Just Shoot Me!

It looks like executive pay caps in the stimulus will be dropped because the so-called fiscal hawks think that they will cost too much:

Unfortunately, [Representative Brad] Sherman told me that he believes the executive compensation limits added to the Senate's stimulus are going to get removed during conference talks with the House. The reason: a new Congressional Budget Office estimate that the pay caps will cost the government $10.8 billion in lost tax revenue over the next 10 years.

"The plan is to take out the executive compensation provisions ... and blame the Republicans for setting out the level [of $800 billion]" for the final version of the stimulus, Sherman said.

Gaah!!!!!!!

Another Prediction Goes South: Israeli Elections

The projected results have Kadima out-polling Likud by one vote, 28 to 27, with Yisrael Beitenu next at 15 seats, and Labor in 4th place at 13 seats, Shas (ultra-orthodox Sephardic party) at 11, with the remaining 26 seats divided amongst 7 other parties who got between 3 and 5 votes.

While I am pleasantly shocked (and once again wrong in my prediction) that Livni out-polled Netanyahu, it's still even odds that Bibi will be the next PM, as the bloc generally considered right wing numbers 62-63.

In any case, we are now well into coalition politics, which is less clear than an airline's frequent flier program, as the graphics below hint:

Won't Result in Meaningful Change

It appears that the lawsuits filed against the Federal Reserve by various news orgs, and the constant complaints in Congress about the opacity of the organization have led to getBen Bernanke to begins ‘Thorough Review’ of the information that it provides to the public.

The translation of this is, "I need to kill this, so I'll do a study, and after a few years, no one will remember.

Predicting Crisis: Dr. Doom & the Black Swan

Nouriel Roubini of RGE Monitor and Nassim Taleb, author of The Black Swan, who both predicted the credit crunch, and who were both mocked for doing so are interviewed on CNBC.

They are saying that our economy is broken and need to be reconstructed in a different model, and the so called "business reporters" are asking for Investment Tips?!?!?!?!?!

Un-dirtword-believable.

Timothy "Eddie Haskell" Geithner Wins, We Lose

First, some context here, even before Geithner's plan, we should note that the taxpayer exposure in all this is, "$9.7 trillion, enough to pay off more than 90 percent of the nation’s home mortgages," or about $30,000 for every man woman and child in the US.

For what Geithner is proposing, we are looking at as much as another $2 trillion.

By comparison, the 2006 US GDP was a bit over $13 trillion, so all of this is a serious chunk of change.

The short version of his plan is that he wants to go with the bad bank, with a fig-leaf of subsidies to bring in "private" money, so my report of the CNBC story was wrong:

Officials said the plan was fashioned after a spirited internal debate that pitted Mr. Geithner against some of the president’s top political hands.

Some of President Obama’s advisers had advocated tighter restrictions on aid recipients, arguing that rising joblessness, populist outrage over Wall Street bonuses and expensive perks and the poor management of last year’s bailouts could feed a potent political reaction if the administration did not demand enough sacrifices from the companies that receive federal money.

They also worry that any reaction could make it difficult to win Congressional approval for more bank rescue money, which the administration could need in coming months.

In the end, Mr. Geithner largely prevailed in opposing tougher conditions on financial institutions that were sought by presidential aides, including David Axelrod, a senior adviser to the president, according to administration and Congressional officials.

So it's more welfare for fat cat bankers, in this case backstopped by, "The Fed will use its balance sheet to provide the financing, and the Federal Deposit Insurance Corporation might provide guarantees to investors."

Nemo at self-evident does the numbers on how this will screw the taxpayers, and I cannot do better than his numbers:

If the Plan involves convincing private equity firms to take “first loss” position on the assets they purchase, and merely limits their downside with some form of insurance, does that make it a good deal for the taxpayer?

Well, let’s see. Suppose some insolvent bank, like Citigroup or Bank of America, has 10 mortgages or MBSes or CDOs. Now, nobody knows what any of these things is worth. Most of them are worth nothing, but some of them are probably worth something, depending on who defaults on what. Suppose, just for the sake of example, that each of these toxic assets has a 10% chance of being worth $100 and a 90% chance of being worth zero.

Obviously, a rational investor would pay at most $100 for the entire pool of 10 assets, or 10 cents on the dollar.

Now, suppose the D.C. branch of Goldman Sachs the U.S. Treasury comes along and offers to insure every one of these investments to the tune of $45 for any private equity firm who purchases the entire pool for $50/asset. In other words, the private equity firm is in “first loss” position on each asset to the tune of $5, while Team Timmay is on the hook for the remaining $45.

Since one of the assets is probably worth $100 and the other nine are probably worth zero, the private equity firm expects to make $50 on one and lose only $5 on each of the remaining nine, for an expected profit of $5 on their $500 investment. (Which they can lever up via the Fed, if the NYT is to be believed. Not to mention that this is just an illustrative example…)

Meanwhile, the taxpayers expect to pay insurance to the tune of $45 * 9 = $405. Thus, despite private equity being in “first loss” position, the most likely result is for the private firm to profit even as the taxpayers get hosed.

Change units to trillions, rinse, lather, repeat.

Now, it appears that Geithner plans to set up some sort of triage, he is calling it a "stress test", to ensure that banks are strong enough to be a part of the program.

I'll believe it's something more than a cute phrase when they seize Citi as insolvent and start a serious criminal investigation of Geithner's protege Robert Rubin, because the former is insolvent, and the latter is a crook.

I still say that the best solution is seizing insolvent banks, and breaking up the rest so that they are "small enough to fail."

This has epic fail written all over it.

Genitals Sliced With a Scalpel; Irritating Liquids Poured in the Wounds

This is what is alleged to have happened to Binyam Mohamed, and the British courts expunged the reports, because of threats from US intelligence that they would stop cooperating with UK intelligence if the information were released, and the is arguing to continue the complete and absolute privilege that Bush and His Evil Minions^™ insisted upon:

“Is there anything material that has happened” that might have caused the Justice Department to shift its views, asked Judge Mary M. Schroeder, an appointee of President Jimmy Carter, coyly referring to the recent election.

“No, your honor,” Mr. Letter replied.

Judge Schroeder asked, “The change in administration has no bearing?”

Once more, he said, “No, Your Honor.” The position he was taking in court on behalf of the government had been “thoroughly vetted with the appropriate officials within the new administration,” and “these are the authorized positions,” he said.

(emphasis mine)

I Barack Obama decided that since he's so awesome, we should just trust him.

We also have graphic depictions of what was done to the man (from the 2nd link):

The court papers describe horrific treatment in secret prisons. Mr. Mohamed claimed that during his detention in Morocco, “he was routinely beaten, suffering broken bones and, on occasion, loss of consciousness. His clothes were cut off with a scalpel and the same scalpel was then used to make incisions on his body, including his penis. A hot stinging liquid was then poured into open wounds on his penis where he had been cut. He was frequently threatened with rape, electrocution and death.”

(again, emphasis mine)

Note that the precedent here, US v. Reynolds, is in fact based on a lie. There were no state secrets involved, the B-29 which crashed was not, as was claimed, on a secret mission or testing secret equipment.

They claimed privilege because the report indicated that the aircraft was in poor condition because of inadequate maintenance, and the USAF wanted it covered up. It was all a lie.

