Links to important economic news

Can't help notice the noise is about the SEC, Yet OTS which was worse than negligent, maybe criminal isn't mentioned....

http://online.wsj.com/article/SB124468047175204449.html

Blame the end of mark to market. This is why we'll have zombie banks. We're not allowing the free market system to operate..

http://online.wsj.com/article/SB124459303760100287.html
http://www.youtube.com/watch?v=DVMshMIPNUg

Ah the true economic indicator...

http://online.wsj.com/article/SB124467942901904435.html

Good IRA Piece, but what else is new..

http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

What offends us about the CDS market is not just that it is deceptive by design, which it is; not just that it is a deliberate evasion of established norms of transparency and safety and soundness, norms proven in practice by the great bilateral cash and futures exchanges over decades; not that CDS is a retrograde development in terms of the public supervision and regulation of financial markets, something that gets too little notice; and not that CDS is a manifestation of the sickly business models inside the largest zombie money center banks, business values which consume investor value in multi-billion dollar chunks.

No, what bothers us about the CDS market is that is violates the basic American principal of fair dealing. Jefferson said that "commerce between master and slave is barbarism." All of the Founders were Greek scholars. They knew what made nations great and what pulled them down into ruins. And they knew that, above all else, how we treat ourselves, as individuals, customers, neighbors, traders and fellow citizens, matters more than just making a living. If we as a nation tolerate unfairness in our financial markets, how can we expect our financial institutions and markets to be safe and sound?

Equal representation under the law went hand in hand with proportional requital, meaning that a good deal was a fair deal, not merely in terms of price but in making sure that both parties extracted value from the bargain. A situation in which one person extracts value and another, through trickery, does not, traditionally has been rejected by Americans. Whether through laws requiring disclosure of material facts to investors, anti-trust laws or the laws and regulations that once required virtually all securities transactions to be conducted across open, public markets, not within the private confines of a dealer-controlled monopoly, Americans have historically stood against efforts to reduce transparency and make markets less efficient - but that is precisely how we view the proposals before the Congress to "reform" the OTC derivatives markets.

check out the video of chris whalen talking about jp morgan and cds

http://finance.yahoo.com/tech-ticker/article/261090/Jamie-Dimon-A-Great-Operator-But-an-Obstacle-to-Reform-Whalen-Says?tickers=JPM,XLF,SKF,FAZ,FAS,C,GS

despite some of the headlines, the yesterday's Beige Book release was pretty horrid:

http://ftalphaville.ft.com/blog/2009/06/10/56882/beige-book-few-signs-of-economic-recovery/

discussion of today's retail sales report.

http://www.calculatedriskblog.com/2009/06/retail-sales-in-may-off-108-from-may.html

Did anyone catch Peter Schiff on Daily Show?

http://www.thedailyshow.com/video/index.jhtml?videoId=230058&title=Peter-Schiff

So who was right?
It just shows how many of the CNBC & FOX business news guys talk out of their.....

http://www.youtube.com/watch?v=2I0QN-FYkpw

http://www.youtube.com/watch?v=2I0QN-FYkpw

Ben Stein is an idiot. He also advocated saving G.M. and used another world war and the ensuring needed tank production as an argument.

Ron Paul is going mainstream, or the rest of the House is going Ron Paul. A majority has now sponsored the bill for a Fed audit.

http://globaleconomicanalysis.blogspot.com/2009/06/ron-pauls-audit-fed-bill-gets-majority.html

unemployment, leadging, lagging, coincidental or all three?

http://www.ritholtz.com/blog/2009/06/unemployment-friday/

The Federal Reserve's balance sheet is so out of whack that the central bank would be shut down if subjected to a conventional audit, Jim Grant, editor of Grant's Interest Rate Observer, told CNBC.

I posted the video earlier....

http://www.youtube.com/watch?v=rv2ApOhFt6Q
http://www.youtube.com/watch?v=9ZZwAG0YYXc&feature=related

thanks riversider. i'll have a look.

one way to reduce the overhang of unwanted housing inventory, bulldoze cities. been done in CA i believe, concept gaining some momentum elsewhere.

http://paul.kedrosky.com/archives/2009/06/bulldozing_us_c.html

"one way to reduce the overhang of unwanted housing inventory, bulldoze cities. been done in CA i believe, concept gaining some momentum elsewhere."

It was done in California to build Dodger Stadium. Only problem was people were still living and thriving in the neighborhood !

It was done in the Bronx during the 70s when landlords burnt down their unwanted buildings, walked away with the insurance, and stopped paying property taxes. It was left to the city to place tax liens, seize the property, and bulldoze areas that remained as rubble for a generation.

I like the idea of planning new urban villages as mentioned in article. I look at these things as public land use opportunities.

one way to reduce the overhang of unwanted housing inventory, bulldoze cities. been done in CA i believe, concept gaining some momentum elsewhere.

