May 10, 2011

Lucid Links (051011, Morning)

Filed under: Lucid Links — Tom @ 8:35 am

NoToNewt2012“Gingrich Jumps In” — My reax: No no, “new” Newt. He’s yesterday’s news, and unfit because of the excuse-making for behavior which led to his previous divorces described here.

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At MarketWatch, Brett Arends, who also authored a brilliant item on the U.S.-China world leadership situation a couple of weeks ago (first item at link), asserts a self-evident truth (“Housing crash is getting worse”) virtually no one else in the establishment press will dare utter, while asking a question yours truly has been asking (“Economic Rebound? What Economic Rebound?“) since the beginning of 2010:

New data just out from Zillow, the real-estate information company, show house prices are falling at their fastest rate since the Lehman collapse.

What a foolish boondoggle those tax breaks for home buyers have turned out to be. The government spent an estimated $22 billion between 2008 and 2010 on tax breaks to prop up the housing market. All it achieved was a brief suckers’ rally that ended last summer.

… Remember Japan’s “zombie banks”? These were the financial institutions that haunted that country’s economic recovery after the 1990 crash. They staggered on with huge losses they could never repay — the walking dead.

Here in America we have “zombie homeowners.”

Recovery? What recovery? This looks a bit like a depression to me.

Arends thinks we might be seeing the bottom. Hope he’s right, but never underestimate this administration’s ability to perpetuate a bad situation with its zombie government programs.

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Speaking of zombies, Fannie Mae lost another $8.7 billion, and needs another $8.5 billion in taxpayer cash.

Smaller zombie Freddie Mac posted a profit before its federal preferred stock dividend payouts; when those are considered, it lost money too.

Here’s a periodic necessary reminder from this early 2010 column concerning why Fan and Fred are the zombies who took down the financial system in 2008:

… Edward Pinto, a former chief credit officer for Fannie Mae and a housing expert, has found that from the time Fannie and Freddie began buying risky loans as early as 1993, they routinely misrepresented the mortgages they were acquiring, reporting them as prime when they had characteristics that made them clearly subprime or Alt-A.

That’s 15 years of systematic deception of the financial markets and ratings agencies.

As I opined at the time:

Sane people at Fan and Fred surely recognized the toxicity of the loans they were in essence being legally forced to buy. They also knew that they had to unload a substantial portion of this rubbish onto the secondary markets; if they didn’t, they would violate capitalization requirements.

They could have blown the whistle and said, “Hey, we can’t do this; the markets won’t buy this garbage.” But they didn’t.

Why? I surely can’t prove anything, but here at least four possible reasons why:

  • James A. Johnson, who was Fan’s Chairman and CEO from 1991 to 1998.
  • Frank Raines, who was Fan’s Vice Chairman from 1991 to 1996 and its Chairman from 1998 until 2004.
  • Leland Brendsel, acting President of Fred since 1985. He officially became the company’s president and CEO in 1987, was its Chairman and CEO by 1990, and stayed until 2003.
  • David Glenn, who became Fred’s President and COO in 1990 and also left in 2003.

Johnson and Raines (clearly the larger offenders) were and still are influential in the Democratic Party.

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General/Multi-Government Motors announced a big first-quarter profit, and Chrysler announced its first profit in five years. Democrats jumped on the news as “proof” that the Obama administration’s creditor-screwing (Chrysler; GM), community-deceiving, largely union concession-free bailouts costing at least $84 billion in GM’s case alone were great things.

What they meant to say is that if you apply enough Institutionalized Gangster Government and throw enough money at something you can make almost anything look like it worked.

While the rest of the press was uncritical, the Wall Street Journal’s Sharon Terlep actually did some sober analysis:

GM’s income rose to $3.2 billion, or $1.77 a share, from $865 million or 55 cents a share, lifted by $1.5 billion in gains on sale of holdings in Delphi Automotive LLP and Ally Financial. Without those gains, its earnings before interest and taxes rose 18% to $2 billion, and North American profit climbed just 8% to $1.3 billion, less than analysts had expected. Revenue increased 15%, to $36.2 billion, from $31.5 billion.

… (GM Chairman and Chief Executive Daniel) Akerson, however, said “intensive cost cutting” is essential to ensure the future profit growth as rising commodity costs push up the prices GM is paying for finished parts and materials.

Well, we all know that union concessions are off-limits; in fact, the UAW wants to negotiate an early deal with GM to claw back the nominal concessions made just before and during bankruptcy so Ford won’t be able to demand to match them. So where is GM going to cut?

GM stock closed yesterday at $31.39. That’s 8% lower than its opening-day IPO close of $34.19 on November 18, 2010, and almost 20% lower than its January 18 high of $38.98, in a market that has generally headed upward (thanks to Ben Bernanke, and no thanks to fundamentals). As Mickey Kaus would say: “Suckers!”

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1 Comment

  1. Calling Out the Republicorps
    We can’t help but notice that Texas is about to hand over more long-term operating leases of public highways as toll roads for often foreign companies.
    Go to: http://www.landlinemag.com/todays_news/Daily/2011/May11/050211/050411-05.shtml

    So the public pays for something – and then keeps paying for it forever. That’s a pantload of fresh & steamy, if you were to ask me. And, sure as day follows night, I expect the Trans-Texas Corridor scheme to resurface, too.

    Politicians as a class, have none, and are deaf to boot.

    Then we see where the Texas republicorps have pushed through a right-wing plan to make sure the “loser pays” so that people will be effectively priced out of suing corporations. Unless you happen to be a multimillionaire.
    go to: http://thinkprogress.org/2011/05/09/loser-pays-lawsuits/

    And, as if that’s not enough, Florida is planning to cut unemployment benefits in order to pay for additional corporate tax breaks.
    go to: http://wonkroom.thinkprogress.org/2011/05/08/florida-corporate-unemployment/

    The trend which the corpgov/republicorps types seem to have cobbled up (not without Big Bux help to be sure) is this: End federal contributions to unemployment and instead move to more of ablock grant approach, which will leave it up to States how to spend the money.

    Add some slimy lobbyists to convince enough people in State Legislatures to go along with the hoodwinking, the corps would get money for pet projects as long as they can paint it up with the job-creation lipstick heavily enough. The people who need money to eat? They be get damned, starved, and turned out, but that’s what wage-serfs are for, anyway. Screw ‘em.

    Not.

    Magic Words: The rabid right continues to sell mindless acceptance of the notion that the Obama administration as helplessly socialist. The rabid’s handlers just know that word – socialist – pulls on a certain mindset. And, in truth, some of them are.

    But what people are blind to is when the rabid right sells out the role of government as in U.I. money and tries to take projects already paid for with public money and turn it over to the private sector – that’s raw, unpardonable exploitation.

    You seeing a trend here?
    Look really hard at both sides – republicorps and democorps are at the trough and that means there’s not room left for you and me.

    There is no right or left.
    Just thems that have and you and me.
    Divine Rights of Capitalists and all that crap.

    Comment by Greg — May 10, 2011 @ 9:25 am

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