Charlie Munger Video/Interview

 Charlie Munger of Berkshire Hathaway fame, talking to a professor at Stanford about accounting practices, etc....



Addendum/Commentary: One thing the self-righteous Mr. Munger doesn't mention when he talks 
about accounting is often accountants are bullied by CFOs (who are bullied by CEOs) to lie about the 
numbers. When accountants are threatened with their jobs or have career advancement placed as a carrot in front of 
their nose they tend to get much more liberal with how numbers are recorded and where they are recorded.  
There has been some funny stuff going on with how Wells Fargo (Wells Fargo is part of 
Berkshire Hathaway) records their Derivatives on the balance sheet, but I don't expect Charlie to be 
writing any Slate stories on that or answering questions from Stanford professors on that any time soon.
You can read the details of Wells Fargo's interesting way of recording derivatives here and here.

A Nice Paper From Gary Gorton

If you are interested in finance reform or just a finance "junkie", we highly recommend you read this paper at this link.  Written by Gary Gorton

Bruce Berkowitz Interview By Consuelo Mack

Consuelo Mack has a show called "WealthTrack".  I am not sure where you find this program, I would guess on some cable network but I don't know.  Judging from this interview it is probably a good show.  I have a great respect for Jewish people and their general intelligence and their ability with money.  You can call it "reverse racism" or whatever, but I just don't think anyone can deny Jewish people are exceedingly intelligent and usually good with a dollar.  Berkowitz is no exception to that generalization and it will serve you well to perk up your ears or take notes when this guy speaks.

Update On Derivatives Legislation

Well, most of these type stories I grab off of Bloomberg, but this is a nice little update on finance legislation progress from Reuters.  It shows four Senators on the correct side of the issue, but it's not as positive as it looks at first glance.  The problem is four Senators do not a passed law make.  So... it's good to see those 4 Senators on the right team, but still you have to get the law past the old white curmudgeons Dick Shelby and Bob Corker, both of whom are fighting against any real form of financial reforms.

But let us give kudos to 4 Senators here: Maria Cantwell, Byron Dorgan, Diane Feinstein, and Olympia Snowe.  They wrote a letter to Senate Banking Committee Chairman Chris Dodd asking that there be no exemptions of any type of trader of derivatives.  The Senate Agriculture Committee has a competing bill, which like the House (House of Representatives) bill, asks for exemptions of certain types of traders in the $300 trillion OTC swaps market.  In their letter, the four Senators argue vehemently against the exemptions of those companies, and here I quote the letter directly from the Reuters story:

"If the federal government fails to impose systemic risk controls on derivatives traders, these traders will continue to shift substantial systemic risk onto federal taxpayers," The letter is dated February 12.

The letter went on to say that if all transactions of swap dealers are not cleared, it could lead to problems in energy markets (similar to what happened in California in 2000--20001).  The lawmakers said that clearing of the trades would still allow utilities and airlines to hedge risks freely, and would NOT necessitate blanket exemptions for those industries.

The four lawmakers also said developers of new derivative products must prove the need for exemption from clearing trades on an exchange.  (my italics)

An Embarrassing Admission From Your Earnest Blogger

I am a Democrat.... no that's not the embarrassing admission.  I'm a Democrat who almost lovingly supports Obama (with my "man crush").  I think FDR was our greatest President of the 20th century.  But, God help me, I enjoy listening to Michael Savage.  He comes on from 9--12 in the evening here, and he fits in with my demented evening mindset quite well.  And he makes literary references---something Glen Beck and Limbaugh never do.  I know what you're thinking.... why not listen to NPR??? Well at night it's mostly music, and many times in the evening I want a voice, not music. And honestly,  I do find Savage fun, and even agree from time to time.  Here is one of those times I agree with Savage.

Whirlpool Moves 1,100 Jobs To Mexico After Receiving $20 Million in Stimulus Money

Sam Stein has an excellent report on Whirlpool workers being threatened with lower chances of future employment (blacklisting??) if workers speak out on Whirlpool moving their jobs to Mexico.  Whirlpool Corporation has announced it is shutting down its Evansville Indiana refrigerator plant and moving its operations to Mexico where it can find a cheaper labor pool.  That means 1,100 lost jobs for the community.  Of course the workers were very angry and pointed to the fact Whirlpool Corporation had received $20 million from the President's economic stimulus package.  Union leaders have petitioned local and state leaders to find positive alternatives, in order to keep the plant in Evansville.

Activists planned an attention getting protest for this Friday (that would be today, the 26th Feb) with AFL-CIO President Richard Trumka attending.  But Whirlpool says this effort is pointless, they have already made their decision to move the jobs to Mexico.  Whirlpool still seems to be very conscious of the chance of bad publicity and damage to the company image if more people know about the shifting of the 1,100 jobs to Mexico.  Paul Coburn,  Vice-pres. for Whirlpool's Evansville operations, sent a memo to all employees with a not so subtle threat of loss of future job opportunities to workers who protest.  And here I quote directly Coburn's memo which is included in Sam Stein's piece (my italics and my bold):

"In the last six months we have delivered strong results in spite of having to see a good deal of our equipment taken out of the building and moved to its new location. I believe that it is a testament to your character that you have continued to work hard to preserve the positive reputation of the Evansville workforce during this period," Coburn writes.

"With this in mind, we have shared our concern with Local 808 leaders that these negative activities will only hamper employees when they look for future jobs. The entire community is aware and sympathetic towards the situation we all face. We fear that potential employers will view the actions of a few and determine whether they would want to hire any of Evansville Division employees in the future. We hope that this is not the case, but think it is certainly a consideration."

Apparently, it's not enough for Whirlpool to ship their workers' jobs overseas, Whirlpool also wants to make sure it kills their right to free speech and kills their chances of future employment.

Federal Reserve Unsuccessful in Prodding Swaps Dealers To Agree With Clearinghouse Goal

Bloomberg has a nice piece of journalism co-written by Shannon Harrington and Matthew Leising.  It helps illuminate the behind the scenes quagmire between regulators and CDS (credit default swaps) investors to lower risk in the $25 trillion CDS market (yes, trillion with a T).

Many of the big players in the market (many of which are hedge funds) refuse to agree to specific goals before the Federal Reserve Bank of New York's March 1 deadline, in which they must define the industry's process by which they will move swaps through clearinghouses.  These talks are currently "private" or behind closed doors.

The New York Federal Reserve Bank was "prodding" (NYFRB "prodding" is probably something close to what most people consider a love smooch) Goldman Sachs, JPMorgan Chase, and Deutsche Bank AG and other swaps dealers into clearing 90% of the eligible trades by 2009.  The investment  banks' clients are fighting against this (clearing trades) because it would cost them more.

