Daily Telly’s Pritchard
re IMF’s new (old) paper

Some call it a global currency.

On the heels of the recent Chinese call for something such.

I imagine Peking’s not thinking the IMF however.

Dem Builderburgers ain’t so bad,
heck, I seen worse

An American in Ireland, Richard Moore, worries often aloud about the world in articulate, informed style — at the moment about the Bilderbergers. Just now I dashed off a reply email that without trying hard encapsulates a view of the world (if not a Worldview):

The Bldbrgers are good and useful to consider. They don’t Run the World but they give insight into some of the people involved in the high level struggles to operate and endure the world.

They express a more European point of view than, eg, the Davos gatherings, which are more technocratic and global and American influenced. This European view is caught in our time in the middle, and I tend to sympathize with it.

I mean — the world today is dividing in a new way:

1. Russia and China, among the major powers, are still nation-states. Their owner-operators are still wed to their Nations (ie People). These powers can be read fairly easily as to what their interests are and how they are likely to behave to protect and forward them.

2. The US since the advent of the bomb has been ceasing to be a nation-state (if indeed it was ever a good idea to consider it as such).

(The bomb brought pressure to control events globally and to do so without major-power war; this pressure has been bending the minds of the people who run the National Security Apparat since the end of the war 1945. This is one big reason why the Apparat has grown so strong in Washington while the Congress has almost ceased to exist as a policy making body and the White House careers back and forth, with presidential heads more often than not winding up on platters.)

The owner-operators of the US began to reassert themselves behind Reagan’s smile and broad shoulders, having gone to school on the lessons of Vietnam (an educated working class is not a good idea, reliable pensions are not a good idea, fairly free and balanced mass media are not a good idea) and having realized that the technological revolution meant (re capital) that Globalization was the ticket.

To be extremely brief then: The US since the war has been morphing from something like a nation-state to a thing bestride the globe with two primary interests: to float the National Security Apparat (chiefly the Pentagon but also the mature so-called intelligence agencies) and to float the large globalizing corporations. Responsibility of the owner-operators for and to the Nation (ie People) has become almost neglible.

(Even the most Progressive voices among the American owner-operators are corporate-centric, as if someday Google may just blast off into space, Silent Running with Hughie, Dewey and Louie … )

3. Europe occupies too a rather new and strange space — having undertaken the Euro Union. But the traditional bonds between the component ruling classes and Nations (Peoples) — born of millenia of strife and tight geography — are still rather strong.

The Bilderbergers convey this uneasy place in the middle — between the brute classico Russian and Chinese nation-states and the global military-industrial enterprise based in the U.S.

Europe: Trying to “compete” with the run-amok North American colossus, while trying (as always) to survive the “Asian Hordes,” while trying to maintain the distinctly European take on the Individual-in-Society.

For my money, Europe’s approach to Modernity (the technological civilization that in the West succeeded Christendom) is superior to the American, the Russian and the Chinese. European societies seem to me superior.

So then — even though my own feet are rooted in the Working Class, I don’t find the Bilderbergers as alarming as some. (And I have always valued the reports from the chamber that Mr Estulin has been channeling for some time now.)

Rather, I find the entire careering planet alarming. Chiefly the unbridled advance of science these past two centuries, which has created monstrous wealth, technological processes and weapons that have left us and the earth at the mercy of forces I think NO one or one body of people has a chance to control, let alone govern. Everything put together sooner or later falls apart, as Paul Simon noted circa Watergate.

My view of Europe’s “superiority” doesn’t mean, of course, that if one had to bet on the Last Man Standing he should bet on the European Union. Indeed, many have been writing that the current financial crisis may ruin it.

Would Europe survive the Union’s disintegration? In some fashion, surely. Might that seismic de-centralizing move actually, despite costs, show us something of the way out of Modernity’s disaster? Too much to hope for, I suppose.

Age of Obama:
Status Quo 2, Change 0

Well the votes this past week came in.

FINANCE

Geithner’s patchwork Smart-Money-to-the-Rescue approach to fixing the banking system — Paulson II — has received the presidential imprimatur. The question now is how long the US will limp along as Japan did thru the 90s. Obama has eschewed the bold moves the world was hoping for last November.

As if in reaction: the Chinese officially called this past week for the a new international currency to replace the dollar as the world’s “reserve currency.” The notion makes no sense, in a way (arbitrageurs would simply constantly trade thru the shell currency to whatever sovereign currency they sought, and in that way designate one of the latter as the de facto “reserve currency”). But it expresses a point of view that bodes ill for Washington’s ability to fund itself going forward.

