There's A Catch

CNBC's Dennis Kneale declares the Great Recession over. "Dow 10,000 here we come."

What he doesn't tell you is that the Dow will hit 10,000 again sometime around late 2011 or early 2012, not to mention a good year plus of double-digit unemployment. Or longer.

We've got a whole lot of puttering back and forth in the 7,000-9,999 territory to go for the next couple years, kids. Look, things aren't going to go back to where they were in 2005. Not for a long, long time, and in the case of some economic factors, never.

The Scalia Point

In the other major Supreme Court ruling, Justice Antonin Scalia's love of state's rights overcame his love for all things corporate as he tore into the Bush administration's banking regulatory practices.

The 5-4 ruling by the high court was unusual. Justice Antonin Scalia, arguably the most conservative jurist, wrote the majority's opinion and was joined by the court's four liberal judges.

The five justices held that contrary to what the Bush administration had argued, states can enforce their own laws on matters such as discrimination and predatory lending, even if that crosses into areas under federal regulation.

Justice Clarence Thomas, writing for the four dissenters, argued that laws dating back to the nation's founding prevent states from meddling in federal bank regulation. He was joined by Chief Justice John G. Roberts and justices Anthony Kennedy and Samuel Alito.

The ruling angered many in the financial sector, who fear it'll lead to a patchwork of state laws that'll make it harder for banks and other financial firms to take a national approach to the marketplace.

"We are worried about the effect that this ruling could have on the markets," said Rich Whiting, general counsel for the Financial Services Roundtable, a trade group representing the nation's 100 largest financial firms, in a statement. The decision "hinders the ability of financial services firms from conducting business in the United States. Even worse, it will cause confusion for consumers, especially those who move from state to state."

It's funny. Conservatives are usually all about states' rights over the Federal government unless it interferes with companies making money in which case "it hurts consumers" who they would normally never give a shit about.

In this case however, Scalia's so conservative his Federalist instincts kicked in.

Go fig.

Lindsey Graham, Are You Kidding?

Has the GOP fallen to the point where Lindsey Graham failing to burst into flame on national TV this weekend means "that he is ready to take more of a leadership role"? Honestly? Village stupidity aside, you don't get more mediocre than Lindsey Graham, John McCain's Faithful Sidekick.

Then again, who else does the GOP have that is A) actually in Congress, B) is not currently in a scandal, and C) can go on national TV without bursting into flame?

The really sad part is, Lindsey there wins this contest by default. It's that bad for the GOP right now.

[UPDATE 4:47 PM] And let's not forget who is currently leading the GOP, and why the GOP (and the Village) is so very eager to put forth the meme that anyone other than El Rushbo is in charge.

100,000 Reasons The CRA Didn't Cause The Housing Crisis

Yesterday I mentioned the vampire-like lie that the "Community Reinvestment Act caused the housing collapse" would not die, as John Carney brought it up again. I gave Barry Ritholtz the kill yesterday, and today he's put up $100,000 of his own money to debate any and all comers on this.

Well, its time to put up or shut up: I hereby challenge any of those who believe the CRA is at prime fault in the housing boom and collapse, and economic morass we are in to a debate. The question for debate: “Is the CRA significantly to blame for the credit crisis?”

A mutually agreed upon time and place, outcome determined by a fair jury, for any dollar amount between $10,000 up to $100,000 dollars (i.e., for more than just bragging rights).

The nonsense rhetoric blogged about has no cost to those pushing these discredited memes — but interferes in the societal attempts to understand how these problems arose and then how to fix them. Perhaps this will help clarify the issue by forcing those with partisan agendas to stand behind their claims.

Which of the many “CRA was a major factor” proponents have the courage of their conviction to step forward?

My money's on Barry. Big time. John Carney, Megan McArdle, Jim Pethokoukis, let's see your hands...

...Felix Salmon at Reuters reports that Carney wants to take up Ritholtz on his offer. Let the games begin.

7,800 Weekends At Bernie's

Because 150 years is a long, long time.

U.S. District Judge Denny Chin said Madoff's breach of trust was massive, and that he lied to investors and to the SEC to buy homes, yachts and pay country club fees. He called the maximum sentence symbolic.

"Not a single letter was submitted in support of Madoff," Chin said. "Not friends, not family. That is telling."

Prosecutors sought a 150-year sentence for the multi-billion dollar fraud scheme, while the federal probation department recommended 50 years.

