Exciting economic news!

Just when you thought the economy was surging to new heights and you'd finally be able to place an order for the platinum monocle, top hat, and spats you'll need as part of your wardrobe now that everyone has ascended to the top of the gilded class what with all these great new jobs we all got... think again. You know the drill; unending horror, plague of locusts, fire from the sky.

But at least it's a different kind of fire. Sure, it's mortgage failures, but on commercial real estate! Oooh, total curveball. And yes, it will imperil society, destroy small businesses, and hinder the economic recovery. Excuse me, economic "recovery." Why do you know you should be afraid? Because the warning are coming from Elizabeth Warren's Congressional Oversight Panel.

A huge wave of mortgage failures on commercial real estate could hit next year, causing banks to lose as much as $300 billion, imperiling lending for small businesses and hindering the economic recovery, a Congressional panel is warning.

In a report to be released on Thursday, the Congressional Oversight Panel... said commercial loan losses could jeopardize the stability of many banks, particularly the nation’s midsize and smaller banks, contributing to prolonged weakness throughout the economy.

The panel’s chairwoman, Elizabeth Warren, has been pressing the Treasury to compel thousands of banks to undergo stress tests like the ones that the Federal Reserve required of 19 of the country’s biggest financial institutions early last year. The Treasury secretary, Timothy F. Geithner, has called that idea impractical.

The signs are there: Elizabeth Warren saying something bad is on the horizon and coming up with a solution to head it off, Tim Geithner shrugging off the advice and the warning, and industry spokeswhores and lobbyists from organizations such as the Commercial Mortgage Securities Association and the Independent Community Bankers Association calling the reports and warnings exaggerated while touting the overall health and rock solid stability of the nation's banks.

I think we all know what that means: further economic collapse followed by complete societal destabilization and cannibalism. I've learned not to go against Warren when flesh reaving is on the line. So there are two options here: get used to the taste of human jerky or wait for Congress and the rest of our elected betters to act. I think we know how that's going to go. I'll get the teriyaki marinade and you get the meat smoker, I smell further banking collapse on the horizon. And mesquite smoke.

Cheap Blogging Crutch 07.28

Tenacious G
New York Magazine asks the question: Is Goldman Sachs evil or just too good? The conclusion they come up with is that they're good at being evil. But new information abounds, as it turns out that Goldman was close to collapse there for a while. I think I just heard Matt Taibbi sigh sadly.

Obama administration reveals evidence of global warming kept secret under Bush
That's right, under the Bush Administration they classified satellite photographs showing that arctic ice was rapidly melting. That's right, ice and US Geological Survey topographical studies were deemed sensitive information. But now that the photos have been released surely this new scientific information will convince guys like James Inhofe of the reality of the situation.

MANSON COURTS SPECTOR BEHIND BARS
Yes, Charles Manson is trying to set up a prison recording session with Phil Spector. Charlie still has those delusions of musical superstardom, good to see he's keeping the dream alive. Hopefully this ends better than Charlie's attempts to get Brian and Dennis Wilson to produce his music. What was it Dennis said? "Chuckles, I'd rather see Sharon Tate and all her friends murdered by your minions than have to listen to your fucking demo of 'Cease to Exist' one more goddamn time"? Hopefully Phil lets him down easier.

Gates, Crowley To Join Obama For Beers On Thursday
Our long national nightmare ends as President Obama finally sits down to drink a beer with the loudmouth professor and the blowhard cop who have transfixed the nation with their childish actions. Though given the interaction between Gates and Crowley when they were sober, should we really be introducing booze into the equation?

Why markets can’t cure healthcare
Nobel Prize winning economist Paul Krugman gets all economical up in this bitch as he explains how because of costs and the very nature of medical care that the free market can't properly regulate health care. This marks the 1000th straight time Paul Krugman will make a trenchant and valid point immediately relevant to the current issues debate that will be promptly ignored by the elected betters he allegedly shares the same side of the ideological spectrum with.

