If you need to measure how crazy things have become . . .

Here's the headline:

Goldman bows on CEO's pay

So what does that mean, exactly?

That besides his base pay of $600,000, the CEO will get only $9 million.

Only $9 million.

That's how out of whack things are.

From the Wall Street Journal:

People familiar with the situation said Goldman's board, which met Friday afternoon, wanted to demonstrate moderation on executive pay. Directors deliberated for weeks, hoping to find a middle ground between the popular anger over eye-popping Wall Street compensation and the board's belief that top employees deserve to be paid fairly. During the discussions, Goldman directors and executives began using the word "restraint," these people said.

Story here (subscription needed)

The banks

There's this:

http://www.pbs.org/moyers/journal/01082010/transcript3.html

and this:

http://www.slate.com/id/2241251/?from=rss

They still don't get it.

But we have. In the usual place.

The true story



"Don't deny for a moment that there are systematic practices in place to keep America in debt."

Gee, this is a shock

Wall Street Finds Profits Again, by Reducing Mortgages

As millions of Americans struggle to hold on to their homes, Wall Street has found a way to make money from the mortgage mess.

Investment funds are buying billions of dollars’ worth of home loans, discounted from the loans’ original value. Then, in what might seem an act of charity, the funds are helping homeowners by reducing the size of the loans.

But as part of these deals, the mortgages are being refinanced through lenders that work with government agencies like the Federal Housing Administration. This enables the funds to pocket sizable profits by reselling new, government-insured loans to other federal agencies, which then bundle the mortgages into securities for sale to investors.

The upshot is, they take private underwater mortgages which some helped write in the first place, and foist them off on the government. Which is, um, you and me.

The story, which is here, goes on to talk to one couple who had a $440,000 mortgage reduced to $314,000. I'm sure they're very nice people, but at least according to the story the husband is the sole bread winner, and he's a 62-year-old janitor in California. I guess janitors there get paid a lot of money.

She gets it



When will everyone else?

He gets it

REAL CHOICE? IT'S OFF-LIMITS IN HEALTH BILL

by David Leonhardt

Consider the following insurance plan:

It refuses to pay for certain medical care and then doesn’t offer a clear explanation. It does pay for unhelpful care that ends up raising premiums. Its customer service can be hard to reach or unhelpful. And the people who are covered by this insurer have no choice but to remain with it — or, at best, to choose from one or two other insurers that are about as bad.

In all likelihood, I have just described your insurance plan.

I have to confess, I don't generally find David Leonhardt on the mark. But he is in this article.

Why don't we just sign over our paychecks to the insurance companies right now and get it over with?


Item:

'PUBLIC OPTION' IN HEALTH PLAN MAY BE DROPPED

Idiots.

No duh . . .

Traders Blamed for Oil Spike

The Commodity Futures Trading Commission plans to issue a report next month suggesting speculators played a significant role in driving wild swings in oil prices -- a reversal of an earlier CFTC position that augurs intensifying scrutiny on investors.

In a contentious report last year, the main U.S. futures-market regulator pinned oil-price swings primarily on supply and demand. But that analysis was based on "deeply flawed data," Bart Chilton, one of four CFTC commissioners, said in an interview Monday.

The CFTC's new review, due to be released in August, adds fuel to a growing debate over financial investors who bet on the direction of commodities prices by buying contracts tied to indexes. These speculators have invested hundreds of billions of dollars in contracts that were once dominated by producers and consumers who sought to hedge against oil-market volatility.

Story. (WSJ)

Slowly, slowly, slowly we catch on

. . . in 1998, the Securities and Exchange Commission authorized electronic exchanges to compete with marketplaces like the New York Stock Exchange. The intent was to open markets to anyone with a desktop computer and a fresh idea.

But as new marketplaces have emerged, PCs have been unable to compete with Wall Street’s computers. Powerful algorithms — “algos,” in industry parlance — execute millions of orders a second and scan dozens of public and private marketplaces simultaneously. They can spot trends before other investors can blink, changing orders and strategies within milliseconds.

