The Obama October surprise video.

I was just forwarded this video by a far ring-wing message board I get updates from. (I wonder how long whoever had this has been sitting on it.) It’s Obama from 1999, interviewed on the Public Access channel of Chicago.   This is even worse than the recent Public Radio talk that the McCain camp and Drudge is reporting.  It’s even making me very worried -  it’s pretty explicit in terms of large redistribution of wealth, talks about how socialism can’t have failed cause it’s never been tried, blames white people for a lot of the world’s problems.

It’s only a matter of a few hours until this video gets to Fox News and Drudge – though it may not cost him the election, it certainly will make this a very close race.  And any honest liberal needs to consider how they should vote now that they know how foreign his views are – here is the video  Transcript is forthcoming, but we should get in front of this ASAP as best we can.  And a President McCain won’t be the end of the world, remember.

Pismo Beach disaster relief

 

 

When I divide Paul Rudd’s career into Canon-Rudd and Lower-Rudd, “Clueless” always gets placed in the Canon-Rudd movies.   Even after all this time, what a great movie – and who knew how relevant it would be so many years later?   as Michael Berube pointed out, isn’t the Palin ClothingGate story’s excuse, that the clothing is going to charity, very similar to that scene in Clueless where Cher is donating to charity?

Besides, as Gov. Palin justly points out, these clothes are not her property.  They’re going to charity.  All across America, needy women will be warmed this winter by the high-necked jackets made famous by Sarah Barracuda.  It’s sort of like that moment in Clueless when Cher donates her new skis and tennis racquet to the victims of a natural disaster:

McCain: Sarah, what are you doing?

Palin:  I’m captain of the Pismo Beach disaster relief.

McCain:  I don’t think they need the Valentino Garavani jacket you wore for your acceptance speech.

Palin:  Daddy, some people lost all their belongings.  Don’t you think that includes ensembles from Saks?

Consumption Junction

So much for consumption smoothing. Reuters:

And, in a “disturbing” trend, Castro-Wright said Wal-Mart for the first time is seeing a paycheck-related spike in sales of baby formula, suggesting consumers are rushing to buy such necessities as soon as they have the cash.

It is worth noting that Wal-mart’s automation and data-mining of their sales data is insane. If there is a spike or an anomaly among consumer behavior, they’d catch it quickly.

I wonder how well that narrative that Inequality matters less because low-income Americans have less consumption inequality is going to survive this downturn.

Macro Events

For a nice counter-opinion to conventional wisdom that greed and stupidity has caused this downturn, Crooked Timber has a nice piece – “Remember yer Keynes. Macroeconomic events have macroeconomic explanations, not micro ones.”

1) This was a policy-caused bubble. As I wrote last week, I noted in 2002 that the Federal Reserve, among others, was attempting to engineer a housing bubble in order to soften the landing post the internet bubble. This was not, I perhaps should have emphasised, a brilliant piece of iconoclastic contrarianism on my part. The jokes were quite original, and the Beanie Babies idea was all my own, but that actual analysis was totally commonplace at the time; I can’t remember if the Fed actually said this was what it was doing and suspect it didn’t, but it was generally and tacitly understood throughout the economic policy community that rising real estate prices were a goal of policy. Oliver Kamm remembers it this way too…

3) The other element of the crisis was “an excessive dependence on wholesale funding”. Again, at the level of the whole system, it could not have been otherwise. It can’t be put better than in John Hempton’s perfect phrase – “The banking system intermediates the current account deficit”….

4) The reasons why the Anglosphere countries ran such large current account deficits over the last ten years are, frankly, not very well understood. There’s a variety of theories – the Ben Bernanke “global savings glut”, Melanie Phillips theory of “a crisis of morality and buy-it-now culture caused by Richard Dawkins” (what do you think I’m lying or something, the intentional undervaluation of Asian currencies, lots and lots of them. But nobody, so far, has come up with a theory under which the entire driving force of the world economy has been the stupidity of stupid bankers.

