Jon Stewart: Prime Mover in Passage of 9/11 First Responder Health Care Bill?

Snowed in in alien territory. Bereft of print edition.

According to Bill Carter and Brian Stelter's article on the New York Times website today, a major force behind the passage of the health care costs of the 9/11 first responders was Jon Stewart, the host of the Peabody-winning "The Daily Show" on Comedy Central.

"I don't even know if there was a deal, to be honest with you, before his show," said Kenny Specht, the founder of the New York City Firefighter Brotherhood Foundation, who was interviewed on Stewart's show on 12/16, which was solely devoted to that cause.

Even New York City Mayor Bloomberg, a frequent guest on the show, recognized Stewart's achievement. This is not to diminish the good Senators from New York, Charles Schumer and Kirsten Gillibrand. The idea is that the focus of that show may have had an impact on the Republicans' only blunt tactic, the filibuster. They stopped the bill from passing on 12/10.

The article goes on to contrast Stewart's role with that of Edward R. Murrow, who was one of the very few (maybe the only) on-air personalities to speak out against the corrosive depradations of Senator Joseph McCarthy during the 1950s, when his tactic was fear of Communism. McCarthy was very effective and powerful. Even President Eisenhower tip toed lightly around him. It was only when McCarthy began investigating and accusing the American military and the state department of Communistic leanings that he was called out and his power waned.

The irony is that the McCarthy hearings where he attacked his enemies were also televised to a much wider, less fragmented audience than would be possible today. This makes Stewart's acknowledged achievement all the more impressive.

The 12/16 show was divided into two parts: the first was on the Republicans and their automatic use of the filibuster to block every initiative in Congress; the second took the broadcast networks to task for barely covering the vote in the months preceding it.

I remember very well the Republicans' use of 9/11 (especially former Mayor Rudolph Giuiliani) as a stepping stone for their political careers.

Maybe Stewart is the figure shaking things up in Washington because he offers an alternative to the blandishments and inside-the-beltway coziness of the Washington media.

As Robert J. Thompson, Professor of Television at Syracuse University, said:

“I have to think about how many kids are watching Jon Stewart right now and dreaming of growing up and doing what Jon Stewart does,” Mr. Thompson said. “Just like kids two generations ago watched Murrow or Cronkite and dreamed of doing that. Some of these ambitious appetites and callings that have brought people into journalism in the past may now manifest themselves in these other arenas, like comedy.”

Atypical Mortgage Modification Shines Light on Serious Housing Problems

Gretchen Morgenson's article in today's Business Section of The New York Times is vital reading for everyone in America who is concerning about the continuing and alarming housing crisis. She discusses the atypical case of Robert and Amy Ahleman, who are a construction contractor and a financial services employee, respectively. When they missed one payment on their small home their loan servicer immediately began charging default fees and sending threatening eviction notices.

At the current rate, the Treasury Secretary's main foreclosure prevention program, HAMP, will stop about 700,000 foreclosures, much fewer than the 13 million expected by 2012. Unfortunately, Elizabeth Warren, the Harvard Law Professor who fought so fiercely for a consumer advocacy program with enforceable powers that was left out of the financial reform bill, was named to a special advisory role on the Congressional Oversight Panel, which was created in 2008 to monitor financial markets and those who regulate them. It is basically a ceremonial role.

HAMP (Home Affordable Modification Program) was devised under Treasury Secretary Timothy Geithner. Under it, loan servicers (which are often owned by large banks) are voluntarily coerced to modify mortgages to prevent foreclosure. They are paid $1,000 per modification. Foreclosures don't benefit anyone but the servicers. The homeowner is evicted, the property values of the surrounding areas go down, and:

Investors who hold the loans in securitization trusts are also hurt by foreclosures, because recoveries on these properties are so low.

Consumers feel (and are) less rich, they spend less, and because many mortgages are underwater (that is, the homeowner ends up holding a mortgage that is more expensive than the plunging value of their home), people are less mobile so if job opportunities dry up in their region, they are less able to move to an area where jobs are growing. Mobility was always a staple of American capitalism.

Foreclosures are much more lucrative to loan servicers than what the HAMP program pays:

[L]oan servicers can profit significantly by pushing borrowers into foreclosure. It gives the servicers more opportunities to keep charging lucrative fees and little incentive to seek a modification.

As Kurt Eggert, a professor at Chapman University School of Law in Orange, CA said:

"I think a big part of the problem is that nobody is effectively holding servicers' feet to the fire to say 'where are the loan mods that you should be delivering that help both borrowers and investors?"

After the Ahlemans, desperate to save their home, filed for bankruptcy in late 2008, their servicer was changed to Litton Loan Servicing, a unit of Goldman Sachs. Ms. Ahleman asked Litton repeatedly for a modification but heard nothing back. Finally, after a reporter contacted Litton, they quickly responded by cutting the Ahleman's variable interest rate from 9.3% to a fixed rate of 4.5% (about the current fixed rate in the marketplace). It also agreed to waive its $38,882 in arrears on their mortgage which included late fees and legal costs. Remember, Litton did not respond to the Ahlemans for months. That certainly increases late fees.

Meanwhile, the bank that held their second mortgage at a 12% interest rate, Banco Popular, wrote off the Ahlemans entire loan of $62,000, which also included late fees.

Under the terms of the new loan, the Ahlemans' mortgage obligations dropped from almost $250,000 to roughly $198,000. Their monthly payment fell from $1959 to $1376.

The Ahlemans have since made all their payments and don't use credit cards any more. "If we can't pay cash, we don't buy it," said Ms. Ahleman.

The Fighter is a Champ

Should be cross-posted from IMDBPro (which is a subscription-based version of imdb.com)

Curious to see why The Fighter was nominated for 6 Golden Globes. Had great word of mouth. But wasn't it just another boxing movie? No no no.

