Quote of the Day

Barry Ritholtz:

I can only conclude that in order to run for governor in Texas, there is some sort of an IQ test involved — if you pass it, you become ineligible for state office . . .

On the fact that Texas Governor Rick Perry, who had said that he would decline stimulus funds, and had actually talked secession, was in fact spending stimulus funds on remodeling the governor's mansion.

The Next Right Wing Phony Sh%$ Storm

It appears that the only people in the United States who are lamer than Code Pink, the "New Black Panther" Party (NBPP), have once again put their foot in it.

They stationed some of their people outside a polling place in uniforms and one of them, Samir Shabazz, was carrying a baton and brandished it, and the Civil Rights division of the DoJ filed a civil suit against them for voter intimidation, which they have now dropped, after review by Obama appointees.

They took it to court, and got a default verdict, which is not surprising, since the NBPP doesn't have the resources for lawyers, and a permanent injunction against Mr. Shabazz from being within 100 yards of a polling place with any sort of weapon.

The NBPP drops Shabazz like he was a Plutonium milkshake, and then issues a condemnation of any sort of voting suppression, and the DoJ drops the case.

Then some of the "professionals staff" in the Civil Rights Division complained to the Washington (Moonie) Times about this.

Why the Moonie Times? Because these were Bushies burrowed into the division, and they wanted to show that it was "those n*gg*rs" who were suppressing the vote, not the 'Phants in Texas, Alabama, etc., who were doing so with back door poll taxes.

So, Bush and His Evil Minions^™ purge the Civil Rights Division, burrow political hacks to replace them, try to show that the problem is black people trying to vote, and then complain to their mouthpiece when the adults come in and fix it.

Expect this to be wall to wall on Rush, Hannity, and O'Falafel tomorrow.

No Longer Well Endowed*

I am referring, of course, to the sad fortunes of Harvard University's endowment, which I have blogged on a number of occasions.

Well, Felix Salmon notes that , something which I noted in December, though, to be fair, I never thought that it would get to this point, he said, quoting Mr. Salmon:

Richard Bradley reports:

Harvard has already halted the hiring of junior faculty and announced an early retirement program for tenured professors, and for the first time ever is considering laying off tenured professors.

And why might Harvard be laying off tenured professors? Because it’s down to its last $25 billion, of course. Bradley adds a bit to what we know about Harvard’s financial mismanagement:

According to the university’s 2008 financial report, in the next 10 years it must pay various private investors some $11 billion in capital commitments. Where will that money come from if, as seems likely, endowment growth over those years is minimal or nonexistent, and alumni’s own strained budgets limit their generosity?

So, the question here is where Harvard will go with all of this.

Obviously, hitting up alumni for more money is a given. That's what they do normally.

The real question is whether they will either move to a less aggressive, and less risky strategy, which will provide lower, but more stable, returns and greater liquidity, or whether they will go whole hog into more private equity deals, betting on a rebound which will lift them out of their problem?

Human nature being what it is, I'm going to guess that they go with the latter, because doubling down on failure is basic human nature.

^*Yes, I spent a lot of time on this title, and get your mind out of the gutter!

Terrorists Strike in American Heartland

Someone shot George Tiller, who ran Women's Health Care Services, in his church in Wichita, Kansas.

It is yet another right-to-life movement murder.

There has been an arrest, but, unfortunately, there has been no movement taken against those people and organizations that offer material support to these terrorists, such as Kansans for Life, Priests for Life, Operation Rescue, former Kansas AG Phill Kline, Randall Terry, and Kansas Coalition for Life.

It is clear that the ties between these people and organizations, and people and organizations that aggressively engage in terrorism against law abiding medical professionals are far closer than those between the Holy Land Foundation, whose leaders just received 65 year sentences, and Hamas, and Hamas has never engaged in terrorism in the borders of the United States.

Spiroid Winglets Enter Flight Test

This is an interesting technology, both for its promise to reduce drag by 6%+, and for the very significant reduction in wingtip vortices that would allow for takeoff and landing spacing between aircraft to be significantly tightened up.



Earlier post from this, from last July, here.

Chinese Pilots to Train on Brazilian Carrier

I think that this implies that the Chinese intend to move very aggressively towards creating an aircraft carrier capability.

It's an opportunity for them to hone their skills, and tap the expertise of the Brazilian, along with the rapidly progressing refit of the Varyag, you can see pictures at the link, implies to me that the Chinese intend to have an training carrier air wing in a pretty near term operating from the never completely Admiral Kuznetsov-class carrier.

USAF May Lose Oversight of Tanker Purchase

The Pentagon is looking at whether the USAF or the Pentagon will run the next competition between the 767 and A330 for the KC-X tanker.

If they go with the Pentagon, this is a a major change from earlier procedures.

It appears that some people are concerned that the USAF is incapable of doing this properly, after the first deal was shot down because of corruption, and the 2nd deal was successfully challenged to the GAO.

I can't imagine why.

Pakistan Aggressively Expanding Nuclear Program

Satellite photos have revealed what appears to be a significant expansion of Pakistan's nuclear weapons facilities.

Among other things, it also points toward an increasing production of Plutonium, Pakistan's arsenal is currently HEU, which, unlike Uranium, could be use for thermonuclear warheads.

A country on the hairy edge expanding its nuclear facilities.....Delightful.

You Don't Have to be a Sick F%$# to be a Republican.....

But they do have more than their share

Case in point, a Republican legislative aide in the Pennsylvania statehouse who propositioned a teen online, he wanted to have sex while one or both of them were wearing a panda costume, and there are indications that diapers may have been involved too.

It gives an entirely new meaning to Richard M. Nixon's "Checkers" speech.

When he talks about his wife Pat having, "Respectable Republican cloth coat," and not a fur coat......

Rearranging Deck Chairs

So, we have a law promising acquisition reform at the Pentagon.

I'll believe it when I see it. Things are too broken and too corrupt for incremental change.

See my earlier post on TSAT and FCS.

Damn! This Crap Never Dies, Does It?

2 of the significant cancellations of the budget proposed by SecDef Gates were the USAF's Transformational Satellite (TSAT), and the Army's Future Combat System (FCS), but like the slasher flick villain, they're back.

The USAF is now looking for funding of a "technology demonstrator" which would mirror TSAT's capabilities, with an obvious eye towards reviving the program, and Army Chief of Staff General George Casey is saying that the FCS has not been killed, prime contractor Boeing still touting fictitious milestones being passed, and a senior acquisition officer saying that it would be split into 3 parts.

So, we'll services coming after this again, and again, even though the gear and tech from the FCS that was supposed to enter service in 2011 has now been delayed.

The Iron Triangle at its finest.

Lithium Hydride Scramjet Shows Promise

Lithium Hydride is a fairly dense and easy to handle way to store hydrogen, which is one of the reasons that it's used, with Deuterium substituting for Hydrogen, as the fusion fuel supply for thermonuclear warheads.

Well, Claudio Bruno, of the University of Rome, has begun testing the material for use in scramjet engines.

Gaseous, or for that matter cryogenic, hydrogen is bulky and difficult to store, but it also is the material that is best suited to burn quickly enough to work well under supersonic combustion.

