Not that the Irish finance minister makes saying it makes it any more or less true, but he's right about this --
Mr [Brian] Lenihan said that that much of the current crisis followed on from the collapse of Lehman Brothers.
"My personal view is that the United States authorities were mistaken in permitting that bank to go to the wall. It has led to very serious consequences for the world financial system, and it illustrates the dangers of permitting banks to become insolvent through the process of private liquidation."
And the decision to let Lehman go was US Treasury Secretary Hank Paulson's call. Next month many of the world's finance ministers will be in Washington for international financial institution meetings. They should tell Paulson to join Lehman in the scrapheap.
Tuesday, September 30, 2008
Monday, September 29, 2008
The failed bailout vote
Isn't this yet another failure of the US Constitution? If this was a parliamentary system, this would be a clear no-confidence vote, the government would collapse, and we'd get a new one in short order that could get a bill passed. But we're stuck with the Leader of Free World for another 4 months regardless of how little power he has.
Sunday, September 28, 2008
The loophole
The trickery in the Wall St bailout -- The Emergency Economic Stabilization Act of 2008 -- seems to be in the alternative to the TARP suggested by House Republicans and midwifed into the bill by John McCain. This has the government providing bad asset insurance, which doesn't like a good business to be in, and firms opting for bad asset insurance can avoid all the regulatory and compensation restrictions in the rest of the bill. It'll be interesting to see how these provisions are greeted this week.
Here's a non-technical explanation of the bill by section
Here's a non-technical explanation of the bill by section
Saturday, September 27, 2008
Say it ain't so
Above is the banner on the McCain campaign website of "Arab Americans for McCain". It also appears on the site for "Lebanese Americans for McCain". One can see the Maverick-in-Chief, Cindy, and Lindsey Graham. But who else is always in any such photo? Who appears in the banner for the Jewish advisory coalition?
But we haven't yet been able to find the original picture to prove they used that blue haze to crop out Joe Lieberman.
[Note: they still haven't fixed another banner image issue]
They do hate the troops
National Review's The Corner --
No Disrespect [Mark Hemingway]
...to soldiers who suffer from PTSD, but have Democrats ever met a vet that didn't suffer from it? My father's a retired Marine colonel and Vietnam vet, so I've met a few vets in my day and while it's not unheard of, it's pretty rare in my experience. So why do Democrats always bring it up? Are they trying to create the impression that somehow every soldier is wounded, even if they don't appear that way?
Leave aside the fact that going off to war with the possibility of killing or being killed probably has an impact. Just read the news and know about Traumatic Brain Injury. Too much for an armchair Iraq war booster to look up.
No Disrespect [Mark Hemingway]
...to soldiers who suffer from PTSD, but have Democrats ever met a vet that didn't suffer from it? My father's a retired Marine colonel and Vietnam vet, so I've met a few vets in my day and while it's not unheard of, it's pretty rare in my experience. So why do Democrats always bring it up? Are they trying to create the impression that somehow every soldier is wounded, even if they don't appear that way?
Leave aside the fact that going off to war with the possibility of killing or being killed probably has an impact. Just read the news and know about Traumatic Brain Injury. Too much for an armchair Iraq war booster to look up.
The debate
John McCain seems to have misheard something at the Friends of Ireland event in Scranton earlier in the week. Ireland's corporate tax rate is 12.5%, not 11%. And as Obama points out, he's not comparing US corporate tax rate with other countries on an effective (i.e. after loophole) basis.
But so far (25 minutes in), it's a stalemate. Obama is slightly sharper but both are just reusing their stump speeches.
McCain has no answer to the question of what additional cuts he would make to the pay for the bailout. Remember, this is $700 billion of new cuts that he needs on top of all the other things he promised to cut.
Does John McCain think that Pakistani people won't notice a US attack if it's not announced?
Pakistan was a failed state when Musharraf took over? Does McCain know that Nawaz Sharif could be back in power in Pakistan very soon?
Final impression: a draw. Both have things to work on. McCain needs to drop that slightly demented voice he takes on when's trying to sound extra serious. And Obama needs a way to defuse the point about meeting Ahmadinejad "without preconditions". It's an idiotic point but McCain is going to keep bringing it up and clearly had his "What we will say: No you won't?" line ready for it. But by the same token, the point is also McCain at his worst. He keeps talking about wanting to be bipartisan but he thinks that the presidential nominee of the other party has a policy that is "dangerous". Nor will he or Palin explain exactly what it is that they would encourage Israel to do about Iran. Now that policy -- not being clear about military intentions -- is dangerous, my friends.
[Transcript]
UPDATE: McCain may be 10 years off in his assessment of Pakistan as a failed state. It's looking like one now.
But so far (25 minutes in), it's a stalemate. Obama is slightly sharper but both are just reusing their stump speeches.
McCain has no answer to the question of what additional cuts he would make to the pay for the bailout. Remember, this is $700 billion of new cuts that he needs on top of all the other things he promised to cut.
Does John McCain think that Pakistani people won't notice a US attack if it's not announced?
Pakistan was a failed state when Musharraf took over? Does McCain know that Nawaz Sharif could be back in power in Pakistan very soon?
