I have been reading my weekend section of the FT this afternoon and came across two unrelated articles that struck a chord with me with respect to the financial markets. Some items that are notable, 1) Treasuries, since the credit crises, have been the only acceptable collateral in the repo market [http://www.ft.com/cms/s/0/aed6f9c8-c035-11de-aed2-00144feab49a.html?nclick_check=1] 2) There are still non financial companies out there that are writing off huge losses in derivative "investments" that are way out of proportion to the revenues they had as functioning companies, making me think more non-financial companies than I originally thought got hood-winked by Wall Street into derivative positions way out of line with the regular functioning of their business.[http://www.ft.com/cms/s/0/95d34212-bfed-11de-aed2-00144feab49a.html]
So what does this mean?
I have been doing some thinking lately and analyzing the Fed's rate action since 2000 and have decided the biggest problem created by the Fed was not bring rates to historic lows after the 9/11 terrorist attacks. The problem began when the jacked up rates in early 2000. Then after realizing they “goofed” dramatically reversed course in 2001 only to overshoot to the down side where they left rates to low for to long. When realizing this, the Fed followed with a draconian attempt to return the rates back to "normal" beginning in 2004, which wrecked havoc with the credit markets and economy.
I came across this comment from "White House Economist" off the Dow Jones Newswire today referring to an article in the http://voices.washingtonpost.com/44/2009/09/24/goolsbee_chides_aig_ceo_to_min.html?wprss=44 Washington Post.
I find it objectionable that AIG has a new CEO with anywhere near the attitude he has. I don't care if the guy thinks Washington is clueless about business or esp. running his business. On this front he is more than likely correct. It is very unfortunate we (the American Taxpayer) own 80% of the blasted company. I would prefer we own 0% I don't give a darn if AIG would have imploded. Personally I think it did not implode because of the number of "well connected" wealthy bank running CEO's and "investors" that would have lost a fortune if it did called their "friends" running the Treasury and said, "Bail out AIG or we will loose a fortune". So the American Taxpayer paid to make sure that Goldman Sachs can pay it's employees $700,000 in bonuses each this year.
Besides the fact this is the biggest financial crime ever perpetrated against the American people, mind you done without any approval from our impotent legislators, the guys running the show at AIG should have better taste than say such things in public about the "crazies" in Washington. I mean how many people in the entire Government are qualified to run a sprawling 100 + country "insurance" operation, let alone all the other far flung divisions they own? There are not many people in the world that understand AIG enough to "run" it.
Obviously Hank Greenberg was running an operation with "Enron" financing. It has been reported he was moving money around to skirt the US regulators (Partly allowed because of the arcane and completely outdated insurance regulation in the US which is still state by state and completely out of touch with the fact that the industry is national and international in scope) and pad his accounts to hide the billions of dollars in risk and losses he began to accumulate when they kicked him out over one false reinsurance deal for which was caught.
Hank still gets "answers" when he make calls to Washington and as far as I can tell he is a one man lobbying effort right now to "save" his old company. He has said himself "all of his wealth" is tied up in AIG shares (though he sole enough to pay some bills) and he obviously thinks he can influence "Washington" to loosen up credit terms and allow AIG five years or so to "unwind" loosing positions and rescue the company's balance sheet.
It is not going to happen. AIG should be "gone" as we know it and unfortunately, not unlike the "bad banks" the Chinese created after bailing out their banking industry about a decade ago, the American Taxpayers will NEVER see the $160 billion sunk into the company. This is reality. But the bankers, hedge funds and other "investors" that benefited from the taxpayer bailout "got theirs" and they are living large off what is left of the crumbled institution's lousy contracts.
Shame. Mr. Robert Benmosche should be fired. AIG wound down, sooner rather than later.
Any Surprise that Friday before next week's Treasury Auction the rates are up significantly? Should not be. The Fed's decision to keep pre-announcing it's auctions has and continues to give the players in market the ability to push up interest rates prior to the auction (pushing down the price) then miraculously after the auction, rates drop back down (with prices on the debt going up) allowing the 18 primary dealers required to bid at Treasury auctions to rake in easy profits. I am very disconcerted by this practice ever since I first read about it some months ago. It is an absolute travesty that our government, the Fed and Treasury continue to feed the profits of a bunch of insolvent institutions on the backs of the taxpayer and now on the backs of other investors. Of course you have seen the percentage of buying of these offerings by so called "indirect bidders" increase by a factor of 4 since late 2008. My unscientific findings of the percentage of uptake by "indirect bidders" are thus: Last 3 months of 2008 = 15% Jan 09 = 18% Feb 09 = 24% Mar 09 = 33.5% April 09 = 38.5% May 09 = 37.3% June 09 = 43.8% July 09 = 54% Aug 09 = 62.5% (a Record) It is nice to know the world of "indirect bidders" is not ignorant. They see "free money" and are taking an increasingly large portion of initial offerings. Are they then selling this supply back to the market for a quick profit? Are they being seduced into taking the product with guaranteed short term profit margins? Is it possible that no matter what is going on now that eventually the free ride will end and ultimately nobody will want to own the massive supply of debt being put out there right now? I don't know the answers to these questions but I do get the sense that what the Treasury is doing is purposefully padding the profit margins and accounts of anyone who wants to "play" in the auctions. What their multiple motives are, I don't know. What the result is... Big short term profit margins, big short term commissions, big short term pay and bonuses for insolvent institutions, yes a BIG PAY DAY EVERY MONTH FOR THE SAME INSTITUTIONS THAT ARE SUPPOSED TO BE UNDER SUPERVISION AND WE ALL KNOW ARE INSOLVENT. Yes, this is just another candle in the eye of the average American for the gain of institutional players on the "Wall Streets" of the planet... For now. Here is a nice chart from the Treasury from previous years:
Bidder Category Purchase Shares for All Treasury Securities
Category
Mean
Standard Deviation
Minimum
Maximum
Primary dealer
70.9
14.6
33.6
100.0
Direct bidder
2.4
3.6
0.0
31.6
Indirect bidder
21.6
12.7
64.8
Noncompetitive
5.1
4.7
16.8
Source: Author’s calculations, based on data from the U.S. Treasury Department.
