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    Daily Digest – July 12

    by Davos

    Sunday, July 12, 2009, 4:14 PM

  • Recession or Depression?: Boston Zoo May Close, Euthanize Animals: Out of Money  
  • Geithner Refuses to Answer Derivatives Bailout Question…(Video)
  • The Fed Under Fire…(Video)
  • Buddy, Can You Spare $5 Trillion?
  • Pete Peterson on Charlie Rose (Videos short and long, repost)
  • 20 Seconds of Air Time (Video)
  • Why some bloggers use pseudonyms
  • Ten eastern European countries now looking to IMF for bailouts
  • Hotels: Starwood faces black hole
  • Gold, the U.S. Dollar, and the Yuan (H/T PineCarr)


Recession or Depression?: Boston Zoo May Close, Euthanize Animals: Out of Money


(Seen on TheComingDepression .BlogSpot.com)

BOSTON — The Franklin Park Zoo, the only Boston institution of its kind, may be forced to close and euthanize some of its animals, zoo officials said Friday.

Without more state funding, zoo officials said that they will run out of money within months and have to close both Franklin Park and the Stone Zoo in Stoneham.

AP Photo/Winslow Townson
The zoos would be forced to lay off most of their 165 employees and attempt to find new homes for more than 1,000 animals.
Zoo officials estimated 20 percent of the animals would not find homes and could be euthanized.

Geithner Refuses to Answer Derivatives Bailout Question…(Video)

[Video on page]

Representative Brad Sherman poses a simple question to little Timothy Geithner which Timmy refuses to answer. Not a hard question, but it was a question meant to pin him down on whether or not derivatives that are being sold today will receive bailout money in the future.

Obviously, the implication of his refusal is that he will bail them out if need be… or not. You see, it has become the Treasury’s, Fed’s, and central banker’s discretion to take your money and give it to themselves or not. NO RULE OF LAW, simply lawlessness. Hat tip Mr. Glass who is rightfully angry and sick of it. Hey America, when you wake up unemployed, lose your house, and are living on central banker welfare to feed your family, you should know why those things are gone – they left with the rule of law.

The Fed Under Fire…(Video)

[Video on page]

Pay attention to the comments of William Greider, author of “The Secrets of the Temple.” He is describing exactly what I was railing about all through the crisis last fall, namely that Jamie Dimon, CEO of JPM, HAD to buy Bear Stearns to save themselves and received $30 billion in guarantees from the Fed while Dimon also sat on the board of the New York Fed of which little Timothy Geithner was the head!

Here’s the real truth. JPM is the center of the derivatives universe and has already imploded. It is only a matter of time before the $90 trillion of derivatives [enphasis min] they hold, and hide, and obscure come crashing down.

Audit the FED? ABSOLUTELY. I fully support that, but I can almost guarantee you it will not happen in any real manner, for if it does, that will lead to the end of the Fed, a very good reason to support the REAL audit of which they are obviously so afraid. (again ht Glass!)

Buddy, Can You Spare $5 Trillion?

I have been writing for months that I don’t think the US can find $2 trillion dollars this year and then come back
to the well for another $1.5 trillion next year without serious disruption in the markets. Where do you find that much money when all the rest of the world also wants to borrow massive amounts? How much are we talking about? The friendly folks at Hayman actually spent the time to add it all up. This is not a comforting graph.

The graph shows the US will need to issue $3 trillion in debt. “Wait,” I asked, “I thought it was only 1.85″ The
answer is that the number has grown to almost $2 trillion (as I wrote it would). Then you need to add in off-budget items like TARP, state and municipal debt, etc. Pretty soon it adds up to another trillion. All told, Hayman estimates that the world will need to find $5.3 trillion in NEW government financing. Never mind the needs of corporations or individuals or commercial mortgages, etc.

I am still trying to get my head around this. Let’s hopefully assume that they made a mistake and it is “only”
$4 trillion. Where do you find that kind of money in a global deleveraging recession?

Pete Peterson on Charlie Rose (Videos short and long, repost)

First video pegs dollar crisis possibility at 75%

20 Seconds of Air Time (Video)

Why some bloggers use pseudonyms

Over the past two years, Doris Dungey has become one of the most respected and influential voices in the industry. We miss her already.

