Big Shitpile
mikethemadbiologist | March 23, 2009Paul Krugman succinctly lays out why the Geithner/Obama* plan won't work:
Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus -- for that is what the Geithner plan amounts to -- will change that fact.
You can't walk back a lost bet, and doubling down isn't an option.
We can spin this around and around and throw up spaghetti code arguments,…
mikethemadbiologist | March 17, 2009In the midst of all of the wailing and gnashing of teeth over the death and cooptation of business journalism inspired by John Stewart's skewering of Jim Cramer, it's important to remember one thing: that's the business model. Or to put it another way, the customer is always right.
If you ever read the biotech press, which is a subset of the larger business press, there is an obvious, inherent structural bias. The biotech press will never critique the fundamentals of the biotech industry as a whole. It will criticize individual approaches or companies. But it will almost never ask…
mikethemadbiologist | March 15, 2009Because AIG is paying bonuses to the division that created a lot of Big Shitpile (italics mine):
The American International Group, which has received more than $170 billion in taxpayer bailout money from the Treasury and Federal Reserve, plans to pay about $165 million in bonuses by Sunday to executives in the same business unit that brought the company to the brink of collapse last year.
Word of the bonuses last week stirred such deep consternation inside the Obama administration that Treasury Secretary Timothy F. Geithner told the firm they were unacceptable and demanded they be…
mikethemadbiologist | March 9, 2009Currently, I'm working on a post about funding and how it's led to employment problem in science....
Meanwhile, this bit about illegal short selling is jaw dropping. I have no idea of this very long article (pdf) is in tinfoil helmet territory or not, but, if it's at all accurate, it looks like Jim Cramer of CNBC is using his media perch to help friends profit from short selling stocks:
The story begins when a very highly respected journalist and business editor for the Columbia Journalism Review, Mark Mitchell, decides to look into allegations made by the CEO of Overstock.com, that some…
mikethemadbiologist | March 6, 2009In the past, I've referred to Peter Pan Conservatives--those who think that winning wars is largely about will (and not logistics, supply, or local political conditions). Well, Treasury Secretary Geithner is now practicing Peter Pan economics:
...top officials in the Obama administration and at the Federal Reserve have convinced themselves that troubled assets, often referred to these days as "toxic waste," are really worth much more than anyone is actually willing to pay for them -- and that if these assets were properly priced, all our troubles would go away.
Thus, in a recent interview…
mikethemadbiologist | February 27, 2009If you want to know what a housing bubble is, you only need look at Maricopa, AZ:
In 2005, her husband, Zachary Campbell, accepted a transfer from San Diego to Phoenix to manage a recreational-vehicle store. For the first time, the Campbells figured, they could afford their own home, though that meant moving to Maricopa, about 20 miles from Mr. Campbell's store. They scraped together a $50,000 down payment to buy a new four-bedroom home in Maricopa, for $250,000. It came with black granite countertops, cherry kitchen cabinets and a pool in back.
Today, Ms. Campbell figures, the home is worth…
mikethemadbiologist | February 22, 2009Over at Beat the Press, economist Dean Baker describes his plan to deal with the wave of foreclosures:
1. Gives homeowners facing foreclosure the option of renting their home for as long as they want at the fair market rate. This rate is determined by an independent appraiser in the same way that an appraiser determines the market value of a home when a bank issues a mortgage.
2. The proposal requires no taxpayer dollars or new bureaucracies. It would be administered by a judge in the same way that foreclosures are already overseen by judges. It simply changes the rules under which…
mikethemadbiologist | February 11, 2009Yves Smith lays out just how stupid Treasury Secretary Geithner's proposal is. I think these are the key points (italics mine):
Let's start with the basics. The US banking system is insolvent. Got that? Insolvent. That does not mean every bank in the US is toast, in fact quite a few are probably just fine, and another large group is no doubt hurting and undercapitalized, but a couple of years of not shooting themselves in the foot again would enable therm (via earnings) to rebuild their equity bases sufficiently to proceed more or less as normal.
The problem is that a significant portion of…
mikethemadbiologist | February 8, 2009Before I get to the ongoing calamity, the economic impact of a nation-wide viral epidemic in horses in 1872 is worth considering (italics mine):
During the late 19th century, the American economy relied on horses the way it depends on gas today. Horses unloaded cargo from ports, transported goods from city to city, worked the farms, supported the army, and served as the emergency vehicles of choice. Without them, the American workforce would have ground to a halt.