Note: The table reports descriptive statistics of bidder category purchase shares in percent for all 576 U.S. Treasury security auctions between May 5, 2003, and December 28, 2005.
I must comment on the idea that pulling down our $100 billion in foreign aid to help other initiatives in the US is somehow going to be “good” for America. This argument pops up every time the US Mindset returns to focus on the disastrous budget deficits we have been running for nearly 2 generations now. Unfortunately, like the ups and downs of our economy, all discussion related to the deficit dies as soon as the economy turns the corner and people go back to focusing on making money in the latest paper bubble. It is also unfortunate that these incredible "peace time" budget deficits do little more than expose the underlying reality that the US economy has become so reliant on consumer spending and non manufacturing "industries" that our bubble to burst cycles have become more frequent (about every 10 years) and more dramatic. Obviously, with the economy based on businesses that have no physical infrastructure and or physical output capacity (the production of intangible products) they are able to grow rapidly when able to exploit the latest economic / financial gimmick and can just as rapidly shrink when that "event" is played out. Consumption as we all know is primarily of foreign made products of all varieties. Getting back to the argument that somehow reducing our "foreign aid" and bringing back a few billion dollars back to the US as having any tangible ability to "enhance" our economic development. This is a completely false argument and even when foreign aid has been reduced during tough economic times, it quickly returns during boom times and is usually a greatly celebrated event stamped by whoever happens to be in the White House as an example of the how "generous American" people are willing to back whatever pop-charity is prevalent at that time. Before I go on, I will preface my argument with my own jaded view of the machine that functions in Washington of ex-piece-corp / lobbyist / international "aid" how to make $200k a year "non-profits" with "do gooder" figurehead cronies "leaders" related to the various politicians, lobbyist, ex-politicians etc., all of whom are very good at raking money out of the Federal Government to feed themselves using their idealistic agenda. These many folk are professional and very good at making carriers for themselves, backed by US Gov money under the guise of "international aid" and normally spend most of their time traveling the world, speaking, living in posh neighborhoods of DC and otherwise justifying their idealistic agenda to other folks who look just like them or aspire to create their "careers" picking up in their footprints. The vast majority of US Foreign "aid" goes in the pockets of these folks and their extended networks and little of it gets anywhere near the end "user" or "target" of the program or individuals it was designed to "help". I could go on but you get the point. In addition, the "International Aid" machine in Washington and associated labyrinth of non-profits (most often not of international focus) are also often the best way to pay for access to the political machine. "Give $50k to my wife's / sister's / friend's / ex-business partner's / other relative's charity and we can talk" kind of politics. Having said all of that, I will go back to the argument that somehow reducing foreign aid is going to better our economy if we redirect that cash. We have directly spent since our pointless invasion of Iraq no less than $1 Trillion. I remember Bush's speech during the height of the financial crises when talk of $700 billion to bail out financial institutions was being thrown around and thinking, "George, why don't you just say it? You know how much $700 billion is, you spent more than that battling your fictitious "enemies" on the other side of the planet for the past 5 years." George could have just said, "T-ain't anything America. Just deal with it. I know the war was a great excuse to use my access to the largest "bank" on the planet to write checks to my friends and buddies, esp. the ones who lost so much money in the .dot com crash and Enron like debacles of the early part of my presidency, but this, well, now we have another "crises" primarily created by my friends and I got no nation to invade so please excuse me if I just hand this money over directly to them this time!" Well, that is reality you know. So what about "foreign aid"? What about pulling our vast military presence out of Japan, 2/3 of it out of Korea and Europe? What about exiting Iraq? Can we get that Trillion Dollars (plus the estimated Trillion or so legacy costs) back? Never. What about the pointless war in Afghanistan? Does anybody ever ask themselves what the real long term ramifications of a decade war against Muslim extremist around the globe will have on the long term desire of these folks to one day actually organize themselves some kind of multi-nation alliance and truly threaten other nations? I mean really, right now and for the years going back to the beginning of radical Muslim movements against nations outside of Israel (the true root of all this mess), was there ever a time in modern history they had the potential to do anything more than cause a bit of terror by blowing something up with some rudimentary explosive devises or come up with more creative ways to use our own technology against us like in the 9.11 "attack"? Come on? Help me out here. How many Americans ever went to bed worried that some "army" from the middle east would invade their shores? We and a few other developed nations feed our "allied" Muslim nation friends all of their military technology for crying out loud. These folks cannot even make a microphone or CD player in their own nations let alone a computer or sophisticated guidance system, navy fleet, air force or any other mass weapon arsenal necessary to threaten other nations. Isn't it true the primary reason we don't want Iran to develop the technology to enrich uranium is that we really don't want any of the nations on the planet that do not align themselves with our capitalist / "democratic" value system to have the ability to create ANY technology or products which could head them in the direction of being able to create real weapons of mass destruction like we do? And so with all this, is taking $25 or $50 billion out of our "foreign aid" going to solve anything? We are directing hundreds of billions of dollars every year to our global military infrastructure; billions more are spent subsidizing our agricultural and agricultural exports; billions more are being spent / or credited to companies for the removal of fossil fuels from all corners of the planet; billions of dollars are being sucked out of our economy, from each individual, by companies operating within pathetically designed regulation / lack of regulation of our energy companies and infrastructure; billions of dollars are being sucked out of the American taxpayer every year for the construction of and maintenance of a transportation infrastructure designed specifically for the single most destructive product in use on the entire planet, the automobile; billions of dollars in energy literally escape right in the atmosphere by the pathetically designed and geographically dispersed regulation of building standards that allow millions of structures to be built annually with the environmental soundness of a mid 20th century box; billions of dollars are being spent incarcerating millions of Americans each year instead of educating them (with more of these dollars going into private hands each year);billions of dollars are being sucked out of the wealth of people, their pension plans and their governments around the planet monthly by the vast unregulated financial industries that have learned to rake as much cash out of the planet's financial wealth as possible with no nation, government, regulatory authority or power to answer to but the pursuit of as much wealth as humanly possible... I could go on about how many ways $25-$50 billion a year are completely wasted, lost, sucked into the coffers of companies riding the "free economic" poorly regulated and wasteful economy we have created but I will rest here.
