just

just ... watch.

sotomayor: racist sexist extremist imperialist

i don't know, man. i don't know what to think, anymore. i hate republicans, just as i've always hated republicans. all conservatisms everywhere have, at their basis, the sanctity of selfishness. all arguments fielded by all conservative ideologies at all points in human history have always held as their motivation the protection of selfish instincts in human beings. in a way, conservatism is axiomatically selfish: in seeking to preserve what is already in its possession, a group based around a conservative doctrine must be against redistributive justice, whether that justice be the redistribution of property or authority. everything other cause that has been championed by the great conservatisms is no more than artifice for keeping the biggest slice of the pie.

of course, by holding this view, i don't correspondingly believe that progressive or left-radical ideologies must, by their anti-conservative nature, be altruistic. my point is perfectly unitary; i don't mean to point out any black by what highlight in white.

anyway, there was a point to all of this when i began, and i'd best get back to making it. the response to sotomayor's nomination by the republicans is what in polite society is called 'a barnyard fuckfest.' take this quote, from g. gordon liddy, a man who i genuinely hope has his ballsack bitten clean off by a very sick wolverine:

"Let's hope that the key conferences aren't when [Sotomayor]'s menstruating or something, or just before she's going to menstruate. That would really be bad. Lord knows what we would get then."

ok, yeah, i know, gordon liddy is a conservative radio talkshow host, and it's his job to be offensive. unluckily enough, it's a job he shares with almost every high-profile republican these days. this is newt gingrich's take, for instance:

"If Civil War, suffrage, and Civil Rights are to mean anything, we cannot accept that conclusion," [Gingrich] writes. "It is simply un-American. There is no room on the bench of the United States Supreme Court for this worldview."

'this worldview' is apparently that associated with being a racist, which, of course, republicans, who have referred to the spanish language as "illegal alien talk" while discussing the nomination, have nothing to do with. they are not racists, they're just instructively pointing out that having a dull-eyed, slobber-lipped, beans-and-rice-smelling wetback in the supreme court of the united states--one who joins organizations for other wetbacks, spics, beaners and border monkeys--would go against the corest of our core values: tolerance. don't you get it? or maybe you're some kind of platano-chomping greaseball, yourself?

i really don't have anything deep to say. none of this bullshit deserves a penetrating analysis, as there's not an ounce of profundity to be drawn from any of this michigas. tpm and other sites have already noticed the divide between moderate and extremist republicans that the sotomayor nomination is exacerbating. for my part, i have to say that people like liddy and gingrich are real, honest-to-god shit, barely deserving of the honorific 'human.' every time they open their mouths, they puke greasy bile all over any issue, and the public debate that should otherwise surround it is poisoned. we are stuck, so long as they have any influence whatsoever. what's truly heartbreaking is that they do command such influence, and not a marginal amount, either. there's some significant portion of the american public that thinks exactly like they do, and is willing to be, on a daily basis, just as larcenous, self-serving and downright vile to their fellow men. i find myself once more wishing for divine intervention, a second flood, maybe, one to wipe out all the jackassery. and if people complain that this thought is too explicitly genocidal, we can still follow noah's lead: save two of the filthiest conservative fuckers, keep them in a pen, allow them to mate and preserve their vitriol-vomiting offspring as a curiosity for future generations to marvel at, and, of course, take heed from.

Most People Are Horrible: Exhibit #1

"Diluting Creative Output and Shorting Your Attention Span."
Here at the Internet, that isn't just our slogan, it's our guarantee.

exposition II

Two posts in a single day--holy amphetamines, Batman.

Paul Krugman, God love him, wrote in the Times today about California, and how much of a disaster it is. He seems somewhat surprised that the state does not in any way function like a state should, even though that is the gist of the news I've heard coming out of California since I was but a wee little weeling. It was one paragraph that stood out to me, and did so for a reason almost completely unrelated to California. It goes a little something like this:

To be blunt: recent events suggest that the Republican Party has been driven mad by lack of power. The few remaining moderates have been defeated, have fled, or are being driven out. What’s left is a party whose national committee has just passed a resolution solemnly declaring that Democrats are “dedicated to restructuring American society along socialist ideals,” and released a video comparing Speaker of the House Nancy Pelosi to Pussy Galore.

And that party still has 40 senators.

Nobody should be surprised that, in a pinch, the Republican Party went to the looney bin. Someone, somewhere, at the back of my mind, in the vestiges of past days, made the point that the Reagan-era transformation of the party bore a striking resemblance to Lenin's approach to the Bolsheviks. Decision-making was centralized; the agenda, with a few, easily sloganized goals, was set in stone; and the rank-and-file were picked for their adherence to that platform. The stupider and less thoughtful a politician could be, the more likely he was to get a handshake from the Great Communicator. As the person-whose-name-I-do-not-remember-but-want-to-credit put it, the Republicans became nothing more than a bunch of snake oil salesmen. And as we should all know from political science, snake oil will not protect you from the end of the world.

But Krugman is right: they still have 40 senators. Proportionally speaking (not that the number of Senators has anything to do with population, of course), this means that they technically represent 120,000,000 Americans. Why, if they have jumped headlong into their mudslinging, millenarian roots?

Does everyone here remember the dinner we had at Niu Ji, just before the Canadian election in, I don't know, whenever Canadian elections are held? It was the dinner at which David and Sarah castigated Zak for being an apathetic pile of crap. David, in fact, more than being aggressive, seemed to express genuine disbelief that anybody could not care at all, not even slightly, about the state of political discourse in their home country.

Now, no offense to Zak (other than the fact that he represents everything odious and miserable about the human race), but something about those 40 G.O.P. senators makes me think that the Republicans are, in some way, the party of Zak. Anecdotal evidence from conservative strongholds seem to support my case. My father was in Laurel, Miss, this weekend, for the extremely extravagant wedding of my cousin to the daughter of the town's (and maybe even the state's) Southern gentry. I'm talking serious, oldschool gentility, here: the men wore seersucker suits at the ceremony. These people have voted Republican since black people started voting Democrats--a long, long time, in other words--but none of them seemed to take anything but passive interest in the state of the nation as it is currently shaping up. They were content to cast their vote as they always had and then go back to minding their business.

