Count On Me, Counting You

With yesterday's decision to actually count a number of absentee ballots in Minnesota favoring Al Franken, incumbent Senator Norm Coleman is crying foul and demanding state Supreme Court intervention, stat.

DFLer Al Franken's campaign scored significant victories in the U.S. Senate recount Friday, as the state Canvassing Board approved the use of Election Day results for 133 Minneapolis ballots that can't be found and also recommended that counties sort and count absentee ballots that were mistakenly rejected.

But the five-member board revealed some fissures. That came when its two Supreme Court justices put the brakes on the apparent hopes of its two district judges to declare in advance that the board would accept the new results that include the previously rejected absentee votes.

The board chose instead to wait until those votes come in before deciding whether to accept them.

Coleman campaign officials planned to file a request today for an order from the state Supreme Court requiring counties to follow consistent standards for counting their rejected absentee ballots. They said they hoped to have a decision by early next week.

"This is the kind of chaos the board has walked us into that we are trying to avoid," said Coleman attorney Tony Trimble.

Marc Elias, Franken's lead recount attorney, called the Coleman petition "an extraordinary action to try and halt this count and re-disenfranchise these voters. ... This is all just smoke and mirrors. They are hoping to run out the clock, delay the counting of these ballots."

Earlier this week, more than half the state's counties and larger cities began to separate out wrongly rejected absentee ballots from those legitimately turned back under state law. Based on the numbers tallied so far by 49 counties and cities, officials estimated that there may be as many as 1,600 absentee ballots that should have been counted but were mistakenly excluded.

The board decision on the Minneapolis ballots means that Franken trails Republican Sen. Norm Coleman by 192 votes. Had the board accepted Coleman's argument that only the ballots that were recounted be accepted, his lead would be 238 votes.

The Franken campaign was plainly delighted with the outcome. The campaign believes he stands to gain from counting improperly rejected absentee ballots.

"It was a good day for the Franken campaign. It was a good day for all the voters of Minnesota who were concerned that their lawful ballots may not be counted," said Elias.

Those 1,600 votes will almost certainly give Franken the win, and Coleman knows it. Either way, I see this issue going before SCOTUS in the next couple of weeks. Coleman will not accept a result where he loses as a sitting US Senator, and Franken will certainly challenge SCOTUS should the Minnesota Supreme Court overturn the state election board.

Would a precedent set by SCOTUS stemming from a challenge based on a "unified standard" be interpreted by lawmakers as a national standard on voting procedures? Possibly, but this is the type of case SCOTUS has been loathe to take up, claiming states can and should run their own elections.

But...this is a federal office. I'm not a legal scholar by any means, but the ramifications of this could be far-reaching. This won't be the last close election...and let's not forget Bush v. Gore either. The court had no problem deciding our President in 2000.

Keep an eye on this case. It could go a lot further than just the Land of 10,000 Lakes.

How Bad Would Auto Bankruptcies Be?

Just how bad would it get it GM and/or Chrysler declared bankruptcy as the GOP wants them to do? The estimates aren't pretty at all.

Industry experts and economists say the automakers would close plants, fire tens of thousands of workers and cut production. That would cause many of their suppliers to collapse, triggering more job losses, straining the cities and states where the car and parts companies operate, as well as federal safety-net programs.

It would also deliver another psychological blow to consumers and a major shock to Main Street following the crises on Wall Street.

“The auto industry is a key element in the economy,” said Bob Schnorbus, chief economist at J.D. Power & Associates in Troy, Michigan. “Anything that disrupts it is going to slow the economy down more than we have already seen.”

Economists say it’s difficult to estimate the full impact, given the large number of possible scenarios. The outcome hinges on which companies filed for bankruptcy and when, and whether they would be able to continue building cars and trucks while in reorganization -- assuming they don’t go into liquidation.

“It would be unprecedented,” says Stephen Stanley, chief economist at RBS Greenwich Capital in Greenwich, Connecticut. “So it’s hard to say exactly what would happen.”

In other words a bad situation would get significantly worse at minimum. How quickly would that happen after a filing?

Still, a GM or Chrysler bankruptcy “would be the start of a cascade of failures,” says Dennis Virag, president of Automotive Consulting Group in Ann Arbor, Michigan. “The economy will be in chaos within weeks.”

That quickly.

And it won't be just obvious auto jobs that are lost, but millions of non-auto jobs too, especially in communities where auto plants are a primary employer.

