If rescinding the Bush tax cuts on the wealthiest .1% will significantly reduce  investment in "small business" Boehner's has an argument.

Will it? Does he?

If it won't Obama should refute Boehner. If it will he should back down.

It's foolish to argue about the height of a flag pole. You should measure it. Ditto for this debate.

I've been a poll watcher and ususually could forecast the state-wide results as soon as we read the night's totals -for about 500 voters  

 -----------------------------------------------------------------------------------------------------------------

The Administration, a think tank, a pollster, the media, some grad student,  my aunt Nelly, someone should interview 500 of these fat cats. What do they do with their funds now? How will that be affected if the maximum incremental rate returns to its 2001 level ?

Not an adequate sample ? Who cares ? It's better than no information at all.

 

 -----------------------------------------------------------------------------------------------------------------

No comment on what's happening here. It is what it is..

 

 

 

 

 

 

 

As fables go the Loch Ness monster is now running a poor second to the  one about   Fannie and Freddie causing the sub prime fiasco.

It surfaced again on Saturday's All Things Considered as the fill in host was unequipped to challenge the guest economist who said that even tho F&F's share of the sub prime financing was tanking as the sub primes were going ballistic.

If F&F didn't exist the sub prime meltdown would have taken place exactly as it did. OK?

Fable #2 on display in the Times last week is that by the time we're finished bailing them out F&F will have cost the taxpayers north of $300Bn that we wouldn't otherwise have had to pay. 

True it will cost  big bucks whatever the final number is.  False that if there were no F&F we could have avoided the ransom.AIG was not a GSE but we bailed it out because we had to.And if F&F's share of the sub primes had dropped from 42% to zero

http://www.cjr.org/the_audit/wall_street_sank_freddie_and_f.php

we'd have bailed out whoever was holding that bad paper instead.

And while I'm at it ATC's economist was equally misleading in blithely attributing the crisis to the banks  relaxing their standards and financing cats and dogs. True they financed cats and dogs. False that they relaxed their standards.Securization meant that those cats and dogs were transmuted into noble stallions.

Think  insurance

If a bank  insures one house against a fire it's taking a risk.If the house burns down the bill will be a lot more than the premiums.

 If it insures ten thousand  it's a lot lower risk . Those ten  thousand premiums ought to cover the cost of the one or two houses that, statistically, could be expected to burn.

 Securitization was supposed to do that.

Which is why Moodys and S&P rated that paper AAA.Not because they were paid by the users- which has always been true. But because they believed the risk was distributed.(Unless Goldman had undistributed it).

And when Billy  banker  bought one of those derivatives he believed he was only taking  a portion of any  possible default. He thought that was less risky than in the bad old days when if he financed a bad apple he was stuck with the whole apple.

And besides AIG was insuring .

What am I saying ? That a cottage industry has sprung up of self interested "analysts" creating fables about the financial crisis.who are indifferent to the real causes of the crisis and are solely intent on describing it in ways that suit some private agenda.

 Next they'll blame it on Obamacare

 

 

Samad Afridi
Ashraf Ahmad
Shabbir Ahmad (45 years old; Windows on the World; leaves wife and 3 children)
Umar Ahmad
Azam Ahsan
Ahmed Ali
Tariq Amanullah (40 years old; Fiduciary Trust Co.; ICNA website team member; leaves wife and 2 children)
Touri Bolourchi (69 years old; United Airlines #175; a retired nurse from Tehran)
Salauddin Ahmad Chaudhury
Abdul K. Chowdhury (30 years old; Cantor Fitzgerald)
Mohammad S. Chowdhury (39 years old; Windows on the World; leaves wife and child born 2 days after the attack)
Jamal Legesse Desantis
Ramzi Attallah Douani (35 years old; Marsh & McLennan)
SaleemUllah Farooqi
Syed Fatha (54 years old; Pitney Bowes)
Osman Gani
Mohammad Hamdani (50 years old)
Salman Hamdani (NYPD Cadet)
Aisha Harris (21 years old; General Telecom)
Shakila Hoque (Marsh & McLennan)
Nabid Hossain
Shahzad Hussain
Talat Hussain
Mohammad Shah Jahan (Marsh & McLennan)
Yasmeen Jamal
Mohammed Jawarta (MAS security)
Arslan Khan Khakwani
Asim Khan
Ataullah Khan
Ayub Khan
Qasim Ali Khan
Sarah Khan (32 years old; Cantor Fitzgerald)
Taimour Khan (29 years old; Karr Futures)
Yasmeen Khan
Zahida Khan
Badruddin Lakhani
Omar Malick
Nurul Hoque Miah (36 years old)
Mubarak Mohammad (23 years old)
Boyie Mohammed (Carr Futures)
Raza Mujtaba
Omar Namoos
Mujeb Qazi
Tarranum Rahim
Ehtesham U. Raja (28 years old)
Ameenia Rasool (33 years old)
Naveed Rehman
Yusuf Saad
Rahma Salie & unborn child (28 years old; American Airlines #11; wife of Michael Theodoridis; 7 months pregnant)
Shoman Samad
Asad Samir
Khalid Shahid (25 years old; Cantor Fitzgerald; engaged to be married in November)
Mohammed Shajahan (44 years old; Marsh & McLennan)
Naseema Simjee (Franklin Resources Inc.'s Fiduciary Trust)
Jamil Swaati
Sanober Syed
Robert Elias Talhami (40 years old; Cantor Fitzgerald)
Michael Theodoridis (32 years old; American Airlines #11; husband of Rahma Salie)
W. Wahid

