Ran across this post today on Lew Rockwell.com. The Rockwell site is a pretty hard-core libertarian site. I contend there is much wisdom there to be acquired. This post on LIBOR is deep but it's worth a read and a bookmark. I guarantee we'll be hearing more about LIBOR as our credit woes grow.
What’s in a Number? Donald MacKenzie on the Importance of Libor
Tuesday, September 30, 2008
Tuesday, September 23, 2008
No to Paulsen-Bush Bailout!!!
Thanks to Mike Morgan for posting this Bloomberg story written by Mark Pittman almost a year a go. I can't go along with this bailout. I know, I know we are facing Financial Armageddon--or so says Hank. Read it and weep.
Paulson's Focus on `Excesses' Shows Goldman Gorged
By Mark Pittman
Nov. 5, 2007 (Bloomberg) -- Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that ``yesterday's excesses'' aren't repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.
Paulson, 61, doesn't mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg.
Goldman, the most profitable investment bank, was one of 14 primary dealers of U.S. Treasuries who contributed to a three- year binge as $1 trillion of subprime mortgages were packaged and sold to investors. The value of Goldman's outstanding subprime bonds trails Lehman Brothers Holdings Inc.'s $33 billion, out of $106.8 billion created during Paulson's years at Goldman, and Morgan Stanley's $28.8 billion, out of $82.5 billion.
``He should admit to having been involved in creating the problem that we have now,'' said Representative Brad Miller, a North Carolina Democrat, who introduced a bill Oct. 22 to make firms packaging subprime mortgages liable for bad loans in some circumstances.
The subprime crisis developed earlier this year when falling home prices triggered defaults by homeowners who wouldn't have normally qualified for a mortgage. Many were unable or unwilling to make adjustable-rate payments that were due to rise. Home foreclosures doubled in the third quarter from a year earlier to 635,159, RealtyTrac reported Nov. 1.
Largely Contained
Starting in March, Paulson said the damage was ``largely contained'' and was no risk to the larger economy. When other credit markets began to be affected, he and others began pushing for solutions.`
`I can't help but notice that when middle-class homeowners were losing their homes to foreclosure, he was pretty nonchalant about it,'' Miller said of Paulson. ``But when Wall Street CEOs start seeing trouble in their absurdly complicated financial instruments built on the mortgages of middle-class homeowners, he feels their pain.
''Paulson declined to comment through spokeswoman Michele Davis, who said, ``he can't talk about Goldman business.'' Spokesman Michael DuVally of New York-based Goldman declined to say how much subprime mortgages contributed to the investment bank's profits, or Paulson's compensation, during his tenure from May 1999 through June 2006.
Goldman paid Paulson $38.5 million for 2005, and he received an $18.7 million bonus for the first half of last year.
Bet Against Subprime
While competitors reported losses from their subprime portfolios in recent months, Goldman said Sept. 20 that it profited from the market's decline by using derivatives to bet that mortgage securities would continue to fall.
Paulson's involvement in the subprime crisis ``points out that there needs to be complete accountability up and down the system,'' said Allen Fishbein, the director of credit and housing policy at the Consumer Federation of America in Washington. ``Goldman wasn't alone. All the brokerages did this.
''Goldman ranks 10th among 118 issuers, based on the amount of subprime loans still on the market. Bonds with a face value of $484.6 billion remain from those created in the years Paulson ran Goldman.
Countrywide
Market leader Countrywide Financial Corp. has $40.7 billion in subprime bonds still on the market, or 8.4 percent of the total. GMAC LLC's Residential Capital LLC has $34.4 billion. Lehman's $33.1 billion leads Wall Street firms. The amounts tally the securities issued, not what remains on the banks' books.
Calabasas, California-based Countrywide, the nation's biggest home lender; ResCap, the Minneapolis-based home lending arm of General Motors Corp.'s finance subsidiary; and Goldman were among those competing to create pools of mortgages consisting mostly of subprime loans, made to borrowers with poor credit records or high debt.
