"If The Democrats Can Grow A Backbone..."

Jon used that phrase in the comments section of the last post, and yes, I am taking him waaay out of context, but it prompted me to think of the gelatinous mass above. Welcome to my mental image of the Democratic Party. There are still a few useful parts...I think the fang hanging on the right side of its mouth is Russ Feingold, the vestigial flippers are Kucinich and Leahy, Waxman is maybe the nose.

Update: Why yes, failure is their preferred option: Senate panel rejects gov't-run insurance plan

Insurance Industry Set To Reap Bonanza

Given the curious advantage, one rather akin to time travel, of writing the health care reform legislation before it even gets inspected by the elected Congressional representatives who vote on it, what's going to happen is hardly a surprise. But it is a disappointment, especially for people like me and my wife and at times like this we are quite capable of sounding like anti-government Republicans. Because we share their opinion of a process gone horribly, irrevocably wrong.

We're both self-employed, you see, and our combined insurance premiums and out-of-pocket health care costs total up to more than $20,000 per year. In fact we still owe nearly $4,000 for our second son's no-complication, no-epidural birth, which took only two hours of delivery room time.

Like Obama, we were naively hoping for a little competition to be injected somewhere into the insurance "industry" processes, so a claim can't be denied retroactively six months down the line with no explanation, so the yearly premiums don't go up by an arbitrary 8, 13, 11, or 15%. Couple that cost into our boxcar of $27,000 per year in child care expenses (note: we chose two of the better day care values available in our neck of Seattle) and an 8% higher tax straight off the top for the temerity of having a small business (known as the "self-employment tax"), and it adds up to one dream sail boat or Porsche worth of cash per year. Something has got to give, and it will almost certainly be us.

To the insurance companies, combine 40-some million uninsured folks with the right wording and it's Bring On the Dancing Nurses for a long, long time. There's an article in the LA Times detailing the mechanics of how a "strong public option" will fleece taxpayers and subscribers who don't meet at-need limits:

Lashed by liberals and threatened with more government regulation, the insurance industry nevertheless rallied its lobbying and grass-roots resources so successfully in the early stages of the healthcare overhaul deliberations that it is poised to reap a financial windfall.

The half-dozen leading overhaul proposals circulating in Congress would require all citizens to have health insurance, which would guarantee insurers tens of millions of new customers -- many of whom would get government subsidies to help pay the companies' premiums.

"It's a bonanza," said Robert Laszewski, a health insurance executive for 20 years who now tracks reform legislation as president of the consulting firm Health Policy and Strategy Associates Inc.

Some insurance company leaders continue to profess concern about the unpredictable course of President Obama's massive healthcare initiative, and they vigorously oppose elements of his agenda. But Laszewski said the industry's reaction to early negotiations boiled down to a single word: "Hallelujah!"

The insurers' success so far can be explained in part by their lobbying efforts in the nation's capital and the districts of key lawmakers.

The bills vary in the degree to which they would empower government to be a competitor and a regulator of private insurance. But analysts said that based on the way things stand now, insurers would come out ahead.

"The insurers are going to do quite well," said Linda Blumberg, a health policy analyst at the nonpartisan Urban Institute, a Washington think tank. "They are going to have this very stable pool, they're going to have people getting subsidies to help them buy coverage and . . . they will be paid the full costs of the benefits that they provide -- plus their administrative costs."

One of the Democratic proposals that most concerns insurers is the creation of a "public option" insurance plan. The industry launched a campaign on Capitol Hill against it, grounded in a study published by the Lewin Group, a health policy consulting firm that is owned by UnitedHealth Group. The lobbyists contended that a government-run plan, which would have favorable tax and regulatory treatment, would undermine private insurers.

Opposition increased this month when boisterous critics mobilized at town hall meetings held by members of Congress home for the August recess.

The attacks, supplemented by conservative critics on talk radio and other forums, drew national attention.

Leading insurers, including UnitedHealth, urged their employees around the country to speak out. Company "advocacy hot line" operations and sample letters and statements were made available to an army of insurance industry employees in nearly every congressional district.

Some insurers supplemented the effort with local advertising, often designed to put pressure on specific members of Congress. Late in the spring, Blue Cross Blue Shield of North Carolina -- the home state of several conservative Blue Dog Democrats -- prepared ads attacking the public option.

Leading Democrats have fought back, with House Speaker Nancy Pelosi (D-San Francisco) last month calling the industry "immoral" for its past treatment of customers and suggesting insurers were "the villains" in the healthcare debate.

Still, recent support for the public option has declined, and the stock prices of health insurance firms have been rising.

Undermining support for the public option wasn't the only gain scored by insurance lobbyists.

In May, the Senate Finance Committee discussed requiring that insurers reimburse at least 76% of policyholders' medical costs under their most affordable plans. Now the committee is considering setting that rate as low as 65%, meaning insurers would be required to cover just about two-thirds of patients' healthcare bills. According to a committee aide, the change was being considered so that companies could hold down premiums for the policies.

Most group health plans cover 80% to 90% or more of a policyholder's medical bills, according to a report by the Congressional Research Service. Industry officials urged that the government set the floor lower so insurers could provide flexible, more affordable plans.

"It is vital that individuals, families and small-business owners have the flexibility to choose an affordable coverage option that best meets their needs," said Robert Zirkelbach, spokesman for America's Health Insurance Plans, the industry's Washington-based lobbying shop.

Consumer advocates argue that a lower government minimum might quickly become the industry standard, placing a greater financial burden on patients and their families.

"These are a bad deal for consumers," said J. Robert Hunter, a former Texas insurance commissioner who works with the Consumer Federation of America.

Meanwhile, companies would probably see a benefit by providing less insurance "per premium dollar," Hunter said.

"It would be quite a windfall," said Wendell Potter, a former executive at Cigna insurance company who has become an industry whistle-blower.

Consumer and labor advocates acknowledged the industry's lobbying success.

