McCain Is A Clunker, Can I Trade Him In?

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graphic by twolf

graphic by twolf

John Sidney McCain III, the blue blooded husband of a beer heiress, has decided he will be the Republican face of opposition to continuance of the wildly successful Cash For Clunkers program. The man who cannot remember how many houses he owns is going to kill the program helping regular people put a decent and efficient new car in front of their humble middle class homes. From FOX News:

Fox has learned that Sen. John McCain, R-AZ, will oppose any move to take up the House bill. Around here, we call that a filibuster.

McCain told Fox earlier today, "I not only wouldn’t vote for the extra two billion, I was opposed to the initial billion. "

McCain, the 2008 GOP presidential nominee who ran as a deficit hawk, said, "Within a few weeks we will see that this process was abused by speculators and people who took advantage of what is basically a huge government subsidy of corporations that they already own. "I can’t imagine that any taxpayer of America would have thought that the TARP, the financial recovery money, would be used now to subsidize the sale of automobiles in America."

This is a pile of bunk; John McCain is not a deficit hawk, he is a narcissistic publicity hawk and he hasn’t had enough lately and saw an opening. What is really rotten, however, is he is trying to take down the one program that has demonstrated immediate and tangible systemic benefits. In other words, the precise stimulus the economy is dying for.

Wildly successful is almost an understatement for the Cash For Clunkers program as Marcy indicated in this post. Quoting from the official website:

According to www.CashForClunkersInformation.org, 79% of clunkers being traded in so far are SUVs, trucks and vans with over 100,000 miles and most are being replaced with new passenger vehicles. The average age of a trade-in model is almost 13 years old, and the average odometer reading is approximately 138,000 miles. The most popular clunker trades are Chevrolet, Ford and Dodge and 84 percent of the new vehicles purchased are passenger cars.

This is economic stimulus at its finest. Customers are flocking to dealerships, dealerships are selling cars, service bays are active, manufacturers are moving inventory, financing shops are making loans, accessories are being sold, manufacturing suppliers are being paid and kept in business – it is one heck of an economic spur to a major sector of the economy and a fantastic lead in to the critical opening of the traditional new model year that annually starts in Read more →

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Speed Freak$: Wall Street’s Fast & Furious MOTUs

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Every day there is a new reminder that the only thing thing that changed on Wall Street as a result of the financial meltdown is that the "too big to fail" entities got bigger through consolidation and they now have all of the taxpayer’s wealth instead of just most of it. Booyah for progress.

From the New York Times, here is today’s installment of hyper-greed:

It is the hot new thing on Wall Street, a way for a handful of traders to master the stock market, peek at investors’ orders and, critics say, even subtly manipulate share prices.

It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

Kevin Drum has more on this. So does Masaccio.

I guess that is how Goldman Sachs is set to pay out mega-billions in bonuses to the very narcissistic pricks who took us down the economic sinkhole to start with. All while their fellow Masters Of The Universe crank up the same big shitpile that led to the crash.

The cliche is to say our economy is built on a house of cards. Not sure that is right anymore; a house of cards would at least have, you know, cards. Heck air may be too substantive, we are down to Goldman Sachs’ electrons and vapor.

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Ponzi Nation: Sports Talk “Webio” Edition

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I’ve been remiss in my tracking Ponzi schemes of late, failing to note this scheme whereby a guy created a Ponzi to fund his Chicago-based sports talk "webio."

The Securities and Exchange Commission today obtained a court order halting an $11 million Ponzi scheme in which a Chicago-based promoter who is a convicted felon promised investors unusually high returns from purported investments in payday advance stores.

The SEC alleges that David J. Hernandez, who was convicted in 1998 for wire fraud arising from his previous employment at a bank, sold "guaranteed investment contracts" through his company that, unbeknownst to investors, was actually out of business. Hernandez promised returns of 10 percent to 16 percent per month and made false and misleading statements about his background, the use of investor proceeds, and the safety of the investment. Among Hernandez’s illicit uses of investor funds was to start up a Chicago sports-talk Web site called "Chicago Sports Webio" featuring Chicago-area sports figures and reporters.

"Hernandez bilked investors out of funds that he led them to believe were being invested properly and safely," said Merri Jo Gillette, Director of the SEC’s Chicago Regional Office. "Instead, he was paying investors in Ponzi-like fashion to keep his scheme afloat while he used their money for personal expenses and to start an online sports talk venture."

 But with two more Ponzis shut down today, I felt I owed you an update.

Michael Regan’s fake MBA:

The SEC alleges that Michael C. Regan and his firm, Regan & Company, fraudulently obtained at least $15.9 million from dozens of investors nationwide by selling securities in his now defunct River Stream Fund. Regan provided fake account statements and tax forms to investors showing artificially inflated account balances and concealing that he did no securities trading at all for several years and suffered substantial losses on investments that he did make. Regan falsely claimed that he earned an MBA from a major New York university and promoted a phony track record of successful securities trading and investment expertise. Regan is not registered as an investment adviser with the SEC or any other securities regulator.