Madoff's attorney Ira Sorkin had tried to argue that both proposed sentences were excessive.

While Madoff, dressed in a dark suit, white shirt and tie, sat with his head down and his back to his victims as they delivered their testimony, he stood and faced them during his statement and apologized.

"I cannot offer an excuse for my behavior," Madoff said. "How do you excuse deceiving investors and 200 employees? How do you excuse lying to my sons and two brothers? How do you excuse lying to a wife who stood by me for 50 years and still stands by me? There is no excuse for that. I made a terrible mistake."

He went on to say he left a legacy of shame for his family.

Nine victims offered heart-wrenching testimonies earlier in the day, asking for the judge to deliver the maximum sentence. Said Burt Ross, who lost $5 million in the scheme, "Commit Madoff to prison for the rest of his life. May Satan grow a fourth mouth where Madoff can spend the rest of eternity."

Yeah. 65 billion dollars? There's a special place in hell for Bernie...but before he gets there, there's a special place in prison for the guy too.

SCOTUS And The Ricci Case

D-day reviews the Supreme Court's 5-4 decision overturning the New Haven firefighters' reverse discrimination case, vacating the decision of nominee Sonia Sotomayor.

What's notable is that this case was previously decided by the 2nd Circuit Court of Appeals by a three-judge panel that included Sonia Sotomayor. And so now we'll hear all about that honky-hating judge reversed again (how does this affect her "reversal rate"?) and the manly men of the Supreme Court helping out those poor white firefighters who worked so hard to pass that test.

Except that Courts of Appeals, who generally follow prior precedent in cases like this, cannot make the sweeping changes that can be made at the SCOTUS level. Far from being a slave to "empathy," Sotomayor followed the law available to her in concurring with the majority decision on her Court. In fact, as Sam Alito wrote in his concurrence today, "But 'sympathy' is not what petitioners have a right to demand. What they have a right to demand is evenhanded enforcement of the law . . . And that is what, until today's decision, has been denied them." The Second Court had no precedent on which to rely to offer that enforcement, and if Sotomayor reversed the District Court ruling in Ricci, she would have been relying on sympathy. Which is what her critics say she always relies on.

What is also often overlooked is that Sotomayor's decision in the Ricci case was part of a unanimous three-judge decision to do so. There was no existing precedent here, so kicking this up to the Supreme Court in order for them to craft one was the right thing for Sotomayor to do. One was then crafted and handed down today, in a close 5-4 decision. If Sotomayor had sided with the firefighters at the appellate level, it would have literally been a case of being an "activist judge" which conservatives hate so much.

But again, being an activist judge (the only honest definition is "a judge that crafts a legal precedent through a decision") is apparently exactly what conservatives want, for they are applauding this decision and the legal precedent it now creates. Activist judges are fine as long as they make precedent that conservatives agree with.

Zandar's Thought Of The Day

At the current rate of logic decay since the NY Times hired Ross Douthat, he should reach his own event horizon of suck sometime in September and collapse in on his own stupidity.

His columns keep getting worse (this week he's blaming Mark Sanford's affair on post-feminist liberal elites) and yet he seemingly is able to reach new nadirs seemingly without any effort. That takes work, people.

DiFi To Progressives: Drop Dead

California Sen. Dianne Feinstein may be a Democrat, but she doesn't seem to give a damn about criticism from the Left on health care reform.

Senator Dianne Feinstein has already taken a hammering from Dems and health care reform advocates for casting doubts on the prospects of President Obama’s health care reform efforts. MoveOn, for instance, aired an ad against her in California, demanding she show some leadership and fight harder to get the president’s reform plan passed.

Now Feinstein has hit back at the criticism from the left in an article about lefty groups targeting Dems for waffling on key components of health care reform:

“I do not think this is helpful. It doesn’t move me one whit,” she said. “They are spending a lot of money on something that is not productive.”

That sharply dismissive tone won’t exactly smooth over tensions.

I'm with Atrios on this one: Progressives don't matter in Washington other than something to be mocked or derided, but even the craziest tinfoil batshit GOP theories get regular airplay and are treated with respect by the Village.

Part of that is the progressive movement's fault (MoveOn.org's disastrous "General Betrayus" attack comes to mind) but that's like maybe 5% of it. The other 95% is the Village, having spent 20+ years in a Washington where progressives simply didn't matter in the least. Now that they do, the Village hasn't gotten the memo. Just because the people swept the Democrats into power doesn't mean the rules of the Beltway have changed at all. Once the Village realized it had the power to make or break politicians, they decided they like the ones that sucked up the most. DiFi has been around since 1992, and her idealism was burned from her by the GOP revolution of 94.

It's still high school popularity to her. She knows how the game is played, and how the game is won. And to her, the conservatives still run the cool kids clique.

Kroog Versus The Stupid

Paul Krugman takes on climate change deniers that voted against ACES, aka the GOP.

To fully appreciate the irresponsibility and immorality of climate-change denial, you need to know about the grim turn taken by the latest climate research.

The fact is that the planet is changing faster than even pessimists expected: ice caps are shrinking, arid zones spreading, at a terrifying rate. And according to a number of recent studies, catastrophe — a rise in temperature so large as to be almost unthinkable — can no longer be considered a mere possibility. It is, instead, the most likely outcome if we continue along our present course.

Thus researchers at M.I.T., who were previously predicting a temperature rise of a little more than 4 degrees by the end of this century, are now predicting a rise of more than 9 degrees. Why? Global greenhouse gas emissions are rising faster than expected; some mitigating factors, like absorption of carbon dioxide by the oceans, are turning out to be weaker than hoped; and there’s growing evidence that climate change is self-reinforcing — that, for example, rising temperatures will cause some arctic tundra to defrost, releasing even more carbon dioxide into the atmosphere.

Temperature increases on the scale predicted by the M.I.T. researchers and others would create huge disruptions in our lives and our economy. As a recent authoritative U.S. government report points out, by the end of this century New Hampshire may well have the climate of North Carolina today, Illinois may have the climate of East Texas, and across the country extreme, deadly heat waves — the kind that traditionally occur only once in a generation — may become annual or biannual events.

In other words, we’re facing a clear and present danger to our way of life, perhaps even to civilization itself. How can anyone justify failing to act?

Well, sometimes even the most authoritative analyses get things wrong. And if dissenting opinion-makers and politicians based their dissent on hard work and hard thinking — if they had carefully studied the issue, consulted with experts and concluded that the overwhelming scientific consensus was misguided — they could at least claim to be acting responsibly.

But if you watched the debate on Friday, you didn’t see people who’ve thought hard about a crucial issue, and are trying to do the right thing. What you saw, instead, were people who show no sign of being interested in the truth. They don’t like the political and policy implications of climate change, so they’ve decided not to believe in it — and they’ll grab any argument, no matter how disreputable, that feeds their denial.

Indeed, if there was a defining moment in Friday’s debate, it was the declaration by Representative Paul Broun of Georgia that climate change is nothing but a “hoax” that has been “perpetrated out of the scientific community.” I’d call this a crazy conspiracy theory, but doing so would actually be unfair to crazy conspiracy theorists. After all, to believe that global warming is a hoax you have to believe in a vast cabal consisting of thousands of scientists — a cabal so powerful that it has managed to create false records on everything from global temperatures to Arctic sea ice.

Yet Mr. Broun’s declaration was met with applause.

But the GOP refuses to care. To them, wrecking the climate by the end of the century is somebody else's problem, and there's no reason to burden today's current leaders with a problem that won't be felt for a hundred years. It'll cost too much to do it, and really who cares, we'll all be dead by then anyway.

Why ruin our economy now because there's an unproven chance we might wreck the planet later, Republicans declare.

Well that's just it. This is something that can't be put off. The numbers are getting worse, accelerating the pace of decay in the system. At this point, some are already saying the steps that Waxman-Markey seeks to take are too little, too late, and that far more drastic measures need to be taken now if there's any hope.

But Republicans could care less. Remember, they are the party that rejects science, and sees science as inimical to Man's God-Given Dominion Over Earth. Many of them simply say "God will fix the problem, thinking that man can affect the climate is arrogance to the point of elevating men above God."

The thing is, I know plenty of people who are devoutly religious and say yes, we're being terrible stewards of the earth God has given us. We're wrecking the place, and people are concerned. I absolutely agree with Kroog's point: the anti-science GOP is latching on to any argument they can make up to stop any action on addressing climate change.

They're on the wrong side of history on this one.

Hotel California

Via CalcRisk, property values of hotels in California are down a staggering 50 to 80% from 2007 peak values.

