SCOOPED THEM AGAIN

You might take a look at the leading article in the Wall Street Journal today. What it does is to explore in greater detail the point I made yesterday that the real shocker in yesterday's testimony was the revelation that it was the threat of the downgrade of AIG by the rating agencies was the catalyst for the final decision on the payout on the banks.

Loyal reader Mark C. has called me a jerk for my comments of yesterday but I would simply reply that the views of the insurance commissioner of the State of New York, Eric Dinallo seems to be in direct opposition to those of Messrs Paulson/Geithner as to the state of affairs at AIG during the time in question. Mark also claims I'm part of the Geithner/Paulson cabal and are being fed what amounts to lies.

Sorry Marc, but I haven't spoken to Mr. Geithner in a hell of a long time and I have never met Mr. Paulson. As for whose correct as to the state of affairs, my bet would be with the Treasury and the New York Fed a opposed to the political hacks in the insurance commissioner's office. Remember, it was that office that oversaw the firing of Mr. Greenberg on trumped up charges brought by Eliot Spitzer and the hiring of the jerk that replaced him. Mark should also keep in mind that fear is all-controlling. The nicities of corporate attachments don't mean a thing in an environment then-faced. I don't like what happened any more than Marc does but I don't think these guys had any good options. Nice to know I'm loved, wanted and read. Thanks Marc.

...AND ON THE SEVENTH DAY

God rested. But he got bored and he said to himself, "Ah, let me fool around with this creation stuff and make a few things that re a bit different. And so he made aardvarks, and marsupials and all sorts of weird, one-of-a-kind animals. He also fooled around with humans, making a sub-species that looked like regular humans but were considerably less intelligent--stupid really--just for amusement. Today, we call this sub-species Congressmen.

They were on full display today as the Townes committee interviewed The Suit. By the by, have you noticed that Mr. Townes looks exactly like Howdy Doody? Honest to God I was looking for Buffalo Bob Smith to pop up behind this guy. SURPRISE! Look, I pull this string and his mouth moves! Intellectually, Mr. Townes is one of the stars so it is no surprise that The Suit put on a terrific show. When he's on, he's on and give him a bunch of straight men like this and brother, he was ON!

The subject was the AIG situation and it became immediately apparent that having received 250,000 subpoenaed not one congressperson had read more than a page. My son, who works within the Beltway hit it right on the head:

"Dad, all these people do is raise money for reelection. They have 20+ staffers and do what the staffers tell them to do." He should know; he was a staffer.

As you know I think the NY Fed could have done better with the AIG situation. I think that the inability of the Fed to guarantee the AIG obligations as it would have been illegal for them to do so should have led them to a market based effort involving making a market in the CDOs central to the issue. I do not know whether this was considered but having failed to adopt that approach the Fed really had little leverage against the banks. What did come out today that was not generally well known was that the rating agencies informed the Fed right in the middle of the mess that they were about to downgrade AIG which, had it occurred, would have created an event of default not only as to the CDOs but as to the insurance business as well. AIG was not the only insurance company involved in this business. The reaction of the market would have been catastrophic. I don't like Mr. Geithner; I don't think he should have been appointed to his present position but then he got it right. Had any of these so-called law makers had been asked to make a decision such as that the people in New York were asked to make I suspect they would have soiled themselves. They are disgraceful and they are liars as well. Practically every one of them accused the Fed of hiding the fact that the banks were being paid 100 cents on the dollar. Crap. I cursory reading of the Times and the Journal would show that the full payout had been reported for days. EVERYONE knew except these clowns.

The Suit also said something that should have sent chills down the spine of every one of these fools but of course they missed it. Speaking to the point as to who was watching the store Geithner said that the insurance commissioners in probably 30 states had no idea in what businesses the companies they oversaw were involved. No reaction. None. Zip. Nada. And this is the financial oversight committee of the Congress of the United States. We're doomed.

MOMMA SAID...

Woke up this morning to discover that something happened to last night's posting: 1/5 got posted. No luck retrieving the rest (which of course was brilliant). The dog was sick as, well, a dog and the wife went to panic stations. Nurse Charlie was trying to get her to move and eat and pee and drink (the dog not the wife) while the latter was on the phone to the vet. Appointment in the afternoon by which time the dog was fine but the marital relationship had suffered. Cost: $120. Being able to tell the wife I told you so: priceless. Of course I'm now sharing the dog's house and missed the blog. See you tomorrow.