Economics Update

I'm not going to be writing about Geithner's bank bailout plan here, it needs it's own post, but I have some graph pr0n, a little update from last night's Pelosi scary employment graph courtesy of Justin Fox (top) and William Polley.

The first goes back 6 recessions, and the 2nd covers all of the recessions since WWII, which makes a bit busy, but they are at least as scary as last night's graph.

On to the update:

It appears that the Asian economies are melt down down, with Japan's economy is deteriorating in a way that has not been seen in 50 years, China’s exports falling by double digits, the Taiwan dollar and Malaysian Ringgit falling, and the IMF predicting a 4% contraction in the South Korean economy in 2009.

Meanwhile, there is a report that Russia is attempting to restructure its debts, which is a polite way of saying that they are threatening to default.

Meanwhile, Geithner's plan, and the Senate's approval of a stimulus, does appear to be having an effect on the markets, with oil falling, which indicates that the oil traders do not expect to see a rapid economic turn around, and the dollar rising, on the same information.

In this case it appears to be cross purposes, but I think that the reason that the dollar is up is because people realize that the bailout makes US investments more attractive, albeit at taxpayer expense, but that is another post.

Dems Win Cloture Vote on Stimulus Package

Here, with Kennedy showing up to cast his vote.

Israel and the Overton Window

First, a definition: The Overton window is a theory first voiced in this form by Joe Overton, which states that ideas, can be classifies as being either inside of or outside of the bounds of conversation in a group. It further notes that this window is not fixed, but rather it moves, and through the application of resources over a long term, can be made to move significantly.

Ideas can generally be classified as unthinkable, radical, acceptable, sensible, or popular, with the latter generally moving toward policy.

Israeli elections are today, and it is likely that the racist Yisrael Beitenu party will be the 3rd largest party in the Knesset, displacing Labor to 4th place.^*

What I think people don't realize is how much of a shift this is in Israel's Overton window.

If one were to suggest at a party an expulsion of Israel's Arab population in 1966, or an expulsion of the Palestinians in the territories in 1968 at a party, the response would have been stunned silence, with people looking at the speaker like they had just admitted to eating children, and that person would be ostracized at the party, and not invited back.

In fact, it could be argued that this was the societal norm well into the 1st Intifada, and possibly up to some time after the Oslo accords were implemented, and the PLO returned to Israel.

Now, we have a party which endorses ethnic cleansing without the movement of people, by redrawing the Israeli border to excise most of its Israeli Arab citizenry, on a path to have the third highest number of seats in Parliament.

This idea has already moved from unthinkable to acceptable for discussion for much of the Israeli population, and the desired political outcome for over 10% of the population, and likely exceeds the vote totals of YB will get, because of the dynamics of the Israeli proportional representation system and the fact that their party leader, Avigdor Lieberman^† is stridently secular.

Needless to say, this marks a significant change in Israeli society, and to my mind, this is a profoundly negative change, and I do not see its trajectory changing in the foreseeable future.

^*Much of their anemic performance in recent elections has to do with the fact that "big L" Labor has largely abandoned the concerns of "small L" labor in favor of a new Thatcherite economic consensus, but that is another post.
^†It seems to be a constant that politicians named Lieberman are complete asswhipes.

1000 Bank Failures?

An analyist is suggesting that this will be the number of bank failures over the next 3-5 years.

This compares to 534 banks being closed in 1989, the height of the S&L debacle, but the banks are now much larger with broader reach, so multiply that number by 2, or 3, or 10, or 20, to get the real effect.

Once Again: What Paul Krugman Said

Just go and read the shrill one's latest:

What do you call someone who eliminates hundreds of thousands of American jobs, deprives millions of adequate health care and nutrition, undermines schools, but offers a $15,000 bonus to affluent people who flip their houses?

A proud centrist. For that is what the senators who ended up calling the tune on the stimulus bill just accomplished.

Good writing. Go Read.

Nancy Pelosi Just Scared the Hell Out of Me

So Nancy Pelosi, or actually her staffer Karina, shows us what 3.6 million jobs lost looks like.

It's falling off a cliff, with no signs of bottoming.

We've lost 3.6 million jobs, as opposed to 1.6 in the early 1990s recession, and 2.7 million jobs following the dotbomb bust.

Obama's Presser

I heard all of it, but I was multi-tasking, helping my son buy algae for the science fair, so you may want to read the Rude Pundit's version....He's is a better writer than I am anyway.

Ghod! It's nice not having a drooling moron (mostly) dry drunk there anymore.

One thing that the Rude One missed though: Chuck Todd is a complete fracking moron.

Seriously. He asked if maybe now it's the time for Americans to save, as opposed to spending.

Does this man even read the paper, and listen to even the most conservative economists, who say that right now paying down debt is the kiss of death?

Jeebus....This guy makes Jonah Goldberg sound like Albert Einstein (the actor, not the physicist^*).

^*Albert Lawrence Einstein the actor changed his last name to Brooks when he went into acting, to avoid confusion.

Economics Update

Well, in terms of the stuff I put here, there was very little today. My guess is that everyone is waiting on Timothy "Eddie Haskell" Geithner's bank bailout plan.

We do have a rumor on the plan though, and it's that Geithner has dropped the federally funded bad bank, and instead any disposal of the financial dioxin out there will be handled by encouraging private money to drain the cesspool, which, when I last checked, was paying about 35¢ on the dollar for the top tranches of this.

Good luck with that.

He was supposed to release it today, but he put it off a day, which pushed the dollar down and it also pushed oil down, despite OPEC talking about more supply cuts.

I will post a bit about Nancy Pelosi's scary graph.

Michael Steele Caught in Corruption Probe

Hmmmm....It appears that his 2006 Senate campaign paid $37,000 to Brown Sugar Unlimited, a catering company run by his sister.

OK, that is unseemly, why is it likely illegal? Because the company had filed to dissolve 11 months before the payment.

There also appear to be questionable money transfers, which pissed off the Maryland Republican Party, and significant payments to a law firm for work never done.

How did the Washington Post find out about this?

The U.S. attorney's office inadvertently sent the confidential document, a defense sentencing memorandum filed under seal [for Alan B. Fabian who was being prosecuted under unrelated fraud charges], to The Washington Post after the newspaper requested the prosecution's sentencing memorandum.

Which seems to me to be a hit job, and the motivations could be:

• A disgruntled 'Phants in the Maryland party.
• A disgruntled prosecutor, who wanted the investigation to proceed.
• It could just be a hit from someone who just does not like Steele.

Note, however, that the US Attorney is still a Republican appointee, so if it's a hit, it's an internecine affair.

Some Sanity in Missile Defense

It's only a one paragraph blurb (paid subscription required), but it appears that Robert Gates is moving toward more cooperation with Russia on missile defense, "In his first appearance before Congress as a member of President Barack Obama’s cabinet, he says mutual missile defense projects with Moscow are not as far-fetched as recent events would suggest."

When this is juxtaposed with the fact that the Czech parliament has placed an indefinite delay on a on a vote approving the missile defense radar, it would appear that using BMD to poke Russia in the with a stick is no longer the order of the day.

Baby Seal Gets More Expensive

It appears that the F-35 cost overruns have already placed the program in Nunn-McCurdy breach in all but name, and a lot of the problem is that the program was poorly managed from the very beginning:

The Pentagon’s top weapons buyer says the huge cost increases and delays incurred on the F-35 joint strike fighter program were inevitable because the Defense Department didn’t spend enough money upfront to build realistic prototypes.

