Why did Johnny Mac pick Sarah Palin?

Reuters Staff
Aug 31, 2008 17:01 UTC

Oh I’ve heard all of the conventional wisdom: 

  • She’s a woman and can pick off disaffected Hillary supporters.
  • At 44, she offsets McCain’s age problem
  • She has a very strong conservative record.  She’s pro-life and pro-guns.  (Exhibit A to the right: an AP photo of her posing with a caribou she shot.)

But there’s another reason no one’s mentioning, at least not in polite conversation: she’s gorgeous.  I mean, have you seen her photos?  She’s a former beauty queen and her looks have only improved with age. Look at that bone structure!

It’s no secret that, in the age of television, looks are crucial to getting elected.  John Edwards was paying hundreds for his haircuts.  John Kerry was rumored to have received botox treatments.  Hillary Clinton wore a pound of makeup to cover her wrinkles.  Candidates that look good naturally have a leg up.

I’m not the first to notice that Palin is easy on the eyes.  Craig Ferguson thinks she has the “naughty librarian” thing going:

McCain, of course, looks every bit his age.  Read this brief account of his time in the Hanoi Hilton and it’s amazing he looks as good as he does.

Not to demean Gov. Palin and her achievements, but maybe McCain made the pick so he could get the youth male vote.  After all, Obama already has young women locked up:

This video has been played on YouTube nearly 10 million(!) times.

Another Friday, another bank failure

Reuters Staff
Aug 30, 2008 01:03 UTC

Integrity Bank in Georgia was shut down by the FDIC today.  Bloomberg has the story.

Integrity Bank, with $1.1 billion in assets and $974 million in deposits, was shuttered by the Georgia Department of Banking and Finance and the Federal Deposit Insurance Corp. Regions Financial Corp., Alabama’s biggest bank, will assume all deposits from Integrity, which was run by Integrity Bancshares Inc. The failed bank’s five offices will open on Sept. 2 as branches of Regions, the FDIC said.

“Depositors will continue to be insured with Regions Bank so there is no need for customers to change their banking relationship to retain their deposit insurance,” the FDIC said.

Banks are being closed at the fastest pace in 14 years as financial companies report more than $505 billion in writedowns and credit losses since 2007. California lender IndyMac Bancorp Inc., which had $32 billion in assets, was closed July 11 in the third-largest bank seizure, contributing to a 14 percent drop in the U.S. deposit insurance fund that had $45.2 billion at the end of the in the second quarter.

Scary to think that bigger banks like Wachovia and WaMu are in such deep trouble that they’re offering way above market rates on CDs. (hat tip CR)  It’s a replay of the S&L crisis.  Banks desperate for capital pay up for the one funding source that comes with a government guarantee: retail deposits.

Scary to think that WaMu has $140 billion of insured deposits, three times what’s left in FDIC’s Deposit Insurance Fund.  IndyMac had only $18 billion of insured deposits, and will cost the DIF almost $9 billion.  If WaMu goes bust, a much smaller loss rate would be enough to wipe out the DIF.

Get ready for another bailout.

Suez, America-style

Reuters Staff
Aug 26, 2008 04:59 UTC

It’s no longer any secret that the USA is deeply in hock to foreign governments, particularly China, Japan, the Petro States, and increasingly Russia. We have two very large deficits that have to be financed: a trade deficit and a fiscal deficit. Americans buy more than they sell. We consume more than we earn. To keep the process going, Americans and our government have to borrow money from abroad. At rates that are totally unprecedented.

As I.O.U.S.A. notes, foreigners today own a larger share of American society than ever before. (During WWII the U.S. government ran up much larger deficits as a percentage of GDP, but these were financed primarily by American citizens themselves.)

This leaves our economy incredibly vulnerable. But how? It’s easy to understand military vulnerabilities, not so easy to contemplate economic vulnerabilities.

The 1956 Suez crisis has much to teach us…..


Movie Review: “I.O.U.S.A.”

Reuters Staff
Aug 22, 2008 04:56 UTC

Who knew someone was working on a documentary following David Walker’s Fiscal Wake-Up Tour? I interviewed Walker for an article about the Tour earlier this year, during the period when much of this movie was shot.

Anyway, tonight there was a special screening at 8PM in select theaters across the nation (see the Trailer at the bottom of this post). All the theaters in Manhattan were sold out. So I schlepped to the nearest theater with seats, out in Queens. The showing promised a live talkback broadcast into the theater from Omaha where David Walker, Pete Peterson, Warren Buffett and the heads of AARP and the CATO Institute all spoke. The talkback was disappointing: it was hosted by Becky Quick (the Squawk Box anchor on CNBC) who fumbled her lines, asked poor questions, and was unable to keep the panelists on topic. But more on that later.