If there were just a 50 percent contraction in the auto industry, nearly 2.5 million jobs would be lost in the first year, resulting in $125 billion less in personal income before a partial rebound in later years, according to the Center for Automotive Research in Ann Arbor, Mich. State and federal coffers would lose $50 billion from lost tax dollars, the center said.

"We believe the economy is in such a weakened state right now that adding another possible loss of one million jobs is just something our economy cannot sustain at the moment," White House spokeswoman Dana Perino said Thursday.

Experts say it's not just the obvious — car companies, suppliers and dealers — who'll be affected. Failure of these companies could affect national security, television studios and even sports teams.

"If you knock out these suppliers who are also providing powertrains and axles to the military, what are you supposed to do then?" former Energy Secretary Spencer Abraham said Friday in a phone interview.

The economy is so weak right now that there's no slack to absorb the blow. The system is already stretched to breaking, especially in Big Three auto plant states like Michigan, Ohio, Indiana, and Pennsylvania.

GM is already in talks this weekend with the White House and the Treasury department to try to get something going, so we'll see what happens.

StupidiNews, Weekend Edition

• Obama has named former NYC Housing Commissioner Shaun Donovan as HUD Secretary.
• The Bush DoJ is stalling on Obama's requests for wiretap and torture documents.
• A combination of bailout fatigue and anger against the UAW and the Democrats fueled the GOP revolt against the auto bailout.
• Could there be an actual market for betting big on the box office in the future?
• More women than men would give up sex for the internet, a new survey reveals.

While You Were Waiting

...for Preznitman to magically do something, GM decided to idle 20 plants for the entire month of January.

General Motors Corp. said Friday it will temporarily close 20 factories across North America and make sweeping cuts to its vehicle production as it tries to adjust to dramatically weaker automobile demand.

GM said it will cut 250,000 vehicles from its production schedule for the first quarter of 2009, which includes a cut of 60,000 vehicles announced last week. Normal production would be around 750,000 cars and trucks for the quarter, spokesman Tony Sapienza said.

Many plants will be shut down for the whole month of January, he said, and all told, the factories will be closed for 30 percent of the quarter.

"We're adjusting pretty dramatically," spokesman Chris Lee said.

The move affects most of GM's plants in the U.S., Canada and Mexico. During the shutdowns, employees will be temporarily laid off and can apply to receive a portion of their normal pay from the company. They can also apply for state unemployment benefits, Lee said.

Clearly GM is still expecting to be around, but if something doesn't happen soon, I'm betting a lot of those GM plants simply aren't going to reopen. Ever.

Still no bottom for the US economy. Still millions of layoffs, billions in bailouts and trillions in total losses ahead.

Epic Comparison Fail

When you compare a "bloated, non-competitive industry" like the Big 3 wanting a bailout to Blago selling his Senate seat on the same day something like the Madoff story breaks, you look like an asshole.

Just saying.

EPIC FAIL.

The Greatest Fraud In History

Even if the financial crisis wasn't upon us, the fact of the matter is the news that hedge fund guru Bernie Madoff has been arrested for a $50 billion investment scam would still be the biggest news of 2008.

Beleaguered investors face a "complete loss" from a scheme at the center of a major U.S. fraud case, which is likely to highlight their tendency not to question the legitimacy of big gains and ultimately lead to tighter regulation if the alleged fraud is proved.

A number of prominent funds of hedge funds are believed to have invested money in portfolios established by Bernard Madoff, a securities trader and investment adviser who was arrested yesterday before appearing at a Manhattan court charged with securities fraud.

U.S. authorities claimed Mr. Madoff told employees at Madoff Investment Securities earlier this month that the investment advisory activities of his business had been "a giant Ponzi scheme."

Christopher Miller, chief executive of London hedge fund ratings agency Allenbridge Hedgeinfo, said: "Some very big investor names are involved in this. The scheme could only work if enough investors were subscribing for him to pay money out. Some of the world's biggest hedge funds have been hit by this. There will be a monumental impact for the hedge fund industry, it could be larger then Enron.

"Some investors in Madoff's funds face 100% write-downs on the money they invested, they will suddenly be nursing full write-downs in December. When people realize the magnitude of this it will be fizzing around the stratosphere."

One asset manager based in Switzerland, home to many high-net-worth individuals who invest in funds of hedge funds, said: "Everyone's talking about this in Geneva. Several wealthy investors could be facing big losses."

Funds of hedge funds are already facing losses of 19.1% from their investments this year, according to the non-investible performance index from data providers Hedge Fund Research. This combined with investor withdrawals have left them with 14% fewer assets than they started with this year, and $140 billion, or 17%, less than their peak level in the second half of this year.