In muted defense of the raters and the traders, the idea that we’d have a nationwide housing bubble, and drop, was a unthought of in 2004. Sure San Diego, LA, an exurbs here and there. But having nationwide CDOs was supposed to smooth that over.

Now we’re the future, we’re your future.

For teachers, if you ever wonder what your students are doing on their laptops while you lecture away, it is very likely to be work related to a flickr group of images of Robocop on a unicorn.

(h/t ezra klein)

Editorial License

The notion that financial markets are self-regulating in terms of risk and reward by absorbing all information, and work optimally without government regulation, has taken a bit of a tumble this year, no? I have no idea if that’s a central plank in Libertarian thought (though I think it is), but Cato’s blog, which is debating a slate piece about Libertarians by Slate’s Weisberg, writes:

With regard to government interventionism as a cause of the crisis, Charles Calomiris and Peter Wallison have marshalled strong evidence that Fannie and Freddie played a major role in inflating the real estate bubble. Despite the fact that these two gentlemen have forgotten more about financial markets than Weisberg will ever know, Weisberg dismisses their analysis as not only wrong, but risible.

Being interested in this, and having not read anything about this evidence, I run to the WSJ editorial – Blame Fannie Mae and Congress For the Credit Mess. It is terrible. It doesn’t do anything it sets out to claim – certainly nothing about inflating the real estate market. Here’s the key paragraph:

If [GSEs] were not making mortgages cheaper and were creating risks for the taxpayers and the economy, what value were they providing? The answer was their affordable-housing mission. So it was that, beginning in 2004, their portfolios of subprime and Alt-A loans and securities began to grow. Subprime and Alt-A originations in the U.S. rose from less than 8% of all mortgages in 2003 to over 20% in 2006. During this period the quality of subprime loans also declined, going from fixed rate, long-term amortizing loans to loans with low down payments and low (but adjustable) initial rates, indicating that originators were scraping the bottom of the barrel to find product for buyers like the GSEs.

In the words of Billy Madison everyone is now dumber for having read that. Notice how they don’t come out and say: “Fannie and Freddie bought x% of subprime loans, which forced other market competitors to increase their holdings to near x% in order to stay competitive.” That’s because that didn’t happen.

See if you can find the several rhetorical tricks with logic they play. To start, “2004, their portfolios of subprime and Alt-A loans and securities began to grow” – that is still true if their Alt-A loans grew just a little, and subprimes stayed almost exactly the same, during that time period. Then there’s a nice trick with the next sentence, trying to confuse a reader with the US total loan industry instead of the GSE’s portfolio. Note that the GSE’s portfolio, total or newly acquired, looked nothing like that national average they quote. The last sentence is my favorite. “buyers like the GSEs” – note that they can’t truthfully say “buyers such as the GSEs, which bought x%” – all we get is “it could have been possible.” In another universe, sure.

Even for the WSJ editorial page, this is lazy. I have no problem thinking that the GSE’s were a major factor in the current problems, but critics need to deal with the fact that they lost market share during the time period (which implies they couldn’t have led market forces, just reacted to them) and their default rate is lower than nation-wide banks (implying they took on less risk than the banking sector as a whole). Their editorials should address Alt-A loans, or something that is relevant, and not churn out “must be completed by deadline” hack jobs such as the one above.

The latest from questionable beverage purchases.

Breaking news (my underline):

MillerCoors LLC announced Monday that it will discontinue the clear malt beverage Zima, introduced by Coors Brewing Co. in 1992, because of “challenging malternative segment sales and declining consumer interest.”

Production of Zima ceased Oct. 10 and remaining orders will be filled on a first-come, first-served basis using available inventory, chief marketing officer Andy England said in an e-mail. The last orders are expected to be filled in December.

The beverage was produced at MillerCoors’ breweries in Golden, Colo., and Elkton, Va., spokesman Julian Green said.

The decision was made to reduce “complexity” in the brewer’s brand portfolio, allowing it to focus on more preferred brands like Sparks, a malt beverage brand acquired by Miller Brewing Co. of Milwaukee in 2006. MillerCoors, the recently merged operations of Miller and Coors, is asking distributors to replace Zima on store shelves with Sparks and Sparks Plus four-packs and Sparks Light.