The Fighter is a movie that works on so many levels it's as dense as a
black forest cake. Based on a true story set in Lowell, Massachusetts,
about two boxing half brothers (their mother had a lot of love to
give), Mickey Ward, played by Mark Wahlberg and Dicky Eklund, played by
Christian Bale, it opens with Bale and Wahlberg sitting on a living
room couch. Bale is a revelation; motor-mouthed, twitchy, punchy, and
doesn't seem to have a lot upstairs. Believe that at your peril.
Wahlberg sits quietly next to him. He's the kind of actor you can
actually watch thinking.

Dicky's claim to fame is that he once knocked down Sugar Ray Leonard
(who makes a brief cameo appearance). Now both he and Mickey are part
of a road crew when they're not in a gym. Dicky trains Mickey for
fights his mother the gorgon manager sets up for him, one of which puts
him in the hospital.

The way The Fighter surprises and confounds your expectations keeps you
on the edge of your seat, along with director David O. Russell's
cutting back and forth between parallel scenes of Dicky on the prison
phone with mother while Mickey battles a powerful Mexican opponent.
It's like cage match dancing.

The fights are not just physical. The family and girlfriend fight for
Mickey's allegiance. A new manager pits Dicky against his brother.
Which ties will be stronger: the anguish of the family or the tempting
opportunities? The low ebb between the brothers comes when Christian
Bale, desperate to compete with an outside offer to pay for training
for Mickey, pimps out his girlfriend and gets into a fight with the
cops. Mickey hears the commotion and runs to intervene, only to have
his right hand crushed by an overly zealous policeman.

An HBO movie-within-a-movie ties the characters and the action even
more tightly. Bale (and the viewer) believe the documentary is about
his knockout of Sugar Ray Leonard when it is actually about his
downfall due to crack addiction. As Bale watches the documentary in the
prison auditorium surrounded by fellow inmates, Russell cuts to
Wahlberg desperately calling his ex-wife to ask her not to let their
daughter watch it. She gleefully refuses, telling him she want her to
know what kind of man he is. In another scene the bleary eyed mother
shoos Bale's little son away so he can't watch it. Christian Bale
suddenly realizes that he is the subject as the crack addict as we hear
the filmmaker within the film say Bale will end up in either the
cemetery and prison. Cut to Bale's face behind bars.

The fights are taut and visceral. You can feel the body blows and get
into the clinches. It all leads up to the climax which reveals the true
nature of the brothers' ties

The cast, especially Bale who seems to do his own stunts jumping out of
a second story window several times, are great. Amy Adams plays
Wahlberg's love interest, a salty tongued college-educated bartender
who is one of the very few characters who is not afraid of mother. She
can give as good as she gets and doesn't take guff from anyone.

Wahlberg is terrific with intelligence, torment and restraint written
all over his face. He's the rock who's shuffled aside by the mother's
fantasies of Dicky's comeback and bears gamely under his ex-wife's
abuse and his family's manipulations. I read that he trained for three
years to get into shape for the movie and it shows.

Making a movie is a collective, lengthy enterprise, and several people worked on the story: Writer (screenplay) Paul Tamasy; Writer (Screenplay/Story)/Producer Eric Johnson; Writer (Screenplay)(Story) Keith Darrington; and writer (story) Dorothy Aufiero.

Aside from acting in the movie, Mark Wahlberg was also one of the main producers and shepherded the project for several lean years before it got into theaters.

Taibbi's "Griftopia" Is A Bracing Tonic, Shaken Not Stirred

Matt Taibbi, a contributing editor to Rolling Stone magazine known for his (how you say?) ascerbic (I was going to say f**k u style, but didn't want to push it), famously calling Goldman Sachs "a giant vampire squid wrapped around the face of hunamity, relentlessly jamming its blood funnel into anything that smells like money." The guy don't pull no punches, eh?

He came out with a new book Griftopia, reviewed by Peter Goodman in this Sunday's New York Times Book review section. Griftopia covers the pungent ground of the 2008 and counting financial disaster that sprang from the loins of Wall Street aided and abetted by many "tentacles".

We all know the polite, papered over explanation for the crisis. Profligate poor people and minorities borrowed money they could not pay back and weren't supposed to be homeowners anyway, simply to redecorate their wood paneled basements and koi ponds. Risk management was too complicated and regulators were merely government employees who couldn't possibly compete with Saville Row tailored Wall Street lawyers. So shrug your shoulders and say, what can you do? That's the price we pay for the free-wheeling casino of Wild West capitalism.

The truth is that the FIRE (finance, insurance, and real estate) divisions make huge bucketloads of money and are a disproportionately represented on the DJIA. They are major players writing financial legislation and they were certainly all present and accounted for back in the second half of 2008.

Let's look at one factor. At the time when A.I.G., the largest insurance company in the world, collapsed under the weight of its insurance claims (ahem I mean credit default swap obligations) and threatened to go bankrupt, the Treasury stepped in to bail it out without any authorization except what it conjured out of thin air. It simply willed the takeover.

You see, my children, in the old days (pre-2008) the government would only lend money to commercial banks which were more tightly regulated. Timothy Geithner decided to pay full price (100 cents on the dollar) to all AIG counterparties (even though some were willing to pay less). This especially benefited Goldman Sachs, also known as the company that created and sold poorly constructed collateralized debt obligations (CDOs) to unsuspecting investors (read: pension funds) in order to bet against them and collect both ways.

