Wednesday, October 1, 2008

UberBailout Still Sucks

It's still a bad bill, folks.

It's the same bill from Monday with some extra marshmallows (green industry tax breaks, FDIC limit raises) that got rejected Monday.

What's different? Suddenly every press outlet has launched a full-scale attack on the American people for daring to oppose this. In the last 48 we've seen every major news outlet predict dire, unspeakable consequences if this bill is not passed this week, like "not being able to get money at the ATM" or "companies not being able to meet payroll" or "not being able to get a loan for anything."

That's not going to happen. You will not fail to get your paycheck. Your world will not shut down overnight. You will not be thrown out into the set of Max Max Beyond Thunderdome. It's the same play made with the same media assist as the Iraq War.

That's not to say we don't need SOMETHING. There are real problems with our economy as I have explained time and time again. But THIS bill is NOT it. This bill simply will not work. It will dump the problem in the next President's lap in a few months, and give whoever it is a massive problem down the road.

Passing this bill will not fix the credit crisis. Period.

There ARE alternatives out there, like the No BAILOUTS Act from Democratic House members Pete DeFazio, Donna Williams, and Macy Kaptur, which proposes a 5-step plan:
1. Require the Securities and Exchange Commission (SEC) to require an economic value standard to measure the capital of financial institutions.

2. Require the Securities and Exchange Commission to restricting naked short sells permanently.

3. Require the Securities and Exchange Commission to restore the up-tick rule permanently.

4. "Net Worth Certificate Program"

5. Increase the FDIC Insurance limit from $100,000 to $250,000.
At least the Senate did crib some stuff from this act, but other then that Senate bill is full of delicious pork, rule changes, and smoke and mirrors for Wall Street to pull the wool over America's eyes.

We're not going to get a better bill unless we demand one. It's not going to come from the Senate. The House vote has been moved to Friday from what I understand.

We'll see.

[UPDATE] 74-25 passage, all the usual suspects voted for it. How much porkified crapola is in this bill with the intention of making it palatable? Another $110 trillion worth, bringing the total to $810 trillion.
In a historic vote, the Senate approved a massive $700 billion rescue plan for the nation's finance system Wednesday night, but only after tacking on another $110 billion in tax breaks to lure votes from both parties.

A strong bipartisan majority rallied behind the controversial Wall Street bailout package, passing it by 74-25.

The vote sends the measure to an uncertain fate in the House of Representatives, where lawmakers rejected the original version on Monday, 228-205. A new House vote is expected on Friday, and many lawmakers in both parties there remain opposed to it.

If anything, odds are now worse among Republicans.
Many lawmakers voiced disdain for the extra tax breaks the Senate added to the financial-rescue package. They ranged from a one-year fix to prevent the alternative-minimum tax from hitting more taxpayers to extending the research credit for business to allowing rural utilities to issue tax-exempt bonds for use of renewable energy.

Also included were more obscure terms extending tax breaks for motor-sports racing tracks, makers of wooden arrows for children, and the rum excise tax for Puerto Rico and the Virgin Islands.

The tax breaks added to the Senate bill would cost the Treasury an estimated $110 billion over 10 years, according to Congress’ Joint Committee on Taxation.

"It's garbage," said Rep. Devin Nunes, R-Calif. "They’re trying to put more decorations on the Christmas tree, but the problem is the Christmas tree."

"The bailout legislation that the Senate is sending back to the House is a fraternal twin to the one I voted against on Monday _ meet the new bill, same as the old bill," said Rep. Joe Barton, R-Texas, who led efforts to kill the House bill. "I'm kind of an old- fashioned guy, and I think we ought to pay for what we do as a government, but instead we’re talking about adding $1.5 trillion to our national debt and forcing our children to pay the cost."

Dole echoed that sentiment.

