Still searching for numbers

Tapped takes on Krauthammer et al and the attempt to pin the crisis on the Community Reinvestment Act:

This is the sort of Big Lie that people who are in a panic are inclined to believe, both because it is simple and it plays on longstanding prejudices. But, as Robert Gordon pointed out, only around 25 percent of subprime loans came from bank subsidiaries and affiliates covered under CRA.

Tapped also draws a distinction between the defaulted mortgages themselves and the profiteering off of these mortgages:

But as I've said before, even if 100 percent of sub-prime loan defaults were made by minorities, without the instruments developed to make tremendous amount of capital off of this debt, the crisis would not have endangered the entire economy. Even so, that's not the case. CRA did not play a key role in exacerbating this crisis, that was done by mortgage companies and bank subsidiaries not covered by that law. But once again, the attraction of Big Lies is that they are so terrifyingly familiar.

Update: This is a much more thorough debunking of the myth that CRA created this crisis.

Bailin' on Palin?

Kathleen Parker abandons Palin.

Palin’s recent interviews with Charles Gibson, Sean Hannity, and now Katie Couric have all revealed an attractive, earnest, confident candidate. Who Is Clearly Out Of Her League.

and

If BS were currency, Palin could bail out Wall Street herself.

If Palin were a man, we’d all be guffawing, just as we do every time Joe Biden tickles the back of his throat with his toes. But because she’s a woman — and the first ever on a Republican presidential ticket — we are reluctant to say what is painfully true.

and

Only Palin can save McCain, her party, and the country she loves. She can bow out for personal reasons, perhaps because she wants to spend more time with her newborn. No one would criticize a mother who puts her family first.

Do it for your country.

Anyone else ready to jump Palin's ship after seeing the Couric interview?

Sizing and categorizing the problem

Maybe this is neither here nor there, but I'm interested in understanding how much of the crisis is about the failed mortgages themselves and how much is about making bad bets about the mortgages (the derivatives).

Devilstower writing at dKos has numbers (but I don't know where s/he got them, unless it's all from the Jt Center for Housing that's cited) that show that the mortages currently in default amount to $111 billion. Extrapolating for expected defaults (X3) and then subtracting for remaining value (50%) in the properties (admittedly making assumptions through these calculations), s/he gets to $175 billion. To provide a sense of scale for that number, s/he also notes that Wall Street payed out $120 billion in bonuses alone between 2000 and 2006. In other words, the defaulted mortgages themselves are not so big a loss that the economy can't absorb it.

Further, his numbers suggest that the lion's share of the requested $700 billion is attributable to the derivatives, and not to people who defaulted on their mortgages.

Coleman beats Franken

if my experience this evening is predictive. I spent the evening doing voter ID for Obama's campaign. We were asking voters for their preferences in all the races. Found lots of Obama/Dem supporters, but every single one said they would not be voting for Franken.

Foreign policy cred

Watch CBS Videos Online

Update: Here's the transcript for your parsing pleasure:
COURIC: You've cited Alaska's proximity to Russia as part of your foreign policy experience. What did you mean by that?

PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land-- boundary that we have with-- Canada. It-- it's funny that a comment like that was-- kind of made to-- cari-- I don't know, you know? Reporters--

COURIC: Mock?

PALIN: Yeah, mocked, I guess that's the word, yeah.

COURIC: Explain to me why that enhances your foreign policy credentials.

PALIN: Well, it certainly does because our-- our next door neighbors are foreign countries. They're in the state that I am the executive of. And there in Russia--

COURIC: Have you ever been involved with any negotiations, for example, with the Russians?

PALIN: We have trade missions back and forth. We-- we do-- it's very important when you consider even national security issues with Russia as Putin rears his head and comes into the air space of the United States of America, where-- where do they go? It's Alaska. It's just right over the border. It is-- from Alaska that we send those out to make sure that an eye is being kept on this very powerful nation, Russia, because they are right there. They are right next to-- to our state.

