Saturday, December 13, 2008

Obama's list of preferred candidates didn't include Jesse Jr.

Jesse Jackson Jr. rubbed me the wrong way throughout the election. I'm pleased to see he wasn't on Obama's list of preferred candidates for his Senate seat. From the Chicago Tribune today:
Another source said that contact between the Obama camp and the governor's administration regarding the Senate seat began the Saturday before the Nov. 4 election, when Emanuel made a call to the cell phone of Harris. The conversation took place around the same time press reports surfaced about Emanuel being approached about taking the high-level White House post should Obama win.

Emanuel delivered a list of candidates who would be "acceptable" to Obama, the source said. On the list were Obama adviser Valerie Jarrett, Illinois Veterans Affairs director Tammy Duckworth, state Comptroller Dan Hynes and U.S. Rep. Jan Schakowsky of Chicago, the source said. All are Democrats.

Sometime after the election, Emanuel called Harris back to add the name of Democratic Atty. Gen. Lisa Madigan to the approved list, the source said.

Whales blowing bubbles

H/T: K

Friday, December 12, 2008

Perspective on bailout, subprime mortgages and credit default swaps

Here's a little diagram that gives perspective to the size of the bailout(s) in comparison to the total value of all subprime mortgages, all mortgages, and credit default swaps:

It's amazing to behold, isn't it? The bailouts could have purchased 2/3 of all U.S. mortgages. If home owners could all just refinance for 1/3 of their mortgage value, that would leave home owners with a ton of disposable income to spend, thereby spurring the economy in a truly big way. (We, for example, would buy two new cars and re-do the kitchen.) Of course, the true cost of the bailout is impossible to know at this point since some of it is loans that will be repaid (maybe).

I used the following sources for the amounts in the chart:
Bailouts: $1-$7 trillion
Auto industry bailout requested: $14 billion (Dec. 12, 2008)
Value of subprime mortgages: $1.3 trillion (March 2007) (MSNBC)
Value of all U.S. residential mortgages: $11.1 trillion (3rd quarter 2008) (Federal Reserve)
Value of credit default swaps: $62 trillion (September 2008) (Newsweek)

Update: Tally on bailouts by CNBC says the bailout total so far is $7.3 trillion.

Credit Crisis?

Closed a $6M deal today for a 501(c)(3) organization in east Texas (behind the Pine Curtain). It was a bond issue for a municipality (oversimplified but you get the tax consequences) that will use the funds to finance expansion and refurb of the 501(c)(3)'s facility.

Three weeks ago the single bank that was going to buy the bond failed. We wrestled with deciding between taking the new deal of the bank (that took over the assets of the failed bank) or a crazy credit swap with another would be creditor (I was against).

My position prevailed and my client got exactly the same deal as under the previous bank's offer...basically 4% over 12 years. Granted, my client has impeccable credit credentials but the idea that money isn't out there seems least anecdotally.


I'm officially paranoid. I saw this story on Biden and immediately thought, "Uh oh. Maybe Biden was the Blago point man." That is one cute puppy. Can't you just smell him? The puppy, I mean. I'm betting he won't name him Checkers or Barney.


Is Rahm setting the table to resign?

ABC News:
Emmanuel appeared "beet-red," according to an ABC News cameraman who was invited inside by Emmanuel to use his bathroom this morning.

"I'm getting regular death threats. You've put my home address on national television. I'm pissed at the networks. You've intruded too much, " Emanuel said, according to the cameraman.

H/t: HuffPo

The thing that concerns me, as an Obama supporter, is that it's clear that someone from Obama's camp had a discussion (directly or indirectly) with Blago in which they said "No deal". Whoever that was would have had a duty to report Blago's crime to federal law enforcement. I'm worried that that person (and Rahm seems like the most likely candidate) did the right thing to say "no", but then failed to report the crime (perhaps not even with any sort of ill intent to cover the mess up, but just failing to recognize the duty to report). Have my fingers crossed that Rahm got everything right here, but if he resigns in a huff about the media exposure endangering his family, I think we'll know where this is headed for him.

Gas is up

Gas prices went up yesterday, from $1.65 to $1.74, here. Maybe it's in anticipation of holiday travel.