"Because of unrelated spending additions, this bill now comes at a cost of over $800 billion, and it is still a government takeover of our economy with no protection for taxpayers. It raises the debt ceiling to $11.3 trillion. It bails out foreign investors before American homeowners struggling to pay their mortgages. And it does nothing to address the root cause of this mess, the housing crisis," Dole said.

Sen. Jim DeMint, R-S.C., echoed many angry constituents.

"It forces innocent taxpayers to bail out government policies and Wall Street mistakes. It asks the American people to take a leap of faith and trust people who have consistently misled them," DeMint said. "Our own government appears to be leading our country into the pit of socialism."

Democratic conservatives too may be far less likely to support it in the House now.
In particular, the additional tax extensions meant to persuade some House Republicans to switch their votes in favor of the bill could cause some fiscally conservative, or "Blue Dog," Democrats to drop their support because the tax cuts are not paid for and will drive up the federal deficit.

Hoyer, the No. 2 Democrat in the House, said he wasn't pleased the tax exemptions were added to the bill and admitted they may result in fewer House Democrats supporting the proposal.

"There's no doubt the tax package is very controversial. The Senate, in my opinion, is adding that on because they think that's the only way they can get it passed," Hoyer told NBC on Wednesday.

This bill is even worse than before. Short of putting the Paulson "No legislative oversight, no judicial recourse" idea back in this I cannot see how this bill can be any worse.

Again, something needs to be passed, but not this bill. This bill is now up to $800 trillion in bullshit that does not solve the core problem, and we're running out of time.

Zero Tolerance

Yeah, so, What Would Jesus Do With A Bunch Of Racist Assholes?
A Christian university in Oregon said Tuesday it has punished four students who confessed to hanging a likeness of Democratic presidential candidate Barack Obama from a tree on campus.

George Fox University broke the news to students and staff Tuesday afternoon at an all-campus meeting. About 1,000 people attended, said Rob Felton, a university spokesman.

A statement from the school said the penalties against the four students were "immediate long-term suspension and public service." The school cited federal privacy rules in not disclosing more about the students or their punishment.

The FBI is investigating whether any civil rights were violated.

I love it. A Christian university in freaking Oregon hanging an Obama effigy from a tree. Only in America is this considered acceptable by anyone.

Show me once where a cardboard cutout of McSame or Sarah Palin was hung by a tree on the campus of a college. Go on, I'm waiting. It would be a national day of mourning if it happened. Malkinvania and Bill-O would demand the university be shut down immediately and the students in question would be harrassed as the wingnuts would release the students' personal info on the internet, subjecting them to thousands of harassing phone calls, emails, and letters (and probably assault).

It wouldn't excuse what they did as repugnant. But equally repugnant would be the response from the wingers designed for maximum outrage and inciting more violence against the people responsible.

But not word one out of the righty blogs about this, oh no. This story doesn't exist for them.

If Sarah Palin Shows Up, She Wins

Since everybody is dumping on Sister Sarah with reckless abandon, the McSame camp has already declared that she wins Thursday's debate if the sun fails to explode.

There’s a sort of pity factor beginning to surface after the disasterous Couric interviews. After you see a week of train wrecks, the sympathy factor starts to set in. That said, it’s pretty embarrassing that she didn’t show up to offer her thoughts about the first Obama/McCain debate. It’s not like FOX News would have grilled her. All she had to do was say McCain won, blah, blah, blah. but hiding her and then defending her against unfair questions is McCain’s strategy so far.

It’s hardly unheard of for a vice presidential candidate to express views different from that of the presidential nominee. Joe Biden has already done so on occasion.

But in a later interview with Palin at his side, McCain claimed it was somehow “gotcha journalism” to have reported Palin’s response. Gotcha journalism, to report accurately a vice presidential nominee’s public response to a voter?

I bet that the VP debate gets higher ratings than the Ole Miss Presidential debate did…

All true, frankly. It's not sexist to assume she's going to be so inept that the McSame camp keeps changing the rules to make it easier on her or anything like that. The spin will be spun HARD: Gwen Ifill is black, in the tank for Obama, ergo the debate is null and void and Obama and the media vs Our Favorite Governor.

