Olympics of Stupid

Not long after saying that health care was more important than lobbying for the Olympics, Barack Obama decided to make the trip to Copenhagen to lobby to put the 2016 Olympics in Chicago.

On this one, here’s hoping he loses.

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Rock and a Hard Place

Even as we wobble towards a coherent Afghanistan policy, Iran continues to be a massive thorn in our side.  What do we do when all of our options are terrible?

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Good Job Switzerland

Roman Polanski, after thirty years of thumbing his nose at justice, was arrested by the Swiss police while on his way to collect a lifetime achievement award at the Zurich Film Festival.

Couldn’t have happened to a nicer guy.

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The World Upside Down

The Kansas Supreme Court has given, if not the green light, at least a very long yellow to people who want to try to drag out foreclosure processes with versions of the “show the note” strategy:

[I]n the event that a mortgage loan somehow separates interests of the note and the deed of trust, with the deed of trust lying with some independent entity, the mortgage may become unenforceable.
“The practical effect of splitting the deed of trust from the promissory note is to make it impossible for the holder of the note to foreclose, unless the holder of the deed of trust is the agent of the holder of the note. [Citation omitted.] Without the agency relationship, the person holding only the note lacks the power to foreclose in the event of default. The person holding only the deed of trust will never experience default because only the holder of the note is entitled to payment of the underlying obligation. [Citation omitted.] The mortgage loan becomes ineffectual when the note holder did not also hold the deed of trust.” Bellistri v. Ocwen Loan Servicing, LLC, 284 S.W.3d 619, 623 (Mo. App. 2009).

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Turf War Run Wild

The FDIC is nearly out of cash, the victim of almost a hundred bank failures this year and a few particularly large ones last year.  Now, that shouldn’t be too big of a problem (it may be a symptom of a problem) in and of itself; after all, the FDIC is a government agency, and the Federal government is still solvent.  As Sheila Blair put it in the dark days of March:

To be sure, we won’t run out of money. We’re 100 percent backed by the full faith and credit of the United States Government. No depositor has ever lost a penny on an insured deposit. And that is not going to change.

The only detail to be worked out is exactly how the FDIC plans on funding the shortfall to its fund:

Senior regulators say they are seriously considering a plan to have the nation’s healthy banks lend billions of dollars to rescue the insurance fund that protects bank depositors. That would enable the fund, which is rapidly running out of money because of a wave of bank failures, to continue to rescue the sickest banks.

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Vulture in the Eye of the Beholder

Felix Salmon relays Johann Hari’s article in the Independent criticizing “vulture” funds:

Would you ever march up to a destitute African who is shivering with Aids and demand he “pay back” tens of thousands of pounds he didn’t borrow – with interest? I only ask because this is in effect happening, here, in British and American courts, time after time. Some of the richest people in the world are making profit margins of 500 per cent by shaking money out of the poorest people in the world – for debt they did not incur.

The Independent is a serious newspaper.  Yet somehow it has decided to publish an article by an author who does not quite seem to understand

• The concept of sovereign debt;
• The concept of a debt market;
• The difference between nominal yield and current yield.

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Private Label Cars

The auto industry is maddeningly difficult.  Overcapacity, long product design cycles, extensive unionization, national champions, frustrating distribution rules, warranty and product liability obligations…it’s amazing anyone wants to do it.  Yet – like the airline business – there is no shortage of people who want to take a crack at it.

Roger Penske’s plan to take over Saturn is scheduled to close within the next month, and the PR rollout features a story in the New York Times.  He has a different approach: instead of building cars, he is going to contract with an automaker and essentially brand and distribute those third-party cars to the former Saturn dealers and his own Penske dealerships.  The hope is that even if the new car business is not terribly profitable, there is money to be made servicing the installed base.

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Creativity

It seems Barclays had a problem with $12.3bn of junk assets (thank you James Kwak).  The damn things were liable to keep falling in value, and every fall tears a further hole in the bank’s balance sheet.  What to do, what to do?

Undoubtedly, someone called a meeting.  And that meeting led to another meeting, which led to a task force, which came up with the following brilliant idea:

A newly formed Cayman entity, Protium – appropriate that they used the exotic name for ordinary hydrogen – will come up with $450mm.  Barclays will lend Protium $12.6bn, which Protium will use to buy Barclays’ $12.3bn of junk and get a head start paying its $40mm management fee.  And who are the managers of this vehicle?  Give you one guess:

It will be run by the same Barclays bankers who managed the assets prior to the deal, including Stephen King and Michael Keeley, who resigned on completion of the deal

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The Fine Print

Ward on Words links to a GQ article from a former Dubya speechwriter describing the TARP launch:

[Dubya] especially wanted Americans to know that his plan would likely see a return on the taxpayers’ investment. Under his proposal, he said, the federal government would buy troubled mortgages on the cheap and then resell them at a higher price when the market for them stabilized.

“We’re buying low and selling high,” he kept saying.

The problem was that his proposal didn’t work like that. One of the president’s staff members anxiously pulled a few of us aside. “The president is misunderstanding this proposal,” he warned. “He has the wrong idea in his head.” As it turned out, the plan wasn’t to buy low and sell high. In some cases, in fact, Secretary Paulson wanted to pay more than the securities were likely worth in order to put more money into the markets as soon as possible. This was not how the president’s proposal had been advertised to the public or the Congress. It wasn’t that the president didn’t understand what his administration wanted to do. It was that the treasury secretary didn’t seem to know, changed his mind, had misled the president, or some combination of the three.

This is why it is important to read proposals.  Carefully.

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Second and Crazy

When it comes to firearms, crazy is never crazy enough:

The Senate voted on Wednesday to allow Amtrak passengers to carry unloaded and locked handguns in checked baggage, even though Amtrak officials had raised concerns that the proposal could present “numerous challenges.”

The measure was sponsored by Roger Wicker (R-MS):

“Only the federally subsidized Amtrak prohibits law-abiding American citizens from exercising their Second Amendment rights in checked baggage.”

Twenty-seven Democrats who undoubtedly know better but are terrified of the NRA voted for the measure.

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