In the first half of 2009, the health service and HMO sector spent nearly $35 million lobbying Congress, the White House and federal healthcare offices, according to data from the Center for Responsive Politics.

With more than 900 lobbyists, that sector -- whose top spenders are insurance giants UnitedHealth, Blue Cross Blue Shield and Aetna -- was poised to spend more than in 2008, a record lobbying year.

UnitedHealth spent the most, $2.5 million in the first half of 2009, and hired some of Washington's most prominent political players, including Tom Daschle, the former Senate majority leader who served as an informal health policy advisor to Obama.

"They have beaten us six ways to Sunday," said Gerald Shea of the AFL-CIO. "Any time we want to make a small change to provide cost relief, they find a way to make it more profitable."

RIAA Spokesman Declares DRM, Self Dead

Interesting. More accurately, however, DRM is undead, a deceased business model which will continue to behave as if legally alive until incinerated. The Recording Industry Association of America, the very folks who helped craft the DMCA (Digital Millenium Copyright Act) might better have questioned the wisdom of suing senior citizens whose grandchildren copy DVDs. And going after universities? Oooom. Big No-No. The RIAA's high-water moment came in 2006, when it won a court ruling which declared all online file-sharing illegal.

iTunes may have scrapped DRM, but the heart of what constitutes digital ownership remains dark. Under the DMCA (which I was forced to read while strapped down in a Microsoft "therapy" center, metal eye-lid claws clamped firmly in place), when you buy something and download it to your machine, you do not own it. You have merely secured the rights to use it under certain conditions. Thus can Amazon brotherfully erase George Orwell's 1984 from its Kindle e-readers, without notice, redress, nor mindfulness to all that is holy and good. Surprisingly, the definitions of book ownership used to be similarly constrained before rights to loan and even re-sell were won. Via Daily Tech:

The RIAA is one of the most controversial corporate organizations in America. It has carried out a prolific lawsuit campaign against file sharers, including its record $1.92M USD judgment against Jammie Thomas-Rasset. It has also taken other less high-profile, but equally contentious positions including declaring making CD backup copies of legal bought works "stealing" and supporting Digital Rights Management (DRM), a means of trying to prevent individuals from copying digital works for backup or other purposes.

One of the staunchest supporters of DRM, RIAA chairman and CEO Mitch Bainwol once commented two years ago, "DRM serves all sorts of pro-consumer purposes."

Even last year as DRM floundered against public opposition, the RIAA held hopes for a comeback. However, it now appears the RIAA has forsaken DRM, the tool it once held dear. In an interview for an upcoming SCMagazine article, Jonathan Lamy, chief spokesperson for the RIAA comments, "DRM is dead, isn’t it?"

With iTunes going DRM free, DRM indeed seems set to go the way of the dinosaur. However, a few commercial entities like Electronic Arts continue to cling to DRM implementations like the controversial SecureROM for their brick-and-mortar sales. Even EA, though, has removed SecureROM from copies of its game Spore sold on Valve's Steam download service.

In the end, DRM struck the public as simply too anti-consumer -- you already bought the content, so why shouldn't you be free to use or copy it? Malware-like implementations also did not help DRM proponent's case, nor did the fact that the protections were easily defeated -- as evidenced by Spore being the most pirated game in history. Now it appears the end is at last near for the scheme as its last advocates forsake it.

Gandhian Hardball: Obama's Political Non-Violence

The leader of Team O is very consciously using civil rights principles to make the Republicans (more) insane, and the "filibuster watch" is on. The sooner they openly shut down legislation, the better, the sooner their Party's spine will be broken. That spine must be broken because, in short, it is a corporatist spine. The man's realism comes through below, and then Hertzberg, an actual journalist, sketches the reasons why maintaining a bipartisan posture makes sense.

1) (Obama Interview) "But he did say that he thought the GOP party-line vote was a fait accompli long before it was taken. "Look," he said, "once a decision was made by the Republican leadership to have a party-line vote -- a decision that I think occurred before I met with them -- then I'm not sure that there was a whole host of things that we were going to do that was going to make a difference."

2) (Hertzberg, New Yorker) "Fifty years ago, the civil-rights movement understood that nonviolence can be an effective weapon even if—or especially if—the other side refuses to follow suit. Obama has a similarly tough-minded understanding of the political uses of bipartisanship, which, even if it fails as a tactic for compromise, can succeed as a tonal strategy: once the other side makes itself appear intransigently, destructively partisan, the game is half won. Obama is learning to throw the ball harder. But it’s not Rovian hardball he’s playing. More like Gandhian hardball."

The holes in this boat may be too big to fix, but this guy can be a joy to watch.

The New-New Bank Bailout Plan, AKA "Thing Which Makes Me Contemplate Mob Hit On Self To Collect Life Insurance For My Family"

So I caught some of Obama's bailout road show in Elkhart, Indiana, in which he said we're in the run-up to something like another Great Depression, only probably worse. Something in that subject inspired a Washington Post reporter to ask what the President thought of Olympic swimming Wheaties-box superstar Michael Phelps going to a frat party and taking a bong hit before getting laid by a cadre of sorority girls. Or maybe he asked something about the pre-Madonna A-Rod taking steroids and how he won't ameliorate his contrition intravenously with the two hundred million dollars he's made as a baseball player. Either way, the Infinite Estate just reached a new journalistic high.

This caused me to look up the stimulus plan between panic attacks, and to actually listen to Treasury Secretary Tim Geithner's interview about his enhanced bank bailout plan today, or at least to some of it. About three minutes in, I hurriedly ran out along with the rest of Wall Street hitting the mute button on my conference calls to start frenziedly converting cash and redeemable assets into more gold bullion and stick it in hard-to-search places. (Did you know you could get gold femur replacements?) Liquidation is a vexing, complicated process, so we could only sell enough of the Dow to lower it by 4.8% in two hours.