The idea makes sense. Score one for Obama.

http://jessescrossroadscafe.blogspot.com/2009/06/wall-streets-toxic-message-carried-in.html

Stiglitz, a very well-written piece, on the world's perception of this economic crisis and the US's contributions and responses to it.

Good article.
I do know an elder Greek man who was a sincere believer in Communism. After The Soviet Union collapsed all he talk about was how wrong he was...
Unfortunately, it's not capitalism that failed, but our government in ensuring a level playing field. Now we will err on the other side..

it's not just the system, it's who is driving the bus and how.

inflation or deflation? why choose when it may be possible to have both? compartflation.

http://ftalphaville.ft.com/blog/2009/06/12/56945/compartflation/

It's as simple as Aleph,Beth, Gimel
Maybe Bernanke needs a lesson in economic dik duk

http://alephblog.com/2009/06/12/ten-points-mainly-about-the-debt-markets/

1) Why have long interest rates been rising?

1. Increased supply.
2. Mortgage bond/supply hedging. (also one, two)...

Our economy, for the poor.

http://www.nytimes.com/2009/06/14/opinion/14ehrenreich.html?pagewanted=3&_r=1&ref=opinion

http://www.nytimes.com/2009/06/13/business/economy/13fed.html?_r=2&hp

Allan Edmunds speaks about Gov't lending and where to draw the line....(name sounds famiar)

Larry & Timmy's goal for the future.. Listen up

A New Financial Foundation

» Links to this article
By Timothy Geithner and Lawrence Summers
Monday, June 15, 2009

Over the past two years, we have faced the most severe financial crisis since the Great Depression. The financial system failed to perform its function as a reducer and distributor of risk. Instead, it magnified risks, precipitating an economic contraction that has hurt families and businesses around the world.

We have taken extraordinary measures to help put America on a path to recovery. But it is not enough to simply repair the damage. The economic pain felt by ordinary Americans is a daily reminder that, even as we labor toward recovery, we must begin today to build the foundation for a stronger and safer system.

This current financial crisis had many causes. It had its roots in the global imbalance in saving and consumption, in the widespread use of poorly understood financial instruments, in shortsightedness and excessive leverage at financial institutions. But it was also the product of basic failures in financial supervision and regulation.

Our framework for financial regulation is riddled with gaps, weaknesses and jurisdictional overlaps, and suffers from an outdated conception of financial risk. In recent years, the pace of innovation in the financial sector has outstripped the pace of regulatory modernization, leaving entire markets and market participants largely unregulated.

That is why, this week -- at the president's direction, and after months of consultation with Congress, regulators, business and consumer groups, academics and experts -- the administration will put forward a plan to modernize financial regulation and supervision. The goal is to create a more stable regulatory regime that is flexible and effective; that is able to secure the benefits of financial innovation while guarding the system against its own excess.
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In developing its proposals, the administration has focused on five key problems in our existing regulatory regime -- problems that, we believe, played a direct role in producing or magnifying the current crisis.

First, existing regulation focuses on the safety and soundness of individual institutions but not the stability of the system as a whole. As a result, institutions were not required to maintain sufficient capital or liquidity to keep them safe in times of system-wide stress. In a world in which the troubles of a few large firms can put the entire system at risk, that approach is insufficient.

The administration's proposal will address that problem by raising capital and liquidity requirements for all institutions, with more stringent requirements for the largest and most interconnected firms. In addition, all large, interconnected firms whose failure could threaten the stability of the system will be subject to consolidated supervision by the Federal Reserve, and we will establish a council of regulators with broader coordinating responsibility across the financial system.

Second, the structure of the financial system has shifted, with dramatic growth in financial activity outside the traditional banking system, such as in the market for asset-backed securities. In theory, securitization should serve to reduce credit risk by spreading it more widely. But by breaking the direct link between borrowers and lenders, securitization led to an erosion of lending standards, resulting in a market failure that fed the housing boom and deepened the housing bust.

The administration's plan will impose robust reporting requirements on the issuers of asset-backed securities; reduce investors' and regulators' reliance on credit-rating agencies; and, perhaps most significant, require the originator, sponsor or broker of a securitization to retain a financial interest in its performance.

The plan also calls for harmonizing the regulation of futures and securities, and for more robust safeguards of payment and settlement systems and strong oversight of "over the counter" derivatives. All derivatives contracts will be subject to regulation, all derivatives dealers subject to supervision, and regulators will be empowered to enforce rules against manipulation and abuse.

Third, our current regulatory regime does not offer adequate protections to consumers and investors. Weak consumer protections against subprime mortgage lending bear significant responsibility for the financial crisis. The crisis, in turn, revealed the inadequacy of consumer protections across a wide range of financial products -- from credit cards to annuities.

