Links 4/21/09

‘Quiet Sun’ baffling astronomers BBC

More Wii Warriors Are Playing Hurt New York Times

Thrice-Married Former House Speaker Charges Democrats With “Breaking Down Traditional Marriage” Matthew Yglesias

70% Off Sale! James Kwak

AIG Mystery Trades – Who Knew? Bruce Krasting

Self-Regulation Doesn’t Work Mark Thoma

Japan reportedly to slash GDP outlook to 3% fall MarketWatch

U.S. to give Chrysler, GM new aid Reuters

Ben’s Shakespearean dilemma Models & Agents

U.S. credit card firms seek to limit crackdown Reuters

Student Loans: Default Rates Are Soaring Wall Street Journal

Can Citigroup Be Restructured Without an FDIC Resolution? Institutional Risk Analytics. I am late to this, but it is an important read. Aside from setting forth how Citi could be put in receivership (although I am not as optimistic about a prepak as he is, and he does not consider the question of what happens to the capital markets operations while C is in receievership. They have to keep trading, otherwise competitors will make toast of every exposure Citi is known to have. But how do you deal with counterparty risk? The rating agencies will downgrade anyone with exposures to a BK’d firm. We need a solution to this piece of the equation.

Regardless, the most juicy bit is FDIC has disappeared some data for WaMu, Wachovia, and NatCity. Whalen thinks including the omitted data would shift the industry from a reported profit to a loss. More banana republic tricks.

The US Government: Over-engineering for Under-performance Roger Ehrenberg. This is a great post. I’d feature it separately, except I have noting to add.

Antidote du jour:

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  1. Anonymous Jones

    Re: WSJ’s student loan article. “‘It feels like I’m being punished for having gone to school,’ Ms. Kostecki says.” Generation of whiners, indeed. “Punished” because of decisions knowingly made going awry! Entitlement society run amok, methinks! And I was one of those who were *defending* the GOW amid the din of the nasty boomer comments that attended Kolvakis’s piece! How silly do I feel now?

    (not at all really … just saying it was a stupid comment by a card carrying member of the entitlement whiners’ association, no matter what the generation)

  2. Carrick

    Anyone care to affirm for myself and the record, that todays “great numbers!” from our biggest troubled banks was just Barney Frank’s accounting gift being unwrapped?

  3. mdf

    Anonymous Jones: “Punished” because of decisions knowingly made going awry!I’m not sure I understand your point, Mr. Jones: it looks to me the lady is speaking accurately. She went into debt by going to school, likely on the theory she would be able to comfortably repay the loans. The economy was then flushed down the toilet … and now she is in fact being punished for her actions.

    What am I missing?

  4. LeeAnne

    “Self-Regulation Doesn’t Work Mark Thoma”

    Wow. and 2 and 2 makes 4. The sleeping beauty wakes up.

    Business without laws doesn’t work.

    Wall Street has always required client agreement to use arbitration to settle any dispute. And the decisions are secret.

    So no one will ever know who among the public has been cheated and how. When people on this blog have asked ‘why do people invest in this stuff?’ The answer is that the public is very effectively kept in the dark by this vast cabal. This is not justice.

    Lots of information readily available on this. Just one: genius, greatest mind in the country Posner didn’t know this?

    The people responsible for destroying the well being of people all over the world are a cabal totally united in their venality and in charge for too long.

    It is obvious by now that this is a country specializing in rule of law for you and a million ways to Sunday for skirting the law for anyone with a buck.
    This is is all so sickening.

    I have to confess I haven’t read the article. I did read Posner on Clusterstock last night and that’s enough.

  5. K T Cat

    I love posts like the Matt Yglesias article where acxcusations of hypocrisy are used to discredit having standards. If you jettison any standard where hypocrisy occurs, you end up with anarchy. I’d love to see little Matty live in such a neighborhood. Can’t you see him asking his neighbors why they stole his car, his stereo and his computer?