Ordinary people may think the bailouts to these "Too Big To Fail" banks are over but the lending library is stil open doling out cheap liquidity to TBTF banks like Citigroup. As far as I know, none of these banks have had to write off the bad "exotic financial vehicles" (like CDOs) on their balance sheets. No mark-to-market accounting, so you never know how solvent they really are. That's like lending money to your brother-in-law who assures you he's going to pay you back but you keep seeing repo men knock on his front door.

Because the banks know they are "To Big To Fail", they know the government won't let them fail, which allows them an advantage over all other smaller banks because they can borrow money more cheaply. And take more extreme risks with your money. They get paid upfront, so it doesn't matter how the deals they make unwind. And they're still in charge, more powerful than ever. There are less of them (the power is more concentrated) and as opposed to 2008, they know now the U.S. will bail them out undoubtably.

The losers in all of these speculative transactions are pension funds, the money set aside for your retirement. And people like Governor Christie of New Jersey are already making noises about defunding pension plans.

Our states, cities and municipalities which, because of the recession, have lost tax revenue and have had to institute severe austerity measures (like not fixing crumbling highways and bridges and selling off valuable properties) shoud be given the same opportunity as the TBTF banks: offered cheap money to be put to use right away for hiring people to work on capital projects. Employed people pay taxes, feel better about themselves and their families, and buy more things upon which they pay sales tax. That would increase revenue, and enable the entities to pay back the money with interest. In fact, in terms of human capital, compound interest.

Shout Out for Jimmy Wales/Wikipedia

Always at the top of the search engine, fast, accurate, malleable--he's doing it for love and Xmas. Happy 2011!

40: A Doonesbury Retrospective

Dwight Garner's review of Garry Trudeau's Pulitzer-Prize graphic chronicle over the past 40 years floods me with so many memories. I don't have the book itself, so I'll rely on them. Mr. Garner paints things in delicate strokes. I'll just describe an encounter I had with Mr. Trudeau some months back at an esteemed institution in New York City where he had spoken and was signing copies of his new book.

I just found out he was there and was so happy to meet one of my heroes I ran into the auditorium to see if he was still there. An usher gave me a program and let me meet with him even though he had probably given a lecture and spoke personally to a long line of admirers. I asked him what he was working on. Because of his BD-focused storyline, I knew he was concerned about the soldiers in Afghanistan and Iraq. I wondered if he was going to tackle one of the seldom spoken of issues of injured soldiers, that of traumatic brain injury. He graciously signed my program and told me that he did indeed prepare strips on that issue.

Beside being a Pulitzer-Prize winner, Mr. Trudeau is married to Jane Pauley and has three children. He attended Yale University and received his M.F.A. in graphic design at the Yale School of Arts in 1973.

Mr. Garner also mentioned "Mike's crunchy and delightful daughter," Alex Doonesbury, who gives the reader (at least, this reader) a little bit of the sense of what it's like to study at M.I.T., chatting with a girlfriend, inventing, and dealing with suitors.

Hopefully Mr. Trudeau will continue to touch on history for years to come through his appealing characters, adapting and adjusting to the zeitgeist.

Glad Tidings Re: Job Openings

According to Indeed Inc., which runs indeed.com, one of the job search web sites I utilize which aggregates a lot of jobs in one place, there is quantifiable growth in job openings as proven by internet postings.

According to James Hagerty and Joe Light's article in the Journal, it looks like new areas of growth are in retailing (hey, must be! Growth in spending in 2010 at the busiest time of the year for retail, Christmas, is inching up towards double digits from year ago), accounting, consulting, health care and telecommunications.

Indeed Inc.'s data may be misleading (as statistics are wont to be). Some jobs simply aren't posted online. That's why it's always good to do things like network face-to-face or ask politely for informational interviews from someone whose successful in the field in which you want to work. (Don't mean to toot my own horn but I worked a lot in the help-get-people-jobs field: job coach, employment counselor, whatever you want to call it--I could shape up a resume and prepare someone for an interview in an hour.) Word of mouth is also important. Let people know who you are. Have a business card (you can make them cheap at different copy places around the city) to hand off to a busy person who might not remember you.

Sorry for the tangent. Farming, manufacturing and construction jobs aren't generally posted online, while computing and mathematical jobs are overrepresented, said June Shelp, an economist and vice president for the Conference Board, a private research group.

To be sure:

[T]he postings data offer only a partial and unofficial look at the labor market. Job losses in the recent recession have been much worse relative to output declines than in previous slumps, and official payroll data so far haven't shown signs of a big rebound in hiring.

While some big companies are expanding, others are merely replacing workers who are retiring or otherwise moving on. and many of the available jobs require experience and technical expertise that few job seekers can muster. Jobs that don't are still seeing a flood of applicants for each opening.

More on this article later. It's Christmas Eve Day and time for an egg nog break. I'll leave you now with some advice: in an interview, be there 5 minutes early. Show respect to everyone at the company on any level. Keep eye contact but don't stare at your interviewer as though your eyes were laser beams. And I totally recommend interview practice, practice, practice. That's what best friends are for.

Census Results Should Prod Democrats Into Action

The results of the 2010 Census are out, and things don't bode well for the Democrats. In Sabrina Tavernise and Jeff Zeleny's article in the New York Times, it is clear that that there were gains in the South and West, areas that contained states that President Obama squeaked by in 2008, and states in which he will have difficulty winning in any case.

Texas gained 4 seats while New York and Ohio lost two, respectively.

The Census draws the map for redistricting the vote. In other words, the number of members of the house are determined by the Census and the state legislatures, which became redder than ever after the recent election, draw the districts from which representatives are elected.

Florida, the original recount battleground in 2000 where Al Gore won the popular vote yet lost to George W. Bush as a result of the Supreme Court's decision in Bush v. Gore, gained two seats. President Obama squeaked by in 2008. The Republicans have made it clear that their main goal for the next two years is obstructionist; that is, they don't care about passing legislation, they care about making President Obama a one-term president.