Final impression: a draw. Both have things to work on. McCain needs to drop that slightly demented voice he takes on when's trying to sound extra serious. And Obama needs a way to defuse the point about meeting Ahmadinejad "without preconditions". It's an idiotic point but McCain is going to keep bringing it up and clearly had his "What we will say: No you won't?" line ready for it. But by the same token, the point is also McCain at his worst. He keeps talking about wanting to be bipartisan but he thinks that the presidential nominee of the other party has a policy that is "dangerous". Nor will he or Palin explain exactly what it is that they would encourage Israel to do about Iran. Now that policy -- not being clear about military intentions -- is dangerous, my friends.
[Transcript]
UPDATE: McCain may be 10 years off in his assessment of Pakistan as a failed state. It's looking like one now.
Friday, September 26, 2008
Whinger in Chief
George Bush's big Friday morning statement about the stalled troubled asset relief program? His favourite phrase: It's Hard Work.
More foreign policy experience
[Sarah] Palin will be at the Irish Pub [Philadelphia] on Walnut Street on Friday night for a public debate watching party, if the debate between John McCain and Barack Obama continues as planned.
This will add to the knowledge of Ireland gained from her Shannon stopover en route to Kuwait.
UPDATE: She was indeed in the pub while everyone else was in Mississippi.
This will add to the knowledge of Ireland gained from her Shannon stopover en route to Kuwait.
UPDATE: She was indeed in the pub while everyone else was in Mississippi.
Thursday, September 25, 2008
Original sin
George Bush, during his transparent attempt to co-opt Democrats in general and Barack Obama in particular to his Wall Street subsidy plan --
First, how did our economy reach this point? Well, most economists agree that the problems we're witnessing today developed over a long period of time. For more than a decade, a massive amount of money flowed into the United States from investors abroad because our country is an attractive and secure place to do business.
This large influx of money to U.S. banks and financial institutions, along with low interest rates, made it easier for Americans to get credit. These developments allowed more families to borrow money for cars, and homes, and college tuition, some for the first time. They allowed more entrepreneurs to get loans to start new businesses and create jobs.
Unfortunately, there were also some serious negative consequences, particularly in the housing market.
Why might it be that over the last decade, more overseas money needed to come into the country?
Chart via Perotcharts
Wednesday, September 24, 2008
Bring it on
US Treasury Secretary Hank Paulson --
The events leading us here began many years ago, starting with bad lending practices by banks and financial institutions, and by borrowers taking out mortgages they couldn't afford.
US Federal Reserve Chairman Ben Bernanke --
Ongoing developments in financial markets are directly affecting the broader economy through several channels, most notably by restricting the availability of credit. Mortgage credit terms have tightened significantly and fees have risen, especially for potential borrowers who lack substantial down payments or who have blemished credit histories. Mortgages that are ineligible for credit guarantees by Fannie Mae or Freddie Mac--for example, nonconforming jumbo mortgages--cannot be securitized and thus carry much higher interest rates than conforming mortgages. Some lenders have reduced borrowing limits on home equity lines of credit. Households also appear to be having more difficulty of late in obtaining nonmortgage credit ... In the business sector, through August, the financially strongest firms remained able to issue bonds but bond issuance by speculative-grade firms remained very light. More recently, however, deteriorating financial market conditions have disrupted the commercial paper market and other forms of financing for a wide range of firms, including investment-grade firms. Financing for commercial real estate projects has also tightened very significantly.
If your crisis diagnosis is that too many people got loans, isn't it part of the crisis resolution that fewer people, er, get loans? It's as if there's something they're not telling us.
The events leading us here began many years ago, starting with bad lending practices by banks and financial institutions, and by borrowers taking out mortgages they couldn't afford.
US Federal Reserve Chairman Ben Bernanke --
Ongoing developments in financial markets are directly affecting the broader economy through several channels, most notably by restricting the availability of credit. Mortgage credit terms have tightened significantly and fees have risen, especially for potential borrowers who lack substantial down payments or who have blemished credit histories. Mortgages that are ineligible for credit guarantees by Fannie Mae or Freddie Mac--for example, nonconforming jumbo mortgages--cannot be securitized and thus carry much higher interest rates than conforming mortgages. Some lenders have reduced borrowing limits on home equity lines of credit. Households also appear to be having more difficulty of late in obtaining nonmortgage credit ... In the business sector, through August, the financially strongest firms remained able to issue bonds but bond issuance by speculative-grade firms remained very light. More recently, however, deteriorating financial market conditions have disrupted the commercial paper market and other forms of financing for a wide range of firms, including investment-grade firms. Financing for commercial real estate projects has also tightened very significantly.
If your crisis diagnosis is that too many people got loans, isn't it part of the crisis resolution that fewer people, er, get loans? It's as if there's something they're not telling us.
Tuesday, September 23, 2008
Get that man a column
From Bono's Financial Times blog (for UN General Assembly week) --
Sarko is a real physical presence in a room. He might even be taller than me… animated, funny one minute; annoyed the next ... The meeting started with the beautiful Carla Bruni, a great ally in our efforts to better our storytelling about the effectiveness of good aid. Both the first lady and the president change the molecular structure of any room they are in - he speeds them up, she calms them down. A great team.
