually called a "mustache")

The advantages on takeoff and landing are clear, giving a whole lot more pitch authority than is generally available with a short coupled tailless design, which can increase max takeoff and landing weight, decrease takeoff and landing speeds, and shrink the landing gear and breaking systems.

It's Alive!!!!

It's beginning to look like the leading candidate for purchasing the assets of Eclipse Aviation may be positioning itself to restart the company as a going concern.

Given the relatively large customer base, and given that the debts of the company will be discharged in bankruptcy, they may be in a position to bring them back in some form, though I would be doubtful of full scale production restarting with the current investment environment.

Friday Night Bank Closings: I'm Scared Now Edition

Not by the total number of bank closings, there was only one, the Omni National Bank, Atlanta, GA, the 21st of the year. (Full List of closings).

Since I figure that there will be somewhere in the neighborhood of 100 bank closings this year, that is not a surprise.

What is a surprise is Calculated Risk's report on regulatory actions in California, where 6 more banks have received a cease and desist order from the FDIC, and there are predictions that two thirds of banks in California will be operating under such orders by year's end.

I honestly cannot imagine that the situation is better in other areas with the largest real estate bubbles, such as Florida, the Las Vegas area, Phoenix, etc.

Space Debris Cleaning, My Ass!

So, the National Reconnaissance Office and Space Command are looking to set up a ground based laser system to clean up space debris. (paid subscription required)

And I'm Anna Nicole Smith....This isn't an attempt to set up a cleaning system, this is an attempt to develop a laser based anti-satellite weapon, not withstanding their fig leaf of some sort of multinational effort:

To help offset such a negative reaction, [Andrew Palowitch, director of the "Space Protection Program"]Palowitch says, five lasers could be built and installed in five countries—­Russia, China, India, France and the U.S. All would be ­operated by an international consortium with “everybody participating equally with free access to the particular sites in a coordinated activity.”

Propose a regime, that you could never get the French to agree to, much less China, and then go and develop a satellite zapper on your own.

Seriously, how stupid do they think that we are?

FCS Active Protection System is Not Working

The Active Protection System (APS) is designed to intercept RPGs, ATGMs, and long rod penetrators, to protect the smaller and lighter manned vehicles of the Future Combat System (FCS), and it now seems that it simply does not work, according to the latest GAO report.

The interesting thing is that the Israelis have a system that does work, Trophy, though it is less ambitious than the APS, but it was rejected and hundreds of millions of dollars directed towards Raytheon.^†

One of the interesting bits about FCS is that is as much an industrial base preservation system as anything else, with bizarre separations of work to ensure that various contractors get sufficient workshare.

I believe that the high technology band tracks are the responsibility of the BAE Systems^†, and the suspension is the responsibility of General Dynamics, for example, which makes no sense whatsoever.

Army Rejects Trophy


Trophy Promotional Video

^*Full Disclosure, I worked for Raytheon a number of times, both in Texas and in Maryland over the past 15 years or so.
^†Full disclosure, I worked on the Future Recovery and Maintenance Vehicle, FRMV, "wrecker" variant of the FCS-MGV from 2003-2006 at United Defense (later BAE Systems after the Carlyle Group sold me to buy Dunkin Donuts).^‡
‡Yes, I have worked everywhere. Maybe I can't hold down a job, but more likely this has been my role as "technical hit man", where you are parachuted in to take care of a specific need.

Gripen NG Gets AESA Radar

SAAB has cut a deal to integrate the front end of the Selex Galileo Vixen AESA radar with the existing back end PS-05/A radar for the Gripen NG.

This replaces the Thales radar on the NG demonstrator, which Thales does not intend to make available for production.

My previous post on the matter.

SecDef Gates Cool to Tanker Contract Split

No big surprise. Splitting the contract would increase acquisition costs significantly, and operational costs by an even larger amount.

Splitting the contract is about appeasing representatives from Boeing, who quite simply had an older and less capable design that cost more than the EADS proposal.

More JSF Problems

The first is a report from the GAO revealing the least well kept secret in defense procurement, that the JSF is over budget and behind schedule, to the tune of about $2 billion, the GAO also believes that the F-35 will need about 1000 additional flight test hours than the F-35 Joint Programme Office (JPO) does, and notes that the time to assemble the first production airframes was 40% greater than predicted.

Additionally, as I have noted before, it appears that there are some very concerning issues regarding thermal management for the aircraft, and it looks like the fuel-air heat exchanger, which not only cools the avionics, but the electro-hydrostatic flight controls is not sufficient in hot weather conditions, like the Middle East.

Additionally, the author of the linked article, Bill Sweetman, notices another potential heat issue, this one having to do with IR signature, that the location of the exhaust for the integrated APU/EPU exhaust has been relocated in the production models.

In the pre-production models, it was located on the top of the aircraft in front of the left vertical stabilizer (you can see where the heat cooked off the paint in the top picture), but in the production models, it has been relocated to the bottom of the fuselage.

The exhaust does not look particularly stealthy from a radar perspective to my untrained eye, and I would have to imagine that it would be a big infra-red "kick-me" sign for Marine STOVL JSFs which would be minutes from the battlefield with APUs running on unimproved strips when the aircraft is used to provide close air support.

Bad Day at the Office: Luftwaffe Edition

A helicopter and a Tornado crashed in Germany recently.

No fatalities in either incident, though the Tornado crew was taken to hospital.

Electric Battlefield Laser Hits 100 KW

Which is generally considered the bottom bound for viability as a battlefield weapon.

