Nobody Could Have Known! Ratings Agency Edition

A blog post by a banking industry insider is generating a good deal of buzz in the blagosphere.

It's a pretty interesting read, but I want to pull out one little quote from the bit that Matt Y excerpted and take issue with it. Namely this:

There were a lot of contributors to the catastrophe, but one indispensable one is that the ratings agencies monetized their sterling reputations in an extraordinary fashion, and nobody in regulatory apparatus of government saw that this was happening, and what it might portend.

That's just not true. For example, you can hear audio from a Spring 2006 Banking Committee where Sens. Shelby (R-AL) and Jack Reid (D-RI) offering to give SEC Chair Chris Cox basically whatever he wants in terms of enforcement power to oversee credit rating agencies. Cox's response? More or less "no thanks." It's in this podcast at 49:43 (trying to track down the transcript...).

This quote from House Report 109-546 - CREDIT RATING AGENCY DUOPOLY RELIEF ACT OF 2006:

We have, finally, very strong apprehensions that this bill could allow history to repeat itself. In the wake of the savings and loan crisis, Congress put in place requirements that the capital held in portfolio by financial institutions must be of investment grade as determined by an NRSRO. We put this requirement in place because we found that a number of those institutions that failed did not maintain high-quality investments in their portfolios. This bill's failure to ensure that the ratings issued by NRSROs continue to be credible and reliable could one day create another regrettable situation whereby taxpayers would again need to finance a bailout.

The problem wasn't that the regulators were UNAWARE of the conflict of interest that drove an artificial inflation of the ratings of CDOs, the political appointees up to and including SEC Chairman Chris Cox simply didn't want to regulate them.

A Feel Good Story For Christmas Day

With tales of factories shutting down, banks getting bailed out, and giant ponzi schemes that made billions for corporate criminals, it's easy to forget that not all corporations are run by douchebags. Happy Holidays.

Merry Christmas

Here's "Santa Claus" from 1898

Brit Hume: White And Balanced

Brit Hume is leaving "Special Report." I guess this is good news. Still I couldn't help but find this "tribute" to him pretty damning.

First of all, if you have the current President, the current Vice President and former president Bush Sr. record nice things for you in your "goodbye" tribute, that MAY be an indication that you have done something horribly horribly wrong. Pretty much that alone should bar you from being called a "journalist." PR flack or Republican mouth-piece would probably be more accurate. I mean, you have quite possibly the most reviled politician of all time saying what a great guy you are. That's not an endorsement you should really seek as a journalist.

Also, couldn't help but notice something very similar among all the people they interview that work on Special Report. See if you can spot it (hint: it rhymes with wright whale):

Bat Girl Demands Equal Pay

Fantastic:



Now if only there was a way to tie the Chamber of Commerce to a ticking time bomb and get them to agree to stop lobbying Congress to block it.

Twas The Night Before Christmas

Santa tracking has begun. Best part of the article comes about halfway down the page:

NORAD's holiday tradition can by traced to 1955, when a Colorado Springs newspaper printed a Sears, Roebuck & Co. ad telling children of a phone number to talk to Santa. The number was one digit off, and the first child to get through reached the Continental Air Defense Command, NORAD's predecessor.

Col. Harry W. Shoup answered.

Shoup's daughter, Terri Van Keuren, said her dad, now 91, was surprised to hear that the little voice on the other end thought he was Santa.

"Dad thought, `What the heck? This must be some kind of code,'" said Van Keuren, 59.

Shoup, described by his daughter as "just a nut about Christmas," didn't want to break the boy's heart, so he sounded a booming "Ho, ho, ho!" and pretended to be Santa Claus.

That's pretty cool.
Via Kos.

Pope: Being Gay Is Like Clear Cutting Rainforests

The Pope has announced in his end-of-year address that "If tropical forests deserve our protection, humankind... deserves it no less." And by "protecting humankind" he means FROM THE GAY.

I'm not entirely clear how treating people in same sex relationships with respect and giving them benefit of protection of law leads to the destruction of the human race. Certainly consensual same sex relationships seems less destructive to humanity than concealment and complicity of systematic child abuse. Then again, I don't have a papal level of knowledge of the word of God, so I guess he must be right.

Santa Is Coming

Even if he has to slide down a bat-pole instead of a chimney.

Christmas Is Coming

Only one more week!

Franken Watch: The Recount!

It looks more and more like Franken may win the Minnesota Senate seat after all. The Star-Tribune is reporting that Coleman's lead has shrunk to FIVE votes and their "projected results" are showing Franken ahead by 89 votes.

Final tallies are still to be made, and keep in mind that any result will almost certainly be challenged in court, but it's looking good for Franken at this point.

Two Conversations At Different Times

A dramatization inspired by a true story.

Time Zero
Real Estate Developer: I would like a loan to build a large luxury apartment building please.
Banker: Fine idea, but what collateral can you offer me?
Real Estate Developer: I have this multi million dollar investment portfolio run by former NASDAQ chair Barry Madoff.
Banker: Excellent my good man, here is your loan.

Time One
Real Estate Developer: Hello my good man, what brings you to my office today?
Banker: The interest rates are going much higher on that loan I gave you.
Real Estate Developer: Whatever for? The target for the Fed Funds rate is at a historic low.
Banker: Well, it's your collateral.
Real Estate Developer: But I put down ... oh, yes I see.

Throw The Shoe

From Boing Boing: the best animated shoe throwing gifs on the internets today!

Zero

That's the target Fed funds rate (the rate at which banks loan their fed fund balances to each other for short periods) that Bernanke set this morning. The fed wants to keep this rate between 0 and .25 percent to ensure liquidity (making it cheaper to borrow money makes it more profitable to borrow that money and use it for enterprise or purchase of goods).

Blogger, New York Times op-ed columnist, and new Nobel Laurette in economics Paul Krugman observes "we are in very deep trouble. Getting out of this will require a lot of creativity, and maybe some luck too." So that's comforting.

By the way, you may be wondering: what is the difference between the fed funds rate (the rate at which banks loan to each other) and the LIBOR (the rate at which banks lend to each other!)? Explanation here.

She's A Kennedy Damnit!

There's been increasing speculation that Caroline Kennedy is interested in being appointed to Hillary Clinton's recently vacated senate seat. The New York Times is reporting today that her interest is now "official."

I for one am not really excited about this at all. According to the story she has been wrestling "with whether to give up what has been a lifetime of avoiding the spotlight." Let me help you out, if you want to give that up and serve government, more power too you, but how about you run for your local school board? How about running for the House? What, other than the fact that her last name is "Kennedy" qualifies her for being in the senate? On NPR the reporter cited the following facts regarding her qualifications: She's a lawyer, she's smart, she has written books, she is pretty. Really?

Color me unimpressed.

Obama Wins!

What's that you say? Old news? No sir. In fact, Barack Obama was officially selected by the Electoral College today.

This archaic institution is the only method by which we select our president. On a related note, why electoral college? Well, the truth is that our founding fathers didn't trust the population as much as third grade civics would have you believe. They wanted a level of elite control to avoid the hoi polli from getting too much influence. Keep in mind that Senators were originally selected by state legislators, not voters.

It'd be nice to see this outdated mechanism relegated to the dustbin of history. The best way to do so is probably the National Popular Vote movement. More here.

Anyway, congrats to President Elect Obama.

No Such Thing As A Free Lunch

I have been offered a free chance to win money. Oh did I say free? well, at a modest cost of providing advertising. Ferryman paid below:

I have registered to play in the PokerStars World Blogger Championship of Online Poker!

The WBCOOP is an online Poker tournament open to all Bloggers.

Registration code: 535496

We Knew He Was Crooked, We Just Thought He Was Stealing From Someone Else.

Bernie Madoff, former NASDAQ chair and investment fund manager, was arrested on Thursday for admitting to being in charge of the largest Ponzi scheme ever created. According to Bloomberg, Madoff told his employees it was "all just one big lie" and that the firm was "basically, a giant Ponzi scheme."

Some on Wall St. were suspicious of his methods, since he reported only 5 down months from 1993-2007. But from Henry Blodget comes the following observation:

Another potential explanation for the performance, which also involved cheating. This is important. As we noted yesterday, many sophisticated Wall Streeters have long suspected that Bernie was crooked. But they invested with him anyway because they assumed that what he was doing was "front running"--an illegal but simple and effective practice in which traders take advantage of the knowledge of impending order flows. The possibility that Bernie was front-running explained performance that no one could replicate and that some experts thought was impossible. This stopped a handful of folks who knew enough to know that Bernie was full of it from crying "foul."

We invested in him BECAUSE we thought he was crooked! Nice.

Brinksmanship Game Won, We All Lose

Well, it looks like the Republican Senate Minority, after ushering through $700 Billion to help banks, has killed a $14 Billion dollar "just get us to the Obama administration" loan. Guess we all get to find out if all that terrible stuff that will happen if we don't bail them out really will happen after all.

I hope that the Democrats in congress finally realize the futility of trying to compromise with these jackasses. In order to compromise, you need a good faith negotiator on the other side. THERE IS NO SUCH PERSON. In the next congress, Democrats will have enough of a majority in the House that the can (not will, but CAN) largely ignore the minority party. In the Senate, the Democrats should pass their bills and let McConnell try to keep together 40 votes. Senators like Spectre in PA, Bond in MO, Burr in NC, Voinovich in OH and Grassley in IA are all vulnerable (and all in states won by Obama except for Bond). Do they really want to go into 2010 with "I stopped Obama's health plan" as their slogan? I doubt it.

Of course, I doubt that the Democrats will learn this lesson. As Will Rogers quipped: "I am not a member of any organized political party, I'm a Democrat."

UPDATE: Before I go to bed, I'd be remiss if I didn't point out that this news has the markets panicking (to be fair, shadows, funny shaped rocks, and small children saying "boo" panic the market at this point but anyway...). US Stock Futures are sinking (the markets are down 2.5-3% as of right now) and the Nikkei is dropping especially automotive stocks interestingly. Wonder how it will look in the morning...

UPDATE II: Turns out the markets are doing ok today. Dow started off low but is now back up to where it closed yesterday. Other markets about the same. On a related note, the dailykos has a list of the senators that voted to approve $700 Billion for Wall St. and against the auto bailout.

Betti Page, We Hardly Saw Ye. Ok We Did But You Were Great

Bettie Page has died in a Los Angeles hospital at the age of 85.

I think it can be safely said that you gave millions if not billions of moments of happiness to others. RIP Bettie.

Spokesperson Cage Match: Vaccine Edition

As previously discussed here, there is a large, or at least very vocal group of people who believe that vaccines cause autism, including celebrity spokes-couple (and parents of an autistic child) Jenny McCarthy and Jim Carey. Now there's nothing wrong with trying to improve vaccines, and there may be benefits to altering vaccination schedules, but any responsible advocacy for changes really must include urging parents to have their children vaccinated, change or no change. The health benefits to the population of vaccination are large and well known, and so far there is scant evidence for a vaccine causation theory.

So it's nice to see that the "get your damn child vaccinated" camp has it's own celebrity spokes person: Amanda Peet. After hearing from "friends" that she shouldn't have her child vaccinated, she did the right thing: looked at the science (thanks to her MD Sister!). Now she's trying to raise awareness, but more importantly, she "says parents shouldn't look to her as a scientific expert. She defers scientific questions to [Paul] Offit [chief of infectious diseases at Children's Hospital of Philadelphia]."

Good for you Peet.

Let's Not Build Stuff, Let's Have A Depression Instead!

Via Matt Yglesias here comes a link to an op-ed in the Politico by Minnesota Gov. Tim Pawlenty who wants to "Cut up the credit card" of the federal government at exactly the wrong time. In his blueprint outlining "steps the Republican Party must do to again become the national majority party" his prescription is "fiscal responsibility — living within our means like most Americans do."

Now this sounds like it makes sense, but this an area where common sense lessons that everyone derives from experience with microeconomics leads to extremely wrong notions about macroeconomics. Credit is fine when your personal economy is operating well and the ability to pay off the debt in a timely manner is both likely and foreseeable. If you lose your job you SHOULD reduce expenses. Debt is especially bad because the chances you will compound your problem by not being able to pay it off is high AND the rates you will be charged will be higher due to your lack of resources.

BUT, as discussed previously, the US Government is VERY different from you! The US Government lives forever, it has the ability to confiscate property of its citizens and corporations to pay off debts, it has a very good credit rating, etc... In an economic downturn it's both cheap and necessary for the government to borrow and spend. As Matt says:

At a time of economic slowdown, tax revenues will fall. Pawlenty would have the federal government offer no aid to state and local governments, forcing them to slash services and raise taxes, further deepening the slowdown. And then we’d need to cut the federal budget sharply, even further deepening the slowdown. And then next year tax revenues would come in even lower, and we’d need another round of counterproductive cuts.

Now "cutting up the credit cards" is not always bad. In times of economic expansion, the government should increase taxes and seek to "live within it's means." Had Gov. Pawlenty courageously urged his party to increase taxes and reduce spending 5 years ago when they controlled all three branches of government, truly he would be a fiscal conservative. But this? This is fiscal foolishness.

Let's Build Lots Of New Trains And Bridges!

An interesting corollary to my comment yesterday on the flight to treasury bills is that the US Government really should start spending more money now.

I know it seems strange that the government should start spending more money in a recession with tax revenues falling, but it's true. First, the reason that T-bills are absurdly expensive (or, to put it the other way, the rate of return on T-bills is absurdly low) is that private money is extremely risk averse right now. Private money doesn't want to invest in factories or equipment or new ideas that create new jobs and expand the economy. It wants to put the money under the mattress until it feels safe. That means if we want to get out of this mess, someone needs to increase spending on things that make jobs, and that someone pretty much needs to be the government.

But the really good news about this is that it's REALLY CHEAP for the US Government to borrow money right now. Normally the bad thing about debt is that you have to pay interest so it winds up costing more in the long run. But right now, because everyone's so shit scared about the economy, the government can borrow money at or below the expected rate of inflation. If the government wanted to borrow money to build a new rail line, it could borrow money right now and basically make money on the loan by taking it out.*

Now the government could spend the money on almost anything and it would stimulate the economy. John Maynard Keynes once proposed that the government take a large amount of money and bury it deep in a mine shaft, then dig it back up again, thus employing large numbers of people and requiring the purchase of lots of equipment, etc... In a more modern vein, we could build lots of new nuclear weapons and stick them in silos in North Dakota.

