You don’t have to believe me. The S&P says so. At the very heart of the supposedly free market, right there on Wall St., they’ve got no use for it. Standard & Poors announced a mass of ratings cuts for the biggest names in banking.
Bank of America and Goldman Sachs, … Barclays, HSBC, … Citigroup, … Morgan Stanley, Commerzbank, and UBS, [all] had ratings cut by one notch. …
But. But, but, but, and however,
it upgraded ratings on two Chinese banks, Bank of China Ltd. and China Construction Bank Corp. …
The upgrade for the Chinese banks has come at a time when there have been increased concerns about the health of the country’s banking sector. …
Analysts said while the Chinese banks were prone to the risk of accumulating bad debt, they still remain a safe bet.
“The key factor is that they are largely government owned, that means the risk to shareholders of these banks is quite low.”
Too funny. The joke is on me, thinking they believed all that free market eyewash.
Good Morning!! I think I have some interesting reading for you today, so let’s get right to it.
Last night I wrote about Goldman CEO Lloyd Blankfein possibly being in trouble with the feds. Interestingly, on Monday another high-profile exec announced he’ll be stepping down. I’m referring to S&P president Deven Sharma. From The New York Times:
The ratings agency Standard & Poor’s said late on Monday that its president, Deven Sharma, who has become the public face of the firm in the wake of its historic downgrade on the United States’ long-term debt rating, will step down and leave the company by the end of the year….
The management change had been in the works for months and was unrelated to either the Justice Department’s inquiry or to the emergence of the activist investors, Jana Partners and the Ontario Teachers Pension Plan, according to people briefed on the matter.
Oh really? Kind of a strange coinky-dink, then, isn’t it?
The ratings agency’s decision to downgrade the United States’ long-term credit rating to AA+ from AAA on Aug. 5 set off a storm of controversy, including criticism by President Obama and Treasury Secretary Timothy F. Geithner. The decision contributed heavily to the worst drop in American stocks since the financial crisis three years ago, as well as volatility that continues to whipsaw the markets weeks later. The other big ratings agencies, Moody’s and Fitch, maintained their top-tier rating on United States debt.
At the same time, the agency is being investigated over whether it improperly rated mortgage securities in the years leading up to the financial crisis. Standard & Poor’s, along with the other major ratings agencies, gave their highest ratings to bundles of troubled loans that appeared less risky during the housing boom, but have since collapsed in value.
Since the financial crisis, the agencies’ business practices and models have been scrutinized by Congress, and Standard & Poor’s is also being investigated by the Justice Department, people briefed on the matter have previously said. At issue is whether the agency’s independent analysis was driven by profits. The Justice Department inquiry, which began before the Standard & Poor’s downgrade of the United States’ debt, is centered on whether analysts’ decisions to assign securities a low credit rating on subprime mortgage loans were overruled by business managers.
Right. I’m sure none of that had anything to do with the president of the troubled company stepping down. /snark
The Financial Times has a piece on the incoming president, Douglas Peterson.
As head of Citigroup’s Japanese operations in 2004, Mr Peterson dramatically bowed in apology before Tokyo regulators after they shut down Citi’s private banking operations there.
Now, as he takes over the embattled ratings agency just weeks after its unprecedented downgrade of US credit, Mr Peterson is likely to find himself before regulators in the US, who are looking into the downgrade and reportedly investigating S&P’s ratings of mortgages before the financial crisis.
Yet, it is Mr Peterson’s experience in Japan, and his more recent turn running Citibank, the retail banking arm of Citigroup, that has given S&P’s owner McGraw-Hill confidence that he is the right man for the job.
Seven years ago, Mr Peterson was given the tricky task of mending relations with Japanese regulators and rebuilding Citi’s tarnished reputation after the US bank’s private banking unit was found to have illegally amassed large profits and was ordered to close down.
By all accounts, the affable Mr Peterson, who is widely described in Tokyo as “nice” and “sincere”, succeeded in reassuring the Financial Service Agency and the Japanese public alike that Citi could once again be trusted with the considerable financial assets of one of the largest economies in the world.
