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Financial fuckery thread

Started by Cain, March 12, 2009, 09:14:45 AM

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Kai

I hear conflicting prophesies all over.


One of my new flatmates is an economist. He said right out that economics is reactionary when it comes to new events (read: black swans), and that he has no clue how it's going to turn out; also, any economist that tells you otherwise is fooling themselves.
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Triple Zero

Quote from: Cramulus on August 18, 2009, 02:24:31 PM
I'm sad and anxious

somebody cradle my head and say soothing words while I reload

BIKAW
    \
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e-prime disclaimer: let it seem fairly unclear I understand the apparent subjectivity of the above statements. maybe.

INFORMATION SO POWERFUL, YOU ACTUALLY NEED LESS.

Cain

Also

http://globalguerrillas.typepad.com/johnrobb/2009/08/more-breakage.html

QuoteOver the last thirty years, the social compact that divided value produced by productivity improvements between workers and corporate/financial interests broke down.  All the value from improvements (they were mighty) in productivity went to corporations/finance.  Median incomes stagnated for 30 years and the illusion of growth was produced by the extension of cheap debt.  It was also the driver behind the ahistorical rise in the stock market and ultimately the recent financial meltdown. 

That would be bad enough, but it's getting worse.  Median incomes are now on a downward track to give corporations the ability to return to profitability through increases in productivity (a massive 6.4% rise in the last quarter). 

This could be an interesting trend line.  Rather than keep median wages at status quo levels (as we have over the last thirty years), this is one where corporate/financial interests claw back on the gains in median wages between the end of WW2 and the mid seventies.  In that direction lies complete and utter failure.

Requia ☣

Hasn't the median been falling for years now?  Since 2000 if I'm not mistaken.
Inflatable dolls are not recognized flotation devices.

Cain

To stop me from making new ones all the time, I'll confine financial fuckery news and links ITT.

Anyway, AIG just threatened the government.

http://www.ft.com/cms/s/0/51b26b2a-b68e-11de-8a28-00144feab49a.html

QuoteKenneth Feinberg, the "special master" for pay at companies that have received government support, has raised concerns inside and outside AIG by putting pressure on the company to alter some pay plans.

People close to the situation said regulators had expressed fears that a crackdown on AIG could impel executives to leave, further harming the company's prospects and the chances of taxpayers' money being repaid.

In other words, they're essentially holding taxpayer money hostage, and saying they wont pay it back if the government tries to cut pay plans.  Never mind they're not going to pay it back anyway, because the American taxpayer is a serf, who should feel honoured to help a successful company like AIG in a time of crisis.  I wish Obama had declared he would not negotiate with investment bankers, a la terrorists.

Halfbaked1

I am gonna ask here since youse guys seem to be more in the know.

The stock market is up, as read by the DOW, so our dear beloved politicians tell us the recession is over.  But we have record unemployment across the country and people are having a hard enough time buying food, especially after wasting money on new cars cause it was SUCH a great deal.  My question is this, how does the market being up mean that the recession is over for us, the little people?

BabylonHoruv

Because unemployment is a lagging indicator.  In other words it comes down after the market goes up, rather than before.
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Cain

Quote from: Halfbaked1 on October 13, 2009, 11:46:53 AM
I am gonna ask here since youse guys seem to be more in the know.

The stock market is up, as read by the DOW, so our dear beloved politicians tell us the recession is over.  But we have record unemployment across the country and people are having a hard enough time buying food, especially after wasting money on new cars cause it was SUCH a great deal.  My question is this, how does the market being up mean that the recession is over for us, the little people?

It doesn't, in short.  The market is being kept afloat by cash infusions from the government and a whole lot of Clap Your Hands If You Believe, which is being aided by good feeling news stories about green roots, usually peddled by the same people who didn't believe a crash was in the making.

