And people wonder why I'm pessimistic about America's economy over the next several years and why I think another even worse meltdown is on the way.
As you probably know by now (you have been paying attention, haven't you?), banks are required to retain a certain amount of capital on their books. The capital is there to keep them solvent even if their assets lose value, so the amount they're required to have depends on how risky their assets are. If they have, say, a bunch of crummy C-rated securities on their books, they have to maintain a full load of capital to back them up. But A-rated securities are less likely to lose value, so for those they only have to maintain 50% of the normal capital levels. And for AAA securities, they can get by with only 20% or less. After all, AAA securities are pretty unlikely to lose value. Right?
This was one of the reasons behind the CDO frenzy of the past few years. If you slice and dice a bundle of securities so that most of them are AAA-rated, then you can reduce the capital you need to back them up, which frees up that capital for other uses.But then everything came crashing down, the ratings on those bundles tumbled, and suddenly banks had to pony up more capital to back them up. What to do? Answer: slice 'em and dice 'em all over again.
Thursday, October 1, 2009
"We don’t intend to go to the floor without a public option in that bill,” Nancy Pelosi said at her weekly press conference. “I have said that the House bill will have a public option.”OK, so what does that mean for the inevitable House/Senate reconciliation for the bill?
The comments come after a key US Senate committee on Tuesday defeated a proposal to include a “public option” plan in legislation to remake the way Americans get and pay for health care.
President Barack Obama, who has made overhauling US health care his top domestic priority, has said he supports the “public option,” and many core Democrats say they will oppose a final plan without one.
“What happens in the conference is another step,” Pelosi said. “I’m confident though that if we go in with a public option, the public support will be overwhelming,” she said.Our very best. Coming from Harry Reid.
The public option is supported by most senators from the Democratic majority.
Senate Majority Leader Harry Reid vowed: “We’re going to do our very best to have a public option.”
Another senior Democratic senator, Charles Schumer, said that he has talked to conservative Democratic senators “and they are open to some kind of public option.”
Oooh, I'm just filled with confidence. That's the best you can do? You need more, guys. How about a little more full-threatedness in the defense there, ace?
[UPDATE 11:20 PM] Iowa Democrat Sen. Tom Harkin: Screw the GOP on the conference process and yes, it will have a public option.
Now that's what I'm talking about.
Iowa Sen. Tom Harkin said today Republicans will not be at the table when the Senate merges the health-care bills from two committees before sending one to the floor.
Harkin, a Democrat and chairman of one of the committees, also said any bill that passes Congress will include a government-run insurance option for Americans to buy.
“We will have a bill on the president’s desk before Christmas, a health-reform bill. It will have a lot of good stuff in it. It will have a lot of prevention and wellness programs in there that I’ve been fighting for,” Harkin told reporters in a morning conference call. “And it will have a public option.”
“The question of if it doesn’t isn’t even an option,” he added.
If you want to see how well Jimbo's economic plan for country is playing out, look no further than California. A balanced budget amendment? Really? Spending limits? And look what a two-thirds vote to raise taxes has done to California's budget.
Liberals love the idea of a VAT because it’s, well, so European — also because it does raise tons of revenue to expand government. And that is what Obama wants: more revenue to pay for bigger government. Is a VAT better than the soak-the-rich approach favored by Democrats such as Nancy Pelosi and Charlie Rangel? Sure. Of course, the concern is that a VAT would be in addition to new soak-the-rich taxes.
See, even after the recession, there might be a 6 percentage point difference between what Uncle Sam spends as a percentage of GDP and what it takes in. Liberals like Krugman have no problem with making up that difference purely through higher taxes, even though that translates into raising the national tax burden by at least a third. And that, even though such a massive hike might well have a crushing effect on growth.