Be sure to watch the Hill testimony on AIG tomorrow. Rep Issa is on a which hunt, the jerk.

... there'd be days like this my Momma said...

THE BLOGGER'S BUDDY

He did it again! Krugman is simply a joy for somebody like me. After a weekend of terrific football, where you're all worn out and hung over, comes this jackass to lighten your life and give you something to write about. Today, he gave a luke-warm thumbs-up to Ben Bernanke calling him a "superb research economist"--takes one to know one. But he's too complacent says Paul, as he was before the crisis, and it was his complacency that caused the same. Seems that Paul thinks Ben didn't speak out on sub-prime lending. Ah, Paul. The origin of sub-prime was always Fanny and Freddie and the Fed had been speaking out against their policies for years--you and your boys just didn't listen. Now the problem is too much complacency about under-employment. It seems that Ben is going to have to adopt policies to create jobs.

How the hell a central banker is supposed to do that Paulie doesn't tell us...which of course begs the question entirely as to whether that is a central banker's job at all. What it does do, however, is avoid the difficult conclusion that The Leader's administration, for the first year at least, has been more or less a disaster on the job and fiscal front which is the real purpose of the piece. Krugman concludes that Bernanke should be reappointed nevertheless because a successor would face too hard a battle in congress. He right there. What he's really saying is that if Ben stays around we can blame him forever...just like george Bush

BETTY GRABLE

Talk about legs! The story was continued today in a manner that defies description and comprehension. Just when folks were beginning to get their arms around The Leader's statement of yesterday to which he has now attached Volker's name, it seemed that every Dumbo...eh...Democrat legislator jumped up to announce that they were not about to support Ben Bernanke's reappointment. Immediately, the leadership announced that they weren't sure they had the votes and delayed the confrontation until next week. Most folks had already concluded that The Suit was toast but the destruction of the administration's entire financial team had never been given serious credence except for a few viewers on the fringe. Reality then struck.

You gotta feel sorry for ol' Helicopter Ben. One should never trust a politician especially this present layer of pond scum that inhabits D.C. but having compromised every principal he had he rightfully might have expected better treatment than this. Didn't happen. The Leader, having decided that rank populism is the way out for him led by bashing anything that looks financial, dragged members of his party into that self-dug septic tank and the hell with anything or anybody that was in the way. It may be self-delusion on my part but I think that the public is warming to the idea that one can rely on nothing this guy says and that this administration is in the first phase of a death spiral from which they may not emerge. The stock market tanked again and I wouldn't be surprised to see a major correction beginning next week and unless there's somebody around to restore confidence the whispers of "double-dip" may become shouts. Not good.

If this wasn't enough, up pops Barney Baby announcing that he's about to end Fanny and Freddie's lives and replace them with something else. Once again The Suit was no where to be seen. And while this was going on The Leader was out in Ohio, tie-less talking to the working man. If he was Mexican I think he'd be wearing a leather jacket and screaming, "COMPADRES" at all and sundry that faced him. What a schtick!

Look, I'm not hoping for doomsday to arrive but this administration makes one yearn for the good old days of Jimmy Carter. Gang, unless somebody comes into touch with reality we could be in real trouble. Whether The Leader and Tall Paul have it right by the banks is rapidly becoming immaterial in an administration that is living in fairy coo-coo land. ... --- ... if anybody still remembers Morse Code.

Tough weekend coming up. Colts vs. the J E T S JETS! JETS! JETS! I'm torn

CHANGE OF PLANS

No C. Fred today. Today was simply too bizarre to let slip by without comment

The day started slowly with the stock market in a bit of a funk primarily over the reports of monetary tightening in China. The, right on the dot for a change at 11:40 came The Leader, flanked on one side by Paul Volker and on the other by Bumbles Biden who rumor has to be the Vice President. The topic was the banks but rather than talk of taxes which everyone expected came this rambling, almost incoherent attack in the most populist of language culminating in the announcement that banks would no longer be able to trade for their own account (I think), have hedge funds (I think) use their deposits (I think) plus a whole bunch of other stuff...then exit stage left. The market, especially for financial shares tanked as The Leader was speaking. Even the talking heads, who are never at a loss for words didn't know what to make of it.

That wasn't bad enough. Two hours later, Barney Frank popped up to say that yeah, he supported what The Leader said, but it wasn't about to happen except on Barney's timetable which was 3-5 years. The market recovered for a brief period then really tanked as everyone seemed to realize that nobody knew what the hell was going on.

