Thursday, January 28, 2010


Matt Taibbi /
Populism: Just Like Racism! -- Normally one would have to be in the grip of a narcissistic psychosis to think that a columnist for the New York Times has written an article for your personal benefit. But after his latest article in the Times, in which he compares the “populism” of people who “blame Goldman Sachs” with exactly the sort of racist elitism I ripped him for last week, I think David Brooks might be trying to talk to me...

Brooks here is trying to say that by criticizing, say, Goldman Sachs for mass thievery — criticizing a bank for selling billions of dollars worth of worthless subprime mortgage-backed securities mismarked as investment grade deals, for getting the taxpayer to pay them 100 cents on the dollar for their billions in crap investments with AIG, for forcing hundreds of millions of people to pay inflated gas and food prices when they manipulated the commodities market and helped push oil to a preposterous $149 a barrel, and for paying massive bonuses after receiving billions upon billions in public support even beyond the TARP — that in criticizing the bank for doing these things, people like me are primarily interested in being divisive and “organizing hatreds.” ...

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The Huffington Post:
Is Bernanke Hiding A Smoking Gun? -- A Republican senator said Tuesday that documents showing Federal Reserve Board Chairman Ben Bernake covered up the fact that his staff recommended he not bailout AIG are being kept from the public. And a House Republican charged that a whistleblower had alerted Congress to specific documents provide "troubling details" of Bernanke's role in the AIG bailout.

Sen. Jim Bunning (R-Ky.), a Bernanke critic, said on CNBC that he has seen documents showing that Bernanke overruled such a recommendation. If that's the case, it raises questions about whether bailing out AIG was actually necessary, and what Bernanke's motives were...
NY Times:
Two at Fed Had Doubts Over Payout by A.I.G.

Wednesday, January 27, 2010

Cleaning House

Adam Warner:
Time To Take Care of Some Family Business? -- Should Ben (Bernanke) and Timmy (Geithner) keep their jobs? How about we take care of some family business here? I mean obviously not saying we should have goons shoot them, but wtf, let's clean house. Seriously...

I kind of agree with Bob Marcin's general point here.
Bernanke Out? QE Out? FHA Out?

It's a load of crap, I say. What's that?

It's a load of crap that we have to manage the economy for the sole sake of the stock market's reaction.

Bernanke can go. Geithner can go. 0% interest rates can go. QE can go. The economy and the markets will survive as long as we have competent replacements for important slots and policies that do the right things. We can make necessary changes without causing the end of the world.

First the bulls said we needed the Infinite Intervention to save the world. Now they say we must keep it and its cheerleaders in place to save the bull market. What kind of crazy world do we live in when stock paper asset prices determine our economic policies?

If 2% is the correct fed funds rate and Volcker is the right Fed head, and if the Fed must stop purchasing trillions of mortgages, then those things must happen -- even if it means a pullback in share prices.

We got into this mess because Greenspan and Bernanke wouldn't ruffle markets, always pulling out the interest rate cuts in a financial decline -- i.e., the Greenspan Put. The bulls who say we must coddle the equity markets with bad policy like too-big-to-fail and won't-it-rile-the-markets and can't-stop-the-QE are putting short-term paper profits above the right long-term decisions. And that's a shame...

Tuesday, January 26, 2010

No Bottom in Home Prices?

Zero Hedge:
Bottom In Home Prices, a Decade Away -- Few people realize that home prices in the United States have only risen in a sustained manner twice in the last 116 years. Edward Kim, hedge fund manager of 2GTT, LLC, brought this fact to my attention and I know very few other people who are aware of this reality. This data can be found below in the American House Price Index created by Robert Shiller. Other than the two aforementioned periods, all others have either seen declining home values or periods of stagnant or volatile prices with a net zero change. In 116 years, only twice have home values appreciated in any rolling 8-year period, adjusted for inflation. The chart below shows data to 2006, the index now stands at about 146 for Oct. 2009...

