It isn’t just Americans who have been screwed in all this:
Norway’s finance minister was being summoned to the parliament this week, to answer questions tied to investments made by the country’s oil fund in the bankrupt US investment bank Lehman Brothers.
The fund, a sovereign wealth fund fueled by revenues from Norway’s offshore oil reserves, reportedly boosted its shareholdings in Lehman Brothers dramatically earlier this year. According to The Financial Times, the fund’s stake in Lehman Brothers rose from 1.7 million shares to 17.5 million shares during the second quarter of this year.
“That’s about the dumbest thing anyone could have done,” one of Norway’s most savvy investors, Tor Olav Trøim, told newspaper Dagens Næringsliv on Wednesday. Trøim works for Norway’s wealthiest man, shipowner John Fredriksen, who has a history of risk-taking. Trøim, however, likened the purchase of Lehman stock to “gambling” that was inappropriate for what actually is a pension fund.
Lehman’s bankruptcy means Norway’s oil fund, meant to finance pensions for future generations, faces heavy losses. “This is very sad for 4.8 million Norwegians,” commented another well-known investor in Norway, Øystein Stray Spetalen.
Do we know how many of the big American pension funds are exposed like this? I assume they were smart enough not to go all in like this manager did, but it seems like there’s always some bozo who thinks he’s got a sure thing.
An officer appears to have violated police department guidelines when he used a Taser stun gun on a naked, distraught man teetering on a building ledge, officials said Thursday.
Inman Morales, 35, was pronounced dead at a hospital after his nearly 10-foot fall Wednesday. Police said he suffered serious head trauma when he hit the sidewalk.
Officers had radioed for an inflatable bag as the incident unfolded, but it had not yet arrived at the scene when Morales fell.
“None of the … officers on the scene were positioned to break his fall, nor did they devise a plan in advance to do so,” said chief department spokesman Paul Browne. The lieutenant who directed the use of the stun gun was stripped of his gun and badge, and the officer who shocked Morales was placed on desk duty as the investigation continues. Their names were not released.
Witnesses and neighbors said Morales had become distraught and threatened to kill himself earlier in the day. When police arrived in response to a 911 call, he fled naked out the window of his third-floor apartment, clambered down to a ledge and began jabbing at officers with an 8-foot-long fluorescent light.
An amateur video posted on the Web site of the New York Post shows one of the officers raising a stun gun at Morales, who freezes and topples over headfirst as the crowd screams.
“They didn’t try to brace his fall. They did nothing. I’ve seen a lot of things in my time. But what they did was wrong,” said neighbor Kirk Giddens, 39, in Thursday editions of the Daily News.
When are we going to do something about this? They are routinely killing mentally ill people with these things and torturing many, many others. Something’s got to be done. I’m physically ill right now.
In case you’re getting as confused as I am (and I’m just talking about the politics!) here’s Krugman on the merits of the deal:
A $700 billion slap in the face
The initial Treasury stance on the bailout was one of sheer demand for authority: give us total discretion and a blank check, and we’ll fix things. There was no explanation of the theory of the case — of why we should believe the proposed intervention would work. So many of us turned to our own analyses, and concluded that it probably wouldn’t work — unless it amounted to a huge giveaway to the financial industry.
Now, under duress, Ben Bernanke (not Paulson!) has offered an explanation of sorts about the missing theory. And it is, in effect, a metastasized version of the “slap-in-the-face” theory that has failed to resolve the crisis so far.
Before I explain the apparent logic here, let’s talk about how governments normally respond to financial crisis: namely, they rescue the failing financial institutions, taking temporary ownership while keeping them running. If they don’t want to keep the institutions public, they eventually dispose of bad assets and pay off enough debt to make the institutions viable again, then sell them back to the private sector. But the first step is rescue with ownership.
