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Basic Open Thread

April 13, 2009

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  1. Stemella permalink*
    April 13, 2009 7:14 am

    Roubini says that Bank Stress tests data is already outdated, they fail the reality test

    The spin machine about the banks’ stress test is already in full motion; some banking regulators have already leaked to the New York Times the spin that all 19 banks who are subject to the stress test will pass it, i.e. none of them will fail it.

    But if you look at the actual data today macro data for Q1 on the three variables used in the stress tests – growth rate, unemployment rate, and home price depreciation – are already worse than those in FDIC baseline scenario for 2009 AND even worse than those for the more adverse stressed scenario for 2009. Thus, the stress test results are meaningless as actual data are already running worse than the worst case scenario.

    The FDIC and Treasury used assumptions for the macro variables in 2009 and 2010 both the baseline and more adverse scenarios that are so optimistic that actual data for 2009 are already worse than the adverse scenario. And for some crucial variables such as the unemployment rate – that is key to proper estimates of default rates and recovery rates (given default) for residential mortgages, commercial mortgages, credit cards, auto loans, student loans and other banks loans – current trend show that by the end of 2009 the unemployment rate will be higher than the average unemployment rate assumed in the more adverse scenario for 2010, not for 2009! In other terms, the results of the stress test – even before they are published – are not worth the paper they are written on as they make assumptions on the economy that are much more optimistic –even in the worst scenarios that the FDIC has designed – than the actual figures for Q1 of 2009.

    • cometman permalink*
      April 13, 2009 7:44 am

      Yeah that NYT article he refers to was a joke. These stress tests sound like a bunch of smoke and mirrors to convince people the government is actually doing something when they had already decided to hand over more money to the banks anyway.

      It’s all about creating the perception that things are OK without actually doing a damn thing to fix the broken system, since that system benefits those in power quite handsomely. Being handed trillions by the government so you can give yourself a huge bonus and then spread the money back to those same government officials in the form of fat campaign donations is nice work if you can get it.

  2. Stemella permalink*
    April 13, 2009 7:24 am

    Things are getting sketchy again in Thailand:

    Thailand troops begin push to end ‘last stand’ by Bangkok protesters

    Troops have closed in on thousands of protesters who have vowed to make a “last stand” in Thailand’s capital, Bangkok.

    The government moved to reassert its authority after a day of running battles in the streets of the city that have left at least 74 people injured.

    Soldiers advanced into an area held by an estimated 5,000 protesters near Government House – the prime minister’s office – in what appeared to be a final push to end demonstrations that have badly tarnished the country’s reputation and deepened its political turmoil.

    “This will be our final stand. I beg that you return here and face them together,” Jatuporn Phromphan, a protest leader, shouted from a platform. “We will use peaceful means and stay right here to end their violence.”

    However, the prime minister, Abhisit Vejjajiva, who has come across as an indecisive figure in the crisis, expressed confidence that the government would restore order.

  3. cometman permalink*
    April 13, 2009 9:51 am

    Mike Whitney has a nice rundown of Elizabeth Warren’s report here with a link to a video of her own summary at the end.

  4. cometman permalink*
    April 13, 2009 10:02 am

    Are we heading for another Blackhawk down episode? The Somali pirates vowed revenge after the US shot some of them during the rescue mission and it looks like they aren’t wasting any time getting started:

    “Somali insurgents fired mortars towards U.S. congressman Donald Payne as he left the Somali capital on a rare visit by a U.S. politician to the anarchic Horn of Africa nation, police said,” Reuters reports. “‘One mortar landed at the airport when Payne’s plane was due to fly and five others after he left and no one was hurt,’ Abukar Hassan, a police officer at Mogadishu airport, told Reuters.”

    “The plane of the congressman was leaving and the mortars started falling. There were no casualties, but the attack was aimed at the congressman. He flew out safely,” the AU official told AFP on condition of anonymity.

    Payne, congressman from New Jersey and a member of the foreign affairs committee, arrived in Mogadishu hours earlier for talks with President Sharif Sheikh Ahmed and his prime minister on rampant piracy off the country’s coast.

