Weekend Economists' Deal You Can't Refuse April 3-5, 2009

[Demeter]

Now, I'm going to make a confession, actually, two confessions.

1. I am no expert on the Godfather. I saw some of the movies back when they came out, and never since. I own no copies. Nor books. I'm more familiar with Prizzi's Honor, or "My Blue Heaven" and "Mickey Blue Eyes" or "Guys and Dolls". My tastes run to romantic comedy, mostly. So, I challenge YOU to ornament this thread with appropriately pithy, witty quotes or threats or whatever.

2. I dug for 3 hours in the Michigan clay yesterday. My muscles are twitching in spasms. This is no doubt due to the fact that it's been a year since I did anything so foolish, and it was 54 years ago today that I entered the world in Detroit, Michigan. In lieu of gifts, I will take any offerings of sympathy for me or dirt on AIG, our prime suspect for all the evil in the world (including GWBush and Darth Cheney). Also, aspirin, advil, or wine.(this could be an interesting exercise in inebriated typing!)

[Demeter]

1. While We Wait on the Failed Bank Report: No Return to Normal / By James K. Galbraith

http://www.washingtonmonthly.com/features/2009/0903.galbraith.html


Associated Press

Barack Obama’s presidency began in hope and goodwill, but its test will be its success or failure on the economics. Did the president and his team correctly diagnose the problem? Did they act with sufficient imagination and force? And did they prevail against the political obstacles—and not only that, but also against the procedures and the habits of thought to which official Washington is addicted?

The president has an economic program. But there is, so far, no clear statement of the thinking behind that program, and there may not be one, until the first report of the new Council of Economic Advisers appears next year. We therefore resort to what we know about the economists: the chair of the National Economic Council, Lawrence Summers; the CEA chair, Christina Romer; the budget director, Peter Orszag; and their titular head, Treasury Secretary Timothy Geithner. This is plainly a capable, close-knit group, acting with energy and commitment. Deficiencies of their program cannot, therefore, be blamed on incompetence. Rather, if deficiencies exist, they probably result from their shared background and creed—in short, from the limitations of their ideas.

The deepest belief of the modern economist is that the economy is a self-stabilizing system. This means that, even if nothing is done, normal rates of employment and production will someday return. Practically all modern economists believe this, often without thinking much about it. (Federal Reserve Chairman Ben Bernanke said it reflexively in a major speech in London in January: "The global economy will recover." He did not say how he knew.) The difference between conservatives and liberals is over whether policy can usefully speed things up. Conservatives say no, liberals say yes, and on this point Obama’s economists lean left. Hence the priority they gave, in their first days, to the stimulus package.

But did they get the scale right? Was the plan big enough? Policies are based on models; in a slump, plans for spending depend on a forecast of how deep and long the slump would otherwise be. The program will only be correctly sized if the forecast is accurate. And the forecast depends on the underlying belief. If recovery is not built into the genes of the system, then the forecast will be too optimistic, and the stimulus based on it will be too small.


Consider the baseline economic forecast of the Congressional Budget Office, the nonpartisan agency lawmakers rely on to evaluate the economy and their budget plans. In its early-January forecast, the CBO measured and projected the difference between actual economic performance and "normal" economic performance—the so-called GDP gap. The forecast has two astonishing features. First, the CBO did not expect the present recession to be any worse than that of 1981–82, our deepest postwar recession. Second, the CBO expected a turnaround beginning late this year, with the economy returning to normal around 2015, even if Congress had taken no action at all.

With this projection in mind, the recovery bill pours a bit less than 2 percent of GDP into new spending per year, plus some tax cuts, for two years, into a GDP gap estimated to average 6 percent for three years. The stimulus does not need to fill the whole gap, because the CBO expects a "multiplier effect," as first-round spending on bridges and roads, for example, is followed by second-round spending by steelworkers and road crews. The CBO estimates that because of the multiplier effect, two dollars of new public spending produces about three dollars of new output. (For tax cuts the numbers are lower, since some of the cuts will be saved in the first round.) And with this help, the recession becomes fairly mild. After two years, growth would be solidly established and Congress’s work would be done. In this way, the duration as well as the scale of action was driven, behind the scenes, by the CBO’s baseline forecast.

Why did the CBO reach this conclusion? On depth, CBO’s model is based on the postwar experience, and such models cannot predict outcomes more serious than anything already seen. If we are facing a downturn worse than 1982, our computers won’t tell us; we will be surprised. And if the slump is destined to drag on, the computers won’t tell us that either. Baked into the CBO model we find a "natural rate of unemployment" of 4.8 percent; the model moves the economy back toward that value no matter what. In the real world, however, there is no reason to believe this will happen. Some alternative forecasts, freed of the mystical return to "normal," now project a GDP gap twice as large as the CBO model predicts, and with no near-term recovery at all.

MUCH MORE AT LINK...APPEND YOUR GODFATHER QUOTE IN A REPLY.

[Demeter]

13. In other words....

[Demeter]

36. Evidently No Banking Failure

What? They can't close a bank with the Prez out of the country?

[4dsc]

37. In other words

I recall hearing this last year but this crisis is like NO other crisis this country has faced before which is why its going to be so difficult to get a grasp on how to attack and fix the problems.. There are too many problems coming at us all at once.

[Demeter]

2. Is GM dead? See the animation By Mark Fiore

http://www.markfiore.com/political/barrys-auto-emporium

[DemReadingDU]

11. Barry's Auto Emporium

That was good!


edit: Godfather quotes

Michael: My father is no different than any powerful man, any man with power, like a president or senator.
Kay Adams: Do you know how naive you sound, Michael? Presidents and senators don't have men killed.
Michael: Oh. Who's being naive, Kay?


Michael: I'll make him an offer he can't refuse.


more...
http://www.imdb.com/title/tt0068646/quotes

[Dr.Phool]

24. From a real Godfather. "I'm gonna send this back to the asshole who sent it to me".

Cleveland mobster Danny Greene, after discovering a bomb in his car. About 2 weeks later, Alex "Shondor" Burns was blown up after starting his car outside Christy's Lounge.

[hay rick]

82. I don't know about GM but

Rick Wagoner sleeps with the fishes.

[ixion]

3. getting back to the earth...uh, er, or the clay, as it were

:)

Tiger Balm is the best for sore muscles. You can find it just about anywhere. I swear by the stuff.

All I have to offer is sympathy, have spent time digging in clay in the past.

Have a :beer: and relax. :party:

My Godfather quote: "Never go against the family"

[Demeter]

12. Thanks for Advice and Quote!

[Demeter]

4. SEC to enlist help on fraud (I THOUGHT THEY WERE DOING FINE ON THEIR OWN!)

http://www.ft.com/cms/s/0/9ba81d98-1e30-11de-830b-00144feabdc0.html



Mary Schapiro, the new chairman of the US Securities and Exchange Commission, is looking at addressing the agency’s limited resources by enlisting more private sector help to uncover fraud.

Ms Schapiro, who took over the beleaguered regulator two months ago, said she was exploring new approaches to enforcement, including ways to “leverage” third parties, particularly in the oversight of investment advisers. There are about 400 SEC staff to examine more than 11,000 investment advisers – up more than 50 per cent since 2001.

“We need to find some ways to increase staffing but beyond that, leverage third parties without abdicating our responsibility,” she told the Financial Times in an interview. “This can be done not just through self-regulatory organisations, though that is one possible mechanism, but other third parties such as auditors or others who can do compliance reviews.”

Scrutiny of investment advisers has become a controversial subject since the emergence of Bernard Madoff’s large “Ponzi” scheme. While the SEC regularly examined Mr Madoff’s brokerage operation, it never inspected the investment advisory business, the centre of the fraud, after it registered with the SEC in 2006.

Only about 10 per cent of SEC registered advisers are examined every three years and the agency’s enforcement staff has fallen by about 10 per cent since 2005. But the resource issue was not solely to blame for missing the Madoff fraud, according to Ms Schapiro, who said the SEC was strengthening internal training programmes and plans to hire employees – including retired FBI agents – with new skill sets, including in forensic accounting, financial analysis and trading.

She has taken steps to speed up investigators’ ability to bring cases and is considering giving more decision-making power to the new enforcement director, Robert Khuzami, a former federal prosecutor, and heads of regional offices. “We need to rebuild the credibility and stature of the agency that has been lost in the last few years, and we have to show everyone that we are absolutely up to it.’’

