Interview with Karl Denninger

October 30, 2009

Part 1

Part 2

Read the rest of this entry »


Your dime

October 30, 2009

Benron et al gorge themselves at the taxpayers trough

Fortunately, the Federal Reserve never took a dime of TARP money. So when Fed Chairman Ben Bernanke, who’s been worried about the federal deficit, went to speak Oct. 19 at the San Francisco Fed conference on Asia and the global financial mess, he was obliged to travel to the spectacular Bacara Resort and Spa near Santa Barbara, where suites in high season can run up to $2,000 a night. (We’re told the resort discounted the rooms — it’s off-season — to a mere $300 a night, though it’s unclear whether that included the primo suites.)

Where better for conferees to worry about saving more than at the uber-swanky Bacara?

[ WaPo ]

Those Federated guys live in a fantasyland. So might as well mark everything to fantasy:

Fed Raises Value of Its AIG Assets, Reversing Potential Loss

Oct. 29 (Bloomberg) — The Federal Reserve increased its estimated value of investment portfolios acquired in the rescue of American International Group Inc., reversing potential losses to taxpayers.

The net holdings of three corporations set up by the Fed for the mortgages and securities it took on in bailing out AIG and Bear Stearns Cos. rose by $4.35 billion, or 7.1 percent, to $65.5 billion, the Fed said today in a quarterly revaluation of the assets. The Bear Stearns investments fell by $116 million to $26.3 billion, while the two AIG portfolios gained $4.46 billion to $39.2 billion, the central bank said.

Head, meet pike: The guilty

A Blast from the past

In 2005 the question is asked: should I buy a home?

The answer and subsequent commentary are for the most part a gallery of truth-tellers (excepting the trolls of course). Be emlightened.
[ Should I buy or wait? ]

Fact file-

Almost 50% of Option Arms +30 Days Late
[ acrossthecurve ] [ wsj ]

Almost 19 million homes sit empty
[ .gov ] [ cnbs ]

Do we henceforth refer to it as the collapse of the middle class, or the destruction of the middle class?

Are You Middle Class? Maybe Not For Long

“[Those in the] middle class suddenly discover that they are overqualified for the jobs they can find and have to settle for anything they can obtain, therefore unemployment sky rockets: too much to offer, too little demand. You see they prepare, study for a job they are not going to get. You kids, you are studying Architecture because you simply wish to do so. Only 3 or 4 percent of you will actually find a job related to architecture.

“When one considers how much work can be replaced now by accounting software, electronic sales presentations, flatter organizational structures, and ‘ news persons ‘ filing reports for free on the Internet via blogs, it is obvious that vast numbers of middle-class Americans teeter on the precipice of unemployability, not just unemployment.

“This time it really is different. The final stages of that blind denial included fiscal imprudence that bordered on insanity. The mirage economy can’t return until after the pendulum has swung its full travel to the other side of the arc. That path leads through the valley of a crushing economic depression, one that will radically and permanently alter the lives of middle-class Americans who are almost universally unaccustomed to hardship.

[ ]


Frontline: Close to Home

“ ‘ I’m a Columbia University graduate. I’m smart. I should be able to stand on my own two feet. ‘ Sitting in a hair salon, Emma looks at herself in the mirror. Her husband Andy sits behind her, nodding. They have a young child, and their personal training company, recently thriving, has fallen on hard times, with business dropped some 40 to 50%. Emma has gone back to school, she says, but in the meantime, her mother, Emma says, is ‘ still working because she’s helping us financially with our kids. Of course I feel guilty. She worked her whole life. ‘ Emma sighs, unable to phrase her thoughts exactly. ‘ Why am I even talking about my mother? I’m 40 years old. With this economy, I feel like a child. ‘ “

“Their strength is their weakness. The focus which permits some people to succeed also gives them a ‘tin-ear’ for the effects of their greed. In other words, they always go too far, and begin to blatantly start breaking the law, and acting in ways that are obvious wrong. And when there is a public revulsion to their deformity, they just do not get it.” -Jesse’s Café Américain

Fall of the Republic

October 29, 2009

Old but still relevant.


Why do we even need banks if 95 percent of the mortgage market is directly subsidized by the government?

October 28, 2009

A good question, asked and expounded upon by Dr. Housing Bubble:

“95 percent of the mortgage market is now backed by the government. As we know, a large part of this growth also occurred with highly risky FHA insured loans that are now imploding at record levels. Last month in Southern California 36 percent of mortgages were FHA insured loans. Now applying the Stockholm syndrome, it would appear that many instead of being angry and calling out the banking fraud for what it is, are starting to believe in what the abductors are pushing. They say things like, ‘ see, the banks are now holding off on the shadow inventory to help the market. Prices are now going up! ‘ As if the banks are concerned about the average American with some banks charging 79.9 percent on credit cards before dealing with the tougher legislation coming in 2010. As you can see from the above chart, the mortgage market is the government which raises the question, why do we even need banks if 95 percent of the mortgage market is directly subsidized by the government?.

His very graphic graphic (not for the squeamish):

“In fact, there have been a few articles talking about the ‘ brain drain’ because of compensation limitations on Wall Street! You have got to be out of your damn mind! People mistake ‘ intelligence ‘ in kleptocracy, cronyism, and financial engineering with actual smarts. They are smart at screwing over our economy so this brain drain argument is absolute insanity. It would be one thing if they were creating life saving drugs or consumer goods but instead, they are an albatross on the rest of the economy sucking taxpayer dollars into their balance sheets. Yes, let us feel sorry for our financial kidnappers. How can they live on a few million dollars (note: read DeanBaker’s rant) a year after all the good they have done? Let us allow them to have the same system that gave them the key to drive our economy off the financial edge.”

