Links 7/11/09 « naked capitalism

Saturday, July 11, 2009

Links 7/11/09

Speedy cheetahs put through paces BBC

Government honours veterans of Bletchley Park at last V3. Cryptonomicon fans take note.

Sarah Palin is resigning over money, says Levi Johnston Telegraph. Makes more sense than any reason I have heard thus far.

NYT Totally Flubs Story on Mortgage Market Dean Baker

Surprise fall in factory prices puts pressure on Bank Independent

The recession is slowing household formation Bubble Meter

Statement of Professor James K. Galbraith1 to the Subcommittee on Domestic Monetary Policy and Technology, Committee on Financial Services On the Fed as systemic risk regulator.

SEC May Gain Expanded Powers to Prohibit Broker Pay, Wrongdoers Bloomberg

Goldman Sachs profit bonanza could stoke anger Reuters. Duh!

Failure of a Fail-Safe Strategy Sends Investors Scrambling Wall Street Journal

Haiku Economics Mark Thoma. Um, this is economists simply doing an older and therefore more upscale version of Twitter. Although I actually do like haiku.

Did a productivity slowdown cause the financial crisis? David Brackfield, Joaquim Oliveira Martins VoxEU. Any readers who want to have fun with this, be my guest.

On Wall Street: Credit crisis is far from over Aline van Duyn, Financial Times

‘Secretive’ firms dominate US share trading Financial Times. How long has Tyler Durden been on this story? Months? Now the FT notices? And thanks only the the Goldman software theft.

A couple of Bloomberg videos (hat tip reader ComparedToWhat?) Mohamed El-Erian on the new normal and a good radio interview with Creditors oppose extending Lehman plan deadline Reuters. If you read our long Lehman post yesterday, we went after Alvarez & Marsal, the bankruptcy consultant, for its clearly conflicted position (it was advising the board before the BK, and since has issued reports that have the effect of exculpating the board, and therefore themselves). The post also pointed to an article from the FInancial Times, which described how A&M was spending time on a nutty scheme to coordinate the BK actions in 27 (maybe more) jurisdictions. Nice in theory, unworkable in practice, and more important, a patently obviously effort to enlarge and extend its involvement. Now get a load of this:

The committee’s filing also criticized a fee structure that it says encourages restructuring advisers, Alvarez & Marsal, to drag out the time it spends managing Lehman. Alvarez & Marsal has so far earned fees of about $115 million.

That is in addition to legal fees of $263 million. More dirt in the article.

Antidote du jour:

12 Comments:

attempter says:

July 11, 2009 at 5:39 am

If Sarah Palin had a brain in her head for a national political strategy (it seems she has enough animal cunning to succeed in the small pond of Alaska politics, but is out of her league at the national level), and/or a master adviser she'd be willing to listen to, then I'd believe in the plausiblity of her trying to lead a right-wing populist insurgency from within the Republican party.

There's certainly an opportunity there. The religious right know they've only been used for corporatist ends which don't benefit them in any way (just as, I hope, true progressives are starting to understand how utterly and irredeemably hopeless the Democratic party is).

The hard-core 20% among the non-rich who still support Bush constitute America's fascist base.

They're ready for a demagogue who can lead them directly rather than manipulate them the way the big-money mandarins have so far. Palin showed last fall she could rouse that rabble, leading them in chants of Burn Baby Burn. (Which was of course the real meaning of shrieking maniacally and idiotically, "drill baby drill". Even those people couldn't be stupid enough as to think drilling will solve their problems or feed their hate.)

So the "quit to tour the lower 48 toward 2012" idea is plausible. But like I said it doesn't seem Palin is mentally organized enough to do that.

D says:

July 11, 2009 at 8:18 am

Here are the Alaska Pension issues that may be material in Sarah Palin's decision to resign:

- the Alaska Public Employees Retirement System (APERS) is in serious financial trouble.

See: http://www.newsminer.com/news/2009/apr/23/state-lawmakers-differ-state-pension-plan/

- Alaska has one of the most generous pension funds for public employees, with amazing deals in terms of credit for years of service (you can purchase it), and one of the most generous payouts including a fantastic COLA clause.

- There is no doubt that in the next year, legislators will have to reform / cut benefits across the board to lower the deficit.

- If Palin is still Governor next year, there is practically no way for her not to have herself included in the new pension regime that is going to be less generous.

- The precedent (from the elimination of a previous pension scheme for Governors and high state officials) was that the legislature cannot retroactively change the terms once they retired.

Palin, by retiring early, locks in the much more generous benefits.

profnickd says:

July 11, 2009 at 9:36 am

She resigned because she's running for President. Being governor of Alaska will only serve to rack up more astronomical legal bills for herself from leftist cretins who are filing frivolous "ethics" complaints (they filed one the Monday after she announced her resignation).

However, she can't actually declare she's running for President because that itself would trigger federal campaign finance regulations. As of the end of July she's just a citizen — she can raise as much money as she wants (and spend it on virtually whatever she wants) without being subject to the regulations that other public officials are subject to.

As to her being "dumb" — I would only argue that the person we have in the White House must be dumbest who's ever occupied it so long as he's pursuing the policies that he apparently is.