Blago's prayer

The Chicago Tribune reports that some ministers have met with Blago at his home and prayed with him. SSJ had a reporter in the room and provides this transcript of Blago's prayer:

"Dear Big Guy, if you will give me eternal life, I'll believe in you."

Always looking for a deal.

This can’t be good

Steph echoed at the Corner.

The Corner a day late and a dollar short as Judge Coussons used to tell me.

Stiglitz, an Econ Nobel Laureate, on the upside of bankruptcy of the Three

From FT:

It is more plausible that confidence will be restored if the industry is freed of the burden of interest payments and is given a fresh start. Modern cars are complex technological products and the US has demonstrated its strength in advanced technology. US workers, working for Japanese carmakers, have shown their hard work can produce cars that are desirable. America’s managers too have demonstrated their managerial skills in many other areas.

H/t: Mankiw

Renewed shame?

I ripped the subhead from Noonan today just because it kinda resonated with my most recent post below. As I read further I found this paragraph in today's column:

There's something else going on, a new or renewed sense of national shame. Or communal responsibility. Or a sense of reckoning. Whatever it is it's a reaction to the excesses of the O's [obscene numbers of zeroes in the dollar figures being tossed around today], a reaction against the ways of those who caused the mess on Wall Street and Main Street. It is a reassertion that there actually are rules, and that it is embarrassing to break them in a way so colorfully damaging and destructive to everyone else.

VDH has been on this for weeks now. If anything good can come out of all this financial mess is a reminder to live within our means. Personally, corporately, governmentally.

How many of us have that six-twelve month cash cushion put away for that rainy day that we were taught to have?

Don’t just do something; stand there.

The much maligned Ms. Parker on the pace of things in 21st C. America from JWR:

In the latest blog scandal-ette, Jon Favreau, a Holy Cross valedictorian and 27-year-old wunderkind speechwriter for Barack Obama, was captured clutching the prospective secretary of state's, um, pectoral area, while a fellow reveler, wearing an "Obama Staff" T-shirt, nuzzles Clinton's ear and holds a beer bottle to her smiling lips.

The photo popped up on Facebook for a couple of hours before being removed... too late. The moment was captured and the rest was instant and persistent history. On the Information Highway, alas, roadkill is never really dead.

It was all about time. In low-tech America, people had time to sober up. There was no e-mail light blinking to demand your immediate attention, no insistent cell phones blasting "Fur Elise" into one's pocket or purse; no 24/7 news producers demanding instant responses to urgent claims and counterclaims. Several hours — or even a few days — could pass before anyone had to Do Something.

When I first started practicing in 1985, the firm with which I started was desperately seeking to avoid the purchase of a fax machine! The partners knew that once purchased, clients would demand immediate answers that once the firm had a couple of days to get its mind around. While I certainly do relish the new speed and efficiencies of today’s technology, I do have certain wistful recollections of the good ol’ days. Have I mentioned I’m the last lawyer in the state without a cell phone?

Thursday, December 11, 2008

The long call to Washington

Juicy details are beginning to emerge from the Blago wreckage. This WSJ story describes a 2-hr long call that Blago had with someone in Washington immediately before CNN reported that Valerie Jarrett was pulling her name from contention.
During the call, Mr. Blagojevich and those closest to him allegedly detailed virtually every one of their ideas for turning Mr. Obama’s open Senate seat into something valuable. Specifically, the governor asked “what he can get from the President-elect for the Senate seat,” the FBI alleged, adding later that callers talked about how to “monetize” Mr. Blagojevich’s connections.

Mr. Blagojevich also bemoaned what he called his financial struggles, although his post reportedly pays about $177,000 per year. “The immediate challenge,” the governor allegedly said, “[is] how do we take some of the financial pressure off of our family.”

Callers discussed the possibility of ambassadorships, which are made by the president. They talked about an appointment for Mr. Blagojevich as head of the Department of Health and Human Services, also made by the president. They explored the idea of getting Mr. Obama to use his clout to put the governor’s wife on corporate boards. And they discussed a deal involving the Service Employee International Union, which would be asked to install Mr. Blagojevich over one of its top political groups in exchange for the union getting to tell Mr. Obama that it was delivering the open U.S. Senate seat to his favorite candidate.

