Archive for December, 2009

Jonathan Jarvis bringing the Fande

December 17, 2009 Leave a comment

The Crisis of Credit by Jonathan Jarvis

Fande = Fact & Evidence; Cande = Conjecture & Exaggeration

Bring your Fande, leave your Cande!


IMPORTANT: Proper accounting rules for Wall Street banks

December 11, 2009 Leave a comment

* For a definition of “proper,” please see Guy Ritchie’s film, Snatch.


* Another name for subprime mortgage-backed securities is SIV, or Structured Investment Vehicle.

“The logic of the off-balance sheet treatment of such things as structured investment vehicles, or SIVs, which banks created in order to get assets off their books, was that the bank did not control them, and so did not have to show the SIV assets, and liabilities, on its own books.

That fiction evaporated early in the financial crisis. Some SIVs were among the first structures to fail, when they could not roll over loans to finance assets that had lost value. The banks chose to, or had to, rescue the SIVs. Maybe they did so to guard their reputations, or maybe they feared they would have been vulnerable to fraud allegations from those who lent to the leaking SIVs. In either case, it turned out there was a black hole that the regulatory rules had ignored in assessing how much capital the banks needed to hold.

There are other examples. Bank holding companies have been allowed to issue something called ‘trust preferred securities.’  The beauty of those securities was that they were really debt that the holding companies could call capital. Having that ‘capital’ meant the bank could take on more debt. A system that lets a bank borrow more money because it has already borrowed money — rather than because it has sold stock — is hardly a wise one.

All this was part of what financial engineers openly called ‘capital arbitrage,’ in which they created securities and structures whose purpose was to let banks slide around the capital rules. Regulators seem to have responded by assuming that everything would be fine.”

Oh, Climate

December 10, 2009 Leave a comment

So what about those stolen emails from the climate scientists who were playing footloose & fancy free with the facts? Was it all Cande?

Let’s hear from Thomas Friedman of the New York Times, Sarah Palin and a climate scientist from UCLA…

“Frankly, I found it very disappointing to read a leading climate scientist writing that he used a ‘trick’ to ‘hide’ a putative decline in temperatures or was keeping contradictory research from getting a proper hearing. Yes, the climate-denier community, funded by big oil, has published all sorts of bogus science for years — and the world never made a fuss. That, though, is no excuse for serious climatologists not adhering to the highest scientific standards at all times.

That said, be serious: The evidence that our planet, since the Industrial Revolution, has been on a broad warming trend outside the normal variation patterns — with periodic micro-cooling phases — has been documented by a variety of independent research centers.

As this paper just reported: ‘Despite recent fluctuations in global temperature year to year, which fueled claims of global cooling, a sustained global warming trend shows no signs of ending, according to new analysis by the World Meteorological Organization made public on Tuesday. The decade of the 2000s is very likely the warmest decade in the modern record.’ ”

–Thomas Friedman for the New York Times

“Our representatives in Copenhagen should remember that good environmental policymaking is about weighing real-world costs and benefits – not pursuing a political agenda. That’s not to say I deny the reality of some changes in climate – far from it. I saw the impact of changing weather patterns firsthand while serving as governor of our only Arctic state. I was one of the first governors to create a subcabinet to deal specifically with the issue and to recommend common-sense policies to respond to the coastal erosion, thawing permafrost and retreating sea ice that affect Alaska’s communities and infrastructure.

But while we recognize the occurrence of these natural, cyclical environmental trends, we can’t say with assurance that man’s activities cause weather changes.”

–Former governor of Alaska and Republican Vice Presidential candidate, Sarah Palin

“The Jones and Mann reconstructions are drops in a global flood of evidence that something is going on with the world’s climate and environments that we had better take note of. The climate change summit in Copenhagen remains completely justified in tackling the issue of climate warming now rather than later. In this regard, Climategate is a dangerous distraction from a frighteningly urgent threat.”

–Glen MacDonald is a climate change scientist, UC presidential chair and director of the UCLA Institute of the Environment


Thomas Friedman…

Sarah Palin…

Glen MacDonald, climate scientist from UCLA…,0,7575923.story?track=rss&utm_source=feedburner&utm_medium=feed&utm_campaign=Feed%3A+latimes%2Fmostviewed+%28L.A.+Times+-+Most+Viewed+Stories%29

The Cande of Kudlow

December 9, 2009 Leave a comment

I used to watch Larry Kudlow for years, when I watched TV (which is only for DVDs and Barcelona football now). He’s a brilliant man, you can tell right off the bat. Crisply dressed always in a finely tailored suit with usually some kind of upper-crust, bon vivant style, like a collar that is a different color from the shirt, or a handkerchief pluming from his outside breast pocket, or french cuffs, also the color of the collar not the shirt.

He’s bald. Or as George Costanza would say it…”Bal-ding! Bal-ding!” Larry, you wear it well, my man. We can’t forget bespectacled and always with a freshly shaved face. Tanned, too, but that could be from the TV makeup. He is thin, but wiry, and makes snappy gestures when punctuating his remarks, sometimes throwing finger pointed jabs while holding a pen.

The show is about economics and politics, so it’s ramped up for turmoil. I enjoyed watching Kudlow & Co. Although, I usually could not watch it all the way through without getting a burning in my chest when I heard the contortionist that is Larry Kudlow twist logic on its ear and offer up false premises for the sake of benefiting the investor class only.

Judging by his recent article about the financial crisis, I can see he’s still at the height of his demagogic powers.

Keep in mind, Larry is writing at a time when we are all struggling to pay our bills, and Americans are talking about not exchanging Christmas presents for the first time in years, or Ever!, because of the subprime mortgage crisis.

