Holy Crapballs, Bailoutman

I'm in disbelief that the bailout didn't pass. And the vote had essentially nothing to do with party lines. The vote was 228 to 205, with 133 Republicans and 95 Democrats in opposition. Then 140 Democrats and 65 Republicans were in favor. It's fucking chaos. At least 90% of these gies are trying to politicize the issue and it seems likely that there won't be any real resolution until after the election.

I guess everyone can blame this on everyone else, but from my biased perspective it seems like this might be something that would push undecideds or independents away from Republicans in all the races, not just the presidential race. Maybe the Republican gies are voting against this in an effort to save their jobs in their districts.

Really at this point I have no idea what's happening. In fairness, I don't think anyone in Washington or on Wall Street seems to know what's going on either. I just don't know what to think at this point. I'm not sure this is an issue that's going to hold its breath until November.

Extra Credit Assignment

So the Mets won, and I allowed myself an extra hour or so of bacchanalia as a result. That was a good decision. But then I made a bad decision. I decided to watch cable news for 30 minutes or so as I nursed my final beverage of the evening. Now typically, Mrs. Side Bar watches cable news with me, and talks me off of the ledge while I scream at some a-hole who just announced that "there is some dispute" over something that is obviously either true or false, and over which there cannot possibly be any rational dispute. But tonight, Mrs. Side Bar was already in bed, and I was left to grow more and more furious with each click through CNN, MSNBC and Fox News (side note: whatever, man; know thine enemy).

Tonight's topic: the credit crisis. And more specifically, the House Republican caucus, whose members have decided to block (or at least try to frustrate) the bi-partisan deal that was struck earlier in the day to resolve said crisis. They claim that they won't stand for a government bailout of those "fat cats on Wall Street who were stupid enough to get in to this mess in the first place." (my words, despite the quotation marks). They claim that their constituents are up in arms about the whole thing, and they won't stand for it. Eat me.

Here's the thing: the very people who are "up in arms" about the proposed federal bailout of so-called "toxic" mortgage securities, are the very people who stand to benefit the most.

See, the entire problem with the American economy right now begins and ends with one word: credit. I think LJT was correct the other day when he posted that we have become a nation of credit card debt, but that doesn't mean (and I don't think he was suggesting) that our nation would be better off if no one could get credit. Small and modest-sized loans from financial institutions are a net good for our economy. People with extra cash invest it with their local bank in a savings or money market account, and in exchange get a nice little interest payment at the end of each month. People who need extra cash borrow money from the same bank at a slightly higher interest rate, and the bank profits by pocketing the difference between the two rates. Now that is way too simplistic, but seriously, that's basically how it works: even with super-complex credit derivatives and structured investment vehicles, if you lend money at a rate that exceeds the cost of borrowing money, you can (and many people did) make a profit.

The problem here is that with mortgage-backed securities taking a nose dive, and with financial institutions invested too heavily in those MBS, no one is willing to extend credit, because they are afraid that they are already over extended, and they don't want to exacerbate the problem by lending money to someone who might not pay it back. In other words, it's all well and good that Mrs. Jones has invested $100 with my bank at a rate of 2%, but before I loan her money out to Mr. Smith at 6%, I better make sure I am not completely underwater on some of the other loans I made to Mr. Wilson, Mr. White, and Mr. Johnson a few months ago. Oh shit. Turns out I am.

The result of all this? No credit. No one - not individuals, not small businesses, not huge corporations - can get a loan right now.

Why is this a big deal? Credit makes our economy hum. You buy a car, some guy in Detroit doesn't get laid off (but you can't buy the car without a decent loan from the bank). You buy a house, two carpenters a plumber and the cable guy are in business (but no way you can afford the house without a reasonably priced mortgage from the bank). You want to start a high-tech company that produces alternative sources of energy on the cheap, to millions of Americans benefit (but you can't get a loan from Deutsche Bank because they won't extend credit to anyone). Some huge company is ready to come out of bankruptcy and start turning a profit again? They can't. Citibank won't fund that $350 million loan they promised. Etc.