The debate itself does not matter. The spin from the debate matters. And it's going to be brutally pro-Palin.

Zandar's Thought Of The Day

If both Jim "Mad Money" Cramer (CNBC's answer to Dick Vitale) and Dr. Nouriel Roubini, (the academic economist's answer to Eeyore) think significantly raising the FDIC's deposit insurance limit is the key to saving America's banks, there's probably something to the notion having the FDIC raise the limit to $2.5 million per account (as Cramer wants) or "blanket deposit protection" (as Roubini advises.)

Both of them strongly suggest doing this to prevent people from taking their cash out of banks, banks in this case being non-US depositors and small businesses, as well as retail consumers with banking accounts. Roubini runs the numbers and finds that only 63% of money in banks as of Q2 2008 are insured under current FDIC limits.

This is the economic equivalent of Londo Mollari and Ambassador G'Kar on the same side of the issue (not to mention Obama and McSame), so it's one Congress should get enacted pretty damn fast. They both think $250,000 isn't nearly enough, and there is the whole point that Ireland's government is indeed offering blanket deposit protection right now for the six largest Irish banks, causing a bit of a problem with most of the EU's countries having, you guessed it, vastly different deposit insurance limits at or above the EU-mandated 20,000 Euro limit.

Something of a worldwide agreement on this might be a really, really smashing idea.

Sarah Palin Is Still Unqualified Completely For Anything Approaching National Public Office

As Cenk Uygur from The Young Turks explains.

Oh, and now she says the cause of global warming "kind of doesn't matter".

Conservative Columnist Also Shocked To Discover The Sun Is On Fire

Kathleen "Sarah Palin Should Resign For The Good Of Her Party" Parker is utterly floored to discover that wingnuts will turn on you in a heartbeat and go right for the jugular should you cross them.
Allow me to introduce myself. I am a traitor and an idiot. Also, my mother should have aborted me and left me in a dumpster, but since she didn't, I should "off" myself.

Those are a few nuggets randomly selected from thousands of e-mails written in response to my column suggesting that Sarah Palin is out of her league and should step down.

Who says public discourse hasn't deteriorated?

The fierce reaction to my column has been both bracing and enlightening. After 20 years of column writing, I'm familiar with angry mail. But the past few days have produced responses of a different order. Not just angry, but vicious and threatening.

Some of my usual readers feel betrayed because I previously have written favorably of Palin. By changing my mind and saying so, I am viewed as a traitor to the Republican Party -- not a "true" conservative.

Obviously, I'm not employed by the GOP. If I were, the party is seriously in arrears. But what is a true conservative? One who doesn't think or question and who marches in lock step with The Party?

If a Conservative is a Liberal who has been mugged by reality, a lefty blogger is a righty blogger who has been mugged by the internets and told to "off" themselves whenever they dare use common sense and say "I can't shovel this shit anymore."

Maybe she'll go all Andrew Sullivan on us.

In The Tank For Obama

Malkinvania is stroking over the fact that tomorrow's debate moderator, PBS's Gwen Ifill, is clearly in the tank for Obama because...wait for it...SHE'S BLACK.

Random House, her publisher, is already busy hyping the book with YouTube clips of Ifill heaping praise on her subjects, including Obama and Obama-endorsing Mass. Gov. Deval Patrick. The official promo for the book gushes:

"In 'The Breakthrough,' veteran journalist Gwen Ifill surveys the American political landscape, shedding new light on the impact of Barack Obama's stunning presidential campaign and introducing the emerging young African American politicians forging a bold new path to political power... Drawing on interviews with power brokers like Sen. Obama, former Secretary of State Colin Powell, Vernon Jordan, the Rev. Jesse Jackson and many others, as well as her own razor-sharp observations and analysis of such issues as generational conflict and the 'black enough' conundrum, Ifill shows why this is a pivotal moment in American history."