After the sudden collapse of AIG and Bear Stearns and the bankruptcy of Lehman Brothers (in other words after all the damage had been done) the Federal Reserve "demanded" the industry start clearing the derivatives trades.  Although asset managers somewhat  backed broader use of clearinghouses, they wanted assurances that clearing trades would also come with some bankruptcy laws protecting the trades. They are also worried about extra collateral costs.  An example the Bloomberg article gives is hedge funds often use trades that take advantage of "price dislocations" between index contracts and swaps on companies included in the index. Prime brokers will demand collateral on the net amount at risk from offsetting trades.

The problem (supposedly) is cash can get tied up in one part of the trades, affecting other trades, and here I will just quote directly from Harrington and Leising's story:

"If one leg of the trade were required to be cleared, while the other contracts aren’t eligible, fund managers may be forced to increase the amount they have to post, tying up cash, the people said.

The New York Fed has led regulators including the U.S. Securities and Exchange Commission, the Commodity Futures Trading Commission, the U.K.’s Financial Services Authority and Germany’s Federal Financial Supervisory Authority in seeking increased transparency and less risk from over-the-counter derivatives markets. Some $605 trillion in contracts were outstanding at the end of June 2009, according to the Bank for International Settlements.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on or hedge a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements."

In essence credit default swaps (my words here) are a type of insurance which people can buy, which pays if a company (or sometimes a country's government) doesn't pay off its debts (maybe debts on bonds or loans).  Derivatives ideally are used to "hedge" against risks or protect from extreme downsides.  There are two leading clearinghouses now, one in Chicago and one in Atlanta mostly involved in contracts tied to credit indexes.

There are ongoing negotiations between the New York Federal Reserve (NYFRB). The negotiations participants include 15 dealers, 9 investment firms, and 3 trade associations. They are trying to resolve obstacles to a higher percentage of swap contracts being traded through clearinghouses.  The New York Fed, PIMCO, and other negotiation participants declined to comment at this stage.

The situation (with negotiations) is probably summed up best by the Chief Operating Officer of BlueMountain hedge fund, Samuel Cole, who I quote directly from the Bloomberg article here:

“The dealer community may be filibustering to protect its oligopoly and not seriously engaged in working with the buy side to develop a clearing solution,”

In other words, dealers are making plenty of money now, and have power in the market, and want things to stay status quo, even if the rest of us have to suffer.

Thanks to "W" Bush and Hank Paulson Having Their Thumbs Up Their Butt Circa 2008 (And Before), Education Today Suffers

Read the extremely sad news about major budget cuts at one of America's best Universities.  Brandeis University.  The link compliments of the good eye of Mr. Felix Salmon.  I keep swiping so many links from Salmon, people are going to start calling me "stale salmon" soon.

Fox News and Republicans Don't Want to Play Nicey Nice With Ron Paul

Ron Paul won the CPAC presidential straw poll of Republicans at the conference.  It seems that wasn't the answer FOX "news" was looking for.  All that FOX propaganda for not....  Hat tip to Andrew Sullivan at "The Dish"

Felix Salmon Updates the Current Status of CFPA Legislation

Senator Dodd and Senator Corker are working together on details of Finance/Bank reform legislation.  One of the snags or sticking points is the structure/configuration of the Consumer Financial Protection Agency (CFPA).  Felix Salmon at Reuters has the most up-to-date news on this.  Great work as usual from Mr. Salmon.  He got some of the info. from here "Sulgrave Partners LLC" as well.  You should read the details at those two links, but my short summary would be "It's not looking good folks."

Two-faced Republicans Ask for Stimulus at Same Time That They Bad-Mouth It To Voters

Journalists Alison Fitzgerald and Justin Blum of Bloomberg have what could be an eye-opening story to Republican voters.  The same Republican Congressmen who have been bad-mouthing the stimulus plan for not creating or saving jobs have tried multiple times to get stimulus funded transportation grants directed to their state.  Jo Bonner and Robert Aderholt (both Republicans from Alabama) wrote Transportation Secretary Ray Lahood multiple times (5+ times) for stimulus funded grants on the basis that it would create thousands of jobs for their state.

Bonner and Aderholt joined more than 100 Republican Congressmen who after voting against the stimulus bill, wrote U.S. Transportation Secretary Lahood asking for part of the money for $1.5 billion that same stimulus plan reserved for local road, rail, bridge, and transit grants.  The money for those grants the Republicans asked for was part of the same $862 billion Recovery Act passed in 2009 with zero Republican votes in the house, and only 3 Republican votes in the Senate.

And this I quote directly word-for-word from Fitzgerald and Blum's story:

"Obama, during a Feb. 19 speech to the Las Vegas Chamber of Commerce, said congressional critics are calling the stimulus a “boondoggle” while “making appearances at ribbon-cuttings” for local projects financed by the bill. “They’re trying to vote against their cake and eat it, too,” he said."

This also I quote word-for-word from Fitzgerald and Blum's story:

"The National Republican Congressional Committee, led by Texas Representative Pete Sessions, released a video montage of clips edited to show a series of news anchors and commentators asking “Where are the jobs?”

Sessions, who called the stimulus “a massive spending binge by the Democrat-controlled Congress,” wrote LaHood three times last September and October. Sessions promoted four projects, including a Dallas streetcar line he said “will create jobs in the region and improve the quality of life for North Texans.” The project got $23 million." Sessions, in an e-mail, called the stimulus an “abject failure” and said he’d vote against it again if he could."

Fitzgerald and Blum list others who bad-mouthed the stimulus package at the same time they wrote Transporation Secretary Lahood asking for more from the same package:

• Indiana Republican Steve Buyer sought $80 million
• North Carolina Representative Heath Shuler (a Republican) requested stimulus money(Interstate Highway Project for 900 jobs)
• Alabama Representative Parker Griffith (since changed to Republican) wrote for money for railway construction
• South Carolina Republican Lindsey Graham wrote Lahood asking for $360 million of Stimulus money for Interstate 73 around Myrtle Beach (one of 12 requests by Senator Graham for stimulus money).
• Oklahoma Republican Tom Cole called it a "recipe for disaster" then subsequently asked for a 2,700 acre industrial park in Ardmore, Oklahoma that he claimed might create 30,000 new jobs.
• Texas Republican Representative Kay Granger wrote for assistance (stimulus) for 6 projects including a toll-road for the Dallas-Fort Worth Metro area she said would create roughly 3,500 jobs for the area.  On the stimulus anniversary Granger said the stimulus was "government waste at its worst".  She should know.

We should thank the two Bloomberg writers for revealing these Republican two-faced liars for what they are.  Again you can read their article here.
Hat tip to Menzie Chinn at Econbrowser blog for this.

Charlie Munger's Foray Into Fables

Hat tip to Felix Salmon for this.  Charlie Munger of Berkshire Hathaway fame pens a fable at Slate magazine.  Worth the read. Here.

Schwarzenegger Calls Out Mitt Romney and Republicans for Hypocrisy On Stimulus

Sam Stein at the Huffington Post does some truth telling with his story related to Republican Governor Arnold Schwarzenegger's appearance on ABC's Sunday Morning program "This Week".  Schwarzenegger pointed directly at Massachusetts Gov. Mitt Romney's hyperbole that the stimulus bill hadn't produced a "single" net job gain.  And here I quote Schwarzenegger's words directly from Sam Stein's article.

