StupidiNews, Weekend Edition

• Obama's weekly address outlines a 2.5 million job public works program.
• Could Janet Jackson's famous Super Bowl "wardrobe malfunction" case hit the Supreme Court?
• The Saudis declare war on Somali Pirates.
• The one Dow stock that's really cooking in this "soup line" economy? Campbell Soup.
• Apple's iPhone 2.2 OS is out with some new Google Maps love.

It's Geithner

NBC is leaking that NY Fed Chair Tim Geithner is Obama's pick for SecTreas.

Barring last minute changes, the nominee for Treasury Secretary will be NY Fed President Tim Geithner -- a career Treasury official under both Bob Rubin and Larry Summers -- who actually had worked at the Treasury in three administrations under five Secretaries -- going back to 1988.

Geithner has been a key player in the current economic crisis -- helping Treasury Secretary Hank Paulson and his team manage the wall street bailout.

Former Treasury Secretary Summers -- also considered for the post -- might still play a major future role in the Obama administration, according to sources. Summers came under fire from women's groups because of controversial comments he made about gender issues while President of Harvard, but sources say the decision to choose Geithner had more to do with Obama's interest in "change" and getting someone new on the team.

Also expected Monday -- an announcement that former U.N. Ambassador and Energy Secretary in the Clinton administration, New Mexico Governor Bill Richardson, will be Commerce Secretary.

How BAD is this pick?

The Dow shot up almost 500 points on the news in the last hour of trading.

I can't get over how hideous of a pick this is. You might as well leave Hank Paulson in charge. There will be no appreciable change in economic policy in the Obama administration, more bailouts for Wall Street, more money thrown down the rabbit hole.

Geithner is literally the worst pick Obama could have made short of letting Paulson keep his job. Not only is he part of the same Ben Bernanke/Alan Greenspan Fed team that got us into this mess, as New York Fed Chairman, there's no single bigger government cheerleader for Wall Street itself than this man.

Obama's message is clear: Wall Street, not Main Street. I hope this is wrong. Honestly, I do. Because if this is true, Obama just sold America down the river, and he most likely has no intention of making the hard choices that have to be made in order to save the economy. Geithner's been the point man for the bailout on the Treasury/Fed side of the deal and while he has made noises about the US economic position being in trouble, his actions speak to supporting the same useless Fed actions that produced this debacle. If anything, Geithner was showing Bernanke "the ropes" 16 months ago.

Among executives of the district banks, Geithner, 46, has the most extensive background in responding to upheavals. During the Clinton years, he was an aide to Robert Rubin and Lawrence Summers, who both served as Treasury secretary. In that role, Geithner helped broker emergency loans for Thailand, Indonesia, South Korea, Russia and Brazil when their currencies sagged. While he was at the Treasury, the U.S. participated in interventions to strengthen the yen in 1998, and the euro in 2000.

``It is a team that is new to the challenge, but it is a pretty smart group,'' said Harris. Bernanke ``really studied for the job. He is familiar with the history of the Fed, the policy errors, and he is a Great Depression buff.'' Bernanke contributed to Depression research with a 1999 paper co-authored with Mark Gertler and Simon Gilchrist on how financial markets can worsen economic downturns.

With Friday's action, Bernanke and his colleagues have ``tip-toed in'' and are ``trying to strike the right balance between doing nothing and riding to the rescue,'' said Gary Schlossberg, senior economist at Wells Fargo Capital Management in San Francisco, which oversees $200 billion in assets. ``They've left the door open to a full-blown easing of monetary policy. The results are mixed so far, and early returns suggest we're not out of the woods yet.''

That worked out well, huh guys?

Geithner's a clueless twit, just like the rest of the Fed crew. Obama's just hung a sign on Wall Street this afternoon: "Under New Management, Same Old Business."

Clinton is arguably strike one, but Geithner is definately strike two for Obama. Two and a half weeks and he's already showing major signs that "Change you can believe in" is the same goddamn thing as Bush.

I am pissed.

[UPDATE]More Geithner is Great! quotes...

I would say the market is going to like it," said James Awad, managing director of Zephyr Capital. "[Former Clinton Treasury Secretary Larry] Summers was more controversial. People will view it as a safe choice, an experienced guy.