People didn't question Madoff because he was making money. The entire scandal is a microcosm of the entire financial crisis. As long as the money came in, nobody cared if it was legit or not. Nobody. It was only because the markets bombed and the resulting credit crunch dried up new investment in Madoff's funds that he was caught at all.

Mr. Miller said: "This is about the credulousness of investors to give the benefit of the doubt to good performance. What has caused all this to come to the surface is really net redemptions from the industry, because Ponzi schemes need net inflows to work. Some investors have the tendency to turn a blind eye to other possibilities when they get good news. But the impact of what has happened will be absolutely huge."

Mr. Miller said tighter regulation of the $1.6 trillion industry could result if the alleged fraud is proven.

Commentators have said losses from the fraud Mr. Madoff is alleged to have conducted could run to $50 billion. This scale of loss would make it the largest in corporate history.

Stop and think about how this was allowed to happen: pure, unadulterated greed. Once again the little guy has to foot the bill for the billions lost. Imagine if a terrorist caused $50 billion in damage to the US. No lives lost as a direct result, but the damage would have crippled the economy and wrecked countless lives. Bin Laden himself could not have done a better job.

How do you punish a man for causing this much damage? How do you truly punish a crime this large? There's no way Madoff would have been able to perpetrate this without the existing financial system itself, and it's just as corrupt as Madoff apparently is, if not more so. Any system that allows one person to do this much damage is a fundamentally broken system, unrecoverable at its core.

It must be thrown out, jettisoned wholesale into the sun. How many other Madoffs are out there yet to be caught? The entire global financial system is built on lies. The entire system is now coming undone.

What will replace it, and who and what will survive to do so?

Zandar's Thought Of The Day

Cutting UAW workers' wages from $28 to $25 is vital to getting $14 billion to the auto industry, but too bad.

Meanwhile over in the financial sector, we have one dude making $50 billion pyramid schemes.

Yeah, life's fair.

The Merry Go Round Broke Down

As mentioned in StupidiNews for today, the auto bailout is officially dead, the final sticking point being GOP demands that the UAW cut union wages to the level of non-union workers.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit’s beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.

The wage concession was basically meaningless for the continued survivability of the Big Three, designed to drive a stake in the heart of the UAW and kill it. Putting an end to the UAW was the real point of the GOP Senate resistance, and it its zeal to bust the last big union, the GOP is apparently deciding to take out the auto industry and a couple million jobs as well.

Nice guys.

So what's next? As the article mentions, the President can tap the TARP fund to save GM and Chrysler, but Bush could have done that at any point in this mess, and he's refused to so far. He may change his mind after all, a legacy-minded Bush doesn't want to be the President that killed the American auto industry. On the other hand, expecting Bush to be a logical actor in any capacity is foolish given the last eight years.

The most likely outcome is a weekend deal that puts GM and Chrysler in bankruptcy soon.

Still, GM also has said it will lack the minimum $11 billion needed to pay bills by the end of this month, raising the prospect of bankruptcy should it fail to win a cash infusion. GM reported having $16.2 billion as of Sept. 30.

An attempt to restructure GM in bankruptcy would end up as liquidation, because sales would plummet as buyers flock to solvent car companies, Wagoner has said.

Chrysler has said it will run out of money early next year. It ended the third quarter with $6.1 billion in cash and needs at least $3 billion on hand to operate, Chief Executive Officer Robert Nardelli told Congress on Nov. 18.

Pressure was mounting on GM and Chrysler this week before the congressional failure as both faced demands from a small number of partsmakers for payments in advance because of the bankruptcy concerns, people familiar with the matter said.

GM is “deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts,” according to a statement. “We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis."

The industry is effectively done at this point, it's either collapse under Bush or nationalization under Obama. GM and Chrysler will not survive bankruptcy, and if both of them go under, Ford will follow.

The ripple effects will be catastrophic. Millions of jobs will be lost as dealerships, parts stores, suppliers and auto mechanics go under. The auto suppliers service several auto brands and manufacturers that share costs. With the Big Three gone, Toyota, Honda, Mazda, Volkswagen and other foreign car companies will have to pick up costs that will be passed to consumers. Those folks will be hurt big time as well.

Obama will have no choice but to fund a massive nationalization project to save the Big Three, and the GOP will blame him for every cent he spends.

Remember that in 2010 if you still have a job in November when you vote.

[UPDATE] Nope, Bush doesn't want to be the goat on this.

