Political Economy category archive

The worst problems are limited to very few states.

Read the column here.

Via Andrew Sullilvan.

Ten companies, led by ConocoPhillips, Time Warner Inc. and recently acquired Merrill Lynch, are behind the bulk of the carnage that helped fuel the worst two-month start ever for the S&P 500 Index, which on Monday made another run through its November lows.

While the companies that make up the S&P 500 tallied a collective $114 billion in losses in the still-being-reported fourth quarter, the scenario would be remarkably different — and profitable — if 10 companies behind $131 billion in losses were removed from the picture, according to S&P’s senior index analyst Howard Silverblatt.

The other seven companies the article refers to are Freeport-McMoRan Copper & Gold Inc., Citigroup Inc., Wachovia Corp. (newly acquired by Wells Fargo & Co.), General Motors Corp., Symantec Corp., Devon Energy Corp., and Regions Financial Corp.

You know, the Masters of the Universe who pay bonuses for performance to retain highly talented executives.

Here.

I agree. If the Repulsicans threaten filibuster, let ’em filibuster. I’d be curious to know which cookbooks John “Boner” Boehner likes anyway.

(Yeah, I know he’s in the House, but who can pass up a name like that?)

Follow the link for the analysis:

. . . the problems in investment started in the residential area, but have since moved to all major subgroups. In addition, at the macro level, the drop in residential investment has been strong enough to make 8 of the last 11 quarters negative. In other words — it’s been bad for sometime.

(chart snipped)

Exports were the one solid performer — until last quarter when they dropped over 20%. Imports dropped as well due to the lack of consumer demand.

The bottom line is simple: there is no area of the economy looking good right now.

AIG is changing its name.

The new name:

Aaaaaarrrrrrrrrrrrggggggghhhhhhhhh.

MarketPlace Morning Report just told me over Marconi’s Magic Box that, in the current economic situation, there are still . . .

. . . relatively good alcohol sales.

Somehow, I suspect that sales of single malts are down and sales of Olde Razorblade are up.

This American Life explains how the Wall Street banks broke the banks, and, in the process, defines in plain language all the gibberish terms and acronyms that Wall Street bankers use to conceal their foolish greed. From the website:

The collapse of the banking system explained, in just 59 minutes. Our crack economics team, the guys who explained the mortgage crisis, Alex Blumberg and NPR’s Adam Davidson are back to help all of us understand the news. For instance, when we talk about an insolvent bank what does it actually mean, and why are we giving hundreds of billions of dollars to rich bankers who screwed up their own businesses. Also, two guys go to New Jersey to look at a toxic asset.

If you want to know what’s going on, listen to this show.

I’ll link to the audio when it is posted. The audio is available for streaming or downloading at the link above.

On the other side of the Big Pond (for perspective, one pound UK = a little less than one and a half dollars US):

The Guardian has revealed that the board of HBOS (the initials are apparently meaningless; it was a British Citigroup type thingee until it failed and got eated–ed.), which yesterday reported a £10.1bn loss for 2008, may have walked away with combined payments of up to £4.5m. None of the executives at HBOS were offered a place on the board of the merged group after Lloyds TSB rescued the collapsing bank.

Most of the focus last night was on Peter Cummings, the executive responsible for the HBOS division that caused huge losses. He is thought to have received one year’s salary and benefits of £800,000 when he left the bank last month and started receiving his £350,000-a-year pension at the age of 53. Executives close to 55 are entitled to have their pensions topped up, which suggests that Cummings’s £5.9m pension pot will have been enhanced.

The Booman reminds us of what tax rates used to be.

Note that he is not recommending returning to Eisenhower-era marginal tax rates; he is simply giving his other comments some perspective.

Nevertheless, this passage–almost an aside in the context of his larger article–illustrates why Republican Economic Theory (AKA the Laughable Curve), the theory that the cure-all for society’s ills is to make the rich richer, fails. The theory denies human nature.

The money doesn’t trickle down; it trickles out:

I want to ask you if you have ever looked at a chart of the highest marginal tax rates since the income tax was created in 1913? Take a look because it’s instructive. Obama has made some sweeping proposals, but he hasn’t proposed restoring tax rates to anything close to what they were for the first six years of Reagan’s administration, let alone the 91% rate that prevailed under Truman, Eisenhower, and Kennedy. Ask yourself a question. If every dollar a CEO made over $500,000 was taxed at 91%, would he or she bother asking for 20 million? Would any board even consider giving 18 million to the government just to give two million to their CEO? Of course not.

It’s the Republican way.

If they can’t make the rich richer, they will still shaft the poor.

This is not a commentary on the stimulus bill. Whether it will undo the damage of years of Republican rule is still a great unknown.

Rather, this points out what this kerfuffle reveals about Republicanism.

Deadender Republican Governors are talking about rejecting portions of the stimulus bill.

Not surprisingly, the portions they are talking about rejecting are the portions designed to help the unemployed.

Nothing better shows that the Republican Party does not care about working–or in this case, out-of-working–persons who are in that condition because of Republican Economic Theory.

John Cole sums it up.

The Republican Party–The Party of Privilege since 1868. A pox on the lot of ’em.

Not getting no more toasters from these folks. They’ve been nationalized and given to someone else.

Security Savings Bank, Henderson, NV

Heritage Community Bank, Glenwood, IL

You can bank on it.

The days of the little match girl appear to have succumbed to invitro fertilization.

