Another Milepost On The Road To Oblivion

Hey the stock market's up! We're saved!

"Don't count on a consumer-led recovery."

Umm...crap. Case in point, who does that leave, big business?

"U.S. output plummets, manufacturing at record low."

Double crap.

Running Vs. Bunning

While the name most KY Democrats hear as the person to run against Jim Bunning next year is Bob Mongiardo, it looks like Rep. Ben Chandler is interested in the job too.

Chandler says he's being encouraged by supporters and he's been approached by the Democratic Senatorial Campaign Committee about a possible run next year.

Chandler, a Democrat, was at the Kentucky Capitol Friday and had a meeting scheduled with Gov. Steve Beshear. He said they were planning to talk about a variety of issues and politics may be one of them.

Beshear confirmed their meeting, but declined to say specifically what they were talking about.

Chandler is the grandson of Kentucky political icon and Major League Baseball commissioner Happy Chandler. He is a former Kentucky attorney general and was the Democratic nominee for governor in 2003.

Either way, Bunning is in trouble in 2010. Keep an eye on this race.

More On ITEISATDF

As the theory goes, any and every event is either good for Republicans, bad for Democrats, or both. Case in point: The AIG bonuses scandal is...you guessed it, bad for Obama and the Democrats.

The Obama administration is increasingly concerned about a populist backlash against banks and Wall Street, worried that anger at financial institutions could also end up being directed at Congress and the White House and could complicate President Obama’s agenda.

The administration’s sharp rebuke of the American International Group on Sunday for handing out $165 million in executive bonuses — Lawrence H. Summers, director of the president’s National Economic Council, described it as “outrageous” on “This Week” on ABC — marks the latest effort by the White House to distance itself from abuses that could feed potentially disruptive public anger.

“We’ve got enormous problems that need to be addressed,” David Axelrod, Mr. Obama’s senior adviser, said in an interview. “And it’s hard to address because there’s a lot of anger about the irresponsibility that led us to this point.”

It doesn't matter what the event is, it's bad for Democrats, good for Republicans, or both. Stock market goes down, it's Obama's fault. Stock market goes up, Bush is responsible. Price of gas goes up, Obama's environmental and foreign policies are driving up oil. Gas goes down, free market principles employed by Bush are working.

Anyone can play, and only Democrats can lose. Remember, In The End, It's Somehow Always The Democrats' Fault.

Think You're Safe In An Apartment?

...from the housing crisis? Think again (h/t Atrios).

Nicholle Krause first noticed the weeds sprouting in the usually well-manicured grounds of her 320-unit apartment complex in Chandler, Ariz., in December. Soon, signs of neglect began multiplying: Garbage spilled over from the dumpsters, the water in the swimming pool turned a slimy pea green and the grounds were infested by swarms of bees — especially alarming because Krause is severely allergic to bee stings.

“I couldn’t even go outside to enjoy where I live,” said Krause, a 21-year-old office worker who pays $827 a month for a one-bedroom apartment with garage space. “I shouldn’t have to pay $800 a month to live in a … hole.”

It wasn’t until early March that Krause and other residents learned why the complex – the alluringly named Alante at the Islands — was rapidly going to seed. The property owner, Irvine, Calif.-based Bethany Holdings Group, had abandoned the complex and a dozen other large rental properties in the greater Phoenix area after defaulting on hundreds of millions of dollars in loans.

As panicked renters in Arizona began holding public meetings to explore whether they could walk away from leases, recoup security deposits or sue, it became clear that the scale of the mess was far larger than they had realized. Companies under the Bethany umbrella owned at least 60 — and possibly many more — large residential complexes across the nation, all of which are now believed to be in bankruptcy or receivership, potentially affecting tens of thousands of renters.

The Bethany Group meltdown highlights how few protections exist for renters caught in the foreclosure crisis. That’s a situation that some experts say is becoming much more common.

Large apartment complexes are owned by companies who own multiple complexes (I know mine is). These companies have been hit just as hard as homeowners by falling real estate values. They're losing money and are unable to by law in most states to jack up rental prices to make up the difference precisely because values are falling. Some are going under. They are taking thousands, if not millions of apartment renters with them.