Advanced Money Management:

The SEC alleges that Moises Pacheco, Advanced Money Management, Inc. (AMM), and Business Development & Consulting Co. (BD&C) raised $14.7 million from more than 200 investors over a 3½-year period, acting as investment advisers to the five self-described hedge funds — AP Premium Value Funds I through IV and Capital Read more →

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Auto Decline Not Bringing Local Media Down–as Much as It Could Have

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Since I elaborated on my auto industry/news industry analogy the other day, I wanted to point to this article describing how the auto industry’s woes haven’t brought down local media as much as it might have. As I’ve been pointing out for some time, auto advertising accounts for a huge chunk of local advertising.

Local traditional media — television, radio and newspapers — are more reliant on automotive advertising than any other medium. In 2008, TV stations got 23 percent of their total advertising from auto, followed by local newspapers at 17 percent and radio stations at 14 percent, according to a Sanford C. Bernstein & Company report released this month.

And the amount of advertising manufacturers, co-op, and individual dealers are buying has declined by numbers that almost match the decline in auto sales.

Local automotive ads come from three sources: Companies like Ford and Toyota take out some ads on local television to promote their new models, in addition to their nationwide ads. Local dealers also pool money, helped out by the corporation, to promote their brand of cars regionally. Then, each dealership takes out television, radio and newspaper ads to list its autos for sale or special discounts.

The ads from automakers — running nationally and locally — fell 19 percent in the first quarter of 2009, compared with a year earlier, according to research firm TNS Media Intelligence. Ads from dealer associations fell 62 percent, while ads from the individual local dealers declined almost 40 percent.

[snip]

Auto advertising in local media declined more than twice as fast as it did in national media in 2008 compared with 2007, according to Bernstein. But it has been so bad already this year that local media managers say they believe they have absorbed much of the pullback in auto advertising.

But the recent further cutbacks associated with the Chrysler and GM bankruptcy have not hit local media still further, largely because the dealers that got closed really weren’t selling that many cars, and because the ones that are left are increasing their advertising. Plus the dealers that shifted into used sales are re-introducing themselves to consumers.

Obviously, the auto industry is so big that it’s linked with everything. That’s particularly true, however, of the auto industry and media. This is an interesting snapshot of how that’s working out.

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American Heroes, American Union Members

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Remember the US Airways crew that pulled of an amazing landing in the Hudson and safely evacuated the plane?

And remember that ship crew that successfully fought off pirates?

Yesterday, three members of the International Union, Security, Police and Fire Professionals of America joined these men and women as union members whose training prepared them to perform heroically when it mattered most.

ThinkProgress spoke to SPFPA Organizing Director Steve Maritas, who said that the officers working at the museum worked for Wackenhut Services, Inc. He stressed that because of the intense security environment in Washington, DC, these men and women go through extensive training:

These guys are security police professionals, which is a whole different level of training compared to security guards. … We represent approximately 5,000 officers around the area, including the Pentagon and the Ronald Reagan Building. It’s a tragedy, what happened. […]

Because of the high-profile buildings that they represent, they would continuously provide training to these officers. … When they train these guys, they’re trained on more of a terrorism level.

Tragically, Stephen T. Johns gave his life while protecting the visitors and employees of the Holocaust Museum. And he might not have died had union demands that these guards receive company-issued protective vests been heeded; Johns took a bullet in his torso.

This is our third reminder this year that unions do more than fight for middle class wages. They fight for the training that prepares men and women to do their jobs well. They help to ensure the safety of these men and women–and through their work, the safety of all of us.

We got another reminder yesterday of the real dangers presented by home grown right wing terrorism. But we also got another reminder that a lot of the heroes of these stories are union members, working to keep us all safe.

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Chamber of Commerce Bids “Campaign for Free Enterprise” to Attack the Bailouts It Doesn’t Like

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Josh is right–Jeanne Cummings’ report that the Chamber of Commerce is launching a "Campaign for Free Enterprise" seems to have regurgitated the Chamber’s press release uncritically:

The Politico has a report on a proposed plan from the US Chamber of Commerce to spend up to $100 million on opposing President Obama’s various economic, energy and health care reforms. But it’s a bit hard to distinguish the Politico article from a Chamber press release. Here are some nuggets from the article itself …

As the Obama administration encroaches deeper into the private sector and Congress contemplates more regulations, the U.S. Chamber of Commerce is launching a multimillion-dollar campaign to defend the free market system.

…

Taken together, the government could soon determine who gets a mortgage, which cars
consumers can buy, the type of treatments patients will get and how many credit cards a person can carry.