PAKGHANISTAN

The prez gave a big speech. No surprises. Putting his stamp on the policy Gates-Mullen began to implement under Bush-Cheney after the banishment of the Likud Lobbyists post 2006 elections.

Obama has consented to the escalation the Pentagon wants. Has consented to the the Apparat’s plan to downgrade the Kabul government of elected President Karzai in favor (again) of Men We Can Work With selected from the quasi-existent rogue Northern Alliance — foreigners (non Afghan, non Pashtun) from the north. Has put Gates-Mullen-Petraeus in charge of policy. Can now go to the beach.

AIG payouts (not news)

This is interesting — to see where AIG distributed its bailout money — but not news, in the sense that it was clear last fall that the prime reason for pumping governmental money in was to allow AIG to fulfill its obligations under the gross ton of credit default swap protection it sold during the decade.

And that Goldman Sachs is number one on the list is also no surprise.   This takes us back of course to the Lost Weekend during which Lehman was almost bought but Paulson declined to provide “encouragement,” precipitating instead Lehman’s bankruptcy the next day.

Then and now it seems it was the pending failure of Goldman (triggered by AIG failing to honor the CDS it entered into with Goldman) that persuaded Paulson, that same Monday, to change his mind and start bailing.

Things Getting Rough:
Pakghanistan & China

When I worried (in the penultimate sentence of an essay about zombies) about things soon “getting rough” for the new President, I was thinking foreign affairs.

And was thinking of President Kennedy, who was blasted by the Bay of Pigs raid on his 76th day in office.  Things were never the same.  The White House’s struggle thereafter to gain control of American foreign policy and change course might best be imagined as one long scraggling slide off a cliff.

But to return to current affairs:

1. Iraq.

Mass murderous bombs are going off again.  Very bad for the Pentagon song that both McCain and Obama began to sing last spring, a coro castrati.  For if the Surge there was not simply a Success — if the relative calm of 2008 was tactical and keyed in good part to the American audience/elections — if the basic animosities (Shia, Sunni, Kurd) and political questions (who shall control the state?) have not been soothed by General Petraeus’s community policing, what then?

And with what effect on the marketing of the Iraqi Surge’s young cousin on Iran’s eastern borders?

2.  Pakghanistan.

Benazir Bhutto’s murder.  The rocky greeting given her widow-successor, Zardari, after his first address to parliament. (During the reception unhappy campers blew up the nearby Marriott, home to yankee journalists and diplomats.)  The attack on the Taj Mahal hotel in Bombay by a Paki assault team.

And, meanwhile: the mass-murderous missile attacks by the Americans in northwest Pakistan, which began circa Labor Day and which yesterday killed 21 people identified — in first reports — as “militants aligned with a Pakistani Taliban leader,” and wounded fifteen others.

Note that three weeks ago, a similar first report by American authorities, claiming that 15 of 16 killed were “militants,” was revised to acknowledge that 13 were random walkers — indeed, “civilians.” The Army general in charge issued not an apology but “deepest condolences” and a week later the New York Times observed in an editorial:

Almost no one wants to say it out loud. But between the threats from extremists, an unraveling economy, battling civilian leaders and tensions with its nuclear rival India, Pakistan is edging ever closer to the abyss.

Such were the trends inherited by Obama and, for his part, left on Cruise Control.

In the past ten days they have coalesced into a major political crisis — based on widespread anti-Americanism — that might leave Islamabad looking more like the Federally Administered Tribal Areas than the capital of a large industrialized state armed with nuclear weapons.

Meanwhile across the border ….

Today the Times relays White House views (elaborating upon Obama’s comments in a pub’d interview last weekend) sketching the new US plan for Afghanistan:  Lots of carrots and a stick or two, to tease out from among the Evil feuding warlords those We Can Work With, and to encourage those to enforce a sort of peace (stability, equilibrium) that at least does lip service to the quasi-installed, quasi-foreign government in Kabul.

Or maybe President Karzai and Kabul will be abandoned in public, in favor of something even more Realistic with the so-called Northern Alliance warlords (non Afghan and non Pashtun) who Bush-Cheney found, however briefly, to be Men We Can Work With.