I haven't worked in this industry for too long (and I don't really even work in this industry), but I have done it long enough to know that there has never been a time like this in anyone's memory. No one can get a loan right now. It permeates every transaction in the country. Everyone with any cash to lend is hording it like the fucking rapture is coming before Open Bar's 30th. It is a very scary time to need to borrow money. And it is only going to get worse when the MBS that these firms are carrying at $0.60 on the dollar (i.e., they already lost 40% on the securities, giving rise to the current crisis) turn out to be worth $0.25 on the dollar. Or less.

But here's the kicker: the very people who are opposing the federal bailout that might reverse, or at least stem, the credit crisis (because removal of toxic securities from the balance sheets of financial institutions would allow them to: (a) know what they have in terms of assets and liabilities, and (b) free up some capital for extension of loans, thus making credit available again) are the representatives of the very people who would benefit the most from the package.

When right-wing senators and congressmen from impoverished states (I'm looking at you, Dick Shelby (R-AL)) stand on ceremony and insist that "my constituents won't stand for this" they aren't hurting me. I live in a densely populated part of the country where the service economy and not the manufacturing economy is king, home ownership is optional, owning a car is downright stupid, and we earn a salary that permits us to get by without hitting up the local WaMu for a home equity loan. Instead, they are fucking over their own constituents. I'll be fine if I can't get a car loan, mortgage, or decent rate on my AmEx for 18 months. What about the guy working two jobs, making $7.15 an hour, and unable to get out from under one or two bad decisions he made when he was 22. Where is that guy going to be when Alabama First National tells him they won't loan him a dime. What about the lady who works at some huge factory in North Carolina? She is going to lose her job because the CFO can't get Wachovia to finance their new expansion that otherwise would have generated millions in new revenue.

I don't like the federal bailout either. If there are 280 million of us, then everyone's share of $700 billion is $2500. That sucks. But do me a favor, before you piss and moan and bitch about it, ask yourself if you can live with the alternative. For god's sake, when George Bush and Nancy Pelosi agree on something, it's time to shut the fuck up and listen to them.

Thursday Classic Video

This is my new favorite thing. I do not disparriage anyone for believing in their religion, as it's way more than I'm capable of, but, I mean, really, it's like...there are no words, just watch. I'm gonna be singing this all day.



My favorite thing about this is easily the guitar player. You'd think they were playing some Zeppelin or something. My next favorite thing is the back up singers, including Jim Henson and a dude with a bad combover who looks like he was even out of touch with that wussified form of rock and roll. My third favorite thing is at the very end when the guy starts riffing by going "J-J-J-J-Jesus" with a high pitched falsetto in the last syllable.

In a similar vein, I also wanted to embed something called The Renewed Mind is the Key, but you can't get it on YouTube. But you have to follow this link and watch that and the dancing that goes along with it. Make sure you watch through the solo dance break. UPDATE: I guess The Way got tired of people linking to that silly performance because the link redirects to the home page now.

Who's Next, Liberace?

No Fucking Way.

Carlos Voltron

According to the Onion, he's our only hope (credit to Open Bar for the heads's up on this classic image).

I wonder if Ryan Howard is related to King Zarkon.

DannyG in Print!

Our good friend Danny G is published in today's edition of that esteemed publication, AM NY.

Check it out:

Timeout!!!

The last week has been unkind to Grandpa Simpson - I mean, um, John McCain.

The economy is failing and with Republicans having been in power for most of the past decade people are blaming Republicans for some reason.

To make matters worse, a serious problem is lack of regulation played a big part in leading us down this road.

That's an especially big problem when you like to call yourself "fundamentally, a deregulator" and have admitted that economics is not your strong suit (even if that quote may have been taken out of context just a bit).

Adding to Mr. McCain's woes is that the Palin Train seems to be losing steam as the people dig into her past.