Ifill and her publisher are banking on an Obama/Biden win to buoy her book sales. The moderator expected to treat both sides fairly has grandiosely declared this the "Age of Obama." Can you imagine a right-leaning journalist writing a book about the "stunning" McCain campaign and its "bold" path to reform timed for release on Inauguration Day -- and then expecting a slot as a moderator for the nation's sole vice presidential debate?
So, in summary:
  1. Gwen Ifill is a political journalist and commentator who is black.
  2. Gwen Ifill wrote a book on the black political experience from the viewpoint of a black political journalist and commentator.
  3. This book includes information on Barack Obama who, if you are just joining us, is also black.
  4. Since we have established Gwen Ifill is black and Barack Obama is black, Gwen Ifill has a clear bias towards Barack Obama.
  5. Gwen Ifill should therefore NOT be allowed to moderate the debate between two people who are not Barack Obama, and are not black.
Or, in other words:

"The fact that Gwen Ifill is a woman and Sarah Palin is a woman and Malkinvania is a woman of course all have nothing to do with what clearly is Gwen Ifill's clear and visible bias towards Barack Obama because she is black! We win!"

(like this.)

[UPDATE] Ifill's book contract was public knowledge weeks before she was agreed to by the McSame camp. This only became an issue 12 hours ago because Malkinvania said so.

Game over.

More Marketing "Mark To Market"

I talked about "Mark To Market" accounting yesterday, and today over at Big Picture they have, well, an even better explanation of FASB Rule 157.
Now that the garbage is on the books, no one wants to admit the original error of purchasing this class of assets. Its not just that the trade has gone bad, its the original buying decision was so flawed even if the trades were not such giant losers.

Recent actions of corporate titans in the financial sector are essentially an admission that their business model was deeply flawed. No one would invest any capital for a ROI of 50 bps per year. They of course knew this -- so they leveraged up that 50 bps 35X or so, creating the false appearance of more attractive returns. This higher risk, potentially higher return paper was part of that misleading process.

Suspending FASB 157 amounts to little more than an attempt to hide this broken business model from investors, regulators and the public. Its not just getting through the next few quarters that matters; Rather, its allowing the market place to appropriately reallocate this capital to where it will serve its investors best. That is what free market capitalism is, including Schumpeter's creative destruction. (A WSJ OpEd today get this issue precisely wrong).

I have been steadfast over the past 2 years about why I did not want to own any of the financials that held this paper on its books. The key was that we could not figure out what the liabilities were relative to the assets. That is investing 101.

If FASB 157 is suspended, I would advise our clients and the investing public that owning any financials that failed to disclose their holdings accurately were no longer investments -- they were pure speculations, with more in common to spinning a roulette wheel than owning Berkshire Hathaway (BRK) or Apple (AAPL) or Google (GOOG). Indeed, I know of no faster way to end up on the DO NOT OWN list than to hide from your shareholders what is on your books.

If investors cannot trust the valuations of what is on a firms books, they simply cannot invest in these firms PERIOD.

In other words, banks get to lie for fun and profit. Not only are other banks not going to want to loan money to them as I said yesterday (liars don't trust other liars they know HAVE to be lying) but the BP guys bring up an excellent point: investors are also going to assume these banks are lying and are not going to want to invest money in them.

Seems to me this is more disasterlicious fun, and why Chris Cox is allowing this to ha...OH WAIT HE'S A REPUBLICAN WORKING FOR BUSH never the hell mind.

Rollercosta...Of Looooooove!

A nasty drop in manufacturing numbers is leading to a bad day on Wall Street as the world struggles to find the New Normal.
Stocks also fell on disappointing economic news. In its report on the manufacturing sector in September, the Institute for Supply Management revealed a troubling drop in new orders. The group's overall index of manufacturing activity fell to 43.5 in September from 49.9 in August. Wall Street had expected a reading of 49.5, according to economists polled by Thomson/IFR.