That’s what we did in the S&L crisis; that’s what Sweden did in the early 90s; that’s what was just done with Fannie and Freddie; it’s even what was done just last week with AIG. It’s more or less what would happen with the Dodd plan, which would buy bad debt but get equity warrants that depend on the later losses on that debt.
But now Paulson and Bernanke are proposing, very nearly, to do the opposite: they want to buy bad paper from everyone, not just institutions in trouble, while taking no ownership. In fact, they’ve said that they don’t want equity warrants precisely because they would lead financial institutions that aren’t in trouble to stay away. So we’re talking about a bailout specifically designed to funnel money to those who don’t need it.
It took four days before P&B offered any explanation whatsoever of their logic. But as of now, it seems that the argument runs like this: mortgage-related assets are currently being sold at “fire-sale” prices, which don’t reflect their true, “hold to maturity” value; we’re going to pay true value — and that will make everyone’s balance sheet look better and restore confidence to the markets.
As I said, this is really a giant version of the slap-in-the-face theory: markets are getting hysterical, and the feds can calm them down by buying when everyone else is selling.
So, three points:
1. They’re still offering something for nothing. In major financial crises, the beginning of the end comes when the government accepts that it will have to pay some cost to recapitalize the banks. But in this case they’re still insisting that it’s basically a confidence problem, and it we can wave our magic wand — a $700 billion magic wand, but that’s just to impress people — the whole thing will go away.
2. They’re asserting that Treasury and the Fed know true values better than the market. Just to be fair, it’s possible, maybe even probable, that mortgage-related paper is being sold too cheaply. But how sure are we of that? There are plenty of cash-rich private investors out there; how many of them are buying MBS? And isn’t it bizarre to have officials who miscalled so much — “All the signs I look at,” declared Paulson in April 2007, show “the housing market is at or near a bottom” — confidently declaring that they know better than the market what a broad class of securities is worth?
3. Even if it works, the system will remain badly undercapitalized. Realistic estimates say that there will be $800 billion or more of real, medium-term — not fire-sale — losses on home mortgages. Only around $480 billion have been acknowledged by financial institutions so far. So even if the fire-sale discount is removed, we’ll still have a crippled system. And Paulson is offering nothing to fix that — unless he ends up paying much more than the paper is worth, by any standard.
Meanwhile, Paulson and Bernanke seem to be digging in their heels against equity warrants or anything else that would make this a more standard financial rescue. I say no deal on those terms — and if the lack of a deal puts the financial world under strain, blame Paulson and Bernanke, who have wasted most of a week demanding authority without explanation.
Obviously the “plan” whatever it is, has been changed by the congressional negotiators. But the central premise doesn’t appear to have been. Throw a huge amount of money willy nilly at the market to slap it out of its hysteria. How that’s supposed to work when you’ve just spent the past week running around like Chicken Little with his head cut off, I don’t really know. But if Krugman’s right, this isn’t a plan at all. It’s a crude psychological experiment.
It’s very hard to get the lay of the land on this bailout, but this looks to me like what happened today.
• After several hours of talks, Democrats and Senate Republicans reached something approaching a deal on at least principles, without specifics. House Republicans, particularly the rank and file, were never on board.
• The deal met virtually every priority John McCain had been promoting all week, but once he got to Washington, he met with John Boehner, came out and changed his tune.
• The White House meeting was a disaster, as Boehner announced his caucus was not on board, McCain blathered away with some gibberish, floating a new plan, and no agreement was made.
• All of a sudden, House conservatives started passing along that new proposal McCain was touting, which amounted to a conservative wish list for, get this, even LESS regulation and lower taxes to spur private investment in the market. If there’s anything that private investors want, it’s to buy worthless securities and cross their fingers, hoping they’ll somehow go up in the future, right?
• McCain hasn’t said yes to anyone but he’s clearly weighing the political pros and cons right now. If he goes against House Republicans he’s stabbed the base in the back. If he goes with them he scuttles the deal and may get the blame for the economic pain to come. Country first. Chris Dodd basically said that McCain blew up the deal.