....

For the JSF program, the Pentagon contracted with Boeing and Lockheed to build "technology demonstrators" and not "true prototypes."

As a result, Young said, "the future of JSF cost growth was largely written in 2001 when budget and pricing decisions were made . . . based on inadequate knowledge gained from the JSF technology demonstrators."

I'm so not shocked. In fact, I think that the DoD in general, and the USAF in particular do this on purpose to conceal the true cost of a program until it is too far along to cancel.

I'm beginning to think that the Pentagon needs to have its contracting authority pulled like the Coast Guard's authority was late last year.

H/T Worldwide War Pigs

The Navy Still Doesn't Know What it Wants

So, the Navy is looking at a 'future surface combatant' (FSC) to replace the DDG-1000 Zumwalt.

It appears to be an improved version of the DDG-51 Arleigh Burke, with possibly a hull stretch and a new engineering plant, and definitely a new radar, the the Air and Missile Defense Radar (AMDR), which was originally intended to be first fielded on the nuclear powered CG(X) cruiser, which now looks to be pushed back a couple of years.

The idea that they are doing this to the DDG-51 implies that part of the problem with the Zumwalts was insufficient robustness to battle damage.

What is shows however, is that the Navy really does not have a coherent path forward.

Blended Wing Transports

Well, NASA is big on them to improve efficiency, and the Boeing's sub scale demonstrator, the X-48B continues apace, with the development team looking at stall characteristics, and the Europeans are conducting validation studies on a BWB with 1000 passengers. (paid subscription required for all links)

It will require rather a lot of validation and test in both structures and control surfaces.

In any case, here is some picture pr0n:

Podded Engines


More advanced serpentine duct arrangement.


Structural Test Item


X-48 B

People Who Speak Better than I Do

Rachael Maddow on the stimulus.

Visit msnbc.com for Breaking News, World News, and News about the Economy

Hopefully, We Can Unfrack This in the Conference Committee

So, based on my not so informed analysis, what the Senate now has a deal on sucks. It appears that the only criteria used by those "wise people" in the middle was what had extensive lobbying support.

Cuts:

• Aid to states.
• Education funding.

Kept or increased:

• More tax cuts.
• Increased funding on the census. (Like that's going to help now?)
  
• Subsidies for digital TV receivers. (Whiskey tango foxtrot)?
• More tax cuts.
• The $15,000 house flipping tax credit.

Total spending is down by around ¼, and tax cuts are up.

Without some Republican style shenanigans in the conference committee (how about stripping out all the tax cuts?) this will really suck.

Three More Banks Closed

• County Bank, Merced, CA
• Alliance Bank, Culver City, CA
• FirstBank Financial Services, McDonough, GA

Link

That's 9 for the year, a pace that would put us at 59 failed banks. There were 26 failures in 2008, and just 3 in 2007.

Sikorsky X2 Powers up Propulsor

As you can clearly see, after a few months of testing with the aircraft powering just the coaxial rotors, they are not ramping up power to the tail propulsor.

The plan is to put drag-reducing fairings on the rotor, and then slowly transition to higher speeds, which would put more and more power toward the tail thruster, with the retreating blade stall being handled by offloading the blade as it moves aft.

They want to hit about 250kts by year's end.

Video pr0n below:

A Challenge to NATO?

Russia, Armenia, Belarus, Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan have agreed to form a joint quick reaction force with a, "joint command and be based permanently on Russian territory."

It does not appear to be a particularly large force, it looks like perhaps a brigade, but it does imply an upgrade to the Collective Security Treaty Organization, which appears to be an attempt at a counterweight to NATO.

What Are They Smoking?

Russia and India now have an in-service date for their joint next generation fighter program, the PAK-FA, 2017.

This simply is not going to happen that soon, particularly when India is still unsatisfied with the level of technology transfer, and they haven't yet agreed on the number of crew (Russia wants a single seater, India a 2-seater).

They may have a demonstrator, at a maturity level of the MiG MFI, or the BAE EAP in the next 5 years, but the former never saw production, and the successor to the latter the Typhoon, did enter service until more than a decade after it rolled out.

If this ever enters service, I'd my guess is that it would be closer to 2025 than 2017.

And the P-80 was 180 days from proposal to first flight......

More Adventures in the Incompetence of the Iron Triangle

In this case, it's the Marine Corps, who have found a disaster besides the EFV, the Growler, which is basically a stunted version of the Jeep Cherokee designed to fit in the cargo bay of the V-22 Osprey.

It's supposed to serve for basic transportation, and to tow a trailer for a mortar.
As Paul McLeary notes, "Well take a look at the vehicle and tell me if you would want to tool around IED alley in Afghanistan in this thing." (Emphasis Original)

In addition to being dangerously exposed in combat areas, it's cost has skyrocketed:

The inspector general report said that the average cost of a single Growler has risen 120 percent, from about $94,000 when the contract was awarded in 2004 to $209,000 in 2008. The unit cost for the vehicle with mortar and ammunition trailer has grown 86 percent, from $579,000 to $1,078,000.

It turns out that part of this has been the Marines adding features, "air suspension ... a new cooling system, power steering and power brakes, along with a beefed-up General Motors engine...," of which only the air suspension would be considered crucial to the mission (it allows the vehicle to squat to fit in the Osprey).

Note that this contract was awarded in 2004, when it was clear that a thin skinned vehicle would not be acceptable in current conflicts.

Last S-3B Viking Retires. Walking Away from ASW?

It's one of those orginary stories that might raise some bigger issues. The US Navy has retired the last S-3B Viking from fleet service.

This means that there is no dedicated fixed wing anti-submarine aircraft in service any more. This is more than just a story about the retirement of an aircraft affectionately known by its crew as "the Hoover."

Given the expansion of capabilities of non nuclear submarines, such as air-independent propulsion (AIP) , improvements in anti-ship missiles, and the reports that the Russians have been working on a low cost "hybrid" nuke boat, I would think that submarines are more of a threat to the CVBG than they have ever been.

Funny News Report, Sad Story

I really can't say anything beyond that it is completely work safe, and don't drink anything while watching this.

I really don’t understand how bipartisanship is ever going to work when one of the parties is insane.

So says yet another person who just writes better than I do, John Cole of Balloon Juice.

Changes in Philosophy Bubbling Up in Banking Rescue Plans

In the Wall Street Journal (!), Paul Romer is suggesting something rather similar to my proposal, you know, the one where I suggest amputating the financial industry:

Everyone agrees that the United States urgently needs a few good banks. Turning bad banks into good banks is a difficult and risky way to get them. It's simpler and safer to start entirely new banks.

In this context, "good" means a bank with assets and liabilities that are easy to value using market prices. At a good bank, officers, regulators and investors can be confident about the value of the bank's capital.
The Opinion Journal Widget

Download Opinion Journal's widget and link to the most important editorials and op-eds of the day from your blog or Web page.

The government has $350 billion in Troubled Asset Relief Program (TARP) funds that it can use to encourage new bank lending. If this money is directed to newly created good banks with pristine balance sheets, it could support $3.5 trillion in new lending with a modest 9-to-1 leverage. Right out of the gate, the newly created banks could do what the Fed has already been doing -- buying pools of loans originated by existing banks that meet high underwriting standards.