 Dean Baker in the Nation.

 

"....wealth created by (the housing) bubble....was generating more than $1 trillion in  demand......economists...have no way to replace (it)

. after World War II, .. no bubbles....Productivity ...translated into wage growth, which in turn led to more consumption. The increased demand led to more investment ,productivity growth and wage growth.

     This virtuous circle was broken by Reagan.....Wages no longer kept pace with productivity...eliminating the automatic link between productivity ...and demand growth.This led to excess capacity .. filled in the  1990s .with demand generated by the stock bubble and in the 2000s .. by the housing bubble......In short inequality is at the center of the current economic crisis"

Next question.

 

 

.

    

It's hopeless I know but one more time David Brooks and Niall Ferguson and the assembled ranks of supply side economists are clueless. In general , of course, and specifically about the connection between economic policy and ceo investment decisions.

Sure ceo's are worried about future tax increases . Or rather they will worry about them in the future , once they stop worrying about whether the dogs will  eat the dog food they're providing right now. 

The only way they can be injured by a future tax increase is if they're still in business and that depends upon making a profit in the interim. 

 

Offer this choice to your friendly neighborhood ceo:

A. We could have 5% unemployment in 2011 and a 5% increase in corporate taxes. Or

B.We could have 9.5% unemployment and a 5% decrease in corp tax

 

90% will choose A.  .The only thing they hate more than paying taxes is not paying taxes because they aren't making a profit.

Furthermore.

The only thing that less interests them than a discussion of the 2012 economy is a discussion of the 2013 economy.AOBTW they aren't even all that fascinated by 2011 right now  because they can retire quite happily on their 2010 bonus.Provided they get it.

Hasn't anybody noticed that all those AIG traders happily risked their long term employment in order to score a 7 figure bonus in March 2009

And so would 90% of all US ceo's.

An economic policy that lowers unemployment right now  puts $s into the pockets of  dog owners who can then  buy the dog food.Right now. Which means well fed dogs and smiling ceo's taking home their bonuses next  March .Simple cause and effect.

An economic policy that lowers the company's 2013 tax rate might well be of interest to them if they happen to still be employed in 2013..Check with them then and maybe you'll find it is  causing them to make investments.It sure won't cause them to make investments now. 

 

 

 

 

 

 

 

 

  

Just taking a position. I have no better arguments than the ones that appear elsewhere.

Certainly I completely reject the proposition that McCrystal might be  indispensable -or even necessary- to our success in Afghanistan. . It would have been  frivolous for Obama to commit to an exercise whose success was contingent on the continued presence of one individual.. Whose life's at risk every time he steps into his helicopter.

Thanks for your service , general. Now go.

 

 

 

 

as LaGuardia put it.  

Should Obama have admitted that he'd been mistaken during his oval office speech? I think so.

BP's inability meaningfully to exploit the containment cap was both a grievous error and an illustration of Obama's ( using his name to stand for his Administration) failure. In business terms they ( BP and  Obama ) were guilty of thinking in series rather than in parallel.The needed backup ships should not have been in the North Sea. Maybe they shouldn't have been in the Gulf but at least one of them should have been well underway.

The Houston command center includes about 30 government engineers ;and both Ken Salazar and Stephen Chu  are there almost continuously.Why didn't they probe BP as to whether they were prepared to put the pedal to the metal if the Containment worked.

"Oversight " means asking the questions that the hands- on guys are too focussed  to ask themselves. Either Obama is insufficiently involved or "he" is involved and therefore shares the responsibility..(The FT is harshly critical of his failure to clarify his command structure).

 

 It's understandable , but unfortunate , that Obama's top team doesn't really include anyone who's "had to meet a payroll". Lawyers ,professors and pols like Rahm  have lots to contribute but Obama should have supplemented them with people like Andy Card. They would have gotten this right  because it's automatic in business.  There's no point in almost jumping over the Snake River.