Sarko is a real physical presence in a room. He might even be taller than me… animated, funny one minute; annoyed the next ... The meeting started with the beautiful Carla Bruni, a great ally in our efforts to better our storytelling about the effectiveness of good aid. Both the first lady and the president change the molecular structure of any room they are in - he speeds them up, she calms them down. A great team.
Monday, September 22, 2008
She's back in style
A few days after Gordon Brown's "We want our money back" reprise of Maggie Thatcher, could Sarah Palin be seeking the mantle? The McCain campaign has released the text of a speech she was to deliver at Iran protest rally at the UN today. Her planned appearance was a transparent stunt to burnish her foreign policy and Hillary-seeking credentials at the same time -- Hillary was scheduled to be there and was not told that Palin had been added to the list. So she pulled out and the organizers (or at least besides the one that was in cahoots with the McCain campaign) then withdrew invitations to all politicians.
But anyway, the speech:
Ahmadinejad may choose his words carefully, but underneath all of the rhetoric is an agenda that threatens all who seek a safer and freer world. We gather here today to highlight the Iranian dictator's intentions and to call for action to thwart him.
He must be stopped.
Stopped, how? There is a precursor for those tough words:
Q: Could you just recall the exact nature of that first conversation with George Bush. As you say, the President said to you "Margaret, what should we do?"
Thatcher: "Margaret, what is your view?" and so indeed I told him that aggressors must be stopped, not only stopped, but they must be thrown out. An aggressor cannot gain from his aggression. He must be thrown out and really, by that time in my mind, I thought we ought to throw him out so decisively that he could never think of doing it again.
At that point of course, Saddam Hussein had invaded Kuwait and the job was to get him out. Iran hasn't invaded anywhere.
But anyway, the speech:
Ahmadinejad may choose his words carefully, but underneath all of the rhetoric is an agenda that threatens all who seek a safer and freer world. We gather here today to highlight the Iranian dictator's intentions and to call for action to thwart him.
He must be stopped.
Stopped, how? There is a precursor for those tough words:
Q: Could you just recall the exact nature of that first conversation with George Bush. As you say, the President said to you "Margaret, what should we do?"
Thatcher: "Margaret, what is your view?" and so indeed I told him that aggressors must be stopped, not only stopped, but they must be thrown out. An aggressor cannot gain from his aggression. He must be thrown out and really, by that time in my mind, I thought we ought to throw him out so decisively that he could never think of doing it again.
At that point of course, Saddam Hussein had invaded Kuwait and the job was to get him out. Iran hasn't invaded anywhere.
Logic to nowhere
Sarah Palin, who says she wants to clean up the culture of corruption in Washington represented by politicians like Ted Stevens, wants to stall a legal hearing on her possible ethics violation until after the election.
Ted Stevens, symptomatic of the culture of corruption in Washington that has been attacked by politicians like John McCain and Sarah Palin, wants his criminal trial finished before the election.
Ted Stevens, symptomatic of the culture of corruption in Washington that has been attacked by politicians like John McCain and Sarah Palin, wants his criminal trial finished before the election.
Saturday, September 20, 2008
Gordon get your handbag
Wall Street Journal --
LONDON – U.K. Prime Minister Gordon Brown said Saturday that he is working with U.S. authorities to get billions of dollars returned to Lehman Brothers Holdings Inc.'s London operations from the firm's U.S. business.
Responding to questions at the start of his Labour Party's conference, Mr. Brown said he wanted to make sure the money was returned in the interest of the investment bank's U.K. employees.
The transfer of $8 billion has become a target of inquiry by Lehman clients as well as PricewaterhouseCoopers LLP, which is overseeing the insolvency proceedings of Lehman units in London.
One wonders if part of Gordon's comeback plan includes following the path of Margaret Thatcher, who of course he is known to admire. Because his demand sounds a lot like her legendary "I want my money back!" European Community summit in France in 1984.
She got her money back.
That's the problem
US National Security Adviser Stephen Hadley in the context of George Bush's schedule for the UN General Assembly meetings next week --
This is a man who is remarkably unaffected by eight years as President, in terms of who he is, what he stands for, how he thinks of himself.
So nothing -- Enron, 9/11, Iraq, Afghanistan, Katrina, deficits, and now the financial meltdown -- has affected him. Isn't that the diagnosis of a sociopath?
This is a man who is remarkably unaffected by eight years as President, in terms of who he is, what he stands for, how he thinks of himself.
So nothing -- Enron, 9/11, Iraq, Afghanistan, Katrina, deficits, and now the financial meltdown -- has affected him. Isn't that the diagnosis of a sociopath?
Friday, September 19, 2008
The poor are revolting
Conservatives have been struggling for an explanatory meme for a financial crisis that has blown up after 8 years of Republican rule. They are inching towards one --
[National Review - Lisa Schiffren]
I always listen to Mark Levin while making Friday night dinner. Tonight he is giving the most serious, intelligent, cogent explanation of the current economic crisis I have heard or read anywhere. He is giving a precise political and legislative history going back several administrations, but concentrated in the Clinton Administration, where the major changes that led down this road were initiated. Funnily enough, he has explained just what it is community organizers do. Advocating, for instance, for affordable housing for the poor — the poor who traditionally rent, because they are bad loan risks. The day that reasoning by banks was junked as "racist," was the day this crisis became a possibility.