This is significant because an electric laser should be a lot easier to handle than the chemical lasers, which require very large quantities of noxious and hard to handle chemicals.

They are looking take it out of the lab and hit a test range in about a year.

I REALLY Do Not Want to See Your Vacation Pictures

Least inspired promotional sweepstakes ever!

If you win the CBS Cares^® Colonoscopy Sweepstakes:

Welcome to the CBS Cares Colonoscopy Sweepstakes!


This is an actual sweepstakes and, if you are the grand prize winner, we will fly you and a companion to New York where you will receive a free colonoscopy. You will also be given three nights' accommodation in a suite at the luxurious Loews Regency Hotel, which will include the night before you are "awarded" the colonoscopy.

.......

This is just wrong on so many levels.

People over a certain age should get regular colonoscopies, and they should be checked for polyps, but this contest is the worst idea since the little Johnnie home root canal kit.

Texas Board of Ed Going Stupid

Courtesy of the Texas Freedom Network, we have a live blog of their meeting, where they are going Creationist.

Norm Coleman May Go To Jail

There has now been testimony that Nasser Kazeminy, a close friend of Norm Coleman instructed his CFO to pay $100,000.00 to Coleman's wife's insurance agency for nothing in the way of services.

The money quote is from TPM:

Now the Star-Tribune has obtained a March 19 deposition from the lawsuit that first surfaced the scandal. The deposition is from B.J. Thomas, the chief financial officer of the company that paid out $75,000 to a firm where Laurie Coleman worked as a consultant -- even though he found no evidence of actual work.

Thomas was asked: "In that conversation that you had with Mr. Kazeminy, did he tell you, quote, United States senators don't make sh#$, close quote? Or words to that effect?"

Thomas answered: "Yes, sir."

Kazeminy is boned, unless he roles on Coleman, and Coleman is a rat, so you gotta figure so is Kazeminy.

Pass the popcorn

Anatomy of a Right Wing Hysteria Campaign: HR 875

HR 875 is a fairly innocuous bill, trying to make sure that food, both domestic and imported, is safer, but a campaign by the National Independent Consumers and Farmers Association (NIFCA), which opposes any regulation of food, and a couple of right wing conspiracy theorists, and suddenly the bill is an attempt by Monsanto to shut down every farmers market in the nation.

Well, it's not. Go read the article for the full scoop.

Remember When I Said that Cap and Trade Sucks

Well, it looks like the Europeans are wising up to the China option of creating false offsets for greenhouse gasses:

The European Union, frustrated that its 11,000 factories and power plants are failing to adequately reduce greenhouse-gas pollution, will seek tighter emission rules that may raise the price of burning fossil fuels.

The 27-nation bloc wants to curb access to a program run by the United Nations that rewards companies more for funding emission-reduction projects in China and India than for decreasing their own gas output in Europe. New limits are needed to force extra pollution cuts at home, the EU said in proposals for climate talks starting in two days in Bonn.

My original post on the subject.

Swiss Banks Put Travel Ban on Top Executives

It appears that they are concerned that foreign authorities will arrest them.....More accurately, they are concerned thatforeign authorities will arrest them, and then they will sing like canaries.

My heart bleeds for people whose business model is based on the idea that, "Only the little people pay taxes."

Michele Bachmann Is Insane

And I mean this in a clinical sense, though obviously, I am an engineer, not a doctor, dammit!<sup>*



*</sup>I LOVE IT when I get to go all Doctor McCoy!!!

NY Rolls Back Rockefeller Drug Laws

They expect to see an annual savings of ¼ billion from not locking up people for years for a single joint.

It looks like we will see more of this as the downturn saps state budgets.

Madoff's Wife In the Crosshairs?

Certainly, if I were a prosecutor, I would be looking at here, because Ruth Madoff's got a $2 million payment from Madoff Securities International Limited just before her husband was arrested, the London office of the Ponzi scheme, and itself under investigation for aiding and abetting Bernard Madoff's fraud.

The World of Red Dwarf is One Step Closer

Because Indian scientists are working out how to put curry in space.

I volunteer as a test subject.

Economics Update

So, we have some mixed news on the state of consumers, consumer sentiment improved slightly, though it is still near historic lows, and incomes have fallen.

Since consumers are generally deleveraging, I would place more importance on the latter, case in point, is February automobile sales continuing to drop, with the replacement for the US auto fleet, fleet size divided by monthly sales, hitting 27 years.

Obviously, this is not a sustainable number, and I would expect car sales to improve at some point, though whether this in time for the Big 3 (Big 2½) is anyone's guess.

In any case, it apperas that Japan is heading back toward a deflationary situation, with their January CPI figures showing no change.

In energy and currency, the dollar is up and oil and other commodities are down.

Pakistan’s ISI Still Giving Aid and Comfort to the Taliban

I'm not sure how to deal with a spy agency that is so focused on an eventual war with India that it allies itself to terrorists, short of some of those predator strikes should hit ISI HQ.

House Health Plan to Includes Government Run Insurance

Hopefully, the idea of a government run option, one that can show similar efficiencies to Medicare or the VA, both of which consistently beat private insurance, will survive the conference committee.

Cuomo Now Going After AIG Counterparty Deals

I'll bet that he is wondering the same thing that I am, how much of this was legitimate deal making, and how much was self-dealing.

Hopefully, we will see serious criminal investigations here.

Convictions Reversed in Pennsylvania - NYTimes.com

The Pennsylvania Supreme Court has reversed hundreds of convictions of children made by judges who took kickbacks from privately owned detention centers.