Although the population increase in the South and West cut inroads into 2008 battleground states, a great deal of the population growth was Hispanic. If the Democrats want to take advantage of that growth, they have to strategize better than they have in the past and appeal emotionally to potential voters. They have to address the immediate concerns of Hispanic voters. The Democrats are generally on the defensive fighting off Republican accusations. Instead, they have to go on the offensive.

I worked as a volunteer tutor in an English as a Second Language (ESL) program. Many of my students were Hispanic mothers (their children were often in the classroom also). They wanted the same things as any other family: a good education for their children, a step on the ladder of the American dream:

[T]he influence of Hispanic voters, particularly across Arizona, Nevada and Texas...underscores the urgency facing both parties in find new ways to appeal to Hispanics. In future presidential races, Democrats believ they can make inroads into Arizona and Texas, which are traditionally carried by Republicans, particularly if voters speak out against Arizona's tough immigration law.

I lay odds that Republicans will push Democratic buttons before the 2012 election. The Democrats have to show some spine and go on the offensive. Otherwise, they'll miss their opportunity.

What Really Happened at Lehman: Maybe Its Auditor Knows For Sure

For the first time since the beginning of the financial crisis, a major financial institution duty-bound to certify the soundness of a huge investment bank might have civil charges filed against it. The targeted firm is Ernst and Young, one of the big Four audit and accounting firms. There used to be Five, but Arthur Andersen, which audited Enron, dissolved soon after Enron did in 2001.

Governor-elect and still attorney general Andrew Cuomo is close to filing charges that Ernst and Young stood by while Lehman lied about the risks it was taking with investors' money and employees' lives which led to its bankruptcy. Many economists believe that Lehman's bankruptcy helped trigger the devastation that followed.

In Liz Rappaport and Michael Rapoport's article in the Journal, Cuomo is investigating whether Lehman engaged in "window dressing", also known as repo debt (Lehman called the activity "repo 105), where banks borrow money on a short-term basis so they can take bigger risks. The more money you can play with (especially borrowed money) the more risk you tend to take. When it came time for quarterly reports, Lehman would lower its repo debt to make it look more sound to investors.

Instead of accounting for Repo 105 as loans, Lehman called them "securities" and Ernst and Young nodded in approval. After Lehman went bankrupt in September 2008, the bankruptcy examiner found that Lehman had moved some $50 billion off its balance sheets:

The attorney general's investigation, which began after the bankruptcy examiner's report, found that Ernst and Young specifically approved of Lehman's use of Repo 105 transactions and provided the investment bank with a complete audit opinion from 2001 through 2007.

Other big banks, such as Bank of America, also engaged in "window dressing". Earlier this year B of A disclosed 6 dubious transactions.

There was a whistleblower at Lehman, Matthew Lee, senior vice president, who complained that Repo 105 violated Lehman's ethics code. He put his concerns in a letter to senior Lehman executives 4 months before Lehman's collapse. As gratitude, he was fired. Ernst and Young did see the letter and said that Lehman management determined that Lee's "allegations were unfounded."

Shades of Enron. Enron was an energy trading company based in Houston which also worked cozily with its accounting firm to hide massive amounts of debt using special investment vehicles. Again, employees and shareholders were left holding the bag. The situation was certainly rigged for the employees: they were only allowed to invest in Enron stock for their 401-Ks. Enron collapsed at the end of 2001. Its share price went from +$90 in mid-2000 to less than $1 in November 2001.

At least a high-level executive, Jeffrey Skilling, went to jail in that case on multiple federal felony charges.

Now Comes the Harder Part: Integrating "Don't Ask Don't Tell" Into Military Culture

The policy of "Don't Ask, Don't Tell", allowing soldiers who are openly gay to serve without fear of expulsion, was finally repealed by the Senate on Saturday. It awaits the President's signature.

But even if the repeal is on the books, frontline combat culture wil take time to adjust. According to James Dao's article in the New York Times, who canvassed the views of some Marine Corps infantry troops, they expressed similar worries about serving with openly gay men: that they won't hold up well in front line combat units, that the units depend on cohesion and bonding over traditional "macho" pursuits, and that there is something too "feminine" about them.

An officer leading troops in Afghanistan said he anticipated that many openly gay soldiers would feel alienated from their straight colleagues.

Some Marines expressed the sterotype that a gay man is more like a female, a stereotype that not only distorts gay male contributions but also stereotypes female soldiers as weak.

Corporal Trevor Colbath, 22, a Marine who returned from Afghanistan in August said:

"Maybe they should just take the same route they take with females and stick them in noncombat units."

I think Colbath should ask some female soldiers if they fight and risk their lives similarly to his colleagues. He might be surprised at their responses. He might have to duck and cover.

Private First Class Alex Tuck, 19, had a different take. He said openly gay men would perform well and be accepted. But his friend Private Justin Rea, 18, echoed the "girly man" sentiment:

"Being gay means you're kind of girly. The Marines are, you know, macho."

The irony is that gay men already serve honorably and well in dangerous conditions. DADT kept them in the closet. Anthony Wilfert, 25, was trusted in combat. He said several colleagues, including superiors, knew he was gay. He was promoted to sergeant.

Eventually, though, he was discharged under the "Don't Ask, Don't Tell" policy. Now that the policy is one stop from repeal, he's thinking of re-enlisting.

Strange Brew

For some strange reason, when my ex-domestic partner went to my profile tab, he told me that instead of having a list of my personal information: interests, education, work history, etc., it has a steady stream of his comments. I did not authorize this information to be placed there. My cousin told me I sounded unduly hostile. That was not my intention. I'm sorry if any of the readers of this blog got that impression.