That's right: the crisis is due to poor black people getting too many loans. David Brooks, channelling Megan McArdle, comes close to embracing similar reasoning (as does Jonah Goldberg). You'd think someone might stop to wonder how people who own so little could cause so much damage. Here are homeownership rates by ethnicity from 1994 to 2007. Blacks had a 42% ownership rate in 1994 and 47% in 2007. So a 5 percentage point increase in their rate brought the system crashing down?
In fact, the increase for non-Hispanic whites was nearly the same, but the key point is: there are way more white people. If you're looking for hundreds of billion dollars of dodgy mortgages, that's where to look for them. Anyway, virtually all the increase in black home-ownership happened under Bill Clinton, so the conservative theory requires believing in an 8 year mortgage time bomb -- as opposed to role, for example, of Alan Greenspan. If you're trying to understand how huge valuations can disappear, you look where the money is.
[Here is the Census Bureau homepage for relevant statistics]
[National Review - Lisa Schiffren]
I always listen to Mark Levin while making Friday night dinner. Tonight he is giving the most serious, intelligent, cogent explanation of the current economic crisis I have heard or read anywhere. He is giving a precise political and legislative history going back several administrations, but concentrated in the Clinton Administration, where the major changes that led down this road were initiated. Funnily enough, he has explained just what it is community organizers do. Advocating, for instance, for affordable housing for the poor — the poor who traditionally rent, because they are bad loan risks. The day that reasoning by banks was junked as "racist," was the day this crisis became a possibility.
That's right: the crisis is due to poor black people getting too many loans. David Brooks, channelling Megan McArdle, comes close to embracing similar reasoning (as does Jonah Goldberg). You'd think someone might stop to wonder how people who own so little could cause so much damage. Here are homeownership rates by ethnicity from 1994 to 2007. Blacks had a 42% ownership rate in 1994 and 47% in 2007. So a 5 percentage point increase in their rate brought the system crashing down?
In fact, the increase for non-Hispanic whites was nearly the same, but the key point is: there are way more white people. If you're looking for hundreds of billion dollars of dodgy mortgages, that's where to look for them. Anyway, virtually all the increase in black home-ownership happened under Bill Clinton, so the conservative theory requires believing in an 8 year mortgage time bomb -- as opposed to role, for example, of Alan Greenspan. If you're trying to understand how huge valuations can disappear, you look where the money is.
[Here is the Census Bureau homepage for relevant statistics]
Common people
George Bush, explaining his affinity with the NBA champion Boston Celtics --
And I welcome the Boston Celtics team that has brought great pride to the Boston area. You know, I was telling them, I went to school up there
"school up there" = Phillips Andover and Harvard Business School.
White House photo by Joyce N. Boghosian
And now the Decider
George Bush just said he wants to "solve" the financial problems before sorting out the origins of them ("There will be ample opportunity to debate the origins of this problem. Now is the time to solve it."). Apparently there are also outrages due to investors doing things for "personal gain". Country First! He also claims that money spent on these assets can be recovered, so implicitly, no need to raise taxes. After bashing America's financial regulatory institutions as being too old, he then hails the 60 year history of the Federal Deposit Insurance Corporation.
The new acronym
TARP: Troubled Asset Relief Program. A lot of US taxpayer money to buy bad mortgages. At what point does George Bush explain how he will raise the revenue needed to pay for it?
It gets worse. Paulson is going to have Fannie and Freddie along with the Treasury itself buy more mortgage-backed securities (and the Fed is buying more FM stuff too). And place any assets they can't buy into the TARP or some other toxic waste dump.
One other thing. Bush this morning gave Paulson another $50 billion --
I approve the use of funds from the Exchange Stabilization Fund to provide up to $50 billion as a guaranty facility for certain money market mutual funds
That is a Great Depression fund that is supposed to be used for exchange rate purposes. When Bill Clinton used it in 1995 to give loans to Mexico -- loans which at least did have an international financial stability purpose -- conservatives screamed in outrage.
It gets worse. Paulson is going to have Fannie and Freddie along with the Treasury itself buy more mortgage-backed securities (and the Fed is buying more FM stuff too). And place any assets they can't buy into the TARP or some other toxic waste dump.
One other thing. Bush this morning gave Paulson another $50 billion --
I approve the use of funds from the Exchange Stabilization Fund to provide up to $50 billion as a guaranty facility for certain money market mutual funds
That is a Great Depression fund that is supposed to be used for exchange rate purposes. When Bill Clinton used it in 1995 to give loans to Mexico -- loans which at least did have an international financial stability purpose -- conservatives screamed in outrage.
Don't mention the Gulf
Condi Rice, in the Q&A part of her big Russia speech --
QUESTION: Madame Secretary, Russia is a petro-state, and its level of assertiveness pretty much correlates to the price of oil. The price of oil is down by 30 or 40 percent, and the oil markets look like they’re going to get softer. Would you expect Russian behavior to be at all modified because of the price of oil and its importance to their economy?