    Meanwhile, a Somali pirate chief on Monday threatened to target Americans in revenge for the rescue of a US captain in a dramatic operation that saw naval snipers kill his captors after a five-day standoff.

    After the rescue late Sunday, the head of the pirate group that had held the American hostage aboard a lifeboat told AFP they had agreed to free him without ransom before the US Navy took action.

    “The American liars have killed our friends after they agreed to free the hostage without ransom… this matter will lead to retaliation and we will hunt down particularly American citizens travelling our waters,” Abdi Garad said by phone from the pirate lair of Eyl.

    “We will intensify our attacks even reaching very far away from Somalia waters, and next time we get American citizens… they (should) expect no mercy from us.”

    • Stemella permalink*
      April 13, 2009 11:05 am

      Now is not the time to be winging around big sticks and starting yet another asymmetrical war on the poor (not that it is ever time for that imo) Obama would do well to get everyone to ratchet it all down and look at long term regional approaches now that the captain is out of harm’s way. I don’t think the pirates are going to go away until they have a better way to make a living ( just as the drug lords won’t go away in Afghanistan and Latin America). Sigh.

      • cometman permalink*
        April 13, 2009 11:13 am

        As long as they have nothing better, they are going to keep it up. The US would have gotten off a lot cheaper paying the 2 million bucks than by sending in warships for days at a time and ratcheting the situation up a notch.

        Nice evenhanded article on why these pirates do what they do here. Like Scahill and others have said, some definitely are just gangsters, some turned to it because it’s about the only job around, and others are motivated by the illegal activities going on in their waters.

  5. cometman permalink*
    April 13, 2009 10:08 am

    Holy shit. Looks like some Senators have proposed a We Have to Destroy the Intertubes in Order to Save Them Bill. From Rawstory:

    A recently proposed but little-noticed Senate bill would allow the federal government to shut down the Internet in times of declared emergency, and enables unprecedented federal oversight of private network administration.

    The bill’s draft states that “the president may order a cybersecurity emergency and order the limitation or shutdown of Internet traffic” and would give the government ongoing access to “all relevant data concerning (critical infrastructure) networks without regard to any provision of law, regulation, rule, or policy restricting such access.”

    Authored by Democratic Sen. Jay Rockefeller of West Virginia and Republican Olympia Snowe of Maine, the Cybersecurity Act of 2009 seeks to create a Cybersecurity Czar to centralize power now held by the Pentagon, National Security Agency, Department of Commerce and the Department of Homeland Security.

    • Stemella permalink*
      April 13, 2009 10:58 am

      Lovely. FISA boy loves him some ATT Rockefeller has drafted it. Not likely to be in the best interests of we the sheeple.

      Here’s the draft of the BillS. 773: “A bill to ensure the continued free flow of commerce within the United States and with its global trading partners through secure cyber communications, to provide for the continued development and exploitation of the Internet and intranet communications for such purposes, to provide for the development of a cadre of information technology specialists to improve and maintain effective cybersecurity defenses against disruption, and for other purposes.”

      It is for commerce – banks and the likes

      I’m not opposed to being prepared in the event of cyberattack. With everything being electronically based these days there’s no quicker path to chaos than shutting down the grids and tubes. I just don’t trust the authors of this thing. Too much power is going to the executive office, still. Too dangerous.

      • cometman permalink*
        April 13, 2009 11:15 am

        Being prepared is great. But you’d think the government would want to make sure the internet stayed running in the event of an attack rather than shutting it down. if grids were ever to be shut down either by an attack or a disaster, it would help to be able to get information to people, especially these days when local media is drying up.

  6. Stemella permalink*
    April 13, 2009 2:41 pm

    This news will stun and amaze I’m sure, (coough) Goldman posts $1.7 billion profit, plans $5 billion offer

    Goldman Sachs Group Inc (GS.N) posted higher-than-expected first-quarter profit as it took more trading risk, and it said it planned to raise $5 billion of common shares to help pay back government funds, but it also lost $1 billion in the final month of last year.

