Quoting the Crisis

Nov 21

“This vividly shows the risk of entering into interest- rate swap agreements. The world’s got to see what stupidity even the sophisticated investors like the transportation fund can get into.” — Christopher Taylor, former executive director of the Municipal Securities Rulemaking Board in Alexandria, Virginia, quoted by Dunstan McNichol in Goldman Sachs Still Paid for Swaps on Redeemed Bonds (Update2) - Bloomberg.com

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So, maybe Blankfein is sorry that his company is so good at wrapping up garbage and selling it as a birthday present.

Or, maybe he’s sorry he didn’t tell everyone (or even the company’s clients) that while Goldman Sachs was selling $40 billion in securities backed by housing junk, the company secretly made a bet against the housing market. When the housing market started to collapse, Goldman Sachs’ profits soared. The company managed to avoid a total meltdown with good timing and excellent salesmanship.

“We participated in things that were clearly wrong and have reason to regret. We apologize.” — Lloyd Blankfein, CEO of Goldman Sachs, quoted by Simon Kennedy in Goldman apologizes, offers small businesses help - MarketWatch

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What the good Professor is suggesting is that the Treasury doesn’t have to issue bonds at all. In fact, since the Treasury does control the electronic printing press, it could legitimately buy stuff with money it prints out of thin air. Sounds a bit like counterfeiting, doesn’t it?

But, let’s step back for a second: what is the functional difference for the federal government between Treasury securities and bank notes? Both are liabilities of the federal government. But liabilities of what? The only obligation they enforce on the government is the promise to repay with more paper (or electronic bank credits, if you will). For all intents and purposes, bank notes, reserve deposits, and Treasury securities are fungible: they are obligations to be repaid in the same fiat currency.

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While seeking concessions from the various banks, the Fed contacted the Commission Bancaire, a French regulator, to request support in its negotiations with two French institutions, Société Générale and Calyon.

The Commission Bancaire responded “forcibly” that unless A.I.G. were in bankruptcy, the French banks were “precluded by law from making concessions and could face potential criminal liability” if they helped.

“We cannot control ourselves. You have to step in and control the Street.” — John Mack, CEO of Morgan Stanley, quoted by Andrew Ross Sorkin in his tweeter feed.

“My interpretation of the data goes to income inequality. I see this as evidence that the last decade of growth in the U.S. has not been beneficial for poorer Americans. However, I would go further in saying that the downturn in the U.S. and rising unemployment, bankruptcy and foreclosure in the middle class has made plain that the middle class has also been left behind.” — Edward Harrison in Food insecurity in America skyrockets «  naked capitalism

Nov 20

“More bad news for the housing market, the number of people falling behind on their mortgage payments continues to climb. The Mortgage Bankers Association says 9.64 percent of all home loans outstanding last quarter were at least one payment past due. What’s worse? That figure does not include loans that are in the process of foreclosure, 4.47 percent of loans were in foreclosure, up from 4.3 percent last quarter.” — Caitlin Kenney in Mortgage Defaults Hitting Record Highs - Planet Money Blog : NPR

“More than a million children regularly go to bed hungry in the US, according to a government report that shows a startling increase in the number of families struggling to put food on the table.” — Chris McGreal in Record numbers go hungry in households in the US | World news | guardian.co.uk

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Just two days before the New York Fed paid A.I.G.’s partners 100 cents on the dollar to tear up their contracts with the insurance giant, one bank volunteered to take a modest haircut — but it never got the chance.

UBS, of Switzerland, alone offered to give a break to the New York Fed in the negotiations last November over how to keep A.I.G. from toppling and taking other banks down with it. It would have accepted 98 cents on the dollar.

But UBS’s good-faith gesture was quickly drowned out by Goldman Sachs and the top French bank regulator. They argued, with others, that it would be improper and perhaps even criminal to force A.I.G.’s trading partners to bear losses outside of bankruptcy court.

“The United States of America … came into this crisis without anything like the basic tools countries need to contain financial panics. Coming into AIG, we had basically duct tape and string.” — Treasury Secretary Tim Geithner, quoted by Sarah O’Connor and Alan Rappeport in FT.com / US / Economy & Fed - Geithner defends record to Congress

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It may be the world’s richest nation, but the US is no stranger to startling poverty. A new report from the US Department of Agriculture says that food insecurity is the highest in America since the survey began.

Food insecurity - defined by the USDA as when “food intake … was reduced and their eating patterns were disrupted at times during the year because the household lacked money and other resources for food” - afflicted 14.6% of Americans in 2008. Ie, some 50 million people were too poor to guarantee being able to put food on the table.

Nov 19

U.S. House Dems sharpening 'too big to fail' plan | Business News | Reuters -

continuum:

WASHINGTON (Reuters) - A key U.S. congressional panel moved toward toughening a plan for dealing with “too big to fail” financial firms on Tuesday, while rejecting a Republican alternative backed by Wall Street.

UC expected to raise student fees 32% -

robot-heart-politics:

pinkpolkadots:

Regents are expected to approve yet another increase, arguing it’s needed to avoid further course reductions and staff furloughs. The plan draws statewide protests. Police arrest 14 at UCLA.

If they cut the salaries of higher level administrators across the board, including Pres. Mark Yudof (I thought the name was familiar—he used to work at UT) who makes over $900,000/year in pay and benefits, it would seriously help to fend off further furloughs and course cuts. You could cut Yudof’s salary alone by half and save the UC system almost half a million dollars. This site lists the salaries just of the chancellors of the various schools within the UC system. Not only have the salaries of administrators increased at a rate far beyond that of inflation, but the “perks” that go along with these salaries have increased as well. And by perks, I mean things like $125,000 relocation bonuses to move 70 miles.

Higher education “executives” (they used to be simply called administrators) have increasingly begun to use the universities as their own personal piggy banks, and this phenomenon is hardly limited to the UC system. I know how outraged I was when, year after year, tuition went up because the university supposedly couldn’t pay its professors or electricity bills or what have you, but on the coattails of these massive tuition hikes, there was often a pay raise included for administrators.

Public universities raised presidents’ pay an average of 7.6% in 2008. Tuition at public universities raised in kind: an average of 7.6%. When students are being told that these annual tuition increases that add hundreds of dollars to their bills every month are necessary to keeping university doors open, it seems unconscionable that the salaries and benefits packages of “executives” and higher level admins continues to go up.

But they do.

Humorously, the UC “executives” argued that their 5% pay cuts were helping them “share the pain” with their other employees and students. Nevermind that some employees experienced up to 10% pay cuts on far smaller salaries. Nevermind that they continue to jack up tuition prices on their students.

It’s offensive. I’m glad those students were out there protesting. More of us should be doing the same, if we are interested in seeing higher education become more affordable and reducing the absurd amount of debt so many students leave school with.

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It’s interesting too that, overall, industry revenues have grown in the period - though admittedly not by much - which arguably adds strength to the notion that, when the BPI releases its annual report claiming how much ‘the music industry’ has suffered from the growth in illegal file-sharing, what it perhaps should be saying is how much the record labels have suffered.

For other people in the industry, not least artists, the future arguably holds more promise.