The SEC is also overhauling the way it handles tips and complaints. Ms Schapiro said there were “multiple” ways to use outside help. “A well-crafted whistleblower legislation that allows us to pay people to bring us well-developed fraud cases that ultimately prove successful is another way to leverage third parties without abdicating our responsibility,” she said.

[kickysnana]

16. Ba-da-bum! n/t

[Hugin]

44. Uh, oh... There's that phrase again.

"through self-regulatory organisations" Did they learn NOTHING from the Peanut Incident?

Also, this sounds like Backdoor Privatization.

[Demeter]

5. Google poised for venture capital launch

http://www.ft.com/cms/s/0/0255df20-1e1e-11de-830b-00144feabdc0.html

Google on Tuesday made a move to extend its already outsized influence over Silicon Valley with plans to join the handful of leading venture capital firms that dominate the tech region’s thriving start-up business.

Though committing only to invest $100m in its first year as a venture capital investor, Google executives made clear in an interview with the Financial Times that the internet group had its sights set on joining the top ranks of the valley’s close-knit financial world, which is dominated by firms such as Kleiner Perkins and Sequoia Capital. These firms typically raise funds of $500m or more and have been behind many of the valley’s leading success stories.

.....

While many technology companies run corporate venture funds to make strategic investments in start-ups, often with a view to acquiring them later on, Google said its investments would be made purely on financial grounds.

Though not setting a financial target, the Google executives said that the company believed it could achieve a strong return by establishing its own venture arm rather than putting money into existing specialist venture firms.

The Google fund has also been created with the “contrarian” view of the company’s founders, and would be open to ideas that could eventually even prove disruptive to Google itself, Mr Miner added.

[Demeter]

6. If Ever There Was an Offer You Can't Refuse!

[Demeter]

7. Goldman partners leave after large fund losses

http://www.ft.com/cms/s/0/bc0b88c8-1e52-11de-830b-00144feabdc0.html

Two Goldman Sachs partners who helped lead the so-called quantitative investment movement on Wall Street have left the firm following large losses at their marquee fund, known as Global Alpha, during the global credit crisis.

Goldman told clients on Tuesday that Mark Carhart and Ray Iwanowski, managing directors and co-heads of its quantitative investment strategy team, had left the bank along with another member of their team, Giorgio De Santis.

Until the summer of 2007, when the US subprime credit crisis wreaked havoc with global markets, the two men were known for their success in employing quantitative investment strategies, which rely on complex algorithms to dictate buying and selling decisions.

Mr Carhart, who studied the performances of mutual funds over a 30-year period and wrote an academic treatise on the subject – On ­Persistence in Mutual Fund Performance – came to Goldman from the University of Southern California. In 1997, he and Mr Iwanowski took over Global Alpha, and helped increase its size from less than $100m to $10bn in assets as of 2006.

Not only did the fund become a big contributor to Goldman’s bottom line, but Global Alpha spawned a host of imitators among hedge funds, and fuelled the market on Wall Street for “quants” – academics who could devise complex trading models based on past market performance.

In the summer of 2007, the credit crisis blew up most of the quant models, and Goldman’s Global Alpha fund sustained heavy losses, said to be as much as 30 per cent at the time.

Goldman Sachs confirmed the departure of the three individuals. In a letter to clients, the firm said Katinka Domotorffy would become chief investment officer of the quant team. Along with managing director Bill Fallon, she will run the Global Alpha fund.

The firm remains committed to quantitative investment strategies, and still employs more than 100 people, the letter said.

Mr Carhart and Mr Iwanowski are the latest among a series of well-known Goldman executives who have stepped down from the firm.

Byron Trott, an investment banker best known for his close association with Warren Buffett, is leaving the bank to set up his own fund, it was revealed on Monday. Like Mr Buffett, he plans to invest in family-run businesses.

Jon Winkelried, co-chief operating officer and president of Goldman Sachs, also left on Tuesday, after a 26-year career at the firm. Mr ­Winkelried announced his departure in February, saying that his last day would be March 31.

Last week, Goldman disclosed in a proxy statement that it had entered into a related-party transaction with Mr Winkelried last ­September.

[Demeter]

8. "It would be a shame if a few rotten apples spoiled the whole barrel."

Senator Geary at Michael's hearing GFII

[Demeter]

9. Harsh environment awaits banking survivors

http://www.ft.com/cms/s/0/84c59738-1e10-11de-830b-00144feabdc0.html

By Peter Thal Larsen in London and Francesco Guerrera in New York

Published: March 31 2009 20:49 | Last updated: March 31 2009 20:49

Less risky, less profitable, and probably a lot smaller – that is the prognosis for the world’s banks as they attempt to rebound from the worst financial crisis of the postwar era.

This epochal shift in the financial climate means that even those institutions that come through the downturn intact will face a struggle to adapt to the new environment.

Amid the turmoil, it might seem futile to sketch out the future banking landscape. Most banks are struggling to forecast their performance over the next three months, let alone the coming five years. Bad loan charges are still rising.

Even though the world’s banks had raised more than $900bn in fresh capital by the end of 2008, capital ratios have improved only slightly and further equity injections from governments and outside investors are likely.

Regulators are drawing up plans to force banks to hold greater levels of capital and stronger buffers of liquidity, though it remains far from clear how these will work in practice.

Some central bankers and policymakers, especially in the US, are advocating a complete separation of investment banking from retail banking.

Even if this is avoided,global banks could face stricter constraints in some countries that will make cross-border operations less attractive.

Nevertheless, a few trends are clear. First, returns are going to be lower. According to analysts at Citigroup, European banks earned a return on equity of 18-23 per cent between 2003 and 2007 compared with 12-15 per cent in the mid-1990s.

This shift mainly reflected more borrowing: European banks’ leverage – the value of their assets as a proportion of their equity – rose from 24 times on average in 1995 to 39 times in 2007.

That trend is now going into reverse. Banks will need to hold more assets on their balance sheets, and keep them there longer – a change that will further depress profitability.

Conduits and off-balance sheet vehicles that were popular during the boom have disappeared. Along with money market funds, these vehicles were among the most active buyers of mortgage-backed securities and other instruments that banks used to both shift risk off their books and pocket hefty fees...

[Demeter]

10. Beg For Mercy, Bankers!

Sal: "Tom, can you get me off the hook? For old times' sake?"

Tom: "Can't do it Sally"

Tessio and Tom

[Dr.Phool]

26. "I heard he went to Florida"

Modern translation of "Luca Brazzi sleeps with the fishes".

[Demeter]

14. Carry On, Marketeers and Economists!

the wine is putting me to sleep early, I'm afraid. Let me know if any banks are seized tonight!

[burf]

15. Happy Birthday

and many happy returns! I hoist a cold one in your honor.

About those sore muscles, just think how good the fruits of your labor will be later this growing season. It makes it all worthwhile.

May the first rec of the weekend serve as a gift in appreciation for all your hard work.

[ozymandius]

17. Happy Birthday Demeter!

:toast: As I shuffle off to bed - thought I might check in for any antidotes to sleep. Looks like there's plenty.

[yowzayowzayowza]

18. "I know he can get the job, but can he do the job?

But can he do the job? I know he can get the job but can he DO the job? I'm NOT arguing that with you. I'm not arguing that with YOU. I'm not ARGUING that with you. I'm not ARGUING that with you Harry! Harry... Harry... Yeah Harry... but can he DO the job. I know he can GET the job but can he do the job?"

Be wary of the "Brain Clouds!!!"

Happy Birthday.

[MattSh]

19. A View from Europe: Kiev

Some occasional ramblings from an American in Kiev. Week ending April 4.

Lately, the general consensus seems to be that Eastern Europe and Ukraine are on the bleeding edge, literally, of the global economic meltdown. A lot of nasty things are going to go down here. Of course, like elsewhere, you have to dig for this information. Because if the truth came out, this part of the world would go off the cliff a whole lot sooner, and drag with it a lot of other places too. In other words, what occurs here first may soon come to an economy near you.

So, just what is going on here? Some of this week's news...

Yushchenko calls on his fellow citizens to trust banks

Ukrainian President Viktor Yushchenko has called on his fellow citizens to restore their trust in the banking system.

"I ask Ukrainian citizens to restore their trust in the banks: not to withdraw their deposits, not to cause harm to themselves and to the state supporting, at the same time, the people like you who obtained credits from in the national banking system," he said in his annual address to the Verkhovna Rada, Ukraine's parliament, in Kyiv on Tuesday.

The president stressed that the banking system is the "backbone of the national economy."