    They are going to use the 5 Bill to pay back the Tarpage. No mention of payin g back the AIGage. These guys are the collective wizard of oz and wicked withches of the north, east, south and west. They ate Glinda’s brains and replaced her with a flying monkey. Fuckers.

    And speaking of monsters, here’s a little piece by Simon Johnson at Baseline Scenario

    The Bank Run Next Time (Frankenstein’s Monster)

    Think about the current and potential future pressure on our largest banks like this. The underlying problems are deep, but the “run” comes from the credit default swap market, and presumably from experienced professional investors – many of whom used to work in the largest banks.

    The big banks helped set up these markets. They trained many of the people who are now engaged in speculative attacks on these banks. And the excessive bonuses of yesterday form the capital base for many hedge funds that now lead the attack.

    In my Economix column at NYT.com this morning, I explore the ironies and emphasize the dangers. The system may have a tendency to self-destruct, but don’t think that the costs to the rest of us will be anything less than huge.

    • cometman permalink*
      April 14, 2009 8:19 am

      I’ve been thinking about this since you posted it yesterday. Couple of things come to mind. First there was this:

      But the results were not all positive. The bank said its net loss for common shareholders was $1.03 billion in December, a month not included in its fiscal 2008 results and not included in the official results for the first quarter.

      This sounds like to me that they turned a profit as long as you don’t include the months when they didn’t. How the hell are they allowed to just leave out a whole month when they lost a billion dollars? Now the profits they reported were only $1.6 billion. But is that really a profit when they were given several billion dollars by the Feds? Goldman didn’t earn it – it was a gift. So did Goldman really earn anything over the past three months due to their own business practices or did they actually lose multiple billions and get a subsidy to make their books look better.

      And second, there was that Tyler Durden article you linked to which talked about the quants. I didn’t understand everything there, but the gist of it seemed to be that it wasn’t individual investors or even pension and other funds who were doing most of the trading. It was these guys at the top of the pyramid (I thought that diagram was very fitting) trading amongst themselves who were driving things lately, much more than they normally would. Because if they didn’t trade back and forth, markets would freeze up and there would be huge gaps between bid and ask prices because regular investors didn’t want to buy anything right now. So who is it that is going to buy these new Goldman Sachs shares? I see that CNBC and the other talking heads are trying to pump up GS on the TV but after Jon Stewart gone done flogging the Cramers of the world, who’s really going to be trusting them if anyone ever did in the first place?

      So this whole deal by Goldman seems just one more part of the enormous shell game these con artists are running. Get a free handout, don’t report the bad stuff, and claim you’ve turned a profit. Have a few knuckleheads cheerlead your company on TV and claim that all is well and it’s time to buy. Issue some more stock which will then be purchased not by actual investors, but by a bunch of clowns at the top of the pyramid to give the appearance that everything is rosy. Then start the whole scam all over again.

      • Stemella permalink*
        April 14, 2009 8:40 am

        Yes, shell game, exactly. I saw this story Behind the profits at Wells Fargo linked on Calculated Risk, which discusses how it is that Wells Fargo had $3 billion profit, when they’ve taken on Wachovia that was completely mired in toxic shit.

        They simply made it up! Voila! Accounting magic. They call it “Accounting Treatment” What, like a fucking spa treatment? Apparently quarterly reports are not audited, only the full annual reports. Shell games indeed.

        It appears, however, that as much as nearly one-third of the bank’s first quarter earnings may be nothing more than the result of an accounting treatment; without such a move, tangible common equity would be 10 bps less than the 3.1 percent the Street expects.

        ~snip~

        WFC’s 1Q09 preannounced results exceeded our expectations, but the release was short on details. We encourage investors to demand better disclosures going forward, and it is our sincere hope that WFC will revisit its long-held practice of not holding live quarterly public conference calls. We caution investors not to get too excited about growth in the tangible common equity ratio until we know how much of the improvement was one-time in nature (and 3.1% tangible common equity is still too low). Announced earnings surprised on the upside, largely based on lower credit costs and net charge-offs, but WFC gave no details on delinquency trends or Wachovia’s credit losses. We find ourselves wondering how were net charge-offs so much lower than we expected? Have we overestimated WFC’s losses, or is the timing obscured by purchase accounting adjustments from the Wachovia merger? Based on everything we know about continued credit deterioration, we are skeptical, and we find no clarity from what little information Wells Fargo has provided.

        • cometman permalink*
          April 14, 2009 9:32 am

          “Accounting treatment” Ha! Not sure why people don’t seem to grasp all these accounting tricks these companies do. All it is is shifting stuff around and magically a liability is now an asset. I suspect that in the case you mentioned, Wells Fargo are likely counting the takeover of of the crap that was Wachovia as a goodwill asset. And that is one of the biggest pieces of bunk accounting I’ve ever seen. basically you take over a crap company that is worth nothing, but someday it might be so you get to count it as an asset based on a figure pulled out of thin air of what profits it could potentially make some time in the future. And it’s all perfectly legal. I remember a few years ago during the tech boom when Qwest took over US West (or vice versa) and booked the acquisition as goodwill. At the time the supposed value of this goodwill asset was far larger than the entire market cap of the company (its share price multiplied by the number of shares).

          Here’s a very simple common sense article from Thom Hartmann I saw yesterday: Debt is Not Money. Particularly enjoyed the quote from Thomas jefferson he threw in at the beginning:

          “Everything predicted by the enemies of banks, in the beginning, is now coming to pass. We are to be ruined now by the deluge of bank paper. It is cruel that such revolutions in private fortunes should be at the mercy of avaricious adventurers, who, instead of employing their capital, if any they have, in manufactures, commerce, and other useful pursuits, make it an instrument to burden all the interchanges of property with their swindling profits, profits which are the price of no useful industry of theirs.”

          –Thomas Jefferson letter to Thomas Cooper, 1814.

  7. Stemella permalink*
    April 14, 2009 8:03 am

    I read the Meta today, oh boy

    Some thoughts…

    I support the struggle for something better, whether in how “we” we bloggers, we people, talk to one another. I cherish the right of the freedom of expression, the freedom of speech, but recognize there has to be responsibile practice in using that right. I recognize that my thoughts when conveyed through verbal or written speech have potential power, both constructive and destructive.

    I may imagine I want to kill someone when I am provoked to extreme anger, but I refrain from that action out of self restraint, for the good of community and for the good of myself. It is the same with words, though I have been known to slip, and I will apologize.

    If we all practiced the self restraint the right of that freedom might flower to its true potential. But some see the restraint as boring, as tedious, as oppression. Those who see no need for self restraint are ultimately selfish. It is a challenge, being a non conformist who has to admit to the need for conformity to get along with others, to be more than a lone wolf, shunned from the pack. It is part of growing into adulthood, balancing the need of the self with getting along with the larger community, whether family, or work, or neighborhood, or town, or city or state or country or planet not to mention the whole ecology of air, water, plant, animal and mineral. It takes care and thought to know the difference. It takes time and investment. It does matter.

    Isn’t this battle over the freedom of expression just a microcosm of the larger struggle we see all around us with government policy? Isn’t this all a battle between the rights of the self vs the rights of the community?

    Fairness is what we’d like to see, whether in interpersonal blog relationships or in domestic and foreign policy. Fairness and justice to keep the peace when the self restraint fails. Isn’t this what we are asking of our government? Isn’t this what we are asking of fellow bloggers? Fairness?

    That’s what rumbles through my brain this morning.

    Time for a cup of tea and to tend to some life responsibilities.

    • cometman permalink*
      April 14, 2009 8:34 am

      Very well said. Really really well said.

      Part of the point I was trying to get across was that IMO people shouldn’t use the cover of a blog to act out in ways they wouldn’t in the real world. You don’t walk into the middle of a bar and start grabbing all the women’s butts without getting knocked on your own. You don’t start insulting everybody within earshot at a workplace and make up wild stories about them and expect to keep a job. As a grownup, you use a little restraint.