UPDATE: Just callin' them as he told me. I submit to a higher power. All families, children, dogs, everyone, my family, your family, have a great Xmas and a Happy 2011.

Another 2011 Spirit Awards Best Picture Nomination: Winter's Bone

Cross-posted from imdb pro:

Winter's Bone, which was originally a novel by Daniel Woodrell, made
into a movie by director Debra Granik, is an original, powerful story
of a 17-year old young girl who tries in the face of unbelievable odds
to keep her family together. The movie takes place in the Ozarks in
Missouri, but the life there feels so alien to this viewer that it
might as well be set on Mars.

It has overtones of ancient tribal behavior with its own code of law
and ethics. The fabulous actress who is the prime mover at the center
of the movie is played by Jennifer Lawrence. She is Dee Dolly,
searching for her drug dealing, oft-jailed father whose disappeared,
then revealed to have put up their home for collateral, jeopardizing the family's shelter. Dee cares for her catatonic mother and two young
siblings. They have no money and despite her pride, she accepts
grudging help from neighboring farmers. Dee is the glue of the story
which focuses on her journey of overcoming unfathomable obstacles. No
one, even her close friends, will help her. Her life becomes as alien
as the terrain. Not only do they refuse aid, her pursuit puts her life
in jeopardy. She learns to function even when there is no one she can
trust.

The town has lost all industry. The only way to make money is to
manufacture methamphetamine. Dee moves forcefully through the mine
field in order to keep her family together, safe and sheltered.

I feel compelled to repeat it: 17-year-old Jennifer Lawrence is a
revelation, determined and unafraid. You fear for her but she is
fearless.

Debra Granik's direction, with its ability to reflect the barrenness of
the landscape and to coax powerful performances from her actors, is
praiseworthy. One of the few women directors (at least that I'm aware
of) with a good distribution deal.

The 2011 Spirit Awards are presented on IFC on February 26, the day before the Academy Awards.

*Sorry for choppy copy editing

2011 Spirit Awards: Best Movie Nominations

Saw a great movie. 127 Hours. It's based on a true story; most who come to see it are aware of its dreadful climax. But it's also the story of a man who heads out on his own to test his abilities against natural elements. Nature is unpredictable. And through no fault of his own, he winds up having to make a very harsh choice in order to survive.

127 Hours was directed by Danny Boyle of 28 Days Later and Slumdog Millionaire. Boyle has range. 28 Days Later is the story of a mysterious "rage" virus that decimates the London (and environs) population, turning people into ferocious zombies, and Slumdog, well, it won the Academy Award for best picture.

But the actor James Franco, pretty much the sole center of 127 Hours has to hold the audience's attention during the entire running time, when they're set up and waiting impatiently for the unthinkable. He's stuck between a rock and a hard place, he's funny and you can see him thinking, not an easy stretch for an actor (no offense meant).

This ole guitar-strumming cat recommends it thumbs all the way up.

Euro Crisis: What Happened at the European Summit

Our breathless story continues. They held the European Summit in Brussels and everybody showed up, at least according to Walker & Forelle's article on today's Journal website.

Did they solve the crisis? Well, they did endorse a plan for a new bailout fund to replace the one expiring in 2013 and proposed treaty changes, but somehow that didn't calm the markets. Spain had to offer very high interest rates on its Thursday bond offerings. As mentioned before, Greece and Ireland had to accept bailout funds, which means they now take marching orders from the European Union and the IMF (International Monetary Fund). Portugal is next in line.

The European Central bank tried to reassure the markets.:

[It] said it will nearly double its capital base--a move analysts see as a strong signal to government leaders that the central bank's loans to banks and its purchases of government bonds of the regions weakest economies carry a risk. The added capital comes through a transfer of assets from each of the euro zone's 16 national banks.

Details are sketchy, but the new fund will probably run along the lines of the old one, about 750 billion euros ($992 billion). The proposed treaty will have to be agreed upon by each of the 17 members of the Eurozone. At least the language is simple. It consists of two sentences:

[I]t permits the Eurozone countries to establish a "mechanism" if "indispensable" for the health of the Euro.

That's kind of vague and broad. Shades of "systemic risk"? Or "too big to fail"? In the case of "too big to fail", the implication is that the U.S. Fed will back risk with its full faith and credit. Is this treaty language similar? What defines "indispensable"?

Zone countries need to raise about $2 trillion in 2011. To quote, "If Europe's governments fail to put their bickering aside, they risk triggering the unthinkable, the implosion of the Euro", evoking painful memories of past financial crises.

I am not writing this to encourage speculation on the downfall of the euro. I do not enjoy vultures feeding on carrion. I really want to see a solution to a very complicated, unprecedented problem.

Musing on Blogging and the Randomness of Life

Sometimes, when you try to make a difference, you ruffle a few feathers. I want to do the right thing (stole that from Spike Lee) and write about business, a subject vital to our country. This is a field I studied and know.

You don't have to look it up: I didn't graduate from Wharton or Tuck. I did get into NYU's MBA program back in the early 80s and was there for 2 weeks and I worked at Goldman in their bond department as a temp sales assistant around the same time. Very exciting. No, I did it the Lincolnesque way; I studied book after book, from Galbraith's "The Affluent Society" to many others, but what really influenced me to the point of taking copious notes was Charles Morris' "The Trillion Dollar Meltdown" which came out in 2008.

It’s funny; I’ve been writing Cassandra since 2007 and nary a peep. Even Cassandra can’t predict the future.

Thanks for listening. Back to our regular programming.

Is Spain's Example Our Fate?