Oregon Guy says:

July 11, 2009 at 10:32 am

After reading Galbraith's statement on the Fed as master financial regulator I suggest that Sec. Geithner be fired and replaced by Galbraith. Then perhaps we can get started on the road to a stable, sustainable economy.

donna says:

July 11, 2009 at 10:41 am

I would appreciate Twitter far more if it had to be in an artistic form. There's too much crap there right now to enjoy it.

NOTaREALmerican says:

July 11, 2009 at 3:10 pm

Re: Goldman Sachs profit bonanza could stoke anger Reuters. Duh!

I'd say "duh" isn't right. Most the Americans I know are clueless about GS. Most Americans think this is all "those people's" fault.

So, "huh, what's on `merican idle" or "See, just like Rush said, it's THOSE PEOPLE" would be more appropriate "exclamation".

VacantHomes says:

July 11, 2009 at 5:21 pm

"Goldman Sachs profit bonanza could stoke anger"

Yves — I was hoping you might directly address the Matt Taibbi RS article on Goldman in a blog post, since it's gotten a lot of attention.

It's a great article, my only quibble is with the "Engineering Every Major Market Manipulation Since The Great Depression" subtitle, which many have latched onto. This gives the article too much of a conspiracy-theory feel, as if Goldman has been some sort of evil behind-the-scenes influence continuously over the last 80 years, when in reality all of the market manipulations happened in the last dozen years (except for one in the '20s). It also makes it easier for Goldman to dismiss the article as wild conspiracy-theory nonsense, which is what they've semi-successfully done.

The key question is what changed 12-15 years ago to turn Goldman into the damaging entity it has recently become. And I agree with Yves' theory that part of it was probably Goldman going public, which changed the focus from "long-term greedy" (which is mostly healthy) to the short-term greed/fraud/bubble approach which has wreaked so much havoc.

Richard Kline says:

July 11, 2009 at 7:39 pm

So VacantHomes, Greenspan gave GS the keys to the kingdom. I don't propose that as a 'conspiracy,' just a working hypothesis of Greenspan's tenure and methods. Letting the markets work wasn't working all that well in the early 90s. Lots of ugly clean-up which in principle, in Keynesian theory, and in applied historical endeavor required more government intervention than he could stomach. Market manipulation and rosy pronouncements were 'interventions' regarding which Greenspan manifestly had no scruple. But to pull of market goosing, one needs goosegirls. Enter GS and JPM, stage right. Favorite sons henceforth, with rights to all goosegirls and the featherbeds upon which they have been lain.

And of course GS and JPM are smart enough to be in this game for themselves, not for St. Alan, and not at all 'for the country.' This is part of Greenspan's anti-regulatory bias/malfeasance: one can regulate or one can manipulate. It is quite obvious which he prefered, and reasonably obvious which he chose.

GS as a Frankenstein was a band of made men; it didn't 'just grow.' This contention is something which should really be researched rather than baldly asserted as I do here. Taibbi wanted to hit the market while the issue was fresh. Let's see what a couple of years of muckraking journalism will make of this. GS and JPM are the Standard and U.S. Steel of our times. And we surely need to bust their trusts' death grip.

autodidact says:

July 11, 2009 at 11:38 pm

If you are not a WSJ subscriber, you will only be able to read the first three paragraphs of the article "Failure of a Fail-Safe Strategy Sends Investors Scrambling" by following the link in this blog directly. If, however, you search for the title of the article on Google — Failure of a Fail-Safe Strategy Sends Investors Scrambling — the Google link will take you to the full text of the article. Neat, huh? Just a little tip for thrifty readers.

What will asset allocation look like at 2009 year-end? I say another bust.

VacantHomes says:

July 12, 2009 at 12:27 am

Richard — Yes, I suppose Alan Greenspan & Goldman/JPM were something of a "partnership". "Goosegirls" is a new one, heh.

I agree that Taibbi took the right approach here, put out an article with the allegations (which are all very likely true as far as I can tell), without necessarily having the rock-solid evidence to back them up at this point, just to at least try to wake America up to the situation and get the real investigations/reporting/muckraking going.

One thing that I've wondered about for some time is how much of all of this was really Goldman versus the other investment banks such as JP Morgan, Morgan Stanley, etc. Did they come up with most of the "innovations" such as using CDS to get around reserve requirements, or was that JPM? Did they come up with the No Doc subprime mortgage securitizations first? My impression is that Goldman was really the overall leader in much of this, just as JP Morgan was the leader back in the '20s. And as JPM became the public face of contrition during the Pecora hearings, perhaps Goldman will this time around in the next few years… we can hope.

Richard Kline says:

July 12, 2009 at 12:40 am

Buncha dopes voted for hope eight months ago; we see what hope's worth. We need action, but Americans cower in their ticky-tackies clutching their shrinking quarterlies, their hopes of personal defection dying in their arms. Solidarity, where art thou? . . . Over a barrel in the graybar hotel on an 'ecoterrorist' rap. : (

skippy says:

July 12, 2009 at 7:04 pm

@Richard k and vacanthomes,

Under all that frosting and decoration, the flesh of American popular history, is a bitter and salty cake, for if monies are the ultimate expression of capitalism, are not those that clutch the largest fistfuls, the gods of its construct.

And as long as we affix $$$ to every component of this world, in order to jot it down in the book of ownership, our tale of woe for profit, the only way we can gage our endeavors, will continue.

Skippy…seems the pain train lost its breaks down a large hill again. Biblical Gluttony pure and simple.

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