Final Score

Dow down 248 to 8,200, NASDAQ under now 1,500, S&P under now 850. Citigroup under the $5 mark again. Not a good day...and it's only Wednesday.

[UPDATE] And tomorrow is going to be bad too in after hours news, with Apple CEO Steve Jobs announcing he's going on a leave of absence for health reasons until June, and Treasury announcing they're having to front Bank of America billions more to cover their massive losses from buying Merrill Lynch.

Apple stock off 10%, BoA stock off 5%, trading at a 52-week low. We could end up under 8,000 again before the end of the week.

We Need More Enemies

If you were worried that with Obama around we'd have fewer enemies to worry about and would have to actually -- *gasp* -- cut our massive military budget or something terribly sensible like that, don't worry. It turns out the Joint Chiefs think we've got a nice little unstable government next door that we have to keep an eye on.

Mexico is one of two countries that "bear consideration for a rapid and sudden collapse," according to a report by the U.S. Joint Forces Command on worldwide security threats.

The command's "Joint Operating Environment (JOE 2008)" report, which contains projections of global threats and potential next wars, puts Pakistan on the same level as Mexico. "In terms of worse-case scenarios for the Joint Force and indeed the world, two large and important states bear consideration for a rapid and sudden collapse: Pakistan and Mexico.

"The Mexican possibility may seem less likely, but the government, its politicians, police and judicial infrastructure are all under sustained assault and press by criminal gangs and drug cartels. How that internal conflict turns out over the next several years will have a major impact on the stability of the Mexican state. Any descent by Mexico into chaos would demand an American response based on the serious implications for homeland security alone."

That's right...Mexico's political instability is equal to that of Pakistan, apparently. The sound you're hearing is the ear-splitting moan of a thousand, thousand wingnuts fapping one-handed while simultaneously typing "BOMB MEXECO NOW11!!!1" with the other.

Maybe we can get those Minutemen dudes to go on cross-border raids. I'm sure the Mexican Army will appreciate it.

I wonder where those Mexican "narcoterrorists" keep getting their money from, anyway? Here's a hint: illegal drugs fetch a high price.

In all seriousness, invade Mexico? Mexico is Pakistan? Really? I mean shit, if we'll invade some country 6,000 miles away for oil, what about the one with oil six miles away?

Dear America:

"Will Obama do the right thing on Israel, or like I expect him to do will he surrender the Jewish state to the Beturbaned Brown Horde like the blood-drinking liberal terrorists in his party want him to do? Gosh, I'm not sure...and that alone should scare the hell out of you."

--Irwin Stelzer, The Telegraph

Bonus Dear America:

"The only way Gazans will embrace Western Democracy is for Israel to kill their democratically elected leaders and install a puppet government at gunpoint. Palestinians should be friggin' grateful for our help on this matter."

--Jeffrey Goldberg, NY Times

The 2009 Rally!

That 2009 Dow rally people were very excited about last week with the index reaching OVER NINE THOUSAAAAND has died quicker than the ratings of the last season of Moonlighting. For those of you keeping score at home, the Dow has lost nearly 600 points since January 6, and is down 300 here just today on that dismal December Retail Sales report.

So yeah, if that number holds we'll be down nearly 10% on the year in the second week of January.

Enjoy. It'll only get worse.

Cleaning Up After The Old Boss

The House at least continues to eagerly pass legislation that Bush vetoed over the last couple years in anticipation of Obama taking over next week. First it was the Ledbetter/Fair Play Act, and this week it's SCHIP that's back on the table.

The House is poised to give Barack Obama a quick legislative victory by approving a bill to expand a health insurance program for children, making a down payment on the president-elect's promise to provide coverage to every child in the country.

The bill, scheduled for a vote today, would expand the State Children's Health Insurance Program, a popular initiative created during the Clinton administration that helps children living at or near the poverty line who fall outside the Medicaid system.

The House bill carries an estimated cost of $33 billion over 4 1/2 years and would extend coverage to an additional 4.1 million children, on top of the 7 million who are currently enrolled. It would be paid for primarily through a 61-cent-per-pack increase in the federal cigarette tax.

In 2007, President Bush twice vetoed similar legislation, objecting to its broader reach and its reliance on the tobacco tax hike. Bush's unwavering position was cheered by conservatives but caused political problems in 2008 for Republican candidates in more moderate states and districts.

Obama vowed as a candidate that one of his first acts in the White House would be to sign the long-stalled bill. It will not be ready on Inauguration Day, but congressional leaders hope to complete work well before the program's March 31 expiration date.

Republicans tried everything to kill this, ending in a pair of Bush vetoes that only made the GOP look more and more like a bunch of greedy assholes than usual. Cigarette taxes versus health care for all American kids? No brainer there.

It's nice being able to get this stuff done and passed, instead of turning everything into a two-year plus Very Special Episode of The West Wing.

