Monday, October 25, 2010

Last Call

Finish this Sen. Mitch McConnell quote from his interview in the National Journal this week on what he would do as Senate majority leader if the GOP retakes the Senate next week:

"The single most important thing we want to achieve is..."

A)  " balance the federal budget by reducing wasteful spending."
B)  " create private sector jobs by cutting corporate taxes."
C)  " restore America to greatness by holding Washington accountable."
D)  " reduce the size of the federal government."
E)  "...for President Obama to be a one-term President."

(Answer after the jump...)

Greek Fire, Part 23

What, you thought the problem had gone away?

All train services in Greece have been suspended after state railway employees launched a series of strikes against planned reforms.

The debt-laden country's railways are €10-billion ($14-billion) in the red, and the government has announced plans to cut benefits and move excess personnel to other public sector jobs.

A draft law expected to be approved in parliament on Tuesday will also allow the partial privatization of the rail operator and open the way for private passenger services.

The railway workers' union on Monday held a 24-hour strike, which will be repeated on Tuesday, Wednesday and Friday. Union officials have threatened to burn any privately operated trains that come into service.

Won't take long for investors to realize that Greece is going to go belly up and soon...along with Portugal, Ireland, and Spain.  And hey, the way the UK and France is going on its austerity hysteria and Germany on its increasing nationalism, pretty soon Russia will be the safe, stable European country of the bunch.

The EU crack-up rolls on (but not the Greek trains, apparently).

Nightmare Factory

New York Mag's piece on how Palin becomes President in 2012 is pretty cringe-inducing, but it goes like this:

  1. Palin wins the GOP nomination.
  2. Mike Bloomberg runs.
  3. Bloomberg carries coasts:  NY, Cali, Florida, New England.
  4. Palin wins the deep South.
  5. Obama carries the rest.
  6. The rest, unfortunately is not 270 electoral votes.
  7. Matter goes to the House, which will be GOP controlled.
  8. They vote in Palin.
  9. World ends.

It's #3 there that I think is where the plan is going to fall through, if not #2 (Bloomberg stays out of it) or even #1 (GOP finds a new Golden Child for 2012).  But that's just me.  I personally think if the GOP gets control of the House and goes on their expected witch hunt, while Obama concentrates on trying to fix things, I think the GOP will eventually go over the line and remind everyone why they get tossed.

But Bloomberg carry NY, California and Florida?  New York I can see.  Cali?  No way.

Still, new tag.  Michael Bloomberg.

Zandar's Thought Of The Day

Brit Hume can kiss my black ass with his fake concern trolling for Juan Williams.

That is all.  Please resume your daily activities.

Turn On The Lights, Watch The Roaches Scatter, Part 31

Even my new favorite CNBC punching bag John Carney has figured out Foreclosuregate can very well be the catalyst that knocks us back into economic depression.  The problem of course is that he still thinks it's a minor paperwork snafu...and of course the moratorium is keeping all those borke people in their houses, the scumbags.

The paperwork problem is curable. Banks can go back through the chain of ownership of loans and liens to correct lapses.
But this process is time consuming and costly, especially when some of the original mortgage lenders or intermediary owners of the mortgages have gone bankrupt or been merged into other banks.
In the meantime, borrowers who have defaulted on their loans will likely be able to keep their homes for longer than they otherwise could. What’s more, banks are likely to find that more foreclosure actions are contested by borrowers as the public and attorneys eager to collect legal fees by fighting foreclosures become more aware of the documentation problems.
All this means that banks will find themselves with more bad loans on their books. The normal pace of run-off of bad loans—delinquency to default, default to foreclosure, foreclosure to sale—has meant banks have not been able to recover revenue on non-performing loans for upwards of a year and a half in much of the country. The new pace of run-off will likely mean that banks are stuck with the non-performing loans for far longer.
The longer it takes for banks to exit bad loans and recover cash, the higher the level of bad loans on the books of banks will get. As the non-performing loan portfolio grows, banks will need to set aside an increasing amount of capital to balance. This will, in turn, mean banks will make fewer home loans until the backlog of bad loans can be cleared up.
In short, the foreclosure crisis has the potential of creating a liquidity crisis for home loans. The actual number of defaults is not necessarily increasing—it’s just taking longer than usual to clear the old non-performing loans. But this means that banks aren’t generating revenue from the foreclosures. It also means that the loan portfolios will appear to be worsening as the percentages of non-performing loans grow. 

As usual, Carney shows he understands the outcome, but not why.  The issue is not a paperwork snafu, but a fundamental confidence issue in the banks.  The foreclosuregate mess was created because all the banks were cutting corners on the paperwork and claiming they still had the document chain for each loan intact...when they do not.  We can't be sure.

Banks can't be sure what they own.  That means their hedge fund investors can't be sure what they own now.  That's the real death spiral.  Yes, the problem Carney describes will almost certainly come to pass, but it will be because the banks have been caught defrauding the public and they have been for years.

It's not sloppy paperwork.  It's institutionalized mortgage fraud.  There's a difference.

The Big Payback

The anonymous Super-PACs are set to drop the last of their campaign millions on ads and GOTV efforts in the next week to deliver Congress to the Republicans.

