reality-based educator

As much as I feel for some of the people who are facing foreclosure because they can't afford their resetting mortgages, I'm not sure a government bail out helps in the long run:

LONDON (Reuters) - World stocks surged on Friday on hopes the U.S. government and central bank will act to alleviate a crisis in subprime, or poor credit quality, U.S. mortgages and ease a global bank lending squeeze the problem has triggered.

...

Markets were also boosted by speculation Federal Reserve Chairman Ben Bernanke may signal a further easing of policy in a speech on "Housing and Monetary Policy" later on Friday -- markets are already betting the U.S. central bank will cut interest rates at its September 18 policy meeting.

"It's expected that Bush will say something on the lines that the government will help sub-prime mortgage owners who are in danger of losing their houses. That will be seen as positive, limiting losses in the property sector," Tobias Thygesen, senior analyst at Danske in Copenhagen.

"Markets are (also) expecting the Fed to cut by 75 basis points by the end of the year, unless Bernanke takes issue with current market pricing."

Some analysts said a coordinated approach to the mortgage hiatus from White House and Fed officials could be key.

"The market is betting on Ben Bernanke coming up with clear-cut statements that if the crisis intensifies he will reduce base rates," said Heino Ruland, a strategist with German brokerage Steubing.

"But with the Bush administration stepping in, he will be less forced to do so. If it's a combined effort, then that's a reason to be bullish."

The markets love the bail out, of course, because it means less problems for the credit market which means less problems for Wall Street.

But won't bailing out the people who bought homes they couldn't really afford and bailing out the investors who bought the mortgages of people who bought homes they couldn't really afford just send the message that risky and/or stupid behavior will be bailed out by the Fed and the government in the future if enough political pressure is ratcheted up?

I just don't see how a bail out now won't cause more stupid behavior in the future which will in turn mean more government bail outs. Not to mention that, as Herb Greenberg says, home prices are artificially inflated and need to come down to get back into a historical range. Bail outs will just prolong the real estate bubble.

Enough with the bubbles.

Mike Huckabee, former governor of Arkansas and current GOP presidential candidate, is intelligent, articulate, funny, and self-deprecating. He plays bass, loves the Stones and handles the media well.

I have never understood why the GOP faithful have basically been ignoring him for much of the campaign, given that he is also a bona fide conservative, he's born again, he doesn't believe in evolution and yet he could certainly win a general election by appealing to independents because he doesn't come across as some scary right wing nut case (even though he is.) Let's face it, Huckabee is hard to dislike.

And yet, up until the Iowa straw poll, Huckabee was down in the low single digits while the GOP faithful held their nose in support of Rudy ("Sure he's for abortion and gay rights, but at least he wants to bomb Iran and stay in Iraq until we get the job done...") or hoped Fred Thompson would turn out to be their conservative Moses. Huckabee looked like he would never get any notice

The Washington Post reports that is changing, at least in Iowa:

Hip is precisely what Huckabee has become in the weeks since he placed second in the Iowa Straw Poll on Aug. 11. Indeed, since walking into the media filing room that night and being swarmed by the media as if he were -- these are his words -- "Britney Spears being released from prison," Huckabee has been seen as the cuddly antidote to what has been an awfully tough-talking Republican field. He's the affable, compassionate, good guy and rock-and-roll evangelical who plays guitar and wants to hang with the Rolling Stones.

It's hard to think of a candidate in recent political history who felt such a bounce and media hug after a second-place finish in a nonbinding contest where three of the top-tier candidates or almost-candidates -- John McCain, Rudy Giuliani and Fred Thompson -- didn't bother to show. But man, is he working it.

"Oh, gosh," Huckabee says when asked to recall the media appearances he's done since his surprise showing at the straw poll. "I did Colbert, Maher. I did Fox News Sunday. 'Face the Nation.' I can't even remember them all. It's just a blur." (Bill Maher, who had Huckabee on his HBO program on Friday, the candidate's 52nd birthday, ended his interview with the former governor by saying, "Rudy Giuliani scares the hell out of me, so I hope you win.")

...

Even those who think little of his political accomplishments can see Huckabee's appeal. Randy Thompson, whose advertising and consulting group has long aligned itself with the Democratic Party establishment in the former governor's home state, can spend 15 minutes bashing Huckabee's decade as governor, only to go soft.

"Everyone who's spent time with him whether they thought he was the best governor in the history of Arkansas or the absolute worst can agree that he's a nice man," Thompson says. "I think there's a certain freshness to that. That's what the people supporting him in Iowa saw."

Now, with the help of the national media, that's what the rest of America has begun to see. Huckabee's rare combination of down-home folksiness, compassion and ability to intelligently articulate conservative views has helped his transformation from former Baptist minister to the avatar of the post-Jerry Falwell evangelical movement. Once ridiculed for holding his hand up during a debate when asked which candidates didn't believe in evolution, he's risen above the label of religious zealot into, well, a conservative whom liberals such as Maher kind of like.

The problem for Huckabee is three-fold:

1. Repubs like to back frontrunners. Rarely has a second tier candidate made even a significant showing in Republican primaries, let alone actually won the nomination.

2. Because he is seen as a second-tier guy, he has not been able to raise significant cash - which means he has to do the free media like Maher, Stewart, Colbert, et al. Relying on the free media can backfire in the GOP primary where rank-and-file GOPers have disdain for the mainstream media in general and especially the outlets Huckabee is doing in particular. This may be a better strategy for appealing to independents and some Dems in the general. Plus he cannot blanket the airwaves with ads the way Romney has.

3. Because Huckabee is NOT running as the "I will bomb the Islamofascist Caliphate back into the pre-Mohammed era," Huckabee risks losing one of the big issues that rallies the Republican base - idiotic macho bullshit cockswinging to show how "tough" we are."

So, my sense is that while the media may like Huckabee and while I may like Huckabee (though I wouldn't vote for him), the GOP faithful will not like him in big enough numbers to help him raise enough money to jump to the top tier of the race and have a shot to win.

Still, given the dismal poll numbers for Bush and the GOP brand and given the head winds the Republican nominee is going to face winning the White House in '08, Huckabee would probably have the best shot to beat a Dem. And yet, it doesn't look like GOPers are even thinking of going with him.

I just don't get it.

POSTSCRIPT: Huckabee also creates problems with some in the GOP base when he pits Main Street against Wall Street and says the Republican Party must stop working solely for the investor class. On top of that, Huckabee says No Child Left Behind harms children by pushing only English and math. He wants to fund art and music education for kids. These are not exactly winning issues in the GOP primaries.

Mayor Moneybags and Chancellor Klein have embarked upon their third Department of Education reorganization in the last five years.

As such, everything in the system has been thrown into flux.

The old superintendent offices are long gone, the central office at Court Street has been turned into condos and the office at Tweed doesn't respond very promptly to questions at the school level (though they do respond very quickly to photo ops, interview requests, and call-in polls about the job Chancellor Klein is doing!)

It would be nice if Mayor Moneybags could create a kind of 311 line for the school system which parents could call and get their questions about the increasingly complex and ever-changing system answered by Education officials.

Lo and behold, the community school districts (which Bloomberg abolished under the second reorganization but brought back for the third one!!!) have help lines, but the Daily News reports you cannot get too much help from them:

Answers can be hard to come by at the city's community school district offices, a survey by Public Advocate Betsy Gotbaum found.

Fewer than a third of daytime calls to the city Education Department's help centers were answered by a person, and just 10% of voice mails left at the offices were returned, according to the survey.

"The start of the school year can be a stressful time for parents and students. The DOE makes matters worse by providing very little information and support," Gotbaum said yesterday.

Staffers called each of the 32 offices three times in the past two weeks, once in English and once in Spanish during the daytime, and then once in English during the evening. The callers posed as parents trying to enroll their kids.

Just three school staffers were able to provide services in Spanish. One Brooklyn office's phone number was disconnected and seven daytime calls were never answered.

Once again, the mayor's and the chancellor's constant reorganization of the school system has hurt the kids, the parents, and the staff working in the system.

Many who are knowledgeable about the school system say the constant reorganization is being done so that Bloomberg and Klein can hold off accountability by saying the school system is "still changing..."

Bloomberg and Klein ought to settle on one model for the system and let it run for a few years to see if it works or not.

But so far, they radically change things every year and a half, let the chaos ensue and blame all the problems on the old Board of Education (now gone 5 years), the old mayor (also gone 5 years), or DOE employees.

Never mind that constant chaos is the one model we know is NOT conducive to helping educate children (who need order and consistency to thrive.)

But let's be honest - Bloomberg and Klein aren't interested in educating children. If they were, maybe they'd lower class sizes, decrease capacity at overpopulated schools, and fix the buildings (many of which are mold-infested rat traps.)

...you are a social conservative and you make the following denial to the press corps:

"I am not gay, I have never been gay, and I did nothing wrong in that Minneapolis airport bathroom..."

