August 24, 2011 archive

The Secret $1.2 Trillion

Yup, this is the Bloomberg piece everyone is talking about.

Wall Street Aristocracy Got $1.2 Trillion in Fed’s Secret Loans

By Bradley Keoun and Phil Kuntz, Bloomberg News

Aug 22, 2011 8:19 AM ET

Fed Chairman Ben S. Bernanke’s unprecedented effort to keep the economy from plunging into depression included lending banks and other companies as much as $1.2 trillion of public money, about the same amount U.S. homeowners currently owe on 6.5 million delinquent and foreclosed mortgages. The largest borrower, Morgan Stanley (MS), got as much as $107.3 billion, while Citigroup took $99.5 billion and Bank of America $91.4 billion, according to a Bloomberg News compilation of data obtained through Freedom of Information Act requests, months of litigation and an act of Congress.

“These are all whopping numbers,” said Robert Litan, a former Justice Department official who in the 1990s served on a commission probing the causes of the savings and loan crisis. “You’re talking about the aristocracy of American finance going down the tubes without the federal money.”

The $1.2 trillion peak on Dec. 5, 2008 — the combined outstanding balance under the seven programs tallied by Bloomberg — was almost three times the size of the U.S. federal budget deficit that year and more than the total earnings of all federally insured banks in the U.S. for the decade through 2010, according to data compiled by Bloomberg.

The balance was more than 25 times the Fed’s pre-crisis lending peak of $46 billion on Sept. 12, 2001, the day after terrorists attacked the World Trade Center in New York and the Pentagon. Denominated in $1 bills, the $1.2 trillion would fill 539 Olympic-size swimming pools.

Two weeks after Lehman’s bankruptcy in September 2008, Morgan Stanley countered concerns that it might be next to go by announcing it had “strong capital and liquidity positions.” The statement, in a Sept. 29, 2008, press release about a $9 billion investment from Tokyo-based Mitsubishi UFJ Financial Group Inc., said nothing about Morgan Stanley’s Fed loans.

That was the same day as the firm’s $107.3 billion peak in borrowing from the central bank, which was the source of almost all of Morgan Stanley’s available cash, according to the lending data and documents released more than two years later by the Financial Crisis Inquiry Commission. The amount was almost three times the company’s total profits over the past decade, data compiled by Bloomberg show.

JPMorgan Chase & Co. (JPM), the New York-based lender that touted its “fortress balance sheet” at least 16 times in press releases and conference calls from October 2007 through February 2010, took as much as $48 billion in February 2009 from TAF. The facility, set up in December 2007, was a temporary alternative to the discount window, the central bank’s 97-year-old primary lending program to help banks in a cash squeeze.

Goldman Sachs Group Inc. (GS), which in 2007 was the most profitable securities firm in Wall Street history, borrowed $69 billion from the Fed on Dec. 31, 2008. Among the programs New York-based Goldman Sachs tapped after the Lehman bankruptcy was the Primary Dealer Credit Facility, or PDCF, designed to lend money to brokerage firms ineligible for the Fed’s bank-lending programs.

The size of bank borrowings “certainly shows the Fed bailout was in many ways much larger than TARP,” Rogoff said.

TARP is the Treasury Department’s Troubled Asset Relief Program, a $700 billion bank-bailout fund that provided capital injections of $45 billion each to Citigroup and Bank of America, and $10 billion to Morgan Stanley.

to the last breath… in memoriam masslass


Wending our way round the soft bends of the Jura mountains in eastern France, we find an even softer landscape there of sloping green fields, pine forests in hues of auburn and umber, and smoothed sedimentary stone struck in blue tones.

It is the stone, this almost 200 million year old Jurassic limestone, I find most intriguing. Rock of ages? I suppose that is so.


Prehistoric Porky

Boeing Boeing

Crossposted from The Stars Hollow Gazette

Ah yes, exceptional Americanism or American exceptionalism.

You know, whatever.

The 787 project has been delayed for over 4 years now, principally due to the fact that Boeing outsourced all the parts to nickle and dime their highly skilled and unionized labor force to death.

Unsurprisingly when they got them back for assembly they didn’t fit together.

Now this is a problem that was solved by one of Connecticut’s favorite sons, Eli Whitney, in 1798 because he needed some money after making institutionalized slavery profitable (we are proud of our Benedict Arnolds here in the Nutmeg State) but apparently ideas like interchangeability take a long, long time to get over the the Oregon trail to Washington.

And so as a consequence there are airports full of uncompleted 787s in various stages of decrepitude, covered in plastic tarps and weighed down with high tech cinder blocks so they don’t blow away.