House passes resolution that states Obama was born in Hawaii, 378-0
Childish political gamesmanship is taken to new levels as Obama birthers were forced to vote on a bill commemorating Hawaii's 50th anniversary as a state that had been augmented to include a reference to the state being the birthplace of one Barack Hussein "Born in Mombassa" Obama. The potential for crazy 'birther' speeches seemed to be ready for blastoff as Michelle Bachmann blocked a simple voice vote on the uncontroversial measure and made it go to a floor vote. But, shockingly, sense prevailed within the GOP caucus as the conspiracy freaks either held their nose and voted for a lie or bravely skipped the vote. In case you're wondering why health care can't get passed it's because our elected betters spend most of their time dicking around with this kind of petty bullshit.

Broken News: California to, um, pay you on Tuesday and shit

The Governor, moments after he realized he'd have to star in Terminator 5 and Predator 3 just to keep the schools open

SACRAMENTO—Amid reports of a state budget crisis that threatens to perpetuate government shutdowns, service cuts, missed payments, and defaulted loans, California reassured the world today that everything is copacetic and that the world's 7th largest economy is "totally good for it."

At a press conference held earlier today, Assistant Press Secretary, Barry "Skeeter" Hamilton sought to quell rumors that the state, which has been in a somewhat dire fiscal condition for years now, was in danger of watching its government and infrastructure completely collapse.

"Dude," Hamilton, who asked to be referred to as Skeeter in the press, began, "We totally just want to tell everyone not to panic. Really, chill. Sure, we got some problems, brah. But who doesn't? I mean, Iran just had that coup and Honduras is trying to figure out how to get away with rigging their presidential election. Speaking of which, why do they call it 'rigging?' Isn't that rope? I mean, if you think about it..."

After flashbulbs from the attendant press roused him, Skeeter continued, "Yeah, so don't go blowing your top. Tops. Top top top... So, yeah, trust us. We'll get you the money, we swear. We're totally good for. We're Cali, baby, we'll come through. We just, like, need a little time to sort some shit out. And if we start to totally get hosed, we'll just bring in Blotter."

It was at this point that Mr. Hamilton proceeded to spin an elaborate story about how bail money for California's deadbeat cousin, lackluster returns from a t-shirt & grilled cheese sale in the parking lot of a Widespread Panic show, and an utterly asinine political system that leaves government at the propositional whims of a notoriously head-fucked electorate had left the state "just a little shy" of the $24 billion required to keep it solvent for the next fiscal year.

The solution, according to Skeeter, will come in the form of IOU's issued to creditors, which he assured everyone were, "like, totally as good as money." Skeeter then added, "Come on, man. We're fucking California! You know we're gonna make up for it. Where are we gonna hide? Ask around, brah, people will tell you we're cool."

Despite California's reassurances, the situation looks more dire by the day. Some reports have Governor Schwarzenegger accepting new movie roles in exchange for studios subsidizing essential services, while others claim that parts of the state have been discounted and offered to Mexico as part of a new "sorry we stole it in the first place" sale.

California is not the only state to face potential fiscal crisis during the recession. Indiana has elected to print counterfeit money, while Illinois issued a formal statement declaring its intention to "break the thumbs" of anyone who tried to collect on its debt.

Pennsylvania absconded with all of its possessions in the middle of the night, leaving no forwarding address. Fastened to its front door with a kitchen knife was a note reading, "You'll never see a fucking dime."

Arizona was able to settle an undisclosed but reportedly significant portion of its debt by marrying Cindy McCain and letting her take care of the bills, whereas Ohio sought a temporary solution by paying for its education and social programs with credit cards taken out in California's name.

Connecticut was curious as to why some creditors and lawmakers had thought it was in financial trouble, as it "totally remembers writing a check for the bill and sending it off.” The Nutmeg State attributed what it called "wildly speculative and reactionary paranoia" to a simple postal error, ensuring its state programs that the check was in the mail.

Those who think California's plan to hand out IOU's in lieu of payment was, at best, extremely childish and, at worst, completely fucking ridiculous, were told by the state that any contractor, construction firm, social services center, hospital, or out-of-state debtor unhappy with the plan can redeem their IOU in Washington DC, where The Golden State suspects most of its confiscated weed is kept.

