SocraticGadfly: 6/17/07 - 6/24/07

June 23, 2007

The “Schmuck Talk Express” caves to lobbyists

Gee, shock me that John McCain has feet of political clay. From Huffington Post:
John McCain, who made his name attacking special interests, has more lobbyists working on his staff or as advisers than any of his competitors, Republican or Democrat. …

All told, there are 11 current or former lobbyists working for or advising McCain, at least double the number in any other campaign. …

A Huffington Post examination of the campaigns of the top three presidential candidates in each party shows that lobbyists are playing key roles in both Democratic and Republican bids — although they are far more prevalent on the GOP side. But, all the campaigns pale in comparison to McCain's, whose rhetoric stands in sharp contrast to his conduct.

“Too often the special interest lobbyists with the fattest wallets and best access carry the day when issues of public policy are being decided,” McCain asserts on his website, declaring that he “has fought the ‘revolving door’ by which lawmakers and other influential officials leave their posts and become lobbyists for the special interests they have aided.”

In actual practice, at least two of McCain's top advisers fit precisely the class of former elected officials he criticizes so sharply.

Nothing about McCain surprises me any more, to be honest.

June 22, 2007

Housing bubble scare in bonds

Merrill Lynch discusses dumping $800 million of mortgage securities, rather than trying to bludgeon Jason Giambi.
A sale would give banks, brokerages and investors the one thing they want to avoid: a real price on the bonds in the fund that could serve as a benchmark. The securities are known as collateralized debt obligations, which exceed $1 trillion and comprise the fastest-growing part of the bond market.

(The story doesn’t mention that CDOs also comprise one of the shakiest sections of the bond market, especially those based on mortgages rated subprime or one level above.)

And, plenty of people are worried about fallout:
U.S. Securities and Exchange Commission Chairman Christopher Cox said yesterday that the agency’s division of market regulation is tracking the turmoil at the Bear Stearns fund.

“Our concerns are with any potential systemic fallout,” Cox said in an interview.

“Systemic,” eh? That’s not a good thing here. BUT, this bubble has to be fully lanced, or like a free-floating piece of arterial plaque, it will land elsewhere.

Blogger Bondad provides more insight:
CDOs are theoretically an insurance policy against a blow-up in the mortgage industry. However, these investments have never been tested by a real problem in the market. That does not mean they won't work as advertised. It simply means that the market has never tested them.

He says Merrill could just be using this as a tool to beat down Bear, or that it could be a more serious issue.

Bud Selig, come on down

And talk more about steroids yourself, rather than trying to bludgeon Jason Giambi.

When you said in 1994 it was maybe time to talk about them “again” already four years before the MacGwire-Sosa home run chase, it’s obvious you’re lying through your teeth with other claims that you really didn’t know they were a problem.

June 21, 2007

FINALLY — new car/truck/SUV mileage standards could be on tap

Without Michgan gasbag Carl Levin able to block, the Senate has approved a 35mpg standard. for cars, pickups and SUVs.

The Senate energy bill is still weak. The 35mpg standard doesn’t hit until 2020, with Levin saying he’s still going to work to kill it. Senate Republicans killed a $29 billion tax on oil companies to pay for renewable energy development, a pittance compared to what most Western nations, especially in Europe, finance.

Also bad, bad is a requirement that half of cars be able to flex-fuel on 85 percent ethanol by 2015. Ethanol from corn is energy-neutral at best, possibly energy-negative. It’s also not that much lighter on CO2 emissions than conventional gasoline.

But, it’s something.

Its strongest point is to put pickups and SUVs under the same overall mileage standards, thus killing a HUGE loophole.

And, this is a fair part of why Levin opposes it, I think.

Detroit builds most of its SUVs on truck platforms; Tokyo on car rails. So, Japanese SUVs get better gas mileage, and can be further improved more easily

Tough shit, Carl. The Not-So-Big Three have had 33 years since the first oil embargo.

Bloomberg bubble — hold the phone on Iraq

Via TPM Election Central, it appears Big Mike does NOT favor an immediate or a full pullout from Iraq.
At a speech at Google HQ Monday:
“We are in trouble overseas. There’s obviously an unpopular war, but a war that has no easy answers. The people that say, ‘let’s just automatically pull troops out,’ I don't think have really looked at the consequences of destabilizing the world, and the genocide that may or may not occur, depending on who you believe.”

The only other quotes TPM EC has about Bloomberg’s position are pre-invasion; any further information about his stance between then and now, to flesh out the picture, is welcome.

In any case, the first picture of him on Iraq is that he won’t be more progressive than any Democrat to the left of JoeMentum Lieberman (whom Bloomberg endorsed over Ned Lamont).

So, contrary to somebody like M.L. Rosenberg over at TPM, right now, I personally don’t have a hankering for Bloomberg, and, unless he changes positions on Iraq, some other progressive bloggers are probably right that he’ll draw more from Republicans, should he jump in.

