28 February 2009

Levin and McCain Look to Give Nunn-McCurdy a Steroid Injection

They are proposing the Weapon Systems Acquisition Reform Act, which is intended to add some teeth to the 1983 Nunn-McCurdy Amendment.

Nunn-McCurdy requires congressional notice when a program goes 15% over budget, and termination when it goes 25% over budget, unless the DoD certifies it as "essential to the national security," but this has come to mean very little, as evidenced by the F-22, DDG-1000, FCS, JSF, EFV, LCS, etc.

According to Senator Carl Levin, the measure includes:
  • Address problems with unreasonable performance requirements by requiring DOD to reestablish systems engineering organizations and developmental testing capabilities; make trade-offs between cost, schedule and performance early in the program cycle; and conduct preliminary design reviews before giving approval to new acquisition programs;

  • Address problems with unreasonable cost and schedule estimates by establishing a new, independent director of cost assessment to ensure that unbiased data is available for senior DOD managers;

  • Address problems with the use of immature technologies by requiring the Director of Defense Research and Engineering (DDR&E) to periodically review and assess the maturity of critical technologies and by directing the Department to make greater use of prototypes, including competitive prototypes, to prove that new technologies work before trying to produce them; and,

  • Address problems with costly changes in the middle of a program by tightening the so-called “Nunn-McCurdy” requirements for underperforming programs.
What is interesting here is that this is juxtaposed with the appointment of Ashton B. Carter as Undersecretary of Defense for Acquisition.

Carter is a Harvard professor, and has no ties to the defense industry. His career has largely involved criticizing the defense industry while at Harvard's Kennedy School of Government, and he served as Assistant Secretary of Defense for International Security Policy under Clinton.

The Iron Triangle types do not like him, which means that I do, though I hope that he has the bureaucratic chops to make this work.

Thai Military Looks to to Purchase 6 More Gripens and a Saab 340 AEW

This would duplicate the purchase that they made last year, though government approval is not certain, given the economic upheaval worldwide right now.

It may all come down to the politics of the military's support of the government, which ousted Taksin Shinawatana and allowed the current government to come to power.

Well, That Makes 3 F-22 Shootdowns in Excercises

Stephen Trimble had a walkaround at Electronic Warfare Appreciation Day at Andrews AFB, and he noticed noticed this EA-18G "Growler" electronic warfare aircraft.

Look at the bottom picture: the pilot bagged an F-22 in exercises at Nellis.

This does raise an interesting question, how does an aircraft largely dedicated to electronic warfare bag what is supposed to be the hottest jet out there.

I think that it comes down to the fact that the F-22 had to get close to burn through the jamming, and once it did, its size, the aircraft is roughly as large as an F-14 Tomcat, made rather more visible to the Mark 1 eyeball than the F/A-18.

This raises an interesting question as to the effectiveness of the aircraft in a heavily jammed environment: will this require the Raptor to get close enough to its target that it is then in a visual conflict, where it will be more visible than its opposition.


French Develop New Penetrator

No, I don't mean GĂ©rard Depardieu.

MBDA has developed a 1000 kg class deep penetrating bomb (paid subscription required) that is expected to be fitted to their Rafale.

The drill like nose on the weapon allows a thin walled casing to be around the explosive, which might increase the total explosive content, and would very likely make it extremely robust.

IDF Namer AIFV Performed Well in Gaza

The Namer is based on a Merkava 4 chassis, and it replaces the preferred personnel carrier for high intensity conflict in the IDF up to this point, which is based on captured T-55 hulls.

It appears that its heavy armor, sensor suite, and remote controlled weapons systems served it well in the conflict.

IIRC, it's the heaviest AFV in the world.

Defense Procurement at Its Finest

So, it appears that the electromagnetic catapult on the Ford is behind schedule and over budget, and the contractor is asking for more money, because if they have to go back to steam, they have to tear up the ship, including its engineering plants.

So, they will get the money, and they will deliver late, and, unless I miss my guess, we will seeing a F/A-18s hitting when the catapults fail, as the bugs are worked out, at cost plus.

27 February 2009

Winnie the Pooh II: He's B ack and He's Packing

He's loaded for bear.

Not content with a gun, he's packing an F-15 Eagle.

Some crew chief got just a wee bit silly here.

Friday Night, "And I Used to Wonder if They Wore Pants," Blogging

What news anchors do during the ad break.

Another Friday, More Banks Shut Down by the FDIC

Security Savings Bank, Henderson, NV
Heritage Community Bank, Glenwood, IL

Full List

16 in about 8 weeks.

Zimbabwe Update

So, now we have a "unity government", only Mugabe continues to make appointments unilaterally, though Tsvangerai is disputing them, for what that is worth.

In any case, we are seeing an increase in political violence, and government elements allied with the ZANU PF are continuing arrests and detentions of political prisoners, including a "terrorism" charge against senior MDC official Roy Bennett, who is still in detention despite a court order realeasing him on bail.

Seriously, one of the two only good pieces of news coming out of here are reports that Robert Mugabe has bought a $5.7 Million house in Hong Kong, because that might mean that he is preparing to leave.

The other good bit of news is that the new Finance Minister, and Tendai Biti (MDC) is starting to pay some wages in foreign currency.

If Tsvangerai and Biti are smart, they will make sure that the foreign currency goes to organizations that aren't just a bunch of Mugabe's thugs.

Unsurprisingly, the seizure of farms is continuing unabated, because it's about the only currency left for Mugabe to use to buy continued support.

CDOs: How Bad Will It Get

This is why our banks are insolvent. Even without the increases in leverage that have been created over the past 15 or so years, when you see losses like this:
The real shocker, though, is what has happened after those defaults. JPMorgan estimates that $102bn of CDOs has already been liquidated. The average recovery rate for super-senior tranches of debt – or the stuff that was supposed to be so ultra safe that it always carried a triple A tag – has been 32 per cent for the high grade CDOs. With mezzanine CDO’s, though, recovery rates on those AAA assets have been a mere 5 per cent.
Your bank is toast.

That's 30¢ on the dollar for the best of the best, and just down from that, it's 5¢ on the dollar.

This is why the big banks are insolvent.

Have I Mentioned that Michael Steele is Really, Really Stupid Lately?

Following Bobby Jindal's disasterous response to Obama speech, RNC Chairman Michael Steele and promoted him using "Slumdog Millionaire" comparisons.

Mr. Steele, there are worse things than not being "hip". One of them is pretending to be hip when you don't get it.

Economics Update

Well, the revised GDP numbers are in for Q4 of 2008, and they are a horror-show, with GDP declining 6.2%, when the initial numbers had been -3.8%.

With numbers like this it's no wonder that the FDIC is reporting that the banking industry posted an aggregate net loss for a quarter for the first time since 1990.

If we are expecting real estate to rebound any time soon and save us, I wouldn't hold my breath with condo developers trying auctions to move properties, and And apartment buyers walking away from deposits....Six and seven figure deposits....in Manhattan.

I would also note that the consumer does not appear to be their either, with the finally tally for the Consumer Confidence Index falling to a 29 year low.

