Financial fail fallout

The Washington, DC Metro system is the only public transit system in America without a dedicated funding source.  Consequently, Metro goes ’round hat-in-hand trying to find contributions from the DC, Maryland, Virginia, and federal governments.  This please sir may I have another? approach has left the system short approximately $1 billion per year needed for the next decade to ensure upkeep and upgrades to the buses, trains, and rails.  The Senate recently ponied up $1.5 billion, and small fare hikes and increased ridership may add a bit to the pot.  (Though the latter obviously increases wear and tear as well)

So today, the Washington Post reports more bad news:

“Metro and 30 other transit agencies across the country may have to pay billions of dollars to large banks as years-old financing deals unravel, potentially hurting service for millions of bus and train riders, transit officials said yesterday.”

Huh? What happened?

“The problems are an unexpected consequence of the credit crisis, triggered indirectly by the collapse of American International Group, the insurance giant that U.S. taxpayers recently rescued from bankruptcy, officials said.

AIG had guaranteed deals between transit agencies and banks under which the banks made upfront payments that the agencies agreed to repay over time. But AIG’s financial problems have invalidated the company’s guarantees, putting the deals in technical default and allowing the banks to ask for all their money at once. “

In other words, the failure of AIG means that the banks can call in their loans whenever they damn well please; as in, tomorrow.  The Washington Metro Area Transit Authority (WMATA) could owe up to $400 million; one Belgian bank has already demanded payment of $43 million by next week.  They’re going begging to Treasury ASAP, but with other cities including Boston and Atlanta similarly desperate, there may not be much to go around.

The full, depressing situation is here.  Above all, the story reveals the dangerousness of the incredible interconnectivity of our modern economic system.

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Disjointed linkage

• Alan Greenspan discovers that banks can’t regulate themselves. In other news, gambling has been discovered in Casablanca.

• Former leader of the lunatic-right Austrian Freedom Party Jorg Haider died in a car accident on October 11.  Today, the new party leader confirmed in a radio interview that he and Haider had been lovers.  Sadly, Bruno could not be reached for comment.

• It’s not a put-on, it’s not faux-populism, it’s not political, self-conscious anti-intellectualism.  Nope.  Sarah Palin is just a straight-up idiot.

• The financial crisis is the result of a number of complex processes.  However, this instant message exchange among Standard and Poors analysts (revealed in testimony to the House Oversight Committee,) goes a long way towards explaining how we got here:

Rahul Dilip Shah: btw: that deal is ridiculous

Shannon Mooney: I know right … model def does not capture half of the risk

Rahul Dilip Shah: we should not be rating it

Shannon Mooney: we rate every deal

Shannon Mooney: it could be structured by cows and we would rate it

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Machination math

Congressman Barney Frank is a witty guy. When California Republican David Dreier was passed over for a House leadership position, the openly gay Frank was asked whether he thought this was because Dreier was “too moderate” or because of persistant rumors about Dreier sexual preferences. His reply?

“[Dreier] didn’t get it because he was moderate. And I’m going to a moderate bar after work.”

Frank is Chairman of the House Financial Services Committee and led the push for the bailout bill. Immediately after the bill’s failure, House Republican Roy Blunt (R-Tobacco) pinned blame on Nancy Pelosi, claiming that her “partisan floor speech” drove 12 Republicans to vote against it instead of in favor as they had promised him. An aide to the Speaker called it “absurd,” adding that “you don’t vote on the speech, you vote on the bill.” Further, none of the 9 Republicans who made floor speeches after Pelosi even mentioned hers, nor did any other Republicans complain besides Blunt.

And so back to Barney Frank, who looked the final roll call and did the math:

“One of the truly great coincidences in the history of numerology. The number of deeply offended Republicans who put feeling over country turned out to be exactly the number you would need to reverse the vote.”