This has clearly been politicized by Republicans, and I don’t see the endgame for them. McCain is trying to be at the forefront of history and thinks the world revolves around him, but clearly his presence was harmful to the process. But it’s not like it would have been smooth sailing if he wasn’t there, either. Stoller is right on this.
The end result of this should be that this is impossible to do in the current environment, and it always was, given that we’re 40 days out from an election, and nothing more should be done than a temporary bridge loan to get us to Inauguration Day. The people can decide on the best practice after that.
I wrote the other day about the wingnut meme that it’s the racial minorities who’ve caused this crisis. They are really going for it now. Here’s Michelle Malkin:
It’s no coincidence that most of the areas hardest hit by the foreclosure wave — Loudoun County, Va., California’s Inland Empire, Stockton and San Joaquin Valley, and Las Vegas and Phoenix, for starters — also happen to be some of the nation’s largest illegal-alien sanctuaries. Half of the mortgages to Hispanics are subprime (the accursed species of loan to borrowers with the shadiest credit histories). A quarter of all those subprime loans are in default and foreclosure.
Regional reports across the country have decried the subprime meltdown’s impact on illegal-immigrant “victims.” A July report showed that in seven of the ten metro areas with the highest foreclosure rates, Hispanics represented at least one third of the population; in two of those areas — Merced and Salinas-Monterey, Calif. — Hispanics comprised half the population. The amnesty-promoting National Council of La Raza and its Development Fund have received millions in federal funds to “counsel” their constituents on obtaining mortgages with little to no money down; the group almost succeeded in attaching a $10-million earmark for itself in one of the housing bills past this spring.
For the last five years, I’ve reported on the rapidly expanding illegal-alien home-loan racket. The top banks clamoring for their handouts as their profits plummet, led by Wachovia and Bank of America, launched aggressive campaigns to woo illegal-alien homebuyers. The quasi-governmental Wisconsin Housing and Economic Development Authority jumped in to guarantee home loans to illegal immigrants. The Washington Post noted, almost as an afterthought in a 2005 report: “Hispanics, the nation’s fastest-growing major ethnic or racial group, have been courted aggressively by real estate agents, mortgage brokers, and programs for first-time buyers that offer help with closing costs. Ads proclaim: “Sin verificacion de ingresos! Sin verificacion de documento!” — which loosely translates as, ‘Income tax forms are not required, nor are immigration papers.’
I guess Malkin has never heard of something called “No Doc” loans which mean No Income, No Asset, No employment Verification. It’s got nothing to do with immigration.
And, like most racists, she forgets herself from time to time and forgets to distinguish between illegal immigrants and Mexican Americans. It makes no difference to her, of course, but they are usually a bit more scrupulous in their obfuscation.
The idea that the trillion dollar credit crunch was caused by illegal immigrants is so ludicrous that I can’t stop laughing. She cites California’s Inland Empire as a hotbed of illegal immigrant mortgage scammers. I suppose it’s possible. But unless they were making a really good middle class living, they wouldn’t have been able to afford the payments even under the best conditions on one of those houses. It seems highly unlikely to me that day laborers had the means to commute back and forth hundreds of miles each day to their half a million dollar tract homes out in the desert.
Here’s a story from today’s LA CityBeat about those houses out in the desert:
As the American financial system finally collapsed and the investment experts swore they never saw it coming, the apocalypse continued out here in the Mojave, slow and steady.
Twenty years ago, the only people who moved to this unloved chunk of inland California were misfits and military and the poor trying to escape the crime and horror of L.A. slums. Then, improbably, absurdly, stupidly, the High Desert on the other side of Cajon Pass became an “exurb,” one of those ugly stucco grids dropped on the ground with feeder roads to the I-15, instant fake luxury, only two hours from the office, when traffic’s good.