"I find it interesting that you have a lot of the Republicans running around, and pushing back on the stimulus money and saying, 'This doesn't create any new job,'" said Schwarzenegger. "And then they go out and do the photo ops, posing with the big check and they say: 'Isn't this great, look at the kind of money I've provided for the state and this is money to create jobs, and this has created 10,000 new jobs, this has created 20,000 news jobs, and all those kinds of things.' It doesn't match up." It's hypocrisy, said host Terry Moran. "Exactly," Schwarzenegger replied.

"I don't want to beat up on my Republican colleagues but I think it is kind of politics rather than thinking about one thing, and this is: 'How do we support the president? How do we support him and everything we can in order to go and stimulate the economy back and think about the people and not the politics?'

"Anyone that says this hasn't created a job, they should talk to the 150,000 people getting jobs in California," he added, "from the private sector and also from the public sector." 

It seems as though even with all the time Schwarzenegger spent in Hollywood, he can still differentiate fact from fiction.  Most likely Mitt Romney can also, but prefers spouting tales of fiction when it favors his political aspirations.

CNBC Cheerleading Team

There is one person in this CNBC video clip who due to his words ends up looking like a complete Jackass. See if you can pick him out.

Accounting Tricks (Lies), Depreciation, Amortization, And Cash From Nowhere

That "son of a gun" Tyler Durden (I say "son of a gun" in the most affectionate and yet envious way) has another great post about misleading numbers on balance sheets at many corporations in the S&P 500.  You can find it over at ZeroHedge with some accompanying charts.  The "permabulls" on CNBC as Durden calls them (a certain Italian C___ comes to my mind, the one who doesn't know when Medicare kicks in) have been doing their usual salesmanship on all the cash these companies have for M&A(mergers and acquisitions), expansion, stock buybacks and on and on....  But as Durden tells us, we need to take a closer and detailed look at what is the real source of this excess cash.

The dunderheads at CNBC would have you believe that the excess cash comes from almost pure (almost 100%) revenue, which "thanks to" vast layoffs, plummeting Selling, General, and Administrative (SG&A) expenses, feeds into retained earnings and then hence to higher cash numbers.  This certainly is part of the uptick in excess cash, but according to Durden's analysis mostly ahem, ahem, bullshit!! ahem.  There is a good chance this "excess cash" (about $155 billion) as it is recorded now on balance sheets will largely "disappear" over time.

I will let Tyler Durden explain the details, but you need to read this.  In light of the recent market upturns people are already starting to get giddy about the stock market again.  People have short memories and there are still a lot of anomalies, funny quirks, and miraculous recoveries in the market now.  This is a must read to keep proper perspective.

Felix Salmon Discusses ETFs

Felix Salmon of Reuters had a nice weekend column discussing some slight downsides to ETFs.  I posted here before that ETFs are overabundantly plugged (peddled) on the business TV and that I smelled a rat there because usually instruments that are over-recommended on TV are done so for commission purposes.  Looking back at that post here, I think maybe I was overly-cynical.  I do think sometimes ETFs can be a good choice, BUT I still am pessimistic on their general performance.  Of course the big advantage of ETFs is the lower fees you have in comparison with mutual funds.  And depending on which ones you choose, they do follow the market trends pretty closely.

Felix Salmon quotes a WSJ story by Ian Salisbury. Salisbury says that the average ETF underperformed its benchmark by 125bp.  "bp" for those of you not ingratiated with the terminology means basis points--bp. A basis point is 1/100 of 1 percent. so here 125 bp=125 basis point=1.25%.  Brokers and analysts   (in my opinion) make up this crappy terminology to convince people what they do is hard and you need to pay them fees, to do what you in reality could do better than they can.... but I digress.

Commodity ETFs can be risky, because they can be dumped quickly as Salmon has pointed out in past articles, such as he notes here with Gold ETFs.  Also small illiquid ETFs can be very risky in volatile markets.  Salmon puts the border line of safety in size for ETFs at roughly $10 billion.  So it's much better/safer to invest in the ETFs with greater than $10 billion outstanding.

Final Analysis: Whether ETFs or Mutual Funds are better is still up for debate.  Depends largely on fees and past performance (5 to 10 years) of that fund.  But the best of all worlds is choosing 15+ individual stocks from different industries with outstanding balance sheets, i.e., doing your own homework.

To "Rocky" Obama and Congressional Dems: Pass The DAMN Bill

One of the goals of this site is to explain some complicated things in a way everyone can understand, yet not have any reader felt I insulted their intelligence.  Well this isn't too complicated.  Play the music "video" youtube link below and as you listen to the music read President Obama's words.  Mr. President we've been waiting for this.

Remarks of President Barack Obama 
Weekly Address
February 20, 2010

The other week, men and women across California opened up their mailboxes to find a letter from Anthem Blue Cross. The news inside was jaw-dropping. Anthem was alerting almost a million of its customers that it would be raising premiums by an average of 25 percent, with about a quarter of folks likely to see their rates go up by anywhere from 35 to 39 percent.

Now, after their announcement stirred public outcry, Anthem agreed to delay their rate hike until May 1st while the situation is reviewed by the state of California. But it’s not just Californians who are being hit by rate hikes. In Kansas, one insurance company raised premiums by 10 to 20 percent only after asking to raise them by 20 to 30 percent. Last year, Michigan Blue Cross Blue Shield raised rates by 22 percent after asking to raise them by up to 56 percent. And in Maine, Anthem is asking to raise rates for some folks by about 23 percent.

The bottom line is that the status quo is good for the insurance industry and bad for America. Over the past year, as families and small business owners have struggled to pay soaring health care costs, and as millions of Americans lost their coverage, the five largest insurers made record profits of over $12 billion.

And as bad as things are today, they’ll only get worse if we fail to act. We’ll see more and more Americans go without the coverage they need. We’ll see exploding premiums and out-of-pocket costs burn through more and more family budgets. We’ll see more and more small businesses scale back benefits, drop coverage, or close down because they can’t keep up with rising rates. And in time, we’ll see these skyrocketing health care costs become the single largest driver of our federal deficits.

That’s what the future is on track to look like. But it’s not what the future has to look like. The question, then, is whether we will do what it takes, all of us – Democrats and Republicans – to build a better future for ourselves, our children, and our country.

That’s why, next week, I am inviting members of both parties to take part in a bipartisan health care meeting, and I hope they come in a spirit of good faith. I don’t want to see this meeting turn into political theater, with each side simply reciting talking points and trying to score political points. Instead, I ask members of both parties to seek common ground in an effort to solve a problem that’s been with us for generations.