I'm exaggerating for effect of course and what everyone meant will come out in the clear tomorrow but I'd like to make a couple of points apart from the actual meaning of the two statements today.

1. What the hell The Leader is doing with a show like this with confidence in his administration a a low ebb and having just gotten his butt kicked in Mass is beyond me.

2. That Barney Frank can feel confident enough to stand up and in effect say I don't care what The Leader says, this is happening on my watch in my time frame tells me The Leader aint got much for street creds.

3. On every international initiative up to this point, The Leader has been essentially ignored. After this week we could be looking at the greatest collapse of American influence since the War of 1812 . If Barney feels he can tell the leader of his party to mind his own business, Foggy Bottom has a problem.

4. The Suit was nowhere to be found in all this. Methinks The Suit is toast.

5. Business confidence in this mob is slipping fast. We could be in deep do-do by mid year.

C. Fred tomorrow unless this tale has legs

MTA

I was watching MSNBC last night reporting on the election returns from Mass. Chris Matthews is still the best political commentator although in recent years he has morphed into a totally Democratic Toad. Anyway, last night he was paired with Rachael Maddow, the failed left-wing radio talk show hostess (arent they all) and one of the dumber people to be paid cash money for appearing on tv. Ol' Rach was trying to convince Chris that the Dems disastrous loss was all due to the incompetence of the candidate and the campaign. The pain on Matthews' face was almost palpable. Suddenly I realized what we were witnessing. The two of them were broadcasting from Jamaica Plains, an area around Boston and just like Charlie on the MTA Matthews he didn't have a dime to get off this train to nowhere and being from Boston he knew exactly what was happening! I never felt more sorry for a guy in my life, but The Kingston Trio ROCKS!!! Rachael Maddow does not. If Jeff Immelt should be fired for anything forget about Zucker and the "Tonight" show. MSNBC is his greatest embarrassment.

But no embarrassment among The Leader and his merry men. Recognizing that the health care debate had just take an ominous term, The Leader today switched the battle front to an all-out assault on the banks. He's going to tax these bums until they finally get it and begin behaving the way he and the American people want them to behave. The fact that the Mass election seems to make it apparent that he and the American people aren't exactly in sync. Rather than continuing to bash business with
cries or regulation and new taxes, perhaps he and his mob might save their hide with a more business-friendly approach, having clear guidelines and proven job-creation plans to remove the uncertainty and fear that rocks the business community today. I think he understands what has just happened but whether he can change direction as did Bill Clinton, I wonder. The Leader is an idealog; Bubba was a politician and a good one. By the way, do you think that Bubba and Hil just might be smackin' their lips at the though of a failed presidency by 2012? I do. Don't count those two out.

In the November/December issue of Foreign Affairs there is a most interesting article by C. Fred Bergsten, the head of the Peterson Institution . C. Fred has been around for a bit and is a D.C. insider if there ever was one. He's boring as hell but an interesting guy in many respects. This is an interesting piece. I'm going to spend a few days on it starting tomorrow. Keep watching.

NOT TODAY

Started and stopped. So much is happening today that tomorrow is a much better day for commentary. See you then. Oh, check out the initial comments tomorrow on the AIG bail-out from info released by the NY FED late this afternoon. Haven't seen them yet but I suspect they may get a lot of press overnight.

YO, PAULIE!

Wow, what a gig you got yourself. Dis is as good as that Tom Clancy Guy or james Patterson. Write a couple of best sellers or get a Nobel and pretty soon you can get people to write stuff for you and all you gotta do is put your name on it for it to sell. But I gotta tell ya Paulie, the difference wit you and dose utter two guys is dat dey put the utter guys name on the stuff so ifin it really stinks dey can say, "Well, you know how it is...I told ya I didn't do it." Take like da ting in da Times dis morning. Paulie, it's only got your name and whilst we knows you didn't write it 'cause you being a Noblist an all can't be dat stupid, you shouda put the guys name what wrote it so...what? You DID write it? Ah, Paulie, say it aint so.

If Paul Krugman had an ounce of street smarts that's what he would be hearing out where the real people live. While repeating the Big Lie that the stimulus package was too small but even at this level created jobs and stimulated the economy , he continues with the theory that it's really the banks that caused the entire thing and the lack of regulation during the Bush years.