This range of possibilities seems to be the Petraeus Plan at the moment. Maybe it’s the best Obama can do with a long-neglected and seemingly pointless situation.  Maybe it’s the best way Home. (Then again, whatever happened to that Unocal pipeline?) One might hope.

But the Times piece also talks about transferring US attention and resources to Pakistan. And so perhaps (as surmised here since erstwhile CIA director Hayden’s belligerent speech of December) the new Afghan policy will be best understood (largely in retrospect) as what the Pentagon thought best to quickly stabilize Afghanistan to allow it to function as the staging of a boots-on-the-ground war in the FATA across the border.

And what further necessities might that incursion give birth to?  Where will the Petraeus Plan really lead?  This is the relevance of the Bay of Pigs precedent.  (See the “blasted” link above.)

3.  China.

It’s hard to imagine serious trouble breaking out between China and the US right now, since they both have so much at stake in the effort to stabilize the global economy.

And gee, surely the Obama honeymoon (internationally — like Gorbachev’s) has more legs than this?

But for the files if nothing else (you realize you have fallen into my filing cabinet?), one must note:

– the seemingly silly quasi-naval confrontation off the Chinese coast.  The Times says the American vessel is a submarine hunter.  But gee, the South China Sea is exceedingly shallow.  Perhaps “spy vessel” is best?  Recall the Mayaguez, during Ford. In any case, now we’re sending in ships with guns and missiles mounted in plain sight.

–  the Chinese premier expressing worries about getting stuck holding the bag on a trillion in US Treasury bonds. Various voices over there have been expressing concern for some time, and more than a year ago Peking began to swap dollars for gold, but this is the most salient signal to date.

Surely Uncle Sam and China must be friends.  Surely.

Yet it’s a signal of how big a worry the current problems could become that Obama had an unscheduled sit with the Chinese Foreign Minister at the White House yesterday.

Did a Bruce Lee boxed set change hands?

HOWEVER THE CURRENT contretemps may work out, things are indeed getting rough.  The Prez is going to have much less time on his hands to muse about where precisely to suggest his arm’s-length adjuncts apply their Band-Aids to the buboed bodies of the big banks and the health care system.

One must temper expectations, of course. Things since November 1963 (of which I have no memory — I was five) have indeed never been the same.  A hundred years hence, Chinese grade-school textbooks will use Julius Caeser’s crossing of the Rubicon River and the murder of JFK to illustrate how republics by and for people morph into empires run by and for the state’s military-money complex.

Nevertheless, Obama has a few miles of blue water left as the pounding of the lee shore drifts to his ears. As an aid to navigation, Robert Dallek points out this morning that LBJ walked away with neither Guns nor Butter from the White House, after one elected term.

A cautionary tale about Imperial Overreach.  It’s worth noting in addition that not one president, but three, back then, were handed their heads by the brassy entrepreneurs of the Vietnam war.

Banking system bells toll for thee,
Mr President
(This is not a test)

For once I agree with Mr Friedman of the Times:

QUOTE:   I wake up every morning hoping to read this story:

“President Obama announced today that he had invited the country’s 20 leading bankers, 20 leading industrialists, 20 top market economists and the Democratic and Republican leaders in the House and Senate to join him and his team at Camp David.

‘We will not come down from the mountain until we have forged a common, transparent strategy for getting us out of this banking crisis,’ the president said, as he boarded his helicopter.” (emphasis added)

END QUOTE

The world — for good reason — expected Obama to deal with the banking system on Day One, as did FDR (literally).   Instead he has Ironically Detached himself and hired Doogie Howser to run the Treasury.

It seems the political side of Team Obama has persuaded the President he should focus on more positive aspects of economic policy and leave the dirty, no-win banking system business to expendable underlings.

“No win” means: the options are Nationalization (the Seidman way!) or Dawn of the Dead (Zombies, depression and chronic deflation).  Neither generates good press.

But the US stock markets tumbled about 22 percent in 30 calendar days following Geithner’s address of Feb 10.  This measures the volume of hope/expectation that had built up since election day, as if behind a dam.   Geithner’s geeky manner and ludicrous grab-bag of vague old ideas blew a hole in the dam.

The pell-mell size & steepness of this latest market crash is exceedingly rare and means the prez cannot afford to play it cool. Friedman’s daydream is right on.  Get on TV and talk tough love about the big banks then put on your parka and gas up the helicopters.