Repubs have thrown Senator Larry Craig to the wolves because they are afraid Craig's public humiliation will do to them in '08 what Mark Foley's scandal helped do to them in '06:

Craig’s defiant news conference came as Senate Republican leaders in Washington called for an ethics committee review into his involvement in a police sting operation this summer in the airport men’s room.

“In the meantime, the leadership is examining other aspects of the case to see if additional action is required,” Sen. Mitch McConnell and other top GOP lawmakers said in a written statement.

Interestingly enough, Senator David Vitter (R-La), a social conservative who has admitted to schtupping prostitutes in the past (rumor has it Vitter liked to wear a diaper while doing it) managed to survive his scandal while Craig looks like he is going to lose his battle to keep his Senate seat.

Part of the problem is Craig has become publicly confrontational with the press as he has denied his sexual peccadillo while Vitter disappeared for a bunch of days after his name surfaced on the DC Madam's client list.

Another part of the problem is that while Vitter was wearing his diaper, he was schtupping female prostitutes. Unfortunately for Larry Craig, he was soliciting a blowjob from a man.

Repubs can handle hypocrisy and adultery (at least in their own party - notice how neither Newt Gingrich nor Rudy Giuliani has been harmed by their sexual peccadillos or hypocrisy), but they can't handle one of their own trying to get a quickie blowjob from a man in a public toilet.

I bet Craig could have survived this easier if only he'd been soliciting sex from a female.

As long as she wasn't a White House intern, of course.

That would be one other sex crime that would have been unforgiveable to the wingers.

Yesterday we learned from the National Association of Realtors that the the supply of existing homes for sale is at a 16 year high. Inventories of homes for sale increased 5.1% from June to July to 4.59 million. This is about a 9.6 months supply at the current sales pace.

Today we learn from the Case-Schiller home price index that U.S. home prices fell 3.2% in the second quarter compared to a year earlier. This is the largest decline in the history of the 20 year Case-Schiller index. Last year at this time, home prices were increasing by 7.5%.

Here's the bad news:

"The pullback in the U.S. residential real estate market is showing no signs of slowing down," said Robert J. Shiller, chief economist at MacroMarkets LLC, which computes the price index for S&P.

The index shows prices falling in 15 of 20 major cities tracked.

Real estate, like politics, may be local, but sometimes you have nation-wide events that make the local suddenly national.

It's starting to look like that's happening now.

Reading over the Idaho Statesmen article about Senator Larry Craig's arrest and guilty plea for disorderly conduct in Minnesota airport bathroom, I can't help but feel pity for this closeted gay man who has spent his entire life hiding who he is so he could get elected to various public offices in one of the most homophobic states in the nation.

Still, the fact that Craig record includes "a series of votes against gay rights and his support of a 2006 amendment to the Idaho Constitution that bars gay marriage and civil unions," I also am glad to see his hypocritical ass outed and his political career essentially ended by the guilty plea for disorderly conduct/soliciting sex in a public place.

Buh-bye, Larry.

From Marketwatch:

WASHINGTON (MarketWatch) - Inventories of unsold single-family homes increased 2.2% to 3.85 million in July, sending the inventory in relation to sales to the highest level in 16 years, the National Association of Realtors reported Monday.

Resales of single-family homes and condominiums fell 0.2% to a seasonally adjusted annual rate of 5.75 million. The results were stronger than the 5.69 million sales pace expected by economists surveyed by MarketWatch, but still the slowest since November 2002.

Sales were down 9% compared with a year earlier but were essentially unchanged from June's 5.76 million pace, despite disruption in the pipeline for mortgage loans, the NAR said.

...

For all homes - condos and single-family homes - the inventory rose 5.1% to a record 4.59 million, representing a 9.6-month supply. Condo inventories surged 20% to 742,000, an 11.9-month supply at the July sales pace.

The National Association of Realtors says the home sales for July were about the same as June despite "disruption in the pipeline for mortgage loans."

Only one problem with that statement - disruption in the mortgage loan pipeline didn't start until August.

When August's numbers are released next month, that's when we'll see what the mortgage pipeline disruptions have done to existing home sales and inventories.

Remember, the summer months are usually the strongest months for existing home sales, so tanking numbers in July and August means a depressed market overall.

The supply of homes number is a bit alarming too. As Calculated Risk notes, the 9.6 month supply of homes is the most since 1982 when mortgage rates were at 16%!

Still, CNBC shills like to say that existing home inventories don't matter too much because people can always pull their homes off the market if they're not getting the price they want (or need) and then put them back up for sale when the market gets better.

But that assumes that other economic pressures - like rising mortgage payments from resetting ARM's - are not forcing many of these home sales.

A 16 year high in existing home inventory, billions of dollars in resetting ARM's in the next year and a half, falling home values and tightened lending standards suggest that the market is going to get a whole lot worse before it gets better.

We used to hear that the housing market would recover by the end of 2008. Now you hear 2010 and 2011 thrown around.

Again, if you can make your payments on your mortgage and you're not forced to sell immediately, then falling home values and a tanking market for the next couple of years may not mean much to you in the short run.

But if you're having trouble making your mortgage payments and you're trying to unload your house before you get foreclosed upon, then life sucks.

Rumors were swirling over the weekend that Attorney General Gonzales was going to be out of his job and that Michael Chertoff was going to replace him.

Dunno if Chertoff is going to be picked to replace Fredo at DOJ, but Gonzales is gone:

WACO, Tex., Aug. 27 — ­ Attorney General Alberto R. Gonzales, whose tenure has been marred by controversy and accusations of perjury before Congress, has resigned. A senior administration official said he would announce the decision later this morning in Washington.

Mr. Gonzales, who had rebuffed calls for his resignation, submitted his to President Bush by telephone on Friday, the official said. His decision was not immediately announced, the official added, until after the president invited him and his wife to lunch at his ranch near here.

...

The official said that the decision was Mr. Gonzales's and that the president accepted it grudgingly. At the same time, the official acknowledged that the turmoil over his tenure as Attorney General had made continuing difficult.

So now we turn to the battle over who will replace Gonzales. Congress is on recess. Can Bush avoid a fight over Gonzales' replacement by making a recess appointment? Clearly a recess appointment would be a huge "Fuck You!" to the Congress and the American people, but if memory serves correctly, Bush loves to say "Fuck you!" to people about as much as Dick Cheney does.



UPDATE: Listening to Joey Scar, Pat Buchanan, and Ana Marie Cox on MSNBC, it doesn't sound like they think a recess appointment is coming. They're talking about how difficult the confirmation hearings for Gonzo's replacement are going to be. We'll probably get a heads up from the White House about who Bush is going to pick. Pat Buchanan just said he thinks Chertoff would be a terrible choice because he would be seen as a Bush loyalist and what Bush needs to pick now is someone who is seen as independent and competent. Scarborough just noted that Bush has rarely picked anybody he doesn't already know to fill these kinds of positions (think Harriet Miers for Supreme Court.) We'll see.

If he actually believes some of the shit he's slinging on the campaign trail, Rudy Giuliani is one dangerous motherfucker:

MANCHESTER, New Hampshire (AP) — A Democratic president would raise taxes and ravage the U.S. economy, Republican presidential primary candidate Rudy Giuliani said Saturday.

The former New York City mayor said he would lower taxes, make permanent President George W. Bush's tax cuts and eliminate inheritance taxes.

...

Giuliani criticized Democrats who want to repeal Bush's cuts. "When it's working, let's change it. That's a brilliant philosophy. It sounds little bit like Iraq," Giuliani said to laughter.

Two points are extremely troubling to me here. First, Rudy thinks Iraq is working and nothing needs to change. Here's how well the AP finds things working in Iraq:

* Iraq is suffering about double the number of war-related deaths throughout the country compared with last year — an average daily toll of 33 in 2006, and 62 so

far this year.

* Nearly 1,000 more people have been killed in violence across Iraq in the first eight months of this year than in all of 2006. So far this year, about 14,800 people have died in war-related attacks and sectarian murders. AP reporting accounted for 13,811 deaths in 2006. The United Nations and other sources placed the 2006 toll far higher.

* Baghdad has gone from representing 76 percent of all civilian and police war-related deaths in Iraq in January to 52 percent in July, bringing it back to the same spot it was roughly a year ago.

* According to the Iraqi Red Crescent Organization, the number of displaced Iraqis has more than doubled since the start of the year, from 447,337 on Jan. 1 to 1.14 million on July 31.

While violence is down in Baghdad, it is up elsewhere in the country - meaning the preznut's surge policy, while technically working to make things better in Baghdad, has made things worse in the country as a whole.

That Rudy can say with a straight face that the Iraq policy is working is troubling.

Troubling point number two - Rudy thinks the economy is working despite the fact that

* Economic anxiety as at an all-time high for working and middle class Americans. In the latest WSJ/NBC News poll 67% of Americans believe the economy is either already in recession or will be by the beginning of next year.