Obviously, it's nice to see their records expunged, but some of the damage will be permanent.

As I said 6 weeks ago, old post This is a Natural Result of Private Prisons.

IMF Economist Compares US to Argentina and Russia

Desmond Lachman, former deputy director of the International Monetary Fund's Policy and Review Department writes an OP/ED in the Washington Post todaysays what I have been saying for some time, that we are not tossing out the incumbents who created the mess, and that we are treating an solvency crisis as a liquidity crisis.

Mr. Lachman, a fellow at the right wing American Enterprise Institute (!) basically says that both Paulson and Geithner are handling the situation in a manner consistent with the most corrupt 3rd world nations.

Your mouth to Barack Obama's ear, dude.

New EU Scraps Net Neutrality

It appears that the new EU telecommunications rules are likely to scrap network neutrality completely.

The big incumbent Telcos there are very much in support of this, because milking money out of their monopoly is really their only skill, same as in the good old USA, and the regulators believe that the market will cure everything, "This approach is backed by the European Commission, which argues that if consumers feel their content is somehow being compromised, they will switch to other providers."

Because competition in such matters has worked so well in the most free market telco environment in the industrialized world, where the speeds are the slowest, and the rates are highest, and ISPs lie about their policies.

Tell Me How This is Not Fraud and Theft of Services

It appears that the senior managers at AIG's Paris division of AIG's Financial Products, Banque AIG, wrote $234 billion in derivatives contracts so that they would likely be technically be in default if they left the firm:

The executives at Paris-based Banque AIG, Mauro Gabriele and James Shephard, have resigned in recent days but have agreed to stay on for a transition, according to people familiar with the matter. In the wake of their resignations, AIG must replace them to the satisfaction of French banking regulators.

If they don't, French regulators may appoint their own designee to manage the bank -- an outcome that could trigger defaults under the bank's derivative contracts. The private contracts say that a regulator's appointment of a manager constitutes a change in control, according to a person familiar with the matter; the provision is often included in derivative contracts where parties want to preserve a way out if something about their counterparties changes.

Seriously, this is fraud. They essentially cooked to books to maximize the possibility that, if they left, there was a real risk of the a technical default.

We need to start throwing these folks in jail by the hundreds, and not a "white-collar resort prison," they should be going to a, "POUND ME IN THE ASS prison," to quote Office Space.

Why Cap and Trade Sucks

Because if there is a sign that a regulatory strategy is ill conceived, it is when you end up paying farmers not to grow crops, and this appears to be one of the new cash crops for the American farmers.

This is a fraud foisted on the American consumer and the environment, much like the construction of unneeded hydroelectric plants in China for carbon credits on the European cap and trade system is a fraud on the European consumer and the environment.

The solution, which is cheaper for the consumer, and keeps the Wall Street types from gaming the system, is the straight carbon tax.

Economics Update

So, the US economy contracted at a revised 6.3% annual rate in the 4th quarter of 2008 and initial jobless claims rose to 652,000 from 640,000 last week, with continuing claims jumped to 5.56 million, another record.

Additionally, we saw New York City’s jobless rate jump by 1.2% in February, from 6.9% to 8.1%.

On the other hand, truck tonnage rose in February, which implies that the requirements for goods and services increased, and the 30 year fixed mortgage rates dropped again.

Meanwhile, in energy, retail gasoline broke $2/gal for the first time this year, and oil hit a 4 month high of $54.34/bbl.

In currency, the dollar rose today.

F-22 Pilot Dies in Crash

Condolences to the family of Lockheed Martin test pilot David Cooley.

Almost Forgot, DFA Baltimore Meeting Today

At Cosi Cafe, from 7:30 to 8:30ish. I'll be there at 7 to greet people.

Not a whole bunch of people there, so your attendance is appreciated.

View Larger Map

White House "Happy" that EFCA is Dead?

I would offer the the caveat that one of the contributors to MSNBC's "First Read" is Chuck Todd, who can be one of the stupidest muthf%$#ers in the White House press room,^* but there is a report that the White House is "happy to have this debate out of the way" because, "sticking a finger in business’ eye wasn’t something the White House was looking forward to."

This is about the most politically opportune time to do this, with the public attitude toward businesses being rather low, AIG is a symptom, not the trend.

I cannot for the life of me think of anyone in the White House who would even hold this opinion, except for economic adviser, and poster child for sex without partners, Lawrence Summers, who is on record saying that unions cause unemployment,^† but even he isn't stupid enough to mouth off to a reporter, or for that matter a co-worker, about this.

I'll call bullsh%$ on this for now.

^*Cases in point were his questions at the first two press conferences, would Obama veto something that doesn't get any Republican votes in the interest of bipartisanship, and how Americans should sacrifice to address the financial meltdown (like millions of people out of work and losing their homes isn't enough) because he does not understand the difference between a foreign war and a domestic economic downturn.
^†Yeah, I know, with "Democrats" like him, who needs Republicans.

Jake DeSantis, Go Cheney Yourself

Mr. Desantis used to work for AIG, but quit, and published his letter or resignation in the New York Times.

So, why am I down on the gentleman? Because anyone who writes such a self-important letter, then goes about having it published in the most influential publication in the United States, and wants us to feel sorry for him, despite the fact that, "I received a payment from A.I.G. amounting to $742,006.40, after taxes," something in the range of $1.2 million pre-tax, is simply an asshole.