Tanks A Lot, Guys

Holiday retail sales numbers are in from the Commerce department, and they're pretty dismal.

Sales at U.S. retailers fell at a steeper-than-expected rate in December, government data showed on Wednesday, as a deteriorating economic environment forced consumers to cut back on spending during the key holiday period.

The Commerce Department said total retail sales fell 2.7 percent to a seasonally adjusted $343.2 billion last month following a revised 2.1 percent drop in November, previously reported as a 1.8 percent decline.

December's drop was the biggest since October last year when sales fell 3.4 percent. For the whole of 2008, sales eased 0.1 percent, the department said.

Excluding motor vehicles and parts, sales were down a record 3.1 percent after a revised 2.5 percent decline in November, previously reported as a 1.6 percent drop, the department said. Total sales, excluding autos, rose 3.0 percent in 2008.

Needless to say, that level of precipitous drop in retail sales during the three busiest shopping months of the year all but guarantees a bloodbath in the retail industry in 2009.

A lot of people are about to lose their jobs as stores will go under during the year in 2009. Count on it. Dow immediately opened up down 150 or so on this news, and it's going to get worse.

StupidiNews!

• Osama bin Laden has reportedly weighed in on the Gaza conflict.
• The House and Senate are getting their own YouTube channels.
• The second half of the TARP fund looks to be go for Obama, despite reservations from Congress.
• While mortgage rates are down and refinancing is jumping, new mortgages are all but dead.
• The Obama team's requested delay in the digital TV changeover may mask a conflict of interest on his staff.

Naked Lunch (Or Dinner)

In the battle of left versus right, we often forget the Village rules all...even Obama, as the Atlantic's Marc Ambinder reminds us. A dinner party at George Will's house, you say?

It's true.

He motorcaded to a house in Maryland this evening, and if the press pool report is accurate, he is breaking bread with William Kristol and David Brooks. (If Brooks and Kristol seem to be unusually briefed about Obama's thinking, you'll know why.)

CBS News's Dan Raviv tells the pool that the house, on Grafton Street in Chevy Chase, belongs to George Will. (Unless he's moved.)

Tomorrow, I hear Obama has another private meeting with non-Republican opinion columnists.

Ellen Moran, the incoming White House communications director, set these meetings up.

Again -- establishment opinion matters to the Obama communications team.

Which is fitting, because the Village could give a damn about Obama's opinions. He's just the incoming President, after all. Obama has his priorities straight, it seems he knows just which rings to kiss.

It's going to be a damn shame when these same folks are the ones who will turn on him in less than three months.

The Next Act In The Play

Lest you believe everyone in Washington is all on the same page of sweetness and light with this "Obama closing Gitmo" thing, rough men stood ready to give press conferences urinating all over America's cornflakes.

Terrorism suspects who have been held but released from Guantanamo Bay are increasingly returning to the fight against the United States and its allies, the Pentagon said Tuesday.

Sixty-one detainees released from the U.S. Navy base prison in Cuba are believed to have rejoined the fight, said Pentagon spokesman Geoff Morrell, citing data from December. That's up from 37 as of March 2008, Morrell said.

The new figures come as President-elect Barack Obama prepares to issue an executive order during his first week in office to close the controversial prison. It's unlikely, however, that the Guantanamo detention facility will be closed anytime soon as Obama weighs what to do with the estimated 250 al-Qaida, Taliban or other foreign fighter suspects still there.

Just in case you believed the Pentagon was actually going to work with the President on this thing, let's get reality straight here. Obama is not the defense community's pal. He's nearly as much the enemy as our guests in Gitmo are to the Pentagon, the CIA, or the FBI. These boys play hardball, and the message to Obama is clear: closing Gitmo is going to be as ugly, painful, and embarassing for Obama as Obama chooses to make it for the Pentagon.

It took less than 24 hours for the Pentagon to completely undermine the entire "close Gitmo" scenario, and you can bet we're going to see the GOP line up behind the Pentagon and say that Obama can't do it or he's "soft on terrorism". If anything, they are going to argue that Obama now has no choice but to keep Gitmo open indefinitely.

It will be a good test of just how much muscle the Bushies have left. "Keep Gitmo open" is going to be a no-brainer position for war hawks from both sides of the aisle to take in Congress. If they can gain broad support, Obama's entire agenda is in real trouble.

On the other hand, if the usual suspects don't back the Pentagon's message, Obama will have won a huge victory.

Either way, the fight to close Gitmo has just started.

How To Disqualify Yourself

If you're up for Secretary of the Treasury and your background pulls up stuff like this:

According to people familiar with the matter, Mr. Geithner employed a housekeeper whose immigration papers expired during her tenure with Mr. Geithner, currently president of the Federal Reserve Bank of New York. The woman went on to get a green card to work legally in the country and federal immigration authorities didn't press charges against her, these people said.

