Market Reaction

Dow is up by almost 400 (10,738.28 at 3pm today). We need to take time and plan the bailout better. The world has not ended as was predicted by the scholars and pundits at the Fed / Treasury.. Maybe I am missing something or am very very stupid.

From Dealbook:

The Center for Responsive Politics, a Washington nonprofit group that studies money and politics, reports that on average, lawmakers who voted in favor of the bailout bill have received 51 percent more in campaign contributions from sources in the finance, insurance and real estate industries — or FIRE industries, for short — over their congressional careers than those who opposed the emergency legislation..

Quick Comment

Taxes will go up. Interest rates will go up. Inflation will go up. Prices of consumer goods will go up. Total US debt will go up. Budget deficit will go up. Dollar will go down.

Why should 300 million people be stuck with the bailout of a few people on Wall Street? I still do not understand how they came up with the $700,000,000,000.00 number other than Mr. Paulson telling us that it needs to be ‘sufficiently large’, we still have not heard a logical price or model for valuation of distressed assets from bruised Wall Street firms, we still do not have a proper regulatory system in place nor regulation to prevent such a thing from happening in the future, curbs on executive compensation are next to nothing currently and Mr. Paulson still remains King Henry.

The bailout done right is needed very much and will be useful for all of US. Ramming a half digested piece of you know what down the throats of the taxpayers is not.

The latest New Yorker cover is memorable.

"They're our next-door neighbors and you can actually see Russia from land here in Alaska, from an island in Alaska." - 'POTUS is only a heartbeat away' contender...

Meanwhile, the ‘no-contraceptive’ agenda continues…

Report on a new ‘conscience clause’ recently added by the U.S. Department of Health and Human Services that can legally help your pharmacy clerk from not filling out the pill, intra uterine devices or emergency contraception prescriptions just because of the clerk’s religious beliefs. The interesting aspect is that now health care agencies, physicians and clinics can legally refuse to offer even referrals citing personal, moral or religious beliefs.

The administration has proposed a new set of regulations that it says will protect doctors, nurses and health care workers who object to abortion from having to participate in providing care they find objectionable.

If workers or organizations declare that the pill, intrauterine device (IUD) or emergency contraception are contrary to their beliefs, they can deliberately withhold both services and information from patients.

Easy access to contraception helps prevent an estimated 1.3 million unplanned pregnancies and 630,000 abortions each year. The rule would directly affect the 37.3 million Americans living in poverty who can’t afford the cost of contraception, especially those who live in small communities where federally funded hospitals or clinics could refuse to support comprehensive family planning.

Huge cow patty with a marshmallow in the middle fails

Looks like the debate will go on in earnest. I heard a little while back that the bailout failed to clear the House. My view is that unless the bill contains clear provisions for the taxpayer to get some money back, unless there are clear provisions for a sane re-purchase price of distressed assets from banks eager to unload their toxicity and unless there are clear rules to limit CEO pay, we will be in limboland for some time. Just my view, but a lot of these lawmakers are going home to get re-elected in a couple of months and it will be the little taxpayer that they will be meeting there. And judging from reactions online and off, the taxpayer does not like what they see - a clear bailout with little to no regulation or oversight...

“A huge cow patty with a marshmallow in the middle of it.” – Rep. Paul Broun’s (R-Ga.) description of the bailout plan. (From Politico)

I guess this is the cue for Mr. McCain to again dramatically suspend his campaign and then - dramatically do nothing...

On Wall Street today: Zeitgeist

King Henry's powers

Mr. Henry Paulson, the Treasury Secretary had originally submitted a bailout plan to the Congress that was all of three pages long and asked Congress to give him explicit authority to do what he seems fit with an arbitrary of amount of $700,000,000,000.00. Specific wording in the three page plan that amounted to hubris included the following:

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.

Congress said that Mr. Paulson overreached and asked for too much and spent about a week crafting legislation that aims to curtail Mr. Paulson’s powers.

Well, here is what we have after the exercise. From here.

• Mr. Paulson can choose to buy from any financial institution that does business in the United States, or from pension funds, with wide discretion over what he will buy and how much he will pay.
• Under some conditions, Mr. Paulson can choose to bail out foreign central banks.
• Under the bill, Mr. Paulson is to buy the securities at prices he deems appropriate. Mr. Paulson may set prices through auctions but is not required to do so.
• Mr. Paulson is directed to “make such purchases at the lowest price” that is “consistent with the purposes of this act.”
• Mr. Paulson does not need the approval of the Fed chairman or the oversight board to buy financial assets not linked to mortgages.

Here is the kicker:

• Mr. Paulson is to be one of the five members of the board watching over his own actions...

That sure is a fine recasting of King Henry's powers...

Lament

The full draft of the bailout bill here. I still do not think this is the right track. The Congress grants full authority for the first $250,000,000,000.00 of a total approved bailout amount of $700,000,000,000.00 to Mr. Paulson rightaway while giving him the authority to appropriate the remaining $450,000,000,000.00 as soon as he deems fit unless both the Senate and the House decide that further appropriations might not be a good idea. The chances of that happening is next to none... This still seems like a bailout of Wall Street fat cats (sorry, could not resist the useless cliche') - regardless of what Mr. Obama and Mr. McCain tries to say to the contrary...

Joseph E. Stiglitz of the Nation said it better than a lot of us...

There are four fundamental problems with our financial system, and the Paulson proposal addresses only one. The first is that the financial institutions have all these toxic products--which they created--and since no one trusts anyone about their value, no one is willing to lend to anyone else. The Paulson approach solves this by passing the risk to us, the taxpayer--and for no return.

The second problem is that there is a big and increasing hole in bank balance sheets--banks lent money to people beyond their ability to repay--and no financial alchemy will fix that. If, as Paulson claims, banks get paid fairly for their lousy mortgages and the complex products in which they are embedded, the hole in their balance sheet will remain. What is needed is a transparent equity injection, not the non-transparent ruse that the administration is proposing.

The third problem is that our economy has been supercharged by a housing bubble which has now burst. The best experts believe that prices still have a way to fall before the return to normal, and that means there will be more foreclosures. No amount of talking up the market is going to change that. The hidden agenda here may be taking large amounts of real estate off the market--and letting it deteriorate at taxpayers' expense.

The fourth problem is a lack of trust, a credibility gap. Regrettably, the way the entire financial crisis has been handled has only made that gap larger.

I want to do more than merely arrive. My whole being is predicated on getting as far inside as I possibly can, for knowledge depends on navigating forbidden waters. As soon as you announce to yourself (or others) that you are "inside", you automatically become "outside", an observer, a person discussing the surroundings.