AIG F#@$ed Up Yet Another Perfectly Good Business

This time, it's International Lease Finance Corp. (IFLC), the largest aircraft leasing operation in the world, which was fabulously profitable when they bought it from Stephen Udvar-Hazy in 1990, and it looks like they are angling for a government bailout, at that's the subtext that I read into the article.

Isn't the idea of successes in their own financial niche moving into areas in which they have no clue such a wonderful idea?

Great Googly Moogly!!! 3 More Years of Her!

Oh crap. Sarah Palin's PAC is robocalling in Iowa and New Hampshire, which means 3 more years of national news coverage about her.

Clovis's lobotomy scar, I don't think I can take it....Please, make it stop.

Bush and His Evil Minions&trade at Their Finest

Remember Bush's HOPE home foreclosure prevention program?

Truth be told, I don't much either, and I didn't expect it to hit its goal of preventing 400,000 foreclosures, but the current total surprises me, just ONE foreclosure has been prevented by this program.

That's an epic fail even by the standards of George W. Bush.

Whiners

Specifically the New York Times reporters covering the press conference:

This was Mr. Obama as more enervating than energizing, a reminder of the way he could be in his early days as a presidential candidate, before he became defined by rapturous crowds.

Hmmm...I wonder why they are so down on the press conference>

He showed his usual comfort with a wide array of subjects, even as he excluded the nation’s big newspapers from the questioning in favor of a more eclectic mix.

Oh my God! He did not ask a New York Times reporter a question. We are masters of the universe! How dare he!

What a bunch of self absorbed pratts.

Larry Summers in a Nutshell

CONGRESS PASSES WIDE-RANGING BILL EASING BANK LAWS, the New York Times, November 5, 1999:

"Today Congress voted to update the rules that have governed financial services since the Great Depression and replace them with a system for the 21st century," Treasury Secretary Lawrence H. Summers said. "This historic legislation will better enable American companies to compete in the new economy."

And folks who got it right:

"I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010," said Senator Byron L. Dorgan, Democrat of North Dakota. "I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness."

Senator Paul Wellstone, Democrat of Minnesota, said that Congress had "seemed determined to unlearn the lessons from our past mistakes."

"Scores of banks failed in the Great Depression as a result of unsound banking practices, and their failure only deepened the crisis," Mr. Wellstone said. "Glass-Steagall was intended to protect our financial system by insulating commercial banking from other forms of risk. It was one of several stabilizers designed to keep a similar tragedy from recurring. Now Congress is about to repeal that economic stabilizer without putting any comparable safeguard in its place."

So, I'm so glad that Lawrence Summers' astonishing brilliance and foresight are at the disposal of the President of the United States of America.

Economics Update

Well, we have some good news today, with both durable goods orders and new home sales up in February on a monthly basis, though on a year over year basis, durable goods are still down 22%, and home sales are still down 41% year over year, so it may mean nothing, or it may be, to quote paraphrase Churchill, the end of the beginning as opposed to the beginning of the end.

The spike in mortgage applications may reinforce this news, or it may just be a lot of people refinancing their mortgages.

Certainly with California home prices down 41% year over year, this end game is likely to to be ugly anyway.

In the mean time, in the world of government finance, the Fed has started buying US treasuries to further push down interest rates, and across the pond, a U.K. bond auction has failed for the first time in 7 years.

There were not enough buyers there.

In energy, oil was down slightly, and in currency, the dollar was mixed against other major currencies.

$180 Million Up in Smoke

An F-22 has crashed near Edwards Air Force Base at around 10:00am mountain time. The status of the pilot has not yet been determinedd.

Senator Whitehouse Shows Us Why It's Better to Elect a Democrat Than the Best Republican

Case in point, Lincoln Chaffee, defeated for the Senate by Sheldon Whitehouse in 2006, and now Whitehouse is putting forward a bill to protect consumers from abusive credit card companies.

Among its provisions in his Consumer Credit Fairness Act:

• Lenders (not just credit cards, but also payday loans, auto loans, layaway, and overdraft charges) would be prohibited from making claims in bankruptcy if their interestrate were more than the yeild of the 30 year bond interest rate +15%.
• The interest rate would be figured including all charges and penalty fees.
• Removal of the means test for bankruptcy that was included in the 2005 "screw the consumer" bankruptcy law.

Electing Democrats make a difference.

OK, I May Be Wrong About Geithner

Kevin Drum just raised an interesting point about what Geithner has been doing so far

If, several weeks ago, you had charged a task force with figuring out how to successfully nationalize a big bank, what do you think they'd say you had to do? Three things, at least: (1) you have to figure out a widely acceptable way to value the toxic assets on bank balance sheets, (2) you have to set up a fair and consistent test for evaluating bank solvency based on those values, and (3) you need to make sure you have the legal authority to take over a huge, multinational financial conglomerate in an orderly way. Is it just a coincidence that these are precisely the things Tim Geithner has set in motion over the past month? I wonder.

It's an interesting point, and just today, while testifying before Congress, Geithner called for the power to place large bank holding companies into government receivership, backed up by Ben Bernanke.

So Mr. Drum's thought that recent activities of Geithner and Bernanke, and by extension President Obama being a ploy is a possibility, though but I'm inclined to agree with Yves Smith the proprietoress of Naked Capitalism, whose beat is economics, and who knows more about economics, and the major players the economic community, than either Drum or me, and she thinks that the Office of Thrift Supervision (OTS)already has the authority to place AIG in receivership, and already answers to him.

Additionally, she notes that his request for additional power does not include any request for a receivership protocol, and concludes that this request is actually an attempt to give him more power to shovel more taxpayer dollars to the financial industry.

