Category Archives: economy

Voluntary Regulation

This is a really long one, but if you have the time and are interested in the current state of water quality, check out this frontline clip:
Poisoned Waters
Bottom line, it may have been 36 years since creation of the EPA, but in that time we’ve only had two administrations interested in doing anything substantive toward sustainability (‘voluntary regulation’ is the common buzzword throughout each Republican administration), and Bill was pretty much Republican Lite. We’ve done a lot with respect to municipal waste, and are now considering the possible impacts of things we can barely measure like endocrine disruptors, while any industry with some clout hasn’t done a damn thing. So fish keep going belly up with regularity, and while over-fishing is a problem the health of aquatic life in many places is very bleak due to poor waste management practices. Happy belated Earth Day!

Class Warfare and AIG

Lots of hand-wringing out there about the 90% tax on bailout bonus money… to which I say…

Why don’t you take a flying fuck at a rolling donut?…

Set aside for a moment the fact that if AIG were a regular company, they would be in the midst of bankruptcy proceedings, with employees no longer receiving paychecks, much less bonuses.  Pretend, if you will, that AIG is not/was not a massive criminal enterprise engaged in fraudulent behavior only one step removed from Bernie Madoff.  The fact remains that the 10% take-home on a million dollar bonus is still $100,000.  Not too shabby!

The sense of entitlement from our ruling class is just appalling.  Here’s a graph from Ezra Klein that does a nice job of illustrating contemporary political and media opinion toward wealth.

The first thing to note: McCain has no business commenting on economic affairs. None. His conception of “rich” makes the $1.6 million earned by the top 0.1% seem reasonable by comparison. Somebody find him a Canasta game and get him off the national scene already. 

And yet, one hardly suspects that his views are unusual around the Senate.  And because rich folks aren’t in the business of taking money from other rich folks (that’s what the rubes are for), his colleagues are currently in the process of cutting the nuts out of the bonus tax, opting for 35% instead.  

I’ve got news for them: we already have that, it’s called the income tax.  You may not know this, but it already applies to the bonus money.  At least that’s how it works for the rest of us.  Maybe quit wasting everyone’s time on this?

Honestly, all I ask is that once they get past the grandstanding, if nothing else comes out of this economic fiasco, let it be the end of Wall Street business as usual.  Brad DeLong makes a great argument against the whole concept of the guaranteed bonus.  This paragraph was especially compelling:

The failure of the major institutions of Wall Street to adopt Silicon Valley compensation schemes in the 1980s and 1990s was always a great worry to regulators and policymakers. The strong view was that the venture capitalists of Silicon Valley knew what they were doing and were acting as prudent and responsible agents of their investors when they insisted on SVCS for their startups. So why didn’t the shareholders of the major banks do the same with their traders, quants, and strategists? The decisive argument in regulatory and policymaker bull sessions about this issue was that this was the shareholders’ business–that if the shareholders of these companies thought that there was good reason to elect board members and CEOs who did not impose SVCSs, the government should be cautious about stepping in. And the argument that “maybe the shareholders know of some good reason not to adopt SVCSs” no longer applies: we are the shareholders, we know of no reason, and we see no reason not to align the interests of our employees at AIG and at TARP-receiving companies with the long-run interests of the U.S. Treasury.

In other words, their license to steal is not a God-given birthright.  There are in fact other, better ways to incentivize corporate initiative (and part of that is to penalize failure). Granted, the Big Money Boys were riding high in the go-go 80’s, until junk bonds and the savings & loan scandal spawned the phrase “Die Yuppie Scum”. But the aftermath of those crises never resulted in the kind of institutional reforms that could prevent the rise of the over-leveraged shitstorm we see today.  

The point is, there has been ample opportunity in our recent history to reign in the greed train that is high finance, but the weasels always manage to slip the collar.  That’s what’s most disturbing about Treasury’s various bailout schemes (TARP, AIG, Citibank, etc).  The message seems to be that we’re going to do whatever it takes to restore these failed institutions.  But it’s not apparent that there will be any consequences for their failure (that is, not counting the consequence of putting the economy in a ditch for the rest of us).