Japan had a "jobless recovery" 10 years ago, and it took them a decade to actually get anything near a proper recovery.  This just means things aren't getting much worse....that is, until the government stops throwing money at banks, or cuts back on social spending (the Tories in the UK have threatened to do both of these when they inevitably get voted in, and everyone with half a brain says it will plunge us into a longer and deeper recession the minute they do it).

Also, most of those toxic assets are still out there.  AIG is almost certainly hiding a ton of them, going by their recent actions.

Requia ☣

Presumably, it isn't actually jobless.  It just looks jobless because there's so much fuckery going on with the unemployment numbers to keep them low in the news.  As the recovery happens the numbers get less fucked with.
Inflatable dolls are not recognized flotation devices.

Halfbaked1

From personal experience the jobless rate is actually pretty high.  As I have said before, I don't trust massive organizations, but i do trust my eyes and I see alot of people in my area that are unemployed that weren't prioor to the recession.  I am happy to say that the plant where I work has brought back alot of the people they laid off, but new hires are still frozen. 

Cain

http://www.latimes.com/business/la-fi-ports17-2009oct17,0,4849546.story

QuoteIn another sign of how deep the global recession has become, the ports of Los Angeles and Long Beach on Friday reported their worst combined import statistics for September in nine years.

September is often the busiest month at the nation's biggest port complex, making it one of the best barometers of the health of the economy and international trade.

The port of Los Angeles received 309,078 containers packed with imported goods in September, representing a decline of 16% from the same month last year and 27% from September 2006, L.A.'s best month ever for imports. Long Beach received 224,924 import containers in September, a drop of 19% from a year earlier and 32% from September 2007, the port's best September ever.

For the first nine months of the year, imports, exports and empty containers through the port of Los Angeles were down 16% at just under 5 million containers while the Long Beach port saw a decline of nearly 25% at just under 3.7 million containers, compared with the same period last year.

Most of the recovery that the shipment industry is having is being fuelled by inventory re-stocking rather than consumer demand, too.

Cain

http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6879558.ece

QuoteTHE state-owned Royal Bank of Scotland is planning to hand out record bonuses of up to £5m each in a snub to struggling taxpayers.

The average employee in its high-risk investment banking arm is likely to take home £240,000, with the top 20 staff in line for payments of between £1m and £5m.

The payouts by the investment banking division — from a total pay and bonus pot of £4 billion — would top the deals awarded at the peak of the financial boom in 2007 and are 66% higher than those paid last year.

RBS, then headed by Sir Fred Goodwin, had to be rescued from collapse by the Treasury last October with an initial injection of £20 billion. The taxpayer now has a 70% stake in the bank.

Any suggestion of bumper bonuses will put RBS on a collision course with UK Financial Investments, which oversees taxpayers' investments in banks. It would have to approve the payments.

The RBS plans are the latest sign that the bonus culture is returning to the City just a year after the financial system was saved from collapse. The banks that have survived the financial crisis are now making huge profits in areas such as debt and currency trading, where instability in the global economy has created opportunities.

Some traders in specialised areas are making bigger profits than before because of the chaos created by the collapse. After a series of forced mergers, there are also fewer competitors in a number of areas, allowing the banks to charge clients higher fees.

RBS is expected to lobby hard to be allowed to make the payments, claiming that dozens of its top performing executives have been poached by rivals offering even bigger pay deals. Almost a third of the bank's wealth management staff in Singapore walked out last week over fears they would receive lower than expected bonuses.

The bank has already provoked anger over a bonus package of nearly £10m for Stephen Hester, its chief executive, which he will earn if he turns round the bank. Hester has said in recent interviews that even his parents think he is paid too much.

The bank has also come under fire over recent "golden hello" deals. It offered an estimated £7m to Antonio Polverino, a bond trader; while Brian Hartzer, recently recruited to head the bank's network of branches, was handed 1.99m shares as part of his sign-on deal — worth about £1m at current share prices.

Paul Myners, the City minister, has written to the boards of all the banks operating in Britain and reminded them that they should hold on to their cash to build up reserves, rather than hand it over to their executives and traders.