That candidate, Mr. Blagojevich believed, was Valerie Jarrett, according to sources familiar with this part of the probe.

There is no inference that Mr. Obama knew about or encouraged any of this alleged scheming, and he has explicitly denied it. But the big question today is this: Were any members of his transition team among the “Washington advisers” on the line during this marathon conference call, or did one of the participants fill them in about these wild ideas?

Cool charts

Here's a site that sells posters of nifty charts. I can't imagine decorating with them. But maybe they'd be useful if you're studying a particular topic.

Tax cuts versus spending increases and GDP

Mankiw today is talking about the multipliers achieved through tax cuts versus those for spending increases. That is, how much does GDP go up for every dollar of tax cut or spending increase. He concludes we get more bang for the buck from tax cuts (contrary to Keynesian models) and so advises Obama to go ahead with his intended tax cuts.

[Update: I should note that last I heard, and this may have been before the election, Obama was planning to go forward with the tax cuts, but was considering delays of the tax increases on those making over $250k.]

Sunset (or Exit Strategy for) the Bailouts

This is so obvious it pains me not to have raised the issue before. I'm not sure how one would do it but like the Bush tax cuts, a sunset mechanism should be limiting these bailouts. I know once the money is spent it's gone. But the brakes should be put on somewhere. It is one of the problems of having lept so quickly into this mess. Would the economy be any worse today if none of the actions taken since October had not materialized? I can't know but doubt it with oil at $40.00/bbl.

From the WSJ:

Our emphasis on private ownership is directly tied to America's dedication to individual freedom. It's in our DNA. It is, in large part, why the United States came to be at all. Our Declaration of Independence is a recitation of the abuses of excessive government power. Our Constitution is a brilliantly crafted system of checks and balances to prevent that abuse by limiting government's authority over individuals -- including in the economic realm, where we're guaranteed our constitutional rights to liberty and property, to freedom from expropriation, and to freedom of contract.

But beyond that, beyond ideals of freedom, the national preference for private ownership is also based on the most basic practicality: It works.

Financial markets, of course, are not perfect. In particular, they are susceptible to boom-and-bust cycles...

Cycles of this sort have been a hardy perennial over the past 400 years of experience with organized markets. Addressing the results of these cycles is why we have protective mechanisms such as the Federal Reserve System and federal deposit insurance.
But clearly these mechanisms proved inadequate to prevent the current crisis.

For all of these reasons, it is incumbent upon federal policy makers to ensure that the extraordinary actions of the past months are understood to be temporary, and constructed so that they are self-liquidating. Since government programs do not on their own go away, there has to be a deliberate design to eliminate them, and a relentless adherence to execution of that plan. Anything short of this will almost certainly guarantee eternal life for these vast new federal roles.

Focusing on exit strategies now is of vital importance to ensure that we do not stumble along a dangerous path of confusion that may end in far greater financial exposure for the American people, and a far worse situation for America's taxpayers and investors. If we answer the tough questions now, and make sturdy plans for the future, we can position our mortgage market, our financial services industry, and the broader economy for renewed growth and prosperity.

Wednesday, December 10, 2008

One of Ours

One of Ours by Willa Cather won the Pulitzer Prize in 1922. It's the story of Claude Wheeler, a young man raised on a Nebraska farm. The story takes him through his college years, through some years back on the farm during which he marries, and then through his service in the First World War. Cather does a beautiful job of conveying what life was like. It's interesting to me, because at the time she was writing, it must have been incredibly dull and mundane to note things like the hassles of "scalding the separator" (i.e. cleaning and sterilizing a contraption for separating fat from milk). But today it's a fascinating detail that brings the time and place alive. (It's also an example Cather uses to suggest that a mechanized world may not be entirely better than a non-mechanized one.) I wonder whether Cather (or any writer describing their present) had an eye on an audience almost a hundred years hence?

Claude was dutiful but discontented with his life in Nebraska. He finds contentment in Europe. He seems to think the difference is with values: Americans are concerned solely with making money and producing things, while Europeans are interested in feelings. I'm not sure that Cather is positing such a thing; I think she gives us plenty of reasons to doubt the reliability of Claude's viewpoint. It struck me that Claude is unfairly comparing the ordinary work-a-day life he experienced at home with the chaotic state of war in the midst of which people place a high value on fundamental things (e.g. having food and being near their loved ones).

