One of the main watchdogs over the government's $13 billion financial bailout, the Congressional Oversight Panel, released its monthly report for July today, bringing some much needed scrutiny to the repayment of TARP funds and the Treasury Department's questionable oversight of that process. The COP highlighted the sale of government-held warrants (options to buy stock for a set price over a predetermined time period) back to bailout recipients exiting TARP, who, according to Treasury's guidelines, get the first crack at repurchasing their own warrants. This repurchasing process began earlier this spring, when the first bailed-out banks bought their stocks and warrants to extricate themselves from the taxpayer-funded TARP; since then, the process has been dogged by numerous reports showing that the Treasury sold warrants for much less than they could have. By one estimate, taxpayers were shortchanged in those early transactions by millions of dollars.

The COP's latest report puts a number to what many suspected: The Treasury, the panel estimates, sold warrants back to the 11 small banks who've so far completely exited the bailout for only 66 percent of their value. If the Treasury had sold them for closer to market value, taxpayers could’ve recouped $10 million more—a small sum compared to the entire bailout, but nothing to scoff at. And though the warrant-repurchasing process will differ for megabanks like JPMorgan Chase, Wells Fargo, and several others currently trying to buy back their warrants, applying that 66-percent rate to all government-held warrants could result in a loss of $2.7 billion.

If you've closely followed the COP's reports, you'll notice a troubling similarity to previous reports in this latest finding. The panel's widely cited February report (PDF), which analyzed the Treasury's 10 largest TARP investments in 2008, found that the Treasury had received, on average, only $66 for every $100 spent, resulting in a $78 billion shortfall. (This while Berkshire Hathaway received $110 assets for every $100 when it invested in Goldman Sachs, and Mitsubishi received $91 in assets for every $100 invested in Morgan Stanley.) Which means that the Treasury received a 34-percent markdown on assets it bought (with taxpayer money) last year with its early TARP investments, and received only a 34-percent markdown for its early warrant sales back to banks.

Coincidence? Hardly.

 Charlotte, North Carolina, has found a silver lining in the housing crisis:

Charlotte's Habitat is among the first in the nation to start buying up houses in troubled neighborhoods where up to a third of the homes are vacant due to foreclosure. Average cost: $38,000 to $55,000, less than half the original price.

"We're getting them as low as $30,000, knowing we'll put in $10,000 of repairs," said Meg Robertson, an associate director with Habitat. "To build a new one is over $60,000 … we're $20,000 to $30,000 cheaper per home."

So what about Habitat's commitment to sweat equity? To having energetic volunteers "build houses together in partnership with families in need?" Robertson told the Charlotte Observer that she thought it was more important to house as many people as possible.

Besides, subdivisions built in the boom are already falling apart on their own or at the hands of vandals, so there should be plenty of sweat required to restore and maintain them.

Despite the smiles and promises of change, the G8 accomplished little to nothing but soft targets on serious climate goals, which will hereafter be easily ignored by all who pretend to endorse them.

This business of holding out for economic equality between all nations in the emissions fight is laughable when you consider that economic mayhem is hot on the heels of do-nothing climate change.

So how can we break the climate impasse? According to a new paper in the Proceedings of the National Academy of Sciences, it's easy.

Since half the planet's climate-warming emissions come from less than a billion of its wealthiest people, the fairest strategy is to base each nation's emission targets on its number of wealthy individuals—not on the basis of whether the country itself is developing or developed. In other words, we should distribute emissions reductions based on the proportion of the population in the country doing the most damage.

At the moment, the world average is about 5 tons per person. But each European produces around 10 tons and each North American and Australian some 20 tons.

By focusing on rich people everywhere, rather than on rich countries and poor countries, the proposed system would ease developing countries into any new climate change framework.

Except it doesn't look like any one is interested in easing anyone else's way. It's still the godawful tragedy of the commons here... Leaders? Barack Obama ain't no Abraham Lincoln.
 

National Public Radio's been getting some serious flak for its policy of not using the word "torture" to describe when the United States uses—well, how to be polite about this?—torture. As Kevin Drum noted the other day, the explanations and clarifications coming from NPR's ombudsman, Alicia C. Shepard, have been pretty weak. The crux of her argument, as detailed here and here, is that the word "torture" is too loaded for a fair-minded news organization to use. Plus, she adds, the word's very meaning is debatable, so NPR can't take sides; after all, what if Dick Cheney et al. really are right that the waterboarding they authorized wasn't torture? It's kind of like the ongoing debate over those loaded, subjective terms "climate change" and "global warming." Oh wait—it looks like NPR sided with the crazy enviros on that one.

Now the ombudsman has waded into another thorny semantic debate: What words should responsible journalists use to describe parents beating their kids? Child abuse? Or perhaps the more neutral-sounding "enhanced parenting techniques"? What about "vigorous love taps"? Let the debate begin. (Preemptive parody warning.) 

 

 Love Taps (parody)

As GM prepares to cut 21 percent of its US jobs and produce smaller, more fuel-efficient cars, it's mulling over changing the color of its logo from blue to green. The AP reports that the switch would be "an effort to show consumers that it is leaner and greener, more focussed on fuel efficiency and better able to make quick decisions."

Depending on your perspective, this is either a brilliant move or a monumental case of chutzpah. It might signal GM's shifting priorities, or it might come off as an effort to put a new coat of green paint on the same grimy clunker. Given how far GM has to go before it's as green as companies like Toyota or Honda, perhaps the strongest message behind the color change would be this: GM is green with envy.

I had a lot of pictures to choose from this week. I'm not sure why I chose these, but they were nice summery outdoor pictures, and I liked them. Maybe I'll use some of the others next week. In the meantime, enjoy the weekend, everyone.

The New Economy?