With numbers like this, it's no surprise that S&P is considering downgrading the ratings on $140 billion of prime jumbo mortgage CDOs, and non-prime mortgage origination hit a 17-year low last year.

Real estate, and hence banking, is in a sad enough condition that the FDIC has instituted a temporary emergency rate hike in order to bolster its reserves.

More generally, we have The Institute for Supply Management's Chicago Purchasers’ Index showing continued contraction. It rose to 34.2 from 33.3, but anything under 50 means contraction, and the 30s are significant contraction.

The fact that GE cut its dividend to 10 cents from 31 cents indicates that no one is doing well here.

The same is going on overseas, with most of eastern Europe in dire straits, getting emergency loans totaling about $31 billion, and Japanese factory output falling, and new jobs drying up.

The revised GDP figures drove both oil and the dollar down.

Jeebus: Over a Month Out of Office, and Bush and His Evil Minions&trade Still Shock Me

So, we know that Dusty Foggo, who was installed by then CIA head Porter Goss, was corrupt, but the court files from his trial are stunning.

He went to jail for taking bribes from Brent Wilkes, who was also bribing Randall "Duke" Cunningham, but we now know that he was alwo sleeping around with his wife with a woman who was also sleeping with a Russian spy, and Porter Goss knew this, and hired him anyway.


Bailouts for Citi and Other Banks

Let's start with the numbers: City is currently trading at less than $1.50 a share, but the US government is converting its preferred shares to common stock at a price of $3.25/share, that's around $12½ billion of taxpayer dollars down the hole.

Between the US Government, and various sovereign wealth funds, it means that existing shareholders have gone from 100% of the bank to 26% of the bank....Let's be clear about it, they are insolvent, that's the only reason that the management and the shareholders aren't screaming bloody murder right now.

This is insane.

Good News on Student Loans

We have some change we can believe in, Obama is calling for an end to federal subsidies to private student loan providers.

Seeing as how the private system has resulted in:
  • Higher costs to borrowers.
  • Higher costs to the federal government.
  • Corruption in the financial aid departments of universities.
It makes a lot of sense to stop subsidizing providers of an inferior service.

Obama would use the money saved for Pell Grants.

Obama Budget Plan

It's a decent plan, though once again, it appears to not go quite far enough.

  • He's rolling back the Bush tax cuts at the top tax brackets, though I think that the max marginal rate should made far higher, something like the 70% we had pre-Reagan for income above $5 million/year or so.
  • He's spending $634 billion on expanding healthcare access, which is good, but the real need exceeds $1 trillion.
  • Closes some of the more egregious tax loopholes.
  • Cuts farm aid to big farms
He is also estimating a decent bit of revenue from a carbon cap-and-trade system, which I think is in error. He underestimates the costs of enforcement, speculative pressures, and evasion, which is why I favor a straight carbon tax.

And Now Republicans Come Out in Favor of Giving AIDS to Children

If you ever wondered just how immoral the Talibaptist wing of the Republican party is, look no further than state Senator Dave Schultheis (R-Colorado Springs), who is opposed to testing pregnant women for AIDS, because it would lead to treatments to reduce the chance of their children catching the disease, and their children having AIDS is appropriate punishment for their promiscuity.

The frightening thing is that coming from Colorado Springs, home of James Dobson's Focus on the Family, a significant portion of his constituents likely agree:
  • What he said during the debate: "This stems from sexual promiscuity for the most part and I just can't go there. We do things continually to remove the consequences of poor behavior, unacceptable behavior, quite frankly. I'm not convinced that part of the role of government should be to protect individuals from the negative consequences of their actions."
  • What he said afterward: "What I'm hoping is that yes, that person may have AIDS, have it seriously as a baby and when they grow up, but the mother will begin to feel guilt as a result of that. The family will see the negative consequences of that promiscuity and it may make a number of people over the coming years ... begin to realize that there are negative consequences and maybe they should adjust their behavior. We can't keep people from being raped. We can't keep people from shooting each other. We can't keep people from jumping off bridges. People drink and drive, and they crash and kill people. Poor behavior has its consequences."
For all those wankers (that's you Lord Saletan) who think that we can engage in meaningful negotiations with the abortion criminalization crowd, understand that they want to eliminate all forms of birth control, and re-institute criminal penalties for "fornication".

In fact, they want to give children AIDS to punish their parents.

You can no more find common ground with them than you can with al Qaeda.

26 February 2009

The Never Ending Minnesota Elections

Still going on, but I'm tired of this, so just go here for updates.

I think that the judges want to hang Coleman's lawyers by their tongues from a flagpole.

Is Glenn Beck Stoned?

I've never watched him before, but I think that he is wasted here.

NY Times OP/Ed Comes Out for Nationalization Pre-Privatization

I think htat it's been clear that this is the best solution for some times, but the fact that The New York Times editorial board has endorsed this action, recognizing that there are Zombie banks, even if Ben Bernanke denies this, is significant.

The conventional wisdom is moving, and one hopes that mssrs Bernanke and Geithner will recognize this and act in a prompt manner.

Another Moron

Ben Bernanke, who is saying that there is no such thing as a US Zombie bank:
They all have substantial franchise value. They are all lending -- all active. All have substantial international franchises.
Between him and Timothy "Eddie Haskell" Geithner, we are fracking doomed.


Well, it looks like Benyamin Netanyahu is intends to go full Herbert Hoover on the Israeli economy.

He's saying that tax cuts are all that Israel needs to fix the economy.

What a bloody tool.

Because the Blue Dogs and the New Democrats are the Suck

It looks like the corporate whore Blue Dog and New Democrat caucuses are doing their level best to kill the ability of bankruptcy judges to rewrite mortgages on primary residences. (Cram-downs)

Chairman of the New Democrat Caucus, Ellen Tauscher, that it's not fair to people not in bankruptcy who are being screwed by their banks, which is complete bullsh$#.

If people have the stick of cram-downs to wave at the banks, it makes those banks much more likely to renegotiate loans.

What's more, it only applies to loans already made, not those going forward, and, depending on draft, may only be limited to sub-prime mortgages.....It is very weak tea to begin with.

This is "I want donations from the banks" crap, and Ellen Tauscher is in a very safe Dem district, having won each election with more than 65% of the vote since redistricting.

She needs to be primaried, but according to Act Blue, she does not have a primary opponent right now.....Damn.

John Thain, Ken Lewis, and A Subpoena

Well, it appears that Thain has told investigators that Bank of America CEO Ken Lewis knew of the bonuses that he rushed through just before the merger, but he was prohibited from discussing it any further by BoA, absent a subpoena, so New York Attorney General Cuomo accommodate him, and got a court order.

So now Thain has provided details on all Merrill Lynch bonuses, though this information is still under seal with the court, ostensibly to deal with confidentiality issues.

I understand where Thain is coming from. If he testifies under the compulsion of a subpoena, then he is not liable for anything that he says, he is indemnified, even if would otherwise violate a NDA or other severence package.

It appears, though it is by no means certain, that Lewis, or his agents instructed Thain not to talk, which would appear to be obstruction of justice.