Let's recap, shall we?

• Her daughter just got knocked up.
• Her son, being deployed to Iraq is said to have some drug problems.
• She announced that we are on a mission from God in Iraq.
  
• She then changed her story, trying to channel a quote from Abraham Lincoln that really was not at all similar to what she said.
• She actually was for that bridge to nowhere before she was against it.
• She was for banning books from local libraries.
• She had rape victims pay for their own rape kits.
• She apparently was banging her next door neighbor and husband's business partner.
• She has had three interviews: Charlie Gibson, in which she came across as a lightweight - to put it nicely; Katie Couric, in which she came across as a lightweight - to put it nicely; and Sean Hannity - which, let's face it, doesn't really count.
  
• She's accused of firing the former boss of her ex-brother in law because he wouldn't fire said ex-brother in law.
• The anti-corruption crusader, actually ran Ted Steven's political action committee.
• She billed taxpayers for travel and expenses for staying at her own home, as opposed to the Governor's Mansion, for 312 nights in the short time she spent as governor of Alaska.
• Put her high school buddies in government jobs that they were not even remotely qualified for.
• Her preacher, Thomas Muthee really hates witches.
  

There's more but, I think you get the point: she's a disaster.

They're just hoping her vagina and Christianity is enough for the American people (and, truth be told, the jury is still out on that one).

Now, with his polls dropping and time running out and on the cusp of the first presidential debate - what does John McCain do?

He calls a timeout??

What the fuck? Can you do that?

He's heading back to Washington DC to.....go to meetings. Oh, and he wants to cancel the scheduled debate because.....he has to go to meetings. I know he isn't really too good with computers but are telephones and airplanes too much for him too?

He really just wants to change the subject and position himself to claim credit for this bailout that is going to come one way or the other - regardless of whether or not he actually goes to DC.

Apparently, Obama called him at 8:30 in the morning on Wednesday to issue a joint statement. Grandpa Simpson returned the call at 2:30 pm and they agreed to issue some sort of joint statement and then, shortly thereafter, GP Simpson came out and announced the timeout.

Bitch-move, Macca. I'm guessing you're not taking the Straight Talk Express back to DC?

I thought Barry handled it nicely, saying that the president needs to be able to multitask.

I think people will see through this and it will ultimately backfire: there's no crying in baseball and there's no siestas in presidential elections - even if you are 100 years old.

I suppose it was a nice try to switch up the game with a gimmick, Johnny Mac - but the thing with Hail Mary passes is that they usually end up incomplete.

"I'm John McCain and I....um, I..........I want a timeout..."

When The Shit Hit The Fan

Back in March, Bear Sterns sold themselves to JP Morgan while on the brink of almost certain bankruptcy as we so brilliantly chronicled here at Wheeeeeeeeeeeeeeeere's Luke. It was a financial failure that shocked many and the first failure of a major financial institution since Long Term Capital failed back in the 1990s.

Ah, the good old days.

Over the course of the last few months, and especially the last week the shit has truly hit the fan.

The US Government had to make explicit what was once implicit: they backed up Fanni Mae and Freddie Mac, two private but yet public corporations that had a piece of 70% of all American mortgages and in whom most of the world's nations held significant amounts of bonds.

Their downfall would have brought the world economy to a screeching halt.

And, so, to avoid this we bailed them out at $200 billion apiece.

Then, last week Lehman brothers, bailout-less, went into bankruptcy and Merril Lynch sold themselves to Bank of America to avoid a similary fate.

But the real kicker seemed to be my former employer, American International Group. As they teetered on the brink of failure The Fed initially threatened to let them fall while trying to push Goldman Sachs and JP Morgan to bail them out for what was $40 billion, then $50 billion and then $75 billion dollars.

No dice, said the I-bankers.

The government didn't want to have to guarantee their investments and Goldman and JP Morgan weren't going to take that risk.