From Calculated Risk:

My dear friend and co-blogger Doris “Tanta” Dungey passed away early this morning. I would like to express my deepest condolences to her family and friends.

Photo: Tanta in 2004 (from her sister Cathy).

From CR to Tanta’s many readers, fans and internet friends: Tanta enjoyed writing for you, chatting with many of you in the comments, and corresponding with you via email. She told me several times over the last few months how much she enjoyed discussing current events with you.

Tanta worked as a mortgage banker for 20 years, and we started chatting in early 2005 about the housing bubble and the changes in lending practices. In 2006, Tanta was diagnosed with late stage cancer, and she took an extended medical leave while undergoing treatment. At that time I approached her about writing for this blog, and she declined for a simple reason – her prognosis was grim and she didn’t expect to live very long. To her surprise, after aggressive treatment, her health started to improve and she accepted my invitation. When she chose an email address, it reflected her surprise: tanta_vive … Tanta Lives!

Armed with a literary background and extensive knowledge of the mortgage industry, Tanta wrote about current events with deep insight and wit. Here is the introduction to one of her posts in 2006: Let Slip the Dogs of Hell

I still haven’t gotten over the fact that there’s a “capital management” group out there having named itself “Cerberus”. Those of you who were not asleep in Miss Buttkicker’s Intro to Western Civ will recognize Cerberus; the rest of you may have picked up the mythological fix from its reprise as “Fluffy” in the first Harry Potter novel. Wherever you get your culture, Cerberus is the three-headed dog who guards the gates of Hell. It takes three heads to do that of course, because it’s never clear, in theology or finance, whether the idea is to keep the righteous from falling into the pit or the demons from escaping out of it (the third head is busy meeting with the regulators).
Tanta wrote a number of posts detailing the inner workings of the mortgage industry. These posts covered a wide range of topics, from mortgage servicing, to everything you want to know about mortgage backed securities (MBS), to reverse mortgages. She called these posts “The Compleat UberNerd” and in typical fashion she noted:

An “UberNerd” is someone who is compelled to understand how things work in grim detail, even if the things in question are tedious in the extreme …”
Tanta liked to ferret out the details. She was inquisitive and had a passion for getting the story right. Sometimes she wouldn’t post for a few days, not because she wasn’t feeling well, but because she was reading through volumes of court rulings, or industry data, to get the facts correct. She respected her readers, and people noticed.

Felix Salmon at Condé Nast Portfolio.com, wrote on Nov 7, 2007 wrote:

“Tanta is one of the best financial writers in the world, and explains complex ideas with wit and great clarity."
Paul Krugman at the NY Times complemented Tanta several times, recently writing:

“The great thing about this age of blogs is the way people who really know something about a subject can quickly weigh in, without being filtered through Authority.”
Even researchers at the Federal Reserve referenced Tanta’s work: From Adam Ashcraft and Til Schuermann: Understanding the Securitization of Subprime Mortgage Credit, credit on page 13:

Several point raised in this section were first raised in a 20 February 2007 post on the blog http://calculatedrisk.blogspot.com/ entitled “Mortgage Servicing for Ubernerds.”
Tanta was also extremely funny. She introduced the Muddled Metaphor Index (MMI) and Excel Art featuring the Mortgage Pig, and she was the originator of a number of phrases in use today, like “We’re all subprime now!”

This is a very sad day and I know many of you are in shock. Tanta was our teacher. She generously shared her knowledge with all of us. I doubt she knew how many lives she touched; her insights, spirit and passion lives on in her writings – and in all of you.

Tanta Vive!

Here’s David Streitfeld’s piece in the New York Times:

The blogger Tanta, an influential voice on the mortgage collapse, died Sunday morning in Columbus, Ohio.

Tanta, who wrote for Calculated Risk, a finance and economics blog, was a pseudonym for Doris Dungey, 47, who until recently had lived in Upper Marlboro, Md. The cause of death was ovarian cancer, her sister, Cathy Stickelmaier, said.

Thanks in large part to Tanta’s contributions, Calculated Risk became a crucial source of prescient analysis as the housing market at first faltered, then collapsed and finally spawned a full-blown credit crisis.

Tanta used her extensive knowledge of the loan industry to comment, castigate and above all instruct. Her fans ranged from the Nobel laureate Paul Krugman, an Op-Ed columnist for The New York Times who cited her in his blog, to analysts at the Federal Reserve, who cited her in a paper on “Understanding the Securitization of Subprime Mortgage Credit.”

