Making the rounds of the blogosphere today, this creepy video, "Sing For Change Obama:"



As I said before, "Oh Fearless Leader! Guide us on the path of hope and change to a glorious future as first among equals!"

Is there a liquidity crisis? Everyone says there is one, so it must be so, right?

Not so fast. At least as of September 17, banks were still lending:

To consumers:



And to businesses:

(From Carpe Diem.)

Apparently, what they are not lending to is each other, but, since the Fed is throwing money at them as fast as they can, is that really a problem?

And, more importantly, is it a problem worth the kind of bail out that has been proposed. Remember that there should be these down-sides to the current proposal:

1) By subsidizing risk, you get more risk. Why wouldn't someone give a big loan to someone on welfare or an illegal immigrant? (WaMu was famous for recruiting illegal aliens for their loans--a little bit of federal law enforcement and a slowing economy, the aliens decide to go home--leaving WaMu high and dry and a subsidiary of JP Morgan.) If the loan pays, they get the money. If the loan doesn't pay, they still get the money--from the taxpayers. It's a win/win for them, and a lose/lose for the rest of us.

2) By preventing bankrupt banks from going bankrupt, you keep stupid bankers in office and diminish the standing of the well-run companies. Why run a company well, if it doesn't matter in the end?

3) By not removing the fundamental problem of Fannie and Freddie's pushing hard for highly risky loans, you do nothing to stop the same loans going forward. The cycle is poised to begin right up again.

As a side note, I don't see anyone worried about inflation. Econ textbooks would tell you that when the Fed throws money into the economy, you get inflation. Will that happen? and if not, why not?

This is an ad running here in Massachusetts:



Pretty lame. In the 24 years since John Kerry took office in the Senate, gas has gone up from $1 to $4/gallon. That's 6% per year. Wow.

Republican Jeff Beatty is going to have to do better than that.

Pretty shocking.

I still don't know if I support this monstrosity.

The way I understand it is the main problem is that the Treasury is lending money to banks like crazy. Just throwing money out there.

But, the banks are just holding on to the cash and not loaning it out.

Couldn't there be an easier way to get the money flowing than this? Something that directly addresses that fundamental problem, instead of doing this end-run?

Furthermore, anything which allows either the people who got or the people who gave the bad loans to get out of trouble free--at the expense of more prudential people, who didn't get in over their head--is a long-term awful thing.

Capitalism depends on profits and losses--if you remove the losses, you get more risk, more stupidity, and more trouble down the line.

Perhaps we would be better off with a short-term recession than we would with this long-term precedent.

Powerline has a an interesting layout of what appears to be the final deal on the financial bailout. I still don't like it, but it's better than the proposal of Barney Frank and Chris Dodd.

Appropriately strong words:

What Senator Obama and his helpers are doing is scandalous beyond words, the party that claims to be the party of Thomas Jefferson is abusing the justice system and offices of public trust to silence political criticism with threats of prosecution and criminal punishment.

... I can think of nothing more offensive to Jefferson’s thinking than using the power of the state to deprive Americans of their civil rights. The only conceivable purpose of Messrs. McCulloch, Obama and the others is to frighten people away from expressing themselves, to chill free and open debate..

He's right. Much more here.

Well done video. Watch for the surprise guest at the end.

Found at Gateway Pundit.

Watching O'Reilly just now, he put blame on President Bush for "not warning the public. He didn't go out there and say `don't buy AIG, don't buy Lehman Brothers`." O'Reilly has lost it on this financial mess. Does he really think the President should review the nation's financial markets and then go out and "warn" the people about investments he thinks are bad? The idea is preposterous.

I've seen O'Reilly in this mode before, amid the Enron fiasco. My guess is then, as now, O'Reilly personally lost money and is upset about it. His anger at having lost money in the markets is driving his commentary.

On the other hand, he had Newt Gingrich on. I agree with much of what he said. He says more here. He also agrees with my dad about the mark-to-market rule.

