What's Breaking News Tonight?

Hummer We Hardly Knew You

By John Batchelor on March 31, 2009 10:17 AM | 5 Comments

Obamauto Discards Hummer Like A Truant.

Like saloon liners, the Hummer was never anything but happy. Did you buy a first or second class ticket on a Cunarder or the White Star Line because you wanted to go across the ocean? Now Hummer is doomed by the castor oil sales force in the White House. Sales are down more than half (just half??) and GM, newly acquired by the Obama administration, will end Hummer as if it is a truant who was caught at the circus. But Hummer was never about a sense of proportion, or thrift, or the bottom line -- or this new mania for bailouts that pay. Who believed in Hummer as a necessary machine? Hummer was the Big Toy among us. Some folk miss their toys when they grow up. Some people regard toys as immature and wasteful. Some people are toys. The Hummer will live on as an idea -- in Hollywood movies, in iconoclastic Max Max remakes, in the driveways of the Ummah and the BRICs and the newly liberated. Hummer was meant as a symbol, never a vehicle, and the symbol was that we are alive, we are goony, and we feel way awkward in our toy bodies, but it's a new day, the road is wide and endless, let's go. Hummer, we hardly knew you, but we miss you already. The smugness of the NYT underlines the imminent nostalgia:

A Dealer's Big Bet Is on the Line as the Hummer Falls From Favor

Sales of Hummers over all have fallen so far -- 51 percent last year, the worst drop in the industry -- that General Motors is trying to find a buyer for the brand. Without one, the company might close Hummer. An announcement about Hummer's fate may be made Tuesday.

"It's a brand that represents a lot of what people want to get away from," said Rebecca Lindland, an analyst with the research firm I.H.S. Global Insight.
...
If Hummer is closed, it would be phased out "rather quickly," G.M.'s president, Frederick A. Henderson, said last month.

G20 Wrecking

By John Batchelor on March 30, 2009 11:58 PM | 4 Comments

Sarkozy Upstages G20 Before It Starts.

Shrewd move by the French president to recognize that the Germans are taking all the credit for wrecking Gordon Brown's soiree before it begins, and so Nicolas Sarkozy will linger in Paris with Brazilian President Lula and then arrive late for the dinner at No. 10 on Wednesday evening, April 1. By then, the headlines will feature the word "disappointment," and Sarkozy can offer his ironic, disconsolate thoughts on the missed opportunities. Perfect. From preliminary excitement, Mr. Sarkozy already asserts that he will walk out of what he has not walked in to if he does not see progress. Some hand-waving Gallic complaint about the American banks being as rotten as Caesar's corpse? Or is it credit? The French are entertainment.

Genuine Trouble.

Simon Johnson of Baseline Scenario, a former IMF official, identifies the disaster inside the failure at the G20 in the preliminary communique. The IMF wants $750 billion for its work supporting failed economies. The G2o has not yet committed to a number, but it is likely betwee $250 and $750 billion. Simon Johnson warns:

Only three interesting points are apparently still open for discussion, all about some dimension of the IMF.First, how much additional funding will the IMF get (paragraph 6)? The debate is apparently still somewhere between an additional $250bn and $750bn. This is the most interesting headline number to watch for. If it's only $250bn, that's disappointing, and if they can't give an exact predicted number (i.e., they fudge the blank currently in the communique), that's a disaster.

Simon Johnson also points to the doubts about how the IMF will support emerging markets. The significance here is that Mexico is in collapse on the American border and needs heroic IMF assistance.

The big test of the summit's IMF-centric approach will be whether the IMF can get its increased resources lent out (paragraph 7), particularly on newly generous terms "for countries with strong policies"? This will happen quickly if it happens at all, and the body language of emerging markets at the G20 - including whether Mexico, Brazil and others sign up for the new facility - should give us early indications.

April Fool's Beauty Contest

Then there is the open question as to why the G20 chose the evening of April 1 for the dinner at No. 10. Sarkozy's spectacular wife Carla Bruni (right) usually steals the show at these events, where the wives are seated in another room. But in this instance, Mrs. Obama is likely to contest the night. And then there is the movie star who, before an unfortunate incident or two with the randy P.M. Silvio Berlusconi, used to answer to the job of the First Lady of Italy, Veronica Lari. (below)

Community Disorganized

By John Batchelor on March 29, 2009 10:05 AM | 5 Comments

POTUS Emergency Meeting with the Super Bankers.

Late in the week, 13 super bankers, led by the crypto-bankrupts Ken Lewis, Vikram Pandit, John Stumpf, were ordered to walk up and down the White House driveway in order to meet with the world famous community organizer, Mr. Obama. If this occasion was about a rent strike, or a voter turnout drive, or an EPA lawsuit, the results of "no change" would have been acceptable. Instead, the occasion was a revolt by the bankers against the Obama administration's class warfare campaign. The one and only issue was money. The super bankers have already decided that the TARP fiasco is a virus that has infected their command and control, and they aim to shed TARP asap while keeping as much of the Fed credit backstop as possible. The super bankers have also decided that the White House telling them how they pay themselves and their crowd is unendurable. The rupture is complete. No trust. No hope for trust. Low intensity warfare in place

now as the bankers pick off members of Congress to see the money their way. Does POTUS know he has lost the respect of the super bankers? Yes. That is why he went through the infantilizing exercise of calling on the lords one at a time. This is the POTUS style from his organizing days. Try to get folk involved by making them speak out their anxiety or their contempt. The aim here was not to persuade anyone. The aim here was to make POTUS believe he is in charge. What do you think?

During the meeting, the president called on the executives one by one, starting with Jamie Dimon of JPMorgan Chase, and asked them to offer their views on their banks and the broader industry. The topics included regulatory reform, mortgage refinancing, the "stress tests" that federal regulators are now applying to large banks, and the proposed program to buy their troubled assets. The executives emphasized that their banks were making loans, despite critics who say they are not.

Meanwhile, the Community of the G20 Has Already Turned to Farce.

You will recall, Gordon Brown and his Chancellor of the Exchequer (and heir apparent?) Alistair Darling need the G20 to support their general quarters call for more and more spending for the collapsed and helpless British economy. Also, Germany has now secured the eager obedience of the rest of Europe to lead the anti-Britain, anti-American offensive at the G20. Germany's PM Angela Merkel emerges as Bismark II:

"The crisis did not take place because we were spending too little but because we were spending too much to create growth that was not sustainable. It isn't just that the banks took over too many risks. Governments allowed them to do so by neglecting to set the necessary [financial market] rules and, for instance in the US, by increasing the money supply too much."

An old rule is that you should never take a meeting unless you already know what the result is. The Obama administration and the Brown government are the only two who don't speak aloud what everyone else (G18) know to be true. Germany triumphant. The hard work work in London will be face-saving by the American and British teams. Mr. Obama may again try his community organizing skills, calling on the other 19 potentates to state their concerns. If POTUS does say, "And you, Prime Minister Brown?" we can expect a growl and, in the background, the laughter of the crowds. Does POTUS know that the G20 has failed already? Yes. Does Gordon Brown? Unknown. The London Times knows:

The likely deadlock at this week's meeting will kill any remaining hope that Alistair Darling's April 22 budget will offer significant tax cuts.

The assault by European Union leaders also represents a defeat for President Barack Obama, who is desperate for other big economies to copy his $800 billion stimulus plan.

"There will be a very long communiqué, but there won't be much in it," said a Washington economist.

Adding to the disarray, a draft of the agreement Brown hopes to secure was leaked to a German news magazine, prompting suggestions of "dirty tricks" by Berlin.

The Obama Team Searches for Life After G-20.

The new language of the new Washington regime includes the word "flexibility" in place of the old, ugly, unhelpful word, "defeat." From Calculated Risk:

From the WaPo: Obama Signals Flexibility Ahead of G-20 Summit

The Obama administration on Saturday appeared to back away from calls for other nations to mirror the United States in combating the financial crisis with ramped up government spending ...

U.S. officials yesterday dismissed any notion of a rift, saying they would not press nations to adopt specific spending targets. "Nobody is asking any country to come to London to commit to do more right now," said Deputy National Security Advisor for International Economic Affairs, Michael Froman. ...

Experts say the U.S. stance may reflect a recognition that the White House may simply not be able to convince their European counterparts to spend more. Some said it may herald a modest outcome for the summit.

Those expecting anything of substance from the G-20 meeting will probably be disappointed ...

Then Again, the G20 Will Feature Twitter Pranks.

"Put People First" is my favorite new NGO (left), and is an example of a fashionable disorganization waiting to be called upon by POTUS one at a time:

There are growing fears that protests at the summit venue, the ExCeL centre in London's Docklands could be marred by violence. Scotland Yard will be deploying specialist officers trained to use 50,000-volt Taser stun guns.

The Mullah Mouse That Roared

By John Batchelor on March 28, 2009 10:11 PM | 6 Comments

The Obama Administration's New Plan for Afghanistan.

The fresh combat troops, the two-star general for the Pakistan border regions, the drug-fighting tactics borrowed from Columbia and Mexico, the outreach to so-called moderate Taliban, the $7.5 billion thrown into Pakistan, the proposal to work around the catastrophically corrupt narco-lords in Kabul, the refusal to challenge the rentier tyro Hamid Karzai, and the endless patter about developing Pakistan -- all of this is talk, cash, fantasy and State Department trivialities invented at Brookings that makes up the new plan for Afghanistan. Smart diplomacy. Brainy combat. Genius grit discovered by Candidate Obama in his July 2008 stopover for a photo op with Hamid Karzai (above). I am momentarily impatient to list all the schemes now rolled out as if the Obama administration has decided it is not significant to read over how the British rode into the Swat Valley for decades in order to solve Afghanistan. You will recall that Sherlock Holmes's Dr. Watson was roughed up in Afghanistan. And that young Winston Churchill charged into the Swat Valley. The fact is that there is no solution in Afghanistan because the rot is entirely and only the superstitious, self-indulgent, bloody-minded and cowardly Pashtuns. I speak to Ann Marlowe on Sunday 29, who writes in Forbes.com that the endless turmoil in Afghanistan is a gang war between two clans of the Pashtuns. Altogether the Pashtuns are only about 4 in 10 of the population; however in their arrogance and cruelty the Pashtuns dominate the country. The Taliban are all Pashtun, but all from just one clan. Karzai is the other clan. The lightbulb illuminates. Afghanistan is the Mullah Mouse That Roared. Entice Britain and Russia and America to enter to solve what is believed to be anarchy, and then milk the empires. It is not anarchy. It is a vigorous family feud with a practical eye on the cash flow. Ann Marlowe is blunt:

The insurgency is first and foremost an intra-Pashtun power struggle. As Thomas Johnson and Chris Mason ably pointed out in the journal Orbis in 2007, Mullah Omar and most of the Taliban leadership are of the Hotaki Ghilzai tribal group. Almost all Taliban are members of the Ghilzai confederation. The Ghilzai and the Durranis--the tribal confederation to which the King and President Hamid Karzai belong--have been bitter rivals for hundreds of years, with the Ghilzais being odd man out for most of that time. Even now, they are poorly represented in Karzai's cabinet and in governorships in the Pashtun provinces.

Laughing at the Obama Team Holbrooke.

What will happen next in Afghanistan is that Pakistan will discover that the more it claims to be part of the solution, the more money will flow to maintain it as part of the problem. And the more it can watch itself on TV from America (right, watching the inauguration speech from Kabul). The Obama administration now proposes to conquer the Taliban by invading the suicidal bankrupt Pakistan and taking on the opium trade with DEA tricks. Richard Holbrooke is the special envoy from Mrs. Clinton's State Department. I am told by Forbes.com Tunku Varadarajan, who will join me along with Ann Marlowe on Sunday 29, that Richard Holbrooke is a challenging colleague, as in vain, self-involved, cunning, opaque. It is critical never to laugh at Richard Holbrooke. Never laugh. It is Mr. Holbrooke's solemn task to bring peace to a severely unlucky part of the world that has not been at peace since Homo erectus arrived. It has not come to the Obama administration that the practiced deceivers who could handle just fine Islamabad and the Pakistan Jihadists all live in Delhi and Mumbai and so forth. Set a fire to stop a fire. Instead, we are going to watch for a few years while the Obama administration rediscovers what a problem allies can be when led by the Diem brothers and when dominated by local family feuds and aimless revenge killings.

Berlin Offensive Plan

By John Batchelor on March 27, 2009 9:35 PM | 4 Comments

Europe Follows Germany, and Germany Follows No One.

Baseline Scenario, the thrillingly dry website by Simon Johnson, Peter Boone and James Kwak, warns that the the Europeans are going to the G20 meeting in London with a plan, and the plan is to stand back and let the Americans sweat while the Germans ponder. They call this "Payback Time." The argument is about the American call for every member of the G20 to spend up to 2% of GDP on so-called stimulus packages -- that is, to spend and spend and spend and spend until the world consumers go back to shopping. Germany regards this as folly. The one and only nightmare for Germany is inflation. It is a German faith that inflation is Satan. European Central Banker and French-born Jean-Claude Trichet and German Prime Minister and East Germany-born Angela Merkel agree that aggressive government spending is unneeded, unwise and self-destructive. Their opinion on stimulus is not negotiable. Baseline Scenario proposes "three possible reasons for this attitude..."

The Germans believe that the economy will recover on its own from this point. Given that not even the optimists in the Treasury Department believe this, I don't see how this could be the case.
They are so afraid of any risk of inflation that they would rather suffer through an extended recession and high unemployment. This could be possible, although misguided, especially since Germany is already in worse shape than the U.S., with its economy expected to shrink by 3.8% this year (vs. 2.5% for the U.S.).
They realize that their economy is driven by exports, and therefore they are planning to free ride off of the U.S. stimulus package. In this scenario, Germany gets to contain its national debt and minimize the risk of inflation, while letting other countries turn the global economy around.

I read through these three possibilities and hesitate to agree that the Germans are wrong-headed. The droll observation recently is that the GOP House is now joined by Germany and Europe in doubts about stimulus and spending and debt. There is wit and not inaccuracy here. Also. Why is this pay back? Perhaps it is a plan, and a Berlin offensive plan.

Gordon Brown Makes Germany Cocky .

Who in all Europe joins with the Obama administration's call for a massive G20 stimulus plan? Only one name, Gordon Brown. After his recent visit to the US, in order to praise the Obama administration again, Gordon Brown is now a burden to himself and to Washington. Despised and mocked in London, discounted and ignored on the Continent, laughed at by China and the weasels of Asia, Gordon Brown is the worst sort of friend to the young American president and his administration's stimulus plan. The special relationship is a curse. The Germans regard Gordon Brown as a weakling, and Gordon Brown's alliance with Barack Obama makes the Germans feel cocky. The easy irony here is that German, sixty years later, has launched a winter offensive against the allies of London and Washington. You recall the scene in "Patton," when George C. Scott argues that the Germans haven't launched a winter offensive since Frederick the Great, and therefore he is sure that it is coming, so be ready. My sense is that Germany has caught London defenseless, while France has already surrendered and all of North and East Europe follows Germany. And the U.S.? Numb with one-worldism. Berlin offensive plan.

Baseline Scenario Hedges.

Simon Johnson, Peter Boone and James Kwak close with a reservation about the German strategy:

"Now, we're not blameless here, what with our "Buy American" provision in the fiscal stimulus. But at least our government isn't closing its eyes and assuming the problem will go away."

I do not have superior information, just a well-read prejudice about the culturally adept militarist minds of Germany. I am guessing that that the Germans know that Gordon Brown is no threat and that Barack Obama can be manipulated. Recall how Mr. Obama behaved when he spoke in Berlin in July 2008, and Mr. Obama's peculiar desire to pose with Angela Merkel for the cameras? The Berlin read on the Obama team may be that it won't shout and it won't fight. Note that the Obama embassy, after the London unpleasantness in which the G20 will squabble like wolves, is going to stop at Strasbourg and then skip over Germany to stop at the Czech Republic before going on to Turkey. Let's add this up. The English, the French, the Czechs and the Turks. From the Berlin point of view, this is a quartet of war prisoners and servants. Berlin offensive plan.

Names the Names Laughing

By John Batchelor on March 26, 2009 10:40 PM | 16 Comments

Simon Johnson of MIT Names The Names.

