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.

Obama And Blago

BooMan rolls out some excellent points on why Blagogate is making Obama look like the Last Great Boy Scout in Chicago politics.

I'm hesitant to defend anybody in the Blagojevich Scandal until more of the facts are known, but BarbinMD has posted exactly what I wanted to say on the matter. It appears that the event that precipitated Blago's downfall was a phone call Barack Obama made to president of the Illinois Senate Emil Jones Jr. in September requesting that Jones Jr. throw his support behind a new ethics bill. The ethics bill quickly passed and is set to go into effect in January. Blagojevich reacted to this by ramping up his corrupt efforts to raise cash before the new law precluded him from doing so. When Fitzgerald got wind of Blago's efforts, he was able to secure a wiretap warrant. The rest is history.

In spite of this, there are a host of articles out there that attempt to tarnish Obama's reputation and good name by tying him to the governor's corruption. But the facts we have right now are exculpatory.

1. It was Obama's successful push for an Ethics Bill that precipitated the governor's downfall.
2. The prosecutor explicitly stated that there is no hint of wrongdoing by the president-elect.
3. Barack Obama denies haven't any direct discussions with the governor.
4. The governor said, on tape, that the Obama Team was "not willing to give me anything except appreciation. Fuck them." He also called Obama a 'motherf*cker'.

Based on the set of facts we have right now, Obama looks admirably unscathed. In fact, it looks like his advocacy of higher ethics standards is what led to Blago's exposure as a rank crook.

In other words, Obama forced Blago's scummy hand and he got sloppy. Fitz in turn got his wiretaps. Blago in turn got busted.

Seems open and shut.

If only it were really that simple.

Year End Sales

On punditry, that is. Foreign Policy magazine takes a look at the ten biggest bonehead predictions of 2008, the losers include Bill Kristol, Jim "Mad Money" Kramer, Don Luskin and of course, Chuckles Krauthammer.

Enjoy.

Zandar's Thought Of The Day

This morning Time Magazine asks bluntly "Can Obama Escape The Taint Of Blagojevich?"

If you're asking that question, not only do you already know the answer to it, but you're perpetuating that answer as well.

StupidiNews!

• Florida officials are investigating a mass grave found at a former boys' reform school.
• With the latest global economic crisis, the world's hungry is approaching one billion people.
• Will the US auto industry be run by a federal "Car Czar" in exchange for bailout bucks?
• Troubled insurance giant AIG is in talks to sell one of its subsidiaries for $10.8 billion.
• Could flexible, paper-thin LCD displays be in your future sooner than you think?

The Big Zero

For the first time ever, four-week US Treasury bills sold at zero percent interest. Zero.

Investors fearful of deflation and riskier assets scrambled to hand over cash to the US Treasury in return for no interest at an auction Tuesday, while some T-bill rates fell below zero in the market.

Pressures on fund managers to stock up on the safest possible assets in advance of year-end book-balancing added to the bid for government securities, traders said.

The U.S. Treasury Department said it sold four-week bills at a high rate of 0.000 percent, a level never before seen, in a $30 billion auction.

When Treasury bill rates turn negative it shows that investors are so concerned about the safety of other assets that they are willing to effectively pay the U.S. government a fee to look after their money.

Rates for three-month bills in the market fell below zero, according to fixed-income trading platform Tradeweb.

"There is just a continuing flight to safety with money that needs to be invested," said Lou Brien, a market strategist with DRW Trading Group in Chicago. "Money funds want it to be invested rather than under the mattress, which is continuing to push rates lower."

The view that the Fed will use other methods in addition to cutting short-term interest rates to ease monetary conditions drove prices of long-dated Treasuries prices higher as well, sending yields on those maturities toward five-decade lows.

This is a classic liquidity trap scenario, where even with dirt cheap interest rates (and the Fed is expected to cut rates to 0.50% next week) and massive liquidity in the form of bailout billions has been pumped into the system, the economy is stalled out like a car with a flooded carburetor. Banks are hoarding cash rather than loaning it out because short term investments are way too volatile and dangerous. The practical upshot is that the economy grinds to a halt and deflation sets in.

We're headed down that road. The interest rate in this country will effectively be zero soon if not zero already. As such, the next step is deflation, and deflation means anybody in a lot of debt now will be only in worse debt later. That situation describes basically every company and most American families out there.