It s becoming increasing apparent to anyone who isn't a Democratic Toad that there are multiple bad actors in this scenario but first and foremost was the Congress led by Barney and Chris. Fanny and Fred, constantly ignored by Krugman are key to an understanding of what went on. Remarkably, little interest has been paid to the fact that the worst offenders in the private financial community were not the banks, or more accurately, those institutions regulated by the Fed, but the other-regulated actors, the Bears, and the AIGs of this world.

Krugman compounds his mythical tale by leaping into the present claiming that the banks non-lending stance is complicating the problem for the poor Leader seemingly having no knowledge of the fact that before the crisis the banks, or at least the ones he so despises, were hardly the supplier of credit to the system. In 2007, the percentage of C & I loans (commercial and industrial) from commercial banks stood at 21%. Credit to American industry was not supplied by the banks but by a myriad of other sources all of which collapsed in the Crisis, but have now, to a goodly extent, returned.

To be sure, Mom & Pop businesses relied on banks for credit but not the Krugman-hated institutions. Guess what? They have withdrawn from local lending--especially real estate because

1. There clients are so uncertain of governmental policies going forward, few if any, are planning expansion, or to put it another was, there is little demand.
2. What policies have been discussed are contrary to economic growth
3. Why take a risk when monetary policy allows one to make a profit in the carry trade with little risk and NO USE OF CAPITAL (buy govvies and capital allocation is zero and The Leader and his deficits are creating A LOT of product to buy).

or so the bankers in my neck of the woods tell me. Krugman, like the mob surrounding The Leader are brilliant academic economists. Unfortunately, the real world is not something they understand or for that matter have any interest in understanding. If they did what they would hear is: "Yo Paulie! Get outta da way would ya! We done this before wit out you. We can do it again!"

OUI, JE PARLE FRANCAIS

Well, not really. Not any more at least but I could get it back in a month or so. The ear is still pretty good but I struggle with the vocab and construction and wondering whether something is male of female--but then again in these times when restaurants proudly advertise that in THEIR establishment boys and girls can go potty in the same place one wonders if even the French care any more. We'll all have to learn it I suspect as yesterday The Leader made it very clear that his goal is to turn this country into the Seventh...or is it the eighth Republic before he's done.

The arrogance is sunning, the stupidity unimagined and the question as to whether ANYTHING The Leader proposes will stand the test of constitutionality remains out there. It is clear he doesn't care. Like FDR he is determined to install his vision of this nation in stone and hope that it lasts. Getting it there is important for he realizes that once enacted, givaway programs are very hard to undo. And so the transfer of wealth continues this time from the hated banks to the UAW, to the lower middle class to every Democratic support group to be found without any concern as to effect. This administration has become entirely political in every action it takes. It exists only to survive and grow like some giant Hydra, devouring every thing to feed itself and its young.

To place a tax on the 50 largest banks is merely a cover-your-ass procedure to deflect attention from the monumentally failed programs of the president and the Democratic party: Fanny and Fred, GM, GMAC, Chrysler and the mortgage protection program. Yes, I am making assumptions but is there any doubt when just this week the "New" GM made it clear that there success depends on...wait for it...TRUCKS! Where have we heard that before.

Now France is a wonderful country and I, unlike many Americans, have never had a problem in France or with Frenchmen. Besides, the food is fabulous. But I fear this reshaping of this country: I fear the spirt a individualism that has shaped and is so much a part of what has made this country grate is being squeezed out of it in favor of an elitism of the political left who for the most part have never struggled with making a deadline, making a payroll or a mortgage payment. They are the new Elite, the children for the most part of privilege and of the eastern finishing schools referred to as Universities, offspring of those who grew up with the sounds of eastern European socialism argued around the dinner table. I grew up with their grandparents and their parents. I recognize the music. I am afraid they are the only band in town.