Goldman has more subprime debt outstanding than Credit Suisse, which has almost $10 billion; Citigroup Inc., with $6.8 billion; or JPMorgan Chase & Co., with $7.8 billion.
Losses on holdings of subprime securities have already claimed the jobs of two chief executive officers. Citigroup yesterday accepted the resignation of CEO Charles Prince after saying its holdings of subprime securities may cause writedowns of as much as $11 billion. Merrill Lynch CEO Stan O'Neal left last week amid writedowns of more than $8 billion.
House Bill
The data on subprime bonds, compiled by Bloomberg from reports by debt servicing companies, don't include all of the mortgage bond offerings managed by any of the firms. That's because all of them handle offerings by bond issuers outside of Wall Street, including Irvine, California-based New Century Financial Corp., a subprime lender now in bankruptcy.
The House bill Miller introduced is backed by Representative Barney Frank, the Massachusetts Democrat who is chairman of the Financial Services Committee. One provision would make firms that package and sell subprime mortgages liable for damages if loans violate certain minimum standards, including ensuring a borrower's reasonable ability to repay.
Paulson criticized the liability idea in an Oct. 16 speech at Georgetown University in Washington.``We need to ensure yesterday's excesses are not repeated tomorrow,'' Paulson said. Penalizing Wall Street for packaging mortgage loans ``is not the answer to the problem,'' he said.
Potential Paralysis
The House measure would ``potentially paralyze securitization,'' which, Paulson said, has been ``extremely valuable in extending the availability of credit to millions of homeowners nationwide and lowering the cost of financing.
''In New Delhi on Oct. 30, Paulson repeated his pledge to find what went wrong in the financial system. ``We need to shed light on it and make the policy adjustments so this doesn't happen again,'' he said.
When the subprime mortgage issue exploded as an economic and political issue this year, Federal Reserve Board Chairman Ben S. Bernanke was the federal government's point man. He was called before Congress to defend regulators' failure to prevent lending abuses.
Paulson's public role increased in the past month as the credit crunch spread to the commercial paper markets and off- balance-sheet structured investment vehicles, known as SIVs. He urged major lenders in a Sept. 12 meeting in Washington to help subprime borrowers keep their homes.
Saving SIVs
Paulson and Robert Steel, a former Goldman Sachs vice chairman who is the Treasury's undersecretary for domestic finance, helped persuade Citigroup and other banks to set up an $80 billion partnership to buy assets from any SIVs that couldn't refinance their debt.
Goldman under Paulson created 58 mortgage pools branded under the acronym of GSAMP, which originally stood for Goldman Sachs Alternative Mortgage Products, starting in July 2002. The value of the loans at risk of default is almost 50 percent for one Goldman pool, according to Bloomberg data, which includes pools identified as containing home equity financings as well as subprime mortgages.
The average delinquency rate for subprime bonds sold from May 1999 through June 2006 is 19.3 percent as of yesterday, according to data compiled by Bloomberg. Among the top 20 issuers that have more than $5 billion outstanding, Goldman's GSAMP ranks ninth with 21.7 percent for delinquencies of 60 days or more, foreclosures or real estate that has been taken away from borrowers.
Higher Delinquencies
That rate is higher than for JPMorgan, with 20.8, and Citigroup, with 19.9 percent, according to data compiled by Bloomberg through October. Goldman's delinquency rate is lower than the 26.2 percent for bonds in Deutsche Bank AG's ACE trust, as well as 25.1 percent for Barclays Capital's SABR and 23.8 percent for Merrill Lynch's MLMI.
One of Goldman's bonds, GSAMP 2006-HE2 B2, is valued at 47 cents on the dollar, to yield 14.5 percent, according to Merrill Lynch. The pool, which was sold March 1, 2006, already has a delinquency rate of 16.4 percent. The bond was cut five levels from investment-grade Baa2 to a junk rating of B1 on Oct. 11 by Moody's Investors Service.To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net.