One of the techniques used is to use a catalyst, and the heat generated at speed, to crack hydrocarbon fuels, and use the hydrogen generated, or to use a preburner, basically a ramjet inside the scramjet, to preburn the fuel and create a hot reducing atmosphere for further combustion.

LiH would decompose naturally at operating temperatures, and would appear to be a simpler solution.

Lo Geithner

Who Knew?

Cats grow on trees.


And exist in the form of a liquid

Whack-A-Kitty

It appears that no pootys were injured in the production of this video.

Economics Update

We're All Red States Now
(Philly Fed Index, Red is Contraction)

The revised numbers for the first quarter GDP are out now, and it's an upward revision for once, from a fall of 6.1% to a fall of only 5.7%.

Of course, -5.7% is still pretty ugly, and the fact that the ATA Truck Tonnage Index fell 2.2% in April, and that the Philly Fed State index is not showing expansion in any states, seems to indicate to me that we are still talking about a change in the 2^nd derivative, i.e. not getting worst faster, than a rebound.

Still, there was still some good news, with the Consumer Sentiment Index reaching an 8 month high, 68.7, and Japan's factory output unexpectedly rose last month.

Still, with Euro zone inflation hitting 0% this month, the specter of deflation is very real.

Meanwhile, the less concern about the economy has pushed the dollar down, while oil price increases have pushed the Canadian dollar up by 9.6% in May.

Not Enough Bullets, No Golden Parachutes Edition

It looks like the banks are at it again, in this case, Associated Banc-Corp, which received $525 million in TARP funds, and its former President and CEO, Lisa Binder, who arranged a $1.65 million payout upon her resignation, they just dressed it up as a "non-compete" agreement.

Grrrr...

U.S. Unemployment Now as High as Europe

Actually the US unemployment rate is higher relative to Europe than the Center for Economic and Policy Research (CEPR) report suggests.

The Europeans have a far more relaxed count for the unemployed, counting, for example, full time students looking for part time work as unemployed, and the US counts active duty military as part of the civilian workforce,, which Europe does not, further lowering the US numbers relative to Europe.

When comparing apples to apples, the EU and US have been much closer in terms of unemployment rate, and right now, our unemployment rate is higher.

Additionally, the consequences of unemployment are far worse in the US with a threadbare social safety net which involves, among other things, things like a loss of healthcare.

Bushie Takes the 5th

When I last wrote about PBGC head Charles Millard, who a large portion of the agency's trust fund, and put it in the stock market just before the crash, I thought that it was just another case of another incompetent ideologue.

I was wrong. It's Bush and His Evil Minions^™ style corruption, baby!

The House Education and Labor Committee is now investigating his contacts with the investment banks that actually bought the stock, and generated over $100 million in fees.

So, they called Millard to testify, and he repeatedly invoked the 5^th.

Sounds to me like he was throwing business their way in exchange for the possibility of a lucrative job offer.

More People Come Out in Support of Inflation

I have been saying for some time that this is the way out of the housing crisis, because it will devalue the mortgage loans to match real-estate prices returning to sanity.

Well, there are now some noted economic voices saying the same thing:

So say economists including Gregory Mankiw, former White House adviser, and Kenneth Rogoff, who was chief economist at the International Monetary Fund. They argue that a looser rein on inflation would make it easier for debt-strapped consumers and governments to meet their obligations. It might also help the economy by encouraging Americans to spend now rather than later when prices go up.

“I’m advocating 6 percent inflation for at least a couple of years,” says Rogoff, 56, who’s now a professor at Harvard University. “It would ameliorate the debt bomb and help us work through the deleveraging process.”

6% is a 12 year doubling time, and 3 years at 6% would get you an increase in prices of about 19%.

I think that the reason that he's talking about those numbers is because much above 6%, you start having real concerns about it getting away from you.

Meanwhile, Paul Krugman, while not coming out in defense of some inflation, says that he does not see it as a big deal.

He feels that the levels of debt under these circumstances are justified, and backs it up with historical examples.

So, Just How Were We Better Than Saddam?

It's far far worse than I imagined.

When I wrote about Bush rape rooms, I cited Scott Horton, who detailed only rape by instrumentality, but the reality is that we are talking full genital rape here, including the rape of a boy:

At least one picture shows an American soldier apparently raping a female prisoner while another is said to show a male translator raping a male detainee.

What's more the Telegraph's source on this is unimpeachable:

Detail of the content emerged from Major General Antonio Taguba, the former army officer who conducted an inquiry into the Abu Ghraib jail in Iraq.

Allegations of rape and abuse were included in his 2004 report but the fact there were photographs was never revealed. He has now confirmed their existence in an interview with the Daily Telegraph.

...

Maj Gen Taguba, who retired in January 2007, said he supported the President’s decision, adding: “These pictures show torture, abuse, rape and every indecency.

We also know that Barack Obama lied when he talked about this:

Mr Obama seemed to reinforce that view by adding: “I want to emphasise that these photos that were requested in this case are not particularly sensational, especially when compared to the painful images that we remember from Abu Ghraib.”

I don't think that he could say that you have pictures of a boy and a woman being raped, in additional to the forcible stripping of a woman detainee to humiliate her, any honest description would be almost as inflammatory as the pictures themselves, but saying that they are "no big" will make him less credible the next time something like this comes up.

More Economic Journamalism

Remember when I was talking about economic journamalism on durable goods orders?

Well Bloomberg gets the story right, with U.S. Economy: Durable-Goods Orders Hover Near Lowest Since 1996, but Reuters (U.S. April durable goods orders post biggest gain in 16 months), and CNBC (Durable Goods in Surprise Jump; Jobless Claims Dip), both get it very, very wrong.

Let's roll the Bloomberg story for what is going on:

Orders rose 1.9 percent in April after a 2.1 percent drop in March that was more than twice as large as previously estimated, the Commerce Department said in Washington. Meanwhile, the Labor Department said 6.79 million people are collecting jobless benefits, and another report showed new-home sales were lower than forecast in April.

(emphasis mine)

OK, this looks like a 1.9% bump, which is a significant bump, but Bloomberg covered this as low numbers.

Why is this correct, and Reuters and CNBC wrong?

That phrase, "more than twice as large as previously estimated," is why it is wrong.

As Reuters notes a few 'graphs down:

However, March orders were revised sharply lower, falling 2.1 percent from the previously reported 0.8 percent decline.

So, we are comparing initial estimates for April with revised numbers for March.

If you were to compare apples to apples, you would have 1.9%-2.1%-(-0.8%), or 1.9%-2.1%+0.8%, or a growth of 0.6% comparing apples to apples.

In fact, you get a lot of this out of the government statistic machine, and it's faithfully echoed by the press.

You have a number that is an improvement over the last month's (revised) numbers, and it's really good news.....And then, a few weeks later it's revised down, and the new figures for the next month come out, and they look really good compared to the downwardly revised previous figures.

Rinse, lather, repeat.

Pakistani Supreme Court Rules that Nawaz Sharif Can Hold Office

He had been banned from office by the Supreme Court some months ago, on the basis of the trumped up charges that Musharraf charged him with post coup, but since then, the Musharraf appointed chief justice has been replaced by Iftikhar Muhammad Chaudhry, who had been removed by the general, and whose whose reinstatement was the subject of massive protests, ruled that the charges in question were bogus.

There should be no short term political impact, but it is clear that Sharif is more popular than the current president, Asif Ali Zardari, who is seen as both ineffective and remarkably corrupt even by the standards of Pakistani politics, and it is likely that he would win when an election is held.

Abolish the U.S. Office of Thrift Supervision

There they are, "cutting red tape," 2 senior OTS officers, and 2 bank lobbyists.

The inspector general has issued a report, and we now know that the OTS approved or directed banks to backdate captital contributions in order to make the institutions that they regulated appear in better shape than they were.

And now these jokers are letting leveraged buyout experts buy into small community banks, despite the best efforts of the FDIC and the Federal Reserve has closed, allowing.

There is talk of regulatory fixes, and one is to prevent banks from forum shopping, so that agencies compete in this way to get more money from fees.

Doing away with the OTS would be a good start.

Auto Industry Update, GM Bankruptcy Imminent Edition, the Sequel

It looks like some of the larger bondholders have blinked, and have agreed to a slightled debt for equity swap.

Even so, GM's bankruptcy now seems a foregone conclusion.

It's the Credit Default Swap doing this. There are too many players out there who bought the debt cheap along with an under-priced CDS to hedge the risk, and so have no incentive not to burn the house down.

Still, all this has GM playing the turd in the punchbowl in Europe, where it
made a surprise demand for an additional €300 million payment on the sale of its Opel division, and at this point, the Germans are beginning to suspect that the US Treasury is trying to pull this money from Germany to the US:

German leaders expressed frustration with the United States Treasury, citing inadequate guarantees that European assets would be protected from the likely bankruptcy filing in American courts and that German money would be used only for Opel.

There is also the issue that EU regulators are looking to see if the loan guarantees offered are an illegal state subsidy.

Meanwhile, Ford's former parts division, Visteon, and Metaldyne have both filed for bankruptcy, and I think that this likely going to get worse, not better.

Economics Update

Initial and Continuing Claims, Courtesy of
Calculated Risk

So, the new unemployment claims numbers are out, and they are still bad, though a bit better, 623,000, down 13,000 from the last week, and the 4-week moving average fell 3K to 626,750.

That being said, the continuing claims were 6,788,000, up 110K, to yet another record, so layoffs may be slowing, but so is hiring.

My take: this is more businesses are running out of people to lay off than it is the economy improving.

On the other side of the pacific, Japanese retail sales rose, but the consensus is that this is a temporary blip, not a trend.

Reinforcing my "dead cat bounce" view is the fact that durable goods orders remain near a 13 year low. (There is also some very bad financial journalism around this story, which I will get to separately)

Meanwhile, in real estate new home sales rose even as prices continued their fall, and if you look at the sales there is a huge portion which are distressed properties, short sales or foreclosures.

It's why we are seeing more stories about how there are No "move-up" buyers, selling their old house and upgrading.

There is very little equity for such a move currently, and with mortgage rates continuing their upward path, and delinquencies and foreclosures rising sharply, they broke another record in first quarter, I don't see any signs of a real rebound in the sector.

Meanwhile, I wonder how much the relaxation of the credit crunch involves the rest of our economy. The metrics involving inter-bank lending show signs of a thaw, but US commercial paper fell to its lowest level in 8 years.

This is largely non-bank lending, and it's absolutely comatose.

Menqhile in currency and energy, the dollar dropped, and the Yen dropped more/a>, on the (not really that) good durable goods numbers and unemployment figures, while oil was up on OPEC's announcement of no production boosts.

Right Wing Priest Uses Schism to Cover Up Embezzlement

Well, now we know what's driving at least some of the Schism in the Episcopal Church over the ordination of gays, some of the right wing priests are taking the money and running:

The conservative Colorado Springs pastor who broke away from the Episcopal Church to form a new Anglican congregation in May 2007 now is accused of stealing $291,000 from Grace Church and St. Stephen's Parish.

...

When Armstrong left the Episcopal Church, he said the split was over theological differences, such as his opposition to gay marriage and the church's ordination of openly gay clergy.

But Colorado Episcopal Diocese officials countered that they believed Armstrong, who had been Grace's pastor for 20 years, had left to escape reckoning for embezzlement uncovered by diocesan officials. The diocese notified police of its suspicions in May 2007.

I think that we'll find a lot more of this, but I am a bit of a cynic on such things.

The Law is a Fool

So, 60% of Royal Dutch Shell voted against bonuses for senior executives getting big bonuses after the oil giant missed its numbers, but it has no force, because it's forbidden in the US and most of the rest of the world for shareholders to have binding votes on remuneration.

The executives keep their money.

Regulatory Arbitrage

Remember the PPIP program, where the US government is going to subsidize the purchase of financial toxic waste in an attempt to clear out banks' balance sheets?

Well, Sheilah Bair just said that banks will not be allowed to purchase their own toxic assets, which is a good thing, as it it turns the program into little more than a corrupt subsidy program to shake down the taxpayer.....Make than an even more corrupt subsidy program to shake down the taxpayer.

If you had told me 18 months ago that the most responsible member of Obama's economic team would be a Bush holdover, I would have wanted whatever it was that you were smoking.

H/T Calculated Risk.

Sestak to Challenge Specter in Primary

TPM has broken the story that Rep. Joe Sestak intends to challenge Arlen Specter in the Pennsylvania Senate primary:

Rep. Joe Sestak (D-PA) is privately telling supporters that he intends to run for Senate, TPMDC has confirmed.

It appears that all that is left is discussions with his family, who I figure are pretty much onboard, or it would not have gone this far.

I think that the family thing is largely a smokescreen for him pulling out if Rahmbo (Barack) pushes too hard.

This is an interesting race. Sestak is by no means a particularly liberal Congressman, but his pressure has already pushed Specter closer to the Democratic mainstream.

I support his bid for a number of reasons:

• Spector is a weasel, and a primary challenge will force him to appeal to the Democratic Party base, particularly to labor.
• Spector is a weasel, and even if he weren't this "clearing the decks" for incumbents is bad for the party and for the nation. It creates a sense of entitlement among incumbents.
• Specter is a weasel.

In any case, I have added the "Draft Sestak" fund campaign to my Act Blue Page.

Our Economic Masters are Completely Insane

A profile of Brooksley Born, who ran the CFTC, and warned of the risks that unregulated derivatives posed in the market, has a profile in the Washington Post, which calls her the, "Cassandra of the Derivatives Crisis".

I've related this story before, but this anecdote just shows how completely delusional Mssrs. Greenspan, Rubin, and Summers were:

Born's baptism as a new agency head in 1996 came in the form of an invitation. Federal Reserve Chairman Alan Greenspan -- routinely hailed as a "genius," the "maestro," the "Oracle" -- wanted her to come over for lunch.

Greenspan had an unusual take on market fraud, Born recounted: "He explained there wasn't a need for a law against fraud because if a floor broker was committing fraud, the customer would figure it out and stop doing business with him."

This made no sense to her. She'd spent much of the 1980s defending clients caught up in a vast conspiracy by two wealthy brothers, Nelson and William Hunt, who duped investors while trying to corner the world silver market.