Suffice to say, any person who decides to go after the politically easy, populace target of "foreign aid" when the true causes of our financial mess and destructive economic model lies right in front of us, is only succumbing to a failed logic and worse, exposing themselves to a deeper sense of "America is right and great and we should look after ourselves even if much of what we do economically and militarily is pathetically harmful to the planet and humanity in general."
I am forever amused by Washington's half-hearted and weak attempts to "regulate" various aspects of the financial markets. All of the approaches they are taking or attempting to take are weak and useless and easy to circumvent.
Most amusing is when a company like Goldman Sachs says out of one side of their mouth that they support limiting exposure to commodities contracts to speculators and at the same time out of the other side of their mouth they are saying, "We are the exception because of our unique offerings and the need to be able to have unlimited access and exposure to 'protect ourselves' against the exposures we offer to our clients.
There is nothing Goldman would like better than to limit other's exposure so they can have even more power in the market place. Goldman is nothing but a big gambling house. Look at the "products" they offer regularly. They are like, "I will pay you X amount of money if you buy this "contract" and the value of the underlying "asset" or "index" increases or decreases in value over Y amount of time". They limit ones gains but not losses. They also "protect" themselves against losses with derivatives.
There is NO limit to the amount of these types of products they can and do offer. This is only one example of how Goldman "creates" products based on underlying derivatives and commodities and indexes and hedges themselves against losses.
There is no legitimate reason for these products to exist. Goldman simply games the market. They use the billions they earn with massive leverage in the derivative markets to buy real assets where they control and monitor the output of the various commodities they are trading. They own directly or indirectly all types of commodity storage facilities, distribution facilities and outright production.
Goldman and Morgan Stanley should be immediately stripped of their bank holding status they were granted during the financial crises (along with Cap One, American Express, State Street and a host of other non retail bank finance companies as well as forced to repay all government guaranteed debt outstanding at artificially low government backed interest rates. They are fast back to their old formulas of risk taking and gambling.
The CFTC is NOT the agency to be doing piecemeal regulation. The financial industry needs total overhaul and total regulation and we desperately need a return to the Glass-Spiegel Act days of separating retail banking from insurance from investment banking etc. We need total regulation of the hedge fund industry and we need to come up with completely new ways to deal with the way in which the financial industry has learned to game the entire market with technology, leverage and control.
I was pleased to read on http://www.bloomberg.com/apps/news?pid=20601087&sid=alaMtgFAIQoc&refer=home# Bloomberg today that Mr. Geithner has a plan to regulate over-the-counter derivatives. This is so overdue and I have been frustrated for 3 years by various leaders in Washington do anything about this market even though it was largely responsible for the collapse of the global economy.
Not only was it largely responsible for the collapse but very dangerous precedents are being set as I write this where these exotic financial products are being used as a gauge to price debt.
These contracts represent a $684 trillion over-the-counter derivatives market and they are now typically conducted over the phone between banks and customers!
What an absolute trip. I know with the "trillion" word being passed around like water lately another "trillion" figure may not sink in but Think about this number for a moment. What is the US debt, $10 Trillion? We are talking $684 trillion here. Yes, yes many of you will say, "So what." there are trillions of dollars in "derivatives" out there on every other product, commodity, stock etc. traded every day. Yes, "traded" on "open markets" with clear pricing and risks born by those who trade them and these types of "products" are not "insuring" against default of debt.
I was so incensed when I heard a clip by Lloyd Blankfein where he made this point with a straight face. The guy is a raving lunatic in my book to be able to do so. He is a "Hitler" of finance. There is no question. Some may call him a genius but he defends destruction and annihilation of all around him from a financial perspective and as I have said a million times and will continue to say, with 6 billion people on the planet all more interconnected every day, guys like Blankfein and the businesses they run no longer serve any benefit to humanity, on the contrary, they are destructive to humanity, our "capital system" and serve no allegiance to any good on the planet other than to do whatever is necessary to return 30% plus to their investors irrespective to the damage they cause economies and individuals and they operate without rules governed by any sovereign state, territory or jurisdiction (except for the strings now on his firm after taking money from the government and borrowing to feed his machine with the backing of the FDIC).
The more I think about the bail out of firms like Goldman Sachs I really get fired up. Goldman is / was a gambling firm, nothing more, nothing less. They did business with the biggest gamblers out there, hedge funds, private equity, off balance sheet firms of banks and individual investor / speculators.
