Items of Interest:
Freddie Mac seeks $30.8 billion in aid after massive 2008 loss -- The government-controlled mortgage company also announced a replacement chief executive. Freddie Mac, facing mounting damage from the U.S. housing crisis, said Wednesday it will ask the government for nearly $31 billion in additional aid after posting a gargantuan loss of more than $50 billion last year...
Freddie Mac Reports Fourth Quarter and Full-Year '08 Financial Results — Fourth quarter 2008 net loss of $23.9 billion, or $7.37 per diluted common share, compared to a net loss of $25.3 billion, or $19.44 per diluted common share, in the third quarter of 2008. Losses were driven primarily by net mark-to-market declines on the company’s derivative portfolio, guarantee asset and trading securities; increased ...
Freddie Mac: $23.9 Billion Loss, Asks for $30.8 billion in funding
discussion:Tom Maguire / JustOneMinute: So Many Numbers — What are the odds of the US economy entering a depression?Taegan Goddard's Political Wire: Obama, Geithner Get Low Marks from Economists
discussion:Now You Own It, Mr. President
The fall in China’s exports has now caught up with the fall in China’s imports -- China has now released its February trade data. Andrew Batson of the Wall Street Journal summarizes:
China’s customs agency said Wednesday that merchandise exports in February plunged 25.7% from a year earlier. That is one of the biggest drops on record, and extends the 17.5% fall in January for a fourth straight monthly decline. Imports declined by a slightly less dramatic 24.1%, thanks in part to government spending, which other data also issued Wednesday showed picking up in February. That left a monthly trade surplus of $4.84 billion – the smallest in three years. The number was just a fraction of January’s $39.11 billion, reversing a string of record surpluses in recent months...
The Looting of America’s Coffers -- Sixteen years ago, two economists published a research paper with a delightfully simple title: “Looting.”
The economists were George Akerlof, who would later win a Nobel Prize, and Paul Romer, the renowned expert on economic growth. In the paper, they argued that several financial crises in the 1980s, like the Texas real estate bust, had been the result of private investors taking advantage of the government. The investors had borrowed huge amounts of money, made big profits when times were good and then left the government holding the bag for their eventual (and predictable) losses.
In a word, the investors looted. Someone trying to make an honest profit, Professors Akerlof and Romer said, would have operated in a completely different manner. The investors displayed a “total disregard for even the most basic principles of lending,” failing to verify standard information about their borrowers or, in some cases, even to ask for that information.
The investors “acted as if future losses were somebody else’s problem,” the economists wrote. “They were right.” ...
Alan Greenspan / Wall Street Journal:
discussion:David Fiderer / The Huffington Post: How Dumb Does Alan Greenspan Think We Are? VeryBruce McQuain / QandO: Hayek, Greenspan And The Designs Of MenPeter Boockvar / The Big Picture: Greenspan's Denial — Since I've been critical of the unstable …Myglesias / Matthew Yglesias: Greenspan: Greenspan is Not to Blame for the Housing BubbleLarisa Alexandrovna / At-Largely: Comrade Greenspan says that the Ministry of $$ didn't do it...Michael Barone: Alan Greenspan Responds to My Yesterday Blog Post on the Financial Crisis
Cafe Hayek: Greenspan vs. Taylor -- The former Maestro (now demoted to Mouse) defends himself.
Madoff's Refusal to Admit Conspiracy Said to Have Scuttled Deal – Bernard Madoff didn’t agree to a plea deal with U.S. prosecutors because of their demand that he admit to a conspiracy, a charge that would require him to say he worked with others in the largest Ponzi scheme in history, according to people familiar with the matter.
Madoff’s decision not to negotiate a deal means the government won’t have his help in determining whether his employees assisted in the fraud, the people said. Madoff, 70, will plead guilty tomorrow to all 11 counts he faces without any promise of leniency or anything else in return. He could receive 150 years in prison at sentencing on charges including fraud, perjury and money laundering...
discussion:Jeralyn / TalkLeft: Madoff and Bail Pending Sentencing
NY Times -- Madoff Faces Life in Prison for Vast Swindle — Federal agents and court security officers surrounded Bernard L. Madoff on Tuesday as he left the federal courthouse in Lower Manhattan. Prosecutors say Mr. Madoff is facing 150 years in prison...
