News from around the web: 2009-09-17
"Finance Minister Brian Lenihan told parliament on Wednesday that the government would demand a 30 percent haircut for parking commercial property loans with a nominal value of 77 billion euros in a state-run "bad bank.""
"Our Nerd President brandishes a lightsaber after a fencing demonstration on the White House lawn today during a photo op to promote Chicago’s bid for the 2016 Olympic Games."
"Barclays is capping its upside. Some of the assets are in the books at just 10% of face value. So Barclays is surrendering the chance of selling one day at, say, 20% and accepting instead a modest-looking rate of interest on the loan. Why would it want to do that?"
"If I want to get the most value out of limited liability, I will gravitate toward fat tailed and complex businesses, where most of the time I pump money out with regularity, but face some prospect of a catastrophic loss. How catastrophic? The bigger, the better. It doesn’t matter to me how bad things get once they have passed my liability limit. And the larger that catastrophic case, the more costs I am passing on, and thus if a general risk-return relationship holds, the more return I will get as long as the catastrophe is kept at bay."
A collection of links of where the economics profession has gone wrong.
"President Dwight D. Eisenhower warned of the birth of a military-industrial complex. Today we have a financial-regulatory complex, and it has meant a consolidation of power and privilege. We’ve created a class of politically protected “too big to fail” institutions, and the current proposals for regulatory reform further cement this notion."
"There are persistent rumors that the export of silver has already been banned. Gold could be next. China, we should note, is already reportedly looking at banning the exports of rare earth metals — the elements used in things like hybrid cars and superconductors."
"The President has marked the anniversary of the demise of Lehman Brothers with a new speech designed to breathe new life into his financial reform proposals. But the Obama administration already forfeited its best chance to reform the banking system when the crisis was at its height."
The White House wishes Carter hadn’t opened his big mouth and talked about race. They see this issue as a distraction that is a political loser for Obama.
I tend to think most all of the animosity toward Obama has to do with social unrest in a recession and the sense that the bailouts have been unfair. But, there is certainly a darker element. I had heard from well-connected contacts here in DC that there had been an enormous increase in death threats against the President. But, that’s not my beat, so I didn’t seek it out. But I did come across this month-old Telegraph story confirming what I had heard (400% increase in death threats) – and what is also common knowledge here in political circles inside the beltway. There is almost no press about this issue stateside – at least until Carter mentioned it.
"A year ago this week, Lehman Brothers blew up, dramatically advancing one of the worst financial disasters in history. The reckless behavior of greedy Wall Street bankers had come home to roost, making life a lot tougher for the rest of us. Since then, what have President Barack Obama and Congress done to prevent them from doing it to us again?"
Follow the money. Bill Gross is loading up on gov’t debt. Doesn’t sound like he expects inflation.
"If you think Lehman Brothers was bad, imagine Lehman compounded by Merrill Lynch," Buffett said. "I don’t know what [the authorities] would have done."…"Why pay X for Merrill Sunday when you could have had it for pennies on Monday?" Buffett said. "When Lehman failed, Merrill would have gone about five seconds later."
"From a friend and successful investor, a list of winners and losers a year after the financial crisis. Agree, disagree, other?"
"Getting the plan right is crucial. Errors would heighten the threat of a double-dip recession"
"Two-year gilts rose for a second day and the pound traded at a four-month low against the euro as speculation the Bank of England will cut the rate paid to hold reserves stoked demand for higher-yielding assets."
You have to believe race is a factor. ""I think that an overwhelming proportion of the intensely demonstrated animosity toward President Barack Obama is based on the fact that he is a black man, he’s African-American," Carter, 84, told NBC television."
"Now, a family earning three times the poverty level — $66,150 for a family of four — would have to pay up to 13 percent of their income for health insurance. And that’s just the premiums — not counting deductibles, co-payments and out-of-pocket expenses. "I don’t know very many working-class families who you can look in the eyes and say: ‘Do you have that kind of money in your checking account?’ — because they don’t," Wyden told me."
"When House Democrats, and a handful of Republicans, reprimanded the congressman on Tuesday evening for refusing to apologize to his colleagues for breaking the rules, it was quite a wonderful way to improve America."
The BIS thinks having skin in the game for securitization will solve the problem.
"An execution in Ohio was delayed for a week last night after prison technicians failed to find veins suitable for a lethal injection in the arms of a convicted child killer."
Hat tip Scott. "A year after the bankruptcy of Lehman Brothers Holdings Inc., credit-default swaps have lost their stigma for disaster and are contributing to the growing confidence in the credit markets."
Distraction of the Day: Too pretty to drive (this woman really needs to get over herself)