Intelligence...

Spectacular quote from Geithner yesterday in the senate

“The deepening recession is putting greater pressure on banks and in response many banks are pulling back on credit. Critical parts of our financial system are working against recovery.”

So, Tim, when did you become suspicious there might be a problem?

ASBOtastic!!

fail

This is what a post-collapse looks like in Iceland.

This is what a pre-collapse looks like in the US.

When people finally come forward and recognize that the banks 'problem is a solfency problem not a likvitity problem' then we can get on with the business of fixing the mess. For the love of god nationalize it before it fails.

Where does America Draw the Line?

Neil Stephenson pointed this one out in Snow Crash. I'm just a decade late echo...

A) Crushing the Genitals of Children?

Doug Cassel: If the president deems that he's got to torture somebody, including by crushing the testicles of the person's child, there is no law that can stop him?
John Yoo: No treaty
Doug Cassel: Also no law by Congress - that is what you wrote in the August 2002 memo
John Yoo: I think it depends on why the President thinks he needs to do that

or...

B) Speaking of McNuggets

“Goodman maintained the attitude ‘this is an emergency, my McNuggets are an emergency,’” the report states.

Where's Vinnie Jones when you need him.


EDIT: Seriously - what do we do with these people? FEMA camps? Legalize heroin? What makes people like this think this is behavior that wont result in dire consequences - and how is it that fear of said dire consequences isnt enough to keep them in line? How many people like these does it take before we start looking for larger systemic problems here...

A Simple Solution

Here's the important graph from this:

Wall Street didn’t help its case by paying out billions in bonuses in a year when the industry loss billions of dollars. The Wall Street Journal reported that “from 2002 to 2008, the five biggest Wall Street securities firms paid an estimated $190 billion in bonuses. Those companies churned out $76 billion in combined profits during the same period. Last year, the companies had a combined net loss of $25.3 billion, yet paid bonuses of roughly $26 billion.”

So it's easy. We start seizing assets of all people who received money from financial institutions in the form of bonuses going backwards until we have enough to pay for the bailout.

Monday

All you mothers out there - if your daughter takes your car without permission, reporting her to the police might end poorly. Here we see 2 police doing something that give the 5% of police who are actually reasonable human beings a bad name.

Then again - she did throw her shoe at him... and in some countries they punish that more severely...

America, importing middle-eastern style democracy since 2001....

Page Two...

The NYTimes re-explains the AIG mess in a way that finally mirrors what some of us have been saying about it since it happened. The reality here is that the shadow banking system levered up - and i'm glad they're using the word - gambled on credit default swaps at a significantly larger number than the actual home mortgage values.

Or - to put it more simply - we know the housing mortgage mess from the flash video i posted last week. Ok. Now - imagine people putting side bets on whether the mortgages will stay sound or not (like an odds bet at craps). Why did they do it? to balance out their hedge fund equations. So for example - lets say you're playing roulette - and there are 34 numbers on the wheel - and you're getting 34:1 payouts (a zero-sum game). The players start putting more than a dollar down on each number (even though they dont have that much money) - it's ok, because it's zero sum - they cant lose it. Then people start taking risks... putting money down on every number except 12 - and making huge profits (brokers who take risks make more money for their investors - this means those brokers keep their jobs and get big bonuses, while other conservative cover all my bets use the system for what it's for people are pushed out of jobs). Someone was selling insurance on 'what happens if 12 comes up' - but they werent funding that insurance - and AIG was betting BIG on that. If there were 34 dollars on the table - a dollar at each number except 12 - AIG was betting 10 just on the fact that 12 wouldnt come up. They were a multiplier - and when they crashed out - if they hadnt paid out to all the other players there'd have been a domino cascade failure in the banking sector (as there almost was when lehman walked away and started off a the beginnings of the fire).

When people like Phil Gramm - paid pocket spokesman for UBS - are out there telling you this was all the fault of a few poor people who got loans for homes they couldnt afford by banks that were under political pressure - i would hope people would put it into the same crank garbage theory box where they stuff ideas like 'aluminum foil hats prevent space aliens from reading your thoughts via their bose wave radio mind control devices'.

Who would have thought....

That famed 70s Ranger righthander Doc Medich was this cool. I mean having Gatorade sponsor you is one thing...