We bailed them out. They were not a regulated bank / financial firm. The Treasury had no right to bail them out with taxpayer money, or Morgan Stanley or any other unregulated entity.
The fact that the Treasury and Fed rushed through applications to make these firms "regulated banks" infuriates me. This was a complete hijack of sensible regulations and laws in place to define what firm is a regulated entity that has to conform to routine inspections and a certain legal framework and those that can gamble at will with money from people who wish to be involved in their conduct.
As far as I am concerned, the folks in Washington who orchestrated the bail out of unregulated financial institutions and who are now making over a trillion dollars of taxpayer money available to unregulated industries to buy debt should all be indicted and tried for wrong doing.
I am very firm on this opinion. In addition, I read yesterday in the http://online.wsj.com/article/SB124139573742681835.html WSJ about the way banks are treating business lines of credit. It appears no only have hedge funds and unregulated (now regulated) gambling institutions have figured out how to make a killing on CDS products but now the banks are using the CDS market pricing of institutional debt as a guide on pricing that debt. From article:
Now, lenders are cutting the length of many commitments to less than a year. They are charging higher fees for the lines of credit, known as revolvers. And instead of promising an interest rate determined mainly by the company's credit rating, banks will now charge more if the cost of insuring the company's debt against default is higher.
I feel this is very dangerous. Although the traditional credit rating agencies completely failed to do their job correctly for the last 5+ years with respect to the secondary market for various types of debt and companies who engaged in selling various secondary products, to resort to making credit available and at what price based on what speculators are paying and or charging for credit default products is very dangerous and will lead to very distorted pricing and benefit money lenders and speculators at the cost to real companies that create real products and employ people in industries that ad real economic output to our GDP (unlike the financial products / debt "industry")
Yes, remember that term, "Regulated Monopoly"? I remember it well having worked in the telecommunications industry for 15 years in the "unregulated" paging and cell phone industry after the US system of market duopoly with a** backwards analog technology finally opened up leaving us a minimum of 5 years behind the rest of the developed world. The telecom companies who were regulated monopolies were the worst run companies in the nation, keeping Americans in mid 20th century telecommunications all the way through the Internet creation and evolution as a consumer accessed network that became what it is today. Dealing with them was like dealing with the Kremlin. To this day, America is 5 to 10 years behind other developed nations like S. Korea, Germany, Japan, Singapore etc. in it's telecommunications infrastructure.
So, what I read today from the power industry side was stirring. I can tell you for sure, America's regulated monopolies, the power companies, were just as bad throughout the history of power in America. The problem we have today is as our impotent government "deregulated" the telecommunications and power industries they did so by rubber stamping plans created by the pigs (think tanks, "non-profit" corporate funded institutions and directly from the companies themselves) legislation that did nothing more than deregulate the regulated pricing mechanisms without allowing any competition to gain access to the infrastructure or industry on reasonable terms or at profitable prices. Competitors were sued and the weakly written legislation was challenged in court by the very industries who were "deregulated" using their limitless lawyer bank accounts managing to overturned any hint of "real" competition written into the toothless laws.
I could go on and on just using the pathetic example of the "deregulation" of Constellation Energy in the Mid Atlantic / Maryland market (BGE is our local distributor here) and how it hamstrung any potential competitor for 10 years after the signing of the pathetic legislation. One could also write a dissertation on the "deregulation" of Bell Atlantic (now Verizon) on the same basis.
So why am I babbling about this today?
I have thought long and hard about our president's decision to cap pay of TARP recipient’s top people and have come to the conclusion it is just plain to low. I would like to have heard some rationale for the cap. We are talking about financial institutions here that vary from a few million dollars in market cap to billions. Any one off salary cap is completely out of touch with several realities: 1) the size of the firm and responsibility that goes with it, 2) the practical costs of living in places like NYC where some of the biggest firms are centered, 3) the real loss of management flexibility in providing incentives to people at the companies who received TARP.
I got a phone call from my mother the other day. She has been staying in her Jacksonville, FL house for the past 3 months. The call was some routine question about her house here in Maryland then ended. Shortly thereafter she called again. This time it was to vent about something or everything. I am not sure which but the conversation started with something like, “I am really upset about these markets.” Then some spouting about “This $700 billion bail out is ridiculous. Using taxpayer money like this really pisses me off. I am really pissed off about these markets. I mean I worked very hard for my money and now it is nearly gone. That xyz mutual fund I have is down to nothing (she was gleaming when it was going up during the unwarranted record reached in the Dow about a year ago). And what about this damn election… I don’t understand why all these black people are voting for Obama. I mean they are all excited to vote just because he is black. That really makes me mad. They are even registering “homeless” people here. Some guy was given an address like “pillar #4 under freeway…”
OK, this is when I have to just cut off the conversation and hang up (with a few short words expressing my extreme displeasure of her “TV induced Talking Head view of the world”, most likely from the antithesis of intelligent reporting, FOX news).
So what is it about Florida that once my mother has been there for more than 60 days she becomes some kind of extreme right wing racist? After she had been there 5 months or so she usually gets fed up with Florida herself and can’t wait to get back to Maryland. That is when I breath a sigh of relief and realize she is only truly 30 percent right of center and not 70 percent as she becomes after a couple of months in that dreadful state.
Occasionally I get questioned about when I am going to come down and visit. Mind you, my mother’s snowbird home is in Jacksonville. She might as well be in Alabama or Georgia cause everything north of Orlando is not worth a wintertime visit. It gets cold there. The beaches are lacking, the economy non-existent, culture does not exist and it is not perpetually warm. What in the hell would I want to go to Jacksonville Florida for? Anything north of Orlando is just not worth the trip.
My impression of the northern ½ of Florida is that it’s heavily settled by blue-collar northerners who just wanted to be in Florida when they retired and found the cheap real estate enticing. The economy there is like that of a Central American nation where all the “currency” that supports the local economy comes from the pension funds and 401k’s built up while people worked in states with productive economies. Go south of Orlando and you get the better off northerners who can afford the more pristine locations and 365-day warm weather offered by the tropical southern part of the state. Here, for example, is where you get the New Jersey and New York Jews who buy up “nice” condos on the beach in Miami and elsewhere they can use to bribe their reluctant children down for a visit. I mean even their kids cannot resist a free condo on the beach in Southern Florida. In fact, I might even visit my mom if she were down there. But no, she had to be where her siblings settled in the northern part of the state.
Initially there was hope. My mom first purchased a condo on a golf course just outside of St. Augustine, still not far enough south but it was a start. I figured maybe she would find it to cold and move closer to her ½ Jewish cousin who lives just west of Miami. I actually went to her condo for about 4 days in November 2007. It was cold. There was some kind of costal storm that had wiped out the beaches. Everything was deserted. I was told the “season” did not start till December. Huge multi story condo buildings rested on the deserted beaches south of St. Augustine. There were no restaurants, no grocery stores, bars, nothing, just rows of condos on the beach nearly deserted. It was surreal to say the least.
One day the little bridge we drove over from my mother’s misplaced “condo on golf course development” was closed and I had to take a detour to get to town where I would go the 5 Star St. Augustine hotel and borrow their network for a few hours for about $10. I was amazed at what I saw. On this detour only minutes from downtown and my mothers condo was a road bordered by double wide trailers on cinderblocks, tiny bungalows and houses that looked like servant quarters from some long lost Georgia plantation that were dragged down to Florida and had survived for 100 years only because of the hardiness of their tin roofs. I mean, the place was downright poor, Alabama, Mississippi and Louisiana poor. Yep, we were in Florida, home of stolen elections, inbred politicians and God fearing racists.
My trip to downtown St. Augustine with friends from the Netherlands and Germany who happened to be in Florida at the same time, hence my reason for trekking down there, were to find places to hang out and enjoy some bourgeois time in town. Unfortunately since we were there in November (once again before the prime season) the place was perpetually deserted except for an occasional day tripper bus tour, a few off season tourists and some students from the tiny collage in town. What was worse than the desertedness of the place was the lack of places where I would want to spend more than 10 minutes hanging out in. I mean poor towns are quite depressing to hang out in. We found one lively bar at the end of a pretty extensive strip of mostly deserted and closed bars (due to the off season time I presume) where they had live music and some people actually in the place. I met a few locals and one nice girl explained how the majority of the strip of bars I asked her about had migrated into the hands of one or two owners over the years. Yep, this is a reality in many towns in America that have seen they’re past glory come and go. The stately houses become 8 one or two bedroom tenement style housing units owned by one or two old school families and the commercial district follows suit, often by the same clan. That is when the rest of society drags down along with the town. If you have an outspoken attitude you are run out of town and if you are black or lacking in education you get exploited to the n’th degree and if you speak out, your destined for the food stamp line for life.
This is an area where the right wing politicians push for school vouchers (an idea pushed by the right wing that a family can obtain a “voucher” they can take to a school that is “achieving” positive test scores and get out of the cycle of sending their children to failed schools in their home district). The reason they push for the vouchers is these pieces of paper allow the families with the means (i.e.; transportation, income/job, freedom of movement and connections) to get a government issued pay out where they can “self bus” their kids to the one school in the entire county that may be able to have test scores that pass the national standardized tests. What the right wing does not bother to say is that in most school districts in poor states (and even in entire districts in most American cities) there is not one public school that is capable of passing national standardized tests. Thus the damn voucher is a worthless piece of paper unless you have the means to trek your kid to some other far school or district or ability to get them into a “limited access” charter school. The people with these means are going to benefit and they of course are the last people who need it. Hence, the voucher program is nothing but another subsidy for the wealthy conservatives who rake the most “rents” from poorer parts of the nation and want some kind of government handout to get their kids to better schools on the broader taxpayer’s dime. Yea, you got it, Banana Republic, I mean America, well the US anyway.
Let’s not mistake my attitude here. I had only been to Florida once, when I was 15 years old and my mother took us down to visit my right wing religious aunt and her family and to see Disney world (or land or whatever they call it there). I think that trip was also to Jacksonville where my aunt and uncle and cousins had recently moved from Tampa. My uncle was from a big farm family in Georgia and all I remember from the trip were new churches with lots of people, a different way of talking and trying to water ski (Disney whatever is a kind of blur). That trip left no lasting impression. I always made an effort to see my aunt and uncle when they came up north to visit the family though. My cousins were great when we were kids and as an adult I always enjoyed the cultural experience of talking at length with my aunt and uncle about everything. I may trash macro cultural realities but I love communicating with individual people of all stripes.
I don’t however like Florida.
I suppose if I were a CEO of a Fortune 500 company and could use the corporate jet to fly down to my waterside house in Palm Beach or Boca Raton for the weekends like about 60% of them do there might be some reason to visit the place. But even then I wince at the idea of finding any kind of cultural entertainment or other stimulating leisure experience to recharge before heading back to the office in some productive economy state. (Well other than having a rolodex of other Fortune 500 company CEO’s and good social calendar where I could always find the hottest place to hang out and flirt with hordes of beautiful borderline professional women who haunt the place looking to land their sugar daddy CEO. Needless to say, this is not happening any time soon.)