Given what the magnitude of what the Republicans have done to us, the fact that they hold onto 40 senators is pretty much astonishing. Part of that has got to be tradition, but part of it is most certainly apathy. After actively depoliticizing much of America by applying heavy economic pressure to it, the Republicans have, in a sense, birthed a golden-egg laying goose. The fruits of their labor is that they can hang onto a substantial amount of power even after wrecking the United States so thoroughly that it may even be, to borrow a new news media meme, an inflection point in the path of American power and prosperity. That, in turn, reconfirms just how bad the shape we're in really is: we don't even have the political morality to address, even hazily, our own wretchedness. We've given ourselves a political class composed of nebbishig Democrats and Republican dreykopen. Let's hope I'm wrong, and that in 2010 that 40 gets knocked down somewhere closer to the 0 that it should be. Maybe then we'll have the good fortune to inflect at a minima, not the reverse.

that thing, that thing, that thiyiyiying

It's health care day, everybody. First up, the latest from the front: employer-provided health benefit taxes, from "The only sure way to fund universal health care" by Robert Reich. To quote the nutshell:

With deficit vultures [Republican Party, no disrespect to actual vultures] already circling, [President] Obama has to come up with a far more reliable [than always controversial taxes on rich people] way to fund health care. That’s where employee health benefits come in. According to the Congressional Budget Office, taxing all employee health benefits would yield a whopping $246 billion every year. Even limiting the tax to higher-income employees [controversy to ensue] would go a long way to funding universal health care. Employer-provided health insurance is the biggest tax break in the whole federal income tax system[[with the exception of every other tax break for the $250k+ club].

On a sidenote, I hear that that club has one helluva golf course. They seed the grounds with diamonds and grow much-coveted 'crisp treasury franklin' instead of your usual bluegrass varieties.

I'm a long-time veteran of American politics, having been invited to more than a few presidential elections. It was me who found the semen stain that unraveled the already loose-woven tapestry of Billy Clinton's late presidential career. I found it, by the way, while looking for something to clean up Newt Gingrich's back sweat. I've got a fine understanding of the democratic process, and, more to the point, I look fucking fantastic in a seersucker suit. So when I heard that the Obama administration was gaming for ways to fly the healthcare hustle, and that it was taking a cue from MC Cain's 2008 album, "I'm Going to Die Soon; Please Elect Me," I knew that I'd let myself get too far out of the loop. Luckily enough, reading Reich's piece twisted me up right good.

Reich tell us that the tax-exemption eliminations for high-earners which were originally considered by the Obama administration, despite their stated cash potential of $318 billion, are like a fat kid in a lion's cage: hilariously well-intentioned, but ultimately, lacking enough hip flexor mobility and anaerobic endurance to successfully avoid a gruesome public relations disaster. The magic of the healthcare tax is that it still functions to tax the rich (or Reich's version does), but in a more indirect way that is also easier to defend. TBlogger: The Chorography - Create Posthat is precisely because health benefits have gone untaxed forever; any plan to generate revenue from employer-provided health insurance would have the advantage of being a novelty, and thus encountering a less entrenched resistance.

It seems to be a magic bullet, this healthcare tax, and one that we need to be shot with ASAP. Just look the laundry list of catastrophic problems we face with the current system:

You’re not eligible for these benefits when you and your family are likely to need them most – when you lose your job and your income plummets. And these days, as we’re witnessing, no job is safe. The system also distorts the labor market. It prevents lots of people from changing jobs for fear they’ll lose their health insurance, or won’t get the benefits they do now. And it invites employers to game the system by seeking young, healthy employees who pose low risks of ill health and will therefore keep insurance costs low, while rejecting older ones who are likely to have more costly health needs. The system also encourages employers to try to push married employees onto their spouses’s health insurance plan so that the spouse’s employer bears the cost.

At this point, the post becomes a little confusing. Reich had me at how glaringly stupid and inequitable the current arrangement is. That, however, is preaching to the lifelong uninsured, the original faithful. He switches, however, from these systemic problems to those of distribution of costs. Apparently, it's the unequal provisioning of healthcare, and not those other hoohaws, that a health-benefits tax really addresses. The rest is just there to get you angry at the system, I guess.

Or maybe... not! Yeah, that wasn't a great transition. I just ran five miles. My brain is in my feet, and my feet are swollen like Akaash's boxers in the morn'. I remember that one of the arguments tossed around by opponents of John McCain (I believe that they are called 'Socialists') and his healthcare plan was that taxing benefits posed a serious threat to the whole employer-centered system. If you tax benefits, the logic went, employers will stop offering them altogether. Since healthcare had already been in decline as a deal-sweetener since the beginning of the Bush years, it's not unreasonable to assume that any additional pressure might cause them to collapse at an even greater rate.

Reich says nothing about this, of course. He's taking a rational position for taxing high-earners, which is, after all, the only place we're gonna find any money in these Gilded-esque days. You can tell, however, that he has no interest in a mixed system; or, anyway, a mixed public-private system of basic care. Reich's invective against the inefficiencies of employer-provided, private health insurance seems to me one way to justify the gradual abolition of the system. And if a health benefit tax does stand a reasonable chance of effecting the gradual abolition--not publicly, and therefore not in a way that would leave elected officials directly culpable--then hey, why not? A single-payer basic care system would pretty much subordinate the healthcare industry (forgetting, just for now, our old democratic friend, lobbying) while creating the largest single insurance pool in the world. For those of you not familiar with insurance theory, a larger pool means a wider distribution of risk, and, therefore, a lower average cost of risk (total estimated cost of risk divided by number enrolled). With three-hundred or more million people in a national pool, your denominator would be huge; and with the government's bargaining weight behind it, your numerator would be smaller in aggregate (you could call it an economy of scale in healthcare purchasing) than the sum of the risk-cost totals of each separate insurance provider.

This huge savings, and the fact that private insurance is pretty much completely unnecessary because of it, is exactly why private insurers will fight tooth-and-nail any direct government action to provide public health insurance. While I think they should just be steamrolled, and I think that the momentum generated by our economic circumstances makes just this hardballing possible, the Obama administration has been pretty lickspittle up to this point. I don't see any balls straining the crotch-seams of anybody's suit pants at the White House. Working with what we've got, a tax that sped up the decline of private insurance could be just what we need to get to where I think we should be: a single-payer system with the possibility of a small market in private insurance for especially costly or cosmetic procedures.

Of course, I could be giving Reich way too much credit. He could turn out just to be a bad writer.

My problems with attack ads

It's no big secret that I don't like Stephen Harper. It might also not be a big secret that I'm not a huge fan of Ignatieff either, and I'm sure that I may have mentioned my distaste for attack ads to some of you. But this is just the cream of the crap, so to speak.

Scott Feschuk had a great piece in this week's Maclean's about the ads, basically saying that it's a classic case of the pot calling the kettle black. The ads attack Ignatieff for everything from spending a lot of time outside of Canada to being a "tax and spend liberal," an academic, and an elitist. His argument is that Harper is almost all of these things (and he illustrated the column with a photoshopped picture of Harper with a pot on his head).

