It’s just a little bit of Policy Fail Repeating

Posted: August 6, 2009 | Author: | Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, president teleprompter jesus, Team Obama, The Bonus Class, The DNC, The Great Recession, The Media SUCKS, U.S. Economy | Tags: , , , , , , , | Comments Off on It’s just a little bit of Policy Fail Repeating

bad-bank-2When you let lobbyists make public policy, failure is an acceptable outcome. That’s because the point of the policy isn’t the public and isn’t necessarily doing what will work. The point of the policy is to enrich and perpetuate the entrenched interests. Every other possible goal becomes expendable including those that have to do with protecting the public purse and welfare.

Imagine my lack of surprise when I saw that the creation of a “bad bank” policy is back in today’s WaPo headlines. Go take a look at “U.S. Considers Remaking Mortgage Giants:’Bad Bank’ Would Wipe the Slate Clean for Fannie Mae, Freddie Mac by Taking Their Toxic Loans” and weep. This administration will reward bad players as long as there is a political reason for them to exist. So, instead of real reform of Fannie and Freddie, they’re proposing a solution that sweeps past mistakes under the rug and allows these failed institutions to operate in the same irresponsible way that brought them their current fate. There is no such thing as the discipline of the market or the bankruptcy court when you’re big enough to hire K Street impresarios to keep your show running and the federal government enables you.

The Obama administration is considering an overhaul of Fannie Mae and Freddie Mac that would strip the mortgage finance giants of hundreds of billions of dollars in troubled loans and create a new structure to support the home-loan market, government officials said.

The bad debts the firms own would be placed in new government-backed financial institutions — so-called bad banks — that would take responsibility for collecting as much of the outstanding balance as possible. What would be left would be two healthy financial companies with a clean slate.

The moves would represent one of the most dramatic reorderings of the badly shattered housing finance system since District-based Fannie Mae was created by Congress to support mortgage lending during the Great Depression. Both Fannie Mae and Freddie Mac, based in McLean, have government charters to buy home loans from banks, which they then repackage and sell to investors. The banks can then use the proceeds to offer more loans to home buyers.

The leviathans became emblematic of the financial crisis when they were effectively nationalized in September amid a market meltdown that revealed much of their holdings to be troubled. The government has since pledged more than $1.5 trillion, including $85 billion in direct aid, to keep the mortgage market working through Fannie Mae and Freddie Mac.

The proposal, which is preliminary and one of several under discussion, is scheduled to be taken up by the White House’s National Economic Council on Thursday.

What about the Japanese lost decade and all the papers and studies written about the bad bank policy did these folks miss? Well, of course, you do know that the head of the “White House’s National Economic Council ” is La-La Summers, right? Mister, I got mine from Wall Street? Let’s look at the other players who buy into this. I’ll just highlight them so you can see that it’s basically the same players that had some kind of supporting role in the original failure. Why does Washington D.C. continue to reward the very same people and players? It has too be some thing pathological.

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What’s That Lassie? Little Timmy’s in the Well AGAIN?

Posted: August 4, 2009 | Author: | Filed under: Bailout Blues, Equity Markets, Global Financial Crisis, president teleprompter jesus, The Bonus Class, The Great Recession, U.S. Economy | Tags: , , , , , , , , , , , | Comments Off on What’s That Lassie? Little Timmy’s in the Well AGAIN?

lassie Wow, it looks like Turbo Tax Timmy has gone rogue! We better send the press up to Alaska to chase down another Palin rumor. First, there’s that nastiness over the weekend with the Stephanapolous show on ABC where he explicitly said that the administration wasn’t ruling out new taxes on the middle class. (Something Larry-the-la-la Summers also inkled, but hey, he’s not a cabinet officer, he’s something akin to a Czar that has to be overthrown by something other than scandal and public displays of stupidity.) I believe that gave Robert Gibbs Excedrin headaches number 349-357 during yesterday’s presser.

Now, there’s rumors of a temper tantrum in the presence of all the nation’s topic economists and financial regulators outlined here in the WSJ. It seems he’s not getting the Obama way on this one. The ladies in the room have taken exception to his granting Ben Bernanke (possibly later, this year, La-la Summers) all the fun and power. I guess being an independent regulator with an agency all to yourself just isn’t what it used to be; especially when you have scary lady parts and a huge brain.

Mr. Geithner told the regulators Friday that “enough is enough,” said one person familiar with the meeting. Mr. Geithner said regulators had been given a chance to air their concerns, but that it was time to stop, this person said.

Among those gathered in the Treasury conference room were Federal Reserve Chairman Ben Bernanke, Securities and Exchange Commission Chairman Mary Schapiro and Federal Deposit Insurance Corp. Chairman Sheila Bair.

Friday’s roughly hourlong meeting was described as unusual, not only because of Mr. Geithner’s repeated use of obscenities, but because of the aggressive posture he took with officials from federal agencies generally considered independent of the White House. Mr. Geithner reminded attendees that the administration and Congress set policy, not the regulatory agencies.