That last paragraph was directed at the so-called “brain-drain” by Hank Greenberg’s new firm from the pool of ready able and willing AIG co-conspiratorshorts, which as you know like GMAC is having trouble paying back the taxpayer bailout that saved their nasty-asses (the perpetual bailout that is never gonna take, they’ll keep coming back for more and more throwing good money after bad, until we realize the only solution is to take ’em out back and shoot the poor old mangy critters).

Ever get the feeling that you’re being gamed?

“Oh no! Our top commanders are leaving the ship. As it turns out, they were on their laptops all day ignoring the financial iceberg ahead. When it came time to jump ship however, they were the only people with lifesavers.”

“Children need encouragement. If a kid gets an answer right, tell him it was a lucky guess. That way he develops a good, lucky feeling. ” -Jack Handy

More declines in the market ahead?

October 26, 2009

Part 1

Part 2

The Warning

October 23, 2009

I watched The Warning on PBS the other night.

By focusing on Brooksley Born and framing her as a truth-teller being scapegoated, the filmmakers portrayed her stand on derivatives in a Quixotic light. It’s as if, perhaps in the interest of fairness and accuracy in reporting, that the makers felt they may have a responsibility to portray that these specious ‘side bets’ known as derivatives could have some viability.

Let us be clear: these ‘instruments’ absolutely don’t. They can’t- except perhaps in the short-term, as in a you haven’t realized that apologetic man who bumped into you just a few seconds earlier has your wallet kind of way. The filmmakers in my humble opinion didn’t make this clear. Wall Street financial geniuses patted themselves on the back after they figured out yet again how to fleece investors by conjuring something out of nothing. And then, as is their wont, lever it up.

Yet the fact that it is merely a handful of billionaire bankers with flagrant and obvious conflicts-of-interest who constituted the Presidential Working Group on Financial Markets (“PWG”) doesn’t even get its due mention.


That was the real story. Right there. Look at that picture with Summers, Rubin, and Greenspan. The palace coup that captured the American government is on display for all to see, right out in the open.  How could this be missed? Maybe that sounds a bit dramatic but this is government-sponsored PBS we are talking about here, so c’mon.

And now they’re baaaaaaaack.

Perhaps the filmmakers could have taken a safer route by fleshing this with 30 seconds to describe how and why having the same people regulate themselves is just plain stupid and wrong. Most people know that, and get that. The obvious is glossed over and the playas bowed to because they’re made men.

It was a prime opportunity to show the American people what isn’t obvious to them- blinded as they are by mis-placed faith in their leaders. It’s troubling enough that most Americans want to complacently believe in their system (Yes. Still. I know.). Let it be known that this was a missed opportunity for some plain speaking. Still, this is consistent with media having long ago abrogated their constitutionally protected responsibility (use it or lose it).

Ah well. Maybe Americans get it and are just too fucking exasperated to want to do anything about it.

One additional point that I was surprised the makers missed- or maybe they just ran out of time. But it would have been a fit ending to their story, as well as added bolstering of Ms. Born’s argument, and another count in the indictment against the PWG- who wear suits of teflon, apparently (did I mention, they’re baaaaaaaaaack?).  So since the filmmakers didn’t address the following tidbit, I suggest this would make a fine epilogue:

2000 Commodity Futures Modernization Act [ CFMA ]

Which basically made into law that which Ms. Born was trying to prevent (yes, Virginia, the unaccountable members of the PWG decided that in the banksters vs. what was right and good for the people of the USA, they would choose the banksters):

“if a court had ruled that a swap was in fact an illegal, off-exchange futures contract, trillions of dollars in outstanding swaps could have been invalidated. This might have caused chaos in financial markets, as swaps users would suddenly be exposed to the risks they had used derivatives to avoid.”

[ Wikipedia ]

… was recommended by those stand-up dudes of the PWG and enacted one year after Brooksley Born left CFTC.

The documentary  briefly covered how the collapse of Long Term Capital Management followed within weeks Ms Born’s testimony in Congress showed her concerns to be absolutely spot-on. Yet the asshats in Congress let the PWG off the hook with the spin that it as an ‘isolated’ incident.

But dig this.

Very soon after the CFMA was enacted, Enron blew up.

Yes, I know! Deja vu all over again!

Another isolated incident?

… and IT IS NINE YEARS LATER AND they’ve yet to close the Enron loophole. How can they, when every Wall St. firm now uses it?

In conclusion, Illargi says it better than I can:

“Our economic, financial, capital, and credit system is done and gone. What you’re looking  at today is a corpse propped-up by the promise of future tax revenues from millions upon rapidly increasing millions of homeless and jobless Americans.

Unfortunately, that’s just the beginning. Because the financial system has been allowed to infiltrate the political system to the degree in which it has  (a full-scale take-over), America’s political system is as bankrupt as its financial system is. It will take a long and hard time to replace.”

[ The Automatic Earth ]

“Obama’s economic team of free market billionaires and financial hotwires includes most of those who helped Bill Clinton sell the theory that Americans didn’t need jobs. Actual labor, if you will remember, was for Asian sweatshops and Latin maquiladoras.” –Joe Bageant

Currency collpase inevitable?

October 21, 2009