Ezra Klein at Prospect asks two questions: Has there ever been a national politician this incoherent? And how has the McCain campaign organization not helped her memorize a better answer to the Russia question?

And to Anonymous who thinks Couric asked this difficult question because Palin's a woman and Couric is sexist: you're kidding right? Couric asked this question because Palin herself previously cited proximity to Russia as a foreign policy credential. Had Palin ever said "I haven't dealt yet with foreign policy issues" then she wouldn't have been asked this difficult question. It's difficult to answer because the premise is ridiculous.

269-269

As of today, here's my state-by-state projection:

Update: that's using the create-your-own-map tool on RealClearPolitics.com

McCain's Left Eye

I'm not the only one who's noticed that there's something up with McCain's left eyelid. People are speculating the droop is caused by a brain tumor related to the melanomas. (I guess melanomas on the head can lead to brain tumors.)

Update: a detailed comment from opthhomd on HuffPo about this: Having seen McCain's face on TV numerous times in the past few months I was struck by something different in his appearance during his speech announcing his campaign suspension yesterday. It was the marked asymmetry of his eyes. The appearance of the droopiness (ptosis) of his left upper eyelid was accentuated by the retraction of his right upper eyelid (the entire iris showed and maybe some superior limbus). This is a compensatory mechanism in unilateral ptosis. It's Herring's law of equal innervation. He's also seemed to be trying to use his brows to elevate his upper lids, revealing some brow ptosis on the left side. A history and physical would be useful in making a diagnosis but without that one can only speculate.....like that the upper division of the seventh cranial nerve is weakened possibly from extension of the melanoma into the superior peripheral branches of the nerve as it travels by the area of tumor resection/reconstruction.

What a Weekend

Sartins Seafood of Nassau Bay and High Caliber Gun Show.

Introduce B to the wonderful world of firearms to prepare for the Global Economic Collapse coming soon to theaters everywhere.

(Before anybody goes nuts...I'm just kidding. Still would like to go to the show, though.)

Kudlow on the Plan and Speech

From the Corner:

.... I don't like it, but sometimes you just have to stop the financial fear. When I spoke to Alexander Hamilton last night about this, he told me it was the right thing to do. Like he did in the 1790s. Anyway, I think President Bush moved the ball forward tonight, and I expect a bi-partisan solution in the next day or two. Without pay limits for auction buyers and sellers, and without government ownership of buyers and sellers; no Soviet-style confiscation. All in all, looks like a good time to buy the depressed stock market. Spells more credit and better growth next year, that is, if we don't hike taxes and put up protectionist trade barriers.

I'm not sure I know what that means but I had to quote another Hamilton reference. Too, he touches on my time to buy thought.

I still have fears that in just a couple of weeks we could be advancing the ball toward socialism more effectively than Hillarycare did in a couple of years.

The Speech

Left a farewell happy hour (for someone leaving the office this week) early to get home to listen to the speech so take these comments for what they're worth.

Sounded like the prez sounded all the right notes (homages, sincere or not, to Capitalism and yet no favors/golden parachutes).

I bet the gets deal done before the markets open Monday for good or ill.

An explanation I can understand

Here. [Ace]

Barney Frank, loser and liar

John at Powerline spots an ugly:

''These two entities -- Fannie Mae and Freddie Mac -- are not facing any kind of financial crisis,'' said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ''The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing." RTWT.

UPDATE: Video here. Plus Schumer guilty as well. Barry absent, of course.

New plan

TPM has got what looks like a summary or outline of the latest version of a plan.

Doing Something Stupid

Does anybody buy stocks directly? Or, does everyone today–at least us lumps down here in the middle-class do so strictly through Pensions, 401Ks, mutual funds etc...so as to ensure enough diversity?

When employed by a big REIT in another life, I occasionally received paltry stock awards which I sold almost immediately with the idea being I don’t want my income and my investments coming out of the same basket. Likewise, I’ve only ever invested through the two of the three listed above to keep said basket as diversified as possible.