- Robin Magowan, Improbable Journeys, Evanston: Northwestern University Press, 2002

The debates

McCain keeps making specious claims and Obama keeps defending them.. This way the McCain camp can deny Obama victory and Obama cannot really claim victory - since he is in a position of defence... Plus, not once did McCain look at Obama in the eye - that was very very strange...

McCain looked down at his notes, smiled nervously and fidgeted - unsure most of the time. I did not see the confidence that was supposedly a mark of this man.

This quote I found on Andrew Sullivan cemented a lurking feeling I had watching the debate...

He was scolding him as if he were a school master, but it is far from clear in any of the exchanges that he knew more. Obama was not forceful enough, but he was so much more focused than he was earlier in the year. McCain came off, in my view, as a snide, bitter old man. His comments betrayed the sentiment of, “How dare you even think that you can compete with me.” This is what Clinton thought, and it destroyed her.

Tongue in cheek...

From a statement read at an event marking the release of Best American Poetry 2008, held last night at The New School, in New York City.

As you know, the glut of illiquid, insolvent, and troubled poems is clogging the literary arteries of the West. These debt-ridden poems threaten to infect other areas of the literary sector and ultimately to topple our culture industry.

Cultural leaders have come together to announce a massive poetry buyout: leveraged and unsecured poems, poetry derivatives, delinquent poems, and subprime poems will be removed from circulation in the biggest poetry bailout since the Victorian era. We believe the plan is a comprehensive approach to relieving the stresses on our literary institutions and markets.

Let there be no mistake: the fundamentals of our poetry are sound. The problem is not poetry but poems. The crisis has been precipitated by the escalation of poetry debt—poems that circulate in the market at an economic loss due to their difficulty, incompetence, or irrelevance.

Illiquid poetry assets are choking off the flow of imagination that is so vital to our literature. When the literary system works as it should, poetry and poetry assets flow to and from readers and writers to create a productive part of the cultural field. As toxic poetry assets block the system, the poisoning of literary markets has the potential to damage our cultural institutions irreparably.

Read on here...

Compensation watch

Just about everyone heard about the largest bank failure in US history - Washington Mutual was seized and sold to Chase for small change last night. As is the norm with these things, the ugly head of excessive executive compensation showed up again.

The New York Times reports on the following:

Mr. Alan H. Fishman, CEO of Washington Mutual who has been on the job for less than three weeks, is eligible for $11.6 million in cash severance and will get to keep his $7.5 million signing bonus.

The guy worked for less than three weeks at Washington Mutual… Morally and ethically, something is not right.

Head of Skate

McCain was for debating before being against it after which he now seems to be for it.

In addition to inventing the Blackberry, McCain also is said to be involved in time travel.

History redux

There was yet another exhortation this morning to pass the bailout. We should not rush to pass the bailout like we rushed into a war five years ago… As usual, Jon Stewart deconstructs.

Palintology

Conservative political commentator Kathleen Parker examines Palin in a National Review article and it looks like even conservative women are starting to balk at the prospects...

No one hates saying that more than I do. Like so many women, I’ve been pulling for Palin, wishing her the best, hoping she will perform brilliantly. I’ve also noticed that I watch her interviews with the held breath of an anxious parent, my finger poised over the mute button in case it gets too painful. Unfortunately, it often does. My cringe reflex is exhausted. Palin filibusters. She repeats words, filling space with deadwood. Cut the verbiage and there’s not much content there.

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

Photos - power lines

As China plans its first space walk, they seem to have approved short selling too..

May you live in interesting times..

Space news: The three taikonauts — the Chinese term for astronauts — plan to run tests in space and launch a small satellite monitoring station. They are carrying traditional Chinese medicine on board, in case of sickness, and their diet includes shredded pork sautéed with garlic and grilled beef with spicy sauce.

While on earth: China's action contrasts with regulators in the U.S., Europe and Australia that have banned short selling in the past week to shore up financial shares battered by the global credit squeeze.

Meanwhile here, we seem to be finally having a debate on the bailout - or so it seems...

Thus spake Sarahthustra - II

Continuing the series started here:

Vice Presidential candidate Palin on the benefits of the bailout package on CBS yesterday: "Ultimately, what the bailout does is help those who are concerned about the health care reform that is needed to help shore up the economy– Oh, it’s got to be about job creation too. So health care reform and reducing taxes and reining in spending has got to accompany tax reductions."

Health care reform and the financial bailout!! As hard as I try, I do not see the connection by any stretch of imagination... Deer / Headlights...

On negotiations with the Russians and foreign policy at the same interview: 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.

What is good for the goose is good for the...

New Yorker's Andy Borowitz has an interesting take on why he is "too big to fail" and makes his case for a bailout.

This is the first time I have ever asked for a bailout from the Federal Reserve. I know what you’re thinking. Why do I deserve your largesse, and I do mean largesse, since I’m asking for five million big ones? The answer is simple. Like many of our nation’s financial institutions, I am simply too big to fail.

Folkert de Jong's sculptural tableau. The Shooting...At Watou; 1st July 2006 on display at the James Cohan Gallery (between Sept 6 - Oct 4th 2008)

Archive trotting

While the reasons behind the current mortgage crisis are myriad, easy down payments, easy access to cheap capital, low interest rates and watered down closing documents were among the leading ones… Here are a couple of speeches which may have been well intentioned...

Remarks by the President at the Conference on Increasing Minority Homeownership at The George Washington University. Tuesday, Oct. 15, 2002 (Full speech here)

To open up the doors of homeownership there are some barriers, and I want to talk about four that need to be overcome. First, down payments. A lot of folks can't make a down payment. They may be qualified. They may desire to buy a home, but they don't have the money to make a down payment. I think if you were to talk to a lot of families that are desirous to have a home, they would tell you that the down payment is the hurdle that they can't cross. And one way to address that is to have the federal government participate. And so we've called upon Congress to set up what's called the American Dream Down Payment Fund, which will provide financial grants to local governments to help first-time home buyers who qualify to make the down payment on their home. If a down payment is a problem, there's a way we can address that. And when Congress funds the program, this should help 200,000 new families over the next five years become first-time home buyers.
.....

I'm also going to encourage the lending industry to develop a mortgage market so that this script, these vouchers, can regularly be used as a source of payment to provide more capital to lenders, who can then help more families move from rental housing into houses of their own. …

Remarks by the President on Homeownership at the Department of Housing and Urban Development Washington, D.C. June 18, 2002 (full speech here)

Probably the single barrier to first-time homeownership is high down payments. People take a look at the down payment, they say that's too high, I'm not buying. They may have the desire to buy, but they don't have the wherewithal to handle the down payment. We can deal with that. And so I've asked Congress to fully fund an American Dream down payment fund which will help a low-income family to qualify to buy, to buy. We believe when this fund is fully funded and properly administered, which it will be under the Bush administration, that over 40,000 families a year -- 40,000 families a year -- will be able to realize the dream we want them to be able to realize, and that's owning their own home. (Applause.)
.....