This sounds an awful lot like what I was suggesting.

BTW, it also appears that Timothy Geithner is backing away from the bad bank idea, and looking at having equity shares that have votes, as opposed to preferred stocks.

He's fighting this kicking and screaming, but the banks are insolvent, and need to be nationalized or otherwise cut loose.

David Ignatius Says that Obama Needs to Be Less Bipartisan

When one of the more prominent villagers suggests that Obama find his inner Eastwood, and tell the Republicans to frack off, in The Washington Post no less, something rather odd is going on.

Economics Update

So we have the new, official jobs report, Oh My God!!!

The unemployment rate went up to 7.6%, and 598,000 jobs were cut, the most since 1974, and it happened across all sectors.

Barry Ritholtz looks at the number in more detail, and finds (excerpting):

• Total job losses since the recession started in December 2007: 3.6 million;
• Over the past 12 months, the number of unemployed persons has increased by 4.1 million;
• For the first time since records began in 1939, there were three consecutive months of 500k + job losses;
• Household survey showed a record 1.24 million job plunge (Since data began in 1950)
• The employment-population ratio fell to 60.5%, down from 62.7% at the beginning of the recession, — the lowest rate since 1986.
• Unemployment rate: 16-year high (1992);
• The 3.5 million job loss since January 2008 is the largest 12-month decline since the government started compiling those figures in 1939;
• U-6 Marginally attached and involuntary part-time workers: 13.9% last month — up almost five percent;
• The employment-to-population ratio was the lowest since 1986.

Except for the jobs report, it's a slow news day, which is kind of like saying, “Apart from that Mrs Lincoln, how did you enjoy the play?

Then again, I expect at least one bank closing shortly after I shut down for Shabbos, because Friday is bank regulator seizure day (cue Prince Spaghetti Day ad).

The good news is that it looks like the SEC and Treasury are denying any plans of suspending mark to market.

Going back to mark to model would be like pouring gasoline on a the bonfire of the fraudulent.

One odd thing here is that the Federal Reserve appears to be walking away from expanding its Term Asset-Backed Securities Lending Facility (TALF) program, a sh%$ pile for cash givaway lending program, to include consumer credit derived instruments.

Not sure what is going on here, but it would seem to me that this might be one of the better ways to throw money at the problem.

Meanwhile, oil fell on the jobs reports, and the dollar was mixed, up against the Yen, down vs the Euro, and flat vs. the Sterling.

Richard B. Cheney Will You Please Go Now!

On July 30, 1974, Art Buchwald, with permission of Theodore Seuss Geisel (Dr. Seuss), made a column of the book, "Marvin K. Mooney Will You Please Go Now!"

It appears that Mr. Geisel sent his friend Buchwald a copy of the book and replaced "Marvin K. Mooney" and with "Richard M. Nixon."

Buchwald wrote, "It sounded like fun so I asked him if I could reprint it" with the suggestion that it be read aloud.

Needless to say, do not have the writing chops of either the late Mssrs. Geisel or Buchwald, but this has to be shared.

At the bottom, is Keith Olbermann's special comment from last night, saying the same.

"Richard B. Cheney will you please go now!
The time has come.
The time has come.
The time is now.
Just go.
Go.
Go!
I don't care how.
You can go by foot.
You can go by cow.
Richard B. Cheney will you please go now!
You can go on skates.
You can go on skis.
You can go in a hat.
But
Please go.
Please!
I don't care.
You can go
By bike.
You can go
On a Zike-Bike
If you like.
If you like
You can go
In an old blue shoe.
Just go, go, GO!
Please do, do, do, DO!
Richard B. Cheney
I don't care how.
Richard B. Cheney
Will you please
GO NOW!
You can go on stilts.
You can go by fish.
You can go in a Crunk-Car
If you wish.
If you wish
You may go
By lion's tale.
Or stamp yourself
And go by mail.
Richard B. Cheney
Don't you know
The time has come
To go, go, GO!
Get on your way!
Please Richard M.!
You might like going in a Zumble-Zay.
You can go by balloon . . .
Or broomstick.
Or
You can go by camel
In a bureau drawer.
You can go by bumble-boat
. . . or jet.
I don't care how you go.
Just get!
Richard B. Cheney!
I don't care how.
Richard B. Cheney
Will you please
GO NOW!
I said
GO
And
GO
I meant . . .
The time had come
So . . .
Richard WENT."

Visit msnbc.com for Breaking News, World News, and News about the Economy

Bad Hair on My Blog

I got a bit of tech help, and costomized my favicons.ico, so now, on tabs, bookmarks, and the URL bar, you can see me in all my bad hair glory as a 16 x 16 pixel thumbnail.

I wish that I still had that much hair.

Regulating Credit Default Swaps

The head of the Agriculture committee, Collin Peterson (D-MN-07) is proposing that credit default swaps be treated like the insurance that they are. Here is money quote(PDF):

(h) LIMITATION ON ELIGIBILITY TO PURCHASE A CREDIT DEFAULT SWAP.—It shall be unlawful for any person to enter into a credit default swap unless the person would experience financial loss if an event that is the subject of the credit default swap occurs.
...
EFFECTIVE DATE.—The amendments made by this section shall be effective for credit default swaps (as defined in section 1a(34) of the Commodity Exchange Act) entered into after 90 days after the date of the enactment of this section.

Basically, what this is saying is that you can't buy insurance on something unless you actually benefit from it.

This was discovered a long time ago, specifically 263 years ago, when the British Parliament passed the Marine Insurance Act of 1746:

In 1746, Parliament passed the Marine Insurance Act, requiring anyone seeking to collect on an insurance contract to have an interest in the continued existence of the insured property. Thus was born the insured-interest doctrine. The indemnity doctrine, which precludes a buyer from insuring property for more than it’s worth, soon followed. The point of these rules is to limit insurance contracts to trading existing risks and not to create new risks by giving buyers of insurance incentive to destroy property. The doctrines have been part of insurance law in both England and the United States (which in 1746 were colonies under English common law) ever since.

Unfortunately, it appears that the distinguished gentleman from Minnesota only intends for this regulation to be temporary, but it's a good start.

It should be permanent though, there is a reason that this adopted so long ago.

But Kevin Lewis Should Still Be Fired

We now have credible reports that Hank Paulson and Ben Bernanke seriously twisted the Bank of America CEO's arm to get him to finish the acquisition of Merrill Lynch, so Merrill may not be entirely his fault, but Countrywide, a morass of fraud, bad banking, and incompetence is.

He needs to go, so that those who would be like him will think twice before being so profligate.

Zimbabwe Passes Power Sharing Law

Well the Zimbabwean parliament finally passed the constitutional amendments to enable a power-sharing government, though cabinet positions are still not set, and a number of MDC and human rights activists remain detained.

Governments in the west have softened their rhetoric, for a while, at least, but are maintaining the sanctions against Mugabe and senior ZANU-PF officials.

As to whether things are going to get better, the fact that Robert Mugabe's wife just seized a farm, from a judge on Zimbzbwe's high court....Damn....It takes stones to steal from a judge in broad daylight, so I'm not expecting things to turn better at any time soon.

In the meantime, Cholera is continuing it's Zimbabwe concert tour, with the WHO saying that cases have broken 65,000.

