Links 10/4/08

Rare white lion cubs born BBC

Seeing with Your Skin BizTech

Ig Nobel awards: Irrelevant scientific research honoured Telegraph. The economics prize winner was suitably amusing.

Fannie Mae forgives loan for woman who shot herself CNN. She managed not to kill herself. Will we now see imitators?

A disturbing darn debate Christopher Caldwell, Financial Times

The Palin Phenomenon: “Like Care Bears meets Jenna Jameson” RFK Action Front. An interesting take.

Paulson Recruits Asset Managers as Rescue Moves Ahead Bloomberg, The feeding frenzy begins.

Lehman CEO Fuld To Testify At Congressional Hearing On Company’s Collapse Huffington Post. Why should we expect him to be any more truthful than he was before the collapse? As the wise man Rodney Dangerfield said, “Steal $1000 and you go to jail for ten years. Steal $100 million and you get called bad named before Congress for ten minutes.” Have your popcorn ready for October 8.

Dubai moves into the slow lane Telegraph

Egg and Tomato Oligopoly Skeptical CPA

MBIA Cries Fraud; Sues Countrywide HousingWire

They’re Pinching Hundred-Dollar Bills Geraldine Fabrikant, New York Times

Europe: In it together Financial Times. An excellent piece on how the crisis is playing out in Europe.

Antidote du jour:

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  1. wm shakespeare

    King Henry V Prologue

    Chorus O for a Muse of fire, that would ascend
    The brightest heaven of invention,
    A kingdom for a stage, princes to act
    And monarchs to behold the swelling scene!
    Then should the warlike Harry, like himself,
    Assume the port of Mars; and at his heels,
    Leash’d in like hounds, should famine, sword and fire
    Crouch for employment. But pardon, and gentles all,
    The flat unraised spirits that have dared
    On this unworthy scaffold to bring forth
    So great an object: can this cockpit hold
    The vasty fields of France?

  2. EvilHenryPaulson

    Link worth adding
    Russian billionaire Oleg Deripaska has been forced to hand over his stake in Magna International Inc. to his banks, after taking a margin call on his $1.54-billion (U.S.) investment in the Canadian auto parts maker.

    In a stunning turn of events, Paris-based bank BNP Paribas SA seized the Russian oligarch’s 20 million shares in Magna, unwinding a deal that closed 13 months ago and making one of the world’s richest men the latest casualty of the global credit crisis

    Background: Deripaska owns a Russian auto-maker and the idea was to use Magna’s expertise to take part of that fast growing market with the home-field advantages of an Oligarch. Magna is a huge parts supplier globally and has produced entire cars under contract for BMW and other companies. It was a #2 bidder for Chrysler when Cerberus went up with its bid

    The real story was how the Russian with bottomless pockets was working on margin, and provides one more anecdotal data point for deleveraging outside of hedge funds and brokers.

    Perhaps someone should construct an index of russian property ownership in Turkey/Finland to measure a broader Russian unwind. (Something like $160bn in 2009, $80bn in 2010 of commerical paper rolling over, dollar denominated mind you)

  3. Comrade Viv

    The Dubai story is really funny, they got handed a reality check. Dubai has been built on hype and speculation. It symbolises the grand excesses and speculation in the world.

  4. Anonymous

    Linking to the juvenile and vulgar comments of “RFK Action Front” diminishes the value of what you have to say…and the interest of (at least some) readers in viewing in your blog.

    john walker

  5. Anonymous

    ‘Nothing — absolutely nothing — could be politically safer than opposing George W. Bush. And yet the entire Democratic leadership, Barack Obama included, lined up to support a cockamamie plan proposed by this scorned and shriveled figure, a plan that was transparently nothing more than an audacious raid on the Treasury by Big Money hoods and yet another authoritarian power grab by a gang of murderous, torturing, warmongering toadies. This was the plan and these were the people that the Democrats decided to fight for.’

  6. RFK Action Front

    Hi Yves! Thanks for the link! You’ve been doing excellent work covering the bailout and recent financial turmoil — so thanks for that too.

    As for john walker in comment #4 — don’t be shooting the messenger, brother. It’s the slobbering adolescent Republican pundits like Rich Lowry and David Brooks who are turning this election into such an embarrassing circus. Just because I point that out doesn’t make me the bad guy.