High-frequency traders often confound other investors by issuing and then canceling orders almost simultaneously. Loopholes in market rules give high-speed investors an early glance at how others are trading. And their computers can essentially bully slower investors into giving up profits — and then disappear before anyone even knows they were there.

But by the time the so-called watchdogs catch on, the game has already moved.

Full story, with a surprisingly good explanation of the issues, here.

About one crash too late . . .

Regulators to Consider Limits on Oil Contracts

Reacting to swings in oil prices in recent months, federal regulators announced on Tuesday that they were considering trading restrictions on hedge funds and other “speculative” traders in markets for oil, natural gas and other energy products.

Link to story.

Closing the door after the horses are out ain't gonna be easy. And with something over a fifth of the market, "pure" speculators are going to be hard to define.... Not to mention be well motivated to keep things the way they are.

Even so, better late than never.

Business as usual . . .


It's hard to be optimistic about fixing what's broken with the economic system when you realize things like this are going on:

Ailing, Banks Still Field Strong Lobby at Capitol

. . .the Helping Families Save Their Homes Act, was missing its centerpiece: a change in bankruptcy law he once championed that would have given judges the power to lower the amount owed on a home loan. It had been stripped out three weeks earlier in a showdown between Senate Democrats and the nation’s banks, including many that are getting big government bailouts. . . .

Full story here.

You don't have to agree with the actual measure, one way or the other, to see the problem.

Even more fun with banks . . .


Baseline Scenario is a blog that has had the Money Meltdown nailed from the get-go. Here's the latest blast. . .

From the headlines of the Wall Street Journal: “Banks Aiming to Play Both Sides of Coin — Industry Lobbies FDIC to Let Some Buy Toxic Assets With Taypayer Aid From Own Loan Books (subscription required, but Calculated Risk has an excerpt). I thought the headline had to be a mistake until I read the article.

To recap: The Public-Private Investment Program provides subsidies to private investors to encourage them to buy legacy loans from banks. The goal is to encourage buyers to bid more than they are currently willing to pay, and hopefully close the gap with the prices at which the banks are willing to sell.

Allowing banks to buy their own assets under the PPIP is a terrible idea. In short, it allows a bank to sell half of its toxic loans to Treasury – at a price set by the bank. I’ll take this in steps.

Read the rest here.

IBM - always on the cutting edge . . .


They do this so well, they want to patent it:

IBM drops patent application for out-sourcing

The same day the Times Herald-Record reported IBM had applied to patent a computerized system to help businesses outsource offshore jobs while maximizing government tax breaks, Big Blue did an about-face.

The application "was filed in error and will be withdrawn," IBM spokesman Steve Malkiewicz said Monday.

IBM's filing with the U.S. patent office describes a "method and system for strategic global resource sourcing," weighing such goals as "50 percent of resources in China by 2010" against such factors as labor costs, infrastructure and the "minimum head count to qualify for incentives."

Full story here. Note that they dropped the patent application - not plans to outsource or help others do it.

IBM was once one of the best companies in the U.S. to work for. Now it's the leader in figuring out how to screw Americans, whether they're employees or simply taxpayers.

If the banking thing doesn't work out . .





There's always singing for your supper . . .

The bonuses are just a symbol


For all the so-called analysis replacing reporting on facts these days, there have been few if any stories that actually point out why the matter of bonuses for AIG, et al, are such a hot issue.

People are reacting to the vast difference in wealth the bonuses represent, and inequity in society and power. Much of that inequity was glossed over or unacknowledged during flush times, when it could be said - if not quite proven - that the vast amounts of money "awarded" to a small fraction of the population was due primarily to success in the marketplace, etc. But the recession - and dwindling balance sheets - has exploded that myth, showing pretty decisively that in most cases there's a rather large disconnect between reward and risk, reward and achievement, etc.

The anger shouldn't be particularly surprising. Anyone who follows baseball knows that the disgust at players' outsize salaries is pretty much a given. Ironically, at least in their case the connections between pay and achievement are pretty transparent - you can look up the batting average or see the home runs.

The question is, what happens to this anger? A really smart politician can channel into something extremely destructive: see Europe during the 1920s and 1930s.

I'm not smart enough to know what the solution is. Retroactively selective tax laws are a bad idea on too many levels to even consider. And socialistic wage ceilings are worse. Part of the answer is surely a moral attitude that acknowledges that greed is bad . . . but how that translates into the real world where us sinners live is an open question.

They get, all right . . .


Sometime during the next week, Goldman Sachs is going to make headlines by paying back the federal money it was loaned to help it through the financial meltdown. It'll be a supposedly feel good moment, with a lot of emphasis on the firm's financial health and how the taxpayers picked up a quick five percent interest on the dough.

There's a lot more to the story, though. Most importantly, the people who run Goldman don't want to function under the scrutiny of the public, and don't want to have to limit their pay to something less than obscene. (Thirty million for the boss seems pretty obscene to me.)

The attitude on all Street - and beyond - remains: we'll take whatever we can, until things sour, then you can rescue us. But if you want to impose rules that will keep us from screwing you in the future, you're shit out of luck.

They get it - and so do we. Unfortunately, what we get is the shaft.

Another crock of crap


The IRS yesterday announced new "rules" which will allow victims of Ponzi schemes to immediately deduct nearly all of their losses this year.

They didn't say it was for Madoff victims, though that's pretty clear.

So basically, if you had tons of money but were exceptionally stupid/greedy/and foolish . . . you get a tax break. But if you only lost half your kid's college fund or retirement because the index fund in your 519 or 401k went down, you're shit out luck and have to play by the rules.

WTF?

Oh wait, the people who were screwed by Madoff weren't just stupid/greedy/and foolish -- they were also a hell of a lot richer than the middle class people who are depending on 401ks and the like to fund their retirement.

And forget about working stiffs who are lucky if their retirement plans include a few lottery tickets.

I'm not saying that victims of Madoff - and every other ripoff - don't deserve sympathy. And yes, I realize that the tax breaks will in no way compensate for the real loss of the money.

What I am saying is that changing the rules for them is just one more sign of the vast inequality that is the real heart of what's killing this country.

Two questions:

1) What right does the IRS - as opposed to congress - have to change the regulations?

2) Where's the "change"?

Guilotine the m-f-ers

A.I.G. to Pay $100 Million in Bonuses After Huge Bailout

WASHINGTON — Despite being bailed out with more than $170 billion from the Treasury and Federal Reserve, the American International Group is preparing to pay about $100 million in bonuses to executives in the same business unit that brought the company to the brink of collapse last year.

Supposedly, the administration tried to get them to reduce the bonuses but was persuaded that AIG was contractually obligated.

That's crap shit.

Time for Obama to man up. These people did damage to the world financial system that terrorists can't even dream of.

Try them for treason. Then cut their heads off.

A failure to educate


The financial meltdown has been generally blamed on greed and the over-use of credit. But it's also the end result of a decades-long failure of the education system.

MBAs have basically been taught how to run companies into the ground.

But the problem goes far beyond the mindless worship of meaningless sheepskin letters when choosing people to manage and lead companies. From elementary school onward, students were and are trained to value short-term, shallow goals. Deep knowledge - well, what's that?

We pay a lot of lip-service to schools and education in this country, but the truth is it's just talk. Schools are run for the convenience of the staff. The standards are low, and too often mindless. Even in the best school districts, the majority of teachers are either mediocre or subtly encouraged to be. And the irony is, things will only get better when they initiate the change themselves.

You can tell I'm an optimistic - I said "when" not "if" in that last sentence.

Masochistic deniers


So the treasury secretary gives a speech on the latest plan to "fix" the banks, and the stock market tanks.

Instant analysis follows . . . deciding the market plunged* because there weren't enough details about the plan.

Which means either a) people who owned bank stocks sold off because the secretary didn't say they would be bailed out with no exposure or loss or b) people who owned bank stocks sold off because the secretary didn't say the banks would be nationalized and they would be wiped out.

Which in turn means that the people who hold bank stocks are (or were) either a) in complete denial or b) heavily masochistic.

Or maybe the people "analyzing" the market couldn't analyze their way out of an empty Wal*Mart parking lot...

* If five percent still qualifies as a plunge