The Mound of Sound

I learned something new on 60 Minutes last night about Credit Default Swaps, those nasty, unregulated mortgage default insurance contracts that are the disease behind the global financial meltdown.

At first I had the impression that these were insurance contracts that Wall Street used to convince prospective customers to buy its toxic securities – securitized mortgages, derivatives, bundled bad debt. Okay, I’m not really sure what it is I’m buying so I want insurance. That makes sense and it’s Wall Street’s fault for selling insurance when they had no means, no assets to honour those committments when the bottom fell out.

But there’s more, a lot more. These Credit Derivative Swaps were available to anyone. They weren’t limited to buyers of derivatives. Anyone could buy a CDS for a few pennies on the dollar without having to buy or hold the dubious mortgage bundles. In this way you were betting against the housing bubble, betting against the securitized mortgages, betting that this madness would collapse.

These unregulated bets earned some people billions in profits, and it’s their billions in profits from gaming CDSs that are a big chunk of the problems that have rocked markets around the world.

What really is outrageous is that governments around the world are using wage-earners’ tax dollars to bail out banks that need to make good on these gamed Credit Default Swaps and, right now, nobody even knows the total value of them or even who is liable for what. It’s estimated that there are 60-trillion dollars of Credit Default Swaps in circulation.

Here’s an idea. Rather than soaking taxpayers why don’t our governments use their sovereign powers to declare those Credit Default Swaps to be redeemable for exactly what was paid for them. If you paid pennies on the dollar, you get pennies on the dollar and thank you for your patriotism in a time of troubles.

The Western world has been raped by these gamblers and swindlers. Why should working stiffs be saddled with making good their bad debts, especially on these gamey Credit Default Swaps? You want to clean up the financial markets, restore confidence and liquidity, get credit moving again? A good way to start is to wipe the CDS garbage off the books. Write them down to what was actually paid for them, pennies on the dollar.

Yes, some people will lose out on their windfall bets but, so what? After all, they not only bet the housing bubble would burst, they also bet that the outfit selling them the CDS would be good for it. That’s a two part bet and they lost. Why should taxpayers be expected to make winners out of losers?

A Little Palin Levity

Republican pundit David Frum is urging fellow Repugs to shift their efforts, and their money, from what he considers an already lost presidential campaign and use them instead to fight a rearguard Congressional defence.

David, son of Barbara, wrote in the Washington Post, that McCain, “is losing in a way that threatens to take the entire Republican Party down with him.”

“The very same campaign strategy that has belatedly mobilized the Republican core has alienated and offended the great national middle, which was the only place where the 2008 election could have been won.

“I could pile up the poll numbers here, but frankly . . . it’s too depressing. You have to go back to the Watergate era to see numbers quite so horrible for the GOP.

McCain’s awful campaign is having awful consequences down the ballot. I spoke a little while ago to a senior Republican House member. “There is not a safe Republican seat in the country,” he warned. “I don’t mean that we’re going to lose all of them. But we could lose any of them.”

Frum argues that Republicans should shift “every available dollar” to the senatorial campaign. For some reason he can’t bring himself to say those dollars ought to be shifted from the presidential campaign. He also argues that Republicans should hammer home the message that the Dems are probably going to take the White House and voters can’t take the risk of also handing congress to a bunch of liberals.

The giveaway was the morning after the vice-presidential debate when Sarah Palin let slip that she had learned of the McCain campaign’s decision to pull out of Michigan when she read it that morning in a newspaper. To quell any doubts, she then proceeded to criticize McCain’s decision and said she and Todd could have worked the state if McCain wasn’t up to it.

It was obvious that McCain hadn’t consulted Palin about the Michigan decision. He hadn’t even informed her. She had to find out about it from a newspaper well after his campaign had announced it to the press. Her response put McCain’s wisdom, even courage into question. Ouch, ouch, ouch and ouch.

Since then, Palin hasn’t minced any words about what she sees as McCain’s weakness in going after Obama. She has repeatedly criticized McCain’s refusal to go after the Reverend Wright issue.

Now, as reported by Canadian Press, it’s come to open warfare among McCain’s and Palin’s insiders:

“The tattered remains of their ticket were everywhere Sunday, with both McCain and Palin insiders publicly on the attack to hold the other side responsible for their candidate’s woes on the campaign trail.

“She is a diva – she takes no advice from anyone,” an unnamed McCain adviser told CNN over the weekend.

“She does not have any relationships of trust with any of us, her family or anyone else … also, she is playing for her own future and sees herself as the next leader of the party. Remember: Divas trust only unto themselves, as they see themselves as the beginning and end of all wisdom.”

It was their decision to limit Palin’s media contact to interviews with ABC’s Charlie Gibson and a series of chats with CBS’s Katie Couric parcelled out over several cringe-worthy days. They proved to be disastrous for both the Alaska governor personally and McCain’s campaign.Wallace sent an emailed response to several news organizations over the weekend: “If people want to throw me under the bus, my personal belief is that the most honourable thing to do is to lie there,” she wrote.