According to Yushchenko, the state has also to assume responsibility for those banks "especially state-owned ones" which are facing the most difficult times.

"We have the resources for this purpose. Some UAH 44 billion (about $5.3 billion. Huh, AMATEURS) is foreseen in the budget for the recapitalization of banks and refinancing the state economy via the issue of state securities", the president added.

http://www.kyivpost.com/nation/38630

>>> So, Mr Yushchenko, where do you keep your money? Somewhere outside the country?

Ukrainians keep USD 40 - 60 billion at home, AUB says

The population of Ukraine keeps about USD 40 - 60 billion at home. If that money returns to the banking system, there will be no need in asking the International Monetary Fund for a new tranche of its loan, Association of Ukrainian Banks President Oleksandr Suhoniako told the press.

In his words, “the main problem of the crisis in banking system is not with the lack of money,” but with people lacking trust in banks. That is why Suhoniako says the authority's priority task is to return people's trust in banks. IMF approved a two-year Stand-By Arrangement for about USD 16.4 billion to help the Ukrainian authorities restore financial and economic stability. On November 10 Ukraine got the first tranche of USD 4.5 billion. In January 2009, the IMF Mission was working in Ukraine to take a decision about granting or non-granting the second tranche to Ukraine. On March 2, Ukraine sent an official letter to the IMF about its intention of further cooperation with the Fund. The letter expresses a coordinated position of the Ukrainian power. On March 25, President Viktor Yushchenko said that the IMF mission would resume its work in Ukraine the next week, and also assumed that Ukraine would manage to solve the issue on extending another tranche of the IMF stand-by arrangement in the next two or three weeks.

http://www.nrcu.gov.ua/index.php?id=148&listid=88048

So, what does this all mean? Well, the government is spending $5.3 billion to stabilize the bank system, but the population is hoarding $40-$60 billion under the mattress. If people would put money back in the banks, the government would have $5.3 billion dollars for other uses. Ah, but there's the rub. People here don't trust banks, nor the government. Why? Well, it's that old fool me once, shame on you, fool me twice, shame on me, fool me three times, I'm a full blown idiot. People got burned when the USSR failed, then got burned again a few years later when inflation hit 10,000%. So, people now get dollars whenever they can, and when they get them, they stash them at home.

But unlike the US, which can attempt to print it's way out of it's current problems, the government here must run to the IMF for loans, and they tell them to use general revenue to stabilize the banks. So money that goes to the banks mean less money for education, health care, fixing roads, what have you.

Currency Exchange Rates.

In a number of ways, Americans have been lucky. One thing most Americans spend no time thinking about is currency exchange rates. The dollar is the dollar, the king of currencies. When you're the king, why think about those who are not?

And the dollar has been a benevolent king to Americans for many years. So many years that most Americans have yet to notice that the king they so revere is just a shadow of it's former self. Irrational spending sprees, stealing from the poor and giving to the rich. One day, and soon, many Americans will wish they spent more time getting to know other currencies, or currency alternatives, such as gold.

So, what's it like to live where the dollar isn't king? Let's say somewhere where no currency is king, where alternative currencies compete for your attention and love. This might sound good, but it's not as good as it might seem. For while currencies may compete, there is still one dominant one. In Ukraine, it's the hriven.

Most of your everyday purchases are in hriven. Your exceptional purchases might be in a foreign currency. An American or Japanese branded car is generally priced in dollars, while European cars are generally priced in Euros. And purchases of local real estate would often be in dollars or Euros.

Now, the hriven was quite stable vs. the dollar for many years, which is a sign of either a stable currency or a pegged currency. But the hriven had a major flaw that almost all currencies have. It's flaw is that it's not the dollar, it's not the world's reserve currency.

For most of my time here, the hriven to dollar rate was around 5:1. Sure it would fluctuate some, but not much. This changed about a year ago, when the rate went to 4.5 to 1. Not so good if you were holding dollars like I was, since in general it meant you just lost 10% of your purchasing power. Ouch. Then, a few months later, it went in the other direction. Currently, it's 8.2 to 1. So now, instead of a 10% loss, holders of dollars who convert to hriven get 65% more.

So, some practical examples. Before 11/08, a ride on the subway system cost 50 kopecks (0.5 hriven). At the 5:1 rate, that's 10 cents. Then the price went up to 2 hriven, but was ordered back down to 1.7 hriven. 3.4 times more than before, or approximately 34 cents. But someone who works primarily in dollars, taking the exchange rate into account, is paying around 18 cents.

So, average Ukrainian: .5 hrv => 1.7 hrv >>> 340% more
American living in Ukraine: .5 hrv => 1.7 hrv >>> 8.25:1 exchange >>> 80% more

Now, using the same 5:1 starting rate, lets say you want to buy a cheap portable TV. One year ago, it would cost 500 hrv, about $100. Now, it would cost 825 hrv, or about $100. If you have dollars to convert, you're paying the same price. But if you never had dollars, you're paying 65% more.

So, average Ukrainian: 500 hrv => 825 hrv >>> 65% more
American living in Ukraine: 500 hrv => 825 hrv >>> 8.25:1 exchange >>> 0% more.

Now, let's say you take out a loan to buy a car. Although you paid the dealer in hriven, the bank often will specify that the amount you pay back monthly depends on the exchange rate. So, a year ago when you took out the loan, the amount you have to pay back is equal to $100. Last year, you paid 500 hriven monthly. Now, you pay 825 monthly, or 65% more. Needless to say, there are massive defaults on car loans and housing loans.

So, average Ukrainian: 500 hrv => 825 hrv >>> 65% more a month.
American living in Ukraine: 500 hrv => 825 hrv >>> 8.25:1 exchange >>> 0% more.

But living in Ukraine is not without risks for the average American. These examples show inflation at work. Depending who you listen to, it was 30-40% last year. Although most of that will fall on those who just must have the fancy imported goods. If you can get by on local goods, inflation does not hit as hard. The Moldovan wines are now priced around $3.40. But I can get a perfectly good Ukrainian wine for as little as $1.60. Life is still good. :-)

And finally...

But Ukrainians have been through crises before. They know how to deal with it. From a TV news report out of Moscow. It seems some locals still want to have a good time on weekends, but cannot afford the usual night out. So they find an accordion player and just gather in some public place. Since it’s still cold this time of year, it’s usually an underground pedestrian walkway. There’s usually a store or two there to buy something to drink, but without the markup a bar would have. It’s sort of like having a Saturday night party in the parking lot of your local 7-11, but without the police coming along to break it up.

Enjoy the week and I hope the weather's well where you are.

[Demeter]

21. Thank You, Matt

Keep warm and safe. You may be looking at our future, if the dollar loses its special status.

How likely is that, though? I sincerely doubt that a global fiat money can take its place, since it would be backed by nothing, not even the US reputation....and it's not like the Chinese will let their currency get locked into being the world's reserve! They would be the most likely candidate, IMO.

It's simply amazing to think that the Ukrainians alone have that many US dollars in the mattresses. Do you think it's a good estimate?

[MattSh]

42. Some clarification...

While a lot of that $40-$60 billion dollars is in dollars, a lot of it is in local currency, and a lot of it is in Euros too. If someone here has a relative or friend overseas who send them money, it's likely they will keep it in the currency that it's in. If a relative wires you funds in Euros, or whatever, expect a 1% currency exchange fee to change it into something else. People will often hold what they get so they can keep that 1%. Depending on what they get sent in the first place...

[DemReadingDU]

25. Appreciate your updates

I think eventually, there will be some kind of event in Eastern Europe, that will trigger the global collapse. But what do I know?

:shrug:



Edit: And a Happy Birthday to Demeter!
:party:

[ozymandius]

30. Thank you for this MattSh. And a question.

My wife has a fascination with Finland, wants to go there next year. Does anyone have any data about Finland's economic condition? Are they, too, on the bleeding edge? I know that Nokia has experienced a great deal of trouble. I am curious if Nokia sets the theme for the overall economy.

Thanks!

[Demeter]

33. My knowledge of Finland is 30 years old, but

Finland suffers from a relative lack of natural resources (they have wood, sand for glass, hydroelectric used to the fullest, and fish. They have to import most foodstuffs because it's too cold to grow much, even under glass.)

As a result, Finland has to work hard for foreign exchange. So they value education, and export a lot of population and as much of everything else that they can.

At the time of my on-site experience, they had to take canned goods from Russia for oil and gas. These items were spoiling from bad processing (leaky cans), but the stores had to stock them. Nobody bought them.