 

 

I supported Obama on Afghanistan and I was wrong.
We're trying to fight 30 million people and it can't be done. The British couldn't, the Russians couldn't. We can't. 
We didn't defeat the Taliban in 2001, the Northern Alliance did. 
 The Petraeus/MacCristal strategy is thoughtful, idealistic and wrong. Because its central premise -that we can win- is invalid. The good guys aren't going to win there, one set of bad guys or another will. It'll be terrible for women and for anyone who collaborated with us but that's not a reason to keep attempting the impossible  until we're left struggling to get on to the last helicopters from Kabul.
We're probably lucky Karzai stole the election.If someone decent had won we'd have been tempted to remain to prop him up.Instead , it's time to get out a long spoon and sup with Karzai. He's not going to do us any favors but if we play our cards right we can make it worth his while so protect the embassy when the helicopters are leaving.
AOBTW , forget about transferring any of the Gtmoites to Bagram.

In 1963 Harold Wilson was met by the Press at Heathrow and asked about Defense Minister  Profumo's screwing Christine Keeler when she wasn't already in bed with her Russian lover . 
He replied:No comment.And lest he'd failed to make his position clear , added In Technicolor.
 Which wouldn't be a bad example of Obama, and his subordinates when asked what BP will  pay as reparations for the  Gulf disaster.
Sadly,  Obama is developing a reputation for speaking loudly and carrying a small stick on too many issues: closing Gitmo, getting out of Iraq, halting West Bank Settlements ,trying accused terrorists in civilian courts, cancelling BP's first quarter dividend..  Candidates do that and no one cares. Goes with the territory. Until the Inauguration.
Then it's a different ball game.. A country's credibility is an asset. ( Which explains Israel's tactics: the least costly defense against an invasion is for it not to happen because the invader knows they'll be defeated and their houses bull dozed.Say what you will about Netanyahu, if he announced Gitmo was closing, Gitmo would close.)
By promising too many things, too soon Obama was dangerously  depreciating the currency of Presidential statements until he somewhat counter acted that by performing on Health Care. But it's started again on the question of  what BP will be required to pay.
In theory we can impose dire consequences on it. Seize its assets or at least deprive it of access to the US market.  In theory. In practice it ain't gonna happen.That's a game two can play and we've got more assets in the UK than vice versa.
Ultimately the composite US damage claim will be settled in the courts:like US Carbide's Bhopal liability. . And however justified that Gulf claim  it will be subject to the overriding constraint about getting blood from a lemon. Given the political impossibility of a take over, the most we can expect is what BP can afford to pay as a going concern. And, given the environmental damage in the Gulf and economic damage on shore  what  BP can afford to pay is , IMHO , only a fraction of  the claims that could be justified based on what's already happened never mind what's to come.
It's time we stopped playing with the hopes of Grand Isle. and the rest of the Gulf Coast. Like Ms Keeler , they've been well and truly f***ed and there's damn little Obama can do about it.Bad things happen. Get over it.

Saturday's  FT's description of BPs Houston command center says it's about half from  BP  . There are another 150 engineers loaned by other companies including its competitors. And about 30 government scientists.  Both Ken Salazer and, Stephen Chu are there much of the time with Chu a particularly  important contributor. You can be sure that Houston doesn't do anything with which he disagrees. 
There's only one test of any decision that Obama  take charge.: whether that speeds up the date when the oil is  contained . Put  another way: the date when that Houston operation succeeds .
 Robert Reich suggests a second test: that Obama be seen to be in charge.To repeat, there's only one test, see above..
You can make your own guess. Mine's that changing horses in mid stream is not a famously effective strategy.

The de facto Hamas government in Gaza has refused to accept truckloads of aid offloaded from the flotilla raided by Israeli forces earlier this week.
June 4 Guardian

o high return for its shareholders if successful,and
o devastating cost to the nation if it failed 
Lehman Bros ?AIG?Citicorp?BP ?
After you choose see the answer below. No cheating.

1. I can understand Israel's embargo on Gaza. I don't think it's  wise. But neither do I think it so foolish as to defy understanding..
2. I can understand Israel's desire to stop the Flotilla. That follows from (1).
3. I can understand  Israel's deciding to do that with lethal force. There won't be any more flotillas.
4.I can understand why a great many thoughtful Jews in Israel or here will think it was morally justified.. Because its state of permanent existential danger requires that it is feared.
5.. I can understand that a majority of Israeli's  approve. From Remember the Maine, to the Gulf of Tonkin to Saddam's WPM , the majority always approves of aggression.At first..
6. But Israel shouldn't have done it
Understandable . Not necessary. There must have been  ways of preventing that flotilla from docking. Non lethal ones. . Which it should have chosen.
 Instead by choosing  unnecessarily  to create a significant number of  attractive martyrs . Bibi has indulged himself at the cost of a future Israeli government. At some point the boundaries and rights will be negotiated of a future Palestinian State. And Bibi's probably wiser but friendless successor will pay the price of this unwise tactic .

