Archive for January, 2009

January 29th, 2009

Times’ Cohen:
War on Terror is over

Posted in Geopolitics, President Obama by ed

This piece by the Times’ Roger Cohen speaks my reaction to Obama’s strategic moves re the mideast so far.

I just hope he’s not speaking too soon.

Ie, the puzzle remains as to what the new prez thinks he can accomplish with tanks and bombs in Pakghanistan.  Why is the Bush Pentagon (Gates-Mullen) running policy Over There?  What’s going on?

January 29th, 2009

Iraq gov’t bans Blackwater

Posted in Mideast & Oil by ed

Interesting.

January 27th, 2009

John Updike

Posted in Reading by ed

Has died.  The best American novelist since 1945.

A radio interview from 1984.

I read The Coup a year or two ago.  Marvelous pitch-perfect comedy, set in a place like Nigeria in the 60s as big oil came on the scene.

A fool in the Times today, while recommending Updike reading, suggested that people might skip the second of the four Harry Angstrom novels — Rabbit Redux — in my humble opinion his single greatest novel.   Set in 1969, written soon after, now reading as a great historical novel furthermore filled with his intense, precise evocations of inner and outer worlds …

Here’s a bit from an upcoming book of his final poetry:

It came to me the other day:
Were I to die, no one would say,
“Oh, what a shame! So young, so full
Of promise — depths unplumbable!”

Instead, a shrug and tearless eyes
Will greet my overdue demise;
The wide response will be, I know,
“I thought he died a while ago.”

For life’s a shabby subterfuge,
And death is real, and dark, and huge.
The shock of it will register
Nowhere but where it will occur.

As if to emphasize the loss, I find myself reading The Da Vinci Code.  The gargantuan bestseller.   The writing: embarassing garbage. The thinking: adolescent.  What we’ve become.

Also today: The Washington Post announces it will junk Book World, its Sunday book review section.

January 26th, 2009

All roads leading to
Price Controls

Posted in Money, President Obama by ed

1. The WS Jrnl reports that the big banks that received TARP money in the early fall went on to reduce lending in the last quarter of 2008. This seems to disappoint and surprise most commentators.

The big banks will continue to suck up and then hoard every drop of credit offered by the fed/gov’t, because they’re afraid that their paper insolvency leaves them vulnerable to the kind of confidence crisis that killed Bear and Lehman and Wachovia.

They are insolvent in the sense that their assets have declined so dramatically as to leave liabilities overweight. The assets have declined largely due to a confidence problem about the methodologies used to create and forecast performance of structured finance instruments like mortgage bonds and CDOs.

The most responsible thing the gov’t can do to cure the insolvency crisis is replace current accounting with a price control regime that would allow the banks to mark their wounded assets in accord with performance instead of (non existent) market value.

2. Obama and the Congress seem focused on the big stimulus package, as if this were 1933 — when the big banks were healthy and the government was a global creditor.

And when they do get around to the banking system, they talk about how to spend the remaining $350 bln TARP money. Going nowhere.

The stimulus bill should be passed. But it should be number two on Obama’s list, and in any case is the Congress’s baby. Team Obama should be focusing and acting on the banking system, where the institutions of the Executive are the point men.

Left to wonder what’s going on between the president’s ears, the financial media are awash in talk of the Second Wave of major bank failures and renewed calls for revoking mark-to-market accounting and/or going back to the original TARP idea of buying the wounded mortgage bonds and the like from the banks.

Or even nationalizing the banks (which in a sense isn’t saying much, given that Citigroup has already received over $40 billion in cash and $300 billion in guarantees — and could be bought in toto today for about $20 billion):

Privately, most members of the Obama economic team concede that the rapid deterioration of the country’s biggest banks, notably Bank of America and Citigroup, is bound to require far larger investments of taxpayer money, atop the more than $300 billion of taxpayer money already poured into those two financial institutions and hundreds of others.

But if hundreds of billions of dollars of new investment is needed to shore up those banks, and perhaps their competitors, what do taxpayers get in return? And how do the risks escalate as government’s role expands from a few bailouts to control over a vast portion of the financial sector of the world’s largest economy?

Bill Seidman is the wise old banker who piloted the Resolution Trust Corporation that bought up failed Savings & Loans 20 years ago and turned a profit for the government. Last week on the tube he said that neither nationalization nor reversion to the original TARP idea won’t work because recent experience shows that the wounded MBS etc cannot be accurately priced.