The astute and convincing professor from MIT writes a lengthy and coherent essay to explain how it is that the banking sector took over the government and the economy after 1980, and especially after 1990, with a combination of smarts, lobbying, luck, influence-peddling and rules-changing. The heart of the story is much simpler than lists of maneuvers or the chronology of dare and caprice. It is the list of names who pushed through into government and then controlled the decision making that favored their own crowd. In a burst of candor, Simon Johnson identifies the characters from the Clinton, Bush and Obama administrations who were friendliest to what the professor calls "The Quiet Coup" of money:

"... Robert Rubin, once the co-chairman of Goldman Sachs, served in Washington as Treasury secretary under Clinton, and later became chairman of Citigroup's executive committee. Henry Paulson, CEO of Goldman Sachs during the long boom, became Treasury secretary under George W.Bush. John Snow, Paulson's predecessor, left to become chairman of Cerberus Capital Management, a large private-equity firm that also counts Dan Quayle among its executives. Alan Greenspan, after leaving the Federal Reserve, became a consultant to Pimco, perhaps the biggest player in international bond markets.

"These personal connections were multiplied many times over at the lower levels of the past three presidential administrations, strengthening the ties between Washington and Wall Street. It has become something of a tradition for Goldman Sachs employees to go into public service after they leave the firm. The flow of Goldman alumni--including Jon Corzine, now the governor of New Jersey, along with Rubin and Paulson--not only placed people with Wall Street's worldview in the halls of power; it also helped create an image of Goldman (inside the Beltway, at least) as an institution that was itself almost a form of public service..."

It is called the Goldman Sachs Conspiracy.

In the years I joked about it on air, I didn't focus on the simplicity of the Goldman Sachs theory. Why so many of the names in all the administrations had connections with one particular gang of rich men and women? The answer was blunt from wise and witty fellows like Charlie Gasparino, CNBC, and Jim McTague, Barron's. Wall Street chose one particular gang to work like fools stabbing at each other and their rivals in investment banking and then to volunteer, at a severe cut in pay, to serve in federal government as a friend of the banks. It made GS guys look like saps and boy scouts. It also made the White House a phone bank for the big bankers. Did it work as planned? Better than planned. The executive and then the legislative branches were ready to cooperate not only for campaign cash but also to provide recruits for new banking jobs. It became credible to go from doing deals with China for profit to doing deals with China for the US. Same fellow. Same customer. Same pay-off. I didn't say this. Smart people such as Simon Johnson said it to me, and now Simon Johnson writes it. He calls

it a "Silent Coup." The rude word is putsch. No one can ever be comfortable to hear that Tim Geithner, Hank Paulson, and L. Blankfein were in conversation that two days in September 2008 that the US government chose to bailout AIG. What did they discuss? The good of the country? After that fairy tale? How about the money GS wanted out of its counterparty deals with AIG? Did that money come up? Not a quiet coup. Noisy. I can hear them laughing. At us.

John Galt Rising

By John Batchelor on March 25, 2009 11:33 PM | 21 Comments

Daniel Hannan's Fresh Remarks.

From out of the least likely place, the European Parliament, meeting in plenary session in Strasbourg on March 24, comes a young voice that speaks defiantly to the grand spending schemes of Gordon Brown and the Labor Government. It is a sturdy, polished, theatrical voice, like a movie performance. It is also a voice that sounds as if it was trained in the School of John Galt himself. A trusted correspondent writes me, upon hearing the video clip, "Wow. A fountain in the Sahara." The hard stone center of the less than four minute clip is the blast at taxes and spending and debt:

"...you cannot carry on forever squeezing the productive bit of the economy in order to fund an unprecedented engorgement of the unproductive bit..."

"...You cannot spend your way out of recession or borrow your way out of debt."

It is easy to rearrange this rhetoric and direct it at the Obama administration. Daniel Hannan could have been speaking for not only the House Republicans who voted "No" twice to the TARP and voted "No" twice to the stimulus plan, but also for Germany's Angela Merkel and much of the EU outside of Britain. The G20 is looking to be a garden party of missed opportunities. The Germans says no more spending on stimulus. The American and British governments ask for much more

stimulus spending. Deadlock. The G20 may fail in the simplest of things: Mr. Obama and Mr. Brown cannot answer Daniel Hannan on YouTube. Nail, shoe, horse, government, fall. I mention the detail that since I wrote above in De-Brief in praise of Mr. Hannan, the views of the clip have climbed from 316,000 to 520,000. I have clearly missed the mark of how big this number will be by the G20 meeting. Blockbuster. Gordon Brown was with the Wall Street Journal's managing editor Robert Thompson this morning, answering questions from the breakfast gathering in Washington. The only question the Prime Misister must answer is Mr. Hannan himself: "You know and we know and you know we know..." "...you are the devalued prime minister of a devalued government." Bravo.

Tim Geithner the Anti-Hannan.

All by himself, the Anti-Hannan, Tim Geithner, confused the markets, the dollar, the Chinese and the media by speaking loosely and ignorantly today about the future of the dollar. As the Anti-Hannan, Mr. Geithner is unpredictably toungue-tied and inarticulate. How does Mr. Geithner praise the Chinese utopian cartoon idea of a new world currency in one sentence, and then, when he is informed he has crashed the dollar in world trading, speak in praise of the dollar as the world reserve currency forever and ever in another sentence? Does he praise routinely? Is he conflict adverse like his boss? My trusted market watcher emailed me at the end of the day to say that, "He has got to go...has this guy just landed or what?" This was the collective opinion of the traders. The laughter drowns out the howling. Time to turn away from the frivolous the Ant-Hannan, Tim Geithner, and back to the astonishing talent of the real thing, a John Galt grandchild for the 21st century, Mr. Hannan. The high hope is that this Hannan phenomenon will loose a flood of John Galt's grandchildren, rising to their feet to say "No" to taxes, spending and debt.

Are They Paying Attention?

By John Batchelor on March 24, 2009 8:25 PM | 20 Comments

Who Is Watching President Obama's Prime Time Press Performance?

The puzzle that does not have an easy answer is, Why is the POTUS on TV tonight? Anything unusual happen today or this weekend? No. New crisis? No. The opening statement and the question and answer with a pat list of correspondents just worked over established spin and rhetoric from weeks of the same. Healthcare, energy, education, crisis, banks, tough times. Then the ritual "signs of progress." FDR saw signs of progress every month from March 1933 until Germany attacked Poland and the draft gave work to the unemployed. The single explanation for the prime time performance was buried in a throw away dependent clause during the first response to a pat question. "...and to make sure the American people are paying attention..." said the POTUS. Here is a motive. There may be polls showing that the American audience has turned away from the elaborate detail and foggy arcana of the stimulus package, the budget plan, the housing and small business and bank plans. In sum, the answer to who is watching may be that no one is watching anymore -- or so the White House has reason to fret.

Ratings Rule.

In show business, there is only one number, and the number is the story. I am guessing now that this was the worst rated appearance by POTUS since his election. You cannot assume the audience will tune in. You must build up expectations. What were the expectations of tonight's appearance? Mystery. What did the POTUS hope to achieve in tonight's restatement of his own remarks for the last two months? Mystery. The overwhelming, numbing, sleep-inducing details of the financial crisis mean that in order to get through a TV appearance talking about global collapse, you must have a story line. Mom and Dad and children and happy ever after. Or, Good guy, bad guy, heroic struggle, victory. What was the story line tonight? "Signs of progress?" That is not a story line. That is spin for a partners meeting at a law firm.

What Is Worrying at the White House?

The POTUS looked blue and somber tonight. About what? I don't have the answer. There are possibilities. There is the usual contradictory polling. Nothing new there. The Congress is acting irresolute and stubborn about the budget plan. Business as usual. The firestorm of the AIG bonuses has swept through the town and is not coming back soon, not unless and until the Senate takes up the legislation. (This momentarily relieves the pressure on Rahm Emanuel and David Axelrod as to who killed Snowe-Wyden? See the London Spectator) So the only other threat is that Tim Geithner does not measure up for the banks, the Street, the markets, the G20. This is not fresh threat. President Obama has many months to solve the Geithner problem. The choice moment of the day was when Tim Geithner told the Congressional hearing today (right, wardrobe problem of suspiciously twinned ties by the Fed boss and the Treasury boss, identified by the Wall Street Journal) that he did not have a back-up plan for his just revealed TARP 2.1 plan. This created the perfect conditions for a flood of wit at Calculated Risk. My favorite is that H. Cortez didn't have a back-up plan either. Instead, he burned his ships so that his men couldn't flee from the mad treasure hunt against the Aztecs. The Geithner/Cortez Plan: El Dorado or Bust!

Share Our Wealth

By John Batchelor on March 23, 2009 3:04 PM | 5 Comments

Huey Long and Barack Obama Big, Smart, Successful Politics.

At his assassination in 1935, Senator Huey Long of Louisiana was easily the most entertaining and media savvy politician in America as well as a man on the rise to the presidency. Franklin Roosevelt feared him as a rival. The Senate despised and envied him as a colleague. The state of Louisiana and a deal of the Democratic South admired and endorsed him and his spontaneous policies. And the radio audience could not turn away from his wild, lucid voice. Seventy-five years ago right now, February 1934, Huey Long proposed on air his brightest and most potent idea, the "Share Our Wealth Society," a utopian club that was immediately as popular to the nation as it was threatening the the Washington leadership. Huey Long always boasted that he could "out promise" FDR. With "Share Our Wealth," Huey Long overwhelmed FDR's struggling New Deal and dazzled the political class. Huey Long aimed to use the cult that sprang up around the society, five million or more members by 1936, to launch his own presidential bid in 1940. Huey Long's sudden death ended the boom but not the notions. What is most entertaining today is to read over the "Share Our Wealth" promises and consider how closely they resemble the Obama administration's to-do list. Huey-Long-following is smart politics. Why? It works.

Share Our Wealth 1934/2009.

1. 1934: No person allowed a net worth more than $5 million. Annual taxes would be used to enforce this mandate on all persons with a net worth over $1 million. 2009: What is the difference between this and the House bill that confiscates the earnings of all persons at private companies that are judged to have received government bail-out cash? Jim Taranto in OpinionJournal.com writes that the 90% levy by the House on AIG and other bonus villains will actually translate, after state and city taxes in, for example, New York, into a 102% tax. Jim McTague of Barron's asks the question, when is what Congress calls a tax -- not a tax? A few voices are now suggesting that the AIG bill is unconstitutional. Meanwhile, the pursuit of the AIG bonuses is excellent politics: New York AG Andrew Cuomo announced late Monday 23 that 15 of the top 20 bonus villains at AIG will return their swag. The other five will provide Mr. Cuomo another week's news in his careful and skillful journey toward the governor's chair at Albany and the president's chair at Washington. Huey Long is a guide for all who read closely.

2. 1934: Every family is guaranteed a fixed annual income. Yearly income of any family is to be capped at 100 to 300 times the average family income. 2009: The Obama administration proposes new and as yet undefined taxes on any family or small business exceeding $250,000 in annual income. This is the first step in the Obama plan to pay for the other Obama plans. This is in addition to the AIG-inspired anti-bonus bill against those who work at firms that take bail-out money. (Trusted correspondent writes me that the Obama administration's ambition to cut the taxes of 95% of the people means that many (who dod not pay federal or state taxes, just sales taxes) will be getting what they never put in, in other words, direct federal subsidies. Is this not Huey Long's genius? Every man a king, and here's a check for your vote, sire.)

3. 1934: An old-age pension for those over 60. 2009: FDR's social security program was the crowning success of the New Deal, in part because it was a political answer to Huey Long's Share Our Wealth. Today, Social Security is broke in n number years (depending upon the spin), and the fuse is lit for a panic. The Obama administration proposes stepping toward federal takeover of healthcare as an answer in part to Social Security's doom.

4. 1934: The federal government will buy up and store excess farm production. 2009: The federal government pays farmers not to produce; however the Obama administration proposes to pay certain so-called wealthy farmers less, as part of the capping of incomes proposals.

5. 1934: Veterans are paid what they are owed. 2009: Veterans may be required to share their healthcare costs with the government, however this general policy seems untouched and consistent with Huey Long -- certainly much different from what FDR mandated in cuts in his first months in office.

6. 1934: Education and training for all children to be "equal in opportunity" for all schools through professional schools. 2009: The Obama administration is aggressive on education, with emphasis on empowering the teachers and their unions.

7. 1934: Federal revenue to be raised for all programs from the fortunes of the wealthy. 2009: The wealthy are, according to the Obama administration, to be obliged to pay their fair share. Details to come; details to be adjusted. The Obama administration's definition of "wealthy" is not yet clarified.

The Bear Market Bear Relief Rally.

Tim Geithner's presentation this morning, however tardy and incomplete, was greeted by a vigorous rally on Wall Street, especially in the ruined financial group. Any good day is a good day for Tim Geithner, President Obama and Ben Bernanke. Calculated Risk provides the steady hand here on what to make of a rally in a bear market of famous dimensions so far (see below). The best way to read this is that we are now rallied back to the bottom of the sell-offs in the 1973-1974 OPEC crisis and in the 2000-2001 technology crash. We must retest the lows of early March 2009. If the March lows hold, then there are several years ahead (a decade?) to rebuild the confidence in the markets. The challenge now and going forward is that the average investor no longer believes in the market. The volume is not robust. Selling any stock or fund or asset will remain the best investment idea for many quarters. In the best of all worlds, we can retest and hold the lows in October 2009, and then try for a rally again in 2010. What will darken this prospect? The ghost of the "Share Our Wealth" in 2009. Caveat: My reading of the life and times of Huey Long is that the man was gifted, inspired, ruthless, strategic and lucky. But for fate, Huey Long may very well have been elected the president of the United States in 1940. He would have assumed office in January 1941, in time to face off with the Devils, and to transform history into "Share Our Wealth." The Obama administration is well-informed to pursue Huey Long's policies and promises and to stay with the pursuit no matter the noise of the opposition. If not, don't look back, because Andrew Cuomo will be gaining on you.

Who Killed Snowe-Wyden?

By John Batchelor on March 22, 2009 5:33 PM | 17 Comments

Random Pieces of the Puzzle So Far.

1. The search for who killed Snowe-Wyden must start the evening of Tuesday February 10 in a windy, cold Washington, just after the Senate voted 61-37 in favor of a vast $838 billion stimulus bill. Three Republicans joined with 58 Democrats to move the legislation: Arlen Specter of Pennsylvania, Susan Collins of Maine, and Olympia Snowe of Maine

2. We are told that White House officials traveled to Capitol Hill to meet with the Democratic leaders in order to agree upon a final version for the bill for vote as soon as the next day.

3. We are told, "After huddling in Ms. Pelosi's office on Tuesday until nearly midnight, top White House officials and Congressional leaders had all but ironed out the differences between the House and Senate versions of the stimulus by noon on Wednesday."

4. On Wednesday 11 February, the ten Congressional conferees gathered in "a packed Lyndon B. Johnson Room on the Senate side of the Capitol." The senior Republican conferee, Chuck Grassley of Iowa, said later that he never got a chance to negotiate anything.

5. On Friday 13 February, Senator Snowe says she learned that the Snowe-Wyden amendement was out of the final version as it was approved by the House and Senate and sent to the White House to be signed into law.

6. In the place of the Snowe-Wyden was the Dodd Amendment that grandfathered bonus contracts prior to February 11, 2008.

7. Who did it? Who are the suspects? Senator Chris Dodd of Connecticut says that he didn't do it, he wasn't even in the Conference: furthermore he says that Treasury officials negotiated with his staff about the Dodd Amendment, which was not connected to the Snow-Wyden. Senator Dodd says that "White House officials," were part of the negotiation.

8. Senator Ron Wyden of Oregon says that he didn't do it. He says that it "didn't happen by osmosis," and that he argued with "key players in the Obama team" but that he was "not able to convince them" to leave the Snow Wyden Amednement in tact and in the final version. Senator Wyden mentions names in the "Obama team." He mentions Larry Summers, Tim Geithner.

9. Senator Olympia Snowe says that she didn't do it. She says that her amendment "inexplicably" disappeared. "It was a little bit confusing -- what was in, what was out. For a while I thought that it was in, then they were going to take parts of it. They went back and forth for quite awhile," she recalled. She also says the she pressed "one person in particular," but wouldn't use a name.

10. What about Treasury officials? Tim Geithner has commented on his knowledge of the bonuses with different dates. He has said he didn't learn until March 10. It is also documented that he was told about it on March 3. Also, there is a report that Treasury officials knew the bonuses were an important issue as early as November 5 in the Bush Administration, when Tim Geithner was still was at he New York Fed. However Geithner is given a free and clear signal from his assistant Gene Sperling, who told a National Review audience on Thursday even March 19 that the polical appointments at Treasury did not remove Snow-Wyden.

11. In sum, the Hill says that it didn't do it. Dodd, Wyden, Snowe say they didn't do it. Geithner, Sperling say they didn't do it. Sometime between Tuesday evening February 10 and Friday afternoon February 13 and the final vote, the Snowe-Wyden was yanked out and the Dodd was substituted.

New Clues

Theleftcoaster.com:

Folks, Geithner, Bernanke, and the Bush Treasury Department knew about the AIG bonuses for months. According to AIG, the payments were OK'd by the White House last Thursday. Why? Because it appears that David Axelrod and Rahm Emanuel grossly underestimated how infuriating this would be. We weren't authorized until Thursday night," the AIG executive said. "We were negotiating with the Treasury and the Federal Reserve. Treasury indicated that they needed it cleared by the White House, as well. We hit the go button for the payments on Friday."

The Plum Line:

Yesterday I noted that Rahm Emanuel had said that Obama saw the AIG fiasco as a "big distraction" from efforts to fix the economy. Later in the day, Obama walked that back, asserting that the public was right to be "angry" about the whole mess and right to find it "consuming." Today, another senior Obama adviser, David Axelrod, is throwing in his lot with Rahm and the AIG-isn't-a-huge-deal camp: "People are not sitting around their kitchen tables thinking about AIG," Axelrod said. "They are thinking about their own jobs."

White House chief of staff: Geithner's job safe

By JENNIFER LOVEN - 3 days ago

WASHINGTON (AP) -- President Barack Obama's chief of staff says Treasury Secretary Timothy Geithner's job is not in danger over AIG bonuses.

White House chief of staff Rahm Emanuel categorically dismissed to The Associated Press any suggestion that Geithner is in trouble.

The millions of dollars in bonuses that insurance giant AIG gave to executives, amid taking billions in federal bailout money, have caused widespread outrage, at the White House, on Capitol Hill and among the public. Questions have arisen about when Geithner knew about the bonuses and whether he did enough to try to head them off.

NYT:

...Yet the next day, President Obama was in front of the microphones insisting that the Treasury would "pursue every single legal avenue to block these bonuses."

Matthew Continetti of Weekly Standard gave his take on the flip-flop:

Why did Obama shift so quickly? Here are two reasons. One, the administration may finally be learning that, while it can still blame the economy on Bush (for now), it does own the bailouts. And any populist furor over the bailouts won't just be directed backward at Bush. It will also be projected forward onto Obama and Geithner.

Second, any day now the Obama administration will reveal the details of and begin to implement their bank rescue plan. That plan requires the government to provide leverage for private financial institutions. The private institutions will put up some money, sure. But, to get them to do that, the government will have to put up A LOT of money. Another trillion, perhaps. And that means public support is absolutely necessary. Public support that may slip away if the AIG problem isn't resolved soon.

Well, we'll see about the rest, but he was certainly right about the trillion.

As for my assumption that nobody could find the A.I.G. situation unimportant, there were a couple of exceptions. First, White House Chief of Staff Rahm Emanuel told The Times that the bonus kerfuffle "is a big distraction" in efforts to fix the economy. Then David Axelrod, the strategic genius of the Obama campaign, told the Washington Post that "People are not sitting around their kitchen tables thinking about AIG, ... they are thinking about their own jobs," which not only didn't tie in very well with the president's "every single legal avenue" approach but seemed oblivious to polls like this one.

This left the Plum Line's Greg Sargent shaking his head: "Again, this just seems weird politically," he wrote of attempts to pretend that folks aren't outraged about the issue "at a time when Republicans are moving aggressively to paint Obama as too passive on the issue and position themselves as the outraged and heroic defenders of the taxpayers?"  "It's not 'weird' -- it's panic," responds Commentary's Jennifer Rubin:

The entire crew is drowning in a public feeding frenzy of their own making. So they are throwing out whatever argument pops to mind. The contracts can't be changed! Oh, we're going to do everything we can to stop this! Oh, who cares!?

And then the president gets into the act, comparing AIG execs to suicide bombers. Is that really the right metaphor for the leader of the Free World?

You sense even their widely admired political skills are buckling under the weight of events and the scrutiny that goes with occupying the White House. It's a good thing they don't like big government or spending money, or we'd really have to worry about them getting in over their heads.

The always-interesting Daniel Drezner has come up with an analogy that either exonerates Emanuel and Axelrod or simply shares their tone-deafness:

AIG bonuses are to the left side of the political spectrum as congressional earmarks are to the right side of the spectrum.

Why? Well, these two things have a surprising amount in common.

* Neither of them poll terribly well; * Both of them reflect waste, inattention, and borderline corruption in handling the government's money; * Both issues force the other party to say something to indicate that they don't support these things; * Earmarks represent a very small percentage of the omnibus spending bill; bonuses represent a very small percentage of the AIG bailout; * So, given the current economic situation, both of them are huge honking distractions and do not matter a whole hell of a lot.

Good arguments, and Drezner, and academic, is free to live by them -- but do we really think Axelrod and Emanuel (and, by extension, the president) have the same sort of latitude.

AIG Kulaks

By John Batchelor on March 21, 2009 1:50 AM | 12 Comments

The Stalinists in Washington.

It is surprising, even creepy, that American citizens are being made into pariahs like the infamous and completely destroyed kulaks of the Stalinist state, and the media and the pols go along with it. From the Wall Street Journal story by Liam Pleven:

Management at American International Group Inc.'s financial products unit has asked employees to let the unit know by 5 p.m. on Monday if they plan to return all or part of the controversial bonuses they received under a retention program, according to a person familiar with the matter....

...A number of employees at the unit have already given up significant income, according to AIG. In a letter to Treasury Secretary Timothy Geithner dated March 14, AIG's government-installed CEO, Edward Liddy, said the "25-highest-paid active contract employees at AIG Financial Products have agreed to reduce their remaining 2009 salary to $1. Salaries for this group range up to $500,000, and the average salary is in excess of $270,000."

What is the crime that leads to this extralegal fine and public abuse? Why must they face a deadline to give it up or get out of town? They work at AIG. They are American kulaks. This is how the Stalinist gangsters invented the kulaks in order to destroy resistance to tyranny in the countryside and force collectivization on defiant and starving people. Invent the kulaks, name the kulaks, brand and persecute and destroy the kulaks, and present yourself as the leader who protected the state from the people's enemies, the kulaks.

....Rank-and-file employees know they're in the process of winding down the financial products unit -- in essence, working themselves out of a job. How long that will take could vary depending on the book of business the employee is responsible for. The unit had a number of different lines of business, many of them distinct from the credit default swaps that helped spur the government bailout. If employees leave the unit soon, they'll be entering a difficult job market. Some may view the retention payments they've already received as hedges against an uncertain future.

The Wrong Path

It is important to say that the AIG employees did not ask to be made servants of the state who must surrender their property at the state's demand. The Fed and Treasury made the decision to take over AIG on September 15-16 2008. It was a poor decision. I opposed it then, and I oppose it still; and I am comfortable saying that the vast majority of American people opposed it then and oppose it now. This did not give the Fed and Treasury the power of theft of private property. If an AIG employee in any unit, including the boneheaded financial unit that is at the heart of the story, had left AIG on September 15, 2008, he or she would be entitled to every dollar of 2008 salary and bonus earned. Do we now watch as the Congress appropriates the property of ex-employees, or of all employees? The Fed and Treasury of both the Bush administration and Obama administration have taken a wrong path. I am not following that path. I am turning back on the trail. Back to September 14 when Lehman died, to September 15 when the market crashed and AIG squealed for its CDOs, to the night of September 15 and into September 16 when Ben Bernanke, Hank Paulson, Tim Geithner caved into the fear-mongering by the bankers. Who fear-mongered? Suspects include investment bankers such as L. Blankfein of GS and other super bankers at Chase, at Citi, including not a few European super bankers, all of whom made certain they got their counterparty swag out of the AIG bail-out cash from the Fed. That is when AIG went from bad news to black hole. That is where the fault lies. These bankers are not kulaks, or even members of a Politburo. These bankers are weak actors, who acted out of fear or haste or self-dealing, and who must answer now for their errors along with their enablers, Paulson, Bernanke and Geithner.

San Francisco Gloom

By John Batchelor on March 20, 2009 9:37 PM | 14 Comments

My Week At Hoover Institution Studying the Bottoming.

A day trip into San Francisco to chat with the media masters at KSFO and KGO also allowed me to observe all the "For Lease" signage on the funky warehouse-lined Townshend Avenue, that runs alongside the Caltrain tracks, where there used to be Web 2.0 palaces. Gone with the wind. Then there were all the empty storefronts from King Street walking up to Market Street as the gathering gloom of the worldwide trade collapse settles on San Francisco like wet fog. There were not many in the shops (just one customer was unusual), no one lingering at the cafes, a glumness to the well-dressed on the BART. The most telling detail in my quick observations walking around both Palo Alto's California Street (high-end residential properties) and San Francisco's Market Street (high-end commercial properties) is that the storefronts most likely to be empty were the real estate brokers. The thrill is gone. The bottom in housing starts may be closer. The bottom in real estate prices may be years away. But the top of the market that I saw in my Hoover trip in February 2007 will not return in my lifetime.

The Brightest Cool Toy.

Ignoring the 1933 Part 2 around me, I did find the brightest cool toy in all of the dreary Bay Area right now, the Flip Mino HD camera. Breaking news this cycle that Cisco Systems of the Bay Area has purchased Flip (company name, Pure Digital) for $590 million in stock tells me that Flip is not going to get much better but it is going to get much better known. This is the toy for the global depression. It is cheap for a digital gift, and it is very easy to use with the Macbook and other Apple toys. The video quality on the Mino HD is stunning and makes anyone a documentarian or a news hound. It is the perfect gift for yourself, as the children will quickly take it from you and assume the burden of where it is. I wish I had the Flip Mino HD for my walk past the empty realtor storefronts. Like Moscow after Bonaparte fled, waiting for the fires. (The Flip Mino HD does fire superbly.) Below, a witty introduction by Kara Swisher of the Wall Street Journal to the Flip toy family. I humbly disagree with the clever and quick Kara Swisher. The Mino HD puts the other Flips out of work.

Confiscation With Representation

By John Batchelor on March 19, 2009 2:25 PM | 18 Comments

The People's House is a Frivolous Mob.

The meaningless news from the House of Representatives is that Speaker Nancy Pelosi's vast Democratic majority, in a screeching hysteria about the AIG bonuses, has passed a bill that engineers confiscatory taxes upon the contractual performance and retention bonuses at AIG and other sad-sack bailed out bankrupts. The confiscation rate du jour is 90%. Charlie Rangel, Democrat of New York, who has intimate knowledge of the IRS skill set, spoke as the all-powerful Cardinal of the Ways and Means Committee, "....The American people demand protection." The vote was 328 to 93. Text of the Bill John Boehner, Republican leader of Ohio, who voted against the bill, spoke dryly by using the word "circus." The bill is frivolous and worthless. Mr. Rangel's trite remark that "we figured the local and state governments would take care of the other ten percent" demonstrates that the Democrats do not expect this bill to be law. All the bill has going for it is the clowns and jugglers who can shout in its favor on local TV to their home districts. Over in the dull circus of the U.S. Senate, there is a dull bill in Kent Conrad's Finance Committee that will tax the AIG executives and their kindred in the other bankrupts at 35%. This is also a rubbish bill and will come to the rubbish heap. However it is revealing of the respect for wealth in the wealthy Senate compared to the (Robespierres) in the House. Also, there is a history homily herein. Charlie Rangel and Kent Conrad and their congressional mob have illustrated once again the merit to cranky Tom Paine's observation of the true nature of government, though he was talking about King George at the time and not the unborn USA: "Government, even in its best state, is but a necessary evil; in its worst state, an intolerable one." Note to the Hill: confiscation with representation is as intolerable as taxation without

representation. You gentle and creative characters voted "yea" to the stimulus bill in February 2009 that contained the language that guaranteed those AIG bonuses (language penned by your jocular enabler Chris Dodd, Democrat of Connecticut). Also, last October 2 and 3, you in the Democratic Majority (and not a few self-involved, insufferable Republican geniuses) voted overwhelmingly in favor of the TARP fiasco that also guarantees bonuses to all the zombie firms that have taken bail-out money. Now you panic when the voters find you gentle and creative characters on the Hill, along with your TARP cronies, your stimulus bill serfs, and your AIG scapegoats, to be an unnecessary evil.

Liquidation

My colleague Thaddeus McCotter, Republican of Michigan, sends along a Republican solution to the AIG fiasco (below) that has the merit of being logical and inevitable. Break up AIG. There is plenty of support for this in the strangest place. At AIG. According to a rambling and sad-eyed email with multiple edits from an AIG client, published two days ago on the strangely compelling gossip Grand Central reddit.com, the ordinary folk who work at AIG and its clients all expect the company to be put into bankruptcy in 2 to 3 months:

...Sorry ive been jumping around so much but i too am worried that I also might be out of a job soon enough when AIG does go belly up. And everyone at AIG KNOWS that it WILL file for Bankruptcy in the next 2-3 months after they sell off their subsidiaries. Just last week i had a meeting with a client in the AIG NYC office where people were acting like it was just another normal day. Even though i noticed little things that were different; tvs weren't tuned to CNN of CNBC rather turned to ESPN watching the upcoming NCAA tournament. Employees are told to act like normal, walk around with big smiles and never show any stress of the real world and media. Its just so sad to see so many hard working people who are just like you and me (other than the SVP and higher ups) just sitting around in their cubicals and offices knowing that soon enough they will be desperately looking for another job just to support their families. I feel like im rambling here so ill take a break and surf reddit for a while then come back and post more....

Sure, it could be a send-up. But the brazen folk at Naked Capitalism, who guided me to the email, argue cleverly that it is so bizarrely organized an email -- with a time out for a corned beef supper -- that it certainly appears genuine. I like the detail that the AIG creatures are wondering around wearing Paxel smiles and trying not to glance at the

monitors carrying CNN and MSNBC coverage of the Edward Liddy testimony in the background. This is credible human fear. Elsewhere there is credible mention that folk are burning off their vacation and sick leave quickly to prepare for the lights-out moment. Below, Thaddeus McCotter (and his co-author Peter Latourrette, Democrat of California) is also credible and would hurry along what the AIG folk believe is already happening. Why bother to pass incoherent, impotent bills that claim to take back what you gave them when you can just detonate the building and sell the furniture and piping? Not bankruptcy reorganization Chapter 11. Go straight to bankruptcy liquidation Chapter 7, the Lehman cure for anxiety. Liquidation is the thing this year. (Then again, that's what Tom Paine told His Majesty's Colonial Government, 1776.)

FOR IMMEDIATE RELEASE
March 19, 2009

CONTACT: Jameson Cunningham
Office: 202-225-8171
Cell: 202-288-2147

McCotter: I'm Not Voting to Let Them Keep a Dime of those Bonuses or Another Dime of Bailout Money. Break Up AIG - Now!

Washington, D.C. - Representative Thaddeus McCotter (R-MI), Chairman of Republican House Policy Committee and the only Republican member from Michigan on Financial Services Committee, today released the following statement on the AIG bonus debacle:

"I'm not voting to let them keep a dime of those bonuses or another dime of bailout money. Break up AIG - now!"

"The American people are outraged; outraged at AIG using taxpayer money to reward the very people who caused this debacle, and outraged at those who voted to protect and approve these bonus checks when they voted for the so-called 'stimulus' bill.

"Facts are hard things to disprove. Every single Democrat in the House that voted for that bill voted to approve and protect those AIG bonuses. Every single Democrat in the Senate that voted for that stimulus bill, along with three Republican senators, voted to approve and protect those AIG bonuses. The President of the United States signed into law the protection and the approval of those AIG bonuses that they find so repugnant, now that the American people know what was done.

"If you are shocked, be shocked at the own members of your party or Administration that put the amendment protecting bonuses in, and be shocked that they will now pass a Bill of Attainder that is unconstitutional to try to cover their tracks.

"The American people want answers. This outrage could have been avoided if an amendment banning executive bonuses was not stripped from the stimulus bill by the majority party. This outrage could have been avoided if Senator Dodd's amendment protecting and approving these bonuses was stripped from the stimulus bill. Not only were there no actions taken to prevent this egregious offense against the American people but this offense was approved by those who voted for the bloated government spending bill.

"Americans deserve 100% of their money back and an unconstitutional bill that uses the tax code as a penal code is a gross diversion from the Democrats in Congress and the Administration who made these bonus payments possible."

Representative McCotter, along with Rep. LaTourette, sponsored a resolution of inquiry which would force Treasury Secretary Geithner to provide all documents, records and communications regarding American International Group (AIG) within 14 days of the bill's adoption.