Building on the recent measures taken to fight predatory lending and unfair practices in the credit card industry, the administration will offer a stronger framework for consumer and investor protection across the board.

Fourth, the federal government does not have the tools it needs to contain and manage financial crises. Relying on the Federal Reserve's lending authority to avert the disorderly failure of nonbank financial firms, while essential in this crisis, is not an appropriate or effective solution in the long term.

To address this problem, we will establish a resolution mechanism that allows for the orderly resolution of any financial holding company whose failure might threaten the stability of the financial system. This authority will be available only in extraordinary circumstances, but it will help ensure that the government is no longer forced to choose between bailouts and financial collapse.

Fifth, and finally, we live in a globalized world, and the actions we take here at home -- no matter how smart and sound -- will have little effect if we fail to raise international standards along with our own. We will lead the effort to improve regulation and supervision around the world.

The discussion here presents only a brief preview of the administration's forthcoming proposals. Some people will say that this is not the time to debate the future of financial regulation, that this debate should wait until the crisis is fully behind us. Such critics misunderstand the nature of the challenges we face. Like all financial crises, the current crisis is a crisis of confidence and trust. Reassuring the American people that our financial system will be better controlled is critical to our economic recovery.

By restoring the public's trust in our financial system, the administration's reforms will allow the financial system to play its most important function: transforming the earnings and savings of workers into the loans that help families buy homes and cars, help parents send kids to college, and help entrepreneurs build their businesses. Now is the time to act.

Timothy Geithner is secretary of the Treasury. Lawrence Summers is director of the National Economic Council.

Roubini, Shiller see more pain for economy

Mon Jun 15, 2009 11:44am EDT

NEW YORK (Reuters) - A rebound in key U.S. economic indicators masks an underlying malaise that will likely hamstring growth for many years and keep housing and banks in a rut, several top economists said on Monday.

Nouriel Roubini, president of RGE Monitor, said a recovery in risk assets like stocks and emerging markets would not last, since it had been based on unrealistic expectations for a global economic rebound.

"I see subpar, anemic, below-trend growth for the next couple of years," Roubini said on a panel sponsored by Time Warner.

Housing expert and MIT Professor Robert Shiller was equally pessimistic, saying, with regards to the four-year housing downturn: "This thing is not over yet."

Banking analyst Meredith Whitney said she was even more bearish than her fellow panelists, saying that better bank earnings would eventually be challenged by the toxic assets on their balance sheets.

http://www.reuters.com/article/gc04/idUSTRE55E4K220090615

http://www.ritholtz.com/blog/2009/06/andy-xie-institutional-irrationality/

interesting analysis of why the market is so frothy.

Zakaria interviews Michael Lewis on wall street and ethics.

http://www.businessinsider.com/michael-lewis-on-the-transformation-of-wall-street-clip-2009-6

Good piece A.R.

I know the market has rallied since the stress tests, but what has changed?
http://www.cnbc.com/id/31373145

Lenders would be required to retain at least 5 percent of the risk of losses on each package of loan pieces, known as an asset-backed security.
Dumb, The last five percent is unsellable anyway, and regardless of the proposal will be hedged.
Those agencies would be required to make clear to investors that the securities are riskier than traditional investments such as corporate bonds.
Not true. We only believe they are more risky now because of poor underwriting. A pool of responsibly underwritten mortgage loans and Pre-bubble subordination levels is not inherently more risky than corporate debt

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/15/AR2009061502523.html

Very good Charlie Rose with Richard Posner

http://www.charlierose.com/view/interview/10374

Government's behavior leading up to the crises--Incompetence-Richard Posner

http://www.charlierose.com/view/interview/10374

this is just stunning to me.

http://www.dailykos.com/storyonly/2009/6/15/742918/-UC-system-hits-the-financial-panic-button

"Six weeks ago, UC Berkeley faced a $67.2 million budget gap for 2009-10. That anticipated shortfall has now grown to $145 million. Here is how we have been working to address the anticipated shortfall."

and our local budget.

http://www.nytimes.com/2009/06/16/nyregion/16budget.html?hp

"Next year, however, might be different. The city drained its surplus funds to help the coming fiscal year’s budget, and is already facing a $5 billion deficit for the fiscal year beginning in July 2010 — a prospect, Mr. Bloomberg said, that “really is troubling.”"

California, what a freakin' fright show.

http://www.calculatedriskblog.com/2009/06/us-rejects-california-aid-request.html

i hope team Obama is prepared for the consequences if they don't take action here soon enough.

I understand what you're saying Aboutready but every states have its own problems to deal with, some bigger than others, but ask New Yorkers what they think about being taxed extra to bail out California... most will tell ya : Fuggedaboudit!

sledge, i don't think we fundamentally disagree, but much of this national mess was NY driven, via the debt markets. and the funds returned here to roost. interesting ethical standoff, horrifying industry practices vs. horrifying governmental budgeting practices.

but my point is just that we may not be able to AFFORD to do nothing. CA could be a bigger shock than Lehman. i don't think they'll let it go there, but i'm interested in seeing what they're planning.

This is a very interesting read on Hyper-Inflation.

http://bloomberg.com/apps/news?pid=20601087&sid=aku06Rgam3n0

I know quite of you don't believe it's possible with no wage increase, but not this group of people.

"but my point is just that we may not be able to AFFORD to do nothing. CA could be a bigger shock than Lehman. i don't think they'll let it go there, but i'm interested in seeing what they're planning."

helping CA will be more politically incorrect that helping a f*ed up homeowner with a jumbo loan. it might pressure CA to sell its own assets and cut spending (including public pensions). the gov could also sell federal owned land and give CA some $ from that (from fees, transfer taxes and the like on the sale). beyond that, i don't see what other states with more poor populations would be ok with. more debt is not gonna do it either.

but my point is just that we may not be able to AFFORD to do nothing
I'm picturing one lifeboat trying to save the entire Titanic passenger list...getting every passenger in it. If we save everyone, we save no one. Maybe California needs some draconian spending cuts.

re inflation: no explanation of how in that article. using gas as an example, as it continues to rise, i still maintain people will cut back on gas and other items. gotta have demand for inflation to work.

"Maybe California needs some draconian spending cuts. "

also getting rid of their bias towards old residents for their property taxes would help a lot. same with florida.

the whole ballot system is a mistake. it shrinks the tax base towards the productive young that consider leaving for texas, colorado, utah, nevada... just getting rid of the ballot and taxing property taxes like most other states (giving relief only to those that are old and poor) will help CA a lot.

requires a political process that appears impossible. california has been known for years as a trendsetter. no different here. choices are simple:

a. cut spending
b. raise taxes
c. get federal bailout
d. do nothing---see who blinks first.

seems like d has to play out further.

"requires a political process that appears impossible." very true, maybe designed on the assumption that CA is too big to fail?

it's still ridiculous for a state to go for help to the feds before dealing with the problems that lead them there (ballot, unequal prop taxes, too much spending, high income taxes, ...)

why is it ridiculous? was one of the risks that bailouts created. if "a" gets it, why not "b?", etc. i still think that lehman had to be allowed to fail even though it was the "wrong" decision. people had to see what would happen.

requires a political process that appears impossible
If the California gov't is anything like NY state gov't they're doomed. Much easier to ask for a hand out

why is it ridiculous?

i do find it ridiculous that a relatively rich state asks for help to louisianna, arkansas, oregon, oklahoma, kansas, ... but nevermind, maybe it's just me. same thing for new jersey. if CA gets anything, NJ will be begging next.

do find it ridiculous that a relatively rich state asks for help

I agree admin, This is classic over-spending. Calfironia's been in trouble for a while. .Kind of reminds me of G.M. The current crisis just exacerbated it.

An entire state is being told that they are less important than aigs counterparties. These are people who won't be receiving basic services. Not everyone voted for this

"These are people who won't be receiving basic services. "

chances are they will keep on receiving better services than people in kentucky, west virginia, mississippi, ... are getting on a regular basis.

An entire state is being told that they are less important than aigs counterparties

http://newsblaze.com/story/20080124044344tsop.nb/topstory.html

A.R. AIG counterparties should not have been bailed out(in my humble opinion). CDS are bucket-shop gambling posing as insurance. But two quote the over-used expression, "two wrongs"... We can't as a society now say that anyone more important than AIG must be bailed out.

where do you think our tax receipts would have been without the bailouts?

where do you think our tax receipts would have been without the bailouts?

On a net basis, I'm not sure we'd be worse off. The huge increase in debt the gov't is taking on is quite scary. We'll probably spend $300 in gov't money for every $100 dollars in income taken home by someone associated with G.M. At least that's the traditional numbers associated with these things.

states that partied the most during the housing bubble (CA, FL, NV, Arizona, ...) have to get real. the party went on on those places (of course, not for everyone, but it did for state's revenues) while states that didn't have any bubble whatsoever lived more modestly. why on earth those that didn't enjoy the party are invited only for the cleanup?

having to live through the same quantity of years (around 6) of duress instead of affluence will even it up for those that lived more reasonably and will not give bad incentives towards making sure that the next bubble is even bigger.

Wasn't clear. Meant new yorks tax receipts

how quickly we forget....

remember when it was ny looking for the "handout?" and remember the reaction both in the city and around the country? same thing here. i am not saying i have the answer; i just don't think its as simple as "screw them...they deserved it."