Even better though, the government has a great opportunity to spend money on things that will create a positive benefit for society, things like community centers that reduce crime, rail and road links that increase commerce, expanded broadband that increases commerce and knowledge, increased building efficiency that reduces energy use, etc... If it did that, the government would not only make money on the loan and stimulate the economy by employing people, the tangible improvements would increase commerce and government revenue going forward.

It seems odd, but right now the government can borrow money really cheaply and should. Deficits be damned we need to spend money.

Matt Yglesias has more on this topic and the dangers of people who say the government needs to cut back and "live within it's means" (aka "Neo-Hooverites") here, here, and here.

*To explain: the government would, of course, pay out interest on the loan, so it would cost more in nominal dollars, but it would make money in real dollars (adjusted for inflation). If person A takes out a $100 loan at 2% annual interest over 5 years the total cost of the loan in nominal dollars (not adjusted for inflation) is $105.17. But if the interest rate over those 5 years is 3% annually, one hundred dollars of value 5 years in the future is actually $116. Thus the government would "make" and the lender would "lose" $10.83.

Zero Point Zero One

While most major networks were focused on Illinois, on Wall St. the Treasury Department was busy selling three month treasury bills at 0.01% interest. This isn't investing, this is hiding in a bomb shelter. Investors are so scared of losing principal that they are just handing the US Government money and saying "hey hold on to this for a while and just give it back to me later." And they weren't just saying that, they were COMPETING to have the treasury hold their money for free. $126 Billion was bid in an auction of $32 Billion in treasuries.

The credit crunch isn't over, it isn't close. On the other hand, it seems that risk must be really underpriced right now.

Car Or No Car?

Well it looks like the auto industry will be getting some of that sweet bailout money.

It seems that the White House forced Nancy Pelosi into a key concession: that the $25 Billion would come from money to subsidize fuel efficient cars. Yes, that's right. Bush wouldn't agree to the bail out unless it also reduced the incentives to make fuel efficient cars.

Franken Says He's Ahead By 4 Votes (Yes, FOUR)

Well, the hand recount is over, and Al Franken's campaign is claiming that they are ahead by four (4) votes. The latest Star-Tribune article says the margin is 192 in favor of Coleman. I think this discrepancy is because Franken's campaign is counting the preliminary decisions on challenged ballots, while the Star-Tribune only reports official numbers. Or maybe Franken's just talking out of his ass.

Apparently they have to find 133 missing ballots (?) then the official hand recount would be over. THEN they go to the board of elections which will rule on each of the 6,657 challenged ballots (Coleman campaign challenged 3,376 ballots and the Franken camp challenged 3,281). After that expect legal challenges and/or Senate action. If it's really this close the most sensible thing might just be to have the Senate call a re-vote right away, which is what they wound up doing last time after wasting a year dithering over it.

Suddenly, I Don't Feel So All Alone

Payroll numbers came out today, one of the numbers they used to calculate unemployment. It turns out that 533,000 jobs were lost in November (that's net lost, so new unemployment claims - hires). They say that misery loves company, but frankly I don't think it welcomes competition...

Headline Stolen From Fark.com

Had to steal this:

Minnesota recount still in progress, officially surpassing Stuart Saves His Family as the longest, most tedious thing Al Franken is responsible for

Here are the details.

From Terrible To Unimaginable Nightmare

As previously noted on this blog here and here, Zimbabwe has been deteriorating for the past two years. The yearly inflation rate has gone from 100,000% to 2,000,000% to now, an unimaginable 231,000,000% (yes, that's two hundred thirty one million percent). The value of the Zimbabwe dollar is now basically zero, and unemployment is a staggering 80%.

Now, in addition to having a non-functioning economy, the collapse of Zimbabwe's infrastructure is causing a cholera epidemic.

The tragedy of Zimbabwe is just awful. It was a stable, functioning state not ten years ago. It had problems with inequality, a history of exploitation and colonial racism, etc... but it was a functional country and a net food exporter. Now that country has been set back so far by it's government that it may not recover in living memory.

Too Good To Miss

I've been meaning to post this for a while and never got around to it. Here is Michael Lewis's piece in Portfolio magazine on the Wall St. melt down. It's good, really good, as one would expect from the guy who wrote "Liar's Poker" and "Money Ball." I would summarize but if you are at all interested in how the financial crisis happened you really need to read the whole thing, and if you're not interested, well then I'd just be wasting your time.

RIP Tanta

Doris Dungey, aka "Tanta" has died of ovarian cancer at the age of 47. She was a writer on one of my favorite economics blogs "Calculated Risk." I didn't know her personally, but she instructed literally thousands looking for answers about the financial crisis and housing bubble in recent years.

Robot Menace: The Latest Developments

Via Ezra here, he points out the innate bloodlust of robot kind.

The article he quotes has far more pernicious implications, however. As the article points out, robots function best in "highly structured environments made just for them." It's not just that robots wish to kill. I mean, sure "If you took a welding bot from an assembly line and put it in your local body shop, it would end up killing somebody in about 30 seconds." Of course. But WHY? It is seeking to eliminate the unstructured elements of its environment. They seek their perfect world...

"Your life is the sum of a remainder of an unbalanced equation inherent to the programming of the matrix."

Original article here.

Citi Bailout 2: Electric Boogaloo

Well, the US Government this morning announced that it would be bailing out Citigroup to the tune of $20Billion in Preferred stock, and, more importantly, guaranteeing some $300 Billion in bad assets. This is in addition to the $25 Billion in preferred stock the US taxpayer bought as part of the first "Big Bailout." This sent the stock market up on strength of a rally in financial stocks, but the reaction of most economists around the blogosphere has been somewhere between "decent idea, bad execution" to "OMG this is cover-your-eyes awful." Mark Thoma has a good round up of informed opinion here. As with a lot of this, I don't know what to think, but I do know who I trust, and the people that I trust seem to think this is a pretty shitty idea.

Obama's Economic Plan

Robert Reich has a nice piece up here describing Obama's economic plan which will be "what he plans to do starting the afternoon of January 20."

Obama has already made clear that economic stimulus done in an intelligent way will be job one (see his radio address here). In his words "We'll put people back to work rebuilding our crumbling roads and bridges, modernizing schools that are failing our children, and building wind farms and solar panels; fuel-efficient cars and the alternative energy technologies that can free us from our dependence on foreign oil and keep our economy competitive in the years ahead." In other words, not just economic stimulus, but stimulus that creates real benefits we will all be able to benefit from in the future, and which will enhance future growth.

You know, it's nice to have a leader that, when he announces a bold new plan, you don't have to try and figure out what the nefarious catch is or how his private sector friends will be profiting from the plan.

Robert Reich himself will contribute to our economic recovery by returning to his job at the north pole manufacturing toys.

Mukasey Collapses

Mike Mukasey collapsed while giving a speech to the Federalist Society annual dinner in DC tonight. No word on his condition but it seems likely it was a stroke.

I sincerely hope he recovers, but in the interest of full disclosure, my first thought was that God smote him down for lying.

UPDATE: According to Justice, he is "conversant and alert."

UPDATE II: Mukasey checked out of the hospital with a clean bill of health.