She wrote under a pseudonym because she hoped some day to go back to work in the mortgage industry, and the increasing renown of Tanta in that world might have precluded that. Tanta was Ms. Dungey’s longtime family nickname, Ms. Stickelmaier said.

Calculated Risk, which gets about 75,000 visitors a day, was started in early 2005 by a retired technology executive named Bill McBride. The housing market was soaring, but Mr. McBride sensed that the industry was about to peak, and he posted articles and data that made his case.

The blog quickly drew a lively and informed group of commentators, few livelier and none more informed than someone who called herself Tanta. She began by correcting some of Mr. McBride’s posts. “She would tell me either I was wrong or the article I was quoting was wrong,” he said Sunday. “It was clear she really knew her stuff. And she was funny about it.”

Tanta soon graduated from merely commenting to being a full-scale partner. Her first post, in December 2006, took issue with an optimistic Citigroup report that maintained that the mortgage industry would “rationalize” in 2007, to the benefit of larger players like, well, Citigroup.

“Bear with me while I ask some stupid questions,” Tanta wrote, and proceeded to assert that the industry was less likely to “rationalize” than fall apart, which it did. Citigroup was bailed out by the government last month.

She loved the intricacies of mortgage financing and would joke about being not just a nerd on the subject but a nerd’s nerd. She eventually wrote, for the Calculated Risk site, “The Compleat ÜberNerd,” 13 lengthy articles on mortgage origination channels, mortgage-backed securities and foreclosures that constituted a definitive word on the subject.

The rest of the time, Tanta liked to chew on the follies of regulators, the idiocies of lenders and — a particular favorite — clueless reporters, which according to her was just about all of them. She did not approve, she once wrote, of “parading one’s ignorance about mortgages in an article full of high-minded tut-tutting over ignorance about mortgages.”

In March 2006, Ms. Dungey was diagnosed with late-stage ovarian cancer.

Ms. Dungey was raised in Bloomington-Normal, Ill., had a graduate degree in English, and worked as a writer and trainer for a variety of lenders, including Champion Federal and AmerUs Mortgage.

One of Tanta’s last posts was written as the $700 billion bailout was first being debated in mid-September, and it seemed that the Treasury Department might buy bad assets directly from troubled banks.

Tanta argued that for every asset that banks unloaded on the government, the chief executives should be required to explain “why they acquired or originated this asset to begin with, what’s really wrong with it in detail, what they have learned from this experience, and what steps they are taking to make sure it never happens again.”

Ten eastern European countries now looking to IMF for bailouts

According to the report, among the countries which have requested assistance at the IMF for the fist time are Bulgaria, Croatia and Macedonia. Ukraine, Serbia, Romania, Belarus and Latvia speculate on receiving a faster payout or increased speculated IMF assistance. Hungary had not yet decided whether it needs more money from the fund. The IMF has recently approved the application of Bosnia, as the Bosnian Minister of Finance announced on Thursday. Bosnia-Herzegovina will receive a credit line of 1.57 billion U.S. dollars (1.13 billion euros) from the IMF.

In regards to emerging markets, this story makes clear how much worse the situation in Eastern Europe is than in Emerging Asia or Latin America.

Hotels: Starwood faces black hole

Hotels are another area of excess where there is going to be a lot of pain.

Clearly, this is the case now with RevPAR (revenue per available room) down 20% across the board at hotel chains. Higher end places are suffering even more. Hence,the downgrade to Starwood.

Gold, the U.S. Dollar, and the Yuan (H/T PineCarr)

Golden Yuan?

China’s increase in gold reserves has another more profound implication that most commentators haven’t realized. It’s clear to me that China has plans to replace the U.S. dollar as a reserve currency with an at least partially gold-backed yuan. I have to give Jim Sinclair credit, as he predicted the Chinese were moving to a gold-backed yuan in 2002 as part of their “long term plan of Economic Ascendancy.” He deduced that the Chinese government allowed the private ownership and sale of gold by their citizens in order to re-monetize gold. China has experienced the folly of paper money many times before and – as Mr. Sinclair puts it – “their memory is culturally infinite.” The Chinese are aware they must step in to facilitate the move back to hard money.

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