The third problem is the fact that the rules are too complex. People get discouraged by the fine print on the contracts. They take a look and say, well, I'm not so sure I want to sign this. There's too many words. (Laughter.) There's too many pitfalls. So one of the things that the Secretary is going to do is he's going to simplify the closing documents and all the documents that have to deal with homeownership.

Thanks to Michelle for the link.

Bartolomeo Veneto, 'Portrait of a Man', 1510, Oil on panel

Why the bailout just may not work

The more I read and think about the $700,000,000,000.00 bailout, the less it seems to make sense.

• The $700,000,000,000.00 bailout has a low probability of saving Wall Street banks because the size of the problem is much larger than the subject of this bailout : sub-prime mortgages (defaults from Alt-A's, option ARM's and second mortgage's have not even started).
• The bailout will cause the dollar to drop. In fact the slide has already started. The only way we could raise $700,000,000,000.00 will be to issue debt in the form of Treasury bills. The bills will need to demonstrate higher yields to attract the dollars sitting in China and the Emirates. As Washington starts to print more dollars to repay the high yield Treasury payments, the value of the dollar will fall leading to inflation amidst the glut of dollars. At some point foreign investors will stop buying U.S. Treasuries entirely, potentially throwing our country into a debt crisis)
• At home, the falling dollar will fuel inflation resulting in increases in the prices of everything we import (primarily gas and consumer products). In addition, a weak dollar naturally causes interest rates to shoot up, including those adjustable mortgages...

There are two other factors one needs to consider here:

• Total debt: If Congress signs off on the $700-billion rescue plan, the debt ceiling will have to be raised to $11.3 trillion. That is 70% of our GDP.
• Budget deficit: If Treasury spends the entire $700-billion next year, as some economists expect, it would drive next year's budget deficit, now projected to be around $500 billion, to $1 trillion or more.

Complied from here, here and here.

No way, No how, No bailout…

In other interesting news, the Protect Palin Plan is working just fine while the Free Palin! movement got a taste of what might be in store... It really does not taste too good...

How the $700,000,000,000.00 bailout will ensure that Goldman Sachs employees keep getting their bonuses come December this year...

Desperate measures...

The campaign keeps getting weirder by the minute... Now McCain wants to postpone the debate... Hmmm. In this case it is clear that he was for the debates before being against it...

It might have been a difficult Friday evening for McCain especially if he had to answer questions like the ‘were you for deregulation before you were against it’ flip flop.. (among the many others)...

Conflicted but uplifting...

NPR broadcast this segment of ‘This I Believe' a couple of mornings back as I was driving to work. A Penn State professor talks about his daughter, three-year-old Genevieve Rogers who was born with trisomy 21 (Down syndrome).

I now believe Genevieve is here for everyone. I believe Genevieve is taking over the world, one heart at a time — beginning with mine. I believe that what was once our perceived damnation has now become our unexpected salvation.

Genevieve recently turned 3 and is doing very well for herself. She runs and climbs on everything and loves to wrestle with her two older sisters and her younger brother. She doesn't have a lot of spoken words yet, although her first full sentence turned out to be, "What's up with that?"

She does have over 100 signs that allow her to ask for strawberries, pizza or ice cream, or tell us when she wants to sleep, or play on her computer. She goes to a regular preschool three days a week and seems to know more people around town than I do. I laugh every day because of Genevieve.

On my right wrist, I wear a simple silver chain with three little beads on it. I used to say the three beads signified the third chromosome that results in trisomy 21, Down syndrome. Now when I look at those beads, they simply remind me that I don't ever know as much as I think I do, but I'm always capable of more than I think I am.

Conjecture

• Wonder why Warren Buffet suddenly started to decide on investing $10.0 billion in Goldman Sachs today?
• Did Secretary Hank Paulson decide on unrolling the $700 billion bailout the moment his alma mater Goldman Sachs started to get into trouble? The bailout was announced the day Goldman shares sank almost $30 last Wednesday...
• Why did Goldman Sachs suddenly change its position from a investment bank to a 'commercial bank' last Sunday? Looks like it was in real trouble...

Of course, now Bloomberg news is now reporting this:
Goldman Sachs Group Inc. and Morgan Stanley may be among the biggest beneficiaries of the $700 billion U.S. plan to buy assets from financial companies while many banks see limited aid, according to Bank of America Corp.

Maybe just an inconsequential conspiracy theory, but the bailout really starts to stink - in investment banks they have a word for this situation: 'conflict of interest'...

Boondoggle dissection

A draft version of the bill authorizing Secretary Paulson to use $700,000,000,000.00 as he pretty much pleases is posted here. A quick, non-economist, layman's readthrough does not seem augur well for the following reasons:

1. How did we arrive at the $700,000,000,000.00 number? Very Unclear.
2. The planned Oversight Board is very very weak and staffed by insiders.
3. To call the section on Executive Compensation 'opaque' would amount to flattery.
4. No clarity on the price that the people would pay to acquire toxic assets.

1. It is customary in planning and budgetary practices to breakdown large dollar numbers into smaller chunks which help demystify and clarify the individual components and constituents which ultimately add upto create the total amount. This is typically done either in the main text or appendices: The only reference to $700 billion I could find was the following sentence:

The authority of the Secretary to purchase troubled assets under this Act shall be limited to $700,000,000,000 outstanding at any one time, by aggregating the purchase prices of all troubled assets held and any expenditures.

No breakup, nothing... Hopefully, a breakup of how the 700 number is clarified in the final version of the bill.

2. Everyone has been clamoring for a strong oversight board - if not to make sure that Secretary Paulson does not go on a trip to Las Vegas with the booty, at least to make sure that the billions are not used in partisan, Street friendly ways. Well, from the looks of it, the oversight board is weak and not independent at all. Judging from the fact that most of the players who indirectly wrote / co-wrote this are on the oversight board - cat guarding the henhouse...

The Emergency Oversight Board shall be comprised of the following:
- Chairman of the Board of Governors of the Federal Reserve System
- The Chairperson of the Board of Directors of the Federal Deposit Insurance Corporation
- Chairperson of the Securities and Exchange Commission
- Two members who are not government employees, having appropriate financial expertise

The first three individuals mentioned were government employees tasked with making sure that we did not fall into this mess in the first place and they failed. Now we put them on an oversight board to bail out companies responsible for bringing the economy to its knees...

Hopefully, we see a little more independent oversight teeth added to the final version.