No market or brand is immune in this downturn. In reviewing the hotels in default or foreclosed on, we found that over 75% of the loans originated from 2005 to 2007. During this period, over 2,500 California hotels either refinanced or obtained new purchase loan financing. Unfortunately, based on today’s market values, we estimate that none of these hotels have any equity remaining. The unprecedented decline in room revenues (California is down 21.5% year-to-date) combined with the jump in cap rates has resulted in a massive loss in values. We estimate that values are currently 50-80% lower than at the market’s peak in 2006-2007.

I don't care who you are, that's a bloodbath across the board. Entire hotel chains are on the verge of collapse. Some have already filed for bankruptcy. More will follow.

The commercial real estate bust is in full swing now, and there's no end in sight.

StupidiNews!

• Bernie Madoff will be sentenced today, the man behind the biggest financial scam in U.S. history faces up to 150 years in prison.
• The U.S. is warning that the coup that ousted the President of Honduras will leave that country "isolated".
• As tomorrow's troop withdrawal deadline in Baghdad approaches, all sides say Iraq is ready.
• The housing sector continues to face dire problems despite stimulus money and tax credits.
• Britain's major record label trade group says it should have embraced Napster ten years ago.

Last Call

How many times must people drive a stake through the bullshit that is "Broke-ass black people caused the housing collapse" anyway? The Community Reinvestment Act (CRA) did not cause the housing depression. Greed did.

Barry Ritholz kills this garbage once again:

Assume arguendo that CRA legislation forced banks into making high risk, ill advised loans. And, let’s further assume a huge percentage of these government mandated mortgages have gone bad. The buyers who could not legitimately afford these homes or otherwise qualify for other mortgages have defaulted, and these houses are either in default, foreclosure or REOs.

What would this alternative nation look like?

Given the giant US housing boom and bust, this thought experiment would have several obvious and inevitable outcomes from CRA forced lending:

1) Home sales in CRA communities would have led the national home market higher, with sales gains (as a percentage) increasing even more than the national median;

2) Prices of CRA funded properties should have risen even more than the rest of the nation as sales ramped up.

3) After the market peaked and reversed, Distressed Sales in CRA regions should lead the national market downwards. Foreclosures and REOS should be much higher in CRA neighborhoods than the national median.

4) We should have reams of evidence detailing how CRA mandated loans have defaulted in vastly disproportionate numbers versus the national default rates;

5) CRA Banks that were funding these mortgages should be failing in ever greater numbers, far more than the average bank;

6) Portfolios of large national TARP banks should be strewn with toxic CRA defaults; securitizers that purchased these mortgages should have compiled list of defaulted CRA properties;

7) Bank execs likely would have been complaining to the Bush White House from 2002-08 about these CRA mandates; The many finance executives who testified to Congress, would also have spelled out that CRA was a direct cause, with compelling evidence backing their claims.

So much for THAT thought experiment: None of these outcomes have occurred.

Zero.

In reality, the precise opposite of what a CRA-induced collapse should have looked like is what occurred. The 345 mortgage brokers that imploded were non-banks, not covered by the CRA legislation. The vast majority of CRA covered banks are actually healthy.

As the Master Control Program famously said, "End of line." Good old fashioned greed killed the housing market. The CRA is nothing more than a convenient dupe, when it turns out it might have actually been the only positive thing going on in the entire housing market during the Bush years.

Just A Little Closer To The Truth

Steve Benen comes a bit closer to the truth of the GOP and health care reform:

Maybe now would be a good time to remind the relevant players that there are different political parties for a reason. Democrats and Republicans are -- I hope you're sitting down -- supposed to disagree.

They have very different policy agendas, driven by different worldviews. That they're struggling to agree on how to pass the most sweeping overhaul of the health care system isn't surprising; that they're trying to overcome this is.

A.L. noted this week:

For as long as I can remember, the Democratic party has fought to increase the government's role in providing health care coverage for Americans while the Republican party has fought to reduce the government's role. The Democrats are responsible for Medicare, Medicaid, and S-CHIP; the Republicans fought all of those initiatives. On a policy level, the Democrats believe that the best health and cost outcomes can be achieved by increasing access and encouraging widespread use of routine and preventative medical care. Republicans, on the other hand, have routinely identified the problem as over-consumption of care. Their proposals to fix the system inevitably involve significant deregulation with the goal of encouraging the use of high-deductible policies to try to discourage personal consumption of health care. Nearly every Democrat (including the blue dogs and "centrists") believes this to be bad policy.