The Leader then gave another of his vacuous speeches about all we (he says "I") am going to do for that poor, benighted country, Haiti. Am so we should. But The Leader doesn't recognize that we are still capable of perhaps bringing this situation back from the brink because of what America has been, not what it will be in his vision of the future. Great nations are great because they stand apart, not blend in. They do this because of the will of the their people who refuse to be just another face in the crowd. The are great because their people have a overwhelming desire to overachieve; who when asked to lead and motivate and overachieve they say, "I will" not, "why should I?" The fruits of that attitude and labor allow us to save Haiti. As I said, I love France, but I don't want to be France. Every day The Leader and his mob gets us closer. Pour moi, NON! Sorry for the rant


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I though I was on to a really great idea as I mentioned, but as I worked on it it didn't come together. Hence nuttin' happened yesterday. I'm still working on it. Sorry again

THE FOUR AMIGOS

Riveting tv today as the heads of GS, MS, BAC and JPM sat down in front of a blue ribbon panel to explain wha' happened. Actually, it might have been shown in all the schools in the United States as a civics lesson as the commission, chaired by Mr. Angelitis demonstrated what a group of reasonably prepared, intelligent people could accomplish as opposed to the morons who sit on Congressional committees, writing laws about things of which they have absolutely no knowledge. It was not uniform to be sure as one of the members, the co-chair named Sullivan as a matter of fact began by proposing to channel the thoughts of the American people and the New York Times to the assembled gathering for a period of one year. I though for a moment I was witnessing Shirley MacLaine in drag but then it came to me that this was the Sullivan ex of Lehman Brothers which begins to explain why they're not around any more.

It was entirely a gentlemanly affair, perhaps too much so. Many of the questions were good but the follow-up was weak as if to avoid embarassing the attendees. Stinking was the soft-show grilling of Lloyd Blankfein as to Goldman's trading practices at the start of the crisis. Blankfein admitted that his firm was in fact creating product (CDOs) while at the very same time selling--or shorting--the same. Blankfein's position was that Goldman is a market-maker and therefor had to be on both the buy and sell side of the same issue. What was NOT directly asked was whether the selling occurred as part of the market-making for the issues involved or whether it was selling under the proprietary positioning accounts of Goldman. If the latter, was Blankfein aware that the prop account boys were acting in a manner detrimental to the long-term interests of his firm's clients and if so why did he not put a stop to an action which, if not illegal, was clearly (in my mind) among the worst examples of conflict and unprofessional behavior ever witnessed on the Street. Many years ago it was reported that the great man himself, Andre Meyer, responded to a question of conflict of interest by reply, "If there is no conflict, we have no interest." If the actions of Goldman were as described I'm certain it would have brought a tear to the old man's eye had he witnessed it. You may draw your own conclusions as to the reason.

Fascinating as was the exchange it brings one no closer as to solving the riddle as to why all this occurred. However, as the questioning continued, one thing began to emerge that I think did not receive enough attention. From approximately 2003, the size of the balance sheets of the firms grew enormously. Again, returning to Goldman, Blankfein stated that in June of 2008 Goldman's balance sheet was approximately 1.8 trillion dollars. Today, it is 860 million. It is astounding that in the period of a year an a half, the firm shrank by a trillion dollars; it is remarkable that it had grown to that size in the first place. How that happened, why it happened and what conclusions can be drawn from these facts are a few things I've been think about and would like to explore over the next few days. Stay tuned


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Received a few comments as to accuracy. A couple of you mentioned that Ms Bair should have been referred to as "Pooh" rather than "Poo." Whinnie the Pooh was a sweet, honest, cuddly little thing who, from time to time was a bit...ah...dim. Shelia the Poo is just a dope. It was deliberate.

WHAT A DIFFERENCE A DAY MAKES

Boy, was I wrong when I said not much was going on. Today exploded with action on the regulatory front all of which stank.
First, The Leader and his boys let it drop that they were trying to figure out ways to insure that the American Taxpayer gets all of his money from TARP back. Of course they couldn't give a damn about the taxpayer but here presented itself another way to lay a tax on the banks which they believe no one in the country cares about anyway. These guys are like Willie Sutton , who wen asked why he robbed banks replied,"Because that's where the money is." Actually, they are worse than Willie; he didn't lie about his reasons.

Anyway, what we have seen is that almost all the "banks" have repaid their TARP funds, with interest and with an additional healthy return generated for the USG by way of the sale of the warrants that were part of the deal. But it would appear that there might be a few problems along the way because if one remembers, a whole bunch of taxpayer money went to GM (now owned by the Gov.), GMAC, Chrysler, Chrysler Financial and AIG. That aint comin' back soon. Then of course there is the little matter of Fanny and Freddie, the makers of the feast about whom we have spoken ad nauseam over the months. So why tax the banks for the decision to bail out this bunch? Think Willie Sutton. Actually, if the actions of the Government were to be viewed from the prospectus of Cui Bono, why not tax the United Auto Workers? How far do you think that idea would get? Or better yet, is there a way to garnish the salaries of Congress? Just a little midwest populist jibe there, don't take me seriously. I'm a little past my "use by" date, but in my lifetime I have never seen a more venial, useless bunch than has been put together by The Leader and his handlers. These guys are the worst.