I'm not sure if I am a realist, or a pessimist, but I don't think that things are going to turn out well for the people of Zimbabwe.

Exec Pay Limit as Toothless as Gabby Hays

Remember when I said yesterday that The Devil is in the Details regarding Obama's pay limits?

Well, ProPublica is all over this.....The bullet points:

• No enforcement mechanism or penalties.
• The conditions for things like stock grants are unclear, and look to be loophole filled.
• Shareholder votes on pay are non-binding.
• The $500K limits applies only to banks that aren't "healthy", which is basically none of them, because if Citi qualifies as "healthy", they all do.

Oh, well, it was nice believing that something would be done for a few minutes.

This Was Not a Bug, This Was a Feture

The TARP watchdog committee is now saying that Hank Paulson and His Evil Minions^™ overpaid for TARP assets, and that they paid $274 billion for assets worth $176 billion.

This was not an oversight. This was what Paulson wanted.

He was looking at bailing out his budget at taxpayer expense, because to him, bailing out overpaid Wall Street pukes was job 1....Mission accomplished.

The Next Shoe to Drop on Wall Street

It appears that Moody's is reviewing the credit ratings of hundreds of billions of dollars of Commercial Mortgage Backed Securities (CMBS).

These are like residential mortgage backed securities, only they are for things like malls and apartment buildings, as opposed to houses and condos, and they are following the same path as the residential MBS, which is, as Calculated Risk notes, "First the reviews, then the downgrades, followed by the bank write-downs, and then more reviews ..."

The House Flipping Subsidy

The Senate just voted to add a $15,000 tax credit for home buyers to the bailout program.

It's a bad idea, which Dean Baker correctly calls it a house flipping subsidy.

What The Littlest Gator Said

at Fighting Liberals

Won't happen though. They hate him for some reason.

British the United States on Wednesday of Threats to Conceal Torture

We now have a report that the UK government demanded that court proceedings detailing torture be suppressed because the United States on Wednesday was threatening to end intelligence cooperation if the details were releases:

Two senior British judges accused the United States on Wednesday of threatening to end intelligence cooperation if Britain released evidence about the alleged torture of a Guantanamo detainee.

The judges quoted lawyers for British Foreign Secretary David Miliband as saying the U.S. government, by reviewing intelligence cooperation, "could inflict on the citizens of the United Kingdom a very considerable increase in the dangers they face at a time when a serious terrorist threat still pertains."

According to the ruling from High Court judges Lord Justice Thomas and Lord Justice Lloyd Jones, Miliband's lawyers said the threat had existed for some time and was still in place under President Barack Obama's administration.

(emphasis mine)

If you think that your behavior is egregious enough that you need to threaten allies to keep it away from public view, that's a pretty good sign that you should not be doing it in the first place, and that you should be looking at criminal prosecution of the perpetrators.

Ginsburg Has Pancreatic Cancer

It was caught early, but it's not an easy cancer to treat.

This is the the Supreme Court Justice's second bout with cancer.

Friends Don't Let Friends Link to the AP

__AP Photo__________"Hope" Poster

For a while now, I have been boycotting the Associated Press, because they established a policy to threaten legal action over copyright for people who link to them and quote a sentence or two.

With one notable exception,^* I have avoided their stories, and used Google News to find an alternate when I found a story of theirs.

Well, the Associated Press moron brigade is at it again, with their suing Shepard Fairey, the artist who created the Obama "Hope" poster, because he based the poster on an AP Photo.

As you can see, it's not a tracing, it's based on a photo, and clearly fair use. The author took the expression, and you can find dozens of pictures with a similar expression, and little else from the photograph, and what's more, it appears that the AP may not even have right to the photograph, as the photographer, a stringer named Mannie Garcia, never signed a contract with the AP:

2) Where you either an employee, or a freelance photographer, as defined by their contract, for the AP when you took this image?

I was a temporary hire, filling in for a staffer at the AP. It is my understanding that I was neither a freelancer nor a staffer, but rather a temporary hire. I have never been an AP staff employee, and no, I have never signed an AP contract.

3) So, you own the copyright to the image?

The ownership of the copyright is in dispute, as per the AP. It is my understanding that since I was not a staffer, and was not a freelancer, and did not sign any contract, that I am the owner of the copyright, but I am in discussions with the AP over this issue.

Needless to say, I will continue not linking to Associated Press stories, and using a Google^® News search to find alternates.

^*When via typo, they referred to Joe Lieberman as the 2000 Vice Presidential pRick.

Economics Update

Our economy just had one of those days when you wonder why you get out of bet.

First, we have initial unemployment claims spiking to the highest number since October, 1982, 626,000. The consensus estimate had been 580,000.

The more reliable, and less noisy, 4 week moving average was up too, from 543,250 to 582,250, and continuing claims hit 4,788,000, another new record.

In manufacturing, December new factory orders fall 3.9%, well above the estimate of 3 %, and in rental real estate, the MIT commercial property price index posted a record drop, 10% in Q4 of 2008.

In international high finance, the Bank of England its benchmark rate by 50 basis points (½%), to 1%, which breaks last month's record.....Considering that the BoE has been around since 1694, that's a long record.

Across the channel in Euro land, the European Central Bank has left its benchmark unchanged, though I think that this is less from optimism than from the inflation-hawk nature of the ECB's charter, and the fear of the zero rate destroying their ability to manage the economy with monetary means.

Meanwhile, mortgage interest rates have continued their increase, with the 30 year fixed being reported at 5.25%.

With the rate cuts in England, and the ECB still signaling future rate cuts, the dollar was up today.

The dismal job numbers drove oil down.

Adult in Charge

Note this quote from an interview:

In evening interviews on broadcast and cable television networks, Mr. Obama said he took responsibility for the errors. “And so I’m frustrated with myself, with our team,” he told NBC, “but ultimately my job is to get this thing back on track because what we need to focus on is a deteriorating economy and getting people back to work.”

He added, “I’m here on television saying I screwed up and that’s part of the era of responsibility.”

(emphasis mine)

Think about that for a second....A president admitting error....Like a non psychopathic adult....

TPMMuckraker | Talking Points Memo | U.S. Attorney Scandal: Feds Probe Domenici for Obstruction of Justice In Iglesias Firing

Murray Waas is reporting that a grand jury is investigating former Senator Pete Domenici for obstruction of justice for his role in the US Attorney firing scandal.

My sense is that this is going to be big, because Waas is a very good investigative reporter, and he has a nose for things that end up big.

Complications in the Iraqi Elections

It appears that the al-Hadba Gathering, a Sunni Arab party, did well enough in local elections in Nineveh province to take control of the provincial council from the Kurds, which means that they have control of it and its its capital, Mosul.

The party, and its leader Atheel al-Nujaifi, took a fairly explicitly anti-Kurdish line during elections, and needless to say, the Kurds, who had previously held 31 of the council's 41 seats, are not amused and are suggesting some level of electoral fraud.

While not a part of the Kurdish autonomous region, they Kurds have maintained that Mosul should be incorporated into this area.

Barack Obama Just Became Judd Gregg's (R-NH) Bitch

You see, a day after being nominated by Obama, Senator Gregg recused himself on all votes on the stimulus package.

The thing is, in order to break a filibuster, you need 3/5 of all senators, so a non vote is the same as a no vote.

So he just announced that he will be voting to support any filibuster on the stimulus package.