I haven't thought too much about it, so this is shooting from the hip, but seems the same companies would've failed and/or would've had the same losses. Lehman & Bear failed regardless JPM didn't really retain very many Bear employees. If anything viable parts of Citi would've been taken over and generated positive income. As it stands Citi isn't paying any taxes and recently enacted a poison pill to make sure they can keep them. My opinion is the bail outs have not generated positive tax receipts at the state level, and probably keeps alive zombie entities who generate no taxes. I'd prefer to see citi & AIG split up. AIG has some very well run insurance operations outside of their now famous unit. if spun off or combined with another company perhaps we'd see a positive return sooner.

remember when it was ny looking for the "handout?" and remember the reaction both in the city and around the country? same thing here. i am not saying i have the answer; i just don't think its as simple as "screw them...they deserved it."

nyc+nys got a "bailout" in the 70s through a loan, not a handout. but look how much ny learned about administrating tax revenue. albany is still a union's entity.

I'd prefer to see citi & AIG split up.

AIG is already doing it. citi not yet. imho citi should be ask to shrink to a point in which it's not "too big to fail" anymore. same with BAC, same with JPM, ...

that would mean acknowledging the depth of problems on the balance sheet.

nobody partied more than nyc during the buildup.

nyc+nys got a "bailout" in the 70s through a loan, not a handout
NYC does not in my humble opinion spend responsibly. Unions are over-paid (including benefits) adn we can no longer afford to provide civil servants retirement at 40+ years of age considering life spans.
And how about the DMV being open two days a week and do the rest via internet.. The #7 train exension while a nice idea, is discretionary spending. I also dont' think the new Yankee & Shea stadium will ever provide a good ROI. I could go on.....

nobody partied more than nyc during the buildup.

Party was on the house... literally

mho citi should be ask to shrink to a point in which it's not "too big to fail
Sheila bair wants pandit's hiney. She's right!
Ask any employee of Citigroup and they will admit they are in disarray and unmanagable.

that's 100% my point. bailing them out means that they don't need to improve/learn/change.

ny's use of tax revenue is disturbing. also the circus they are providing as we speak while they should be working their ass off given the budget troubles the state is in.

ny's use of tax revenue is disturbing
It's always politically convenient to target a small percentage of the population with new taxes(the rich) and keep spending to protect your political base(unions, etc)

http://www.10news.com/news/19584179/detail.html
I totally respect their Job and acknowledge it's a dangerous one but when i read these kind of articles, i wonder how many of them are in the same boat. Good for them by the way but if California has a budget deficit, they may want to reconsider how much pension they give to its employees.

http://www.10news.com/news/19584179/detail.html
I totally respect their Job and acknowle..

I agree with you on that, but most fire fighters and police look forward to collecting retirement and a a job on top of that. They're very well compensated if you factor that in. When you realize that no private sector person could ever dream of this arrangement except some ceo of a failed financial firm, the conclusion is it's not sustainable.

"It's always politically convenient to target a small percentage of the population with new taxes(the rich) and keep spending to protect your political base(unions, etc)"

of course. those union members should have their incentives aligned with the rest of the taxpayers and have their pensions cut if there are budget problems.

Michael Lewis better than ever..
http://www.businessinsider.com/michael-lewis-explains-the-end-of-wall-street-2009-6

riversider, i'm assuming you've read Liar's Poker? great book if you haven't done so.

what a great communicator. he has such an ability to distill things to their raal essence and make them accessible to many without dumbing down the message.

"nyc+nys got a "bailout" in the 70s through a loan, not a handout
NYC does not in my humble opinion spend responsibly. Unions are over-paid (including benefits) adn we can no longer afford to provide civil servants retirement at 40+ years of age considering life spans"

Absolutely.

WSJ columnist wrote an entire book on this - while america aged.

NYS government is horribly stupid, but the pension areas is where the worst damage is done, because it doesn't show up right away.

We are absolutely screwed with our benefit costs.

riversider, i'm assuming you've read Liar's Poker?
I did back in 19991(met a few of the characters though they would not recall meeting me). Lewis runs cold & hot with me
this is my favorite...