There were claims last night that some cabinet ministers wanted a "windfall" tax on bank profits. However, the Treasury is resisting any move that might damage the health of the financial sector at a time when banks are still struggling to rebuild their balance sheets.

Lloyds Banking Group, which is 43% owned by taxpayers, has been working on plans for a multi-million-pound incentive programme for its top managers.

Barclays, which has not received direct state support, is expected to post record profits of about £10 billion this year, leaving senior executives including Bob Diamond, head of Barclays Capital, the group's investment banking arm, in line for multi-million-pound bonuses. Barclays Capital, which took over the remains of Lehman Brothers in the US, is expected to see its profits soar.

Last week Goldman Sachs, the American bank, which employs 5,500 people in London, announced that its staff would share about £13 billion in pay and bonuses. Its senior partners in London, such as Michael Sherwood, the vice-chairman, could be in line for payments running to tens of millions of pounds.

The record payouts across the City come despite political pledges to clamp down on bankers' pay, drafted at meetings of the G20 countries in both London and Pittsburgh this year.

Lord Oakeshott, the Liberal Democrat Treasury spokesman, said: "The masters of the universe in investment banking are taking away lorryloads of loot because they are the last men standing. They have a virtual monopoly, partly because governments chose to save some banks and let others fall . . . It's survival of the fattest."

He added: "All this raises serious issues about competition and monopolies. The government must get a grip and look at this now — and not hide behind G20 principles which are mushy and meaningless."

None of the banks will decide final bonus payouts until the end of the year at the earliest, but the US banks have already set aside large sums to make the payments.

JP Morgan Chase revealed last week that it was preparing to pay almost £18 billion to cover salaries and bonuses for its staff, after posting profits of £2.2 billion for the past three months.

Even banks that have lost money are believed to be considering enormous payouts to some of their senior investment bankers. Bank of America Merrill Lynch, which revealed a quarterly loss of more than £600m last week, is believed to be preparing to make big bonus payouts to staff in its London operations.

Cain

Speaking of Barclay's, maybe there is a reason the bank didn't need direct financial assistance from the UK government

http://www.zerohedge.com/article/rare-glimpse-feds-discount-window-courtesy-brewing-lehman-barclays-scandal

QuoteIt is becoming increasingly likely that Barclays will have to pay a cool $5 billion (at least) in additional consideration to the Lehman estate, after the Official Committee of Unsecured Creditors came out yesterday with a hefty joinder piece to the debtor's motion that Barclays materially misrepresented and, in essence, stole $5 billion or more from under the noses of both Lehman Brothers Holdings and its Creditors, all as the megalomaniacal Judge Peck was trying to ram the largest prearranged stalking horse bankruptcy through, in the shortest (im)possible amount of time, just so he could print "Judge Peck  - Greatest Restructuring Judge in the World" t-shirts at the Bowling Green sweat shop just off NY Southern Bankruptcy court.

QuoteBasically, Barclays tried to rip JPMorgan off by collecting not just on the Lehman collateral which was part of the Barclays APA, but pretty much all the collateral in the tri-party repo, backed and funded by the NY Fed and JPMorgan. But the bottom line is that chaos ruled: tens of billions of dollars were flying on the wires at any given minute, in order to give the impression that with Lehman's collateral now on Barclays' books everything was magically better.

In this firestorm of wire transfers, the Fed's direct Lehman exposure was made obvious. From the Jamie Dimon letter, one can see that in the days after Lehman's bankruptcy, over $50 billion in securities had been assumed by the Fed via FRB and DTCC programs, which also included anywhere between $3 billion and $4.5 billion in equities. It was Barclays' onus to shift this entire collateral exposure to its own balance sheet (while paying both the Fed and JPM off).