Guy is on his hands and knees underneath a lamp post

Passer by: What are you looking for?

Guy: I lost my wallet

Soon, lots of people on their hands and knees searching. Unsuccessfully.

One of them: Are you sure you lost it here?

Guy :. Oh no  I lost it over in the woods.

OOT: Well then why are we all searching here?

Guy: The light is better.

From today's FT

Letter.

The root cause of the recent financial distress was a Clinton era edict ......that a percentage of all mortgages had to be granted to blacks and Hispanics........

I have no axe to grind regarding bank  bonuses  but these.....(have) at best a tenuous link ....to the current  banking situation.

 So. maybe he's found the wallet.Umn. No.

Insight Column

All (financial crises) have one thing in common-easy money. The notion that central banks would be quick and aggressive ......was the short term anasthetic that......set the stage fir the next crisis.

.......it is high time to banish the moral hazard of macro policy,the false sense of security provided by open ended fiscal and monetary accommodation.

The wallet? No..

News story

 

"T.......W.............and one of its executives have been accused of "stuffing " the accounts or..customers .......to raise $15.7M to pay executive bonuses.......In an e-mail (the)controller told  Mr. B........ that he had until the end of the month to sell $25M worth of securities ....to ...pay corporate bonuses.

The complaint alleges Mr. B.........could only unload  $9M.  It says they then placed the securities in the accounts of ...customers in exchange for  $15.7 in cash.

Through his lawyer  Mr. B........... denied  the allegations.

 Ureka!   The wallet. We just had to look in the woods.

...................................................................................................................

AIG didn't morph into the World Economic System's analog of Three Mile Island because of Clinton's edict to provide mortgages to blacks. Or Greenspan's monetary policies. But because some traders , who'd been promised very big bonuses insured  assets that were known to be toxic by , Goldman Sachs, John Paulson  and a guy with Asbergers  currently  celebrated in glossy magazine articles.

 Two possibilities.

1. Those AIG traders weren't very smart.

2. They knew the risk they were exposing AIG to. And they did so anyway. 

 If like me, you think  (2) is right. Why? And for the matter why  did Mr. B.....allegedly stuff $15.7 million of dubious assets into some customers' accounts.

Because they wanted their bonus so much they were willing to roll the dice with their employer's existence.

But weren't they risking the golden egg laying goose?

Yup. Next question..

But how come we're just learning about this now?

Because now is when it's happening. It didn't use to.

But why are they doing it now when they didn't use to?

Because it didn't use to make  economic sense. Until Reagan cut the top income bracket it wasn't possible to earn an after tax bonus so generous  you could afford to risk your company's existence.Now it does.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Today's Huffington Post  points out that 25 years ago the average US workers salary was  $19,000 and Wall Street bonuses were $13,700 per capita(list).

 

 But happy days were coming.  Come 2006- about when John Paulson and GS were launching their custom- made designed-to- sink Flagship CDO- the average Wall Street bonus was around $190K and the average workers salary was.....oh ,imagine,still $19,000.   AOBTW in the interim Reagan  and W combined to slash the top  marginal tax rate in half.

 Which was , to be honest,academic  for Joe Lunchpail, but made the after- tax effect of that $190K the equivalent of $380K back in 1981.

 

 Still those Masters  of the Universe made their money the hard way :by screwing the investors.Left  to our own devices we'd never have had the foresight to concoct a synchronised CDO specifically designed to wipe out both the Royal Bank of Scotland and the occasional credulous German one.(Let's hear it for the opportunities provided by the Flat World). That sort of initiative has to be recognized,nurtured  and appropriately compensated.Where would we be without them? (I don't know about us but the British tax payer would be a lot richer) .

 

 Fair does. But for their efforts we might never have had our very own:TARP or found ourselves proud  owners of Citibank. And Chrysler..   How did Greenspan put it ?. He was shocked  that bankers would make decisions that would put their banks at risk. AOBTW the entire economy.  

 

 You know,is it just maybe the case that back in the days when their after- tax  bonuses were  one twenty eighth of their coming  2006 splendor, Goldspan would have actually  been right: (law of averages strikes again)? Bankers didn't put their banks at risk . Because that meant    also putting next summer's Hampton's rental at risk Not to mention the apartment in the 80s.   Whereas come 2006 with their contribtions to society and our sort- of shared economy  finally properly recognized-and compensated-  they could happily devise new and improved ways to kindle the coming financial meltdown . Coming for the rest of us.Which they'd   read about on their porch in Tuscany..

 

 Or maybe they didn't cause the meltdown. Probably it was all the fault of those workers whose pay hadn't budged  in 25 years. Can't we  have some accountability around here damn it?.Tom Friedman's right. It's time for some shared sacrifices , let's cut teachers' pay and make it harder to vote for a union.. :