I don't like attack ads at all. I don't think they contribute in any significant, positive way to political discourse. I know that the idea is not to make the attacker look good, but rather to make the attackee look bad, and I guess I'm just missing something, because I don't get it. I think it's made worse by every single advancement in technology, because now you can watch them on your smartphone, making it so much easier to access a wider audience with greater frequency.

What do you think?

bonne anniversaire, chorographie

the stars shine just for you, tonight:

THE HISTORY OF POOP

Either imitative, or POOP v.¹ Compare German regional (Low German) pp ( German Pup; compare Middle Low German ppeken, diminutive), Dutch poep ( Afrikaans poep) act of breaking wind.

...

3. slang (orig. nursery). An act of breaking wind or of defecation; (concr.) faeces; (fig.) nonsense.

1888 Stag Party 193 When Alcy pooped, the poop was mostly tallow. 1937 E. PARTRIDGE Dict. Slang 648/2 Poop,..a breaking of wind. 1940 E. POUND Let. 8 Feb. in Pound/Lewis (1985) III. 220 This federation poop is just the same old..secret committee of shit. 1977 J. MCCLURE Sunday Hangman x. 105 Ja, we scared the poop out of him that time. 1984 Staffrider 6 No.1. 17 Let Kakgat stay out there a while longer. Smell of his last poep isn't even gone yet. 2004 Derby Evening Tel. (Nexis) 13 Dec. 16 My other favourite doll is a baby called Jessica and she does real poop poops.

and now, i hope, thanks to the OED (to whom credit for this presentation is entirely due), that you have entirely lost the ability to laugh at poop. i do hope that you can still poop, however. can't you poop?

The Chorography Hits Puberty

It was only a matter of time. Sure, in the earlier months of its existence, this blog was riddled with poop-jokes, name calling, and shoddy economic and political analysis--you know, the trappings of youth and naivety. But just as the snows of winter yield to the tender blossoms of spring, oh so fair, so much our baby grow up.

And so I consider myself honored to present the first blog post solely about sex.

Actually, it's just a video really.


I should point out that I post this not just because as a TED video, sexual content aside, it's basically porn for nerds, but also because this is a family friend of mine and I think that's pretty neat.

News Update

Not looking to write much here, just wanted to put this into everyone's pipe:

Lawmakers in the US Senate have voted overwhelmingly in favour of a bill that puts new restrictions on the credit card industry.

The bill would curb sudden interest rate increases and hidden fees.

The industry has warned that the measure could backfire, leading banks to issue fewer credit cards thus making it harder to get credit. (source: BBC)

What struck me was that "warning" by the industry. Similar to what you wrote, Lion, in your post on Planet Money (by the way, why'd you take that down?); in contrast to the common knowledge among every analyst that expanding credit is always and in every way a good thing,
this really doesn't sound so bad. I also don't really buy the argument that putting limits on rate fluctuations is going to restrict borrowing all that much. Sure, it will make credit card companies more risk averse when it comes to interest rate fluctuations, but if the last few years have taught us anything, there's a derivative for everything these days and in the derivative game, hedging against interest rate changes is old school.

The bill would prevent companies from raising interest rates on existing balances unless a card holder was 60 days behind, and then it would require the rate to be restored to its previous level if payments were on time for six months.

Card holders would have to be told of rate increases 45 days in advance and it would also make it harder for people aged under 21 to be issued with credit cards.

My main point: if credit card companies are a little bit more hesitant to dish out credit to the average consumer, that sounds to me like, fundamentally, a good thing. Speaking as a person who does not and never has owned a credit card, having plastic access to a line of credit should not be the litmus test for financial independence. If a person doesn't have a job and/or has a history of bad credit, that person probably shouldn't be getting a credit card in the first place and I wouldn't mind it one bit if American Express or Mastercard approached those potential client with tighter fists.

As it is now, in the absence of this kind of regulation, the costs of tighter credit have been transferred whole sale onto the credit card holders. By putting a bit of that potential cost on the purveyors of credit, they might think twice before pushing plastic on everybody.

But not knowing much about the credit card industry, this is just my knee jerking. I'm sure the story will continue to develop.

london times on AIG

or, more to the point, here is the london times's expose about a man from brooklyn named joseph cassano, and his role in AIG's derivatives business. it's great reporting (despite being owned by rupert murdoch, the times does, occasionally, put on a good show) overall, and deserves more than the casual summary i would usually deliver. what struck me especially, though, was not its account of what can only be described as herculean fraud, but a little sidenote about the securities and exchange commission thrown in on the second page. apparently, the SEC employed only one person to oversee the nearly $600 trillion derivatives market. one person had to account for transactions more than 50 times the value of the united states economy. i guess that's the best possible answer to why ben and i find it so hard to get government jobs in regulation: the government doesn't employ regulators.

exposition I

has anybody noticed that planet money can at times be strikingly conservative? i've grown, more and more, to dislike adam davidson in particular, who often comes off as a grinning stooge of some-such or other financial lobby, that who he has most recently interviewed. i don't have anything to say about what i think is the astonishing ignorance, not to mention outright rudeness, that he displayed in his interview with elizabeth warren--not, anyway, anything that everyone else hasn't been over a million times. suffice it to say that his vast generalizations about the consensus among senior economists was not only a serious overstretch, but also, given the track records of those economists with regards the state of the world at this moment, not very tenable. i wouldn't rush to hold up the joint integrity of the academic economic and finance industry establishments, not with private debt having reached a staggering 303% of GDP under their thirty-year reign.

in fact, that the very existence of that debt, or the fact that borrowing, and the ease with which it could be effected, brought on this economic depression, seems to have missed planet money completely. that's what you think, anyway, listening to davidson chat with times reporter david duhigg (broadcast 05/15) about his book on credit card companies and their customers. i haven't read it, and i don't apologize for saying that i probably never will, but if duhigg wrote a fair and balanced account of the (to put it mildly) combative relationship between credit card issuers and their clients, that was not the book that he was selling on planet money. in a nutshell, he told davidson that unlimited and unfettered access to private information about a person's spending habits, both past and present, was necessary to extend credit as widely as possible. this widening of credit, duhigg claimed, was one of the strengths of the american economy. i am not making this shit up: listen to it yourself. forget the fact that anybody, and i mean ANYBODY, whose cojones are brass enough to argue that what america needs is easier access to credit--that americans can only benefit from having more debt--should have molten glass poured into every orifice in their body. we can all agree on that, i think. what is fucking revolting is listening to davidson eat every last bit of shit duhigg dumps on him, because you can HEAR the smile on his face while he does it. he never once, and i mean never, makes the very valid point that making it harder for people to get credit, i.e. ensuring that they have both the means to repay their debts and the restraint to accrue them conservatively, would be a very, very good thing, and might have saved us from the complete meltdown of our economic system (not to mention insidious journalistic memes, like 'green shoots').

i hope somebody puts ground glass into davidson's salad nicoise, or whatever the fuck he gets for lunch in midtown. there's enough brown-nosing to be had on any of the major networks, or in the print press, or in press conferences, or  pretty much anywhere. but npr? if npr won't even politely call people on their bullshit, the fuck do we do?