If you go, you will find high quality items and high prices. Finns have an appreciation for quality, even if they can't always afford it.

The arts are strong, public transport is strong, public welfare is strong, if they have been able to keep them up.

Alcoholics don't get to drink and drive but once. As guns are prohibited, knives are more likely the murder weapons of choice.

Finns live on borrowed time. To the fullest.

And it's quite beautiful, both the unspoiled nature and the cities.

[tclambert]

45. Acoording to the guys on the BBC show Top Gear, Finland also produces

great race car drivers. Apparently they require 16 hours on a skid pad for everybody in drivers' ed.

[MattSh]

43. One more thing.

I've never been to Finland, but the general impression I get is that the people and the government run on the fiscally conservative side. And as a EU member, there is a limit to how much a deficit any government can run.

[ozymandius]

59. Thank you for these posts.

I recall reading somewhere that Finland's economy is suffering and that conditions were worsening. I cannot locate the article.

I greatly appreciate you putting your thoughts into this.

[girl gone mad]

20. k&r

Some dirt:

Congress needs to knock some sense into the Executive.

http://www.washingtonpost.com/wp-dyn/content/article/2009/04/03/AR2009040303910_2.html?hpid=topnews

And a cake I copied just for you. Mmmmm...

[Demeter]

22. A Feast for the Eyes!

Scrumptious and no calories! Thanks!

That was an amusing article--I'd love to see Congress try to bell this Administration. At least it's a friendly pussy cat, instead of the snarling, man-eating tiger of BushCo.

[Hugin]

23. Happy Birthday!

:party:


TheWatcher slipped in yet another post worth reading in the SMW for Friday.

"End Of Day Commentary: Between The Wheels"

[Demeter]

29. Yeah, I Saw That

He was a bit upset.

[Tansy_Gold]

27. Happy Birthday Week-end!

Plenty of sympathy for you, none for the dirt (we only have rocks here in AJ), and no quotes to share, but many wishes for a happy and celebratory week-end.

I'm off to do art shows the next couple of days, for which I have had no time for building inventory this past winter. But it will be a fun time in a glorious setting with great friends (today, at least; not so sure about tomorrow) so consider me as celebrating a bit for you.

:party:




Tansy Gold

[ozymandius]

28. Good morning. Here is a Bill Moyers video series that I commend to your attention.

Here is the link to the DU thread about them.

Part One
Part Two
Part Three

[Demeter]

31. I Hate It When I'm Right

It was a year ago, maybe, when I responded to a question : What do we still produce in this country? With the simple answer: Fraud.

I thought perhaps that might be an exaggeration.... I no longer have that hope.

[DemReadingDU]

34. Here's one way to explain the AIG fraud

I saw this over on Denninger's forum...

Joe Blow starts a sham car insurance company. But instead of calling it insurance, he calls the product a "crash protection swap" to get around regulators. The only thing he is selling is the "piece of paper" that says that says "I'm covered" to the people who bought it, and its a lot cheaper than actual "insurance". He has no reserves to pay any accident claims.

John Q. Public buys the product knowing its a fraud, runs around telling everyone he is covered in case he gets into a crash. Speeding through town, he gets pulled over, Johnny Law ask for "proof of insurance", JQP shows him the "piece of paper". No harm no foul, pay the speeding fine, just don't do it again.

JQP starts drinking, a lot. Driving home one night he crashes into a school bus killing some kids and wounding more. Johnny Law doesn't give JQP a road side test, writes the accident report, and goes to Joe Blow insurance to let him know that one of his clients has gotten into a horrific crash. Joe Blow, knows he's broke and can't pay the tab, but before he goes TU, a local judge comes in a pays all the fine and lets everyone off the hook. Tells everyone not to do it again. Everyone go home, nothing to see here, keep moving...

End of today's nursery story.
http://www.tickerforum.org/cgi-ticker/akcs-www?singlepost=1117920

[tclambert]

46. How about a Godfather misqote:

AIG executive: If Goldman Sachs had all the regulators, and the politicians in Washington, then they must share them, or let us others use them. They must let us draw the water from the well. Certainly they can present a bill for such services; after all... we are not Communists.


The "We are not Communists" line always gives me a big laugh.

[Dr.Phool]

40. I TiVo'ed it last night, and just finished watching it.

Excellent show. I guy who knows what he's talking about.

The 2nd half of the show was just as good, with Amy Goodman and Glenn Greenwald.

[bread_and_roses]

32. If true, this is insane

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x3814965

(Administration Seeks an Out for Bail-Out Rules for Firms...)

Like the change in vauation is insane.

I don't have any quotes - never watched "Godfather" movies or "Sopranos" - I don't like gangsers or gangster movies. I see enough of it reading the news about the real-life Corporate Raptors running the show.

On a side note, I live in Binghamton and we are all in shock - this sort of thing doesn't happen here. We've one of the lowest crime rates in the nation, last I knew. (of course, that doesn't stop R pols from running on "tough on crime" platforms and trying to whip up more racist fear of "those" people (people of color) who've come up from the city trying to find a better place to live.)

And then last night, just before 11:00 PM, an "alert" came up on my TV - said something like "a law-enforcement alert has been declared for Broome County." I've never heard of a "law-enforcement" alert, so got on-line, looked around the news channells, and couldn't find anything. Still have no idea what that was all about.

[Demeter]

35. You're Right, It Is Insane. and It Is true.

just repeat my new mantra:

This is the end of the world (as we knew it)

and

At least we aren't in Fargo. Although, it's not a happy time in your neck of the woods, either.

They are still trying to cover up the bank frauds, and that includes the salaries and bonuses. Obama had better drop Geithner hard and fast, right into prison.

[Dr.Phool]

38. It's the End of the world as we know it, and I feel fine.

I don't really feel fine.

They won't even enforce the few feeble rules that they were forced to put into place, and the looting continues.

Meanwhile this week, BofA and Wachovia are revealed to be using H1-B visa's, to replace employees and forcing them to train their replacements. You bailout dollars at work.

Summers earned about $8 million in speaking fees from the same bankers and hedge funds that he's supposed to be overseeing.

We've got the Presidency, and large majorities in both houses, and yesterday 9 DINO's voted against usery laws, and for a cut in the estate tax.

I'm not even going to bother calling them DINO's anymore. They're just more crooks from the same money party as the other side.

"Looks like I picked the wrong week to quit sniffing glue". Lloyd Bridges, who wasn't a gangster, but he saw a disaster coming.




Dr. Phool, eating a leftover Hawaiian and habanero pizza!

[Hugin]

41. After reading your summary... I'm going to have to take a sanity break today.

:/


Here's a little non-Godfather music to listen to while I'm gone.

"Electric Avenue"

Electric Avenue -- Eddy Grant

Boy
Boy -
Now in the streets there is violence
an-not-not lots of work to be done.
No place to hang all our washing and then I can't blame it all on the sun.
Oh no
we're gonna rock down to Electric Avenue
And then we'll take it higher.
Oh
we're gonna rock down to Electric Avenue
And then we'll take it higher.

Working so hard like a soldier
can't afford the things on T.V.
Deep in my heart I abhore you
can't get food for the kid.

Good God

we're gonna rock down to Electric Avenue . ..
Oh no
oh no
oh no
oh no

Oh Lord
we're gonna rock down to Electric Avenue . . .
Who is to blame in what country? Never can get to the one.
Dealing in multiplication and they still can't feed everyone.
Oh no
we're gonna rock down to Electric Avenue
Out in the streets
out in the streets

Out in the playground in the dark side of town.
Oh
we're gonna rock down to Electric Avenue . . .
Oh
we're gonna rock down to Electric Avenue . . .


YouTuber Edition: http://www.youtube.com/watch?v=UA5MtAmT24g

[DemReadingDU]

39. Scenes from the recession

3/18/09 Scenes from the recession By Alan Taylor
The state of our global economy: foreclosures, evictions, bankruptcies, layoffs, abandoned projects, and the people and industries caught in the middle. It can be difficult to capture financial pressures in photographs, but here a few recent glimpses into some of the places and lives affected by what some are calling the "Great Recession". (edit: After reading some comments about this on Boing Boing, I was able to track down the location of the newspaper boxes in photo #30. The boxes belong to the San Francisco Chronicle, who I called and confirmed that the boxes had been removed per city rules, not due to recession. The photo came across the wire with the caption below, the contextual error was mine.) (35 photos total)

http://www.boston.com/bigpicture/2009/03/scenes_from_the_recession.html

[DemReadingDU]

47. TAE: April 4 2009: Iris Mack and Brooksley Born

From The Automatic Earth
4/4/09

Ilargi: As both Bill Black, in conversation with Bill Moyers, and Julian Delasantellis at Asia Times (no less interesting than Black) explain once more, at length, how insidious, widespread, and deeply embedded corruption and fraud have become in the White House-Wall Street revolving corridors over the past decade or two, we simultaneously learn that Larry Summers, one of the pivotal players in those corridors, has accepted $5.2 million from a hedge fund he is today supposed to regulate, as well as millions more in speaking engagements are the financial industry.