Having known some bankers, I empathize. Geithner didn't name even one of them or confirm their home address so he could send them, their lovely wives, mistresses, call girls and children seven or eight figure magic checks. More palliatively for their panic, however, the "bad asset bank" you may have heard about was discussed in the form of a "Public Private Investment Fund.” Apart from language being officially dead after a life-long torture by Washington beaurocrats, Satan ruling with blood and power on this earth, and people getting tax cuts for buying crappy new cars, those words don't even form an acceptable acronym. Attempting to explain the PPIF makes even less sense, because it will be “jointly run by the Treasury and the Federal Reserve, with financing from private investors, to buy up hard-to-sell assets that have bogged down banks and financial institutions for the past year.”

Bogged down? My plan for bipartisanship was to cram a stimulus bill down Republican throats, getting two votes short of cloture and then letting them make more fulsome assholes of themselves by filibustering for three months on the Senate floor reading autographed English and Arabic translations of Mein Kampf. But no. We got this. Maybe, as Lord Wife urged Team Obama, they can just take the bill back into committee and add stimulus in, with a provision for razing the vacant public school three blocks away from our house and turning it into an Indy-Car race track for hyper-competitive children. Also with some other stuff like job creation, public works, renewable energy projects which would never get built except by a government and will move us up into this century and keep giving back for 120 years.

I've just taken two deep lung-fulls of air and have started holding my hopeful breath. The political system could change from within, unlike the rioting by the without in Iceland, Latvia, Estonia, Greece, Argentina, the demonstrations and strikes in France and England. And what would happen here? We shoot socialists, don't we?

GM Takes Out Full-Page Ad In Automotive News

"You wouldn't buy our shitty cars. So we'll be taking your money anyway. The Bailout. Coming this January."

That's how the ad could've read. In its own way, the actual one was much better, titled: GM's Commitment to the American People. It would be wise to practice and master this particular form of contrition: "We know, we screwed up. Now we really, really need 18 billion dollars. Even though we've still got 16 billion in the bank."

The crowd from home plate on up to the peanut gallery was, you might say, a bit underwhelmed. GOP congress-critters worked up the spunk to actually heap a helping of scorn and derision on Dick Cheney for asking them to become communists. (Get used to a steady diet of those. Dick.)

Actually, GM would probably be ok if it hit Chapter 11, so it just needs a bridge loan, like, I dunno, maybe from a bank that has just shared in 4 trillion dollars of largesse. GM has some good models like the Malibu and Impala, can restructure a couple brands, and can bring in good models from subsidiaries where people haven't forgotten how to build them, such as Opel-Europe and Saab. All told, they probably need $5-8 billion before the Volt comes on line, which is an electric car powered by gasoline. (Don't ask.)

Ford probably doesn't need a bailout at all to avoid chaptering, with a stronger model line and high-quality small cars it's already bringing in from its European sub. It also owns part of Mazda, which it could sell without much difficulty. But Ford would feel quite snubbed if GM got a bailout, and it did not. It might fail out of sheer pique, just to get back at us, so look for something in the $4-6 billion range, with concessions of a green nature, and promises not to bust the union too openly or ship all production to Malaysia.

Chrysler? It is, in the Catholic sense, beyond redemption. It has no compelling models coming online, no far-off subs to get them from, no reserves, just liabilities. Daimler-Benz paid billions to be shot of it for good reason. There's talk of forcing GM or Ford to merge with it in order to save the doomed, lobbyist-chocked private equity firm ("Cerebus") which was dumb enough to buy it from Daimler, but whoa-ho. When you're drowning, you don't catch anchors.

So there's the quick-n-dirty state of automotive affairs. Please don't actually believe any of the above, your mileage may vary, etc. I've just always loved cars, and will mourn the loss of these once-glorious enterprises which made some of the best, now become wart-nosed, blinded, degenerate albatrosses. And someday I'll get around to writing about our new Honda Fit.

(Update: I'm about as flip-floppy as the rest of the country on the bailout issue, with 47% for, 42% against, 11% undecided. Cars have killed and maimed more Americans than the total casualties of all US wars, one hit me in a crosswalk in LA, one permanently messed my neck up in a rear-ender. Yet it was cars which first united the US as a country, and they remain the building block of our present structure. Transitions away must be gradual, and add to that the fact that England, France, Germany, Italy, Holland, and Sweden amongst others all bailed out or nationalized indigenous failed car companies. Car industry is heavy industry, the engineering know-how can be readily harnessed to other purposes, so we should be solidly in favor of a limited, controlled bailout (let none dare say Nationalization.) Amazingly, it looks like Congress will be of the same mind.)

The Republican Party's Head Is Examined

One cold and wet night about four years ago, I was listening to the radio, driving near my house. A professor was talking public policy with an audience at Town Hall, speaking with scholarship, clarity, authority, and humor; I pulled over and turned up the sound. "Geez," I thought. "Why can't somebody like this guy be President? Dream on, kiddo." I listened to the end of the program just to find out the gent's name: Barack Obama. Four years and many downpours later, the Novelty Generator that is my country has thunk the unthinkable. As blogger Frank Paynter at Listics remarked, "Historic? This beats the effing moon landing."

We're in a new era. For the first time in 49 years, a Texas Oil Man is neither the President nor Vice President of the United States. The only civil war being fought so far, one which tempts an urge to incivility, is between the Whack Jobs (Palin Wing) and the Gippers (Noonan Wing) in the Grumpy Old Party, which the Whack Jobs are destined to lose. Their war is a good thing for all of us, being one only of ideas, and what emerges will figure out how to win the mainstream back. Being right under their nose, there's a decent chance they'll find the answers, and the upshot is this: Republicans can do Progressive Politics, too. Call me crazy, but the GOP will soon cast itself as the Party of Small Business.

Consider, if you will, Newt Gingrich. He's a genuine intellect, was the leader of the Republican congressional takeover in 1994, the architect of the "Contract With America." He was an extremely prolific fund-raiser and earned the loyalty of his peers by sharing the wealth generously. Christians love him. Business people love him. He's a master of crafting agendas, and he is going to wind up running the Republican Party.