Robert Shiller's American House Price Index

Zero Hedge:
Observations On The Ongoing $1.5 Trillion GSE Wealth Transfer -- John Hussman shares an interesting perspective on yet another from of intergenerational wealth transfer (aka theft), this time involving the US (and by implication its taxpayers), its increasingly unmanageable debt load, and the resultant preservation of wealth of lenders to the nationalized GSE complex, which is massively underwater but will never be forced to be impaired on its holdings, for as long as the current Fed leadership is in place, and the chimera of "change" continues being just that. The kicker - Congress has no way whatsoever to prevent this theft from happening. Once again, America's entire legislative apparatus has been bypassed in order to bail out the reckless lenders who inflated this whole credit bubble in the first place...

Sí: California is the First Failed State
California is the First Failed State

Andreas Kluth /
We won: California IS the first failed state

Saturday, January 23, 2010

The Secret Bank Bailout

If true, that the Fed overpaid mark-ups when buying and selling Treasury securities, it is a criminal scam. That's money that should end up benefiting taxpayers.

Robert Wenzel /
The Secret Bank Bailout --

There's one method that the Federal Reserve has been employing to shovel money to the bank elite that is rarely mentioned, though I hear the sums that have been shoveled are in the billions and they are showing up on the books of firms like Goldman Sachs as pure profit. It's really pure scam.

Here's what went on for months, according to traders familiar with the situation.

When the Federal Reserve buys and sells Treasury securities it does so through primary dealers. Goldman Sachs and JPMorgan are among the select elite firms that, naturally, got into this club...

Once the Fed and Treasury started shoveling money in every possible way they could think of to the elite banks, the word came down to Fed traders to "ease up" on the mark ups and down. Let the banks take a "healthy" mark up and mark down, they were told. I'm advised that the "healthy" mark ups and mark downs have resulted in the Fed overpaying on their trades with primary dealers to the tune of billions. These billions are looking like profitable skilled trades, when they are nothing of the kind. They are hidden gifts from the Federal Reserve that are generally unseen, unknown and will never be paid back...

Thursday, January 21, 2010

Wednesday, January 13, 2010

I Ain't Pay'n Bupkis!

If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem. - Jean Paul Getty
Items of Interest:

Peter Atwood / Minyanville:
Why Vilifying the Banks Matters -- For as long as banks have existed, the industry has suffered from a perception problem. From the money changers in the temples to Mr. Potter in It’s a Wonderful Life, banks and bankers have been reviled. To me, it's inherent to the business. A borrower’s current gratification, pardon the pun, is mortgaged for the future. The moment a loan is made, an obligation is born.

But of late, what has always been a tenuous relationship between the general public and the financial services industry has turned particularly ugly. From “reprehensible” subprime lending activities to “obscene” post bailout earnings, the current perception is that our banks have unduly profited from the customers and the nation these firms supposedly serve.

At its core, it's a violation of public trust.

Unfortunately, it's this same public trust that serves as the foundation for our banking industry. As inherent middlemen, banks must trust a borrower’s willingness to repay a loan as much as depositors must trust the banks. Failure in either direction creates catastrophe.

In the 1930s, it was the breakdown in depositor confidence that led to bank runs, and ultimately the creation of the FDIC*.

In contrast, what appears to be happening in this crisis is a breakdown in borrowers’ willingness to repay loans. In increasing numbers, those who can are opting for “strategic default” or bankruptcy...
Robert Lowenstein / NY Times:
Walk Away From Your Mortgage! -- No one says defaulting on a contract is pretty or that, in a perfectly functioning society, defaults would be the rule. But to put the onus for restraint on ordinary homeowners seems rather strange. If the Mortgage Bankers Association is against defaults, its members, presumably the experts in such matters, might take better care not to lend people more than their homes are worth....
John Robb:
The double standard on debt defaults. The aggressive behavior of corporations and high net worth individuals relative to debt and contracts will be copied by the rest of society. Get over it, game theory dictates this. The result a legalism so intense (since basic norms of behavior can't be assumed, they must be spelled out with excruciating detail and enforced through lengthy and exhaustive monitoring) that the overhead expenses of running our economic system become unsustainable. Why? This behavioral roll-out converts the economic returns on societal complexity already in place (systems we built to solve past problems) from marginally positive returns (I'm being generous) into deeply negative drags on all economic and social activity.
Diana Olick / CNBC Realty Check blog:
Walkaways, Pay Option ARMS Hit Banks Bad -- A lot of reports out today collectively gave me a very bad feeling about the state of our current housing recovery.