3. The other item deemed important was the need to put checks and balances on executive compensation such that all entities seeking to sell assets through the bailout under the Act meet some kind of punitive standards. One of the ideas advanced was to limit compensation for the CEOs of such entities to be lower than the United States President... Well, the bill is as vague as it can get in this subject...

The Secretary shall require that all entities seeking to sell assets through a program established under this Act meet appropriate standards for executive compensation and shareholder disclosure in order to be eligible, which standards shall include
- limits on compensation to exclude incentives for executives to take risks that the Secretary deems to be inappropriate or excessive;
- a claw-back provision for incentive compensation paid to a senior executive based on earnings, gains, or other criteria that are later proven to be inaccurate and
- such limitations on the entity paying severance compensation to its senior executives as are determined to be appropriate in the public interest in light of the assistance being given to the entity.

Pretty much means - the CEOs keep on making what they currently get - the bill will couch it in a language so broad and unclear, you CEOs need not have to worry one bit...

Hopefully, we will see clearer punitive measures added to the final version.

4. As far as the prices that they plan on purchasing the assets at – the bill is very, very vague – Are they planning on purchasing the assets at market price (par) or substantially above market price (both of which has its own advantages and disadvantages in a macro economic aspect)…

This definitely needs a lot of work and is not something that the lawmakers should rush and sign…

Lipstick on the bailout, still a bailout

Mr Hank Paulson is performing the job he knows best – peddle snake oil to the unsuspecting masses… Come to think of it, this was what he learned and honed as an investment banker at Goldman Sachs - sell your way into a deal using fancy shmancy words...

Memorable quotes from Secretary Paulson trying to sell the $700,000,000,000.00 bail out plan to lawmakers today.

"this is not an expenditure, it’s an investment”

“if you impose any kind of punitive conditions, this program won’t work and we’ll all lose"

"this is all about the American taxpayer, that's all we care about”

The last statement is hilarious. Maybe the guy thinks the rest of us are complete idiots... The Lede is liveblogging the session...

A discussion draft of the bill here. (via Dealbook)

Wish list

Heard that they are having hearings on bailouts and free handouts over in DC. While the lawmakers are at it, can they throw in a couple of trillions for the following wish list?

• Nationalized healthcare for all residents with options for foreigners to avail of healthcare benefits for a nominal fee.
• Free food and clothing for all US residents with drop box provided at street corners to discard leftover clothing and food.
• Free checking accounts with a guaranteed minimum of $100 at all times for all residents.
• Nationalize the airways with maximum ticket prices not to exceed $100 (with plans for extension of the $100 ceiling to international routes).
• Guaranteed free education, housing, healthcare and any other benefits one can think of for residents under 15 and guaranteed social security benefits for all residents above the age of 15.
• Citizenship for just about anybody who steps foot into the country (even if the individual is in transit). Of course, immediate retroactive citizenships for just about any illegal alien at this point in time is indisputable.
• Authorize and bear costs of building custom designed homes to house just about anybody who feels like they are not satisfied with the one they have already.
• All mortgage down payments capped at 1% of the total value of the house with the remaining payments paid monthly by the home-owners future grandchildren.
• Mandatory one month ‘all expenses paid for’ vacation at a location of the individual’s choice for all US residents above the age of 30.

Some more ideas are in the works, but as soon as they get started with the list above, we could add more…

Olivier Blanckart, 'MoMA Don't Preach', 2008, adhesive tapes, cardboard, kraft paper, trampoline, ink jet print, Life sized. From a recent visit to P.P.O.W Gallery (exhibition runs from Sept 4 to Oct 4, 08')

On that note

Adapted from here: "If you had a stack of $1000 bills in your hand only four inches high you would be a millionaire. 700 billion dollars would be a stack of $1000-dollar bills 44 miles high"

On the $700,000,000,000.00 ‘Honk for Hank’ campaign

I am sure the following is old news:

Hank Paulson, the US treasury secretary on Saturday raised the price tag on its emergency plan to revive the U.S. financial system, asking Congress for authority to spend up to $700 billion to relieve crippled financial institutions of their mortgage-based assets, a sum that would exceed the cost of the Iraq war so far.

What is NOT making the mainstream news rounds is the following plans hatched by Wall Street to benefit from the largesse:

- Blackstone Group, may be interested in pursuing an asset-management assignment from the government.
- Pimco, which manages about $830 billion in assets, would like to be an asset manager for the government.
- BlackRock, a big New York asset management firm, was also involved in negotiations with the government
- Bank of New York Mellon and JPMorgan Chase were also campaigning for a spot.
- While an earlier plan said that only US headquartered firms could sell assets to the government under the program, a later version said sellers could include any financial institution (foreign banks).

So, lets get this right - first these firms use high risk financial instruments to bleed people out of their homes, make their money while the bubble is still strong, then, as the bubble pops, they plan to get the government to take over these risky holdings for pennies on the dollar and as the government guarantees these toxic instruments other Wall Street firms come up and catwalk their way to be money and fund managers for these instruments charging the government additional monies. Reminds me of carrion birds feeding on leftover carcasses after the lions have fed themselves.

At this point, when just about everyone is clear that Wall Street firms and its leaders were overpaid, under scrutinized and overvalued, why would anyone with a sane mind give them even more - especially in the management of these assets that the taxpayer is planning on buying and on top of that - have them charge the taxpayer to manage the assets?

Is this not the time for the government to create a public agency or a corporation that is empowered to drive a hard bargain and acquire these toxic assets for the lowest possible price to protect taxpayers against potential future losses, manage these assets until the taxpayer sees a return on the $700,000,000,000.00 investment and then ultimately sell these assets when they become profitable on the open market thus giving back some of the valuable taxpayer money back where it belongs : TO THE TAXPAYER!? Why should the people who are financing this largesse be NOT allowed to have a share of this ownership?

Any plan is suspect when the leaders of the party who propose the plan itself may not have anything positive to say about it. I am yet to read a single piece of economic analysis that talks about the benefits of this $700,000,000,000.00 socialist rescue effort other than the fact that it will bail out big Wall Street firms (oh, and add to that foreign banks too - after intense lobbying this weekend, they managed to get themselves on the gravy train).

Even William Kristol, a regular commentator on the Fox News Channel and staunch conservative who is normally a champion right wing intellectual mouthpiece cannot muster a single word in support of this plan: He even endorses a novel idea in the realm of executive compensation structures:

It would enable the Treasury, without Congressionally approved guidelines as to pricing or procedure, to purchase hundreds of billions of dollars of financial assets, and hire private firms to manage and sell them, presumably at their discretion There are no provisions for — or even promises of — disclosure, accountability or transparency. Any institution selling securities under this legislation to the Treasury Department shall not be allowed to compensate any officer or employee with a higher salary next year than that paid the president of the United States. - This would punish overpaid Wall Streeters and, more important, limit participation in the bailout to institutions really in trouble.