Hey, Geithner, it’s official! They crashed the car! Now take away the keys! Krugman:

At every stage, Geithner et al have made it clear that they still have faith in the people who created the financial crisis — that they believe that all we have is a liquidity crisis that can be undone with a bit of financial engineering, that “governments do a bad job of running banks” (as opposed, presumably, to the wonderful job the private bankers have done), that financial bailouts and guarantees should come with no strings attached.

This was bad analysis, bad policy, and terrible politics. This administration, elected on the promise of change, has already managed, in an astonishingly short time, to create the impression that it’s owned by the wheeler-dealers. And that leaves it with no ability to counter crude populism.

Suddenly all the “Obama is a socialist” talk begins to make sense… Rather than being the failed electoral strategy it seemed at the time, perhaps big business saw their house of cards tumbling and decided to get out in front of “nationalization” by keeping pressure on Obama to make it the option of last resort, lest he reveal his “true” communist nature. Even though in a perfect world these banks would already be in receivership.

Who the fuck knows?  So long as Obama doesn’t let it stop him.  For a great article on the current state of the crisis and what needs to be done, be sure to read James Galbraith’s article, “No Return to Normal“.

And just to finish my earlier thought:

…why don’t you take a flying fuck at the MOOOOOOOOOOOOON!!

(with apologies to Kurt Vonnegut)

They Work While You Sleep

The bald headed VP said it 5 times during the meeting. Literally 5 times. He wants to outsource our engineering.

“The Indian bridge engineers will work while we are sleeping.”

This ass-clown in his fancy suit seems to think that this is a big advantage. The fact that this conflicts with their policy of keeping standard 8 am to 5 pm hours in the office at all time, must not have occured to this frantic self obsessed monster. This is also an obvious cost savings- what an advantage! with all this new american transportation money, let’s save a little & not hire the american worker (who would totally learn and then sell our technology- evil usa!).

“You see, if we hired an American company, they would surely steal our company secrets. But we trust the Indians because they signed the no compete claus.”

Why outsource the bridge engineering? Because they will take the liability if the bridge falls down. Chase them down in India.

In his mind, dick face bald headed VP, using the Indian workers bolstered his reputation as, slam it to em Sammy Saberfuk. Sammy made no mistake, if you cut employees, and intimidate them into a corner, eventually, the fear will drive them into productivity.

One of these things is not like the others

In the spirit of charts and graphs, here’s one that I’ve seen in various forms recently… the plummeting cliff you see represents the accelerating job losses (relative to the recent peak) in our current “recession”…

Job Losses in Post-WWII Recessions

Perhaps this is a serious problem?  

Meanwhile, the Senate jagoffs watered down the stimulus bill with lame tax cuts, to the tune of 42% of the overall stimulus package.  Honestly, fuck tax cuts.  Tax cuts don’t help me if I ain’t got a job. It’s been widely demonstrated that everyone and their mother is now hoarding cash and paying off debt.  Which is great in the long term, but doesn’t do a damn thing for the people that have already gone over that cliff above. Here’s another chart:

Setting aside food stamps (which over 30 million Americans now rely upon), the two other big items I see up there are “Infrastructure Spending” and “Aid to States”.  Both of those items have been cruelly mistreated at the hands of the Senate.  Regarding infrastructure, consider this chart from the Economic Policy Institute

Now here’s today’s failing infrastructure anecdote: the Maryland State Highway Administration’s main Headquarters complex was closed today due to a water main break outside the building.  The exact same thing happened in roughly the same location all of one year ago.  Ignoring the irony of the roads literally crumbling outside the DOT’s door, the main point I’d like to make is that all personnel had to stay home with Administrative Leave.  This for an agency that recently forced workers to take at least two unpaid “furlough” days (more depending on salary) to help make up budget shortfalls.  So there’s your “cost of doing nothing” right there.

As for “Aid to the States”, here’s Matt Yglasias discussing the hypocrisy of your “centrist” senator from Maine:

“This deal represents a victory for the American people,” said Senator Collins. “We came together to tackle the most immediate problem facing the nation. This package cuts $110 billion in unnecessary expenditures. These are not minor adjustments, but major changes. It contains robust spending on infrastructure to create jobs, $87 billion in assistance for states, and assistance to schools, especially for special education and Pell grants. This bill is not perfect, but it represents a bipartisan, effective and targeted approach to the crisis facing our country.”