This should get interesting, as Cuomo has subpoenaed Lewis as well, and given that Thain's testimony is under seal, significant discrepancies might lead to legal problems for him.

But I'm an engineer, not a lawyer, dammit!*

*I LOVE IT when I get to go all Doctor McCoy!!!

What Gail Collins Says

Louisiana has gotten $130 billion in post-Katrina aid. How is it that the stars of the Republican austerity movement come from the states that suck up the most federal money? Taxpayers in New York send way more to Washington than they get back so more can go to places like Alaska and Louisiana. Which is fine, as long as we don’t have to hear their governors bragging about how the folks who elected them want to keep their tax money to themselves. Of course they do! That’s because they’re living off ours.
You go, girl.

Economics Update

So, the new unemployment numbers are out, and once again, they are brutal, with adjusted initial claims hitting 667,000, up 36,000 from last week, and the less noisy 4-week moving average hit 639,000, up 19,000, while the continuing claims are at 5,112,000.

As Calculated Risk notes, the 4-week moving average is the highest since 1982, and the continuing claims are the highest ever recorded, though both are somewhat better when normalized against total workforce size. (Graph at CR)

We also saw durable goods orders fall to a 6 year low, and new-home sales fell in January, the lowest number since records started to be kept in 1963.

We also have banks cratering with the FDIC list of problem banks up 50% in Q4 of 2008.

BTW, it's hitting the export driven economies of Asia even harder, with Singapore's Q4 GDP falling at a 16.4% annual rate.

We also have oil down following the announcement of production cuts by the UAE, and the dollar is down, for reasons that are not entirely clear to me.

Almost Forgot, DFA Baltimore Meeting Today

At Cosi Cafe, from 7:30 to 8:30ish. I'll be there at 7 to greet people.

Not a whole bunch of people there, so your attendence is appreciated.

View Larger Map

25 February 2009

Looks Like We Will Have the Zombie Banks Around for a While

Because when you look at the Treasury's terms of their Capital Assistance Program, (Treasury link)it's clear that they are propping up Citi, the weakest of the Zombie banks, because it's purchasing preferred stock, and "These shares can convert at the firm’s discretion (with the approval of their regulator) into common equity if needed to preserve lending in worse-than-expected economic environment at a conversion price set at a 10% discount from the prevailing level of the institution’s stock price as of February 9, 2009."

Why February 9, 2009? Because that's the day before Citi's common share price fell off a cliff.

If they go back any further, it makes it transparently clear that Citi is insolvent, and Timothy "Eddie Haskell" Geithner is trying to avoid placing it into receivership...So....More zombie banks.

If you want any confirmation that they won't nationalize pre-privatize the big banks ever, you need only look at Bernanke lobbying for a weakening of the mark to market rules, so that they can call the valueless sh^% on their books a pony.

It appears that everyone is doing their level best to duplicate the mistakes of the Japanese in the early 1990s.

Citi is trading at less than $3/share. BoA ain't doing much better. Their shareholders are already wiped out. This is about letting senior management keep their jobs, even after they mismanaged our finance system out of existence.

If There Is An Organization More Capable of Sabotaging Itself Than Fatah...

It appears that there was a deal to open the borders to Gaza. It seems to have involved a prisoner release by Israel and the PA in exchange for the release of Gilad Shalit, but PA walked away from the deal, "because the Fatah officials believed it would weaken them."

These guys really don't have a clue. If Hamas releases Shalit, is ready to release Shalit, even with a significant release by the Israelis is going to be a net minus for Hamas, because it removes a bargaining chip from their hand, and because it means that they have negotiated a deal.

But the leadership of the PA is so damn timid, they snatch defeat from the jaws of victory.

Ford Is Going Bankrupt

And existing shareholders will be wiped out.

How do I know this?

Because Ford has concluded negotiations with the UAW to allow them to fund their health care trust fund with stock.

If there is anything that I am sure of, it is that when equity in a company is used as a benefit for rank and file workers, they will be wiped out, along with other share holders, in a bankruptcy.

Call me a cynic, but just ask the United Airlines pilots.

Spinal Tap Has a New Drummer Obama Introduces a New Commerce Secretary Nominee

Former Washington State Governor Gary Locke.

This is assuming, of course, that he doesn't:
  • Die in a bizarre gardening accident.
  • Choke on someone else's vomit.
  • Spontaneous combustion at the press conference.
Welcome to the White House, Mr. Shrimpton.

Being Batsh%$ Insane is a Reason to Fire a CEO

Case in point, Bank of America CEO Kenneth Lewis, who is now saying that Merrill-Lynch and Countrywide Financial are, or will be "stars" this year:
Bank of America Corp. Chief Executive Officer Kenneth Lewis said Merrill Lynch & Co. and Countrywide Financial Corp., the two acquisitions that some analysts say helped push down the bank’s share price, have been “stars” so far this year.

Lewis, speaking today in a Bloomberg Television interview from his Charlotte, North Carolina, headquarters, said Merrill will be “a thing of beauty” over the long term. Merrill, the New York-based securities firm, lost $15.8 billion in the fourth quarter.

Ummm....This guy is ready for the rubber room....Seriously.

Well, I Was Wrong Again

It appears that there never was a rule requiring people conducting a filibuster to talk, it was just a matter of custom until some point in the 1970s.

Live and learn.

Economics Update

More brutal numbers on home sales, with sales of existing homes falling to a 12 year low.

Note also that existing home sales are becoming a bigger part of home sales in general, as foreclosures and other distressed sales make up a bigger part of the market.

Of course this can't compare to the financial putrescence that is AIG, which just failed on an asset sale.

It wanted to use the proceeds to pay down some of its debt to the US government, but could not because of a lack of bidders. No one wants their crap.

BTW, Ken Lewis's gift keeps on giving to Bank of America, because Merrill-Lynch lost $15.84 billion in Q4, about $500 million more than predicted.

There was an unexpected decline in gasoline stocks that drove oil higher today, while the poor housing news and the declines in the stock market have driven the dollar up as people look for safe havens.

24 February 2009

My Thoughts on the Speech

A little bit under the weather, so my mind wandered, but it was a good speech, but I'm an engineer, so I want to see the numbers.

Solis Confirmed as Labor Secretary

If memory serves, the 'Phants were doing their hissy fit thing because Hilda Solis would support the EFCA, because they think that it's wrong for a Labor Secretary to, well, support labor.

McCain Gets Punk'd

McCain decided to to take a shot at Obama regarding the escalating cost of the new Presidential helicopter, the VH-71, which has suffered massive cost overruns (as a result of Bush and His Evil Minions gold plating the mofo):
Said the president's former Republican rival, "Well, thank you, Mr. President. And thank you for doing this...Just one area that I wanted to mention that I think consumed a lot of our conversation on procurement, it was the issue of cost overruns in the Defense Department. We all know how large the defense budget is."

And, McCain noted, "your helicopter is now going to cost as much as Air Force One. I don't think that there's any more graphic demonstration of how good ideas have -- have cost taxpayers an enormous amount of money."
Meow.....That's a slam, right?

Not so much:
Said Obama, "I've already talked to (Defense Secretary Robert) Gates about a thorough review of the helicopter situation."