You're going to see a lot more of this in 2009. Know who you're writing the checks to if you rent. Do some research. If your rental group landlord goes under, you're out on the street even if you've never been a day late on the rent. Know what the laws are in your state.

Find out what renters' legal protections are in your state now if you're a renter. Strongly consider paying on a monthly basis instead of tying yourself down to a lease.

With this job market and corporate landlords going under, you need flexibility right now.

Heavy Is The Head Tha Wears The Pants In The Family

Mixed (and horribly slaughtered) metaphors aside, breadwinners are worried about their jobs.

Thirty-six percent of people questioned in a CNN/Opinion Research Corp. survey released Monday morning said unemployment is the most important economic issue facing the country today, almost three times higher than the 13 percent who felt the same way last April. Inflation is second at 20 percent, followed by the mortgage crisis at 16 percent, the stock market at 14 percent and taxes at 11 percent.

Last April, 47 percent of poll respondents said rising prices and the rate of inflation were the most important economic issues facing the country, putting that at the top of U.S. economic concerns.

"Last spring, Americans were spooked by rising gas prices," said Keating Holland, the CNN polling director. "Now they're spooked by high unemployment figures and the growing concern that good jobs aren't available."

I forsee that number going a lot higher in the next few months as unemployment increases.

The Last Ten Years In Economic Journalism Explained

...expertly by Steve Benen.

I see. Just so we're clear, here's a helpful guide to the rules of market watching, as they relate to partisan politics:

When the market went down on Bush's watch before the 2008 elections, this was Bill Clinton's fault.

When the market went down on Bush's watch between November 2008 and January 2009, this was Barack Obama's fault.

When the market went down during Obama's first seven weeks in office, this was definitely Barack Obama's fault.

And when the market rallies on Obama's watch during the second week in March, George W. Bush deserves at least some of the credit.

Or to put it even more simply, Village Rule #1: ITEISATDF: In The End, It's Somehow Always The Democrats' Fault.

Needless to say, new tag.

Fish In A Barrel

Josh Marshall has a decent point about AIG's bonus story over the weekend:

Few exchanges have so captured the disconnect that makes this situation so politically explosive. We're collectively taking our country's future in our hands, spending vast sums of money to keep these companies from suffering the consequences of their own folly and (in many cases) criminality. And in return we're receiving cavalier dictates about pay-outs and bonuses from executives who by any reasonable measure work for us -- dictates we promptly accede to. There's a beggars can't be choosers problem there. And the disconnect is so mighty that it fuels the impression that the whole enterprise is not what it seems, not what we've been told, that in addition to picking up the tab we're being played for fools.

And while that's correct, the real problem with AIG is that CEO Edward Liddy can actually tell Timmy and Ben to go intercourse themselves with farm implements because AIG really does have the global economy over a barrel. If AIG goes under, the global financial system goes under with it. Period. Checkmate.

So nothing will be done in the long run. We'll continue to shovel money into the AIG furnace and shut the hell up like good little boys and girls, or the counterparty system will annhilate the entire system of global finance, leading to a total collapse of the whole pyramid. Lehman Bros. was allowed to die, and as a result the global banking system nearly went under. It will not be allowed to happen again with a much, much larger company like AIG.

AIG knows it can do whatever it wants to do right now. It's bulletproof. If it wants to give bonuses, it will. Honestly, what's the government going to do about it? Let the largest insurance company in the world go bankrupt and collapse the world?

Ask yourself how AIG was allowed to get this large and this important in the first place: complete failure of Federal oversight. Those are the people we need to be angry at here, not just AIG...Democrats and Republicans alike.

[UPDATE] Obama is trying to pursue "every legal avenue" to block AIG's bonuses. There's really not much the government can do, frankly, short of mass firings and forcing AIG to break contracts to employees.

[UPDATE 2] Or as Atrios says, if it's a problem, just nationalize the assholes already. If Marcy Wheeler is right over at Fire Dog Lake, they're basically extorting billions from us with this little bonus plan. Pay up or else, they say. The "or else" needs to be "We own you and we're firing all of you. Now."