      Of course to make a point, I decided to give the people what they want and use a little less restraint yesterday than I normally might :)

      Maybe the Free Speech Zone should bring back the old practice of ostracism. The Athenians who valued democracy and free speech did it. Every month the participants at the site put the name of one user in the Ostrakon diary. Whoever gets the most votes as the biggest problem gets the boot for a month and has to take a time out. Maybe I’ll write a diary about it!!! Then again, maybe I wasted enough time with silliness yesterday. Have to see how the mood strikes me.

      • Stemella permalink*
        April 14, 2009 8:45 am

        Yes, you went seriously Medieval on their asses! I think it would be highly appropriate to go Ancient Greek on the situation at this point! haha It is in your blood after all.

        I like the idea of time outs as opposed to full banishment. Can we make them wear virtual dunce hats, pretty please? ;)

        • cometman permalink*
          April 14, 2009 9:32 am

          You really need to stop egging me on :P

  8. Stemella permalink*
    April 14, 2009 8:29 am

    And while I wait for the tea to brew, here’s some news to chew:

    Obama to tap Fannie Mae CEO to head TARP FM Herb Allison to head the U.S. government’s $700 billion TARP program.

    Porn star Marilyn Chambers dead at 56 Chambers was notorious for “Beyond the Green Door,” which was the only porn film I’ve ever watched. Never needed to see another one after that seven minute long spurt shot.

    99 Most ethical companies worldwide Check it out. Interesting selection, many surprises.

    The Pirates have attacked 3 more ships and captured two of them

    The Greek-owned commodity carrier Irene E.M. was taken early today, Andrew Mwangura, a Nairobi, Kenya-based official at the Seafarers’ Assistance Program charity, said by phone today. Within hours, a smaller Togolese-flagged cargo ship called the Sea Horse was snatched, according to the North Atlantic Treaty Organization.

    Another shocker! Bank of America May Need More Capital, Wachovia Says

  9. triv33 permalink
    April 14, 2009 8:37 am

    Fairness. I did not want to wade in to the meta but in the end I couldn’t help myself. That’s what it all boiled down to for me, a basic sense of fairness.

    • Stemella permalink*
      April 14, 2009 9:01 am

      Given some time and patience, perhaps more can come around to seeing it that way too. As long as Jack has patience to keep the place open, there is that distinct possibility. I hope so.

  10. triv33 permalink
    April 14, 2009 8:52 am

    In other news…
    The Phils lost their voice yesterday. Harry Kalas died. I’ve been listening to the man for 39 years.
    R.I.P. Harry.

    • Stemella permalink*
      April 14, 2009 8:59 am

      Sorry to hear that, Triv. I know how certain sports casters can be like family when you’ve grown up with them. RIP Harry.

      I, on the other hand, grew up with memories of the likes of Howard Cosell and can’t say I’ve missed him one bit!

      • triv33 permalink
        April 14, 2009 9:30 am

        I don’t miss Howard Cosell either. Damn, I wish HTP was still up. Darrell is a Phils fan too.

    • cometman permalink*
      April 14, 2009 9:43 am

      That was sad to hear. A lot of the oldtime broadcasters have passed away in recent years. makes me wonder how long the Red Sox radio guy Joe Castiglione will be around. He took over when I was a kid and has been doing it for a few decades now. Love that guy even though he can be very frustrating sometimes. The Sox will hit a fly ball and he’ll start in “There’s a LONG drive, to DEEP DEEP right field, the outfielder is going BACK BACK…..” and just when you’re sure the Sox have hit a homer, his voice will drop and he’ll say “….and it’s caught three feet in front of the warning track.”

      The nice thing is there are new guys coming along who are pretty good too. The Sox TV guys are really good. Jerry Remy has been doing color for about 25 years or so but the play by play guy he works with now, Don Orsillo, is relatively new- been around 6 or 7 years or so. Those two have a great time doing the games and make it really fun to watch. Last night the Sox played the As and ex- Red Sox Nomar Garciaparra was playing against them for the first time since he got traded over 5 years ago. Nomaaaah, as Sox fans liked to call him, always swings at the first pitch. Last night he did it in his first two at bats so on the third time up Remy and Orsillo placed a $5 bet on whether he’d swing the first time again. The pitcher threw the ball about 2 feet outside so Nomar didn’t swing and as the camera showed Remy handing over his 5 bucks to Orsillo, Nomar whacked the second pitch out of the yard as the two of them were still chuckling with each other. Even when the Sox lose like last night, those guys make the game fun.

