Happy Thanksgiving!

Thursday, November 27, 2008

I have an enormous amount to be thankful for. I hope you do too.

Enjoy the day!


Gates Stays at DoD; Involved in Reagan’s Oct. Surprise?

Wednesday, November 26, 2008

I was very much for this move. I think the continuity is important and I thought Gates was a dedicated public servant.

Then I read this post from, of all places, the American Conservative:

Robert Parry of Consortium News is reporting that in 1992 the Russians turned over to the White House a secret report confirming that senior US officials and Reagan campaign staff met with Iranian officials in Europe during the summer of 1980. The meetings, since known as the October Surprise, were designed to delay the release of the American Embassy hostages in Iran until after the US elections, depriving President Jimmy Carter of a success that might have kept him in office…

…Parry is now reporting that current US Secretary of Defense Robert Gates was also involved, according to the intelligence allegedly provided by the Russians. Gates was, at the time, a senior official in Carter’s National Security Council…

…Meeting clandestinely with the officials of a foreign country to come to an arrangement intended to influence the results of an election in the United States goes well beyond ordinary political shenanigans and makes Richard Nixon’s sins seem almost trivial.

To me, this is treason. And if it is factual, Gates should be arrested. But then, so should everyone involved, including George H.W. Bush. The funny thing about this is that this October Surprise has been talked about for a long time, but no one seems to have been punished for it, nor has Reagan’s star been dimmed.

I’ve always been puzzled by this. Reagan actually delayed the release of American hostages to help an election and he’s an American hero? He’s a criminal. Literally.

Honestly, I’m not sure I know the whole story, but I feel like I’ve read this many times. Is it a rumor? Fact? I’d like to know more.

If there is evidence, I am going to be sick. It’s bad enough that there are apologists for Bush’s criminality, and that Obama seems unwilling to press the issue, but we can’t just acknowledge this kind of disgraceful, unpunished law-breaking without repercussions to the validity of our laws and the moral and civic fiber of our country.

We are either a nation of laws or we are not.

Which is it?

Q3 GDP Revised Downward

Tuesday, November 25, 2008

U.S. GDP shrank 0.5% in the third quarter, downwardly revised from the previously announced 0.3%

Can’t wait for the Q4 numbers…


Monday, November 24, 2008

I don’t know what the market is rallying about.

I understand that they feel cheered about Citi taking the Feds to school and there is general (and justified) excitement about Obama’s economic team, but our problems remain. To wit: (emphasis added)

The inventory of existing homes for sale slipped 0.9 percent to 4.23 million from 4.27 million in September. The median national home price declined 11.3 percent from a year ago to $183,300, the lowest since March 2004 when a median price of $183,200 was recorded. The percentage drop was the biggest since the NAR started keeping records in 1968

So prices are now at 2004 levels and still have more to go (especially in New York City).

Also, Bloomberg points out that the real cost of the bailout is $7.4 trillion so far, of which the Fed is responsible for $4.4 trillion.

I’m too busy right now to write more about this, so read the article yourself.

Merry Christmas to Citi

Monday, November 24, 2008

It had to happen, and so it has.

The Treasury department in coordination with the FDIC and the Fed has bailed out Citigroup. Here is a summary of the deal terms.

The bottom line is that this is a very good deal for Citigroup. They get $20 billion and a 90% guarantee (from you) on all of their junk assets (after the first $29 billion in losses) and in return they merely have to issue a little preferred stock to the U.S. Government. Citi should no longer have liquidity problems as they will likely be able to raise cash against the government’s guarantee (after all, if there’s no downside risk, why not?) Two other key sections:

USG will provide institution with a template to manage guaranteed assets. This template will include the use of mortgage modification procedures adopted by the FDIC, unless otherwise agreed.

Compensation: An executive compensation plan, including bonuses, that rewards longterm
performance and profitability, with appropriate limitations, must be submitted to, and approved by, the USG.

The mortgage modification aspect is important and the FDIC is involved (they have a smart, workable plan). Although I am opposed to all of these bailouts in principle (in practice, something must be done), it is essential that we provide relief to homeowners as well. They are the root of the problem, and though they are as guilty as anyone, fairness and financial common sense dictates that we help them too.

As for compensation, the Feds should insist on a UBS model of pay for performance. That is, payment spread over three years with modifications based on continued performance. They should also set ceilings on reward.

There is one other problem with this bailout. From the Wall Street Journal:

The agreement marks a new phase in government efforts to stabilize U.S. banks and securities firms. After injecting nearly $300 billion of capital into financial institutions, federal officials now appear to be willing to help shoulder bad assets, on a targeted basis, from specific institutions…

…Government officials could face requests from other banks for similar help shoring up their balance sheets. Banks, hedge funds, and private equity firms have urged Capitol Hill and government officials to restart the asset-purchase program in recent weeks.

“The problem is that other banks would want to get in line” for such government support, says Thomas B. Michaud, a vice chairman of investment bank Keefe, Bruyette & Woods Inc. “Is there enough money to do that?”

This is the problem, isn’t it? We simply can’t afford to take all of the junk assets off the books of financial institutions. And yet, ultimately, I’m afraid, that’s exactly where this is headed. Who’s next in line for some taxpayer largess?

I now see an outline of how this will end. The Government will pick and choose who to bailout and guarantee their junk. Working with these institutions, they will aggressively prune irredeemable loans and modify the rest. Taxpayers will take the loss. And on the guarantee the institutions will raise the cash they need to begin soaring again.

Uncle Sucker (you and me) will take it on the chin while a lot of bankers and irresponsible borrowers get away with it. Sure, there will be a few prosecutions, but for the most part, we’re just going to have to like it.

And, by the way, it’s still going suck out there.

Merry Christmas to Citigroup.

Obama’s Jobs Goal

Saturday, November 22, 2008

2.5 million new jobs by January 2011.

Give him credit, the guy has got balls. This is a measurable metric by which to judge him come 2012. He is not promising results after the election.

He’s got Geithner and Summers and crew working on it already, but it’s going to be tough. These are all going to have to be WPA-like taxpayer funded jobs. Look for a massive stimulus bill of (after all is said and done) the 12-digit variety early next year.

Citi Chats with the Feds

Saturday, November 22, 2008

Will they last the weekend?

From the New York Times:

With the sharp stock-market decline for Citigroup rapidly becoming a full-blown crisis of confidence, the company’s executives on Friday entered into talks with federal officials about how to stabilize the struggling financial giant.

In a series of tense meetings and telephone calls, the executives and officials weighed several options, including whether to replace Citigroup’s chief executive, Vikram S. Pandit, or sell all or part of the company.