* The median income for Americans has risen just 0.06% a year for the last 30 years, adjusted for inflation, while it increased 2.8% in the preceding 26 years. Working and middle class Americans have been squeezed over the last 30 and are working longer and harder to make less. Pensions are disappearing, social security is under attack, at least 45 million Americans (many of them "middle class") lack health care coverage, and college tuition costs have risen 350% over the last 10 years, making it very difficult for young Americans to start life without a huge amount of debt.

* Credit card debt has tripled in the last 20 years, totaling 100% of GDP. Total credit market debt in the United States is equal to 350% of GDP - we are a debtor nation. We produce very little and have made most of our wealth over the last six years by borrowing money from overseas and selling each other houses at ridiculously inflated prices. Now the Federal Reserve and the boys on Wall Street may think the more debt Americans are carrying the better (as long as Americans make their monthly payments, of course and keep using the borrowed money to consume, consume, consume!!!), but as a general policy, we would all be better off if we became a saver nation once again.

Rudy doesn't think anything needs to change, however - he thinks things are just fine and dandy on both the foreign policy and domestic policy fronts.

If you like what we've seen over the last 6+ years of Bush Rule, you should vote for Rudy - cuz' he's going give you at least 4 more years of the same (only this time with more race-baiting and probably some adultery when his third marriage inevitably breaks down and he moves on to his fourth.)

POSTSCRIPT: Giuliani's honesty about his economic record has been questioned this week. He has claimed he cut taxes 23 times in New York City (and remember, in the Grand Old Tax Cutting Party, deficits don't matter, only tax-cutting prowess does.) The AP finds however that:

Giuliani initiated only 15 cuts and opposed one of the largest, accepting it only after a five-month negotiation with the city council. Seven cuts started at the state level. One was initiated by the council.

Also, Giuliani likes to claim he brought fiscal sanity to NYC and left the city with a budget surplus. But the NY Times reported yesterday that

Rudolph W. Giuliani has been broadcasting radio advertisements in Iowa and other states far from the city he once led stating that as mayor of New York, he “turned a $2.3 billion deficit into a multibillion dollar surplus.”

The assertion, which Mr. Giuliani has repeated on the trail as he has promoted his fiscal conservatism, is somewhat misleading, independent fiscal monitors said. In fact, Mr. Giuliani left his successor, Michael R. Bloomberg, with a bigger deficit than the one Mr. Giuliani had to deal with when he arrived in 1994. And that deficit would have been large even if the city had not been attacked on Sept. 11, 2001.

“He inherited a gap, and he left a gap for his successor,” Ronnie Lowenstein, the director of the city’s Independent Budget Office, a nonpartisan agency that monitors the city budget, said of Mr. Giuliani. “The city was budgeting as though the good times were not going to end, but sooner or later they always do.”

So there you have another way Rudy Giuliani is like George Bush - he's an out-and-out liar.

Vote for Rudy if you want at least 4 more years of dishonesty, distortion, stupid-ass machismo masking as "toughness," and out-and-out cluelessness about the true state of America here at home and in the eyes of people abroad.

Right-wing rocker Ted Nugent tells Obama to suck on his machine gun:



Gee, wouldn't it be nice if Mr. Nugent would take his sweaty machine guns and go over and physically support the war in Iraq that he so strongly supports politically rather than hit Obama and HRC with thinly-disguised assassination threats. And I don't mean by playing a concert or two, I mean by signing up for multiple 15 month tours of duty and doing what our soldiers are actually doing.

BTW, ole tough Ted loves wars now, but he dodged the draft in Vietnam when he was eligible to fight. He has claimed he crapped in his pants for a week and went into the Army office reeking of week-old feces so he wouldn't have to fight in Vietnam.

Ted Nugent - all class.

Friday night edition of cat blogging. This cat could use a home. Cunning Realist found her uptown at 135th Street. Details here.

My girlfriend is allergic to cats so we can't take her, but I do hope this story has a happy ending.

Peace.

Back before the subprime mortgage mess exploded this summer, we kept hearing from Fed officials and Bushies at the Treasury Department and the usual array of shills on CNBC and at the Wall Street Journal that the problems from subprime were "well-contained" and would not hurt the overall economy.

And then the summer hit and we learned that:

* Two Bear Sterns hedge funds had lost all but 9% of their value

* A Goldman Sachs fund had also taken a big hit from subprime issues

* American Home Mortgage was bankrupt

* BNP Paribas (largest French bank) was halting withdrawals from three funds just one week after saying its exposure to subprime problems was limited

* IKB Deutsche Bundesbank was also taking a hit from subprime problems and had to be bailed out by the German government

* The United Kingdom declared their subprime mortgage problems could be worse than those in the United States

* Financial system tightened as a result of a credit crunch related to subprime problems

* Central banks in Europe, Japan, Australia, Canada and the U.S. injected over $ 300 billion of liquidity into the financial system to fix the crunch

* Countrywide, the biggest mortgage lender, borrowed $11.5 billion to continue operations

* Australian lender Rams Group took a 20% hit from subprime problems

* August 15th was Redemption Day - the day that investors had to tell hedge funds with 45 day advance notice redemption periods that they wanted their money back (we still don't know just how many redemptions requests were actually acceded to and how many were not)

* Markets hit 10% correction levels as credit crisis continued - full-scale panic seems ready to break out in the financial markets

* On August 17, the Fed lowered the discount window rate for banks and urged banks to take advantage

* Over the next few days, Deutsche Bank, Chase, Citigroup, Bank of America, and Wachovia borrow from the discount window not because they had to but because they wanted to show support for the Fed's actions (or so they said...) - global stocks soar as a result

* Senate Banking Chairman Chris Dodd meets with Fed Chair Ben Bernanke and Treasury Secretary Hank Paulson and declares that Bernanke assured him that the Fed was willing to use all tools at its disposal to fix problems - global stocks soar again as a result

* Bank of America invests $2 billion into Countrywide in a move that is seen as a BoA expansion into the subprime business - Countrywide and BoA stock soars

* Despite the equity market turnaround, financial sector continues to shed jobs at a torrid pace (24,000 layoff have been announced since Monday, 38,000 for the month of August so far)

Amazing, the trajectory of that - from well-contained to near full-scale panic to restored confidence that central banks could handle the problems. Now we're hearing again, just one week after the Dow and the S&P were down 10% in the middle of the trading day, that problems from subprime are contained:

Aug. 23 (Bloomberg) -- European stocks climbed for a fifth day after a capital injection into Countrywide Financial Corp. reassured investors the fallout from the global credit rout will be limited.

Barclays Plc, the third-biggest U.K. bank, and Societe Generale SA of France led an advance by banks. Northern Rock Plc, the worst-performing U.K. bank stock this year, also jumped.

``It's a significant vote of confidence,'' said Simon Carter, who helps oversee $3 billion at Aegon Asset Management in Edinburgh. ``The subprime problem now looks more contained.''

...

``This $2 billion deal is very significant and bolsters Countrywide's financial position and reduces the possibility of the subprime problem extending into the wider economy,'' said Bob Parker, vice chairman of Credit Suisse Asset Management in London, which oversees $502 billion.

So there you go - it's all good.

And yet, don't you get the feeling that when we finally find out how many redemption requests were rejected on August 15th by various hedge funds, learn that many more subprime and Alt-A homeowners are going belly up as their mortgages rates reset, learn just how many jobs are going to be lost in the financial sector as a result of all the market turbulence and mortgage problems, and learn just how small those Christmas bonuses are going to be for the Masters of the Universe, that near full-scale panic will return to Wall Street?

The top financial story at The Street:

Stocks Back on Easy Street

The top financial story at Reuters:

U.S. stocks rose on Wednesday as takeover activity resurfaced and credit markets stabilized, luring investors back into riskier assets such as equities.

The top financial story at Marketwatch:

U.S. tide expected to lift Asia
Stocks expected to open higher on strength of U.S. markets' gains, alleviating fears of subprime meltdown's effect on U.S. economy.

Seems pretty clear to me - the panic is over, confidence is returning, liquidity is fine.

So tell me again, if everything I'm reading at Reuters, The Street, Bloomberg and Marketwatch is true, then why are all the free-market conservatives who usually hate government intervention/bailouts demanding at least one rate cut from the Federal Reserve in the next month and more cuts before the end of the year?

I mean, if everything's swell in the equity and credit markets and M&A season is all set to go after Labor Day, why does Helicopter Ben have to shower the market (and the economy) with cheap money?

Unless of course things aren't really that good...

...or are REALLY, REALLY scary just below the surface and when everything breaks, oh, boy look out below...

POSTSCRIPT: Barry at Big Picture calls the people demanding rate cuts whining and pleading and crying and begging and beseeching and howling and weeping anti-free market self-cry babies.

That gets it pretty well.

UPDATE: The ECB still plans to raise interest rates in September:

FRANKFURT -- The European Central Bank signaled that it is still inclined to raise interest rates by a quarter of a percentage point on Sept. 6 to 4.25%, provided market turmoil doesn't deepen.