In recent weeks, Palin has publicly parted ways with the McCain campaign on various fronts, leading many to speculate she is attempting to distinguish herself from the flailing Arizona senator and forge her own identity in preparation for a run for the White House in 2012.”

The Anchorage Daily News has endorsed Barack Obama for president. Coming from a solid “red” state that’s something. Coming from a red state which the Republican vice presidential candidate calls home and sits as governor, that’s something again. From the Associated Press:

The Daily News said since the economic crisis has emerged, Republican presidential candidate John McCain has “stumbled and fumbled badly” in dealing with it.

“Of the two candidates, Sen. Obama better understands the mortgage meltdown’s root causes and has the judgment and intelligence to shape a solution, as well as the leadership to rally the country behind it,” the paper said.

The Daily News said Alaska Gov. Sarah Palin has shown the country why she is a success as governor. But the paper said few would argue that Palin is truly ready to step into the job of being president despite her passion, charisma and strong work ethic.

I just spotted this in The New York Times and decided it needed to be posted. It concerns the hundreds of billions of dollars the US government has chosen to inject into the nation’s banks to improve their liquidity in order to get credit flowing again to American business.

Guess what? The banks are happy to take it but they have a different idea of what to do with their Washington windfall. One executive at one of the surviving megabanks was careless enough to let a Times reporter eavesdrop on an internal discussion:

“In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshot of a journalist.

(He didn’t mean to, of course, but I obtained the call-in number and listened to a recording.)

“Twenty-five billion dollars is obviously going to help the folks who are struggling more than Chase,” he began. “What we do think it will help us do is perhaps be a little bit more active on the acquisition side or opportunistic side for some banks who are still struggling. And I would not assume that we are done on the acquisition side just because of the Washington Mutual and Bear Stearns mergers. I think there are going to be some great opportunities for us to grow in this environment, and I think we have an opportunity to use that $25 billion in that way and obviously depending on whether recession turns into depression or what happens in the future, you know, we have that as a backstop.”

So, to summarize, those hundreds of billions of dollars of wage-earning taxpayers’ money the banks are getting to free up America’s credit markets are to be used, instead, as a mergers and acquisition windfall.

That kids is fraud, plain and simple, old-fashioned fraud. And it’s fraud on the very taxpayers whose own financial future already has been put in jeopardy by the greed of these same banksters.

I think it’s time that Washington simply seized these banks and threw their scheming managers out on the street.

This is truly mind-boggling.

http://www.nytimes.com/2008/10/25/business/25nocera.html?em

Dear Red States:

We’ve decided we’re leaving. We intend to form our own country, and we’re
taking the other Blue States with us. In case you aren’t aware, that
includes California , Hawaii , Oregon , Washington , Minnesota , Wisconsin, Michigan , Illinois and all the Northeast. We believe this split will be beneficial to the nation, and especially to the people of the new country of New California.

To sum up briefly: You get Texas , Oklahoma and all the slave states. We get stem cell research and the best beaches. We get the Statue of Liberty . You get Dollywood. We get Intel and Microsoft. You get WorldCom. We get Harvard. You get Ole’ Miss. We get 85 percent of America’s venture capital and entrepreneurs. You get Alabama . We get two-thirds of the tax revenue, you get to make the red states pay their fair share.

Since our aggregate divorce rate is 22 percent lower than the Christian Coalition’s, we get a bunch of happy families. Please be aware that Nuevo California will be pro-choice and anti-war, and we’re going to want all our citizens back from Iraq at once. If you need people to fight, ask your evangelicals.

With the Blue States in hand, we will have firm control of 80 percent of the country’s fresh water, more than 90 percent of the pineapple and lettuce, 92 percent of the nation’s fresh fruit, 95 percent of America’s quality wines(you can serve French wines at state dinners) 90 percent of all cheese, 90 percent of the high tech industry, most of the U.S. low-sulfur coal, all living redwoods, sequoias and condors, all the Ivy and Seven Sister schools plus Stanford , Cal Tech and MIT. With the Red States, on the other hand,you will have to cope with 88 percent of all obese Americans (and their projected health care costs), 92 percent of all U.S. mosquitoes, nearly 100 percent of the tornadoes, 90 percent of the hurricanes, 99 percent of all Southern Baptists, virtually 100 percent of all televangelists, Rush Limbaugh, Bob Jones University , Clemson and the University of Georgia. We get Hollywood and Yosemite , thank you.

Additionally, 38 percent of those in the Red states believe Jonah was actually swallowed by a whale, 62 percent believe life is sacred unless we’re discussing the death penalty or gun laws, 44 percent say that evolution is only a theory, 53 percent that Saddam was involved in 9/11 and 61 percent of you crazy bastards believe you are people with higher morals than we lefties.

Finally, we’re taking the good pot, too. You can have that dirt weed they grow in Mexico.

Peace,

Blue States