"After all," Born said, looking back, "I'm a lawyer, and I think the existence of fraud prohibitions is critically important."

But Greenspan was insistent, she said.

Finally, he said, "Well, Brooksley, I guess you and I will never agree about fraud." (Greenspan did not respond to requests for comment. Daniel Waldman and Michael Greenberger, both top aides of Born's, were briefed on the lunch at the time and independently confirmed Born's recollection of the conversation.)

(emphasis mine)

Seriously, this is beyond ideological. This is quite literally completely detached from reality, and Alan Greenspan was viewed as a genius of unparalleled proportion at that time.

Economics Update

So, it looks like the ratings agencies are beginning to do their job.

Of course, this is at absolutely the worst possible time for the economy, because it means that Standard & Poor’s is considering downgrading a large portion of the best quality commercial mortgage backed securities (CMBS):

As much as 90 percent of so-called super senior commercial- mortgage backed bonds sold in 2007 may be affected as the ratings firm changes how it assesses the debt, New York-based S&P said today in a report. About 25 percent of the bonds sold in 2005, and 60 percent of those sold in 2006 may be cut.

(emphasis mine)

This, among other news, is driving rates up on CMBS, though rising rates on treasuries, despite the best efforts of the Fed to hold rates down are a contributing factor.

Basically, people believe that we will be seeing higher interest rates in the near future, which drives rates up, particularly longer term rates, which is why the spread between the 2-year and the 10-year treasury have hit a new record.

It's why mortgage rates are on the rise, driving down new mortgage applications.

In other banking news, the FDIC's problem bank list is now more than 300, the highest number in fifteen years.


Meanwhile in energy and currency, oil is up on Saudi statements that the world economy can "handle" $75-$80/bbl oil, and the dollar rose on concerns about bad housing data.

Zimbabwe Update

Well, it's been about a month, so it's time for another update on Zimbabwe.

Basically, things are still screwed up, and it's all thanks to little Bobby Mugabe.

While, the IMF is offering technical assistance to the government again, most of the potential donor nations are unwilling to provide aid until the see evidence that the government has gotten it's sh%$ together.

The lofty phrase used is, a "Commitment to economic stabilization, restoration of the rule of law, respect for property and human rights, and freedom of expression," but it basically comes down to the fact that everything that ZANU-PF touches becomes a miasma of corruption and incompetence.

What they are really saying is that Reserve Bank of Zimbabwe governor Gideon Gono has got to go, after creating the hyperinflation that made multi-trillion $Z banknotes necessary, and also the stealing from private accounts.

Finance minister Finance minister Tendai Biti has accused the RBZ of operating illegally, and he's probably right.

Meanwhile Gono has complained to Prime Minister Morgan Tsvangirai about the "attacks" against him.

Dude, in any sane world, a the word to describe a central banker who engineered a 516,000,000,000,000,000% inflation rate, prices doubling every 2 days or so, would be unemployed.

Just be glad that they are not trying to throw you in gaol...Yet.

Gono is where he is because he is a ZANU-PF loyalist who manages to create enough money to keep the ZANU-PF cabal satisfied.

This has led various aid agencies to take measures to avoid the government, and government agencies when distributing aid.

The MDC has called for his removal, see here and here, and have called for international intervention to remove him, see here, here, here, and here.

This has, of course, upset the delicate sensibilities of ZANU-PF officials, and Mugabe has dug his heels in on this too, probably because he needs him to, "pay the entourage."

What a damn mess.

Auto Industry Update, GM Bankruptcy Imminent Edition

Well, it looks like GM could not get enough of the bond holders to agree to the deal. The deadline passed without the requisite 90% buy-in.

My guess is that a lot of the speculators who purchased this debt at around 10¢ on the dollar had already purchased Credit Default Swaps (CDS) on the face value, so they had no incentive to settle.

This is yet another example of how the complex derivatives and swaps system is broken.

The UAW has been far more accommodating, with the CAW cutting a deal in the great white north, and the UAW cutting a deal down here, which I guess is the great uninsured south.

Meanwhile, the Obama administration apparently already has the bankruptcy "i"s dotted and "t"s crossed, so we may see a filing sooner, rather than later.

It looks like the new GM will be 70% government owned, though there are many sources saying that they will take no role in how the company is run.

This is bullsh#@....Not the government ownership, but the constant assertion that when the taxpayer buys a company, that they should have no voice whatsoever in how that company is run.

Government ownership should have 2 goals:

• An unwinding of this ownership sooner, rather than later with terms favorable to the taxpayer.
• An active involvement in the operation of the concern, to ensure that it is run for the long term benefit of the taxpayer.

The idea that the government should have no say in things like, location of manufacture, executive compensation, etc. when the taxpayer owns the firm is simply stupid ideological crap.

Meanwhile, there are a number of bids for GM's Opel division, and Fiat is by no means the front-runner there.

Maqsood Gave Him a Lot of Marijuana

That's a quote of a regarding the FBI informant's relationship with one of the Newburgh Four, and it pretty much describes how FBI informant Shahed Hussain, aka "Maqsood" forged a relationship with the 4 losers that the FBI is now trying to sell as some sort of major terrorism bust, and it's rather illustrative of just how incredibly f$#@ed up this entire thing, and how f$#@ed up the FBI, is.

California Supreme Court Upholds Gay Marriage Ban

Damn!

Hopefully, the next initiative-petition campaign will be better run than the last one.

Economics Update

Bank Failures reported by FDIC

The economic press is touting the fact that consumer confidence hit an 8 month high.

More accurately, they are touting that the jump from 40.8 to 54.9, is the biggest in 6 years....Only, of course, the index is bench marked such that 1985=100, so the number is still crappy.


It's the same as the Chicago Bank of the Federal Reserve's April National Activity Index, which is up (Yay!), but this does not mean expansion, it means contraction, just not quite so fast (Awww!).

You know, maybe we can wait to call a recovery until we have a month where the year over year Case-Shiller housing price index does not fall by 18.7%.

Consumers will not spend under these circumstances, and the economy, which is/was 70%+ consumer spending, will not recover.

In any case, be glad we aren't German, and not just because that means that we aren't German, because Germany's GDP fell by 3.8% for the quarter and 6.7% year-over-year, as their export driven economy sputtered.

Meanwhile, in energy and currency land, oil was up on the consumer confidence figures, and the dollar rose as people freaked over the DPRK conducting another nuke test.

If I could predict the actions of the North Koreans, I would make a killing on the futures markets.

Sotomayor for Scotus

Obama has chosen Sonia Sotomayor to replace David Souter on the Supreme Court.

I don't have enough legal knowledge to know her qualities as a jurist, but from what I've read, notwithstanding some "what about some white guys whining" from TNR, is that she is a first rate legal mind and is qualified for the court.

I have some concerns:

• I believe that some of the members of the supreme court should come from some other walk of life than federal judge. Until 20-30 years ago, that was the case, with justices being governors (Earl Warren), William O. Douglas (SEC Chairman), Felix Frankfurter (Academic and Solicitor General), Hugo Black (Senator), Robert H. Jackson (Attorney General), Thurgood Marshall (Chief Council of the NAACP), etc.
• Her age and health. At 54, she is a bit older than Republican nominees, and she is a type I diabetic, which likely shaves a decade off her life expectancy.

I think that getting some non-judges on the court, and getting some younger appointees, would be a very good thing for the Dems.

Additionally, I think that the Ivys are overrepresented on the court, but Barack Obama, Harvard Law, is not likely to be the guy who does this.

Economics Update

Calculated Risk: Case-Shiller: Prices Fall Sharply in March

Reading Between the Lines: FDIC Assessment

Props to Margaret Chadbourn at Bloomberg, who sees a change in policy and recognizes its significance.

Specifically, she notes that the FDIC will be assessing an emergency assesment on banks in order to shore up their insurance fund, and she sees a real change in policy:

U.S. banks will pay an emergency fee based on their assets to rebuild the Federal Deposit Insurance Corp.’s reserves, putting a greater burden on large banks to replenish the fund amid the fastest pace of failures since 1994.

The FDIC voted 4-1 today to impose a fee of 5 cents per $100 of assets, excluding Tier 1 capital, backing away from a proposal of 20 cents per $100 of insured deposits. Local bankers said the fee on deposits could erase more than half their 2009 earnings. The fee will rebuild the fund that started the year at $18.9 billion, the lowest since 1994’s first quarter.

(emphasis mine)

Fees have traditionally been assessed on deposits, not assets, but the problems with bank failures, particularly among the giant banks are dodgy asset problems, so it serves to hit the big banks harder, who are less well capitalized on the basis of deposits.

It adds cost to risk, and it is a significant, and I hope permanent, change.

So, the DPRK has Tested Another Nuke

Or at least that is what they are claiming, it could be another fizzle, but I'm inclined to agree, as the tremor on this one is 4.7 on the Richter scale, which makes it something on the order of 3 times as powerful as the last test.

Company Claims Throttlable Solid Fuel Rocket

A company called Digital Solid State Propulsion claims to be able to throttle a solid state rocket electronically. (See vid below).

This has a number of potential applications, such as variable blast bombs and thrusters for satellites.

To my mind, one of the applications would be for an air to air missile, where the motor would be on continuously for short/medium range flight, but for longer range, it would coast much of the way to the target.

Neat tech.

UK Commits to Tranche 3 Typhoon Buy

The MoD has formally confirmed that they intend to purchase the aircraft, and they expect to sign a contract later this year.

It looks like part of their buy will actually go the Saudi's though, because of budget issues.

Thielert Reenters Aero Diesel Engine, Diamond Pursues Their Installed Base

Thielert (top picture), and Diamond (bottom picture) are now both aggressively competing for market share for aircraft diesel engines. (paid subscription required)

Both engines are based on the same Mercedes diesel engine block, so the real differences are design philosophy and corporate history.

In terms of design philosophy, Diamond's engine, the AE300, is somewhat heavier, and it is implied, more robust.

In terms of corporate history, Thielert went into bankruptcy, largely driven by the warranty costs on their engine, production ramp-up issues, and financial irregularities, and the trustee basically tried to shake down the installed base by demanding ruinously expensive service and parts.

They have since returned to a going concern status, though their warranty terms are now far less generous, and their engine division has been rebranded "Centurion".

Diamond aircraft, as Thielert's best customer, was left in a serious lurch by this, and so developed its own engine, which has now been certified by the EASA, and they are using it on their new build aircraft.

The two main draws of Aero-Diesels are better fuel economy, and the ability to run on Avjet fuel, as opposed to the increasingly expensive and hard to find, particularly in austere locations, Avgas.

I think that for Theilert to compete, it needs to get a handle on reliability, as is evidenced by the line from the article, "By year-end, the company hopes to have doubled the service life of the two vital components to 600 hr," (emphasis mine) which means that they were operating at a 300 hour life (!!) (IIRC, it's the reduction gear and clutch).

By comparison, the TBO (time between overhaul) on the 0-360 is 2000 hours.

Both diesels are pushed harder to get their power than current commercially available engines, with he competing Avgas is something like the Lycoming 0-360 (whose origins are more than 50 years old) generating 180 horsepower out of 5.91 liters (361 cubic in) at 2700 rpm, while the Theilert gets 135 hp at (it's been certified for 155 hp) out of 1.9 liters at 3700 RPM, and the AE300 gets 166 hp out of 1.9 liters at 3800 rpm .

Note also that the prop speed on the diesels is 2300 RPM, while on the direct drive Lycoming it remains 2700 rpm, so propulsive efficiency per hp should be a bit better for the diesels, and their fuel consumption is on the order of ½ that of the gasoline engine.

Yesterday Was Bank Failure Friday

And we got two more bank failures, Citizens National Bank Macomb, IL, and Strategic Capital Bank, Champaign, IL.

When added to the failure of BankUnited on Thursday, this makesz 36 banks having failed this year, or about a 90 bank failure a year pace.

Full FDIC list.

Israel May Drop JSF

So, we now have a report that Israel may order the semi-stealthy "Silent Eagle" if it does not get technical data on the computer for the F-35 JSF.

The claim is that they need to be able to repair the systems under combat conditions, but the counter claim by the US that they will have sufficient spares to swap them out seems to be convincing to me, so I think that there may be other issues.

First is the price. With an order of 75 aircraft, and a price of up to $20 billion, the cost of the aircraft is $266 million each (!), and that is simply not affordable.

Heck, the good old USA can't afford more F-22s at a mere (!) 185 million each.

More significant, however, is that without this access, the Israelis will be unable to qualify their own systems on the aircraft.

This means that they cannot configure their own weapons, or their own avionics in such a system, means that, for example, they could not make adjustments to the AESA radar in order to jam some new sensor that was fielded, or install a dedicated jamming system on the aircraft.

I think that idea that they would be at the mercy of Lockheed-Martin for timely software upgrades to counter a new weapons system that the Russians or Chinese ship to the Syrians scares the hell out of the IAF.

Pakistan Is Expanding Nuclear Arsenal

Admiral Mike Mullen, chairman of the JCS, has testified that Pakistan is expanding its arsenal to Congress: "WASHINGTON — Members of Congress have been told in confidential briefings that .

While his response in public testimony did not contain any detail, we are talking at a significant increase in capability, including the creation of new reactors which can create bomb grade plutonium, which would allow for significantly more compact and weaponizable bombs.

The Danger Room has a satellite pic showing the expansion of its facilities.

Seriously, we have a borderline failed state, a civilian government that is failed by most criteria, and they are building more nukes....Delightful.

Boeing's Looks to Uprated Engine for Super Hornet

As a results of GE's work on the Integrated High Performance Turbine Engine Technology (IHTET) research program, GE has managed to increase the thrust of the F-414 engine by 20%, which would take it from its current 22,000 lbs to about 26,400 lbs of thrust, and Boeing is looking to using this engine as an inducement to sell more of it's F/A-18E/F Super Hornet and EF-18G Growler on the export market (paid subscription required). (See also here).

Basically, there is a new core, which the US Navy wants to increase durability, and reduces fuel consumption by about 3%, and a new fan, which can be used to increase thrust, and which the navy does not want.

Boeing is offering the 2^nd option to other customers, which is a sort of acknowledgement that the "market" finds the F/A-18 E/F (and G) to be a little bit poky compared to the competition.

It might also make SAAB's Gripen NG, my fighter obsession du jour, more attractive, as the increased durability engine would save costs and give it somewhat longer legs, and the 20% increase in thrust, which might require a new inlet, because mass flow increases, would offer a very significant increase in performance.

One Solution to Piracy

There is s conflict between merchant ships being generally forbidden under international maritime law from carrying weapons, and how to deal with the the upsurge of pirates.

One interesting solution is the electronically controlled water cannon, which comes with a remote control joystick, so that the operator can be away from the turret, and the returned fire, an automatic system to track small boats, the ability to also shoot pepper spray, and, at 5000 liters a minute, it can, "send an 85 kg barrel flying end over end at 75 meters", which is well probably at the accurate fire limit for someone shooting you at a small boat.

Best of all, it's not a weapon, it's "fire fighting equipment," and so is not subject to things like port restrictions.

This is Just Wrong...Or Maybe Spot on...

I'm not sure, but it is funny.

Gives New Meaning to the Term "Standing for Election"

A Sex Party has been formed in Canada, which is committed to the liberalization of sex laws and regulations and to to combat the stigmatization of sex in the political process in North America:

The monster in question is 'erotophobia'. "Running amok through the North American psyche - like a deranged yet invisible King Kong - are deeper antisex attitudes that produce stale marriages, anti-prostitution legislation, laws against public nudity, government classification of pornography, cautionary - not positive - sex-education classes, media censorship, homophobia, and the biggest bugaboo of all: guilt."

This follows the formation of similar political organizations in Australia and the UK.

I actually think that puritanical attitudes about sex, and the alarmist attitudes about the juxtaposition of sex and race in the United States, have created a truly delusional mindset on the part of the right wing, and the emergence of a truly pro-sex movement in the US would therefore be a good thing.

Teaching a Cat to Yodel

This is wrong on so many levels.

Economics Update

So, the bank failures come later today, it's Friday, but Calculated Risk's Credit Crisis Indicators are generally positive, though it appears that there are a lot of bears on Treasuries, with the 10-Year note falling sharply.

Then, we have a return of the monoliner insurers, with Moody’s looking at cutting ratings on a whole passel of them.

Meanwhile, all the concern about treasuries and the USD pushed the dollar down today, which in turn pushed oil above $61/bbl.

On the brighter side, this led OPEC to decide against a production cut.

Heck of a Terrorist Plot You've Got There

You know, those highly trained terrorists who were planting bombs.

You know, the ringleader, David Cromitie, who admitted to being stoned while planting what he thought were bombs.

And you have the full rundown of the "Newburgh 4", which includes a cocaine addict, a schizophrenic who is borderline retarded, and the government informant, was facing deportation for what amounts to forging immigration documents, who ran a similar sting a few years back, allegedly attempted to pay another member of his mosque to join his merry band, and was described by independent observers as "the boss."

I have no doubt that they will be convicted, that's what happened to the folks down in Florida, but this does nothing for anyone, except perhaps the police and prosecutors who use unreliable informants for career climbing.

Let There Be No Kings

So, one of the proposals in Barack Obama's speech is a proposal for permanent preventive detention on the say so of the President:

"But even when this process is complete, there may be a number of people who cannot be prosecuted for past crimes, in some cases because evidence may be tainted, but who nonetheless pose a threat to the security of the United States. Examples of that threat include people who've received extensive explosives training at al Qaeda training camps, or commanded Taliban troops in battle, or expressed their allegiance to Osama bin Laden, or otherwise made it clear that they want to kill Americans. These are people who, in effect, remain at war with the United States.

Let me repeat: I am not going to release individuals who endanger the American people. Al Qaeda terrorists and their affiliates are at war with the United States, and those that we capture -- like other prisoners of war -- must be prevented from attacking us again. Having said that, we must recognize that these detention policies cannot be unbounded. They can't be based simply on what I or the executive branch decide alone. That's why my administration has begun to reshape the standards that apply to ensure that they are in line with the rule of law. We must have clear, defensible, and lawful standards for those who fall into this category. We must have fair procedures so that we don't make mistakes. We must have a thorough process of periodic review, so that any prolonged detention is carefully evaluated and justified.

I know that creating such a system poses unique challenges. And other countries have grappled with this question; now, so must we. But I want to be very clear that our goal is to construct a legitimate legal framework for the remaining Guantanamo detainees that cannot be transferred. Our goal is not to avoid a legitimate legal framework. In our constitutional system, prolonged detention should not be the decision of any one man. If and when we determine that the United States must hold individuals to keep them from carrying out an act of war, we will do so within a system that involves judicial and congressional oversight. And so, going forward, my administration will work with Congress to develop an appropriate legal regime so that our efforts are consistent with our values and our Constitution."

This is contemptible.

If they are prisoners of war, then treat them as such, and grant them the rights therein, including the Geneva conventions, which among other things, prevent their transfer to 3rd countries (Bagram and the CIA gulags).

If they are not, then try them by jury.

This was also the reaction of civil libertarians who had an off the record meeting with him at the White House.

I'm sure that Barack Obama has read the Declaration of Independence, and amongst the grievances given by the founding fathers were, "depriving us in many cases, of the benefit of Trial by Jury," and "transporting us beyond Seas to be tried for pretended offences," which sound a lot like what he wants to do.

His argument is that unlike Bush, he can be trusted.

This is a lie. Any agency of government who wishes the grant or extraordinary power on this basis is inherently untrustworthy, and the same goes double for his successor.

Sorry, but, "Because I'm so awesome," is not a reason.

His speech frightened me more than Dick Cheney's, because Dick Cheney no longer has the power to do what he wants.

FASB Rule Will Force Banks to Move Assets Onto Books

Effective for reporting periods after November 15 of this year, the Federal Accounting Standards Board (FASB) is requiring that the assets of Qualifying Special Purpose Entities (QSPEs) be reported "on the books".

Yes, I know your first question, "Can I have that translated please?"

The quick translation is that these are "off balance sheet entities," which are used to conceal losses and risk.

Here is a snapshot:

Lenders recorded profits before the U.S. subprime mortgage market collapsed in 2007 by selling pooled loans to off-balance- sheet trusts, which repackaged the pools into mortgage-backed securities. Banks then sold those securities to other off- balance-sheet vehicles they sponsored, concealing from investors that the securities were backed by deteriorating mortgages.

As to the next obvious question, "What does this all mean?", it means that significant losses and risks which, until now, have not been a part of many financial institutions reporting, will be reported, and significant losses will result.

How much?

Well, the article says about $900 billion, but my guess is that this is low, because one is always shocked when one turns over a rock.

Let There Be Contested Primaries

Barack Obama must be listening to Rahm Emanuel again, because he just successfully pressured Rep. Steve Israel to drop out of the New York primary race against Kristen Gillibrand.

I guess we see yet another case of incumbent protection.

I do not know whether or not Gillibrand would win in a real contested primary. She probably would, she is a prodigious fund raiser.

What's more, she seems to be moving a little to the left now that she is representing the state of New York, as opposed to just her Neanderthal district.

But none of that earns her, or any candidate, the right to a primary without a meaningful challenger.

Well, That's a Relief

It appears that, according to Matthew Lynn, the credit crunch was not caused by Lap Dancers, Cocaine, £900 bottles of wine, sexual promiscuity, and general hedonism.

Whoa, that's such a relief.

Actually, it's not a relief, because fixing this problem will be much more complex, and much more painful than anything we would have to do in the hedonism scenario.

"Move Quickly" Means that the Taxpayer Getting Boned By the Banks

So, Timothy "Eddie Haskell" Geithner is saying that the Treasury will move quickly to sell the warrants it got for the TARP money.

The warrants, basically stock options, were there to ensure that taxpayers would share in the upside, as well as the downside, but now he's looking to "move quickly" to sell them.

The devil is in the details:

Big banks may value their warrants at an amount that is hundreds of millions of dollars below the prices that other models might generate, the Treasury official said. That range makes it hard for the government to find a price that protects taxpayer funds without penalizing the banks.

...

Geithner today reiterated that the government can sell the warrants back to the bank or to a third party.

Translation: How do we cut a sweetheart deal for the banks?

Because if the Treasury actually believes that the banks are truly solvent, and will survive, then the warrants are worth tens, if not hundreds, of billions more than what we the taxpayer will get for them.

This Article Makes Me Feeling Queasy

A New York Times financial reporter describes how he got tied up in the foreclosure crisis.

I guess the article is a good description of the mania that gripped the nation,^* but it makes me feel like a peeping Tom, so I let it percolate in my mind for a while.

It's informative, but it made me feel like I was intruding to read it.

^*Well, not so much me, I bought a house in 2004 with a 30 year fixed rate mortgage and 20% down, at only about a 15% greater payment than the half a duplex I was renting, I had to move, and so I bought, even though I though houses were overpriced.

Morons Trying to Drum Up Billable HOurs

So, two lawyers specializing in IP litigation have proposed changes in copyright and anti-trust law to bolster newspapers.

Unsurprisingly, their proposals would create an explosion of litigation, which would mean that they could buy that yacht that they have their eye on.

What they propose:

• Ummm....Making search engines indexing web sites a copyright violation?
• The idea here is that creating an index is a copyright violation, which means that things like the old index of periodicals in the library, an essential research tool, would be illegal.
• And allow newspapers to price fix, so that they can all start charging for online content.
• Let's note that newspapers are not in the business of selling the content called "news", they are in the business of selling advertising. The cost of purchasing a paper only covers the cost of the ink, paper, and printing. That's why, when the chains started buying up newspapers, and cutting newsrooms about 2 decades ago, they could generate those 20%+ margins on a much crappier product.
• The threat to newspapers is not people reading their news online, it's Craig's List. It's the loss of classified ad revenue that has put these institutions behind the financial 8-ball
  
• Oh, yes, there's also the issue of accumulating insane levels of debt to build these chains in the first place.
• Federalizing the "hot news" doctrine.
• This one is just plain stupid. It's a 1918 decision which says that a news service cannot take a story from another, rewrite it, and pass it off as it's own, which is a good idea, but they want to make the reporting that a news source broke a story, like, "The Wall Street Journal reported today that sources in the Treasury have determined
  

As Timothy Karr notes

But consider this. Just a few years ago, the average profit margin for newspapers was 20 percent -- with some raking in twice as much or more.

"Did they use these astronomical profits to invest in the quality of their products or to innovate for the future?" asked Free Press' Craig Aaron on Thursday. "No. They just bought up more newspapers and TV stations." (On May 12 Free Press released a National Journalism Strategy that outlines forward-thinking policies to save journalism, and not merely prop up the creaking old guard.)

(emphasis mine)

I am not concerned about the future of news papers, I am concerned about the future of journalism......Scratch that...I am concerned about the present of journalism, because the professionals out there, whether covering George W. Bush, the housing bubble, or just publishing this bit of crap, seems to be in a state of incompetent free fall.

Professional journalism today in the United States is a captive of those that they cover, and so people like me go to foreign and not-for-profit sources to find our news.

It's About Bloody Time

There are indications that the government is pressuring Bank of America to make major changes in the composition of its board.

Basically, they want people who actually understand banking to be the directors of a bank, imagine that.

When juxtaposed with FDIC Chief's Sheila Bair's comments saying to expect that some bank CEOs will be given their walking papers, though the FDIC walked backed from the statement later, is a good sign.

We own the banks, now lets fire the rat bastards who broke them.

Bank Failure Friday on Thursday

BankUnited, FSB, Coral Gables, FL, which is no surprise. BankU has been dead man walking for at least 2 weeks.

It's the biggest failure of the year, and 2^nd biggest ever, only exceeded by the failure of Indymac last year.

It's the 34^th bank failure of the year.

The closure will cost the FDIC $4.9 billion, almost doubling the amount of money that it has shelled out so far this year.

As to why do this on Thursday, probably because they have a very busy Friday planned.

Before the President's Day weekend, there were 4 bank closings, the most this year, and my guess is because they had an extra day to straighten things out before the banks had to open their door, so I would expect this 3 day weekend to be very busy.

Full FDIC list.

Another New Word Learned in Real Estate

Courtesy of Calculated Risk, I come across the term "loan recast."

It's similar to a "loan reset", in that it means that your mortgage payments are increasing, but instead of being an increase in interest rates, it is a change in terms.

So, for example, if you have an interest-only or negative amortization mortgage, when the time comes to catch up, and make payments on principal, you have a recast.

They are in some ways much more worrisome than resets, because if a mortgage resets during a time of low interest rates, the payment may not change by much, but when a mortgage recasts, the payments go up regardless of the interest rates.

The yellow are recasts, and they look like a tsunami.

The graph on the right

A Battle Obama Needs To Lose

And hopefully, he already might have lost.

There was every indication of a knock down drag out fight inside the Democratic party over the Panama free trade agreement, dealing with the fact that it did nothing about Panamanian money laundering or labor and environmental protections.

Well, after over 50 Dem Representatives sent a letter on this matter, Obama agreed to hold back on submitting the Panama free trade deal until there is a "framework" for protecting labor and the environment.

One of the unspoken consensuses in Washington, DC is that a bad free trade deal is better than no free trade deal, because free trade, raises living standards, spreads democracy, prevents rain on picnics, and keeps your daughter from dating the guy with the studs and tattoos.

I don't believe that this pause is real. It is merely a ploy to get the votes he needs to pass the deal(s), which also include Columbia and Korea.

When you look at the people around him, like Austan Goolsbee, it's pretty clear that these folks are free trade (except when it comes to IP) fanatics, and they keep coming back until they either win, or are slapped down firmly.

What Josh Said

I don't have much to say on Obama's speech, I've only read the transcript, and Obama needs to be watch, but Josh Marshal finds the reality on Richard Bruce Cheney when suggests that Cheney is at best a figure of mockery and derision:

This is someone who not only organized and seemingly directed a policy of state-sponsored torture. He did it in large part to get people to admit to crankish conspiracy theories he got taken in by by a crew of think-tank jockeys in DC whose theories most even half way sensible people treated as punch lines of jokes. So it's Torquemada or 1984 but only after getting rescripted by Mel Brooks.

This is an extremely gullible man who has just come off being the driving ideological force in an administration that most people can already see produced more fiascos and titanic, self-inflicted goofs than possibly any in our entire history. By any standard the guy is a monumental failure -- and not one whose mistakes stem in some Lyndon Johnson fashion from tragic overreach, but just a fool who damaged his country through his own gullibility, paranoia and bad judgment. Whatever else you can say about the Cheney story it ain't Shakespearean.

Indeed.

Economics Update

The Economic Downturn and Contemporary Art Sales, courtesy of Felix Salmon

Well, Thursday is jobless claims day, and weekly initial jobless claims fell by 12,000, to 631,000, and the 4 week moving average fell to 628,500 from 632,000, but continuing claims hit yet another new record, hitting the number of the beast, 6.66 million.

Meanwhile, more GDP data from more countries has come out, and it is almost uniformly grim.

Additionally, the Philadelphia Fed manufacturing index is showing further contraction, though it did rise, from -24.4 to -22.6.

Of course, the press is touting the fact that the April leading economic indicators rose, but this is a volatile index, and is not supposed to mean anything until you have 3 straight months up or down.

Meanwhile, Treasuries fell, and yields rose, on reports that the Fed will be buying less of them, and on an announcement that the government would be selling an additional $162 billion of them next week.

Basically, it's inflation concerns, which also drove the dollar to a 4 month low.

Oil rose, largely on profit taking from yesterday's high.

Why Mass Transit Sucks in the US

Matthew Yglesias points to an interesting study on world subway systems.

It's just a bunch of maps printed out at the same scale, and you notice a difference between the US and the rest of the world:

Take a look:

London


New York


Tokyo


Moscow


Paris


Chicago


Berlin


Washington, DC


Osaka


San Francisco's BART


Boston


Philadelphia

There some outliers in the rest of the world, Seoul, for example, but the difference, except in New York, is that America does not really build subways, which serve the city and allow you to get around in the city, it builds some sort of light rail, for commuters to get into the city, in yet another subsidy of the American suburb.

Not Shocking: Habits are Hard to Break

and paying bonuses to KBR for substandard work that killed soldiers was SOP when Halliburton owned them, because they were still paying bribes deferred compensation to him, and organizational inertia took over, even after their shoddy electrical work killed American GIs.

Martha Coakley Must Have Pictures of Them Doing an Underage Goat

Because that's about the only way that I can see that the Massachusetts Attorney General managed to pry $60 million from Goldman Sachs for engaging in deceptive loan and loan securitization processes.

$50 million dollars to the home owners, and $10m in fines to the state, which will reduce principal on, "first mortgages by 25-35% and second mortgages by 50% or more."

Yes, I know, it's a typical "no wrongdoing admitted" deal, but she had to have found an awfully big club to use on them.

I wonder what it was.

Signs of the Apocalypse

It's by Lanny Davis, a Washington, DC insider, and the guy who accused people supporting Ned Lamont in 2006 against Joe Lieberman of "Liberal McCarthyism", and he is calling for the criminal prosecution of Dick Cheney for authorizing torture:

I have agreed with President Obama on the need to look forward, not backward.

But … I have changed my mind about the need to indict former Vice President Dick Cheney for complicity in illegal torture.

...

Even more, they seem to be an in-your-face dare by Mr. Cheney to the U.S. criminal justice system: "I am Dick Cheney, I approved violations of the law in the name of the war on terror, and what are you going to do about it?"

It reminds me of Gary Hart's reaction in the early days of his 1988 presidential campaign to the rumors of his womanizing. .....

So as to Mr. Cheney: I think it is time to take him up on his implicit dare and indict him for violating the 1994 federal law against torture.

This is as big a Beltway Blowhard^™ as they come, and he called for Dick Cheney to be prosecuted, and got it published in the Moonie Times (Link is to The Hill, which republished it.

I don't think that he is suggesting this out of any real moral imperative, it's just that he feels that Dick Cheney is, to paraphrase Bull Durham, "Calling the umpire a called the guy a c$#@sucker," which offends his genteel Beltway sensibilities.

It's a Chu-Chu Race

But not between locomotives. Judy Chu won the special election to replace Hilda Solis in California's 32nd Congressional district, but did not get an absolute majority, and Betty Tom Chu was the highest finishing Republican, so they, along with Libertarian candidate Christopher Agrella face off in a runoff in runoff on July 14, Bastille Day.

And, yes, it appears that the two Chu's are distantly related.

In any case, it is a solidly Democratic district, so Judy Chu should likely be the next Representative from CA-32.

Where Are the Slime Going to Flow?

One of the arguments about the obscene compensation on Wall Street is that they have to pay in order to keep their "talent" from jumping ship.

Brendan Coffey looks at this, and notes that these folks really have no where to go:

• Hedge funds: They are shutting down, and now that they aren't making double digit returns people are not interested in 2% of assets and 20% of gains any more.
• Private Equity: It's dependent on cheap credit, there isn't that much any more, and it likely won't be in the near term.
• Foreign banks: Compensation for CEOs, except for the UK's "The Street", which is sicker than Wall Street, their CEOs make less than a lot of junior traders get for bonuses.

If these whiners are so sick of this, and threatening to jump ship, let's not throw them a life raft when they land in the water.

Thoughts on Netanyahu and I/P Issues

I think that Benyamin Netanyahu is a corrupt nutjob, and his economic policies, specifically his his economic and fiscal embrace of Thatcherism, are almost as crazy as his security policy.

That being said, one of the goals of negotiation is to negotiate and the Palestinians have been consistently infantilized in this process.

In any other negotiation, whether it be the UAW and General Motors, Croatia/Slovenia border discussions, or two people dickering over a used car, people try to maximize their advantage in a negotiation.

To use the case of the used car, it means that the price on the window is higher than the dealer really needs to sell it at, and the car has been repainted, and the customer comes with a magnet to look for bondo and paint jobs, and parhaps a carfax.com report, and they start off very far apart.

This is what happens in negotiations. Both sides take positions as a starting point that are more extreme than they expect to actually get, and try to define the situation on the ground (paint jobs, bondo, etc.) to bolster their positions.

This is what happens, and once this does happen in negotiations between the Israelis and the Palestinians, things will move forward, toward an (inevitable) Palestinian state.

People who believe that the normal give and take of a negotiation process is somehow unfair and unjust, and must be somehow avoided, it will forestall meaningful negotiations. It raises unrealistic expectations, and in the case of the Palestinians, those expectations mean that real negotiations, which will produce a less than optimal solution for everyone on both sides, create a very real risk of the death of whoever signs off on such a deal.

It probably won't be Netanyahu who will be the one to finish the deal, but someone will.

As to the what a Palestinian state would look like, I rather imagine that it will be a typical failed Arab government, much like the corrupt and autocratic Egypt, Sudan, Algeria, Jordan, Iraq, UAE, etc., but it will be their failed government, and that is what they want.

One final note: A solution to this problem will not solve any other problem in the world. The idea that all of the problems in the Middle East somehow run through Jerusalem and Ramallah is as nonsensical as it is widely held.

This does not make the problem not worth solving. This is worth solving on its own merits.