Well, let me rethink that. Came today Shelia ("Poo") Bair, head of the FDIC with another idea. With a split vote, the FDIC is now proposing a tiered level of deposit insurance to be paid by banks based upon the perception of risk that SOMEBODY will determine exists on the banks' balance sheets. To put it another way, she is proposing to tax liabilities (she claims it's not a tax) according to some credit determination made by SOMEBODY (you see, she doesn't have nearly the talent in house) at some point for some non-defined period of time. This is a Bair of very little brain. When questioned about this on TV this morning she was unable to come close to explaining her theory behind this. Nor has she apparently considered the fact that the cost of this hair brained scheme will be passed right through to the consumer depositors in the form of either lower interest payments, additional fees, reductions of service or all of the above including a few other delicious charges all of which will be blamed on the FDIC. Nor has she considered the fact that the two biggest risk takers, Goldie and Morgan Stanley have little if any consumer deposits but as bank holding companies they now come under the FDIC umbrella and the implied protection that that brings. If there is a X rated version of "Dumb and Dumber," she should be the star.

Finally, it now appears that Helicopter Ben may well be back in trouble as to his re-confirmation. He deserves it, the jerk, and on top of it all he is now in a nasty little open-air brawl with John Taylor, now of Stanford over the "Taylor Rule" which the good prof feels Mr. Bernanke has deliberately mis-catorgorized. Academics at each other's throats!! Hide the Children! I could care less if the Chairman gets himself into this little brawls except that it does no good for his institution in these times. Somebody had better start standing up for the only group of people who actually know what the hell is going on out there otherwise we are heading for a real mess if not catastrophy .

CAN'T MAKE IT UP

Damndest thing. For probably the first time in his life Harry Reid says something that is completely honest and he gets murdered. You can't make this stuff up. I'll leave it there because this is not supposed to be a political blog. Funny, though.

Not much happening of great interest. The talk on the street is how much GS and he other firms are going to pay their top producers and in what form will the payments take. For the gang on the left, anything will be too much whereas for the States of New York and New Jersey as well as the City of New York, anything that isn't immediately taxable simply makes their problems multiply. The financing of those two states are so linked to the pay on the Street as to make them joined at the hip with the high rollers. The Brits of course are planning to tax any payments above 25,000 Pounds and 50% and there are cries that we do the same. The fact that we have this little thing called a Constitution that might get in the way is apparently of no consequence to the tax and spend mob. I remember a wonderful little event that took place whilst I was in London before the Thatcher revolution. I fellow director of mine, a Brit to be sure, approached me with his pay record for the last month of the year. He owed the bank money for the right to work there. What a hoot although he was not amused. In those days we spent almost as much time trying to figure out how to outwit Inland Revenue as we did trying to do business. It was insane but necessary as the talent and brain drain from Britain was murderous due to the high marginal tax rates. But Wee Gordie, staring defeat square in the face, is desperate for any populist trick to include deamonizing one small element of the workforce. Madness. Might well get away with it, though.

We wonder why there has been no real turn-around in the economy. Actions such as this by governments create so much uncertainty that corporate managers are loath to take any risk other than a sure thing. Hence we see little lending because there is little demand for lending. Washington is breeding uncertainty and confusion on taxation, regulation and employment. Less is always more from that part of the world, and truth rather than political other-speak is what is needed. In other words we need more Harry Reids.......That's a joke, son.

THE GIFT THAT KEEPS GIVING

Paul Krugman announced today that he will begin writing extensively in the future weeks about reforming financial regulation. I can't wait. Coming up with stuff every day isn't easy but when you have a guy with this reputation supplying high comedy, life has just gotten well worth living. As the NYT and it's op ed page is often closely read as the horn book for the Democratic Party's positions, we may be able to get a real insight has to who has climbed onto of the heap by reading him.

Now as far as I can determine, Krugman has no real expertise in Banking but of course that has never previously stopped him from commenting on...whatever. Of course the West End Avenue crowd assigns him an Ex Cathedra status on all matters as a result of his Nobel but we may also learn just where The Suit stands with the Boss of Bosses as well through Krugman's thoughts. Anyway, I'm stoked, the NFL playoffs are here and it stopped snowing. Corse it's going to zero tomorrow night but what the heck. Things are looking up.