"There's a little bit of a question because he's associated with the bailout," Awad added, "and that's still a work in progress and not totally successful. There will be a few who'll be upset because he's associated with the TARP."

"Geithner is a solid choice. He has shown more independent thinking," said Former Sen. Don Riegle, who chaired the Senate Banking Committee during the savings and loan crisis. "He has also seen this financial system meltdown from the inside ... he can offer highly skilled and pragmatic advice to Obama."

"He will understand the urgent necessity of assembling a world class team at Treasury ... and be able to attract the talents he needs," Riegle continued. "This choice will also facilitate close cooperation between the Treasury Department and the Federal Reserve, [which is] much-needed given the increasing scale of the economic crisis."

"He is battle-tested with Rubin and Summers and has done an excellent job orchestrating the Fed's response to the worst financial crisis since the Great Depression," said Chris Rupkey, economist at Bank of Tokyo-Mitsubishi. "A crisis manager par excellence who will hit the ground running, as he has been on the case since the Global funding crisis began way back in July 2007. I cannot think of a better choice who will mesh seamlessly with the Fed and FDIC."

If you actually think the Fed has done a excellent job in any way, shape, or form, then yes, Geithner's your man.

Spin Citi

No go on the Citigroup rebound. Stock's down another 20% to around $4 a share and falling here at 10:45 AM or so. Dan Wilchins at Reuters is already running down the list of what the Gubment can do, which boils down to four choices:

1. Government buys a crapload MORE of Citi preferred stock,
2. An AIG style multi-billion "loan",
3. An FDIC liquidation, WaMu style,
4. Government guarantees all Citigroup debts and derivative obligations.

Number 2 is the most likely, 3 cannot be allowed to happen, but I'm assuming the government will screw around with 1 first.

Which means of course option 4, the option that would actually work, won't be considered. Once the government starts acting as derivative counterparty for Citi, every bank in the country will want the same exact guarantee, period. It's the derivative obligations that are going to kill the banks, and they both know it...but eventually this is what will be have to be done. Banks still refuse to come clean on derivative debt and the fact the banks are basically insolvent because of it.

So yeah, we'll stick with 2. Big old loans. They've worked GREAT so far. Obama's Treasury Secretary is going to be the worst job on Earth.

But at least it's a job.

Dear America:

"Quit complaining about the economy. We'll be fine, just as soon as you realize there's nothing fundamentally wrong with the global financial picture and you get your ass to Wal-Mart like you've been doing and deal with the fact Obama's going to fail to keep any of his domestic spending promises and will have to slash spending across the board like McCain was going to do anyway."

--Irwin Stelzer

The Enemy Of My Enemy

Seems the universe has an unlikely ally in fighting those pesky Somali pirates off the Horn of Africa: militant Somali Islamists.

Dozens of Somali Islamist insurgents entered a port on Friday in search of the pirate group behind the seizure of a Saudi supertanker that was the world's biggest hijack, a local elder said.

Separately, police in the capital Mogadishu said they ambushed and shot dead 17 Islamist militants, in the latest illustration of the chaos in the Horn of Africa country that has fueled a dramatic surge in piracy.

The Sirius Star -- a Saudi vessel with a $100 million oil cargo and 25-man crew from the Philippines, Saudi Arabia, Croatia, Poland and Britain -- is believed anchored offshore near Haradheere, about half-way up Somalia's long coastline.

"Saudi Arabia is a Muslim country and hijacking its ship is a bigger crime than other ships," Sheikh Abdirahim Isse Adow, an Islamist spokesman, told Reuters. "Haradheere is under our control and we shall do something about that ship," he said.

Islamists on one side, pirates on the other, and we're stuck in the middle. Lovely.

I'm assuming then standard US operating procedure and asking "So, which side do we start bribing first to kill the other?"

A Smidge Of Good News On Housing

As Fannie and Freddie are suspending foreclosures until after the New Year.

The six-week halt will begin Nov. 26, a day before the U.S. Thanksgiving holiday, and last through Jan. 9, the companies said in separate statements today. The hiatus is designed to give servicers more time to implement a streamlined loan modification program for struggling borrowers.

“It’s a giant time out,” Paul Miller, an analyst at FBR Capital Markets in Arlington, Virginia, said today in a Bloomberg Television interview. “I wouldn’t be surprised to see this across the board.”