Specifically, it demands the following information: (1) negotiation(s) concerning the controlled break-up of AIG into at least three government-controlled divisions; (2) negotiation(s) concerning the need for an additional $30 billion from the Troubled Asset Relief Program (TARP) funds [PL 110-343, Section 2]; (3) government communications and authorizations for payment of pre-existing bonus contracts with AIG executives.

###

Chris Dodd At the End of His Tether

By John Batchelor on March 18, 2009 10:27 PM | 5 Comments

Bonus Baby Douglas Poling Cowers and Begs.

The breaking news that the powerful Banking Chairman Senator Chris Dodd was the man who adjusted the legislation that permitted the AIG executives to take their bonuses is now overwhelmed by the breaking news that Chris Dodd was a recipient of campaign money from many of the biggest AIG executives who got the biggest bonus money. The number one bonus baby at AIG, Fairfield Connecticut citizen Douglas Poling, 48, now cowers and begs to be permitted to give back his $6.4 million swag. Poling begs us to take it back. Odd behavior for a homo sapiens sapiens isn't it? Why would a regular kind of walking around 21st century rich person from Fairfield County throw $6.4 million back over the garden wall? Too rich already? Stupid? Generous? Frightened? Of what? A quick search shows that the comfortably bizarre Mr. Poling gave a mere $4600 to Democrat Larson and Democrat Dodd in the 2008 cycle (see below). Suddenly, the suggestion of a motive. It gets much worse for Senator Dodd. In his 2008 presidential campaign, Mr. Dodd received $103,000 from AIG executives, most of it from a dozen AIG executives whose bonuses are protected under the legislation that Dodd now admits he wrote. Dodd is shouting that he will give the money back. It is way too late for throwing money back over the garden wall. Do you think the public outrage on TV is faked? One day, there was gloom and confusion. The next day, there was a mob and a scapegoat. This is melodrama we all understand. Douglas Poling is only the first name below, and none of these men have talked yet, nor have they been stalked, mocked, forced to hire armed guards because of bomb and arson threats, fled the country for exile. AIG executive "Bonus Villain" Jonathan Liebergall is also said to be another of Dodd's contributors. Expect several lush estates in Fairfield County to be on the market pronto. According to the Connecticut Post, the list of the about to be harassed by TV includes:

Douglas Poling, of Fairfield; Christopher Phole, of New Canaan; Steven Pike, of Stamford; Robert Powell, of Westport; Joseph Rooney, of Fairfield; Gregory Ruffa, of Darien; Christian Toft, of Weston; Steven Wagar, of Norwalk; Jonathan Liebergall, of New Canaan; Leonid Shekhtman, of Redding; and James Haas, of Fairfield. Three of these executives, Poling, Haas and Liebergall, were outed as possible recipients of bonuses on Wednesday.

The Torricelli Moment.

The time has arrived for the Democratic Party to let Chris Dodd face the camera and say, "This is the end." The Clinton fund-raising scandal with the Chinese, shrug, the Countrywide influence-peddling scandal with Friends of Angelo Mozila, wink. But AIG execs renting a friend in high places who crosses the "T" for "Tough" in his own Federal legislation that guarantees them their cash -- that is one sought favor too far. Chris Dodd stood by while President Obama signed this clever prank into law. Tough, tough. Hard guy, Chris Dodd. Major leaguer: missed your calling: Tammany Tough. In New Jersey, this is called the Torricelli Moment, named for a banal and creative politician, Bob Torricelli, who was so twisted up in scandals of influence peddling during his 2002 senatorial campaign that he decided, for the good of the party, to take himself out of the race. He was replaced by the inert and retired Frank Lautenberg, who won the race easily. Because he knew when to fold, Bob Torricelli was permitted to go back to his useful life as fixer and all was forgiven. This may be Chris Dodd's fate, if he is lucky and hurries off the stage well before his 2010 re-election contest. The one time rep for dating Bianca Jagger and Carrie Fischer no longer work as a buffer. Like father, like son is the unspoken curse of the moment. You will recall that Senator Dodd's father, Thomas J. Dodd, (above) two-term senator from Connecticut, was disgraced by a campaign fund scandal in 1967 and chose, after a health collapse, to retire from the Senate rather than run again in 1970. Now Chris Dodd is preparing himself to walk the same walk as his father, into retirement, despair, blame-shifting and, after a decent interval of about three months, into lobbying for the rich men he serves so well. Unless Chris Dodd chooses another way, known as martyrdom for principle. Can we be so lucky?

Poling, Douglas L.

FAIRFIELD, CT

06824

AIG Financial/Attorney

$500

08/18/2008

LARSON FOR CONGRESS - Democrat

Poling, Douglas L.

FAIRFIELD, CT

06824

AIG Financial/Attorney

$2,000

04/27/2007

LARSON FOR CONGRESS - Democrat

Poling, Douglas

FAIRFIELD, CT

06824

AIG Financial

$2,100

11/21/2006

CHRIS DODD FOR PRESIDENT INC - Democrat

Geithner Hires Citigroup

By John Batchelor on March 17, 2009 10:09 PM | 10 Comments

The Weakest Link Finds a Weaker Link.

The torchlit mob surrounding the AIG castle now so dominates the TV that Treasury can take advantage of its momentary placidity to hire the chief economist of Citigroup "to work on domestic financial issues." Blink, blink. I repeat that the chief economist of the wrecked and disdained Citigroup, a scholarly and ebullient economist named Lewis Alexander, has been hired by Tim Geithner, the Secretary of the Treasury, who cannot find deputies or assistants to fill the empty offices and abandoned building around him. And what did Lewis Alexander do to earn this trusted post during a national crisis caused by the housing bubble and its predatory exploiters? Chiefly, he took substantial money from Citigroup in exchange for his cool tones about the "sanguine" and stable state of the housing market in the US. Wall Street Journal reporter David Enrich (who will join me Sunday 22) finds a peculiarly wrong-headed quote from a February 28, 2007 interview on PBS with Susie Gharib -- when she asked Mr. Alexander if the recovery was now in question after a rocky day on the street, "... I think we're going to have a normal kind of housing cycle that's going to last through the middle of this year." Later in 2007, Alexander was seemingly vindicated, when the stock market went to all time highs, in the summer and then again in October. (We know now this was a blow-off.) In closer examination of the Susie Ghraib interview with Alexander, we can find a chilling arrogance. Susie Ghraib asked about "the new buzz word," "sub-prime mortgages," and Mr. Alexander replied,

"...There`s no question that we`ve had a lot of innovation in the mortgage financing system and credit standards eased a lot, particularly towards the end of the cycle, and we`re seeing the payback for that now. You`re seeing higher rates of delinquencies on these sub-prime mortgages and that is going to be a challenge for some mortgage issuers. But there`s an awful lot of credit out there. Interest rates are still very low. Mortgage credit is still quite available and, therefore, that`s going to limit the magnitude of the spillover on the rest of the economy."

Was this an isolated instance of Lewis Alexander's rosiness about housing? Apparently not. Looking at the record two months earlier, December 2006, in an interview with Forbes.com, Mr. Alexander was cocky to the point of flippancy about the housing market and its flush and extravagant Baby Boomers:

For the United States, the risks to this bland outlook are greater on the growth than on the inflation side. But even here, Alexander is sanguine.

The downturn in the housing sector may not be as bad as some doomsayers are predicting. After all, the rate of household formation, the most basic driver of housing demand, is on an upswing. And another demographic factor, the aging of the Baby Boomers, will help to prop up demand: Purchases of second homes by this crowd has been a major driver of the housing boom and may not abate sharply.

Meanwhile, supply should remain fairly tight, Alexander argued, thanks to laws barring housing construction on huge tracts surrounding many hot markets, like Silicon Valley and Boulder, Colorado.

During what we know now to have been a staggering housing bubble, now into the history books with tulips and the flappers, Lewis Alexander sniffed and declared that the second homes purchases of the aging Baby Boom would help stabilize housing demand and prices. The same Baby Boom that is now wrecked, its wealth reduced by 40%, its prospects bleak as it must compete for retirement resources with the federal debt costs. The chart (at right) shows how, from the moment Lewis Alexander spoke, the months of supply of new homes climbed like a ballistic missile. New housing stock is now higher than during any recession in forty-five years. This is the new hire at Treasury. Next, the Bin Laden Group gets contracts building bridges with the new stimulus money. And then, Treasury outsources printing hundred dollar bills to the really good presses in North Korea. And yes, AIG sends money to Hamas.

White House Panics at the Mob Marching on AIG

By John Batchelor on March 16, 2009 12:22 PM | 17 Comments

Breaking AIG News (Sort of) from the WSJ.

"Obama told Geithner to take all legal means to block bonuses awarded to employees of AIG, Reuters reported, citing White House adviser Goolsbee." The full Reuters report, though brief, has more puzzles:

By REUTERS

Published: March 16, 2009

WASHINGTON (Reuters) -- President Obama has told the Treasury secretary Timothy F. Geithner to take all legal measures to block hefty bonuses awarded to employees of AIG, the insurance company that received up to $180 billion in bailout money, a White House adviser said Monday.

"The president told Secretary Geithner ... to take every legal means that he has to push back against this, to figure out who put this in the contracts and when, and to make sure this doesn't happen again," Austan Goolsbee, a member of Obama's Council of Economic Advisers, told Reuters Financial Television.

"Obviously we're not going to break the law, but there are a number of legal means that we have to push back, and the president instructed Secretary Geithner to do so," he said.

The puzzles include: Tim Geithner, as then President of the New York Fed, attended and even hosted the meetings in New York in mid September that decided to bail out AIG. Also at those meetings were the super bankers whose companies were at risk if and when AIG broke apart and could not pay the billions owed on the bad deals. Chief among the super bankers was L. Blankfein, boss of Goldman Sachs. The Treasury Secretary supervising the decision was Hank Paulson, ex-chief of Goldman Sachs. The Chair of the Federal Reserve at the time was the same man who is there now, Ben Bernanke. In sum, the crew that bailed out AIG is still largely in place. These dignitaries lobbied the 110th Congress to go along with the scheme, along with the TARP money that accompanied the scheme. The first puzzle is, when did it occur to them that by keeping the bankrupt and ruined AIG alive with the public treasury that this meant, logically and legally, that all the employee contracts for bonuses would be paid in time? Do any of them now say they didn't know? The second puzzle is, (2) When did the White House realize that the money was going out? Friday evening? Guru Larry Summers was on TV within the weekend declaring the bonuses an "outrage," but did he not chat with Tim Geithner and Ben Bernanke about those bonuses when he joined the White House economic emergency team in January? A third puzzle is, (3) Why now? The big news of the weekend was supposed to be the comity of the G-20 finance minister meeting in Sussex. Instead now the narrative has changed profoundly to protest, indignation, obfuscation, explanation, derogation about the AIG deals. The Obama administration spotted the rebel mob of taxpayers going by outside on its way to burn down the bankrupt and zombie AIG, and so the White House decided to join the mob, sort of, and perhaps lead it if it can be done with measured pomposity. The Obama team has lost control of the story. The president now goes on air to explain to the mob how this came about, how everyone was only doing the right thing to clean up the mess and no one wanted the AIG bankrupts to be rewarded for their failures, but gosh, it is a nation of laws, and gosh, those are contracts. This points to that dependent clause from the president to Tim Geithner, according to Austan Goolsebee: "to take every legal means." This is Washington talk for, There's nothing we intend to do about it but talk about it. The president also goes on to restate the problem as if he was just told: this is smooth Washington behavior. Make yourself important by pontificating on the problem that everyone already knows about: It is raining, so state loudly that getting wet is icky. Or, Frankenstein is a monster, grab a torch and pitchfork (below), let's get him!

"All across the country, there are people who work hard and meet their responsibilities every day, without the benefit of government bailouts or multimillion-dollar bonuses. And all they ask is that everyone, from Main Street to Wall Street to Washington, play by the same rules. This isn't just a matter of dollars and cents," he added. "It's about our fundamental values."

Big Brother Dresses Well.

The AIG weather report continues to deteriorate. The bonuses paid this weekend are the first wave of perhaps $1.2 billion more to be paid to the dead firm's failed and disgraced executives. All the big rascals of the firm have already fled with their pensions and pay-outs and consulting deals. What is left is the little rascals who can and will hire rascal lawyers to make sure the bonuses keep flowing. The national upset about the notion of bailing out failed companies, such as banks and their pals, has found a focus. AIG is face on the poster of the bail-out. It is grinning at us. Looks like Big Brother in a $3,000 suit? Looks like Goldman Sachs and JP Morgan Chase and Deutsche Bank and the rest of the banks who got their money back (and their chiefs who got their bonuses too) and also looks like Congress? Only the well dressed part of Congress, the lobbyists. It does not look like us. We can't afford to dress so well. We have to pay for AIG's wardrobe.

Plain Speaking 1933, Babble 2009

By John Batchelor on March 15, 2009 1:15 AM | 3 Comments

First Reports from the G20 Feature Blame-shifting, Selfishness, Anti-Americanism and Defeat.

The rich nation finance ministers of the G20 met at a verdure resort south of London to prepare for the April 2 meeting of the rich nation chiefs to address the worldwide panic and GDP depression. The first reports present discord, penny-pinching and non-ironic babble.

Brazilian Finance Minister Guido Mantega, attending the talks in southern England, said the IMF (International Monetary Fund) would not get extra money from China, India, Russia or his own country until their voting power at the finance agency rose.

Most significantly, the missionary call by Britain and the United States for the members to commit to a massive, collective, overwhelming global stimulus plan -- Gordon Brown and Alistair Darling like to call it a "Global New Deal" -- has been swatted aside by France and Germany, among others.

"The United States is insisting on the need for a strong, rapid and coordinated stimulus. Why? Because they were the last ones to put in place their plan and they are facing a bigger crisis," French Finance Minister Christine Lagarde (right with Alistair Darling) said.

"For most of the countries in continental Europe, the urgency is to develop the rules, highlight discipline and sanctions through a new architecture of the financial system," she said in an interview in Les Echos newspaper.

Canada put a finer spin on the general rejection of a global stimulus plan by mocking the United States for its broken banks and headless drift on nationalization. Germany piled on with the Canadians:

"Some countries have not fixed their banks, so I want them to fix their banks," Canada's Finance Minister Jim Flaherty said after the meeting.

The point was also emphasized by Germany's finance minister Peer Steinbrueck. Germany, like other European nations, has been under U.S. pressure to boost its fiscal stimulus.

Brazilian finance minister Guido Mantega was much more rude about the American inability to solve its banking problems, to discard the zombie banks of Citigroup and Bank of America: "If they're going to be nationalized then go ahead, if they're going to be liquidated then go ahead. But it must be done quickly." China was usefully non-committal, agreeing with everyone. Host Chancellor of the Exchequer Alistair Darling did the reporters a favor by restating the goals that were not met:

"We must do three things: boost demand, reform the global system of financial regulation, and increase the resources of the International Monetary Fund."

All this adds up to a monopoly of disappointment, and the headline writers are already certain that world markets will not be cheered. The British media is keen to declare Gordon Brown a flop. Everyone agrees that Tim Geithner is obtuse and slow-handed. In sum, the G20 now faces failure just like the London World Economic Conference of 1933. Why? Because great nations do not long remain great if they quit their parochial, poll-driven, national mania for winning elections for some delightfully utopian exercise of world-class utopian union. Do they know there is bad trouble? Yes. Do they know that the remedy is gruesome and necessary? Yes? Will they each chip in cash (borrowed from the future) and work together? No.

Just Like 1933.

The Americans were the problem in June 1933. Back then, Britain and France were looking to the American delegation to compromise and cooperate with regard tariffs, currency and demand. By the eighth day of the London Conference, one member of the American delegation, Republican Senator James Couzens of Michigan, understood exactly what was going wrong and that it could not be fixed. Perhaps he was free to speak plainly because he was the only Republican in the Secretary of State (and ex Tennesse Democratic congressman) Cordell Hull-led delegation, and therefore he was powerless. Couzens said that the 66 nations had not yet suffered enough "to be willing to meet in complete humility." Couzens added that most delegates were "too cocky." He also found an "unfortunate attitude," of those who "feel confident they can paddle their own canoes." Couzens then declared what came to be an epitaph of the meeting. "Between the time of the calling the Conference and the present, the developments in American seem to indicate that internationalism will conflict quite severely with our national economic programme. If my analysis is correct, we cannot carry through both programmes. Sooner or later in the Conference, we shall have to decide which programme we are to follow." The decision in 1933 was that America chose economic nationalism, isolationism, and years of tending its own garden. Will that be the decision in 2009? What do you think? Have the rich nations changed in the last seventy-six years? Is this a smarter, quicker, wiser community of nations? Do you hear any humility?