QuoteComing full circle, the major question we have is what, if any, considerations did the Fed use when determining how much of Lehman's collateral pool it would be willing to onboard in the discount window. And if back then it was willing to accept securities of bankrupt companies as value pledges to US taxpayers, why would one assume that anything has changed? The next time there is a "risk-flaring" event (and with bankrupt companies presumably still on the Fed's balance sheet, it is merely a matter of time), how much more leeway will be given to toxic assets? Will the Fed now allow for a 10% haircut instead of 20%? Or how about 5%? Or maybe it will actually say the securities deserve a premium, since all that money Bernanke is printing has to go somewhere. We hope that the over 300 members of Congress who already support Ron Paul's "Audit the Fed" Initiative consider the implications of what the Lehman fiasco has taught us, and how this unique look into the Fed's balance sheet should be a very critical reminder of just how much risk the Fed is willing to take on with taxpayer capital when bailing out a financial system that, absent ongoing accounting gimmickry and endless Reserve Banking System subsidies, is still rotten to its core.

Those are the highlights, I suggest reading the whole thing

Cain

Oh, OK, just one more then:

http://www.nytimes.com/2009/10/18/opinion/18rich.html?_r=1

QuoteIt was hard not to think of Rockefeller's old P.R. playbook while watching Goldman Sachs's behavior when the Dow hit 10,000 last week. As leader of the Wall Street pack, Goldman declared surging profits, keeping it on track to dispense a record $23 billion in bonuses for 2009. But most Americans know all too well that only the intervention of billions of dollars in taxpayer bailout money saved Goldman from the dire fate of its less well-connected competitors. The growing ranks of under-and-unemployed Americans, meanwhile, are waiting with increasing desperation for a recovery of their own.

Goldman is this century's octopus — almost literally so. The most-quoted sentence in financial journalism this year, by Matt Taibbi of Rolling Stone, describes the company as a "great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money." That's why Goldman's chief executive, Lloyd Blankfein, recycled Rockefeller's stunt last week: The announcement of Goldman's spectacular third-quarter earnings ($3.19 billion) was paired with the news that the company was donating $200 million to its own foundation, which promotes education. In Goldman dollars, that largess is roughly comparable to the nickels John D. handed out to children a century ago. At least those kids could spend the spare change on candy.

Teddy Roosevelt's trust-busting crusade ultimately broke up Standard Oil. Though Goldman did outlast three of its four major rival firms during last fall's meltdown, it is not a monopoly. And there is one other significant way that our 21st-century vampire squid differs from Rockefeller's 20th-century octopus. Americans knew what oil was, and they understood how Standard Oil's manipulations directly affected their pocketbooks. Even now many Americans don't know what Goldman's products are or how it makes its money. The less we know, the easier it is for reckless gambling to return to capitalism's casino, and for Washington to look the other way as a new financial bubble inflates.

As Wall Street was celebrating last week, Congress was having a big week of its own, arousing itself to belatedly battle some of the corporate suspects that have helped drive America into its fiscal ditch. The big action was at the Senate Finance Committee, which finally produced a health care bill that, however gingerly, bids to reform industries that have feasted on the nation's Rube Goldberg medical system. At least health care, like oil, is palpable, so we will be able to keep score of how reform fares — win, lose or draw. But the business of Wall Street, while also at center stage in a Congressional committee last week, is so esoteric that the public is understandably clueless as to what, if anything, the lawmakers were up to, if anyone even noticed at all.

The first stab at corrective legislation emerging from Barney Frank's Financial Services Committee in the House is porous. While unregulated derivatives remain the biggest potential systemic threat to the world's economy, Frank said that "the great majority" of businesses that use derivatives would not be covered under his committee's much-amended bill. It's also an open question whether the administration's proposed consumer agency to protect Americans from mortgage and credit-card outrages will survive the banking lobby's attempts to eviscerate it. As that bill stands now, more than 98 percent of America's banks — mainly community banks, representing 20 percent of deposits — would be shielded from the new agency's supervision.

If it's too early to pronounce these embryonic efforts at financial reform a failure, it's hard to muster great hope. As the economics commentator Jeff Madrick points out in The New York Review of Books, the American public is still owed "a clear account of the financial events of the last two years and of who, if anyone, is seriously to blame." Without that, there will be neither the comprehensive policy framework nor the political will to change anything.