Sept. 12 (Bloomberg) -- Given the huge costs of me being
off the trading desk in these tumultuous times, I assumed the
first article I wrote for Bloomberg might be my last.
But a lot of people seemed to really appreciate an actual
Wall Street hedge-fund manager being honest about the big lesson
of the subprime crisis: that it's a mistake to lend money to
poor people. And so I've agreed to share some more lessons I've
learned from hard experience -- in this case from my recent,
highly frustrating, dealings with the U.S. Congress.
Over the past few weeks I've wasted a lot of time trying to
explain to senators who want to raise taxes on private-equity
firms and hedge funds how much damage the government is doing --
not just to the global economy but also to the very idea of
economic justice. I'm writing this in hopes of speaking directly
to poor people (those whose assets don't meet the Securities and
Exchange Commission minimum for hedge-fund investing). Maybe
they can pass along my message to their elected representatives
in their preferred language.
Here goes:
A Wall Street Trader Learns Some Taxing Lessons: Michael Lewis
1) Democracy is due for an upgrade.
The glitch is this old-fashioned idea of one man, one vote.
That might have worked back when the interests of really
successful people (i.e., Henry, Steve, even the guys at
Fortress) were roughly the same as those of the lunch-pail
crowd. But America has created a new class of rich people who
really deserve to be on top -- and a lot of angry people bent on
pulling them down.
In a properly functioning economy these rich people should
have a lot more political power than ordinary people. It's crazy
that they have only the same measly vote as, say, one of the
workers they might have to lay off in a restructuring. Giving
workers this sort of equal time is counterproductive, especially
for financial markets.
Think about it: The worker is going to do everything he can
to screw up new deals. He's going to cling to his old job; he
wants us all in the same rut. And there are a lot more people
like him than there are like Steve or Henry (or even the guys at
Fortress).
2) Most people -- even highly educated congressional
staffers -- still don't get it: Private-equity deals create
jobs.
By borrowing a lot of money to buy entire companies, and
then cutting out fat to pay off the loans, private-equity firms
give the people who work for those companies a chance to find
something more productive to do with their lives. A glance in
the employment statistics suggests that some large majority of
these ordinary folks find work elsewhere. Those are new jobs!
3) A lot of people -- even U.S. senators -- seem to have
gotten the idea that the behavior of the top guys in private
equity and hedge funds is somehow ``excessive.''
The media is clearly to blame for this: I can't tell you
how many times some pinhead congressional staffer brought up
Steve Schwarzman's 60th birthday party. A guy rents the Seventh
Regiment Armory, hangs a giant portrait of himself on the wall,
invites 5,000 of his closest friends, and spends a few million
bucks to bring in Rod Stewart to play and all of a sudden he
doesn't deserve to eat what he kills?
This is the point I tried to make to the political people:
It's really hard for someone of Steve's caliber to relax. It's
no accident that he threw his party in an armory. As he told
some reporter from the Wall Street Journal (big mistake, only
talk to the editorial page): for him, each deal is life or
death.
``I want war, not a series of skirmishes,'' he said. ``I
didn't get to be successful by letting other people hurt
Blackstone or me.'' I mean no disrespect to the generals in
Iraq, but if they had Steve's warrior soul they wouldn't still
be fighting Iraqis. They'd be buying and selling them.
Great men require great diversion from their great
troubles. Even the giant oil painting of himself was totally
necessary: Steve -- like a lot of us under 5 feet, 7 inches --
tends to lose himself in his work. He needs to be reminded that
he actually exists. For one night the guy tries to stand tall,
and Congress responds with a new tax on platform shoes .
This brings me to. . .
4) The working rich are already way too heavily taxed.
The truest arguments are often the ones that are hardest to
make ordinary people understand, and this is the truest of them
all. Rich people know how to invest extra money. Poor people
just squander it on necessities. That's why capitalism works so
well: it keeps money out of the hands of people who don't know
how to use it and directs it to people who know how to make it
grow.
This is why it makes no sense for rich people to give away
their money. Warren Buffett had the right idea: keep piling up
as much as possible until the very end -- and then give it to a
guy even richer than you. But to judge from the media response
hardly anyone understood what I think Warren was trying to say:
``IF YOU'RE HOPING FOR SOME RICH GUY TO GIVE YOU HIS MONEY,
YOU BETTER GET YOUR ASS OFF THE SIDEWALK AND FIGURE OUT HOW TO
MAKE EVEN MORE THAN HIM.''
5) Darwin was onto something.
One way to look at Wall Street is as evolution, speeded up.
It's all about the survival of the fittest. Well, the fittest
have been identified, and it's important, for the greater good,
to help them to survive.
For some reason our democracy can't see that. It takes the
opposite approach: The minute a guy makes his first hundred
million, ordinary people and their elected representatives
scheme to weaken him.
So what if forcing the top 25 hedge-fund managers to pay
Medicare tax would cover the Medicare costs of more than 68,000
old people? Florida could stand to lose a few geezers. America
can't afford to weaken even one of its most successful
financiers.
Anyway, I'm not even sure it's possible to do it. Some of
the private-equity guys have threatened to up and move to Dubai
if they're forced to pay Medicare. And maybe they will. But I'll
bet a lot of them will do what I plan to do: fight back.
Last year I took home $50 million in carried interest, give
or take. I paid 15 percent in taxes. I was so upset that I went
out this year and made $70 million. You do the math: you take
away 7 1/2 I just go make 20 more.
Tax us all you want. You'll never catch up.

maybe because i just read it for the first time this year i had an abundance of appreciation for it.

woops wrong one. Thjis is it a.r.