This is turning into a textbook disaster. Remember, it wasn't inflation that caused the Great Depression, but a catastrophic deflationary spiral. Prices dropped. Wages dropped as a result. People were laid off. Demand for goods dropped, causing prices to drop more...and the cycle continued for most of the 30's. It took us almost 20 years and World War II to recover from it.

We're heading into another situation like that now.

And One Last Thing

Blagojevich has no intention of resigning over this.

Illinois Gov. Rod Blagojevich has no plans to resign after being indicted on a raft of corruption charges, including the alleged "sale" of former Sen. Barack Obama's Senate seat.

Blagojevich's attorney Sheldon Sorosky told reporters outside the courthouse where the governor was arraigned that the governor has no plan to resign.

"He didn't do anything wrong," Sorosky told reporters. "A lot of this is just politics."

Blagojevich should be in the office Wednesday, his attorney added.

This will get a whole lot worse, and quickly.

Blagogate Is Obama's Whitewater

I'm glad I'm not the only one who sees this whole Blago/Rezko baloney as Obama's Whitewater. Digby weighs in:

The minute I heard about Fitzgerald's press conference, I knew this would follow shortly: Questions Arise About the Obama/Blagojevich Relationship. That's Jake Tapper, not making any charges but bringing up all kinds of cross currents in Illinois politics to suggest that there are "questions." And all over TV they are talking about "corrupt Chicago politics," which is being splashed onto Obama.

It's natural that Obama and many of his staff have crossed paths with the players in this scandal. But according to Lynn Sweet of the Tribune, who has followed Obama for some time and is not a sycophant, says the campaign put a mile between itself and Blagojevich, not even allowing him to speak at the Democratic convention. They are not close.

I don't know if this will go anywhere. At this point, I think there's just too much news and too many problems for a phony scandal to have any legs. But, as I wrote almost a year ago, these Chicago shennanigans have elements of a perfect right wing smear by association if they have the energy to launch one and the press decides it's sexy enough.

Count on it. Taking down Obama is a national sport among the Village. Every single one of them wants to be the next Bob Woodward and write their own ticket for the next 35 years. You can absolutely count on story after story trying to tie Obama to Blago and "the Corrupt Chicago Machine."

The same people who ignored Bush scandal after Bush scandal are the same ones who will spend four years trying to gotcha Obama over this.

As I've said time and time again, if you thought the Village hated the Clintons, wait until you see what they do to Obama.

It starts today. The press honeymoon is certainly over. They know they can turn this into 24/7 Blagogate and control Washington once again...and that's exactly what they are going to do.

Blago-Sphere

Blagogate continues to get more and more interesting by the hour. First of all, Obama is looking more and more like the Good Guy here.

Marcy Wheeler catches local Chicago press reporting that Rahm Emanuel may have tipped off federal investigators that Gov. Rod Blagojevich (D) was engaging in corrupt acts. Jack Conaty, a Chicago reporter for the local Fox affiliate, said on-air that Rahm Emanuel might have been responsible for causing federal investigators to act quickly to apprehend Blagojevich this morning:

CONATY: We did receive a tip this morning that perhaps all of this came together so quickly because the Governor may have reached out to Rahm Emanuel, the president-elect’s chief of staff, in attempting to leverage filling the Senate seat. And it may have been Rahm Emanuel who tipped the scale and made this move as quickly as it did.

Second of all, Emanuel may have been cooperating with the Feds all along.

Third of all, the person Blago was going to appoint if Obama didn't play ball, the so called "Senate Candidate 5" is looking more and more like Jesse Jackson, Jr.

Capitol Fax's Rich Miller updates the state of the speculation on the identity of "Senate Candidate 5," the public official who -- from the complaint -- appears to be in the most jeopardy, aside from Blagojevich and Harris. "Senate Candidate 5." He thinks its either Emil Jones or Jesse Jackson, Jr., though it's conceivable that others would fit the description.

Though Fitzgerald warned us not to cast aspersions based on Blagojevich's version of other people's words, this is the damning quote: “We were approached ‘pay to play.’ That, you know, he’d raise me 500 grand. An emissary came. Then the other guy would raise a million, if I made him (Senate Candidate 5) a Senator.”