The only investigation in town is a bipartisan Financial Crisis Inquiry Commission created by Congress in May. It is still hiring staff. Its 10 members are dispersed throughout the country, and, according to a spokeswoman, have contemplated only a half-dozen public sessions over the next year. Such a panel, led by the former California state treasurer Phil Angelides, seems highly unlikely to match Congress's Depression-era Pecora commission. That investigation was driven by a prosecutor whose relentless fact-finding riveted the country and gave birth to the Securities and Exchange Commission, among other New Deal reforms. Last week, we learned that the current S.E.C. has hired a former Goldman hand as the chief operating officer of its enforcement unit.

Even as we wait for Congress and its inquiry to produce results, the cultural toxins revealed by our economic crisis remain unaddressed by the leaders in the private and public sectors who might make a difference now. Blankfein may be giving $200 million to "education," but Goldman is back to business as usual: making money by high-risk gambling, with all the advantages that the best connections, cheap loans from the Fed and high-speed trading algorithms can bring. As the Reuters columnist Rolfe Winkler wrote last week, "Main Street still owns much of the risk while Wall Street gets all of the profit."

The idea of investing in the real economy — the one that might create jobs for Americans — remains outré in this culture. Credit to small businesses remains tight. The holy capitalist grail is still the speculative buying and selling of companies and the concoction of ever more esoteric financial "instruments." The tragic tale of Simmons Bedding recently told in The Times is a role model. This successful 133-year-old manufacturing enterprise was flipped seven times in two decades by private equity firms. Investors made more than $750 million in profits even as the pile-up of debt pushed Simmons into bankruptcy, costing a quarter of its loyal workers their jobs so far.

Most leaders in America are against this kind of ethos in principle. Last month the president of Harvard, Drew Gilpin Faust, contributed a stirring essay to The Times regretting that educational institutions did not make stronger efforts to assert the fundamental values of pure intellectual inquiry while "the world indulged in a bubble of false prosperity and excessive materialism." She rued the rise of business as the most popular undergraduate major, an implicit reference to the go-go atmosphere during the reign of her predecessor, Lawrence Summers, now President Obama's chief economic adviser.

What went unsaid, of course, is that some of Harvard's most prominent alumni of the pre-Faust era — Summers, Blankfein, Robert Rubin et al. — were major players during the last two bubbles. As coincidence would have it, the same edition of The Times that published Faust's essay also included an article about how Harvard was scrounging for bucks by licensing a line of overpriced preppy clothing under the brand Harvard Yard. This sop to excessive materialism will be a scant recompense for the $11 billion Harvard's endowment managers lost in their own bad gamble on interest-rate swaps.

Obama has also passed through Harvard. (Disclosure: so did I.) He too has consistently said all the right things about the "money culture" of "quick kills and bloated bonuses," of "reckless behavior and unchecked excess." But the air of entitlement that continues to waft from his administration sends another message.

In particular, the tone-deaf Treasury secretary, Timothy Geithner, never ceases to amaze. His daily calendars reveal that most of his contacts with the financial sector in the first seven months of 2009 were limited to the trinity of Goldman Sachs, Citigroup and JPMorgan. And last week Bloomberg News reported that his inner circle of "counselors" — key advisers who, conveniently enough, do not require Senate confirmation — are largely drawn from the same club. It's hard to see how any public official can challenge a culture that he is marinating in, night and day.

Those Obama fans who are disappointed keep looking for explanations. Is he too impressed by the elite he met in Cambridge, too eager to split the difference between left and right, too willing to compromise? As he pursues legislation, why does he keep deferring to others — whether to his party's Congressional leaders or the Congressional Budget Office or to this month's acting president, Olympia Snowe? Why doesn't he ever draw a line in the sand? "We know Obama has good values," Jeff Madrick said to me last week, "but we don't know if he has convictions."