Fannie and Freddie, government-sponsored enterprises that own or guarantee $5.2 trillion of the $12 trillion U.S. home mortgage market, were placed under federal control Sept. 6. They have since been pushed to work harder at modifying troubled single-family and multifamily mortgages to curtail foreclosures.

Better than nothing, especially if other mortgage lenders follow suit. But six weeks from now, folks will still be underwater on their mortgages and out on the streets in January.

And a hell of a lot more people will follow over the next 18 months.

StupidiNews!

• Attorney General Michael Mukasey collapsed after a speech last night and has been hospitalized.
• Obama's personal cell phone records have been compromised by Verizon employees.
• Hillary Clinton will indeed be named Secretary of State next week.
• US military contractors in Iraq could soon be facing charges under the new agreement worked out this month.
• Will California soon be testing a statewide electric car charging grid?

Global No Confidence Vote: The Naked Citi

Economically we're approaching another fateful moment, another fork in the road...and quite likely another cliff ahead. The Dow tumbled to near 7,500 today, representing a devastating loss in the last week as the auto bailout has stalled out until December.

Far more sinister is the collapse of Citigroup, the number 2 bank in the US. Announcing 53,000 layoffs on Monday, the bank's stock has now imploded under the vital $5 a share point where institutional investors like pension plans and hedge funds aren't allowed to tread. This could trigger a massive selloff that will sink the company, and indeed Citi is now shopping itself around in a last ditch effort to get above the $5 mark.

It's the latest company to play "Deal or No Deal."

Citigroup Inc., which fell 26 percent in New York trading today, is considering selling off pieces of the bank or the whole company, the Wall Street Journal reported online, citing people familiar with the matter.

Talks are preliminary and don’t suggest that New York-based Citigroup is backing away from its insistence that it has sufficient capital and funding, the Journal said.

Buffeted by four straight quarterly losses, Citigroup has raised about $75 billion since December by selling assets and equity stakes, including a $25 billion injection from the U.S. Treasury. The government will do whatever it takes to stabilize Citigroup, including pouring more money into the company, because of the threat its failure would pose to the global economy, said Peter Wallison, a fellow at the Washington-based American Enterprise Institute.

“There is no question that Citigroup will not be allowed to fail,” said Wallison, who was Treasury Department general counsel under former President Ronald Reagan. “I would not think it is a good idea to restore the ban on short selling,” he said.

Citigroup declined $1.69 to a 15-year low of $4.71 on the New York Stock Exchange at 4:15 p.m. It has fallen 84 percent this year.

Like AIG, Citigroup will not be allowed to go under. Hundreds of billions will be poured into it over the next few days by Hank Paulson and friends. Another loaded Weapon of Financial Destruction has been pointed at the global financial system, and as sure as Jack Bauer saves the day in "24" the government will save the floundering company. Bank of America, the number one bank in the US, has slid to $11.25 or so.

The largest banks in the US are failing.

But even more sinister than that, the S&P 500 hit its lowest close since 1997.

"It was pretty brutal," said Phil Orlando, chief equity market strategist at Federated Investors.

He said the market is at a critical point, with the S&P having "tested" or closed below the lows of the previous bear market. Investors will be looking closely at the next few sessions to see if stocks can hold those key levels.

Since peaking at an all-time closing high of 1,565.15 on Oct. 9, 2007, the S&P 500 has lost 52%. The Dow has lost nearly 47% since closing at an all-time high of 14,164.53 on the same day. Since hitting a bull market high of 2,859.12 on Oct. 31, 2007, the Nasdaq has lost 54%.

"The wealth destruction is phenomenal," said Tom Schrader, managing director at Stifel Nicolaus.

Cut in half and still falling. Nobody knows what to do. We're out of rate to cut. We're not running on fumes, we're running on OTHER COUNTRY'S FUMES.

It's rather depressing. What's worse is I don't see a bottom to this yet. The housing crash rolls on, unemployment is rising sharply, and the consumer-driven economy is running out of consumers to consume.

It's a race to see who gets bailed out first, the automakers or Citigroup. I'm betting Citi, and I'm betting a deal will roll around before Monday, stoking another lovely bear market rally that will run smack into the reality of a dismal holiday shopping season come a couple weeks or so.