In other words, there is virtually no common ground between the parties. The parties don't even see eye-to-eye regarding basic goals and policy assumptions.

There's nothing wrong with this. It's nice and pleasant when both sides can agree, and President Obama probably hoped the situation was so severe, Republicans would put aside many of their preconceived ideological objections to reform, and work in good faith towards obvious, common-sense solutions. That's not going to happen, of course, but that's not necessarily awful. The political system expects the parties to argue with one another. It's a feature, not a bug.

It looks like the opposition party is going to criticize and object to the Democrats' health care reform effort. That's what opposition parties do -- they oppose.

Sen. Jay Rockefeller (D-W.Va.) asked the other day, "[D]o you want to be non-partisan and get nothing? Or do you want to be partisan and end up with a good health- care plan? That is the choice."

The process will probably go much smoother once negotiators come to grips with this.

And from there, it's just a couple small steps to the realization that the GOP never, ever, ever will accept health care reform in any way. There's a big difference between simply opposing the plan and actively working to destroy it by any means necessary. Steve has finally accepted the former, but the trick is of course that the GOP is actively engaged across the board in the latter.

If Obamacare passes, the GOP is done for a generation. I've said that for quite some time now. Any Democrat behind passage can turn to their constituents and say "Democrats helped get you and your family health insurance. What have the Republicans done for you? They did everything they could to try to stop this." And the voters will nod their heads and go "You're right. Thank you."

They know it's a generational bribe, but it's a necessary and useful one. One in six Americans lacks health insurance. The Republicans will never spend a dime to fix that. Ever.

So the Republicans are scared, truly frightened. This is why we're seeing such hateful, over-the-top rhetoric and accusations against Obama, such an ardent effort to dehumanize the President and his supporters as something less than American, something less than human, as Those Who Are The Enemy. If Obama is successful on health care, he'll go a long way towards dismantling the Pretty Hate Machine that has sprung up since 1990 or so. Most importantly, he'll prove that government can actually help the people.

The Republicans can't afford that. They've bet the farm on using fear and hatred to control America for far too long. If Obama comes along and dismantles that, they have nothing. They become powerless.

It has to die, or the GOP does. It is, quite honestly, an existential battle.

John Boehner Has Quite A Mouth On Him

He used it to try to basically filibuster the ACES bill and to swear at it, calling it a "pile of shit".

Minority Leader John Boehner (R-Ohio) had a few choice words about House Speaker Nancy Pelosi's (D-Calif.) landmark climate-change bill after its passage Friday.

When asked why he read portions of the cap-and-trade bill on the floor Friday night, Boehner told The Hill, "Hey, people deserve to know what's in this pile of s--t."

Using his privilege as leader to speak for an unlimited time on the House floor, Boehner spent an hour reading from the 1200-plus page bill that was amended 20 hours before the lower chamber voted 219-212 to approve it.

Eight Republicans voted with Democrats to pass the bill; 44 House Democrats voted against it.

Pelosi's office declined to comment on Boehner's jab. But one Democratic aide quipped, "What do you expect from a guy who thinks global warming is caused by cow manure?"

Thers at Whiskey Fire on the other hand has a much worse (better?) pottymouth.

A Possible Coup

The BBC is reporting that the President of Honduras has been arrested and detained by that country's army in what one of his supporters is calling a military coup.

President Manuel Zelaya's secretary said he had been taken to an airbase outside the capital, Tegucigalpa.

Mr Zelaya, elected for a non-renewable four-year term in January 2006, wanted a vote to extend his time in office.

The referendum, due on Sunday, had been ruled illegal by the Supreme Court and was also opposed by Congress and members of Mr Zelaya's own party.

Reuters news agency reports that soldiers fired teargas at about 500 supporters of Mr Zelaya who had gathered outside the presidential palace, as air force jets flew over the capital.

Early on Sunday, a reporter for the Associated Press news agency said he had seen dozens of troops surround Mr Zelaya's residence.

The arrest comes after President Zelaya defied a court order that he should re-instate the chief of the army, Gen Romeo Vasquez.

The president sacked Gen Vasquez late on Wednesday for refusing to help him organise a referendum.

Mr Zelaya, who under current regulations leaves office next January, also accepted the resignation of the defence minister.

The referendum was to ask the population if they approved of a formal vote next November on whether to rewrite the Honduran constitution.

Seems Zelaya wanted to pull a Hugo Chavez and the Honduras military was having none of it. We'll see where this goes.