What we also know is that if Teddy Roosevelt palled around with John D. Rockefeller as today's political class does with Wall Street's titans and lobbyists, the tentacles of the original octopus would still be coiled tightly around America's neck.

Cain

The debtors revolt is starting

http://www.nytimes.com/2009/10/25/business/economy/25gret.html

QuoteFor decades, when troubled homeowners and banks battled over delinquent mortgages, it wasn't a contest. Homes went into foreclosure, and lenders took control of the property.

On top of that, courts rubber-stamped the array of foreclosure charges that lenders heaped onto borrowers and took banks at their word when the lenders said they owned the mortgage notes underlying troubled properties.

In other words, with lenders in the driver's seat, borrowers were run over, more often than not...

But some judges are starting to scrutinize the rules-don't-matter methods used by lenders and their lawyers in the recent foreclosure wave. On occasion, lenders are even getting slapped around a bit.

One surprising smackdown occurred on Oct. 9 in federal bankruptcy court in the Southern District of New York. Ruling that a lender, PHH Mortgage, hadn't proved its claim to a delinquent borrower's home in White Plains, Judge Robert D. Drain wiped out a $461,263 mortgage debt on the property. That's right: the mortgage debt disappeared, via a court order.

Just a reminder of some basic facts

http://www.ft.com/cms/s/0/b82d2b96-bc02-11de-9426-00144feab49a.html

QuoteOnce perceptions of rising inflation return, central banks might be forced to switch towards a much more aggressive monetary policy relatively quickly – much quicker than during the previous cycle. A short inflationary boom could be followed by another recession, another banking crisis, and perhaps deflation. We should not see inflation and deflation as opposite scenarios, but as sequential ones. We could be in for a period of extreme price instability, in both directions, as central banks lose control.

This is exactly what the economist Hyman Minsky predicted in his financial instability hypothesis.  He postulated that a world with a large financial sector and an excessive emphasis on the production of investment goods creates instability both in terms of output and prices.

While, according to Minsky, these are the deep causes of instability, the mechanism through which instability comes about is the way governments and central banks respond to crises. The state has potent means to end a recession, but the policies it uses give rise to the next phase of instabiliy....The world has witnessed a proliferation of financial bubbles and extreme economic instability that cannot be explained by any of the established macroeconomic models. Minsky is about all we have.

His policy conclusions are disturbing, especially if contrasted with what is actually happening. In their crisis response, world leaders have focused on bonuses and other irrelevant side-issues. But they have failed to address the financial sector's overall size. So if Minsky is right, instability should continue and get worse.

Our present situation can give rise to two scenarios – or some combination of the two. The first is that central banks start exiting at some point in 2010, triggering another fall in the prices of risky assets. In the UK, for example, any return to a normal monetary policy will almost inevitably imply another fall in the housing market, which is currently propped up by ultra-cheap mortgages.

Alternatively, central banks might prioritise financial stability over price stability and keep the monetary floodgates open for as long as possible. This, I believe, would cause the mother of all financial market crises – a bond market crash – to be followed by depression and deflation.

In other words, there is danger no matter how the central banks react. Successful monetary policy could be like walking along a perilous ridge, on either side of which lies a precipice of instability.

For all we know, there may not be a safe way down.

http://www.zerohedge.com/article/overview-feds-intervention-equity-markets-primary-dealer-credit-facility

QuoteRecently, Zero Hedge presented a snapshot analysis of the various securities that made up the triparty repo agreement involving JPM, Lehman and the Fed. We uncovered numerous bankrupt companies' equities that were being pledged as collateral for what ultimately was taxpayer exposure. To our surprise, this discovery is not an exception, and in fact in the days immediately preceding the collapse of Bear Stearns first, and subsequently, Lehman Brothers, the Federal Reserve established and refined a program that permitted banks to pledge virtually any security as collateral, including not just investment grade bonds and higher ranked securities, but also stocks of companies, the riskiest investment possible, and a guaranteed way for taxpayer capital to evaporate in the context of a disintegrating financial system, all with the purpose of bailing out Wall Street's major institutions. On two occasions last year: on March 16, 2008, and subsequently on September 14, 2008, the Federal Reserve first established what is known as the Primary Dealer Credit Facility (PDCF), and subsequently amended it, so that the Fed, in becoming the lender of last resort, would allow any collateral, up to and including stocks, to be funded by the Federal Reserve's credit facility, in order to prevent the $4.5 trillion repo financing system from imploding. By doing so, the Federal Reserve effectively gave a Carte Blanche to primary dealers to purchase any and all equities they so desired, with such purchases immediately being funded by the US taxpayer, via the PDCF. In essence, this was equivalent to the Fed purchasing equities by itself through a Primary Dealer agent.