The second issue involved taxes due while Mr. Geithner worked for the International Monetary Fund between 2001 and 2004. As an employee, Mr. Geithner was technically considered self-employed and was required to pay Social Security and Medicare taxes for himself as both an employer and an employee.

He apparently failed to do so, resulting in Internal Revenue Service audits his last two years at the IMF. As soon as the IRS brought the issue to his attention, he paid the taxes with interest, these people said.

Then you have basically completely disqualified yourself for the job...period. The dude responsible for fixing our multi-trillion dollar septic tank of an economy apparently welched on his friggin' taxes.

Now it's no secret that I don't like Tim Geithner at all, as far as I'm concerned he's one of the guys responsible for this mess. But this is ridiculous to the point of being insanity.

Don't let the door hit you on the way out, Tim.

In Which Zandar Answers Your Burning Questions

Over at MoJo, Kevin Drum takes a look at yesterday's story about Ehud Olmert running Bush's foreign policy and asks the Burning Questions:

There are, of course, many things you could say about this. But the question that most piques my curiosity is: Why? Why would Olmert tell this story? Sure, he's bragging for a local audience, but what's the point? It's not as if he's running for anything these days. And he has to know that a story like this will embarrass the American government on a whole bunch of different levels. So why do it? Is he an idiot? Does he just not care anymore? What's the deal?

In which my reponse is "You're asking the wrong question, KD."

The question you should be asking is why both Barack Obama and Hillary Clinton are silent when given a perfect opportunity to turn around and tell the wildly unpopular outgoing Israeli PM and the entire world that "This kind of thing won't happen in our State Department" with Obama's bully pulpit and Hillary's confirmation hearing. If there was ever a better opportunity to say the next administration would be different from Bush on Israel, this would be it. "With all due respect to the Prime Minister..." would be the response Obama or Hillary would be giving to ANY other world leader who bragged like Olmert did.

But there's nothing out of the Obama's camp about Olmert's comments. And the answer to both Kevin's set of questions and my own in response is the same: AIPAC has bought and paid for Washington, both the left and the right. And that includes our new President and his foreign policy team.

It's the worst kept secret on Earth. It's the main reason why the United States can never be an agent of peace in the Middle East, because we're nothing more than the armed adjunct of Israel. And until we detach ourselves from Tel Aviv, there will never be any improvement there.

Welcome To Our World

Wingnuts are fuming today at the complete failure of GOP Senators to take any shots at Hillary Clinton today during her confirmation hearings, despite the "liberal media" dredging up all kinds of dirt on her today. Not one peep from the Hill-haters in the GOP where she's been an open target since 1993, and that's got BooMan convinced the GOP is scrambling to stay relevant.

As I have long argued, the behavior of politicians is driven far more by the dynamics of power structures than by ideology. The Democrats were not uniquely spineless during the Bush years. They behaved the way they did largely because their cost/benefit analysis led them to limit their fire in battles they knew they could not win. This isn't an apology for the Democrats, it's just an observation about human nature. If the Republicans had the votes to kill Hillary Clinton's appointment, they might very well go after her with everything from today's AP piece to the 'murder' of Vince Foster. But, without the votes, it's all about how great she is, how smart she is, and how fantastic it will be to work with her.

This is just a small example of a larger point. The sheer numbers of Democrats on the Hill creates a power dynamic that it is impossible for the old GOP to navigate using their old tactics. They cannot maintain unity and discipline while in the minority, nor can they bully through the terms of the debate. For the foreseeable future they will be weak and ineffective. (emphasis mine)

I'm gonna say this is wishful thinking right there. I'll believe this when I see much more progressive members of Obama's cabinet get confirmed without a hitch. Hillary on the other hand is exactly the person the GOP want as Obama's SecState to the point she might as well be a Republican. On everything that matters to them, Iran and Israel especially, she's a blood red hawk.

The combination of Robert Gates and Hillary Clinton assures there will be no real deviation in our foreign policy in the Middle East other than the excuses Obama gives to why it's failing. The GOP is more than happy to have Hillary around because it means continuity on GOP policy. Why would they object?

One-Stop Shopping Becomes Just Stop Shopping

Citigroup is now resigned to giving up its "financial supermarket" business model after ten years of trying and one particularly bad year of failing miserably.

The eventual breakup of the supermarket model—in which a bank handled a client's every financial need, from investing to insurance—would mean that Citigroup would become more of a traditional bank like JP Morgan Chase.

The core of the remaining company would be a global wholesale bank with some investment banking capability and include private and regional banking.

Citigroup's former CEO Sandy Weill developed the financial supermarket model in 1998 when he fought successfully to allow the merger of Travelers with Citibank. The merger circumvented the Depression-era Glass-Steagall Act that separated commercial and investment banking and helped pave the way for the banking behemoths that have been crumbling during the credit crisis. Glass Steagall was repealed in 1999.