Senate Race In Minnesota Even Closer

Wow. The margin in the Minnesota Senate race between Norm Coleman and Al Franken is down to 136 votes. Wow wow wow. That's out of more than 2.4 Million votes cast (between the two candidates, Independence Party candidate Barkley got another 437,000). WOW.

As you can see, Coleman has lost 232 votes so far in the recount, compared to 153 for Franken. Once the recount is complete, each "challenged ballot" is reviewed. Either side can issue a challenge to any ballot that the counter decides is for the other candidate (yes, they actually have 3 people looking at each ballot, one for Franken, one for Coleman, and one guy or gal counting). Most challenges are overturned on review (i.e. the counter is usually right) but they are not counted in the recount totals until they've been separately reviewed after the hand count. This race could be even tighter depending on the challenges.

Either way this winds up, the margin is going to be TINY. Expect potential legal challenges and/or wrangling in the Senate over this for months to come. For the record, the closest ever Senate election (SO FAR!) was the 1974 New Hampshire Senate race between Republican Louis Wyman and Democrat John Durkin. Wyman won by 355 votes, then Durkin won after the recount by 10 votes, THEN Wyman demanded a second recount, after which he won by 2 (yes TWO) votes. Durkin petitioned the Senate, which basically punted. They declared the seat vacant, allowed the governor of New Hampshire to appoint a care taker, and the citizens of New Hampshire voted a second time in 1975, wich Durkin finally won by 27,000 votes. Full details here.

PS: I think that link goes to a site that updates as new results come in, so if you click through, you might not see exactly the results discussed above.

UPDATE: Interestingly, there were 221,850 total votes cast in the 1974 New Hampshire election. A 100 vote margin in this Minnesota race is statistically similar to about a 10 vote margin in the 1974 New Hampshire contest.

Rare Sunday Score

Pittsburgh defeated San Diego at Heinz Field yesterday by the score of 11-10. Apparently, in the 12,837 games played in NFL history, no game has ended with the exact final score of 11-10.

Twilight

With three successful books and a movie coming out, Forks WA is getting a lot of new tourist attention.

My Aunt lives in the western Olympic peninsula, although I don't know if the vampire-positive nature of the community factored in her decision.

Now Is The Winter Of Our Homemade Gifts

Scary, scary news from calculated risk here. Retail sales are falling off a cliff as we approach the holiday season, dropping 5% year over year, and 8.8% adjusted for inflation.

Expect to see several major retailers go into bankruptcy in late January/early February. Winter is coming to retailers. The weak and sickly of the herd won't live to see spring.

UPDATE: Except, of course if you're in the business of selling guns to gullible conservatives.

Speculation Is ... Speculation

I've seen some speculation about Kerry being Secretary of State, and now via Ezra comes speculation about Hillary Clinton.

The post makes some good points. I can see the logic behind wanting to remove a powerful and potentially rival voice from the Senate. However, it still seems to me that Richardson is the logical choice here. Former secretary of the interior, former UN ambassador, and veteran of several special missions while he was a house member and later governor of New Mexico. It would be good to remember that the wide ranging speculation regarding Obama's VP pick was all over the map. Obama's campaign showed a lot of discipline in keeping the press in the dark until the 11th hour, and eventually Obama made what I think was a very good choice. I'm inclined to give them the benefit of the doubt on this one.

Of course, as Matt Y. points out, much of this speculation is meaningless speculation. Political writers write because that's what they do. And the post election season is the season for "pick the cabinet" parlor games. But on a very basic level, this speculation exists because there are no answers to be had. Picking cabinet level appointees is a pretty involved process and to a great extent the choices simply haven't been made.

Alaska: Maybe Not So Crazy

I admit, when the results for Alaska's Senate race the day after the election I was surprised. Ted Stevens (R-AK) had a lead in the reported vote totals despite the fact that he had just been convicted of 7 felony counts.

Well, it turns out that those totals were not quite complete. There were a number of absentee and provisional ballots that had not been counted. Today about half of the 90,000 outstanding ballots were counted, and Mark Begich is now ahead. Good news for Alaska and the Senate.

UPDATE: Final count today. The Anchorage Daily News reports that the trends favor Begich based on the counties where the uncounted votes come from.

Listen To This Man

Armistice Day

Remember, today we commemorate the peace, not the war.

What passing-bells for these who die as cattle?
Only the monstrous anger of the guns.
Only the stuttering rifles' rapid rattle
Can patter out their hasty orisons.
No mockeries now for them; no prayers nor bells;
Nor any voice of mourning save the choirs,
The shrill, demented choirs of wailing shells;
And bugles calling for them from sad shires.

What candles may be held to speed them all?
Not in the hands of boys, but in their eyes
Shall shine the holy glimmers of good-byes.
The pallor of girls' brows shall be their pall;
Their flowers the tenderness of patient minds,
And each slow dusk a drawing-down of blinds.

Anthem for Doomed Youth - Wilfred Owen

Lighter Side

"It's hard to believe that the sight of an armless man walking along with a giant TV clamped to his body did not get anyone's attention," said police.

Also, this real headline:
"Unaware police carry guns, mountain lion charges at officer"

You don't say...

On College Football

In response to this piece by Matt Y, which cites this article in the New York Times Magazine on the Texas Tech Red Raiders' offense, it is true that Collegiate recruiting is fundamentally uneven.

That being said, that inequality is one of the reasons that Michael Lewis was interviewing Mike Leach. It's not just the underdog story, though those are always appealing. It's that the unequal nature of high school and collegiate athletics breeds innovation. If Coach Leach tries to compete against University of Texas with a power running game he's going to lose. Every. Time. He needed to develop a system that was innovative and dynamic enough that it could even the odds against teams stacked with highly recruited high school talent.

A very similar story from high school football can be found in the New York Times' story on the A-11 offense here.

High school and collegiate athletics are fundamentally inequitable. At least that inequality breeds creativity, creativity which affects all levels of play. Look at the Miami Dolphins adoption of the wildcat set. Or lowly Kansas City last week scoring on a wide receiver pass to the quarter back Tyler Thigpen.

UPDATE: I should probably say just a bit more about this. It's natural to think that very tight competition breeds innovation, since every competitor is close even a small edge can reap great benefits. One hit every twelve at bats (about 3-4 games) is the difference between a below average hitter and a very good one. But something happens in a system of close peer competition. If each competitor is closely matched at a particular contest, each seeks SMALL advantages. The risk of trying something very new and different is seen as great next to the rewards of doing so. After all, if you are very close to your peers and you make big new changes, those changes are as likely to make you worse as they are better. Making small changes in an attempt to move from JUST behind to JUST ahead are seen as much lower risk.

In systems with fundamental inequality among competitors, the dynamic is different. The top schools are in a peer competitive dynamic. They see the competition in recruiting as much as in coaching. But the mid-majors and the lower Div. 1-A schools can't compete on that level. The risks of them trying something VERY different are seen as small. They've been losing to the football factory schools for years, if they throw their playbook out and try something totally new, what do they have to lose?

