Lunchtime Links 1-28

Jan 28, 2010 17:49 UTC

Bernanke didn’t have staff support on AIG bailout (Ed Harrison) Ed has a copy of a letter from Rep. Darrell Issa, in which he claims Fed staffers weren’t keen on bailing out AIG. He wants another subpoena.

Fed as chump or Fed as crony (Yves Smith) Long form thoughts about why Tim Geithner’s defense yesterday was troubling.

Bernanke seen winning second term (Felsenthal, Reuters)

FOMC statement, redacted (David Merkel) Picking apart the Fed’s FOMC Statement yesterday. The headline is that they still see rates staying low for an “extended period,” which is problematic language/policy in my opinion because it will lead to bank/investor complacency. Quantitative easing, i.e. printing electronic money to buy MBS and other paper, will end on schedule at the end of March. Look for it to pick up again in the future. To fight off deflation, the Fed will be forced into multiple rounds of quantitative easing….just like the Bank of Japan.

Bono invests in Yelp (Bits) Elevation Partners, the VC firm funded by U2′s lead singer (among others), is committing $100 million to the local search site. No word on the % stake the money will buy, but $75 million will be paid to existing shareholders to cash them out. Good deal for Yelp? We know that they turned down a $500m offer from Google recently. If Elevation is getting anything less than 20% of the company for this investment, it would value the company at greater than $500 million.

Prime Minister: Greece victim of “rumors” (Bloomberg) Yeah, uh huh. And Wall Street was unfairly maligned by short sellers worried about capital shortages in fall ’08.

Freddie delinquencies increase sharply (CR)

Divided SEC makes climate another “risk” (Scannell/Hughes, WSJ) Investors aren’t clamoring for this information in 10-Qs. The Republican commissioners have this one nailed: “a breathtaking waste” of the SEC’s time/resources and a foolish, misguided gesture to put the SEC’s imprimatur on an agenda about which it has zero expertise.

How to report the news (YouTube) Brilliant.

Academics fight rise of creationism at universities (Guardian) I had no idea this was a problem outside of the American bible belt.

VIDEO: Dump truck destroys pedestrian bridge in Turkey (Break) A guy on the bridge sees trouble coming but freezes…..doesn’t think to run back….

Jon Stewart on Obama’s war against bankers…

The Daily Show With Jon Stewart Mon – Thurs 11p / 10c
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Scientists use the word “theory” in a different manner from its general usage. In general usage it often means a guess about how something works. But in science it is used to describe an explanation that is strongly supported by evidence – no guessing allowed. An explanation without sufficient rigorously tested evidence is called a hypothesis or conjecture. It takes a lot of proof for a hypothesis to be called a theory by the scientific community. For example, the notion that if you drop something it falls to the earth is called the Theory of Gravitation. Do you doubt that anything will drop if you let it go? Evolution is called a theory because scientists have the same level of confidence in it based on an abundance of evidence of many kinds. Biology simply cannot be explained without evolution.

As Judge Jones, the Republican and devoutly Christian judge who presided over the Dover School Board case asserted, creationism simply does not merit being considered side by side with the Theory of Evolution. It has no scientific basis at all. Creationists start from a need to believe in a literal interpretation of Genesis and they desperately seek evidence to support their ideas. The mainstream Christian faiths – Catholicism, Anglicanism, Methodism etc – long ago dispensed with a literal interpreation of Genesis and have no trouble embracing evolution.

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Lunchtime Links 1-15

Jan 15, 2010 16:00 UTC

Consumer protection agency in doubt (Paletta, WSJ) Chris Dodd appears willing to trade the CFPA in exchange for Republican support of his financial reform bill.

Manhattan apt rents drop 9.4% in Q4 (Gittelsohn, Bloomberg) Great stimulus for the NY economy.

Volcker calls for support in fighting bank lobby on reforms (Harper, Bloomberg) Looking to get a copy of this speech to post later today.