See you next week.

...AND THE WORLD TURNED UPSIDE DOWN

...which is what the band of the British army played at Yorktown when it surrendered and indeed, in so doing, did change the world forever. By the by, the wonderful painting of Cornwallis surrendering to Washington is a nonsense, did you know that? Cornwallis refused to surrender to ol' Georgie, demanding that a French General receive his sword. The admirable Frenchman said "Non," and the surrender was accomplished by lower ranking officers. Lord Cornwallis was a slug and an idiot of a military tactician but stood a good deal higher on the food chain than Chris the Crook whose announcement of yesterday will certainly not change the world but sure as heck will bugger up finance regulatory matters for a bit.

Speculation as to why he took this step in rampant but to me it is clear that he was about to get his brains beat in electorally and either decided or was strongly urged to retire with whatever grace he had left from the field. Like Cornwallis he placed himself in an totally untenable position and chose surrender rather than defeat. What next? Well, if true to form in about a year he will resurface in D.C. as some kind of K Street maven working both sides of the political street for the finance industry. Given that, one can be fairly certain that the complete populist positions he had been staking out in regard to his proposed "financial reform" are about to get rethought because folks you've just screwed are not likely to dole out a couple of hundred large a year later.

Oddly, this is not a bad thing and a rather good way for it to occur as bringing some sanity back into the discussion and getting rid of this guy is a twofer devoutly to be wished. It might also allow some saner voices to be heard--such as that of Paul Volker--who's continued mantra of the return of Glass-Steagle in some form might gain some traction. If at least the insane one regulator idea through the creation of another massive oversight governmental group employing thousands of new union members who know not a damn thing about their responsibility gets killed, the world will be a better place. If you think I overstate the case, allow me to refer you to Dec. 24 in the skies over Detroit. But now of course The Leader is going to fix that little hiccup so we can all rest easy. Heard him today; I was involved a bit in Intel work in an earlier life. This is another thing about which he hasn't a clue, but I digress.

There is actually a chance that both sides of the aisle get together and talk about this thing as Lame Duck Chris is no longer capable of ramming any totally partisan bill through even if he had the notion to so do. God knows where that might lead as a new approach to things? A functioning government? In Congress? Who would have thunk it! Ah, isn't high finance a wonderful thing!! As Mr. Blankfein put it, "We are doing the Lord's business." Yeah.

ANYBODY SEEN MY OLD FRIEND AL?

Got halfway through yesterday and the power went out. It's so damn cold the squirrels clime into power transformers to get warm and POW! They normally don't survive the experience, but screw the little buggers, it causes us to freeze our buns off until the get the damn things fixed. Which brings me to the heading. Anybody seen Fat Al? I think he must have frozen to death along with the Polar Bears up north. Sad. Anyway this is what I was writing...


While we were away, Paul Krugman did it again. Writing, as usual, on the op ed page of the NYT, created a new bad word: mercantilism, or Chinese mercantilism to be more precise. He's on the same old kick; one of the reasons that we are having so many problems is that the Chinese refuse to revalue their currency, choosing instead to leave it pegged to the U.S. dollar and gaining an unfair advantage against all other trading currencies...mercantilism. The really funny thing about this piece is that Krugman begins with this statement: "Actually, the biggest problems with China involve climate change..." Now Krugman is a hell of a smart guy so you really have to wonder why he can't see what it is that is staring him right in the face; the Chinese don't think climate change is THEIR problem, but if they must appear to be cooperating with the U.S. they would rather appear to cooperate on climate change as we pointed out in this space some weeks back. I say "appear" because you all must have read the nonsensical crap they put out in Copenhagen which, at best, was playing the ball square. No the biggest problem with China if you were to ask the Chinese is the 600,000,000 or so who don't have jobs. And yet, people read this crap and based upon his well-deserved Nobel for his work on international trade, the assumption is that he's right on this as well. Amusingly, in support of other arguments throughout the article he quotes Paul Samuelson who he says "more or less created modern economics," conveniently forgetting that the late Professor also "proved" that the centrally planned economy of the Soviet Union was more efficient than that of the U.S. and would soon surpass the same. I guess we all get it wrong every once in a while. By the by, did you know that Larry Summers is Samuelson's nephew?" He invented endowment investing, you know.