"We're now seeing in those numbers that we're getting a contraction in economic activity," said Jim Dunigan, managing executive of investments at PNC Wealth Management.

At this point in the credit crisis, weak economic numbers are coming as no surprise to Wall Street -- but September's numbers are expected to be particularly bleak because of the seizing up of the credit markets that occurred during the month. Each number is a further reminder of how much pain is being felt in the economy, and the data is likely to motivate more investors to pull more money out of stocks.

Down crashes almost 800, up almost 500, now down 200. Hell of a week.

Interestingly, bank stocks are up.

Global No-Confidence Vote: It's All Local

It seems Jefferson County, Alabama (home of Birmingham) is facing the largest municipal bankruptcy since the OC went under in '94.
Jefferson County, Alabama, won't make an $83.5 million payment on some of its $3.2 billion of sewer bonds, as it continues to seek more time to negotiate an end to the debt crisis that has pushed it close to bankruptcy.

Jefferson County Commission President Bettye Fine Collins said yesterday that Wall Street creditors indicated they would be willing to extend a new agreement allowing the county to avoid paying all that it is required on its bonds. Meantime, the county will miss a payment on a portion of the debt, she said.

``We don't have the funds to cover these interest payments,'' Collins, a Republican, said in a telephone interview from Birmingham.

Jefferson County, which includes Birmingham, has prepared to file for bankruptcy protection if it can't reach an agreement with JPMorgan Chase & Co. and other creditors to refinance bonds whose interest rates soared as high as 10 percent because of the U.S. financial crisis spawned by the subprime mortgage meltdown. The county is among U.S. states and cities in the $2.6 trillion municipal market whose finances have been pinched by debt costs that have risen more than fourfold in some cases.

Ahh, but Jefferson County isn't alone, folks. Times are tough for local governments across the country.
Cities, states and other local governments have been effectively shut out of the bond markets for the last two weeks, raising the cost of day-to-day operations, threatening longer-term projects and dampening a broad source of jobs and stability at a time when other parts of the economy are weakening.

The sudden loss of credit, one of the ripple effects of the current financial turmoil, is affecting local governments in all parts of the country, rich and poor alike. In New York, a real estate boom has suddenly gone bust. Washington has shelved a planned bond offering to pay for terminal expansion and parking garages already under construction at Dulles and Reagan National Airports.

Billings, Mont., is struggling to come up with $70 million more for a new emergency room. And Maine has been unable to raise $50 million for highway repairs.

“We really are in terra incognita here,” said Robert O. Lenna, executive director of the Maine Municipal Bond Bank, which helps that state’s towns and school districts raise money. He said he had worked in public finance for 34 years and had never seen credit evaporate so completely.

Maine had already begun some of its road work when the bond markets stopped functioning, so now it is scrambling for bank loans to keep the dump trucks rolling. If money does not start flowing soon, Mr. Lenna said, Maine will have to cancel some of its road and bridge projects.

The only alternative would be what New York City did on Monday: Go into the locked-up markets and whip up demand by offering to pay investors a very high return.

Analysts said the dysfunction in the municipal bond markets appeared to signal the end of an era of relatively cheap money for governments and, probably, the start of an era of tough choices for communities. When the market starts moving again, they said, it will look a lot like the municipal bond market of 10 years ago, before the arrival of financial wizardry in the form of structured-finance products, which lowered borrowing costs but added big new risks. Instead, governments will probably be issuing plain-vanilla bonds with fixed rates of interest, higher than they are accustomed to.

And higher rates suggest some degree of belt-tightening, especially difficult in places where tax revenues are being squeezed because of falling real estate values and the slowing economy.

It's bad out there. I have a friend who works for the City of Cincinnati in the budget department and she tells me things are bad, and that significant city job cuts are coming. It's like that all over the country, folks. Service cuts, job cuts, and tax hikes are coming for the local and county governments where YOU live and work, and Jefferson County, Alabama isn't going to be alone in having to consider municipal bankruptcy.