The Devils

What goes wrong now is not just that no one can agree with the United States, and that the United States cannot seen anyone else's problems for our own. What goes wrong now is that the Devils see the weakness in the powerful and make their moves. In 1933, the squat, stupid, morally damaged, ghoulish Josef Stalin saw that he could crush all resistance to his social engineering delusions by starving to death millions in Ukraine and then by shifting more millions into beggary and death in the wilderness of Central Asia and Siberia. The paranoid gangsters in Japan (the Japanese slaughter any one strong man; in those days they had to move collectively to steal, to murder, to conquer) saw that Britain was either bankrupt or pacifist or defeatist and moved against all of East Asia without fear of the Royal Navy. The lunatic race-mystic Adolf Hitler saw that his truly phenomenal grandiose plan to purify the German race by extermination of the Jews, the weak, the non-Teutonic, would not be checked by joint operations by Britain and France, so Hitler launched his ambition to take over Germany, Central Europe, Continental Europe, and eventually (after his lifetime) the whole world. All three Devils routinely mocked publicly and privately the great nations of Britain, France and the United States. Sadistic Joseph Gobbels gave a secret briefing to German journalists in 1933, saying that, if he had been the French premier, he would have crushed Hitler the moment he grabbed power from Ludendorf at the end of January. That the French did not move amazed and consternated the bloodlessly ironic Joseph Goebbels. The American Congress passing the Neutrality Act in 1935 made the Hitlerites, the Stalinists and the Japanese militarists feel vindicated and boosted. Hitler said much the same thing in a secret briefing in 1938; and in early 1939, Hitler was roaringly derisive of Franklin Roosevelt for seeking peace and disarmament. Yes, the Devils were all mad, and their plans came to ruin; however their predations wiped out human decency for sixty years of the 20th Century and still haunt us with derivative race-social engineering in the Ummah, in Europe, in Africa. Who are the Devils today who will see their chance and move? No need to be creative. Tehran, Damascus, Pyongyang, Caracas. Too weak? Yes. So was Berlin in 1933, so was Moscow in 1935, so was Tokyo in 1938. You can see (below) all three Devils busily opportunistic at the same time Couzens spoke disconsolately and the great nations decided at London to abandon comity and face the future as pious, frivolous, whining weaklings.

JFK the Black Ops

By John Batchelor on March 14, 2009 12:25 AM | 14 Comments

Freshly Declassified CIA Documents.

The week after his January 1961 inauguration, JFK told his National Security Council that he wanted black ops to start immediately in North Vietnam, with the CIA DCI Allen Dulles and his Saigon station chief William Colby as the executive agents. William Colby argued for romantic black teams to set up secure bases in the North. Other CIA agents, veterans of the failed black entry operations in China in the 1950s, protested Colby's scheme and complained about Colby that "he thought it was like Norway." (Colby was a veteran of the OSS Jedburgh program that ran operations in Norway during the Second World War.) The CIA launched a singleton agent in the Spring of 1961, and then its first black airdrop Team CASTOR on 27 May. It was compromised in four days, given away by a radar installation in the flight path of the C-47 delivery aircraft and by a village only a kilometer from the drop zone. Ignorant and only slightly suspicious, the CIA dropped Team ECHO on June 2; it was swiftly compromised. A third Team DIDO was dropped on June 29. Soon all three were detained; however the CIA continued to believe in Colby's genius. Langley reported positively to the White House. Washington did want Colby in Saigon to demonstrate more confidence, and on August 21 cabled,

"Can we state with

as much certainty as [you] indicate that all four

teams [are] free of enemy control?

The Comic Tragedy Continued Another 14 Years.

What is also presented in this new document, "The Way We Do Things: Black Entry Operations into North Vietnam," is that there never was any success with black entry operations in all of Asia. Not in China, 1950 and 1951, not in North Korea, 1952 and 1953. Not in Vietnam 1961 to 1975, under four presidents. There was no record of success with black entry anywhere on Earth other than briefly in Europe during the Second World War, and then because of the close cooperation of the French and others on the ground. The National Security Council and the CIA chose and engineered a policy that was blind, uncontrollable, inert, and stupid. Why? Because the new president asked for it. And because William Colby pushed the case against the resistance of China hands. Colby's reward for his hardheadedness was that Allen Dulles brought him home to Langley in 1962 as the Deputy and then the Chief of the Far East Station. Colby's career path was launched. He became DCI in 1971 for Richard Nixon, and he was present for all the romantic folly in Vietnam, Cambodia, Laos, Argentina, Watergate. In 1975, Colby retired, so that youthful Ambassador George H. W. Bush (right with Colby and President Gerald Ford) could replace him. The 2005 CIA historical report of Colby's beginnings in 1961 observes dryly:

Whatever the considerations that led to its application in North Vietnam, no sign has

been found that they conducted a serious search for an alternative. Indeed, there may

have existed no such alternative, using either human or technical means. There are

things that, in a given place at a given time, are simply impossible.

The Question Today.

Yes, I am wondering out loud what orders the young President Obama has given to his National Security Council within a week of the inauguration. And I am puzzling what pressures the NSC and CIA are already feeling? Find common ground with Tehran? Examine the PLA at Shanghai as an ally in peace-keeping? Share military exercises and operations with the IRGC to avoid conflict? Or the opposite? Launch black operations in DPRK? Infiltrate Khartoum and Mogadishu? Mount joint operations with the KGB? My imagination spins. Who could have argued effectively in March 1961 that JFK had launched a covert war on Hanoi? That was supposed to be LBJ's gamesmanship when he decided to turn up the heat on the war in August 1964 in order to run up his national security vote against Barry Goldwater. Instead, we know now that LBJ just continued the brutish and futile folly. It intrigues me that Mr. Obama is said be be like JFK. Leon Panetta is nothing like Allen Dulles. William Colby? Anything goes.

The Few, The Proud, The Treasury

By John Batchelor on March 13, 2009 1:45 AM | 8 Comments

Lindsay Graham Mocks Tim Geithner.

During the battering at Chairman Kent Conrad's Senate Finance Committee, the urbane senator from South Carolina, no one's notion of a GOP tough guy, remarked to the Treasury Secretary:

"This is not easy and you don't have your team in place. And if you're looking for a way to serve the country, join the Marines or go to Treasury."

The breaking news of the evening is that another President Obama nominee to be Deputy Secretary (No. 2) of the Treasury, the Wall Street mouthpiece and rainmaker Rodgin Cohen of the swank Sullivan, Cromwell, has quit the nomination process and walked away from Geithner's team. This is the second name to quit the nomination process for No. 2 -- last week it was SEC veteran Annette Nazareth -- and the third big name to abandon Treasury on two weeks, along with Caroline Atkinson, who walked away from another top Treasury post. The pattern is that public acclaim it is not worth public strife. Treasury is the War Department of the Obama administration, the front lines in the battle with the worldwide panic. When Lindsey Graham called Treasury the same as the Marines, we all got the point that this struggle will continue for the first term of the President.

Treasury Is Slow and Weak.

The senators probed and toyed with Tim Geithner, and he was not impressive in his own defense. The senators complained that Tim Geithner was unconvincing. They did not say he looked like a rookie pitcher facing the 1927 Yankees. (Nor did any wit suggest that Tim Geithner made the usual fuddy-duddy senators look like the 1927 Yankees.) The senators are just warming up. Kent Conrad doesn't like the way the Obama budget spends healthcare's $600 billions, and he will renovate the bill for his own purposes. Same for the others with regard energy and education. (And Kent Conrad teased Tim Geithner about the markets being up 100 points as he closed his testimony -- a demonstration that the Congress has watched the bear market closely and doubts that the White House is paying mind to the screaming of the investor class.)

Enemy Action.

After seven weeks, the Obama administration has run up against an imperial Congress and yet doesn't have an imperial plan. What the President does have is a sluggish Treasury and a slow-footed Treasury Secretary. It will only get worse, as Tim Geithner and his junior staff now airlift to London for a fiance minister meeting to prepare for the G20 meeting on April 2. Our allies watch cable TV too, and they know that Geithner does not enjoy the respect of the Senate nor the back-slapping confidence of the semiotic-rich and theatrical new president. (Note: below, Mr. Obama grips the hand of acerbic Jamie Dimon of JP Morgan Chase at another business confab in Washington: looking for value in the rot of the banks, why look into the eyes of a banker who denounces the vilifying of bankers?) Rodgin Cohen's withdrawal now completes the old rule. Once is happenstance. Twice is coincidence. The third time is enemy action. Expect the Germans to frown ruefully, the French (who own semiotics) to sniff ruefully, the Russians to stare ruefully, the Japanese to bow ruefully, and the Chinese to smile ruefully. (Note: the Chinese do not forget Tim Geithner's knuckleheaded though accurate remark, during Inauguration week, that China manipulates its currency. Of course it manipulates its currency. Tim Geithner will lose his head just because he said the obvious without being able to do anything about it.)

"...where we are today," said FDIC Professor Sheila Bair

By John Batchelor on March 12, 2009 1:24 AM | 9 Comments

Calculated Risk Points To A Large Problem With Our Bank Accounts.

The Federal Deposit Insurance Corporation (FDIC) treasure chest is empty. And why is it empty? Because the FDIC decided not to collect insurance premiums from its membership of banks from 1996 to 2006. After reading this on Calculated Risk, pointing to the Boston.com story, I put on the Best of Boccherini so that I can enjoy this folly with lush baroque music. These are adults at the FDIC, and the Congress is full of adult appetites. Starting from the second Clinton administration, with Larry Summers (now the sorcerer's apprentice) as Treasury Secretary, Bob Rubin as the genius of Citigroup as Sandy Weil's best idea, and Tim Geithner (now the sorcerer's apprentice's sorcerer) at Larry Summer's side, with the usual suspects in both the Republican and Democratic parties chairing the various banking or finance committees, (Chuck Grassley, Phil Gramm, Paul Sarbanes, Chris Dodd, Chuck Schumer, Barney Frank), no one thought to collect the fees for a rainy day. Times were too good. Who needed to plan for bad times? (You would not believe this unless it had actually happened.) Now FDIC Professor and Chair Sheila Bair needs emergency funds because the bank failures so far, with giants such as IndyMac already gone, and with the threat of Behemoths such as Citigroup and Bank of America possible deaths, have drained the $52 billion in a wink. The quotes about the deeply comic stupidity of Treasury, Congress and the bankers themselves are staggering:

"That is how we find ourselves where we are today," said Bair. "An important lesson going forward is we need to be building up these funds in good times so you can draw down upon them in bad times."

Cornelius Hurley, (director of the Boston University law school's Morin Center for Banking and Financial ) agreed with Bair's analysis of the FDIC's dilemma. "Typically you would build up a reserve during the halcyon days to protect yourselves during a recession," he said, calling the decision to stop collecting most premiums "a political one" that was pushed by banks and not based on strict accounting principles.

How hard can we laugh at this and still find coffee money in the morning? These are the geniuses who claim they have insured our deposits up the $250,000 each. The FDIC is bust. It didn't collect for ten years. The banks that are gone never paid their fees and are now draining the pool. And the same crew that crashed the airplane is now claiming it can take off again even though it is out of fuel, and they forgot to lay in a supply.

Who Is Stupid?

At what point -- and we may already be passed it -- do we give up castigating the Congress and the White Houses (Clinton, Bush) and accept that we get the kind of government we deserve? These men and women are vain, blind, goofy, drunk on status, herd-like, lazy and without common sense. It's raining. The roof is leaking. There is no heat. We are out of food and coffee. Trees grow to heaven. I will live forever. It can't happen here. The FDIC is fiction. The enemy he is us. The enemy he is us. And do not miss the comments on Calculated Risk: everyone is staggering either to the Tylenol or to Tijuana.

World Trade and the Pirates

By John Batchelor on March 11, 2009 1:09 AM | 8 Comments

Catch and Release.

The collapse of Somalia at the Horn of Africa is well documented at least since the Blackhawk Down episode of the first Clinton Administration. Is the phenomenon of piracy off Somalia evidence of deterioration or reorganization? Simon Constable and I spoke with Robert Wright, the Transportation correspondent at the FT, and learned that two Somalia clans have learned to work together, the Hawiye Clan of Central Puntland around Haradere, and the Darod Clan of Puntland. The first documented piracy was 2005. In 2008 there were 111 attacks. Forty-two are recorded as successful, the most notorious the Sirius Star, a large oil tanker that was held for three months until a $3 million ransom was paid, and divided up on the beach. German, Italian, American (below), Indian and Russian naval vessels are now patrolling a huge piece of the ocean. There is no agreement as to what is to be done with the captured pirates, and the estimate is that of 238 pirates captured, just half were prosecuted. The others were catch and release.

Desperation Trade.

My puzzle is how to measure the piracy as a metric of the collapse of world trade. Robert Wright told us that the traffic in the Suez Canal has declined sharply. Much of the decline is because the shipping companies do not want to risk the insurance loss trying the run past Somalia, and so they send their vessels the long way around the Cape of Good Hope. I pushed Robert Wright that the piracy itself was a way of talking about global collapse. Somalia is out of resources and assets. Taking to sea in small, decrepit boats with overflowing crews and inadequate motors is not just desperate, it is madness unless the alternative was abandonment. The pirates are said to attack in packs to overwhelm the patrolling navies. Also, the trade ships know the risk, know they could pay the higher costs and go via Good Hope, and still they risk the run to the Gulf of Aden and the Red Sea. Sirius Star was taken more than 400 kilometers at sea. Nowhere is safe near the continent. The ships still try it. Robert Wright told us that the drop off in pirate attacks the last months is because of weather, not because of the patrols. Also, there is still the catch and release detail. Within the last days, the German Navy has delivered nine pirates to Kenya, but there is little expectation they will be tried and jailed. Kenya does not want the trouble, and there is no Somalian court that makes sense.

KSM Under The Bus

By John Batchelor on March 10, 2009 12:28 PM | 8 Comments

The Obama Administration Cannot Solve KSM.

News arrives that the 9-11 conspiracy clown act at Guantanomo, Khalid Sheik Mohammed and his kindred of Cain, have published another incoherent, taunting, brutish and, fact be known, stupid letter to the usual bored, humorless and copy-and-paste media platforms.

...Many thanks to God, for his kind gesture, and choosing us to perform the act of Jihad for his cause and to defend Islam and Muslims. Therefore, killing you and fighting you, destroying you and terrorizing you, responding back to your attacks, are all considered to be great legitimate duty in our religion. These actions are our offerings to

God...

The Europeans once seemed the most concerned with the fate of a ragged gang of enthusiastic suicides, but a quick look today over the London headlines shows the KSM flap well down in the page. The French are equally puzzled. Since the Obama Administration ordered GITMO closed (eventually) and ordered all the prisoner cases reviewed for possible release or transfer to the US justice system, the Euros have lost focus and the Arab media has moved on to preaching about the evils of Israel. Contrarily this makes KSM an Obama team problem only. What to do with a fellow who is clearly sane, clearly ambitious, clearly a self-confessed mass-murderer?

...We ask to be near to God, we fight you and destroy you and terrorize you. The Jihad in god's cause is a

great duty in our religion. We have news for you, the news is: You will be greatly defeated in

Afghanistan and Iraq and that America will fall, politically, militarily, and economically. Your end is very

near and your fall will be just as the fall of the towers on the blessed 9/11 day...

To transfer KSM to the US courts is not the quick answer. Attorney General Eric Holder stated in his confirmation hearing that water-boarding is torture. KSM was water-boarded. Therefore in a US Court all charges developed from the information gained during the water-boarding are futile. This suggests that KSM walks out of a US. court. But what about a military tribunal? The President's executive orders suspended the KSM tribunal underway as recently as December 2008. We wait now for a finding after six months by the Attorney General and Defense Secretary Robert Gates as to how to treat KSM and his gang. Again, the answers are not obvious. Pakistan does not want KSM returned. GITMO is closing (eventually). The choice of SuperMax in Florence, Colorado is a good one, where KSM can idle the next forty years in 23 of 24 hour solitary and wither with cancer of the soul, but how to try KSM in a federal court without solving the torture story and the fact that he was never given his Miranada warning?

The Bus.

I am watching for a legal solution. For now, the political solution, before KSM websites start again, before KSM signs a $10 million book and movie deal, is for the Obama team to use the ploy that worked during the campaign. Throw KSM under the bus. Never talk about him again. And don't forget to edit the Wiki entry accordingly and lock it up. The signature part of the recent rant especially can never get into Wiki: this never happened: repeat: this NEVER happened: these people do no exist. Who? Who?