...

In a statement, the central bank said "the position of the Governing Council of the ECB on its monetary policy stance was expressed by its President on 2 August 2007." At that time, ECB President Jean-Claude Trichet said the bank would exercise "strong vigilance" against inflation risks. The phrase is the bank's standard expression to indicate a rate rise in a month.

As the ECB and other central banks have pumped billions into markets over the past weeks in order to quell a global credit crunch, analysts and investors have scaled back expectations of a quarter-point interest-rate rise next month by the ECB.

The statement "means that the events so far have not yet brought the ECB to the point of taking back the pre-announced Sept. 6 rate hike," says Holger Schmieding, senior European economist with Bank of America in London.

Also, Asian stocks are gaining for the fourth consecutive day:

Aug. 23 -- Asian stocks gained for a fourth day, the longest winning streak in seven weeks, after a capital injection into the biggest U.S. mortgage lender reduced concern a credit-market tightening will derail economic growth.

With markets soaring all over the world this week and the credit market stabilized for now, can all the whiny ass anti-free market titty babies shut the fuck up about Economic Armageddon and the need for a rate cut for a few days until we actually get some signs that Economic Armageddon is actually here?

The financial sector continues to shed jobs:

The rising cost of credit took its toll on Lehman Brothers Holdings Inc., Accredited Home Lenders Holding Co. and HSBC Holdings Plc as the subprime mortgage fallout spreads through the economy.

Lehman, the biggest underwriter of U.S. bonds backed by mortgages, became the first firm on Wall Street to shut its subprime-lending unit and said 1,200 employees will lose their jobs.

...

Accredited said in a statement today it will shut more than half of its mortgage operations and fire about 1,600 people.

...

HSBC plans to close its Carmel, Indiana, office by the end of the second quarter of next year, eliminating 600 jobs, spokesman Michael Trevino said.

In addition to the job cuts announced today, at least 20,957 layoffs in the financial sector have been announced this month as a result of the subprime mortgage mess.

It will be interesting to see what the overall August job numbers look like when they're released after Labor Day.

You know the Fed will be looking very closely at them before they make any decisions on rate cuts.

UPDATE: The Associated Press reports that job layoffs related to the subprime mess in the financial sector have totaled 38,000 for the year - but over 24,000 have come in just the last three weeks.

Markets finished up big today on speculation that the credit crunch is subsiding and this year's record pace of takeovers will not be hurt by liquidity issues. The Dow was up more than 150 points, the Nasdaq was up more than 30 and the S&P closed up 17.

This is the fifth straight day that markets have advanced.

So tell me again, if the markets believe the credit crunch is subsiding and mergers and acquisitions season is back in full swing, why does the Fed have to cut interest rates?

After all, the argument for an emergency rate cut before the Fed's September meeting or for cuts at the September, October or December meetings is that the overall economy has been harmed by the credit crunch and market turmoil of the last two weeks.

But that argument surely gets blown out of the water now that the Dow is less than 700 points off its all time high, the S&P 500 is nearing 1,500, the Nasdaq is making some nice gains, the bond market is getting back to normal and two big deals got batted around today (Dubai World bought into MGM Mirage and E-Trade and Ameritrade may merge) and more are expected to get done in September.

I guess the only reason Wall Street has for demanding rate cuts as of today is simple greed - they want cheap money to help inflate more bubbles and drive corporate profits.

We'll have to see if Helicopter Ben gets up into his whirly bird and gives it to them.

I suspect an emergency rate cut before the Fed's September 18th meeting (which the shriller of the market shills have been calling for) is out of the question unless current conditions change drastically.

As for what happens at the September meeting, that's probably still up in the air.

If the macro numbers (especially the job numbers) get ugly or if the credit market seizes up again, maybe Bernanke cuts.

But if the macro numbers are just so-so, equity markets continue to hum along and the credit market is okay, I bet Bernanke waits until October before making a decision on interest rate cuts.

Wall Street doesn't think this is so, but they've been pricing in an interest rate cut since the Fed raised rates to 5.25% in June 2006.

And they've been wrong every time.

Bloomberg News reports that Fed Chairman Ben Bernanke wants to avoid having to cut the federal funds rate as a result of the recent subprime mortgage mess fall-out/credit crunch:

Chairman Ben S. Bernanke wants to avoid an emergency easing of monetary policy, contrasting with predecessor Alan Greenspan, who cut the federal funds rate target three times in 1998 after the collapse of Long Term Capital Management LP. Richmond Fed Bank President Jeffrey Lacker said yesterday that policy must be guided by the outlook for economic growth and prices, not entirely by markets.

...

Lacker said in a speech to a conference in Charlotte, North Carolina yesterday that while the credit crunch and gyrations in financial markets has the potential to hurt growth, signs so far indicate business and consumer spending will continue.

In response to a question, Lacker also underscored the Federal Open Market Committee's determination not to insure poor investments with a cut in the federal funds rate. Ten-year U.S. Treasury notes fell in response, pushing the yield up 4 basis points to 4.63 percent at 7:32 a.m. today in New York.

``The Federal Reserve isn't responsible for the size of credit spreads,'' he said. ``We leave those to be market determined. Our responsibility and what we are capable of influencing on a sustained basis is inflation and growth.''

Meanwhile back in the financial markets:

Stocks look set for a solid day as optimism for a cut in interest rates sweeps through the market.

...

Investors are increasingly convinced the Fed, the U.S. central bank, will cut rates sooner rather than later after it surprised markets on Friday by cutting the rate at which it lends to banks.

Clearly Wall Street wants an interest rate cut of at least 25 basis points in the near-term and is not going to be happy if Bernanke does not give it to them. I suspect they want interest rate cuts of at least 75 basis points by the end of the year.

These same greedy motherfuckers have been whining for interest rates cuts ever since the Fed first raised its benchmark rate to 5.25%. They claim the economy will be hurt if they don't get the cuts because they won't have the cheap money to make the buyout deals that have inflated stock values to historic prices and kept the irrational exuberance going for the last five years

And yet, if you read the Reuters article I linked to above, there are plenty of deals getting done today (E-trade and Ameritrade may merge; Dubai World bought a 9.5% stake in MGM Mirage.)

And if you read the Bloomberg article I linked to above, the Fed wants to only cut rates when the macro stats show that the economy has been hurt by the subprime fall-out/credit crunch.

Other than the housing market, which created this whole mess in the first place, the macro stats have NOT shown any serious harm to the overall economy from the recent market turbulence and credit crunch.

Not yet, at any rate. There will be fall-out, of course, especially in the job numbers as the financial sector continues to shed jobs. But so far, we don't have them.

So what's the rationale for interest rate cuts (which will simply save the asses of those who engaged in stupid, risky deals and ensure there will be more of them in the future)?

Simple - Wall Street wants them so they can reinflate their asset bubbles.

And as we learned during the Greenspan years, what Wall Street wants, Wall Street usually gets.

Via Bonddad, Marketwatch reports that there have been lots of layoffs in the financial sector since the beginning of the month:

CHICAGO (MarketWatch) -- Problems in the nation's housing markets have prompted many of the 20,957 job cuts announced by financial institutions since the beginning of the month, according to Challenger, Gray & Christmas.

Moreover, 11,040, or 53%, of those cuts have come since last Friday, the global outplacement consultancy reported on Tuesday.

...

According to Challenger's data, the financial industry has announced 87,962 cuts so far this year. That's 164% more than had been tallied up through the end of August in 2006, the firm said. Forty-one percent of the cuts this year were related to mortgage and subprime lending markets, the data showed.

"There are two big issues behind the cuts," CEO John A. Challenger said in a news release. "First, demand for new mortgages and home-equity loans and other forms of credit have fallen off dramatically. The other issue is the increasing rate of defaults and foreclosures, which is leaving the lending institutions unable to meet their own financial obligations."

If increasing defaults and foreclosures mean more layoffs, look out below...

BTW, I just learned on Kudlow and Company that the worst of the financial panic is over, Bernanke is a "rock star" who is on the markets' side and all we have to do now is sit back and wait for the rate cuts to come down the pike...

...how sweet it is!!! (snark)

So much for the "New York will escape from the subprime mortgage meltdown unscathed" meme:

In New York City, the number of foreclosures rose 55 percent between July 2006 and July 2007, to 2,561 from 1,648. The increase in the Bronx was 54.3 percent, to 321 from 208; in Brooklyn, 50.6 percent, to 875 from 581; in Manhattan, 12.4 percent, to 253 from 225; and in Queens, 126.1 percent, to 882 from 390. On Staten Island, the number of foreclosures decreased by a modest 5.7 percent, to 230 from 244.

...

Other sources of foreclosure data suggest that there has been an increase in foreclosures in recent months compared with the same period a year ago.

PropertyShark.com, a real estate research firm based in New York City, reported that in the April-June period of this year, scheduled foreclosure auctions rose by 19.5 percent in New York City (and 146 percent in Miami and 202 percent in Los Angeles) from the same period a year earlier.

And as I keep reminding people, most of the really toxic subprime and Alt-A mortgages were only made last year, which means they will not be resetting until 2008.

Which means this has a long way to go before we reach bottom.

Unless Helicopter Ben gets up in his whirly-bird and lowers the fed funds rate down a few hundred basis points, of course.

But if that happens, inflation is REALLY going to get out of hand.

Especially since China raised interest rates again today because of high inflation.

We import so many goods from China, there's no way we can avoid importing some of their inflation.

All of this comes while GDP growth is stalling and government and individual debt are at historical highs.

Gee, it's going to be like the 70's all over again!!!

Thank God I still have my John Travolta suit!!!

Disco duck!!!

UPDATE: Along with the news that foreclosures across the country are up 93% come these two beauties, via Minyanville:

# The National Association of Realtors reported that in June the supply of houses on the market at the pace of sales was about nine months, double what it was two years ago.
# "We are estimating that we will see about 2 million foreclosure filings this year,'' Rick Sharga, RealtyTrac's executive vice president for marketing, said.

2 million foreclosure filings this year?

That's not good.

The markets were down this morning until this:

U.S. stocks rose on speculation the Federal Reserve will cut interest rates, spurring economic growth and reviving this year's record pace of takeovers.

...

Stocks erased an earlier decline after Senate Banking Committee Chairman Christopher Dodd said Fed Chairman Ben S. Bernanke agreed to use ``all of the tools at his disposal'' to restore stability to markets roiled by mortgage defaults.

The equity market turned when a CNBC shill characterized Dodd's characterization of what Bernanke said about a possible rate cut after the Fed's move to lower the discount window rate hadn't stabilized the credit market.

Now that's desperation.

Turning on a characterization of a characterization.

Another CNBC shill just told me that "all we have to do is sit back and wait for the rate cuts to come."

And then all will be good again!!!

Ho, ho, ho.

The NY Daily News has the story:

Demolition crews at the former Deutsche Bank building turned the cursed skyscraper into a deadly firetrap for two firefighters - and the standpipe that was supposed to send water to the fire wasn't even connected.

Instead of using steel or other fire-resistant material to build partitions on each floor to protect the public from falling debris, the crews used plywood, sources told the Daily News yesterday.

Stairwells were sealed, and even the supposedly "fire-retardant plywood" used to build decontamination chambers on the floors for workers clearing asbestos and other toxic substances quickly went up in flames.

Adding to the string of tragic mistakes, the city disclosed yesterday that a chunk of the standpipe was disconnected, a valve broken and there were other breaks in the system. The FDNY slapped the contractor with a violation.

...

City officials, who were hunkered down all day in meetings about the fire, contended the FDNY and the Buildings Department inspected the standpipe "numerous" times but they provided no dates or documentation.

...

Fire officials believe Saturday's blaze erupted on the 17th floor on the south side of the building near a decontamination area.

"Marshals have also spoken to eyewitnesses who've stated that workers would smoke and extinguish cigarettes in the area," the report states.

The contracting agent cut the standing pipe that provided water to the building, shut off the sprinkler system, erected wood partitions everywhere and allowed employees to smoke in the building.

And the city, which claims to have inspected the site "numerous times," either is lying and never inspected it or did inspect it and let all these violations stand.

Either way, the fault for the senseless deaths of two firemen Saturday while fighting a fire at the Deutsche Bank Building lies with both the contracting agent and the city.

But I'm sure Mayor Moneybags will defend both himself and the contracting agent CEO and blame the death on the peons who were stupid enough to smoke in the building.

Never mind that the people in charge of the building dismantling and the people responsible for the regulation of that company abdicated their duties to clear up the violations.

Why does the Bush administration hate children?

WASHINGTON — The Bush administration and China have both undermined efforts to tighten rules designed to ensure that lead paint isn't used in toys, bibs, jewelry and other children’s products.

Both have fought efforts to better police imported toys from China.

...

The Bush administration has hindered regulation on two fronts, consumer advocates say. It stalled efforts to press for greater inspections of imported children’s products, and it altered the focus of the Consumer Product Safety Commission (CPSC), moving it from aggressive protection of consumers to a more manufacturer-friendly approach.

“The overall philosophy is regulations are bad and they are too large a cost for industry, and the market will take care of it,” said Rick Melberth, director of regulatory policy at OMBWatch, a government watchdog group formed in 1983. “That’s been the philosophy of the Bush administration.”

Today, more than 80 percent of all U.S. toys are now made in China and few of them get inspected.

On a related note, the Bush administration is also creating new rules to cripple the expansion of the Children's Health Insurance Program:

The Bush administration, continuing its fight to stop states from expanding the popular Children’s Health Insurance Program, has adopted new standards that would make it much more difficult for New York, California and others to extend coverage to children in middle-income families.

Administration officials outlined the new standards in a letter sent to state health officials on Friday evening, in the middle of a monthlong Congressional recess. In interviews, they said the changes were intended to return the Children’s Health Insurance Program to its original focus on low-income children and to make sure the program did not become a substitute for private health coverage.

After learning of the new policy, some state officials said yesterday that it could cripple their efforts to cover more children and would impose standards that could not be met.

“We are horrified at the new federal policy,” said Ann Clemency Kohler, deputy commissioner of human services in New Jersey. “It will cause havoc with our program and could jeopardize coverage for thousands of children.”

Compassionate conservatism at its finest.

Children?

Fuck 'em!

Underlying the credit crunch and the subprime mess is the knowledge that we have another year and a half before the worst of the toxic adjustable rate mortgages reset. Which means a lot more foreclosures may be in the pipeline in the near term. So far, the stats bear that out:

WASHINGTON (Reuters) - Home foreclosures rose 9 percent in July from June and soared 93 percent from a year ago as states that once enjoyed a white-hot housing market are now seeing the greatest number of loan failures, a real estate survey reported on Tuesday.

The July foreclosures -- a tally of default notices, auction sale notices and bank repossessions -- totaled 179,599, according to RealtyTrac, an online marketplace for foreclosure properties.

Five states accounted for more than half of the country's foreclosure activity in the month and two of those -- California and Florida -- saw some of the biggest price gains during the recent housing boom.

Ohio and Michigan, two other states among top five in foreclosures in July, have seen a jump in job losses while Georgia has also suffered a high level of home losses.

As Bonddad notes, foreclosures lead to bond defaults which lead to very volatile and testy financial markets.

Although I just heard from some smirking shill on CNBC that the good news about all these foreclosures is that people who are no longer paying those mortgages (because they've lost their homes!!!) will be spending that money on retail.

Jesus Fuck, how's that for the ultimate in cynicism.

Not enough bad stuff can happen to an asshole like this.

Adjusted for inflation, we're making less money per year now than we were in 2000.

2000 was the last year before the Mayberry Machiavellis came into office, cut taxes for millionaires and billionaires and helped engineer an economy that squeezes the working and middle classes and forces them to work longer and harder to make less.

But if you make more than $1 million a year, then you're taking home a lot more than you were in 2000:

Americans earned a smaller average income in 2005 than in 2000, the fifth consecutive year that they had to make ends meet with less money than at the peak of the last economic expansion, new government data shows.

While incomes have been on the rise since 2002, the average income in 2005 was $55,238, still nearly 1 percent less than the $55,714 in 2000, after adjusting for inflation, analysis of new tax statistics show.

...

Total income listed on tax returns grew every year after World War II, with a single one-year exception, until 2001, making the five-year period of lower average incomes and four years of lower total incomes a new experience for the majority of Americans born since 1945.

The growth in total incomes was concentrated among those making more than $1 million. The number of such taxpayers grew by more than 26 percent, to 303,817 in 2005, from 239,685 in 2000.

These individuals, who constitute less than a quarter of 1 percent of all taxpayers, reaped almost 47 percent of the total income gains in 2005, compared with 2000.

People with incomes of more than a million dollars also received 62 percent of the savings from the reduced tax rates on long-term capital gains and dividends that President Bush signed into law in 2003, according to a separate analysis by Citizens for Tax Justice, a group that points out policies that it says favor the rich.

The group’s calculations showed that 28 percent of the investment tax cut savings went to just 11,433 of the 134 million taxpayers, those who made $10 million or more, saving them almost $1.9 million each. Over all, this small number of wealthy Americans saved $21.7 billion in taxes on their investment income as a result of the tax-cut law.

The nearly 90 percent of Americans who make less than $100,000 a year saved on average $318 each on their investments. They collected 5.3 percent of the total savings from reduced tax rates on investment income.

Republicans plan to use the old "Dems are tax and spenders" meme in '08 to try and paint Dems as fiscally irresponsible, but Big Picture notes that Americans seem to know just how screwed they've been over the Bush years on the economic front and know who to take their anger out on.