The government won’t let me buy a Toyota? Do I have to buy a GM car? Really?

 I’m guessing this claim came right from the press release, too:

The administration’s aggressive action on so many fronts has put the business community on defense in a way not seen in more than a decade — and it’s losing more often than it’s winning.

But in addition to questioning whether the business community is losing more than it’s winning–and whether we’ll still be able to buy Toyotas–I’d have liked Cummings to ask one more critical question: about timing. The Chamber of Commerce did not launch this campaign when Bush took an even bigger stake in AIG. It did not launch this campaign when the Federal Government dumped billions of TARP dollars to keep the banking system afloat. In fact, the Chamber’s Tom Donohue all but admits he’s happy that the bankers got to suck at the federal teat for the last nine months.

“Dire economic circumstances have certainly justified some out-of-the-ordinary remedial actions by government,” said Chamber President Tom Donohue, referring to the bank bailouts and the $787 billion economic stimulus program.

What bugs Donohue, apparently, is not the possibility that corporations can be massive recipients of federal welfare. What appears to bother him is that the federal government would ask something else in exchange or–shockers!!–compete with the private sector in something like health care (buzz me when Donohue starts complaining that FedEx has to compete against the postal service). 

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Is Obama Fixing to Own Some Banks?

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The other day, I suggested that Obama’s principles of government ownership sounded like they were designed for more than just GM.

There’s evidence to support that suggestion in this reasonably good David Sanger article on the GM bankruptcy.

In interviews in recent days, Mr. Obama’s economic team said it anticipated [political pressues regarding business decisions related to companies the government owns], and had moved to cut them off early.

“It started right around the time of the bank stress tests,” said Rahm Emanuel, Mr. Obama’s chief of staff, in an interview on Monday. During one of the president’s daily economic briefings, Mr. Emanuel added, “he said that taking over companies like this is a big deal, and that no president has ever faced anything like this before. And he said he wanted to see some rules of the road about how the government should act” when it suddenly becomes the biggest shareholder in the market.

Mr. Obama clearly wanted protection: a set of principles he could hand to angry members of Congress, campaign contributors or executives to explain why he would not call Fritz Henderson, G.M.’s chief executive, to discuss whether an engine should be made in Saginaw or Shanghai.

The result was an interagency task force informally called “The Government as Shareholder,” headed by Diana Farrell, the deputy director of the National Economic Council and formerly the head of the McKinsey Global Institute, the research arm of McKinsey & Company.

It was Ms. Farrell’s report, delivered to the Oval Office fewer than 10 days ago, that laid out the principles that Mr. Obama described on Monday.

The White House insists the principles will apply equally to the government’s investment in the American International Group, the fallen insurer, or in Citigroup and other banks that the government has rescued. [my emphasis]

Sanger doesn’t seem to get the implication of Rahm’s comment. Rahm tells us these principles–principles the government will use with companies it owns–came up not during auto task force discussions, but during the bank stress tests.  That means the conversation about socialism how big a deal it is for the government to own companies came up in the context of owning banks, not owning car companies.

Sure, we already own an insurance company and Freddie and Fannie. Sure, maybe the reference to Citi is a very pointed reference. 

But it sure seems like these principles suggest we’re going to be owning a bank in the near future, to go along with GM and AIG.  Read more →

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Obama “Looks Forward” on Financial Fraud, Too

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Obama just issued a signing statement to the bill establishing the "Pecora Commission," mandated to investigate the financial meltdown. The statement seems to signal a desire to "look forward" on financial fraud, in the same way he continues to try to "look forward" on torture an other abuses of power.

The complete statement reads,

Today I have signed into law S. 386, the "Fraud Enforcement and Recovery Act of 2009." This Act provides Federal investigators and prosecutors with significant new criminal and civil tools to assist in holding accountable those who have committed financial fraud. These legislative enhancements will help the Department of Justice to combat mortgage fraud, securities and commodities fraud, and related offenses, and to protect taxpayer money that has been expended on recent economic stimulus and rescue packages. With the tools that the Act provides, the Department of Justice and others will be better equipped to address the challenges that face the Nation in difficult economic times and to do their part to help the Nation respond to this challenge.

Section 5(d) of the Act requires every department, agency, bureau, board, commission, office, independent establishment, or instrumentality of the United States to furnish to the Financial Crisis Inquiry Commission, a legislative entity, any information related to any Commission inquiry. As my Administration communicated to the Congress during the legislative process, the executive branch will construe this subsection of the bill not to abrogate any constitutional privilege.

Which affects the following section, laying out the Commission’s investigative power. 

(d) Powers of the Commission-

(1) HEARINGS AND EVIDENCE- The Commission may, for purposes of carrying out this section–

(A) hold hearings, sit and act at times and places, take testimony, receive evidence, and administer oaths; and

(B) require, by subpoena or otherwise, the attendance and testimony of witnesses and the production of books, records, correspondence, memoranda, papers, and documents.