    RFK Action Front

  7. Dave Raithel

    To the contraray of John Walker’s complaint at 8:41am:

    Juvenile vulgarity might go a long way to explaining Caldwell’s concluding observation (in the FT link above RFK): “It is astonishing … how little impression has been made by a crisis that has been under way for weeks now. This is a sign that the interests involved are well entrenched. It leads to the troubling suspicion that the US might be darn unreformable.” When one party offers sexy sizzle and people buy it, small wonder that the rest of us will be relieved if even a corporate front-man like Biden gets between the Armegeddon Now!!! Club and the launch codes.

    Palin was both inane and meretricious, and RFK’s characterization of Lowery was no exageration – so why object to the vulgarity of the term when the thing so termed is what it is?

  8. Dean

    I read with horror of what David Brooks was doing while watching the VP debate. Not so much that he was doing it; rather the fact that it was exposed.

    Therefore, I wanted to double check with Yves on this fine point; should it happen to me I hope to be spared such maltreatment in her expert hands. I believe all disciples (of various denominations) are protected in these matters by international treaties and savoir vivre conventions.

  9. mxq

    “Steal $1000 and you go to jail for ten years. Steal $100 million and you get called bad named before Congress for ten minutes.”

    There’s a great Chappelle show skit that spoofs this exact concept. Youtube has a clip from it. (Tron, a crack dealer, pleads the “fif” in front of a senate sub committee) I can’t find the whole clip anywhere, but for anyone interested its Chappelle show #205 (itunes or amazon probl. has for ~$1.99…warning: be prepared to be offended)

  10. apikoros

    “Will we now see imitators?”

    The important question is not whether we see imitators but rather whether imitation is required for anyone participating in the bailout, or, better yet, requesting a waiver from mark-to-market accounting rules!

  11. Abbott_Of_Iona

    Nothing left in the coconut squirrel………not surprising the police are thieves.

    Junior Murvin (Not the Clash)

    Police (SEC & Herr Paulson) & Thieves (Goldman Sachs & Herr Paulson) in The (Wall) Street

    Guns & Ammunition (Bazooka?)

    Genesis (The SEC allowing Wall Street gear up from 12:1 to 30:1 and that piece of cowardly filth Greenspan and his spawn Bernanke)

    Revelation (Bankrupt Wall Street ~ America wakes up)

    The next Generation WILL BE (have FAITH)

    Hear Me (The Fascists always loose even if many of the free die)

    Police & Thieves in the Street
    FIGHTING……… the Nation with their Guns & Ammunition

    Police & Thieves in the Street
    SCARING……… the Nation with their Guns & Ammunition

    From Genesis to Revelation

    The next generation….WILL BE……………HEAR ME

    All the crimes committed day by day
    No one try to stop it in any way
    All the peacemakers turn war officers

    Hear what I say

    Police & Thieves
    Police, Police & Thieves
    Police & Thieves
    Police, Police & Thieves


    Don’t wait.

    Fight FACISM NOW.



  12. Kafka

    Hank Paulson and the Treasury Department are engaging in the most massive tax fraud in the history of the United States by devising a “sham” acquisition structure for Fannie and Freddie which will arguably allow these failed entities to take approximately $80 Billion in tax deductions per year. This tax fraud dwarfs any scheme in history. Why did the acquisition of Fannie involve warrants for exactly 79.9% of the common stock at a price of .00001 dollars per share (essentially zero though by the time Bernanke and Paulson get done debasing the dollar in a manner which would make Stalin and Mao proud, it may be less than zero)? Well, Section 163(j)(6) provides that if a related exempt organization (the Treasury Department) controls a corporation (in this case Fannie) and the exempt organization guarantees the debt of such corporation, the interest expense on such guaranteed debt is nondeductible (or subject to severe limitations) for tax purposes. Treasury has clearly guaranteed the debt of Fannie as defined under section 163(j)(6)(D)(iii). Related person is defined under section 267(b) which provides the corporation must be controlled by Treasury. Control is generally defined by the IRS as owning 80% of the corporation. Thus, Hank and Treasury hope to evade taxes on $80 Billion of income per year based on acquiring only 79.9% of Fannie and thus, defeat their own tax law notwithstanding Treasury effectively owns 100% of Fannie. Interestingly, the Treasury actively throws commoners in jail for life for interpreting the tax law literally as the Treasury argues the non tax paying miscreants violated the spirit of the law under the so called economic substance doctrine (an undefined vague legal concept universally interpreted differently by most courts). In fact, a literal interpretation of 163(j) via its underlying regulations specifically requires that the transaction be analyzed based on the substance of the acquisition under the 1.957-2 regulations which is a catch all provision for any legal machinations to avoid the tax law. Most of the dudes Treasury puts in jail for life for interpreting the tax law literally are using tax laws which have no literal corollary to 163(j) (i.e., no legal requirement to look at the substance of the transaction). Hank Paulson may be the biggest tax fraudster in history: not only did he avoid taxes on $100 million of his Goldman stock through the use of 100% controlled private foundations; illegally change the law under Section 382 to provide tax benefits in the realm of $750 Billion to his friends on Wall Street (which under Section 7201 is likely tax evasion (the intentional violation of tax law to avoid taxes)); but now he is engaging in further tax fraud to the tune of $80 Billion of tax deductions per year (for interpretations of the tax law Treasury sends people to prison for life over) yet again for the benefit of his buddies on Wall Street. If Hank was judged by the same standards he judges others, Hank would have to go to jail for life (notwithstanding all of the securities fraud he has engaged in).