Added the president, to laughter, "the helicopter I have now seems perfectly adequate to me. Of course, I've never had a helicopter before. So, you know, maybe -- maybe I've been deprived and I didn't know it.But I think it is a -- it is an -- an example of the procurement process gone amuck, and -- and we're going to have to fix it."
I think that he was expecting this from someone, and had just the response to make the accuser look small and petty.

Scary Pictures, Bear Market Edition

So, Barry Ritholtz shows us this graph of comparisons between bear markets, and the current one is now the 2nd worst in history.

Obviously, this is for the Dow which is (at best) a rather imperfect market indicator, but we are now in the worst downturn since the Great Depression.

Obama Gets Rolled By The Pentagon on Iraq

That's the only way you can describe it, and seeing as how he rolled it out hours before his speech to Congress, they want it buried.

19 months with a 50,000 troop "residual force," is not a good thing.

Economics Update

Well, the Conference Board's consumer confidence report came out and it is starkly grim, dropping to a record low of 25, lower than had been predicted.

BTW, it's not just us, German business confidence has fallen, and Standard & Poor’s lowered Latvia's debt rating to junk.

This means that German businesses have no confidence in the new future, and no one has any confidence in Latvia.

Even the New York Stock Exchange is getting in the act, looking at temporarily suspending a requirement of a $1/share price in order to avoid delisting....I call it a Citi Special, though the two most prominent companies at risk of delisting right now are AIG and Ford.

The fact that the Case-Shiller numbers for the top 20 real estate markets show a price decline of 18.5% year over year, has a lot to do with that.

In currency, the dollar fell a bit, while in energy, oil rose.

23 February 2009

The "Stress Testing" of the Big Banks is a Lie

I'm shocked, shocked to find that gambling is going on here!
As Atrios notes, this is, "just overpaying for sh&%pile."

Statement from the Treasury
Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized.:
A strong, resilient financial system is necessary to facilitate a broad and sustainable economic recovery. The U.S. government stands firmly behind the banking system during this period of financial strain to ensure it will be able to perform its key function of providing credit to households and businesses. The government will ensure that banks have the capital and liquidity they need to provide the credit necessary to restore economic growth. Moreover, we reiterate our determination to preserve the viability of systemically important financial institutions so that they are able to meet their commitments. “We announced on February 10, 2009, a Capital Assistance Program to ensure that our banking institutions are appropriately capitalized, with high-quality capital. Under this program, which will be initiated on February 25, the capital needs of the major U.S. banking institutions will be evaluated under a more challenging economic environment. Should that assessment indicate that an additional capital buffer is warranted, institutions will have an opportunity to turn first to private sources of capital.

Otherwise, the temporary capital buffer will be made available from the government. This additional capital does not imply a new capital standard and it is not expected to be maintained on an ongoing basis. Instead, it is available to provide a cushion against larger than expected future losses, should they occur due to a more severe economic environment, and to support lending to creditworthy borrowers. Any government capital will be in the form of mandatory convertible preferred shares, which would be converted into common equity shares only as needed over time to keep banks in a well-capitalized position and can be retired under improved financial conditions before the conversion becomes mandatory. Previous capital injections under the Troubled Asset Relief Program will also be eligible to be exchanged for the mandatory convertible preferred shares.

The conversion feature will enable institutions to maintain or enhance the quality of their capital. “Currently, the major U.S. banking institutions have capital in excess of the amounts required to be considered well capitalized. This program is designed to ensure that these major banking institutions have sufficient capital to perform their critical role in our financial system on an ongoing basis and can support economic recovery, even under an economic environment that is more challenging than is currently anticipated. The customers and the providers of capital and funding can be assured that as a result of this program participating banks will be able to move forward to provide the credit necessary for the stabilization and recovery of the U.S. economy. Because our economy functions better when financial institutions are well managed in the private sector, the strong presumption of the Capital Assistance Program is that banks should remain in private hands.”
(Emphasis is from FT Alphaville, not the original)

I don't know about you, but it appears to me that Timothy Geithner has absolutely no intention of applying the normal standards of solvency to any of the big banks.

We have this further reinforced by this lovely quote:
Said one high-level official, “I think the market is missing that the whole intent of this process is to show that the banks have enough capital for even worse outcomes than we currently envision and to show there’s a program in place to give banks access to that capital if they need it.”
So that's Geithner's and by extension Barack Obama's official policy: privatize profits, and nationalize losses.

(H/T Naked Capitalism for finding the quote)

BTW, just when you thought that Geithner could not get his tongue any further up Wall Street's anus, we have news that he wants to loan massive amounts of money to hedge funds, to encourage them to buy large pieces of the sh%$pile.

By Dagon's doughnuts, if this is that bad, we need to nationalize preprivatize the banks tomorrow.

I'm Speechless (Scummy Bank Edition)

It appears that a number of states have moved to debit cards for unemployment applications, and the banks that have been contracted the service are nickel and diming the recipients with fees (see also here).

Even better, the banks in question are TARP recipients.

I will note that the banks are already making millions in interest on the "float" on the accounts sitting there, and if you call to complain, they charge you for that too.

Quoting Bruce Cockburn, If I had a rocket launcher, some son-of-a-bitch would die."

Citi's Plan to Get Bailed out....Again

Once again, I can't believe it, but I'm quoting Henry Blodgett, and he runs the numbers on the proposed conversion of preferred stock to common stock:
And what will the US taxpayer get for this preferred stock conversion? 40% of the company for some of its $45 billion of preferred, say reports. The reports add that Citigroup's goal here is to keep the US's ownership under 50%, so this won't be a de facto nationalization.

Well, that's nice for Citigroup...and another ream-job for taxpayers.

Citigroup's common equity is currently worth $10 billion. If the US were to convert all $45 billion of its preferred at the current stock price, it should end up with 80% of the company, not 40%.
Basically, preferred stock is very similar from an accounting standpoint, to debt, while common stock is assets....What's more in the process of writing off debt to assets, the taxpayer is expected to take a 50% haircut.

So the way for the banks to stay out of government hands is for the government to own the banks.

Citi also wantsother sovereign investors, such as, "Abu Dhabi Investment Authority, the Government of Singapore Investment Corporation, and the Kuwait Investment Authority," to take part in a similar debt to equity swap, though it is not clear if they are being asked to take a similar haircut.

It appears that the US government, particularly treasury are, "open to considering a request to so do," because placing an insolvent bank, which is what we have with Citi, in receivership is, at least according to Timothy "Eddie Haskell" Geithner evil beyond belief.

Someone needs to explain to Mr. Geithner that he is no longer an employee of the New York banks, as he was when he was president of the Federal Reserve Bank of New York.

Philadelphia Papers Go Chapter 11

They will continue normal operations for the moment.

My assessment is that this is not another sign of the death of newspapers, but rather what happens when a bunch of finance types decide to buy something with no money down.....and then the balloon payment comes due during a liquidity crunch.