Paulson's Focus on `Excesses' Shows Goldman Gorged
By Mark Pittman
Nov. 5, 2007 (Bloomberg) -- Treasury Secretary Henry Paulson says the U.S. is examining the subprime mortgage crisis to ensure that ``yesterday's excesses'' aren't repeated. He could be talking about himself and his former firm, Goldman Sachs Group Inc.
Paulson, 61, doesn't mention that Goldman still has on the market some $13 billion of almost $37 billion in bonds backed by subprime loans or second mortgages that it created while he was chief executive officer. Those bonds have an average delinquency rate of almost 22 percent, higher than the average of other subprime bonds from the period, according to data compiled by Bloomberg.
Goldman, the most profitable investment bank, was one of 14 primary dealers of U.S. Treasuries who contributed to a three- year binge as $1 trillion of subprime mortgages were packaged and sold to investors. The value of Goldman's outstanding subprime bonds trails Lehman Brothers Holdings Inc.'s $33 billion, out of $106.8 billion created during Paulson's years at Goldman, and Morgan Stanley's $28.8 billion, out of $82.5 billion.
``He should admit to having been involved in creating the problem that we have now,'' said Representative Brad Miller, a North Carolina Democrat, who introduced a bill Oct. 22 to make firms packaging subprime mortgages liable for bad loans in some circumstances.
The subprime crisis developed earlier this year when falling home prices triggered defaults by homeowners who wouldn't have normally qualified for a mortgage. Many were unable or unwilling to make adjustable-rate payments that were due to rise. Home foreclosures doubled in the third quarter from a year earlier to 635,159, RealtyTrac reported Nov. 1.
Largely Contained
Starting in March, Paulson said the damage was ``largely contained'' and was no risk to the larger economy. When other credit markets began to be affected, he and others began pushing for solutions.`
`I can't help but notice that when middle-class homeowners were losing their homes to foreclosure, he was pretty nonchalant about it,'' Miller said of Paulson. ``But when Wall Street CEOs start seeing trouble in their absurdly complicated financial instruments built on the mortgages of middle-class homeowners, he feels their pain.
''Paulson declined to comment through spokeswoman Michele Davis, who said, ``he can't talk about Goldman business.'' Spokesman Michael DuVally of New York-based Goldman declined to say how much subprime mortgages contributed to the investment bank's profits, or Paulson's compensation, during his tenure from May 1999 through June 2006.
Goldman paid Paulson $38.5 million for 2005, and he received an $18.7 million bonus for the first half of last year.
Bet Against Subprime
While competitors reported losses from their subprime portfolios in recent months, Goldman said Sept. 20 that it profited from the market's decline by using derivatives to bet that mortgage securities would continue to fall.
Paulson's involvement in the subprime crisis ``points out that there needs to be complete accountability up and down the system,'' said Allen Fishbein, the director of credit and housing policy at the Consumer Federation of America in Washington. ``Goldman wasn't alone. All the brokerages did this.
''Goldman ranks 10th among 118 issuers, based on the amount of subprime loans still on the market. Bonds with a face value of $484.6 billion remain from those created in the years Paulson ran Goldman.
Countrywide
Market leader Countrywide Financial Corp. has $40.7 billion in subprime bonds still on the market, or 8.4 percent of the total. GMAC LLC's Residential Capital LLC has $34.4 billion. Lehman's $33.1 billion leads Wall Street firms. The amounts tally the securities issued, not what remains on the banks' books.
Calabasas, California-based Countrywide, the nation's biggest home lender; ResCap, the Minneapolis-based home lending arm of General Motors Corp.'s finance subsidiary; and Goldman were among those competing to create pools of mortgages consisting mostly of subprime loans, made to borrowers with poor credit records or high debt.
Goldman has more subprime debt outstanding than Credit Suisse, which has almost $10 billion; Citigroup Inc., with $6.8 billion; or JPMorgan Chase & Co., with $7.8 billion.