Signed: The 9/11 Shura Council

Khalid Sheikh Mohammed

Ramzi bin As-Shibh

Walid bin 'Attash

Mustafa Ahmed AI-Hawsawi

'Ali 'abd AI-'Aziz 'Ali

SundaY,3/1/1429h

Guantanamo Bay, Cuba

Two Lessons From London In 1933 - RealClearMarkets

By John Batchelor on March 9, 2009 6:55 PM | 5 Comments

March 09, 2009

Two Lessons From London In 1933

By John Batchelor

From London's "Radio City," the eminent English economist John Maynard Keynes spoke bluntly of the world as "desperate" and urged "reasonableness and compromise" to the American journalist Walter Lippman, who was broadcasting from New York.

In a spectacularly well-staged "transatlantic talk," simulcast on the BBC and the National Broadcasting Company of America, just hours before the opening of the World Economic Conference in London on June 12, 1933, the two celebrated pundits exchanged grim views. Lippman felt that, while the unpaid English war debts to America were a problem for the Congress and President Franklin Roosevelt, most Americans believed the "larger nations" could act unilaterally "to combat the depression" without waiting for universal agreement.

It had been thirty months since the start of what came to be known as the "depression" had pushed the industrial states into massive unemployment, crushed commodity prices, and had initiated the belligerent "economic nationalism" of tariffs and currency manipulation. And there was a tone of crisis as sixty-six nations gathered by train, steamer and airplane to find a collective will.

"Civilization itself stands at the crossroads," announced a full-page advertisement from the Harrod's department.

Today, after fourteen months of employment declines, a retreat from trade and a roller coaster ride of commodity prices, it is commonplace for prominent commentators such as the Financial Times' Martin Wolf, and MIT's Simon Johnson to point to the upcoming G20 conference in London as the moment when the big nations must act effectively and collectively to stem the global financial depression.

The London Conference of 1933 is correctly considered a failure that led to a widespread breakdown in national relations, to a helter skelter raising of trade barriers, to random and often sinister currency manipulations, and to a prolonged crushing of commodity prices. It is crucial to understand that the disappointment of the London Conference, the inability of the great powers to find common ground on trade, currency and prices, led to a sense of moral helplessness in Europe.

The breakdown at the Disarmament Conference in Paris in the fall of 1933 was a quick result. So was the steady rearmament of and re-militarization of states with high unemployment that led, within three years, to the military adventurism of German and Italy. However, Britain and America were not exempt from exploiting the industrial demands of war-footing economies, and the observation that the American depression ended when the unemployed went to boot camp is not off the mark. It is crucial to make the connection that failure in economic conferences can and will lead to failure in peace conferences.

So what caused London 1933 to fail? What two lessons can we learn from seventy-six years ago that will guide the G20 as it approaches strikingly similar problems of demand, trade, currency, regulation and collective action?

The first and most helpful lesson is that we are no smarter than our forebears, and they were no less informed than we are of the threats of trade, currency and prices. Our global communications and transportation systems, our swift multilingual video chats, our access to ceaseless data streams watching trillions of dollars of assets and credit, does not give us a clearer vision of the solutions. It is the same world of trade, currency and closely watched commodity prices. It is also the same world with confrontational voices of well informed men who saw in 1933 that the London Conference was headed for trouble because the "larger nations" were selfish, willful and untrustworthy.

The chief problem was the "economic nationalism" of the United States; and this fact was well known at the time. In New York days before the Conference, Benjamin Anderson, economist for Chase National bank, derided the three-month-old Roosevelt administration's "so called planned economy." He spoke ruefully of the President's surprise decision to suspend the gold standard in order to improve commodity prices. "We must get back to gold", Anderson said.

Meanwhile, Congress remained fixated on a sort of "planned economy" that was the opposite of what Keynes and Anderson said was required for success in London. The Senate gave the President what was understood to be sweeping authority -- including the power for FDR to place "an embargo upon all foreign imports which might hinder the successful application of the internal industrial policy..." The report from Washington was clear that "the bestowal of such extraordinary powers suggests the possibility of the United States carrying the policy of economic nationalism to the point of complete isolation."

The second lesson from the failure of the 1933 London Conference is that no amount of dreadful predictions or chart-based projections, no consensus of economists or brainy professors, can convince the political leadership of powerful states to work together. If the end result does not contain an immediate, tangible, poll-boosting pay-off, the safe course is to loudly restate your fears and do nothing.

In London there was the impression this was a job fair of national brands. It is confounding to see that Ramsay MacDonald's government chose the dusty reception hall of the Geological Museum to shoehorn in seating for the thousand guests. There was no room for observers, no space for consultations, and by the opening remarks from the King, the proceeding was as dead as the fossils in the museum.

We know now, just as the delegates did then, that there was a supposed secret negotiation going on outside the Hall, between the United States, Britain and France, to solve the currency manipulation crisis. The U.S. Secretary of State, Cordell Hull, arriving on thePresident Roosevelt a few days before, had given away this secret when he had told the Press Association that the chief problem was trade barriers. By not mentioning what was on everyone's mind, the gold standard and currency manipulation, Hull was giving away the game.

The delegates knew the formula: economic nationalism led to reduced trade, currency abuse and isolationism. They even had the same alarming words of inflation, deflation, credit drought, capital flight, retaliation. Did they know it would end so badly that not one of them would survive the decade intact?

The host, dour, sober, tidy British Prime Minister Ramsay MacDonald, said on the opening day of the Conference, "The economic life of the world has for years been suffering from a decline which has closed factories, limited employment, reduced standards of living, brought some states to the verge of bankruptcy, and inflicted on others Budgets which cannot be balanced...

"The world is being driven upon a state of things which may well bring it face to face with a time in which the gains of the past are swept away by the forces of despair..."

Watch for two warning notes at the G20 meeting in three weeks' time. If the delegates claim, as a way of asserting confidence, that we today are smarter, wiser, more cautious, more cosmopolitan and communitarian than 1933, then the brain rot has started. If the delegates pronounce, especially if the host, dour, sober, Prime Minster Gordon Brown pronounces, as a way of spurring agreement and success, that the world is on the brink of slipping backwards to a time of protectionism, nationalism, militarism, isolationism, then it is already too late.

John Batchelor is a radio host in New York, Washington, San Francisco and Los Angeles.

Obama Calls Petraeus "Success;" Disdains "Blogs;" Shrugs at "Jobs" Recovery

By John Batchelor on March 7, 2009 4:34 PM | 9 Comments

The NYT Interview on Friday 6 March.

Am waiting to hear from the blogosphere archivists if this is the first time that Mr. Obama, aboard Air Force One in a stimulus spending dash to Ohio (right), has ever acknowledged that the Petraeuus surge plan in Iraq was a "success:"

"If you talk to General Petraeus, I think he would argue that part of the success in Iraq involved reaching out to people that we would consider to be Islamic fundamentalists, but who were willing to work with us because they had been completely alienated by the tactics of Al Qaeda in Iraq," Mr. Obama said.

The President on Blogs.

The President, carrying a Blackberry and with digital mastery at his elbow (right), also dismisses financial and economic blogs while at the same time acknowledging their insistent presence with regard the banking crisis. Since blogs are now the brains and sensors of the media -- blogs in the Wall Street Journal, in the Financial Times, in the NYT, as well as the blogosphere -- it is unclear if the president means all blogs or just blogs who don't agree with his team -- such as Calculated Risk, Simon Johnson's Baseline Scenario, Nouriel Roubini's RGE, Gideon Rachman and Martin Wolf in the Financial Times, Dennis Berman and Evan Newmark in the Wall Street Journal, Charlie Gasparino in TheDailyBeast.com. Then there is my favorite blog of blogs, John Tamny's RealClearMarkets.com. This will take some days of rhetoric, but it is likely that the President, in his windy oversimplification of the debate about Citigroup and Bank of America and TARP, just fired up the blogs as the agreed upon battlefield of ideas: if the President says that "we don't spend a lot of time looking at blogs," then it is a near certainty that the Obama team is very, very worried about the consensus building that Tim Geithner is a lightweight, that TARP is a bust, that propping up C and AIG is futile, and that the market has made obvious its opinion until the inevitable retreat and concession by Geithner and Bernanke.

"Part of the reason we don't spend a lot of time looking at blogs," he said, "is because if you haven't looked at it very carefully, then you may be under the impression that somehow there's a clean answer one way or another -- well, you just nationalize all the banks, or you just leave them alone and they'll be fine."

No "Jobs" Recovery in Sight.

Then there is the odd detail that the President discarded the rosy scenario of recovery in 2009 that was the fancy wrapping of his behemoth budget just submitted to Congress. This will need plenty of spinning in the days to come. Again, it is too early to say how the blogosphere will play with this one, but it does open the door to mischief: however I am sure the stimulus package at $1 trillion, and the budget at more than $1.6 trillion were based upon the idea of jobs not pork: (right, the apparently pork-free breakfast on Air Force One).

Still, he avoided guessing when the situation might begin to turn around. "Our belief and expectation is that we will get all the pillars in place for recovery this year," he said. "How long it will take before recovery actually translates into stronger job markets and so forth is going to depend on a whole range of factors."

He added that "part of what you're seeing now is weaknesses in Europe that are actually greater than some weaknesses here, bouncing back and having an impact on our markets."

Mr. Obama's uncertain forecast about when the economy will begin to rebound contrasted with the projections embedded in the budget he recently released.

AIG Coincidence of Witches

By John Batchelor on March 7, 2009 10:04 AM | 7 Comments

The September 2008 AIG Bailout Comedy Gets a Subplot.

The Wall Street Journal reported after market close last evening March 6 that the decision to engineer the AIG bailout of last September, the weekend the music died at Lehman, included an analysis by a team from Goldman Sachs among others. In sum, Hank Paulson at Treasury asked his former firm to measure the risk of bailing out AIG, and that risk included GS. Fox, coop, fox apprentice, chickens. Calculated Risk grins at the fact. (We all grin at the peculiar coincidences of September 14, 2008, when GS rival Lehman was nixed and GS debtor AIG was rescued, all by the still unexplained-under-oath decisions of GS friend Hank Paulson.) The comedy gets stranger. The AIG bailout included at least $50 billion of US money passed through to major Europeans banks, including the wretchedly managed RBS, the lunatic Lloyds, and someone else's problem Deutsche Bank. The parasites continue to drain AIG, which explains some of why AIG keeps posting deeper losses. The original low deal is open-ended:

Now, other problems are popping up for AIG. The insurer generated a sizable business helping European banks lower the amount of regulatory capital required to cushion against losses on pools of assets such as mortgages and corporate debt. It did this by writing swaps that effectively insured those assets.
Values of some of those assets are declining, too, forcing AIG to also post collateral against those positions. And if the portfolios incur losses, AIG will have to compensate the banks.
AIG had seen this business as a relatively safe bet for the company and its investors. The structures were designed to allow European banks to shuck aside high capital costs. A change in capital rules has meant that the AIG protection no longer meets regulatory requirements.
The concern has been that if AIG defaulted, banks that made use of the insurer's business to reduce their regulatory capital, most of which were headquartered in Europe, would have been forced to bring $300 billion of assets back onto their balance sheets, according to a Merrill report.

Stupid and Reckless Coincidence of Witches

This fact beggars logic. The Wall Street Journal asserts that if AIG had failed, meaning Chapter 11, then the European banks would have been on the hook for up to $300 billion. And why did this become a US taxpayer problem? AIG had concocted a formula based upon pseudo-science fictions called CDS that it sold for cheap to European banks as insurance against losses in mortgage backed securities. My assumption is that adults were involved in all these decisions. AIG was stupid. The Euros were stupid and reckless. The bonuses paid out to all parties because they conspired in this witches brew was cash. And the US taxpayer is responsible to pay off all the losses? And the collective value of all of our 401ks declines 40% because these men nd women misled and cheated each other and took money home in their own pockets as rewards for their creativity? This does not at first seem to pass the smell test. And this is even before we get on to the part of the story that most wrecked the market, which was the Lehman failure/AIG rescue-created TARP fiasco -- sold to the US Senate by the GS loyalist Paulson and passed eagerly and pridefully by a Senate laced with characters who were party to all this numbing chicanery, such as Chris Dodd, Chuck Grassley, Chuck Schumer, Judd Gregg and their kindred of Babel. (Note that John McCain, Barack Obama, Hillary Clinton were yes votes to the TARP fisaco that was built to pour money into the Lehman failure and the AIG rescue genius.) The Senate wasn't for sale, but leasing terms were available. The comedy gains a subplot, the seduction of the purposefully ignorant and goofily obedient accomplices, and below find the list of the seducers:

Covered Counterparties

Some banks that were paid by AIG after it was bailed out by the government

Goldman Sachs
Deutsche Bank
Merrill Lynch
Société Générale
Calyon
Barclays
Rabobank
Danske
HSBC
Royal Bank of Scotland
Banco Santander
Morgan Stanley
Wachovia
Bank of America
Lloyds Banking Group

Source: WSJ research

Wall Street Journal Commenters Feature Much Paranoid Cleverness:

Below a selection of commenters from the Wall Street Journal story on the AIG pay offs to the Europeans and so forth. Many, many details to pursue, not the least being that Hank Paulson had advice and cooperation not only from the Democratic and Republican leadership of the U.S. Senate in the 110th Congress but also from New York Fed President Tim Geithner and Federal Reserve Chairman Ben Bernanke. This posse is still on the bridge of the wrecked and sinking ship, thought now it is Treasury Secretary Geithner, Fed boss Bernanke, and the usual suspects in the US Senate -- all now joined by the fresh leadership in the White House, Barack Obama, Rahm Emanuel, Larry Summers. No change in the AIG deal: we bail out Europe's sick banks as well as Goldman Sachs, Morgan Stanley, and the Merrill executives who are spending down their plundered 2008 bonuses quickly.

Chris Barriteau wrote:

This is NO surprise - of course the Counterparties to AIG's Credit Derivatives book will be the large Banks and Brokerages, I've been yapping about this since Paulson slam the door in Lehman's face, and only allowed his G/S and a few other Banking buddies to the Party. I mean who do you folks think would be the 2nd-level beneficiaries of the AIG bailout, Dunkin Donuts?
Please before you start yakking away again about how terrible the bailout was, get a better understanding of the Credit Derivatives market and realize that it's this Toxic paper that really screwed up the Banking system more so that the Mortgage/ Real Estate market - after all isn't Mortgages secured by real estate ( yeah yeah it crashed, but it still has some value), where as the CDS market what was it securitize by?
You should know, it's the hundreds of billions you (the taxpayer) gave AIG and the other banks.

What we really need to investigate is the self-dealing between Paulson and his G/S buddies, and the absolute catastrophic decision to allow Lehman to fail, which caused this AIG to collapse since they were the largest insurer of Lehman (CDS) debt. Paulson knew this and that's why very serious questions need to be asked

14 hours ago
Mathew Spector replied:

And Geithner as the President of the New York FED which was responsible for the holding companies oversight.

Reply to Mathew Spector

Report Abuse

14 hours ago
HENRY HONTORIA wrote:

I consider this a ponzy scheme with the tax payers being the last in.

Illusionary money backed up by more illusionary money so banks could get around regulations.

How long will this be allowed to continue? Hiding true losses for all the parties involved? How large is the securitazion market AIG holds? I don't think I want to know the answer to that but my guess is about 99% of all banks are insolvent and this AIG propping up is just some clever way of trying to stall that. The 1% that is healthy will be collapse with the rest unless some adults take resposibility and start doing the hard things that need to be done to resolve this mess.

If that means letting AIG collapse so we can get some clarity into what the banks have actually lost and closing down those who are screwed so we can get a healthy financial system going, then so be it.

Reply to HENRY HONTORIA

12 hours ago
Tim Lawler replied:

yes William...we have private banks looting the US tax payer via AIG.....it's not unlike me betting 1 million dollars with my local bookie for the Cowboys to beat the Redskins.....the Redskins win and so I lose the bet.....it turns out though, that i actually didn't have a million dollars and I had no collateral either....

so my bookie, instead of getting stiffed....goes to the US government who bails me out of my bet...... since the guy in charge of the treasury at the government used to work for my bookie, and still has some ownership in the bookie's business, and so he is happy to oblige and use the government's money to bail me out of my bet!!

don't be thrown off the trail by the article insinuating that European banks are the primary benefactor of the AIG bailout money....