SECRETARY RICE: Well, I don’t know if their behavior will be modified. I do know that there are significant vulnerabilities for petro-states that do not diversify. And there are significant vulnerabilities for petro-states that depend on their ability to engage in monopolistic behavior during good times, when those – when the price of oil is down and that monopolistic behavior doesn't pay off in terms of customers. So those are facts that I understand and realities that I understand that are independent of Russia in particular ...
But there are just certain structural problems with being a petro-economy. And if you look at places that have handled it well, for instance like Norway, they have taken very different course, and of course, as a democratic state, have had to take a different course.
The petro-state/oil price concept comes from Tom Friedman. And it's not clear that on a systematic evidence basis, it's correct. But leave that aside. Everything she said about Russia and oil could be applied to Saudi Arabia.
QUESTION: Madame Secretary, Russia is a petro-state, and its level of assertiveness pretty much correlates to the price of oil. The price of oil is down by 30 or 40 percent, and the oil markets look like they’re going to get softer. Would you expect Russian behavior to be at all modified because of the price of oil and its importance to their economy?
SECRETARY RICE: Well, I don’t know if their behavior will be modified. I do know that there are significant vulnerabilities for petro-states that do not diversify. And there are significant vulnerabilities for petro-states that depend on their ability to engage in monopolistic behavior during good times, when those – when the price of oil is down and that monopolistic behavior doesn't pay off in terms of customers. So those are facts that I understand and realities that I understand that are independent of Russia in particular ...
But there are just certain structural problems with being a petro-economy. And if you look at places that have handled it well, for instance like Norway, they have taken very different course, and of course, as a democratic state, have had to take a different course.
The petro-state/oil price concept comes from Tom Friedman. And it's not clear that on a systematic evidence basis, it's correct. But leave that aside. Everything she said about Russia and oil could be applied to Saudi Arabia.
Thursday, September 18, 2008
New Spain
Josh Marshall has a hilarious series of posts this evening dealing with John McCain's apparent declaration that Spain is a new enemy in the War on Terror. But here's a hypothesis as to what happened: McCain seems to have gotten confused when the interviewer, for Union Radio, switched from talking about the usual Latin American rogue states to Spanish PM Zapatero. McCain almost certainly thought it was a reference to the Zapatista rebels in southern Mexico -- after all, how many bad dudes beginning with Z can there be? Thus the basis on which war policy would be made under a President McCain.
UPDATE: A complementary possibility is that McCain has internalized the right's hatred of Zapatero since his post 11-M victory in 2004.
FINAL UPDATE: Unbelievable. McCain's campaign is going with the 11-M/Iraq interpretation.
UPDATE: A complementary possibility is that McCain has internalized the right's hatred of Zapatero since his post 11-M victory in 2004.
FINAL UPDATE: Unbelievable. McCain's campaign is going with the 11-M/Iraq interpretation.
Wednesday, September 17, 2008
The curse of sponsorship
The following is a list of sponsors and their line of business for each English Premier League club at the start of the 2008-09 season. The title is sponsored by Barclays.
Arsenal -- Emirates (airline)
Aston Villa -- Acorns (charity)
Blackburn Rovers -- Crown (paints)
Bolton Wanderers -- Reebok (sportswear)
Chelsea -- Samsung (electronics)
Everton -- Chang (beer)
Fulham -- LG (consumer products)
Hull City -- Karoo (communications)
Liverpool -- Carlsberg (beer)
Manchester City -- Thomas Cook (travel)
Manchester United -- AIG (insurance)
Middlesbrough -- Garmin (navigation equipment)
Newcastle United -- Northern Rock (bank)
Portsmouth -- Oki (printers)
Stoke City -- Britannia (building society)
Sunderland -- Boyle (bookmaker)
Spurs -- Mansion (casinos)
West Bromwich Albion -- T-mobile (telecom)
West Ham -- -- XL* (travel)
Wigan -- JJB (sportswear)
So from the list we have one club beginning the season with a sponsor since gone bankrupt, one now owned by the US government, and one now owned by the UK government. There's almost enough there for a correlation. And that's before one notices that there is still some awkward sectoral exposure for other clubs.
*sponsorship cancelled with bankruptcy of XL.
Arsenal -- Emirates (airline)
Aston Villa -- Acorns (charity)
Blackburn Rovers -- Crown (paints)
Bolton Wanderers -- Reebok (sportswear)
Chelsea -- Samsung (electronics)
Everton -- Chang (beer)
Fulham -- LG (consumer products)
Hull City -- Karoo (communications)
Liverpool -- Carlsberg (beer)
Manchester City -- Thomas Cook (travel)
Manchester United -- AIG (insurance)
Middlesbrough -- Garmin (navigation equipment)
Newcastle United -- Northern Rock (bank)
Portsmouth -- Oki (printers)
Stoke City -- Britannia (building society)
Sunderland -- Boyle (bookmaker)
Spurs -- Mansion (casinos)
West Bromwich Albion -- T-mobile (telecom)
West Ham -- -- XL* (travel)
Wigan -- JJB (sportswear)
So from the list we have one club beginning the season with a sponsor since gone bankrupt, one now owned by the US government, and one now owned by the UK government. There's almost enough there for a correlation. And that's before one notices that there is still some awkward sectoral exposure for other clubs.