The GOP as a whole worships authority. That's what the God Thing in the Base is about. While managing those impulses can be tricky, Gingrich grasps the absolutely tremendous potential for positive activism that's scurrying around in there, and he's got the smarts and the bona fides to bring it out. The departure from the current GOP will be radical, it needs to be, and the exit won't turn in Palin's direction. It will far more likely be a mirror image of Obama Community Activism. Gingrich has suggested, for example, that kids be paid for getting good grades. He has held forums on health care, communities, and the environment. And he came within a hair's breadth of being the real kingmaker in this election.

Gingrich wanted McCain to pick Bobby Jindal, the Louisiana governor, as his running mate. Jindal is a Rhodes Scholar of Punjabi/Indian descent, a convert to Catholicism who has convincingly testified to his faith in front of numerous evangelical congregations. He's the youngest governor in the country and the blackest in Louisiana's history. Jindal would have noise-cancelled Obama's thunder in terms of race, scholarship, and youthful vigor. If Gingrich had succeeded with McCain, you would've heard cries of despair from here, because the election would've been a lot closer. Or lost. But I trusted Karl Rove's Boys to block Jindal--they won't work with political clay that's smarter than them, and that was their undoing.

The Republican Party has to re-evaluate its environment to re-forge its platform. The environment is sick to death of imperialists (neocons) , radicals (fundies), and thieves (supply-side economists), and the platform begs for a more enlightened, more inward-looking pastoralism. With better fences, and the best Republican course is to steer away from Big Business. They must drag their dream of success back down to a more accessible financial level, precisely where the Democrats won, and be even more aggressive. Gingrich is quite capable of distilling energy policy down into slogans like "We Are The Grid" and turn everybody with a roof into a wind farmer. Meantime, while it's unlikely Big Business will get hit with cap and trade, it's very likely that tax breaks will be used to reward non-carbon sources. Republicans will support that. In fact, Gingrich probably has a better appreciation of renewables than so far exists in the Obama Administration.

The very basis of Obama politics was the hypothesis that small donor contributions could scale up and beat out K Street and large corporations. He was right. The victory will extend with pronounced effect on policy and law, eventually at every level of government. Households like mine saw how changing where the money for politics came from would change the country, so we gave all we could to Barack. Justifiably disaffected people criticized us for being fools, but they're the political Has-Beens who refused to learn that laws are written with money. That's what this election was about: if we pool our money to buy candidates, we'll beat the corporations. There's nothing to stop Republicans from playing the same game.

Obama's victory upended all the old political models, lobbyists are weakened, and every politician in the country knows the jig is up. We are the heralds of the next stage of American Greatness, and Republicans will be swept along. There have been only a few major developmental stages in the sweep of US history: the Founders created a highly scalable federal system; Jefferson sent it to the shining seas; Lincoln nationalized it; Roosevelt socialized it; and Truman globalized it. Now we're going to energize it. Now it's up to the other wing of the Property Party to try and out-dance us at a Second Declaration, and I bet we'll be seeing Mr. Jindal again.

American Mania, Pt. II: "You Maniacs! You Blew It Up! Damn You! God Damn You All To Hell!"

Where to begin. The scheduled intervention fails, 777 DJIA points and $1.15 trill go ba-bye in a few hours. I've seen worse, but this falls probably somewhere in Phase 3 of the manic cycle, the part where the victims devolve into terrified grandiosities, deciding to run out into traffic because they think they're privy to the Special Knowledge and can control cars with their minds. Both they and their rescuers will become very confused and can't put together why they got hit and flew through the air, because it makes no sense. I meditate on minds, markets, and money, on religions, and quests for immortality. As it is on the micro-individual, so it is on the macro-collective.

What the hell were they thinking, and what are they doing out there? South Sea bubbles, popular delusions, madness of crowds, marathon weekend meetings, tulip crazes unwinding, dot-com business and bailout plans rejected, broken shop windows burning and can't we all just get along as the batons rain down on our Rodney-Kingness. If maniacs survive the impact, they'll just respond with indignation, and serve out venomous recriminations. When you hear those creative obscenities, it means they're almost at the end of the cycle.

In the first stage, mania is easily camouflaged in masks of optimism and bliss. When you feel great, better than great, when you're able to directly hear the music of the spheres, the twitching muscles of the bull are at your command. You expand, you swell, you exuberate, and your exuberations are infectious. You form magical ideas, dwelling on them until you assemble them into energetic arguments, so you start to run, calling others to follow, and some do.

You run faster, faster still, shedding your past self, and so you shift into the second phase of mania. Into what they call hypomania. The compass of your body is pointed at the elixir and is propelled by fire. It's pressed down into inexhaustible white embers, stoked and sheltered in your ashes, difficult for many to detect. Your animus can outlast, it can baffle and overcome all who would assail it, and you silence the doubts of the skeptics and naysayers, even the ill-advised on cocaine. Your convincing crystalline vision sweeps them aside like a UFO sweeps away Model Ts. Risks and expenses be damned, disposable servants of supernatural vision. You will change the world.

You become impatient. The slow parts of the world do not serve quickly enough, they lag, and you are surrounded by uncomprehending fools who dispense intolerable ridicule upon you. What the spheres have revealed must work, it is destiny, and these detractors are irrational simpleton. Why do they not see? They refuse your simplest requests. You have an urge to do them harm, if only it would do some good, but your mission is to help them because you're their Messiah. It's far better to show them what you mean, to construct a perilous illustration of your powers which none can deny, so you hoist upon your back the crucifix, you'll walk out onto that freeway, the oncoming Pharisees and cars at your command.