Why We Need Real Health Care Reform

The US may spend the most per capita on health care, but health care is a much more efficient and cost-effective process in every other major country -- including Brazil, China, and India.

U.S. workers and employers get 23% less value from their health-care spending than those in Britain, Canada, France, Germany, or Japan, and 46% less value than in Brazil, China, or India, according to a Business Roundtable study that examined the cost and performance of the U.S. health-care system.

That value gap exists even though the U.S. spends far more on health care per worker than the other countries examined. The study, released on Mar. 12, found that for every dollar the U.S. spent on health care, Britain Canada, France, Germany, and Japan spent 63¢, yet the health of the U.S. workforce lags by 10% on a composite measure. As for Brazil, China, and India, they spend just 15¢ for each U.S. dollar spent, yet the health of the U.S. workforce lags behind those three by 5%.

And despite all that, nearly one out of every six Americans lacks health insurance period. Big Pharma and Big Insurance has turned the industry into a complete joke. We're the laughing stock of the world, spending nearly $600,000,000,000 a year on health care, and yet we still have millions of Americans who can't afford to see a doctor.

It's gotten to the point where even Big Business is sick of paying for health care benefits that only seem to "benefit" drugmakers, hospital chains, and insurance companies. Businesses want to keep the existing model and just "rein in costs" of course, but only a totally new system will fix the problem.

If it's not fixed, businesses will take their jobs overseas in this economy. It's as simple as that.

StupidiNews!

• Pakistan has decided to reinstate its fired Chief Justice, ending days of protests.
• Actor Ron Silver has died from cancer at age 62.
• The number of MBAs is increasing as out of work business execs go back to school.
• Sony is facing pressure to cut the price of the PlayStation 3 or they could lose even more games to market leader Nintendo's Wii.
  
• Scientists are zeroing in on the Higgs boson particle -- if the Large Hadron Collider can get back on-line.

Last Call

Josh Marshall takes a look at AIG's list of counterparties and comes up with a doozy.

The 'toplines' don't seem terribly different from what had been assumed. European banks show up disproportionately among the highest payouts. Barklays $7B in payments to counterparties by US Securities Lending, $.6B through Maiden Lane III, $.9B in collateral postings under AIGFP CDS.

The biggest recipient seems to be France's Societe Generale for about $12B. Deustche Bank got slightly less.

The one thing I had not heard of previously was $12.1B that went to municipalities in twenty states.

Yesirree Bob, your local government had pension and investment plans with AIG! One billion to California, another billion to Virginia, half a billion to Ohio, almost $300 million to Kentucky...the list goes on. AIG turned around and lost all that money and more. You paid for it after all when they bailed AIG out and they paid off these counterparties. So not only did you pay for it the first time when these governments collected the taxes and then invested it with AIG, you paid for it a second time when you bailed out AIG.

You would think a company like that with billions of state government dollars would attract more oversight.

You'd of course be wrong.

The Cincy Tea Party

Instagoober reports that the Cincy Tea Party rocked the universe and redefined the history of protest! Or not.

Couple thousand people showed up to say "We don't like bailouts or Barack Obama!" These things are popping up all over. Yeah, you have to figure that with a 60ish approval rating, about a third of the public doesn't like the President so far. They're organizing on the internet and peacefully protesting something they don't like. You can do that in America.

But as these same people told people like me over the last eight years, "You guys lost the election. Get over it. He's our President now."

The Ultimate Bad Bank Plan

After several wrenching weeks, it's looking like Timmy The Invisible Boy, Helicopter Ben, and Team Treasury have come up with the plan to save the banks through wishful thinking.

Officials said President Obama has largely signed off on the plan in discussions with Treasury Secretary Tim Geithner and the president's economic team. A meeting was scheduled today at the White House to discuss the plan. But some details of the so-called Public Private Investment Fund, or PPIF, had yet to be worked out and officials cautioned that could delay the announcement to the following week.

