Commentaries
Now raising intellectual capital
from Rolfe Winkler:
Lunchtime Links 2-2
Homeownership rate falls to 2000 level (CR) At 67.2% it's still way overstated. Home "ownership" is a misnomer in cases when the owner has withdrawn mortgage equity or when the price of the home has fallen below the principal value of the mortgage. A better measure of homeownership, I think, is just to look at total owner's equity as a % of household real estate. The most recent Fed Flow of Funds report (page 104, line 50) puts the figure at just 37.6%...
U.S. could extend bank fee beyond 10 years, Geithner says (Di Leo/Crittenden, WSJ) The proposed tax on non-deposit liabilities should be permanent, and should target ALL liabilities, including repos. Deposits are guaranteed via FDIC. While that insurance is dramatically underpriced (witness the cash-strapped state of the DIF) at least banks pay something for it. Non-deposit liabilities are also effectively guaranteed, for the biggest banks anyway, via the promise that none which is too big will be allowed to fail. To counter moral hazard, this implicit guarantee must be taxed in order to offset any benefit derived from lower funding costs.
Must-Read: What's a college degree really worth? (Pilon, WSJ) A lot less than you think, as argued here before. This piece is well-written with lots of good data!
AIG derivatives staff said to forgo $20 million in retention bonuses (Katz/Son, Bloomberg) They're still well-paid, but this is better than nothing I suppose.
Deficits as a national security issue -- Sanger NYT & Seib WSJ -- Good to see prominent columnists picking up the thread. A refresher on the Suez Crisis of 1956 offers helpful background.
Rising FHA default rate foreshadows foreclosure crush (ElBoghdady/Keating, WaPo) Key line: "the FHA projects that it will pay out claims to lenders on one out of every four loans made in 2007 -- the worst rate in at least three decades. The claim rate should be nearly the same on the vastly larger volume of loans made in 2008."
Goldman spokesman's most withering rebuttals (Daily Intel) Methinks he doth protest too much...
from Rolfe Winkler:
Buffett lets public down…again
The public has always seen in Warren Buffett a different kind of capitalist, an honest observer providing sound financial advice regardless of his personal interests. But is he?
When it comes to his own holdings Buffett seems to use a carefully cultivated reputation for financial rectitude to feather his own nest.
On Wednesday he came out against Obama's proposed bank tax, but his comments were inconsistent. On one hand he's always maintained banks needed to be bailed out, yet he opposes ways to make them pay for it. At this point, financial giants in which Buffett has large stakes -- Wells Fargo, Goldman Sachs and General Electric -- all benefit from an implicit too-big-to-fail government insurance policy. How can Mr. Buffett, an insurance executive, argue that it's inappropriate to charge them for it?
This is just the latest example of Buffett talking his book.
Buffett also lobbied for and profited greatly from the bailouts. He invested in Goldman, he said, with the expectation that Congress would "do the right thing" by passing the Troubled Asset Relief Program. In other words, it was a bet on a bailout.
Later he mocked the stress test, which forced over-leveraged banks to raise needed capital. This was bad for Buffett because it diluted his stakes in banks.
Less well-known is that Buffett was the first to propose a private-public partnership structure in order to rescue troubled banks. In a letter to Hank Paulson in the fall of '08, cited in Andrew Ross Sorkin's recent book, Buffett pitched his idea for a "public-private partnership fund" that would use public debt to finance private bets on toxic assets. When Tim Geithner rolled out a similar plan a few months later, it was widely panned as a giveaway to banks.
Annette, how long is a coal train ? Is the US so short on super-heroes that someone with an inside track on information supposedly donates ALL his money to charity ? Does that sound right ? Trela, you are right, how did taxpayers benefit from this ? Peter and Paul… Peter Johnson, if ‘everyone on the planet’ was saved, did the US cock it up for everyone in the first place ?
Well done Rolfe ! This guy is a hopeless egomaniacal opportunist.
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The Wall