First, he demanded that a Republican replace him, and now he has declared that he will support a Republican filibuster.

Now is the time to tell that rat-bastard that you changed your mind, because you heard the rumor about him and the 16 year old boy, Mr. President

Economics Update

Well, the ADP Monthly Survey estimates that 522,000 jobs were lost in January, and while the Institute of Supply Management’s non-manufacturing index rose, it's still below 50, 42.9, which means more contraction on the way.

These aren't official government figures, but those figures, due out Friday, are expected to be grim:

In its report on Friday, the Labor Department is expected to show 525,000 jobs were lost throughout the economy in January and the jobless rate is expected to rise to 7.5 percent.

Meanwhile, the dollar is up on expectation of further Euro zone rate cuts, and oil was down 46¢, continuing its love affair with the $40/bbl price.

What the Hell Are They Smoking?

To replace Tom Daschle at HHS, Karen Tumulty of Time Magazine is suggesting Willard "Mitt" Romney, and Craig Crawford CQ Politics is suggesting Newt Gingrich!

Either these people are completely insane, or they are amazing performance artists....Or maybe both.

Get Used to Saying Governor Cuomo

Because the New York Times is now calling out David Paterson about leaking damaging information about Caroline Kennedy.

Stupid, really stupid.

It's clear that Paterson didn't want Kennedy, and neither did I, but it was well within his purview to simply say, "No", particularly after her disasterous performance in interviews and her prior lack of involvement in politics, even to the level of voting in primaries.

Going after her with a whispering campaign is stupid, and it makes his chances of losing the next primary much more likely.

Jeebus, this is stupid.

Iran Really Launches a Satellite This Time

We have both the report from Iran, and a report from JSR that they have observed the satellite and 2nd stage in orbit.

So it appears that they actually did it this time.

If you look at the launch (video below), I notice something odd, no ice, which implies the use of less efficient room-temperature propellants, which makes the technology more applicable to military uses, as it can be stored fully fueled in as silo or on the back of a TEL.<sup>*



*</sup>Transporter/Erector/Launcher

Kyrgyzstan To Close US Airbase

President Kurmanbek Bakiyev of Kyrgyzstan Kjust announced his intention to close the Manas air base at a press conference with Russian President Dmitry Medvedev.

He is claiming that the US is not paying enough, and my guess is that the Russian aid also announced influenced him:

Russia, meanwhile, was ready to pay. The Kyrgyz president collected pledges of a $2-billion discounted loan and a $150-million grant. The Russian government also agreed to cancel Kyrgyzstan's $180-million debt and to build a hydroelectric power plant.

I think that Russia does not want Afghanistan to fall back into the Taliban's hands, but I also think that they see the bases in former Warsaw Pact and FSU nations as being a deliberate attempt to create a "ring of steel" in order to contain Russia.

I think that there are elements in the US military, and elements in the past administration (Cheney, Rice, etc.) who have been rather strong supporters of the "ring of steel" concept, so it's not like they are paranoid for nothing.

From a tactical perspective, the loss of Manas is crushing, as it will, leave Pakistan as the only supply route available.

1000 Words on Republican Bloggers

Taking Stock

The Devil is in the Details

Because Obama's plan to limit executive pay to $500K to TARP recipients will sink or swim on the loopholes.

Larry Summers' suggestion that, "Executive compensation above a specified threshold amount be paid in restricted stock or similar form that cannot be liquidated or sold until the government has been repaid," is one such loophole, because if the restricted stock has dividends, it's back to the races.

One of the things that needs to be understood is that Wall Street's excessive salary structure is not just a symptom of the current banking problem, it's one of the causes, because the excessive leverage and incompetent risk taking made year over year results so remunerative that it encouraged byzantinely complex instruments.

As a note, it's actually not the executives who will get hit hardest by this:

“That is pretty draconian — $500,000 is not a lot of money, particularly if there is no bonus,” said James F. Reda, founder and managing director of James F. Reda & Associates, a compensation consulting firm. “And you know these companies that are in trouble are not going to pay much of an annual dividend.”

Mr. Reda said only a handful of big companies pay chief executives and other senior executives $500,000 or less in total compensation. He said such limits will make it hard for the companies to recruit and keep executives, most of whom could earn more money at other firms.

(emphasis mine)

It's the "compensation consulting firms", whose business model is to get paid lots of money from CEOs and Boards of Directors to recommend high salaries to those very same CEOs and Boards of Directors, who lose the most.

It sure beats working for a living.

F%$@ing Stupid Idea

Barney Frank has a good basic idea, that of a federal regulator with the power to regulate all financial transactions with regard to systemic risk, and then he jumps the shark completely by suggesting that this regulatory authority be placed in the Federal Reserve.

Seriously. Much of the Federal Reserve has not only gone native, but are to some degree actually owned by the commercial banks.

Any organization that was headed by Alan "Bubbles" Greenspan 20 years should be kept as far away from managing systemic risk as possible.

It's like giving an infant a loaded revolver.

A Perfect Storm Benefits Netanyahu

In addition to the assault on Gaza achieving basically nothing, it now appears that the increased popularity of lunatic bigot Avigdor Lieberman and his Yisrael Beitenu party have made Netanyahu appear sane and moderate to the Israeli electorate by comparison, so people are feeling more comfortable about him.

This really sucks.

Obama nominates Gregg for Commerce

Interestingly enough, Gregg had proposed abolishing the Department of Commerce at one point.

Details here.

Tom Daschle Withdraws as Head of HHS

Nominally, he withdrew because of tax questions, but there are reports that this New York Times OP/ED convinced him to withdraw.

When even the New York Times realizes that you have functioned as an über lobbyist and calls you on it as game over.

Matt Taibbi was far more colorful in his description of Daschle and his revolving door porfiteering, "Tom Daschle would suck off a corpse for a cheeseburger."

Economics Update

To no one's surprise, the Federal Reserve has extended its multi-trillion dollar so called liquidity facilities another 6 months, better known as the sh$tpile for cash program:

In addition to prolonging the currency swap lines that were due to expire on April 30, the U.S. central bank said it would extend through October 30 a host of other programs providing liquidity to the U.S. commercial paper and money markets, and to large Wall Street firms.

They've already spent in excess of 8 trillion dollars bailing out insolvent banks, but they think that more of the same will help.

The Federal Reserve is broken as an institution. It is run by and for the banks.

We also have aggressive stimulus programs ramping up in Australia and Japan.

Meanwhile, real estate and construction continues to be a disaster with US construction falling 1.4% in December and 5.1% for 2008, the largest drop since records began being kept in 1993, and the Homeownership rate has fallen to the 2000 level, so much for Bush's "Ownership Society....In stead of owning, we got pwn3d.^* With current equity losses of US home owner pegged at $3.3 trillion, a new record on vacant homes 19 million.

Even alleged good news in real estate, that the Pending Home Sales Index rose in December is pretty hollow, because, money quote from CR, "The biggest gains were in areas with the biggest improvements in affordability."

So, if your house prices have dropped by 40+%, as they have in parts of California and Florida then homes might be moving...Otherwise, not so much.

Still real estate is not as bad off as the auto industry, with GM and Chrysler offering buyouts to all of their hourly workers, Ford posting 40.2% drop in January U.S. sales, and GM dropping 49%, Chrysler down 55% LLC, with the Japanese car makers seeing their sales dropping about 30% each

BTW, it appears that China may be headed for a period of economically induced social unrest, because more than one in seven rural migrant workers, more than 20 million, are unemployed.