Frank is right. Twelve is the perfect number for a political trick. Without the dozen alleged Pelosi defections, the final 205-228 failure becomes a perfect 217-216 pass (with one abstention.) Had Blunt blamed the Speaker for any number less than this, it wouldn’t have changed the outcome anyway. Had he cited a large number like 20 or 30, it wouldn’t have been believable since no Republicans actually cited her speech as having influenced their votes.

I’ll make a conjecture: Blunt straight-up lied. Does anyone honestly think that 12 Republicans switched to “no” votes on a seemingly urgent bill supported by their House, Senate, and White House leadership because mean aunt Nancy hurt their feelings? Blunt looked at the final tally, realized it was a lost cause, and threw out a magical number.

Today, Blunt backed away from his whiny-ass bullshit. It’s possible he felt like a fool being called out. It’s also possible that he realized his political mistake. It’s a much easier sell for Democratic leadership to pin the bill’s failure on obstructionist Republicans than for Blunt to blame a 1-minute floor speech no one saw. Even without a cue, Americans are blaming the GOP by a 2-1 margin. Explains why fatty Blunt has moved back to the bi-partisan blah blah blah he was carrying on before…

Oh, and I’m with everything Digby said.

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Pirates! (not another keira knightley period peice)

I was always under the impression that part of the current pop culture fascination with maritime piracy sprang from commonness of internet piracy.  People, I think, like to indulge in the 18th century fantasy of rum and plunder because it serves as a kitschy extended metaphor for their bittorrent habit.  ‘Yarrr, it be the Morrisey discography ripe for the takin’, yoho yoho’.  Often we forget that there are, you know, actual pirates still lurking the waters–and stealing Ukrainian tanks!

The story of Somali piracy as an institution is interesting.  It began as a vigilante force to protect the tuna-rich waters off the coast from international commercial fishing operations when the central government collapsed over a decade ago.  They eventually evolved from armed tax collectors to straight up pirates because it was more lucrative — quiet million dollar pay outs from counties who want their men and property back, no harm done.  In an interview with the New York Times, the Somali pirates’ spokesmen Sugule Ali claims that they didn’t know there was and estimated $30 million in weapons on the ship they hijacked, but that they simply boarded because it’s standard procedure to attack large, vulnerable vessels.

“We don’t consider ourselves sea bandits,” he said. “We consider sea bandits those who illegally fish in our seas and dump waste in our seas and carry weapons in our seas. We are simply patrolling our seas. Think of us like a coast guard.”

Yet another timely example of how one man’s criminal is another’s folk hero. I do not condone the pirate’s actions but admit to being struck by their romantic sort of BAMFness.  Theres something inspiring about people of a developing nation demanding ransom on the high seas from their neocolonial detractors.  If nothing else, it forces us to remember that even those we dismiss as powerless can forcefully insert themselves into international economic and military discourse.  Pushed too far, some people will arm themselves, organize, and board your frigate.

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And now a word from the Jew who doesn’t understand finance

All this financial stuff is above my pay grade.  If any commenters want to debate the economics of the bailout, it’s all yours.  But a few unconnected thoughts first:

1)  It’s the politics, stupid.  One thing I did see coming, no one in a tight re-election race was voting for this $700 billion boondoggle.  Voting against it was cheap & easy populism, and the obvious choice for candidates facing 100-to-1 phone calls against.  (Actual public opinion isn’t that bad, but Congressmen respond to volume.)  The boys over at Fivethirtyeight did the math to verify, so here’s the “vulnerable” House members:

REPUBLICANS
AK-AL  Young         R      NAY
CO-4   Musgrave      R      NAY
CT-4   Shays         R      YEA
FL-8   Keller        R      NAY
FL-21  L Diaz-Balart R      NAY
FL-24  Feeney        R      NAY
FL-25  M Diaz-Balart R      NAY
ID-1   Sali          R      NAY
IL-10  Kirk          R      YEA
MI-7   Walberg       R      NAY
MI-9   Knollenberg   R      NAY
MO-6   Graves        R      NAY
NC-8   Hayes         R      NAY
NV-3   Porter        R      YEA
NY-29  Kuhl          R      NAY
OH-1   Chabot        R      NAY
OH-2   Schmidt       R      NAY
PA-3   English       R      NAY
VA-2   Drake         R      NAY
WA-8   Reichert      R      NAY