Sparks Energy Drink is a rough drink, nowhere near as smooth as Zima. Also, if you pour Sparks into a glass, the foam has the yellow-orange color of a chemical spill.

RIP Zima 1993-2008. I’ll always remember that finals week sophomore year where our dorm floor bought out all the Zima in our mid-state IL college town and hosted Zima Parties.

Care Bears for after the financial collapse.

Seen in SF:

What would you add?

Sharpen it up.

David Brooks brings back Patio Man!:

Patio Man is surprised at how much the bankruptcy of Sharper Image has upset him.

I’ve been watching here and there on the conservative in-fighting going on at The Corner. This is my new favorite epic burn between Palin supporters and Palin detractors (Brooks here, called Palin “a cancer”):

As for the first bit, Peggy Noonan complains that she doesn’t know what Sarah Palin believes, and Ross Douthat thinks she needs David Brooks as her speechwriter. Well, I no longer know what David Brooks believes. Last I heard from him was on the Charlie Rose post-debate show when he was gushing that it was like being on a hiking trip and looking out the tent every morning and being reassured that the mountain is always there and Barack is like the mountain: he’s always there. Maybe he can sharpen it up for the book proposal.

Heh. From Bobos to Patio Man to ????. I’m sure there is something on the way.

Dividends

I’ve been meaning to write about this. This nytimes editorial is worth a minute – This Bailout Doesn’t Pay Dividends:

…Although there are many things to like about the government’s plan, the failure to suspend dividends is not one of them. These dividends, if they are paid at current levels, will redirect more than $25 billion of the $125 billion to shareholders in the next year alone. Taxpayers have been told that their money is required because of an urgent need to rebuild bank capital, yet a significant fraction of this money will wind up in shareholders’ pockets — and thus be unavailable to plug the large capital hole on the banks’ balance sheets.

Moreover, given their own equity stakes, the officers and directors of the nine banks will be among the leading beneficiaries of the dividend payout. We estimate that their personal take of the dividends will amount to approximately $250 million in the first year…

So why would the banks want to maintain large dividend payouts when they’ve had such a hard time borrowing, are starved of cash, and the credit markets believe that they run a significant risk of defaulting? Shouldn’t these distressed banks be marshalling all of the financial resources available to them to ensure their viability?

Although dividends should be a matter of near indifference to shareholders of healthy companies, when companies are financially distressed there is a conflict of interest between shareholders and bondholders that leads shareholders to prefer immediate payouts….

If the government is unwilling to take this step, then the boards of the banks should take it upon themselves to do the right thing. They may even have a legal obligation to do so, because courts have ruled that directors of financially distressed firms have a fiduciary duty to creditors as well as to shareholders.

The creditors of the banks include not just those who have already lent them money, but also American taxpayers who put their money on the line by guaranteeing the banks’ debts. From the perspective of this broader set of stakeholders, it is best to end dividend payments until the banks have returned to health.

We know from basic finance theory that, when there is no bankruptcy short-term dividends do not matter. You don’t care if you get paid $1 a day or $7 at the end of the week (plus risk-adjusted interest) – provided you get paid. Since there is a risk of bankruptcy (banks failing), shareholders want to get as many dividend payments as they can. Bondholders (which includes American citizens now) want no dividends, because it makes it more likely there will be a default. Since the whole point of this exercise is to keep banks afloat, doing measures that have no net economic effect (if the banks stay afloat, see theory link) on value is the first place to go.

Also there’s a prisoner’s dilemma here. Any one bank wants to not pay dividends (unless the board wants to turn the taxpayer’s money into their own money while f***ing over the bondholders, which includes the USA – which is a seperate reason to go after this) – however the first bank to do so is going to get creamed by the market. The government forcing this move allows all banks to benefit.

The fact that this hasn’t gone in makes me have serious doubts about the interests of many of the people carrying this out.