I would also note that Geithner, and his mentor, Larry Summers, have a history that stretches back decades, and there is nothing in what they have done, or are doing now, which would indicate that they would be inclined to do this...ever!

So, while Kevin Drum has an interesting wheels within wheels theory, I am more inclined to go with Nobel Prize winning economist Joseph Stiglitz, and simply say that Geithner's plan is robbing US taxpayers.

But that's my gut, and my sense that past is prologue.

The Upside of the Financial Meltdown: Mindless Imprisonment Edition

It looks like the financial meltdown, and the reduction in tax revenues for local and state authorities have lead to a reevaluation of incarceration policies, which have led the US to have the largest prison population of any society in history: (Gulag nation)

For nearly three decades, most U.S. states have dealt with lawbreakers in two ways: Lock more of them up for longer periods, and build more prisons to hold them. Now many governments, out of money and buried under mounting prison costs, are reversing many of those policies and practices.

Some states, like Colorado and Nevada, are closing prisons. Others, like Kansas and New Jersey, have replaced jail time with community programs or other sanctions for people who violate parole. Kentucky lawmakers passed a bill this month that enhances the credits some inmates can earn toward release.

Obviously, it's depressing that it's taken a fiscal crisis to interject some sanity on the entire issue of over imprisoning our population, but I'll take what I can get.

Hopefully this can make a dent in the "prison-industrial complex."

Political Scabbing and Management Threats Against Labor

So Arlen Spector has decided to cave, again, because of his fears of being primaried, and he has announced that he will vote against cloture on the Employee Free Choice Act, and Federal Express has said that it will cancel its contract to purchase Boeing aircraft if the EFCA passes.

I am not surprised at Spector, who has never seen a principled stance that he couldn't weasel of, though I am surprised that FedEx, which has a long history of virulent and nasty anti-union activity, put a clause in their aircraft purchase contract that allowed them to cancel if unionizing there gets easier,^* is a surprise.

Needless to say, if I need to send anything, I will use the use the US Post Office or UPS, rather than those C*cks*ck*rs.

^*The EFCA would change how FedEx organizes, moving it from the National Railway Labor Act to the National Labor Relations Act, which means that parts of the company could unionize, as opposed to the whole company at once.

Senator Dodd Sees Joint Regulator for Systemic Risk

He says that creating a council of the Fed and the Comptroller of the Currency concentrates power too much, and I would agree.

And as I said before, we do not want another Greenspan in a position like this with no checks.

Labor Joins Israeli Coalition

Benyamin Netanyahu and Ehud Barak have come to an agreement for a coalition government, and the Labor Party central committee voted to approve the deal, so it appears that there is now a governing coalition is Israel.

It appears that Netanyahu gave labor much more than just the Defense portfolio:

• 5 Cabinet posts, including the Defense and Trade and Industry Ministries.
• 2 Deputy ministry positions.
• A fairly liberal economic policy, which includes:
• Money for retraining workers
• Funding for child care
• A commitment not to cut salaries in the public sector
• A commitment to increases in benefits for pensioners
• An increased political role for the Histadrut, Israel's organization of trade unions.

It's clear from this deal that Netanyahu was desperate to have this, given Labor's poor showing (only 13 seats), and it also represents a return by the Labor Party to the interests of, well, (small l) labor, which may go a long way towards distinguishing themselves from Kadima.

I think that Netanyahu could have gone right for the coalition, but the idea of actually having to follow up on his hard line rhetoric during the campaign scares him.

Vermont Senate Passes Marriage Equality

By a 26-4 margin (!), so it goes to the state house, where it is almost certain to pass, the governor, Republican Jim Douglas, says that he does not support the bill, though it is not certain whether he will veto it from the story.

China Calls for Currency Basked as Reserve Instrument

This would replace the US dollar as a reserve currency.

It would obviously weaken the US dollar in the long run, which is not necessarily a bad thing, the "strong dollar" policy of Robert Rubin (and Larry Summers, and Timothy Geithner, and Ben Bernanke) benefits Wall Street at the expense of main street, and is long term unsustainable.

It is unclear to me as to whether this is a real move for change, or simply an attempt by China to assert itself on the world economic stage, though.

Opposition Figures Arrested In Georgia

It appears hat Mikheil Saakashvili is feeling threatened, so he is unleashing the state security apparatus in advance of an opposition rally.

Economics Update

So the latest investor confidence survey is down, no big surprise there, things are still not looking good.

Case in point, Fitch ratings is warning on prime grade residential mortgage backed securities (RMBS) created between 2005 and 2007 because so many of the mortgage holders are under water.

In energy, oil fell, though it's still above $50/bbl, on profit taking from yesterday's price increase.

In currency, the Dollar rose as people went back to it as a safe haven, and the Yen fell, because yields are so low in Japan.

Return to Your Undisclosed Location

This appears to be what House Republicans are saying to Dick Cheney, and I agree with them.

They think that he's so unpopular that he costs them political capital (probably true), while I feel that even if it is to the advantage of the Democratic Party, the man is such a cancer on public discourse that he should never again be given a seat on the Sunday morning shows.

Still, it leaves me amused

Banking Industry Threatens Obama Administration

That's the subtext of this Wall Street Journal article on how Obama is dealing with the financial industry.

The bankers are saying, "If we don't get our bonuses, we will destroy our companies and the economy."