First, Amherst Securities Group took a look at Pay Option ARMs. These are the adjustable rate loans so popular in 2006 that allowed you to choose your monthly mortgage payment, while tacking what you don't spend on to the principal of your loan. Only 9 percent of these loans had full documentation from the borrower and 76 percent were originated in California, Florida, Arizona and Nevada, our four disaster states for housing. It should therefore come as no shock that they are suddenly approaching subprime in their delinquency status. So while we all sit around saying that the subprime loans have already worked their way through the system, they're fast being replaced by POA's. "For 2006 securitized issuance, 61% of subprime loans have defaulted, as have 49% of the option ARMs," according to the Amherst report...
Galveston County News:
Lawsuit accuses bank of seizing wrong house -- GALVESTON — A West End property owner is suing Bank of America Corp., asserting its agents mistakenly seized a vacation house he owns free and clear, then changed the locks and shut the power off, resulting in the smelly spoiling of about 75 pounds of salmon and halibut from an Alaska fishing trip and other damages...
NY Times:
For Bankers, Saying ‘Sorry’ Has Its Perils -- As America recovers from the worst financial crisis since the Depression, some of the nation’s chief executives are offering that rarest of statements — an apology.

But often, their words are so carefully parsed, scrubbed by lawyers or picked over by public relations professionals that it is unclear just how much mea is in their culpa...
Henry Blodget / The Business Insider: YEAH, BABY! Massive Taxpayer-Sponsored Wall Street Bonuses! -- Thank you, Tim Geithner! Thank you, Ben Bernanke! Thank you, Hank Paulson! Thank you, Larry Summers! Thank you, Barack Obama!

Thank you, AMERICA, for making this yet another absolutely great year to work on Wall Street!

Monday, January 11, 2010

Linkage — 1/11/09

Items of Interest:

Recession Wire:
Recession Briefing: One in Five Men Unemployed -- The recession and the resulting shortage of good jobs have spurred a jump in applications to law schools and a growing interest in graduate programs. (New York Times)

One in five working-age American men does not have a job, according to the latest federal employment numbers, an all-time high that illustrates the extraordinary toll this recession has taken on male-dominated professions in particular. (Huffington Post) [...]

Pragmatic Capitalist:
THE ULTIMATE GUIDE TO 2010 INVESTMENT PREDICTIONS AND OUTLOOKS -- We’ve compiled many of the very best outlooks from various analysts, gurus, hedge funds and investors. We hope you find the list helpful in mapping your successful 2010...
David Rose / Daily Mail:
The mini ice age starts here — The bitter winter afflicting much of the Northern Hemisphere is only the start of a global trend towards cooler weather that is likely to last for 20 or 30 years, say some of the world's most eminent climate scientists. — Their predictions …
Mikkel Fishman / The Moderate Voice: Global Warming Reporting Is Basically Libel
Dubai’s First Foreclosure May Open Floodgates in Worst Market -- Dubai’s housing rout sent prices down 52 percent in the past year, prompting some homeowners to abandon their cars and mortgage payments and flee the country. Not one received a foreclosure notice.

Until now...

Monday, January 4, 2010

National Debt Road Trip

Benn Steil / Wall Street Journal:
Prepare for a Keynesian Hangover -- Our government's spending orgy will haunt us in 2010.

Amusing Ourselves To Death

Recombinant Records -- cartoons by Stuart McMillen

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