Citigroup will not be long for this earth in its current form. Bank of America is most likely next. These institutions are testing multi-year lows this week. We're down to a massive decision point here. Too Big To Fail is about to be tested.

Citigroup shares lost more than one-quarter of its market value on Thursday as investors questioned the banks ability to handle potential credit losses and writedowns in 2009.

The bank has been reeling on concerns that mounting losses from credit cards, mortgages and toxic debt could overwhelm its efforts to slash costs and add deposits. Citigroup has access to U.S. Federal Reserve funds, is working at insuring some of its debt and is reducing its balance sheet faster than any other company in the banking industry, said analyst Bove who believes these steps backstops the bank's liabilities.

"It would take a Depression every bit as large and long as the 1930s debacle to shake this company's viability," Bove said.

Care to test that theory? Nevermind...we're testing that right now.

Be prepared.

Cross-posted at the Frog Pond.

Waxman On, Waxman Off

Democrat Rep. Henry Waxman, that is. He's now the Chair of the mega-powerful House Energy and Commerce Committee after taking the spot from Michigan Rep. John Dingell.

Rep. Henry Waxman (D-Calif.) will become the next chairman of the House Energy and Commerce Committee after House Democrats voted to replace current Chairman John Dingell (D-Mich.).

Waxman won 137-122 in the secret ballot vote.

The dramatic intra-party showdown for the coveted position signals a leftward turn for the Democratic agenda. The outcome was a blow to the seniority system and a victory, at least in perception, for House Speaker Nancy Pelosi (D-Calif.).

Though her aides denied it, many saw the hand of Pelosi in Waxman’s challenge for the post, which conveys great power over how the Democratic agenda of President-elect Barack Obama will be implemented.

Waxman is considered more liberal on issues like climate change, energy and business regulation, and potentially more aggressive on healthcare. Dingell, the longest-serving House lawmaker, is close to the auto industry and autoworkers.

Dingell has long been the main obstacle on the Democrat side of the aisle to reforming the auto industry and to clean energy technology. He fights for his home district of Detroit deep in UAW country and he's fought for it well, but he's put the auto industry's needs ahead of America's for decades now. It's time for the country to move on. Environmental and energy reform are far more important now, not to mention badly needed reform of interstate trade laws and REAL climate change legislation. This committee would handle health care reform legislation on the House side too, most likely working hand in hand with Ted Kennedy and presumptive HHS Secretary Tom Daschle.

Waxman taking this committee over is a big neon sign that Obama's domestic agenda is on the front burner and cranked up to boil. This is huge folks, Dingell has been the ranking Democrat on this committee since Reagan and it means Obama's allies in Congress are gearing up swiftly and effectively to launch into signfiicant action come January. Going after Dingell is something even Clinton wouldn't contemplate, much less do. This is the kind of change we need.

Obama knows exactly who he needs to have going into the fights ahead...and he knows who he needs to have moved aside. I'm feeling better and better about the real prospect of effective environmental, energy, and health care legislation.

Indiana Jones And The Search For The Market Bottom

You don't have to be a world class archaeologist to figure out what's going on in the Dow this week. Earlier I warned that the Dow would indeed test the 8,000 mark again, and it did at the end of yesterday's session falling to just under the 8k level.

With an entire night to digest the numbers, Dow futures are having another meh day. It could go either direction, and this may actually be a vitally important day in the markets. If the Dow rallies once again or stays around the opening level then it's another sign the 8k level is the bottom for now. There's evidence that the market really wants to stay above 8,000. News this morning that Saudi prince Alwaleed Bin Talal Alsaud increased his stake in Citigroup to a full five percent of the company may be the rally point for today.

If it sinks big time however like yesterday, then all bets are off.

Plenty of evidence is there on the latter. The Fed is starting to see evidence that deflation may be the threat, not inflation.

Five years after Federal Reserve Chairman Ben S. Bernanke helped stamp out the risk of deflation, the threat is returning as the financial crisis and a worsening economic slump pull inflation lower.

Fed policy makers now predict the U.S. economy will contract until the middle of next year, according to minutes of their Oct. 28-29 meeting released yesterday in Washington. Government figures showed that consumer prices excluding food and fuel costs fell for the first time since 1982 last month.