In a nation that has systematically eliminated its safety net, 20 million pissed off unemployed people can make a lot of trouble.

In energy, I'm not sure if $40/bbl is the bottom, or if OPEC cuts are working, but oil was up today, and it appears that we have found a bottom there.

In currency, there dollar was down as there was less "flight to safety."

^*Leet speak for "owned".

Holder Confirmed By the Senate

With 21 'Phants voting against, largely, it appears, because the report in the Moonie Times saying that he would not prosecute torture was in error, and he actually has refused to rule out prosecutions.

An Interesting Perspective on the Big Sh%$Pile

The New York Times has an article on how difficult it would be value the bad financial instruments that banks are holding, and they relate the story of a bond:

But getting this right will not be easy. The wild variations on the value of many bad bank assets can be seen by looking at one mortgage-backed bond recently analyzed by a division of Standard & Poor’s, the credit rating agency.

The financial institution that owns the bond calculates the value at 97 cents on the dollar, or a mere 3 percent loss. But S.& P. estimates it is worth 87 cents, based on the current loan-default rate, and could be worth 53 cents under a bleaker situation that contemplates a doubling of defaults. But even that might be optimistic, because the bond traded recently for just 38 cents on the dollar, reflecting the even gloomier outlook of investors.

(emphasis mine)

Let me make an observation here, if the financial institute thinks that this is worth 97¢, and S&P thinks that it is worth 87¢, then this is a top tranch of bonds. It's the best of the best, and it most recently traded at a 62% loss.

The banks are completely insolvent, and paying them off is much more expensive than declaring them insolvent, stripping out these assets, and then holding them like the Swedes did.

What's more, if we go with Timothy "Eddie Haskell" Geithner's "Bad Bank", the same people will remain in charge, and because they were bailed out, they, and their successors will leaarn nothing, and so we will seem the same errors, over, and over, and over again.

Seize the banks as insolvent. Break them up into tiny pieces which are small enough to fail, and fire the upper management and stiff the shareholders.

Either that, or we can, as Ripley said in Aliens, "We take off and nuke the entire site from orbit. It's the only way to be sure," as

Not Enough Bullets: Can’t Live on $150 to $180,000 Edition

It appears that for investment banking types an outrageous salary is not enough.

They also need bonuses. Bonuses whether their company makes money or not. Whether their company is on the bederal dole or not.

It's because....It's because....I don't know why, but the rules don't apply to them.

BTW, the last paragraph of the story is the killer:

“Without a doubt, $18 billion is a lot of money, but it’s a drop in the bucket on Wall Street,” said Gustavo Dolfino, president of the WhiteRock Group, a headhunter for the banks. “These bonuses are down, and the salaries are not enough for these people. They can’t live on $150 to $180,000, so they haven’t saved any money. They put it on credit lines and at bonus time, they thought they’d pay it off.

Median family income is $49K/year, and they cannot live on three times that.

Andred Lahde got it right when he called them, "The low hanging fruit, i.e. idiots whose parents paid for prep school, Yale, and then the Harvard MBA, was there for the taking. These people who were (often) truly not worthy of the education they received (or supposedly received) rose to the top of companies such as AIG, Bear Stearns and Lehman Brothers and all levels of our government."

Zimbabwe Government Formed, Etc.

It appears that their parliament has passed a bill allowing for a unity government, as a result of the strong-arming of former South African president Mbeki and the South African Development Community (SADC).

As I've said before, I think that this will work as well as Nkomo's incorporation into Zimbabwe government, as in not at all.

Meanwhile the EU will maintain sanctions against ZANU-PF officials, even though the
African Union has asked them to be lifted.

This is a good thing. The upper levels of ZANU-PF are nothing more than thieves, and denying them easy access to banks to hide their ill-gotten gains is a good start, particularly when Zimbabwe was just forced to issue new dollars worth a trillion times more than the old ones, because of hyper-inflation.

GDP Numbers Artificially Inflated by TARP

Barry Ritholtz has the goods.

He notes that the Bureau of Economic Analysis (BEA) notes the effect in their report:

Troubled Asset Relief Program

In October 2008, the Emergency Economic Stabilization Act of 2008 established
the Troubled Asset Relief Program (TARP). Among its provisions, the act authorized the Department of the Treasury to purchase or insure up to $700 billion in assets to alleviate the financial crisis. By the end of the fourth quarter, the program had disbursed $243 billion to banks and other institutions in exchange for shares of preferred stock and warrants. The program also disbursed a $4 billion loan to General Motors in the fourth quarter.

Purchases of financial assets are generally not recorded in the GDP accounts (though they appear in the Federal Reserve’s flow of funds accounts). However, when the Treasury purchases a financial asset (other than a loan) at more favorable terms than are available in private markets, BEA records a portion of the purchase as a capital transfer, calculated as the difference between the actual price paid for the financial asset and an estimate of its market value. This treatment is consistent with the recommendations of the newly updated international guidelines, System of National Accounts 2008. For the fourth quarter, in most cases BEA’s estimates of these capital transfers are based on Congressional Budget Office estimates, which are prepared on a net present value basis. The recording of a capital transfer in the GDP accounts does not affect GDP or net government saving, but does reduce net government lending or borrowing.

(emphasis mine)

You'll notice that that the BEA is saying that the TARP is just a transfer payment, and hence is not counted as GDP, but I would argue that in overpaying for assets and preferred stock, these expenditures find their way into the numbers indirectly.

Ritholtz says that the effect is close to 8% of Q4 GDP, I'd say a bit less, say 2-4%, because the money finds its way into the economy indirectly and slowly, but in either case, it makes the GDP numbers worse than they seem.

If any bankers want to correct me, please do so.

Iraqi Regional Elections

The Iraqi tribes at the center of the "Anbar Awakening" are alleging fraud by the Sunni religious party and threatening violence while we have reports that ISCI and the religious parties have suffered losses.

There probably won't be official results for the next few days, and I'm not sure how contradictory reports, or at least contradictory perceptions, will play out here.

Not Enough Bullets: The Ever Reliable AIG

AIG is looking getting more US government aid to unload its dodgy assets because at this point it has only been able to unload about $1b in assets, and that money had to go to retention payments:

So far, AIG has announced sales of only a few smaller businesses that, at least based on deals where a sale price was announced, will earn it a little over $1 billion. That is about what AIG is paying employees in retention payments to keep them from leaving for rivals, which could further erode the value of its units.

They need to pay money to the the very people who ran the company into the ground, in an employment scenario where no one on Wall Street is hiring, because they are worried they might go somewhere else.

I'm not just referring to the people who actually sold insurance here, I'm referring to the people who actually set up the CDS catastrophe that took the company down:

American International Group Inc., the insurer saved from collapse by government money after losses on credit-default swaps, offered about $450 million in retention pay to employees of the unit that sold the derivatives, according to two people familiar with the situation.

About 400 workers at the financial products unit may get the money in two installments, said the people, who declined to be named because details of the payments were confidential. The business was responsible for about $34 billion in writedowns since 2007 as the market value of swaps AIG sold to banks plunged amid the subprime mortgage market collapse.

They are not just paying people who were passengers at some car wreck in another division, they are paying the driver of the car that crashed.