As Ezra Klein notes, patriotism is a joke for the super-rich bankers who run Wall Street:

But whenever it comes up in conversation, I'm shocked at the depth of my own fury. And here's why: Not to sound naive about this, but the absence of patriotism that galls. The lack of responsibility is sickening. These bankers delivered an almost mortal wound to the American economy. Their actions threw millions out of work and wrecked the retirement savings of tens of millions more. It is no exaggeration to say that they will cost us more than 9/11.

And you cannot negotiate with terrorists.

Rival Insurance Companies Claim AIG Used Bailout to Undercut Their Prices

So, we have the AIG bailout undermining the rest of the insurance industry now, because of the federal money and implicit federal guarantee.

Delightful.

I think that the Geithner plan will do the same thing to the smaller more responsible banks out there.

The federal bailout is squeezing out the good actors in these industries.

Yoo May Have Tenure Revoked

Basically, the question is whether the legal opinions that John Yoo supplied to Bush and His Evil Minions^&trade are so outrageous as to justify the termination of his tenure at UC Berkeley law school.

I am of the opinion that Yoo actually broke the law, using the Nuremberg precedents for trying judges and lawyers.

One caveat about this article, ignore Alan Dershowitz, who has actually been a big supporter of torture, going so far as to suggest that judges should authorize it, and not an opponent of Yoo's position as the writer states.

Barney Frank Walks Away from Fed as System Risk Regulator

It looks like there will be some real good coming from the AIG bonus fiasco, as Barney Frank is taking a few steps back from his idea of the Federal Reserve as the über regulator of the economy:

A proposal to put the Federal Reserve in charge of market oversight is losing congressional support after its main backer, Barney Frank, said criticism over American International Group Inc. “undercuts” his proposal.

“There’s still a need for a systemic-risk regulator,” Frank, a Massachusetts Democrat who chairs the House Financial Services Committee, said yesterday. “The argument for the Fed alone has lost a lot of political support. I think that’s now got to be re-looked at.”

Senate Banking Committee Chairman Christopher Dodd and Richard Shelby, the panel’s top Republican, said March 19 they are reluctant to expand the Fed’s role, faulting the central bank for lapses leading to the financial crisis.

When one considers how opaque the operations of the Federal Reserve are, and how, of all the regulatory agencies, it was the one that failed the worst, the others being hamstrung through legislation or executive initiative, Dodd and Shelby are right to be dubious of the fed.

Just ask yourself this question: Do you want Alan "Bubbles" Greenspan to be the systemic risk regulator for the economy?

US Tried to Silence Detainee to Cover Up Torture

US Government lawyers attempted to get Binyam Mohamed, the Ethopian detained at Guantanamo, to sign an aggreement not to discuss his treatment as a condition for his release.

Since Mohamed is alleging illegal torture, and the lawyers in question had reason to believe that there was a possibility of criminal prosecution, I do not see how this could be anything but a slam dunk case of obstruction of justice:

U.S. government lawyers tried to get a British resident held at Guantanamo Bay to sign a deal saying he had never been tortured and that he would not speak to the media as a condition of his release, according to documents presented in Britain's High Court.

U.S. lawyers also wanted Binyam Mohamed, an Ethiopian citizen held at Guantanamo for more than 4 years, to plead guilty to secure his freedom, even though he was never charged with a crime, according to documents released by two judges who ruled in the High Court case.

The documents, relating to a ruling the judges made last October, reveal the U.S. military wanted Mohamed to agree not to sue the United States or any of its allies, and that any rights to compensation should be assigned to the U.S. government.

Any lawyers among my reader(s) want to weigh in on this?

Scatological Explanation of the Geithner Plan

So, I was on a private BBS formed out of the ashes of Netslaves, and someone asked the following:

CNN keeps talking about it raising the DOW today, but I have no idea what it actually is supposed to do.

So I quickly riffed on this, and the response was very positive, so I thought that I should share my (somewhat profane) explanation with the world:

---

Short:

• Place your hand in your pocket.
  
• Remove wallet
  
• Hand to Wall Street Executive.

Longer version:

• The Treasury/FDIC/FED will make non recourse loans to allow investors to buy into the big sh@#pile of mortgage backed securities (MBS), credit default swaps (CDS) and other alphabet soup so that they buyer will put down about 3% for a 20% stake in this sh@#.
  
• A non recourse loan means that if the investment fails, the lender (i.e. the taxpayer) takes back the sh@#, and the loan is settled, basically, they are only out their 3% (or less) down payment.
  
• Basically, it's a subsidy to the big banks and investment houses, who created the sh@#, because the small investor cannot get the sh@# for cash deal without going through the big banks and investment houses, and paying a sh@# load of commissions.
  
• This has the effect of creating a taxpayer subsidy for the sh@# that is (at least, there are other programs that feed in) of at least 30%.
  
• So eat your sh@# sandwich, and know that somewhere a Wall Street banker is spending your money on some prostitute to sh@# on him.

What can I say but sh@#?

Netanyahu is Terrified of His Campaign Promises

Benyamin Netanyahu is aggressively pursuing a coalition with Labor, and strange as it sounds, it might happen because Ehud Barak really wants to stay on as head of the Defense Ministry, though some of his fellow Laborites are aghast at the prospect.

I would also take issue with one of the points that the author of the second link, Jeff Barak, has with Avigdor Lieberman being the Foreign Minister: It's actually one of the two positions where his positions are least likely to cause a problem, because his three basic planks are a two state solution (and as FM he won't get to draw those boundaries), hostility to the Arab population inside the Green Line, and staunch secularism.

I'd much rather see him being the Minister of Religious Services, but when all is said and done, the FM position keeps him away from internal Israeli politics.