Mr. Geithner, without singling out officials, raised concerns about regulators who questioned the wisdom of giving the Federal Reserve more power to oversee the financial system. Ms. Schapiro and Ms. Bair, among others, have argued that more authority should be shared among a council of regulators.

This current turf battle is only the latest move by a group within government possibly thwarting the Treasury’s plans to continue uploading tax dollars to the bonus class in the guise of saving the financial sector. If there’s still disagreement about this point, can you imagine what other things are going on in complete disarray behind the scenes? Who is really in charge of solving this overt act of sibling rivalry? Well, if you have figured out where the buck stops in this administration, you’re doing better than me. (Hint: these folks are ALL presidential appointments).

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Fed Continues to Subsidize the Bonus Class

Posted: August 3, 2009 | Author: | Filed under: Equity Markets, Global Financial Crisis, The Bonus Class, The Great Recession, U.S. Economy | Tags: , , , , | Comments Off on Fed Continues to Subsidize the Bonus Class

logo-mr-monopolyI’m again relying on the Financial Time’s for this latest bit of no suprises here. The big question is when will the political class pull the rug out from under the bonus class?

Wall Street banks are reaping outsized profits by trading with the Federal Reserve, raising questions about whether the central bank is driving hard enough bargains in its dealings with private sector counterparties, officials and industry executives say.

The Fed has emerged as one of Wall Street’s biggest customers during the financial crisis, buying massive amounts of securities to help stabilise the markets. In some cases, such as the market for mortgage-backed securities, the Fed buys more bonds than any other party.

However, the Fed is not a typical market player. In the interests of transparency, it often announces its intention to buy particular securities in advance. A former Fed official said this strategy enables banks to sell these securities to the Fed at an inflated price.

The resulting profits represent a relatively hidden form of support for banks, and Wall Street has geared up to take advantage. Barclays, for example, e-mails clients with news on the Fed’s balance sheet, detailing the share of the market in particular securities held by the Fed.

“You can make big money trading with the government,” said an executive at one leading investment management firm. “The government is a huge buyer and seller and Wall Street has all the pricing power.”

Let me be clear that the Fed is not a government agency. It makes profits each year from services it provides banks and returns those profits to the Treasury. The Treasury uses the Fed as its agent for a few services but the Fed is a central bank, the bank of bankers. It is not part of the Treasury per se. However, even with that being said, this news continues to be disturbing. Wall Street is gaming the Fed because they can. These things are monopoloy/oligopoly behaviors and we have laws against them!

Barney Frank, chairman of the House financial services committee, said the potential profiteering may be part of the price for stabilising the financial system.

“You can’t rescue the credit system without benefiting some of the people in it.” Still, Mr Frank said Congress would be watching. “We don’t want the Fed to drive the hardest possible bargain, but we don’t want them to get ripped off.”

The growing Fed activity has coincided with a general widening of market spreads – the difference between bid and offer prices – as the number of market participants declines. Wider spreads enable banks, in their capacity as market-makers, to make more profit.

Larry Fink, chief executive of money manager Black Rock, has described Wall Street’s trading profits as “luxurious”, reflecting the banks’ ability to take advantage of diminished competition.

“Bid-offer spreads have remained unusually wide, notwithstanding the normalisation of financial markets,” said Mohamed El-Erian, chief executive of fund manager Pimco in Newport Beach, California.

Spreads narrowed dramatically during the years of the credit bubble.

Brad Hintz, an analyst at Alliance Bernstein, said he doubted that spreads would ever return to those levels, a development that could be pleasing to the Fed.

“They want to help Wall Street make money,” he said.

I’m trying to think why any one would want Wall Street to make huge profits by arbitraging what is basically government debt. Why, in the face of this situation, would Congressman Barney Frank make a lame comment like that? Any one have any suggestion? Read the rest of this entry »

The Kitty Genovese Case: A Fascinating Intersection of True Crime, Psychology, and Media Misinformation

Posted: August 2, 2009 | Author: | Filed under: GLBT Rights, psychology, Violence against women | Tags: , , , , , , , , , , , | Comments Off on The Kitty Genovese Case: A Fascinating Intersection of True Crime, Psychology, and Media Misinformation
Kitty Genovese

Kitty Genovese

AUTHOR’S NOTE: I want to thank Bob Somerby for inspiring me to do more research into this crime that I remember so vividly from my teenage years. Somerby included the following comment in a recent post about “Ceci Connollyism.”

It was all completely different back then: In the Wikipedia account, note how the high-profile Genovese case was driven along by “factually inaccurate,” “melodramatic” New York Times reporting.

Apologies in advance for the length of this post. I simply couldn’t help myself, and I hope some of you will enjoy it.

A Murder in Kew Gardens

On March 13, 1964, at around 3:30AM, there was a murder in the Kew Gardens section of Queens, New York. The murder probably wouldn’t have gotten much publicity at all if it hadn’t been for a sensational article that appeared on the front page of The New York Times, a couple of weeks later. The Times story led to groundbreaking research in social psychology and the discovery of new and counter-intuitive information about human behavior.