You are hit and cry. Why hast thou forsaken me? Your tired dopamine receptors, your burned dendrites and glazed synapses unlock as the pain starts to break through, and your joy circuits begin to realize they've been overladen for so long, so long. You're brought broken into a den, nay a cage, angry, angry with God, angry with those who thwarted you, angry with the ones who rescued you, angry over the passage of time, angry at the pointless waste, at the reversion to the human mean, flooding with anguish and self-doubt, wondering how to bear your unbearable humiliations, knowing and needing to reconstruct who and what you are.

Compared to the rest of the cycle, the hibernation is short. We're all going to heaven, we are all going the other way, and this is what we have to go through.

(Note: I've stolen from so many unattributed sources in this post, it's silly. If you're one of them, complain.)

American Insurer AIG To Become People's Insurance Group (PIG)

Yesterday, Henry Paulson, aka "The Taxpayer's Friend," organized an $85-billion government loan to the American Insurance Group. AIG owns everything: insurance policies, fleets of jets, railroads, shipping, the Caribbean, and about $600 billion in subprime derivatives. Today, gold went up $90.40, the biggest one-day gain since Rumpelstiltzkin stopped magically spinning it out of straw. There just might be a connection.

There are a couple of interesting details about AIG's deal. First, the government got 80% of its assets in return for a 12.5% (8.5+LIBOR) loan. 80 percent. If you're an AIG shareholder your shares were just diluted by 80 percent in one night. But, it's not a bail-out, no siree...it's more of a huge doomed fire-sale with overwhelmingly tempting opportunities for fraud. How?

Before the "how," the Feds are a little short of the $85 bill promised, so Treasury announced it would auction new debt to finance the AIG rescue plan, no doubt pointing to the great yield they're getting. (CBS News) Financial systems are interconnected, of course, with the vital organs of heart, lung, brain, liver, kidney represented by New York, London, Hong Kong, Paris, Berlin. When those stop functioning normally, lesser organs and extremities fail first:

“Russia halted stock trading for a second day, poured $44 billion into its three largest banks and relaxed restrictions on lenders to stem the worst financial crisis since the nation defaulted a decade ago.” (Bloomberg)

But any one major organ failure can take the whole body down, too. Today's good news was that the two remaining investment banks, Morgan Stanley and Goldman Sachs only went down by 44% and 25%. The good news is that they'll trade tomorrow; not so the oldest money-market fund in existence, which broke the buck (devalued under $1) and halted trading after experiencing a run on the bank. At last Friday's close, the Primary Fund had $62.6 billion in it, and depositors withdrew $40 billion between then and 3PM Teusday, when it froze redemptions for 7 days, citing the Lehman bankruptcy.

To judge by the sector-focused failures in the heart of the system, and by their accelerating intensity, we've got a system-wide emergency going down, one which is probably about to turn deflationary. Deflation, a quaint term, is now known by its new-fangled term as "demand destruction." Given that Lehman alone lavished $5.7 billion in bonuses onto its favored employees last year, most of whom live in New York City, quite a few yachts and vacation homes are poised to hit the market.

But back to the AIG fraud, which by now looks like an order of fries. The $85 billion in loans are supposed to finance an "orderly liquidation" of AIG assets. Translation: AIG is toast, they will sell off the good stuff first at low prices, stuck with crappy non-performing derivatives no one wants. As with any yard sale, they'll eventually prop the unwanted items up on the front lawn under a hastily hand-made sign which says, "Free." A likely question: how much of the government loan will be repaid before the default? I'm guessing about $40 billion will ever come back, or a year's worth of debt service at %12.5 plus the sale of a few core businesses. AIG shareholders, screwed. US taxpayers, check. AIG's dream-luck scenario is they unload their toxic subprime portfolio for .25 to the $, which means many newly unemployed homeowners will be trying to stave off agents of foreign banks and Sovereign Wealth Funds from foreclosing on their domiciles.

Don't panic--there's a real upside here. For example, the collapse of the Almighty Dollar means it won't be able to finance the ground wars it has going, much less start WWIII. This too shall pass, and financially speaking, there's a lot of America left to buy. Things will come around, the heart and lungs won't completely fail, they'll just be on life support for awhile, pumped with blood and oxygen from other sources.

Paying off a hefty resuscitation bill won't be fun, but American capitalism will survive in a restrained form, savings rates will return and be invested, and another New Economy will come roaring unreflectively back to start downing $200 martinis. Now that all the pigeons are coming home, I can't help but draw a comparison. The difference between the AIG deal and how the Soviets used to subsidize a system of horribly unprofitable, venially corrupt industry sectors, cement production to name but one example, is this: at least the Soviets got cement.

(Update: there is a great financial industry visualization tool up over at the NYT. It's called 'A Year of Heavy Losses,' and draws the banks to scale. When you roll over each box, you see their market values vs. a year ago, their current status, and the financial sector as a percentage of total Wall Street valuation.)

Like Mama Always Said, "Evil Is As Evil Does"

Syndicated columnist Robert D. Novak, a.k.a. "The Prince of Darkness," was cited by police after performing a hit-and-run on a pedestrian with his black Corvette in downtown Washington, D.C., Wednesday morning. Novak, a press chum of Karl Rove, was a willing pawn in the White House's decision to blow the cover of its most important spymaster in the Mideast, the CIA's anti-WMD operative Valerie Plame. (I suppose executive privilege covers treason, too.) Novak claims he didn't notice a man splayed across his windshield after hitting him in the crosswalk. Police let him go with a $65 ticket. He would have gotten away scot free but for a bicyclist who chased him down and physically blocked his car:

Politico reporter Jonathon Martin saw Novak in the front of a police car with a citation in his hand; a WJLA-TV crew and reporter saw Novak as well. The pedestrian, a 66-year-old male, was hospitalized at George Washington University Hospital with minor injuries according to DC Fire and EMS. Novak was later released by police and drove away from the scene.

“I didn’t know I hit him. I feel terrible,” a shaken Novak told reporters from Politico and WJLA as he was returning to his car. "He's not dead, that's the main thing." Novak said he was a block away from 18th and K St. NW, where the accident happened, when a bicyclist stopped him and said, "You hit someone." He said he was cited for failing to yield the right of way.