It’s in that spirit that I have sought out and supported Republican ideas on reform from the very beginning. Some Republicans want to allow Americans to purchase insurance from a company in another state to give people more choices and bring down costs. Some Republicans have also suggested giving small businesses the power to pool together and offer health care at lower prices, just as big companies and labor unions do. I think both of these are good ideas – so long as we pursue them in a way that protects benefits, protects patients, and protects the American people. I hope Democrats and Republicans can come together next week around these and other ideas.

To members of Congress, I would simply say this. We know the American people want us to reform our health insurance system. We know where the broad areas of agreement are. And we know where the sources of disagreement lie. After debating this issue exhaustively for a year, let’s move forward together. Next week is our chance to finally reform our health insurance system so it works for families and small businesses. It’s our chance to finally give Americans the peace of mind of knowing that they’ll be able to have affordable coverage when they need it most.

What’s being tested here is not just our ability to solve this one problem, but our ability to solve any problem. Right now, Americans are understandably despairing about whether partisanship and the undue influence of special interests in Washington will make it impossible for us to deal with the big challenges that face our country. They want to see us focus not on scoring points, but on solving problems; not on the next election but on the next generation. That is what we can do, and that is what we must do when we come together for this bipartisan health care meeting next week. Thank you, and have a great weekend.

Funny Picture Over At Baselinescenario

A funny picture from the good gentlemen at Baselinescenario.  Done in connection to Centrepiece magazine of the London School of Economics.  Cheerio Blokes!!!

Pearls of Wisdom From the Mostly Soft-Spoken Volcker

Video of an interview with Paul Volcker by Margaret Brennan of Bloomberg. 10 minutes, good stuff.  Hat tip to ZeroHedge.

Mathematical Models Used In Finance: Help or Hindrance??

Normally I don't like to use stories from the British based magazine "The Economist" because they have an extremely asinine policy of not giving credit to writers on individual stories.  Indeed this will hurt them because all writers and journalists will hate them in their heart-of-hearts for this misguided and dictatorial way, but I digress about the Hugo Chavez style editorial policy....  The person/persons who wrote the article (who wrote it is something they feel their readers aren't entitled to know) entitled "Number-crunchers Crunched" did a good job.

The article starts off by noting Black-Scholes model was first used by options traders in the mid-1970s.  Initially, when the Black-Scholes model was used it might have seemed emasculating to some in the macho world of options trading (at least as done on the floors of exchanges then).  But as it proved successful it came to be used by most traders.  Derivatives trading got a shot in the arm from Black-Scholes and over time more "quants" entered the finance and trading field.

Over time though (most obvious with the economic crisis of 2008-2009) these models didn't prove to be so dependable, and many people believe that the unregulated derivatives market, collateralised debt obligations (CDOs), and credit default swaps (CDSs) were the root cause of this crisis.  "The Economist" article states (I paraphrase here) that the math models were useful for interest rates and foreign exchange, but were a total failure in debt markets,  where the mathematical models proved to have zero prognosticating function when it came to the collapse of the housing market.

Bankers took low-quality mortgage-backed securities and bundled them together with supposedly higher quality debt securities (combining different classes or "tranches" of debt).  These different classes of
quality debt securities that were packaged together were then labeled CDOs and stamped with a AAA rating.  Credit ratings agencies (such as Moody's) were more than happy to appease the investment banks who paid them.  Financial firms chose to rely on those models, even though they full well knew that the expected rates of return were unrealistically high for the so-called  "AAA" rated securities.  Some risk managers were even fired from their jobs for questioning the realism of the models (Does the name Iris Mack come to mind??).   No matter how wacky the risk vs. expected return the models showed were, Moody's and S&P models were not to be questioned, afterall as "The Economist" article quotes a regulator saying "A lifetime of wealth was only one model away".

Also, the rampant use of these models probably impacted markets in such a way as to create a sort of "feedback loop" where the models detrimentally affected their (the models') own function to predict.  This feedback process is sometimes termed counter-performativity, which usually occurs when a mathematical model used in the markets becomes so popularly used it then has a negative affect on itself.  It's important to note that this counter-performativity was not a root cause of problems, but one of the many smaller factors to consider.


As the article rightly notes, and I quote here directly from the article (referring here to the mathematical models):

"They failed Keynes's test that it is better to be roughly right than exactly wrong."

The banks were trying to "unwind" the same positions (same types of securities) at the same time.  Which of course added an enormous amount of uncertainty/risk during the peak of the crisis.

Models used for stress tests

The article then goes on to discuss different type models used for stress tests. There are 3 types stress tests this article discusses:

1. VAR "value-at-risk"
2. Conditional VAR (CoVAR)
3. "stress" VAR

These tests can be used to judge a portfolio of assets, or by regulators looking at banks' quality of capital reserves (the banks' capital "buffers" in times of calamity). The VAR was invented by some brainiac types at JPMorgan in the late 1980s.  VAR and its descendants have since become very popular at banks.  Bank regulators seem to favor CoVar style tests more because CoVAR accounts more for spillover affects in bad markets and "counterparty risks"---the distress of others you deal directly with.  CoVAR would give a worse picture of the future, but CoVAR is more realistic during times of major trouble. "Stress"VAR which Morgan Stanley uses, factors in liquidity much more (possible scenarios where liquidity is very tight).

Some banks systems seemed to be more dysfunctional than others.  For example Citigroup was using many different "legacy" systems (computers, etc...) because of many past mergers.  Also different units (subsidiaries) of the same large banks may have used different data inputs into the same models, therefor even inside the same bank, units would come up with different measures of risks.

Some Solutions to Finance Models' Downsides

1. More reliance on solid and prudent judgement, less reliance on numbers.
2.  Using stricter stress tests (such as CoVAR) which rely on more capital buffers and more margin of safety.
3. Synchronizing of IT systems between different units (subsidiaries) and making sure the better information spit out by the IT system makes its way to senior management's eyeballs.
4. "Model-uncertainty reserves".  JPMorgan Chase now holds $3 billion of these such reserves.

"The Economist" article (writer unknown) has more details I didn't include here.  I encourage those interested to go there.

On Exile From Tibet And The Tibetan People, The Dalai Lama Meets With President Obama

A story which includes the press conference of the Dalai Lama speaking, and a picture of the Dalai Lama speaking with President Obama inside the White House.  From youtube and the PBS NewsHour. Link to video here.

Registered Exchanges For Derivatives and Vanilla Flavored Swaps

Mike Konczal and James Kwak are my two favorite business bloggers.  And Mike Konczal is arguably the best internet writer on issues directly related to finance. His latest post relates to derivatives markets reforms which could make the world (at least America) a much safer place to do business and keep a bank account.  Although I don't keep money at banks myself, I only keep my money at credit unions because credit unions are safer and offer better interest rates, but that's another story/post.  But anyone who cares about the safety of the American financial system should read Mike Konczal's latest post.  He also quotes Rick Bookstaber who has a financial blog that is worth checking out at this web address.  I've recently added Rick Bookstaber to my blogroll so you can check him out any time here, just click on the link in the right margin.