*sponsorship cancelled with bankruptcy of XL.
The no-doc borrower-in-chief
National Review's Ramesh Ponnuru --
[quoting Joe Biden] "We should try to correct the problems that caused this [financial crisis]. And what's caused this? The profligate tax cuts to the very, very wealthy that John [McCain] wants to continue."
Note that the first culprit Biden mentions is tax cuts. I think it is very hard to connect the "tax cuts for the rich" with no-doc loans, but Biden has a very high IQ (just ask him). Clearly, the solution is higher taxes.
Fed chairman Ben Bernanke, back when he was Fed governor --
A second issue concerns the uses of international credit in the United States and other industrial countries with external deficits. Because investment by businesses in equipment and structures has been relatively low in recent years (for cyclical and other reasons) and because the tax and financial systems in the United States and many other countries are designed to promote homeownership, much of the recent capital inflow into the developed world has shown up in higher rates of home construction and in higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things. However, in the long run, productivity gains are more likely to be driven by nonresidential investment, such as business purchases of new machines. The greater the extent to which capital inflows act to augment residential construction and especially current consumption spending, the greater the future economic burden of repaying the foreign debt is likely to be.
So in fact there is a link between tax cuts, huge deficits (since it's the tax cuts to the rich that result in the most foregone revenue), the foreign capital inflow to help finance those deficits (and to meet the private sector borrowing needs with the government sucking in so much available savings), and the riding of a housing bubble (such as no-doc loans) and the financial mess the country is now in.
Another way to think about the question: would the financial world really look the same without the $2 trillion in public debt that George Bush has added in the last 8 years?
UPDATE 15 OCTOBER: Bernanke is even clearer about the link between capital inflows and the crisis --
Large inflows of capital into the United States and other countries stimulated a reaching for yield, an underpricing of risk, excessive leverage, and the development of complex and opaque financial instruments that seemed to work well during the credit boom but have been shown to be fragile under stress. The unwinding of these developments, including a sharp deleveraging and a headlong retreat from credit risk, led to highly strained conditions in financial markets and a tightening of credit that has hamstrung economic growth.
[quoting Joe Biden] "We should try to correct the problems that caused this [financial crisis]. And what's caused this? The profligate tax cuts to the very, very wealthy that John [McCain] wants to continue."
Note that the first culprit Biden mentions is tax cuts. I think it is very hard to connect the "tax cuts for the rich" with no-doc loans, but Biden has a very high IQ (just ask him). Clearly, the solution is higher taxes.
Fed chairman Ben Bernanke, back when he was Fed governor --
A second issue concerns the uses of international credit in the United States and other industrial countries with external deficits. Because investment by businesses in equipment and structures has been relatively low in recent years (for cyclical and other reasons) and because the tax and financial systems in the United States and many other countries are designed to promote homeownership, much of the recent capital inflow into the developed world has shown up in higher rates of home construction and in higher home prices. Higher home prices in turn have encouraged households to increase their consumption. Of course, increased rates of homeownership and household consumption are both good things. However, in the long run, productivity gains are more likely to be driven by nonresidential investment, such as business purchases of new machines. The greater the extent to which capital inflows act to augment residential construction and especially current consumption spending, the greater the future economic burden of repaying the foreign debt is likely to be.
So in fact there is a link between tax cuts, huge deficits (since it's the tax cuts to the rich that result in the most foregone revenue), the foreign capital inflow to help finance those deficits (and to meet the private sector borrowing needs with the government sucking in so much available savings), and the riding of a housing bubble (such as no-doc loans) and the financial mess the country is now in.
Another way to think about the question: would the financial world really look the same without the $2 trillion in public debt that George Bush has added in the last 8 years?
UPDATE 15 OCTOBER: Bernanke is even clearer about the link between capital inflows and the crisis --
Large inflows of capital into the United States and other countries stimulated a reaching for yield, an underpricing of risk, excessive leverage, and the development of complex and opaque financial instruments that seemed to work well during the credit boom but have been shown to be fragile under stress. The unwinding of these developments, including a sharp deleveraging and a headlong retreat from credit risk, led to highly strained conditions in financial markets and a tightening of credit that has hamstrung economic growth.
Big government
Tuesday evening --
The precise details of the government's plans were still being formulated. The primary option being hammered out involved the Fed providing AIG with a short-term loan of $85 billion, according to people familiar with the situation. In exchange, the government would receive warrants in AIG representing the right to buy its as much as 80% of its stock under certain conditions, according to one person familiar with the matter.
Monday evening --
J. C. Flowers & Company, a buyout firm focused on financial services firms, offered $8 billion for preferred shares in A.I.G. — but the offer also included an option to buy all of the insurer down the road at a discounted price. Two other firms, Kohlberg Kravis Roberts and TPG, also said they would buy preferred shares in the insurer, but only with a backstop from the Fed.
So AIG rejected private deals because it thought -- correctly as it turns out -- that it could get a better deal from the government. Not that anyone needs reminding, but this happens under a president who thinks that there's a risk of too many children having publicly funded health care.
UPDATE: How bad can the private terms have been? AIG will pay 2.88+8.50=11.38% on its government loan (3 month LIBOR + 850 basis points)! AIG will be bleeding cash at that rate.