How was the movie? Good, but incomplete. Kudos to the director for not dumbing down the subject too much for the audience. There was substantive discussion about

  • the current budget deficit,
  • about the unfunded liabilities for Medicare and Social Security that threaten to wipe out ALL government spending (except those two and interest on the federal debt) by 2030,
  • about poor personal savings rates and how that leads to dependence on foreign creditors to finance our way of life and
  • about the trade deficit itself, which leads to still more dependence on foreign largess.

All of the above included some ingenious animation that explained the math behind the issues very clearly. For this reason alone, everyone who pays taxes should run to their movie theater to see this when it hits wide release Friday. Also the trade deficit section brought in Warren Buffett to narrate his parable about Thriftville vs. Squanderville, which I’ve published under the Tutorials section of this blog for some time. Audiences will find that appealing as well.

But the movie was incomplete……


Foreigners push back….

Reuters Staff
Aug 20, 2008 14:49 UTC

How often does the NY Post beat the Journal and the Times to a good financial story? Today they did, noting that Lehman tried to secure $5 billion of rescue capital from South Korea, but failed to do so:

Lehman Brothers’ embattled Chief Executive Dick Fuld nearly struck a deal to raise almost $5 billion from South Korean wealth funds and institutions but the pact disintegrated, according to sources familiar with the matter.

That’s the meat of the article. No word on why talks broke down, what Lehman was offering to sell the Koreans, etc.

Though the article is short on detail, it remains very interesting thematically. Sovereign wealth funds that rode to the rescue in the early part of the credit crunch have suffered some brutal losses as I wrote in Post Infusion Blues (see bottom of this post for a nifty chart). Once bitten, twice shy: it’s likely that the Lehmans, Merrills, Fannies and Freddies of the world—who are in desperate need of MORE rescue capital—are finding that foreigners aren’t willing to write any more checks.

Speaking of Fan and Fred, the WSJ published a front page story today with this crucial paragraph:

[Freddie] had to pay hefty interest rates [in an auction of its debt yesterday]….Five-year notes were priced to yield 4.172%, or 1.13 percentage points above yields on safe Treasury notes, the highest “spread” Freddie has ever paid on such debt.

Also this: in this latest auction, Europeans/Asians bought 41% of Freddie’s debt, which is down from an average of 51% last year.

Among the largest buyers of Fannie and Freddie debt are foreigners recycling the dollars they collect as part of their trade surpluses. This is the ultimate source of many of the dollars flowing into the U.S. mortgage market. We buy foreign goods, foreigners get our dollars in return and then have to invest them somewhere. Many end up invested in so-called “agency” bonds; the agencies (Fan, Fred are the largest) use this cash to fund home loans.

If foreigners stop buying agency debt, the capital available to finance housing will be reduced significantly, and mortgage rates will spike.  Anyone who thinks the fall in housing prices can’t get much worse hasn’t considered what will happen if mortgage rates go to 9-12%. The trend isn’t looking good lately as you can see below………


Lowenstein Lecture

Reuters Staff
Aug 17, 2008 05:12 UTC

In researching my last post, I found this video. It’s long, but worth it. One of the best summaries of the state of the American economy that I’ve seen or read.

Skip the introduction…

Summer Reading

Reuters Staff
Aug 15, 2008 17:28 UTC

I had a chance to catch up on some reading while in South America. Two books that may be of interest to readers of this blog include Roger Lowenstein’s new book While America Aged on the various pension crises facing America and Martin Mayer’s older book The Greatest-Ever Bank Robbery on the collapse of the savings and loan industry in the late 80s.


MBA’s Kempner out, replacement a doozy

Reuters Staff
Aug 13, 2008 02:28 UTC

This is old news at this point, but since I’ve been on vacation (a few pics here), I thought I’d note it just the same.

A few days after we published our expose of Jonathan Kempner’s poor performance as CEO of the Mortgage Bankers Association, he announced his resignation. He was most likely on his way out already, but I got word from the inside that the timing may have been accelerated in order to save those concerned some embarrassment.

Last week the Washington Post published a piece noting that deal volume in the D.C. commercial real estate market has collapsed this year. With vacancy rates ticking up and more space coming online, rents are sure to decline as well. Taken together, these trends demonstrate the sheer stupidity of Kempner’s choice to “invest” MBA’s rainy-day assets in a building purchased at the top of the market.

It would be interesting to know what kind of exit package Kempner received. One source said it will be a year’s pay, or more than $1.0m.

Making the story more interesting is MBA’s choice to replace Kempner: John Courson.


Back from vacation

Reuters Staff
Aug 11, 2008 16:53 UTC

Hello again all. I’m back after 3 weeks in South America on the Amazon River and sailing the Galapagos Islands. The Amazon was fantastic, though the wildlife in Galapagos made for better photographic opportunities:





Along the way, we stumbled upon a sea lion in labor. We watched her give birth.  Amazing but poignant: the baby was still-born.

And, shortly, an update on the situation at the Mortgage Bankers Association, where the CEO resigned, a few days after OptionARMageddon exposed his poor performance.