Readers who have been concerned with the moral hazard provided by the Fed's monetization of Treasury and Mortgage debt, should be doubly concerned by this Fed action which sent three key messages to Wall Street: i) it made sure that Primary Dealers would generate massive profits on risky assets as the Fed would provide the funding to acquire any and all stocks (keep in mind the cost of funding of the PDCF to primary dealers was negligible); ii) it tipped its hand as to the existence and modus operandi of the rumored "plunge protection team," iii) and it made clear that the much maligned, by none other than Chairman Bernanke, concept of "moral hazard" is the one and only systemically relevant doctrine as long as the Fed's Chairman is in control, and not subject to any auditing auspices. The fact that PDs used over $140 billion of taxpayer money within a few weeks of the program's expansion in September to fund what one can assume were exclusively equity purchases, demonstrates that the American financial system got the message.

http://pong.tamu.edu/wp/?p=298

Exactly right:

QuoteSo what is the Dow Jones Industrial Average, a number that even those bomb-throwing ultraliberals at NPR worship on a daily basis? It's a stock market index based on the stock prices of 30 publicly held companies in the U.S. So who's in it and how did they get there? The wikipedia entry tells us that "the individual components of the DJIA are occasionally changed as market conditions warrant." The accompanying table shows us that the oldest company in the current DJIA (General Electric) has been a member since 1907, with the newest companies (Cisco and Travelers) joining in June of this year. To put it another way, the DJIA is an arbitrary number based on the arbitrary choice of 30 publicly owned companies out of thousands that exist at any given time. The losers are booted out - Cisco and Travelers replaced GM and Citigroup, for instance - and the winning flavors of the month get their invitation to the cigar and brandy club. If GM and Citigroup hadn't been given the bum's rush, the DJIA would almost certainly not have gone over 10,000 a couple of days ago, and we would have been spared the triumphalist sights and sounds of the usual army of hucksters, halfwits and whores employed to endlessly chant "buy stocks."

It is left as an exercise for the reader to figure out how many of the current DJIA cabal are  members of the FIRE (finance, insurance, real estate) sector, and also which ones can be construed to be "Industrial" (ignoring for now the location of the industries vis a vis the continental U.S.).  To be brief and perhaps flippant, the DJIA shows us that we charge each other rent, take a lot of drugs  (3 pharmaceutical companies), buy a lot of shoddy merchandise and software, buy a lot of military hardware (Boeing, Caterpillar, General Electric and United Technologies), and really like our cartoons.  Quite a change from the historical components of the DJIA.

And finally

http://feedproxy.google.com/~r/NakedCapitalism/~3/vKiiGyJrWH4/pay-czar-decides-to-collect-a-few-scalps-a-sign-of-weakness.html

QuoteThe Wall Street Journal reports that the pay czar, Kenneth Feinberg, is going to cut executive comp at 7 TARP recipients for the 25 most highly paid employees.

Does this really mean anything? The press will noise it up as significant (and some outlets will no doubt finger wag at this "interference") but the short answer is no.

First, recall Feinberg's hollow mandate. He is limited to only TARP recipients, not the beneficiaries of other forms of government largesse. And as anyone who has an operating brain cell knows, the number of firms on the dole and the degree of subsidies is much greater than the TARP. Have a look at the Fed's balance sheet for a reality check.