Boeing’s 787 Glut Casts $16.2 Billion Cloud Over FAA Approval

By Susanna Ray, Bloomberg News

Aug 23, 2011 12:01 AM ET

Boeing amassed $16.2 billion worth of inventory related to the 787 through June 30, with so many almost-finished jets the company ran out of room to park them. There are 35 scattered outside the Everett, Washington, plant, in leased space across an adjacent airfield and in a facility in Texas. Many lack seats and lavatories and have black plastic over the windows and concrete blocks hanging from the wings to keep them from tipping over before engines are installed.

The mothballed jets represent almost $6 a share in inventory growth since 2009. Counting four planes in the factory and six test jets, Boeing has more 787s on hand than Richard Branson’s Virgin Atlantic Airways has planes in service.

Credit-default swaps tied to Boeing bonds, which rise as investor confidence falls, closed yesterday at the highest since Dec. 7, 2009, gaining 1.3 basis points to 84.5 basis points, according to data compiled by CMA. A basis point is $1,000 a year on a contract protecting $10 million of debt.

Boeing can “eat some of the dirt of the inventory cost” by spreading it out over the initial block of 787s, using so- called program accounting, said Demisch, the consultant. The company plans to reveal the size of that accounting block with its third-quarter earnings in October.

The 45th plane to be built — in the factory now — will probably cost Boeing at least $184 million, Harned estimated after analyzing inventory figures. That would make the average cost over the first 1,000 jets, including a learning curve, at least $116 million per plane, he projects. FAA approval this week after a flight-test program that began in December 2009 would set the stage for delivery of the first 787 to All Nippon Airways Co. next month.

Each plane is in a different state of readiness, since Boeing kept improving processes after the jets began rolling out of the factory in 2009.

They have undergone waves of repairs based on testing discoveries, and numerous jobs remain on “various and sundry components” before they’re ready for delivery, said Scott Fancher, Boeing’s 787 chief.

“Anytime you’re building an airplane out of sequence, the amount of work that’s required probably goes up by a factor of 10, because they have to unbuild all the things you built on top of whatever you have to change, and then build it all back,” said Demisch, the consultant. “It’s better than starting the airplanes from scratch, but it’s cost that will be added to production and make the likelihood of a profit on this program over the next half-dozen years very, very low.”

As much as I hate flying in general, let me just say I can’t wait to strap myself into one of those puppies.

I want to die peacefully in my sleep like my Grandfather the pilot,

not screaming in terror like his passengers.

On This Day In History August 24

Cross posted from The Stars Hollow Gazette

Find the past “On This Day in History” here.

August 24 is the 236th day of the year (237th in leap years) in the Gregorian calendar. There are 129 days remaining until the end of the year.

On this day in 79 A.D., Mount Vesuvius erupted burying the cities of Pompeii and Herculaneum in nearly thirty feet of ash and pumice. The toxic gases killed at least 2200 people who remained in Pompeii after the evacuation.

After centuries of dormancy, Mount Vesuvius erupts in southern Italy, devastating the prosperous Roman cities of Pompeii and Herculaneum and killing thousands. The cities, buried under a thick layer of volcanic material and mud, were never rebuilt and largely forgotten in the course of history. In the 18th century, Pompeii and Herculaneum were rediscovered and excavated, providing an unprecedented archaeological record of the everyday life of an ancient civilization, startlingly preserved in sudden death.

At noon on August 24, 79 A.D., this pleasure and prosperity came to an end when the peak of Mount Vesuvius exploded, propelling a 10-mile mushroom cloud of ash and pumice into the stratosphere. For the next 12 hours, volcanic ash and a hail of pumice stones up to 3 inches in diameter showered Pompeii, forcing the city’s occupants to flee in terror. Some 2,000 people stayed in Pompeii, holed up in cellars or stone structures, hoping to wait out the eruption.

A westerly wind protected Herculaneum from the initial stage of the eruption, but then a giant cloud of hot ash and gas surged down the western flank of Vesuvius, engulfing the city and burning or asphyxiating all who remained. This lethal cloud was followed by a flood of volcanic mud and rock, burying the city.

The people who remained in Pompeii were killed on the morning of August 25 when a cloud of toxic gas poured into the city, suffocating all that remained. A flow of rock and ash followed, collapsing roofs and walls and burying the dead.

Plaster Citizens of Pompeii

Those that did not flee the city of Pompeii in August of 79 AD were doomed. Buried for 1700 years under 30 feet of mud and ash and reduced by the centuries to skeletons, they remained entombed until excavations in the early 1800s.