It's going to get bad for a lot of taxpayers next year. Unemployment is going to be up significantly, bailout or no bailout. With home prices continuing to drop and property tax revenues dropping as a result, and the credit crunch meaning these governments can't borrow money cheaply any more to cover costs, you're going to see a lot of local governments have to make some very tough and very unpopular decisions. They WILL have to slash the services you depend on or raise taxes sharply.

If they don't, they'll go under.

Imagine the bailout argument being repeated across nearly every county and city government in America right now. Who is going to bail them out? Who is going to lend them money by allowing them to issue bonds? What if bonds are rejected by voters in places where bond referendums go to the ballots?

We're talking about local and country governments across America declaring bankruptcy. And the Bailout in front of Congress this week does little to address the problem. Home prices will continue to drop well into 2009 if not 2010, meaning lower tax revenue, astronomical bond interest, and job and service cuts. The job cuts mean higher local unemployment and lower revenues as people move out of the area looking for new jobs or are forced to move.

It's a nasty spiral. And it's taking place right now, where you live.

Your local government's not going to be able to help you in the months ahead. Odds are very good major tax increases, local job cuts, and local service cuts are coming. They are going to be dramatic.

You're on your own.

Be prepared.

Cross-posted at the Frog Pond.

Clearly McSame Needs To Fight Dirtier

At least, that's what Republicans are saying. The latest Quinnipiac University swing state poll has Obama kicking McSame's ass in Ohio and Florida by eight and up by fifteen in Pennsylvania. Given the fact that Obama's pretty much close to breaking this race wide open into a bonafide beatdown, the GOP is scared. As such, the GOP now are suggesting not so much that McSame fling more poo at Obama, but that he should build a Super Lie Machine to in fact accelerate the poo to near relativistic speeds.
John McCain’s fade in recent polls, combined with a barrage of negative news coverage during the financial crisis, has leading Republican activists around the country worrying about his prospects and urging his campaign to become much more aggressive against Barack Obama in the remaining month before Election Day.

A flurry of new polls shows Barack Obama gaining in several battleground states – most notably Florida, Pennsylvania and swing states throughout the West. Officials worry early voting, which is under way in important states such as Ohio, is likely to favor Obama in this toxic political climate.

Several state GOP chairmen in interviews urged the McCain campaign to be more aggressive in hitting Obama’s vulnerabilities, such as his past relationship with the Rev. Jeremiah Wright and other problematic associations from Chicago.
So expect to see some pretty brutal commercials now. McSame is clearly losing this race and Obama is threatening to blow it wide open into a full landslide with less than five weeks to go. We're getting to the point now, this week, where McSame has nothing left to lose but his relatively unimportant dignity and honor. He can keep those and lose this race, or he can trade them in to Karl Rove for a shot at fomenting a race war.

Personally, I'm betting he will sell his soul in a heartbeat in order to slime Obama as a racist Islamofascist terrorist sympathizer liberal who kills babies in their sleep.

After all, we're getting to the point where Obama's lead may be too much for the GOP to steal/disenfranchise/cage, and McSame has to keep it close, or it's 2006 all over again.

McBurninating The Countryside, McBurninating The Peasants

So here's McTrogdor the McBurninator being interviewed by the editorial board of the Des Moines Register in Iowa, defending Sarah Palin and generally trying to burininate everyone in the room with the burning burnification of his burnified anger that burns like burniness with its burnosity.

...but the SOUL STILL BURNS.

Day Ahead

Asian stocks closed a bit higher, Euro stocks are flat, US futures are down. The LIBOR dropped to something freaking high instead of completely ridiculous, dropping 300+ basis points to 3.79% That is a good sign...but it was at 2.60% or so last week. TED spreads went up a bit too...not a good sign.

A new month, a new fiscal quarter, the Senate vote on UberBailout Mark II tonight and the House tomorrow...along with the VP debate in about 36 hours or so.

Things move fast these days.


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