Officials involved in the effort over the midterm elections’ final week say it is being spearheaded by a core subset of the largest outside conservative groups, which have millions of dollars left to spend on television advertisements, mailings and phone calls for five potentially decisive Senate races, as well as the scores of House races.

Bolstered by a surge in last-minute donations and other financial support, outside liberal groups and unions say they are stepping up their response in advertising and get-out-the-vote efforts, but remain largely outgunned by the scale and sophistication of the operation supporting Republican candidates.

A vivid picture of how outside groups are helping Republicans across the country can be found here in central Florida. The incumbent Democrat, Representative Suzanne M. Kosmas, had a nearly four-to-one fund-raising advantage over her Republican challenger, State Representative Sandy Adams, at the end of September.

Ms. Adams, low on cash, has not run a single campaign commercial. But a host of outside groups have swept in to swamp Ms. Kosmas with attack ads, helping establish Ms. Adams as the favorite without her having to spend on television.

Many of the conservative groups say they have been trading information through weekly strategy sessions and regular conference calls. They have divided up races to avoid duplication, the groups say, and to ensure that their money is spread around to put Democrats on the defensive in as many districts and states as possible — and, more important, lock in whatever gains they have delivered for the Republicans so far.

“We carpet-bombed for two months in 82 races, now it’s sniper time,” said Rob Collins, president of American Action Network, which is one of the leading Republican groups this campaign season and whose chief executive is Norm Coleman, the former senator from Minnesota. “You’re looking at the battle field and saying, ‘Where can we marginally push — where can we close a few places out?’ ”

Democrats said the conservative groups were upending some of their best-laid plans in several important races, like here in Florida, especially those in which they had been counting on the financial advantages their candidates had over lesser-financed Republicans at the beginning of the general election.

Filings with the Federal Election Commission over the weekend show that one Republican group, American Future Fund, has purchased more television advertisements attacking Representative Bruce Braley, Democrat of Iowa, who was expecting an easier path to re-election. Another group, the 60 Plus Association, reported spending more than $150,000 against Representative Solomon P. Ortiz, Democrat of Texas, who has been considered a likely victor in November against his cash-short challenger, Blake Farenthold.

“As you know, they have been dumping tens of millions of dollars of secret money into these campaigns,” Representative Chris Van Hollen of Maryland, the chairman of the Democratic Congressional Campaign Committee, said in an interview. “I would say the outside groups have shuffled the deck in a number of these races.” 

And you can again thank the Supreme Court and the Citizens United decision for that.  Before, outside money like this was prohibited in the final 30 days before an election or primary.  Now, these anonymous donors and their Super-PACs can buy ads all the way up to election day and swamp the airwaves.  No accountability, no responsibility, no check on these campaign millions, and these ads can be an inflammatory and over the top as possible...and all that matters is winning.

Big Business wants the Democrats and their oversight eliminated.  The richest 20% of America wants to go back to the Bush Gilded Era so they can finish the job of taking the 16% of the wealth they don't have to go with the 84% they do, and they've literally got all the money in the world to spend on doing it.

Haiti Update

Aid workers and doctors in Haiti are scrambling to keep the country's cholera outbreak from reaching the capital, but it will be a difficult task given the widespread squalid living conditions and tightly packed refugees.

It should be possible to keep an outbreak of cholera out of Haiti's capital, but the potentially deadly disease remains a major risk, an international aid worker told CNN on Monday.

"I think we'll be able to contain it fairly well, but it is a risk, it is a major risk," said Jason Erb, deputy country director for the International Medical Corps.

The fast-moving outbreak has claimed at least 253 lives on the impoverished island nation, which has yet to recover from January's massive earthquake. Another 3,015 cases have been reported, according to Haiti's Health Ministry.

Even if the disease can be kept out of the capital, Port-au-Prince, it remains a serious risk in the tent camps that remain home to tens of thousands of earthquake survivors, Erb warned.

"It's a danger because the camps are so crowded and so unhygienic," he said on CNN's "American Morning."

Even if the disease is contained in the areas south of Port-au-Prince, that still means tens of thousands of Haitians risk contracting it, and thousands could die from a preventable disease.

The situation in Haiti will not improve anytime soon, either.  The country still has no real infrastructure.  It's chaos at best, anarchy at worst.  They need significant help.

Help that will almost certainly be too late for many.

How You Know Grayson Is Driving Them Insane

Democrats are supposed to lie down and surrender to Republicans.  They are supposed to fold under the slightest pressure, they are supposed to give in whenever possible, and above all Democrats are never, ever, ever allowed to fight back.

Given the outright bigotry, staggering ignorance, blithe racism, horrible fearmongering and virulent rancor out there by the Tea Party, you'd think someone would notice.  Alas, for the unforgivable, intolerable crime of being Democrat With A Spine, Newsweek's George Will has named Alan Grayson the worst politician in America.