I’m sure it’s a terrible idea but I’m sorely tempted to jump at a few with the market as low as it is.

I think I’ve heard that on average over the last 60 years that when the market comes our of recession (and I know technically until we have two quarters of negative growth we aren’t really there yet...just a slowdown), the first 12 months of recovery have averaged in excess of 25% to the good. I know that trying to time the market is also nuts but a little dollar cost averaging doesn't seem too out of order. Much safer to pick some more funds but how fun to pick a winner or two.

Max Boot

While some of his conclusions about WWII made me wince recently and I'm not sold on his optimism that, "... our politicos [can] cross party lines and formulate a decisive response in a time of crisis," I am somewhat comforted by his report on the dreaded sound fundamentals.

From the LA Times:

What the pessimists ignore is that the fundamentals of the U.S. economy remain strong. Indeed, the World Economic Forum has ranked the United States as the world's most competitive economy for the last two years. (The new survey comes out next month.) Its statistics show that per-capita gross domestic product in the U.S. consistently has grown faster than in other developed economies since 1980.

Looking deeper at the causes of American competitiveness shows that we score especially strongly not only in domestic market size (No. 1 in the world) but also in such areas as time required to start a business (No. 3), venture capital availability (No. 1), the cost of firing an employee (No. 1), ownership of personal computers (No. 2), university/industry research collaboration (No. 1) and quality of scientific research institutions (No. 2).

I'm convinced

that McCain has recently had a stroke or is suffering from some Bell's Palsy or something. I noticed his eyelid looked weird last week. Here's footage from today. Notice the droopy left eyelid. I think this is the real reason he's trying to bag the debate; the closeups are going to look nasty.

Revolving credit

Here's a diary at Kos that offers a number of reasons the plan should not be approved, including this gem:

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Did you catch that? There's a great little language shift. The Treasury Secretary's authority is limited to $700 billion outstanding at any time. That means he could buy $700 billion -- then sell some at a loss -- and then buy more to get back to $700 billion. This is a revolving credit line, not a firm upper limit. It's conceivable the Treasury could but and sell trillions of dollars under this authority.

We had the sense to be suspicious that "$700 billion" meant "way more than $700 billion", but I hadn't appreciated how completely open-ended it really was.

The politics

So there's that Raffini guy (Republican congressman) who's trying to talk the Republicans into all voting against the bailout, leaving the Dems in political bed with Bush for the November election. Smart, in one sense: if the bailout were actually a good idea and worked magnificently (to whatever good end), we'd never really notice it because it would mean the markets would perk along just fine without substantial losses and taxpayers would be mad because they'll feel like they paid a lot for nothing, but if the bailout doesn't work and we pay all this money and there's still a huge loss in value, we'll be pissed. Either way, taxpayers are going to be disaffected by any bailout plan that occurs.

This morning I heard that Harry Reid was threatening to let Congress take its sweet time until AFTER THE ELECTION with the bailout bill. I wish he meant it, since the more time passes, the more the markets will solve their own problem. But I'm afraid it is just posturing for leverage for Nancy...

Now, Halperin is previewing that Pelosi and Paulson have been negotiating and that may bear fruit, whatever that might mean.

I wonder whether the threat of public protests on Thursday will push a resolution before the end of the day Thursday.

My firm's 401k Manager...

Carl Stuart is coming in 10 minutes for a chat. This should be interesting.

(I know what you're thinking...a radio host? I listen and he's really good. "He owns his own firm where he manages approximately $280 million of clients' assets.")

Accountability.

Text of the plan

in its Sept. 20th form. We should have this handy:

LEGISLATIVE PROPOSAL FOR TREASURY AUTHORITY TO PURCHASE MORTGAGE-RELATED ASSETS

Section 1. Short Title.

This Act may be cited as ____________________.

Sec. 2. Purchases of Mortgage-Related Assets.