David Rosenberg On Bogus EPS Numbers and Buyer's Housing Market

Well it kills me to do it but once again I'm gonna have to largely borrow from a ZeroHedge post.  Blast those sons of guns, they have some jewels over there.  This time from David Rosenberg, in the WSJ and from Rosenberg's reports at Glusken Sheff.  Rosenberg tends to be on the pessimistic side and has taken some criticism for that, but the brokers and interested parties don't like "stick-in-the-muds" or party-poopers.  I don't deal in market timing, but I do tend to side with Rosenberg in his generally negative views on the market at this time (Mid-February 2010). So I'm just gonna break down in numerical fashion (but no order of priority or importance) the major points of the ZeroHedge post:

1.  Many S&P 500 companies probably "fudge" (lie about) their EPS numbers to the positive side (or "round" them up).  Rosenberg says "On average, it only takes $31,000 in quarterly net income to beat estimates by a penny, which can be handled easily by a tweak to inventory evaluation."
2.  The stats show that the recession statistically ended in June, but if you ask the average man on the street he still feels like there is a depression.
3.  People's attitudes on homeownership have drastically changed (especially homeownership viewed as an investment).  Only 3% of people surveyed in the famous University of Michigan survey see housing as a dependable investment right now.  Most baby-boomers only need about 1,800 square feet of housing, but they purchased more (bigger houses) during the housing boom (or bubble) thinking they would eventually sell it for a profit.
4.  The pressure to "walk away" from a house has very little to do with the ability to make mortgage payments.  People are slowly figuring out (a light bulb is popping on over their head) that the lender (bank) has to bear some of the cost of the risk when they (the bank) committed to the financing.  Often times private businesses "walk away" from real estate or mortgages on office space--nobody calls them "bums".
5.  The deflation cycle in real estate is not over.
6.  It will take years, not quarters, for housing demand to catch up with housing supply---and come into equilibrium or evenness.

This Video Selection Dedicated to Google Buzz and Other P.R. Liars

This video was made around 1994, Directed by Philip Hunt and Written by William Burroughs.  Other credits listed at the end of the video.  I want to dedicate it to some liars and the PR staff of Google.  It's entitled "Ah Pook Is Here".

If Wes Anderson Directed a New Spiderman Movie

Actually I'm a huge Wes Anderson fan.  I get emotional sometimes when I'm watching "Rushmore" (especially if I'm drinking).  But we have to admit his work has gotten a little cliche' and there is some humor there.  So even though this is a tad sacrilegious (Wes if you're watching I'm sorry, I love ALL your movies) it is a little funny.  Hope my blog visitors get a chuckle here.  I found this at "The Dish" over at Atlantic magazine's website, so hat tip to Andrew Sullivan for this.

You Can't Find Better Weekend Reading Than This Roger Ebert Post

Roger Ebert is not as famous as he was in the early '90s as co-host of the Siskel & Ebert movie reviews TV show.  At least not as famous with young peoples.  When Gene Siskel died the magical on-air friction between the two went with it.  Not terribly long after (at least not in my mind) Ebert lost his voice due to complications of the cancer he had been battling.  He still writes a lot.  My beloved readers will notice I added a link to his blog on my blogroll recently.  Here is a very very precious post about a walk through London with his grandson, which is very enjoyable reading.  Hope you like it.  If you are a younger reader and curious about the show's history, or older and want a nostalgic walk down memory lane, you can also read this post which relives Roger's memories and progression of the show through the years.  A long post, but also good.

Eliot Spitzer Video/Presentation On the Crisis of 2008--2009

I should give a hat tip to Tyler Durden and ZeroHedge where I found this.  The video is originally from the FORA.tv website.  Of course it is Eliot Spitzer basically giving an hour long lecture on the corruption on Wall Street and large systemically threatening banks.  Frankly, he's an intelligent man and I don't care if he wore socks or not.  It's good viewing for the weekend. The lecture is a little over 1 hour.

Progress On Finance Reform Can Be Made Without Dick Shelby

Jim Puzzanghera of the Los Angeles Times has a moderately encouraging story on finance reform legislation trying to make it out of the Senate Banking Committee but stalled because of Dick Shelby's personal policy of obstructing any progress made on the issue.  The foot-dragging and inaction by Republican Dick Shelby is probably due to the fact Dick has received $502,150 from the finance industry (10th highest in ALL of Congress, see here).

But, the good news is one of Shelby's cohorts Senator Bob Corker of Tennessee has decided maybe the Republicans obstruction on banking reform is not good P.R. for the Republican party.  He has decided to work with Senator Christopher Dodd on the issue to try to break the "impasse".  Details at the LATimes.

Is a 401K Really Good For You or Just Kickbacks For and Robbery For Somebody Else???

In a recent Forbes magazine (Jan. 18 print edition) there is an excellent story about the backdoor deals that go on very commonly with employers' 401K plans and how they choose inferior mutual funds for you, and that they are also a very limited choice of inferior mutual funds.

The writer, Stephane Fitch (who did a superb job of journalism here) uses the example of Wal-Mart, which has 1.2 million participants in its 401K plan, which makes it the most populous 401K plan in the world.  Wal-Mart which is known for its low prices offered to shoppers in stores, apparently wasn't so nice to its own employees when offering them high priced retail mutual funds in their 401K plan, and also limited choices of those high priced mutual funds with only ten funds to choose from.

Fitch says, and I quote her story directly here:

"It was as if the greatest retailer in history had consigned its employees to shop for retirement services in a Soviet department store."

The story goes on to say that Wal-Mart is anything but uncommon among employers in this aspect.  Disgracefully, tens of millions of workers have 401K plans infested with poor fund selections, almost zero cost disclosure and fees that do not take advantage of employers' bulk buying power.

All through its 10 year long existence, Wal-Mart's $10billion (of assets) 401K plan has been run by Merrill Lynch which is more infamous for its large group of full-service (and full-charging) securities salesmen than for low commissions.  On the other hand of the spectrum you have Wal-Mart which is known to be extraordinarily fierce with suppliers of its goods, and its leaders certainly know how to get bargains.  The executives of Wal-Mart definitely managed their own retirement plans quite well with large guaranteed returns.


Well, "lo and behold!!!", one employee at Wal-Mart dared to say enough was enough.  Jeremy Braden in Ozark Missouri filed a class action law suit and alleges that when failing to demand institutional rates for employees' 401K plans and failing to disclose details of revenue sharing plans between Merrill Lynch and eight outside firms with funds on Wal-Mart's 401k plan menu, Wal-Mart had breached its fiduciary duty under the Employee Retirement Income Security Act (ERISA).  That breach cost Braden and all Wal-Mart employees in Wal-Mart's 401k plan $140million in excess fees in the six years through 2007, the suit claims.  And here again I quote directly from Stephane Fitch's article:

"Merrill Lynch, with Wal-Mart's blessing, was choosing mutual funds based on payments that the funds would make to Merrill Lynch," says Braden attorney Derek Loeser of Keller Rohrback in Seattle, Wash. "This explains the anomaly of a $10 billion plan ending up with off-the-shelf retail funds that just so happen to share revenue."