Today (Thursday), Spain plans to sell up to 3 billion euros-worth (that's about $4 billion) in 10 to 15 year Spanish treasury bonds because it has to finance its considerable national debt. According to William Mallard et al's article on yesterday's Journal website, one of the credit rating agencies, Moody's, threatened to downgrade Spain's debt. Its current rating is Aa1, one notch below triple-A, the gold standard for large fixed income pools in the U.S. (Read: pension funds like CALPERS).

Spain is a major Eurozone economy and there seems to be the sort of domino effect I wrote about in my earlier "Dire Euro" posts. On Wednesday, Portugal sold 500 million euros of shorter term debt (3 month bills) at an average yield of 3.4%, up from 1.8% only a month and a half ago. When investors heard Moody's rumblings, Spanish debt yields rose but flattened out. Theory may be that Spanish costs have already risen so much as to factor in this news. Its yield on 12-18 month bills are more than 1% higher than one month ago.

As in the U.S., Spain is suffering from a long binge and the collapse of an overheated housing market. Unemployment is over 20% Austerity measures have been put in place, as they have been in the other faltering Euro countries:

Responding to intense pressure from markets and the European Union, Prime Minister Jose Luis Rodriguez Zapatero has stepped up efforts to cut its double-digit budget deficit and spur economic growth. He forced through an austerity budget that included tax hikes and deep spending cuts for this year and next. Earlier this month, he announced a series of economic measures to raise about 14 billion euros through the partial privatization of the national lottery and airport operator AENA, as well as the managment of Madrid's and Barcelona's airports.

You cannot win your way back to prosperity by selling your country's treasures on the cheap. That's a one shot deal at fire sale prices.

Very soon there will be a European Union summit. Maybe not soon enough. Hopefully there will be solutions hammered out dealing with the unsustainability of escalating debt in the face of recession, high unemployment and harsh austerity measures. There is a bailout fund, the European Financial Stability Fund, that Greece and Ireland had to utilize. But that expires in 2013.

The U.S. cannot look away from the problems in the Eurozone. We are competing in a global marketplace. Sooner or later, unsustainable debt levels for a country become prohibitively expensive. We (or rather, U.S. politicians) have to make choices. And no one wants to eat cat food.

No man is an island...
Send not to know
For whom the bell tolls,
It tolls for thee.

Obama's Affordable Health Care In Serious Jeopardy

According to Kevin Sack's article in the New York Times, Federal Judge Henry Hudson of Virginia ruled that the mandate that most Americans obtain insurance "exceeded the regulatory authority granted to Congress under the Commerce Clause."

That's a mouthful of legalese. In essence, the federal judge ruled that people cannot be compelled to pay into the insurance fund that will cover the costs of Obamacare. The idea behind such a mandate is if you have the widest pool of people participate, both the sick and the healthy, insurance risk is kept down and costs stay affordable. Without such a mandate, it's most likely that only the sick or those fearing illness and needing health care coverage will pay the mandate. Costs would probably become much higher because health insurers would consider those purchasing the mandate risky customers (Read: more likely to file claims) and charge accordingly.

In America we are compelled to pay for automobile insurance because theoretically there's a future risk of liability (someone might get hurt).

By contrast, the plaintiffs in this health care case argue that the new law requires people to obtain health care insurance simply because they exist.

By this logic, you can extrapolate further and assume that the judge's holding will lead to exorbitantly expensive fees for the ailing and those fearing future risk that they will get sick and need health insurance. Therefore, they will not exist.

The Dire Eurozone Crisis Part II

To pick up from my previous post, German Finance Minister Wolfgage Schauble's comments about how to deal with the growing crisis of nonpayment of debt "suggest Germany is prepared to go much further than many observers had expected to defend the euro." They may be ready to establish some sort of federated system to transfer money from fiscally sound to struggling countries.

Some background: Ireland was in dire straits recently and received a 70 billion euro ($93 billion) bailout/rescue package which failed to calm the markets. In fact, observers are worried about a domino effect, because other Eurozone countries (as is true for many countries in the world without shared currencies) are on shaky ground. They're especially worried that the crisis will hit Spain, one of the region's largest economies suffering from high debt levels and sky-high unemployment.

A Spain rescue would largely exhaust the EU's nearly trillion-dollar bailout fund and focus attention on the sustainability of government debt in countries at the core of the eurozone economy, especially Italy.

At that point, the cost of the bailouts would be too high to keep the euro zone together, some economists warn.

There's still more to come. I'm actually merely critiquing the article by Marcus Walker and Matthew Karnitschnig in the weekend Journal, "Germany Vows Defense of Euro", so if you see me misrepresent your work, let me know.

Focus on the Euro: Something's Dire

The most pressing difficulty weighing on the world's economy right now (and this phrase understates its enormous size and difficulty) is the Eurozone/Euro problem. The Eurozone is an artificially created conglomerate of disparate European nations, each with its own strengths and weaknesses, all sharing the same currency, the Euro.

I find the growing problem of the Euro difficult to understand. Turned to the Journal yesterday to find out why investors were panicking and credit spreads widening by the minute. Here goes:

Not all countries are created equal. Some countries have stronger economies than others (Germany and France versus Ireland and Italy). The weaker countries suffer from a combination of too much debt and too little wherewithal to ever repay it, particularly at a time of global recession. This is creating huge panics across the board. Weaker countries have to pay enormous sums in interest to attract investors to its bond offerings, and sometimes they have no takers. The Euro, the world's second largest currency, is in danger of collapse.

The Finance Minister of Germany (the most prosperous country) , Wolfgang Schauble, has hinted it will lead the way to preserve the Euro. This shows a certain amount of bravery on his part. A lot of Germans have the not uncommon feeling, "Why should we have to pay for the profligacy of the Italians or Irish, not to mention the Spanish?" Well, they may not share common national boundaries but they do share a currency, just like the collar, in which they traded, sold, bought, borrowed, stole and now there's got to be solutions on the table.

