FIRST THINGS FIRST

I was going to comment on the 60 billion dollar misunderstanding in the Gulf but I though I would clean up a few things first and save that piece of lunacy for another day.

Wonderful leading article in the Wall Street Journal today highlighting a rather unfortunate piece of scholarship written in 2002 by the newly minted Nobel laureate joe Stiglitz (who is reported to be even more arrogant that Larry "double down for Harvard" Summers if that is possible) and the Orszag brothers in re the risk of Fanny and Freddie. It was spectacularly wrong of course but to cast judgement with the benefit of hindsight is not a good nor gentlemanly thing to do. The article points out that the writers acknowledged that "the extremely rare events located in the tail of a distribution are often quite difficult to analyze accurately." Might I point out (as I have previously) that another Nobel laureate was also spectacularly wrong in 1997 in the LTCM debacle and there too, the tail of distribution proved difficult to analyze accurately. What is most remarkable to me is that these three chuckle-heads didn't learn a damn thing from the chuckle-heads who went before them, wouldn't recognize systemic risk if it bit them in the ass and are now all in favor of a moronic plan to let a mob of politically appointed hacks figure it out for the rest of us. As events have proven, it is not easy to identify risk even if you have been doing it all of your professional life; it is impossible if you are new to the game. I've been saying this for months now; thank you WSJ for agreeing.

Skip a paragraph and the final article in today's Journal concerns the agreement by the management of AIG to bury the hatchet in regard to Hank Greenberg and, in fact, choose to use Mr. Greenberg as a resource in trying to put Humpty Dumpty together again. Hopefully, this is the end of the sad tale begun by the odious Eliot Spitzer and followed by the only slightly less so Andrew Cuomo. As loyal reader Paul points out in his comment to last week's post, AIG probably never represented a systemic risk except for the fact that the handling of that mess by the FED & Co.--in one of their rare missteps--made it such. I suspect that a hugh pile of excrement can be pilled up outside The Suit's door for this one but of course we can never be sure. Now Mr. Greenberg isn't a miracle worker but he's a hell of a smart guy and just mean enough that I suspect he will WILL himself to stay around long enough to fix his creation. Best of luck to him and the good Lord willing, the political thug Cuomo will keep the hell out of it. Thanks again for agreeing---well, that may be a bit of an overstatement--WSJ.

Finally,...I simply can't resist. WHAT THE HELL ARE YOU THINKING ABOUT, TIGER WOODS?!!!!

We will deal with the Gulf tomorrow.

A STAND UP GUY AND OTHER MUSINGS

Bernie caught 150 years today. The max. But right to the end Bernie was a stand up guy. He didn't roll over on anybody to the point where some people are beginning to suggest that maybe--just maybe--he pulled this off all by himself. Forgive me if I don't believe that it would have been possible. The saga is of course far from over and it will be fascinating to watch what is revealed and argued in the coming months. Way back in the last century I took the New York State Bar exam. On it there was a essay question (there were 12 in those days) on bankruptcy and the jurisdictional issues posed by the facts in the case as between two Federal Districts. No one with whom I spoke after the exam knew what the hell was going on. Amazingly, they through the entire question out grading only the remaining eleven. That's why I passed; that's why most of my friends passed. This mess has more issues than that question. What goes 'round...but if you think there are regulatory issues involving banking how 'bout the SEC in this one? As the kids would say, "Like, DUH!" Back in the Great Depression, FDR hired Joe Kennedy as the first SEC commissioner. He rational was that it was best to send a crook to catch a crook. Wise. The Leader, who seems to be channeling up FDR at every turn should perhaps take heed.

Missed in all of the deaths and sentencing over the last few days was the restatement of the Chinese position that the world needs a new reserve currency to replace the dollar. With more force and conviction this time SDR's were brought to the fore. Now there are a bunch of really smart guys out there that keep saying don't worry, the Chinese will still hold the Dollar because they have no alternative. Then again, the Chinese have never been a bunch for idle chatter. Most statements by that government are for a purpose although, admittedly, opaque at times. I can't seem to get over this great uneasy feeling that they are telling us something and we are not listening. I don't like it, I really don't

In a few days, we will find out how the banks did in the second quarter. We already know about Goldman; gangbusters. As stated here, if you're a trading institution with a big capital markets business with this kind of a yield curve your organs could be in the midst of being harvested and you could still make money. I don't know how they do it, I really don't. Oh, I don't mean how they make money, that's easy. A few years back, some wag asked Bill Gates who was his greatest competition. His answer? Goldman Sachs. Remember, pay peanuts, you get monkeys. Pay over the top? You get really smart people. That's how they make money. No, what I'm talking about is how do they come up smelling like a rose every time they fall in poo-poo. The got the outrageous bail-out in AIG even when they were prancing about claiming that they were fully hedged and in 1997, who had the opportunity to front-run Long Term Capital Management? Why none other than Goldie again whose then-Chairman John Corzine was the overseer of the wind down of LTCN's positions. Chinese wall? Sure. And I have a bridge for sale. Smell a bit of rot, Horatio? I do.

Finally, no sooner does your humble scribe point out that banks' balance sheets tend to look a bit different in the middle of a reporting period than at the end of one, comes Scott Patterson in last Thursday's WSJ in his "Ahead of the Tape" column pointing out the same thing. His solution? Quoting Lou Crandall, chief Economist of Wrightson ICAP, Scottso thinks that all banks should report a daily average balance ; I assume he wishes to add "sheet" to his idea. I've always felt that one of the best definitions for "mixed emotions" was watching a bus load of economists going over a cliff and realizing that there are three empty seats. Daily reporting? Think about it.