White House Push-Back On Pentagon Insubordination

Obama's people are demanding that all Pentagon staffers working on the budget sign a non-disclosure agreement:

In an undated non-disclosure agreement obtained by Defense News, the administration tells defense officials that "strict confidentiality" must be practiced to ensure a "successful" and "proper" 2010 defense budget process.


The pledge covers any data about the 2010 budget, including: "planning, programming and budgeting system documents and databases, and any other information" that concerns the administration's internal discussions about "the nature and amounts of the president's budget for fiscal year 2010, and any supplemental budget request during the current fiscal year."


"Under no circumstances will I disclose such information outside the Department of Defense and other government agencies directly involved in the defense planning and resource-allocation process, such as the Office of Management and Budget," the agreement said.
I'm not sure if this is just paranoia, a recognition that there are a lot of Bushies burrowed in the bureaucracy who will work against this, or a realization that the Pentagon is completely out of control as an organization.

Maybe it's all three.

When Lebanon is A Safe Haven for Your Money....

You know that we are completely boned:
Instead, the silver-haired banker became a hero by playing it very, very safe. In 2005, he defied pressure from the Lebanese business community and bucked international trends to issue what now looks like a prophetic decree: a blanket order barring any bank in his country from investing in mortgage-backed securities, which contributed to the most dramatic collapse of financial institutions since the Great Depression.

So as major banks in America and Europe were shuttered or partly nationalized and thousands of people in the U.S. financial sector were laid off, Lebanon's banks had one of their best years ever.

Billions in cash continue to pour in to the relative safety of Lebanese savings accounts, with comfy but not extravagant yields of 6%. A nation shunned for years as the quintessential failed state has become a pretty safe bet, or as safe a bet as investors are likely to find in this climate.
Lebanon as safe haven....I have a real problem wrapping my head around this.

Bad Idea Stopped, For Now

It appears that the Congressional Democrats killed a proposal to convene a special Social Security task force, at least in the near term.

There will not be any announcement of such a body at the “fiscal responsibility summit”, and this is a good thing.

The solvency of Social Security is the least of our worries right now, the public already pushed back on this in 2005 when Bush tried it, and people are looking at their 401(k)s right now, and want no part of privatization.

Handing off social security to wall street is a bad idea.

Expanding the sorts of wages covered by social security, and dropping the earnings limit may not be a good thing, but the "a bipartisan group take up the issue and devise a plan" people like Representative Ellen O. Tauscher, chairwoman of the New Democrats coalition, have one plan:
  • Give the money to Wall Street.
  • Extract campaign contributions from Wall Street Bankers.
Further raising the retirement age, reducing benefits, and/or handing the money to investment bankers, which is what the "Social Security Reformers" really want is a bad idea.

Just look at Chile's privatized pensions.

The problem is 40 years in the future, and if one were simply to drop the cap on the employers portion of social security taxes, and expand the wages that are covered, there are an awful lot of wages to fat-cats that don't count, and the problem is solved.

The Mess That Greenspan Made: The Great Inflation Moderation that Wasn't

Tim at The Mess That Greenspan Made has a great post on how the Federal Reserve, and Alan "Bubbles" Greenspan, succeeded in making a laughing stock of inflation results through the use of imputed rent (owner's equivalent rent) in the CPI data.

Not only is inflation higher, but the swings in inflation, driven as they are by the aggressive policies of the Federal Reserve to drive down wages manage inflation, are much more extreme.

In essence, as I've noted before the Fed has made itself look good.

BTW, you can get more information, in mind numbing detail, from Shadow Stats.

Governor Andrew Cuomo

Because we just had New York Governor David Paterson confirm that he let his people loose to smear Carolyn Kennedy, to the New York Times, no less:
For the first time, Gov. David A. Paterson acknowledged Friday that he personally ordered his staff to contest Caroline Kennedy’s version of events in the hours after she withdrew from consideration to be United States senator.

However, Mr. Paterson said that he was bewildered when his staffers subsequently unleashed harsh personal attacks against Ms. Kennedy, saying he merely wanted them to challenge the assertion from Ms. Kennedy’s camp that she had been his first choice to replace Hillary Rodham Clinton.
Let me be the first to say to you that you are lying through your teeth.

You could have picked up the phone, and talked to any paper on the record, and it would have ended this, but you leaked it via your staff, and considering what your staff said, through staffers who were clearly given marching orders to slime her.

Not choosing Caroline Kennedy as Senator was the right course of action.

She is intensely private, generally uninvolved in politics, and shows all indications of being worse on the campaign trail than her cousin, Kathleen Kennedy Townsend.

That being said, you did not have the guts to say that to her face, or to tell the people of New York the truth, which is pathetic.

Economics Update

The Federal Reserve Bank of Chicago's National Activity Index showed a small bump in January, though it should be noted that December was an absolut disaster, so I'm callijng dead cat bounce, particularly since the 3 month moving average is at a record low.

It also appears that the gift that keeps on giving, AIG, is looking for more welfare from the government.

The US government already owns 70% of the company. How about giving all of senior management the boot....TODAY.

BTW, it appears that the rising levels of derfault on commercial real estate are giving Atlanta Federal Reserve Bank President Dennis Lockhart the willies. He says that it is keeping him up at night.

Meanwhile, the go-go free market capital of the Arab world, Dubai, has just gotten a bailout from the United Arab Emirates following the failure of its bond offering.

Dubai has done its level best to cast itself as the banking sector of the Arab petro-states in the region, and now it looks like things are going bad there too.

Not only are there problems with bond offerings, but thousands of expats are fleeing the country, because they have lost their jobs, and under the law there, they face debtors prison.

Meanwhile, it appears that oil spiked above $40 on Friday, but it's below $40/bbl again.

In currency, the dollar gained against both the Yen and Euro.

The Yen is down largely on concerns about declining exports will effect Japan's export driven economy.

The concern with the Euro is that the former Warsaw Pact and Soviet States that were absorbed (too soon) in the optimism that followed the fall of the Berlin Wall are beginning to resemble Iceland, or Ireland, or Argentina.

I will be posting on Citi, and "stress testing", later.

22 February 2009

European Aerospace Aggressively Pursuing Indian LCA Program

With its indigenous Kaveri engine repeatedly delayed, India is looking to foreign engines to power light combat aircraft (LCA), the Tejas, and Eurojet is pitching its EJ200 as a competitor to the GE F414, and they are promising some, "special sauce", thrust vectoring.

Unspoken in this bid to power the diminutive delta is the concerns that the Indian government has regarding ITAR restrictions which could hamstring sales to other nations.

This is also what is driving India's interest in procuring an AESA radar from EADS for an upgraded version of the fighter.

India Reveals Manned Capsule Concept at Aero India

So, it looks like India is looking to join the man-in-space club, unveiling a 3 person capsule.

I'm not sure why, but I get the sense that there is a lot of Russian/Soviet lineage in the design.

I'm not sure why it gives me that sense, but it does.

21 February 2009

Another Bank Closed by FDIC

Silver Falls Bank, Silverton, OR

Full list

I'm feeling proud. I caught this one, and Atrios missed it for his "eated" post.

Russia Freezes S-300 Sale to Iran

The Jerusalem Post is reporting that Russia has frozen sales of its advanced S-300 surface to air missile system to Iran.