The minutes, along with a slide in financial stocks to the lowest level in 13 years, increased the odds that the Fed will cut its benchmark interest rate next month. Bernanke may also need to revisit the unorthodox policy options, such as purchases of U.S. government debt, that he outlined as a board member in 2002-2003, Fed watchers said.

``The Federal Reserve put deflation back on the table as a significant policy concern,'' said Vincent Reinhart, former director of the Fed's Division of Monetary Affairs, who is now a visiting scholar at the American Enterprise Institute in Washington. ``There does not appear to be any barrier to lowering'' main rate below the current 1 percent level, he said.

Deflation, or prolonged declines in prices, hurt the economy by making debts harder to pay off and lenders more reluctant to extend credit. Japan is the only major economy to have suffered the phenomenon in modern times.

Things could go either way, short term. Long term however keep in mind things will get worse...much worse. We're getting closer and closer to the "Stagpression" scenario, a multi-year period of recessionary contraction that will cycle around the globe.

StupidiNews!

• The Obama cabinet continues to take shape with Arizona Governor Janet Napolitano as Homeland Security Secretary.
• If the GOP does have a leader, it's House Minority Leader John Boehner.
• It's all but official: Missouri got it wrong on November 4th for the first time in 48 years.
• After 17 years, Guns N' Roses has a new album out and it's launching on...MySpace?
• US corporations want a major rollback of pension plan rules to stay afloat.

Obamacare Is A Go

While much has been made of Obama's selections for AG and SecState, possibly the most telling and potentially important cabinet appointment was leaked today, that of Health and Human Services Secretary: Tom Daschle.

As Ezra Klein points out, this means Obama is dead serious about getting Obamacare signed into law.

CNN is reporting that Tom Daschle will not only be Health and Human Services Secretary, but also health reform czar under the Obama administration. This is huge news, and the clearest evidence yet that Obama means to pursue comprehensive health reform. You don't tap the former Senate Majority Leader to run your health care bureaucracy. That's not his skill set. You tap him to get your health care plan through Congress. You tap him because he understands the parliamentary tricks and has a deep knowledge of the ideologies and incentives of the relevant players. You tap him because you understand that health care reform runs through the Senate. And he accepts because he has been assured that you mean to attempt health care reform.

And I agree with his analysis 100%. Obama may be playing politics with Clinton and State, but he's playing politics to win with HHS.

Considering the seriousness he's taking this with, new tag: Obamacare.

The Whole Hillary Thing

There's two schools of thought on Hillary Clinton as SecState:

1) The Sopranos Theory -- Much like Tony Soprano did with his the relatives he had to keep an eye on, Barack Obama is wisely putting Hillary Clinton in the post where Obama appears to be the most magnanimous and the Clintons end up causing the least actual damage. If she accepts, it means:

• her fate is now tied to Obama's success,
• she can't turn around and run against him in 2012,
• Bill's legacy is on the line as much as hers is,
• she's duty-bound to implement Obama's foreign policy, not her own,
• the most popular US Presidential couple living is America's new face abroad,
• the Clintons are a lightning rod taking needed pressure off Obama,
  
• and Hillary really does want this job, and wants to do well internationally.
  

Obama's got her right where he wants her, and he knows this is the best way to neutralize Hillary Plan 2012. Keep your friends close, keep your enemies in your cabinet.

2) The Sandbag Theory -- Obama's telling the netroots on the left to go screw off just two weeks into his transition, he's going straight down the middle with this Village centrist stuff and the reason Clinton is his SecState is because his foreign policy isn't going to be different from hers. Obama's just hung a huge "Open For Business, Neocons Wanted" sign up on Foggy Bottom and his policy on Iraq is to reduce troops there so they can be deployed to Afghanistan, Pakistan, and eventually Iran. Progressives has served their purpose and now will be abandoned as Obama and the Democrats angle towards the center-right. They find out the hard way Obama's foreign policy is the same as Dubya's only with the competence and slickness of the Clintons behind it. The Left has been totally had and Obama will now be operating to stay in power and pleasing the GOP, having learned the Power of Triangulation from the master himself. The key to winning GOP support will be his Neocon foreign policy, and in the end it's Clinton's third term and Obama's going to throw the Left under the bus.

Which theory is true? I don't know, it's only been two weeks. But the arguments are there, the appointment of Clinton means "No Drama Obama" either is brilliantly tapping the Clintons, or he's already turned on the netroots.

Zandar's Thought Of The Day

Cartoon by Pat Bagley at Cagle Cartoons.

Let's not forget both sides are using the auto companies to advance their political agendas.

The GOP wants to protect auto executives and CEOs, while busting the last remnants of the UAW and ignoring global warming. The Dems want to protect the UAW while stopping global warming and attacking excessive CEO pay.

The GOP position is like the airlines, the Big 3 will emerge leaner, meaner, and stronger (never mind the airlines had to then turn to consolidation, massive layoffs, and union busting to do so.) The Dems position is that the government has to step in (never mind the Dems screamed that the auto industry was a dinosaur that deserves to die.)

The compromise will most likely save the industry...just not the union jobs. Dems will get a much greener industry, GOP will get the UAW all but decimated, and they'll each call it a win.

Unless, you know, you're an auto worker in a plant town.

Obama's AG

Many news outlets are saying this morning that Obama has picked former Clinton Justice Department #2 man Eric Holder as his choice for Attorney General, but there's one rather big blemish on his record:

Holder, 57, has a rich background within the criminal justice system as a former judge and top federal prosecutor in Washington. He is widely known within the city's legal community and for his philanthropic work on behalf of troubled juveniles detained at Washington's Oak Hill facility. If he is confirmed by the U.S. Senate, Holder will be the first African American attorney general.

For the past several years, Holder has defended private corporations as a partner at the law firm Covington and Burling. But he took on an active role in the Obama campaign as a friend and adviser to the senator from Illinois after meeting him at a Washington dinner party, and over the summer served on his vice presidential vetting team.

Holder has won praise from lawmakers on both sides of the aisle, although his selection is likely to revive questions about his failure to act forcefully to prevent a last-minute pardon of fugitive Marc Rich, who won clemency from President Bill Clinton during his last days in office in early 2001.

The Republicans are already attacking Holder on this, and the wingnuts are gleefully pointing to this as proof that "Clinton's third term" is underway and that Holder is somehow worse than disgraced Bush AG Alberto Gonzales. I leave with you with part of a speech given by Holder in 2004, courtesy of Melissa McEwan at Shakesville:

At the beginning of the 21st century, this nation faces problems that are old and that are new: racial, sexual orientation, and gender inequality all remain. … The solutions are contained within a new, dynamic, progressive movement that has the ability to inspire and motivate the people of this nation in the way that progressives have in the past. That ability exists in this room, and in the law schools, and in the courtrooms, and in the law offices around this country. It is our task to unlock, to unleash the creative energy needed to give life to this renewed movement. It is not enough for us to gather at annual meetings, to participate in panels, and to return to our communities, and be content to observe, or to passively criticize, the now dominant governing philosophy.

Quite simply, it is time to act. It is time to organize. It is time to retake the levers of government and to use them for the common good. It is time, finally, to be true to our ideological heritage. And so my challenge to you tonight is to leave this convention renewed in your convictions, and committed to using your abundant talents for the good of the citizens of this country.

So...yeah. This is one of the guys who will help Obama put the country back together, I hope. I'm far less worried about Eric Holder and Marc Rich than I am his views on the Constitution, torture, executive power and the "plenary executive", the legality and scope of how much power the Warren Terrah grants President Obama, enforcement of civil rights and voting laws, and the politicization of the Justice Department.

Even more than SecState, Obama's appointment to AG is the most important appointment he can make after the "above the law" presidency of Bush, Ashcroft, Gonzo, John Yoo, and Mike Mukasey. It was the Bush legal team (illegal team?) that gave him the cover to do all the horrendous things that he did to America like torture, like suspension of habeas corpus, like wiretapping American citizens, and it was specifically Gonzales who turned Justice into the Cover Preznitman's Ass Department.

Only after Gonzo went too far and fired career US Attorneys based on political reasons was he forced to resign. Meanwhile, current Chief Ass-Coverer Mike Mukasey has done exactly nothing to clean up Justice.

I understand that "Better than Gonzo" is about the lowest bar in the history of Presidential cabinet appointments, but Eric Holder seems like somebody actually dedicated to Rule Of Law and not Rule By President. More than any other cabinet position, it's the AG that has the most work ahead of him, and it's good to see former Consitutional Law professor Barack Obama take this seriously.