IOW, Peterson has been hired because of his pleasing personality and his ability to make friends and influence people.
But Sean Gregory at Time argues that “A New Leader Won’t Save S&P.”
It’s tempting to read the resignation of Deven Sharma, who stepped down as president of S&P Monday night, as an admission that the rating agency goofed in downgrading the United States’ sovereign rating from AAA to AA+, even as Fitch and Moody’s maintained America’s top grade. Warren Buffett said the U.S. should be rated “quadruple A.” The Treasury department complained that S&P overestimated the nation’s future debt by $2 trillion. Timothy Geithner said that the S&P decision shows “a stunning lack of knowledge about basic U.S. fiscal budget math. And I think they drew exactly the wrong conclusion from this budget agreement.”
Guess Sharma and Geithner won’t be hanging out at any holiday parties. If the S&P downgrade was indeed a mistake, it was an expensive one. In the week after the Aug. 5 S&P downgrade, according to Bloomberg, the market value of global stocks tumbled by $7.6 trillion. Sharma, a former Booz Allen Hamilton consultant who has headed S&P for the past four years, might not be trumping this fact on his newly-polished resume. So you’re the guy who cost the world $7.6 trillion in wealth? You’re hired!
Like FT, Gregory points out that S&P has been shopping for a new leader for months, mostly because Sharma has failed the company in a number of ways. So will a new president make a difference? No, because the ratings agencies simply aren’t qualified to evaluate the credit of sovereign states.
There’s a frightening earthquake story at The Daily Beast: The Quake We Should Fear. Apparently it’s the Midwest that is due for a big one–not the east coast.
Early in the morning of May 16, while most of America was being titillated and transfixed by the appearance in court of the then-suspect Dominique Strauss-Kahn, an urgent message was suddenly received at the headquarters of the Federal Emergency Management Agency (FEMA) in Washington, D.C.
Reports were streaming in of a catastrophic earthquake, magnitude 7.7, that had struck the Midwest near the town of Marked Tree, Ark. First reports were alarming: phenomenal property damage; casualty figures were unprecedented; transportation links were severed; and cities like St. Louis, Memphis, Little Rock, and Cincinnati had been thrown into utter turmoil. Eight states were believed to have been directly affected, and it was thought the death toll would be in the thousands.
A gigantic federal relief mission swung into action. Nine thousand National Guardsmen were ordered to be deployed. Triage centers were opened in all the affected cities—a list that grew longer as a secondary magnitude 6.0 earthquake struck close to the city of Mt. Carmel, Ill. The Red Cross deployed emergency teams. Power companies were given priority to restore electricity and gas supplies. Heavy equipment was sent in to clear highways and railway tracks.
Within 72 hours some kind of order was restored. Hospitals found themselves more able to cope with the vast number of patients suffering injuries. Refugees fleeing in panic were being assembled into special camps. Temporary tent cities were set up along the main refugee routes.
Huh? Oh wait. That was a FEMA exercise. But it was based on the real possibility of a major earthquake on the Madrid fault. It’s happened before and is due to happen again.
This year marks the bicentennial of the great swarm of earthquakes that afflicted New Madrid between December 1811 and February 1812—hundreds of them, day after day, but punctuated by four enormous ruptures, two occurring on Dec. 16, and one each on Jan. 23 and Feb. 7. These caused spectacular effects all across the then young, sparsely settled United States—toppling church steeples in South Carolina, ringing church bells in Boston, causing the Mississippi to reverse it course, and sinking numerous properties deep into the liquefied earths of the prairies.
Yikes! But I’m still worried that Boston hasn’t had a major earthquake since 1755–so we’re probably due also.
Yesterday I came across a couple of interesting stories on Muammar Gaddafi and his son Saif that you might want to check out.
From Scientific American: Egotist Rex: Are a Dictator’s Defiant Statements Indicative of Self-Delusion? It’s an interview with George Washington University Professor of Psychiatry Jerrold Post.
The interviewer asks Post about the many bizarre statements that Gaddafi has made since the rebellion began. He seems out of touch with reality. Is he delusional? Post discusses the circles of sycophants that surround every world leader–this may make it difficult for the leader to see what is really happening outside this protective bubble of supporters.