I've written about this not too long ago in Cassandra but I wanted to get my two cents out faster than I wanted to locate the darned post.

More later.

The Smoking Gun Is Petering Out

Founder
Other (or same) Founders posing (look, the woman has short hair!)

Is it possible that thesmokinggun.com, which sold its scenario of "World's Stupidest Criminals" to trutv (formerly Court TV of O.J. Simpson fame) writes stories that mock women who resemble Rachel Maddow? And therefore must be horribly stupid bank robbers who don't realize they have a GPS implanted in stolen money, they think it's a dye pack?

I must be dreaming. This is the site that gave us the fabulous Nick Nolte mug shot and other vital legal documents.

The Tactics of Cyberwarfare

A common tactic used to discredit political enemies (I've written about this before in Cassandra) is to mix the rebel up in a sex scandal. Sometimes scandal does exist factually and evidentially, as in the cases of David Vitter and Mark Foley. But other times the charges are murky.

The New York Times has an article on its front page (that's right, I'm an oldster, I subscribe to the print edition of the Times) which indicates that's what seems to have happened to Julian Assange, who was a former cyber hacker who founded an organization known as Wikileaks. Wikileaks has been brashly releasing evidence of such activities as pilots casually discussing the killing of civilians from a safe distance of 30,000 feet.

Some accuse young people of all techno, no causes. But in Assange's case, they seemed to have found a cause to rally around, his jailing. They are using their formidable weapons, their knowledge of how computers and the internet really work and intermingle, to disrupt some powerful corporate interests. This is also not a new activity. It's done by governments all over the world. So what exactly are they doing? In some cases they are bombarding the websites with coordinated messages simultaneously as to overwhelm the IP, which leads to a denial of service. No one can then access that website.

Some of these attacks, which appear to have no connection with Assange, are from a group that calls itself "Anonymous". To all you folks out there who get confused by a concept known as "irony", when a group pointedly calls itself "Anonymous", operates on the Internet which cloaks itself in anonymity but they themselves are operating in plain sight, that's irony. These guys are out on a limb ostensibly fighting for a cause they fervently believe in.

More later about the limits of privacy.

With Politics, There's Always Nasty Compromise

According to today's Wall Street Journal, there might be a light at the end of the tunnel for the middle class even in the midst of the unhappy compromising on the Bush tax cuts:

Th deal includes a 13-month extension of lapsed federal jobless benefits and a temporary cut in the worker's shaer of the Social Security payroll tax. It would extend a raft of other tax cuts aimed at middle-class tax payers, including a two-year program to shield most Americans from the Alternative Minimum Tax (AMT).

The price to be paid is huge: $700 billion in unfunded mandates for extending the Bush tax cuts set to expire at the end of the year. The prospect of passage has already pushed up U.S.borrowing costs which will greatly increase the budget deficit. A standard in credit determination, the yield on the 10-year treasury bond, has gone to 3.22%, the highest level since June 2010.

The Democrats are rightfully angry.

[They] want an extension of the Build America infrastructure bond program, but many lawmakers concede it might die due to Republican opposition. The bond program, set to expire at the same time as the Bush tax cuts, provides subsidies for taxable bonds issued by state and local government.

Who Has to Pay: Millionaires or the Unemployed?

Very interesting. Just read both the New York Times and the Wall Street Journal articles on Washington's big pow wow this weekend, which basically covered two fronts: 1) Extending the $700 billion tax cuts for all Americans, including the top 1% who are millionaires/billionaires; and 2) extending unemployment benefits for the rest of us.

Curiously, the Republicans insist that the $700 billion bite taken out of our Treasury doesn't need offsetting spending cuts (read: schools, highways, libraries, police, firemen, etc.) while unemployment benefits do need offsetting spending cuts.

Quoting the Senate Republican leader, Mitch McConnell, on "Meet the Press" yesterday:

[And] Mr. McConnell acknowledged that there would be a continuation of jobless aid for the long-term unemployed, though he reiterated the Republican contention that the cost should be offset with reductions in spending elsewhere.

"I think we will extend unemployment compensation," he said. "We've had some very vigorous debates in the Senate. Not about whether to do it but whether to pay for it as opposed to adding it to the deficit. All of those discussions are still under way."

My question to Mr. McConnell is, do you only care about the deficit in terms of the lower 99%? Who pays for the $700 billion? What offsets the cost of extending the Bush tax cuts?

Post Crisis: 3 Mavericks With New Ideas--Part II

As promised, here are the ideas of the 3 brave men attempting to wrestle with the post-crash economy.

Cast of Character: Physicist Doyne Farmer, who thinks we should analyze the economy like we do the weather and epidemics.
Psychoanalyst David Tuckett: The key to market gyrations is found in Freud (monsters from the id?)
Economist Roman Frydman thinks we can never forecast the economy with any accuracy.

Farmer doesn't see people as rational actors, and he definitely doesn't believe current models take into account (how did he put it?) "large chunks of reality." His solution is to create a more complex simulation of the economy like those used to model weather patterns, epidemics and traffic.

Of course, as we all know (those lovable weather people!) there's a large amount of failure built into those models as well. That doesn't make them unsuccessful. Look at baseball. To be a pro you only have to hit 3 times out of 10. Farmer's model would include actors who don't have to agree with one another and who don't act in predetermined ways.

Tuckett seeks to look inside the mind for answers. When I was a tot there was one thing I took to heart: the market is driven by greed and fear. That's plainly illustrated by the attitude toward credit pre- and post- housing crash. Before the crash, mortgage brokers gave money to anyone with a pulse. Afterwards, the money men pulled in their tents, cut credit lines to viable small businesses and in general acted like miserly, prudent schoolmarms.