Obama wants a VAT? First, it should be part of broader tax reform, including getting rid of capital gains and corporate taxes. Second, it should accompany an Economic Bill of Rights much like Ronald Reagan used to suggest. Its elements: a) a balanced budget amendment, b) a line-item veto, c) a spending limit such as inflation plus population growth, d) and a two-thirds vote in the House and Senate for any tax increases. (Reagan also wanted a prohibition on wage and price controls. That would likely kill ObamaCare.)
And come to think of it, let’s cut spending and streamline government before cash-strapped, wealth-reduced taxpayers are forced to pony up a penny more, OK?
Republicans and fiscal conservatives like Jim want the same fate for everyone: to force the government to downsize and eliminate any programs that might benefit the least members of society, or might interfere with corporate disaster capitalism running America and the pork machine that feeds it.
It's always the same, taxes are evil, government is evil, unless it's using your money to give to lobbyists and wars in the Middle East.
But in a spirited discussion on CNN that included Democratic strategist James Carville and Republican strategist Alex Castellanos, Grayson stood his ground. He flatly rejected the suggestion that his remarks were the political equivalent of South Carolina Republican Rep. Joe Wilson's shout of, "You lie," at the president during his nationally televised speech on health care.
"I didn't insult the president in front of 40 million people," he said. " … When you don't have a plan, what that means is your plan is don't get sick. So what I said is true. What Joe Wilson said, on the other hand, is false."
Castellanos insisted that Republicans agreed with the Democrats on pre-existing conditions and would "stand with him 100 percent" if the president added such Republican-backed proposals as tort reform and allowing citizens to shop across state lines for insurance — a strategy Democrats say will drive insurance companies into the states with the most lax regulations.
"The congressman is at least giving the chance for the Republicans to look responsible. It's not fair to say that the Republicans have no plan. They actually do," said Castellanos, whose campaigns include George W. Bush in 2004, Mitt Romney in 2008 and Florida Gov. Jeb Bush and the late Sen. Jesse Helms of North Carolina in the 1990s.
Carville, who was Bill Clinton's lead strategist during his successful run for the presidency in 1992 and worked Hillary Clinton's campaign last year, congratulated Grayson for having "the courage to go up and say what he said."
But Carville backed away from Grayson when the congressman said that Republicans he believes are obstructing health care reform are "foot-dragging, knuckle-dragging Neanderthals."
Last night I had the pleasure of interviewing an old friend of the program, Texas Republican Senator and gubernatorial candidate Kay Bailey Hutchison.Because America is so very eager to put another pro-business Texas Republican Governor in the White House.
Among other things, we discussed why she's leaving Washington and heading back home to run against Gov. Rick Perry for the Governor's seat.
I'll just say this: If she wins in Texas, she'll be president in 2012.
Don't get me wrong, as far as Republicans go, Hutchinson actually counts as progressive almost. But that's like being the least rabid pit bull.
In a series of studies published in the Oct. 2 special issue of Science — 11 papers by a total of 47 authors from 10 countries — researchers unveiled Ardi, a 125-piece hominid skeleton that is 1.2 million years older than the celebrated Lucy (Australopithecus afarensis) and by far the oldest one ever found. Tim White of the University of California, Berkeley, a co-leader of the Middle Awash research team that discovered and studied the new fossils, says, "To understand the biology, the parts you really want are the skull and teeth, the pelvis, the limbs and the hands and the feet. And we have all of them."This is some pretty cool stuff here, and an important find, potentially.
That is the beauty of Ardi — good bones. The completeness of Ardi's remains, as well as the more than 150,000 plant and animal fossils collected from surrounding sediments of the same time period, has generated an unprecedented amount of intelligence about one of our earliest potential forebears. The skeleton allows scientists to compare Ardipithecus directly with Lucy's genus, Australopithecus, its probable descendant. Perhaps most important, Ardi provides clues to what the last common ancestor shared by humans and chimps might have looked like before their lineages diverged about 7 million years ago.Ardi is the earliest and best-documented descendant of that common ancestor. But despite being "so close to the split," says White, the surprising thing is that she bears little resemblance to chimpanzees, our closest living primate relatives. The elusive common ancestor's bones have never been found, but scientists, working from the evidence available — especially analyses of Australopithecus and modern African apes — envisioned Great-Great-Grandpa to have looked most nearly like a knuckle-walking, tree-swinging ape. But "[Ardi is] not chimplike," according to White, which means that the last common ancestor probably wasn't either. "This skeleton flips our understanding of human evolution," says Kent State University anthropologist C. Owen Lovejoy, a member of the Middle Awash team. "It's clear that humans are not merely a slight modification of chimps, despite their genomic similarity."