I can't help but get the feeling that Prof Krugman is beginning to get a sense of the possible outcome of he fiscal policies of this administration and without Bush 43 to kick around for much longer the boys in the back room are looking around for some one to blame if things go sneakers-up. The Chinese look like the perfect patsies. Problem is these guys always seem more interested in who to blame when things go wrong that getting it right the first time around. The Chinese are not going to shift their emphasis; we had better figure out just how we are going to deal with it. So far we haven't; indeed, we haven't much tried.


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Big surprise. Chris the Crook announced that he's going to pack it in in November. What does this mean for regulation We'll try to explore that tomorrow.

...BACK HOME AGAIN...

Sorry, gang, I know it's been a long time. But the thing I discovered since I have been doing this is that there is a rhythm to this blog thing. One can't pull a Bernanke and parachute in and out; you have to stick with it otherwise you are just spouting disjointed rubbish. Well, there is now a new year in which to get jointed so let us begin

Since we went away, Harry the Crook and his mob in the Senate have passed something that may be a health care bill by bribing everybody except the tea lady in the Senate dining room. Come to think of it, she may have gotten her piece of the action as well. I'm old, who cares, but our kids are going to have a hell of a time. Regulatory action continues in mindless pace, the Dollar has resumed it's march into the toilet, Paul Krugman gets dumb and dumber and Congress in a remarkable piece of indolence removed all of the funding fetters on Fanny and Freddie in the dead of night on Christmas eve no less when everyone was paying attention to the health bill.

You might remember we have been saying that the beginning of the mortgage crisis was the Fair Housing Act that mandated (forced?) financial institutions to lend to what previously had been considered less than credit worthy borrowers thereby creating the first sub-prime loans in the mortgage business. In the forefront of this activity was of course Fan and Fred and they remained so until the Great Crash. They are still there with a TRILLION AND A HALF of crap on their books and God only knows how much in contingent liabilities in the form of guarantees for you see, both institutions have consistently lied about the nature their exposure and have been covered in their deceptions by a more than willing Congress led by Barney and Chris the Crook. By the terms of the TARP, Treasury support was limited to 400 billion, but now no more. As of Christmas eve, the support is now UNLIMITED and will be unknown because as can only happen in Washington and support extended will not be counted in the budget.

Now this rip-off of the U.S. taxpayer would be bad enough but it gets worse in a policy sense. Remember we talked about the actions of the Fed in supporting the issuance of Agency paper? Guess what's going to happen. Sometime early this year the Fed will proclaim that this activity will no longer be needed and begin withdrawing from the purchasing of the same. HUZZAH! will proclaim the market! The Fed is tightening, things are looking good. Uh, no. The Fed will simply be replaced by the unfettered Treasury, Fan and Fred will continue to lend to crap and renegotiate existing crap, Fan and Fred's portfolios will advance towards a possible loss of a trillion dollars of taxpayer money, the housing market will not stabilize and the deficit will grow by leaps and bounds but that fact will not be recognized as all of this will occur off-budget. If they can hold the thing together until Nov 7, 2012, The Leader might get re-elected; if not...a true Louis XIV moment. You have to hand it to this bunch; we have never seen anything like this in our history as a nation. Chutzpah? They invented it.

While all of this was going on, Helicopter Ben, keenly aware that a vote on his future was rapidly approaching, threw his organization (and his colleagues) on its/their swords and took all the blame for the past few years in the form of poor regulatory oversight. Where do we get such...men? It's not that he's stupid, or ill-informed, or lacking in vision. It's just that he's...small. He REALLY likes HIS job. I find it quite extraordinary that so many pundits can write (correctly, I might add) at how Wall Street and American business lost their sense of mission and purpose; how the public trust was forgotten when staring them right in the fact is the greatest total abandonment of the public interest by the members of the Congress of the United States and many of the employees of the same government. Shocking. Perhaps it is simply too hard to really try to understand; perhaps we have been so caught up in "immediacy" that depth of understanding has been abandoned; perhaps--dare I say it--we have forgotten how to think. We deserve better.

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You might remember me writing about my friend Joe, the son of my friend, Dick. Joe lost his battle jut before Christmas, with lung disease that required him to receive a double lung transplant. Joe wasn't much on formal religion, but he was a hell of a good guy, a great financial technician and a wonderful friend. If you have a moment, say a little prayer for Joe. As the man said, "it can't hurt."