But further comments showed that what he meant is NOT that a “hold-to-maturity price” (Bernanke’s term) is unfathomable, but, rather, that in October the banks and the feds couldn’t agree on a sale price.

That is:

– Treasury didn’t want to pay best guess hold-to-maturity because that would be assuming all risk and paying all/most value to the miscreant banks.

– And the banks weren’t willing to take anything in the neighborhood of (non-existent) market value.

In other words: The problem is not that a performance-based price cannot be decently estimated. It’s that the principals don’t want to transact at those prices.

THUS a fortiori: Instead of buying the wounded assets, the feds should prescribe controlled prices for them (segmented demographically across the wounded sectors of the structured finance universe).

These controlled prices would be based on short-term trailing performance (how much interest actually being paid and how much principal actually being lost) and best guesses on housing price and foreclosures for coming six months or so. Prices would then be adjusted quarter by quarter.

The banks would get immediate write-ups to something near best guess hold-to-maturity price, while retaining risk going forward.

The feds would have to do a ton of spreadsheeting and regulating, but would not have to lay out the several trillions more that Paul Volcker spoke of this week while introducing Tim Geithner.

The market for mortgage bonds and related has been broken for 18 months, and the markets for credit card bonds are not much better. Broken markets do not always fix themselves. These are not.

Price controls WERE in the toolbox during the postwar era (Eisenhower, Kennedy, Nixon) — until the owner-operator class realized in the 80s that globalization was the ticket and got laissez-faire religion.

People who spent their formative years watching Age of Reagan television have driven the global economy into the ground. It’s time to bench them, and open the toolbox.

January 26th, 2009

FBI says something positive about 9/11 Truth

See Architects & Engineers for 9/11 Truth.

January 23rd, 2009

Castro praises Obama and
sorta says sayonara

Posted in Geopolitics, President Obama by ed

Interesting.

I’ve always liked him, of course.

January 23rd, 2009

NY Times: Women don’t
know what they want.
Or: They want everything

The Sunday magazine takes a break from the sociopolitical.

January 21st, 2009

Inaugural throat clearing

The festivities were joyous and interesting to behold. But life in the Scientific Civilization is no party.

The inaugural address was drafted by a 27-year old and its first scripted sentence — “Forty-four Americans have now taken the presidential oath” — was false.

(There have been 44 distinct administrations but 22 and 24 were presided over by the same American, Grover Cleveland. )

It’s odd, then — superstitiously disturbing in a small way — that the first sentence of this eloquent president, a man concerned like Jimmy Carter with speaking truth to the public, by adopting its conceit and then employing “American,” seems almost to have gone out of its way to misspeak. Spilled wine at a wedding toast …

Moments before uttering his first falsehood, the president smiled as Chief Justice Roberts stumbled in his own attempt to show the world that he’s the very smartest boy in the class.  (Roberts chose to recite rather than read the presidential oath, then flubbed it by first passing over and then misplacing the word “faithfully.”)

Obama — who as a senator voted against Roberts’ nomination — was sharp and smooth to pause when Roberts uttered his error. 

But it seems the president may not have said precisely the 35-word oath prescribed by the main body of the Constitution.  If so, most constitutional wonks seem to think it doesn’t matter given the 20th amendment.  But are right-wing headcases blogging this morning about the new president’s legitimacy?

Cheney in the wheelchair seemed Dr Strangelove, especially as he yanked on a black leather glove while rolling down a ramp exiting the White House.  Mein Fuhrer I can valk

090122_ed.gif

Obama’s talk thru the first half of the speech about responsiblity and sacrifice reinforces worries that the new administration will do little to undo the ill economic effects of Reaganism.

Indeed, it seems (from several reports out of the inner circle aired on the tube Monday and yesterday) that Social Security and Medicaire will be targeted.  Rather startling. To think that a long-anticipated reduction of working-class supports might be attempted by the most powerful Democratic constellation in DC since Reagan, as the GOP smiles from the sidelines.

I continue to get MyObama emails asking for donations without a word as to what purpose the money might be put.  If it turns out that the Congress dominated by Democrats will obstruct Obama’s sacrificial notions, perhaps we will see him go the way of Teddy Roosevelt, who in 1912 left the GOP (under which he had served as Vice President and then President) to form the Bull Moose Party, a short-lived and unsuccessful affair.