An interesting message from my Dad:

The Sarbanes/Oxley legislation came about as a result of the Enron scandal. According to Sarbanes/Oxley, companies no longer carry their assets on the books on the basis of purchase price less depreciation. Instead they have to continually mark their assets on the basis of what they can be sold for at the time.

Some years ago I was negotiating an insurance program for Republic Airlines (now merged with another airline). In looking at their financial statement, I realized that Braniff Airlines had recently gone broke and had a lot of planes they couldn't sell. If Republic had to mark their assets down to their sale price at that time, they would have had to report that they were bankrupt. At first glance, you might say that they were bankrupt but there was no reason why they had to sell their planes in that down market. If they were going to sell planes, they could do so in a better market or over time in all kinds of markets.

Sarbanes/Oxley has resulted in mortgage guarantee companies having to mark down the mortgage assets at "fire sale" prices. That is ridiculous but it is the law. The organizations lending money to mortgage guarantee companies normally have codicils in the lending contracts that say the borrowers have to come up with additional cash when their net worth falls below a certain level. Just as was the case with Republic Airlines, no mortgage company has to cancel all of their mortgages today in this down market, but that is the requirement of today's accounting principles.

Reversing Sarbanes/Oxley would go a long way toward solving today's crisis because it would more realistically portray the financial status of the mortgage guarantee companies.

[Update²: Student and Car loans????]
[Update: Here it begins. Check the comments though. A lot of folks there apparently agree with me.]

I just heard Barack Obama on NPR saying that as part of the general financial bailout we should have some sort of relief for people who can't pay their mortgages. This distinguishes him from John McCain.

Mark my words. If Obama wins and the Democrats dominate Congress, they will use their newly granted power over Fannie, Freddie and the Financial sector to force an enormous housing giveaway. There is no way the Democrats will demand that people meet their financial obligations. Instead, we will get sob stories about "hurting families." The temptation for the Democrats to buy an entire generation of voters by waiving mortgage obligations will be too much to resist.

People who acted responsibly and didn't buy into the housing speculation bubble will be forced by their own government to help pay the mortgages of those who irresponsibly gambled and lost.

Maybe I'm crazy cynical. I hope I am. But as I said before, I have a bad feeling about this.

Greg Mankiw points out that James Taranto points out this exchange between Paul Krugman, ABC's John Donvan, and a live audience. The topic is healthcare:

Krugman: --and I wanted to ask, actually two questions, to the audience. First, how many Canadians, would Canadians in the room please raise your hands. [One person applauds, laughter]

Donvan: We have about seven hands going up—

Krugman: OK, not as many as I thought. OK, of those of you who are not on the panel who are Canadians, how many of you think you have a terrible health care system. [pause] One, two--

Donvan: We see—almost all of the same hands going up. [laughter]

Krugman: Bad move on my part [applause]. I've got a selected--all right, I won't try it. But I will say, that--

Pretty amusing. Krugman seems to violate the Lawyer's First Rule of Cross Examinations: never ask a question if you are not sure what the answer would be. However, Mr. Krugman probably was sure about what the answer would be. He just got served a dose of cold reality.

So the talk of the nation is the proposed $700 billion bailout of Wall Street. I don't know enough about the specifics to have a strong opinion (does anyone?), but from what I've read I would vote against it. Besides, the idea of giving a handful of bureaucrats the corresponding power makes me very nervous. Newt has some good questions. This is very good too, (hat tip Mankiw). This might also be interesting, from Harvard's president:

I hope that you will join fellow students, faculty, and staff colleagues for a special panel discussion on this Thursday, September 25, entitled "Understanding the Crisis in the Markets: A Panel of Harvard Experts." We are fortunate to have on campus some of the nation's leading scholars and practitioners in finance, policy, law, and other fields relevant to the current situation, and several of them have generously agreed to participate in a special session for the Harvard community to help us understand and interpret recent developments in the U.S. and world markets. The panel will begin at 4:00 p.m. in Sanders Theatre and will include the following faculty members:

Robert Kaplan, Professor of Management Practice
Jay Light, Dwight P. Robinson, Jr. Professor of Business Admin
Gregory Mankiw, Robert M. Beren Professor of Economics
Robert Merton, John and Natty McArthur University Professor
Kenneth Rogoff, Thomas D. Cabot Professor of Public Policy
Elizabeth Warren, Leo Gottlieb Professor of Law

You can watch online, Thursday at 4pm eastern, here.

My wife Jui, baby Shivani and I headed home to Milwaukee last weekend to help my dad celebrate his 80th birthday. AuntieAnn was able to attend as well. A good time was had by all!

A week or two ago, I mentioned tigers and leopards and their fur patterns. Today, this was in the New York Times:

The first and most obvious trick is to fade into the background, as a leopard’s spots enable it to do while it’s patiently waiting to ambush a prey. The spots aren’t shaped like leaves or branches, but they form an overall “micropattern” matching the colors and overall texture of the woodland background.

That trick, though, won’t work for a predator on the move, which is why a tiger doesn’t have spots. It has a “macropattern” of stripes that break up the shape of its body as it’s stalking or running.

“The prey can detect the tiger’s movement,” Dr. Neitz says, “but if the shape isn’t recognized as the outline of a tiger, nothing registers in the higher center of the prey’s brain.”

So there you go. Leopards don't move apparently.

New York Times Editorial:

Meanwhile, the Bush administration keeps raiding factories and farms, terrorizing immigrant families while exposing horrific accounts of workplace abuses. Children toil in slaughterhouses; detainees languish in federal lockups, dying without decent medical care. Day laborers are harassed and robbed of wages. An ineffective border fence is behind schedule and millions over budget. Local enforcers drag citizens and legal residents into their nets, to the cheers of the Minutemen.

Huh? Terrorizing people is bad. But isn't raiding factories to expose horrific abuses, like child labor, good? Who's getting robbed by whom? Laborers by employers? Laborers by George Bush? Who's dying in the lockup? So we should hurry up with that border fence? Citizens are being dragged off in nets? My head hurts...

Bizarre. I just made this post, but it appears dated yesterday!

The Oak Street Cinema, just off the U of MN campus, will shut down in May, eventually to be torn down.

Pretty darn amazing.



On August 1, 2007 an important interstate highway bridge that I drove over daily for years collapsed in Minneapolis.



On November 1, 2007 construction of the replacement bridge began.

At 4AM on September 18, 2008 the new bridge opened to traffic, and Minneapolis has one of its major arteries back.



Just 414 days from collapse to renewed traffic flow. Well done MNDOT!

Steve Says: Yes, I thought the same after seeing a report on the Lehrer News Hour. Very impressive, and under budget! By the way, a researcher I know back in Minnesota had his lab right under that bridge. I remember him complaining long ago about how annoying it was that paint and debris would rain down on his building from the bridge. Fortunately, he and his team weren't hurt in the collapse. I'm not sure what he's done about his lab.

Here, at Fox News, is an interesting review of McCain's and Obama's position on some technology issues. Who wrote this thing? I thought Fox was supposed to be more conservative. All of the background is absurdly loaded:

Broadband Adoption

The U.S. lags behind Canada, South Korea and most of northern Europe in per-capita broadband “penetration,” the number of people who have access to high-speed Internet. Many Democrats have called for better and faster Internet access to make up for this gap...

Many Democrats? Five? Who? Only two Republicans?

Cancer Research

Both McCain and Obama have pledged to increase cancer funding for research and improve patient access to screening and clinical trials. (The National Cancer Institute’s total budget has been reduced under the Bush administration from $4.83 billion in 2005 to $4.75 billion in 2007.)