The most recent Wall Street Journal poll, taken in late July and early August, found that 2/3rds of Americans think the economy is either in recession or heading for one. The same poll found that more than 2/3rds think that America is on the wrong track. They are distrustful of Washington (especially the president, but also the Congress), but they're also distrustful of

financial industry, large corporations in general and energy, drug and insurance companies in particular.

Big Picture also notes that Wall Street and the Feds have been using "Bullshit Math" to make the stats look better than they really are:

So long as we are popping economic myths, let's also dispatch with the 4.5% unemployment rate. That number has been largely caused by several million exhaustees and others simply leaving the work force.

The actual unemployment rate is closer to 6.5%. And if we measured it the way the Europeans do, its closer to 8%. This explains why wages and labor costs have remained subdued despite the alleged 4.5% UE measure.

Anyone with more than 4 functioning brain cells should be able to figure out that a 4.5% unemployment rate would be causing huge labor shortages and wage increases.

Instead, the average income gain is merely a measure of inflation: reported gains reflect increased costs for medical care -- the exact same coverage (but with a higher copay) which costs 15% more year-over-year shows up as increased total wages.

So while the government and the Wall Street guys fudge the stats and make everything look good fundamentally, the experiences of people on Main Street are telling them that something is rotten in Bush's Ownership Society.

People know that they're working longer and harder to make less. They know that they've had to borrow to live the lifestyle they used to live just a few years ago. And now with interest rates rising and home prices tanking, they can't borrow any more. Since inflation has eaten away any wage gains they've made, they know they're worse off than they were before Bush and Company took power.

POSTSCRIPT: Treasury Secretary Henry Paulson just said on CNBC that the "economy is strong" and "will continue to grow, create jobs and raise standards of living for all Americans."

Uh, huh - as long as you're using the Bullshit Math.

But in reality, Paulson's right about that only if you're making $1 million or more a year.

Otherwise, you're fucked.

Earlier today I posted an article by Bill Gross at Fortune describing the subprime mortgage mess as a huge game of "Where's Waldo?". According to Gross, Wall Street investors are holding their breaths wondering just which financial institutions have exposure to the toxic waste of the subprime and Alt-A mortgages ("Waldo"), just what the fall-out from that exposure will be and if the contagion will continue to spread.

Tonight we learn via the Wall Street Journal that Waldo showed up at Capital One and cost the company $2.15 a share:

Capital One Financial Corp., citing "an unprecedented set of market circumstances," plans to shut down its struggling GreenPoint mortgage unit -- keeping only pieces of a business valued at $6.3 billion just three years ago.

The ninth-largest U.S. bank by market value, Capital One bought GreenPoint in last year's $13.2 billion purchase of North Fork Bancorp, of Melville, N.Y. In 2004, North Fork paid $6.3 billion for GreenPoint Financial Corp., then a large New York savings and loan specializing in mortgages.

In a statement, Capital One, McLean, Va., said it will take an after-tax charge of $860 million, or $2.15 a share, most of it this year. The company is revising downward its 2007 earnings guidance to approximately $5 a share. Capital One had 2006 per-share earnings of $7.62.

...

Capital One officials said the bank will close GreenPoint's 31 locations and eliminate 1,900 jobs immediately. The credit-card giant said the subsidiary wouldn't make any more new mortgages but will fund those in the pipeline with locked-in rates.

...

Capital One isn't exiting the mortgage business entirely. The company will still continue to originate and sell traditional mortgage loans through its 750 bank branches in the northeastern U.S., Texas and Louisiana. Capital One is also retaining a $12.5 billion mortgage portfolio, which includes loans originated by the banks it acquired and $680 million of second mortgages originated by GreenPoint. Capital One said it could have sold those $680 million in second mortgages at a loss but decided to keep them.

Capital One now joins the ranks of Countrywide, BNP Paribas, and IKB as a big-time lender that has taken a big-time hit from the collapse of the subprime and Alt-A mortgage markets.

Some of the shills on CNBC were saying today you should by financial stock because the sector was oversold.

Given that Waldo just showed up at another big-time lender with exposure to the subprime and Alt-A mortgage industries today and wound up costing $2.15 a share, I wonder if the shills will be saying the financials are oversold tomorrow.

UPDATE: The LA Times reports that Countrywide is laying off 550 employees immediately. Add that to the 1,900 that Capital One is laying off and you have 2,450 people who have been laid off in the last two days as a result of the subprime mortgage fiasco.

From Political Wire:

The New York Times looked at Rudy Giuliani's claim to have spent more time at Ground Zero than some of the 9/11 rescue workers and finds he spent "a total of 29 hours in those three months, often for short periods or to visit locations adjacent to the rubble. In that same period, many rescue and recovery workers put in daily 12-hour shifts."

Meanwhile, Salon shows how Giuliani used his time: "By our count, Giuliani spent about 58 hours at Yankees games or flying to them in the 40 days between Sept. 25 and Nov. 4, roughly twice as long as he spent at ground zero in the 60 days between Sept. 17 and Dec. 16. By his own standard, Giuliani was one of the Yankees more than he was one of the rescue workers."

Ha- Rudy was one of the Yankees more than one of the rescue workers.

Can't wait to see the first commercial using that comparison on TV.

Via Calculated Risk, Bill Gross of Fortune describes the subprime mess as a huge game of Where's Waldo:

The bond and stock market problem is the same one puzzle players confront during a game of "Where's Waldo?" -- Waldo in this case being the bad loans and defaulting subprime paper of the U.S. mortgage market.

While market analysts can estimate how many Waldos might actually show their faces over the next few years -- $100 billion to $200 billion worth is a reasonable estimate -- no one really knows where they are hidden.

First believed to be confined to Bear Stearns's hedge funds and their proxies, Waldos have been popping up with regularity in seemingly staid institutions such as German and French banks, and that has necessitated state-sanctioned bailouts reminiscent of the Long-Term Capital Management crisis of 1998.

IKB, a German bank, and BNP Paribas, its French counterpart, encountered subprime meltdowns on either their own balance sheets or investment funds sponsored by them. Their combined assets total billions, although their Waldos are yet to be computed or even found.

Those looking for clues to the extent of the spreading fungus should understand that there really is no comprehensive data to allow anyone to know how many subprimes actually rest in individual institutional portfolios.

Regulators have been absent from the game, and information release has been left in the hands of individual institutions, some of which have compounded the uncertainty with comments about volatile market conditions unequaled during the lifetime of their careers.

Also many institutions, including pension funds and insurance companies, argue that accounting rules allow them to mark subprime derivatives at cost. Default exposure, therefore, can hibernate for many months before its true value is revealed to investors and, importantly, to other lenders.

The significance of proper disclosure is, in effect, the key to the current crisis.

News comes today that Deutsche Bank tapped the Fed's discount window over the weekend for a loan.

Have we found another of Waldo's hiding spots?

The Financial Times says Deutsche Bank was simply trying to show support for the Fed's move to combat the credit squeeze.

Maybe that's so.

Probably it is.

But as Bill Gross notes, with little regulation, no transparency, and information release left up to the the same institutions who have made billion-dollar mistakes, it's hard to say.

And that's the real problem.

BNP Paribas said one week that they had little exposure to the subprime mess.

The next week, they had to be bailed out because several of their funds had melted down from the subprime mortgage mess.

IGiven the amount of hidden Waldo's out there, it's hard to believe anything you hear from any of these institutions.

Global markets rallied today after Friday's move by the Federal Reserve to cuts the discount window rate.

Wall Street is set to open higher.

Reuters reports that policymakers across the world have also breathed a sigh of relief at signs that panic in the financial markets has eased.

The shills on CNBC are shilling away and waving their pom poms.

I guess all that bad news from last week that had people ready to jump off buildings on Thursday is gone.

Uh, huh.

Anyway, sounds like Wall Street is looking at a big gain this morning.

We'll see if that holds through the afternoon.

And then we'll see if any more funds fail this week.

Dan Rather broke the news of that very possibility on The Chris Matthews Show:

Mr. Rather: Michael Bloomberg, mayor of New York, told me that he was not going to run for president. In a direct answer to a direct question, would he run under any circumstances, he danced around a bit and finally said ‘No.’ Furthermore, he said he wasn’t open to even considering running as a vice presidential candidate with anybody, and he wouldn’t take a place in anybody’s cabinet.”

Mr. Matthews: “Is he going to run against Spitzer for governor next time?”

Mr. Rather: “I wouldn’t bet against it.”

This doesn't surprise me, actually.

The mayor, a self-made billionaire, is no dummy.

He's got to know that he doesn't have a shot in hell of winning the White House as an independent candidate, no matter how many billions he throws into his propaganda campaign.

But to take that $1 billion he's got set aside for his ostensible White House run and use it to buy the Governor's Mansion in Albany - that I can see, particularly since the current inhabitant, Eliot Spitzer, has been so weakened by the Bruno scandal.