Commentary by Michael Lewis
Sept. 5 (Bloomberg) -- So right after the Bear Stearns
funds blew up, I had a thought: This is what happens when you
lend money to poor people.
Don't get me wrong: I have nothing personally against the
poor. To my knowledge, I have nothing personally to do with the
poor at all. It's not personal when a guy cuts your grass:
that's business. He does what you say, you pay him. But you
don't pay him in advance: That would be finance. And finance is
one thing you should never engage in with the poor. (By poor, I
mean anyone who the SEC wouldn't allow to invest in my hedge
fund.)
That's the biggest lesson I've learned from the subprime
crisis. Along the way, as these people have torpedoed my
portfolio, I had some other thoughts about the poor. I'll share
them with you.
1) They're masters of public relations.
I had no idea how my open-handedness could be made to look,
after the fact. At the time I bought the subprime portfolio I
thought: This is sort of like my way of giving something back. I
Hard to say when this happened; it might have been when I
stopped flying commercial. Or maybe it was when I gave up the
bleacher seats and got the suite. But the first rule in this
business is to know the people you're in business with, and I
broke it. People complain about the rich getting richer and the
poor being left behind. Is it any wonder? Look at them! Did it
ever occur to even one of them that they might pay me back by
WORKING HARDER? I don't think so.
But as I say, it was my fault, for not studying the poor
more closely before I lent them the money. When the only time
you've ever seen a lion is in his cage in the zoo, you start
thinking of him as a pet cat. You forget that he wants to eat
you.
4) Our society is really, really hostile to success. At the
same time it's shockingly indulgent of poor people.
A Republican president now wants to bail them out! I have a
different solution. Debtors' prison is obviously a little too
retro, and besides that it would just use more taxpayers' money.
But the poor could work off their debts. All over Greenwich I
see lawns to be mowed, houses to be painted, sports cars to be
tuned up. Some of these poor people must have skills. The ones
that don't could be trained to do some of the less skilled labor
-- say, working as clowns at rich kids' birthday parties. They
could even have an act: put them in clown suits and see how many
can be stuffed into a Maybach. It'd be like the circus, only
better.
Transporting entire neighborhoods of poor people to upper
Manhattan and lower Connecticut might seem impractical. It's
not: Mexico does this sort of thing routinely. And in the long
run it might be for the good of poor people. If the consequences
were more serious, maybe they wouldn't stay poor.
5) I think it's time we all become more realistic about
letting the poor anywhere near Wall Street.
Lending money to poor countries was a bad idea: Does it
make any more sense to lend money to poor people? They don't
even have mineral rights!
There's a reason the rich aren't getting richer as fast as
they should: they keep getting tangled up with the poor. It's
unrealistic to say that Wall Street should cut itself off
entirely from poor -- or, if you will, ``mainstream'' --
culture. As I say, I'll still do business with the masses. But
I'll only engage in their finances if they can clump themselves
together into a semblance of a rich person. I'll still accept
pension fund money, for example. (Nothing under $50 million,
please.) And I'm willing to finance the purchase of entire
companies staffed basically with poor people. I did deals with
Milken, before they broke him. I own some Blackstone . (Hang
tough, Steve!)
But never again will I go one-on-one again with poor
people. They're sharks.

maybe because i just read it for the first time this year i had an abundance of appreciation for it.

I did a short stint as a broker, and the part about charging maximum legal mark-up resonated...It was a good book.

back to politics and pensions: we, in ny, are in good company with overextended municipal benefits. how and when we get out from under this is another subject that is beyond me. there is no doubt that we must do so but how do you do this without breaking basic promises and wrecking potentially millions of lives?

CC: millions of lives won't be wrecked if you cut pensions by 20%.

Especially when the pensions were inflated by 100% when they used shady union rules to "work" overtime in the last couple of years.

Its not even the pension amounts that are killer, its the ridiculous union work rules that enable the system to essentially be stolen from.

"CC: millions of lives won't be wrecked if you cut pensions by 20%."

exactly. the more unions do adds giving that sort of emotional take on the issue, the more i want them to have a similar experience as people in the private sector.

come on---don't shoot the messenger but...

lets reduce all pensions by 20%...why not 22%? why not 18%?

we do not have a political / legal means to achieve any of this. and we don't even want to talk about it....not here, but publicly with our politicans.

who wants to run on the cut pensions by 20% platform?

who wants to run on the cut pensions by 20% platform?

giuliani?