They can have a very unrealistic understanding and believe, as Qadhafi stated again and again, “My people, they all love me.”
I found this language of his quite remarkable. And with Qadhafi as an exaggerated example, this is true of any of the other leaders, too—namely, they believe they have widespread support. If there are public demonstrations against them, that must reflect outside agitators. This was true with [ousted Egyptian president Hosni] Mubarak as well. He spoke of outside conspiracies.
But it is particularly true of Qadhafi. There is an interesting kind of almost syllogism for him: “My people all love me, and therefore if there is anyone protesting against me, they are not really my people, and that must be a consequence of outside provocation.” And one of the points that he made early on was that this was crazed youth who were on hallucinogens with which their Nescafe had been laced, which I thought was rather creative, really.
I found Qadhafi’s language in general very striking. And what is most interesting about it is it is entirely in the first person singular: “My people all love me. They will support me. My people, they love me.” It was very “me” centered.
Next the interviewer asks whether narcissism is a characteristic of many national leaders? The response could perhaps be applied to someone a little closer to home, if you know what I mean. Check it out.
Vanity Fair has a new article up about Saif Al-Islam Gaddafi. It’s rather long, but here’s the introductory paragraph:
Saif al-Islam Qaddafi—son of Muammar, and long regarded as his heir—was subjected to an arrest warrant months ago by the Criminal Court for crimes against humanity. Libyan rebels in Tripoli reported that he was in custody, but Saif soon appeared in public, rallying what’s left of pro-Qaddafi forces. As NATO bombs fell on Libya, the distinguished international lawyer Philippe Sands sat down with those who know Saif Qaddafi best—a London professor, his Libyan mentor, and the prosecutor who may decide his fate. Saif Qaddafi may claim that he was merely an intermediary, or a force for moderation, or perhaps even a victim. But whatever the claims, according to the prosecutor, he was deeply complicit in his father’s crackdown this year.
Hurricane Irene could become a category 3 sometime today. It’s still predicted to go right up the coast to New England. States all along the east coast are preparing for the worst. Will it hit the Cape and islands? The LA Times suggests President Obama might have to be evacuated.
First, President Obama’s golf game was interrupted by an earthquake. Now, it appears that Hurricane Irene is beating a path toward Martha’s Vineyard, where the president is vacationing with his wife and two daughters.
The National Hurricane Center’s latest forecast shows Hurricane Irene reaching landfall in the Carolinas late Friday and early Saturday before raking its way up the East Coast and into New England. Coastal areas are urged to keep tabs on the storm’s path and remain alert for possible evacuation orders as the hurricane continues to grow in intensity.
It swelled to a Category 3 storm overnight with winds that could exceed 110 mph, and remains on track to gain in strength and ferocity to become a Category 4 hurricane.
Obama is supposed to be in Washington on Sunday to speak at the opening of the Martin Luther King Memorial and then return to the Vineyard. The storm is supposed to hit DC before moving up to Massachusetts.
The eye of the storm appears to be sticking to the coastal outlines, which could spell trouble for Martha’s Vineyard, an island accessible only by boat or plane. As it has done throughout the storm, the National Hurricane Center stresses that the projected path could change dramatically as weather projections come into sharper focus over the next several days.
Hmmm…. Perhaps Mother Nature is trying to send a message to our obtuse leader: Americans need jobs!! Or maybe not.
That’s all I’ve got for you today. What are you reading and blogging about?
Good Morning!! Let me get a sip of my breakfast tea, and then I’ll share what I found in the news today.
After doing his level best to wreck the U.S. economy, President Obama headed to Chicago to celebrate his birthday and rake in some campaign donations.
Taking a brief hometown respite Wednesday night, President Barack Obama used a 50th birthday bash in Uptown to raise re-election money from a friendly crowd as he sought to recharge a presidency showing signs of scars from Washington’s partisan battles.
The president told supporters at the Aragon Entertainment Center that the nation doesn’t have time to “play these partisan games.”
“I hope we can avoid another self-inflicted wound like we saw over the last couple weeks,” Obama said of the recent debt-ceiling gridlock.