  13. Concerned Reader


    I enjoy reading your posts, but I am very annoyed by your meanness and hatred toward a very successful woman, Sarah Palin.

  14. Abbott_Of_Iona

    Kafka said…

    “Hank Paulson and the Treasury Department are engaging in the most massive tax fraud in the history of the United States”

    I am not familiar with the tax code of the United States.

    I take a more simple view.

    Hank Paulson is both the police and the thief.

    He is (his peers and lapdogs notwithstanding) an evil man.

    I never thought that in my lifetime I would see Facism.

    And it was beyond my imagination that Facism would sprout again in, of all places, the USA.

    I think I am correct in stating that the ban on short selling ceases at one second into 9th October 2008.

    Goldman Sachs then have, having been refreshed at the expense of the Citezens of the US, an opportunity to CRUSH what remains of main street banking. And Bernanke will buy all of the bad debts and make you pay.


  15. Yves Smith


    Your definition of “successful” is considerably more generous than mine. Her record in Wasilia and Alaska is decidedly mixed, she is facing corruption charges, and what I find more offensive than her ignorance (which she has displayed in interviews and in the vice presidential debate) is her lack of inhibition about lying, not typical politician-stretching-of-the-truth, but baldfaced lies.

    I consider my antipathy toward her to be amply justified. I know many highly successful women, and to a person, they are dismayed at what Sarah Palin is doing to the image of high performers.

  16. Anonymous

    Interesting old link:

    John Dizard, in a Financial Times article, “Useful thinking from inside the box,” reminds us of a metric that was once used by some savvy investors (the sort who would be interviewed at a Barron’s Roundtable) as a reasonable proxy for overall growth trends: cardboard box demand. And the cardboard box indicator is sending warning signals:
    Before Alan Greenspan was known for making scary speeches, market people knew he spent a lot of time looking at the market for cardboard boxes. Most things you use are put in a cardboard box at some point, and box use, production, inventories, and pricing are, therefore, useful indicators. Boxes, in this context, are specific to the North American market, as distinct from pulp and newsprint, which are global markets. What is the box world telling us?

  17. Anonymous

    Yves, chill. Concerned can’t offer a rebuttal for the stuff in your links, so all he he can do is to call you mean. That is so obviously lame that you shouldn’t dignify it with a reply.

  18. Richard Kline

    So Yves, your point re: Palin at 10:25 above is very telling, though I hadn’t conceptualized this so clearly before. Thinking back over my life to all the _actually_ successfull women I have known—brilliant, driven, informed, tougher than shoe leather in a crisis, clever, perseverant, speakers of truth—not one, not a single one, would be anything but APPALLED by Sarah Palin. And the issue would not be, fundamentally, her politics, but rather her complete hollowness and absence of any real personal integrity. She’s a vessel bearing slogans for personal advancement, and that is exactly what all the really successful women I have known would have cut their own throats before succumbing to. And, regrettibly, she does reinforce the negative stereotype of ‘I’m here for the purposes or others, not for what _I_ bring to the table myself.’ And that’s sad.

  19. Richard Kline

    Thornhill’s piece in the FT _is_ quite good, a balanced ‘state of the financial union’ summary.

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