(a) Authority to Purchase. The Secretary is authorized to purchase, and to make and fund commitments to purchase, on such terms and conditions as determined by the Secretary, mortgage-related assets from any financial institution having its headquarters in the United States.

(b) Necessary Actions. The Secretary is authorized to take such actions as the Secretary deems necessary to carry out the authorities in this Act, including, without limitation:

(1) appointing such employees as may be required to carry out the authorities in this Act and defining their duties;

(2) entering into contracts, including contracts for services authorized by section 3109 of title 5, United States Code, without regard to any other provision of law regarding public contracts;

(3) designating financial institutions as financial agents of the Government, and they shall perform all such reasonable duties related to this Act as financial agents of the Government as may be required of them;

(4) establishing vehicles that are authorized, subject to supervision by the Secretary, to purchase mortgage-related assets and issue obligations; and

(5) issuing such regulations and other guidance as may be necessary or appropriate to define terms or carry out the authorities of this Act.

Sec. 3. Considerations.

In exercising the authorities granted in this Act, the Secretary shall take into consideration means for—

(1) providing stability or preventing disruption to the financial markets or banking system; and

(2) protecting the taxpayer.

Sec. 4. Reports to Congress.

Within three months of the first exercise of the authority granted in section 2(a), and semiannually thereafter, the Secretary shall report to the Committees on the Budget, Financial Services, and Ways and Means of the House of Representatives and the Committees on the Budget, Finance, and Banking, Housing, and Urban Affairs of the Senate with respect to the authorities exercised under this Act and the considerations required by section 3.

Sec. 5. Rights; Management; Sale of Mortgage-Related Assets.

(a) Exercise of Rights. The Secretary may, at any time, exercise any rights received in connection with mortgage-related assets purchased under this Act.

(b) Management of Mortgage-Related Assets. The Secretary shall have authority to manage mortgage-related assets purchased under this Act, including revenues and portfolio risks therefrom.

(c) Sale of Mortgage-Related Assets. The Secretary may, at any time, upon terms and conditions and at prices determined by the Secretary, sell, or enter into securities loans, repurchase transactions or other financial transactions in regard to, any mortgage-related asset purchased under this Act.

(d) Application of Sunset to Mortgage-Related Assets. The authority of the Secretary to hold any mortgage-related asset purchased under this Act before the termination date in section 9, or to purchase or fund the purchase of a mortgage-related asset under a commitment entered into before the termination date in section 9, is not subject to the provisions of section 9.

Sec. 6. Maximum Amount of Authorized Purchases.

The Secretary’s authority to purchase mortgage-related assets under this Act shall be limited to $700,000,000,000 outstanding at any one time

Sec. 7. Funding.

For the purpose of the authorities granted in this Act, and for the costs of administering those authorities, the Secretary may use the proceeds of the sale of any securities issued under chapter 31 of title 31, United States Code, and the purposes for which securities may be issued under chapter 31 of title 31, United States Code, are extended to include actions authorized by this Act, including the payment of administrative expenses. Any funds expended for actions authorized by this Act, including the payment of administrative expenses, shall be deemed appropriated at the time of such expenditure.

Sec. 8. Review.

Decisions by the Secretary pursuant to the authority of this Act are non-reviewable and committed to agency discretion, and may not be reviewed by any court of law or any administrative agency.

Sec. 9. Termination of Authority.

The authorities under this Act, with the exception of authorities granted in sections 2(b)(5), 5 and 7, shall terminate two years from the date of enactment of this Act.

Sec. 10. Increase in Statutory Limit on the Public Debt.

Subsection (b) of section 3101 of title 31, United States Code, is amended by striking out the dollar limitation contained in such subsection and inserting in lieu thereof $11,315,000,000,000.

Sec. 11. Credit Reform.

The costs of purchases of mortgage-related assets made under section 2(a) of this Act shall be determined as provided under the Federal Credit Reform Act of 1990, as applicable.