There were times when people like Summers were forced to step down in the face of such blatant potential conflicts of interest, but these days it's hard to escape the feeling that these activities have become so all-pervasive that none of the actors sees much difference between themselves and their colleagues.

And so the lines once drawn between what is legal and what is not, what is sound policy and what is abuse of power and trust, grow less transparent by the day. Of course you can't let a person who’s waiting for a big fat paycheck have a say in regulating the sender of that check. Or at least there was a time when that was considered out of the question. Times have changed. Nowadays, it has become the norm, and only a handful of people raise a voice of protest. By the time the main media catch up, if they ever will, the additional damage done to the interests of the people, financial and otherwise, will be huge. Several times GDP-size huge.

And when we look at that, who could still be surprised to see that AIG spends millions of dollars of your money on PR campaigns intended to persuade you that its present management team is not to blame for the litany of losses and illegal money transfers to Wall Street that we have witnessed so far? It's all in a day's job for a clique of insiders who are permitted to get away with ever more -borderline- criminal activities, aided and abetted by the people's chosen representatives. Indeed, they are emboldened by the lack of adversity they have encountered, apart from an overinflated hot-air hullaballoo over a few handfuls of bonuses.

I have condemned Obama's Rubin-Summers-Geithner team from the start, because it is made up of exactly the same people who under Cinton enforced and facilitated the erosion of those US laws that kept unbridled greed in check on Wall Street. They will never turn their back on those who gave them the power and status they presently enjoy. On the contrary, they will make sure more of the same is in the works. As long as they are in charge, there will never be any recovery in America, just more looting and pillaging. And no matter how popular Obama is today, he is very much to blame for allowing the plunder to continue.

It seems fitting, then, to take a look at the bear market rally, the biggest 4 week rally perhaps since the 1930's. Of course, financiers and the politicians on their payrolls will use it to declare that we have been saved, that the worst is over. Their control over the media guarantees that that message will be heard all over. And don't we all want to believe? Bernanke takes the lead in insisting that the stimulus has already started working (and for $12.8 trillion, you’d expect at least something). But if it were truly so, then Britain would have to see similar effects, since they took measures that were largely the same as the US, and sometimes even earlier.

Instead, this -and next- week's attempts by the UK government to prepare the population for an upcoming -behemoth- IMF loan for Britain raise strong suspicions that Gordon Brown et al indeed have no choice but to go the IMF route. And no matter how they try to soften the message and the impact, the shock will be immense. It also says a thing or two about Britain's perceived ability to raise money through the bond markets, whether it's because the Brits don't believe in the bond markets, or because the markets don’t believe in the Brits. WIll it be radically different for the US? Sure, US debt is more in demand. But don't let's forget that there is also a lot more supply. The future course of the markets, after the suckers have been cleaned out, will to a large extent depend on the balance between this supply and demand game, and Britain's recent experiences should at the very least be cause for reflection.

Click to read associated articles followed by the comments section...
http://theautomaticearth.blogspot.com/2009/04/april-4-2009-iris-mack-and-brooksley.html

[Demeter]

48. Thank You. It May Not Be Cheering News, But We're Into Reality, Here

"It seems in today's world, the power to absolve debt is greater than the power of forgiveness."
Archbishop Gilday to Michael


GF3

[Demeter]

49. Summers Earned Millions in D.E. Shaw Salary, Bank Speech Fees

http://www.bloomberg.com/apps/news?pid=20601087&sid=a4iGjejJVRko&refer=home

By Timothy J. Burger and Kristin Jensen

April 4 (Bloomberg) -- Lawrence Summers, director of President Barack Obama’s National Economic Council, earned millions working at a hedge fund and speaking to banks such as Citigroup Inc. that later received taxpayer bailout money.

Hedge fund D.E. Shaw & Co. paid Summers more than $5 million in salary and other compensation in the past 16 months, according to a financial disclosure form released by the White House yesterday. Summers served as a managing director at the New York-based firm. Summers, a former Treasury secretary, also earned more than $2.7 million in speaking fees.

“There was considerable interest in hearing his economic insights,” said Ben LaBolt, a White House spokesman. At the White House, Summers “has been at the forefront of this administration’s work to shore up our nation’s financial system and to put in place a regulatory framework that will strengthen the financial system,” LaBolt said.

The disclosure statement for Summers and several other top administration officials illustrates the quandary Obama and his predecessors have faced in their personnel decisions because “powerful people are almost always also rich people” who have earned money from private interests, said Steffen Schmidt, a political science professor at Iowa State University in Ames, Iowa.

Obama’s “choice going forward is to choose unknowns of modest means who may be less controversial in terms of their connections,” Schmidt said. “Except those people would be far less knowledgeable and thus less of an asset to fix these very same urgent problems.”

Speeches by Summers

Summers spoke to Citigroup, Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. audiences twice last year, according to his disclosure statement. Lehman, which went bankrupt in September, paid Summers $67,500 for an engagement on July 30, the filing showed.

Summers contributed a $45,000 fee from Merrill Lynch & Co. for a Nov. 12 speech to charity, according to his form. When the economist learned that Merrill would be accepting taxpayer funds because of its merger with Bank of America Corp., he tried unsuccessfully to cancel the appearance and then decided to donate the money, a White House official said.

“In ordinary times, a U.S. economic expert receiving honoraria from U.S. banks wouldn’t raise many eyebrows -- nor would a money-making stint in the private sector,” said Rogan Kersh, a public-service professor at New York University. “These aren’t ordinary times, and as populist anger at the banking and hedge-fund industries continues to spread, Summers could have some serious explaining to do.”

Kersh said he didn’t see any obvious conflict of interest for Summers, who served as treasury secretary under former President Bill Clinton and a stint as president of Cambridge, Massachusetts-based Harvard University.

Other Officials

The White House also released the personal financial disclosure forms of other top White House officials yesterday.

White House Chief of Staff Rahm Emanuel’s form listed a holding of less than $1,000 in shares of American International Group Inc., the insurer that has taken $182.5 billion in taxpayer funds to avoid financial collapse. The White House said Emanuel doesn’t currently own shares in the company, which sparked a public furor by paying $165 million in bonuses to its employees as it was taking the taxpayer money.

Emanuel’s congressional disclosure form that covered 2007 said his wife bought between $1,000 and $15,000 worth of AIG stock in August that year.

He also reported holdings of between $1,000 and $15,000 in Limited Brands Inc., and less than $1,000 in Wal-Mart Stores Inc. Those are small holdings “that do not present a conflict of interest under ethics rules,” said Sarah Feinberg, a White House spokeswoman.

Jarrett’s Stocks

Valerie Jarrett, a senior adviser to Obama and a close friend from Chicago, sold shares she owned in CME Group Inc., Caterpillar Inc., Hewlett Packard Co., Intel Corp., Sony Corp., General Mills Inc., General Dynamics Corp., Costco Wholesale Corp. and Nike Inc. The income from those sales and dividend payments ranged from as little as $200 to as much as $100,000 each, according to the filing, which only lists ranges.

Jarrett also reported at one time owning between $15,000 and $50,000 worth of Apple Inc. shares and between $1,000 and $15,000 in stock of Best Buy Co., Brinker International Inc., Staples Inc. and Starbucks Corp. The White House said she no longer owns any shares.

Jarrett reported income of $393,286 for selling restricted stock options in Navigant Consulting Inc., a Chicago-based consulting firm. She earned a salary of $302,000 from Habitat Executive Services Inc. in Chicago and directors’ fees of more than $346,000 from groups and companies ranging from Navigant to USG Corp., a manufacturer of building materials.

Axelrod Income

David Axelrod, the chief strategist of Obama’s campaign who is now a senior adviser to the president, received $1.55 million in salary and partnership income from public affairs firms. He agreed to buyouts that will pay him $3 million over five years, his disclosure form showed.

