Quote of the Day - 02.11.09

| Wed Feb. 11, 2009 1:01 PM EST | Scheduled to publish Wed Feb. 11, 2009 12:48 PM EST

QUOTE OF THE DAY....From Rep. Steve Austria (R–Ohio), explaining that FDR's deficit spending in 1933 was responsible for an event that began in 1929:

“When (President Franklin) Roosevelt did this, he put our country into a Great Depression. He tried to borrow and spend, he tried to use the Keynesian approach, and our country ended up in a Great Depression. That’s just history.”

Republicans really do have a unique definition of "history," don't they? Via Matt.

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Valuing the Toxic Waste

| Wed Feb. 11, 2009 12:59 PM EST | Scheduled to publish Wed Feb. 11, 2009 12:38 PM EST

VALUING THE TOXIC WASTE....Part of the Geithner bank bailout plan is apparently a scheme to partner up with the private sector to buy up the toxic assets on bank balance sheets. Will this work? John Hempton thinks it might. Right now, he says, a lot of these assets are modestly underpriced by the market and might well make decent investment opportunities — but only if the feds provide enough low-priced leverage to turn a decent investment into a great one:

So how are those assets really? Underpriced but hardly exciting....No — to be exciting you need to borrow against them. You need to be able to use leverage. Cheap leverage. Lots of leverage. And it can’t be margin loans or the like — because the asset prices are so volatile that your funding might go away.

But — with permanent cheap funding at government rates it should be profitable to buy those assets. Seven to one levered at government rates (which are a couple of percent) the returns will be spectacular.

So if the Geithner plan is to attract say one hundred and fifty billion of private risk capital and allow it permanent and secure access to say a trillion dollars of government money at a government rates then hey — I am in. (I would require the interest rate risk be matched too.)

It would be a pretty big gift from the government — as nobody — a good bank or a bad bank — can borrow at the same (extraordinarily low) rate as the US Treasury. But as a plan it might just work. And because 150 billion of real private spondulicks is at risk there are some pretty strong incentives for the private sector manager to get it right.

Basically, the idea here is that private investors are better at ferreting out the true value of the toxic waste, while the feds are the ones with the money. And I guess maybe that makes some sense. But you still have a pretty serious problem on your hands: banks don't want to sell this stuff at honest prices. So even if you get both the valuation and the funding in place, how do you force banks to sell? And if you do force them to sell, are you just driving them into insolvency?

It's possible, I suppose, that this is the real point. Use private investors to figure out the valuation. Use the Fed's balance sheet to provide funding. Use Geithner's "stress test" to figure out which banks are bust, and force them to recognize the true value of their assets whether they sell them or not. Then let the private investors buy the junk and take over the remaining husk to be run as a nationalized bank.

But....if that's the plan, why not just nationalize in the first place, skip the process of valuing the junk, and set it aside to be sold off in a few years? And perhaps that's all this is: a piece of kabuki designed to get the private sector to make the determination that some of these banks are insolvent and have to be taken over. After all, if the private sector makes the valuation, no one can claim it was just some bureaucratic maneuver by a power-obsessed Obama administration.

Or something. Like everyone, I'm just guessing here.

Awards, Not Bonuses

| Wed Feb. 11, 2009 12:54 PM EST | Scheduled to publish Wed Feb. 11, 2009 12:08 PM EST

AWARDS, NOT BONUSES....What do two failed investment banks that have received $60 billion in federal bailout cash do when they merge? Pay their people more! Sam Stein reports:

The soon-to-be-merged financial giants — Morgan Stanley and Citigroup's Smith Barney — announced the payments during an internal conference call last week, but warned advisers against describing them in terms that would cause PR headaches.

"There will be a retention award. Please do not call it a bonus," said James Gorman, co-president of Morgan Stanley. "It is not a bonus. It is an award. And it recognizes the importance of keeping our team in place as we go through this integration."

Yeah, there's nothing more important than keeping all these folks in place. There are so many other lucrative opportunities for them in the rest of the financial industry, after all. Yeesh.

Fallen Soldiers

| Wed Feb. 11, 2009 12:53 PM EST | Scheduled to publish Wed Feb. 11, 2009 11:06 AM EST
FALLEN SOLDIERS....Following a question at Monday's press conference, the Obama administration is reviewing a longstanding policy that prevents the media from photographing flag-draped coffins being returned from war zones:

Defense Secretary Robert Gates suggested today that he was open to allowing the media to photograph the flag-draped coffins of fallen soldiers as their bodies and remains are returned to the United States.

"If the needs of the families can be met and the privacy concerns can be addressed, the more honor we can accord these fallen heroes, the better," Mr. Gates told reporters.

That's the right attitude. I've been in favor of allowing reporters to record the return of fallen soldiers for years, and the Bush administration stand on this never made any sense to me. Yes, of course the pictures could be used to stoke antiwar sentiment, but the same can be said for any war-related photography. At the same time, they can also do just the opposite. But in a democracy, this is all irrelevant anyway. These are American soldiers fighting an American war, and the American public has a right to see the price of that war. This is a policy that deserves to be overturned forthwith.

(Slight) Good News in the Israeli Elections: Obama Might Be Forced To Intervene

| Wed Feb. 11, 2009 12:09 PM EST

When the chief political correspondent of Ha'aretz says that the Israeli elections have produced a "big mess," you know there's trouble. And that's how Akiva Eldar put it during an interview conducted shortly after exit polls indicated that Tzipi Livni and her centrist Kadima party won 28 Knesset seats to the 26 won by Likud, led by hardliner Benjamin Netanyahu. (Likud ended up winning 27 seats.) You can hear the interview here.

