Tuesday, March 17, 2009

Last Call

I wonder if CNBC has learned anything since the Cramer/Stewart fiasco last week. Let me go check to see if they're doing responsible economic journalism and reigning in the happy face, head in the sand mentality that persuaded so many people to buy into the economic disaster of the last two years, especially given the evidence that the worst is still on the way as the commercial real estate market cracks up...

Well, let's see here...
Call off Depression 2.0.

While still far from health, the U.S. economy is showing some encouraging signs of life as consumers tiptoe back to the shopping mall, home builders pick up their hammers, and manufacturers clear out inventory.

That suggests the soon-to-be-completed first quarter will be as bad as it gets, and apocalyptic fears of another lengthy, painful Great Depression look unwarranted.

Oh f*ck it all. It's St. Patty's Day, I'm gonna go have a Guinness and a corned beef sammich.

The Most Breathtakingly Racist Logical Fallacy In The Last Week Or So

It belongs to My Second Favorite Village Idiot, US News's Jim Pethokoukis. His thesis? N*gga Stole My Economy.
There has been a lot of push back against the idea that the Community Reinvestment Act nudged banks to give mortgages to people who should have not gotten them. But then here comes this fantastic story, courtesy of the Boston Business Journal, about East Bridgewater Savings in Boston:

Bad or delinquent loans? Zero. Foreclosures? None. Money set aside in 2008 for anticipated loan losses? Nothing. ... The bank even squeaked out a profit of $87,000. And its Tier 1 risk-based capital ratio was 31.6 percent, or more than three times higher than many community banks in Massachusetts. “We’re paranoid about credit quality,” Petrucelli said. The 62-year-old chief executive has run the bank since 1992.

Yet the FDIC has turned up the heat on Petrucelli's bank, giving it an apparently rare "needs to improve rating," for not making more risky loans under the Community Reinvestment Act. Here is how the FDIC puts it: “There are no apparent financial or legal impediments that would limit the bank’s ability to help meet the credit needs of its assessment area. The FDIC examiners also faulted East Bridgewater "for not advertising and marketing its loan products enough. The bank, which does not have a Web site, offers fixed-rate mortgages."

Let me spell Jim's fantasy out for you.

  1. The collapse of the housing market destroyed the economy.
  2. The housing market collpased due to subprime loans going bad.
  3. The CRA (Community Reinvestment Act) forced more loans to be created and given to minorities.
  4. Jim found a bank that didn't meet CRA standards.
  5. This bank didn't have any bad loans, which proves CRA caused bad loans.
  6. Therefore, any bank that did meet CRA standards had to have made bad loans.
  7. Therefore, the CRA forced banks to make bad loans or face punishment under the CRA.
  8. Most banks chose to make loans to minorities to meet CRA standards.
  9. To do that, they had to make subprime loans to minorities that were bad loans.
  10. Therefore, all minorities are poor and cannot afford a home.
  11. Therefore, the subprime market collapsed and it's the fault of poor minorities, not banks.
  12. The CFA and broke ass minorities wrecked the economy.
Now, considering everything after 2 becomes a logical fallacy due to the fact that banks pushed subprime loans and refinance options with ridiculous terms to as many Americans as possible in order to make as much money as possible (it was okay if they foreclosed on a subprime loan once in a while, as the house they got when they foreclosed was increasing in value) and the fact that subprime loans only became possible after Alan Greenspan's easy credit bubble, we have Jimmy here basically blaming the victims.

It's repugnant, really. We're supposed to believe that while the fnancial industry was screaming REFI NOW! HISTORICALLY LOW RATES! and making NINJA loans to anyone they could find without following up on them, that the Feds held a gun to their head while doing so.

They knew what they were doing. Preying on people and calling it "the ownership society".

[UPDATE] Or as Gavin at Sadly, No! puts Jim's bullshit:
I’m not saying that a fanciful what-if scenario that I built atop a flimsy anecdote refutes all the actual data, but to let the actual data run around unchecked is ridiculous.

Zandar's Thought Of The Day

What are the odds that the "Let's tax the bejeezus out of AIG's bonuses!" move is in fact a trap by Democrats to force a knee-jerk reaction out the GOP, where they start yelling "REMEMBER JOHN GALT!" and start siding with AIG?

I'm not sure if the Dems are quite that clever, or the GOP is quite that stupid. But they are politicians, after all. We'll see.

[UPDATE] Well, the Wingnuts are that stupid. Let's see if the GOP is dumb enough to get on the wrong side of this issue.

The Right Question

Joe Weisenthal asks the right question about AIG: not "Will AIG give in to Obama?" or "Will AIG snob Obama?" but "Should AIG give in to Obama?"
Think about it for a moment. Obama is threatening to cut off AIG's air supply unless it reverses course on its bonuses. But AIG's bailout isn't meant for AIG, it's meant for AIG's counterparties. At some point along the way, it was deemed that the best way to bail out those banks was via AIG rather than directly.