Edified

Just to quickly follow up on the NYRB article. It was really interesting and generally speaking, right on.
I wanted to pick up on one of Freeman's ideas though.

The more important question is whether what Akerlof and Shiller have offered in Animal Spirits amounts to "a theory" in the sense that it could stand in place of the current theories that they criticize for being based entirely on rational responses to economic motives. There is a difference between a series of ideas about different aspects of economic behavior and an integrated account of macroeconomic fluctuations. Akerlof and Shiller are surely on the right track in pointing to elements that are missing from today's conventional models, and in arguing that incorporating them into mainstream macroeconomic analysis would help. But they have neither done this nor shown others how to. Hence their goal of replacing what macroeconomists teach their students is likely to be disappointed, at least for now.

I don't doubt that Freeman's critique is valid--on top of having a Ph.D he also has the additional advantage of having actually read the book. And I'm not so much looking for a bone to pick as I am an idea to flesh out. But maybe the book's lack of specificity on that account, their "silence" as Freeman calls it at the end of the chapter, isn't such a problem. From what I've read about it (I haven't read any of it), Keynes' General Theory is notoriously complicated, vague, even self-contradictory--a kind of bible for economists and economic historians in the flexibility it allows for at times equally contradictory interpretation. But economics is, after all, a social science. Maybe this expectation that theory be both analytically comprehensive and proscriptive is exactly the problem. As Keynes found out, a "series of ideas" that question the existing analytical approach can have a much bigger impact than the most elegant theory.

edification, for yours

the first part of this article, by benjamin friedman at the new york review of books, may be the best that i've read so far at summarizing the larger social and economic implications of the past few years: http://www.nybooks.com/articles/22702

when the heads gonna roll?

regulating derivatives markets would be a great thing. as this (and this and, to some extent, this) make clear, though, what we're looking at in finance is such a baseness in morality that nothing short of public trials and executions is going to protect us. in 2007 and 2008, wall street, through bribery, tried to use public pension systems as sinks for their toxic assets. in new mexico, for instance, something called vanderbilt capital advisors (a major donor to the campaign of bill richardson, the state's republican governor), convinced the state's teachers' retirement fund to buy $90 million worth of "equity" tranche assets. that particular sort of tranche is most famous for spawning the term 'toxic waste,' and, incidentally, for the ruination of global finance. while $90 million may seem a paltry sum to you, consider the $525 million invested in those same assets by the new mexican state investment council, also thanks to the advice of vanderbilt capital advisors. tpm says that, as of today, vanderbilt has paid new mexico a total of $3.7 million in interest. it's also gone bankrupt.

this follows on a wave of public pension scandals, some of which i wrote about a few months ago. with medicare now under severe pressure, and social security, the executive branch's de facto credit card, set to run out in 2037, we've now got what is evidently a crisis in the public pension system that's going to be exposed by the end of the era of cheap money. i don't know what effect CDOs will ultimately have; probably, the purchase of bad assets was a drop in the bucket. but given that these systems have as their charge the economic well-being of vast millions of americans, and that they are already hobbled by hostility in many state legislatures, as well as by our flagging economy, any kind of additional pressure is unacceptable.

i'd say 'shoot all of them'--them being the guys who sold the CDOs--but that's old hat, and it's not going to happen. as usual, nobody will be prosecuted, largely because we've had our laws redefined so as not to make what they did a crime. while bribes break the law, 'finder's fees' are business-as-usual. it could take a generation of sustained effort to revamp the legal system so that this kind of rent-seeking with severe negative externalities is properly criminalized and prosecutable. as things stand, wall street can desroy the world, but as long as it thought it had a legitimate opportunity to make a profit, it remains untouchable. that might've been able to fly, even if unjustly, before every single store of cash in the country was looted. now, though, i don't think we can afford to be so sanguine.

The Path to Doing Nothing is Paved with Talking about your Good Intentions

First, I realize that this blog post could just as easily be an email to Lion (maybe a twitter at Elias too, I'm not sure). But I can't really pick up girls as an email writer. No, "blogger" is much more to my liking.

But also, I'd like to provide this whole enterprise with a bit of momentum so that when the missing 50% of our writing staff returns from Italy, there will be many new posts to meet them and, it is my most sincere of hopes, to incite them into writing something too.

But also, this is pretty interesting. So here we go.

As the AIG situation has made clear, massive risks in derivatives markets have gone undetected by both regulators and market participants. But even if those risks had been better known, regulators lacked the proper authorities to mount an effective policy response.

Today, to address these concerns, the Obama Administration proposes a comprehensive regulatory framework for all Over-The-Counter derivatives. (source: CR)

Go ahead and replace "today" with "a few days ago, but Ben was too lazy to write anything about it then" and, as far as I know, the information is still pretty much up to date.

I don't actually have much to add to this. But then again neither did the Treasury. The proposal, the entirety of which you can find at the other end of the link above, is more a statement of purpose than anything. In it, the Obama administration signals to everyone that, "yes, we see what a mess unregulated derivatives (okay, fine, we're talking about credit default swaps) made of everything and, yes, we intend to do something about it."

Is this good news? Well, it's certainly better than no news, but obviously the proof is going to be in the regulatory pudding.

Here are some not very detailed details:

* The Commodity Exchange Act (CEA) and the securities laws should be amended to require clearing of all standardized OTC derivatives through regulated central counterparties (CCP):

o CCPs must impose robust margin requirements and other necessary risk controls and ensure that customized OTC derivatives are not used solely as a means to avoid using a CCP.

o For example, if an OTC derivative is accepted for clearing by one or more fully regulated CCPs, it should create a presumption that it is a standardized contract and thus required to be cleared.

[...]

* All OTC derivatives dealers and all other firms who create large exposures to counterparties should be subject to a robust regime of prudential supervision and regulation, which will include:

+ Conservative capital requirements
+ Business conduct standards
+ Reporting requirements
+ Initial margin requirements with respect to bilateral credit exposures on both standardized and customized contracts

[...]

