How the Greedheads and the Internet Destroyed Thought

On this last day of 2008, I mourn the loss of the thinking writer. What is this shit with Twitter (164 characters worth of discussion at one time? Rachel said last night that Israel "tweaked[?]" its current bombing and possibly ground troop campaign against Hamas in the Gaza through Twitter. "Isrl bomb only mil instal; civ dths sad but nec."

Meanwhile, just read in the
New York Times that Nat Hentoff and Lynn Yaeger were laid off. According to Tom Robbins, who is still a staff writer there, half the staff of the VV has been laid off since the New Times Media (a Phoenix-based publisher of alternative weeklies that later changed its name to Village Voice Media) bought it in 2005.

Nat Hentoff has been there for 50 years, since 1958. I disagreed with him on many issues, particularly abortion, but he was always a worthy adversary. He could think in print. He discussed detailed constitutional issues, like the urgency of protecting first amendment rights. How can you discuss this shit in 164 characters without being extremely reductive, if not totally stupid? Is this what everyone is evolving towards (whether they want to or not), public discourse based on Valley Girl text messaging?

I am guilty of the same short-term responses myself. If my homepage hesitates for a milisecond, I get impatient. The thought of pulling down the Encyclopedia Britannica to research something seems anachronistic and a waste of time. Why look it up in a deliberate fashion: selecting the proper book, leafing through the pages, and reading all those goddamned words when all you have to do is type "key" words into a search box to get answers? But what the fuck kind of answers are they?

Banks, Automakers and (T)he (A)ct to (R)eward (P)lutocrats

This is a horrible economy (that is the understatement of the year). Some estimate that the official unemployment rate will rise to 10% from around 6.7% now. 1 in 7 homes will be in foreclosure. And the TARP bailout is causing more problems, not less.

“Banks Need More Than Just A Tuneup” 12/1/08 from “Heard on the Street” column

The banks’ business model has failed. That’s the truth. They lent poorly, gave out credit to anyone with a pulse and were sorely undercapitalized. They used off-balance-sheet vehicles (like SIVs) to sock away their bad debt. And the incentives were set up to make a killing and walk away. You got paid on the basis of your deals, not how the deals unraveled.

Congress is closely monitoring the auto bailout (if there even will be one) with the sticky fingers promise of maybe $25 billion, a mere drop in the bucket for the failed banks. In order to get the money, Detroit will have to genuflect, including cutting down the union. By contrast, banks get money with few strings attached. There is no demand to lend, no requirement to reveal collateral, no requirement to cut salaries or dividends, fucking nothing.

The banks blame everything but themselves. It’s the volatile, unpredictable market. It’s predatory hedge funds; short sellers; a “perfect storm” of events coming together at the same time (I mean, who could predict that housing prices would actually go down?). If the fault, dear Brutus, lies not in ourselves, then why change?

This is the exact opposite of the argument being made against the Big Three. They’re dinosaurs; their business model failed; the market should let them die. But the business model for banks has also failed, as stated in above article:

The reality is the crisis is due to bad lending, and investment decisions. And those, after all, form the core of the banking business. In auto terms, it’s as if banks designed cares that suffer from catastopic mechanical failures, or can’t be driven during snow storms.

Banks need to adjust incentive structures so bad lending decisions aren’t as likely, slim costs to reflect reduced future profitability and rethink capital.

If the Fed and the Treasury keep rewarding bad players, if they reward reckless decisions with more money while requiring nothing in return, this catastrophe (if it ever ends) will continue.

I know that Bloomberg News service filed a Freedom of Information Act (FOIA) to force the Fed to reveal what it is accepting in return for all the taxpayer money it is printing and doling out. The Fed refuses. It is laughable to believe that we will make anything back from all the shitty debt they’re shoveling onto us. What collateral is the Fed accepting?

From 11/25/08 www.rgemonitor.com :

The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the U.S. GDP, to rescue the financial system since the credit markets seized up 15 months ago. Bernarke’s Fed is responsible for $4.4 trillion of pledges, or 60% of the total commitment of $7.4 trillion. The unprecedented pledge of funds includes $2.8 trillion already tapped by financial institutions. The commitment dwarfs the only plan approved by lawmakers, the Treasury Department’s $700 billion Troubled Asset Relief Program (aka The Act Rewarding Plutocrats). Regulators refuse to disclose who is receiving how much while Congress starts pushing for transparency and give authority over taxpayer money back to elected officials.