Yes, those last words are the most crucial "just so happen to share revenue", shocker eh?? Fitch's article also notes and I quote from it directly here:

"Because the case involves the giant retailer and controversial practices common across defined contribution retirement plans, a ruling that requires Wal-Mart and Merrill to reveal more about the motives that went into assembling the fund menu, and how it was priced, could prove a watershed for the $2.3 trillion (assets) 401(k) business."

Wal-Mart incidentally has no guaranteed match for contributions to 401K plans.

At question at the core of Braden's suit is:  Do employees have the right to know, that the retail mutual funds they are constrained to choose from in the plan (only 10 in this case), seem to be chosen by Merrill Lynch on the basis of kickbacks given behind closed doors, and not chosen on the basis of quality, safety, and potential returns for employees when they retire???

Wal-Mart has never explained how the funds were chosen.  In fact, Wal-Mart signed a nondisclosure  agreement with Merrill Lynch, which legally prevents them from saying anything.  And surprise surprise, Merrill Lynch declines comment....

Braden's lawyers strongly suspect the fees that the mutual funds charge to Wal-Mart employees are then "rebated" back to Merrill Lynch.  His lawyers also suspect that not only were asset management fees "rebated" but also flat fees were "rebated" to Merrill Lynch, which would create a conflict of interest when Merrill's people gave advise to the Wal-Mart workers.

For each fund the participant chooses to put in his individual 401k plan there is a $8 to $12 flat fee added.  Take that flat fee and multiply it by the number of employees (in Wal-Mart's case 1.2 million) and you could see why Merrill might advise Wal-Mart employees to choose more funds from the limited choice of 10.  But that is most likely happening in many 401K plans, not just Wal-Mart's.  In other words, this alleged crime on employees, bilking employees with fees which kickback to the company managing the plan, is happening in many companies now, not just Wal-Mart.  Reader take note.

Next time you're called in to discuss retirement plans by your boss, you might ask, with your fellow employees listening, "How are the mutual funds on my 401K menu chosen???" and if they say by a 20 man committee of "experts", just know in your mind what is really happening.  Again, please read the Forbes article,  if you have a 401K it is worth your time to read.

Texas Congressman Charlie Wilson Passes Away

Charlie Wilson passed away Wednesday in Lufkin, Texas at age 76.  A hard drinking, "womanizing" man, Charlie Wilson was an overall force for good in his life.  And if people had listened to the man a little more, we might not  be in the mess (it certainly wouldn't be this bad) we are now in Afghanistan and Pakistan.  A stiff drink wouldn't do these war yahoos a bit of bad from my view of things.

Read the New York Times synopsis of his life here.

Joseph Stiglitz Discusses Greece and the Chances of Eurozone Contagion

Let me make it very clear I'm not near as concerned about the PIIGS and contagion as some people are.  Just keeping my beloved readers "in the know" here.  Joseph Stiglitz on BBC discussing what moves Greece and their neighbors in the Eurozone should take to get the rates back down on Greece's debt.  Hugh Hendry sporting his usual mammoth size ego. Video below from BBC.  Hat tip to ZeroHedge for this

Crux of the Crisis: Did Goldman Have Incentive to Push AIG/Mortgage Securities Into Failure????

Gretchen Morgenson and Louise Story of The New York Times have an outstanding story on the relationship between Goldman Sachs and AIG just prior to and during the economic crisis.  The story seems to imply that Goldman Sachs attempted to sabotage AIG by pressuring them for insurance payments, threatening to expose information about weaker parts of their balance sheet to the market, and even asking other of AIG's counter-parties to pressure AIG for mortgage securities insurance payments.

Here are some of the major facts I gleaned from the article:
1. Goldman Sachs strongly resisted consulting 3rd parties to help estimate the value of the securities which were in dispute between Goldman and AIG.
2. Taxpayer assistance to AIG is currently totaling $180billion.
3. Although other banks gained from AIG's bailout, Goldman received more taxpayer dollars than any other of AIG's creditors (other banks) at $12.9 billion.
4. A portion of the $11billion French bank Societe Generale received was subsequently given to Goldman under a deal both had agreed on.
5. Goldman Sachs had huge bets against the mortgage market, when the mortgage market went bad, Goldman largely benefitted from it.
6.  Some AIG insiders were upset about Goldman Sach's valuations of the insurance on packaged (bundled) mortgage securities, quoting from Morgenson and Louise Story's reporting: “Would we call bond issuers and ask them what the valuation of their bonds was and take that?” asked Robert Lewis, A.I.G.’s chief risk officer, in a message in January 2008. “What am I missing here, so I don’t waste everybody’s time?”
7.  After paying $180billion to AIG, the Securities and Exchange Commission(SEC) and Congress is asking question about the possibility that Goldman gave them more than a little nudge to send AIG over the cliff.


Read the details of Gretchen Morgenson's and Louse Story's terrific reporting here.

PIIGS and the Eurozone

Paul Krugman at New York Times uses the good old pie chart to give us a better mental picture of the sovereign debt problems which have given the market slight jitters recently.  PIIGS is the new pop lingo (similar to garbage words used to help people convince themselves they are smarter than others like "green shoots", "tranches", "haircuts", "contagion").  PIIGS is an acronym for Portugal, Ireland, Italy, Greece, and Spain which are 5 countries (there are others with less spotlight on them now) in the Eurozone with debt problems so bad there is some worry the governments might default on debt.  Some people (including Krugman in this pie chart) are kind of leaving Italy out of that for now.  If it becomes "contagion" (oh, excited! my IQ just jumped 2 points!), it could possibly even cause probs here in America.

As Krugman shows, those PIIGS economies (not counting Italy yet) accounts for 20% of Eurozone GDP.  So it is cause for deep concern, but not quite at worry stage for Americans yet.  One of the big problems (though not the root problem) is individual countries in the Eurozone are less able to adjust to capital inflows and outflows because they all use the Euro.  As Krugman points out, one of the ironies of this is Spain had a relatively good balance sheet before the crisis hit.

Another Day In China 2010

Well you know there are a lot of business analysts, economists, traveling journalists who spend 3 days at a 5 star hotel/restaurant in Shanghai barely wandering out of the hotel lobby to one of the Shanghai McDonald's for a hamburger and fries, telling us how much great knowledge we can learn from the Chinese and how they are progressing at lightning speed to a "free market".  Read this story about 170 tons of tainted milk powder (yes AGAIN, the same scandal that happened in 2008) repackaged for sale.  That's just what the COMMUNIST GOVERNMENT of China has found so far.  Another proud moment for Hu Jintao and his cadres.

How Dirty/Filthy Can One Politician Be???---Look At Senator Dick Shelby

A very thorough and comprehensive report on the friends of Dick Shelby has been done by Sam Stein of Huffington Post, and looking might make you cringe at the amount of filthy money Senator Dick Shelby of Alabama has taken from some companies.  If you are a voter from Alabama I highly encourage you to read the link here.