Bernie Sanders Blocks Gensler as CFTC Chairman

I wholeheartedly approve of the distinguished gentleman's decision to place a hold on the nomination of Gary Gensler to be chairman of the Commodity Futures Trading Commission.

Gensler (along with Geithner and Summers, but those guys are water under the bridge) fought long and hard for the Commodity Futures Modernization Act of 2000, first as Assistant Secretary of the Treasury, and then as Undersecretary of the Treasury, which deregulated derivatives and swaps, and is one of the architects of the current meltdown, and Sanders is 100% correct in objecting to his having a any role in further regulation of derivatives.

Then there is also the matter of his brother being hip deep in Wall Street too, running a fund for T. Rowe Price, and Gary Gensler himself is another Goldman Sachs alum.

Enough is enough. We need people who aren't the ones who created the problem in the first place in charge of policing those who were.

Un-dirtyword-believable, and good for Sanders to stand up for a semblance of competence and honesty in Barack Obama's economic team.

Common Sense on Pakistan

It looks like the White House will be linking future aid to Pakistan to their performance fighting the Taliban and limiting cross border incursions.

This is a very good idea.

There are elements in Pakistan who are still supporting the Taliban, because they see it as a way of offsetting Indian influence in Afghanistan, and much of the military establishment that isn't doing this is completely focused on a future conflict with India, so they do not spend resources to assert a level of control in the "tribal regions."

If they realize that spare parts for their F-16s is contingent on their performance in keeping the Taliban from using northern Pakistan as a staging area, maybe elements of the Pakistani security apparatus will get on the ball, as opposed to spending most of their time and energy on planning for an apocalyptic conflict with India.

Economics Update

Since we've already covered the Geithner political suicide pact economic plan, let's lead off with housing.

Happy, happy, joy, joy, home sales rose 5.1% in February relative to January, seasonally adjusted, though people not so closely attached to the realty industry have noted that it's
really a pretty modest rise, or note that home sales have fallen year over year, and that about 45% of these sales are distressed in some manner.

I would say that year over year is the only metric to apply, because the so called "seasonal adjustment" if it ever were valid, has become meaningless in the current collapsing market.

Internationally, we have another member of the 0% benchmark club, as the Bank of Israel has cut its benchmark rate to 0.50%.

In currency and commodities, the dollar is down, because people are less concerned about safe havens, so there is less dollar flight to safety, and copper and oil rose.

It appears that these markets like Geithner's plans, because, they are over paid and over bonused trader types, I guess.

Governor Paterson Gets Clue

So, we now have a New York Post reporter breathlessly reporting that he is planning a "secret" tax hike on the rich.

Well, considering the fact that the Wall Street masters of the universe upon whom he hoped to fund his reelection bid are now less popular than either Dick Cheney or a case of the clap,^* this is not surprising, though according to Dicker, Paterson wants to appear to be against the tax hikes while pushing them through, which indicates once again that he has the political instincts of Kathleen Kennedy Townsend, or a packet of Fleishmann's active dry yeast.^*

My guess is that he's flailing around because the polls show him being crushed by Andrew Cuomo in the primary, and by Rudolph Guiliani in the general by numbers that exceed what a banker can supply to him by the way of campaign funds.

^*For some reason, I always confuse the two.^†
†I love it when I get to "twofer" footnotes.

Geithner's* Plan

So, the plan has been announced, and it's pretty much what I said over the weekend: A massive subsidy to big investment firms, and the little guy can't get in on the "3% down and that's all you lose" deal.

It's the buy the sh%$pile with taxpayer money thing all over again....and again....and again.

Geithner has an OP/ED in the Wall Street Journal,^† where he rolls out the Treasury's new weasel words for financial toxic waste, "Legacy Assets."

I'm sure that he thinks of Chernobyl as an "accelerated sunshine facility" too.

We know that the financial masters of the universe love the subsidies, because players like BlackRock and Pimco are falling all over themselves to get in.

I won't go over the problems with the plan here, you can look at my Saturday post for that, but the short form is that Wall Street is mugging you.

^*Really Barack Obama's plan, because he is where the buck stops, though a lot of the blame goes to Larry Summers too.
^†Which, considering the WSJ's editorial page reputation for outright deception, is utterly appropriate.

Reality Sets In

It appears that the economic Calvanism^* of the past 3 decades is on the wane.

Michael Hiltzik notes that one of the characteristics of the AIG scandal is the reemergence of the concept of the "undeserving rich" in the public discourse:

That the point is even open for discussion suggests that a sea change is taking place on the American political scene. For decades, the wealthy have been held up as people to be admired, victors in the Darwinian economic struggle by virtue of their personal ingenuity and hard work.

Americans consistently supported fiscal policies that undermined middle- and working-class interests partially because they saw themselves as rich-people-in-waiting: Given time, toil and the magic of compound interest, anyone could retire a millionaire.

That mind-set has all but been eradicated by the damage sustained by the average worker's nest egg, combined with the spectacle of bankers and financial engineers maintaining their lifestyles with multimillion-dollar bonuses while the submerged 99% struggle for oxygen.

Here's hoping that this is a generational change, and not a 15 minute fad.

^*Traditional Calvanism sees profit, and wealth, as a sign of God's grace.

Bush Appointee Incompetent and Corrupt: Afghan Edition

It looks like the US and its NATO allies are looking to appoint a Prime Minister to bypass and diminish Hamid Karzai's role in the day to day operations in the Afghan government.