* Amending the CEA and securities laws to authorize the CFTC and the SEC to impose:

+ Recordkeeping and reporting requirements (including audit trails).
+ Requirements for all trades not cleared by CCPs to be reported to a regulated trade repository.
# CCPs and trade repositories must make aggregate data on open positions and trading volumes available to the public.
# CCPs and trade repositories must make data on individual counterparty's trades and positions available to federal regulators.
+ The movement of standardized trades onto regulated exchanges and regulated transparent electronic trade execution systems.
+ The development of a system for the timely reporting of trades and prompt dissemination of prices and other trade information.
+ The encouragement of regulated institutions to make greater use of regulated exchange-traded derivatives. (source: BB)

Since we're talking about credit default swaps, and we are talking about credit default swaps, this all brings to mind a question. Sure we can regulate the hell out this infamous instrument, but is there any reason we really need to have them around (in their current form) in the first place? Taking out insurance on a bond seems to me a legitimate and noble enough pursuit, but what is the rationale for allowing people to purchase CDS coverage on bonds and loans in which they have no vested interest? In the history of insurance law, it only took a few sabotaged merchant ships for people to figure out that allowing individuals to hold shipping insurance on boats or merchandise that they don't own produces all kind of preverse incentives. As far as I can tell, the rationale is the tired old liquidity arguement: by allowing anyone at any time to take out CDS coverage on any bond at any time, you are increasing the overall liquidity of the market. But since when is liquidity in every form such a good thing? This is gambling. If people want to call credit default swaps insurance, lets regulate it as such. I've already posted on this issue back in January (yeah, I'm linking to myself! you want to fight about it?!), but I really don't understand the regulatory pussy-footing around this issue.

But again, this is better than no news.

For further, and not directly related reading, I have two more links:

• A blog post (Zero Hedge via Naked Capitalism) on how AIGs unwinding of its CDS contracts (with the help of the U.S. government) has contributed to the Q1 greenshoots in the banking sector.
• A Planet Money article on the bizzare and now hilariously anarchronistic bureacratic structure of derivative regulation.
  

Woot!

President Obama’s top antitrust official this week plans to restore an aggressive enforcement policy against corporations that use their market dominance to elbow out competitors or to keep them from gaining market share. (source: NYT)

Like, I said: Woot!

That said, this in itself probably wouldn’t have done anything about the “too big to fail” problem. It might have increased scrutiny over large bank mergers – like Nations-Bank of America, Bank of America-Fleet, or JPMorgan Chase-Bank One, but frankly those probably would have gone through anyway; the banking industry is just not that concentrated compared to some others. Too big to fail is a combination of size, interconnectedness, and the critical role of finance for the economy. (source: Baseline Scenario)

Woot?

But the signal that the administration will actually enforce antitrust law is a step in the right direction.

Woot.

shove your green shoots

i may be late in reaching this bit of news, but bear with me. the headlines made a lot out of April's unemployment figures, which seemed to show a sharp slowdown in the contraction of the labor market. this, in turn, prompted every pundit from here to the moon to once again pronounce the second coming of the fast times. i'm afraid to say, gentlemen, that you should slow down your prognosticating: there's a catch in those unemployment figures, and boy, it's a doozy.

the bureau of labor statistics, they who handle the numerical aggregates we wait at the edge of our seats for, did something curious when analyzing the state of the labor market in april. unlike in previous months, it chose to adjust its figure upwards--that is, positively--rather dramatically; the adjustment made was, in fact, to the tune of 226,000 jobs. that's the amount that the BLS thought was created by 'new firm start-ups'. why did they make this assumption? because 227,000 jobs were lost in the same month due to firm closings, and apparently, when a firm closes, the BLS makes the statistical leap-of-faith that a new firm automatically appears to take its place. as sandwichman over at econospeak points out, this kind of jiggering with numbers might make sense during good times, when businesses are born fairly rapidly and the government cannot track their labor market decisions month-to-month, but it's absolutely absurd in this economic climate. the fact that the lay-off numbers for firm deaths and births are nearly exact--only 1,000 jobs apart--stinks to high heaven of political jerrymandering.

it seems pretty clear from this, and from the results of the stress test, that the government's strategy is less the practical application of economic policy and more the steering of popular expectations about the economy's performance. if everyone can be tricked into believing things are alright, then, this particular line of reasoning goes, everything will become alright. people will act as if they aren't in a recession and suddenly we will not be in one. i'm not going to lean too heavily on why that is a truly terrible national strategy. structural weaknesses are structural weaknesses, and cannot simply be wished away. the unadjusted BLS figures show an even stronger historical contraction in the labor market than has thusfar been reported: 815,000 laid-off in february, 813,000 in march, and765,000 in april. the numbers for april are further distorted by the one-time hiring of 62,000 new census bureau employees to conduct the first stages of census 2010. in other words, absolutely nothing has changed; the best that can be said is that our situation hasn't gotten significantly worse.

i'm betting, however, that that might not continue to be the case. with the stock market in an unsustainable mini-rally (since 1930, every major period of economic slowdown has feature several periods of rapid upward movement in the dow, followed by slumps so severe as to bring the index below earlier lows) and the banks fudging their financial health, my spider sense is tingling, warning me of danger. the fundamentals don't look good, no matter how you spin them. it's only too bad that the public is being so severely misinformed, and is, potentially, being encouraged to act in a more profligate way than is reasonable, given the severe reality of its economic position.

Stressed Again

I don't mean to beat this issue to death, but I have a few more comments on the stress test.

First, now that all the various news and editorial sources have had time to digest the release of the test, its becoming fairly apparent that the evaluation process used by the Fed and overseen by the Treasury were at least in part influenced by the lobbying efforts of the banking industry.

I don't think anyone would really benefit from me repeating myself, but needless to say, the fact that the stress test was less rigorous than was probably necessary and more forgiving towards trading desk activity--points I outlined in my previous unnecessarily lengthy post--is suggestive of some bias.

But apparently, there is still some more explicit evidence.

US banks have been given government assurances they will be allowed to raise less than the $74.6bn in equity mandated by stress tests if earnings over the next six months outstrip regulators’ forecasts, bankers said.

The agreement, which was not mentioned when the government revealed the results on Thursday, means some banks may not have to raise as much equity through share issues and asset sales as the market is expecting. It could also increase the incentive for banks to book profits in the next two quarters. (source: Financial Times)

Which, except for the whole secrecy thing, sounds like perhaps not such an atrocious idea. But some are more incredulous than I:

And in case you missed it, the phrase in the FT, "increase the incentive for banks to book profits in the next two quarters" is code for "fabricate earnings". Per below, there were quite a few instances of permissive accounting this quarter. The powers that be are inviting more of the same. And this is all in the name of boosting confidence. (source: Naked Capitalism)

This past quarter, mark-to-market regulations were suspended (or at least, eased up) for certain classes of bank assets, which some claim account for a bit (or maybe more than a bit) of the the banking sector's surprise recovery since January. So Smith certainly has a point.