A two-party system makes sense in this respect:  it concentrates as much power as may be available for the two basic components of any society:  the Haves and the Have-Nots.  If the class struggle is one of the “childish things” (from Paul’s first letter to the Corinthians) that the president’s tweenage writer intended to target yesterday, he and I will probably be disappointed (for different reasons).

OVER THERE

The international half of the speech was hopeful.  Several great things were said in simple language.  This morning Obama is suspending prosecution activity at Guantanamo.  One way or another it seems it will be shut down.  If he drags his feet there, however, it will be an early indication of reverting to mean.

The incumbent chairman of the Pentagon, Admiral Mike Mullen, chatted for the tube at the CinC’s Inaugural Ball last night.  He seems a nice fellow and quite deferential to the new CinC, but it remains clear that both McCain and Obama last spring were apprised of and accepted the coming aggressive policy in Pakghanistan.

Mullen’s deference, then, may be deceptive; the policy is a child of the post-Rumsfeld National Security Apparat, seated it seems more in the Pentagon than CIA (although maybe I’m the more deceived).

TIM GEITHNER and WHAT’s TO BE DONE

Also today, wounded Treasury nominee Timothy Geithner is facing his Congressional betters.  His opening statement contained nothing of substance as to how to best spend the remaining $350 TARP cash, nor anything confessional or apologetic about the various missteps, including his own, that led to the current debacle.

But he spoke of a new Obama plan for the banks — and, while introducing Geithner, fomer Fed chairman Paul Volcker told the people’s reps that the rescue would cost several trillion more.

Despite his recent past and ancillary political problems, perhaps Geithner is the best candidate willing to take on the job.  I’m not against him so much as against the idea that he (or any one) is essential for the Treasury post.  It requires neither an artist nor a magician.  Implying that it does continues to obscure what’s wrong.

Recall that an explicit aim — ask Jude Wanniski and Jack Kemp — of Reaganomics was to paralyze the federal government with debt, when it was clear that the Congress would never consent to dismantle the New Deal and take us back to the Gilded Age.  Reagan told the world in his own first inaugural that government is the problem; Wanniski, Kemp, David Stockman & co. then sold a way to take it out of commission.

The current debacle is achieving this aim, however and with however much malice aforethought it may have come about.  Bush-Cheneyism has already more than tripled the national debt left behind by Reagan and Bush pere (who themselves tripled it), and Volcker, as noted, today growled about trillions more while introducing President Obama’s chosen point man.

Also recall the fears of some right-wingers about the globalizing North American Union movement, which, re economics, would dump the dollar and replace it with a new currency spanning Mexico, the US and Canada.  The current debacle may be taking us down that road, in that the one thing all financial pundits seem to agree on is that our $11 trillion and counting national debt means the dollar is toast against Asian currencies.  Long-term and perhaps mid-term (2-5 yrs).

(Against the Euro and the Pound …?   There it’s a race to the bottom, but I guess when dust settles the dollar will suffer the worse. )

Keeping the toasted dollar would work against globalization in many ways. It would reduce the flow of cheap goods from Asia into the US and stimulate the return of domestic american manufacturing.

SMILE

It may turn out that the best lasting effects of Obama’s presidency will be cultural:  Gangsta hipsters and Identity Politics out of style.  And, most importantly and astoundingly, this residing sense that the Civil War is over and that American society has taken a huge irreversible step in the direction of its ideals.  Things to smile about as we go under.

January 20th, 2009

Eyeless in Gaza

Posted in Mideast & Oil by ed

Ed Note: This –  first posted in August 2007 — is now bumped up to link to Roger Cohen’s current piece of same name in the New York Review of Books:

“I have never previously felt so despondent about Israel, so shamed by its actions, so despairing of any peace that might terminate the dominion of the dead in favor of opportunity for the living.”

Also note: it seems Israel has acknowledged bombing Gaza with phosphorus shells.  War crime plain and simple.

==========

They’ve closed the borders, they’ve cut jobs. Today they’ve cut the electricity, tomorrow they’ll cut the air for us.”

gazablackout.jpg

August 21 [2007] was the fourth day of no electricity in Gaza. There’s only one power plant and when Israel closed the border the Israeli company supplying the plant its fuel stayed home.

The Nation has some thoughts about the current situation.

As does Blind John Milton, channelling the blinded Samson:

O glorious strength,
Put to the labour of a beast, debased
Lower than bond-slave! Promise was that I
Should Israel from Philistian yoke deliver!
Ask for this great Deliverer now, and find him
Eyeless in Gaza, at the mill with slaves,
Himself in bonds under Philistian yoke.