Now we're learning how wrongheaded that was.

So there's really not that much upside for AIG. It's a heads-we-win, tails-we-nuke-the-entire-banking-system proposation. Is it really worth playing that game just to stoke outrage.

Which once again is strong evidence that the only workable long-term solution to problems like AIG is Plan N, period.

So let's do it already. I think the public is more than ready to have the government start calling the shots on these companies.

Vast Left Wing Conspiracy!

The Wingers are going insane over this Politico.com story (natch) revealing a SUPER SECRET LEFT WING CONSPIRACY!!11!1eleventy-one!!
For the past two years, several hundred left-leaning bloggers, political reporters, magazine writers, policy wonks and academics have talked stories and compared notes in an off-the-record online meeting space called JournoList.

Proof of a vast liberal media conspiracy?

Not at all, says Ezra Klein, the 24-year-old American Prospect blogging wunderkind who formed JournoList in February 2007. “Basically,” he says, “it’s just a list where journalists and policy wonks can discuss issues freely.”

But some of the journalists who participate in the online discussion say — off the record, of course — that it has been a great help in their work. On the record, The New Yorker’s Jeffrey Toobin acknowledged that a Talk of the Town piece — he won’t say which one — got its start in part via a conversation on JournoList. And JLister Eric Alterman, The Nation writer and CUNY professor, said he’s seen discussions that start on the list seep into the world beyond.

“I’m very lazy about writing when I’m not getting paid,” Alterman said. “So if I take the trouble to write something in any detail on the list, I tend to cannibalize it. It doesn’t surprise me when I see things on the list on people’s blogs.”

Last April, criticism of ABC’s handling of a Democratic presidential debate took shape on JList before morphing into an open letter to the network, signed by more than 40 journalists and academics — many of whom are JList members.
Oh NOES! They're ganging up! They're organizing! It's a huge conspiracy to skew the news!

Or it's just an e-mail list.
If you would have told me this Politico story was excerpted from the Onion, I honestly would have believed you. Yes, this is a "reported" story about a secret email list for Beltway media elite to talk with each other and congratulate each other for having "fame" to be invited into this apparently high status symbol - as if the creation of said list, and its discussions, is "news." The story really epitomizes every stereotype of the Washington-New York Elite Media Cabal as an insulated status-obsessed hive of self-importance and political incest that is most focused on chattering amongst (and about) itself.

At one level, this is quite literally a "news" story about an email list - yes, a news story about an email list (what amazing grassroots organizing!). At another level, this piece is media reporting on media talking to other media about the media. At still another level of self-absorption, this piece is the New York-Washington Elite Media bragging about the New York-Washington Elite Media talking to fellow New York-Washington Elites about their exciting lives in New York and Washington (which might be fine for a social club - but as the subject of a political "news" story...uh, not so much). And yet, somehow, the elite press corps wonders why it is seen by the public at large as an increasingly irrelevant group of self-obsessed sycophants, and why so much of the public is turning elsewhere for news.
Honestly, journalists communicate with each other. You're telling me the Republican effort to e-mail RNC talking points to every newsie and blogger on the conservative side wasn't by the same logic a vast conspiracy?

Teenagers, You Give Them An Inch

...They swim all over you."

--Sebastian The Crab, The Little Mermaid
Anticipating restrictions on bonuses, officials at Citigroup Inc and Morgan Stanley are exploring ways to sidestep tough new federal caps on compensation, the Wall Street Journal said.

Executives at these banks and other financial institutions that received government aid are discussing increasing base salaries for some executives and other top-producing employees, the paper said, citing people familiar with the situation.

The discussions are at an early stage, partly because the government has not yet issued specific rules on the bonus payments that will be allowed at companies that received aid under the government's Troubled Asset Relief Program, the paper said.

The report comes on the heels of widespread outrage that insurer AIG, kept alive on a government bailout of up to $180 billion, was paying its employees bonuses of $165 million.

In February, President Barack Obama set a $500,000 annual cap on pay for top executives at companies receiving taxpayer funds.

Can't blame Citi and Morgan Stanley for trying, eh?

Oh wait. Yes we can, especially Citigroup. I think this is one fight these guys don't want to pick, but like I've said, more shenanigans were inevitable, and all this does is push Obama more and more towards Plan N.

A Bit Of Good News...Or Not

Housing starts for February rebounded considerably from January's record low.
New U.S. housing starts unexpectedly rebounded in February, surging 22.2 percent, according to data on Tuesday that provided a rare dose of good news for the recession-hit economy and fractured housing market.

The Commerce Department said the jump in housing starts to a seasonally adjusted annual rate of 583,000 units was the biggest percentage rise since January 1990.