1957 Live Jazz

The Great Billie Holiday in a live performance.  When I listen to this and think of most female "musicians" today I feel nauseated.  Oh well, that's why God gave us recordings eh???  Holiday's phrasings are absolutely incredible, and only a woman with "life experience" could sing it like she does.  Hope you enjoy.  They booted her out of the "speakeasies" and basically ruined her career.  She always told the story like it really was, and that's what people do to you when you speak the raw truth. My favorite part of the lyrics are the last part "Love is like a faucet, it turns off and on.  Sometimes when you think it's on baby, it has turned off and gone."

Analysis of American Security and the Chinese Hacking of Google

Marc Ambinder of the Atlantic magazine website has a nice post breaking down what happened to cause weaknesses at Google which the Chinese government preyed on to steal personal information of Google users.  Most of the analysis/information for Ambinder's article was provided by Fred R. Chang who is an Associate Dean of Information Technology at the University of Texas at Austin.

If you have better than an intermediate level of knowledge of internet security/software and are interested in internet espionage and how that relates to America's national security, I also recommend you read this post by Sebastian Anthony of "Download Squad" .  The post details how the Chinese attacked and broke through Google's security.

Republican Dick Shelby Still Trying to Kill/Obstruct Banking Reform

Catherine Dodge of Bloomberg has an informative story on what is currently going on with the draft legislation and negotiations on Bank reform and stricter regulatory oversight.  This is basically comprised of Senator Dodd and his staff writing legislation to "compromise" and Senator Dick Shelby of Alabama saying "No!" to everything they write.  Pretty simple.

Also Senator Barbara Boxer and Jim Webb of Virginia came up with a very insincere piece of legislation which would tax 50% on bank executives' (of banks that had received bailout money from the taxpayer) bonuses which went over $400,000.  I say insincere because both Barbara Boxer and Jim Webb are fully aware this legislation will never be passed into law, and are using it as a cheap way to score points with their constituents.  Also pretty simple.  You know anyone past the age of 15 with half a brain and literate can write these headlines at least 3 weeks before they come out.

The Female Form/Photo Appreciation

Ok, generally I try to stay above the fray here, but it's the weekend and I couldn't help myself people.  And I could say I chose these because of the exquisite photo techniques used, but you wouldn't buy that line of crap would you??? Take a look at these photos of Evangeline Lilly she did in Esquire magazine.  Believe it or not I never watch the "Lost" TV show, but I may have to start.  These 5 photos of her are quite incredible.

Animation and William S. Burroughs

Cool video clip/montage of some animation with William S. Burroughs narrating over the top.  Credits at the end of the video.

Sorry I Forgot Bill

Yesterday was William S. Burroughs birthday, born in 1914, he has since died.  But his birthday should not go unnoticed.  I'm sorry I forgot it William.  I think the mugwumps put something in this nasty crappy coffee and rolled me.  You know how those mugwumps get when you're in a situation and can't get your vodka and sody pop Bill.

An interview with the great William S. Burroughs can be found at this link to The Paris Review.

Wall Street Journal Editorial Writer John Fund Tells Lies and Is A Liar

I found this on TalkingPointsMemo (TPM).  John Fund (who writes Editorials for the Wall Street Journal) telling lies about non-existent legislation and then does not issue a public retraction after his lie he pulled out of his own head.

After The Supreme Court's Decision to Give Corporations Freedom of Speech

A picture of what the Supreme Court symbolically and idealistically stands for after their 5-4 decision in the Citizens United v. Federal Election Commission ruling, which went against decades of legal precedent and allowed corporations unlimited spending for political campaign contributions.  I found this photo on New Deal 2.0 website and it was given to them by George Haywood and Rob Johnson.  Click the link here to see the photo of Alito and his pals.

Why Must Andrew Cuomo Do Ben Bernanke's Job for Him???

Felix Salmon has a brief but informative post on Andrew Cuomo going after large banks in New York that are abusing customers.  Isn't it extremely sad that Cuomo is forced to do the job that Ben Bernanke, the Federal Reserve, and the New York Federal Reserve refuse to do?????

Bloomberg updates this general story on Andrew Cuomo going after the banks.  Be careful Attorney Cuomo, little men in dark glasses may be following you like they did Eliot Spitzer and Ralph Nader.  Maybe some lobbyist or friend of AIG.....

Krugman Explains Currency Exchange

Paul Krugman can be a little arrogant sometimes and strongly opinionated all the time.  But two things I love about Paul Krugman:  He states some complex ideas in simplified form so most people can understand them (not all economists have this ability) and he empathizes with the "working man" or the blue-collar guy on the street.  He has a post that explains very very well how to understand exchange rates.

I think Krugman if nothing else has been implying and really it seems to me stating it straightly, that America and President Obama (and the World) need to get tough with China on the currency issue.  China has held their currency artificially low for many many years now, which hurts American companies selling products overseas.

Which Horsey Will "Win" Default Derby First???

I've recently become a fan of this creditslips.org site.  Originally learned of it by way of Elizabeth Warren's connection and also seems this Adam Levitin gets quoted sometimes in the blogosphere.  Well Wednesday Stephen Lubben had a nice post there talking about CDS prices (specifically 5 year CDS prices).  I am a novice to this, and not very well educated on this specific topic (CDS).  But the way Lubben explains it, it seems kind of like a golf score.  The higher the number, it's got a bad meaning as far as the country or state's ability to pay all of its debts (more likely to default).  The lower the number means you have a better ability to pay off your debts (less likely to default).

Lubben points out that although Greece has gotten a lot of media attention for its relatively high chances of going into default, that France's CDS has declined (We say decline but the numbers themselves actually rise) more on a percentage basis this year (26.33 to 37.84).  Germany has also had a bigger percentage decline and of course Iceland is in shambles with 639.42.  California is between Lithuania and Greece, more likely to default than Lithuania and less likely than Greece.  California is at 327.
Lubben explains, and below I quote directly from his site, which gets the numbers from Bloomberg:

" all prices are for 5 year CDS and come from Bloomberg. CDS prices are in basis points, so that California's price suggests that one would have to pay 3.27% of the amount you want to buy protection against (or $3.27 for every $100 of protection)."

Will Sarah Palin Ask That Rush Limbaugh Be Fired!?!?!?!

For those of you who don't know, Sarah Palin recently demanded that President Obama fire Rahm Emanuel for saying "F#*^ing retards" to describe some cannibals in the Democratic party.  Now Rush Limbaugh has also dared to "unforgivably" say the "R word".  Listen to Rush's show in the clip shown below.  Will Palin now demand that Rush Limbaugh be fired????  I basically stole this lock, stock, and barrel from Andrew Sullivan. So hat tip to Andrew Sullivan.  The Clip was taken from Media Matters.

What Happens When Government Revenues Disappear???