And every little chunk of non-government-owned sun-blasted creosote – from the prison-covered hellscape of Adelanto to the trailer-park junkyards of Yermo – suddenly became valuable real estate. Dirt lots you couldn’t give away in 1999 were selling for half a million in 2005, at the insane peak of the bubble, complete with a three-bedroom cardboard castle in the middle of the scraped-bare lot.
There are dozens of these abandoned new houses around me, in these desert foothills that deserved a better fate. The financial wizards could’ve predicted the entire apocalypse had they simply walked around the Mojave and watched the sad routine that’s been going on since at least last year.
Read it all for a very evocative illustration of what’s happened to these places. The idea that illegal maids and gardeners were the ones buying is ridiculous. It was average middle class Americans buying in the exurbs to get away from the hustle and flow of the city — which for many of them was defined as — too many Mexicans.
This meme is absurd, but it’s the only way the conservatives can explain things within their world view. And there’s nothing new here. The historical American resistance to government action is historically tied to a reluctance give money to people of color. This goes all the way back to the beginning. They have to find a way to blame this mess on “the other” and while there’s certainly plenty of anger at the Wall Street fat cats, it just can’t satisfy the wingnut lizard brain. They’ve been trained to think that the owners have their best interests in mind and will put them first over the darker hued.
I would also bet that one of the ways their conservative leaders can make sure their base will agree to a bail out of the fat cats (eventually) is by making damned sure that blacks and Mexicans aren’t similarly rewarded. They’re going to have to take responsibility for thinking they had a place in the ownership society.
Whether the debate happens tomorrow night or not, if anyone thinks we are going to have a sort of Lincoln-Douglas series because of the “new rules” they’d better think again:
Before negotiations with the campaigns began, the plan was for the two formal debates (the third is a “town hall” format) to focus on nine questions, with nine minutes devoted to each. Now, each topic will still be allotted nine minutes — but not for focused debate. Instead, the candidates will begin each response with a two-minute statement, which, freely translated, means two minutes from their stump speeches. That leaves only five minutes for discussion of any topic — just long enough to offer the merest start of an exploration of complex issues such as, for example, conflicting explanations for the success of the military “surge” in Baghdad.
The Commission on Presidential Debates called these rules “a breakthrough in the history of televised debates.” And the commission and the political parties speak of these craven modifications as if the public interest were their overriding concern. But to do well, a candidate need only memorize enough statistics and one-liners to fill 45 minutes — essentially what many college students do at exam time. No wonder these debates are likely to disappoint politically aware viewers and fail to enlighten those who watch out of a sense of duty.
It’s a pity. Just a few changes in format could transform these unrevealing, visually static and technologically backward shows into genuine must-see TV.
Read on for a list of excellent suggestions. I particularly like this one, but they’re all good:
Teach painlessly.
Let’s not pretend that viewers have followed politics, economics and war as closely as professional journalists and news junkies — a third of our citizens still believes that Saddam Hussein was personally involved in the 9/11 attacks. Use the video screens to showcase incontrovertible facts: “The U.S. national debt is now equivalent to about 65% of the nation’s gross domestic product.” Then have the candidates discuss: “What does that mean to you? To your kids? What would you do about it?”
Nobody knows if the debate will happen tomorrow. If it doesn’t, Obama is planning on being there anyway and he’ll hold a town meeting anyway. The networks should tell McCain that if he doesn’t show up, they’ll show Obama’s town meeting in prime time. Everybody’s spent a lot of money and time preparing for the event and he’s canceling it as a political stunt. He shouldn’t benefit from that.
Besides, the Republicans are the ones who insisted on repealing the fairness Doctrine. They don’t believe there’s any obligation for broadcasters to provide the public with both sides of the argument. As ye sow, dudes.
A spokesman for House Minority Leader John Boehner, R-Ohio, cautions that House Republicans have not signed on to anything.