And then there's this:

“The Federal Reserve significantly scaled back the size of the capital hole facing some of the nation’s biggest banks shortly before concluding its stress tests, following two weeks of intense bargaining.

In addition, according to bank and government officials, the Fed used a different measurement of bank-capital levels than analysts and investors had been expecting, resulting in much smaller capital deficits. . .

The Fed ultimately accepted some of the banks’ pleas, but rejected others. Shortly before the test results were unveiled Thursday, the capital shortfalls at some banks shrank, in some cases dramatically, according to people familiar with the matter.” (source: WSJ)

Over at Big Picture, there is a corresponding graphic that shows just how "dramatic" these reductions were. To cherry-pick the most outrageous, CitiGroup's capital requirement was reduced from $35 billion to $5.5 billion.

Lastly, focusing on that second WSJ paragraph above, apparently half-way through the process, the type of capital evaluated by the Fed was changed. Instead of looking at "tangible common equity," the Fed started measuring "Tier 1 Common Capital." This may seem a bit of a technical detail, or at the very least, prosaic, but the implication is an important one.

The point of such measures is to gauge leverage. Does a bank have sufficient capital to offset potential losses on assets? The measurement used in the stress test—”risk-weighted assets” / “Tier 1 Common Capital”—is more favorable because it understates assets and overstates capital. (source: Option ARMageddon)

Basically, Tier 1 CC is a broader type of capital than TCE. OA posted a helpful
little table to show the difference, but, like with the Big Picture graphic, let me cherry-pick the most extreme example. The Bank of NY Mellon had a TCE-Asset ratio of 2.1%, but a Tier 1-Asset ratio of 9.5%.

I also bring up this particular accounting detail to point out a mistake a made in my last post on the stress test. Towards the bottom of the post, I mentioned that

Much of the TARP money came to these banks in the form of "preferred shares"--less risky and easier to get out of for the investor than common stock. But all those preferred shares can be converted into common equity and--POOF!--, in a cloud of financial wizardry, the banks are capitalized.

That isn't true anymore. I was working with old information and only a very vague understanding of what I was talking about.

When the Fed was using TCE as a measure of bank health, this particular maneauver could have been used to get better stress-test results. Why? Because TCE, stricter than Tier 1 CC, only looks at common stock and not preferred share capital. If TCE had been the benchmark, the administrative could have swapped preferred for common and thus fiddled with the stress-test results. But not so with the Tier 1 Common Capital, since that actually takes into account preferred shares.

Anyway, my B.

And if you're lost in all of this and are interested enough to read about it, here's a good basic explanation of the various types of equity.

David Simon on the Future of Newspapers

I post this clip not only because I have an enormous man-crush on David Simon, but also because here he delivers one of the more comprehensive critiques of the current state of the American newspaper that I've seen in a long while. Or at least, outside a conversation I've had with my mom. Based on that fact alone, I would assume that Simon's represents the insider-view on a debate so often dominated by unproductive Chicken Littles on the one hand and overly optimistic web-2.0 assholes on the other.

I couldn't figure out how to post the video directly, but follow the link. The player provides the entire Democracy Now! episode, but should skip directly to the Simon bit. It's under 10 minutes long and well worth it.

Stressed

America's 19 largest banks have spent the last couple of months strapped with wires, monitored by shiny steel machines and prodded with pointed instruments, huffing it out on treadmills owned and operated by the U.S Treasury Department. But as of yesterday afternoon, the so-called stress test of the U.S. banking system is over. And the results are in.

So, how'd we do? Before I get going, I should point out to the entirety of my loyal and trusting fan base ('Sup, Dave? Hey, where'd Lion go?) that when it comes to disentangling the labyrinthine language of financial regulation--to deciphering the various definitions of capital adequacy, the regulatory definitions and categories of equity-types, all those scary looking numerical charts--I, for the lack of a better word, can't. Not always anyway. So, for everyone's sake, without getting into too much of either the nitty or the gritty, how'd we do? The answer: I don't think it's really that kind of test.

First, tired treadmill metaphors aside, how did the Treasury Department and the Fed "stress" the banks? Unfortunately, it's not nearly as exciting as you might have expected. And I doubt you were expecting much. Maybe too simply put, the government looks at the balance sheets of these various banks and runs them through hypothetical scenario models. For example, let's say Dave Bank has only one kind of asset: loans to people named Sol. At the moment, what with the economy and everything, a lot of Sols are having trouble paying back their loans, so the default rate on Sol loan's is about 6%. The government looks at Dave Bank's balance sheet and says, "but what if things really went to hell?" The government wonders what would happen if the GDP growth fell by x-amount next year and unemployment rose by y-percent. It then estimates as best it can how those particular contingencies would affect the default rate on Sol loans, how that would affect Dave Bank's balance sheet, and where that would put Dave Bank on the solvent/not quite so solvent spectrum.

And here are the numbers presented in neat graphical form courtesy of the Wall Street Journal.

According to the government's "more adverse" scenario (more on that later), the overall short-fall in capital, the amount that these 19 banks must cumulatively raise in order to weather those "more adverse" conditions, is $75 billion. Of the 19 banks, only 10 are considered under-capitalized, and of those 10, Bank of America sits at the top (or at the bottom, depending how you look at it). Disproportionately so. B of A needs $33.9 billion, more than half the total estimated short-fall. Next in line is Wells Fargo, needing $13.7 billion, followed by GMAC for the bronze, which needs $11.5 billion.

So how nay the nay-sayers? The New York Times invited six people considered to be in-the-know to weigh in on the entire effort in blog forum format. On one side, you have the skeptical: Yves Smith of Naked Capitalism, Simon Johnson of every-god-damn-thing-lately but also Baseline Scenario blog, William K. Black, former bank regulator, and Bert Ely. In the middle, bravely offering no discernible opinion about anything, Douglas Elliott. And finally, offering a tentative thumbs-up, Alex J. Pollock and a dropping pin.

According to frowning majority, the entire approach was flawed from the start. Yves Smith, for example:

[T]he stress tests fell far short of the needed level of review. First, they were administered by the industry based on scenarios provided by the industry. Most observers found the “adverse” case to be too optimistic. Even worse, banks got to use their own risk models, the same ones that got them into trouble.