As excavators continued to uncovered human remains, they noticed that the skeletons were surrounded by voids in the compacted ash. By carefully pouring plaster of Paris into the spaces, the final poses, clothing, and faces of the last residents of Pompeii came to life.

n the only known eye witness account to the eruption, Pliny the Younger reported on his uncle’s ill-fated foray into the thick of the ash from Misenum, on the north end of the bay:

“. . .the buildings were now shaking with violent shocks, and seemed to be swaying to and fro as if they were torn from their foundations. Outside, on the other hand, there was the danger of failing pumice stones, even though these were light and porous; however, after comparing the risks they chose the latter. In my uncle’s case one reason outweighed the other, but for the others it was a choice of fears. As a protection against falling objects they put pillows on their heads tied down with cloths. ”

And then:

“You could hear the shrieks of women, the wailing of infants, and the shouting of men; some were calling their parents, others their children or their wives, trying to recognize them by their voices. People bewailed their own fate or that of their relatives, and there were some who prayed for death in their terror of dying. Many besought the aid of the gods, but still more imagined there were no gods left, and that the universe was plunged into eternal darkness for evermore.”


Muse in the Morning

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Muse in the Morning

Time for a break from poetry…in order to create some art.

Learn to… be what you are, and learn to resign with a good grace all that you are not.

–Henri Frederic Amiel

Art Glass 38

Hurricane Irene on track for NYC. Closing update.

I haven’t attempted to meddle with it at all yet, since it managed to avoid hitting Hispanola directly. Perhaps with someone else’s help? I’ve been hoping Irene would just curve around to the northeast, away from the coast. That isn’t looking likely now.  It’s projected to hit New York as a Category 3. Not good. There’s an excellent diary about it at GOS, in great detail. So. I guess it’s time to put up or shut up, eh? It usually takes 4 to 6 hours for my “meddling” to bear any fruit. I’m going to meditate now. If any shamans are around, this would be a good time to pitch in. It’s 2:37 a.m. PST. Wish me luck.

Sunday, 1:15 a.m.

I’m done. Given the location of Irene now, over such heavily populated areas, anything I might be able to do to, or with, the storm could easily backfire. For example, stalling it, even inadvertently, could be disastrous. Which is not a result I wish to risk.

At this point, I don’t expect anyone to be convinced I affected the storm. I’M not even 100% convinced.

Thank you all for bearing with me. If you have any suggestions–such as you’d rather I didn’t post any more hurricane diaries because it’s just too far out, or if you have ideas for improving the diaries–I’m listening.

For comparison purposes, the corresponding times are bolded:

Last Wed., 5:00 pm, NOAA:


INIT  24/2100Z 23.1N  74.7W  105 KT 120 MPH

12H  25/0600Z 24.3N  75.8W  110 KT 125 MPH

24H  25/1800Z 26.1N  76.8W  115 KT 135 MPH

36H  26/0600Z 28.2N  77.3W  115 KT 135 MPH

48H  26/1800Z 30.1N  77.3W  110 KT 125 MPH

72H  27/1800Z 34.3N  75.8W  100 KT 115 MPH

96H  28/1800Z 39.5N  73.0W   85 KT 100 MPH

120H  29/1800Z 47.0N  69.0W   55 KT  65 MPH…POST-TROP/EXTRATROP

Yesterday, Sat., 5:00 pm, NOAA:


INIT  21/2100Z 17.7N  64.4W   45 KT  50 MPH

12H  22/0600Z 18.2N  66.6W   60 KT  70 MPH…INLAND

24H  22/1800Z 18.9N  69.3W   65 KT  75 MPH…INLAND

36H  23/0600Z 19.6N  71.5W   50 KT  60 MPH…INLAND

48H  23/1800Z 20.3N  73.5W   50 KT  60 MPH…OVER WATER

72H  24/1800Z 22.7N  76.7W   60 KT  70 MPH

96H  25/1800Z 25.5N  79.5W   75 KT  85 MPH

120H  26/1800Z 28.5N  81.5W   50 KT  60 MPH…INLAND


Late Night Karaoke

On The Wrong Side Of The Rule Of Law

Cross posted from The Stars Hollow Gazette

Once again the President who campaign on the restoration of the rule of law falls on the wrong side. The New York Times writer, Gretchen Morgensen, revealed in an article that the Obama Justice Department and Housing and Urban Development were putting pressure on New York State Attorney General Eric Schneiderman to drop his investigation into the banking industries foreclosure fraud that led to the economic housing crisis:

Eric T. Schneiderman, the attorney general of New York, has come under increasing pressure from the Obama administration to drop his opposition to a wide-ranging state settlement with banks over dubious foreclosure practices, according to people briefed on discussions about the deal.