It's unclear if this is change in policy, or simply a temporary measure to avoid issues at the upcoming meeting between President Dmitry Medvedev and US President Barack Obama.

AESA And Typhoon

It looks like Eurofighter is considering adding an AESA radar to the Typhoon that has mechanical scanning.

The neat trick here is that instead of simply strapping an AESA radar to the pitch and yaw actuators, they mount the radar at an angle, and then rotate the array to get a wider field of view.

About a year and a half ago, I posted about the Russians looking at something similar, though their idea used the existing actuators of a plane array radar.

I don't believe that in either case the actuators would respond as quickly as those on a more conventional radar, because the AESA is heavier than a slotted plate array antenna, but the electronic response of the AESA within a narrower band is literally hundreds of times faster than that.

Both would achieve the same thing, a very large field of view, though I think that Eurofighter's concept looks like it is much more amenable to reduction of head on radar cross section.

Mechanically, this is a lot simpler to do, though you need slip rings for both power and signal, and a rather complex fitting for cooling, as all current AESAs need liquid cooling.

More F-22s Appear to Be Coming

The reports appear to indicate that the USAF will get 60 More F-22s, at a price tag of around $800-900 billion, though it appears that it will remain firmly in the "not for export" category.

Won't be much use for the military, and it's really expensive, the the wild blue yonder types are ecstatic right now.

How about if instead of the planes, we just chip in and rent them a hooker?

That way the taxpayer won't be quite so f%$#ed.

An End to Pilots?

The Airforce will graduate its first class of unrated pilots to operate the MQ-1 Predator drone this summer.: (paid subscription required)
The first group of nonrated U.S. Air Force pilots who are being trained to fly MQ-1 Predator missions is expected to graduate by the end of the summer.

The Air Force selected 10 active-duty nonpilot (unrated) captains to be the first of two groups to receive unmanned aircraft system (UAS) training. Once qualified, they will be a beta test group for Air Force leadership to see how nonrated pilots perform at the controls of UASs. The Army has proceeded with UAS flight operations using nonrated pilots, while the Air Force has come under fire for slow training of its UAS pilots, maintainers and sensor operators.
It makes sense.

Modern UAVs are sufficiently automated that the role of the operator is far closer to that of a gunner than it is a pilot.

It's interesting how it's going. My guess is that the USAF fought this every step of the way, just like they fought UAVs when they first came out.

The white scarf must cut off blood to the brain.

High Speed Helos Looks to Boost Speed in Tests

Piasecki helicopter is looking to demonstrat higher speeds in its vectored-thrust ducted propeller (VTDP) X-49 Speedhawk demonstrator. (paid subscription required)

They are currently installing a 3rd engine to power the propulsor, and expand the envelope to 193 kts (223 mph).

In the meantime, Sikorsky is looking toward taking its X-2 advancing blade helicopter to about 250 kts (288 mph). It's already powered up the propulsor on the ground, and they look to open the envelope slowly, as this is a privately funded project.

Interestingly enough, it appears that they may exceed 250 kts in test at some point, as the manager of advanced programs notes, "We are comfortable getting to a 250-kt. cruise. The dash speed will be higher."

I can see one or both of these technologies as a replacement for the A-10, which is a fine aircraft, but the US Air Force has wanted it dead for 30 years, and they only grudgingly address the close air support needs of ground troops.

India Working on Stealthy Successor to LCA

The Indian Defence Research and Development Organisation (DRDO) is looking at a twin engined two seat stealthy aircraft as a follow on to the LCA.

Considering the glacial pace of these programs in India, I'll probably be a grandparent by the time this is reaches squadron service.

Additionally, it really does not look to have a particularly low RCS.

Color me skeptical.

Retrofitting Stealth to Existing Airframes

Bill Sweetman was at Aero India, and he noticed that the Zhuk-M1E proposed for Mig-29 upgrades has been treated with a bit of radar absorbent material (top picture).

This won't make a plane invisible, but it will significantly reduce the RCS of an aircraft in the front aspect, so the rule of thumb, about 5m2 is likely no longer operative, particularly when juxtaposed with RAM coatings on the inlets, fan, or the installation of radar blocker screens, as was done with the F/A-18 E/F, though the environment in an engine inlet is rather more severe than that found under a radome.

You can see a similar application on the Have Glass II F-16s (bottom, the RAM is white).

Additionally, the move to AESA radars might provide some additional reductions.

This probably doesn't reduce detection much, but it probably does increase the effectiveness of jamming relative, particularly with the necessarily (physics is a bitch) high frequency radars on air-to-air missile seekers.

Also, you may want to check out this PowerPoint (19.3M) for some perspectives.

Gripen/JSF in the Netherlands Gets Odd

So, Saab is talking about cutting its losses on the fighter competition in the Netherlands if they order two F-35 test aircraft in the next few months, which brings them into the JSF test program, which makes sense, the fix has been in for some time here, with Lockheed throwing too much business Dutch industry's way for them to say no.

But wait, there's more.

The Netherlands is demanding a firm fixed price for the F-35, which Lockheed Martin is simply unable to do....The aircraft is still (!) not mature enough, and we are seeing price ranges from $60m to $160 million from various sources and what is counted. (The last number is from Air Power Australia, and they really dislike the JSF[Update: the Israelis are saying $200 million, more than the F-22])

Saab, meanwhile, has given a firm fixed price offer which covers pretty much everything from soup to nuts of around $79 million.

I don't think that Saab has the least chance of winning this, but this is definitely interesting.

Israel Balking at JSF Cost

The flyaway cost has gone from $50-60 million to something closer to $100 million, and the IAF is beginning to wonder if it is worth it, particularly since the electronic warfare and avionics systems are going to be locked up tightly, preventing the Israelis from customizing the aircraft to their needs.

Note that this is flyaway costs, which is the lowest measure of cost, so these budget numbers, which are still in flux, are only going to get worse.

I would also note that down the road, countries that want to upgrade their JSFs are going to get done like a 3 dollar whore by Lockheed Martin.

Update: We have these comments from a Israeli Air Force (IAF) chief procurement officer Brigadier-General Ze’ev Sni giving a $200 million price tag.

20 February 2009

Friday Cat Blogging: George Carlin

I wish he were still around.

Class Warfare

This picture of a sheriff, gun drawn, to evict a family from a home was named was named World Press Photo of 2008 by judges at World Press Photo.

Guns drawn so that a bank can make sure that no one is living in there.

God bless America.

Californicated Real Estate Markets

This story on the skyrocketing rates of default in jumbo loans misses the point.

It ain't rich folks. It's folks in places like San Diego and San Jose where house prices went insane, and people were putting down $400K for a 400 square foot 1BR.

Have You Heard the Latest Polish Joke

It appears that the Irish police have been looking for the worst driver in that nation.

One Prawo Jazdy has been ticketed all over the Emerald Isle, but they have been un able to track him down, because each time that he was stopped, his contact information was different.

So the Irish Garda has had capturing this scofflaw as a major priority for some time now.

Well, I'm sure that if any of my readers read Polish are now laughing hysterically, because Prawo Jazdy means "drivers license" in that language.