For those of you who are completely miffed by the markets and what is happening, well hope you can repair your toaster... Just know, the Fed is bailing out un unregulated market and all those dollars they are printing are going into the pockets of hedge funds and others who bought the unregulated insurance products making this exercise the largest wholesale transfer of wealth to the wealthy in the history of capitalism.
Lehman Credit-Swap Auction Sets Payout of 91.38 Cents on Dollar
http://www.bloomberg.com/apps/news?pid=20601087&sid=aLkOZnNcDmSQ&refer=home
Some excerpts are here:
By Shannon D. Harrington and Neil Unmack
Oct. 10 (Bloomberg) -- Sellers of credit-default protection on bankrupt Lehman Brothers Holdings Inc. will have to pay holders 91.375 cents on the dollar, setting up the biggest-ever payout in the $55 trillion market.
An auction to determine the size of the settlement on Lehman credit-default swaps set a value of 8.625 cents on the dollar for the debt, according to Creditfixings.com, a Web site run by auction administrators Creditex Group Inc. and Markit Group Ltd.
Based on the results, sellers of protection may need to make cash payments of more than $270 billion, BNP Paribas SA strategist Andrea Cicione in London said. The potential payout is higher than the 90.25 cents indicated by initial results from the auction earlier today. Lehman bonds traded yesterday at 13 cents on the dollar, suggesting a payout of about 87 cents was expected.
No one knows exactly how much is at stake because there's no central exchange or system for reporting trades. It's that lack of transparency that has increased the reluctance of financial institutions to do business with each other, exacerbating the global credit crisis and prompting calls for regulation of the market. More than 350 banks and investors signed up to settle credit-default swaps tied to Lehman...
Some funds may be forced to dump assets to meet the payment demands if they haven't hedged, BNP Paribas's Cicione said.
``Banks can go to the Federal Reserve, or use the commercial paper market where it is still functioning'' to meet protection payments, said Cicione, who said a 9.75 cent recovery rate would lead to payments of about $270 billion. ``But fund managers or hedge funds, once they've used their cash, have only one option: to sell assets.''
The failures of Lehman, once the fourth-largest securities firm, and Seattle-based Washington Mutual Inc. as well as the government takeovers of Fannie Mae, Freddie Mac and Iceland's biggest banks have provided the 10-year-old credit-default swaps market with its biggest test to date. The use of credit derivatives has grown more than 100-fold in the past seven years as investors began using the swaps to bet on companies' creditworthiness.
Fed Meeting
The Federal Reserve Bank of New York is meeting with credit swap dealers and exchanges today to expedite efforts for a market clearinghouse that would reduce risks and absorb counterparty losses resulting from the failure of market makers such as Lehman.
Credit-default swap indexes around the world soared today on concern the deepening credit crisis will trigger company and bank failures. The Markit CDX North America Investment Grade index, linked to 125 companies in the U.S. and Canada, jumped 17 basis points to 215 basis points as of 12:54 p.m. in New York, according to Barclays Capital.
Credit-default swaps are financial instruments that can be based on bonds and loans. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.
The Icelandic banks that failed this week were also often included in CDOs created during 2006 and 2007, according to Sivan Mahadevan, a New York-based Morgan Stanley strategist.
Dear Senator Obama, I am writing this open letter due to the irresponsible actions being taken almost daily by Mr. Paulson, Mr. Bernanke and now your body of government is being coerced into going along. Please read my message below. Please take a step back and realize what you, we, are doing here. It is unwise. We must stop now. Please pardon the somewhat less than respectable additives used to describe some members of our government.
Mr. Paulson and the Fed have done it again, panicked. Another 300 point drop last week and walla, they are off to save Wall Street.
I will say this one time: Buying the kind of debt that is on the books of financial institutions is complete madness. We are not talking about buying mortgages here. This is a quote from a Bloomberg article today: http://www.bloomberg.com/apps/news?pid=20601087&sid=aEexq7pcbTY4&refer=home#
``The scope of the government's purchase program is quite significant,'' Merrill Lynch & Co. strategists Akiva Dickstein, Roger Lehman and Kamal Abdullah wrote in a note to clients today. At distressed prices, the Treasury could acquire as much as 10 percent of the outstanding residential and commercial mortgages that aren't already owned or guaranteed by Fannie Mae, Freddie Mac or Ginnie Mae, they said...
"The U.S. Treasury late yesterday gave Congress revised guidance on its plan, which may allow the government to also buy other devalued assets such as car loans and credit-card debt. Paulson also has proposed as much as $400 billion to guarantee money-market mutual funds."
Am I reading this correctly? The US Government is going to purchase auto loans? Purchase credit card debt? Guarantee money-market mutual funds?
These guys are completely nuts. Off their rocker! Find me ONE and I mean ONE sane person with any hint of an economic background and they will tell you, Paulson is nuts! The Federal Government is going insane one 300 point Dow drop at a time.
Let me put something into perspective here. The market has only had a 20% correction since it’s all time high less than one year ago. You heard me correctly, LESS THAN A YEAR AGO!!
With the completely reckless way Wall Street and all other financial firms for that matter lent money to Private Equity, Hedge Funds, Structured Investment Vehicles etc. a 20% correction is peanuts.