The state also announced that it is willing to perform free massages and engage in a discussion of the recently published policy paper by the State Budget Office entitled "A Study on the Feasibility and Viability of Pleasant Conclusions."

After strongly suggested that all in attendance "Read it and shit," Skeeter told those assembled he would give them further details after he laid down for a bit and recovered from "that laser light that hit me in the eye at the Blue Oyster Cult show."

Your afternoon gun-in-mouthing

What Are the Odds of a Depression?

Central questions these days are how severe will the U.S. economic downturn be and how long will it last?

The most serious concern is that the downturn will become something worse than the largest recession of the post-World War II period -- 1982, when real per capita GDP fell by 3% and the unemployment rate peaked at nearly 11%. Could we even experience a depression (defined as a decline in per-person GDP or consumption by 10% or more)?
...
The bottom line is that there is ample reason to worry about slipping into a depression. There is a roughly one-in-five chance that U.S. GDP and consumption will fall by 10% or more, something not seen since the early 1930s.

Our research classifies just two such U.S. events since 1870: the Great Depression from 1929 to 1933, with a macroeconomic decline by 25%, and the post-World War I years from 1917 to 1921, with a fall by 16%.

It's not my fault: Madoff edition

THE SEC WATCHDOG WHO MISSED MADOFF

The Securities and Exchange Commission's New York watchdog, under fire for failing to uncover Bernard Madoff's alleged $50 billion Ponzi scheme - despite a dead-on tip by a whistleblower - yesterday tearfully defended herself, arguing that she and the agency did the best job possible.

"Why are you taking a mid-level staff person and making me responsible for the failure of the American economy?" an upset Meaghan Cheung, with eyes tearing up, told The Post.

"I worked very hard for 10 years to make a career, and a reputation, and that has been destroyed in a month," said Cheung, who was the SEC's branch chief of the New York enforcement division during that unit's earlier probe of Madoff's brokerage business.

The 37-year-old has been singled out by whistleblower Harry Markopolos as the woman who failed to detect the scam despite his lengthy warnings. It was Cheung who signed off on a 2006 SEC investigation that effectively gave Madoff the all clear.

First off, you are a Branch Chief. That's not mid-level. Secondly, you received extremely specific warnings about the exact type of scheme Madoff was running and you failed to even come anywhere close to finding out what happened, in fact you said everything was on the level. Ponzi schemes are possibly the easiest fraud schemes to figure out and bust. The fraud behind a Ponzi scheme is that they don't have the amount of money or holdings that they say they do. Whether or not they are telling the truth is a matter of you looking at what they claim they hold and then going to the custodian/banks who are holding all that money/filthy lucre and seeing if the numbers match up. You couldn't even do that.

Boo hoo, you fucked up horrifically. Of course your career should take a drubbing. Despite a detailed map, flashlight, and a sherpa, you couldn't hack it up the mountain. Maybe you're an idiot, maybe you didn't want to take on the guy who was buddy-buddy with everyone important in the financial industry, including the SEC. Either way you told everyone the guy who defrauded people for $50 billion was squeaky clean, despite him running one of the oldest, most obvious, and most easily verifiable scams in the books. You didn't notice any of this, but it wasn't your fault. Thanks for taking responsibility and showing so much dignity, somewhere there's a four year old who's embarrassed for you.

Apparently this financial thing wasn't a one day occurrence

Imagine my shock when I woke up today and saw that this massive financial collapse wasn't a one day story. I appears there's more stuff going on and that people might be talking about this all week. Fuck. I've just about summoned all the market information I posses, and used up my stores of financial information. I give you the last of what I know, use it to help yourselves: money is green, it can be traded for goods and services. Pass it on, don't keep it to yourselves.

In scanning the various stories on this event you see the constant repetition of headline words like 'meltdown', 'crisis', 'collapse', 'fire sale', 'plunges', and 'clusterfuckpocalypse'. That last one was the Wall Street Journal headline today in big 30 point letters. Those aren't reassuring words.