For you New York City teachers out there, this news, if true, should seem pretty devastating. Here we have already started the countdown to the end of Mayor Moneybags' term at City Hall and now he's threatening to buy the governorship and bring his education reform movement to Albany.

I hope the kids around the state like standardized tests (at least 10 a year in English and math, with more to follow in history and science), uniformly measured bulletin boards, reading rugs (watch out for those reading rug bugs and dust mites!), the small school movement (in which ALL big schools are eventually declared failures, closed and replaced with "smaller schools" inside the very same buildings that used to house the "failed" big schools), manipulated test scores and a public relations education campaign staff that is second to none (though the people actually running the Department of Education don't really know or care much about education.)

Here's hoping Spitzer regains his political strength and deters a Bloomberg run. Spitzer may not be the friendliest of governors to NY teachers, but he sure as hell isn't Moneybags either.

2 firefighter died fighting a fire at the Deutsche Bank Building at 130 Liberty Street across from Ground Zero, joining 343 other fire fighters who died in the pit on that terrible day almost 6 years ago.

Why is the Deutsche Bank Building still standing so long after the rest of Ground Zero has been cleaned up (WTC 7, for instance, destroyed by the 9/11 attacks, has already been replaced with another skyscraper and occupied by tenants) and who is to blame for yesterday's tragedy.

It sounds like the firemen who fought yesterday's fire know:

Two firefighters were killed yesterday when a nightmarish inferno engulfed a vacant skyscraper overlooking Ground Zero that was left decimated by the 9/11 attacks.

Fallen heroes Joe Graffagnino, 34, and Robert Beddia, 53, ran out of oxygen while trapped inside the former Deutsche Bank building, a maze-like warren of debris, sources said.

They died steps from The Pit where 343 of their brethren perished when the twin towers fell on Sept. 11, 2001 - including 11 from their own Engine 24/Ladder 5 firehouse.

...

Graffagnino, an eight-year veteran from Brooklyn, and Beddia, a 23-year veteran from Staten Island, were running a hose up when they got trapped on the 14th floor, where they were found unconscious.

They suffered smoke inhalation that caused cardiac arrest, officials said.

They had air tanks, but it appears the oxygen ran out before they were found, a source said.

A paramedic who struggled to save one of the victims said it was a hopeless situation.

"He was dead from the moment they brought him out of the building," the emergency worker said. "We tried everything ... but nothing helped."

The loss seemed senseless to some firefighters.

"The city lets that building sit there for what, going on six years, and now two more firefighters die?" said one who worked with Graffagnino and Beddia. "It makes me sick."

Battling the flames was harrowing because of the condition of the partly demolished building - including a lack of water outlets inside.

"This fire was a nightmare. The standpipes for water were out of commission because the building was being torn apart," said a firefighter.

"Every floor was wrapped in heavy plastic sheeting because of the asbestos abatement work being done.

"Only one of the two construction elevators was working.

"Getting in and out was a mess - and two men died for this cursed building," the firefighter said.

Another said, "It was a maze inside. The building was a shell filled with combustibles."

Flaming plywood that had been nailed across windows destroyed on 9/11 fell to the ground, close to passersby and fire trucks, said witnesses.

Glass showered onto sidewalks as much as three hours after the fire first erupted.

More than four hours after the first report, it was upgraded to a seven-alarm.

The blaze was still not under control when the deaths of Graffagnino and Beddia were announced at NYU Downtown Hospital.

The widow of one of the men was inconsolable when she arrived.

"She was screaming, 'Please, let me know, is he dead?'" said Evelyn Franco, who was with a sick relative in the ER when the firefighters' families showed up.

"She was shouting, 'Oh my God, please, don't take him away.'She was hysterical. The place was full of firefighters. There were hundreds of them."

There's going to be shitloads of anger from firefighters over this. This building should have been pulled down long ago. The collapse of 2 World Trade Center tore a 15 story gash in the front of the building and destroyed the lobby. The owners of the building, Deutsche Bank, argued that the building was uninhabitable and had to be destroyed. The insurance company argued that the building was recoverable and could be fixed.

In the meantime, two years passed and conditions in the building worsened. Black mold developed inside the building from water damage caused by the attacks. Asbestos, dioxin, lead, chromium and four other hazardous substances were also found inside. It finally became clear even to the insurance company that the building could not be recovered. On February 27, 2004, an agreement was announced to settle the dispute between the two parties and later that year the Lower Manhattan Development Corporation agreed to take the land and begin destruction of the building.

But then there was the problem of human remains. Remains from the 9/11 attacks were first found inside the building in 2002. In September 2005, more human remains were found on the roof. In March 2006, workers removing toxic waste from the building found more human remains inside. 9/11 victims' families called for a complete search of the building to see if the building contained more human remains. In April of 2006 that search was done and 766 bone fragments were found on the roof of the building. Why the whole building search wasn't completed in 2002 after the first human remains were found inside is a mystery, but the remains recovery process has also delayed the destruction of the building.

And then there was the dilemma of how to get the building down. Loaded with toxic waste, residents of the area argued that the building had to be taken down very carefully so that the surrounding area was not contaminated by hazardous materials. The Lower Manhattan Development Corporation, purchasers of the building back in 2004, argued that the building was not contaminated with toxic waste and could simply be imploded. The mayor, ever a billionaire buddy, sided with the LMDC that the quickest and safest way to take the building down was to simply blow it up. Congressman Jerrold Nadler argued that the building was a toxic nightmare that had to be taken down very carefully:

According to the Deutsche Bank court documents, "Environmental test results show that a combination of contaminants known to be hazardous to human health, in quantities and concentrations unparalleled in any other building designed for office use, permeate the entire structure at levels which exceed by up to thousands of times the levels considered appropriate... For example, the concentration of asbestos present at certain locations in the building is almost 150,000 times the level considered appropriate."

...

Given the unprecedented level of contamination present in the Deutsche Bank Building, residents and workers in Lower Manhattan are concerned that their health will be once again put at risk when the building is torn down. Phil McArdle, the Health and Safety officer of the Uniformed Firefighters Association, has expressed concern for the safety of firefighters at neighboring Firehouse 1010. There are also concerns that people throughout New York will again be exposed to the contamination as materials removed from the building are transported through neighborhoods on the way to landfills.

"During the original WTC clean up effort, the EPA failed to protect public health or enforce applicable environmental and counter terrorism public safety standards. Residents and workers are now sick because EPA failed to do its job. The people of New York are still waiting for a comprehensive and effective environmental testing and clean up program. A class action lawsuit has even been filed in federal court to get the EPA to do its job, and do it right," said Nadler.

Nadler recommends that the following measures must be taken to protect people living and working in Lower Manhattan: All test results from the building, unfiltered by government agencies, must be made public, for example on a website updated daily. Additional real-time testing of all contaminants known to be present in the building must be conducted in the surrounding area to detect any contamination released during the demolition. A disinterested, independent party must monitor the entire operation. Contingency plans must be put in place, and enforced, in the event that any of these contaminants escape during demolition. The hazardous waste from the site must be properly handled so that there is no release into the community during transport, and it must be disposed of in a legally licensed hazardous waste facility. In short, the site must be handled in a public and transparent manner, consistent with all applicable federal environmental and counterterrorism public safety laws. The EPA must also conduct comprehensive testing of all buildings contaminated by the collapse of the World Trade Center, and it must test for all substances known to present, such as those documented at the Deutsche Bank.

"We know thousands of firefighters who were present at the World Trade Center on 9/11 have already become sick. Because we have this unfortunate advance notice of the disastrous effects of the exposure to World Trade Center contaminants, the government would be knowingly poisoning people if it did not make certain that this tear down is done correctly.

Nadler and residents of the area won the argument - the building was to be dismantled rather than imploded. The NY Times, in a story in yesterday's paper, described the arduous, painstaking process:

The New York base of Deutsche Bank at the time is now being dismantled.

That is different from being demolished. The building is being taken apart almost piece by piece, something demolition experts say has been done before.

What is a first is the complete removal of a building so large and so badly contaminated by hazardous substances. And it is happening under the wary eyes of regulators, neighbors and even the Wall Street types who will someday fill the building that is scheduled to take this one’s place.

So, day after day this summer, workers with acetylene torches are going floor by floor, slicing through the steel beams, the horizontal parts of the building’s skeleton. With help from small tractorlike machines, they are pulling down the beams and the steel columns they are attached to.

Then they are cutting the beams and columns into smaller pieces and loading them into trash-hauling bins that a crane lowers to the street.

Working their way down from the top of what was once a 41-story building, the workers reached the 26th floor on Tuesday morning.

They were cutting into the beams at the southwest corner of that floor, and the two-and-a-half-inch-thick concrete floor slab was vibrating. That was because a mechanical excavator — another tractorlike machine, with a jackhammer mounted on a movable front arm — was breaking through the slab on the southeast corner.

The broken pieces went into another trash-hauling bin and the crane took them away, too. The workers can dismantle one floor every four days or so.