You could make an argument that the same thing happens in business. The US car market comes to mind. When small fuel efficient Japanese imports first entered the US market they simply were seen as curiosities. Who would want one of those little things? The GM and Ford knew how to make cars that people wanted, after all, they were selling way more cars than Toyota. Even after it was clear they were headed down the wrong path, GM and Ford continued to lag Toyota and Honda in producing quality compact vehicles. By contrast, when they first started Japanese manufacturers had to innovate. They HAD to make something new. It would have been impossible for them to compete if they insisted on entering the market by competing in 4 door sedans.

Evolution in business, in coaching, and in nature is not about slow improvement. It's about slow, steady stasis punctuated by dramatic leaps and changes.

Economic Shadenfreude Watch: Circuit City

Looks like Circuit City is declaring bankruptcy. There was a time when I felt pretty sympathetic towards Circuit City. They were a local Virginia chain that built itself into a national retailer by competing on service and price. Their sales people were (relatively) knowledgeable and they had a pretty good low price policy. I remember my family bought several things from them because we felt their service was good and they stood behind their products (including our FIRST MICROWAVE ooooo!1! which lasted for something like 10 years).

However, as time (and management) changed, so did the company. First Best Buy came along with slightly better prices and a "no hassles" policy, which is great if you have a sales force that doesn't know it's products (We won't hassle you! We don't even know how to turn it on!). As people started using the internet for shopping as well as research, competition became even tighter in the electronic retail market.

So how did Circuit City respond? They fired all of their most experienced sales people because they were too expensive. Say, thanks for working for us for 5 years, you're fired because you earned too many raises. It's ok though, you can reapply for your old job making a starting salary again!

Needless to say, I'm not exactly sympathetic to see them going bankrupt a year and a half after this brilliant business move.

Satan Is No Match For Modern Lawyering

Just FYI, EULA is "End User Licensing Agreement." That's what comes with every piece of software you buy. You see, you don't "own" software on your computer. What you "own" is a license to use one copy of that program on the machine of your choice, plus the right to make one back up copy of the software.

Bad Analysis Watch: The God Gap

I just wanted to point out this and this from Kevin Drum.

The take away here is if you see someone in the paper or on TV telling you that Obama did well because he convinced regular church goers to vote for him DON'T BELIEVE IT. It's just lazy reporting. As Kevin shows, Obama did improve over Kerry's numbers among self-reported regular church goers, but by no more than he improved among everyone! Obama got more votes! If you want to say Obama did particularly well among a group, you need to compare it to his improvement among other groups and the electorate as a whole. Obama did improve among regular church goers, and those votes help, but anyone that says Obama's message to/more effective persuasion of church goers was WHY he did so much better than Kerry is selling you a bill of goods.

Franken Creeping Closer

As Kos notes here, Norm Coleman's lead over Al Franken has been slowly narrowing as provisional ballots and local recounts slightly adjust the totals. The difference is now a mere 337 votes out of 2,860,110 total votes cast in the senate race.

Once all counties have certified the vote totals, they will go to a mandatory recount. This seat won't be decided until late November.

Update: Now it's a 221 vote margin according to the star-tribune.

One More Good Thing About That Election

It looks like we won't pick up the 8 seats needed for a filibuster proof majority. However, one good thing about that is the Democrats don't need to placate Joe Lieberman (I-Conn). Harry Reid is meeting with him today. Hopefully Reid will be telling him he's lost all his seniority on his committees. Maybe even that he's no longer welcome in the caucus.

I'd give the odds Lieberman loses his chairmanship around 90%, the chance he's kicked out of the caucus all together around 50%. He's still got some friends in the caucus. Why I don't know but he does.

Rahm Emanuel To Be Chief Of Staff

Rahm Emanuel, the #4 Democrat in the house has agreed to be Barack Obama's Chief of Staff. Rahm is the representative of Illinois 5th, part of Chicago, so he has long known Barack as part of Chicago politics. Rahm has a record of being tough, take-no-prisoners guy. In his role as a Clinton staffer he earned the nick name "Rahm-bo." After election to congress, he was very successful as the head of the DCCC, leading the campaign that lead to the Democratic take over of the house in 2006. That earned him the position of head of the Democratic Caucus, fourth in the house behind Pelosi, Majority Leader Hoyer and Majority Whip Jim Clyburn.

So, tough, pragmatic, and a record of success. The cons: he has been cautious, and he's has expressed centrist tendencies both in writing (the book he co-authored "The Plan" warns against universal healthcare as politically impractical) and as a member of the "New Democrat" caucus, which is closely aligned with the DLC.

A good run down of the pros and cons can be found here.

Oregon Update

Gordon Smith's lead has shrunk to just over 1000 votes. If you mouse over the county by county map of Oregon, you'll see that Multnomah county (Portland) is only 60% reported and Merkley is winning there 67/29, and in Lane county (Eugene) Merkley is winning 58/38 with only 69% of the votes in. Smith carried most of the rural counties, but most of those votes are in. Judging by eyeball, there are more ballots out in Democratic areas than Republican ones, so this seat still has a real chance of flipping.

UPDATE! Merkley has been projected as the winner!

The Onion: Still Excellent.

Black man given nation's worst job.

Post Mortem, Good, Bad And Ugly

The Good: Obama, Obama, Obama. Not just a win, but a mandate. Popular vote was 52-46 (I was spot on!), and while the electoral margins have yet to be fully determined, Obama won not just the electoral college, but a majority of states. That's big. When Obama says "I want to do this" people have to pay attention.

The Bad: The senate results are honestly a bit disappointing. The Democrats were going to take the Senate going into last night. That was never seriously in question. I thought that the groundswell would push the close races towards the Democratic candidates. Really it didn't. There are several elections that are going to recounts, but in each the Republican candidate holds a slight edge. In Georgia, Chambliss has a significant lead, but he is JUST short of the 50% needed to avoid a runoff with Democratic challenger Martin (he's short about 5,000 votes). It's likely Chambilss will win a runoff, but Martin will have the advantage of having the full attention and support (and financial support) of President-elect Obama.

Merkley is currently behind Smith in Oregon by about 11,000 votes. All results are not in yet, but with 72% reporting I am honestly surprised that Merkley is that far behind. Obama has a margin over McCain of 150,000! Gordon Smith is far from the most conservative member of the Senate, but it's still kind of surprising that he's been able to pull around 100,000 Obama voters onto his side.

In Alaska, convicted felon Ted Stevens is up by around 3,000 votes over Mark Begich. They're still counting the absentee ballots. The fact that this is still close is kind of strange. Harry Reid has said that Stevens will be subject to ejection by the ethics committee even if he did win.

And in the ultimate heart breaker, Franken is behind by less than a thousand votes to Norm Coleman in Minnesota. Jerk of the day goes to Dean Barkley. Guess who got 15% of the vote? Dean Barkley. Way to go jerkface. By the way, Minnesota, unlike Georgia, does not require an absolute majority for victory. By law Minnesota will have a full recount of all votes. It's so close that they probably won't have certified results for another week or so.

The Ugly: Prop 8 passed in California. That's really disappointing, not just for obvious policy reasons but also because McCain only got about 3.7 million votes in California. 5.3 Million Californians voted to ban gay marriage. So while America is busy patting itself on the back for being so great and inclusive by electing Obama, keep in mind that lots of these open minded folk aren't really interested in equality for everyone just yet.