(2) SUBPOENAS-

(A) SERVICE- Subpoenas issued under paragraph (1)(B) may be served by any person designated by the Commission.

(B) ENFORCEMENT-

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Geithner NY Fed & Congress Knew About AIG Bonuses All Along

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It is not just torture hearings on the training table this morning, there is a plateful of AIG/Bankster/Bailout fun on tap too. At 10:00 am EST, the House Oversight and Government Reform Committee will hold a hearing on “AIG: Where is the Taxpayer Money Going?”.

In advance of the big hearing, David Cho and Brady Dennis in the Washington Post have a significant article out this morning confirming what any sane mind has thought all along, namely that the government and the Fed were way deeper in the muck of the AIG bonuses, and knew full well about the issue, long before they have admitted:

Documents show that senior officials at the Federal Reserve Bank of New York received details about the bonuses more than five months before the firestorm erupted and were deeply engaged with AIG as well as outside lawyers, auditors and public relations firms about the potential controversy. But the New York Fed did not raise the alarm with the Obama administration until the end of February.

Timothy F. Geithner, who became Treasury secretary early this year, was the head of the New York Fed when it became aware of the bonus details. But his name is not among those of senior New York Fed officials mentioned in the summaries of phone calls, correspondence and other documents obtained by The Washington Post.

Those documents also illuminate who in the government, beyond the New York Fed, knew what about the bonuses at AIG’s most troubled unit, and when.
…
By Sept. 29, the bonus matter first appeared on the radar of the New York Fed, which was designated as the primary contact for AIG, documents show. Senior officials from the New York Fed met with AIG officials to discuss the compensation plans in place at Financial Products, whose risky derivative contracts had brought the insurance giant to the brink of collapse.

AIG e-mailed officials at the New York Fed copies of the company’s compensation plans, which detailed bonuses and retention payments, including those at Financial Products, documents show. The issue arose in scores of meetings and conference calls over the ensuing months. AIG also disclosed its retention programs in public filings.

Weeeeeeee! Another shocking instance of gambling going on at the casino. Or not. Actually, when we first learned of the Semtex laden AIG Retention Contracts there were immediate questions as to how it could be that the Fed and the rest of government had no idea of the explosive potential. Now that we know they knew, it sure is hilarious that Treasury Secretary Tim Geithner, in mid-March 2009, tried to devise a laughably bogus plan to fix the very same problem he apparently full bore ignored in October 2008 at the previous job where he was supposedly the smartest kid in the room.

Of course, it wasn’t just the New York Fed, and their purportedly detached head, that have completely misrepresented their depth of knowledge of the pending AIG Bonus Scandal. Congress did too (and Read more →

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Stressing Teh Kitty

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The bank stress test results are in! Wonderful news, the economy is totally groovy man! Well, except not. For what are being hailed as great results, there are some disturbing numbers. Said stress tests of the 19 largest U.S. banks show they will need a total of $74.6 billion to withstand a deeper recession. For some reason, the NYT seems to think this is good news:

Federal regulators told the country’s 19 largest banks that they must raise $75 billion in extra capital by November, a more upbeat verdict on the health of the financial system than the industry had feared just two months ago.

Ten of the 19 bank holding companies deemed “too big to fail” by the Obama administration will be required to raise additional capital, according to the results of the government’s stress tests, released late Thursday afternoon. But the 10 banks will have to raise much less capital than some analysts had expected as recently as a few days ago.

Citigroup must raise $5.5 billion in new capital, on top of converting $45 billion in rescue funds into ordinary stock, which would give the United States ownership of 36 percent of Citi.

Bank of America must raise $34 billion, but it is likely to resist achieving all or some of that by converting its $45 billion in bailout money into common stock. Instead, the bank is expected to fill its capital hole by selling off smaller divisions, a stake in China Construction Bank and other asset sales.

The stress tests are aimed at estimating how much each bank would lose if the economic downturn proved even deeper than currently expected. Under the worst-case scenario — an unemployment rate of 10.3 percent, an economic contraction of 3.3 percent this year and a 22 percent further decline in housing prices — the losses by the 19 banks could total $600 billion this year and next, or 9.1 percent of the banks’ total loans, regulators concluded. Losses to the banks’ loan portfolios alone could total $455 billion this year and next.

“There is a reassurance in clarity," Treasury Secretary Timothy F. Geithner said at a news briefing on Thursday afternoon.

A "reassurance in clarity". Thanks for that Mr. Geithner. Bank of America Inc – $33.9 billion; Wells Fargo – $13.7 billion, GMAC – $11.5 billion, and Citigroup Inc needs $5.5 billion. Good thing it wasn’t bad news I Read more →

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