discussion:Myglesias / Matthew Yglesias: Department of WTF — One of the best ideas to come out of the New Deal was the FDIC.John Cole / Balloon Juice: Ralph Nader's RevengeDday / Hullabaloo: Big Bank Strikes AgainMary Kane / The Washington Independent: FDIC Strapped Because It Quit Collecting Premiums in Good Times
Buffett's Unmentionable Bank Solution -- Last week's post mortem on the Fannie and Freddie takeover was received better than we might have expected. A few readers assumed Eddie Lampert and Bill Miller, fund managers who lost money when Fan and Fred were seized, and whose letters to their own investors we quoted, were engaged in special pleading.
In fact, the nationalization of Fannie and Freddie is water over the dam. The men's perspective may be one of pain, but it is historical pain.
Now comes Warren Buffett, a big investor in Wells Fargo, M&T Bank and several other banks, who, during his marathon appearance on CNBC Monday, clearly called for suspension of mark-to-market accounting for regulatory capital purposes...
discussion:Joseph Lawler / AmSpecBlog: Mark-to-Market Update — Holman Jenkins's article in today's WSJ …David Henderson / EconLog: Buffett on Mark to Market
David Goldman / Inner Workings:
Warren Buffett: Leave the Banks Alone! -- BUFFETT: Yeah, the interesting thing is that the toxic assets [of American banks is] if they’re priced at market, are probably the best assets the banks has, because those toxic assets presently are being priced based on unleveraged buyers buying a fairly speculative asset. So the returns from this market value are probably better than almost anything else, assuming they’ve got a market-to-market value, you know, they have the best prospects for return going forward of anything the banks own...
discussion:Johanna Neuman / Top of the Ticket: Ron Paul defends earmarks, says anti-pork McCain is just grandstandingDoug Mataconis / The Liberty Papers: Is Ron Paul Right About Earmarks ?The Raw Story: Ron Paul: McCain's earmark opposition just ‘grandstanding’
- This Crisis Requires More Than Money - Steven Pearlstein, Washington Post
- How The Crisis Fooled BofA CFO Joe Price - David Katz, CFO Magazine
- How To Account for Tuesday's Rally? - Randall Forsyth, Barron's
- Seven Quick Steps To Avoid a Depression - Mark Haefele, TheStreet.com
- The Eight Most Optimistic Prognosticators - Will Swarts, SmartMoney
- Obama Takes On Market-Based Government - Thomas Frank, WSJ
- Obama's Policies Have Made Recession Worse - David Harsanyi, Reason
- What Democrats Really Think Of Tim Geithner - Dan Gerstein, Forbes
- Obama Needs Buffett, Not Vice Versa - John Dickerson, Slate
- If Tax-Cut Lapsing Is Class Warfare, Let's Fight - John Berry, Bloomberg
- Our Real Estate Obsession Endures - Steven Malanga, RealClearMarkets
- With Banks, We Have Moral Hazard On Steroids - Thomas Cooley, Forbes
- AIG's Demise Speaks to Mark-to-Market's Importance - James Keller, RCM
- Buffett's Mark-to-Market Solution - Holman Jenkins, Wall Street Journal
- Get Ready For the Coming Economic Storm - Nicholas Von Hoffman, Nation
- Adam Smith's Market Never Stood Alone - Amartya Sen, Financial Times
- Upbeat On Uptick Rule's Renewal - Editorial, Investor's Business Daily
- Bernard Madoff: The Villain We Needed - Chadwick Matlin, The Big Money
- Is Washington's Love of Labor Lost? - Kirsten Powers, New York Post
- Hero Needed to Fight Obama's Healthcare Tax - Amity Shlaes, Bloomberg
- It's Time to Rein In the Economic Chaos - Andrew Grove, Washington Post
- Letting Lehman Go Didn't Crush The Financial Markets - Business Insider
- Alan Greenspan, The Excellent Obfuscator - David Merkel, Aleph Blog
- Should The Market Ever Go Up 7% in a Day? - Doug McIntyre, 24/7 Wall St.
- Paging Dr. Copper--The Bears Are Watching - Todd Sullivan, ValuePlays
- So, Who Started the Financial Crisis? - Stephen Grocer, Deal Journal
- Has the Oil Price Slide Ended? Will Gas Prices Go Up? - BloggingStocks