Perhaps events will sweep the sleepy Admin up in any case. After yesterday’s WSJ report re “contingency plans” for Citigroup, many are now expecting to soon see C in receivership.  Beware the Ides of March.

Or St Paddy’s Day.

Chances are (I guess) the stock markets would react positively to the seizure of Citi. Ding Dong the Zombie’s Dead …    Credit markets likely a different story short and mid term.  (There don’t seem to be any private buyers, even at the current $1 per share fire sale.)

But if Obama-Geithner continue to dither, Dow 6000 as Abgrund is baked into the cake, and the chart suggests 4000 may be the Urgrund.

This is not a test of presidential Coolness Under Fire.

Get out the frickin’ fire hose.

Dead deadbeats cough up

Apparently it pays to dun the dead.

Why may not that be the skull of a lawyer?

Where be his quiddities now, his quillets, his cases, his tenures, and his tricks?

Why does he suffer this rude knave now to knock him about the sconce with a dirty shovel, and will not tell him of his action of battery? Hmm.

This fellow might be in’s time a great buyer of land, with his statutes, his recognizances, his fines, his double vouchers, his recoveries.

Is this the fine of his fines, and the recovery of his recoveries, to have his fine pate full of fine dirt?

Will his vouchers vouch him no more of his purchases, and double ones too, than the length and breadth of a pair of indentures?

Alex Jones Documentary:
The Obama Deception

I don’t agree with some detail here but it’s certainly worth chewing on, particularly as we watch Obama sleepwalk (?) into the Pakghanistan quagmire.
The DVD can be ordered from Alex Jones’s web site: http://infowars-shop.stores.yahoo.net/obdedvd.html

All of the Youtube segments are gathered on one page here: http://www.youtube.com/profile?user=josh99smith&view=videos.

But this may be a handier way to access them:

Part 1. http://www.youtube.com/watch?v=23h4IlRQGZ8&feature=channel_page

Part 2. http://www.youtube.com/watch?v=RHiENcsO10Q&feature=channel_page

Part 3. http://www.youtube.com/watch?v=AjLUkAuT2AA&feature=channel_page

Part 4 http://www.youtube.com/watch?v=mY-8snkdpyE&feature=channel_page

Part 5 http://www.youtube.com/watch?v=BqHi4kmnO2Y&feature=channel_page

Part 6 http://www.youtube.com/watch?v=LWZvBMkZkM4&feature=channel_page

Part 7 http://www.youtube.com/watch?v=mnkbPsfTLyw&feature=channel_page

Part 8 http://www.youtube.com/watch?v=BKqd4UAG8kQ&feature=channel_page

Part 9 http://www.youtube.com/watch?v=YJMB3gxk4jg&feature=channel_page

Part 10 http://www.youtube.com/watch?v=GAmQnUQFG4o&feature=channel_page

Part 11 http://www.youtube.com/watch?v=pf1fD7D0xcc&feature=channel_page

Part 12 http://www.youtube.com/watch?v=iAJAb52PVUw&feature=channel_page

Part 13 http://www.youtube.com/watch?v=w9Ija31HdUs&feature=channel_page

Part 14 http://www.youtube.com/watch?v=l_6sYwMQLLU&feature=channel_page

Obama-Geithner dither as December housing prices drop thru floor

S&P has released December’s Case-Schiller housing price numbers.  Worst monthly decline ever, beating record set … the month before.

See Floyd Norris’s over-all assessment last month.

The dithering of Obama-Geithner this first month in office is indefensible.

Geithner has been there all along.  To report (as the Wash Post apologia speaking for his team did last week) that he came into office and was shocked, shocked by the mess he found and had to drop his best ideas and go back to the drawing board …

Ludicrous.  Indeed, I don’t believe it.   The Times expose the week before seems the more plausible picture:  division and discord between Geithner and his team (all from the Clinton White House) and Obama’s inner circle.  Resulting in squat.

And that’s Obama’s fault. For appointing Geithner.  The Lincolnesque notion of stocking a cabinet with one’s ideological and even political opponents is not something anyone in today’s Washington can survive.  True Ingenue.
Lincoln did not survive it himself, and spent two years dithering, which cost a lot of lives and treasure.

Fed sees 3 to 6 more years of pain, “absent further shocks”

See Paul Krugman’s discussion of the depressed minutes of the last Fed Open Market Committee meeting.

The title of his column:  Who’ll Stop the Pain?