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks.

Mr. Schneiderman and top prosecutors in some other states have objected to the proposed settlement with major banks, saying it would restrict their ability to investigate and prosecute wrongdoing in a variety of areas, including the bundling of loans in mortgage securities.

But Mr. Donovan and others in the administration have been contacting not only Mr. Schneiderman but his allies, including consumer groups and advocates for borrowers, seeking help to secure the attorney general’s participation in the deal, these people said. One recipient described the calls from Mr. Donovan, but asked not to be identified for fear of retaliation.

In other words, this is going to take too long and we have an election to finance. Please, do not piss off the banksters, they’re the only ones with money.

Obama administration doesn’t want to help the homeowners or prosecute those who committed this fraud, as David Dayen so bluntly states, they want to “white wash the fraud”:

The White House must think that if they can get Schneiderman, the AG with the most leverage over the talks by virtue of New York’s important position with respect to mortgage securitization, to bend, they can roll the rest as well. The WSJ article says that federal officials have a Labor Day target date for a settlement, and that they’ll continue “outreach” to all AGs. I bet they will.

The banks want at least 40 states signing off on this settlement before they agree to it. I can think of at least 10 AGs right now who wouldn’t agree to the broadest terms. Democrats Madigan, Schneiderman, Delaware’s Beau Biden (the VP’s son, who has joined Schneiderman on his intervention into the Bank of America settlement with investors over mortgage backed securities), Massachusetts’ Martha Coakley and Nevada’s Catherine Cortez Masto are on the record against a broad liability release in one way or another, and others like Washington’s Rob McKenna (R), Colorado’s John Suthers (R), California’s Kamala Harris, and even Utah’s Mark Shurtleff (R) and Michigan’s Bill Schuette (R) have active investigations or lawsuits on this issue. That’s an incomplete list off the top of my head. And if you add Republican anti-government types who don’t want to see any monetary penalty at all, you might not get to 25 in favor.

Of course this has earned a couple of people the dubious honor of not being named “wankers” but two of the worst people by Dayen and our man of few words, Atrios.

From Dayen the honor goes to Kathryn S. Wylde, board member of the Federal Reserve Bank of New York:

   The lawsuit angered Bank of New York Mellon, and as Mr. Schneiderman was leaving the memorial service last week for Hugh Carey, the former New York governor who died Aug. 7, an attendee said Mr. Schneiderman became embroiled in a contentious conversation with Kathryn S. Wylde, a member of the board of the Federal Reserve Bank of New York who represents the public. Ms. Wylde, who has criticized Mr. Schneiderman for bringing the lawsuit, is also chief executive of the Partnership for New York City. The New York Fed has supported the proposed $8.5 billion settlement {…}

   Characterizing her conversation with Mr. Schneiderman that day as “not unpleasant,” Ms. Wylde said in an interview on Thursday that she had told the attorney general “it is of concern to the industry that instead of trying to facilitate resolving these issues, you seem to be throwing a wrench into it. Wall Street is our Main Street – love ’em or hate ’em. They are important and we have to make sure we are doing everything we can to support them unless they are doing something indefensible.”

And from Atrios, his honor goes to HUD Secretary Shaun Donovan for this gem:

In recent weeks, Shaun Donovan, the secretary of Housing and Urban Development, and high-level Justice Department officials have been waging an intensifying campaign to try to persuade the attorney general to support the settlement, said the people briefed on the talks. … In an interview on Friday, Mr. Donovan defended his discussions with the attorney general, saying they were motivated by a desire to speed up help for troubled homeowners. But he said he had not spoken to bank officials or their representatives about trying to persuade Mr. Schneiderman to get on board with the deal.

Remember HAMP? Right. They just want to help.

Hinky Tubes

Things have been slow bordering on non functional all afternoon.  I don’t blame it in the quake though there may be some relation.

I’ll try to catch up later on.

Hinky TubesThings have been slow bordering on non functional all afternoon. I don’t blame it in th

Things have been slow bordering on non functional all afternoon.  I don’t blame it in the quake though there may be some relation.

I’ll try to catch up later on.

Countdown with Keith Olbermann: Worst Persons 8.22.11

Find out why Congressman Lamar Smith of Texas is WORSE, Tony Perkins of the Family Research Council is WORSER, and Congressman Eric Cantor of Virginia, is the WORST PERSON IN THE WORLD for August 22, 2011.