Would you ever in a million years have guessed from this rhetoric that the primary change Collins and Nelson made was to implement big reductions in aid to states and, especially, in funding for education? I think not. In their rhetoric, Collins and Nelson preserved vital education funding and state assistance while eliminating various metaphorical animal products. Meanwhile, actual changes Collins and Nelson made include:

  • Elimination of $25 billion in flexible funding for state governments.
  • Cut $7.5 billion in funding for “state incentive grants” to help states make progress toward NCLB goals.
  • Eliminated $19.5 billion in construction aid for schools and colleges.
  • Reduced new aid for the Head Start early childhood program by $1 billion.

These clowns want to be commended for creating a bill that all parties can vote for.  Bullshit.  This is just cuts for the sake of cuts, economics be damned.  I keep reading about 60 votes to prevent filibuster… why the dems wouldn’t simply call their bluff is beyond me.  Republicans don’t have the stones to filibuster when the country is in such obvious need.  Even their core constituency (big business) has had enough.  Let them overplay their hand and be hounded into the caves like the Taliban they aspire to be.

Ok, one last fucking chart, this time from a Think Progress piece whose title says it all: Supporters Of $1.3 Trillion Bush Tax Cuts In 2001 Now Call $900 Billion Recovery Plan Billion ‘Too Much’

  2001 2009
Cost of package: $1.35 trillion $900 billion
Unemployment: 4% 7.6%
Percent of Population Living In Poverty: 12.7% 17%
Foreclosure Rates: .48% 1.19%
Americans Relying On Food Stamps: 17 million Over 30 million

 

I’m officially out of charts.  Draw your own conclusions…

Bo(eh)ner prefers a smaller package

I know that seems “hard” to believe, but Boehner is taking exception to some of the spending in the bailout bill. Obama, on the other hand, wants to extend the package! No gimmicks or herbal supplements. Who could be against extending the package? These folks are the same members of congress who, without thinking twice, throw billions of dollars at the failure in Iraq and then get upset when Obama wants to invest in THIS country. Look around you. There are all kinds of potential public works projects. Our infrastructure is old and tired. And the civil engineers are crying for a bigger package than the one Obama is proposing. It’s time for Obama to stand up to the punks who want tax cuts for the rich (or make Bush’s tax cuts permanent). I can appreciate reaching out to the other side after eight years of being ignored by Bush, but on Nov 4th America chose Obama’s economic policy. Obama himself reminded us just the other day of exactly who won. Besides, as David Sirota points out, if you dilute the bailout bill with weak Republican ideas, and this causes it not to be effective, then Obama looks like he failed and the GOP may look a little more respectable-like.

The Hypocrisy of Credit Scores

In light of us pouring billions of dollars into the banks, so they can keep buying corporate jets and eventually ask for another bailout when they can’t collect on their moronic loans that they have written, I would like to take a look at the utterly stupid and hypocritical nonsense known as credit scoring.

I am not going to try to explain all the mumbo jumbo complexity of credit scores, but the hypocrisy part of this story is pretty simple. In theory the credit scoring system is supposed to keep banks from lending money to folks who can not pay it back. It supposed to be a measure of how credit worthy a person is. Instead, banks use it to charge a higher interest rate to folks who have had credit mishaps. In other words, the banks have said, “if you have financial problems, sure we’ll lend you the money, but we’ll charge you higher interest, and variable rates, that will actually make it more likely that you can not pay it back. Look at me. My name is jackass banker.”

A bank should have every right to decide HOW MUCH money they want to lend you, but why should they be able to penalize folks with higher interests rates? This is exactly the kind of process that has led to all these foreclosures. Am I right or am I right?

How about while we are bailing these jerks out, we reform this whole bogus system so that everyone gets a fair shot at a decent loan that they can afford to pay back?

Not sure this should be a post….

….but what the hell, I have embed privileges now. And as far as I can see there are only four contributors to this blog….which is fine with me. This is my go-to site for news and comment.

Here is George Will taken to school by Paul Krugman on FDR and the New Deal. It’s great to watch this pompous ass looking over his shoulder. This Week is the only Sunday morning news show I can tolerate but it bugs me that George Will pretty much has free reign to make any outrageous commentary he desires and noone calls him on it. Well George, meet Mr. Krugman….