White Paper(near final draft) too bad this isn't in word, i would've turned on the reveal mark-up notes feature..
http://media.washingtonpost.com/wp-srv/politics/pdf/nearfinaldraft_061709.pdf

i wasn't heartened by the ppi numbers also.

http://blog.andyharless.com/2009/06/long-way-to-inflation.html

http://www.reuters.com/article/smallBusinessNews/idUSTRE55F5FR20090616

"The panic's hasty retreat should not be confused with robust recovery," Federal Reserve Governor Kevin Warsh said in prepared remarks to the Institute of International Bankers annual meeting in New York.

"The rather indiscriminate bounce off the bottom -- across virtually all assets and geographies -- may be more indicative of a one-time reset, which may or may not be complete."

Warsh said private demand, the true arbiter of economic performance, "remains weak" even while government spending has surged, and the the jobless rate is likely to peak at a higher rate, and linger longer at those high rates, than in recent recessions.

"The 'jobless recovery' may prove to be a familiar and vexing refrain," he said.

Looks like West67thStreet isn't the only person recommending finding a comfy chair & getting some popcorn while watching this whole mess play out. The author of this article does too.
http://www.newsweek.com/id/202323

http://us1.institutionalriskanalytics.com/pub/IRAMain.asp

It starts. and so true...
As we've noted before, the Summers approach to the economic crisis is "continuity and confidence,

Sheill Bair is really the best regulator if you had to chose between Fed,Occ & FDIC.

http://www.ritholtz.com/blog/2009/06/the-fdic-vs-the-banksters-regulators-feud-as-banking-system-overhauled-nyt/

A soupcon of sound economic sense.

http://housingcrashhub.com/thoughts-on-the-ethics-of-walking-away-from-an-upside-down-mortgage?ref=patrick.net

http://www.nytimes.com/2009/06/18/business/global/18poundside.html?ref=global

HELLO! THIS IS WHAT I'VE BEEN SAYING....

LONDON — Addressing a room full of British banking executives, Alistair Darling, Britain’s chancellor of the Exchequer, said Wednesday night that a lack of caliber among companies’ board members was partly responsible for the financial crisis.

Mr. Darling used the chancellor’s speech at the annual Mansion House dinner in London to defended Britain’s regulatory framework and said it was not the system that needed to change but the skills of bank managers and supervisors to avoid financial crises.

http://www.washingtonpost.com/wp-dyn/content/article/2009/06/17/AR2009061703548.html?hpid=topnews

"I think the time has probably come," said Ellen Seidman, a Democrat who headed the Office of Thrift Supervision from 1997 to 2001. "I don't think they did such a great job over the last several years."

Countrywide, AIG, GE, INDYMAC, DOWNEY....

Wow, I'm quoting the NY POST and I can't argue with the logic....
http://www.nypost.com/seven/06182009/business/sheilas_bair_ly_there_174820.htm

Bair's jockeying for greater authority over money center banks is driven by her belief that the FDIC is best suited to offer help to financial firms and doesn't have any conflicts of interest. By contrast, the Fed is partially owned by the banks that it oversees.

The FDIC also has hundreds of billions of dollars at risk through guarantees it provided to backstop losses at banks.

What the OTS approved..
http://2.bp.blogspot.com/_pMscxxELHEg/SShOBNqn83I/AAAAAAAAD1E/SB8uKD_hTVI/s1600-h/Downey_Savings.gif

Haven't been following this thread lately, but this little document from CFR has an interesting chart-investigation of how the current crisis compares to the Depression and to other major recessions.
http://www.cfr.org/content/publications/attachments/2009OutlookFinal_Long.pdf

Some aspects aren't as bad as the Depression; housing, however, is startlingly worse.

This wasn't supposed to happen..

So we have evidence—strong evidence—that exchange-traded funds, because of the timing that goes on in them, are not acting in the best interest of investors. Or, that investors are not acting in their own best interests, which may be a better way to put it.”

http://seekingalpha.com/article/144052-bogle-investors-getting-killed-in-etfs

The swiss are on to something...This idea sounds very familiar, Maybe too big to fail is to big to exhist...

http://www.ft.com/cms/s/0/90c7015a-5c01-11de-aea3-00144feabdc0.html

Credit crisis hitting small business. These guys created the jobs. I'd rather help them than G.M.

http://www.nakedcapitalism.com/2009/06/credit-card-squeeze-hits-small.html

Nobody suspects a Japanese tourist...

http://www.ft.com/cms/s/0/f200bec6-5c69-11de-aea3-00144feabdc0.html

Detective Jones: Nobody looks at a Japanese tourist. -Spanish Prisoner

interesting discussion of our future need for china to ramp up domestic consumption to fuel our recovery.

http://economistsview.typepad.com/economistsview/2009/06/a-lasting-recovery.html