Michelle Malkin, another right wing conservative blogger had the following to say:

And this is a Republican White House presiding over the Mother of All Bailouts. Every step along the way since stimuluspalooza began last summer, we’ve heard that every bailout step was just a one-off. Each step was supposed to calm the markets. Each new government intervention and allocation of taxpayer dollars was supposed to achieve “stability.” Each new package of goodies rewarding irresponsible behavior and bad financial decisions was supposed to prevent new ones. None did. And now, here we are. This is your Bush legacy — not Pelosi’s, not Reid’s, not Obama’s: A ginormous bailout of every last, failing, panicked financial institution’s illiquid assets that may reach into the trillions — TRILLIONS – when all is said and done.

Paul Krugman, a Princeton economics professor calls it 'cash for trash'. He is right.

If the government is going to provide capital to financial firms, it should get what people who provide capital are entitled to — a share in ownership, so that all the gains if the rescue plan works don’t go to the people who made the mess in the first place. That’s what happened in the savings and loan crisis: the feds took over ownership of the bad banks, not just their bad assets.

It is especially frightening when Mr. Paulson is demanding what amounts to absolute unfettered authority over the overseeing, administration and the means to manage this $700,000,000,000.00 payout: He demands immunity from review “by any court of law or any administrative agency”. When public officers ask for enormous powers of this kind and ask for blanket protection from any screw-up – one should instinctively be cautious.

This was the same man who said the following with respect to the sub-prime mortgage crisis a couple of years back: “I don’t see (subprime mortgage market troubles) imposing a serious problem. I think it’s going to be largely contained”

Nobody is clamoring for killing the bailout – it will fry the financial world at this late juncture, all one asks for is accountability to the people, ownership by the people and regulation for the people.

Aaron Johnson, 'Star Crossed', Acrylic polymer and pigment on polyester flag, 93 x 128 inches. Photo from a recent visit to Aaron Johnson's show at the Stefan Stux Gallery (runs from 4 Sept - 18 Oct, 08). Reverse-painted acrylic polymer peel paintings on polyester American flags.

The wings of Time are black and white,
Pied with morning and with night.
Mountain tall and ocean deep
Trembling balance duly keep.
In changing moon, in tidal wave,
Glows the feud of Want and Have.
Gauge of more and less through space
Electric star and pencil plays.
The lonely Earth amid the balls
That hurry through the eternal halls,
A makeweight flying to the void,
Supplemental asteroid,
Or compensatory spark,
Shoots across the neutral Dark.

Man's the elm, and Wealth the vine;
Stanch and strong the tendrils twine:
Though the frail ringlets thee deceive,
None from its stock that vine can reave.
Fear not, then, thou child infirm,
There's no god dare wrong a worm.
Laurel crowns cleave to deserts,
And power to him who power exerts;
Hast not thy share? On winged feet,
Lo! it rushes thee to meet;
And all that Nature made thy own,
Floating in air or pent in stone,
Will rive the hills and swim the sea,
And, like thy shadow, follow thee.

---- Ralph Waldo Emerson 'Compensation' from Essays: First Series (1841)

Cloudspotting

Lying as a strategy

Dishonesty seems to be the only option remaining. Now both Obama and McCain are employing the low down tactics... Meanwhile, in Alaskan pork chronicles they got a road to nowhere instead of the bridge.

Thus spake Sarahthustra - I

Reading quotes from the candidate for the next Vice-President of the United States, one is struck by a mixture of confusion or awe - depending on which side of the aisle one leans. Maybe they are extremely profound on a level that I am unaware of or maybe they are so absurdly stupid that the words seem to mock the intellect - either way, these are worth some parsing - dare if you can...

Views on energy: Oil and coal? Of course, it’s a fungible commodity and they don’t flag, you know, the molecules, where it’s going and where it’s not. But in the sense of the Congress today, they know that there are very, very hungry domestic markets that need that oil first,” Palin said. “So, I believe that what Congress is going to do, also, is not to allow the export bans to such a degree that it’s Americans that get stuck to holding the bag without the energy source that is produced here, pumped here. It’s got to flow into our domestic markets first...

Reaction on being asked to be a candidate for the Vice President of the United States: I answered him yes because I have the confidence in that readiness and knowing that you can't blink, you have to be wired in a way of being so committed to the mission, the mission that we're on, reform of this country and victory in the war, you can't blink. So I didn't blink then even when asked to run as his running mate.

Bailout frenzy continues..

The news is that the Bail baby, Bail! team composed of the Federal Reserve and the Treasury are planning on coming up with the god of all bailouts. They plan still being worked out relies on the now familiar tactic of buying up large portions of toxic debt held by the banks using taxpayer money. This is good on several fronts. This way the companies that got to play and profit with exotic financial instruments are saved, the CEO's still get to take home their million dollar bonuses, very little regulation gets passed in the spirit of 'market knows best, stupid' and mainly ensuring that the common individual and taxpayer keeps getting screwed again and again.



John Updike, "Superman"


I drive my car to supermarket
The way I take is superhigh
A superlot is where I park it
And Super Suds are what I buy.
Supersalesmen sell me tonic
Super-Tone O, for relief.
The planes I ride are supersonic.
In trains I like the Super Chief.
Supercilious men and women
Call me superficial, me!
Who so superbly learned to swim in
Supercolossality.
Superphosphate-fed foods feed me
Superservice keeps me new.
Who would dare to supercede me
Super-super-superwho?


---From the New Yorker, November 12, 1955, p. 56

Oh, I forgot to mention the cost: The ranking Republican on the Banking Committee, Sen. Richard Shelby, said the U.S. has "been lurching from one crisis to another" and predicted the new bailout plan would cost at least a trillion dollars.

I wonder if Richard Shelby did one of those Dr. Evil type little finger in the corner of mouth routine as he reeled off these numbers...