The Treasury threw a lifeline to the beleaguered US car industry, saying it is ready to prevent the failure of auto makers until Congress reconvenes next month."

Because Congress failed to act, we will stand ready to prevent an imminent failure until Congress reconvenes and acts to address the long-term viability of the industry,'' Treasury spokeswoman Brookly McLaughlin said.

The announcement came shortly after the White House said it will consider using the $700 billion Wall Street bailout fund to rescue the auto industry after the Senate refused to pass a $14 billion bailout plan late Thursday night.

"The current weakened state of the economy is such that it could not withstand a body blow like a disorderly bankruptcy in the auto industry," White House press secretary Dana Perino said.

The Bush administration has repeatedly opposed using the bailout fund, saying it was designed specifically to restore stability to the financial sector. But the White House said Friday it must reconsider after the Senate failed to agree on rescue plan late Thursday.

Considering the Dow is down less than a percent this morning instead of the meltdown predicted this morning, clearly the market is expecting Bush to step in and float the industry until Obama can act.

We'll see.

StupidiNews!

• A last minute compromise to save the Big Three ran out of gas late last night.
• Obama plans to extend the "nuclear umbrella" over Israel.
• The total planned jobs lost to the BoA/Merrill Lynch merger is up to 35,000.
• The US remains tight-lipped about an Afghan mass grave of Taliban fighters.
• The Obama team and NASA are on a collision course over the Ares moon program.

Dear America:

"If the GOP tries the same stuff they completely failed with in 2006 and 2008, I know it'll work for them in 2010 and 2012!"

--Karl Rove

Zandar's Thought Of The Day

$25 billion is not enough for the Big 3.

$36 billion is too much for the Big 3.

Therefore, the answer is $14 billion and one of those demeaning retractable child harness on a leash dealies, which magically is also too much and not enough at the same time, meaning it's going to die in the Senate and a couple million jobs along with it. But that's okay, because the job losses will come from the other 49 states the Senators voting against the plan are from.

Thursday Job Numbers

And they're not good folks. Weekly jobless claims hit a 26-year high with a staggering 573,000 unemployment claims last week.

It was the highest number of jobless claims since Nov. 27, 1982 when initial filings hit 612,000. Economists were expecting jobless claims increase to 525,000, according to a consensus compiled by Briefing.com.

The four-week moving average of jobless claims, which works to eliminate fluctuations in data was 540,500 last week, an increase of 14,250 from the previous week's revised average of 526,250.

One economist said the number of initial claims decreased in the previous report because the data from that report represented the week of Thanksgiving. Some of the surge in initial filings in this current report could be a bounce from that week.

However, "the underlying trend in the labor market is that it continues to weaken," said Jay Bryson, global economist with Wachovia Economics, and that is evident in the 4-week moving averages of initial claims.

The number of people continuing to collect unemployment rose to 4,429,000 in the week ended Nov. 29, the most recent week available, which was also a 26-year high. The measure was an increase of 338,000 from the preceding week's revised level of 4,091,000.

The last time continuing claims was at such an elevated level was Dec. 4, 1982, when continuing claims hit 4,509,000.

Folks in my generation and younger simply have not seen anything like this, period. We've been through a couple of hiccups like in 1991 and 2002, but nothing like a sustained, multi-year recession. How scared are Americans? For the first time ever, our household debt decreased.

According to the Federal Reserve's flow of funds report released Thursday, consumer debt fell an annualized $30 billion, or 0.8% in the third quarter to $13.91 trillion.

Americans holding less debt may sound like a positive, but it also means consumers are spending less, as debt has become more expensive and harder to come by.

As the credit crunch intensified in the third quarter - and exploded late in the period with the bankruptcy of Lehman Brothers - Americans were increasingly unable to finance big purchases like homes, cars and big-ticket goods.

"Consumers are going through a major change in their spending and savings habits," said Lyle Gramley, a former Fed Governor. "Throughout the housing bubble, consumers had a savings rate of zero, relying on the rising price of their homes. Now they're saving money for the future instead of spending it."

That's a worrisome sign for the economy, as consumer spending makes up 70% of overall U.S. gross domestic product. And the fourth-quarter numbers are likely to grow, as the peak of the credit crisis came in mid-October.

As I've said time and again this is a consumer-driven recession. Consumers buy less, more and more people lose their jobs as demand dies, and in turn they buy less, Deflationary Spiral 101.

The pain is just beginning.