Congressional Republican leaders are apparently feeling left out of the health care reform process. Imagine that.The Republicans have made themselves irrelevant to the health care reform process because they have chosen to be irrelevant to the process. They want no reform to pass. They will automatically oppose any reform bill and have publicly said they will oppose any reform bill.
President Obama has cut off communication with Republican leaders, going more than four months without hosting the bipartisan congressional leadership at the White House to discuss his health care proposal, the No. 2 Republican in the House said Wednesday.
Minority Whip Eric Cantor, Virginia Republican, told The Washington Times that health care reform has been an "utter disaster" for Mr. Obama and predicted if he pushes through a public option as part of a final bill, Republicans will win back at least one chamber of Congress in the 2010 elections.
Mr. Cantor said Mr. Obama initially asked for Republican help on health care, but Republicans have heard nothing since they offered their ideas.
"No matter what the cry is from the White House, no matter what the president claims, they have not engaged with us," he said. "The White House at this point has shut down, as far as any kind of engagement."
I'm delighted to hear that; it was a pointless exercise anyway.
In April, President Obama met with GOP leaders in the White House, and started talking about the kind of concessions he was prepared to make as part of a bipartisan compromise. He asked what Republicans might be willing to do in return. They offered literally nothing. Soon after, GOP leaders "guaranteed" they would offer an alternative reform bill. Yesterday, White House Press Secretary Robert Gibbs said the administration is still waiting for it.
So no, the White House and the Democrats don't care to talk to them.
Car dealership operator Penske Automotive Group announced on Wednesday that it has cancelled plans to acquire General Motors' Saturn unit. As a result, GM said it will wind down the brand and dealer network, potentially putting 13,000 Saturn dealership jobs at risk.So another 13,000 jobs about to get canned, more dealerships closed, etc. Our car nation is taking it right in the economic engine here, folks. Good manufacturing jobs created the middle class in America. Now they are the herald of the death of the middle class.
The announcement comes nearly four months after Penske agreed to buy the rights to the 19-year old brand from GM when the automaker was in bankruptcy.
As part of the deal, GM would have continued making Saturn's three best-selling models -- the Aura sedan, as well as the Vue and Outlook cross-over SUVs -- for the rest of this year and next. Penske, which is an auto distributor and not a manufacturer, would have sold the cars on behalf of GM. Penske said it would find another third-party manufacturer to make new Saturns in 2011.
But negotiations with another, unnamed manufacturer fell through after an agreement was rejected by that manufacturer's board, according to Penske. According to a report in the Wall Street Journal, the manufacturer in question is Renault.
"Without that agreement, the company has determined that the risks and uncertainties related to the availability of future products prohibit the company from moving forward with this transaction," the company said in a statement.
Michelle Obama began the day today with a very important meeting with the president. But it wasn't President Obama she was meeting. It was Jacques Rogge, president of the International Olympic Committee, and probably one of the most sought-after leaders in the sports world this week.Take THAT, Brazil. Oprah!
The first lady is leading the U.S. delegation to bring the 2016 Olympic games to Chicago, with some star athletes by her side, and not to mention some very high powered help.
"I'm sort of an ambassador, am I not?" A laughing Oprah Winfrey said. "I've appointed myself ambassador for Chicago."
Mrs. Obama has likened the trip to the presidential campaign. From the moment her feet touched the ground here in Denmark, the first lady has been in campaign mode, lending her clout to Chicago's bid for the 2016 Olympic Summer Games.