January 18th, 2009

A Fortiori: Price Controls and
the lingering odor of Reagan

Posted in 2008 Elections, Money by ed

FINANCE

1.  Oppenheimer analyst Meredith Whitney, now celebrated for calling Citigroup a spade in 2007, displeased people early this new year by predicting over $40 billion in further writedowns by the big banks in the first half.

2.  A week later:

(a) Bank of America, which TV had delcared this past fall a survivor (along with Wells Fargo and JPMorgan Chase), disappoinrts by touching up Treasury and the Fed for another $120 billion (20 in cash and 100 in guarantees) in order to close its fire-sale buyout of Merrill Lynch.  Merrill, recall, went under for being loaded with mortgage bonds; and BoA is blaming December writedowns on those assets for the newly discovered black hole.

(b)  Citigroup announces a plan to give the appearance of dismembering itself, into a Good and Bad bank.  The Bad will contain the marketless structured finance assets at which the feds have already thrown approximately $350 billion in cash and guarantees.  (A measure of how much good has been thrown at the Bad: all of Citi’s common stock could have been bought this past Friday for about $23 billion.)

3.  This same week, foreclosure data for December indicate the trend is still accelerating.

Thus a fortiori:  The need now for PRICE CONTROLS on the wounded segments of the structured finance universe.

(Bernanke, during his first round of TARP salesmanship in October, spoke of a “hold-to-maturity price” for Trouble Assets the program might buy.  That notion would be the basis of a price control regime — ie, valuation based on current and best-guess future PERFORMANCE rather than (non-existent) market value. )

POLITICS

I’m happier with the choice of Larry Summers to head the White House economic team than I was when his name was first floated at Treasury.   He seems in a mood to ream people in high places.  Good.

As for Geithner …  He was part of the problem at the NY Fed.  I don’t understand why Obama thinks he’s golden.  Esp in light of his problems paying taxes.  To tell the public (as this does) that anyone is crucial to New England here is to encourage a kind of superstitious obscurantism about finance.

It seems, rather, that the balls-to-the-wall defense of Geithner has mostly to do with the felt need at Team Obama to ride into DC on a steamroller. Acknowledging that the choice of Geithner was a mistake would blunt big mo.

The choice of FINRA’s Mary Schapiro for SEC is similarly tainted (another top regulator of the current mess) and uninspiring.  I guess they needed a woman and were running out of slots.  Eliot Spitzer was the obvious Change candidate here.

Geithner didn’t pay $34,000 in taxes in two recent years. Spitzer transacted with prostitutes. The defense of Geithner sends an odd message.

The Lincoln train from Philadelphia this weekend, the Lincoln bible coming Tuesday, all seem a bit much — and inapt, in that as Lincoln arrived in the city it was clear near and far that it meant civil war.

(Lincoln was for Unity in the odd sense of being able and willing (after the Free Soil compromise broke) to divide the nation and imperil the state as never since or before over the issue of slavery — which he discussed during his campaign and presidency by talking about Preserving the Union.   I admire him for all of this, and merely wish to point out that he was not about Unity.)

The theme of Obama’s inaugural address is said (on the Sunday talk shows) to be Personal Responsibility and a Call to Sacrifice.  This (again) sounds like Reaganite marketing materials.

Our woes were not caused by irresponsible working class Americans. Most Americans have been sacrificing time and quality of life since the advent of Reagan.

Why then will we be getting this lecture?   Is it (inapt) Cosbyism, aimed at malingering black american males?  If so, it’s way too personal.  Or will it prove to have been a roundabout way to target the rich (with targeted sacrifice)?  Or, most likely, a way to begin watering the rhetoric of the campaign down into middle-of-the-road policy that will do little to address the economic warfare practiced by the owner class upon the working class since the advent of Reagan?

The black woman chosen to read a poem at Obama’s inaugural is telling the tube that Whitman was a poet of “diversity.”   No he wasn’t.  He was the precise opposite — the most potent expressor of universality and American melting-pot newness we have ever had.  But since one in a thousand TV viewers have ever read more than a wisp of Whitman …

Reaganism and the Identity Politics it provoked both need burying.  It remains a question if that’s what Obama’s about.  Indications so far are boxing the compass.

January 17th, 2009

Memo to Files:
NorthCom created in 1999

Why does the Pentagon want a Command for the homeland?

Interesting that the Pentagon asked the President.

Congress (the people’s house)?   Apparently none of their damned business.