AIG is an enormous company that does many things: insurance, aircraft leasing, money management, port owners just name a few and I think no one felt they could have possible done an even remotely reasonable amount of due diligence in a day or two.

And, so, The Fed blinked and bailed out AIG.

Why Bear and AIG and not Lehman?

Well, I think it's because while Bear Sterns and Lehman were both the same thing, Investment Banks, essentially what the difference was no one saw Bear about to fall whereas everyone was sitting around sort of watching Lehman fall apart for six months - lessening the investor panic when the eventually fell whereas a Bear fall would have been much more jarring to the markets.

Now, with AIG, I think the problem was, of course, the 'no-one seriously saw this coming' factor but they were also really just too big to let fail.

At the heart of this whole things are CDOs, or credit default swaps, and if you don't know how they work you can check it out here.

AIG was so big and had so much money in these CDOs, basically, insuring banks against potential defaults that if they were to go under it would have meant that those banks that they insured would then have to account for that increased liability on their balance sheets - showing a lot more debt.

To offset all that debt, they would have had to raise more cash but AIG had something in the neighborhood of $500 billion in of these CDOs - that's a lot of pesos.

To put that much debt back into the market overnight would have been catastrophic because none of these banks are liquid enough to come up with cash that quickly which could have resulted in many more banks going under.

And so, The Fed bailed out AIG.

Basically, the financial sector has turned into a giant Jenga game and everyone was too afraid that to pull out the AIG pegs would make the whole fucking thing fall.



It was not, however, a game saver and while the market continued to dive the undertakers sized and sold short on WaMu, Goldman and the like forcing them to consider selling themselves or face dire consequences.

No one knew where it would stop and that is why The Fed has proposed throwing $700 billion dollars at this problem.

Now, I don't profess to really know how to solve this problem, but first we have to identify the problem and what I think is that there are two problems.

First, with these CDOs, basically what happened was that people writing mortgages were able to sell them off and not 'live' with them so they made their money not on getting paid back but on the up front fees and costs which made it beneficial for them to relax their criteria for giving out mortgages. The companies buying these CDOs were making pretty good coin on them for a long time as well. And of course, Americans wanted bigger and bigger houses.

The thing is, everyone lost touch with reality which is that they housing boom had to end eventually. And it did, in a big way.

So, there's that.

But here's the thing that we don't really want to admit.

The problem really is bigger than AIG and Fannie and Freddie and whoever else may have invested unwisely.

The problem.....(drumroll, please)...is Americans.

(I said it, I said it!)

It's me and most of you.

We live our lives buying shit we can't afford. Wanna go to Vegas? Charge it! That house? Charge it! That car? Those shoes? That expensive dinner? That war in Iraq? Those tax cuts? Charge it! Charge it! Charge it! Charge it! Charge it!

We are a Veruca Salt Nation.

"I want it noooowwww!"

At some point that is going to have to change: we can start following a budget or we're going to go broke.

Now, I'm all for getting out of this serious emergency but along with plugging a hole, we have to go on a fiscal diet.

That maybe means no tax cuts and maybe some raises.

That means losing benefits.

That means driving that toyota for another five years instead of getting that Benz you've beeing dying for.

That means figuring out what the fuck we are, in fact, going to do with Medicare once and for all.

So yes, let's step back from the brink and bail ourselves out but let's not kid ourselves: we are bailing ourselves out on a giant credit card courtesy of the U.S. of A. and we're going to have to pay it back, along with our kids and grandkids and, so, we need to wakeup and realize we don't just need to get our I-Banks in order.

We need to put an end to The Credit Card Culture.

No, I Do Not Like Maureen Dowd

After posting a lengthy quote from Maureen Dowd's most recent column yesterday, Open Bar asked if it meant that I like Maureen Dowd now. The answer is no, I do not like Maureen Dowd. I think Maureen Dowd is a snarky asshole who is so pre-occupied with belittling political figures that she obscures her underlying message (on the days when she even has one). She loads her column up with insutls, sarcasm, and inside jokes based on offbeat news reports from the campaign trail. As a result, they tend to read more like a rambling summary of trivial news stories about the candidates, and less like journalistic prose that has a beginning, middle, end, and a coherent theme.