Michael Booth of the Denver Post gives a prototypical example of what can happen to towns and communities when government revenues (you know, the money they collect from taxes) are low and municipal governments are forced to cut services.  I found this on Thomas Levenson's blog "The Inverse Square" blog.  Thomas does a much better job of breaking down the wider implications of this than I could (darn him anyway, he's a better writer than your goofball blogger here).  So you should examine Thomas Levenson's  three posts (yes ALL three are worth a gander) here, here, and here.  Thomas even throws a couple jabs at Megan McArdle which makes the posts even more fun to read.

Republican Dick Shelby Kills Consumer Financial Protection Agency

Journalist Ben Protess of Huffington Post Special Investigations reports on the progress (or lack thereof) being made on finance/banking reforms to protect consumers.  Get ready for it people, the Consumer Financial Protection Agency is as good as dead.

Thanks to Republican Dick Shelby the banks will continue on with business as usual, abusing customers and depositors with fees and conning them into ARMs (adjustable rate mortgages).  Lying, cheating, stealing your tax dollars and taking your savings deposits to roll the dice on derivatives and then asking YOU to pay for their losses, while bank executives run away with billions in bonuses.  It seems to make him so happy that bank customers and savers get abused on a daily basis and have their homes taken away.  All in a good day's work for Republican Dick Shelby.   Look here at the video from HuffPo Special Investigations of Republican Dick Shelby.  See his big grin??

HOUSE DEMOCRATS---QUIT PUSSYFOOTING AND ACT LIKE MEN!!!!

The Huffington Post has a rock solid article by Sam Stein (dated Feb. 1).  In the article, Senator Arlen Specter says using "reconciliation" to pass the health care bill is the best option available now.  That way amendments to the bill could be passed "simultaneously" in order to compromise and appease House Democrats.

There are current discussions going on between both chambers (Senate and House of Rep.) and the White House.  Many of those discussions between Harry Reid (Democrat of Nevada) and Rahm Emanuel, the President's "point man" on many Congressional issues.  The House wants the Senate to go first, seemingly because Nancy Pelosi is a political coward and a cuhhh........nevermind.

What empty-headed politicians don't understand is, whatever votes they could lose by passing the bill they have already lost through months of staggered action, so voting for the health legislation now isn't going to cost them votes anyway, so they might as well get the benefit of passing the bill into law.  PASS. THE. DAMN. BILL.


James Kwak explains thoroughly the drawbacks of the Republicans' best proposal at these three links here , here , and here.  Oh James, next time you'll be saying the trading of Ann Taylor options on February 1 disproves the EMH. Darn you James!!! (haha, joking)

Senator Dick Shelby and Republicans on Banking Committee Trying to Kill Proprietary Trading Ban

Tyler Durden at ZeroHedge has a terrific post about the corruption of the Senate Banking Committee.  Mainly Dick Shelby and the Republicans trying to kill any real banking reform and Chris Dodd worried he might ruin his reputation as a legislative coward before he retires.  Tyler Durden lifts some information from the Financial Times, but Durden's analysis adds highly to the story.  This is a must read and I encourage those who want to understand the dirty dealings of Dick Shelby and the Republicans on the Senate Banking Committee to read it.

Watch how Republican Senator Dick Shelby kills the proprietary trading ban before it becomes law, and how he walks out of it unscathed as if he was never involved in the process.  This blogger doubts any media outlet will ask Shelby pointed questions about why he is trying so hard to kill the ban on proprietary trading.  For those of you who don't know, proprietary trading is one of the main reasons your tax dollars are going to big bankers now.  But Senator Shelby seems to think since he gets campaign money from the big banks, it's ok if large banks steal depositors' and taxpayers' dollars.  Read the details at ZeroHedge.

Bruce Krasting On the Continuing Problem of GSEs and One Man Trying to Rectify Them

Bruce Krasting has a terrific post on the problems at the government-sponsored enterprises (GSEs).  Namely Fannie Mae and Freddie Mac.  Edward DeMarco wrote a letter to some Senators trying to re-emphasize the dangers of repeating the same problems, and that although there are some new players at Fannie and Freddie, the game plan of corruption and callous inactivity are continuing.  Edward DeMarco is the current head of the Federal Housing Finance Agency (FHFA).  He is trying to give a heads up to Senators such as Dick Shelby (Republican of Alabama) that Fannie Mae and Freddie Mac are sucking $10 billion of taxpayers money every month, and if they don't change the current laws and take action nothing will change.  The problem will grow.

Some People Don't Know the Meaning of the Word Quit

CBS News Correspondent Cynthia Bowers does a report on a woman who has been blind since birth, but has battled her way to becoming a Professional Chef.  Laura Martinez has earned high praise from her culinary instructors and is now working with famed Chef Charlie Trotter at Charlie Trotter's Restaurant in Chicago.  Think about that next time you think you got dealt a bad hand of cards.  A must read for people who feel cynical about humanity.

Bruce Bartlett Comments On Pretty Boy Tim Pawlenty

Phony solutions for the FOX/teabagger crowd, from the 2012 Republican Presidential candidate.  Tim Pawlenty serves up an exquisite dessert for the illiterate teabaggers. Nay, not a single spending cut is mentioned.  On Bruce Bartlett's blog "Capital Gains and Games", hat tip Paul Krugman.

Simon Johnson Has Some Scuttlebutt On Geithner Being Pushed Out

Simon Johnson over at Baselinescenario blog has some scuttlebutt about Timothy Geithner possibly being shoved out at Treasury.  Professor Johnson suggests Tom Hoenig, current President of the Kansas City Federal Reserve.  Tom Hoenig would be an ok choice.  I wouldn't be against it.

My personal choice would be Austan Goolsbee.  I think it's a nice fit.  He's better with the media than Geithner, young, energetic, familiar with the Obama administration.

Most Recent Quarterly Report on SIGTARP (Jan 31, 2009)

ZeroHedge blog summarizes and gives the full report download of SIGTARP.  It's worth your time to at least read the summary.

The main points: 1. Treasury did  not directly oversee AIG's executive compensation prior to March 2009, but basically deferred that duty to the Federal Reserve Bank of New York. 2. The Federal Reserve Bank of New York had a magical inability to get concessions (i.e. haircut) from Goldman Sachs and their counterparties, while having no problem getting GM bondholders on their knees. The FRBNY had considerable leverage over Goldman and their counterparties yet refused to use it. 3. GM and Chrysler dealerships were closed based on largely (if not wholly) political decisions.  4.  The housing mortgage market is now 99% controlled by the Federal Reserve with the U.S. taxpayer carrying the burden of the worse risks once held by the private sector (banks).

The ZeroHedge link also has some very good charts, breaks down the relationships in the PPIP, and gives the FULL SIGTARP quarterly report to congress for download.

Hey Obama, You Sure Did Show That Lloyd Blankfein Guy Who Is The Boss, Didn't You??

The Times of London is reporting Lloyd Blankfein has a very good chance of clearing $100million this year.  Read about it here.