Axelrod’s clients included the AFL-CIO, a federation of labor unions; the American Association for Justice, formerly known as the Association of Trial Lawyers of America; AT&T Inc.; and Bally Total Fitness Corp.

Carol Browner, the White House energy policy coordinator, was paid $450,000 for her work last year with Albright Group LLC, a consulting firm founded by former Secretary of State Madeleine Albright. Browner is still owed between $350,000 and $750,000 in Albright Group member distributions and has agreed to sell her ownership interest for about $370,000, to be paid over three years.

Browner Assets

Browner also is selling her interest in Albright Capital Management LLC, a related investment advisory firm. Browner didn’t disclose the amount she will receive. She listed among her assets Albright Capital Management holdings worth between $450,000 and $1 million.

Browner also listed a stake in Downey McGrath Group Inc., a lobbying firm headed by her husband, Thomas Downey, a former Democratic congressman from New York. The stake, owned by her husband, was valued at between $1 million and $5 million.

White House Press Secretary Robert Gibbs earned $156,188 last year as Obama’s campaign press secretary. He and his wife own shares in four residential buildings in Alexandria, Virginia, which they rent out. He valued his ownership in the buildings at between $700,000 and $1.5 million.

Craig, Rogers

White House Counsel Gregory Craig was paid $1.7 million by the law firm Williams & Connolly LLP, where he was a partner. His clients included companies such as Abbott Laboratories and Digital Fusion Inc. and former UN secretary general Kofi Annan.

Desiree Rogers, the White House social secretary, was paid $1.8 million for less than seven months’ work as president of Peoples Gas and North Shore Gas. In July, she left the utility company to work for Allstate as president of social networking, and was paid $350,000 through the end of the year.

She also was paid $150,000 for serving on the board of Equity Residential, a real estate firm and $20,000 for serving on the board of Blue Cross Blue Shield in Chicago. She owns between $250,000 and $500,000 worth of stock in Equity Residential.

Thomas Donilon, deputy White House national security adviser, was paid $3.9 million by O’Melveny & Myers LLP, his former law firm. Donilon represented such clients as Penny Pritzker, Obama’s campaign finance director; Verizon Communications Inc.; UnitedHealth Group; Citigroup; Goldman; and Apollo Management LLP. He will receive a pension from Fannie Mae, where he worked from 1999 to 2005.

“This is one of many stories where we see the intricate connections” between the government and those that it oversees, said Julian Zelizer, a history and public affairs professor at Princeton University in New Jersey. “There is a long history of this and it does not mean that serious regulation cannot take place. But without substantive lobbying and campaign finance reform, the nation will always face this challenge.”

[Demeter]

50. Big Banks Resist Call To Aid Chrysler

http://www.huffingtonpost.com/2009/04/03/big-banks-resist-call-to-_n_183088.html




NEW YORK — Chrysler LLC's lenders are resisting efforts to convert most of the automaker's debt to equity, a conversion key to Chrysler's plan to restructure without filing for bankruptcy protection, according to a published report.

Banks including JPMorgan Chase & Co., Goldman Sachs, Citigroup Inc. and Morgan Stanley loaned Chrysler $6.8 billion in 2007 when Cerberus Capital Management LP acquired an 80.1 percent stake in the automaker.

Now, Chrysler needs to swap $5 billion of that debt for equity in the automaker, as part of the plan for the company to become viable, The Wall Street Journal reported Friday, citing unnamed people familiar with the talks.

The banks' reluctance is slowing Chrysler's efforts to reach a definitive deal on an alliance with Fiat Group SpA, and also stalling the company's attempt to reach a health care agreement with the United Auto Workers union, the Journal reported.

A Citigroup spokeswoman declined to comment to The Associated Press. Messages seeking comment were left for the other banks.

Chrysler released a statement saying it "is committed to working closely with all constituents, the administration, U.S. Treasury and the (government's auto) task force over the next 30 days to reach a successful conclusion." The company declined further comment.

Treasury officials couldn't be reached for comment.

Because the banks hold debt secured by collateral, they have the right to take Chrysler plants and assets if the company files for bankruptcy protection. That means they may be better off with what's left of Chrysler in liquidation than what they'd get if they agree to restructure the debt.

The government has little leverage to force the banks to make concessions if they believe they'll be better off in bankruptcy court. But the banks that are pushing back against Chrysler and the government are also the direct recipients of government aid through the banks' own bailouts.

One person familiar with the matter said the four banks have had senior people involved in talks with the Treasury Department during the last two days.

Chrysler also owes money to Cerberus and Daimler AG, but they already have agreed to exchange all that debt for Chrysler equity. Other lenders also appear willing to make concessions, but JPMorgan is leading the negotiations with Treasury, the Journal reported.

Chrysler and General Motors Corp. have received a combined $17.4 billion from the government to keep them alive amid the worst auto sales market in 27 years. On Monday, President Barack Obama announced that the companies' plans to become viable and repay the loans were insufficient.

The government gave Chrysler 30 days to show it is deserving of more government help by securing a definitive deal with Fiat and getting further concessions from debtholders and the UAW. GM has 60 days to satisfy the government or face bankruptcy.

[Demeter]

51. "You will not give -- I'll take!

As for Don Corleone, well he makes it very clear to me today that he is my enemy. You must chose between us."
Joey Zasa to Commission

[Demeter]

52. Administration Seeking to Circumvent Restrictions Imposed on Bailout Recipients

http://www.nakedcapitalism.com/2009/04/administration-seeking-to-circumvent.html


One of the disturbing trends of the financial crisis hasn't simply been the willy-nilly shifting of costs onto the taxpayer, even when there were investors in risk capital, aka bondholders and stockholders, who properly should take the hit first. As distressing is the repeated, flagrant disregard for the rule of law, starting with the Treasury Secretary being put outside the reach of the courts in his oversight of the TARP, the use of the Fed and FDIC to circumvent budgetary requirements, failure to resolve banks in danger of being insolvent as required under the law, and rampant signs of cronyism (for instance, participation in the legacy securities program being limited to a few large players).

In a further sign of an imperial Presidency in action, the Washington Post describes how the Obama administration is circumventing bailout legislation by channeling fund through various entities, then contending the the end recipients aren't subject to Congressional requirements. Huh?

Notice that the Chairman of the House Oversight Committee, a Democrat, is none too happy.

From the Washington Post:

The Obama administration is engineering its new bailout initiatives in a way that it believes will allow firms benefiting from the programs to avoid restrictions imposed by Congress, including limits on lavish executive pay, according to government officials....

The administration believes it can sidestep the rules because, in many cases, it has decided not to provide federal aid directly to financial companies, the sources said. Instead, the government has set up special entities that act as middlemen, channeling the bailout funds to the firms and, via this two-step process, stripping away the requirement that the restrictions be imposed, according to officials.

Although some experts are questioning the legality of this strategy, the officials said it gives them latitude to determine whether firms should be subject to the congressional restrictions, which would require recipients to turn over ownership stakes to the government, as well as curb executive pay.


Yves here.The US has a rules-based rather that a principles-based legal system, but the flip side is that my impression was that in grey areas, courts looked hard at the legislation for intent. And the intent here was crystal clear. But this crowd loves the sort of deal structuring that would do a tax evader proud. Back to the story:

The administration has decided that the conditions should not apply in at least three of the five initiatives funded by the rescue package.

This strategy has so far attracted little scrutiny on Capitol Hill, and even some senior congressional aides dealing with the financial crisis said they were unaware of the administration's efforts....

Rep. Edolphus Towns (D-N.Y.), chairman of the House Oversight and Government Reform Committee, said the congressional conditions should apply to any firm benefiting from bailout funds. He said he planned to review the administration's decisions and might seek to undo them. "We have to make certain that if they are using government money in any sort of way, there should be restrictions," he said.....

In one program, designed to restart small-business lending, President Obama's officials are planning to set up a middleman called a special-purpose vehicle -- a term made notorious during the Enron scandal -- or another type of entity to evade the congressional mandates.....

In another program, which seeks to restart consumer lending, a special entity was created largely for the separate purpose of getting around legal limits on the Federal Reserve, which is helping fund this initiative. The Fed does not ordinarily provide support for the markets that finance credit cards, auto loans and student loans but could channel the funds through a middleman.

At first, when the initiative was being developed last year, the Bush administration decided to apply executive-pay limits to firms participating in this program. But Obama officials reversed that decision days before it was unveiled on March 3 and lifted the curbs, according to sources who spoke on condition of anonymity because the discussions were private.