In sympathy the Murdoch (formerly Dow) Industrials broke thru their crisis-lows from this past November (roughly 7400) and closed at 7365.   The all-time high from October 2007 was about 14,121, if memory serves.

Every dark thing I imagined in August 2007 has already come to pass.  Whatever lies ahead is virgin territory.

The dithering of Obama-Geithner in the month since the inauguration is (despite this tepid defense) indefensible.  Geithner, with his vague scattershot presentation last week, seems stricken with ADD at a time when leaders with the steely focus of the Terminator are needed.

Not that Arnold is doing well out West.  I don’t mean we need more Arnolds. (But not that I’ve  followed his work as governor.)  Rather, we need more Chainsaw Bills.

Again I think back to the day Obama declared his candidacy.  Barely a breath of this disaster in the air.  It seems he took office with his head still somewhat in the clouds of that day’s dreams. That was then.

What a shame, if this disaster swallows and digests him whole.

Which resurfaces old thoughts — that Hillary was the better candidate a year ago to face this storm. She was ready to fight, and it seems he was not. A Hillary presidency, however badly buffeted, even broken, would have left Obama intact to continue leading the party thereafter.

A Good Leader is a Terrible Thing to Waste.   And the current configuration — with Clinton at State and Obama at the rudder of a ship that may sink — threatens to waste them both.  Leaving what?

A far-right rebound in four years?  Romney. Palin.  (Rick Santelli …?!?)   What’s the Vegas line that cities will not be burning by the time of the party conventions in summer 2012?

If Arnold & co. don’t pick up steam, we may see cities burning before Memorial Day.

Seidman the Zombie Slayer

Click for full pic.  Rated R.

And here for grisly story about Bill’s tendency — difficult to control when times are hard — to sieze Zombie banks and cut off their heads, purge their innards and re-privatize what’s left.

He’s Back.

And the Living Dead may Never be the Same.

William Seidman, Bill Seidman, zombie banks, nationalize banks, nationalise banks, nationalization of banks, nationalisation of banks, mortgage bonds, asset-backed securities, paulson plan, TARP, troubled asset relief program, geithner

Earth Shakes:
Big Swiss Bank to Name Names

UBS. “You and Us.”  Biggest bank in Switzerland (and maybe the world, memory suggests).  As part of settlement in tax evasion spat with Uncle Sam, is going to break tradition stretching back to roots of modernity by giving USG account holder names.

You and US indeed.

In aid of tax fraud, on its face.  But perhaps something to do with Bernie Madoff’s misadventures?  Or, even, an angle re terrorism?  The world spins …

The Problem is Political
and Bill Seidman is right:
Nationalize, purge then re-privatize our zombied
Too Big to Fail banks

Time for the President to heed sage advice and
– See here, sir! — cut the Gordian Knot.

Click link above to read.  Then lodge comments here below (or click link to do so at end of the piece.)

Stabilities of a New Kind:
- Worst decade ever for stocks
- Geithner Plan is more of same

Ed Note:  First posted Feb 7.  Bumped up to follow up (see comments below) and for some tunes.

There’s a warning sign on the road ahead …

1. This report by Floyd Norris that the S&P 500 has just completed its worst ten years ever brings to mind this observation by Walter Benjamin from 1928 and the dissolving Weimar Republic.

Stable conditions need by no means be
pleasant conditions …

Click on pics to enlarge

.

2.  The much ballyhooed bank plan, rumored to be announced this coming Monday at noon, is now (friday evening) being leaked to the press and looks a disorganized mess, the product more than anything of an inability to agree on big moves.

Headed by Geithner, who has been there all along, this looks nothing like Change We Need.

Indeed, it seems the bulk of the second half of the TARP $700 billion will be — like the first — given to the banks with few strings. Will not be using the cash to buy the wounded assets or banks holding them; rather, will be “encouraging” private sector investors to do so.

I.e., Geithner has run thru the same cycle that Paulson did, bumping into the same obstacles, and backing down.  The banks have said get lost, and the new administration seems to lack the will to enforce whatever other ideas may lay between the president’s or Geithner’s ears.

Brings (again) to mind Walter Benjamin:

“Again and again it has been shown that society’s attachment to its familiar and long since forfeited life is so rigid as to nullify the genuinely human application of intellect and forethought — even in dire peril.”

It’s astounding how poorly prepared the new prez seems to have been on inauguration day, given the Change anthem of his campaign.