Robert Reich says that it's consumers, not investors, who will need to lead a recovery out of our current recession:

Problem is, consumers won't start spending until they have money in their pockets and feel reasonably secure. But they don't have the money, and it's hard to see where it will come from. They can't borrow. Their homes are worth a fraction of what they were before, so say goodbye to home equity loans and refinancings.

....My prediction, then? Not a V, not a U. But an X. This economy can't get back on track because the track we were on for years — featuring flat or declining median wages, mounting consumer debt, and widening insecurity, not to mention increasing carbon in the atmosphere — simply cannot be sustained.

The X marks a brand new track — a new economy. What will it look like? Nobody knows. All we know is the current economy can't "recover" because it can't go back to where it was before the crash. So instead of asking when the recovery will start, we should be asking when and how the new economy will begin. More on this to come.

For many years it's looked as if we were getting closer and closer to an economy in which there flatly wasn't enough unskilled work left to keep employment at normal levels.  Stagnant median wages were the canary in the coal mine, with permanently higher unemployment coming in the future.  But I dunno: maybe the future is now.

I'll write more about this later so that everyone can tell me where I'm wrong.  At least, I hope I'm wrong.  We'll see.

The Overdraft Scam

Kathy Chu reports on the overdraft fee scam, which currently generates nearly $40 billion in income for banks — by far their most lucrative source of fees and penalties:

Some consultants offered banks ways to boost overdraft and credit card revenue. A 2001 "checklist" from Profit Technologies — a firm that has worked with 19 of the USA's 20 largest banks — has more than 600 strategies....One strategy listed to boost overdrafts: "Allow consumers to overdraw their ... accounts at the ATM up to the bank's internally set limit." To increase credit card fees, banks can "delay crediting of payments not received in bank provided envelop (sic) or for which payment coupon is not received for up to 5 days," and "remove bar coding from remittance envelopes," slowing the payment.

....Has banks' pursuit of profit gone too far? Ken Vollmer, 49, of Augusta, Ga., thinks so. He sued Wachovia this year, alleging it "purposely structured transactions to make money." A merchant mistakenly put a hold on his funds, then the bank cleared transactions from high to low, triggering hundreds in overdraft fees, he says. Spokeswoman Richele Messick says Wachovia processes transactions in an "appropriate" way and will "vigorously defend" itself in the case.

Banks clear larger payments first, says Talbott, because they tend to be more important. But Douglass Colbert, who advised banks on overdraft and card strategies at Profit Technologies, says fees are a key driver.

"Banks will say (high-to-low clearing) is for the consumer," he says. "Bottom line is, when it was pitched, we'd say ... a side effect is that it results in more fee income to you because it bounces more checks." Colbert says that after leaving Profit Technologies, he joined a credit-counseling firm and saw the damage fees did to consumers.

Just to make this clear: Say you have $100 in your checking account and four checks arrive at your bank in the following amounts: $15, $20, $30, and $150.  If you clear them in that order, the first three are fine and only the last one incurs an overdraft.  If you clear them in the opposite order, all four incur overdraft fees.  Ka-ching!  That's why banks like to clear high to low.

In any case, if our Congress had any balls they'd fix this in a trice: simply regulate overdrafts as short-term loans, which is what they are.  The interest rates would be high, but nowhere near as high as the effective 1000%+ that banks charge now.  And it wouldn't matter what order checks cleared.

Banks still have to make money, of course, and if overdraft fees went down then the cost of other services would go up.  But that's fine.  There's no reason that overdraft fees from their least prosperous customers should subsidize other business lines.  It's better to charge everyone fairly and openly rather than trying to make outsize profits on the banking industry's poorest customers.

And the chances of this happening?  About zero.  Why?  Don't be silly.  It's because the finance industry still owns Congress.

Jake Tapper tweets on what I'm calling Assgate:

heard more outrage from conservative tweeps today re: alleged POTUS once-over than about @johnensign, @davidvitter + mark sanford combined

And that's outrage over a photo that doesn't show what they say it shows. In other news, John Ensign's parents gave the family of the woman he was having an affair with a $96,000 "gift."

Now if my headline were true, you'd have a real story.

Up North in Iraq

Violence may be increasing in Baghdad, but it's up north in disputed Kurdistan that Iraq's bigger problems are likely to erupt.  Here's the LA Times:

The worst attack Thursday occurred in Tall Afar in Nineveh province in the north, where a double suicide bombing killed 34 people, prompting a senior Iraqi official to express concern that the country's security forces, now fully responsible for protecting the cities, had been penetrated by armed groups.

....Militants appear focused on the north, where Arabs and Kurds are locked in a dispute over a 300-mile stretch of land where Saddam Hussein's regime expelled Kurds and settled Arabs in their place. Iraq's semiautonomous Kurdish region wants to annex those areas, an idea Arabs oppose.

And the New York Times:

With little notice and almost no public debate, Iraq’s Kurdish leaders are pushing ahead with a new constitution for their semiautonomous region, a step that has alarmed Iraqi and American officials who fear that the move poses a new threat to the country’s unity.

....The proposed constitution enshrines Kurdish claims to territories and the oil and gas beneath them. But these claims are disputed by both the federal government in Baghdad and ethnic groups on the ground....Vice President Joseph R. Biden Jr., sent to Iraq on July 2 for three days, criticized it in diplomatic and indirect, though unmistakably strong, language as “not helpful” to the administration’s goal of reconciling Iraq’s Arabs and Kurds, in an interview with ABC News.

I don't have any special comment on this.  Just pointing it out.  Kurdistan has always been the wild card in Iraqi politics, but despite lots of warnings it's never quite erupted.  It always seemed to be a problem for tomorrow.  Now, though, it's possible that tomorrow has finally arrived.