Kevin Drum

AIG Fesses Up

| Sun Mar. 15, 2009 8:57 PM EDT
So where has all that taxpayer cash that's been shoveled into AIG gone?  Today they revealed their largest counterparties, and the top 5 — drum roll, please — are:
  • Goldman Sachs: $12.9 billion
  • Bank of America + Merrill Lynch: $12.0 billion
  • Société Générale: $11.9 billion
  • Deutsche Bank: $11.8 billion
  • Barclays: $8.5 billion
So it looks like everyone was right: Goldman did have enormous exposure to AIG and foreign banks did get massive dollops of aid from the bailout.  No wonder Lloyd Blankfein and Christine Lagarde took such a keen personal interest in AIG's fortunes.

UPDATE: The AIG memo contains four appendices that list amounts paid out to various creditors.  I just added them up to get the numbers above, but Felix Salmon says that amounts to adding up apples and oranges.  The real action, he says, is solely in Appendix 2, which gives us a different top 5:
  • Société Générale: $6.9 billion
  • Goldman Sachs: $5.6 billion
  • Merrill Lynch: $3.1 billion
  • Deutsche Bank: $2.8 billion
  • UBS: $2.5 billion
There's more to it than this, though.  Read Felix for more details on why further transparency is still needed.

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Bay Bleg

| Sun Mar. 15, 2009 1:16 AM EDT
Marian and I are coming up to San Francisco in a couple of weeks and we're going to have all day Sunday free for sightseeing and whatnot.  Do any of my Bay Area readers have any nonobvious suggestions for things to do and see?  Anything accessible by foot or transit is OK.  Thanks!

Tim Geithner's Plan

| Sat Mar. 14, 2009 6:27 PM EDT
Ezra Klein reports on Larry Summers' talk yesterday:

Summers [...] argued that the administration was right to be vague on its banking plan. Specifics, he said, could only come after the stress tests reveal what action is needed. That sounds sensible enough, though it's hard to say whether that's been the plan along or it's just the plan now that no one liked Geithner's original banking proposal.

I too think that a bit of vagueness might have been justified here.  It's better than rolling out a detailed but half-baked proposal that gets immediately shot down.  However, if that was the plan all along, then surely President Obama wouldn't have said this 12 hours before Geithner took the podium:

[T]omorrow my Treasury secretary, Tim Geithner, will be announcing some very clear and specific plans for how we are going to start loosening up credit once again.

There are a few possible explanation for this: (a) Obama is an idiot, (b) Obama wasn't up to speed on what Geithner's plan was, (c) everyone in the administration was under the impression that Geithner's plan was "very clear and specific," or (d) they changed their minds a lot in the days and hours leading up to the announcement.  I'm guessing the answer is (d).

Your Tax Dollars at Work

| Sat Mar. 14, 2009 6:12 PM EDT
Here's something a little different to take advantage of our brief respite between Friday the 13th and the Ides of March.  Yesterday Marian and I had lunch at Ruby's, and as usual our utensils came wrapped in a napkin that was held in place by a paper napkin ring.  I have helpfully recreated this setup in the picture on the right.

Seems ordinary enough, doesn't it?  But as I unwrapped the silverware I noticed something: a patent notice.  This little paper napkin ring, it turned out, was protected by U.S. Patent No. 6,644,498.  I was intrigued.  What was patentable about this thing?  The stickum?  It seemed like ordinary Post-It Note type stuff.  The size and shape?  Couldn't be.  The logo?  No.

Luckily, the web knows all.  When I got home I pulled up the patent to see what it was for.  The answer is below the fold.

Friday Cat Blogging - 13 March 2009

| Fri Mar. 13, 2009 2:54 PM EDT
Today is Friday the 13th and Inkblot and Domino have decided they should lie low.  No point in taking chances, right?  My mother's kittens, however, have no such superstitions and were delighted to romp around for the camera.  On the left, Ditto (because he's a carbon copy of one of my mother's other cats) is staring at a bug in the garden, waiting for a chance to pounce.  It came a few seconds after I took this picture.  On the right, Tillamook (because he looks like a piece of cheese) has scampered up a tree and is obviously delighted with the way the setting sun shows off his orange coat.

(And why was I over visiting mom?  Because Tillamook dived into her wall unit the other day, knocked the cable box down the back, and then bolted out of the room.  He was fine.  The TV, not so much.  So I went over to fish the thing out and get it reconnected.  Only time will tell if Tilly has learned his lesson.)

King Coal

| Fri Mar. 13, 2009 2:26 PM EDT
Barack Obama has promised to push cap-and-trade legislation this year, and one way of getting it approved in the Senate is to push it through via the budget reconciliation process, where it would require only 50 votes to pass.  Elana Schor reports that this has run into a roadblock:

In a letter delivered to the Senate Budget Committee yesterday, eight Democratic senators joined 25 Republicans to defend the GOP's right to set a 60-vote margin for passing emissions limits.

"We oppose using the budget process to expedite passage of climate legislation," the senators, including eight centrist Democrats, wrote in their missive.

....Late Update: The eight Democratic senators who signed on to the letter are Robert Byrd (WV), Blanche Lincoln (AR), Ben Nelson (NE), Evan Bayh (IN), Mark Pryor (AR), Bob Casey (PA), Carl Levin (MI), and Mary Landrieu (LA).

Take a look at those names: six are from the midwest and the south, joined by Casey and Byrd.  In other words, coal country senators.  Nearly all the electricity generated in these regions comes from coal, and a lot of that coal comes from West Virginia and Pennsylvania, the #2 and #4 coal-producing states in the country.

This is a dynamic to watch.  The battle over cap-and-trade isn't just between liberals and conservatives, it's also between regions.  You'll find coal-fired electric plants all around the country, but the midwest and the south rely on it much more heavily than the west and the northeast, which generate a lot of their electricity via hydro and natural gas.  Cap-and-trade will raise the price of coal-fired electricity more than any other kind, which means the price increases will hit the south and midwest especially hard.

This letter, then, isn't just a sign that there are some Democratic senators who feel strongly about not bending Senate rules.  It's a sign that Democrats from the south and midwest are probably going to have to bribed to support cap-and-trade.  The big question is, how?  Can they be bought off in fairly benign, traditional ways, or will their price effectively mean the gutting of the legislation?  Stay tuned.

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Michael Mania

| Fri Mar. 13, 2009 1:56 PM EDT
Big news from across the pond:

Tickets for Michael Jackson's 50 live dates at London's O2 arena have sold out, meaning that a staggering one million tickets to see the singer have been bought in a matter of hours....Those not lucky enough to secure a ticket can head to eBay to buy them second hand, providing they are prepared to pay between £170 and £10,000.

Obviously I'm not a cultural critic or anything, but seriously?  A million people still want to see Michael Jackson?  WTF?

Summers at Brookings

| Fri Mar. 13, 2009 12:56 PM EDT
Tim Fernholz highlights a passage from Larry Summers' speech at Brookings today:

The stress tests now underway will enable a realistic assessment of the position of each different institution and appropriate responses in each case to assure their ability to meet their commitments and lend on a substantial scale. And as the President said in his joint address to Congress, “When we learn that a major bank has serious problems, we will hold accountable those responsible, force the necessary adjustments, provide the support to clean up their balance sheets, and assure the continuity of a strong, viable institution that can serve our people and our economy.”

As Tim says, "That answer, I think, will disappoint almost everyone with it's lack of detail, but at least doesn't rule out the various receivership plans people are discussing. Interesting, there was no mention of the public-private partnership that would supposedly be creating a market for the various toxic assets."

But while it might be wishful thinking on my part, this strikes me as a slightly stronger statement than Tim makes it out to be.  It's possible, of course, that the stress tests are intended to be fig leaves: they'll deliberately be done using scenarios that make the banks look relatively healthy and in no need of dramatic action.  But the other possibility is that they're intended in just the opposite way: as a fig leaf for the president that practically forces him to take dramatic action.  Note, for example, that Summers didn't simply make an anodyne statement about safety and security, he specifically said that the administration's response would be designed to insure that big banks "meet their commitments and lend on a substantial scale."  That's a stiffer metric than simply being able to meet their payroll.

Like I said, I might be reading too much into this.  But we know two things about pronouncements like this: (a) they're usually very, very circumspect in order not to panic the markets, and (b) they're very carefully vetted.  Summers chose his words deliberately here, and it's possible that they really mean something.

Cramer Folds

| Fri Mar. 13, 2009 12:25 PM EDT
Like everyone in the galaxy, I watched Jon Stewart eviscerate Jim Cramer last night. But it was kind of weird. The conventional wisdom is that Stewart ripped Cramer to shreds — and he did — but he only succeeded because Cramer apparently made a preemptive decision not to fight back. He just sat there and took it. Felix Salmon has the right take:

Jim Cramer was craven and highly apologetic on the Daily Show last night [...] and almost never attempted to defend himself, preferring to go the mea culpa route.

....In a sense, it's a shame that Stewart had on his show the most self-loathing of all the CNBC personalities — but then again he, too, had little choice, since Santelli cancelled on him. But the lesson of this interview is that when CNBC is pressed on the way in which it has hurt America, its response is to capitulate and say "well I guess that's true". Which means that the bigger lesson is simpler still: don't watch CNBC. Doing so will do you no good at all, and will quite possibly do you a lot of harm.

There's a real sense in which CNBC is truly a microcosm of the entire financial meltdown.  Sure, they were irresponsible, and they deserve the hits they're taking.  At the same time, they only succeeded because the more irresponsible they got, the more their audience grew.  Their audience deserves a share of the blame in the same way that the voracious buyers of preposterously leveraged and tranched CDOs share some of the blame with the financial engineers who put them together.  None of this works without a willing buy side, does it?

Glenn Beck

| Fri Mar. 13, 2009 11:28 AM EDT
It's more and more obvious that Glenn Beck has decided that becoming a male Ann Coulter is good for his ratings.  So his show is now dedicated to saying increasingly outrageous things solely in an attempt to get liberals to denounce him and drive his ratings yet higher.  Conclusion: it's time to start ignoring him, right?