The bicyclist was David Bono, a partner at Harkins Cunningham, who was on his usual bike commute to work at 1700 K St. NW when he saw the accident happen.

As he traveled east on K. Street, crossing 18th, Bono said a "black Corvette convertible with top closed plowed into the guy. The guy is sort of splayed onto the windshield.”

Bono said the pedestrian, who was crossing the street on a "Walk" signal and was in the crosswalk, rolled off the windshield and then Novak made a right into the service lane of K Street. “The car is speeding away. What’s going through my mind is, you just can’t hit a pedestrian and drive away,” Bono said.

He chased Novak half a block down K St., finally caught up with him and then put his bike in front of the car to block him and called 911. Traffic immediately backed up, horns blared, and commuters finally went into reverse to allow Novak to pull over.

Bono said that throughout, Novak "keeps trying to get away. He keeps trying to go.” He said he vaguely recognized the longtime political reporter and columnist as a Washington celebrity but could not precisely place him.

Novak, 77, has earned a reputation around the capital as an aggressive driver, easily identified in his convertible sports car.

In 2001, he cursed at a pedestrian on the corner of Pennsylvania Avenue and 13th streets Northwest for allegedly jaywalking.

“’Learn to read the signs, [bodily orifice]!’ Novak snapped before speeding away,” according to an item in The Washington Post’s Reliable Source column.

Novak explained to the paper: "He was crossing on the red light. I really hate jaywalkers. I despise them. Since I don't run the country, all I can do is yell at 'em. The other option is to run 'em over, but as a compassionate conservative, I would never do that."

Have We Met The Enemy, Pt. XIX: Wal-Mart

From Mother Jones:

Just when you think that Wal-Mart had already exhausted every last
possible strategy for screwing over its employees, here comes this
story in the Wall Street Journal. Deborah Shank, a Wal-Mart employee gets
into an accident with a semi and ends up permanently brain-damaged a
few years back. Her Wal-Mart health insurance paid her medical bills, but
she also sued the trucking company for damages. She wins $700,000,
which after legal fees and expenses, nets her about $400,000, which was
put in a trust to pay the nursing home she now lives in.

But Wal-Mart gets wind of the settlement and turns around and sues
Shank for $470,000, the money its insurance company paid for her care
from the accident. Now, the woman is reliant on Medicaid and Social
Security and Wal-Mart apparently got a much needed windfall.

Wal-Mart isn't alone in such behavior. Insurance companies seizing
lawsuit winnings from catastrophically injured Americans is a common
practice that gives lie to the notion that anyone gets rich off a
personal injury lawsuit these days, as insurance companies often get first
dibs on any judgment or settlement in such cases. But Wal-Mart's cruelty,
as always, is extreme in this case. Not only is Shank profoundly
disabled, but while her family was fighting off the company in court, her
son was killed while fighting the war in Iraq. Not even bad PR like this,
apparently, can eke out a drop of compassion from the retail giant.

Not sure if the story is apocryphal or not, or what the suit's outcome was. Will check further before my HQ is overrun and I'm forced to call artillery down onto my own position. (Research credit to Lord Wife.)

Update: the above story is legit, Wal-Mart won its suit, and the practice of health care cost "recovery" by corporations is becoming common policy, written into the fine print of health care plans. From the Wall Street Journal health blog:

A collision with a truck left Deborah Shank brain-damaged and in a wheelchair. A settlement awarded her $700,000 but what’s left of that money — after legal fees — is slated to go to Wal-Mart Stores Inc., her former employer, WSJ’s Vanessa Fuhrmans reports in a Page One story.

Wal-Mart’s health plan covered Shank’s medical costs, which were more than $460,000. Later Wal-Mart won a lawsuit against Shank seeking $469,215 in medical costs, legal fees and interest for the cost of suing.

The move by Wal-Mart is one that’s becoming increasingly popular by employers, insurers and union-administered who are struggling to deal with rising health costs. A provision, commonly found in health plans, allows the employer to recoup settlement money that it paid out in medical costs.

The argument that Wal-Mart and others makes is that Shank shouldn’t be paid for the same medical care twice. (In a similar dispute, a Supreme Court ruling sided with a health plan.) However, Shank’s lawyer argues that she could use the settlement money for future care and she wasn’t fully compensated for her injuries, a common claim in large settlements.

Companies are even starting to go after smaller claims.

A cottage industry of auditing firms helps recoup payments and they estimate that between 1% and 3% of health-care spending is potentially recoverable. Hospital-chain HCA says it has seen recouped claims rise to $1.8 million in 2006 from just under $800,000 in 2000 after hiring one such firm, Benefit Recovery Inc.

“In the past, employers used to think of this as an afterthought,” says Tom Lawrence, Benefit Recovery. But now they’re apparently banking on it as a revenue stream.

How Corporations See Blogs

"They destroy brands and wreck lives! Is there any way to fight back?"

Nice to see that the knights who fight for the Divine Right of Capital are offended by blogs. ("It's all just so unfair!") China just shut off all RSS (Real Simple Syndication) feeds going into it, and now sits behind a great Information Wall. That probably won't happen here, but likely there will be regulations, and punishments, making it difficult to denigrate "brands."

Smart corporations reach out to blogs, and even have begun to hire bloggers and podcasters. Microsoft's XBox group recently hired Nelson Rodriguez, who ran "Achievement Junkie," one of the most popular podcasts about XBox games. It also hired Rob Greenlee of WebTalk Radio to head up its ZuneCast project, a destination, directory, and discovery tool for tens of thousands of podcasts.

Global Equity Markets Panicked, Fed Signals US Bail-Out

The stock chart above is clear evidence that The US Federal Reserve Bank yesterday told the managers of its largest financial institutions, presumably over lunch, that they would step in to halt the market's slide by:

1) dropping margin requirements on options, futures, and index funds from 50% to 15%;
2) directly buying highly leveraged options, futures, and index funds to force the purchase of their underlying stocks;
3) dropping interest rates.