Reply to Tim Lawler

1 hour ago
DAVID LAWRENCE wrote:

The Democrats are still talking about Lehman and complex derivatives causing this whole mess. The truth is the root of the whole financial crisis can be found in AIG and their ilk (remember Sandy Weill at Travelers?) with their "insurance" of the underlying securities. When a small segment of the real estate market began to tank exposing this myth and take with them the investment banks, that "insurance" disappeared and magically all of those loans the whole banking system was holding reappeared on their books at enormous losses rendering them insolvent - which was theoretically impossible if they had a AAA guarantee. During the whole boom when these securities were bundled, the whole world was saying it was the magic of math and physics that made the risk go away because their were investors who bought the inherent risk with their layers of counter-party insurance (call it what you like but lipstick on a pig is a little over used lately). I am a mathematician and physicist and could not figure out how complex modeling and using "The Monte Carlo Method" was going to do anything but provide smoke and mirrors, but I only work in radioactive world where risk has been the watchword in the press since Three Mile Island. It is no small wonder people don't trust our industry either (even though the science here is sound). AIG was not regulated in Washing ton, but in New York whose regulators were purported to be amongst the world's most savvy. Where is Anrew Cuomo with his warrants of State officials?? Name me one Democrat who wanted this to change before the meltdown. The asset inflation this caused was largely a blue state phenomenon anyway in total costs and the losses to be protected largely fall in those states or with their foreign allies who hated GWB,(now that you can count Florida LAs Vegas and Arizona as blue since the buyers of their gasoline laced markets were from blue states), so the red states will have to bail them out now. The image of a middle Americann in his Hummer going to the mall with money he didn't have is a New York Times myth. What is going on in America today is nothing more than a red state stick up!!!

1 hour ago
Michael Conway wrote:

Many types of derivatives effectively settle in cash for their current market value on a daily basis. WSJ know this. I am disgusted that the WSJ leaves open to interpretation that these payments are something mysterious and illicit. Disgusted!!! Get your gold and guns, now that the WSJ jumps on the populist bandwagon, it's over

25 minutes ago
John Nadeau wrote:

Found ! The Black Hole !

Reply to John Nadeau

Report Abuse

Prediction from Calculated Risk: Guest says:

Yesterday, 8:07:30 PM EST

The first politician who has both the brains and the balls to run with this - by getting out of his/her chair during Congressional testimony and walking right up to Bernanke's or Geithner's face and screaming and screaming until Security has to drag him away (all on camera, theatrical enough to make the lead on the major network newscasts)- will immediately vault into the lead as frontrunner for the 2012 election.

My money is on Bunning.

The Contest is Open for Political Advantage.

Do GE or America Express or GM mean to defend themselves? This plundering of the US Treasury in order to save GS and its pals was done at the expense of the market that has now trashed the Dow 30 along with the S&P 500. Detroit must die so that GS may thrive? So that RBS and Deutsche Bank get their money and do not suffer the consequences of their creativity?

Dreams Are Made of

By John Batchelor on March 7, 2009 12:28 AM | 3 Comments

Kepler Launched.

In the gathering gloom of the planetary depression, a trustworthy Delta II rocket roared out of Cape Canaveral to lift the most graceful of homo sapien sapien hopes into Earth orbit, the Kepler robot with its five-year mission to find as many Edens as possible in a tiny slice of the Milky Way. I have been corresponding and speaking with the wonderful Dimitar Sasselov of Harvard's Origins of Life Initiative for more than a year in preparation for this event. The mission is the closest I can ever come to life on another Earth like planet, a dream since I read science fiction starting at 11 years-old with Destination Venus. After that, there were all the Tom Corbett books, which I read as much as possible until I found J.R.R. Tolkien, Issac Assimov, Fredrick Pohl and Ray Bradbury and my favorite, C.M. Kornbluth. Now there is Kepler. After its sixty day shakedown cruise in orbit, it will aim the largest digital lens ever placed in space, 95 megapixels, at the Northern Sky near the star Vega, in the constellation Cygnus, and just stare and stare.

All the data will be collected at U.C. Berkeley, where the work begins, using the Lick Observatory and the W.M. Keck Observatory, of identifying planets that make transits of their stars. We can read the chemical signature of the planets by the change in the light of the sun behind it. Dimitar told me that we can read rocky and wet planets so carefully that we can determine the atmosphere contents, oxygen, nitrogen, methane, carbon dioxide, the usual suspects for organic life. I asked Dimitar Sasselov if the camera could read an artifact in Earth or solar orbit -- say a filament five hundred miles across that spelled out a message. The answer is affirmative. Bob Zimmerman will review the excellent launch with me Sunday 8, and we will discuss the NASA Jonah that was dodged this time with the Kepler launch. So far.

What Kepler Can Find

Dimitar Sasselov's estimate is that in five years, Kepler will locate between fifty and one hundred rocky and wet planets in the habitable zones of stars similar to ours, G Type stars. This translates into one hundred million planets like ours in the Milky Way. No estimates on the flat, four-dimensional, 13.6 billion light year across known visible universe. In addition, we will be able to see not only backwards in time to rocky and wet planets like ours in the habitable zones of the systems, called Edens, forming in orbit around younger stars, but also able to see into the future of our planet -- one, two, five and ten millions years into the future. Edens that are rich with oxygenated clouds; Edens cracked open by collisions; Edens cooked by hotter suns; and Edens frozen by cooler suns. Perhaps an Eden where they have nationalized the banks before they ran out of trust. Definitely many Edens, the stuff that dreams are made of. Tom Corbett on the ready for adventure.

Stress Tests

By John Batchelor on March 6, 2009 1:16 AM | 28 Comments

The Nineteen Big Banks.

Thanks to Paul Kiel of ProPublica we learn that the nineteen big banks, about to undergo Tim Geithner's stress test, are in fact only seven really, really big banks that collectively represent $10 trillion in assets. The other twelve represent only $2 trillion. The stress test is entirely about JP Morgan Chase, Citigroup, Bank of America and Wells Fargo. At least two and maybe all four are in doubt. If the economy deteriorates in the worst case scenario, with 10% unemployment in 2010, then all nineteen banks may be in doubt. But for now the center of the poison storm is Citigroup, Bank of America and Wells Fargo. The note in Calculated Risk is that adding Merrill into the BAC assets puts the whole at 2500 billion, making it the largest of the large. The two banks that most observers agree are now zombie banks are Citigroup and Bank of America.

The Warning.

Simon Johnson's argument is that Tim Geithner is not giving the big banks the stress test that is required to bring clarity. Johnson had many years at the IMF, and he gives the impression that no IMF officer would tolerate the sort of hasty, facile, nervous, iffy test that is underway. Not stress. Handholding. The longer C and BAC remain zombies, the more likely it is that they will be plundered. The longer C and BAC remain zombies, the more likely it is the markets will sag and stagger. The longer Treasury and the Fed remain fearful, stubborn, deaf, opaque, evasive, absent, and, in the case of Geithner, unreliable and untrustworthy, the longer the banking system will shrink. I am not making this case out of ideology. I am repeating, to the best of my ability, a summary of what Simon Johnson, Nouriel Roubini, James Baker, Martin Wolf, Charlie Gasparino have argued. Roubini says that C and BAC are insolvent now, and that if we wait another six months, all nineteen may be insolvent.

Grin of the Day.

The wit in the markets was that McDonald's has now added Citigroup to its $1 menu. The less witty thought of the day is that Geithner will have it easier to hire at Treasury, where major talent now refuses to go, if it

Warning of the Day.

400,http---d.yimg.com-a-p-ap-20090226-capt.d8b20ebbf04a4da49df2d51520884479.economy_jobless_claims_caps208.jpg

My best trader source wrote me late int he day that the unemployment number for February, due at 830 am Friday 6, could triger a capitulation. The official number expected is under 700,000 lost. The whispering is above 700,000, and the nightmare, turn out the lights, battle stations number is 900,000. The market has already sold down in anticipation of a bad number. We are going lower. The pressure grows on the White House to comment. Whatever the POTUS says will be resented. He is wise to keep shut, as he did not on Tuesday when he mumbled a naive and even ignorant buy recommendation. If it is not the 900k number, what will POTUS do, celebrate? We will all know in seven hours.

Heads Up Minute: C May Be Launching Lifeboats

By John Batchelor on March 5, 2009 2:52 PM | 6 Comments

As Citigroup Sinks Under a Buck for De-Listing on the NYSE.

The rumors start on the blog Calculated Risk, picking up on other reports, that the abandon ship plan is in place and the crew is moving the few remaining passengers to the boat deck. The commanders on the bridge will not move and insist upon going down with the rubbish. Does that include Larry Summers, Tim Geithner, Peter Orszag, Christina Romer (right) and Ben Bernanke? Unknown. The market has now told the Treasury what Geithner cannot or will not acknowledge -- that Citigroup is insolvent, that no private money will ever flow into a sinking ship, nor will anyone invest in a ship commanded by the government. It is sinking. What happens after C goes? BAC? Wells Fargo? Capital One? VISA? Unknown. The American Armada is foundering. Here are the rumors right now, with the markets still deteriorating and the White House silent and a sense of arrogant malaise settling upon the fledgling Obama administration.

joe shmoe says:

Today, 2:05:06 PM EST

are there moves afoot in (or on) Citi?

lots of articles today about Citi's split into Citicorp and Citi Holdings, good bank/bad bank style: http://www.housingwire.com/2009/03/05/for-citigroup-investors-actions-louder-than-words/

Plus calls for more splitting and selling off of units, including, shockingly enough, from the Straits Times. Now why would Singaporeans feel interested in this?http://business.asiaone.com/Business/News/Story/A1Story20090304-126132.html

Haven't checked the Saudi papers for their views, but I'm guessing they have some ideas, too.

Simon Johnson Publishes His Warning.

I reported MIT's and Baseline Scenario's hot brain's warning, after his years at the IMF watching chaos in other countires, that the delay in nationalization of insolvent Titanics like C leads to hank-panky. He calls it "tunneling." We call it theft. Here is the lead graphs of the blog post:

Confusion, Tunneling, And Looting
with 46 comments
Emerging market crises are marked by an increase in tunneling - i.e., borderline legal/illegal smuggling of value out of businesses. As time horizons become shorter, employees have less incentive to protect shareholder value and are more inclined to help out friends or prepare a soft exit for themselves.
Boris Fyodorov, the late Russian Minister of Finance who struggled for many years against corruption and the abuse of authority, could be blunt. Confusion helps the powerful, he argued. When there are complicated government bailout schemes, multiple exchange rates, or high inflation, it is very hard to keep track of market prices and to protect the value of firms. The result, if taken to an extreme, is looting: the collapse of banks, industrial firms, and other entities because the insiders take the money (or other valuables) and run.
This is the prospect now faced by the United States. Read the rest of this entry »

N.R.A. 2: Hugh Johnson's Folly Reawakened

By John Batchelor on March 5, 2009 12:41 AM | 5 Comments

The Obama Administration Invites General Hugh Johnson's Drunkeness Into the Story.

For 1933, Time Magazine made the strangely aggressive, secretive, belligerent, hard-drinking, false-witnessing, ludicrously loose-living General Hugh Johnson, boss of the just invented N.R.A (National Recovery Administration) into its the "Man of the Year" just because it was out of plaudits for FDR and couldn't find a member of the New Deal cabinet it liked or trusted. Johnson was a fresh face to the nation then, and the NRA sounded loony, spontaneous, desperate but harmless and well-intentioned. Soon, after Johnson's frantic travels and loud mouth, after his threats, harangues and hostile notes, after his aping a dictator as he campaigned and manipulated in opposition to large and small businesses, store-owners, unions, the unemployed, the governors and Congress, everyone knew to stay away from him and ignore him. Johnson talked and talked about minimum wages, child labor laws, maximum work weeks, compliance, enforcement, rules, the so-called "blanket code." An endless stream of hooey and paper emerged from the NRA teeming offices of clerks and snitches. Johnson stayed in power long enough to wreak havoc and invite mockery of all aspects of the New Deal before FDR fired Johnson for loutishness, drinking, lying and womanizing. What Johnson did that was most damning is that he lied about the results of the programs, claiming he put four million people to work in the first year of the NRA. Does that number sound familiar? Four million jobs saved or created? Please note that the NRA did especially create 1555 NRA jobs in Washington right away: we can see the busy, earnest, paper warrior youths hard at work (below). Here is a telling excerpt (my italics) from Time Magazine's tribute to Johnson as the "Man of the Year" 1933:

Reviewing NRA's first six months, during which General Johnson mustered 1,500,000 volunteer workers and speakers, issued 100,000,000 "pieces of literature," plastered millions of Blue Eagle posters throughout the land, the historian will look to net results as well as dates. When the NRAdministration first settled down in the Department of Commerce Building, it had 87 employes, with a half-month payroll of $6,619.41. NRA now employs 1,555 people, uses 105,000 sq. ft. of office space, meets a $166,608.40 bi-monthly payroll. General Johnson gets $6,000 a year. His secretary, nurse, guardian and constant companion at Washington, in airplanes, on trains, at banquets, Frances ("Robbie") Robinson, gets $5,780. When that news got out last month, Man of the Year Johnson hotly announced: "I think that was one below the belt. She
knows more about this organization than anyone else. I am sure that nobody here ever thought she was a mere stenographer or secretary. She has been my personal assistant straight through." Not on the payroll is Mrs. Hugh Johnson of the Consumers Board. Son Kilbourne, 26, on leave from the Army, who spells his name with a "t" as his father used to, draws only his 2nd lieutenant's pay ($143 per mo.) as a member of NRA's compliance Board.

Of the 3,000,000 Blue Eagles NRA has issued, only 48 have been revoked. It has fought eight code violators in the courts, has won seven cases. Pending are twelve more. To date 168 codes have been approved. Seventy-five more will be approved by New Year. Man of the Year Johnson believes that he has put 4,000,000 people to work, has upped the national payroll $2,500,000,000 in the past half-year. last week the President extended his blanket re- employment agreements to May 1, but these have lost their importance since 70% of the nation's workers will be covered by regular codes by Jan. 1.

The Obama Team Tries More Graphics.

The new Recovery.gov sticker pushes and pushes the comparison to the NRA. Is this wise? Is this on purpose? Do they know the history? The NRA failed as Hugh Johnson failed. The NRA was never more than a hodge-podge of tricks, schemes, guesses, wage and price controls based upon hearsay and influence-peddling, and a gigantic patronage boondoggle -- what Huey Long of Louisiana called government "boodle." Johnson was a bully, a liar and a crude politician, who after 1936 denounced FDR as a dictator. It is passing peculiar that the Obama administration wants to be associated in any way with Johnson's folly. In the heyday of the NRA, with stickers plastered on windows and cars and schoolbags, with the country giddy for a display of togetherness, Johnson was just another power-grabbing hack. Consider the scale of the NRA hiring. The jobs it created were government jobs, and when those jobs went away after 1936, the depression deepened and lengthened. Johnson was a petty, petty bully who enjoyed having thousands march by him in salute. There is a picture of him raising his arm in a Fascist salute to a crowd marching by. He claimed it was doctored. The blue eagle was a farce with a big stick for awhile, then Johnson blew up and the courts knocked down the NRA enforcement mechanism (the famous Schecter kosher chicken case in NY and the Supreme Court ruling that swept the NRA into the dustbin of history Schechter Poultry Corp. v. US) and the blue eagle turned into a blue chicken, then a dead chicken, then just silliness.

Six Thousand Cinema Workers Led By Al Jolson.

Below the opening graphs of a Time Magazine story on NRA parades the summer of 1933. Juvenile, pointless, brutish, goofy, infantilizing, and the product of a mind that likes propaganda as much as policy:

People, thousands and thousands of people, more people than there are in Indianapolis and St. Louis and Birmingham, Ala. combined, jam-packed the stone-cliffed canyon of Manhattan's Fifth Avenue for half a day last week. Three out of every ten New Yorkers were there, 2,000,000 strong. They fainted, they cheered, their feet hurt, their clothes got mussed. At 58th Street their sheer bulk bulged through splintering plate glass windows. The Governor's motorcycle escort rode one down. A pack of them upturned a policeman and his screaming horse. There never had been so many people gathered anywhere in the nation since Armistice Day. Nobody in town, not even the blind news dealers and the invalids and sick folk in their beds--for the bands brayed ten solid hours--will soon forget New York's NRA parade.