Spokesman Kevin Smith said this includes Rep. Spencer Bachus, the ranking Republican on the House Financial Services Committee, who spoke to the press after this morning’s negotiation over the Wall Street bailout bill.
[…]
Bachus was the only House Republican at the meeting. Three Senate Republicans were in attendance. Asked if his boss had signed on to the plan, Bachus’s spokesman said “this is above my pay grade” and referred a reporter to the House Financial Service Committee staff.
Boehner issued a statement this afternoon saying, “I am encouraged by the bipartisan progress being made toward an economic package that protects the interests of families, seniors, small businesses, and all taxpayers. However, House Republicans have not agreed to any plan at this point. We owe it to all those with a stake in this process to continue our discussions until we arrive at an agreement that is acceptable on both sides of the aisle – and more importantly, one that serves the interests of American taxpayers. With that in mind, I look forward to joining my colleagues, President Bush, Sen. McCain, and Sen. Obama at the White House later today to take the next critical steps on a rescue package.”
Two possibilities here. First, that House Republicans are going to let McCain “convince them” that they must sign on to the bailout, thus showing the country that he’s toppermost of the bipartisanmost, who will work with the Democrats and knock his own troops in line for the good of the country. Say jalapeno!
Or, they are giving cover to McCain to vote no on the basis of fiscal conservatism and anti-Big Gummint principles.
There is some basis for them thinking they can get away with it. This is from the WSJ/ NBC poll:
While McCain trails Obama on the issue of the economy, he appears to have tapped into the anger voters feel on this topic.
Asked to pick between two these two statements below, a whopping 67 percent said they preferred the latter:
* End President Bush’s policies and have more oversight over government institutions * Clean up Washington and take on waste and fraud
That second statement, in fact, is very similar to what McCain routinely says now on the campaign trail. “I’ll tell you whose fault it is — corruption in Washington and corruption on Wall Street,” he said in Michigan last week. “And as president, I am going to clean it up, and I am going to fix it and return you back to the strength of our economy which you have earned and deserve.”
In another article, Peter Hart calls McCain the “Howard Beale of this election.” Geez..
Certainly, voters still think the Democrats and Obama are better able to deal with the economy, but the protests we are seeing sprout up around the country may actually end up aiding McCain’s cause.
At this point, I just have to cling to the idea that Democrats understand that the single worst thing they can do for the health of the economy is to allow John McCain to become the next president (and then very likely shortly thereafter, Sarah Palin!) If you want to see a worldwide economic catastrophe handled like Katrina, wait until Phil Graham gets a hold of it.
Uhm, I just saw the video of the “big meeting” which showed Bush flanked by Pelosi and Reid. He blathered about something useless and then said they wouldn’t take any questions. The camera then panned over to McCain grinning like a jack-o-lantern and that was it.
If politics is TV with the sound turned off, this photo-op gave the impression that Bush, Pelosi and Reid are consulting McCain.
It’s probably just as well. This Dog and Pony show is not something Obama should wish to be associated with.
Update: Ok there’s some footage that shows Obama in the room.
I think John McCain suspended his campaign (sort of) to deflect attention away from the jaw-gaping performance by his running mate with Katie Couric. We already know that he ran in for a damage control interview with Couric last night in the middle of Letterman. That was the right move. I mean this is stunning:
COURIC: Why isn’t it better, Governor Palin, to spend $700 billion helping middle-class families struggling with health care, housing, gas and groceries? … Instead of helping these big financial institutions that played a role in creating this mess?
PALIN: 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.
COURIC: You’ve cited Alaska’s proximity to Russia as part of your foreign policy experience. What did you mean by that?
PALIN: That Alaska has a very narrow maritime border between a foreign country, Russia, and on our other side, the land– boundary that we have with– Canada […]
COURIC: Have you ever been involved with any negotiations, for example, with the Russians?
PALIN: We have trade missions back and forth. 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.