Seriously?

This will end well.

Wasteful Government Spending

Every day they blow doing stupid things like this is another trip around and slightly down the toilet bowl. When we had preferred stock - it meant that the taxpayer would get paid interest on the tens of billions of dollars of money we were giving them. Now we're just getting the 1 cent dividend. In essence, they've just flat out given the money to the banks. How the hell do these people still have jobs? Why are they getting bonuses instead of cardboard boxes?

Obviously the current government doesnt have the courage to solve this problem and deal with those who've taken the economy here. I'd hoped that, perhaps, we'd elected someone and something more than this.

In the end - the reality is that John McCain couldnt really be any less effective than Obama and the Democrats are being right now. Giving them MORE money does not help. Nationalize them. Fire the executives. Seize their assets. Put a swath of them in prison. That GM isnt bankrupt yet, that Bank of America thinks it's solvent, these are fantasies being encouraged by members of this administration who dont want to face the reality - and the longer we go without doing something about it the worse it gets.

Edit: oooh - imagine that - the nobel prize winning economist agrees with me. Hey - Obama - quit being a jackass. Seize the banks - reset ALL mortgages to 4% - reset ALL credit card debt to 8% - and let the dammned thing FIX ITSELF. There's a limited time for us to be able to get out of this - and that time is before all the guys just like AIG fail as spectacularly.

Reality

The big banks are insolvent.
Worrying about whether we use the term 'receivership' or 'nationalization' is crap.

First we take over the banks - and we fire the executives that were responsible.
Then we take over the insurance companies that are also insolvent.
Then we take over the brokerages and hedgefunds - that are more insolvent than the other two put together.

Talking about what we want to put back into the public sector is a discussion to have AFTER we clean up the mess. Burn that bridge when we get to it.

A little simplistic

but a good visual primer on the mess. Once you've seen it - i want you to remember the bit about 'leverage' - and imagine how much debt is 'owed' by the hedge funds and banks and insurance companies (now that you have a big number in your head - go ahead an leverage your imagination 30x).

Legal Technicalities

So North Dakota passed a dumb law.

"The bill declares that "any organism with the genome of homo sapiens" is a person protected by rights granted by the North Dakota Constitution and state laws."

So.. um... if i have 400 of these in a jar do i get 400 exemptions on my taxes? Hell of a lot easier way to get a free house than this. If I carry them around in a little battery operated cooler? or what about a liver transplant - that liver is an 'organism with the genome of homo sapiens'...

Was this country always so full of stupid people? or is this a relatively recent development.

I'm sensing a pattern

Obama stuffs Justice with RIAA lawyers
then the MPAA lobbyists push for a billion network sniffer project into the stimulus package
then they continue to invoke the bush state secrets protections in absurd ongoing court cases
then Geithner has a total crap plan with no specifics on how he's going to spend a trillion dollars - but Obama comes out to reassure people he has no intention of doing what Sweden did and nationalize the banks...

Maybe he's in over his head.

The Downward Spiral Revisited

So on the one hand, we have congressmen trying to plug the hole in the bucket - but realizing that the hole is $4t and they dont have the cash... then you have unbelievable morons at CNBC asking for stock tips from two of the only experts who saw this coming as if nothing has really changed... and now news that Geithner has won out over the more extreme thinkers (like Krugman) and we're going to end up with some bleeding Japan-esque downward spiral into 10 years of misery and what looks like 10 trillion dollars of responsibility (that you know will be called in). This makes the RTC fraud from Bush I look Mickey Mouse.

If you're not paying attention to how bad this situation is... this thing is so much uglier than Obama laid out to the American people. Though he was the best choice for having the ability and balls to fix it... it seems that even he doesnt have the cajones to change the system the way it needs to be changed. I guess it's all just going to get really really really crappy around here.

Monday

So Obama wants to cap executive pay at bailout banks at 500k... but not retroactively (only those who take addl money)...

Someone at the NYT decided to breakout how much it costs to be an executive - what with the mandatory upper east side flat and house in the hamptons.

"A personal trainer at $80 an hour three times a week comes to about $12,000 a year."

"Total cost for three gowns: about $35,000."

Poor Bankers... having to do without a $125,000 driver?
And a Nanny? The last thing these people should be doing is breeding...

Happy Monday