There’s colors on the street
Red, white and blue
People shuffling their feet
People sleeping in their shoes
But there’s a warning sign on the road ahead
There’s a lot of people saying we’d be better off dead

The stock market had rallied this week on the hope of a decisive bank plan. I would now look for a turnaround, back down to test the lows of November. Those soft areas have been tested before, and such things tend to weaken with each probe. Perhaps, finally discouraged re Change, this time they will give way.

If so, look out below: Dow 4000. Keep on rockin’ in the Free World.

There must be some way out of here …

Mark-to-Market on block?

Ed Note:  Been whining and yammering here about mark-to-market accounting since August 2007.  

For the best succinct discussion on the topic in these here parts see this section and that section in a profile of Bill Seidman the Zombie Slayer.

The current below was first posted Feb 9, 2009, day before Young Tim Geithner gathered his loins like a wrestler and went before cameras to pee his pants.  See comments below to follow thru time since — in purticlar takin’ notice of Ben Bernanke’s signal-laden comments of March 10.

1.  Vince Farrel, something of a grizzled eminence on Wall Street, suggests today that part of Geithner’s plan (the announcement of which has been delayed til tomorrow) will be to repeal the Financial Accounting Standards Board regulation (passed in late 2007 if memory serves) that requires institutions to “mark” their wounded structured-finance bonds on their books at (non existent) market values.

Institutions would then mark the assets in accord with “models” (spreasheet predictors) based on actual performance and guesstimates of the future — the old fashioned way.

2.  This would be HALF of what I’ve been whining/screaming for since August 2007.

The other half would be to have the feds — not each individual institution — do the modelling and setting the marks for the distressed segments of the s-f universe.

This “price control” regime would bring transparency and level-playing field fairness to the world.  Doubts about what banks hold would vanish.  Most banks would enjoy write-ups (reversing some of the gargantuan paper losses taken in the past 20 months).   Banks would retain the essential risk of the asset, but would no longer be punished for the absence of a market.

Market Fundamentalists would cry havoc.  But they were raised on Age of Reagan television, and it’s time to tell them to shut up.  Markets break.  Markets are often irrational and fail to work properly.  The market is not a fundamental cultural value.

Vinnie’s lips to Geithner’s ears.

November Case-Schiller housing price index

The November numbers were out last week.  Floyd Norris of the Times sorts them this way (re cumulative decline from the peak of the Case-Schiller index in 2007 or 2008 for 20 metro areas):

Gentle Decliners
Dallas, -6 percent
Charlotte, -8 percent
Denver, -9 percent

No Disaster Yet
Portland, -13 percent
Cleveland, -13 percent
New York, -13 percent
Seattle, -14 percent
Atlanta, -15 percent
Boston, -15 percent
Chicago, -16 percent

Worth Worrying
Minneapolis, -22 percent
Washington, -28 percent

Foreclosure Specials
Tampa, -32 percent
Detroit, -34 percent
Los Angeles, -36 percent
San Diego, -38 percent
San Francisco, -38 percent
Miami, -40 percent
Las Vegas, -41 percent
Phoenix, -43 percent

All roads leading to
Price Controls

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.

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 …

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.

A Fortiori: Price Controls and
the lingering odor of Reagan

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.

The Dollar: China Syndrome

Here’s a good if convoluted chat about the current macro picture as the various economic powers twist in the breeze and try to protect themselves.

China in late October increased by several orders of magnitude its verbal attacks on the dollar. But in the wake of the G20 meeting it seems to have softened its own currency (by buying dollars) in an attempt to prop up its domestic industrial enterprises (which are suffering for lack of consumers in, to begin, the U.S.).

The dollar has been going up  for a month or so, generally speaking.  A good deal of this is flight from minor currencies (like Argentina’s, alas) based on fear that the local banks will collapse.

This component of the dollar’s recent surge won’t last.  Best guess is that soon enough the dollar will continue its plummet, and that long-term the chinese currency will rise.

The current dollar boost, then, might be imagined as the point in the sinking of the Titantic where the bow suddenly goes under the waves and the stern ascends to bring the ship nearly vertical — until it shaps amidships — upon which the stern falls like a brick into the sea.

And, as the dollar turns and sinks, the cost of oil (denominated in dollars) will go back up.

A debased dollar is good for people who make things with dollars and sell them in other currencies.  And for debtors, in general (assuming they can make their payments).  Otherwise it’s rather bad.