The US and its European allies are ­preparing to plant a high-profile figure in the heart of the Kabul government in a direct challenge to the Afghan president, Hamid Karzai, the Guardian has learned.

The creation of a new chief executive or prime ministerial role is aimed at bypassing Karzai. In a further dilution of his power, it is proposed that money be diverted from the Kabul government to the provinces. Many US and European officials have become disillusioned with the extent of the corruption and incompetence in the Karzai government, but most now believe there are no credible alternatives, and predict the Afghan president will win re-election in August.

Hooccoodanode that George "Heck of a job, Brownie" Bush would appoint people completely inept and corrupt to critical positions?

New York Times OP/ED Asks if Geithner/Summers/Bernanke is Obama's Katrina Moment

Frank Rich, who I generally find unobjectionable, but also unmemorable, asks this question, and I believe that he may be right.

I believe that Wall Street is being run by, and for, a corrupt class of overpaid crooks, and most of the country agrees with this, but Geithner/Summers/Bernanke believe that these folks posses the unique genius to fix the problem that they have created.

They are wrong, and unless, and until, the campaign to fix these things becomes a campaign against these folks too, a bit of reality that even perennial light weight Maureen Dowd gets, things will get worse.

These people don't work for their banks or brokerages, they work for their own benefit at the expense of those banks or brokerages.

Credit Union Failures Too

U.S. Central Federal Credit Union, Lenexa, Kansas, and Western Corporate (WesCorp) Federal Credit Union, San Dimas, California.

They are commercial credit unions, which means that they do things like serve as check clearing houses for retailers, they do not hold personal accounts.

Assets, %57 billion.

NCUA Link.

Body Armor for the Judean People's Front Crack Suicide Squad

Judean People's Front Crack Suicide Squad!
What, you haven't seen Life of Brian? Rent it now!

You may, or not, be aware of the concept of reactive armor.

It's used on a fair number of armored vehicles out there: It's a box with explosives in it, and when struck by a round, it explodes, dissipating the jet from a shaped charge or altering the path of a kinetic energy penetrator dart.

Well, someone has taken the next forseeable step, and submitted a patent application for an exploding bullet proof vest:

As Dave Barry would say, "I am NOT making this up!"

Check out patent number 6474213, Reactive stiffening armor system, which proposes:

A reactive armor structure having an outer layer and a reactive element adjacent to and integral with the outer layer is provided. The reactive element provides an amount of support to the outer layer effective to restrain movement of the outer layer and to delay fracture of the outer layer when the outer layer is impacted by a projectile.

I wonder what happens when a limb is in the path of the detonation of:

10. The structure of claim 1, wherein the explosive material has a detonation velocity of from about 2 km/s to about 5 km/s.

...

24. The structure of claim 15 wherein said reactive material comprises a material selected from the group consisting of TNT, RDX, Comp-B, Octol, and nitromethane.

I'm not sure if it would be worse to be the guy in the armor, or the guy standing next to the guy in the armor.

A400M Troubles Continue

Best evidence of this is that the seven partner nations in the program have agreed to a moratorium on cancellation until July.

They are not agreeing to continue, they are just saying that they won't cancel in the next 4 months, because the program is 4 years behind schedule, and well over budget.

I think that the new lesson of defense procurement is never buy anything unless you can cancel it when costs escalate and schedule slips.

Geithner's New Plan: Same Old, Same Old, Failure

So, we now have a definitive leak of the features of Geithner's plan to help the financial system, and it's the same old, same old: The problem is not that the banks are insolvent, or that their assets are worthless piles of crap, it's that the markets are just undervaluing them.

The basic provisions:

• An auction of the big sh#@pile, which is a bad thing, because it only serves to expand taxpayer exposure.
• The FDIC will lend about 85% of the money to buy this.
• These FDIC loans will be non-recourse loans, which means that if those assets bought with that particular loan would be used to repay. Any further losses would be eaten by the taxpayer.
• The Treasury will match, "the private money that each of the firms [4-5 investment firms hired by the Treasury, meaning Goldman and the rest of the usual suspects] puts up on a dollar-for-dollar basis with government money," which means that the 15% that they have to buy to get the assets is now 7½%
• The Treasury/Federal Reserve TALF lending program will be used to further expand lending to buy this toxic waste.

This is what Geithner has been pushing for a long time, some sort of program to overvalue assets at taxpayer expense, all while, "firmly against imposing any restrictions on pay for companies investing money in the rescue effort rather than receiving money from it," except, of course, any participants in this are receiving federal money because of the subsidies.

Dean Baker notes that the that unlike Timothy "Eddie Haskell" Geithner and Lawrence "Shoggoth" Summers and their Evil Minions^™, the current market values of the securities are probably accurate, because real estate prices remain 20% above the historical trend, and if houses fall another 20%, these mortgage backed securities now selling for 30¢ on the dollar, which are the very top tranches, would be near a dime on the dollar.

Paul Krugman correctly calls it, "an open invitation to play heads I win, tails the taxpayers lose," policy, and Calculated Risk and Yves Smith are similarly disparaging, though John Cole is the one who best nails the situation:

The Illness- reckless and irresponsible betting led to huge losses
The Diagnosis- Insufficient gambling.
The Cure- a Trillion dollar stack of chips provided by the house.
The Prognosis- We are so screwed."

Seriously, tag team of Geithner/Summers may very well be worse for the economy than Hank Paulson.

For your amusement, here is Rep Brad Sherman (D-CA) opening up a can of whup ass on the CNBC Wall Street apologists