In order to prove my point, I have hacked in to her personal computer and located her column for tomorrow. A classic example of Dowd-esque writing:

This week in Tampa, Florida, U.S. gold-medal hopeful Barry Obama is rehearsing for the first event in the O-lympics. It's a house-off with the McCampaign and their 8 McMansions. Barry's crowd has been crowing all week about cars and mansions and elitism (oh my!). Meanwhile, Johnny and the GOP have spun the wicked witch of the northwest into a sweet little girl from Kansas. And now she is ready to charm the lollipop guild at the U.N. Enchante, Dorothy.

But while Johnny and his might-be mistress flirt with the French on First Avenue, something's rotten in the State of New York. And it's just down the road on Wall Street. Johnny doesn't know too much about the economy, he told us a few months ago, and then he announced last week that the fundamentals are strong. Barry chided Johnny for taking the fun out of fundamentals, and little Dorothy shacked up with Sean Hannity for a cozy recovery interview after that mean old Charlie Gibson asked her about the Bush Doctrine. The newly-minted feminists on the right thought Charlie was a little too hard on Bristol's babygrandmamma. It's not like she said we might go to war with China.

To clean up the mortgage mess, Henry Paulson and the Bushies over at Treasury want to know if they can bum $700 billion off of Congress. They'll totally pay it back. In O'Henry's view, the moral of this story is that the way out of a financial crisis borne of insufficient oversight on Wall Street is to give him a blank check and the authority to spend three-quarters of a trillion with no oversight at all. Cheney and Rummy fumed that they hadn't thought of it first. Oh and by the way, he needs the money like now.

I wonder if Barry likes jelly beans.

Martin Sheen is my President

Maureen Dowd's column this morning takes the form of an imaginary meeting between Barack Obama, and Jed Bartlett (Martin Sheen's character on The West Wing). At one point, the fake fake President gets a little frustrated with Obama, and goes on a rant about what Obama needs to do to win the election and take back the momentum:

GET ANGRIER! Call them liars, because that’s what they are. Sarah Palin didn’t say “thanks but no thanks” to the Bridge to Nowhere. She just said “Thanks.” You were raised by a single mother on food stamps — where does a guy with eight houses who was legacied into Annapolis get off calling you an elitist? And by the way, if you do nothing else, take that word back. Elite is a good word, it means well above average. I’d ask them what their problem is with excellence. While you’re at it, I want the word “patriot” back. McCain can say that the transcendent issue of our time is the spread of Islamic fanaticism or he can choose a running mate who doesn’t know the Bush doctrine from the Monroe Doctrine, but he can’t do both at the same time and call it patriotic. They have to lie — the truth isn’t their friend right now. Get angry. Mock them mercilessly; they’ve earned it. McCain decried agents of intolerance, then chose a running mate who had to ask if she was allowed to ban books from a public library. It’s not bad enough she thinks the planet Earth was created in six days 6,000 years ago complete with a man, a woman and a talking snake, she wants schools to teach the rest of our kids to deny geology, anthropology, archaeology and common sense too? It’s not bad enough she’s forcing her own daughter into a loveless marriage to a teenage hood, she wants the rest of us to guide our daughters in that direction too? It’s not enough that a woman shouldn’t have the right to choose, it should be the law of the land that she has to carry and deliver her rapist’s baby too? I don’t know whether or not Governor Palin has the tenacity of a pit bull, but I know for sure she’s got the qualifications of one. And you’re worried about seeming angry? You could eat their lunch, make them cry and tell their mamas about it and God himself would call it restrained. There are times when you are simply required to be impolite. There are times when condescension is called for!

Amen.