As Couric said yesterday, in the understatement of the year, “She’s not always responsive when she’s asked questions.” Yes, in the way a hen is not responsive.
(ZOMG, you just called Sarah Palin a hen!)
I’m with Greenwald, she’s either deeply ignorant and incurious or she’s so buttoned up by the McCain campaign that she can only speak gibberish. I’m inclined toward the latter, actually. McCain’s team is desperate to keep her stage-managed to such a ridiculous degree that Campbell Brown is calling it sexist. Nobody can look too credible when you’re always looking over your shoulder and worried about what you’re going to say.
The second area whereby God wants us, wants to penetrate in our society is in the economic area. The Bible says that the wealth of the wicked is stored up for the righteous. It’s high time that we have top Christian businessmen, businesswomen, bankers, you know, who are men and women of integrity running the economics of our nations. That’s what we are waiting for. That’s part and parcel of transformation. If you look at the — you know — if you look at the Israelites, that’s how they work. And that’s how they are, even today.
Yeah, I think you would want to hide the candidate of holy war. Plus there’s the unseemly influence of Todd Palin, her unelected de facto chief of staff. And the vindictiveness of their obstruction in the Troopergate case, which now might include witness tampering.
“Until McCain campaign staffers flew to Alaska to stop this investigation, the Governor and her staff agreed to comply with what we all know is a bi-partisan investigation. After Aug. 29 the campaign started working to block this investigation, and witnesses began joining that effort by ignoring their subpoenas and risking jail time. Something obviously changed the minds of these witnesses after Aug. 29th,” said Rep., Les Gara (D-Anchorage), a State Representative and Former Alaska Assistant Attorney General.
Alaska’s witness tampering statutes prohibit any person from “inducing” a witness to fail to comply with a subpoena. Almost daily, McCain staffers have called press conferences and made efforts to stonewall the legislative investigation. Prior to Aug. 29 no witness had stated they’d refuse to comply with the investigation, and the Governor in fact promised she and her staff would comply.
Karl Rove was asked if Sarah Palin would make a good President. He said “I don’t know.” And the McCain campaign wants to keep it that way.
Last night I was driving on the freeway listening to Mara Liasson tell me all about McCain’s debate gambit and realized that the news media was going to cover the story with a “waiting for Biden” vigil. It’s their favorite kind of story. They can spend the next two days speculating about something they can’t possibly know the outcome of. What’s not to like?
It’s possible that Bush actually thinks he helped McCain by demanding the meeting and dragging Obama back to Washington. But I think he may have thrown a monkey wrench into his mavericky plans by trying to get both candidates to hold hands and accept the bill. Mccain desperately wants to vote against this thing, but if he has to accept it, I have no doubt that McCain didn’t want to be anywhere near him at the moment, preferring to be seen marching into meetings from which emerge details of his hard knuckled demands that everybody “stop the bullshit.”
Of course, I’ve been wrong about this before. I assumed that when Bush defied all logic and initiated the surge after having just lost the congress to anti-war Democrats, that he’d seriously messed up McCain’s electoral hopes by taking away his ability to run against the administration on Iraq from the right. It didn’t work out that way. The surge ended up having some press friendly short term success so McCain took credit for it and now he’s seen by too many people as some kind of foreign policy oracle.
So, it’s theoretically possible that could happen now. He may be backed into supporting the bailout in which case he has to hope that it works fast and that they can diffuse the “economy story” long enough for him to get elected. One thing you can bet on is that if McCain votes for the bill, he will certainly take credit for having knocked the heads together to make it happen.
And if it happens before tomorrow, he’ll say it was a result of his cunning, well-timed threat to cancel the debate and force a resolution. I don’t think it will work, but it’s all he’s got.
Update: A deal has been struck among the congressional negotiators. No details yet. Also no word on whether the House republicans and the Bush administration agree. And we still don’t know if McCain will vote for it (or Obama, for that matter.)