The Promised Land

Well, I don't know what will happen now. We've got some difficult days ahead. But it doesn't matter with me now. Because I've been to the mountaintop. And I don't mind. Like anybody, I would like to live a long life. Longevity has its place. But I'm not concerned about that now. I just want to do God's will. And He's allowed me to go up to the mountain. And I've looked over. And I've seen the promised land. I may not get there with you. But I want you to know tonight, that we, as a people, will get to the promised land. And I'm happy, tonight. I'm not worried about anything. I'm not fearing any man. Mine eyes have seen the glory of the coming of the Lord.

Martin Luther King Jr. April 3, 1968, the eve of his assassination. Full text here.

The Next President Of The United States

What a great day. Wow.

Photo from barackobama.com

My Predictions

I am feeling really optimistic. Probably too optimistic for my own good. I really think this is going to be one of those "wave" years. Sometimes one party has a lot of momentum going into a general election, and it seems all the undecideds break their way across geographic and income lines.

I think that will happen this year. I think Obama is going to crush McCain, winning Ohio, Virginia, Florida, Missouri, North Carolina and some surprise western states (like, maybe Montana or some such), popular vote: 52-46 (rounding, there's probably a few percent drop off from green/libertarian/write in). I think the Dems will pick up 8 seats in the Senate (AK, NH, MN, VA, NM, OR, NC, and one of GA/MS/KY) and probably 40+ in the house. I'd love to say that I thought the dems would get 9 Senators for a veto proof majority, but probably not (note: counting on Lieberman for a "veto proof majority" probably is a dumb idea anyway).

It's kind of too bad that Maine wasn't more competitive, I thought Allen would give Susan Collins a real run in what is presidentially a solidly Democratic state, but there's always a bit more you could do I guess.

Richard Pryor As The First Black President

To be fair, he's only off by 10% in the "40th president of the US." It should be noted that we have made significant progress in having black starting quarterbacks and black head coaches in the NFL. Not so much on the ownership front though.

Voted. Book it. Done.

Now we begin with the waiting...

Poll closing times can be found here. Hopefully the race will be more or less over by about 8/8:30.

Indiana and Kentucky close at 6:00 (some of each state is in Central Time, but significant portions of each are in the Eastern Time Zone. Florida and Virginia close at 7:00, and Ohio closes a half hour later at 7:30. All three lean Obama but are expected to be close, so they may not be called for a few hours, but if one of those three breaks for Obama, that's almost certainly game over. Note that Pennsylvania will be closing at 8:00, and that's McCain's only (slim) hope to pick up a Kerry state.

UPDATE: As for my personal voting experience, it was pretty unremarkable. About a 20 minute wait. Not too bad. There were 8 election districts in my polling station (they divide voters up based on address, because of certain local elections, mostly civil court judges, there actually were different ballots depending where you lived). Only one election district had a line significantly longer than mine. People in the 39th probably had to wait 45 minutes at least.

Try not to get too nervous -

VOTE

It's election day. GO VOTE!

Public Service Announcement

The following states ban liquor sales on election day:
At Package stores, bars, and restaurants:
Kentucky
Indiana
South Carolina
At Package stores only:
Utah
West Virginia
All sales, local exceptions allowed:
Alaska
Massachusetts

More interesting is the claim that the "restriction is a relic of the Prohibition era when saloons sometimes served as polling stations." Sounds fascinating but I'd like to see more evidence of that.

So Sad

One day before the election, Obama's Grandmother has died. She came so close to seeing her grandson become president.

Obama did the absolutely correct thing by taking time out of his campaign to see her. No matter how much he achieves as president, that is time he couldn't have gotten back.

My thoughts go out to his family.

UPDATE: Check it out! Madelyn Dunham's vote will count! She was able to cast a vote for her grandson for president (well, assuming she didn't vote for McCain).

The New Poll Tax

Great commentary from Rachel Maddow:



Time equals money.

Happy Halloween!

Looking for something scary?

BOOO!!!

Yes, another death right on Halloween. Maybe Freedom Bank will become a zombie!

Spooky!

Today's Candidate Schedule

Here is today's schedule for both campaigns.

As you can see, the candidates are speaking at large venues like _____ stadium, ______ amphitheater, and _______ convention center.

Well except for one that's appearing at _______ high school and _______ community college.

"One of these things is not like the others..."

Guess which one.

Senator Biden Is Now My Homeboy

Stevens Guilty

According to CNN Senator Ted Stevens (R-AK) has been found guilty of knowingly and willfully concealing gifts worth more than $250,000 he was obligated to disclose to the Senate ethics committee.

Stevens is currently running for re-election in Alaska. The two most recent polls have his opponent, Mark Begich, running slightly ahead. One must imagine that this will hurt Sen. Stevens' chances at the polls.

Unclear On The Concept

In a major military misunderstanding, rebels in the Democratic Republic of Congo have seized a gorilla sanctuary.

When reached for comment the rebels admitted that spelling was not their strongest subject in school.

Happy St. Crispin's Day

Today is St. Crispin's day.

This story shall the good man teach his son;
And Crispin Crispian shall ne'er go by,
From this day to the ending of the world,
But we in it shall be remembered-
We few, we happy few, we band of brothers;
For he to-day that sheds his blood with me
Shall be my brother; be he ne'er so vile,
This day shall gentle his condition;
And gentlemen in England now-a-bed
Shall think themselves accurs'd they were not here,
And hold their manhoods cheap whiles any speaks
That fought with us upon Saint Crispin's day.

Henry V, Act 4, Scene III

Via atrios, comes this from Calculated Risk.

If the FDIC is looking for office space in southern California, well, this is bad news for Western banks. At least the FDIC is taking the southern California housing problems seriously.

Improvements In Commercial Credit Market

The TED spread has narrowed recently. It's still very high versus its historical average, but seeing it narrow is at least a sign the abject fear is receding somewhat.

Update: Looks like this is partly responsible for the improvement in commercial credit market.

Natalie Portman Solves Financial Crisis

See more Natalie Portman videos at Funny or Die

You have to admit, it's about as likely to work as some of the other proposals I've heard.

Best Flickr Group Evar!

via Ezra I am directed to the greatest Flickr group ever created: Robocop and Unicorn.

2000 Days

Today is the 2000th day since this picture appeared in your local paper:



(Photo by Scott Applewhite/AP)

Colin Powell Endorsement

Don't know if you caught the endorsement yesterday, but Powell endorsed Obama on Meet the Press. Here's a video montage of the interview plus his comments leaving the studio, with bits of footage of things he refers to.



Now I'm not crazy about Gen. Powell. Because of his moderate image and position as Bush's first Secretary of State he was in a unique position of public trust, especially when it came to establishment media. His presentation before the United Nations was pivotal in convincing America that invading Iraq was a good idea. Powell was in a position to know that the evidence was thin, and he's smart enough that he should have known what he was doing. He, perhaps more than anyone else, probably had a chance to stop the mad cap invasion cold. Endorsing a democrat two weeks before the election is hardly a profile in courage.

Still despite all that, he still does have the ear of a certain contingent of "conservative center-right" type. His endorsement does carry weight. More than that though, his reasoning is devastating. Take a listen.

UPDATE: It probably is worth reminding people that Colin Powell was part of a criminal conspiracy to commit war crimes.