Obama's team is also planning to exempt financial firms that participate in a program designed to find private investors to buy the distressed assets on the books of banks. But Treasury officials are still examining the legal basis for doing so. Congress has exempted the Treasury from applying the restrictions in a fourth program, which aids lenders who modify mortgages for struggling homeowners.....

Legal experts said the Treasury's plan to bypass the restrictions may be unlawful.

"They are basically trying to launder the money to avoid complying with the plain language of the law," said David Zaring, a former Justice Department attorney who defended the government from lawsuits involving related legal issues. "They are trying to create a loophole to ignore Congress, and I think the courts will think that it's ridiculous."


The Administration defends these actions as necessary, of course.

[Demeter]

53. Obama May Be the First Democrat Impeached By a Democratically-Controlled Congress

Cassandra (my alter ego) speaks!

[Demeter]

54. The Credit Bubble Was a Ponzi Scheme Enabled by the US Dollar

http://jessescrossroadscafe.blogspot.com/2009/04/credit-bubble-was-ponzi-scheme-enabled.html


They say a picture is worth a thousand words.

Here is a picture of the US credit bubble, with the deleveraging which has just begun.



It is/was a Ponzi scheme, enabled by the advantages of controlling the reserve currency of the world, pure and simple.



It was the US dollar that was monetized, or more specifically US debt obligations, which are now substantially worthless and will have to take a significant haircut in real terms. This is similar to the Japanese experience in which they monetized their real estate.

Ironically, those expecting this deleveraging to result in a stronger dollar could not be more mistaken. The Obama Administration is scrambling to obtain relief from Europe and Asia, getting them to inflate their own currencies through 'stimulus,' in order to continue to hide the unalterable truth - the US must partially default on its debt as expressed in the dollar and the Bond.

This is the inevitable outcome of all Ponzi schemes. Several smaller, private schemes already have collapsed. The big one is yet to come down. And when it does, the foundations of democracy will shake, several governments will fall, and we will once again experience the kind of uncertainty more familiar to those who lived in the first half of the twentieth century.

The sad truth is that the Obama Administration has barely begun the real work of rebuilding the economy. Everything to date is simple looting, paper-hanging, and the rewriting of history.

Until the median wage improves significantly in real terms, and the economy is put back on a productive basis without relying on the unsupported expansion of credit, there will be no recovery, merely sound byte opportunities for the smoke and mirror crowd.

This is the reality.

[Demeter]

55. Non-Farm Payrolls: Revisio ad Absurdum

http://jessescrossroadscafe.blogspot.com/2009/04/non-farm-payrolls-revisio-ad-absurdum.html


Orwellian manipulation of government economic statistics, par excellence.

[Demeter]

56. Everything about this market, and our economy, is directed by expediency rather than principle

Everything about this market, and our economy, is directed by expediency rather than principle, and is therefore short term in its goals and outlook.


http://jessescrossroadscafe.blogspot.com/


Is this the Obama obituary?

[Demeter]

57. "Never let anyone know what you are thinking."

Michael to Vincent

[Dr.Phool]

58. Kick! for in the morning.

And if you don't like it, you'll be sleeping with the fishes.

Or maybe a horse head, in your bed. Don't fuck with me.

[Demeter]

62. You'll Never Sleep Alone, Though

There's a thought to sleep on!

[Dr.Phool]

68. I never sleep alone, although sometimes The Fudd pushes the wife out of bed.

[Dr.Phool]

60. Soprano's: " You'd never know it by looking at his apartment".

Tony (over a very bad cell phone connection to Paulie Walnuts, after they screwed up whacking a Russian mobster): "He was with the Interior Directorate, and he killed at least 42 Chechen's!

Paulie to Christopher: Tony say's he's an interior decorator, and he killed 42 Czechoslovakians!.

[Demeter]

63. Love It!

[Pale Blue Dot]

61. The Only Way Out Of This Crisis Is To Build More Houses

Every time I turn on the TV, it's the same thing: Everybody's moaning on and on about the economy without offering any solutions. People are losing their jobs left and right, and our leaders act like we're helpless to do anything about it! This is the greatest country in the world, and still, none of these eggheads in the government can figure a way out of this mess? Come on.

Fortunately, I have the medicine for what ails us all. It's so simple, I can't believe no one thought of it until I did, just now. Ready?

We build more houses.

There. That's it. It's so obvious, maybe that's why I'm the first one to come up with it. Houses got us into this mess, and by God, it's houses that are going to get us out!

Think about it. We've got thousands of tradesmen out of work 'cause no one is building houses. Plumbers, guys who do drywall, the like—none of them have a job to go to in the morning. If the carpenters don't have jobs, then they aren't buying any lumber. Then the lumber guys don't have any money to buy dresses for their gals, and the dressmakers can't buy cars, and so on down the line.

You see? They need jobs, pronto, otherwise we're going to be sitting on a load of lumber and dresses and cars. So I say, give 'em some houses to build! Then they'd have some money to spread around, and the economy wouldn't be so bad.

Problem solved.

I know what you're thinking: Wouldn't that leave us with a bunch of new houses and no one to live in them? Well, as it happens, with so many homes in foreclosure, there are a lot of folks right now who need a place to hang their hat. Excuse me, did you hear someone at the door? Oh, hello, opportunity. Come on in!

http://www.theonion.com/content/opinion/the_only_way_out_of_this_crisis

Once again, The Onion gets it exactly right. I'd post this in GD but I don't want to get in any more fights today.

[Demeter]

64. Good Old Onion!

I expect someone in Congress will propose this next week....

[Dr.Phool]

65. Florida beat them to it.

Our county just swapped some bear habitat for some swampland so developers can put in a new 20,000 home golf course and marina development. Our water supplies are already strapped, and the developments they've built over the last5-6 years are running at about 30% foreclosures.

The state is loosening any restrictions on developers, so that they can build, build build. Never mind that we have a glut of housing. It's about as dumb as "Drill, baby drill"!

[antigop]

66. OMG! Now we have "pension longevity swaps"--MORTALITY SWAPS??

http://www.watsonwyatt.com/news/press.asp?ID=20921

It is odds-on that the coming months will see the first UK pension schemes buy protection against their members living longer while keeping control of how their assets are invested, according to Watson Wyatt.

Already a number of life insurers have transferred longevity risk either to a reinsurer or to investors via the capital markets. No transaction taking mortality risk directly off the hands of an occupational pension scheme other than through annuity contracts is yet in the public domain. However, Watson Wyatt is advising a number of companies and trustees on how they can best hedge their mortality risk. Providers of mortality swaps and insurance contracts also report having issued quotes to more pension schemes in recent months and say they have a strong pipeline of potential deals.

Speaking today at a Westminster and City Conference, Buyouts, Buy-ins and the risk transfer market, John Ball, head of defined benefit pension consulting at Watson Wyatt, argues that the barriers to the completion of a mortality-only deal have been falling away over recent months.

John Ball says: “Longevity swaps allow pension schemes to protect themselves against unanticipated improvements in life expectancy so that members can live long and the company underwriting their pensions can still prosper. Until recently, the market price anticipated much higher life expectancy than schemes were allowing for in their funding reserves. That made swaps look like an insurance policy with a high excess charge. But the gap has narrowed as pension schemes are starting to set more cautious assumptions and greater competition is developing among the providers, so cost will be less of an obstacle for many pension funds.”

[antigop]

67. Did I not call this on the SMW this week?

Remember when I asked whether credit default swaps could be used to help shore up deficits in pension funds?

Looks like I was on the right track...only they are "mortality swaps" ...not CDS.

<edit to add> It looks like they haven't been used yet, but they are coming soon to the UK.

[Dr.Phool]

69. You gave them the idea.

Some brain-dead financial genius at AIG-FP was scouring the SMW thread looking for ideas and said, :hurts: :think: :wtf: , "How come I never thought of that?"

[antigop]

70. Naw, I've just learned to think like these guys --- pretty scary, huh? n/t

[Demeter]

73. Terrifying

And even so, we cannot act to head them off. And Obama, like a lamb to slaughter, follows their every direction.

[Dr.Phool]

71. She ought to look under the hood of her car, before she starts it!

They ain't gonna like this.

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x438567#438678

From a post by CHIMO. I thought it needed to be posted here.