Still, officials say the broad outlines of the plan have been decided. Several competing funds will be established with capital from both public and private sources. The hope is to have these funds bid on the assets weighing down the balance sheets of the nation's banks and create a market price through the competition.

The administration plans to begin the program, to be overseen by the Treasury, the Federal Deposit Insurance Corporation and the Federal Reserve, with purchases of up to $500 billion in assets. It could be expanded to $1 trillion.

The bidders will be offered low-cost government financing to buy the assets and some form of insurance to protect them against downside risk. Taxpayers, in turn, will also have a way of profiting on the upside if the assets appreciate.

So, if I'm reading this right:

1. The government will create funds to compete to purchase toxic crap, leaving good bank assets behind.
   
2. The government expects private investors to put money into these funds to see which one can buy the most toxic shit for the best price.
   
3. The reason private money would ever show up in these funds is that the taxpayer will pick up the inevitable losses.
4. Ergo, the government is setting prices for these assets through the funds, effectively giving the banks free money for crap assets.
5. The taxpayer then is stuck hoping these assets go up in value at some point, which is wishful thinking.

Banks get free money and get bailed out. We get toxic crap that will continue to fall in value because nobody will in turn purchase these assets from the government funds. They know they are worthless. If they were worth something, companies would be buying them without the government having to do it.

Once again I fail to see how this is anything other than giving $500 billion to $1 trillion more in free money to banks and sticking taxpayers with the bill. If the funds pay too high a price, the taxpayer will never get their money back. If the funds pay too low a price, the banks go under and private investors will never put in any money.

This still comes down to the problem being "what's the correct valuation of toxic assets" when the question should be "How do we break apart these insolvent zombie banks safely?"

Timmy and Ben are wasting our time with this plan, not to mention another trillion bucks. If this is what Obama is relying on, then yeah, we're done for.

If You Walk Down The Middle Of The Road...

...you get hit by the bus. I appreciate that California Democrat Ellen Tauscher and her Sensibly Centrist "New Democrats" caucus in the House want to get things done, but what they want to do is in fact keep Obama from doing much of anything.

"This is a healthy reprise (of) what we had in the Clinton administration. We were go-to people on the pro-growth area and on balancing the budget, and on making sure that we were competitive in the trade environment," said California Rep. Ellen O. Tauscher, head of the New Democrats. "We've got members strategically placed throughout all the big committees. ... We can really deliver votes."

Deliver votes. Right, like backing Clinton on health care reform, and stopping Bush's massive tax cuts for the rich, and not rubber stamping Bush for the last eight years. Evan Bayh of Indiana is no different in the Senate.

"Our group is not to be a counterweight to anyone or to obstruct anything. On the contrary, our group is to get things done," Bayh said. "You've got to get to 60 votes in the Senate most of the time, and our group will be a key to making that happen."

You've got to get 60 votes in the Senate most of the time because these moderates are obstructing votes through fillibuster, rather than letting majority votes pass. The DINOs are just using the GOP's tactics against their own Democratic collegues in order to gain influence. Blocking Bush's legislation on FISA, wiretapping, the Patriot Act, torture, endless Iraq War funding...that wasn't worth obstructing becuase "Bush was our President during times of crisis." Obama is trying to clean up all this mess, and these same Senators decide that this loose cannon he has to be stopped at all costs.

I'm with BooMan on this one. It's time to clean out the DINOs in 2010, starting with bad Democrats like Ellen Tauscher. Primary them now.

Or do we have to wait another 16 years for a shot at health care reform?

MEOW! BOING!

Roubini calls last week's rally "a dead cat bounce". I'd heed his advice if I were you.