Move along here, nothing to see.

What David Said

David Sirota notes that the push by the 'Phants to cut retiree healthcare and pensions may create a profound change in labor negotiations.

This makes sense. Why negotiate for pension benefits or health insurance for retirees if you cannot trust the company to be there when the bill comes due.

Just go for the money up front:
Now, I think workers should always drive a hard bargain, but I also think that we don't want to have an economy that effectively tells workers that they should never trust the future commitments of employers and that they therefore should be willing to destroy a company in order to get cash/benefits up front.

And that's what slashing autoworkers' health care and retiree benefits would do: It would likely make unions far more rigid in their future negotiations with all employers. That, of course, would be rational behavior by unions - having learned that employers' future commitments cannot be trusted, they would simply never be flexible in trading wages for future benefits.
Somehow, the right wing thinks that contracts are sacred, so no cramdowns on mortgages, unless, of course they are with their employees, in which case, they are mere scribblings in the sand.....on a beach....before a hurricane hits.

Perez Chooses Netanyahu to Form Government

This development is not a surprise.

Once Lieberman said that he wanted Likud, Perez really had no choice.

Livni, however, is having none of a unity government.

On Travel This Weekend

Visiting my mother-in-law's, so posting will be light to non-existent.

Economics Update

Posted from my mobile, so rather limited today, pretty much just inflation with the CPI Up 0.3% in December, the first positive CPI in months.

That being said, 2008 's CPI was 0%, for the first time since 1955.

19 February 2009

Fear and Loathing in Euro Missile Defense

Click Pictures for full size images
Tehran to DC

Masshad to Washington, DC

Masshad to San Francisco

Masshad to Rome

Masshad to Madrid

Masshad to Istambul

Masshad to Athens

Masshad to Chicago
I'm thoroughly skeptical of BMD systems to begin with, particularly the current Ground-Based Midcourse Defense system.

The technology for decoys is simply too easy, it's basically the same as the shiny metalized children's balloons you can get at party city, and striking a reentry vehicle when closing speeds are in excess of a mile per second seems to me to involve awfully long odds.

I call it "faith based missile defense," and one of the earliest goals of the Bush administration was to ensure that it be deployed into service come hell or high water, on the theory that once it was there, it would be politically costly to remove it.

OK, so we all know the game, scary Persians are going to lob an IRBM at Europe, so we have to put an Ballistic Missile Defense (BMD) system into Poland, so as to protect everyone.

Thing is, Poland is a pretty crappy place to put a BMD system to protect our NATO allies, and this installation, along with the associated radar at Brdy in the Czech Republic* and it's gotten the Russians absolutely batsh$# insane.

If you figure out the trajectory of a Ballistic missile, and the tools to the this can be found in a number of places on the web, the location does not make sense.

It does not protect Turkey, Greece, Spain, Portugal, Bulgaria, Romania, Slovenia, or southern France.

I've had discussions with people sho have suggested that it would protect the eastern seaboard, and it would, if you launched the missiles from downtown Tehran, but just like our ballistic missiles are not located on Washington DC or Crystal City, it's unlikely that they would put their installation there.

They would want to locate it as far away from a potential aircraft carrier, NATO airbases in Turkey, and the US base at Diego Garcia.

This would put a missile base in the North East corner of the country about 500 miles east of Tehran, in the general vicinity of Masshad, the 2nd largest city in Iran.

Suddenly that interceptor in poland does not do such a good job protecting the east coast.

For an attack on the West Coast, it's path is too far from either Poland, or the base at Fort Greely, and the installation at Vandenberg seems iffy for covering San Francisco and points north.

Now, the folks the Missile defense agency claim that the installation in Poland is unable to intercept Russian ICBMs (bottom picture), but unsurprisingly the Russians do not believe them.

The Russians did offer a site at Qabala, which they rent from Azerbaijan, if the US dropped the Polish installation, but the respons, at least by Bush and His Evil Minions was to go pound sand.

In any case, it's clear that Azerbaijan, Turkmenestan, Uzbekistan, and Georgia would be prime locations for such a site, though there are serious political issues there, but sites in Turkey, Romania, or Bulgaria would provide better coverage of Europe, and might have a shot at intercepting something headed for Chicagoland, which none of the current installations do.

*In fact, the radar, which can surveil all the airspace in European Russia, may be more of a sticking point than the missile base in Poland.
I used Google Maps. Go there, then click "my maps", and then click on "browse the directory", and click on the distance measurement tool, and it will compute great circle distances, which is what modern aircraft, and ballistic missiles, do .
It's the shortest distance between two points on a sphere. The straight line on a Mercator projection is actually longer. It's what you would get if you used a globe, and a tight string between two points on that globe.


Avigdor Lieberman, the head the #3 Yisrael Beiteinu Party just threw his support to Benyaman Netanyahu.

The question here is whether Yisrael Beiteinu demand the bigoted part of his party's platform, or the secular part of his party's platform to be Likud's coalition partner.

The nature of Israeli politics is that he can only look for accommodations on one of these issues, particularly since his presence in the coalition would appear rule out a 4 way coalition between the 4 largest parties, Likud, Kadima, Yisrael Beiteinu, and Labor.

California Finally Has a New Budget

The Dems were forced to buy off a 'Phant legislator with an unrelated open primary clause.


Schadenfreude, Sweet Schadenfreude

Goldman Sachs partners are being forced to borrow money to cover margin calls on their shares:
Several Goldman Sachs partners have leveraged their Goldman Sachs stock to buy alternative investments such as hedge funds & private equity, and they have done so through their Goldman Sachs brokerage accounts.

But Goldman stock has declined in value by more than 50 percent since last spring, meaning that Goldman Sachs is in the awkward position of making margin calls on its own partners, who can't meet those calls because their alternative investments are underwater and they don't have enough cash on hand.

Now those partners are being forced to borrow money—millions of dollars—to meet Goldman Sachs' own margin calls.
(emphasis mine)

That's some yummy schadenfreude....Until you realize that, even if completely wiped out, they are still worth millions....sigh.

I Have to Admire this Legal Stragegy

Muntadar al-Zaidi, the Iraqi shoe throwing journalist, has a novel defense against charges that he assaulted a foreign dignitary who was a guest of the Iraqi Prime Minister:
Zaidi, 30, who is charged with assaulting a foreign head of state, posited that Bush's Dec. 14 trip to Baghdad was not an official visit by a foreign dignitary because he arrived in the country without prior notice and didn't leave the Green Zone, which at the time was still under U.S. control.

"I am charged now with attacking the prime minister's guest," he said stoically, making his first public remarks since the incident. "We Arabs are famous for being generous with guests. But Bush and his soldiers have been here for six years. Guests should knock on the door. Those who come sneaking in are not guests."

Roughly an hour into the hearing, Presiding Judge Abdul Amir al-Rubaie announced that he would postpone the proceeding until March 12 to seek an opinion from the Iraqi government about whether Bush's swan song visit to Baghdad was, in fact, an "official" one.
True to form, and unlike the statements made by Chinese Premier Wen Jiabao following a similar incident, when he asked for his show thrower to be released, Bush has made no statement regarding the fate of Zaidi, who has already been tortured by Iraqi authorities.