It was the formation of Citigroup on Clinton's watch that really spelled the death of Glass-Steagall. I worked for Primerica, their residential financial services division, briefly in 2002, and Sandy Weill was most certainly pushing the "Wal-Mart of Finance" model for the new combined company. Very much so the division was preaching the Gospel of ReFi at every opportunity, and uncomfortable with the notion of convincing everyone I knew to refinance their homes coming off the post 9/11 recession while selling them insurance, stocks, and everything else, I left the company.

I knew it was going to go all bad eventually with Greenspan's dirt cheap rates. I'd like to think I left because I smelled a rat, but the truth is I wasn't good at selling people on bullshit. There was tons of money to be made by the people who were good at doing everything they did, and like most folks I was with the flood of displaced workers coming off the dot-com bust looking for a new industry. I had the math and the financial know-how, but all that did was allow me to crunch the numbers and see how bad of a deal people were getting in the end should housing prices ever fall or rates go back up...or both, as they would eventually.

"Eventually" of course turned into last year. Citigroup has been at the heart of this mess since the beginning, and to see them abandon the business model that started this whole fiasco is a little gratifying. It does nothing for the thousands of Citi employees shown the door as a result however...and the millions losing their homes, jobs, and financial freedom thanks to companies like this.

You don't get something for nothing.

Up In The Sky, It's Junior Birdman

Helicopter Ben has choppered in to London Town to say we need more bank bailouts.

Bernanke, speaking in London, said in his prepared remarks that the nearly $800 billion plan being discussed by the incoming Obama administration and the newly elected Congress "could provide a significant boost to economic activity." He did not comment on or endorse any specifics of the nearly $800 billion.

But Bernanke cautioned that the plan is "unlikely to promote a lasting recovery unless they are accompanied by strong measures to further stabilize and strengthen the financial system."

Bernanke suggested that more banks and financial firms are likely to need additional capital injections from the government, and that further guarantees of their debt could be necessary, in return for the federal government receiving further equity in the firms.

And so it goes, forever and ever, amen.

Morally Bankrupt

Steven D over at the Frog Pond has a great article on one part of the economy that he's had personal experience with that's expected to do very well over the next several years: Bankruptcy Law.

...The credit card companies did want to kill off consumer bankruptcy lawyers, but more as an added benefit. What they really wanted to do what cut the costs and losses they incurred when people who were maxed out on credit filed bankruptcy. You see most banks and credit card companies wanted people in debt, they just didn't want them to be able to walk away from that debt. What the bankruptcy code revisions did was force many people to use the equity in their their homes as a means to pay off their credit cards, rather than file bankruptcy.

And it worked, too. That is, it worked so long as the real estate bubble lasted. Banks earned fees from home equity lines, and banks and credit card companies earned fees from consumers (and retailers) who continued to use their credit and debit cards (often branded with the Visa or MasterCard logos) to buy, buy and buy some more. It was a great little racket they had going -- until the bubble burst and the housing market collapsed, triggering the Fall of the House of Greenspan and with it the Bush Economy.

Of course, consumer bankruptcy attorneys are just the small fry. The real money to be made is representing debtors, or their creditors, in corporate bankruptcies, especially in Chapter 11, the reorganization chapter of the bankruptcy code. And wouldn't you know that corporate Chapter 11 reorganization filings are expected to boom this year, as well...

And the real stinger is that bankruptcies at this level will only beget more bankruptcies down the line as creditors get screwed out of their investment and have to settle for pennies on the dollar. I've talked about America's biggest mall owner, General Growth Properties before. It's on the edge and has been for some time now, and the wave of retail store closing across America's shopping centers almost assures that GGP is done for. Commercial real estate will be the next economic disaster Obama will have to face. He's going to want to hold on to that second half of the TARP fund.

Indeed, General Growth Properties may be filing for Chapter 11 any day now, which can't make Tommy Friedman very happy, seeing his billionaire status put at risk. However, when big commercial real estate firms go under, guess what? They don't pay their local taxes. And the stores that go out of business in the malls they own don't generate any sales taxes. Which means many local municipalities lose a large amount of the revenues they depend upon to finance schools, fire fighters, police and other essential services.

Which again brings the financial hurt back to you and me. Tom Friedman will manage just fine, trust me. It's our jobs, our families livelihoods and the future for our kids which are really in danger today. Which makes you wonder why any Democrat would continue to support extending Bush's tax cuts for the rich. I sure don't see any reason for letting the people who profited and partied off the decline of the middle class in America over the past three decades getting away scot free with their often ill earned gains.

In other words, the pain is just beginning. 2009 and 2010 are going to be a tidal shift in America...and millions of us are going to drown in the financial currents as a result.