And that's exactly what happened in 1872, when an estimated 99 percent of all horses in America contracted equine influenza. The…
mikethemadbiologist | February 5, 2009You know things are going wrong when a Congresswoman urges her constituents (and others) to squat in their homes, even when the bank can foreclose on them:
It's safe to say that the current system isn't working. Some borrowers were stupid, and others just greedy, but these loans should have never been made. And when banks made them, they should have held onto the paperwork (the irony is that bundling loans into big piles of shit helped create this mess, and now banks are unable to trace the actual loans due to said bundling). Ian Walsh:
Banks have been abusing the privileges they received…
mikethemadbiologist | February 2, 2009By now, you might have heard about the growing outrage that bankers at banks receiving bailout money are drawing bonuses. It's reached the point where Sen. Claire McCaskill has proposed capping bankers' income at a salary equivalent to that of the president of the U.S. I didn't really have much to add about how ridiculous the arguments for paying the bankers bonuses when their firms have been nationalized (if, nothing else, most employees, who through no fault of their own, working in dying businesses are getting laid off--that is, no salary at all). But a quotes from a NY Times article…
mikethemadbiologist | January 28, 2009It looks like nationalization of failing banks is off the table. What bothers me are two of the reasons given by Treasury Secretary Geithner. Reason #1:
Explicit nationalization of financial companies has little support among key Obama officials, sources said. Treasury Secretary Timothy F. Geithner and top White House economic adviser Lawrence Summers think governments make poor bank managers and cannot efficiently manage a vast number of institutions, according to some of their associates.
Given that the goal is to wipe out the shareholders and sell off Big Shitpile for whatever you might…
mikethemadbiologist | December 31, 2008By way of Edward Glaeser's post (via ScienceBlogling Jonah) about the relative stability of housing prices in the New York City area, I was looking at the S&P/Case-Shiller Seasonally Adjusted Home Price Values (I really need new hobbies...). The really odd thing I noticed is that in the metro areas that had huge crashes (greater than twenty percent of the maximal value), there was a huge spike in home prices from 2005-2006 (and which sometimes started in mid-2004), while, in metro areas that haven't crashed, there was no 2005-2006 spike. So what the hell happened in 2005?
Consider…
mikethemadbiologist | December 26, 2008So, if you go on the teevee machine and tell people that investment banks should be allowed to pay out dividends, and you're simply an economics professor, we should probably take the claim at face value. But what if you have tens of thousands of shares as compensation for being a board member? Oops:
I did some more checking, and Tyson has received over a million dollars in cash and stock options combined from Morgan Stanley. As I've noted before, you can't be a stateman and a salesman.
mikethemadbiologist | December 9, 2008It would seem to me that if Obama is serious about reaching out to Republicans, keeping Sheila Bair on as head of FDIC is a no-brainer. Yet Treasury nominee Geithner does not support her. I can't figure out what Bair did wrong (and I'm not being snarky). Consider:
Geithner became increasingly wary of Bair as she worked with the other regulatory agencies on emergency bailouts of banks in recent months. The New York fed chief has been concerned that Bair was more worried about keeping the FDIC's insurance program protected than she was about the entire financial system, one person said.
Bair…
mikethemadbiologist | November 24, 2008From Bloomberg News:
Nov. 24 (Bloomberg) -- The U.S. government is prepared to lend more than $7.4 trillion on behalf of American taxpayers, or half the value of everything produced in the nation last year, to rescue the financial system since the credit markets seized up 15 months ago.
When I read this, a line from a movie* kept running through my head:
With a lie this big, we can get away with anything.
Seriously, we have no conceptual means to grasp something of this magnitude. And tell me why we can't lend Detroit $25 billion? That is one three-thousandthhundredth of the package to…
mikethemadbiologist | November 7, 2008I agree with ScienceBloglings Orac and Mike Dunford: Robert Kennedy Jr. shouldn't be in an Obama cabinet.
As far I'm concerned, Kennedy's bullshit about thimerisol is every bit as ridiculous as creationism, except that it's far more murderous. While I don't think that would be an issue that he would deal with at Interior (but might be at EPA), irrationalism has no place in a Democratic administration. Could we wait a few months before we cede the intellectual highground? Related to this, Mike has a good suggestion:
If we want to effectively oppose this nomination, we need to bring in the…
mikethemadbiologist | November 6, 2008One thing about the de facto nationalization of companies is that the government--that is, we--ends up being responsible for some of the really ugly things companies do. Now we might become the proud owner of tax shelters:
The troubles of the American International Group are causing headaches for dozens of municipal transit authorities, which want the federal government to help them avoid multimillion-dollar early-termination fees for tax shelters linked to the troubled insurance giant.
The authorities are asking the government to assume A.I.G.'s role in scores of tax shelters, even though…
mikethemadbiologist | November 3, 2008I finally figured out what the underlying philosophy for the banking bailout is (other than TEH STOOPID): it's supply-side/trickle down economics. First, the latest insult by way of Chris in Paris (italics mine):
http://www.washingtonpost.com/wp-dyn/content/article/2008/10/29/AR20081…
U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.
The government said it was giving banks more money so they could make more loans. Dollars paid to…
mikethemadbiologist | November 2, 2008I think this quote by Nell Minow sums up what most people feel about bonuses for employees at bailout-receiving investment banks:
"I'm just flabbergasted that the financial community has failed to show any sense of leadership on this issue and doesn't seem to understand how angry people are at them,'' said Nell Minow, editor of Corporate Library, a Portland, Maine-based corporate-governance research firm. "They are just a bonus away from having the villagers come after them with torches.''
Actually, I think some people would like to skip the 'bonus away' and go straight to the torches…