    “Well, Matt, once when you were six, you stole a piece of gum from your mom’s purse! You have no right to talk. Go away!”


  6. Harlem Dad

    Re: Traditional Marriage

    It boggles my mind that, despite all that’s happened, this remains an issue at all. Do the millions of people who’ve lost jobs and homes really care that same-sex partners might want to get married?

    More theater of the absurd to distract us from the important stuff.

    Tim in Sugar Hill

  7. Harlem Dad

    Re: Credit Cards

    Credit card issuers have received over $120 billion in taxpayer funds since October, money the government has asked them to use to expand lending.I’ve been an American Express cardholder in good standing since 1985 — 24 years! They just cut my line of credit to about 28 percent of what it was, which is just a few dollars more than my current balance.

    That balance will be paid in full in 30 days. But I’m canceling my account with American Express today. Further, I’m in the process of changing my lifestyle so that I never again use credit cards. If I don’t have the cash on hand in my debit account, I won’t buy it. It’s that simple.

    I’ll follow up with phone calls and letters to my representatives in Washington, just to let them know how much “expansion of lending” their $120 billion has bought.

    Tim in Sugar Hill

  8. Don

    First, from the FT:

    “Fresh questions on Pandit’s future at Citi

    By Francesco Guerrera and Joanna Chung in New York

    Published: April 20 2009 23:38 | Last updated: April 20 2009 23:45

    Vikram Pandit, Citigroup’s chief executive, will on Tuesday strive to convince investors that the company is on the road to recovery amid fresh questions over his future at the financial group.

    Ahead of Citi’s annual investor meeting, it has emerged that senior officials at the Federal Deposit Insurance Corporation privately discussed who might replace Mr Pandit if the bank needed more government aid.

    “It is unthinkable that Vikram could stay on if Citi requires more federal funds,” said a person familiar with the matter. “It is prudent to be thinking about different scenarios.”

    The FDIC is only one of the regulators which has a say on whether Mr Pandit steps down if the government bails out Citi for the fourth time in six months following completion of the “stress test” of its health.

    Any decision on Citi’s leadership will be led by the Treasury, which is about to take a 36 per cent stake in the company and will sanction further capital injections.

    The Federal Reserve and the Office of the Comptroller of the Currency, which regulate national banks, will also have to bless top management changes.

    People close to the situation said FDIC officials had discussed successors to Mr Pandit, who became chief executive in December 2007. “

    So, there might well be some changes soon. The IRA post was interesting, but I think that it ultimately showed how complicated taking over Citi would be. Nevertheless I enjoyed it, and essentially agree with it. I’m just more pessimistic about problems mentioned working out.

    Don the libertarian Democrat

  9. Anonymous Jones

    Punishment is “the practice of imposing something unpleasant or aversive on a person or animal, usually in response to disobedient or morally wrong behavior.” “Punishment” involves conscious action on the part of the punisher. The use of “punished” in that sentence is a strategic attempt (though undoubtedly subconscious) at claiming victimhood at the hands of something other than oneself. It seems to me that one would have to jump through some serious semantic hoops to equate “punished” to “I’m suffering adverse consequences because of a decision I made under uncertainty. The future unfortunately turned out not to be as I supposed when I made that decision.”

    My whole point was that her phrasing made it seem that she was “entitled” to the future she supposed would exist. No one is promised tomorrow or what it will look like.

  10. profnickd

    Re: the Institutional Risk Analytics Citi article

    At first I thought this was going to be another one of those melodramatic, “we can’t let C fail!” articles — turns out it was pretty much the opposite, with lots of good data.

  11. snerfling

    Re: InfoAbritrage article:

    Nice essay, Roger, but you miss some essential points:
    * Why was the FIRE economy constructed in the 1st place?
    * Why couldn’t the US compete with other nations on a productive basis?
    * Why was credit expanded in order to pull forward consumption?