Now it’s big match girls:

Drawn by payments of up to $10,000, an increasing number of women are offering to sell their eggs at U.S. fertility clinics as a way to make money amid the financial crisis.

’nuff said:

Banks insured by the FDIC posted a collective loss of $26.2 billion in the fourth quarter of 2008, the agency said Thursday, as the percentage of charged off loans tied a quarterly record of 1.91%.

The grim results compared to a $575 million profit during the fourth quarter of 2007.

Meanwhile,

The U.S. economy was hitting on virtually no cylinders in the fourth quarter, as gross domestic product fell at the fastest pace since 1982 on sharp declines in consumer spending, investment and exports, the government said Friday.

GDP fell at a 6.2% seasonally adjusted annualized pace in the final three months of 2008, revised from the initial estimate of a 3.8% drop, the Commerce Department reported. It was the worst decline in GDP since a 6.4% decrease in the first quarter of 1982.

Hilzoy has a thought (Via Andrew Sullivan).

BogusBonus worthy.

I ask again, should I just make my next mortgage payment payable to the United States Treasury:

After two multibillion-dollar lifelines failed to shore up Citigroup, the government will increase its stake to 36 percent from 8 percent.

The chief executive, Vikram S. Pandit, will remain, but Citigroup will shake up its board so that it has a majority of independent directors, a move that federal regulators had already been pursuing. The moves come as the bank announced that its 2008 loss had spiraled to $27.7 billion, among the largest in corporate history.

And I still want the bozos that ran Citi into the ground to top out at a GS-15 pay rate (under “pay for performance,” they wouldn’t qualify for GS-5).

‘Twasn’t the fly. Nor was it Senator Schumer who killed Cock Robin. It was the failure-to-regulatory agency:

While the Office of Thrift Supervision had blamed Senator Charles Schumer for sparking a run on the bank by releasing a letter critical of IndyMac, today’s audit said the company was already headed for probable failure. The OTS, which regulates the Pasadena, California-based lender, “failed to prevent a material loss” to the Federal Deposit Insurance Corp., the Treasury Department said in the report.

“The thrift’s high-risk business strategy warranted more careful and much earlier attention” from regulators, according to the report distributed by the Treasury’s Office of the Inspector General.

IndyMac’s “nontraditional” loans and “insufficient underwriting” helped lead to its seizure by regulators in July, according to the audit. The FDIC estimated last month that IndyMac’s failure would cost the insurance fund $8.5 billion to $9.4 billion, up from its prediction in July of $4 billion to $8 billion.

Moral: You don’t just need cops. You cops who actually walk there beat.

The direct result of the Republican Economic Policy of non- and deregulation and their deluded belief that those pursuing tons of money will ipso facto conclude that acting responsibly and morally is in their and society’s financial best interest:

Sales of pre-owned homes dropped 5.3% to a seasonally adjusted annual rate of 4.49 million in January, the lowest sales pace in 12 years, the National Association of Realtors reported Wednesday.

Sales are down 8.6% in the past year, the industry trade group reported. The sales pace in December went unrevised at a 4.74 million annual rate.

It was like pulling the cops off the street and trusting drivers not to drive recklessly. Most drivers will not drive recklessly (many do not drive competently, but that’s another issue).

The ones that do drive recklessly cause horrible damage, especially when they are driving overloaded semis with bad brakes.

Like Citigroup and Bank of America.

Why didn’t the free and unfettered market sort this out?

U.S. Attorney George Holding said Tuesday that federal authorities have launched an international search for the executive charged with rushing shipments of bacteria contaminated syringes from an AM2PAT Inc. plant. Two former plant workers who provided prosecutors details about the plant’s operations have pleaded guilty for their roles in shipping tainted syringes.

The syringes contained Heparin, a blood thinner, and saline, and were recalled in December 2007 after an outbreak of illnesses. Health inspectors identified bacterial infections in Colorado, Texas, Illinois and Florida.

Oh. I forgot. It did.

According to the lead (and, dammit, it’s “lead,” not “lede”) for the story (follow the link), not steriziling the syringes was a “cost-cutting move.”

Masters of the Universe:

Shares of AIG fell 2% to close at 53 cents on Monday. The stock has dropped 66% so far this year. It slumped 97% in 2008.

Cookie Jill has more.

The Booman points out why Republican Economic Theory brings only failure. Read the whole thing:

At the root of the problem is the Republican’s positions on taxes, on government spending, and on federalism. A government that never raises taxes loses the ability to adjust taxes to the needs of the time. Such a policy is a like a broken clock. It will sometimes be the right policy to cut taxes, but with Republicans those instances will be strictly by accident and not design. Meanwhile, they will get it wrong every single time that conditions call for raising taxes.

(snip)

What this really amounts to isn’t just a failure of imagination. It’s a life lesson in the non-rational nature of Republican ideology in general. It works in good times to a certain non-idealized degree, but it completely lacks situational flexibility. It becomes bankrupt and bankrupts the institutions it controls at the same moment that conditions make its basic irrationally manifest.

I wonder whether I should just make my next mortgage check payable to the United States Treasury Josh Marshall on Citigroup:

As I read more about what’s happening . . . , I almost wonder if this is the nationalization decision, just in a way that no one quite wants to concede, since it makes even more explicit that the US is effectively in control of the bank. That said, the whole thing just seems to show that the institution is not viable.