So it turns out the "more adverse" scenario really wasn't quite so adverse. Following up on that thought on a different site, Bonddad has put together a number of revealing graphs. I'd suggest any interested parties take a look, but for the lazy, a summary:

GDP is already performing more poorly than the Fed's stress test.
The worse case scenario for unemployment is the most realistic possibility.
Home prices are already closer to the Fed's worst case scenario than the median baseline forecast.
Bottom line: the worst case scenario is the most realistic scenario.

So kuddos to the Treasury for getting the patient with congestive heart failure to get off the couch. But a little jogging would have been helpful too. And according to Smith and then, scrolling down the Times' blog, William Black too,

Banks continue to overstate asset quality. The bankers pressured Congress, which extorted the Financial Accounting Standards Board, which gutted the accounting rules on loss recognition. Because there were no real examinations, there were no real stress tests.

Which is to say that regulators were accepting as truth the values of assets supplied by the banks themselves. If I ask Dave of Dave Bank how much all of his Sol loans are worth and he tells me that, well as a matter of fact, they're still pretty valuable all things considered, is this truly actionable information? Furthermore, as I mentioned briefly in a previous post, the stress test began with the initial assumption that derivatives and other assets of a bank's trading desk were less risky than individual home loans. Since larger banks and financial institutions tend to have disproportionately large trading desks, this constitutes a built-in bias towards the too-big-to-fail and against perhaps significantly more viable regional banks.

The capital requirement posited by the Treasury now that the stress test is over is that each one of these banks must raise Tier 1 common stock equivalent to 4% of all the risk-weighted assets of the bank. What does this mean? Tier 1 common stock is just the standard kind of stock one might purchase of any company. Why is the government focusing on this category of equity specifically? It's seen as the most safe form of capital for the bank. If the bank comes upon some unexpected losses, it is the common stock cash that gets wiped out first. The more common stock a bank has, the bigger its proverbial cushion.

At the moment, most of the big banks are currently planning on issuing more stock to raise the money. The market is, go figure, welcoming this announcement with open arms and higher share prices. I suspect the enthusiasm is coming very much from the fact that the Obama administration, with the publication of the stress-test, has implicitly (maybe explicitly at this point, I haven't been keeping track) pledged that no bank will fail. In fact, a fair amount of this capital is expected to come from a simple accounting maneuver conducted by Uncle Sam. Much of the TARP money came to these banks in the form of "preferred shares"--less risky and easier to get out of for the investor than common stock. But all those preferred shares can be converted into common equity and--POOF!--, in a cloud of financial wizardry, the banks are capitalized. Not being a financial wizard myself, I fail to see how this actually helps the banks. One kind of equity moves from one part of the balance sheet to the other and a regulatory standard has been met through a loophole. All snarkiness aside though, I could legitimately be missing something in this.

In any event, I suspect the sweaty-palms of the market will dry as soon as investors wake up to the fact that these new shares are diluted in value and that the banks themselves aren't out of the woods as the economy scrapes the bottom of the barrel. After all, even if all the banks do manage to get together the 4% equity, even if we assume the TARP switch-a-roo is somehow helpful, even if we do trust the in-house risk-weighting of these assets, 4% is still only 4%. That translates into a 25-to-1 asset-to-capital ratio (leverage).

What about the positive news in all of this? There is the faintest of clues that Obama is beginning to consider other options.

It’s not that Barack Obama isn’t aware of what’s at stake. That’s very likely why on April 27, the president gathered in some of his chief outside economic critics —including two of the most vociferous, Nobelists Joseph Stiglitz and Paul Krugman—for a secretive dinner in the old family dining room of the White House. Also in attendance: Paul Volcker, who has one foot in and one foot out of the administration as the head of Obama’s largely cosmetic economic recovery board; Princeton economist and former Fed vice chairman Alan Blinder; Columbia’s Jeff Sachs; and Harvard’s Ken Rogoff. Representing the home team, as it were: Obama’s chief economic adviser Larry Summers, Treasury Secretary Tim Geithner and Chief of Staff Rahm Emanuel. Why did Obama hold the meeting? “I think he wanted to hear the [opposing] arguments right in front of him,” says Blinder. “All I can say is if the president of the United States devotes that much personal time, and it was about two-hour dinner, he must want to hear what people outside the administration are saying and hear what his own people say in rebuttal to that. Why would you do that if you aren’t at least turning over your mind what to do next?” (source: Newsweek)

Well, we can all dream anyway.

A Jared Diamond Primer

Lion and I discussed a week or so ago my disdain for Jared Diamond, which happens to be shared by most anthropologists and archaeologists. The main reason for not liking him is, as I explained to Lion, his unabashed, if slightly modified, unilineal evolutionism. This is the theory that held Western civilization to be the pinnacle of human achievement, with all "lesser" civilizations working toward that level of civilization. It don't take an anthropologist to see what's wrong with that.*

Now I don't think that Jared Diamond is either a) stupid, or b) racist. His reason for writing the New York Times best-seller Guns, Germs, and Steel was to dispute the idea that there was something biologically, intellectually, or spiritually different between the Europeans and their descendants who influence the course of global history so much today and those other people who do not. In doing so, Diamond chose the environment to be his whipping boy - the underlying implication of that book was that any person in a given environment will respond exactly the same. If sub-Saharan Africans had had access to the same metals, fertile fields, and domesticable animals as Europeans did, they'd have been the ones to decimate the rest of the world's population and culture for four hundred and fifty years. Essentially, Diamond sees the world the same way as a game of Civ: every civilization is capable of the exact same things, but unfortunately they're also limited to the exact same line of development as one another, the only difference between them being whether or not they have access to the iron and horses they need to murder everyone who doesn't look like them (unique units and leader traits notwithstanding).

Anyway, my real reason for writing this post is to bring this to everyone's attention. A year or two ago Diamond wrote a short piece for the New Yorker in which he described his field work in Papua New Guinea (originally as an ornithologist, mind you) and claimed that the tribal feuds that go on their can teach us something about the universal human need for revenge. Now, those tribal feuds probably can teach us something - that's not the problem. The problem is that Daniel Wemp, Diamond's interviewee, is now taking offense to what was written about him and attempting to sue. It's a pretty fun read, if you don't like the guy, and the original piece is a good intro to what's wrong with his way of thinking.

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* Most anthropologists today subscribe to so-called "multilineal evolutionism," whereby individual cultures are considered to follow their own trajectories, and may or may not go through the phases identified by the earlier unilineal evolutionists. The legacy of the latter lingers, though, in anthropologists who try to isolate "stages" that are generally common between cultures, though the specifics will differ.

Cramdown Gets the Clampdown

There was almost breaking news yesterday.

The senate voted yesterday on a measure proposed by Dick Durban that would have allowed bankruptcy judges to renegotiate the terms of mortgages on a debtor's primary residence.