2nd UPDATE: The rejected bid from JC Flowers is important, since the legal authority being used by the Fed to lend to AIG requires showing that AIG could not obtain bank credit from any other source. Did JC Flowers have lenders lined up to support the company if its bid was accepted?
The precise details of the government's plans were still being formulated. The primary option being hammered out involved the Fed providing AIG with a short-term loan of $85 billion, according to people familiar with the situation. In exchange, the government would receive warrants in AIG representing the right to buy its as much as 80% of its stock under certain conditions, according to one person familiar with the matter.
Monday evening --
J. C. Flowers & Company, a buyout firm focused on financial services firms, offered $8 billion for preferred shares in A.I.G. — but the offer also included an option to buy all of the insurer down the road at a discounted price. Two other firms, Kohlberg Kravis Roberts and TPG, also said they would buy preferred shares in the insurer, but only with a backstop from the Fed.
So AIG rejected private deals because it thought -- correctly as it turns out -- that it could get a better deal from the government. Not that anyone needs reminding, but this happens under a president who thinks that there's a risk of too many children having publicly funded health care.
UPDATE: How bad can the private terms have been? AIG will pay 2.88+8.50=11.38% on its government loan (3 month LIBOR + 850 basis points)! AIG will be bleeding cash at that rate.
2nd UPDATE: The rejected bid from JC Flowers is important, since the legal authority being used by the Fed to lend to AIG requires showing that AIG could not obtain bank credit from any other source. Did JC Flowers have lenders lined up to support the company if its bid was accepted?
Tuesday, September 16, 2008
Where the action is
One little detail in the just released Federal Reserve statement that it is not cutting interest rates --
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; ... Ms. Cumming voted as the alternate for Timothy F. Geithner
Geithner is the president of the New York Fed, who apparently was too busy to even attend the meeting by telephone. Is the AIG situation that bad?
UPDATE: It is.
Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; ... Ms. Cumming voted as the alternate for Timothy F. Geithner
Geithner is the president of the New York Fed, who apparently was too busy to even attend the meeting by telephone. Is the AIG situation that bad?
UPDATE: It is.
Lending freely against dodgy collateral
John McCain is sounding pretty confused about the Wall Street turmoil. He comes very close to claiming that a bankruptcy for AIG would actually be a good thing --
"There are great efforts being made to try to raise sufficient capital to keep AIG in business," McCain said in an interview with CNBC. Taxpayers shouldn't be held responsible for the bad performance of U.S. institutions and "the moral-hazard issue is something that we have to take head-on," he said.
One possibility is that the Federal Reserve could be lending a lot of money to the other banks that might end up lending a lot of money to AIG. Is that taxpayer funding? It's definitely taxpayers exposed to risk and lending at interest rates so low that the private banks couldn't get such rates anywhere else. As the Fed is already doing under all the lending facilities that were added over the last year. So does McCain oppose those too?
McCain also doesn't understand that moral hazard isn't just something caused by governments. It's also caused by limited liability. There's only so much you can recover from a dude who has cost you a billion dollars. Maybe McCain wants to bring back debtor's prison.
UPDATE 17 SEPTEMBER: McCain is forced into a reversal of his incoherent position --
On Wednesday, McCain repeated that he didn't want to bail out AIG and knew of no one else who did. But, he told "Good Morning America" on ABC, millions of people with retirements, investments and insurance tied to AIG were "going to have their lives destroyed because of the greed and excess and corruption."
Elaborating on the charge of corruption, McCain said that many Wall Street executives had claimed "everything's fine, not to worry" and that Congress and regulators had paid no attention. "All of them were asleep at the switch," he said, and went on to blame special interests and lobbyists as well.
Asked for specific examples of corruption regarding AIG, senior McCain campaign adviser Steve Schmidt offered none.
"There are great efforts being made to try to raise sufficient capital to keep AIG in business," McCain said in an interview with CNBC. Taxpayers shouldn't be held responsible for the bad performance of U.S. institutions and "the moral-hazard issue is something that we have to take head-on," he said.
One possibility is that the Federal Reserve could be lending a lot of money to the other banks that might end up lending a lot of money to AIG. Is that taxpayer funding? It's definitely taxpayers exposed to risk and lending at interest rates so low that the private banks couldn't get such rates anywhere else. As the Fed is already doing under all the lending facilities that were added over the last year. So does McCain oppose those too?
McCain also doesn't understand that moral hazard isn't just something caused by governments. It's also caused by limited liability. There's only so much you can recover from a dude who has cost you a billion dollars. Maybe McCain wants to bring back debtor's prison.
UPDATE 17 SEPTEMBER: McCain is forced into a reversal of his incoherent position --
On Wednesday, McCain repeated that he didn't want to bail out AIG and knew of no one else who did. But, he told "Good Morning America" on ABC, millions of people with retirements, investments and insurance tied to AIG were "going to have their lives destroyed because of the greed and excess and corruption."
Elaborating on the charge of corruption, McCain said that many Wall Street executives had claimed "everything's fine, not to worry" and that Congress and regulators had paid no attention. "All of them were asleep at the switch," he said, and went on to blame special interests and lobbyists as well.