US watchdog calls for bank executives to be sacked

Elizabeth Warren, chief watchdog of America's $700bn (£472bn) bank bailout plan, will this week call for the removal of top executives from Citigroup, AIG and other institutions that have received government funds in a damning report that will question the administration's approach to saving the financial system from collapse.

Warren, a Harvard law professor and chair of the congressional oversight committee monitoring the government's Troubled Asset Relief Program (Tarp), is also set to call for shareholders in those institutions to be "wiped out". "It is crucial for these things to happen," she said. "Japan tried to avoid them and just offered subsidy with little or no consequences for management or equity investors, and this is why Japan suffered a lost decade." She declined to give more detail but confirmed that she would refer to insurance group AIG, which has received $173bn in bailout money, and banking giant Citigroup, which has had $45bn in funds and more than $316bn of loan guarantees.

Warren also believes there are "dangers inherent" in the approach taken by treasury secretary Tim Geithner, who she says has offered "open-ended subsidies" to some of the world's biggest financial institutions without adequately weighing potential pitfalls. "We want to ensure that the treasury gives the public an alternative approach," she said, adding that she was worried that banks would not recover while they were being fed subsidies. "When are they going to say, enough?" she said.

She said she did not want to be too hard on Geithner but that he must address the issues in the report. "The very notion that anyone would infuse money into a financially troubled entity without demanding changes in management is preposterous."

http://www.guardian.co.uk/business/2009/apr/05/useconomy-regulators

No mention in the US press.

[Demeter]

75. Not Only That

Japan looks like it's planning to lose another decade. Will the US follow suit?

[Dr.Phool]

72. "Don Corleone, I want to thank you for inviting me to your daughters wedding".

I was a little lost a couple of weeks ago during our "Princess Bride" week-end, since I never saw it.

My wife just told me that it's on Bravo tomorrow evening, I think at 7:00pm. She set it up to record it for me.

[Demeter]

74. It's a Roller-Coaster

If you get a little lost in the middle, just sit tight. It all comes out in the end.

I appreciate your participation in this weekend's theme! I've been having some bad health--too much digging? In any event, I've not been pulling my end of the posting.

Honestly, Obama says we have to tell him what we want, but how can he hear us, when Geithner is taking up all the speaking time? Economics is not a new product to be shilled on TV, it's a discipline which we are sorely lacking today and recently. Okay, maybe forever.

[Dr.Phool]

77. I wanted to post a lot more last night, but I was on my laptop.

And my desktop has all the good bookmarks on it.

But, I got some pepper plants potted today, and I'm headed next door for a few cocktails and a dip in the pool.

Hope you're feeling better.

[Demeter]

78. No Hurry. This Economy Isn't Going Anywhere (Alas)

and why the hysteria over Korea? Why should the US or anybody dictate what other nations can do with the science and technology? Is Iraq's nuclear program, all over again.

I REALLY don't like the trends on policy that we see coming out of the Obama administration. This doesn't look like change to me. Not substantive change.

[Demeter]

76. Stolen from emad: Former Wall Street computer whizz Michael Osinski made the 'bomb' that broke the

Former Wall Street computer whizz Michael Osinski made the 'bomb' that broke the banks

Michael Osinski, a former Wall Street computer programmer whose fancy software helped bring the banks to near collapse, says he is dismayed at the financial whirlwind.


By Philip Sherwell in New York
05 Apr 2009


As world leaders in London put the finishing touches to their G20 communiqué, Michael Osinski was up to his thighs in water on the other side of the Atlantic, retrieving oyster cages at low tide off a misty Long Island.

Nowadays, he supplies oysters to some of the best restaurants in Manhattan. But he was following the efforts to reach agreement on tackling the global economic crisis with a deep personal interest.

For in his previous incarnation, Mr Osinski played a crucial, if inadvertent, role in stirring up the financial whirlwind that has battered the world. As the top computer programmer for the titans of Wall St, he wrote the complex software that bundled home mortgages into bonds, making possible the subprime loans collapse that sparked the global meltdown.

"I didn't realise I was building a bomb at the time," said Mr Osinski, 55, as he reflected on his part in the worst slump since the Great Depression. "I thought I was building something that was a valuable tool for the industry. And for many years, it was." But, he added wistfully, "the software turned out to be more sophisticated than the people using it".

http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=103x438768

So much for 'May the world be your oyster"...

[Demeter]

79. Fed in Congressional Crosshairs — Part I

http://blogs.wsj.com/economics/2009/04/02/fed-in-congressional-crosshairs-part-i/

By Jon Hilsenrath

For the past 18 months Federal Reserve officials have been fighting off storms in financial markets – now they’ve got a storm brewing in Congress that they’re going to have to direct their attention to fighting.

The Senate on Thursday passed a resolution that put it in the line of fire of lawmakers who want to shake up the Fed’s regional bank system. In a nonbinding resolution that passed 96-2, the Senate called for “an evaluation of the appropriate number and the associated costs of Federal reserve banks.”

A nonbinding resolution is a long way from becoming law. But it’s a clear signal to the Fed that it is headed for increased scrutiny on Capitol Hill. (It was also striking that Nancy Pelosi, speaker of the House, last month held Fed Chairman Ben Bernanke out as partly to blame for the troubles at American International Group Inc.)

In addition to the Federal Reserve Board in Washington, the Fed system has 12 regional Fed banks around the country. They rotate on the Federal Open Market Committee in casting votes on Fed interest rate policy. The New York Fed also has been at the center of government financial rescue efforts.

Congress has no say in the naming of bank presidents. The presidents of the district Fed banks are appointed by their private-sector boards with the consent of the Fed’s Board of Governors in Washington.

Should someone with as much public responsibility as the New York Fed president not face more scrutiny?

The resolution was sponsored by Sen. Christopher Dodd (D, Conn.), the chairman of the Senate Banking Committee, and Sen. Richard Shelby (R., Ala.), the ranking Republican on the committee.

The 1913 Federal Reserve Act created between eight and 12 regional districts, and gave to the Treasury secretary, agriculture secretary and Comptroller of the Currency the task of deciding how many districts, which cities would be the headquarters and what the district boundaries would be.

After substantial controversy and rivalry among various cities, they created 12 districts, the boundaries of which haven’t been altered despite all the demographic changes since then. Some of the Fed banks’ responsibilities –- notably clearing checks –- have been diminished as the financial system has evolved.

COULD THE SENATE BE GUNNING FOR GEITHNER/ OR IS IT, LIKE A BLIND RUFFLE PIG, FOLLOWING THE AMAZINGLY AWFUL SMELL COMING OUT OF THE GROUND?

[Demeter]

80. Lengthy, Interesting Post on Mark to Market

http://www.housingwire.com/2009/04/02/more-glib-press-on-fasb/

contrasts with

How the FASB aids and abets obfuscation by wonky zombie banks

http://blogs.ft.com/maverecon/2009/04/how-the-fasb-aids-and-abets-obfuscation-by-wonky-zombie-banks/

[DemReadingDU]

81. Gold Star for Demeter!

She finds the most links to financial news!



Can't find a star smiley, so applause are in order!
:applause:

[Dr.Phool]

83. I second the motion!

:applause: :woohoo: :woohoo: :applause: :yourock: :applause: :woohoo: :woohoo: :applause: :yourock:

[antigop]

84. Stiglitz: "It's going to be bad, very bad"

http://www.salon.com/news/feature/2009/04/03/stiglitz/print.html

Many people are comparing the financial crisis to the Great Depression. Will it really be that bad?

It's going to be bad, very bad. We're experiencing the worst downturn since the Great Depression, and we haven't reached the bottom yet. I'm very pessimistic. Governments are indeed reacting better today than during the global economic crisis. They're lowering interest rates and boosting the economy with economic stimulus plans. This is the right direction, but it's not enough.

The American government has committed over a trillion dollars to save the banks and $789 billion to boost the economy. Do you think this is too little?

I do. More than $700 billion sounds like a lot, but it's not. On the one hand, a large part of the money will first be given out next year, which is too late. On the other, a third of it is drained away by tax cuts. They don't really stimulate consumption, because people will save the majority of that money. I fear that the effect of the American economic stimulus plan won't be even half as big as expected.

[Karenina]

85. HAPPY BIRTHDAY, DEMETER!!

:yourock:

[willing dwarf]

86. Some people I know are putting in lasagna gardens to avoid digging

You layer stuff ( not sure quite what, but I know newspaper is involved) and grow vegetables. Maybe flowers too.

I hope your back feels better and that you have a very happy birthday! I really really appreciate your many posts here at DU!