President Bush has been in office since 2005? No, but we would rather not mention the fact that the NCI budget was $4.1 billion in 2001, and the overall NIH budget has grown as well.

Climate Change

President Bush has called for halting the growth of U.S. greenhouse gas emissions by 2025, a stance that environmental groups consider insufficient...

A stance that level-headed, non-fanatical people find ambitious.

Space Exploration

The Bush administration has long favored manned missions, which are risky, expensive and often scientifically unnecessary, over cheaper and safer robotic missions...

I agree with the bias here. It's bias nonetheless.

Stem-Cell Research

Proponents of embryonic stem cell research believe it holds the key to finding cures for diseases such as Alzheimer’s, Parkinson’s and diabetes. President Bush has opposed federal funding for stem cells extracted from embryos that were created for the purpose of research...

Proponents of armadillo pee feel it holds the key to finding a cure for arthritis. Ok, I admit I'm stretching here.

In any case, much of this science platform is little more than a demand for funding from scientists and engineers. Note that it is never, ever enough. I've seen other queries of the candidate's positions on these and similar issues. The responses from candidates are always the same, an attempt to outbid each other on how much they are going to spend. "I see your $40 billion and raise you $20 billion!" There is never any estimation of what those dollars will bring us, in terms of actual "results," nor an estimation or description of how the money Science is already getting is being spent. Are we getting a good return on our investment?

Generally, I agree with treating funding of science as an investment. But that requires an analysis of science research, not just the problems that are being worked on, but an estimation of the payoff from additional research money. This doesn't preclude spending on a few research "longshots" (see DARPA for an idea of that sort of funding), but generally we should invest our dollars in science as wisely as we invest our dollars in stocks and bonds. I have never heard a government approach to science funding that was more than throwing money at a problem.

Some morons have broken into Sarah Palin's Yahoo email account. They took screen shots of some of the emails and posted them to the notorious /b/ bulletin board. Gawker.com got a copy and has put them up on its web site. Governor Palin's account has since been shut down. Some thoughts:

1) I hope whoever did the hacking is caught and severely punished. I hope they throw the book at them. This is not a harmless prank.

2) Bill O'Reilly was about to pop a blood vessel in his forehead last night, over this issue and the finance meltdown. He wants the Gawker people thrown in jail. His resident internet 'expert' was there to parrot his outrage. The fact that Gawker has probably not violated any laws doesn't seem to matter to Bill or his 'expert'. Bill doesn't like what Gawker has done (who does? it is no doubt slimy) and that's enough for him to demand jail time. It's important to remember that Gawker didn't do any hacking. They only re-posted the pics after the actual hackers posted them to /b/. Newspapers print evidence of criminal activity all the time. Gawker's action is likely covered by the 1st amendment.

3) As of early this morning, the FBI hasn't contacted ctunnel.com. Ctunnel is the web proxy that the hackers used while accessing Palin's account. They hoped this would give them some cover. Why the FBI didn't contact ctunnel within about 10 minutes of the breaking of this news is unfathomable. I know that yesterday, within about 5 minutes of seeing one of those screen shots, I was Googling and looking at information on ctunnel. And I'm no internet cop. Is the FBI really that incompetent? It's pretty disturbing.

"We are aware of the allegations and we are coordinating with Secret Service as far as the allegation that someone has hacked into Governor Palin's personal e-mail account," he said. "We are going to be working a joint investigation with Secret Service on this."

I'm not holding my breath while I wait.



4) Fortunately, again looking at one of those screen shots, I see that Sarah Palin has only 84 or so messages in her inbox. The list of subjects for the messages makes it seem like there is little there to embarrass her. My guess is that she rarely used this account. This shouldn't matter in the prosecution of those hackers though. "Fullest Extent of the Law," says I.

This could have been much worse.

Update: Buzz says this is the guy. Son of a Democratic State congressman from Tennessee. Yeesh.