      • triv33 permalink
        April 14, 2009 9:52 am

        Retired Phils pitcher Larry Anderson was a real hoot to listen to when they would bring him in to do color for a few innings. Now, I can’t say whether he’s been doing it lately because of the bullshit exclusive deal the Phils had with comcast sports net for the home games, but that is coming to an end. I can remember a night when the Rockies were spanky new and it rained and their ground crew lost control of the tarp…the guys in the booth were pissing themselves, ah..good times.

  11. Stemella permalink*
    April 14, 2009 10:49 am

    Carlyle Group being investigated. Veddy interesting. I’ve always known it to be a hot bed of Bush Family neo-con politics and neo-liberal economics. This story could require following.

    Carlyle Group is being probed by New York prosecutors and the U.S. Securities and Exchange Commission over whether the world’s second-largest private- equity firm made illegal payments to intermediaries to secure $1.3 billion in investments from the state’s pension fund, according to a person with knowledge of the matter.

    New York Attorney General Andrew Cuomo and SEC lawyers are investigating Carlyle, hedge funds and other private-equity firms that did business with New York’s employee pension fund, according to the person, who declined to be identified because the probe isn’t public.

    The Carlyle Group, according to wikipedia is described thusly

    The Carlyle Group is a global private equity investment firm, based in Washington, D.C., with more than $91.5 billion of equity capital under management.[1] The firm operates four fund families, focusing on leveraged buyouts, growth capital, real estate and leveraged finance investments. The firm employs more than 575 investment professionals in 21 countries with several offices in the Americas, Europe, Asia and Australia; its portfolio companies employ more than 415,000 people worldwide. Carlyle has over 1200 investors in 68 countries.

    The firm has employed political figures and notable investors. Some of these figures include former US President George H. W. Bush and former US Secretary of State James A. Baker III. The State of New York is currently investigating the firm in connection to an illegal kickback scheme with the state’s pension fund.[2]

    Here’s a related story from last month NY Cuomo: Tainted deals included Carlyle Group

    • cometman permalink*
      April 15, 2009 8:23 am

      Be interesting to see if anything comes of this. From what I understand members of the Carlyle group are the ones who pull the strings all over the place. Poppy Bush could probably just give a wink and make sure the whole thing was nothing but a whitewash. Love to see somebody stand up to these people though.

  12. cometman permalink*
    April 14, 2009 12:38 pm

    Check this out. Mike Whitney has an interview with Mike Morgan, the guy whose website Goldman Sachs is trying to shut down.

    MW: Could you tell us something about yourself so that readers can trust your criticism of G-Sax?

    Morgan: I am 53 years old and believe all of the answers for how we should live are in the Bible…God gave David the choice of paying the consequences at the hands of David’s enemies or at the hand of God. David chose God’s consequences. Hank Paulson and the thousands of wicked men like him deserve the wrath of the millions of lives they have destroyed. We must go after the crooks and make them pay the consequences for their greed and the total disregard for anyone other than themselves. We need to start with Hank Paulson, who as CEO of Goldman Sachs, was more responsible than any 10 men combined, for the violent Depression we are about to enter.

    Sounds like Morgan is having a Samuel L Jackson/Pulp Fiction moment and wants to visit the wrath of god on the iniquities of the selfish and the tyrannies of evil men! Go get ’em!

    • Stemella permalink*
      April 14, 2009 1:43 pm

      He is very snarky! I saw his blog the other day when I found Tyler Durden’s. Agree that Durden is a bit dense to read, but I too appreciate his perspective.

      I find it interesting that Morgan predicts that this summer will be the beginning of the violence (ala riots of 68-69). I’ve speculated the same for isolated urban areas at the minimum, including my own.

      Thanks

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