    When you understand the answers to those questions, then you will understand the machinations behind the recent administration(s). No, it has nothing to do with global banking conspiracies, etc. Rather, it has to do with a lack of basic confidence in the abilities of the populace. You hint at it by suggesting the FedGov doesn’t believe we can handle the truth.

    You know what? They’re right. Unfortunately for them, there’s only one way out of this mess, and it’s coming no matter what anyone does to try and prevent it from occurring.

  12. Susie Dow

    Thought this might be of interest. AIG covered insurance for Halliburton/KBR in Iraq. Every contract includes premiums – which are a reimbursable expense as the insurance is a legal requirement under a 1940’s era law known as the Defense Base Act.

    A new series of articles and investigations from ABC News, ProPublica and the LA Times with T. Christian Miller, author of Blood Money: Wasted Billions, Lost Lives, and Corporate Greed in Iraq, on the failure of the Defense Base Act to provide care for injured contractors after they return from Iraq.

    Injured War Zone Contractors Fight to Get Care From AIG and Other InsurersBy T. Christian Miller, ProPublica and Doug Smith, Los Angeles Times – April 16, 2009

    Civilian contractors died like soldiers. They were injured like soldiers. But back home, the U.S. government consigned the wounded and their families to a private insurance system that shunted them to substandard treatment and delayed their care as they suffered from devastating injuries, an investigation by the Los Angeles Times, ABC News and ProPublica has found.Injured war zone contractors fight to get careBy T. Christian Miller and Doug Smith Los Angeles Times, April 17, 2009

    Civilian workers who suffered devastating injuries while supporting the U.S. war effort in Iraq and Afghanistan have come home to a grinding battle for basic medical care, artificial limbs, psychological counseling and other services.Bailed-Out AIG Pampers Execs While Denying, Delaying Claims of Contractors Injured in IraqBy Brian Ross and Avni Patel, ABC News, April 17, 2009

    Insurance giant AIG, the same company that rewarded its executives with millions in bonuses and spent hundreds of thousands of dollars on a spa retreat at an exclusive California resort and private jets, has been nickel and diming employees of private contractors injured in Iraq, with a pattern of denying and delaying their claims, a joint investigation between 20/20, the Los Angeles Times and the non-profit group ProPublica has found.

  13. emca

    To your antidote du jour:
    one sad group of puppies hung out to dry…for some reason it reminds me of handling of current fiscal dysfunctions.

  14. asphaltjesus

    Regarding the story about student loans, what’s happening is more pernicious.

    As much as many legitimately complain about health care costs rising much faster than the average American business or individual’s ability to pay for insurance, the exact same thing is happening in the delivery of higher education.

    The math used to calculate the long-term benefits of a first-tier public college education (private Universities are way, way out of reach) as a way for the unwashed masses to ‘get ahead’ stopped working in the 1990’s.

    The social implications aren’t pretty. Off the top of my head, Declining social mobility, declining global economic competitiveness, hopeless cycle of poverty and others.

    The article dances around the issue but doesn’t want to be the bearer of bad news no one wants to hear.

  15. PeeDee

    A great post from David Goldman on First Things:

    Sometimes it helps to look at the world with a kind of simplicity. Think of it this way: Credit markets derive from the cycle of human life. Young people need to borrow capital to start families and businesses; old people need to earn income on the capital they have saved. We invest our retirement savings in the formation of new households. All the armamentarium of modern capital markets boils down to investing in a new generation so that they will provide for us when we are old… Perhaps the world is poorer now because the present generation did not bother to rear a new generation. All else is bookkeeping and ultimately trivial… In the industrial world, there are more than 400 million people in their peak savings years, 40 to 64 years of age, and the number is growing. There are fewer than 350 million young earners in the 19-to-40-year bracket, and their number is shrinking… In demographic terms, America is only the leper with the most fingers… The graying of the industrial world creates an inexhaustible supply of savings and demand for assets in which to invest them—which is to say, for young people able to borrow and pay loans with interest. The tragedy is that most of the world’s young people live in countries without capital markets, enforcement of property rights, or reliable governments…

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