Posts from — September 2008

Paul Krugman notes that in August of 2005 he wrote a piece in the New York Times telling the world that the housing bubble was at the point of bursting and that things would get ugly.

In October of that year the House passed the Federal Housing Finance Reform Act of 2005 by a vote of 331-90 with a majority of both parties that the Republican Senate buried in committee because the White House opposed it.

Three years ago this would have been easy to fix with some more oversight and a few people getting their hands slapped for “irrational exuberance”. Now we have a worldwide crisis.

US News tells us that in 2007 the median¹ wage for women was $35,102 and the median wage for men was $45,113. The Bureau of Labor reports that in 2007 women made up 46% of the workforce. That means the median wage for all workers in 2007 was $40,507.

A lot of people are throwing around the median wage for “households” which is higher because many households have multiple wage earners. The problem with doing that is that most “benefits” are tied to the individual, not the household, and many households with seemingly high income don’t have any benefits.

People are talking a lot about 401(k) plans. In my area almost no one who is still working has one, so they don’t have any idea what a 401(k) is. If they have any kind of a pension beyond Social Security it is because they work for the government at some level or they have an IRA. People are overwhelmingly employed by small businesses, not corporations. All of the breaks go to corporations, so small businesses rarely get large enough to actually be able to afford to offer benefits, and the first benefit they go for is health insurance, not retirement plans.

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Position: 43.6 N 48.0 W [10 PM CDT 0300 UTC].
Movement: North-Northeast [015°] near 16 mph.
Maximum sustained winds: 50 mph [85 kph].
Wind Gusts: 65 mph.
Tropical Storm Wind Radius: 230 miles [370 km].
Minimum central pressure: 1000 mb ↑.

It is 300 miles [530 km] Southeast of Cape Race, Newfoundland.

Here’s the link for NOAA’s latest satellite images.

[For the latest information click on the storm symbol, or go to the CATEGORIES drop-down box below the CALENDAR and select “Hurricanes” for all of the posts related to storms on this site.]

Robert Peston finds something puzzling: B&B collapse to cost City £9bn

All of which begs a big question: why on earth didn’t those big banks club together to rescue B&B rather than let it collapse and be nationalised.

Surely that would have been cheaper for them.

Their apparent inability to act collectively for their common good is not altogether encouraging.

The City in the UK = Wall Street in the US. £9bn = $16.6 billion US. Financial Services Compensation Scheme [FSCS] in the UK = Federal Deposit Insurance Corporation [FDIC] in the US.

The FSCS and FDIC are both funded by the financial institutions they insure, not tax dollars. If the money runs out, the banks get an assessment for more.  Wall Street and The City have not been acting in their own best interests, and that’s why governments have to get involved.

McClatchy cuts to the chase: For once, Congress heard as voters protested bailout plan

Hensarling, Cummings and lots of others had pleaded with their leaders to give them a bill they could explain easily back home. Constituents wanted Congress to act, they said, but were suspicious of what they might do.

Instead, many members found the compromise that emerged to be too complex, fueling constituents’ qualms.
…

Rep. Jeff Flake, R-Ariz., recalled how many people voted for hard-to-understand measures such as the 2003 Medicare prescription drug bill or 2002 legislation giving President Bush broad authority to wage war in Iraq, only to learn later that they’d signed blank checks to Bush that would come to haunt them.

“There were a lot of eyes rolling on this bailout. We’re heard this kind of thing before,” said Flake, who voted no.

It’s not that people don’t understand there are problems, nor do they think the problems should be ignored, but they want a clear explanation of the problems, and a clear explanation of what Congress is voting on before they will go along. The way this thing was sprung on Congress and the people is really suspicious. The fact that people are not being given time to read and digest the supposed solution, makes them more suspicious. They know what the Hedgemony has done in the past, and they don’t want it to happen again.

Position: 39.0 N 48.4 W [10 PM CDT 0300 UTC].
Movement: North [360°] near 9 mph.
Maximum sustained winds: 60 mph [95 kph].
Wind Gusts: 70 mph.
Tropical Storm Wind Radius: 220 miles [350 km].
Minimum central pressure: 995 mb.

It is 585 miles [940 km] South-Southeast of Cape Race, Newfoundland.

This is a “fish botherer” and is included for information purposes only.

Here’s the link for NOAA’s latest satellite images.

[For the latest information click on the storm symbol, or go to the CATEGORIES drop-down box below the CALENDAR and select “Hurricanes” for all of the posts related to storms on this site.]

The Stock Market and Bailout Bill are both “FAIL” right now.

The House Roll Call page is also “Fail”, so I’ll go with the MSM’s 205-228.  So much for “leadership”.

Update: Here’s the vote.