And here’s just a random nugget to keep things light. Gotta maintain that groovy post election vibe…

I was doing a little job seaching the other day and came across an environmental engineering position. Who is this handsome devil front and center?

Who could have foreseen?

As the Bush Administration winds down, the Big Money Boys have just about finished cleaning us out. Per Think Progress, CNBC has a nice chart detailing all the various bailout monies that’ve been lavished on corporate America… and the total is over 4 trillion dollars:

Financial Crisis Balance Sheet
Government Entity Sum in Billions of Dollars
Federal Reserve
(TAF) Term Auction Facility 900
Discount Window Lending
Commercial Banks 99.2
Investment Banks 56.7
Loans to buy ABCP 76.5
AIG 112.5
Bear Stearns 29.5
(TSLF) Term Securities Lending Facility 225
Swap Lines 613
(MMIFF) Money Market Investor Funding Facility 540
Commercial Paper Funding Facility 257
(TARP) Treasury Asset Relief Program 700
Other:
Automakers 25
(FHA) Federal Housing Administration 300
Fannie Mae/Freddie Mac 350
Total 4284.5
Note: Figures as of Nov. 13, 2008

Allow me to ask a rhetorical question or twelve:

How did this happen? Was this economic crisis an accident? The cost of doing business? A simple but inevitable downturn on the great cycle of prosperity? An unfortunate confluence of economic forces, caused by the ripple effects of a far off butterfly, flapping its wings to the (temporary!) detriment of our glorious DOW?

Could this have been avoided? In other words, who the hell can we blame for this mess? Because for something to be avoidable, it must be knowable in advance. And if it was knowable, and there were people sounding the alarm, then it surely follows that there were those who heard that alarm and cynically ignored its warning.

Ladies and Gentlemen, I give you Exhibit A: Peter Schiff. This video is a compilation of Peter’s greatest hits from 2006-2007, before the shit was even near the fan, when various cable outlets would routinely trot him out as the token pessimist to be ridiculed like the town simpleton in a medieval passion play. Watch in amazement as poor Peter’s clear-eyed prescience is rewarded with howls of derision from his fellow Fox News “analysts” (anal-cysts?).

When I saw the length of the video, I figured there was no way I’d watch to the end, and yet there was super genius Ben Stein braying like an ignorant jackass and I couldn’t look away.

Exhibit B is the remarkable true story of Steve Eisman, an investor who for years has been short selling all manner of stocks and bonds related to the the housing market, on the basis that the emperor has no clothes. [Note to you Fantasy Wieners, the article is written by noted Moneyball author, Michael Lewis.]

He and his team set out to find the smelliest pile of loans they could so that they could make side bets against them with Goldman Sachs or Deutsche Bank. What they were doing, oddly enough, was the analysis of subprime lending that should have been done before the loans were made […]

“You have to understand this,” he says. “This was the engine of doom.” Then he draws a picture of several towers of debt. The first tower is made of the original subprime loans that had been piled together. At the top of this tower is the AAA tranche, just below it the AA tranche, and so on down to the riskiest, the BBB tranche—the bonds Eisman had shorted. But Wall Street had used these BBB tranches—the worst of the worst—to build yet another tower of bonds: a “particularly egregious” C.D.O. The reason they did this was that the rating agencies, presented with the pile of bonds backed by dubious loans, would pronounce most of them AAA. These bonds could then be sold to investors—pension funds, insurance companies—who were allowed to invest only in highly rated securities. “I cannot fucking believe this is allowed—I must have said that a thousand times in the past two years,” Eisman says.

Even if you have no idea about any of this (especially if you don’t) I recommend reading the whole piece. You come away with the distinct impression that high finance is nothing more than an elaborate Ponzi scheme.

Kurt Vonnegut wrote about the Money River (God Bless You Mr. Rosewater). How if you were lucky enough or smart enough, you could get one of the guardians to show you the river so that you yourself might “slurp”. I think nowadays the proper metaphor is not a river, but rather a Money Vortex – I’m just not sure if it’s a tornado, funneling money up and out of our pockets… or a swirling eddy, siphoning it down the drain. Nothing about the last 8 years has been an accident. Sure, there has been “collateral damage”, and that’s been regrettable. But in the end, everybody in charge got more or less what they wanted.

The question is, will they get what they deserve?