Losses on holdings of subprime securities have already claimed the jobs of two chief executive officers. Citigroup yesterday accepted the resignation of CEO Charles Prince after saying its holdings of subprime securities may cause writedowns of as much as $11 billion. Merrill Lynch CEO Stan O'Neal left last week amid writedowns of more than $8 billion.
House Bill
The data on subprime bonds, compiled by Bloomberg from reports by debt servicing companies, don't include all of the mortgage bond offerings managed by any of the firms. That's because all of them handle offerings by bond issuers outside of Wall Street, including Irvine, California-based New Century Financial Corp., a subprime lender now in bankruptcy.
The House bill Miller introduced is backed by Representative Barney Frank, the Massachusetts Democrat who is chairman of the Financial Services Committee. One provision would make firms that package and sell subprime mortgages liable for damages if loans violate certain minimum standards, including ensuring a borrower's reasonable ability to repay.
Paulson criticized the liability idea in an Oct. 16 speech at Georgetown University in Washington.``We need to ensure yesterday's excesses are not repeated tomorrow,'' Paulson said. Penalizing Wall Street for packaging mortgage loans ``is not the answer to the problem,'' he said.
Potential Paralysis
The House measure would ``potentially paralyze securitization,'' which, Paulson said, has been ``extremely valuable in extending the availability of credit to millions of homeowners nationwide and lowering the cost of financing.
''In New Delhi on Oct. 30, Paulson repeated his pledge to find what went wrong in the financial system. ``We need to shed light on it and make the policy adjustments so this doesn't happen again,'' he said.
When the subprime mortgage issue exploded as an economic and political issue this year, Federal Reserve Board Chairman Ben S. Bernanke was the federal government's point man. He was called before Congress to defend regulators' failure to prevent lending abuses.
Paulson's public role increased in the past month as the credit crunch spread to the commercial paper markets and off- balance-sheet structured investment vehicles, known as SIVs. He urged major lenders in a Sept. 12 meeting in Washington to help subprime borrowers keep their homes.
Saving SIVs
Paulson and Robert Steel, a former Goldman Sachs vice chairman who is the Treasury's undersecretary for domestic finance, helped persuade Citigroup and other banks to set up an $80 billion partnership to buy assets from any SIVs that couldn't refinance their debt.
Goldman under Paulson created 58 mortgage pools branded under the acronym of GSAMP, which originally stood for Goldman Sachs Alternative Mortgage Products, starting in July 2002. The value of the loans at risk of default is almost 50 percent for one Goldman pool, according to Bloomberg data, which includes pools identified as containing home equity financings as well as subprime mortgages.
The average delinquency rate for subprime bonds sold from May 1999 through June 2006 is 19.3 percent as of yesterday, according to data compiled by Bloomberg. Among the top 20 issuers that have more than $5 billion outstanding, Goldman's GSAMP ranks ninth with 21.7 percent for delinquencies of 60 days or more, foreclosures or real estate that has been taken away from borrowers.
Higher Delinquencies
That rate is higher than for JPMorgan, with 20.8, and Citigroup, with 19.9 percent, according to data compiled by Bloomberg through October. Goldman's delinquency rate is lower than the 26.2 percent for bonds in Deutsche Bank AG's ACE trust, as well as 25.1 percent for Barclays Capital's SABR and 23.8 percent for Merrill Lynch's MLMI.
One of Goldman's bonds, GSAMP 2006-HE2 B2, is valued at 47 cents on the dollar, to yield 14.5 percent, according to Merrill Lynch. The pool, which was sold March 1, 2006, already has a delinquency rate of 16.4 percent. The bond was cut five levels from investment-grade Baa2 to a junk rating of B1 on Oct. 11 by Moody's Investors Service.To contact the reporter on this story: Mark Pittman in New York at mpittman@bloomberg.net.
Friday, September 19, 2008
Guns and Butter Part 2
Guns and Butter was a term often used to describe the policies of LBJ in the 60's whereby massive Government spending was implemented along with massive military spending needed to fight the Vietnam War. The end result was inflation,stagflation and 20% interest rates over the next decade or so. Given the announcement last night of the Fed's stepping in to buy toxic mortgages I think we are on our way to a '70's repeat. The U.S. is already the world's biggest debtor nation and over the past 7 days or so we've added probably another $300-$1trillion in additional unfunded obligations. Remarkable. I have no ideas where the markets are headed longer term but I am glad a have a reasonably decent position in gold and gold related holdings.
Wednesday, September 17, 2008
George W-Our First MBA President
What irony, I couldn't help thinking today as I watched the DJIA get slammed another 400+ points ( closed below 10,700) and Gold scream $80+ to the upside, that George W Bush and Dick Cheney, the MBA (Harvard) President and the CEO Vice-President (Halliburton) were presiding over the utter destruction of our private market system. Let' s see ,over the past week we've seen the Fed's step into the Freddie/Fannie mess to the tune of $100-200 billion. Last night it was AIG for $85 billion .Let's not forget Bear Stearns a couple months ago. On top of all that, Lehman Bros., a company that survived the Civil War and the Great Depression got toe-tagged. What a record of economic stewardship for W!
Saint Paul said, " For the wages of sin is death" (Romans 6:23). To me the wages of the Bush ownership society is fascism. Think that is too outrageous? This statement is usually attributed to Mussolini ( in all fairness there is some debate about the accuracy of the attribution)
"Fascism should more properly be called corporatism because it is the merger of state and corporate power."
Even so, the direction we are now headed seems to have some echo from the '30's as Thomas J. DiLorenzo points out in this essay ( written back in '94)
So- called corporatism was adopted in Italy and Germany during the 1930s and was held up as a "model" by quite a few intellectuals and policy makers in the United States and Europe. A version of economic fascism was in fact adopted in the United States in the 1930s and survives to this day. In the United States these policies were not called "fascism" but "planned capitalism." The word fascism may no longer be politically acceptable, but its synonym "industrial policy" is as popular as ever.
1-20-09 can't come soon enough!
Saint Paul said, " For the wages of sin is death" (Romans 6:23). To me the wages of the Bush ownership society is fascism. Think that is too outrageous? This statement is usually attributed to Mussolini ( in all fairness there is some debate about the accuracy of the attribution)
"Fascism should more properly be called corporatism because it is the merger of state and corporate power."
Even so, the direction we are now headed seems to have some echo from the '30's as Thomas J. DiLorenzo points out in this essay ( written back in '94)
So- called corporatism was adopted in Italy and Germany during the 1930s and was held up as a "model" by quite a few intellectuals and policy makers in the United States and Europe. A version of economic fascism was in fact adopted in the United States in the 1930s and survives to this day. In the United States these policies were not called "fascism" but "planned capitalism." The word fascism may no longer be politically acceptable, but its synonym "industrial policy" is as popular as ever.
1-20-09 can't come soon enough!
Monday, September 1, 2008
She Must Be Wonderwoman
I was wondering how long it was going to take before the media started their own vetting process of Gov. Sarah Palin. I really can't believe John McCain made this decision. I used to think he was a capable leader. I hope I am not too harsh in considering Sarah Palin laughably unprepared to be Vice-President of the United States. It's not worth even debating. What I've wondered from the first little bit I heard about her is, "what kind of strange person is this". She just gave birth to a down syndrome baby. The baby is 5 months old. She preaches the value of life and family values and is now going to leave this child at 5 months of age and run for Vice-President. Pathetic.
Monday, August 18, 2008
How He Will Improve Our Lives?
So , Obama is getting a little heat for a lack of "specifics" in his hope message . That is certainly a legitimate and fair criticism. What stood out for however me in reading the NYTimes piece was the comment made by the Governor of Tennessee, Phil Bredesen,
"Instead of giving big speeches at big stadiums, he needs to give straight-up 10-word answers to people at Wal-Mart about how he would improve their lives.”
special emphasis on the last thought--how he would improve their lives. Politicians are so unbelievable in their arrogance. Instead of worrying about improving my life for me, why not spend a couple minutes and think about ways to stop screwing up our lives. How about figuring out ways to deal with the multi-trillion dollar unfunded liabilities we face in the not too distant future?All these guys know how to do is promote themselves, their careers and spend our money-- please Governor Bredesen don't worry about "improving my live"--I'll focus on that.
On a serious note, it is exactly this expectation that some guy is going to come into office and be able to somehow magically change the world and make everything better. With those kind of expectations going in is it any wonder that we become so disappointed with those we choose to lead us?
"Instead of giving big speeches at big stadiums, he needs to give straight-up 10-word answers to people at Wal-Mart about how he would improve their lives.”
special emphasis on the last thought--how he would improve their lives. Politicians are so unbelievable in their arrogance. Instead of worrying about improving my life for me, why not spend a couple minutes and think about ways to stop screwing up our lives. How about figuring out ways to deal with the multi-trillion dollar unfunded liabilities we face in the not too distant future?All these guys know how to do is promote themselves, their careers and spend our money-- please Governor Bredesen don't worry about "improving my live"--I'll focus on that.
On a serious note, it is exactly this expectation that some guy is going to come into office and be able to somehow magically change the world and make everything better. With those kind of expectations going in is it any wonder that we become so disappointed with those we choose to lead us?
Wednesday, August 13, 2008
The Bear is Back
In this case it's not the market I'm talking about. Russia is the subject and there is no doubt that they are back as a regional power and there is not much the US can do about it. George Friedman's Stratfor piece explores the ramifications of the Russia- Georgia conflict from multiple angles.
One of the first questions is how, given the massive quick Russian response to the Georgian invasion of S. Ossetia ( obviously the Russians had been prepared for this offensive for some time) could the US allow it's closest ally in the region to walk into such a trap? Was it a failure of intelligence or a misreading of Russian attitude and will? Either way-- not good. I thought Condi Rice was a Soviet expert. Maybe she is just another academic with no real world experience.
The end result is that Russia has shown the world that they are the boss in their neighborhood and that other former Soviet Republic states might now realize that the while the US is bogged down in battles in the Middle East we have nothing much to offer them other than empty words--- the old gum flapping routine. Forget about ant-missile defense sysems or additions to NATO. What I don't understand is this need for the US to continue to try to expand NATO. It would seem to be like spitting into Russia's face.
As of today Putin is stronger domestically and the Russians have reasserted their leadership of the region. Our European " friends" must wonder where their bread is buttered.They need Russia a hell of a lot more right now than they need the US ( energy supply) . How does this all play into what's coming soon -- the conflict with Iran. All in all another mess. W's inane comment about looking into Putin's eyes just speaks to his utter incompetence on the world stage. 1/20/09 can't come soon enough.
One of the first questions is how, given the massive quick Russian response to the Georgian invasion of S. Ossetia ( obviously the Russians had been prepared for this offensive for some time) could the US allow it's closest ally in the region to walk into such a trap? Was it a failure of intelligence or a misreading of Russian attitude and will? Either way-- not good. I thought Condi Rice was a Soviet expert. Maybe she is just another academic with no real world experience.
The end result is that Russia has shown the world that they are the boss in their neighborhood and that other former Soviet Republic states might now realize that the while the US is bogged down in battles in the Middle East we have nothing much to offer them other than empty words--- the old gum flapping routine. Forget about ant-missile defense sysems or additions to NATO. What I don't understand is this need for the US to continue to try to expand NATO. It would seem to be like spitting into Russia's face.
As of today Putin is stronger domestically and the Russians have reasserted their leadership of the region. Our European " friends" must wonder where their bread is buttered.They need Russia a hell of a lot more right now than they need the US ( energy supply) . How does this all play into what's coming soon -- the conflict with Iran. All in all another mess. W's inane comment about looking into Putin's eyes just speaks to his utter incompetence on the world stage. 1/20/09 can't come soon enough.
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