Painting post

Sunil, 'Moksha', Oil on canvas, 88" X 84", 2008

It was about a year back. On a weekend, we decided to head out to the Princeton University campus for a quick stroll. The campus gets especially beautiful during fall and last year was no different. Steadfast trees and the undecided leaves on seemed to take on an entirely different hue as they tried to fight the oncoming cold months. Pushing our little son’s baby stroller along, we chanced upon a press release announcing a new exhibition underway at the Princeton University Art Museum. Museum visits are challenging with little ones in tow, but on a whim, we decided to go in and quickly check out the offerings. On display were Fazal Sheik’s photographs of widows in India. It seemed that they were constrained to a strange life of isolation after their husbands had passed on from this world. Due to strange local mores and traditions, they were castoff from normal life and society and constrained to a life of worship - worship of the Hindu god Krishna – it were as if the fault that their spouses died were directly attributed to some failing of their and they were undergoing penitence through a life of prayer. As is attendant with tragic situations like the ones they faced, it was clear that sexual abuse, extreme isolation, mental issues and physical ailments visit the widows. Factors like abuse and isolation tend to leave their characteristic marks on humans. The human face records time and abuse like no other part of our mortal frames – one only has to look carefully for the signs. I wrote about the exhibition in detail here, but what caught me the most was the look on their faces. I took some pictures of the stark black and white faces for projects that were undecided then. Over the past year, I have been planning on painting some of the more evocative ones but did not find the time or inclination. Finally, over the past month, I completed this particular lady. I plan on completing about four more over this year. This was painted in raw sienna, monochrome - a lighter color that I hoped would try and mute the abject darkness inherent in the lady’s face. Of course, try as I might, the light color did not seem to help.

On flipping flopped companies

Looks like the Fed is flipping and flopping a lot like the McCain campaign in its policy pronouncements. “Being for something before being against the same”.

When the financial markets were melting down on Monday with Lehman going under and jobs lost all around, McCain coolly comes up and tells us that the economy is strong. Later he backtracks and says that he was talking about the American people and not the health of the economy actually. Likewise, the Fed initially said that they will not bail out AIG before actually deciding to bail them out late evening yesterday. Yes, it called for an injection of $85 billion of taxpayer money this time. Of course, this is on top of the bail out of Bear, Fannie and Freddie.

The latest bailout might be labeled as the ‘mother of all bailouts’ since it was not just the company (AIG) that was bailed out, but all those toxic assets from companies that AIG had insured. In essence, AIG's clients still got to chew on their toxic mortgage meatballs while the taxpayers stepped in to foot the bill. Of course, many will advance the argument that AIG was 'too big to fail'. Even if one agrees with this theory (yes, this too big to fail thing is fast becoming a theory as more and more banks are signing on the bailout bucket list), the bailout should have come with regulatory conditions that will prevent this mess from happening again. Of course, none of that happened. Taxpayer money was pledged to straighten a large Wall Street firm with minimal guarantees ensuring the survival of the firm, ensuring the people at the top get their regular bonuses and also ensuring that nary a legislation or regulation is passed that would have prevented a meltdown like this from happening in the future. Well, this is free market at its best.

Two things were clear after the latest bailout: The first being that the Fed is absolutely clueless and has just about zero control over the rapidly deteriorating situation in the financial markets. The other being that we have just further slowed down what was essentially an already very slow moving financial train wreck. What is that expression of Chinese torture – death by a thousand cuts – is what we will be subject to….

Executive paycheck watch - II

As the investors keeps getting hammered with more bad news (AIG falling under after ratings cut last night, Goldman announced a couple of minutes back that their profits were down 70%, the first time since the company went public, Merrill to see large layoffs, thousands of Lehman workers out on the street), here is a bit of news that looks to the bright side of things...

From here: Merrill Lynch & Co. Chief Executive Officer John Thain and trading-division head Thomas Montag may reap payouts totaling more than $47 million if they leave or are given lesser roles after Bank of America Corp. buys the firm.

The ultimate irony with the whole payout was that John Thain was hired into Merrill nine months back explicitly to turn the ailing company around. Instead, he turns tables and sells the company lock stock to Bank of America (of course, he had no other option after the debacle at Lehman). Yes, greed is good.

The executive paychecks for CEOs who were responsible for sending Fannie Mae and Freddie Mac into the ground covered here previously.

On a recent garage art sale - II

From the description of items offered up at a recent auction, one might think that the items being hawked were the leftovers of a science experiment gone horribly wrong.

For sale were variations on all of his best-known themes: dead animals, including several sharks, a calf, a zebra and doves, all submerged in formaldehyde; glass cabinets filled with diamonds, cigarette butts and practically everything in between; and paintings and drawings with his signature skulls and dots, swirls and butterflies.

No, it was not a garage sale of the remnants of a science experiment; it was Damien Hirst's first solo auction (yes, first solo show is 'out', solo auctions are 'in'). A new precedent was set where he bypassed dealers, gallerists and other middlemen to sell his works. In spite of the Lehman's and Merrill’s going down, investors seem to think that art is still a good bet (I am not complaining – but this kind of art - I do not know?). He seems to have made good on the first day of auction of the motley items on sale and the day netted over a $100 million.

The questions I raised regarding the new avenue explored by him still remain.

Here is a description of a couple of works that did not sell...
- 'Devil Worshiper': A canvas with dead flies.
- 'Theology, Philosophy, Medicine, Justice': Four dead bullsharks floating in two tanks.

In memoriam

Some works online by David Foster Wallace (1962 - 2008).

Some more from Harper's here.

There are these two young fish swimming along and they happen to meet an older fish swimming the other way, who nods at them and says "Morning, boys. How's the water?" And the two young fish swim on for a bit, and then eventually one of them looks over at the other and goes "What the hell is water?" - David Foster Wallace at the 2005 Kenyon Commencement Address - May 21, 2005

Art?

I wonder how many think the new 'doctored' pictures of Mr. McCain by Canadian artist Jill Greenberg is 'art'? I do not think it is. It looked more like political porn done in vile mood by a disgruntled adolescent. I remember being turned off by her 'crying children' photos, but then she was marketed as a 'controversial' photographer then... This will definitely be used by the McPalin campaign machinery to discredit artists in general and reinforce the stereotype of the rabid 'left leaning' artist... Reminded me of another artist who recently planted an erection on a Christ statue (will not link from here)... Again, the focus on real issues is the loser.

Using more of our money… Bail Baby, Bail!

On April Fools day of this year, I wrote about a money spigot opened up by the Fed that allowed investment banks on Wall Street to drive by and borrow any amount that they wished from the Feds sans rigorous oversight or regulation. The rate of drawing from the spigot was about $33 billion a day then – I do not have the numbers for now. The ostensible reason for this largesse was to preserve 'financial liquidity' and make sure that the major players on the Street have enough money to perform their complex dalliances and ensuring year end bonuses.

This weekend, we witnessed multiple events that almost looks like an automatic structural re-adjustment of the financial industry. The spectacularly predictable failure of Lehman. Merrill rushing into the waiting hands of its suitor, Bank of America and AIG (the biggest insurance company in the world) gasping for air as it asks the Fed for $40 billion in restructuring costs.