What's more, the driver was drunk, sending a text message, getting a blow job, and speeding at about 150 mph when they plowed into an orphanage.

Again, heads I win, tails you lose remuneration, bonuses to the tune of over a million dollars per employee to the folks who bankrupted the company.

Cutting the Cord: The Lines Cross

US spending on cell phones has now exceeded spending on residential land lines.

One wonders how much of this is increased cell phone uptake, and how much is consolidation and profiteering by the wireless providers.

Economics Update

Consumer spending fell for the 6th straight month in December, and all of 2008 turned in just 3.6% increase, the worst year over year number since 1961.

The Institute for Supply Management's factory index was better than expected, but still an anemic 35.6, but better than the consensus prediction of 32.5, but 50 is neutral, so anything under 50 signifies more contraction.

In inflation, the "Treasury Real Yield" is at a 16 month high.

The Treasury Real Yield is the spread between TIPS (Treasury Inflation Protected Securities) and regular treasuries, and is a measure of investor expectations of inflation....Which means that they are expecting more inflation.....Which is a good thing in this topsy-turvey economy.

Meanwhile in the Celtic kitten, Ireland is looking at injecting €8 billion into its troubled banks.

In Russia, and it looks like speculators are betting very heavily against the Ruble, which just hit a new low.

With Russia having already burnt through about 1/3 of its reserves in an unsuccessful attempt to maintain the currency, this could get very ugly.

Shrinking consumer demand has oil prices dropping again, and has pushed the dollar down against the Yen and Euro, though it improved against the sick man of Europe, the British Pound.

Almost Forgot, Banks Shuttered on Friday

MagnetBank, Salt Lake City, UT

Suburban Federal Savings Bank, Crofton, MD, and yes I mentioned the possibility that Suburban Feceral would be the first MD bank to fail since 1992 on Thursday.

Ocala National Bank, Ocala, FL

That's 6 banks shuttered in January total. (list here)

Broken News and Accusations of Witchcraft

So I'm surfing the net and come across PZ Myers on his blog Pharyngula talking about an ACLU press release about a student in Oklahoma who was suspended for allegedly placing a hex on a teacher which resulted in a "mystery illness".

So I set fingers to keyboard, and write a ferociously critical piece, invoking knowledge, Texas, and, of course Monty Python and the Holy Grail, and while I'm Googling to see the outcome of the case I notice something in the ACLU press release:

ACLU of Oklahoma Files Federal Lawsuit on Behalf of Student Accused of "Hexing" a Teacher (10/26/2000)

(emphasis mine)

It's from almost 9 years ago, and the events in question occurred 10 years ago, and Lifetime made a TV Movie about it, but that still does not mean that you can't have a minor Blogasm over this. (Google Search Link)

I'm just glad that I noticed the dateline before I made a complete ass of myself.

For those of you wondering, the judge dismissed the case, and assessed legal fees against the parents, who then dropped the case in exchange for the fees being waived.

I still need an excuse to invoke Monty Python though....I'm Jonesing for it right now.

What the Littlest Gator Said

Dump Daschle Choose Dr. Dean

Update on Gregg as Commerce Secretary

It appears that Judd Gregg is demanding a promise that anyone who the (Democratic) governor appoints would caucus with the Republicans, and the word is that the rather Broderiffic Governor of New Hampshire, John Lynch would likely do this anyway.

Screw it. Why give a 'Phant a leg up in the 2010 election in a state that is increasingly blue.

Update:

OK, the NY Times is reporting that there is a rumor that former NH Senator Warren Rudman would be appointed as a caretaker:

But there are no guarantees that Mr. Lynch would pick a Democrat: New Hampshire prizes its political independence, and the governor is a moderate. Some analysts say he could turn to a well-regarded Republican — former Senator Warren Rudman has been mentioned — to serve as a kind of caretaker to fill out the remainder of Mr. Gregg’s term, which expires at the end of 2010.

This might work, as Rudman is fairly clearly a vote against cloture almost all the time, and he won't run in 2010.

Diamond Aero-Diesel Gets Euro Certification

I have been following the story of Thielert's insolvency, and Diamond Aircraft has been hit particularly hard by the loss of their engines, which were a major part of their business strategy.

Diamond has now certified Austro AE 300 turbo-diesel, which it has been feverishly working on since Thielerts troubles, which means that it can start shipping aircraft with the highly efficient, and perhaps more importantly, jet fuel compatible, engines shortly.

They still need type certificates, but that should be relatively straightforward, as their engine uses the same Mercedes block as the Thielert, and so fit and mounting should be very similar.

More Defense Procurement BS, the Boeing Wedgetail

After $3.5 billion (Aus) it won't meet specifications, and it is going to be 4 years late.

And the government of Australia's response appears to be to say, "Thank you sir, can I have another," they are revising the terms of their contract to match what Boeing isn't delivering.

There is already so much money down the drain that Boeing owns the Australian ministry of defence.

Russian Defense Recapitalization Threatened by Financial Meltdown

Vladimir Putin committed to major new spending on the Russian military. He has committed to 1 trillion rubles ($30.5 b) on new procurement, upgrades, and R&D.(paid subscription required)

Notwithstanding this spending, the Russian defense industry is still not in great shape, as commercial credit has largely dried up:

Putin met with industry leaders recently at Tactical Missile Corp. headquarters in Korolev, a Moscow suburb. The package unveiled by Putin includes the injection of 35 billion rubles in additional capitalization and the allocation of 100 billion rubles as a state guarantee on bank loans. Along with the loan guarantee, there is a further 15 billion rubles to compensate for high interest rates.

(emphasis mine)

Additionally, there is likely to be further rationalization (mergers and tighter integration) among manufacturers, as is evidenced by the continuing submergence of MiG in United Aircraft Corp. (UAC) with Sukhoi firmly in the lead.

In terms of likely purchases, the Russian air force is looking for upgraded Su-27s (SU-35 shown) in the near term, and the Indo-Russian PAK-FA in the long term.

Talk About Gold Plated Weapons Systems

The US Air force is looking to buy 2½ inch diamonds as gunports for a high power microwave weapon.

Obviously, they will be synthetic diamond, and diamond already is used for high performance heat sinks, but 2½ inch diamonds? It sounds like something out of James Bond.

Is the A400M Cursed

In addition to everything else, it appears that the Airbus A400M is significantly overweight.

The first 6 produced will be 12 tons overweight, and the production models are looking at a 5-7 ton weight problem, which means that it would have to enlarge the wing to meet performance guarantees.

Further Delays in Indian MMRCA Competition

There is still no word on when when field trials will start for the Medium Multi-Role Combat Aircraft fighter competition. (paid subscription required)

One of the issues that complicates this is mother nature: If the demonstrations do not finish by July, then they run into delays as a consequence of the monsoon season.

Current competitors for the medium fighter are the, "Boeing F/A-18, Lockheed Martin F-16, Eurofighter Typhoon, Mikoyan MiG-35, Saab Gripen, and Dassault Rafale."

It's intended to replace their fleets of older model MiG-21s, which are at end of life.

My guess would be the the MiG-35 has the inside track, the Indian AF already has operational experience with the MiG-29, though the least expensive over the life time is very likely the Gripen.

It's unclear to me whether SAAB is submitting the base Gripen, or the improved Gripen NG.