This is exactly what the managers wanted to hear, and it looks like they spread the word. Benchmark stock averages like the Dow Jones came back like Lazarus from the tomb to make back a 340 point deficit in little more than the final hour of trading. This is the stuff of market legend, and a mathematical event of a lifetime. A two-day chart of the more broad-based Standard and Poor's average of 500 stocks is attached above, which records the slide and places the late rally in perspective. This is the picture of a market in panic, with bankers finally pulling out every stop they can think of to get it to level out. Which it did. The last half hour of trading was the steepest rise I ever remember seeing. The line on the chart is nearly vertical.

Yes, I am assuming the Fed is engineering a bail-out based on limited data. Yet I also know the assumption is correct because the amount of confirming information is so voluminous. The far more pressing question are, for which I don't have any confident assumptions and little confirming information: will the Fed's intervention package work? And for how long?

The answer to those questions will have a huge impact on almost every single person reading this post. Anyone who has a pension, who receives a Social Security payment, who owns stock or bonds, who is indebted, who holds the debts of others, who pays taxes, who has a mortgage, who has a job. Who has parents or children, who eats and breathes. If your house is paid off and you have fifty or more pounds of precious metals stashed away, or if conversely you are homeless and are reading this over a public library's internet connection, don't sweat it. It's only central banking, publicly-traded capitalism, and post-Keynesian economic theory on trial.

George Soros likens the modern global financial system to blood flowing through a body's organs. New York is the heart, London is the lungs, Tokyo is the liver, Hong Kong the pancreas, and so on. In his mental model, places like Thailand and South Korea are somewhat less essential extremities, and when the vital central organs are threatened, the extremities, much like in a human body, tend to be starved of blood first. The Fed's move yesterday didn't immediately get blood going back to the extremities. I'm checking weak pulses right now.

Asia continued its white-knuckled blood loss today. I forget which organ South Korea might be, but yesterday it fell by almost 7%, its biggest one-day decline ever. It dropped by a further 3% today. Asia's largest market, Tokyo, dropped by 5.4%. Kuala Lumpur was down 5%, Mumbai down 2.3%, Shanghai down 2.28%, Manila down 2%. Thailand, which took steps to become more independent of Western monetary policy, only dropped half a percentage point.

European markets just turned upwards. As I write this, London suddenly turned up from down 1% to up 3.3%. France and Germany are following suit. And my assumptions about the Fed dropping interest rates were confirmed in real time. The Yahoo headline reads, "Fed Turns Around Stock Markets."

Honestly, I hope it's true. God help me, but I hope the party doesn't end with a bad bang. Still, there are consequences of trading one bubble for another. In the last week, well over a trillion dollars of new credit was injected into the financial system, that is to say money was created electronically and given to banks, in many instances to buy securities no one else wanted and to redeem debts. Normally, this would be called a "massive bail-out," yet that term is deemed too harsh in these polite times to apply.

The immediate consequences of bailing out bad decisions by bankers and lowering interest rates will be a quickening of inflation, or dollar devaluation. The longer consequences of juicing the market and dramatically lowering margin requirements will be that next time, the blood may well stop flowing entirely. It is axiomatically believed now in US economic theory that the Great Depression could have been avoided if the Fed had more quickly stepped in to not just drop interest rates, but to provide direct stimulus by printing massive amounts of money and forking it over to buy more stock. That proposition is now being tested, and its outcome will be an authoritative lesson referred to through the unfolding century. The lesson, as far as I can see, will be that sticking already over-heated asset markets into the microwave is a truly bad idea.

(Update: The Dow opened 125 points up off the bell. Love that juice! Now it's up 269 points. Now 287, all in the first 4 minutes. Pass the jug, baby. Pass the jug.)

Thanks For The Melamine!

"May you live in interesting times." My handler taught me the Chinese for that in the mountains somewhere north of Shinhua. Instead, maybe I should've asked the Chinese phrase for, "Where is the nearest dialysis machine?"

Anyhow, melamine certainly is interesting. And it's coming to a meal near you. One your pets have eaten. One we've most likely ingested in any number of foods in the past 6-7 months. We and our pets live in the same houses and are served by the same loving, caring Global Corporate Entities.

Melamine's chemical formula is C3H6N6. Similar to cyanamide, basically it's a complex trimer cyanide molecule with three amino acids hanging on it. It is formed in the bodies of mammals after they have consumed and metabolized cryomazine, a pesticide. Plants can also metabolize cryomazine into melamine, and its industrial applications include polymer formation processes and adding it to resins as a fire retardant. So it's really not too surprising why Lord Cat was barfing up blood along with his Eukanuba, flirting with kidney failure, and generally looking like he was about to die. This last point about the fire retardant may not explain why so many people had difficulty incinerating their pets after their food killed them.

I'm supposed to know a thing or two about capitalism, supply chains, queing theory, profit, shareholder adoration, the use of yarrow sticks in corporate boardrooms, how to read the entrails of spread-sheets, and generally how to worship the Horned God of Optimization and the Fertility Goddess of Capacity Utilization. Many people who rely on the outmoded quaintnesses of common sense may ask me, "Why would North American pet food companies buy wheat gluten from China?" Simple: because it is cheaper to ship wheat grown in North American fields to China, have a NORINCO corporation process it into flour or wheat gluten, put it into bags, and ship it back across the ocean to pet food processing plants. Having melamine in the wheat actually helped it win contracts, because the extra amino acids made it look in tests not like a deadly compound, but like it was more protein-rich. A better product at a lower price. And the compound is very common in the Chinese food-producing system.