Sec. 12. Definitions.

For purposes of this section, the following definitions shall apply:

(1) Mortgage-Related Assets. The term “mortgage-related assets” means residential or commercial mortgages and any securities, obligations, or other instruments that are based on or related to such mortgages, that in each case was originated or issued on or before September 17, 2008.

(2) Secretary. The term “Secretary” means the Secretary of the Treasury.

(3) United States. The term “United States” means the States, territories, and possessions of the United States and the District of Columbia.

Thorough assessment of plan

Mankiw's blog points to this assessment of the bailout plan. Old news, now, though. I think we can be confident that the plan won't be passed in its original form.

Greg Mankiw

Harvard econ prof is blogging about the crisis. (He's in our blogroll, btw.)

Michael's neighbor on the Fin'l Meltdown

Does Mr. S have anything to add that you can post in less than 100 pages?

and not to mention Social Security and Medicare

We've been struggling with the former since Reagan and Tip and the latter for the last ten years; we think we can muddle our way through here in a week or two.

Take action against bailout

Several groups are organizing to say "No" to the bailout. (Damn those worthless community organizers.)

Update: The Minneapolis gathering is in front of the Federal Reserve Building.

Oh for Pete's sake

From the AP:

The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae (FNM) and Freddie Mac (FRE), and insurer American International Group Inc. (AIG) Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. (LEH) also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

Reich on extent of debt

Robert Reich says bad mortgages are only part of the debt picture. I don't expect his proposed solution (extend unemployment insurance, freeze mortgage rates, stimulus package) will seem like a good idea to all, but still his portrayal of the larger picture of debt is probably right.

Too big to fail

A seriously not thought out idea:

Maybe the SEC should condition mega-mergers on a condition...no bailouts. Then the shareholders could decide. I know, I know, shareholders don't really have a say...so don't invest in big companies or divest after the merger.

Won't help with companies that just grow huge on their own or "quasi-governmental" enties like Freddie and Fannie but would at least make directors and shareholders think twice before an Exxon/Mobil type merger.

I'm just sick that we are on the verge of this...$700B, and we all know that really means: >$1.5T.

I'm not afraid to say markets fail. They do. Business will aspire to monopoly because once attained it no longer has to compete. Markets succeed when businesses compete. When businesses have to compete that's when markets succeed.

Freddie and Fannie didn't have to compete. I have no idea about AIG. Let the brokerages burn.

Newt + Kos

Here's kos backing Gingrich.

Another reason for a "deep breath before...

the plunge" on the bailout. If this AP report is true:

Democrats have decided to allow a quarter-century ban on drilling for oil off the Atlantic and Pacific coasts to expire next week, conceding defeat in a months-long battle with the White House and Republicans set off by $4 a gallon gasoline prices this summer.

We should see another big drop in oil prices and eventually local energy costs. It will be the equivalent of a big tax break.

Jonah Goldberg goes a bit beyond my position but...

I echo the sentiment. From The Corner:

Even if I completely trusted the wisdom of Paulson and his bureaucrats — which I don't — there's no way that I trust the Dodds, Franks or the next Treasury secretary. Every day the markets don't go off the cliff suggests to me that we can do this in stages and that Paulson's do-it-my-way-or-it's-the-Dark-Ages-for-us-all argument doesn't hold water.

Kurtz puts on Ayers

This is Kurtz's big expose on Obama and Ayers?! Looks like a whole lot of nothing to me, but then I'm not seeing it through the same surely-Obama-must-be-an-evildoer lens that others are.

Ed Feulner (Pres. of heritage.org) on the bailout

From RealClearPolitics:

As a rule, Congress is good at two things: 1) doing nothing at all. 2) overreacting.

Lawmakers appear ready to prove that rule with a massive overreaction. They would be better off letting free-market principles guide any rescue package. Otherwise, who’s going to bail out taxpayers?