After the dot-com crash in 2000 the Nasdaq dropped nearly 80%. We had telecommunications, technology and other bankruptcies of epic proportions. We had billions of dollars evaporate from all of the worthless pipe dream companies launched on a whim with idea of getting rich on the Internet (remember we were mostly dial up then also). The Dow fared well dropping only about 40% and as we sit today it is still above most of the levels of 2006 and all of 2003-2005.
So I ask you, who exactly are we protecting here? If the worthless paper sold as stock of legitimate companies during the tech bubble created an 80% correction in the tech heavy Nasdaq (which still has not managed to maintain ½ it’s highs of 8 years ago), is it not expected that an index like S&P Financial Index should not loose 80% of it’s value after the worthless mathematically engineered garbage pumped onto the balance sheets of nearly every financial institution, pension fund, local government and some individuals collapses? Well as I write this it is down roughly 50%. It touched 70% in July.
Now I am not trying to bore you with this index / history stuff. I am no chart watcher and do not profess to have expertise in this subject, but common sense will tell you, the government did not bail out Worldcom, PSI.net, Enron (well that was a world of it’s own), Global Crossing, Adelphia and Kmart right? Yes, about a Trillion Dollars worth of major bankruptcies (filings over $1 billion) happened over the four years from 2000 to 2003. The government did not bail anyone out, not anyone. So what gives?
I can tell you this for sure. This will not work. This is not the same as the Resolution Trust Corp. bailout. This is dangerous, reckless, stupid and disastrous for the US economy, dollar, interest rates, inflation etc. We will be bringing wheel-barrels of cash to buy groceries if we do this. Trust me. I am not kidding. I am not a doomsayer, conspiracy nut or radical. I have common sense and what Paulson, Bernanke and your government is doing right now is completely crazy.
I am not going to say there are easy solutions here, but when our government is run by to many impotent, bought and paid for weans who will bend over to any idea pushed out there to protect their political future instead of thinking of what is right for the American People, we are in trouble.
Bailing out Bear Sterns, Taking over Fannie and Freddie, and taking a controlling stake in AIG were all wrong. All of these situations could have been dealt with in a fashion that did not involve the government as we did.
Our government is playing chicken with the largest pool of unregulated money on the planet, the hedge fund industry, and until and when they shut this thing down, they will LOOSE.
Sincerely,
Patrick Henry
I want to encourage Senator Obama to avoid being sucked into the "drill more oil" debate by reading the message below and using this message to completely redefine the debate on energy extraction and use in the world. He is beginning to seem a bit of a reactionary to events around him on this issue instead of creating a leading vision. This message draws the framework for this vision.
The potential that we have reached "peak oil" is the greatest gift the human race could have right now. It means the earth is incapable of producing (humans are incapable of extracting) enough carbon-based energy (oil) to meet the growing demands of 6 billion plus people. Wow, think for a moment and consider the earth as one large complex computer program that includes a kind of formula for energy extraction and use that has human need and technological maturation in it. No matter how hard we try we cannot completely destroy our planet because of the limits of human kind to extract from the planet enough carbon based fuels at a rate which will produce enough pollution to completely destroy our environment; while at the same time human kind has reached the technological capacity to tap into “clean” energy (solar, wind, hydro current, and to some extent nuclear) at economic rates and efficiencies that make the replacement of destructive 19th century power sources we originally tapped into to fuel our insatiable demand for material consumption, practical. This is kind of like keeping us from drinking too much by limiting how much alcohol we can immediately consume. If anyone in the Obama camp, including Obama himself, can see this for what it is and take a hold of the idea that "earth" is telling us that if we truly could produce enough energy from carbon based sources to burn all we wanted we would destroy our very existence, i.e.; drink to much and poison ourselves. Instead, we cannot. The formula of energy to consumption has reached "peak" with carbon-based fuels. What better message, gift, could we have than to simply have to face the fact that the time is now to shift to non carbon based energy. It is the "Duh" factor. Now, if we can spend $1 Trillion on some completely destructive mission half way around the world (in a country with a total population only 3 times that of New York City) and accomplish absolutely NOTHING, they why should the Obama camp not be capable of taking hold of this gift of global balance (peak) in carbon energy extraction and turn it into a powerful "vision" for removing us from its use. This message would resonate with everyone from the “religious” who believe in the wisdom of a supreme power to the science crowd and average Joe who can understand such an idea. Surly a fraction of the $1 Trillion spent on destruction / reconstruction / destruction in the war (say $300 billion) could allow us to completely transform a large chunk of our energy to solar, wind and other renewables (not corn) over a period of less than 10 years.
The potential that we have reached "peak oil" is the greatest gift the human race could have right now. It means the earth is incapable of producing (humans are incapable of extracting) enough carbon-based energy (oil) to meet the growing demands of 6 billion plus people. Wow, think for a moment and consider the earth as one large complex computer program that includes a kind of formula for energy extraction and use that has human need and technological maturation in it. No matter how hard we try we cannot completely destroy our planet because of the limits of human kind to extract from the planet enough carbon based fuels at a rate which will produce enough pollution to completely destroy our environment; while at the same time human kind has reached the technological capacity to tap into “clean” energy (solar, wind, hydro current, and to some extent nuclear) at economic rates and efficiencies that make the replacement of destructive 19th century power sources we originally tapped into to fuel our insatiable demand for material consumption, practical.
This is kind of like keeping us from drinking too much by limiting how much alcohol we can immediately consume.
If anyone in the Obama camp, including Obama himself, can see this for what it is and take a hold of the idea that "earth" is telling us that if we truly could produce enough energy from carbon based sources to burn all we wanted we would destroy our very existence, i.e.; drink to much and poison ourselves. Instead, we cannot. The formula of energy to consumption has reached "peak" with carbon-based fuels. What better message, gift, could we have than to simply have to face the fact that the time is now to shift to non carbon based energy. It is the "Duh" factor.