“Subprime” being the key word. I invite you to watch this clip:

See, banks and lenders should not have been offering loans to anybody without proof of job or income, but they did. These loans sometimes shot up from a teaser rate of 2% to 15%, often without proper notification to the homebuyers. Yeah, plenty of greedy people lied to get subprime mortgages. But plenty more got duped, sucked in and set up…set up just right they thought with a subprime loan to buy a home, which was in reality about to explode into a money death trap. People deserted those homes. When the rates exploded on the loans some people just threw the keys in the mailboxes and drove off. Other people received foreclosure notices from their banks and were evicted.

Those abandoned homes, and foreclosed homes, were tied to stocks on Wall Street. Those stocks were called “mortgage-backed securities.” Wall Street was selling off pieces of the poisoned pie to other banks around the world. That’s why foreign banks got sick. But the U.S. got the flu. We’re at 10% unemployment, 17.5% underemployment. We gave $700 billion to the Wall Street banks to cover their losses on subprime, so they would start lending again, but they didn’t. The credit markets seized up and small business got hurt because there were no short-term loans, or “commercial paper,” from local banks to cover payroll costs (*many companies allow their suppliers to pay on monthly credit, and if those payments have lag times of a few days, the companies’ other costs have to be covered by small private loans from local banks).

So instead of the Wall Street banks lending to the smaller banks, they paid off their debt and started investing the money the United States Treasury gave them. We, the taxpayers, paid double for Goldman when we covered its personal losses on subprime and also paid off its outstanding marker to its virtual bookie, AIG.

That’s why it is pure balderdash when Larry claims…

“In effect, you get what you pay for. The Fed paid for easy money, and we all got the recessionary credit-crunching consequences of the Fed’s mistake.”

Here Larry makes the argument that low-interest rates on loans caused a buying frenzy in the home market. When it was the manipulation of the rules that caused the financial crisis. Along with the lack of regulation by the Bush S.E.C., which allowed self-regulation by the Wall Street banks. Some people selling subprime mortgages to consumers did a bad thing. Then Wall Street got a hold of that bad thing and made it into stocks, or “toxic assets.”

Flashback to a duped home in California, circa 2005…”Mom, Dad, I took all our money out of Google stocks and let it ride on a package of subprime-mortgage-backed securities sold to me by Bear Stearns!”

It’s just ludicrous that Larry doesn’t understand the mess created by his “free-market is best” notion. America got hurt by the hucksters on Wall Street, and those hucksters double-crossed us on the $700 billion TARP bailout. Those hucksters were supposed to lend that money. Instead they’re sitting on a pile of gold that we gave to them. While we don’t exchange presents for Christmas, Goldman Sachs is set to pay its employees the biggest bonuses in the bank’s history… during the Great Recession.

And Larry puffs out his finely tailored sternum to write on his web page:

“Time and again Bernanke argued that the Fed was not to blame for the ultra-easy money that created the housing and commodity bubble which got us into this soup in the first place.”

Now that’s sophistry! Show us your jazz hands, Larry.

To argue that “easy money” from the Fed created the housing bubble is to omit the deceitful loans offered by supbrime mortgage lenders and excuse the misdeeds of Wall Street betting heavy on these “toxic assets.”

Over the last decade, average Americans’ wages were stagnant. And during the subprime fallout housing values plummeted, 401ks lost half their value just like the U.S. stock market, and the Detroit automakers had to get bailed out, too.

Knowing all that, Larry writes a critique of Ben Bernanke’s handling of the financial crisis without once using the word “subprime,” when that was the culprit all the time. By “subprime” I mean the exploitation of naive homebuyers & homeowners, followed by the plundering when Wall Street got a whiff down wind.

Fande = Fact & Evidence; Cande = Conjecture & Exaggeration

Bring your Fande, leave your Cande!

Morning Becomes Eclectic

December 7, 2009 Leave a comment

Click, listen…

* Inspired by 89.9 KCRW “Morning Becomes Eclectic” radio show

Open letter to President Obama

December 4, 2009 Leave a comment

Mr. President,

Get the banks lending or the markets won’t work.

Isn’t that what the $700 billion TARP bailout money was for? The banks were supposed to lend that money in order to lubricate the wheels of the U.S. Economy. We the taxpayers paid that money to the banks.

Please have the banks lend us our money.

Through the Federal Accounting Standards Board reinstating previous accounting standards, please require that the banks take the write-downs on their subprime mortgage-backed assets by end of Q409.

Let’s start 2010 with a clean slate…no toxic residue on any assets.

You floated into D.C. on cloud 9, but Dubya left an ominous cloud hovering over our economy.

How about a little sunshine to lighten the mood? Solar anyone? Can you please enact a Public Works Program like back in the 1930s? Let’s put up solar-electricity on every public college campus, so we lower the monthly bills for our educational future. Men and women who install get minimum wage or better. The federally funded training centers provide the skilled labor. Everyone has a legit SS card.

We can also construct solar charging stations for plug-in, electric cars along major U.S. freeways . Reference Tesla Motors.

This will spur investment from the private sector, and rev up our economy. Maybe we can get manufacturing back in the U.S. again.

One more thing, please fire Geithner and replace him with Paul Krugman. Get rid of the Goldman Sachs connection. After 8 years of the rich making out like bandits it’s time for the majority of Americans to benefit. That’s why we elected you. Please staff your administration with people who bear in mind their responsibility to the 300 million American people. Paul Krugman aims to benefit the majority of Americans, as I believe you do.

Please make job creation your #1 priority. Ending the wars and diverting those funds to the homeland will help. Institute a federal purse for the states to employ WPA and CCC type workers.

Sincerely, your fellow American

Life Exists

December 3, 2009 Leave a comment