So it is no wonder that Citi, Bank of America and JP Morgan can argue that they will be making this year a profit “before provisions for writedowns”. That is the most important caveat: while operational margins can be positive if you borrow at 0% and lend at much higher rates, the actual P&L and balance sheet of banks and broker dealers depends also on writedowns. And delinquencies, charge-off rates and writedowns are rising rapidly as both the loans and securities are showing mounting losses given the worsening of the economic recession. Losses are spreading from subprime to near prime and prime mortgages; to commercial real estate; to credit cards, auto loans and student loans; to leveraged loans and corporate boans; to industrial and commercial loans; to loans to real estate developers; to muni bonds and sovereign bonds of emerging markets and European economies where sovereign spreads are rising; and to the entire alphabet soup of credit derivatives that securitized these loans and mortgages (MBS, CMBS, CDOs, CLOs, CMOs, CPDOs, ABS, etc.). So for the major banks to argue that they are profitable before provisions on losses is a joke: such losses are now officially over $1.2 trillion globally (and $900 billion for US financial institutions) and they will be at least $2.2 trillion (according to the conservative estimates of the IMF and of Goldman Sachs) and as high as $3.6 trillion according to the peak time estimates of such losses according to our most recent study.

And according to independent analysts of the financial system – Meredith Whitney, Chris Whalen – charge off rates on loans – let alone additional losses on securities – are rising at alarming rates: they are already at levels twice as high as in the 1990-91 recession and they will soon enough – given recent trends be much higher double further. So, regardless of whether you got smarter management or not (i.e. it does not matter if you are JP Morgan and run by someone as brilliant as Jamie Dimon) the macro picture trumps any other bank-specific factors (the loan book of JP Morgan is as exposed to residential and commercial mortgages, consumer credit and other loans as any other major bank): i.e. with the unemployment rate going above 9% in 2009 and highly likely to reach 10% in 2010, with GDP growth likely to be 1% or lower in 2010, with home prices likely to fall – conservatively - at least another 15%, with commercial real estate rents now falling about 40 to 50% and valuation bound to fall 30 to 40% then losses on any category of banks loans and mortgages and consumer credit will sharply rise over time; and losses on the assets that securitized these loans/mortgages will increase over time.

In other words, this ain't the bottom kids. We're not out of the woods yet.

Not even close. We're going to soon be wishing the Dow was at 7,000.

Tortured Logic, Con't

Yes, we tortured people in the name of national security, as Mark Danner explains in his new NY Times bombshell.

Their stated goal was to produce a report that would “provide a description of the treatment and material conditions of detention of the 14 during the period they were held in the C.I.A. detention program,” periods ranging “from 16 months to almost four and a half years.”

As the Red Cross interviewers informed the detainees, their report was not intended to be released to the public but, “to the extent that each detainee agreed for it to be transmitted to the authorities,” to be given in strictest secrecy to officials of the government agency that had been in charge of holding them — in this case the Central Intelligence Agency, to whose acting general counsel, John Rizzo, the report was sent on Feb. 14, 2007.

The result is a document — labeled “confidential” and clearly intended only for the eyes of those senior American officials — that tells a story of what happened to each of the 14 detainees inside the black sites.

A short time ago, this document came into my hands and I have set out the stories it tells in a longer article in The New York Review of Books. Because these stories were taken down confidentially in patient interviews by professionals from the International Committee of the Red Cross, and not intended for public consumption, they have an unusual claim to authenticity.

Indeed, since the detainees were kept strictly apart and isolated, both at the black sites and at Guantánamo, the striking similarity in their stories would seem to make fabrication extremely unlikely. As its authors state in their introduction, “The I.C.R.C. wishes to underscore that the consistency of the detailed allegations provided separately by each of the 14 adds particular weight to the information provided below.”

Beginning with the chapter headings on its contents page — “suffocation by water,” “prolonged stress standing,” “beatings by use of a collar,” “confinement in a box” — the document makes compelling and chilling reading. The stories recounted in its fewer than 50 pages lead inexorably to this unequivocal conclusion, which, given its source, has the power of a legal determination: “The allegations of ill treatment of the detainees indicate that, in many cases, the ill treatment to which they were subjected while held in the C.I.A. program, either singly or in combination, constituted torture. In addition, many other elements of the ill treatment, either singly or in combination, constituted cruel, inhuman or degrading treatment.”

This was done in my name, your name, our names.

Bush is a war criminal. Obama is heading down the same path. America's moral authority has collapsed.

We are a rogue nation. History will not be kind to us. Already, the present isn't being too kind to us as it is.