Now, if we can spend $1 Trillion on some completely destructive mission half way around the world (in a country with a total population only 3 times that of New York City) and accomplish absolutely NOTHING, they why should the Obama camp not be capable of taking hold of this gift of global balance (peak) in carbon energy extraction and turn it into a powerful "vision" for removing us from its use. This message would resonate with everyone from the “religious” who believe in the wisdom of a supreme power to the science crowd and average Joe who can understand such an idea.
Surly a fraction of the $1 Trillion spent on destruction / reconstruction / destruction in the war (say $300 billion) could allow us to completely transform a large chunk of our energy to solar, wind and other renewables (not corn) over a period of less than 10 years.
The time has come to recognize a Gift Horse when you see one and stop pandering to the PR hype, Think Tanks and "Drill More Now"19th Century Boneheads.
Senator Obama,
I beseech you to please make it clear to those that are making these government bail out decisions that they are playing a loosing game against the most powerful unregulated pool of money on the planet, the Hedge Fund Industry.
This industry has over $2 trillion in assets and is completely unregulated, primarily incorporated in island nations where they are completely out of the legal jurisdictions of the nations they operate in, have no allegiance to any nation, and have one primary objective: To make as much money as possible indiscriminately, at all cost and risk.
The time has come to understand, "With 6.2 billion people on the planet and economies all interlinked there is no longer any positive role that can be determined by having $2.5 trillion floating around playing havoc with any asset class it so chooses”.
I cannot make this message any clearer. There is much talk about regulation and cleaning up Wall Street and Washington etc. However no person anywhere is talking about the Golden Cow in the room, the Hedge Fund Industry. Without an immediate set of regulations baring players in this industry from operating in the United States under any context, you will loose, the American People will loose and our government will loose.
I leave you with this thought:
There is a story in the Old Testament about a bunch of people who flee repression only to end up building and worshiping a golden cow. This leads to great moral degradation and a sinful and corrupt people. Does anyone see the golden cow here? Lets call the golden cow "hedge funds" for the lack of a better word.
The golden cow analogy: All of the powers that be, including the chiefs of all the financial firms and government leaders across the globe are playing with the golden cow. So why does the subject of hedge fund influence in Wall Street never come up? Why does everyone talk around the subject, talking about 'regulation' etc. without mentioning the golden cow? The golden cow corrupts deeply and its influence is broad.
Urgent Matter of Attention with Respect to Access to, and Availability of, Sufficient Polling Stations / Booths / Hours for the 2008 Presidential Election Given the Obvious Surge in Voter Participation Expected in Districts with Historically Lower Voter Turnout
I am writing this message to bring attention to the issue of adequate polling access leading into the 2008 Presidential Election. We saw in 2000 tactics designed to limit access to and availability of adequate polling stations and booths that serve minority and or lower income populations in a variety of states around the country, resulting in people unable to make it to polling stations and people left waiting in line when polling stations closed without having the opportunity to vote.
I have been struck by the complete lack of coverage on this issue leading up to the 2008 Presidential Election. This year, more than any election in history, will result in election turnouts that are historically high in demographic areas that turnout historically has been low.
With 2 months remaining before the Presidential election, the time is now for election commissions around the country to address the issue of adequate polling resources for citizens to vote. The time is now for national media organizations to bring this issue to the spotlight.
The time is now for citizens around the country to make the necessary phone calls to their local election commissions and demand to know what accommodations have been made to allow citizens to vote in a reasonable amount of time and not loose the ability to vote due to long lines and inadequate polling resources.
I am encouraging citizens and news organizations to take up this issue with a passion. The failure to provide adequate polling infrastructure in all districts in the United States allowing all citizens the opportunity to vote could result in catastrophic circumstances and a complete loss of trust in the integrity of our election / political system in the United States.
I have become somewhat disenfranchised by Obama being sucked into the "drill more oil" debate. He is beginning to become a reactionary to events around him and he is loosing his leading vision. Obama needs to dramatically shrink his league of advisors, stop listening to the news feeds and polls and start thinking independently again.
The potential that we have reached "peak oil" is the greatest gift the human race could have right now. It means the earth is incapable of producing (humans are incapable of extracting) enough carbon-based energy (oil) to meet the growing demands of 6 billion plus people. Wow, think about that formula for a moment. No matter how hard we try we cannot completely destroy our planet because of the limits of the planet to produce enough carbon energy at one time for us to do so.
If anyone in the Obama camp, including Obama himself, could see this for what it is and take a hold of the idea that "earth" is telling us that if we truly could produce enough energy from carbon based sources to burn all we wanted we would destroy our very existence, i.e.; drink to much and poison ourselves. Instead, we cannot. The formula of energy to consumption has reached "peak" with carbon-based fuels. What better message, gift, could we have than to simply have to face the fact that the time is now to shift to non carbon based energy. It is the "Duh" factor.
Now, if we can spend $1 Trillion on some completely destructive mission half way around the world (in a country with a total population only 3 times that of New York City) and accomplish absolutely NOTHING, they why is the Obama camp so incapable of taking hold of this gift of global balance (peak) in carbon energy extraction and turning it into a "vision" for removing us from its use.
Surly a fraction of the $1 Trillion in destructive energy (say $300 billion) could allow us to completely transform a large chunk of our energy to solar, wind and other renewables (not corn) over a period of less than 10 years.