Well, the common sense would dictate the following: Hey, these companies played poker with the money entrusted to them and during the process of carving up mortgages into complex financial instruments that no-one understood, they were setting themselves for failure. Let the structural adjustment happen, let the financially unsound institutions fail, as soon as the bad apples amongst the lot is weeded out and we should see the bottom of this thing - Or so, one might think.

Well, the Fed thinks otherwise. In a sign of continuing largesse and misfired blanks from Paulson’s bazooka, the Fed has opened up newer spigots of money to Wall Street banks.

From here:

In an obscure but highly important announcement late Sunday evening, the Fed said it would let Wall Street firms post as collateral much riskier assets — including equities, junk bonds, subprime mortgage-backed securities and even whole mortgages — in exchange for emergency loans through the Primary Dealer Credit Facility.

But with the new announcement, the Fed will accept stocks and some debt that has junk-bond status and some securities that may have few real buyers.

Well, now they are ready to accept junk bonds from distressed companies on Wall Street. Wonder what is next.

What amazes me is that we have just peeled some preliminary skin off the mortgage mess. We are only witnessing the fallout from a type of mortgage called 'sub-prime'. Mortgages of lesser toxicity sit waiting for their turn to wreck havoc – an example of such a mortgage is called 'Alt-A'.

From here:
Homeowners lured by low introductory rates to Alt-A mortgages, which typically require little or no proof of a borrower's income, may fuel the next wave of foreclosures and further delay a recovery from the worst housing decline since the 1930s. Almost 16 percent of securitized Alt-A loans issued since January 2006 are at least 60 days late, data compiled by Bloomberg show. Defaults will accelerate next year and continue through 2011 as these loans hit their three- and five-year reset periods

About 3 million U.S. borrowers have Alt-A mortgages totaling $1 trillion, compared with $855 billion of subprime loans outstanding, according to Inside Mortgage Finance, a trade publication in Bethesda, Maryland. Of the Alt-A borrowers, 70 percent may have exaggerated their income, said David Olson, president of mortgage research firm Wholesale Access in Columbia, Maryland.

Wonder what the Fed will do when the bottom on the Alt-A mortgage market fall out. I guess we all have a simple enough answer: Use more of our money… Bail Baby, Bail!

Wall Street is churning. Not a good sign for the rest of us.

On a recent garage art sale

Damien Hirst's work is on sale at Sotheby's on Monday and Tuesday of next week (euphemistically called formaldehyde sculptures). He is offering his pieces for sale directly, not through a dealer, not through a gallery - (not that there is anything wrong in this approach) - just that what he is hawking might be suspect...

Here is Guardian's take on the garage sale... Edward Winkleman is also surprised...

If there is anything special about this event, it lies in the extreme disproportion between Hirst's expected prices and his actual talent. Hirst is basically a pirate, and his skill is shown by the way in which he has managed to bluff so many art-related people, from museum personnel such as Tate's Nicholas Serota to billionaires in the New York real-estate trade, into giving credence to his originality and the importance of his "ideas". This skill at manipulation is his real success as an artist. He has manoeuvred himself into the sweet spot where wannabe collectors, no matter how dumb (indeed, the dumber the better), feel somehow ignorable without a Hirst or two.

Living sharks are among the most beautiful creatures in the world, but the idea that the American hedge fund broker Steve Cohen, out of a hypnotised form of culture-snobbery, would pay an alleged $12m for a third of a tonne of shark, far gone in decay, is so risible that it beggars the imagination. As for the implied danger, it is worth remembering that the number of people recorded as killed by sharks worldwide in 2007 was exactly one. By comparison, a housefly is a ravening murderous beast. Maybe Hirst should pickle one, and throw in a magnifying glass or two.

Hirsts' move does raise some interesting points:

- Does this mean that the gallery based representation of works is on the wane and slowly artists are going to flock to the auction based marketplace however small (eBay type gig) or large (Sotheby's)?

- Does this mean that once an artist gains recognition and acclaim, it does not make sense to have a gallerist trying to promote and sell works - rather it makes better sense to get the free market enterprise (which the auction based marketplace represents) offer artists the highest monies for the work without the middleman gallery owner pocketing a percentage?

- Some galleries start with soul and a vision - moves like this will tend to remove the soul associated with the exhibition of works in a public place. Not to mention that works sold through the auction based marketplace system will never see the light of day - it will go into the rich buyers storage unit immediately after the purchase...

Weekend pictures

Hilarious repartee dept.

From the world of sub-editors - that oft maligned species in the publishing industry:

Two emails. Priceless.

30 second video break

For someone to sponsor a bill that protects little children from sex abusers and for a campaign to distort the contents so thoroughly is egregious.

Morning musing

Going to work yesterday, I saw new beginnings and hope in the sky... It was Sept 11, 08'.

Morning thoughts on bailouts and abuse

If the Fed and the government allows Lehman to fail, it might be better for al of us - having a market correction now rather than keep delaying the inevitable is definitely not good for the nations interests at large. Plus the usual argument 'they were too big to fail' put forward by the Fed in the case of Bear, Fannie and Freddie seems more rancid than ever - especially with many other distressed banks in the line after Lehman... (read WaMu, Wachovia etc…)

An interesting line from today's Wall Street Journal (WSJ): "To avoid reckless lending in the future, failure has to be an option.". Never thought I will see this day when ultimate free market cheerleaders like the WSJ opines on an investment bank's failure.

The other thought I was having was that it is time for Obama to act and act decisively. Especially in light of the shameful 'kindergarden sex-education' advert which was clearly a complete bag of lies. If Mr. Obama does not act now, come out forcefully and tell the nation that what is at play is pure partisan politics which erases the lines between the truth and untruth and the public needs to start questioning adverts like these, we as a nation would be the losers. He needs to tell us that as a responsible parent of two young girls he took the right steps in sponsoring legislation that will protect young children from predators and for the McPalin team to distort this record is simply dishonest and dishonorable. In addition, he will need to demand a public apology from the McCain for distorting his vote on protecting young children from sexual predators. If he does not do this soon enough and forcefully enough, he will lose the election.

From here: “I have a 6-year-old daughter and a 3-year-old daughter, and one of the things my wife and I talked to our daughter about is the possibility of somebody touching them inappropriately, and what that might mean,” Mr. Obama said in 2004. “And that was included specifically in the law, so that kindergarteners are able to exercise some possible protection against abuse, because I have family members as well as friends who suffered abuse at that age.”

As we rouge pig lips...

Just this morning on the train to work, I read…

- 156 year old Lehman Brothers is fighting for its life on Wall Street – fallout from the ‘markets know best’ culture that spawned the sub-prime mortgage fiasco

- One of the poorest nations, Haiti (whose citizens use clay mud cakes to soften their hunger pangs) has been battered beyond belief by Hurricane Ike – fallout from global climate change

- Special Operations forces are now unilaterally striking targets in Pakistan without much regard to what the government of that country thinks or says – fallout from the so called ‘war on terror’.