VULNERABLE GOP = 3 YEAS, 17 NAYS (15%)
OTHER GOP = 62 YEAS, 116 NAYS (35%)

DEMOCRATS
AZ-5   Mitchell    D      NAY
AZ-8   Giffords    D      NAY
CA-11  McNerney    D      YEA
FL-16  Mahoney     D      YEA
GA-8   Marshall    D      YEA
IL-14  Foster      D      YEA
IN-9   Hill        D      NAY
KS-2   Boyda       D      NAY
KY-3   Yarmuth     D      NAY
LA-6   Cazayoux    D      NAY
MS-1   Childers    D      NAY
NH-1   Shea-Porter D      NAY
NY-20  Gillibrand  D      NAY
PA-4   Altmire     D      NAY
PA-10  Carney      D      NAY
PA-11  Kanjorski   D      YEA
TX-22  Lampson     D      NAY
WI-8   Kagen       D      NAY

VULNERABLE DEMS = 5 YEAS, 13 NAYS (28%)
OTHER DEMS = 135 YEAS, 82 NAYS (62%)

ALL VULNERABLES = 8 YEAS, 30 NAYS (21%)
OTHERS = 197 YEAS, 198 NAYS (50%)

…and one of their helpful readers adds:  Of the 26 Congressmen not up for re-election at all, 23 voted “yes” with only 2 opposed and 1 abstention.

Of course another way to read this is that the conservative House members killed it themselves; take out the “vulnerables” and the GOP still manages to sink the thing.  But clearly, having to face the voters with this albatross was hugely prohibitive.

2)  Revolt of the masses. (No, not the real one.)  Consider that this bill had the support of the President, Vice President, both leaders in the House, both Presidential candidates, and all related Committee chairs on both the House and Senate sides; as well as the leaders at the Federal Reserve, SEC, and every other relevant government institution.  And it still failed by a good 20+ votes.  I can’t think of a bill that had such bipartisan support, the entire elite political establishment and most of the media, and yet failed.  Fact is, not only was it a terrible bill but it was a cynical one as a leaked conference call revealed.  The question then becomes…

3)  What next? Probably a similar bill.  Maybe some small changes to grab a few more votes.  What kills me is that we’re looking to people like Alan Greenspan, Hank Paulson (former Goldman CEO,) and Bob Rubin (Clintonomics, ) to plan our way out of this. It’s the way we do things – turn to the same fools who drove us into a ditch in the first place.  No one on the Iraq Study Group had the good sense to oppose the war before it started.  Washington has a very small coterie of Wisened Old Whiteys (WOWs,) epitomized by Lee Hamilton who served as Chair of both the Iraq Study Group and 9/11 Commission.  Hamilton’s a fine old man, but aren’t we moving towards intellectual calcification here?

I want my “experts” to have actually been a) right and b) not pursuing conflicts of interest.  I’d like to hear from Nouriel Roubini instead of the de-regulators and speculators who got us here.  I’d like to hear what Steve Pearlstein thinks.  Galbraith.  Fuck it, give me Eliot Spitzer’s prescience.  (If you want Roubini’s plan, registration is free.)  Why don’t we look at how someone else did it?

Instead, we’re more likely to get a scaled-down version of the same bill by the end of the week.  A few words tacked on or excised to win votes, cheers from the people who put us in this situation, and a nice bipartisan signing ceremony to bring a few hundred points back to the Dow.  Mazel tov, but what are the odds it constitutes the necessary rethinking of the past couple decades worth of unicorn political economics?

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the middle class first?

Is anyone else really, really bothered by the end tagline? Or, as another person pointed out on the youtube comment page: “Shouldn’t the poor be first? Oh, that’s right, they don’t vote.”

Problematic all around.

I don’t know how to react to this, I would like to hear your thoughts.

Still waiting for your text, Barack.

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