Tampa Sunday Sports Capital

Tampa/St. Pete is the sports hub of the United States on this Sunday night. Right now the Rays are locked in a tight ALCS game 7 at home against Boston. Across town, the Bucs are playing the Sunday night game against Seattle (and getting tarred).

UPDATE: Congratulations to the Rays. Their 3-1 win puts them into the world series vs. the Philadelphia Phillys. Worst to first is quite an achievement.

Who Is Going To Win?

Check it. Wow.

Cheney Relased From Hospital

Cheney was hospitalized for an "abnormal heart rhythm" but was released later today.

Apparently his doctor became alarmed when they detected a heart beat, and they had to shock him in case he became any more human.

Say I Love You With Ed Meese

Nothing says I love you like "surprising your sweetheart" by locking her on a cruise ship for 10 days with John Ashcroft, Tom Tancredo and Ed Meese.

This is so bizarre it has to be real.

Journalism Face Off: Rolling Stone v. National Review

This is hilarious. Matt Taibbi and Byron York have a "conversation" over IM where Taibbi shows he is extremely knowledgeable about the current financial crisis and the credit default swap market and Byron York demonstrates his knowledge goes as deep as his talking points.

In a larger sense, it's very important to point out that the idea that this happened because fannie mae and freddie mac gave "mortgages to people, particularly minorities, who could not afford them" is not just wrong, it's shamefully racist and ignorant. The credit default swap market was up around $60 Trillion dollars at it's height. The total mortgage debt in the US was less than 1/10th that number, and the number of "subprime" loans and other non-AAA debt is far, FAR less than that. The Republican attempt to paint this problem as "poor people getting loans they couldn't afford" is 100% bull-pucky.

See also here, here, and here.

Death By Chocolate

Via Brad Delong, I'm pointed to the Wikipedia page with the lethal dose for an adult human:

Humans are also susceptible to chocolate poisoning if enough is ingested. The lethal dose is placed at around 10 kg (22lbs).

Not just deadly for house pets.

UPDATE: from the I.F.O.C.E (International Federation of Competitive Eating!) Patrick Bertoletti won the seven minute "St. Valentine's Day Chocolate Massacre" by consuming 1 lb 15.5 oz of chocolate. Far short of the lethal dose, but probably enough to give him a tummy ache.

Sarah Palin Committed Ethics Violations

Once again, the daily show presents the facts more clearly than CNN. See for yourself.






Here is what the Anchorage Daily News thinks.

Deal Or No Deal? Just Kidding It's All Deal.

The Treasury Department formally announced that it will buy $250 Billion in preferred stock about half of which will go to 8 major financial institutions. The times has a more detailed article here. The eight major banks that have "agreed to participate," Bank of America, Citigroup, JP Morgan Chase, Morgan Stanley, Goldman Sachs, Bank of New York, and State Street all pretty much had no choice. Paulson brought them in and put the screws to them.

Banks that didn't really want to participate, like Bank of America and Wells Fargo had to participate or it would look like the government was "singling out" the weaker banks. While this looks like the financial equivalent of having to give everyone in your second grade class a valentine so no one's feelings get hurt, the stakes are much higher than that. It's much more akin to the national geographic channel, with Citigroup and Morgan Stanley playing the part of an injured ewe seeking safety in the flock lest they appear weak the wolves of Wall Street.

Brad DeLong seems pleased with the deal, although he has some reservations with the concept of buying preferred shares rather than voting common stock. Quick note: preferred shares get paid first, so they're more secure, but they don't vote. Theoretically, if a bank had $10 Billion in preferred shares outstanding, with another $10 Billion in common stock, if the bank is worth only $10 Billion, that's a big problem. If it was sold, only preferred shareholders would get money, but the people who decide whether or not to sell are the common stock holders, who get $0. Thus the "Zombie Bank" problem Brad mentions, where the people running the bank have nothing to lose by keeping it running to maybe make a profit eventually, even if it would be way smarter just to sell it today.


Image from New York Times here (see sidebar) used without permission.

More Canada In The News

It's election day in Canada today. So if you live in the great white north, go vote eh?

True Bipartisanship Reaches Around The Aisle

Congressman Tim Mahoney (D-Fl) from Florida's 16th Congressional District, has made the national news.

You may remember the Hon. Mahoney as the successor to congressman Mark Foley who resigned in disgrace over a sex scandal involving high school students in the congressional page program. Well it seems the Hon. Mahoney, who ran on the platform: "Restoring America's Values Begins at Home" (I can't find an actual example but it's been repeated frequently), is carrying on the proud FL-16 tradition by becoming embroiled in a sex scandal of his very own.

It's a little disappointing that this sex scandal doesn't have any elements of abuse of power, homosexuality, or underage targets. It seems to be the standard, run of the mill heterosexual screwing someone that's not your wife and then paying her hush money. Still, it's nice to see that somewhere politicians are keeping up traditional values.

According to blogger brownsox on Daily Kos, he's not going to be missed much. From a strategic point of view, he wasn't a very reliable ally of progressive values, and his district is moderate enough that a more progressive replacement would be electable. Hopefully Mahoney can be removed quickly and someone can run in his stead.

Pie You Can Believe In

Vote Obama.

Dow Up

The Dow closed at 9,413.34 up almost one thousand points today.

The last trading day, October 10, the Dow hit a low of 7,822.51. That's a fluctuation of almost 1600 points in two days. What does that mean? I have no idea, but it's a pretty good bet most everyone doesn't know either.

Happy Canadian Thanksgiving

Canadians celebrate Thanksgiving on the wrong day.

Even though my Canadian friends suffer from a calendar malfunction, I wish them a happy Thanksgiving anyway.

Congratulations To Paul Krugman

Paul Krugman, Princeton economics professor, NYT editorialist and harsh Bush critic has won the Nobel Prize for Economics.

Nice to see someone you totally agree with be officially recognized as really really smart. Note that as much as I agree with his political commentary, he won the Nobel for his work on international trade and economic geography. My understanding is his work deals with the question of why similarly countries with similar levels of development engage in so much trade.

Update: Here are some completely incomprehensible (to me) white board equations of Krugman's Theory.

Family Values Destroyed In Connecticut By Allowing Loving Couples To Mary

Congratulations Connecticut! They're the third state after Massachusetts and California to allow gay marriage. Naturally, this means that Connecticut will become a modern day Gomorrah.

(note in that link, Massachusetts has the second lowest divorce rate in the US)

Interesting Times

Although it is widely reported, the ancient Chinese curse "May you live in interesting times" can not be substantiated as either ancient or Chinese. Sadly, the idea that the characters for "danger" and "opportunity" combine to form that of "crisis" is similarly apocryphal.

All this is to say that while it's good to look for a silver lining in turbulent economic times, perhaps it's best not to look for it in trite western concepts of eastern philosophy.

It looks like Paulson will be taking action over the weekend. I've heard that there may simply be a forced nationalization of the entire banking sector, though I don't know if it's true. After the last week on Wall Street, the idea of setting up some kind of market for distressed securities seems like it would take far too long.

DOWn DOWn DOWn

The Dow closed below 9,000 today, closing at about 8,590. It hasn't been this low for 5 years.

On the plus side, it's probably close to bottom. Well, it's closer for sure but that's ... well not saying anything at all.