Here's what we know. Candidate 5 is:

-"publicly reported to be interested in the open Senate seat"

- not who Blagojevich thought Obama wanted

- not someone with whom, by November 10, Blagojevich had a "long, productive discussion"

- someone with fundraising wherewithal who could produce something "tangible up front"

- someone Blago was "getting a lot of pressure" not to appoint

- someone with whom Blago had "a prior bad experience...not keeping his word"

The complaint also says that on November 10, Blagojevich told an advisor to leak to the Sun-Times's Michael Sneed that Blagojevich "is seriously considering Senate Candidate 5 for the open Senate seat" and that the advisor agreed to call the Sun-Times to leak the story, apparently false, that Blagojevich end of the conversation Advisor A agreed to call the Sun Times columnist to leak the story had a “long, productive discussion” with Candidate 5.

One thing I do know is that this is far from over.

It's In The Blag

Illinois Governor Ron Blagojevich has been arrested by the Feds for, among other things, trying to sell Obama's vacated Senate seat to the highest bidder.

Illinois Gov. Rod Blagojevich was arrested on criminal charges on Tuesday, including trying to sell the U.S. Senate seat being vacated by fellow Democrat President-elect Barack Obama, federal prosecutors said.

Blagojevich was also accused of threatening to withhold substantial state assistance to the Tribune Company in connection with the sale of the Chicago Cubs' baseball home Wrigley Field "to induce the firing of Chicago Tribune editorial board members sharply critical" of him.

The 51-year-old Blagojevich and his chief of staff, John Harris, were charged in a 76-page federal indictment with conspiracy to commit mail and wire fraud and solicitation of bribery. Both were taken into custody at their homes in Chicago.

In Illinois, the governor selects a successor when there is a mid-term Senate vacancy. Obama resigned from the Senate soon after winning the Nov. 4 presidential election.

Blagojevich allegedly was caught on court-authorized wiretaps during the last month.

He was seeking a "substantial" salary for himself at a nonprofit foundation or union affiliated organization, a spot on a corporate board for his wife, promises of campaign cash, as well as a cabinet post or ambassadorship in exchange for his Senate choice, the FBI affidavit added.

The man prosecuting Blagojevich? None other than Chicago crimefighter US Attorney Patrick Fitzgerald (yes, THAT Patrick Fitzgerald).

Fitzgerald said the case required "unusual measures" because of actions Blagojevich was expected to take soon, including filling the vacant Senate seat. "There were a lot of things going on that were imminent," he said.

"We were in the middle of a corruption crime scene and we wanted to stop it," Fitzgerald said.

He said Blagojevich was looking to pull $8 million in funding for a children's hospital after the hospital's chief executive officer did not give a $50,000 contribution to the governor's campaign.

Also, Fitzgerald said, it was expected that Blagojevich would soon sign into law a bill that would direct a percentage of casino revenue to the horse racing industry -- a bill supported by someone who contributed $100,000.

"To let that bill be signed, to me, would be very, very troubling," Fitzgerald said.

One big question now is whether Blagojevich retains the right to name Obama's successor if he remains in custody or even under indictment. The answer is yes, according to Fitzgerald.

Jay Stewart, executive director of Chicago's Better Government Association, agreed. He said Blagojevich retains the right to fill the senate vacancy until he's out of office, which won't happen unless he quits or is removed from office by impeachment.

At a press conference Tuesday, Illinois Sen. Dick Durbin, a Democrat, said he wants the Illinois legislature to act quickly to pass a law setting a special election to fill Obama's seat, in order to prevent Blagojevich from making a tainted appointment or there being a lengthy vacancy in the Senate.

"No appointment by this governor under these circumstances could produce a credible replacement," Durbin said.

This is going to be Obama's Whitewater. The GOP and the right wing noise machine will be screaming about this for Obama's entire career. How much did he know about the scheme? All evidence so far appears to be "zero", but that won't stop them from looking for or creating links where there are none.

Way to go, Blago. Democratic Stupidity at its finest. New tag: Blagogate.

Out Of The Frying Pan...

...into the mortgage default. The newest report out this week from the Office of the Comptroller of the Currency shows that when the feds stepped in an intervened with mortgage payments to keep people in their houses, a large percentage ended up back behind in their mortgage payments again, sometimes within only a few months.

The OCC found that 58 percent of borrowers who received a modification in the first quarter have since missed at least one monthly payment. In the more recent group of borrowers who received modifications in the second quarter, 51 percent have missed a payment. The finding was based on data provided to the OCC and its sister regulator, the OTS, by 14 of the nation's largest banks, which account for about 60 percent of the mortgage market.