MSNBC tells us that Citigroup buying Wachovia banking operations

NEW YORK – In the latest byproduct of the widening global financial crisis, Citigroup Inc. will acquire the banking operations of Wachovia Corp. in a deal facilitated by the Federal Deposit Insurance Corp.

Citigroup will absorb up to $42 billion of losses from Wachovia’s $312 billion loan portfolio, with the FDIC covering any remaining losses, the government agency said Monday. Citigroup also will issue $12 billion in preferred stock and warrants to the FDIC.

The FDIC says that Wachovia didn’t “fail” and they just “assisted” in the purchase. Yeah, right.

This was the last of the major banks with problems, so what is Congress mucking about for?

Happy 5769!

At sunset Rosh Hashanah begins, so get your honey, challah, and apples ready.

[If they don’t vote soon, Congress will shut down for the holiday, so don’t bet on a bill being passed.]

CNN reports that Cadbury recalls Chinese-made candy in chemical scare

LONDON, England (CNN) — British confectioner Cadbury has recalled all of its Chinese-made candy products over fears they may be contaminated with the chemical melamine, a company statement said Monday.
…

The following 11 products are included in the recall, according to Hong Kong’s Centre for Food Safety:

• Cadbury Dark Chocette, 45 grams.
• Cadbury Dark Chocette, 80 grams.
• Cadbury Eclairs, 180 grams.
• Cadbury Dairy Milk Chocolate Pumpkin, 150 grams.
• Cadbury Dark Chocolate, 40 grams.
• Cadbury Dairy Milk Chocolate Bulk Pack, 5 kilograms.
• Cadbury Dark Chocolate Bulk Pack, 5 kilograms.
• Cadbury Dairy Milk Hazelnut Chocolate Bulk Pack, 5 kilograms.
• Cadbury Dairy Milk Cookies Chocolate Bulk Pack, 5 kilograms.
• Cadbury Hazelnut Praline Chocolate (2008 Chinese New Year), 312 grams.
• Cadbury Dairy Milk Chocolate (2008 Chinese New Year), 300 grams.

People won’t trust Cadbury after this. Years of “good will” have been thrown away over possible gains in profits.

Nouriel Roubini thinks it’s a rip-off. Brad DeLong is in favor of Nationalization. Paul Krugman says it may be the least worse alternative with the Shrubbery in the White House, so maybe they should hold their noses and vote for it.

Robert Peston explains the British plan that culminated in the B&B bank take-over. He thinks the problem is over for the UK financial markets. Nationalization was an important part of the plan.

I would wait until I saw an actual majority of Republicans voting for it in both Houses of Congress before I supported this toxic mess. If the Republicans can’t get a majority to agree, let them own the problems.

CNN-Money has a PDF of a Draft House version of the bill, but Paul Krugman notes that House staffers are saying that a number of changes were made to the draft.

They have posted the real bill at a House web site, but they are apparently using “a Kaypro with a Z80 chip running at 4 Mhz using CP/M for the operating system and a Bell 103 modem”¹ because I haven’t gotten a connection after a couple of hours of trying. I guess it would have been too much to expect them to upload a copy to someone with the server capacity to actually make it available.

They probably didn’t understand how many people throughout the whole financial network around the world would like a look at this turkey before tomorrow’s markets open.

I still don’t understand how what they are talking about doing is going to convince the people with money that the people who are holding this manure are going to be more worthy of trust after they dump it in the Septic Bank™.

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The “bubble” started in South Florida, burst there first, but the banks have tied themselves in knots because of their greed. The Miami Herald has the grisly details: Homes more affordable; loans are not

To understand how the credit crisis is hitting home in South Florida, consider the plight of Teresa and Hoover Encalada. The couple found a two-bedroom condo they loved at the Plaza on Brickell. At $434,000, the price was right. Their credit was good.

Friday, they got the bad news: The lender wants 45 percent down on a five-year loan with an initial interest rate of 7.8 percent. Now Encalada, a 39-year-old administrative assistant, and her husband, an Ecuadorean banana grower, are waiting on a second bank offer requiring only 40 percent down before they proceed.

Existing home prices in South Florida have fallen 20 to 30 percent over the past year, putting once-unaffordable homes within the grasp of buyers — if only they could qualify for a loan at reasonable rates.

If you have the cash, the prices are in line again. If you need a mortgage, forget it.  That “mortgage” offer isn’t even a good deal for a car loan.

Position: 44.8 N 65.9 W [10 PM CDT 0300 UTC].
Movement: North [010°] near 30 mph.
Maximum sustained winds: 70 mph [110 kph].
Wind Gusts: 85 mph.
Tropical Storm Wind Radius: 240 miles [390 km].
Minimum central pressure: 986 mb ↑.

It is 55 miles [60 km] South of St. John, New Brunswick.

Kyle has transitioned to an extratropical storm and this is the last advisory.

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