Monkey Robot Alliance Continues Apace

The Monkey Robot Alliance (previously discussed on this blog here) has made another gain. A monkey has been taught to serve beer in Japan. You'll note that Japan is the one place where intensive robot research is seen as important and meeting a long term need.

Great, so you have one tiny country simultaneously training monkeys and robots to perform the same functions. It's only a matter of time before the discover a common interest in our overthrow.

Hey, This Guy Can Fix The Economy! He Knows What's Wrong Cause He Broke It!

The New York Times has a great piece on the change in the "Net Capital Rule" in 2004 that allowed investment banks to leverage (borrow against assets) up to 40:1 (because before they could only leverage 12:1). This dramatic increase in leverage helped drive the demand for investment vehicles in financial markets, helping in turn to cause over valuation and the subsequent collapse. It also insured that once the market did collapse investment banks were so over extended that they were sure to go broke.

And guess who helped lobby for these changes? Why Henry Paulson, then CEO of Goldman Sachs! Excellent!

Jonathan Schwartz also points out here that Paulson testified before Congress in 2000 specifically lobbying for this rule change.

TMQ Animadversion

Gregg Easterbrook has an excellent weekly sports column called "Tuesday Morning Quarterback" here. Through his funny and insightful column about football, Gregg has really enhanced my understanding and enjoyment of the game.

However, he often inserts poorly researched (or poorly thought out) water cooler editorial about current events. Now when I say "poorly researched or thought out" I don't mean it's as dumb as most of what you hear on CNN, but it is often borderline negative information value (i.e. if you read it and think it's true, you are less well informed than if you hadn't read it at all). See for example here.

Now this doesn't detract from my ability to really enjoy his football analysis. His cheering for coaches to make mathematically correct plays (such as punting less on fourth and short), his hatred of the big blitz (though I think the data is more mixed on that) and other fun commentary is great. But I actually wrote in to complain about an item he had in this week's column.

Easterbrook complains that New York State is asking the Federal Government for $6.2 Billion to make up for financial shortfalls caused by the total melt down on Wall Street. But in the same article he links to this report, which shows Federal Taxes Paid vs. Federal Benefits Received, when complaining about how much government money Alaska gets per capita. Well where do you think that money comes from? Why look, on page 32 we see that in 2005 alone New York gave the Feds $23.83 Billion more than it got in services. Maybe we can afford a fraction of that to stabilize the economy that provides so much money for the rest of America.

Beer Google Goggles

Google has a new trial feature, Google mail goggles.

"This feature is designed to prevent you from sending stupid e-mails in the small hours, when you're most likely to be inebriated and at risk of making a complete idiot of yourself."

When enabled it gives you a few simple math questions to be sure you are sober enough to make that decision.

Too bad it came to late for this person.

Fed Moves To Buy Commercial Paper

I discussed commercial paper here. The fact that the Fed feels it needs to step into this market is worrying. On the other hand, the fact that the Fed is doing something is good. So... well, I dunno what to think.

Calculated Risk notes the same issue here, but doesn't really offer an opinion.

Update: Dow down around 500 points today. Brad Delong thinks helping commercial paper is a good idea provided we really have the money to be able to do it right.

Update 2: I should mention that my friend in commercial insurance said the Dow would drop "a few thousand points" when the market was around 10.5K, so maybe more to come. Sadly he's been scary right so far.

Two Roads Diverged In Skins' Training Camp

Gus Frerotte is the starting quarterback for the Minnesota Vikings in tonight's Monday Night Football match up versus New Orleans. Frerotte was drafted in the 7th round of the 1994 draft by the Washington Redskins (that's the last round by the way). In the same draft, in the first round, with the third over all pick, the Washington Redskins selected Heath Shuler as their "quarterback of the future."

While Shuler is still in Washington, he's not playing quarterback. He's a freshman congressman from North Carolina's 11th District.

Guess life is funny sometimes.

Apologies to Robert Frost for the title.

This American Life Explains Again

As I previously mentioned here, This American Life had an excellent episode directed at explaining the underlying financial crisis called "The Giant Pool of Money."

They're back with the aptly titled "Another Frightening Show About the Economy."

Again, strongly recommended.

Keating 5 Back To Haunt McCain

Awesome short form documentary from the Obama campaign on McCain's role in the "Keating 5" scandal.


Pass it on.

Bailout Saves The Economy

As of 2:32, the DOW was down 741 points. The DOW dropped below 10,000 at around 10:20AM and has slid down hill the whole day. The market average has not been this low since October of 2004.

The headline is a bit facetious. Trying to figure out the day to day movements of the stock market is a fools game. Still, it does show that this idea that ok we'll pass this one plan and everything will stabilize is wrong. There are still big problems in the world economy, and the markets won't really be stable until all the bad debt is worked out.

Dow closed down about 400 points, just below 10,000.

Day Late Debate Blogging

I was out watching the debate elsewhere last night, but I have to say, the thing that struck me most is how every answer Palin gave came out sounding like word vomit. It's like you took a reasonably on topic article, shook it up, then poured it out. All the words are sort of related and sound generally on topic, but it's hard to find a coherent thought.

Here's her answer on climate change:

PALIN: Yes. Well, as the nation's only Arctic state and being the governor of that state, Alaska feels and sees impacts of climate change more so than any other state. And we know that it's real.

I'm not one to attribute every man -- activity of man to the changes in the climate. There is something to be said also for man's activities, but also for the cyclical temperature changes on our planet.

But there are real changes going on in our climate. And I don't want to argue about the causes. What I want to argue about is, how are we going to get there to positively affect the impacts?

We have got to clean up this planet. We have got to encourage other nations also to come along with us with the impacts of climate change, what we can do about that.

As governor, I was the first governor to form a climate change sub-cabinet to start dealing with the impacts. We've got to reduce emissions. John McCain is right there with an "all of the above" approach to deal with climate change impacts.

We've got to become energy independent for that reason. Also as we rely more and more on other countries that don't care as much about the climate as we do, we're allowing them to produce and to emit and even pollute more than America would ever stand for.

So even in dealing with climate change, it's all the more reason that we have an "all of the above" approach, tapping into alternative sources of energy and conserving fuel, conserving our petroleum products and our hydrocarbons so that we can clean up this planet and deal with climate change.

Is there a coherent thought in there anywhere? "All of the above" is her plan for combating climate change? Also, if you listen to the actual footage while you read this, you'll see that CNN did a generous job of punctuation for her. Notice how many sentences begin with a conjunction or conjunctive adverb (like "also"). Watching it live those didn't sound like new sentences, which made it even harder to parse what she was saying.

National Debt Clock

One more bit of good news before I sign off. The National Debt Clock will soon need an additional digit. The national debt should go crashing past $10 Trillion Dollars pretty soon now. Pretty much as soon as the bail out plan 2.0 - now with extra spending - is passed.

Image stolen from Conde Nast's Portfolio online without authorization. Please don't sue, I have no money.

Cost Of War Explained

This is a nice video explaining where the "Three Trillion Dollar" estimate comes from (so often referred to on the War or Car blog). Some of the specifics are debatable, but the take away is that the three trillion dollar estimate is reasonable. Numbers based on the Joint Economic Committee of Congress and The Three Trillion Dollar War by Stiglitz and Blimes.

Ok just A link because I'm having trouble resizing it.

Via Yglesias.