Now raising intellectual capital

from Rolfe Winkler:

Lunchtime Links 9-25

Iran reveals existence of second uranium enrichment plant (WaPo) According to the article, we've known about this site for years but Obama/Brown/Sarkozy "decided to publicly disclose the existence of the facility after learning that Iran had become aware the site was no longer a secret." Pardon me for not understanding the intricacies of diplomacy, but if we've known about this site for years, why wasn't it made public? I'm sure there's a reason...

Credit quality declined sharply for Shared National Credits (CR)

Randy Quaid, wife arrested over unpaid hotel bill (Reuters) More from TMZ.

Bank bailout reject embraced by declawed Tiger (David Reilly) "Irish taxpayers are guinea pigs in a government experiment to buy property loans from banks at prices higher than market values yet lower than the amounts banks carry them for on their books. Although markets are reacting favorably, there’s a good chance taxpayers will get stung"

The $20 theory of the universe (Esquire) Hilarious. From 2003.

A fare price? (Economist) The costliest cities for public transport.

Warning: This image has been photoshopped (ars technica) "The French parliament has held its first hearing of a proposed law that would require every advertisement to display a disclaimer telling the public that images of people were manipulated. The goal is to help cut down on body issues in adolescents, and violating the law could be costly."

G20 protesters blasted by sonic cannon (Guardian) Interesting, but wouldn't recommend playing this at work.

from Rolfe Winkler:

Afternoon Links 9-24

(Reader note: yeah, R.I.P. in two successive headlines is problematic. My bad. Next time we'll plan our headlines a bit better.)

Volcker criticizes Obama plan on "systemically important" firms (Bloomberg) The guy is on fire here. Though he's an adviser to Obama, he's clearly willing to criticize many of the flaws of Obama's financial regulatory overhaul. Here is the full text of Volcker's speech. Worth reading on your commute home...

from Rolfe Winkler:

Lunchtime Links 9-23

Kalashnikov faces bankruptcy (Globe & Mail) Knockoffs are cutting into sales of AK-47s....

Stiglitz/Sen: Emphasis on growth misguided (NYT) They don't emphasize it enough in this piece, but the primary problem with GDP is that it doesn't account for debt. As long as it's growing, we congratulate ourselves for successful economic management. But if borrowing is the key driver, previous "growth" melts away when debt is paid back.

from Rolfe Winkler:

Lunchtime Links 9-22

AIG may never pay backtaxpayer billions, GAO (WaPo) $120.4 billion to be precise. Why make AIG pay all that money back? Why can't we go after banks like Goldman that were the ultimate recipients of much of the money?

MUST READ--USDA Home Loans, subprime redux? (BusinessWeek, ht Felix) You can get 100% financing from the Dept of Agriculture. They've extended $10.5 billion worth of loans this year. Here I thought FHA was offering the easiest terms on government home loans!

from Rolfe Winkler:

Lunchtime Links 9-21

Everyone, into the pool! It's the only way insurance works (NY Daily News) Eric Dinallo pens this op-ed. He's the former insurance commissioner for NY State and is running to replace Andrew Cuomo as Attorney General. He's also championed tighter regulation for CDS.

VIDEO: Steve Keen (Edward Harrison) Keen understands the dynamics of the economy as well as anyone.

from Rolfe Winkler:

CreditSights: Bearish on housing

Commentary from CreditSights today (no link):

As we have repeatedly commented over the past few weeks, we believe the current positive momentum in the housing sector (especially in the equity market) has been a product of government life support and cannot be sustained once government initiatives that were implemented to boost the sector come to an end.The recent improvement in home demand and prices has been the result of government efforts to lower mortgage rates and provide tax credits for potential home buyers. The homebuyer tax credit expires on December 1 this year, while the Fed's program of buying MBS--which have kept rates low and mortgage loans flowing--will eventually wind down. We are concerned that once this happens, the momentum of better sales could halt unless jobs are created and mortgage rates remain low....

My thought is that the tax credit will get extended. Politicians aren't ready to grapple with the consequences of removing support for the housing market. A bigger question is what will happen when the Fed stops buying mortgage-backed securities. As Peter Eavis noted in the WSJ last week:

from Rolfe Winkler:

Lunchtime Links 9-20

Homeowners who "strategically default" on loans a growing problem (LA Times) More evidence that negative equity causes walk-aways. This will be a growing problem as folks realize home values aren't coming back. If they do come back, it will be because the Fed has succeeded in blowing another asset bubble, and the consequences of that will be much worse.

$30 billion home loan time bomb set for 2010 ( Just reminding us that Option ARMageddon is around the corner for California. Count on many of these folks to "strategically default."

from Rolfe Winkler:

Lunchtime Links 9-18

FDIC considers using Treasury line of credit (WSJ) This would be a shame. FDIC should keep charging special assessments on banks before taxpayers are forced to borrow to replenish the fund. CR notes that Senator Carl Levin has asked Bair not to charge another assessment because it would hurt small banks. That's just misdirection; FDIC charges special assessments as a % of total deposits, which means the biggest banks pay the most. 95% of banks got a free ride for years, not paying ANY premiums for deposit insurance from 1996-2006. Now they have to pay. Special assessments are an good way to shrink the financial system; it reduces the profitability of the business!

FHA's cash requirements will drop below requirement (WaPo) I sniff another bailout...

from Rolfe Winkler:

Afternoon Links 9-17

Barclays accused of trickery in $12.3 billion toxic asset sale (Telegraph) Speaking of off-balance sheet games, Barclays lent $12.6 billion to a limited partnership called Protium so that Protium could buy $12.3 billion worth of Barclays' toxic assets. So Barclays rids its balance sheet of thee toxic assets -- which are subject to fair value accounting rules -- in exchange for a loan -- which isn't. It's a shame accounting rules permit such shenanigans. Neil Unmack has more.

FDIC finances sale of troubled mortgages (NYT) Remember PPIP? Unfortunately it hasn't died. I hope to have more on this later. If you want to hear the conference call describing the transaction, the replay is here: (866) 392-0223. It starts five minutes in...



Can Wall Street find a balance between risk and prudence? — Andrew Ross Sorkin

“Extensive participation in the impersonal, transaction- oriented capital market does not seem to me an intrinsic part of commercial banking,” Paul Volcker tells an audience in Los Angles. “Substantial involvement in heavily leveraged finance and heavy proprietary trading almost inevitably entails risks.” — Bloomberg