Can online comments affect your credit? Yup. (Sandberg, SF Chronicle) More an oddity than a trend, but interesting nonetheless.

CBO: Fannie/Freddie cost government $291 billion in ’09 (Golobay, HW) The full report from CBO is here. CBO estimates the total cost of subsidizing Fan/Fred will only be $99 billion more through the end of 2019. Meanwhile most of the housing stock in the U.S. will end up on the government’s balance sheet.

JP Morgan loan losses overshadow higher profit (Comlay, Reuters) The bank reported earnings that beat analyst estimates, but the reasons for the beat — lower taxes and lower bonus accruals in JPM’s investment bank — are considered “low quality” because they aren’t sustainable sources of profit. And lower bonus accruals may sound good from a populist point of view, but they don’t really help anyone other than bank shareholders who get to retain the earnings.

Monologue wars (Gawker) Late night hasn’t been this interesting in years. The 10@10 segment with Jimmy Kimmel on Leno is gold. In related news, Conan’s show is for sale on Craigslist.

Roger Ebert vs. Rush Limbaugh (SunTimes)

The Exorcist (imgur)

Windpipe transplant renews Belgian’s life (AP) A Belgian woman has a working windpipe after surgeons implanted the trachea from a dead man into her arm, where it grew new blood vessels before being transplanted into her throat.

For the next time you’re playing H-O-R-S-E. And the handshake at 0:18 is possibly more impressive than the shot….

Lunchtime Links 12-21

Dec 21, 2009 17:00 UTC

Hedgie Tepper on pace to make $2.5 billion this year (WSJ) The moral hazard trade has a new face. Tepper bet big that government would rescue bank shareholders and creditors. He was right. Can we blame him? He didn’t make the rules; he just played the game better than the rest once they were made.

Why can’t Americans make things? Two words: Business school (Scheiber, New Republic) For 30 years we’ve been focused on teaching finance, not manufacturing…

At top subprime lender, policies were invitation to fraud (Heath, HuffPo)

Fannie/Freddie suspend foreclosures for holidays (AP) Citi, JP Morgan and BofA have followed suit.

Goldman threatens to move some London staff to Spain (Evans, Independent)

Citadel files for bankruptcy (Spector/McBride, WSJ) The syndicator of Don Imus’ morning show is the latest radio company to struggle with debt. See also Clear Channel, Emmis and Regent….

GE uses UK libel law to gag doctor (Gerth, ProPublica) Ironic: GE wants to shut up a doctor for saying GE suppressed information. (ht, NG)

Trader Joe’s does something awesome (Reddit) Reminds me of all the guys out on bicycles Saturday night delivering food in NYC. I’m from Chicago so am not intimidated by windy Winter weather. Still, Saturday night’s storm was impressive. Wind so bad in the building canyons that you couldn’t walk more than a block or two. So everyone ordered in. No one was on the street besides food delivery guys. I wish Lou Dobbs could have seen it….

Anonymous dry cleaner also in holiday spirit (imgur)

Snoop Dogg invests in inner-city football (AP) Snoop Dogg, 38, launched the [youth] league in 2005 with $1 million of his own money after noticing that much of urban Los Angeles had no football for boys ages 5 to 13. He’s since invested about $300,000…The league now has 2,500 kids enrolled.

For anyone else who’s ever sung Handel’s Messiah….(ht CSQT)


“Tepper bet big that government would rescue bank shareholders and creditors. He was right. Can we blame him? He didn’t make the rules; he just played the game better than the rest once they were made.”

did Tepper LOBBY for the bailouts? did Gross?

Evening Links 12-16

Dec 16, 2009 22:20 UTC

Fed repeats “exceptionally low” for “an extended period” (Fed statement) The Fed maintains that it isn’t raising rates for the foreseeable future, but repeated that it plans to end MBS asset purchases by April next year. Too bad we can’t get a surprise rate hike in order to chase risk back out of credit markets…

Wells’ CLO deal called “landmark” (Paulden, Bloomberg) The return of CLOs would be the latest sign that Wall Street is dancing again.