"We are fired up and ready to go," she said at a welcome reception for Chicago boosters, employing a familiar phrase President Obama has used on the campaign trail.
And the GOP continues to complain about this. They'll complain right up until Chicago wins, give it a day, and start complaining again the day after the announcement.
Chicago's bid is drawing protests at home, with some saying the games will bankrupt the city's economy, rather than helping it grow. Tom Tresser, who runs "No Games Chicago," is among those.Which is funny, because if Bush were doing this instead of Obama, it would be a "new era of international diplomacy" for Republicans, and "showing the world what American elbow grease can do". Instead, because Obama is doing it, it's "soaking taxpayers."
"It's the wrong project for the wrong city at the wrong time," he said. "We think the bills are going to go through the roof and the taxpayers will be soaked."
Experts say the economic impact is positive when the games are held, but the large investments that have to go into infrastructure can add up.
"If we're trying to sell the games on the economic boost it provides the economy, I think that it is a straw," said Robert Baade, a professor of economics at Lake Forest College in Chicago and president of the International Association of Sports Economists. "But if we sell the games on what it might do for a city psychologically, that is a much more compelling argument."
In Washington, critics are panning Obama's decision to fly to Copenhagen Friday for a brief trip to persuade the judges that Chicago should be the next site.
"Now the president is going to go to Copenhagen when we've got serious issues here at home that need to be debated," House Minority Leader John Boehner told reporters Wednesday. "I think it's a great idea to promote Chicago, but he's the president of the United States, not the mayor of Chicago."
The president will be on the ground for merely three hours, long enough to headline the final presentation and make the final pitch to undecided IOC members, like Ung Chang, who has been an IOC member for the last 13 years.
When asked what can convince him of his vote, Chang replied, "Last presentation, that's important."
I'm taking 300K jobs lost and being pessimistic.
Supporters of Senate climate change legislation introduced Wednesday rallied outside the Capitol to promote their bill as a lifeline for the planet and a way to protect both economic and national security.Note Jay Rockefeller's response there: he's from the coal capital of the country, West Virginia. Of course he's going to oppose any climate change legislation that affects coal mining, and while I don't expect him to be Max Baucus on this mess, I do expect him to be as much against this bill as he is for the public option in health care legislation.
The event effectively marked the start of what is expected to be a bruising battle in the Senate this fall over climate legislation leading into the global climate summit in Copenhagen, Denmark, in December.
The legislation introduced by Sens. Barbara Boxer (D-Calif.) and John Kerry (D-Mass.) calls for a 20 percent emissions cut by 2020, tougher than the 17 percent cut the House bill that narrowly passed in late June called for, and a greater than 80 percent cut by 2050.
The measure was immediately criticized by Republicans as an energy tax that threatens jobs, and some Democrats also had harsh words, signaling the tough road ahead.
Sen. Jay Rockefeller (D-W.Va.) called its requirements “a disappointing step in the wrong direction.”
“Requiring 20 percent emission reductions by 2020 is unrealistic and harmful — it is simply not enough time to deploy the carbon-capture-and-storage and energy-efficiency technologies we need,” Rockefeller said.But President Barack Obama said the release of the draft bill moves the country “one step closer to putting America in control of our energy future and making America more energy-independent.”
The bill will be a tough, tough sell. The names will change but the problems will be the same: Jay Rockefeller may not be owned by the health care companies, but it just means he's simply owned by King Coal. Expect another brutal fight ahead here over the next couple of months.
- The death toll from yesterday's quake in Indonesia is over 450 as a second 6.8 magnitude quake struck this morning.
- Michigan Gov. Jennifer Granholm signed an interim budget giving the state another 30 days after last night's midnight shutdown.
- The United States and five other countries will face Iranian diplomats in a day of diplomacy in Geneva.
- Bank of America CEO Ken Lewis is stepping down at the end of the year, two years early.
- Carbon nanotube technology may be coming to an electric car battery near you.