Economics Update

Well, we have another Asian economy cratering in Q4 of 2008, with Taiwan's GDP shrinking at an 8.36 annual rate. Unsurprisingly, they are now predicting a contraction for 2009.

This is "post Berlin Wall coming down shock-treatment elderly begging in streets" numbers.

In the US, producer prices posted a large gain, 0.8%, or about a 9½% inflation rate. I'm not certain if this is good or bad news, as the concern right now is deflation, but the impetus for the jump seems to be massive cash infusions from the Fed and the Treasury, which implies that we may be tiptoeing toward Zimbabwe.

Still, the jobless report was brutal, with initial claims remaining at 627,000, and continuing claims jumping to 4.99 million, the highest number ever.

I wouldn't expect manufacturing or building to be a part of a recovery any time soon though, as the Philadelphia Fed's Business Outlook Survey hit a record low, as did the Architecture Billings Index (ABI).

Note that the ABI typically presages construction activity 9-12 months ahead.

Additionally, I think that we are near seeing some of the non AIG insurance giants failing, with the first indicator being that Prudential Financial Inc. being excluded from the Federal Reserve's commercial paper program, because Fitch Ratings downgraded them.

Note that Prudential Financial Inc. is the parent of Prudential Insurance, and that the insurance division can still use the "Commercial Paper Funding Facility," for a while, at least.

The dollar fell a bit today, largely on reduced concerns about the smaller nations in the Euro zone going completely broke.

In energy, oil rose, though it is still well below $40/bbl, because of a surprise drop in inventory.

Shift in Tactics in Employee Free Choice Act

It looks like labor has signed off on letting the measure start in the Senate, which will slow things down, because starting in the Senate slows everything down.

I'm not as sanguine about this is AFL-CIO spokesperson Eddie Val, who is quoted in the article. I think that Harry "Filibuster to your heart's content" Reid lacks the stones to make them talk, and so the bill will languish.

18 February 2009

More Calls to End "To Big to Fail"

We are hearing more calls for breaking up the banking giant, this one from Rusty Cloutier, of MidSouth Bank, a regional institution.

Clouter, as CEO of a bank, obviously has an axe to grind, as the prospect of the banking giants getting massive bailouts makes it difficult for him to raise capital.

Right now, this doesn't seem to be on the agenda, but three weeks none of the very serious people in Washington DC were willing to discuss it as anything but a joke, but yesterday hell froze over, and Alan Greenspan, longtime friend of Ayn Rand, said that it was the least bad solution.

Hopefully, we will see this bubble up over the next few weeks/months.

H/t Calculated Risk

Fire Robert Gates Today

There is a fight brewing about whistleblowers in government service, and Robert Gates is fighting tooth and nail to stop meaningful whistleblower protections.

This is more than a fairness issue, this is a national security issue. The government, including defense and intelligence, simply do not work, and much of this comes from a lack of accountability, which has gotten worse over the past 8 years because of secrecy fetish of Bush and His Evil Minions.

Excessive secrecy is a far greater threat to our national security than is excessive disclosure.

Google Adopts Take No Prisoner Policy Against Patent Trolls

About 2 years ago, Google made a policy decision to stop settling law suits with patent trolls, including going after them for legal fees.

I think that we will see a lot more of this from companies with deep pockets, because paying people to make them go away has resulted in an explosion of law firms whose business model is to find dodgy undeveloped patents, and then use those to extract nuisance money.

It's a protection racket.

It's a good development, but the real solution is to change the law:
  • Eliminate the patent court, because when you create a body that just handles patents, patents handle everything.
  • Eliminate software, business plan, species, gene, and tax deduction patents (yes, you can patent a tax deduction).
    • Note that genetic technology can and should remain patentable, it's the genes and the species that were not patentable until about a decade ago.
  • Treat patents like civil rights laws, allow the person who is restricted by the to file suit against the holder of the patent.
Patents are not about property, they are about encouraging innovation,* and our current regime is discouraging innovation.

*The Copyright Clause of the Constitution, "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." (emphasis mine)

Israel Demanding Shalit Return in Exchange for Truce

It's not going to happen, because if Hamas cuts a deal to release Shalit, even if it gets a truce and (somewhat more) open borders, it cuts its own throat.

Because Hamas' credibility comes in large part from its absolutist positions,* a negotiation which results in Shalit's release would be seen by many of their supporters as a capitulation and a defeat, and this would compromise their political viability, both in Gaza and in the West Bank.

The short form is that if Hamas did this, they would be signing their own death warrant.

*I was going to use the "takes no prisoners" metaphor, but given the situation here, it just doesn't work.

Obama Announces Foreclosure Relief Plan

Like most of his approach to banking, it appears to be rather timid and too industry friendly for my taste, though it appears to be paired with cramdown legislation, which allows bankruptcy attorneys to modify mortgages, which is good, even if the legislation is too watered down for my taste too.

Colonel Renault Moment Hits the TARP....Again

I'm shocked, shocked to find that gambling is going on here!
Gee, you mean that after receiving $350 billion of no strings attachec money, the banks are still lending less to businesses and homebuyers?


Kyrgyzstan Makes it Official

The Kyrgyz ruling party voted to close the airbases.

It comes down to three things:
  • The Kyrgyz wanted a better deal.
  • The initial deal mostly gave money to family the now overthrown despot, and the Kyrgyz were honked off by that.
  • A Kyrgyz citizen was shot on base by a US soldier, and no meaning action was taken by US authorities against the soldier, inflaming local anger.
This, along with Russia giving them a better offer, was more than enough for them to kick us out of their airbase.

Economics Update

Well, I guess the lede is that the Federal Reserve is cutting its 2009 economic forecast....Reality has a way of doing that.

Real estate is ugly today, with housing starts and applications for building permits falling to record lows, which is not surprising as it's clear that there is a significant overhang in inventory.

That overhang in inventory is why builder sentiment is at the staggering number 9, with 50 being neutral.

It's not pessimism, it's sanity.

We did get another jump in mortgage applications, but that's just a refi surge when the numbers go below 5%.

We also saw a record slide in GDP for OECD nations in Q4 of 2008.

On the brighter side, I'm not in the Ukraine, where industrial output shrank by 34.1%, which is return to the stone age type numbers.

We also have record lows from Taiwan's central bank, which cut its benchmark rate to 1.25%.

We also have some insurance news, including our friends the monoliner bond insurers.

First, we have MBIA splitting itself. It's separating its municipal bond insurance from its mortgage backed securities interests, which is likely a good thing in the long run, though S&P downgraded them from AA to BBB+, which, while not junk bond status, is rather too close to junk bond status for comfort.

Additionally, Moodys cut ratings mortgage insurers MGIC, Radian, Republic, and Genwort.

We are actually seeing some indications that the price drops in commodities are dropping, most notably the Baltic Dry Index of shipping costs has doubled recently, which indicates more cargo, particularly in terms of raw material.

Obama's housing rescue plan appears to have strengthened the dollar, and driven oil up today.