A separate team is working its way through the building, removing the interiors and scrubbing away any contaminants that may remain.

Consultants to the development corporation said more than two years ago that besides asbestos, the building had excessive levels of seven hazardous substances, including dioxin, lead and chromium.

Now those floors have been reduced to their structural elements: naked columns and beams. The walls that once defined offices are gone. So are the plate-glass windows that once looked out on the trade center across the street. So are the wires that connected computers and phones and brought in electricity.

It is thought that one of the acetylene torches that are used to dismantle the building may have started yesterday's fire.

And now, 2 more fire fighters have joined the 343 of their brothers who died across the street on 9/11.

This is a shame.

It did not have to happen.

While the mayor sanctimoniously talks about the "sacrifice" these two firefighters made yesterday fighting this fire, he needs to look in the mirror and ask himself just who helped contribute to those sacrifices.

But the mayor is not the only person complicit in this tragedy.

Let's not forget that Deutsche Bank, the insurance company, the LMDC, Governor Pataki, Shelly Silver and a bunch of other pols contributed to the various impasse that have kept this building up nearly six years after the 9/11 attacks took down WTC 1, WTC 2, and WTC 7.

POSTSCRIPT: Fiterman Hall, a building that is part of the Borough of Manhattan Community College, was contaminated on 9/11 by the destruction of WTC 7 and has also been the subject of political and economic wrangling. Like the Deutsche Bank Building, it also still has not been completely cleaned up. You can see a post-9/11 history of that building here.

A six alarm fire that broke out in the contaminated Deutsche Bank Building near Ground Zero has injured at least three firefighters.

The building, located at 130 Liberty Street, was in the process of being dismantled floor by floor because of contamination caused by the 9/11 terrorist attacks in 2001.

Construction crews had dismantled 14 of the 40 floors in the building. Just this morning, the NY Times ran a story on the dismantling process, noting that this is the first time in American history that a building of this size has been dismantled rather than imploded.

The building is known to be highly contaminated with excessive levels of seven hazardous substances, including dioxin, lead and chromium. Imploding the building would have sent those hazardous substances into the air and contaminated the surrounding area. This is why the building is being dismantled rather than imploded.

Now those hazardous substances are contaminating the surrounding area anyway, as the smell of acrid, toxic smoke is wafting through the downturn New York air once again, just like on 9/11. Emergency crews are pushing on-lookers away from the fire as pieces of burning debris from the building have fallen to the street.

The firefighters and other emergency crews fighting this blaze are quite literally risking their lives to put it out.

I probably shouldn't write this, but I wonder when the first cancer death associated with this fire will occur?

It can't be safe to be anywhere near that fire, let alone fighting in from inside the building.

UPDATE: The fire broke out on the 20th floor around 3:30 PM. A reporter for 1010 WINS says the top four floors continue to burn as of 8:25 PM.

Wouldn't want top live downtown with that building having burned for 5+ hours and spewed god knows what toxic crap into the air.

The mayor is set to hold a press conference from NYU Medical Center where the injured fire fighters were taken.

I'm sure Moneybags will tell anybody who asks him about the safety of the air to stop whining.

After all, this is New York - you shouldn't expect safe air to breathe.

SECOND UPDATE: NY1 reports that two of the firefighters have died. The fire is now 7 alarms.

THIRD UPDATE: Moneybags confirms that 2 firefighters have died fighting the fire. He says the air is safe, downtown does not need a frozen zone around the building, and the building is not in danger of collapse. The fire commissioner says that the fire started on the 17th floor of the building.

1010 WINS reports that at one point the fire was on 10 floors of the remaining 26 floors of the building.

FOURTH UPDATE: There were rumors swirling that the building could collapse. NY 1 reported those rumors earlier, but the mayor shot them down, saying the Department of Buildings had tested the structure and found it safe.

So where did these rumors that the building could possibly collapse come from?

From some of the firemen who were fighting the fire:

About 50 people milled about on Greenwich Street watching flames shoot out of the top of the building, which is surrounded by scaffolding and covered with a black shroud.

Pieces of fiery debris rained down from the building onto the street and booms sounded periodically as glass shattered.

About 4:30 p.m., a firefighter approached a group of about two dozen people who were watching the scene unfold from across the street and yelled, "This building could collapse. If the building collapses you're all going to die. If the scaffolding collapses you're all going to die. You've got to get out of here."

But a New York police sergeant said "the building is in no danger of collapsing."

Most people, however, moved and found another spot from which to see the fire.

Clearly, emotions were running high for many of the firefighters. Not only were they once again responding to a fire in a building at Ground Zero, but that fire had already killed some firefighters. Still, the mayor says the bank building was never in danger of collapse.

I wish I didn't have such a difficult time believing anything Bloomberg says. But he's such a little liar and manipulator, I roll my eyes whenever he issues assurances about the quality of the air or the safety of the area around one of these disasters. I felt the same way after the midtown steam pipe explosion in July.

FIFTH UPDATE: The NY Times provides some details about the sights, smells and dangers at the scene:

“It was like another 9/11,” said Ed Mecropolis, 57, who lives in a red-brick building near the back of the former Deutsche Bank building and was prevented from going home by a police barricade. “I couldn’t go home to get my clothes for a week. All my credit cards, my checkbook, my cash, anything.”

Jillian Jaques, who lives in the same building as Mr. Mecropolis at 109 Washington, stood with him at the corner of Washington and Rector streets. Tourists snapped photos as they worried about their neighbors’ dogs and wondered where they would stay the night. “With this going on,” she added, “we can’t stick around.” Ms. Jaques said she was heading to the Jersey Shore for the night.

The abandoned building, shrouded in a grim black fabric netting, has been more than an eyesore to its neighbors. Residents expressed concern about the building immediately after the attack and in the ensuing years as it was being dismantled. The building, laden with asbestos, was heavily damaged in the terror attack.

The fire yesterday seemed to only worsen its stigma.

“I used to work in that building and I’ll tell you, that building is bad luck,” said Sanjay Deepti, 32, who lives in Battery Park City. “It should have been torn down long ago. It’s jinxed.”

Michael K. Williams, 28, a publicist who rents a one-bedroom apartment at 90 West St., an apartment building overlooking ground zero about one block away from the Deutsche Bank building, said he was not in the least surprised by the fire.

“That whole building is such as disaster,” he said. “It’s riddled with problems.”

Mr. Williams said he is even more concerned after the fire about breathing in asbestos emanating from the building. “You could smell it,” he said. “I don’t want to breathe that stuff.”

By 6 p.m., Mr. Mecropolis, who lives on Washington Street, was let back inside his bulding to get some belongings and he decided not to come back out.

He said he headed to the roof of the building, joining his neighbors to watch the abandoned building burn. He heard a loud boom, and he said he felt his throat get very dry. He thought there was some residue of asbestos in the air.

“The smell and the taste went from campfire to dramatically chemical,” he said. “My throat was dry and irritated.”

Not good.

SIXTH UPDATE: WCBS reported at 11:03 PM that the fire at the Deutsche Bank building is now under control.

SEVENTH UPDATE: The firefighters who died while fighting the Deutsche Bank building fire have been identified:

One of the firefighters killed was identified as Joseph Graffagnino, 34, of the Dyker Heights section of Brooklyn. A firefighter for eight years, he was a member of Ladder 5. The other firefighter was identified as 23-year veteran Robert Beddia, also a member of Ladder 5.

The NY Times explores how it those fire fighters may have died:

The Fire Department’s emergency air packs are meant to provide firefighters with roughly 40 minutes of vital oxygen. But there is a catch: the harder a fighter has to breathe, the more quickly the oxygen runs out.

That, Fire Department officials said last night, was probably what helped doom Joseph Graffagnino and Robert Beddia on the 14th floor of the Deutsche Bank building at ground zero.

The two firefighters, assigned to Engine 24, had made their way within striking distance of the fire that broke out around 3 p.m. yesterday.

But, trying to navigate through a maze of construction equipment, scaffolding and other impediments posed by a skyscraper in the process of being demolished, the firefighters appear to have become confused, perhaps even trapped, said fire officials, who spoke on condition of anonymity.

Of course, firefighters are used to working in unfamiliar situations. But the Deutsche Bank building, fire officials suggested, presented its own bewildering array of conditions. Some rooms were sealed, perhaps as part of the asbestos removal under way. Lighting might have been miserable, even in midafternoon.

For the two firefighters, misfortune would only be compounded.

At least one of the building’s standpipes, conduits for water that run like a spine through the building, was not working. Firefighters had to improvise a way to get water on the growing blaze, an effort that required time.

Time the two firefighters were running out of.

Fire officials last night said that the two firefighters — taxed by the climb up the 14 floors and perhaps unable to find a clear way to retreat — likely expended their supply of oxygen in as little as 25 minutes.

The growing smoke soon became lethal. City officials said both firefighters were overcome by carbon monoxide, and their hearts soon became casualties.

Sigh - truly New York's bravest.