Predictions, Part 2

Well gosh, Atrios is just a smart guy. The GOP holding up Obama's cabinet? Nobody saw that coming, etc. blah blah blah. I figured it would be Susan Rice as UN Ambassador, but with Blagogate having opened the door to giving Obama a hard time as a national sport, it seems the initial target is the more obvious of the choices, AG nominee Eric Holder.

Sen. Arlen Specter (R-PA), the ranking member of the Senate Judiciary Committee, called for a delay in Holder's confirmation hearings because of troubling questions stemming from Holder's role in the pardon of fugitive financier Marc Rich.

This led the committee's chairman, Sen. Patrick Leahy (D-VT), to fire off an agitated letter accusing his colleague of making unreasonable demands.

Leahy said he was "confounded" at Specter's surprise that the Holder hearings had been scheduled for Jan. 8, two days after the 111th Congress convenes. Specter said Wednesday he didn't think the confirmation hearings could happen until Jan. 26, a week after Obama's inauguration, so Republicans could have ample time to review thousands of pages of documents and the nominee's FBI background check.

"My recollection is that your initial reaction on November 18 was that you were at that time already reviewing his record," Leahy wrote. "Of course, Eric is someone you and I both know well and have known and worked with for years."

Leahy noted that the Holder hearings were scheduled within a comparable time-frame of other Attorney General nominees. While word began to leak that Holder would be the nominee in mid-November, Obama made the official announcement last week, more than a month before the hearing's are scheduled.

Specter's attempt to delay the hearings marks a shift from earlier statements on Holder. Appearing on MSNBC on Nov. 19, Specter voiced concern about the Rich pardons but specifically said he would not obstruct confirmation hearings.

"Would I hold it up? No," He told Andrea Mitchell. "I would be prepared to move ahead very promptly with hearings. Move into the substance of the matter. Ask the important questions. Look for any documents that might be relevant.

"As fast as we can move through, I'm prepared to decide it one way or another," he continued. "I wouldn't hold it up."

It's unclear what changed in the three weeks since that interview aired.

Blagogate, you idiots.

The GOP smells an opening here. Obama's honeymoon is officially over with both the GOP and the press, and that means it's open season on him.

The Village Idiots are now going to do everything they can to sink Obama under the weight of Rod Blagojevich's ego.

StupidiNews!

• The House passed a $14 billion auto bailout, but the Senate appears to be much tougher.
• California's budget shortfall has reached $40 billion as that state's financial crisis rolls on.
• Lawyers acknowledge Democratic Rep. Jesse Jackson Jr. is "Senate Candidate 5" but he says he's innocent of wrongdoing.
• US retail sales took their biggest nosedive in five years as Americans cut back on spending.
• Just how much does the black hole at the center of the galaxy weigh, anyway?

Serious Energy

Washington DC, the Land Of Ten Thousand Leaks, has offered up Obama's choice for Energy Secretary, and for once there's no doubt it's a home run. The candidate? Nobel prize winner and Lawrence Berkeley Labs director Dr. Steven Chu.

The Lawrence Berkeley Web site says Chu was an early advocate for finding scientific solutions to climate change and has guided the laboratory on a new mission to become the world leader in alternative and renewable energy research, particularly the development of carbon-neutral sources of energy.

That experience will be useful as the next energy secretary, as Obama wants to spend billions of dollars to promote alternative energy sources and create millions of green energy jobs.

A spokesman for the Lawrence Berkeley laboratory offered no comment on the prospect of Chu becoming the next energy secretary. Chu is traveling abroad in Asia and Europe and will be back at work on Monday, he said.

Chu is a scientist and advocate of alternative energy, not a politician. With his pretty much impeccable scientific credentials, we'd have a cabinet official who actually knew what the hell his department was regulating. The NY Times has a pretty good bio on Dr. Chu as well, they inform us that his former jobs bring a lot to the table:

Chairman of the physics department at Stanford, and head of the electronics research laboratory at Bell Labs. Since 2004, he has been director of the Lawrence Berkeley National Laboratory, which has 4,000 employees and a budget of about $650 million. The lab is owned by the Energy Department and operated under contract by the University of California; Dr. Chu was chosen for the job by the university but approved by the Energy Department. He shifted the lab’s work more heavily into research into advanced biofuels, artificial photosynthesis and other solar energy research. He has been a vocal proponent of vigorous steps to control greenhouse gas emissions.

Yeah. This is the type of person we need to help spearhead the US effort for committed, serious climate change across the globe, not another Bush/Cheney oil company/nookular plant yes man like Sam Bodman and Spencer Abraham. Good for Obama. Very good.