In today’s NYT, Andrew Ross Sorkin writes about how Paulson, Bernarke, et al lent money to a Lehman subsidiary AFTER they let Lehman go bankrupt, ostensibly because (as Paulson claimed) they didn’t have the legal authority to lend to Lehman based on Lehman’s collateral. So why did they lend to its subsidiary after Lehman crashed? Didn’t Lehman still have the same collateral?

Municipalities Going Down The Drain

Buyers Shun Port Authority Bond Issue

Alan Greenspan Destroyed the World, Darth Vader-Style

The Sky Is Falling, Really, Says Alan Greenspan

BLOOMBERG 10/23/08: Alan Greenspan, Fed Chairman from 1987-2006, conceded to Henry Waxman, Chairman of the House Committee on Oversight and Government Reform, that he may have been a wee bit wrong about the idea that self-interest and an invisible hand would regulate the markets.

Firms that bundle loans into securities for sale should be required to keep part of those securities, Greenspan said in prepared testimony. Other rules should address fraud and settlement of trades, he said.

The admission that free markets have their faults was a shift for the former Fed chairman who declared in a May 2005 speech that ``private regulation generally has proved far better at constraining excessive risk-taking than has government regulation.''

Today Committee Chairman Henry Waxman, a California Democrat, said Greenspan had ``the authority to prevent irresponsible lending practices that led to the subprime mortgage crisis.''

Greenspan opposed increasing financial supervision as Fed chairman from August 1987 to January 2006. Policy makers are now struggling to contain a financial crisis marked by record foreclosures, falling asset prices and almost $660 billion in writedowns and losses tied to U.S. subprime mortgages.

Securities and Exchange Commission Chairman Christopher Cox and former Treasury Secretary John Snow also appeared at the House committee hearing.

Addressing the trio that oversaw the U.S. financial markets as the housing bubble developed, Representative John Yarmuth, a Democrat from Kentucky, characterized them as ``three Bill Buckners,'' referring to the Boston Red Sox first baseman whose fielding error some fans blame for the team's loss in the 1986 World Series.

These fucking Congressmen, they do the same damn thing everytime: they ignore or actively oppose regulation at the time when it would actually do some good. Then after disaster strikes (and this is disaster: countries are defaulting at a breathtaking rate—Hungary, Argentina, etc.—emerging markets are fragile because investors are pulling out and putting their money into wealthier nations that can afford to back up debt with guarantees.

Corporations can’t sell 3-month commercial paper. In a week or so the Fed will begin buying it, presumably to ease the market. Is this the trickle-down theory?

Greenspan actively fought regulation, especially during the run-up to the housing boom and throughout the bubble. When Brooksley Born, head of the Commodities Futures Whatsis, tried to get derivatives regulated, she was not only rebuffed, Greenspan and Robert Rubin, Clinton's Treasury Secretary, derided her concerns in front of Congress and managed to remove all of her enforcement powers. She resigned shortly afterward.

AmeriDream President Asks for Congress to Pass Downpayment Assistance

Ann Ashburn, President of AmeriDream, Inc., today released the following statement in response to former Federal Reserve Chairman Alan Greenspan's testimony before Congress regarding the current U.S. financial crisis. Dr. Greenspan identified the stabilization of the U.S. housing market as a key condition for economic improvement.

"We agree with Dr. Greenspan that housing prices must stabilize for our economy to recover," said Ashburn. "Homebuyers currently have little incentive to enter the housing market. Fortunately, we can fix this problem: Congress must reauthorize downpayment assistance funded in part by sellers, commonly known as DPA, which was eliminated October 1st of this year. A bipartisan coalition in Congress has introduced H.R. 6694 to achieve this goal. H.R. 6694 will bring creditworthy "main street" homebuyers - each of whom qualifies for an FHA loan - back to a housing market that desperately needs them. Without DPA, more than 300,000 homebuyers will remain on the sidelines annually. I urge aspiring homeowners and housing industry professionals to contact their members of Congress and tell them to support H.R. 6694. Our housing market depends on it."

Dr. Greenspan testified today that, "a necessary condition for this crisis to end is a stabilization of home prices in the U.S. They will stabilize and clarify the level of equity in U.S. homes, the ultimate collateral support for the value of much of the world's mortgage-backed securities. At a minimum, stabilization of home prices is still many months in the future. But when it arrives, the market freeze should begin to measurably thaw and frightened investors will take tentative steps towards reengagement with risk." His entire testimony can be read here:

BACKGROUND: AmeriDream, a 501(c)(3) charity, was established in 1999 to provide housing-related programs to low and moderate income individuals and families. Many recipients are first-time homebuyers, minorities, legal immigrants, women headed households, and single-parents, achieve homeownership. AmeriDream provides a wide range of programs, including homebuyer education, loss mitigation counseling, community development, and privately-funded down payment assistance. These programs are provided at no cost to the taxpayer. AmeriDream not only seeks to help families purchase homes, but also provide them with the education and other resources needed to be responsible homeowners.