So, what has the FDA done? Well, 50,000 swine have been quarantined in Illinois. I haven't been eating much pork for awhile anyway. Also, the Chinese wheat gluten was actually simply wheat flour adulterated with melamine, not wheat gluten. It was sold to many fish and animal farms in the US and Canada. The FDA can't say to which farms owned by which corporations in which states. That's ok, though. I haven't been eating much farmed Salmon lately. Or bread with flour in it. Or waffles. Or fortune cookies. Plus, the FDA thinks melamine is not a "residue of concern" to begin with. Phew! Glad we got that concern over with. I'll tell Lord Cat to either keep chowing his pet food down or he'd better start catching some birds on the back lawn.

Finally, we've got nothing at all to worry about. Even if we had, the only thing that matters is that Big Business is able to make money, because that's what makes the world go 'round and engenders the competition which makes everything wonderful. The dance around the corporate May Pole is right around the corner. Do you know who the sacrifice is yet?

Wolfiegate

Here's Pat Lang's take on the Wolfowitz woes (starting out with a Financial Times quote, Pat's commentary is below the break):

"It is important to understand what is not at issue here. It is not Mr Wolfowitz’s unpopularity, even though his role as an architect of the Iraq war made him disliked from the start. It is not failures of management, even though his reliance on a group of outside appointees made him mistrusted by many inside and outside the Bank. It is not disagreements over development doctrine, where some convergence of views has occurred. It is not a romantic relationship with a subordinate, itself hardly a rarity in today’s world.

The issue is whether the failures of corporate governance are serious enough to damage the Bank’s moral authority. In a world where curtailing corruption and improving governance have become central to the practice of development, the world’s premier development institution must, like Caesar’s wife, stand above suspicion." FT

---------------------------------------------------------

IMO, he is a war criminal. Men were hanged after WW2 for "planning and waging aggressive war." What did he (PW) do? IMO, he was at the heart of the conspiracy to persuade GWB to invade Iraq (for whatever set of reasons that you prefer), depose its ruler, destroy its government and substitute another more to our liking. Is this not "planning and waging aggressive war?"

And now this over educated and deceptively mild mannered nitwit has literally and figuratively screwed himself out of a job. His penchant for such behavior has long been known among the cognoscenti in Washington. Under most circumstances I would not take notice of such personal details in his mis-spent life, but in this case I can hardly wait for the denouement.

Of course, the MSM is much more interested in the moral drama of Imusgate, but, what can one say about that? pl

http://www.ft.com/cms/s/18b3bad0-e914-11db-a162-000b5df10621.html

Finally Someone Does It!

Black Entertainment Television did a riff on BushCo, in which Dubya and Dick "Freeway" Cheney go to take down D.C. A "thug" who used to run with Dubya when he had a narcotics problem relates that "He would watch the movie New Jack City about 15, 20 times a day, and he would often look at the White House and say, I can make this just like the Carter Apartments." (The Gangsta crack production headquarters in the movie.) Word is the execs at BET took some major heat over airing this harmless fun.

True to the spoof, Cheney is taking the mobster's way out again, announcing two hours before the Libby verdict came back that he was suffering from Deep Vein Thrombosis in his left leg. Just as he has for about the last thirty years.

Get ready to hear this phrase uttered by Cheney's lawyer in a civil court: "Your honor, my client is suffering from a life-threatening condition which does not allow him to attend these proceedings." Chicken-hawk candy-ass stiff.

Re-post From Chris Floyd's "Empire Burlesque"

{This is encouraging; it indicates spines are re-growing at the margins of Congress, they've taken up whips and chairs and are starting to back the bureau-whores into a corner. I wanted to do a post on this, but Chris already did a better job than I could've, and so here you go.}

Rising From Their Knees: New Bill Strikes Blow at Oil Barons

Friday, 19 January 2007

House Votes to Rescind Oil Drillers’ Tax Breaks (NYT) Excerpts: House Democrats easily passed legislation on Thursday that would rescind $14 billion in tax breaks and subsidies for oil drillers and reserve the money to develop alternative energy projects and conservation technologies. The measure passed 264 to 163, with many Republicans joining a bloc of Democrats...The bill will rescind $7.6 billion in tax breaks for oil drillers that Congress passed in 2004 and 2005 and will add $6.3 billion in royalties from companies that pump oil and gas in publicly owned waters of the Gulf of Mexico and off Alaska... “Big Oil is hitting the taxpayer not once, not twice, but three times,” Representative Nick J. Rahall II, Democrat of West Virginia and chairman of the House Natural Resources Committee, said. “They are hitting them at the pump. They are hitting them at the Treasury through the tax code. And they are hitting them with royalty holidays.” This is good news, although it faces a certain Bush veto -- if, that is, it gets by the Senate in any strong form, as it's easier for Big Oil to pick off a few "moderates" in the smaller body than a passel of pols in the House. Still, the real importance of such bills lies in the fact that they force Republicans and "moderate" Democrats to take a public stand for their corporate paymasters. It smokes them out and puts them on record as voting for big tax breaks for oil companies who are now making not just record profits but world-historical rakeoffs unseen since the loot of the Caesars. We fight wars for these people -- we die by the thousands and we kill by the hundreds of thousands; they can at least pay a little more chump change (for that's all the amounts involved are to the oil barons) for the blood and treasure we've given them. With the thin Democratic majorities in both houses -- majorities that are riddled with spineless timeservers, bagmen and Bush-coddlers -- it is not likely that any strong legislation proposed by Democrats to rectify some of the monstrous imbalances and perversities of the Bush years will pass. Very few, if any, such bills will command enough support to be veto-proof. But again, the Democrats should be relentless in sending this kind of legislation (and even stronger bills) to the White House, over and over and over. Force Bush to veto every week some bill that would benefit the vast majority of Americans. Force him to veto a bill that would strip away some of the overwhelming bias toward the richest and most powerful that now distorts and corrupts the Republic. Make sure that all those -- Republican or Democrat -- who stand with Bush in perpetuating this immoral bias are put on the record as doing so. And then hang this record around their necks at election time. Enough already of this bullshit bowing and scraping to the rich. Let's take the country back.