- Oil companies in Texas bedded with an Interior Department agency that collects taxes on oil drilling using sex and drugs as carrots. Investigators called it a ‘culture of ethical failure’ – fallout from the ‘drill, baby drill’ chant popularized by you know who

- Venezuela’s president plans to pilot Soviet made TU-160 ‘Blackjack’ bombers in a show of joint military force with the Russians just south east of our coastal borders – fallout from an ill conceived backing of the Georgian war

- The worlds most isolated and unpredictable regime’s ‘Dear Leader’, Mr. Kim Jong-il suffered a stroke – raising fears of an ugly succession battle in a country armed with nuclear missiles – fallout from the world deciding to isolate the regime as rogue and classifying it as ‘axis of evil’.

And here we are – debating pigs and lipstick… My take is that the only good thing that go well with pigs is dollops of barbecue sauce. When are we going to get to some real issues?

We survived the Large Hadron Collider!

The first proton beam successfully completed a circuit of the entire length of the Large Hadron Collider and contrary to some wild predictions, our world failed to come to an end.

A good essay and some porcine piecemeals

The eponymous Chelsea gallery owner Edward Winkelman has a calm and measured essay on why he will vote in the November 08 elections for the Obama/Biden ticket rather than for the Bridge to Nowhere duo. One of the better essays I have seen in some time.

It would be nice if we could honestly discuss whether a J.D. vs. a bachelors in journalism reflected a stronger ability to learn, but alas, in a campaign where race and gender are finally, finally much less relevant, the pseudo-folksy anti-intellectual pose adopted by both cynical political operatives and lazy-ass underachievers who relish in the license that lends them to feel superior without having to work for it still...remarkably...inconceivably...remains a hot-potato issue in this country. Let me say, for the record, that being incurious is not a virtue. It only helps the people eager to take advantage of you convince you that it is.

Today, the NYT reported the following statement that Obama made last night:

“John McCain says he’s about change, too — except for economic policy, health care policy, tax policy, education policy, foreign policy and Karl Rove-style politics,” Mr. Obama told his supporters here. “That’s just calling the same thing something different.”
With a laugh, he added: “You can put lipstick on a pig; it’s still a pig. You can wrap an old fish in a piece of paper called change; it’s still going to stink after eight years.”

Yes, and now we are being asked to believe that Obama referred to Ms. Sarah Palin in porcine ways. Yes, and I suspect this will be the focus of the media spotlight for the next couple of days. Half the nation will debate without access to the facts, context or relevance what Obama said without thinking that he just resorted to an old metaphor to highlight McPalin's 'change' plank. People will not dig deeper to understand the reference or the meaning in today's 'live for this moment' environment. Edward Winkelman's last sentence above rings more clearly now... "being incurious is not a virtue. It only helps the people eager to take advantage of you convince you that it is."

Sermon time...

Sometimes we find interesting snippets in the unlikeliest of places... and people. Here is fashion designer Marc Jacobs on having the work 'perfect' tattooed on his arm..

“I have a choice. We all have a choice in how to look at things, and when things don’t go the way I like I tend to think they’re a problem. Well, you can look at something as a problem or look at it as a learning experience or an opportunity for growth or whatever. This idea that everything happens for a reason and is perfect and you will benefit from it even if you can’t see the benefit—it’s just a nicer ideal to subscribe to than ‘Oh God, I’ve got all these problems and life is full of obstacles.’ ”

For fashion biography lovers who wish to read the whole profile, see here.

Lines on a long distance relationship

He watches her grow up from another land,
smile, skip, play and breathe,
the vagaries of work and study
keeping them apart, his hopes
riding on the plans for tomorrrow.
She discovers daddy to be a ghostly face
brought to her by a distant webcam,
a pixilated, shape shifting image
on her mothers computer screen.
It was only last month
she opened the cd drive,
and placed on it her favorite bear
and told her mother to send it to daddy.
He celebrates her birthday long distance
and blows her a kiss while she huffs and
puffs; Two small red candles on a cream cake.
Wistfully reaches and plays with her dark curls
on the inky cold flatness of his laptop screen.
It has been two years since she was born
and he is finally going home now.

Of Largesse and oversized executive pay

"If you have a bazooka in your pocket and people know it, you probably won't have to use it." - U.S. Treasury Secretary Hank Paulson said at a July 15 Senate Banking Committee hearing referring to the fact that if he has a blank check for bailing out Freddie and Fannie, people will continue to trust the institutions without him having to resort to writing taxpayer monies on the blank check that was ultimately offered to him.

The Treasury department rescued Fannie Mae and Freddie Mac by placing them into a conservatorship. Paulson was proved spectacularly wrong on his bazooka based thinking when the ever falling markets combined with creditors from Asia demanding fair share for their invested bucks threatened to topple these fair handmaidens of the mortgage industry. It is indeed ironic that the bastion of free market enterprise, the United States has to resort to government backed bailouts at the end of the day. Unclear still is the cost of the bailout - which could either be $25 billion or $100 billion depending on who you talk to. We are not even sure what the exact amounts the taxpayer will have to bear.

If one assumes that a conservative 20% of the holdings of Fannie and Freddie (assets currently at $5.3 trillion) are toxic, the amount that the government will have indirectly committed would be approximately $1030 billion – or about a trillion dollars of taxpayer monies. I feel for our children who will see the effects of this played out in their lifetimes…

All said and done, this might have been the right thing to do to restore needed faith and credit in our local economy and stabilizing the global markets at large.

However, I ran into the following bit of news that smacked of double standards.... Normal wisdom and classic free market principles would allow one to punish stewards of companies by slashing pay and withholding perks for jobs poorly done. Yes, bigger screwups bestow smaller paychecks - or so the saying goes - not so for the CEO's of Freddie Mac and Fannie Mae.

From here:

Daniel H. Mudd, the departing head of Fannie Mae, stands to collect $9.3 million in severance pay, retirement benefits and deferred compensation, provided his dismissal is deemed to be “without cause,”

Richard F. Syron, the departing chief executive of Freddie Mac, could receive an exit package of at least $14.1 million, largely because of a clause added to his employment contract in mid-July as his company’s troubles deepened.

Looks like the chiefs were fattening their pockets for many years…

Mr. Mudd’s predecessor at Fannie Mae, Franklin D. Raines, took home more than $52 million while he was chief executive from 1999 to 2004 while Mr. Syron’s predecessor at Freddie Mac, Leland C. Brendsel, took home more than $28.4 million from 1993 to 2003

Blinds