SOURCE: American Dream, Inc.

Copyright (C) 2008 PR Newswire. All rights reserved

Where is Roger? Stone, that is...

Andrew Cuomo, our current New York attorney general, is hot on the trail of dastardly financial institutions and their evil spawn. He got major companies to cough up the value of auction rate securities when the market froze because the companies sold them as the equivalent of cash but refused to make good. He had his attack dog Eric Dinallo, the insurance commissioner, reclassify credit default swaps as insurance, so they have to be regulated and carry cash reserves to cover claims against them. He pursued the executives at AIG who are still pocketing lots of cash even though now it's the taxpayers' cash courtesy of Hanky Panky.

He's Tony the Tiger chomping on the asses of these overpaid criminals. So my question is, where is Roger Stone to wiretap and stalk him? That's how the Republicans (and probably a few Democrats, like Shelly Silver) got rid of Eliot Spitzer, our last New York pit bull. It's the same way Richard Johnson gets the tip that Michelle Obama ordered lobster thermador and caviar at the Waldorf last night when the Al Smith dinner was held. The Emperor Club? VIP Lounge?

Medicare Part D or how to impoverish the elderly

The trumpeting cry behind the Medicare Part D program was that it would finally provide prescription drug coverage for the elderly and disabled. AARP, the powerful advocacy organization, rallied behind it, giving cover to that bastard.

But as it turned out, Bush created Medicare Part D as an insured pay flow for private vendors, middlemen between drug companies and hapless recipients. It is widely known that the government will not negotiate for lower drug prices for its vast constituency, unlike the Veterans Administration.

When I examine one case, that of a close relative who receives prescription drug benefits through a Medicare-preferred private insurer, it is obvious that the concern is not for the person who needs medicine but for the bottom line of the insurer.

She pays premiums of $100 per month (an increase of 80% from a year ago) for the opportunity to have $2400 worth of drug costs covered. The calculation of that $2400 includes the entire cost of the drug, not merely the co-pay. So if you buy a drug with a co-pay of $40 but the total cost of the drug is $350 (not uncommon), the $350 counts towards the $2400 initial coverage. Once you hit that $2400 mark, you fall into what is known as the "doughnut hole". (Meaningful name) Then confusion and dismay follow in short order.

In the "doughnut hole" you have to pay 100% out of pocket for your prescription drug costs until you have spent $3600. The calculation of that $3600 out-of-pocket figure includes your co-pays over the year. It's very confusing for her, and she can read without moving her lips.

The way it breaks down is: She pays about $100 monthly premiums, about $1200 per year, plus $3600 out of pocket for $2,400 worth of benefits. Unless somehow she gets through that $3600 doughnut hole intact in order to qualify for catastrophic coverage, wherein she only has to pay 5% of total drug costs.

So she pays $4800 for $2400 worth of benefits. But she has to keep paying the premiums in case she god forbid is diagnosed with something unexpected that may entail runaway drug costs (i.e. cancer, diabetes, et al). This is not insurance for her. This is insurance for them.

When I contacted this magnanimous "preferred" vendor, I didn't get the impression that the customer service reps were prepped and ready to serve. My vision was that of a desk, a chair and a telephone under a bare light bulb in an anonymous rent-by-the-month room-for-an-office. I have nothing against a bare bones operation. I just wonder where the profits are going. Maybe the CEO can send my aunt a postcard during his vacation in Tuscany, or the blueprints of his new McMansion. Then she'll feel better about skipping her insulin.

Oops! Russia Just took over BP

What a jolly theoretical world. British Petroleum (or BP, or Beyond Petroleum, as its tagline goes) is having a little trouble with its Russian partners in a venture known as TNK-BP Ltd. In fact, the head of the BP venture, Robert Dudley, has just fled Moscow, officially because the Russians wouldn't renew his work visa. Unofficially, he's been barraged by threats and intimidation from the Russian consortium, AAR, which owns 50% of the venture.

The Russian government denies that it backs the effort to force out BP in order to nationalize the company. It won't get involved, it says. It's merely a matter between Dudley and the consortium's dissatisfied board and shareholders. But Dudley says he's been subject to investigations, intimidation and inquiries. The three Is.