Although Obama doesn’t turn 50 until Thursday, his visit symbolized presidentially and politically a need to turn the corner following weeks of bruising debate over raising the nation’s debt ceiling and cutting the country’s deficit.
Awww, poor guy. Screwing the poor, the elderly, baby boomers, and the working- and middle-classes must be really exhausting.
Meanwhile, Tavis Smiley and Cornel West are heading up a “poverty tour”
to highlight what they see as deficiencies in the Obama’s administration and to force the president and Congress to pay more attention to poor people who have been hit hardest by the recession.
Smiley called the legislation, signed by the president, “a declaration of war on the poor.”
“I don’t understand how the president could agree to a deal that does not extend unemployment benefits, does not close a single corporate loophole and doesn’t raise the taxes on the rich,” said Smiley. “The poor are being rendered more and more invisible in this country. Nobody, not the president, not the Republicans in Congress, is speaking to the truth of the suffering of everyday people.”
Paul Krugman was on Keith Olbermann’s show last night. I keep forgetting to watch that! Krugman discussed a number of things related to the debt ceiling bill, including Newt Gingrich’s remark that the Obama’s is “the Krugman Presidency.” It is to laugh!Vodpod videos no longer available.
Today, Obama’s press secretary Jay Carney said there won’t be a double-dip recession and the economy is going to grow.
He blamed the earthquake and tsunami in Japan, higher energy prices, default worries in Europe and recently resolved uncertainty over raising America’s borrowing limit. Carney said, “We believe the economy will continue to grow.”
Al-righty then! I guess we have nothing to worry about.
At his blog, Krugman responded that “hope is not a plan.”
Of course there’s a threat. Larry Summers puts the odds at one in three; I might be slightly more optimistic, but the risk is very real. Who, exactly, is at the White House who knows better?
And think about the politics here. For two years the White House has been determinedly cheerful, always declaring that the recovery was on track, that its policies were working fine. And all it did was squander its credibility. Maybe admitting the truth, saying that in fact we hadn’t done nearly enough, would not have helped get useful legislation through Congress. But at least it would have conveyed the message that the WH was living in the same reality as ordinary workers.
Now they’re doing it again. To what purpose? Do they think the markets will be reassured? Do they think consumers will be reassured? At this point, after the “summer of recovery” came and went a whole year ago?
Apparently, that is what they think. Via Digby, Tim Geithner, who seems to be the person Obama listens to most on economic issues, strongly believes in the “confidence fairy.” He must also be the source of Jay Carney’s belief that we won’t have another recession, because that’s what Geithner told George Stepanopoulos a couple of days ago.
GEORGE STEPHANOPOULOS: But don’t you think that any deficit reduction now will — will hurt the attempts of the economy to recover?
TIM GEITHNER: You know, I think the — basic reality we live with and, you know, part of governing is recognize we live with — we don’t have unlimited resources, and we inherited and are left with unsustainable deficits long term. And the president understands that for the sake of the economy long-term it’s very important we demonstrate to the American people, to people around the world that we can get our arms around this and start go back to living’ within our means.
Now, we want to do that very carefully so we create room for the economy to grow and we have the resources necessary to invest in things that are going to be very important to the future like education, like infrastructure, like incentives for private investment. And to do that, it is absolutely essential to lock in these long term savings. Now — the president was very strong on this and made sure that we were not going to accept spending cuts that would damage the prospects for near term recovery. Now, with this behind us, and we get this —
GEORGE STEPHANOPOULOS: So this won’t cost us jobs?
TIM GEITHNER: No, it will not. Now … if we put this behind us then we can turn back to the important challenge of trying to find ways to make sure that we do everything we can to get more people back to work, strengthen our growth. And we’ll have more ability to do that now with people more confident and we can start to get our arms around the long-term problems.
WTF?! Is this guy for real? As Krugman said, “hope is not a plan,” but they don’t seem to have anything else.
At The Nation, George Zornick asks a very good question: Is it time to downgrade the ratings agencies?
…by almost all accounts inside the beltway, a downgrade in the federal government’s credit rating would be catastrophic. But a closer look at who issues these ratings, how they do it, and the real-world impact of these ratings tells a different story.