It was very late, very cold, and very dark when 28-year-old Catherine “Kitty” Genovese parked her car at the Kew Gardens train station after driving from Ev’s Eleventh Hour Bar in Hollis, where she worked nights as manager. When she got out of her car, she saw a stranger walking toward her. The man, Winston Mosley, 29, stabbed Genovese two times as she hurried past a bookstore on Austin Street, pehaps headed a local bar named Bailey’s to seek assistance. She called out, “Oh my God. He stabbed me. Please help me,” and fell to the ground. Winston was leaning over her to stab her again, when he heard a man’s voice calling from a window in an apartment building across the street, “Leave that girl alone!”

Winston Mosley

Winston Mosley

Startled, Mosley ran down an alley, got into his car, and backed up, ready to drive off. Lights had gone on in the nearby apartment building, but they went off again. Mosley got out of the car and again followed Genovese, who had reached the doorway of her apartment building, which was in the back of the building at 82-62 Austin Street. As she fell forward through the doorway, crying out, “I’m dying, I’m dying,” Winston caught up with her, stabbed her again, and then raped her. A short time later, a neighbor, Greta Schwartz, who had called the police after receiving a phone call from another neighbor, ran down to the lobby and cradled Kitty in her lap until the paramedics arrived.

From interviews in the neighborhoods of the two stabbing incidents, police learned that as many as 37 people had seen or heard part of the stalking and murder of Kitty Genovese by Winston Mosley, but supposedly none of them had called the police except Greta Schwartz. Read the rest of this entry »

De-linking an American Myth

Posted: August 2, 2009 | Author: | Filed under: Health care reform | Tags: , , , , , , , , | Comments Off on De-linking an American Myth

There are so many thinright-winggs wrong with the current conversation on Health Care Reform that it makes it difficult to catch a whiff of civility on the topic. Most of the problems come from good old fashioned ignorance. Why do we continue to see this debate more in mythic terms than fact-based? It’s enough to make this Cajun country economist round up a few alligators to go after her blue dog pols. This reform should save the country and businesses beaucoups bucks if done right. Every other industrialized/advanced nation has gone before us! There are examples we can learn from! Most of them include way more provider choice than we have now!

Still, all we get are canards of epic proportion. Moses did not come down from the Mount with employer based insurance programs inscribed on the tablets. We can do much better! The continuing screed from the right claiming that a single payer insurance option is complete nationalization of the delivery system that will lead to huge wait times and ice floe ends for the elderly is probably the most obvious example of making policy based on myth rather than common sense and data.

I continue to have to remind people that while that story about some one’s Aunt Sally that died in Canada while awaiting hip replacement surgery is touching, it is an anecdote. Anecdotes are just specific data points in a population that may or may not be representative of what goes on for the most part within that population. You need a database to get the complete picture. That explanation even gives the anecdote the benefit of being true since many are just those viral things passed around the internet as urban myths. One data point is not the proper reference for any kind of policy decision. Try, however, to tell that to the general population and some depressingly dim witted pol like the majority of mine from Louisiana.

There are so many myths surrounding the health care debate that Nancy Pelosi has sent fact sheets to Democratic Congress critters to help them fight off the disinformation. (Yeah, like people are going to take THAT source as the best messenger for the program. What’s her approval rating? Some where in vpResident Evil range?)

House speaker Nancy Pelosi returned home to San Francisco this weekend carrying a red, white and blue pocket card that will help guide her through the August recess. The card lists talking points she hopes will convince everyday Americans of the benefits they could receive under the health-care reform plan she hatched with other House Democrats last week.

Pelosi distributed the cards to all 256 of her caucus members, arming the unruly Democratic majority for battle in their disparate districts across the country. After laboring for weeks in Washington to reach a compromise between liberal and conservative factions of her caucus, Pelosi is taking the fight outside the Beltway, where polls show that her popularity is faltering. She plans to stump for health-care reform in San Francisco, Denver and other cities.

At stake is legislation that could define her legacy as speaker and shape President Obama’s political future. Pelosi called health-care reform with a public insurance option “the issue of an official lifetime.”

“August will be a month of inoculation against the negative message of the insurance industry,” Pelosi said in an interview, resting in a yellow armchair in her stately office, which has sweeping views of the Mall. “It will be a month of education in terms of what is in our bill. It will be a month of communication — listening, listening, listening to what constituents have to say.”

In this particular debate, I’m not sure we need to listen to everything constituents have to say because they’re getting their data from viral email anecdotes and TV infomercials from the insurance industry. I’d say it’s more about at looking at what the facts on the ground say and helping constituents make sense of what various options with health care reform would mean to the American people. We need to debunk the myth that we have this great functioning system now. We also need to de-link from the US pathology that makes our health care system unique, costly, and deadly.

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