Eldar said he was "confused" by the results, which place tipping-point power in the hands of ultra-hardliner Avigdor Lieberman's radical right/rabid nationalist party, Yisrael Belteinu, which won 15 seats. (Labor finished fourth with 13 seats.) But Eldar did note that these results had a slightly positive element, given that Netanyahu and Likud had been predicted to place first: "The good news is that Tzipi Livni [who supports negotiating toward a two-state solution]...ended up with a couple of more Knesset seats than Netanyahu. That's a big surprise." But it seems unlikely she will be able to form a government. One possible--probable?--outcome is a government dominated by Netanyahu, who will owe plenty to Lieberman and his fanatics. "The next government," Eldar noted, "will have to include the...radical right party [and] that will paralyze it." Translation: there will be no peace process.

But Eldar saw another small--make that, very small--bit of good news in that.

Dobson's Focus on the Family Out-Hates the Mormons

| Wed Feb. 11, 2009 11:16 AM EST

Guess who is just as bad (and possibly worse) than intolerant, fundamentalist Mormons? Intolerant, fundamentalist Christians. The Colorado Independent has the story:

Colorado Springs-based Focus on the Family gave $727,250 in cash and services to the anti-gay marriage Proposition 8 campaign in California, according to records released by the California secretary of state, including a $100,000 check in late October, just days before the evangelical media empire announced it planned to lay off nearly 20 percent of its employees.

While there has been public scrutiny of the Church of Jesus Christ of Latter-day Saints for its attempts to influence the campaign to reverse a California Supreme Court ruling allowing gay and lesbian couples to marry, Focus on the Family and related donors pumped more than six times as much as the Mormon church did into the campaign, records show.

In sum, the Independent reports, Focus on the Family and its sister groups gave a stunning $1.25 million to the Yes on 8 movement, including $50,000 in seed money a year before the election. It is worth noting that the largest benefactor supporting Proposition 8 was not Focus on the Family. It was the Knights of Columbus, the Connecticut-based political arm of the Catholic Church.

For more on where the Christian Right is taking the country, see our cover package "God and Country."

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Livni or Netanyahu? Israeli Prime Minister TBD by Radical Lieberman (Not That One)

| Wed Feb. 11, 2009 4:28 AM EST
After Israel's  tight election for prime minister Kadima Party moderate Tzipi Livni is now just ahead of right-wing Likud Party leader Benjamin Netanyahu (with 28 vs. 27 seats in the Knesset). But the real power sits with rising radical Avigdor Liebermanan ultra-conservative who wants to establish a blanket denial of all Arabs for citizenshipwho can throw his support to either to determine who becomes prime minister. (He said he's open to talking with both but will no doubt side with fellow hard-liner Netanyahu.)

This is not good news.

Sirius XM Prepares for Possible Bankruptcy

| Tue Feb. 10, 2009 8:25 PM EST

Sirius XM, the satellite broadcaster who only recently combined their previously-competitive channel offerings and cut a whole bunch of the popular stations, suddenly has an even more uncertain future. The company is preparing for a possible bankrupty filing, which "could come within days," according to the New York Times. However, this may just be a crazy high-stakes cat-and-mouse game with EchoStar/Dish Network bigwig Charles Ergen, who controls a whole bunch of Sirius' bulging debt. Ergen would apparently have to make a formal offer to purchase the company sooner than later if he wanted to avoid the bankruptcy mess, so it's kind of like Sirius CEO Mel Karmazin (formerly in charge of former Party Ben employer CBS awesome radio!) is saying pony up or watch us go bye-bye. Gutsy!

Are Non-Stick Chemicals And Aging Dads More Dangerous To Babies Than Cocaine?

| Tue Feb. 10, 2009 7:21 PM EST
Last week the New York Times printed good news about a worrisome issue in childhood development. As it turns out, children whose mothers used cocaine during pregnancy have only slightly lower IQ scores than children whose mothers didn't use. The difference between the children's scores was so low it was deemed "scientifically insignificant." In fact, the effect of alcohol on the fetus is more detrimental than cocaine's, while tobacco's is about the same. But potential parents have some other science to consider this week. In the latest issue of Human Reproduction scientists found that women with higher levels of perfluorinated chemicals (PFCs, or the chemicals that make products "non-stick") in their blood had more trouble getting pregnant. Women with higher levels of the two main chemicals—PFOA and PFOS—were up to 154 percent more likely to be infertile. Exposure is a particular problem for developed countries like the US, where eight percent of women of childbearing age have consulted a doctor about infertility. And, like we've said before, Teflon is forever.

Men's Health Worst Foods: Healthy List or Sneaky Ad?

| Tue Feb. 10, 2009 6:16 PM EST
Image by flickr user Matt NichollsFrom Men's Health magazine comes a list of the worst foods in America of 2009. By "worst" Men's Health means worst for your body; by "food" the magazine means products or menu items. The list is basically a catalog of the fattest prepared foods in America.

Topping said list is Baskin Robbins' infamous Large Chocolate Oreo Shake, which with 2,600 calories (about 400 more calories than I consume in a day) and 263 grams of sugar (that's equal to about 18 cupcakes), is essentially a heart attack in a disposable cup. Ian Froeb at the St. Louis Riverfront Times tried the Oreo Shake last month and found the taste and color somewhat wanting: