Now raising intellectual capital

from Rolfe Winkler:

Lunchtime Links 11-12

Wall Street faces "live ammo" as Congress aims to unravel banks (Vekshin/Schmidt, Bloomberg) Yves complains that this isn't enough, that size isn't the only problem. She's right, but I think these are good discussions to have. We'll have to wait to see what's in theKanjorski amendment, but I like where his head's at. To Smith's point, we desperately need to SIMPLIFY banks, not just shrink them. Ironically, today is the 10 year anniversary of theGramm-Leach-Bliley Act, which repealed the last vestiges of Glass-Steagall. Besides GLB, we also need to dump the CFMA....

Have we reached peak gold? (Evans Pritchard, ht frog) Exploration budgets are up, but results have been poor. On the flip side, William Buiter is not a fan of gold. He makes some good points, though Jesse disagrees.

FDIC helps securitization market (Shrivastava, Dow Jones) Interesting,

The dollar is the most crowded long in history (Johnson, Alphaville) A very good point. I like to think of all the paper we've shipped overseas as "latent" inflation.

FHA's cash reserves down sharply (Streitfeld, NYT) It's capital reserves have dwindled to 0.53% from 3% a year ago. Given the high quantity and poor quality of loans FHA has been making of late -- little down, low doc -- it's a good bet they'll need a bailout.

Government weighed down by bad mortgages

The Federal Housing Administration – the U.S. agency that actually enjoys full faith and credit of the government – is in quite a pickle. Reuters reporting that its capital reserves stand at a scant 0.53 percent, below the 2 percent regulatory minimum and without spitting distance of the “help me” threshold.

The deterioration has been fast and furious. Last year the ratio stood at 3% and the year before than 6.4%, according to The Wall Street Journal.

from Rolfe Winkler:

TARP may pay down debt

From Deborah Solomon and Jonathan Weisman at WSJ:

The administration wants to keep some of the unspent [TARP] funds available for emergencies, but is considering setting aside a chunk for debt reduction, according to people familiar with the matter. It is also expected to lower the projected long-term cost of the program -- the amount it expects to lose -- to as little as $200 billion from $341 billion estimated in August.

The idea is still a matter of debate within the administration and it is unclear how much impact it would have on the nation's mounting deficit levels. Still, the potential move illustrates how the Obama administration is trying to find any way it can to bring down the deficit, which is turning into a political as well as an economic liability.

A camel for EU president?


camelsA camel, says an old Middle East joke, is a horse designed by a committee.

The European Union is in danger of getting camels for its two new leadership positions — president of the European Council and foreign policy High Representative — because of the dysfunctional appointment process created by the Lisbon Treaty.

The secretive horse (or camel)-trading by which EU governments choose the 27-nation bloc’s top office-holders seems designed to deter strong candidates and produce lowest-common-denominator outcomes. Some of the most able potential contenders would rather stay at home than take the key jobs to Brussels.

from Rolfe Winkler:

Palin speech a syntactical comedy of errors

And now for something completely different. Jonathan Martin covered a speech by Sarah Palin for Politico last week. Comedy gold.

On healthcare:

“What may they feel about an elderly person who doesn’t have a whole lot of productive years left?....In order to save government money, government health care has to be rationed… [so] than this elderly person that perhaps could be seen as costing taxpayers to pay for a non-productive life? Do you think our elderly will be first in line for limited health care? And what about the child who perhaps isn’t deemed normal or perfect per someone’s subjective measure of their use or questionable purpose in the eyes of a panel of bureaucrats making our health care decisions for us,”

Do Galleon’s tentacles reach to Chicago?

It appears Chicago-based Balyasny Asset Management may have been drawn into the Galleon insider trading scandal.

Hedge Fund Alert is reporting that a former Balyasny analyst is drawing scrutiny from securities regulators in connection with the fast-growing insider trading case that has led to the filing of either criminal or civil charges against 20 people. The $2 billion hedge fund reportedly notified some of its investors that the Securities and Exchange Commission has been investigating the unnamed analyst’s activities for several weeks.

Reasons to be cheerful

By John M. Berry

John M. Berry, who has covered the economy for four decades for the Washington Post and other publications, is a guest columnist.

Doing more with less is a corporate mantra that some say bodes ill for job growth. Data last week showed that productivity at non-farm business jumped at an extraordinary 9.5 percent annual rate in the third quarter.

from Rolfe Winkler:

Rosenberg: Unemployment headed to 12-13%….

...but that doesn't mean the overall employment picture will get a lot worse.

From today's "Breakfast with Dave" e-mail:

There are serious structural issues undermining the U.S. labour market as companies continue to adjust their order books, production schedules and staffing requirements to a semi-permanently impaired credit backdrop. The bottom line is that the level of credit per unit of GDP is going to be much, much lower in the future than has been the case in the last two decades. While we may be getting close to a bottom in terms of employment, the jobless rate is very likely going to be climbing much further in the future due to the secular dynamics within the labour market.

But in a nutshell, to be calling for a 12.0-13.0% unemployment rate is meaningless except that it is very likely going to be a headline grabber. The most inclusive definition of them all, the U6 measure of the unemployment rate, which includes all forms of unemployed and underemployed, is already at 17.5%. The posted U3 jobless rate that everyone focuses on is at 10.2% (though if it weren’t for the drop in the labour force participation rate, to 65.1% from 66.0% a year ago, the unemployment rate would be testing the post-WWII high of 10.8% right now). The gap between the U6 and the official U3 rate is at a record 7.3 percentage points. Normally this spread is between 3-4 percentage points and ultimately we will see a reversion to the mean, to some unhappy middle where the U6 may be closer to 15.0-16.0% and the posted jobless rate closer to 12%. This will undoubtedly be a major political issue, especially in the context of a mid-term elections and the GOP starting to gain some electoral ground.

Triple-A rated tripe from the ratings agencies

How the ratings agencies must love Stephen Lewis, the lugubrious economics guru from Monument Securities. He’s spotted that two views make a market, even in the whacky world of these bodies who must judge how creditworthy borrowers really are.

Lewis points out that on November 3, a Fitch analyst fretted about China’s property bubble and the risks to its banks. Six days later, rival agency Moody’s decided to raise China’s sovereign debt rating from stable to positive.

from Rolfe Winkler:

Afternoon Links 11-10

Mishkin defends bubbles (Yves Smith) Yves tears apart former Fed Governor Frederic Mishkin's op-ed in FT, for good reason.

Bank told to raise more common equity (8-k filing, ht frog) Hanmi bank in CA was told to raise capital, tangible capital in particular. Hopefully regulators continue in this direction with other banks.