The first clue that these ratings might not be highly calibrated, serious indicators of creditworthiness can be found in the 2008 economic collapse. The financial products created by Wall Street that were full of toxic mortgage securities were all blessed with gold-star ratings as safe investments from the country’s three main credit ratings agencies, Moody’s, Fitch and Standard and Poor’s.
These products were so awful as to destroy Lehman Brothers, threaten many other trading firms, and plunge the economy into recession, but the ratings agencies consistently told investors they were safe. As William Greider has noted here, this essentially made the rating agencies “unindicted co-conspirators” in the collapse.
Were these agencies just bad at their jobs? Maybe, but Greider offers another more sinister theory: since the banks pay the rating agencies to examine their financial products, a harmful rating would persuade the banks to just shop elsewhere for a more favorable outcome. “This is an outrageous conflict of interest at the very heart of the financial system,” Greider writes.
Overpaid New York Yankee Alex Rodriguez is in trouble again, this time for illegal gambling. Baseball officials opened an investigation after
Star Magazine reported that Rodriguez “played in an underground, illegal poker game where cocaine was openly used, and even organized his own high-stakes game, which ended with thugs threatening players.”
Under the rules that govern baseball players, Rodriguez will have to truthfully answer baseball’s questions. If he acknowledges that he played in underground games or if officials uncover evidence that he did so, he could face a suspension.
The report Wednesday came a month after Major League Baseball opened its own investigation into Rodriguez’s ties to gambling. The investigation was prompted by a Star Magazine report in June that said Rodriguez had participated in a high-stakes illegal poker game with the actors Tobey Maguire, Leonardo DiCaprio, Ben Affleck and Matt Damon.
Hmmm…he was playing with Red Sox fans Affleck and Damon. I wonder who talked to Star Mag? I also learned on Google that A-Rod is dating actress Cameron Diaz. Boy is she making a big mistake.
To Marla Cooper of Oklahoma, her uncle was D.B. Cooper — except she knew him as Uncle L.D. She believes he died in 1999.
“I saw my uncle plotting a scheme,” Cooper told CNN’s Brooke Baldwin of what she said she remembers witnessing as an eight-year-old girl four decades ago.
Cooper said she was with two uncles at her grandma’s house around Thanksgiving time.
“I was with them while they were plotting it. I didn’t really know what was going on,” Cooper said. “Afterwards on Thanksgiving Day, I saw them return and I heard them discussing what they had done with my father. I have very vivid memories of it.”
Her claim might be cause for healthy speculation, especially 40 years after the fact, but two sources close to the investigation have told CNN that Marla Cooper’s tip led to the FBI reviving the case and for the past year the agency has been actively working the lead.
She says her uncle returned home badly injured and was treated at a VA hospital. Then he disappeared and she never saw him again. Her family made her swear she would never talk about what had happened.
Finally, from Think Progress, here’s an update from the annals of wingnut craziness: MO High School Bans ‘SlaughterHouse Five’ From Curriculum, Library Because Its Principles Are Contrary To The Bible
On Monday at the Republic, MO school board meeting, four Republic School Board members reviewed a year-old complaint that three books are inappropriate reading material for high school children. In a 4-0 vote, the members decided to ax two of the three books from the high school curriculum and the library shelves: Twenty Boy Summer by Sarah Ockler and Slaughterhouse-Five by Kurt Vonnegut. Speak by Laurie Halse Anderson was spared. The resident who filed the original complaint targeted these three books because “they teach principles contrary to the Bible”
Wesley Scroggins, a Republic resident, challenged the use of the books and lesson plans in Republic schools, arguing they teach principles contrary to the Bible.
“I congratulate them for doing what’s right and removing the two books,” said Scroggins, who didn’t attend the board meeting. “It’s unfortunate they chose to keep the other book.”
Horrors! Contrary to the Bible? We can’t have that! You know, sometimes I’m very grateful to live in a relatively civilized place like Boston. This is one of those times.
On that note, I’m going to get another cup of tea and then check out what you all are reading and blogging about. Please post your links in the comments.