SOTD: Dot Allison - Strung Out

Two years after Hurricane Katrina and Thousands are Still Without Homes

Why are we spending $500 billion and thousands of lives in Iraq when we have this going in America?

Bush is the real disaster.

Geography Lesson

I suggest that the Bush Administration pick Miss South Carolina to be the new Attorney General, as she is about as coherent as anyone in the administration.

Socialism For The Rich

Jim Grant is great.

...Why does the Fed feel the need to intervene at the drop of a market? The reasons have to do with an idea set firmly in place in the 1930s and expanded at every crisis up to the present. This is the notion that, while the risks inherent in the business of lending and borrowing should be finally borne by the public, the profits of that line of work should mainly accrue to the lenders and borrowers.

...Understandably, it’s only the selling kind of panic to which the government dispatches its rescue apparatus. Few object to riots on the upside. But bull markets, too, go to extremes. People get carried away, prices go too high and economic resources go where they shouldn’t. Bear markets are nature’s way of returning to the rule of reason.

...Now comes the bill for that binge and, with it, cries for even greater federal oversight and protection. Ben S. Bernanke, Mr. Greenspan’s successor at the Fed (and his loyal supporter during the antideflation hysteria), is said to be resisting the demand for broadly lower interest rates. Maybe he is seeing the light that capitalism without financial failure is not capitalism at all, but a kind of socialism for the rich.

SOTD: Britta Phillips & Dean Wareham - Night Nurse

SOTD:The White Stripes - Truth Doesn't Make a Noise

Federal Reserve Accepting Boat Loans As Collateral at Discount Window

Remember, the problem is contained. Next they'll also accept loans backed by plasma TV's, mattresses and Yu-Gi-Oh cards.

Lacker told risk managers yesterday that the Fed's district banks would even accept boat loans as collateral. It's up to the banks to establish a value for the assets as they make the loan, he said.

The same banks that are essentially insolvent due to inept risk management and greed now are being told to "establish a value" for their junk. Sounds like a bailout of the big banks, but hey, what's more American than that?

...via Peace.

Erin Burnett Is An Idiot

I honestly can't believe that this bimbo is allowed to use the public airwaves...check this tortured logic out...


“A lot of people like to say, uh, scaremonger about China, right? A lot of politicians, and I know you talk about that issue all the time. I think people should be careful what they wish for on China. Ya know, if China were to revalue it’s currency or China is to start making say, toys that don’t have lead in them or food that isn’t poisonous, their costs of production are going to go up and that means prices at Wal-Mart here in the United States are going to go up too. So, I would say China is our greatest friend right now, they’re keeping prices low and they’re keeping the prices for mortgages low, too.” - Erin "Einstein" Burnett

The Panic of 2007

Good analysis of how we got where we are today, in the mortgage market anyway.

Office Party

Subprime Quote of the Day

"I would argue that Countrywide is insolvent. Their only asset is their pricing platform, their business algorithm, and that's not working. The next biggest asset they have is the toner for their copiers." - Joe Mason, an economist and professor of finance at Drexel

SOTD: Air - All I Need

Moon Safari, 1998

SOTD: Pearl Jam - Black

Live 1991

Subprime Quote of the Day

From the LA Times "For consumers, there's little reason to worry"...

...if you're trying to choose between that Countrywide CD and cramming cash under your mattress, the CD's probably still the better bet.

Yes, probably. And if you're trying to choose between that Countrywide CD and setting your cash on fire or using it to line a bird cage, the CD's are also probably still the way to go.

Bush Actually About to Accomplish Something

Apparently after the past 6 1/2 years our fearless leader is about to overtake Ronald Reagan in the race for "most vacation days taken by a sitting president"...we're at 423 and counting.

Too bad he didn't take the other 5 years off too.

Great Game Show

The Japanese sure are, uh, eccentric.

By the way, I saw this on a post on a stock market site. That's how weird the markets are getting.

Cheney Got Stupider Since 1994

Q: Do you think the U.S., or U.N. forces, should have moved into Baghdad?

A: No.

Q: Why not?

A: Because if we'd gone to Baghdad we would have been all alone. There wouldn't have been anybody else with us. There would have been a U.S. occupation of Iraq. None of the Arab forces that were willing to fight with us in Kuwait were willing to invade Iraq.

Once you got to Iraq and took it over, took down Saddam Hussein's government, then what are you going to put in its place? That's a very volatile part of the world, and if you take down the central government of Iraq, you could very easily end up seeing pieces of Iraq fly off: part of it, the Syrians would like to have to the west, part of it -- eastern Iraq -- the Iranians would like to claim, they fought over it for eight years. In the north you've got the Kurds, and if the Kurds spin loose and join with the Kurds in Turkey, then you threaten the territorial integrity of Turkey.