Wow

Here's one seriously frightening and depressing take. The whole thing is worth reading so I hesitate to clip from it. Or maybe it's hooey. How do I know? My biggest misery, so far, about the financial crisis is that I'm not sufficiently educated in the right topics to evaluate what I'm reading.

Re: Stein and Schumer

I don't have the foggiest idea if Stein is right but he and Sen. Schumer to be on something of the same page....why turn Paulson into Hamilton so quickly? Let's go slow...if we go at all.

Let's not have another Sarbanes-Oxley here. Let's not, in an effort to solve the Enron crisis, send investors to London instead of New York. Let's put our toe in before we dive.

Schumer asks why $700 billion

Senator Schumer wonders why the check has to be for $700 billion; why not write a check for a smaller amount and see what happens, allowing for more Congressional oversight and leaving some opportunity for the next president to deal with the mess.

Newt Gingrich thinks the plan is a loser and suggests anyone who votes for it will lose in November.

Credit Default Swaps

Ben Stein discusses credit default swaps:

Here s one big part of the answer. First, the alert reader will notice that Ben Stein said many times that the amount of money at risk in the subprime meltdown was just not enough to sink an economy of this size. And I was right...to a point. The amount of subprime that defaulted was at most - after recovery in liquidation - about $250 billion. A huge sum but not enough to torpedo the US economy.

The crisis occurred (to greatly oversimplify) because the financial system allowed entities to place bets on whether or not those mortgages would ever be paid. You didn't have to own a mortgage to make the bets. These bets, called Credit Default Swaps, are complex. But in a nutshell, they allow someone to profit immensely - staggeringly - if large numbers of subprime mortgages are not paid off and go into default.

The profit can be wildly out of proportion to the real amount of defaults, because speculators can push down the price of instruments tied to the subprime mortgages far beyond what the real rates of loss have been. As I said, the profits here can be beyond imagining. (In fact, they can be so large that one might well wonder if the whole subprime fiasco was not set up just to allow speculators to profit wildly on its collapse...)

I haven't the foggiest idea whether he's accurately described the situation.

I keep meaning to write a blurb about Naomi Klein's book The Shock Doctrine. I gave up on it because I thought it was too sensationalistic but I think we're watching exactly what she describes: the manufacturing of a "crisis" that requires emergency action, during which the population is led to believe that power must be handed to a few to address the crisis. When we do this, those few rob us blind and insist it was in all our best interest while the few profit mightily.

Has anyone seen a good description of exactly what would happen (immediately as well as in the coming months or year) if we did nothing?

Take a breath

Herbert echoes Scooter.

Eat, Pray, Love

This was a book club pick. I couldn't get through it. It's a memoir.

Gilbert takes a year off from ordinary life following a divorce and spends it questing for pleasure and spiritual growth and balance, by spending four months in Italy (experiencing pleasure through eating and learning Italian), four months at an Ashram in India meditating, and four months in Bali seeking balance by spending quite a bit of time with a medicine man. She seems to find everything to be laden with meaning and magic and that gets old after a few chapters.

I always have problems reading memoirs. I dislike the inevitable posturing/posing; it's usually transparent and that makes me a bit embarrassed for the author. It's sort of like how I feel watching bad actors in a play. The authors always claim that they knew that for their memoir to be compelling they needed to show the readers their failures and inadequacies and they seem to think they've portrayed themselves honestly; but typically any such disclosures are coupled with explanations or excuses or balanced against something charming, all in the effort to be likable.

Couple that kind of posturing with pontifications about spiritual matters and you have Eat, Pray, Love.

The delay on the bailout...

Not that I think Sen. Reid has good intentions but I have to think a deep breath would be a good idea. Hewitt is hammering the Dems on the delay but this time he's really wrong.

Computer fixed and faster than ever...

Wasn't me though. Had to call Austin Computer Pro..."Don't Send a Geek to do a Pro's Job."

Big shake-up at the firm...

Yikes, I may be looking for work soon.