Today the news is what everybody's doing to save AIG. The Fed told them to get stuffed after a $40 million loan was requested. Now it appears they need somewhere in the range of $75 billion just to avoid bankruptcy......for now. Investment banks are trying to put together a deal to get them the 75 extra large. AIG has been allowed to pull $20 billion from their subsidiaries, usually illegal but waived in this case. If they don't get the money, bankruptcy is a comin'. Goldman Sach's, one of the last 2 independent investment banks, also posted it's worst quarter since it went public, a 71% drop in profits, and their stock is down almost 50% in the last year. So, good news there.

At least WSJ sees the bright side. Their Moneywatch section posted up a article on the winners and losers of this weekend, because the best way to analyze the repercussions is to look at the meltdown as if it were the Golden Globes. John Thain, who ran Merrill Lynch, is a winner. Because evidently selling off a company you ran into the ground with stupid decisions is better than just straight running it into the ground like Lehman CEO Dick Fuld, who is a loser. It was a bad weekend, maybe we have to adjust the expectations of a winners and losers list. Winner: people who didn't have to sell their shirt. Loser: shirtless and pantsless wretches.

So, yay capitalism. If you reside in a financial hub try not to get crushed by any bankers jumping out of highrises. Those boys really pick up steam when they leap from their top floor offices.

Of note

Lehman Brothers was founded in 1850 and survived the Great Depression. It was not able to survive the subprime mortgage crisis and the deregulation caused by the Gramm-Leach-Bliley Act.

Oh by the way, the financial system collapsed last night

Yeah, I don't know if you were paying attention last night, I wasn't, but it appears we've had some sort of major financial collapse. Lehman Brothers seems on the verge of liquidation after filing for the biggest bankruptcy in history ($613 billion in debt) and Merrill Lynch just was sold to Bank of America for $50 billion because of it's massive massive problems. For good measure, AIG then announced a plan to restructure and grub for $40 billion from the Fed or else it might go down this week. Rumor has it that Washington Mutual might be sucking dick for cash underneath a city underpass soon as well. Goldman Sachs and Morgan Stanley are still standing......for now. All because of the mortgage, housing, and real estate crisis. I think the solution is more market deregulation.

If you're paying attention to the stock market you'll have noticed the European markets dropping about 5% per stock exchange at this news. Good 'ole Wall Street has, as of this writing, lost 311 points. It's still early yet.

What does this mean for you, the consumer? I have no fucking idea. I couldn't tell you the first thing about financial markets. All my financial plans involve imagined large lottery winnings, wealthy heiresses I marry/kill, and various bags of money I stumble across. But here's what I have figured out: we're all going to be paying for their crooked, shortsighted, money grubbing, incompetent mistakes. Oh we'll be paying with the damage to the financial markets and jobs lost, but I meant paying in the sense that the American taxpayer will have to bail out these companies. Because the first rule of the free market is "when in doubt get the government to pay for your mistakes." As you read this, the Fed is meeting to decide just how much money to hand over. I'm guessing it'll be a lot.

Campaign wise, Obama has already pilloried the Bush administration and John McCain for the economic policies that helped this clusterfuck on it merry way. McCain has spent the morning strangling Phil Gramm to death, burying him in a shallow grave, and setting about to erase his name and legislative accomplishments for the financial markets from history. Meanwhile, one of John McCain's economic advisers, Donald Luskin, got to write an op-ed for the Washington Post this weekend where he......wait for it....told us to quit fucking whining about the bad economy, everything's fine. Then McCain went out this morning and declared, AGAIN, that "the fundamentals of our economy are strong," despite what he described as "tremendous turmoil in our financial markets and Wall Street" apparently not having felt he's made things easy enough for Obama to attack him on. I'm sure he'll later redefine our fundamentals to be the American worker so he can get some cheap mileage out of claiming that bashing his ineptness is bashing America.

Dust off those old Woodie Guthrie songs, buy a ramshackle pickup, and make your own banjo, methinks belts are going to get a lot tighter.