It's a quagmire if you go that far and try to take over Iraq.

The other thing was casualties. Everyone was impressed with the fact we were able to do our job with as few casualties as we had. But for the 146 Americans killed in action, and for their families -- it wasn't a cheap war. And the question for the president, in terms of whether or not we went on to Baghdad, took additional casualties in an effort to get Saddam Hussein, was how many additional dead Americans is Saddam worth?

Our judgment was, not very many, and I think we got it right.

SOTD: Morcheeba - Blindfold

The Resurgence of Risk – A Primer on the Developing Credit Crunch

Canary in a Coal Mine

[BRIEFING.COM] The market continues to deteriorate as speculation about a letter to clients from a money market fund halting redemptions is confirmed. Within the last 10 minutes, CNBC reported that Sentinel Management Group has asked permission from the CFTC to halt money market redemptions.

Sentinel's inability to meet significant redemption requests has exacerbated the liquidity concerns that have led many to believe a real credit crunch is forthcoming. While the credit markets continue to experience liquidity problems, which are real and of serious concern to the financial markets, there is no evidence yet of a credit crunch that would impact the overall economy. Nonetheless, the Financial sector has edged even lower and is now down 1.9% as the bottom continues to fall out of the brokers and banks.

More here. [Note: They filed for bankruptcy a few days later...]

Least Timely Commercial Ever

From early 2006.

Bush's Brain Resigns

My first thought was "the indictment must be coming down soon."

At least there's one reporter who got it right

As Karl Rove embraced President Bush today following an emotional farewell announcement on the South Lawn, the solemnity of the moment was shattered by Bill Plante of CBS, who bellowed to Bush: "If he's so smart, how come you lost Congress?"

Are Money Market Funds Safe?

Maybe not. According to the NY Post

Fidelity's Cash Reserves prospectus indicates that, as of May 31, 26 percent of its $98.2 billion portfolio was in repurchase agreements with Wall Street's investment banks.

Fidelity accepted billions of dollars worth of "mortgage-loan obligations"as collateral for the trades, although it doesn't note whether those are riskier "private label" mortgages, or the triple-A bonds guaranteed by Freddie Mac and Fannie Mae.

The money-management giant also has 1.7 percent in collateralized debt obligations, or bonds made from other bonds, a market that has seen billions of dollars of credit downgrades.

Fidelity also has plenty of indirect exposure to the mortgage-security market via its investment in the commercial-paper subsidiary of Countrywide Financial, a mortgage lender whose portfolios have suffered sharp credit losses from homeowner defaults.

The commercial-paper market - ultra-short term, publicly traded corporate debt -has been rocked by the inability of several subprime mortgage companies to meet
their obligations.

A Fidelity spokeswoman told The Post, "We are very comfortable with the holdings in cash reserves."

I'm glad they're "comfortable". I'm not. These are the same type of people who said a week ago that the "subprime" mess was contained.

More Stuff to take Our Minds off Iraq

Barron's, via The Big Picture, has a nice piece on the true architect of the current credit mess, the "Maestro" (eventually to also be known as "worst Fed Chairman ever"), Alan Greenspan.



Fortunately, now we've got another genius running the show, Ben Bernanke. He's book-smart.



Speaking of geniuses, Goldman Sachs is run by some really smart guys supposedly. That said, their largest hedge fund has dropped by about 40% since 2006, according to Bloomberg. I wonder how the stupid managers are doing.



Sudden Debt as usual explains the world in plain English:

First, let's dispense with two common misconceptions - or outright lies, if you prefer:

1. It is not a "US subprime credit crunch", but a credit crunch, period. The trouble surfaced first at low-quality mortgage loans because that was the weakest in a long series of weak links. The problem, taken as a whole, is too much debt assumed by too many borrowers who cannot hope to service it without relying on constantly higher asset prices. In other words, it is a classic asset-credit bubble, only this time it is not contained within one country but it spans nearly the entire globe.


2. Liquidity is not a stash of cash sitting in an account, looking for assets to buy. Liquidity is (a) access to reasonably cheap credit and (b) the ability to sell assets at reasonable prices, quickly and in size.

...as does the excellent train-wreck-in-progress chronicler The Housing Bubble Blog.

And if next week is as fun as last, the Market Ticker is the place to keep up on the action. In a nutshell, here's their assessment of the financial markets' situation:

Perhaps Cramer will kill himself live on CNBC this week (and maybe take Maria and Erin with him). Anyway, I would think you could do worse than own Berkshire Hathaway, gold, the Yen and cash 'til this thing sorts out in a week or decade or so.

Jim Cramer Flips Out

Wow.

Maybe this is a bullish sign....Naaah...

SOTD: James Morrison - Wonderful World