There are hundreds of plausible nominees for the title of America’s Second-Smarmiest Politician, but surely the top spot is un-contested. Americans of all political persuasions can come together in affirming one proposition: Public life would be improved by scrubbing Rep. Alan Grayson from it. This act of civic hygiene probably will be performed Nov. 2 by voters of Florida’s Eighth Congressional District. Polls indicate that a majority of them plan to deny Grayson, 52, a second term by electing his resonantly named opponent, Daniel Webster.

Nice piece of eliminationist rhetoric too:  Grayson must be "scrubbed out of public life."  No, you see, Grayson ran ads attacking Webster as "Taliban Dan" and that's so far beyond the pale of anything Sharron Angle, Ken Buck, Tom Tancredo, Joe Miller, or Christine O' Donnell has done that he is the one who must be "scrubbed" out.

Everything you need to know about George Will, the Village, and the vicious double standard that Democrats are held to is summed up by Will's hack piece here, including the fact that Grayson is so despised for standing up that Will declares he must be taken out of politics for good.  The Wingers are lining up to let everyone know what they mean by "scrubbed" too, Ed Driscoll hoping it's Grayson's "epitaph" and Jeff Dunetz calling him "stupid and nasty, a deadly combination."

This is what a Democrat who refuses to buckle under must endure.  And for that, he is History's Greatest Monster of the moment.  Help Alan raise his million dollars.  He's extremely close right now.

The Price Of QE2

So just how much money will Helicopter Ben's Magic Printing Press have to spew out in order to make a difference in the economy?  Tyler Durden takes a look at Goldman Sachs's math on what needs to be accomplished and comes up with a big number.

With just over a week left to the QE2 announcement, discussion over the amount, implications and effectiveness of QE2 are almost as prevalent (and moot) as those over the imminent collapse of the MBS system. Although whereas the latter is exclusively the provenance of legal interpretation of various contractual terms, and as such most who opine either way will soon be proven wrong to quite wrong, as in America contracts no longer are enforced (did nobody learn anything from the GM/Chrysler fiasco for pete's sake), when it comes to printing money the ultimate outcome will certainly have an impact. And the more the printing, the better.

One of the amusing debates on the topic has been how much debt will the Fed print. Those who continue to refuse to acknowledge that the economy is in a near-comatose state, of course, hold on to the hope that the amount will be negligible: something like $500 billion (there was a time when half a trillion was a lot of money). A month ago we stated that the full amount will be much larger, and that the Fed will be a marginal buyer of up to $3 trillion. Turns out, even we were optimistic. A brand new analysis by Jan Hatzius, which performs a top down look at how much monetary stimulus is needed to fill the estimated 300 bps hole between the -7% Taylor Implied Funds Rate (of which, Hatzius believes, various other Federal interventions have already filled roughly 400 bps of differential) and the existing 0.2% FF rate.

Using some back of the envelope math, the Goldman strategist concludes that every $1 trillion in new LSAP (large scale asset purchases) is the equivalent of a 75 bps rate cut (much less than comparable estimates by Dudley, 100-150bps, and Rudebusch, 130bps). In other words: the Fed will need to print $4 trillion in new money to close the Taylor gap. And here we were thinking the economy is in shambles. Incidentally, $4 trillion in crisp new dollar bills (stores in bank excess reserve vaults) will create just a tad of buying interest in commodities such as gold and oil...

But that's not the scary part.   This is.

Hatzius pretty much says it all- suddenly the market will be "forced" to price in up to 4 times as much in additional monetary loosening from the "convention wisdom accepted" $1 trillion. We have just one thing do add. If Goldman has underestimated the impact of existing fiscal and monetary intervention, and instead of closing 4% of the Taylor gap, the actual impact has been far less negligible (and if Ferguson is right in assuming that all this excess money has in fact gone to chasing emerging market and commodity bubbles), it means that, assuming 75bps of impact per trillion, the Fed will not stop until it prints nearly ten trillion in incremental money beginning on November 3. That's almost more than M1 and M2 combined.

Is the case for $10,000 gold becoming clearer?

Now, I'm not sure we'll ever get that far, because down that path is the new Weimar Republic.   But it's pretty clear that if the Fed turns on the machine, it's not going to stop anytime soon.  And everyone expects the switch to be flipped on Election Day.

Wingers Discover The U-6 Figures

The big kerfluffle this morning is this 60 Minutes story on America's unemployed and underemployed, the labor department's U-6 figure.  I've been talking about this for, I don't know, years now?

The national unemployment rate of about nine and a half percent sounds incredibly high and of course it is. But it doesn't nearly capture the depth of the trouble. It doesn't count the people who've seen their hours cut to part time. It doesn't count the people who have quit looking for work.

If you add all of that together, the unemployed and the underemployed, it's not nine and a half percent, it's 17 percent; and in California it's 22 percent.

And what makes it so much worse is that, nationwide, one third of the unemployed have been out of work more than a year. That hasn't happened since the Depression.

You mean wingers are just now noticing the fact the U-6 has been 17% plus for years now? Hey guys, try reading a friggin BLS website or an economic report once in a while. The underemployment rate in this country has been over 15% for 18 months now and has been hovering around 17% for all of this year.

This isn't news to anybody who has been paying attention, that Obama inherited this mess and gosh, it's taking longer than 2 years to fix it.


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