Maybe that's just a blip, but again if the supply of houses goes up, the price goes down. If anything, this means there's still a major glut of homes on the market, and the big jump in new houses means there will be even more pressure on prices to drop.

And that's not good news.

Scary Ass Numbers

The number of folks who expect another Great Depression within a year is up to 45% in CNN's latest poll.
"Will the Great Recession turn into another Great Depression? A growing number of Americans think it might," said CNN Polling Director Keating Holland. "Last December, 38% said a depression like the one the U.S. experienced in the 1930s was likely in the next year. Now that number is up 7 points."
Of course if you asked Americans "Do you think Admiral Adama is a Cylon?" 45% of them would say yes too. Still, these are scary numbers no matter how you look at it. Confidence is pretty damn low right now.
The poll described the 1930s' Great Depression as a time in which roughly one out of four workers was unemployed, banks failed across the country and millions of ordinary Americans were temporarily homeless or unable to feed their families.

Nearly nine out of ten people questioned in the survey said economic conditions in the country are poor today, with only 11% suggesting that conditions are good.

And the poll indicates that Americans think it will take time to rebound from the recession, which began at the end of 2007.

"Only one in ten say recovery is likely within a year; one in five predict it will take longer than four years for the country to get back on its feet," Holland said.

And the people will shout "Helicopter Ben, save us!" And Helicopter Ben will whisper, "I think we've averted that risk. I think we've gotten past that."

We'll see. Me? Yeah, count me in that 45%.

Your Liberal Media In Action

Front page on the Washington Post: AIG's bonuses could very well sink the entire Obama administration!(emphasis mine)
President Obama's apparent inability to block executive bonuses at insurance giant AIG has dealt a sharp blow to his young administration and is threatening to derail both public and congressional support for his ambitious political agenda.

Politicians in both parties flocked to express outrage over $165 million in bonuses paid out to executives at the company, demanding answers from the president and swamping yesterday's rollout of his efforts to spark lending to small businesses.

The populist anger at the executives who ran their firms into the ground is increasingly blowing back on Obama, whom aides yesterday described as having little recourse in the face of legal contracts that guaranteed those bonuses.

Wow, not even the GOP could have written a better article. Obama is floundering! He's in over his head! Eight weeks into his failed failure of a failed term he's failing badly! Last Obama aide out of the White House, turn out the lights, please.
But the bonus issue, in particular, is hounding Obama as he pursues his larger goals, in part because of the president's own repeated declarations of outrage -- offered again yesterday -- aimed especially at the firms that are feeding at the public trough.

In February, Obama announced tough new restrictions on executive compensation that promised an end to massive salaries for executives of failing companies. Similar rules were eventually written into legislation and hailed as evidence that executive compensation would be checked.

But reports about the latest AIG bonuses quickly undermined whatever political capital Obama has earned with his past efforts.

Got that? OBAMA IS AN UNQUALIFIED FAILURE AFTER EIGHT WEEKS! Surely the American people have spoken!
President Barack Obama's job approval rating, at 61% in the latest three-day average of Gallup Poll Daily tracking, is slightly above where George W. Bush's and in particular Bill Clinton's were at this point in mid-March of the first years of their administrations.
Umm...what? That can't be! Surely the President's agenda is in deep trouble!
A new Gallup Poll finds just over half of Americans, 53%, favoring a new law that would make it easier for labor unions to organize workers; 39% oppose it. This is a key issue at stake with the Employee Free Choice Act now being considered in Congress.
Ummm....OBAMA IS A SOCIALIST! (storms off)

All winguttian satire aside, there's not a whole lot Obama can do about AIG's bonus situation as I explained yesterday. In fact, a lot more bonus shenanigans and counterparty payoff three card monte is on the way for bailout recipients. However, the notion that AIG has already deep-sixed the President and his agenda is pretty ludicrous. Nobody's blaming Obama for this...except the Washington Post. Funny how that works. Even the wingnuts are blaming, well, AIG for this.

Let's blame AIG for getting themsleves into this mess, needing bailouts from Bush before Obama took office. Course, that hasn't occured to the Village. ITEISATDF. The article glosses over how Treasury has decided it doesn't need to give AIG that latest $30 billion in bailout cash if AIG insists on handing out millions in bonuses.

And while Treasury taking that money out of AIG's bailout is a great idea, there is another option: Plan N. Nationalize AIG and fire people. It really is that simple. If anything, AIG has just brilliantly made the case as to why Plan N needs to be executed now...and the people would certainly back taking over failed companies that required billions and billions of taxpayer money and firing the people responsible for losing all that money in the first place.

The Wonk Room's Pat Garofalo has more on why AIG may have just forced Obama's hand on Plan N. I'm all for THAT action.

StupidiNews, St. Patty's Day Edition

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