There's every reason to believe this is representative as a whole of the mortgage situation in the US. As the housing market continues to collapse these problems will continue until the housing market hits bottom, and there's no reason to believe that will happen anytime soon.

StupidiNews!

• Illinois suspends all activity with Bank of America in an unprecedented show of solidarity with laid off workers.
• The Fed has authorized China Construction Bank to operate in the US.
• Dems are pushing a $15 billion automaker bailout plan that would effectively nationalize the industry.
• Sony plans to lay off 16,000 Japanese workers as that company struggles with collapsing sales.
• Suspicious but harmless powder-filled letters were sent to at least six Governor's offices yesterday.

The Badness Continues

The WSJ has a pretty good article on the India-Pakistan situation that's worth a read if only for this truly scary theory at the end: (h/t TPM)

India has also upset many inside Pakistan by demanding the government hand over 20 terror suspects, many of whom appear to have no link to the attack in Mumbai, Western diplomats say. Acquiescing to India has now become politically problematic, say analysts.

"I don't think there is any Pakistani leader who wants to be seen giving in to demands by India. That would cause problems," said a retired army general who declined to be named. "No one wants to see one of our boys handed over to an Indian court. There would be no justice there."

A top security official has also said the military would be willing to fight India alongside Pakistani Taliban leader Baitullah Mehsud, the man accused of assassinating Mr. Zardari's wife, former Prime Minister Benazir Bhutto, last December. Mr. Mehsud has denied involvement.

The Taliban, too, says it would suspend its fight against Pakistani soldiers to join them a conflict with India.

"Any aggression will be resisted jointly by Pakistan's armed forces and the Mujahideens," said Maulana Faqir Mohammed, a top figure in the Tehrik-e-Taliban Pakistan, in a statement sent to reporters. "We would raise a force of 15,000 tribal Taliban to fight on the side of Pakistan's armed forces. We would infiltrate 500 suicide bombers into India to cause havoc there."

Yeah, that's good news there. The Pakistani Taliban and Pakistani Army fighting India together.

Nothing bad would come from that.

StupidiNews!

• 2 in 3 Americans say they have cut back this year on holiday spending.
• Newspaper publisher Tribune Media could be filing for bankruptcy as early as this week.
• Has Britain's "Surveillance Society" gone too far?
• Another Senator is calling for GM's CEO Rick Wagoner to go as part of any bailout deal.
• A new survey finds more than half of adults and 50% of women over age 18 are gamers.

It's Bad Now And It Will Get Worse

Certainly Obama believes things are going to continue to get worse, but just how bad? One estimate from the UK has November's massive job losses as the good times...and 2009 could see job losses of twice that.

As many as a million American jobs could be lost every month by next spring as businesses struggle to raise capital in financial markets consumed by fear, according to a new analysis.

November was the worst month in the US labour market since the oil crisis of 1974, as more than 500,000 US workers were laid off, according to official figures released on Friday.

But Graham Turner, of consultancy GFC Economics, says the rising cost of corporate debt is now flashing a red warning signal that far worse is to come over the next few months and job losses are heading for levels last seen in the 1930s Great Depression.

Corporate bond yields have rocketed since the credit crisis began as investors flee risky assets in search of safe havens such as US Treasuries. That effectively means many firms are being forced to pay eye-watering interest rates to borrow funds.

Turner says when the gap between the yield on high-risk company bonds and US Treasuries widens sharply, unemployment tends to shoot up - and current credit conditions are pointing to a doubling in the pace of layoffs, to more than a million workers a month, by spring.

'The correlation is holding up all too well,' he said. 'It's very disconcerting.' He added that the pace of layoffs already happening in the US 'is indicative of panic'. During the 1970s oil crisis the panic was relatively short-lived, he says. 'But the worry now is that this will just roll on and on.'

Sustained job losses of that magnitude would indeed be catastrophic for America and the world. Consumer spending would drop like a stone, and retail level goods and services would evaporate, taking the economy with it. We're talking a deflationary dealth spiral scenario, one where millions of jobs would vanish and the US would face shortages, riots, and chaos. The effective unemployment rate is 12.5% now...it could end up twice that, with one in four working age Americans either out of work, under-employed, or no longer seeking a job because there will be none to have. The Happy Face economic press has so badly underestimated this crisis that the reality is more and more likely to be an "effective depression" where the entire global economy is restructured...and when it is, America will no longer be on top.

There is no visible bottom to this abyss. 2009 is going to be one of the worst years in American history, bar none.