The story touches on tensions between new German immigrants and their neighbors during the war years. I guess the fight against an us-versus-them mentality is perennial, as is the tension between freedom of speech and patriotism/treason.

The story is beautifully told. Here's a lovely exemplary sentence:
The sun was like a great visiting presence that stimulated and took its due from all animal energy. When it flung wide its cloak and stepped down over the edge of the fields at evening, it left behind it a spent and exhausted world.
The graphic I used is for a volume from the Library of America series. The black cover is probably familiar to all. Very pleasant to read from a book that has a stitched binding and opens flat.

Update: This was a book club pick.

Point of Order

When referring for a newly elected head of the United States of America in a profane way, one mustn’t forget the formalities, Mr. Governor. From Monsieur Steyn at this morning’s Corner:

Still, I enjoyed this helpful bit of annotation by Patrick Fitzgerald:

ROD BLAGOJEVICH said that the consultants (Advisor B and another consultant are believed to be on the call at that time) are telling him that he has to “suck it up” for two years and do nothing and give this “motherf***er [the President-elect] his senator. F*** him. For nothing? F*** him.”

Shouldn't that be "the motherf***er-elect"?

For posterity

Just have to save this partial screen capture from HuffPo today:

Tuesday, December 09, 2008


Where is M when I need him. The Counts:

Count One

From in or about 2002 to the present, in Cook County, in the Northern District of Illinois, defendants did, conspire with each other and with others to devise and participate in a scheme to defraud the State of Illinois and the people of the State of Illinois of the honest services of ROD R. BLAGOJEVICH and JOHN HARRIS, in furtherance of which the mails and interstate wire communications would be used, in violation of Title 18, United States Code, Sections 1341,1343, and 1346; all in violation of Title 18 United States Code, Section 1349.

Count Two

Beginning no later than November 2008 to the present, in Cook County, in the Northern District of Illinois, defendants ROD R. BLAGOJEVICH and JOHN HARRIS, being agents of the State of Illinois, a State government which during a one-year period, beginning January 1, 2008 and continuing to the present, received federal benefitsin excess of $10,000, corruptly solicited and demanded a thing of value, namely, the firing of certain Chicago Tribune editorial members responsible for widely-circulated editorials critical of ROD R. BLAGOJEVICH, intending to be influenced and rewarded in connection with business and transactions of the State of Illinois involving a thing of value of $5,000 or more, namely, the provision of millions of dollars in financial assistance by the State of Illinois, including through the Illinois Finance Authority, an agency of the State of Illinois, to the Tribune Company involving the Wrigley Field baseball stadium; in violation of Title 18, United States Code, Sections 666(a)(1)(B) and 2.

Preemptive Update: I know most of the accused bad guys lately have been Elephants.

Monday, December 08, 2008

Make room on your mantles

"The Pulitzer Prizes, the most prestigious US journalism awards, announced Monday they were expanding to include online-only publications." Here.

Pulitzer 2009. C'mon guys. We can do it. Someone write something. (I'm pretty sure gravy tips won't do it.)

General Motors Ad

From WSJ article (with link to full ad) on the GM ad:

GM's letter does not simply sound more alarm bells. It is anchored by a long paragraph admitting to several costly mistakes.

"While we're still the U.S. sales leader, we acknowledge we have disappointed you," the ad says. "At times we violated your trust by letting our quality fall below industry standards and our designs become lackluster. We have proliferated our brands and dealer network to the point where we lost adequate focus on our core U.S. market."

The entire ad is pretty long but trust me when I say it does not inspire me with confidence. It also contains this gem:

And, we made commitments to compensation plans that have proven to be unsustainable in today’s globally competitive industry. We have paid dearly for these decisions, learned from them and are working hard to correct them by restructuring our U.S. business to be viable for the long term.

Sunday, December 07, 2008

Masonic temples turned arts centers

This is one of my favorite buildings in downtown Minneapolis. It was built in 1889 as a Masonic temple. In the 1970s, a dance organization purchased it and has since operated it as an arts center. The large open-span spaces, uninterrupted by the ubiquitous steel pillars of modern construction, are well suited to rehearsal and performance spaces.