Tuckett's research led him to believe that some financial instruments (credit default swaps?) "are so volatile and hard to value, they trigger humans' tendency to fantasize." In fantasy mode people will pay anything to acquire the magical powers they themselves have bestowed upon the object (Dutch tulips, potatoes that look like Richard Nixon)--also known in psychological circles as "projection". When the object loses value, people focus on its flaws.

Frydman, the economist, went his own way, butting heads against the idea that all buyers will act in the same way. As discussed in previous post, such logic makes for gorgeous, icy, inexorable mathematics, but it can also be severely misleading.

"Capitalism works better than other systems because it lets people disagree about the future and profit from their insghts. This is rational behavior that the models don't accommodate."

Perhaps the best thing is to recognize the limits of our knowledge. Even if we know a crash is coming, as people like Nouriel Roubini tried to warn, we don't know exactly when it will happen.

Frydman thinks the Central bank can play a huge role in signaling when asset classes like stocks, bonds (what's the par value on that thing?) or houses are getting overheated. No encouragement of irrational exuberance or promotion of adjustable rate mortgages, as previous Central bankers espoused. The idea is to warn buyers about risk so they can factor it into their decisions, thus not only arming the individual but help to prevent systemic failure.

According to the Journal, Maybe Economics Isn't So Dismal After All

Did you ever feel that a Corvette could chase the blues away? Mon dieu! The Wall Street Journal has actually begun exploring different theories of how the economy functions based on the concept that people are driven by emotion, especially when it comes to money.

Neo-classical belief which has been the prevailing theory for years, posits that people are rational actors and make stolid, price-based decisions on every purchase, which enables the markets to work smoothly. The beauty of this theory is that the workings of the economy can be reduced to the inexorable logic of mathematical equations. Very elegant. Not the real world.

Unfortunately, such logic did not work in terms of the ongoing housing crisis. Models were created by MIT PhD's best and brightest, but the data that girded these paradigms had cracked foundations. They had 20 years of housing data to work with, so they fed those 20 years into the gaping maw of their machines. Because housing prices did not fall during that time, the assumption of the model was the housing prices would NEVER fall. The beauty and comfort of mathematics smacked headlong into unforeseen events (which include many things too numerous to mention, like fraud, greed, lying and other criminal behavior).

After all, it's statistically impossible to feed every conceivable variable about thousands of mortgages that comprised one mortgage backed security. One person may pay his/her bills on time, the other may be on welfare, another is profligate (you get the picture).

So the Journal has given three economists who would be considered on the fringes a chance to explain their theories, which include real-life human behavior. I will take them up in another post.

Is Silicon Valley Headed For Dot-Com Bust 2.0?

On the front page left column above the fold article in the NYT today, "Silicon Valley Showing Signs of Bubble", the article questions whether all the venture capital money flowing to current Silicon Valley social network start ups will actually pan out in the long run, particularly in terms of the huge amounts they're investing in these entities. Some of the apps trade on exclusivity, almost like Studio 54, like Path, "an iPhone app for sharing only photos on a social network limited to only 50 people". Investors coughed up $2.5 million for that one.

The question becomes, will these young and hot entities go the way of early 21st century dot com busts like pets.com?

Are we seeing herd behavior again? People are afraid to "miss the next big thing". There are differences between 1.0 and 2.0. Most of the companies now are not traded on the stock exchange so there is no exchange bubble. Of course, that leads to questions of transparency and regulation in favor of investors.

But in this current environment, when money is hard to come by with ZIRP interest rates, cash is king. And some technology companies are sitting on a lot of cash.

[Microsoft, Apple or Google] have about $90 billion in case on their books. McKinsey & Company calculates that the largest software and hardware companies have enough excess cash on hand to buy nearly all of the tech industry's medium-sized companies.

The question in my mind is, how will these companies eke out profits? Will online advertising actually support these businesses in the long run?

Do Politicians Stand With Us or Against Us?

The top marginal tax rate during the Eisenhower years was 90%. No one can argue there wasn't prosperity then. But in the 1980s, President Reagan cut taxes to 25% and thus began the largest income inequality in American history, which persists to this day. In the face of crumbling cities and vanishing services, the Republicans want to continue this failed, destructive policy by extending the Bush tax cuts for millionaires and billionaires.

Reagan and his henchmen referred to the theory of giving the rich tax cuts as "trickle down" economics, also known as "piss on us" economics, which was discredited by none other than David Stockman, Reagan's Budget Chief at the time. The rich do not spend to create jobs. They invest and manage to pay 15% tax on their capital gains. Ordinary earned income is taxed at 35%.

It's simple in terms of numbers. The most stimulative program that puts money directly into the economy is unemployment insurance. Ordinary people must go out to buy food, shelter and other taxed consumables. In essence, the lower 99% often pay tax twice, on their income and on the products they purchase.

I see more jobs disappearing every day. In my neighborhood, there is a drug store chain that has replaced humans with "self check out" machines. This is the finest example of corporate thinking, to commodify everything and everyone.

Rachel Tells It Like It Is

Sorry for the quick study, but it's time to pay attention!

#1: Bush Tax Cut Love: Republicans want to add $700 bn to the budget deficit without figuring out how to pay for it by continuing the Bush tax cuts for the top 2% (millionaires and billionaires: read "Politicians and friends thereof").
#2: They don't care about middle class (or working class, or any other class) concerns, including health care, unemployment insurance, jobs or eating.
#3: They are not in the majority even though the Beltway media encourages that belief.
#4: The filibuster is anti-democratic and will erode the ability of the government to function, except to cut themselves and their friends paychecks.