Big decision looms on Fannie and Freddie (Timiraos/Hagerty, WSJ) Suggests Obama could expand his commitment to Fannie and Freddie beyond $400 billion while he’s still able to unilaterally. If he waits till next year, Congress would have to approve.

Man of the Year: Ben Bernanke (Time) Ha! Ben should have said thanks but no thanks. Ten years ago Time christened Rubin/Greenspan/Summers as The Committee to Save the World. In the fullness of time, all have been proven failures. Time’s endorsement is final confirmation that Bernanke too is a failure.

Norway raises rates (Kremer, Bloomberg) More fodder for yesterday’s Norway thesis. Higher rates make for a more attractive currency…

Some debt-laden graduates wonder why they bothered with college (ABC News) Full of choice quotes: “You’re led down this path of needing to go to college,” [says one indebted grad]. “The college diploma is the new high school diploma.”

Spend more. Get less. The worst fun city in America (Wachs/Eskenazi SFWeekly)

The year in photos, part 1, part 2 and part 3 (The Big Picture) More from the best photo blog on the web.

Canadian ice-fishing…


Agree with Andrew! A state school will be fine for most people.

Too many doors are closed if you have no degree. It’s a screening tool used by most employers. You *probably will not* get a white collar job with any fortune 500 company without a college degree or a job in any state or federal bureaucracy. Without a college degree, you had better go into business for yourself, learn a trade like plumbing or data networking, work on a rig or as a miner, etc. if you want to make good money.

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Behind Freddie’s “profit,” rising NPAs

Aug 8, 2009 15:38 UTC

Late yesterday Freddie Mac surprised markets by reporting a profit and by not requesting additional bailout money from Treasury.  Before we celebrate, however, let’s consider a few revealing footnotes from the company’s quarterly filing.  But first, some key financial ratios.

As you can see, non-performing assets are still rising quickly.  (Click table to enlarge in new window)


As for the filing footnotes, we see that Freddie’s profit line got a big assist from FASB’s new fair value accounting rules:


… the company recognized $10.5 billion in total other-than-temporary impairments of AFS securities. Included in this amount were $2.2 billion of credit-related impairments recognized in earnings …. Also included in total other-than-temporary impairments were $8.3 billion of non-credit related impairments that were recognized in accumulated other comprehensive income (loss) (AOCI).


During the first quarter of 2009, prior to its … adoption of the new accounting standard, the company recorded $7.1 billion of security impairments on its AFS securities in earnings, reflecting both credit-related and non-credit-related impairments.

Overall, accounting changes increased equity $5.1 billion according to Freddie..  Higher equity equals higher net worth.  As long as the company maintains positive net worth, Treasury doesn’t have to provide more bailout funds.  Freddie’s total bailout to date, by the way, is $51.7 billion.

What FASB giveth, it can also taketh.  Revisions to other accounting rules will require Fred to bring off balance sheet assets back onto the balance sheet:

Upon the adoption of SFAS 166 and SFAS 167 [on 1/1/10], we will be required to consolidate [off balance sheet assets] in our financial statements, which could have a significant impact on our net worth. Such consolidation could also significantly increase our required level of capital under existing capital rules …

I doubt the significant impact is going to be positive.  And remember, whenever Freddie’s net worth goes negative, that triggers another bailout payment from Treasury.

As for any talk that Fan and Fred will be wound down over time, that’s certainly not in the near future.  You can see in the table above that the company’s portfolio of mortgages is not shrinking.*


*Including non-Freddie securities, the total mortgage portfolio would have shrunk 0.3% Q2 vs. Q1.


Rolfe: I enjoy reading your postings!
I thought Fannie and Freedie have balance sheets and guarantee Agency RMBS securities. What constituits their off balance sheets assets? Also, because they are in Conservativeship, are the taxpayers also ultimately on the hook for the Agencies off balance sheet assets/liabilities?

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