Asked for specific examples of corruption regarding AIG, senior McCain campaign adviser Steve Schmidt offered none.
Sunday, September 14, 2008
Other people's liberties
Interesting Washington Post article (buried in the Metro section) about the aggressive terrorism prosecution tactics of Assistant U.S. Attorney Gordon Kromberg, which have drawn the wrath of a prominent judge and civil rights groups. One noteworthy point about what he was doing before 9/11 --
An NYU Law School graduate who worked as a military defense attorney for the Army in the 1980s, Kromberg was using cutting-edge legal tactics before Sept. 11, 2001. After joining the U.S. attorney's office in Alexandria in 1993, the wiry, quick-witted prosecutor became an expert in forfeiture -- seizing money and property gained from crime.
He highlighted his approach during a 1999 speech at the Cato Institute in Washington, saying the government should seek the assets of drug dealers even if they are not charged. "Does that mean you should just walk away and let the activity continue? . . . Not if you want to punish the defendant in some way short of prosecuting him," he said, according to a videotape.
During the 1990s, Kromberg helped the government seize fees defense attorneys had received from drug dealers, an uncommon tactic that led to denunciations from defense lawyers nationwide.
Civil forfeiture comes very close to a run-around the presumption of innocence. Example: your car is pulled over by police and a drug-sniffing dog reacts to the car. Among the possibilities: that the dog is wrong or that there was once someone who smoked pot in your car. Civil forfeiture says that the prosecutor can still seize the car. It's the kind of things that libertarians used to get upset about. But now the mentality that could come up with that system is prosecuting terrorism cases. And the 1990s libertarians have run to the hills.
An NYU Law School graduate who worked as a military defense attorney for the Army in the 1980s, Kromberg was using cutting-edge legal tactics before Sept. 11, 2001. After joining the U.S. attorney's office in Alexandria in 1993, the wiry, quick-witted prosecutor became an expert in forfeiture -- seizing money and property gained from crime.
He highlighted his approach during a 1999 speech at the Cato Institute in Washington, saying the government should seek the assets of drug dealers even if they are not charged. "Does that mean you should just walk away and let the activity continue? . . . Not if you want to punish the defendant in some way short of prosecuting him," he said, according to a videotape.
During the 1990s, Kromberg helped the government seize fees defense attorneys had received from drug dealers, an uncommon tactic that led to denunciations from defense lawyers nationwide.
Civil forfeiture comes very close to a run-around the presumption of innocence. Example: your car is pulled over by police and a drug-sniffing dog reacts to the car. Among the possibilities: that the dog is wrong or that there was once someone who smoked pot in your car. Civil forfeiture says that the prosecutor can still seize the car. It's the kind of things that libertarians used to get upset about. But now the mentality that could come up with that system is prosecuting terrorism cases. And the 1990s libertarians have run to the hills.
Saturday, September 13, 2008
Eye of the Nile
Is there anything he can't do? In the details of the emergency flights to get stranded customers of the XL tour company back home --
The lead singer of Iron Maiden, Bruce Dickinson, who works as a pilot for the UK charter airline Astraeus, flew a plane back to the UK from Sharm El Sheikh. He said people had given up leave to get a crew together for the flight.
The lead singer of Iron Maiden, Bruce Dickinson, who works as a pilot for the UK charter airline Astraeus, flew a plane back to the UK from Sharm El Sheikh. He said people had given up leave to get a crew together for the flight.
Change he could believe in
The White House has put out a Friday night press release which disputes the conclusions that Bob Woodward draws from Bob Woodward's book about the crisis in Iraq war policy in 2006. One interesting thing about the release is that it neatly, if unintentionally, summarizes Bush's thought process that led him to the surge. It had just two steps.
1. There had to be a radical change in troop levels, up or down: At a December 12 NSC meeting, the President explained, "'We have to do something different. . . . We have to demonstrate that we're doing something fundamentally different.'
2. A radical change down was out of the question: In early December, "Hadley realized the president was going to go with the surge. It was the only option that seemed to offer a bold change. Talk of an exit seemed absurd to Bush."
So he wanted more or fewer troops, but couldn't conceive of the logical implication of fewer troops. So the decision was more.
Thus the process by which the Churchill of our time was led to the greatest strategic decision ever. Think they could use a few more of those troops in Afghanistan right now?
1. There had to be a radical change in troop levels, up or down: At a December 12 NSC meeting, the President explained, "'We have to do something different. . . . We have to demonstrate that we're doing something fundamentally different.'
2. A radical change down was out of the question: In early December, "Hadley realized the president was going to go with the surge. It was the only option that seemed to offer a bold change. Talk of an exit seemed absurd to Bush."
So he wanted more or fewer troops, but couldn't conceive of the logical implication of fewer troops. So the decision was more.
Thus the process by which the Churchill of our time was led to the greatest strategic decision ever. Think they could use a few more of those troops in Afghanistan right now?
Friday, September 12, 2008
Matters spiritual and temporal
Pope Benedict meeting Alitalia's bankruptcy commissioner, who asked for Benedict's prayers. Benedict replied that he had been already been praying for Alitalia. Whether he had also included Europe's imploding charter and package tour business in his prayers is unclear.Photo: REUTERS/Osservatore Romano
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