For hours the side streets around sunny Washington Square were bursting with marchers waiting their turn in line. While they waited many of them visited speakeasies, got tiddledy. There were a quarter-million of them: 20,000 dressmakers, 10,000 brokers & bankers and their clerks, 1,000 barbers, 35,000 city employes, 6,000 cinema workers led by Al Jolson, 5,000 oil workers led by Walter Teagle, metal workers, hatters, florists, waitresses, soda jerkers. Every guild, every trade and calling was on hand to honor the Blue Eagle. that hopeful bird with lightning in his claw.

"Well," said Grover Whalen, local NRA Administrator, just before 2 o'clock, "forward march!"

Up the Avenue chattered a smoky-tailed vanguard of motorcycle police. Out stepped spectacled Major General Dennis E. Nolan, commander of the 2nd Corps Area and Marshal of the parade. Along came Administrator Whalen, who once was Police Commissioner. Behind them, on the parade's lone official float, rode two symbolic beauties, "Miss Liberty" and "Miss NRA," the Misses Elise & Doris Ford of Brooklyn, Howard Chandler Christie's models. When the head of the parade reached the Public Library at 42nd Street, Grover Whalen and General Nolan joined General Hugh Johnson, Governor Lehman of New York and prognathous, bag-jowled Mayor O'Brien on the reviewing platform.... (more)

(Below see Hugh Johnson, Fiorello LaGuardia and Robert Moses on Grand Street to start a section of the FDR Drive, an infrastructure project of make work jobs and patronage and graft, 1934).

Real Clear Markets: Spooky Parallels 1933 and 2009

By John Batchelor on March 4, 2009 3:49 PM | 4 Comments

March 04, 2009

Spooky Parallels Between 1933 and 2009

By John Batchelor

Watching the moody Scot and Laborite Prime Minister Gordon Brown meet at the White House with President Obama amid worldwide panic, a meeting darkened by a mysterious diplomatic "snub", there is new cause to search for a foreshadowing of troubles. Looking back seventy-six years to the depths of the Great Depression, we find that another moody, isolated Scot and Laborite Prime Minister, Ramsay MacDonald arrived to confer with the new President of the United States, Franklin Delano Roosevelt.

It was April 1933, and the financial crisis, called bluntly in America and Europe "the depression," was in a new panic stage. Following a collapse in world trade and widespread protectionism, not to mention massive bank failures and severe price deflation in America, Congress had given the president what were understood as temporary dictatorial monetary powers. While the PM was crossing the sea, Roosevelt made the decision for the U.S. to go off the gold standard. The market reaction in New York and London was one of shock and worry. Senator Reed of Pennsylvania, in opposition to Roosevelt, said this was "frankly a programme of currency manipulation."

MacDonald was in a rush when the gigantic Cunarder Berengaria delivered him to a municipal tug that steamed to Jersey City for a train to Washington. There was a general sense the Americans didn't know where they were going.

MacDonald's "flying visit" had a threefold purpose: to befriend the new president, to debate the causes of worldwide "economic ills," and to encourage and hurry up the proposed World Economic Conference in London. MacDonald needed the Economic Conference to stop a trade war that he felt was wrecking Britain and Europe.

For four days, Saturday through Tuesday, at the White House and on the presidential yacht Sequoia, the two leaders and their aides ranged over tariffs, deflation, currency policy, market instability, military adventurism in Asia, and the new regime in Germany. Roosevelt was brash and powerful.

Somewhat surprisingly, the seemingly opaque MacDonald alarmed the Americans by making bold remarks at the National Press Club, broadcast nationally on the radio, in which the PM emphasized that the gold suspension was a "great crisis," his regret that some were using the "ugly" word "retaliation" with regard to the President's decision, and that there was now even greater need to focus on the London Conference in order to agree upon "common action."

"I hope our French friends, our Italian friends, and all others will be spurred to seek agreement rather than be discouraged and make no attempt. Tarrifs, restrictions of all kinds, quotas - of what use are they in a free, sane world where exchange is as profitable in trade as in ideas?"

Ramsay MacDonald's question deserved an answer in 1933 no less than it deserves an answer today. "Retaliation" was the weapon of choice that doomed the London Economic Conference in June of that year, and that opened the door for those who Paul Johnson names the Devils in Germany, Japan, and Russia.

The gold suspension, the paradoxical fears of deflation and inflation, currency policy: all were pieces of the larger face of the protectionist creature loosed in America by the sinister Smoot-Hawley legislation of 1930, and present in many guises in the Four Powers of Europe, as well as in Soviet Russia and predatory Imperial Japan. We know now that the failure of MacDonald and Roosevelt to agree on reversing the trade collapse ahead of the Conference was the last opportunity the two states would have - ever - before the trade war morphed into the military campaigns of 1936 and beyond.

Returning to the present, it is a simple, rational mission for Gordon Brown and Barack Obama. Brown calls his ambition "a global new deal," but it is not necessary to oversell it with cable news concepts. What Messrs. Brown and Obama need to do, is to accomplish what MacDonald and Roosevelt did not. They must arrive at the G20 meeting next month in London united on trade, and with a vocal sense of alarm that world governments are following an anti-trade script that will surely end wretchedly.

John Batchelor is a radio host in New York, Washington, San Francisco and Los Angeles.

Page Printed from: http://www.realclearmarkets.com/articles/2009/03/spooky_parallels_between_1933.html at March 04, 2009 - 02:48:58 PM CST

Nationalization and Plunder

By John Batchelor on March 4, 2009 12:24 AM | 9 Comments

Simon Johnson Warns.

On NPR, Simon Johnson calls for a systemic nationalization of failed banks. He says that each of the 19 big banks must undergo a genuine stress test, and perhaps a brief period of time to try for private recapitalization, and then the failed and insolvent must be taken over by the FDIC writ large. Yet. Yet. Simon Johnson warns that the sooner the better because, like Russia in the chaos of the mid 1990s, assets disappear in a crisis, just vanish (he says this with a small laugh). His nationalization program is well known: push Citigroup and others (BAC) into candor, fire the boards, strip put the bad assets and re-privatize the stable parts quickly. What is not well-known is what he means by assets disappearing. He means theft, plunder, piracy. Is this happening already? Is it useful for the bankers and hedgies who understand the parts of Citi and BAC, who have access to officers or ex-officers, to position themselves to get ahold of pieces of the bank as it crumbles. Johnson says that during chaotic strife, no one knows where anything is. Simon Johnson says that it is called "asset-stripping" or "tunneling." He then tells the story of an honest bank minister in Russia, now deceased, who tried to halt the tunneling out of value from state owned assets in the privatization mania in Russia under Yeltsin. Simon Johnson recalls that the honest Russian banker would say that "periods of chaos and confusion are perfect for people who want to make off with valuable assets." "Things disappear," says Simon Johnson. "Honestly all kinds of strange and imperfect things happen." It ended badly for the honest man and for Russia. Is this happening now with C? For example, who still owns C stock at $1.22? CNBC Charlie Gasparino writes of Sandy Weill (right), the man who built Citigroup in the 1990s until he was driven out after the dot.com bubble burst. As late as 2006, Weill owned more than 15 million shares of Citi, then trading in the mid 40s, worth up to $750 million. Does Weill still own C? And if he does not, does Weill know what parts of C he would seek to revive or renovate in the event of nationalization, break-up and re-privatization? Does Weill's hand-picked successor Chuck

Prince (who was fired one disconsolate weekend in the fall of '07 by a cranky, opaque C board) know where there are assets that can be seized upon at a cheap price and then quickly made profitable? In sum, no less a dignitary that Simon Johnson is suggesting that

there may be more than one game in the collapse of C stock, and BAC stock. Drive it down to force it into pieces, then grab the pieces. Look at the report on the ex officers of Countrywide, who are now buying up foreclosed mortgages and turning them over for a profit. They admit they wrecked things with the predatory and lunatic practices, but they are beyond the regulators now, they are happy to blame-shift, and they are making money with properties they helped destroy. Would this not work the same way for Citigroup officers and major shareholders, or for wolves in hedgie clothing who know where the good stuff is hidden? Simon Johnson says that we have kept these big banks going with loans and cash since last September 2008. Plenty of time to plan, to designate, to execute and to wait to pounce. It worked in Russia and created the commodity oligarchs. Would it work in America and create the financial oligarchs?

And is Treasury Involved in the Planning of the Break-Up and Plunder?

Simon Johnson also mentions the peculiar detail that Treasury decided, when it negotiated the 36% purchase of the common stock, that Vikram Pandit would stay as CEO at Citigroup. Meaning that Treasury and the Obama finance chiefs (right, Larry Summers, Peter Orszag, Timothy Geithner, Christina Romer) is already running C to the extent that it can name the manager and ask the board members it does not like to leave. I add that Simon Johnson points to James Baker calling for nationalization as well. The name I watch is Nouriel Roubini, who told Aaron Task and Henry Blodgett at Yahoo Finance last Friday (right) that C and BAC are already nationalized in part, and that it was like being a little pregnant. Roubini recommends that the Treasury just go ahead and get the job done. Again, Roubini does not know why Treasury is waiting? He does not believe the banks can recover with any combination of public and private intervention. Roubini calls them zombie banks. Simon Johnson also refers to the banks as zombies, as in the Japan banks of the 1990s. Johnson and Roubini are certain that Citigroup and other big banks (Bank of America) are far gone into zombie hood. There is no alternative other than the lost decade scenario. Again though, the lost decade may be pleasing to a small gang of predators who aim to pick off the good bits. I

am being suspicious, paranoid, bloody-minded, speculative, ruthless toward the Treasury under Hank Paulson and Treasury under Geithner. Yet greed and fear, greed and fear, these are captivating motives. Why is Citi's stock at $1.22 and sinking and yet no one at Treasury is screaming, "Get rid of it!" No one knows. Stubborn? Stupid? Part of a conspiracy? Didn't Treasury Secretary Hank Paulson tell New York Fed Chair Tim Geithner to sell Bear Sterns to a member of the New York Fed board Jamie Dimon for cheap, helped by a $30 billion Fed loan at good rates, on the wild weekend of March 15. Was that shrewd management by regulators or collusion with predators and pay-off during chaos?

Oz Dodges A Bullet Named Oz

By John Batchelor on March 3, 2009 1:24 PM | 3 Comments

News that Australia Sky Watchers Spy a Killer NEO.

Last Friday evening East Coast Time, Australians recorded a video of a 65 meter wide rubble pile of a Near Earth Object (NEO) flashing by the Pacific basin at nearly 9 km/s (see above) and coming within a very tiny 46,000 miles to impact. What is critical here is that the NEO was only spotted and identified 2009 DD45 at the very last moment and that it is now in an orbit around the Sun that will bring it close repeatedly to the Earth? Will it strike? Unknown. The Sun's heat changes the orbits of asteroids, so does a close pass to the Earth, and the future track of an Apollo asteroids is uncertain to a wide degree. All we can do is make assumptions and wait for the next opportunity to see the object when the sunlight and the orbit of Earth the the Earth-crosser allow. And what would a 65 meter rubble pile do if it strikes? If it hit the Pacific, estimated west of Tahiti, it would have sent a sizable tsunami in all directions, especially against the eastern coast of Australia and norther New Zealand. If it hits land, it is a multi megaton like detonation that sends out molten ejecta to start fires, perhaps around the planet. In brief, an NEO strike is a natural evolutionary moment that has happened millions of times and will again, millions of times. It is how the Earth was constructed. Carbon-based oxygen breathing bipedals swarming along coastlines or at rest in fragile wooden or iron roosts are not a critical part of the dynamic process of planetary bombardment. Can we stop an Oz killer? Nope. Planet killer? Nope? Can we evacuate? Where? It would solve the banking crisis for a few years.

Deliberate Snub

By John Batchelor on March 3, 2009 10:33 AM | 8 Comments

President Obama Shrugs Off the Special Relationship.

At first the detail of the President sending back the bust of Winston Churchill from the White House to Britain seemed a slight, trite, forgettable matter of style. Today, with the surprising cancellation of the joint press conference at the White House between Barack Obama PM Gordon Brown, the London papers are having at it in a full-scale dust-up. Not since the British Cornwallis was sent in disgrace from the Virginia shores in 1781, not since Andy Jackson smote the Redcoats at New Orleans in 1914, not since Woodrow Wilson doubted the English cause after the sinking of Lusitania in 1915 -- and so forth hyperbole -- has an American leader so flagrantly slapped down a British leader. Gordon Brown, battered at home, struggling with his EU allies for a common front on the financial crisis, bleeding banks like the shattered and nationalized RBS, came looking for public relations steroids from the popular new President. Instead what the unlucky Mr, Brown finds is a wet snowstorm blanketing the City of Global Warming and then a White House staff that cannot or will not rebuild the Rose Garden event of the press conference into an East Room event. Instead the PM will get a pool spray of a handful or reporters from both countries asking two questions only, and then out, well out, shrugged-off out. Handshake and a door, and take Churchill's drunken and seedy ghost with you.

Poodle No More

The London media built up to this meeting with the usual derision of a PM coming hat in hand to the Americans.

Unlike Tony Blair, Mr Brown would quite like to be a poodle to the President - if that meant he could lap up some of his popularity

The proper metaphor now is stray dog fed scraps while waiting for the ASPCA. Gordon Brown enjoys a speech to a joint session of Congress tomorrow, but this will only draw attention to the President's non event. The London Times is thorough to point to the fact that Mr. Obama's schedule was not exactly overwhelmingly state business -- a speech at Interior, a meeting with the Boy Scouts -- that he could not have delayed for a press conference in some fashion. There is that detail of a worldwide market panic and cliff-diving trade and retail and employment metrics. There is also a fresh report that Mr. Obama has written a letter to D. Medvedev of Russia seeking a grand bargain -- we'll make friends with Tehran if you cancel your nuke cooperation with Tehran -- that points to a new scenario that the rude strongman Russia is now more important to the Obama administration for world peace and comity than the toney, tidy, tiny ruined financial state of Great Britain.

Ken Lewis Enemy of the State

By John Batchelor on March 2, 2009 1:51 PM | 11 Comments

Breaking News that Bank of America's Beleaguered Chief Has Failed.

400,http---d.yimg.com-a-p-rids-20090302-i-r2676047462.jpg

Ken Lewis, the pugnacious, hysterical and surly boss of the deeply doomed Bank of America, now announces that he made a mistake with the Merrill deal and the Merrill bonuses and that he will depart his enterprise when he repays the Treasury the TARP $45 billion. This is good news for those of us who require candor and proportion in the economy before we can restore confidence to the nation. The markets are in a panic. The SPX is broken at 750 and will now fall helplessly toward 600 and even 450. It is useful to spend the time of panic on shooting the traitors, the enemies of the state, and Ken Lewis is in the first ranks. He erred when he acquired Merrill, he erred when he let those bonuses go out to Merrill's captain early, and he erred when he told the House and Senate committees in March, during the fools on the Hill episode, that BofA was solvent and stable. Bunk. And he erred the last time when he asked the board at BofA to support his leadership and continue his contract in January. Ken Lewis claims that he made a "tactical mistake" with TARP, that he took too much because he wanted a cushion. Bunk. He stuffed cash in his pocket and got out of Washington, and now he realizes it was a mistake? Bunk.

"I want to repay the Tarp money before I go anywhere, and by then I think we will be seeing the success of the Merrill Lynch acquisition," he said. "It would be very easy to disappear into the sunset but we have to slug through this."

The Enemy

Ken Lewis is part of the problem. He boasts that he will leave BofA when he repays the TARP the $45 billion. Go now. You are a disgraced captain of a foundered schooner. Go now. And we look forward to the details of your exit package. Go now. This will be funny. Go tonight. How many millions for the Marie Antoinette figure who is your spouse? How many millions for your retirement? What needs happen is that the Treasury bills you personally for the Merrill plunder. And your cronies. And your golf clubs. Ken Lewis is an enemy of the state, not because he is well-to-do but because he wrecked his company and made the people pay for it. The rude term is "thief." The only wit slap-funnier at the moment than that Ken Lewis will repay anything to anyone is that the moral hazard incarnate Tim Geithner is the people's bill collector. Better to outsource the job to Fagan of Twist than to wait for The Miniature Banker to collect on squandered billions just printed last night. The only irony deeper in the news than that Ken Lewis will join the ranks of the disemployed is that the Obama administration is a day closer to acknowledging that there are no enemies of the state left, and the enemy of the state is us. (Hat tip Pogo)

Commentary: Bank of America's CEO seems out of touch McClatchy Washington Bureau

FromMARKETS9:29pm

Stock markets tumble on new bank fears

Wall St hits lowest level since 1997, FTSE at six-year low

What's Breaking News Tonight?

Two Lessons From London In 1933

Spooky Parallels Between 1933 and 2009

Monthly Archives