The mortgage provision garnered only 45 votes in the Senate, falling well short of the 60 votes necessary to break a threatened filibuster to a measure sponsored by Senator Richard Durbin, Democrat of Illinois, that would give bankruptcy judges greater flexibility to modify mortgages. (source: New York Times)*

As the law stands now, an individual can file for bankruptcy under Chapter 13. This, like Chapter 11 for businesses, allows the overly indebted individual to go before a bankruptcy judge who will then determine if a) the individual is capable of paying off all of his or her debts, and if not then b) which creditors should be given priority, which interest rates are or are not viable given the income stream of the debtor, which principal amounts may be too high and what, if anything, the debtor needs to either sell or fork-over to the creditor. This applies to any and all debts--from mortgages on vacation homes to car loans to student loans--except to loans taken out on the primary residence of a debtor.

So, as an example, if Sol makes only minimum wage but also happens to owe $100,000 plus 6% annual interest on his yacht, while I make minimum wage but also happen to owe $100,000 plus 6% annual interest on my apartment, Sol can go before a bankruptcy judge and have those number tinkered down to accommodate his financial position, while I am totally screwed.

So, why the provision? The blanket statement issued by the banks, the various lobbyists of the banks, and the various senators of the banks is that maintaining the rates and premiums established in the terms of the mortgage contract helps to "encourage the flow of capital into the home and lending market."(source: opencrs)

Which is to say that if I'm a bank (or more importantly, an investor who might want to buy a mortgage from the bank in the so-called secondary mortgage market), I'm going to be much more likely to throw money in that particular direction if I know for sure that the rate that I sign off on is going to be the rate of return I receive. If there is a chance that the loan I make or the bond I buy is going to return substantially less than the contract-determined value because the debtor goes bankrupt, I'm either going to go elsewhere with my money or demand a higher interest rate. So, in simple terms,

the main legitimate argument against bankruptcy cramdowns: it increases the riskiness of mortgages, and therefore mortgage rates would have to go up a little for everyone. (source: baselinescenario)

Now, given the fact that mortgage rates were probably too low for too many people for way too long, that in itself might not be such a bad thing in the long-run, but even if we ignore that for a second, one could say that this is the price of any kind of bankruptcy provision. If businesses are allowed to declare bankruptcy, maybe banks and investors won't lend as much to businesses than they otherwise would. So are these same people arguing against Chapter 11 bankruptcy law? And for those who argue that enacting this law in the middle of the crisis is a bit like changing the rules in the middle of the game, this could be said of the enactment of any bankruptcy provision. It isn't as if the entire business cycle freezes to allow Congress to enact a new law.

While I think it's generally ill-advised to turn to any blog comment thread for enlightened commentary, one of the most satisfying counter-critiques that I've read comes from a comment left at the New York Times Freakonomics blog:

The idea behind keeping home mortgages intact through Chapter 13 (where just about every other creditor can be “crammed down to value”) is that the due diligence was done up front, and to allow the loan to move through the secondary market easily, a future holder of the mortgage wouldn’t have to do new due diligence on every mortgage when the secondary market buys bought hundreds or thousands of loans at a time. And all of this would minimize the cost of the lenders, and keep home mortgage interest rates lower than other consumer debts, etc.

This idea fell apart when loans were made that should have never been made, and the people working in the secondary market became complicit in allowing cruddy mortgage assets to become common. (Source: NYT, F. DiCesare)

In other words, back in the golden days when lending standards were tighter and home-loan securitization less common, it made sense to stream-line the processes of the mortgage market by keeping all the rates, prices and premiums fixed and visible for all to see. In theory, back in the late 1970s when the law was enacted, the banker who made the home-loan had properly evaluated the relative riskiness of the borrower and priced the mortgage accordingly. But with the advent of subprime lending and the kind of assembly line home-loan securitization that one found at such esteemed institutions as Countrywide until only two or three years ago, the assumption of the responsible banker who had an interest in the financial health of the borrower was tossed enthusiastically out the window.

So while I understand the complaints of those who argue that primary residence mortgage restructuring increases uncertainty and information asymmetry in the mortgage market, I also wonder where they've been the past two decades. The entire subprime lending market was built upon asymmetric information and uncertainty. Allowing a lower-middle-class borrower to restructure the loan on his or her first residence after it, in accordance with the fine print, adjusts upward from 3 to 12% may very well make lenders and bondholders feel uneasy about their subsequent lending activity, but given the complete lack of oversight and complete and voluntary blindness towards risk adopted by both the private and public sector in the lead up to this crisis, maybe that uneasiness isn't such a bad thing. And maybe, if it allows a significant portion of America's working and middle class to stay in their homes, to avoid foreclosure and to keep home prices from plummeting further, it's worth it regardless.

But nevertheless, over at Zero Hedge, Tyler Durden is indignant:

Apparently in addition to TurboTax, the current administration needs a refresher course on contract law
...
But than again what is wrong in having the entire nation pay for the ridiculous greed of a few million fiscally irresponsible potential voters, living way beyond their means, buying vacation homes in Florida and Lake Tahoe, and maxing out their credit cards to buy that 3rd 50 inch plasma TV screen for the second bathroom. (source: ZeroHedge)

To which I respond: go fuck yourself. First, the criticism that this bill was proposed to save a bunch of speculating flappers is beyond ridiculous--it's lazy. The entire purpose of the bill is to allow those who have mortgages on their first home--not their fifth McMansion, not their vacation villa in the Pocannos--to renegotiate terms. This bill would have simply extended the same legal rights currently enjoyed by those who owe money on second and third homes and plasma screen TVs and whatever the hell else the lower-middle class are apparently enjoying at the taxpayers' expense, to those who own a single home which they can no longer pay for.

But on a larger scale, what about contract law, this uncorruptable virgin that's always dragged out of the basement to shame us all whenever someone contemplates reform the sake of equity? What people forget is that once upon a time, the concept of bankruptcy was proposed. That certainly violated the existing notion of contract law, just like the Treasury Department's various permutations of the TARP program may violate contract law, but you see very few bankers complaining about either of those. Law is adaptive when improvement is possible. That's the magic of democracy.

But then again, with 12 Democrats helping to kick the bill to the gutter, so apparently is lobbying.

*By the way, does anyone remember when that majority party called Republican tried to do away entirely with the filibuster? I know the Democrats are supposed to be the better party in all of this, but if Republicans want to threaten a filibuster on a bill that helps more people stay in their homes and helps to dampen both the increase in national foreclosure rates and across-the-board adjustable rate mortgage rates, why can't Harry Reid and the rest of the Senate majority leadership hand them that rope? Since when is 60 votes the new 51?