Also, and something I missed, Bloomberg’s been ginning up speculation for a month, even to the point of a possible VP to run with him.
Only days after Bloomberg’s [mid-May] Houston appearance, maverick Sen. Chuck Hagel (R-Neb.) hinted broadly that he was considering joining forces with the billionaire mayor to run for the White House as independents.

So, his Hamlet-like demeanor will wear thin soon enough.

China now No. 1 on CO2 emissions

Blame dirty Chinese coal plants, among other things, says Netherlands environmental group.

At the same time, the U.S. is still to blame; manufacturing gets outsourced not only because of cheap labor but because many companies don’t want to do the environmental cost of business, either. For example, the majority of coke used in various U.S. metallurgical and other chemical processes is made in China.

U.S. already active in British portion of Iraq?

So it would seem, if we’re down near Basra:
In what appeared to be a separate operation deep in the south near the Iranian border, a ferocious battle between American troops and Shiite militants left at least 20 people dead and wounded scores more, Iraqi and American officials said.

The clashes, in Amara and Majjar al-Kabir, a pair of mostly Shiite towns just north of Basra, started early Monday. They were sparked by raids on what American officials described as a secret network involved in transporting “lethal aid” from Iran to Iraq, particularly deadly roadside bombs known as explosively formed penetrators, or E.F.P.’s.

Lt. Col. Christopher Garver, an American military spokesman in Iraq, said American troops have intensified their focus on finding and dismantling places where those weapons are built, like the towns raided Monday, because the weapons were especially hard to stop at the border. “It’s hard to catch because they are shipped as components, not completed weapons,” he said.

According to officials aligned with the Shiite cleric Moktada al-Sadr in Basra, the fighting involved members of Mr. Sadr’s Mahdi Army militia. The battle appeared to be the largest clash with Mr. Sadr’s loosely affiliated gunmen since the start of the new American security plan in February.

In addition to the 20 dead, six suspects were wounded and one was detained, officials said. A hospital official said that at least 60 people were wounded.

So, is British control slipping? Is the heat picking up in the south? And, if soon-to-be British PM Gordon Brown does go through with a British drawdown, how do we fill the gap?

Gen. Petraeus ain’t talking about this one, at least not in public.

I would say it would necessitate a minimum of 20,000 additional troops.

Maliki government looking more shaky in Baghdad

Samarra bombing leads to top resignation, again bring its viability into question.

Iraqi Vice President Adel Abdul Mahdi, a senior Shiite politician often mentioned as a potential prime minister, tendered his resignation last week in a move that reflects deepening frustration inside the Iraqi government with Prime Minister Nouri al-Maliki.

Other senior Iraqi officials have considered resigning in recent weeks over the failures of their government to make progress after more than a year in power, according to Iraqi and U.S. officials.

Abdul Mahdi said he was provoked by the second bombing of the Shiite shrine in Samarra on June 13, in which he said corrupt police abetted Sunni insurgents. “The two minarets were as important to us as September 11, and we should be accountable to the people,” Abdul Mahdi said in a telephone interview Wednesday. “We should be doing more to move in a positive direction — on corruption, accountability and defending the important sites.” …

Maliki’s political benefactor, radical cleric Moqtada al-Sadr, has again withdrawn his followers in parliament in the wake of the Samarra bombing. The leader of Sadr’s legislative bloc, Nasar al-Rubaie, said that “the Maliki government will surely collapse if the situation continues as it is right now.”

I don’t think it’s a question of “if” the center can hold any more, but “how long.”

From the BushCo point of view, Maliki continues to dilly-dally on things like the draft oil law. Now, he’s president, not a prime minister, but especially with his veep just resigning, don’t doubt that Bush, Condoleezza Rice and Ambassador Ryan Crocker aren’t sniffing around for some way to not only fill Mahdi’s vacancy but “lean on” Maliki at the same time — or perhaps even trying to run the table with a “two-fer.”

Petraeus: September is no policy deadline date — he has no deadlines at all

Gen. David Petraeus says September is a report deadline and nothing more, one of several insights in a British interview.

“That is a deadline for a report not a deadline for a change in policy, at least not that I am aware of. Ambassador Crocker and I intend to go back and provide a snapshot at that time, however focused the photograph is at that time and begin to describe what has been achieved and what has not been achieved and also to provide some sense of implications of courses of action. Neither of us is under any illusion.”

Really? Wonder if Dems will smell more coffee on the next Iraq supplemental?

And, he doesn’t expect “total victory”:
Will [the surge] be enough to restore security?

“You are never going to eliminate sensational attacks in Baghdad. That cannot be your metric of success. What we have to do is reduce their number and their impact. We had done quite well until the attack yesterday that killed a number of innocent civilians.”

And, apropos of the headline, he’s very open-ended about deadlines:
Would you like the surge to continue indefinitely?

“It depends on what the sense is for the prospects of achieving Iraq’s constitution. I hope that we can put time back on the Washington clock. Al-Qaeda is keenly aware of the Washington clock. They are obviously going to have a surge of their own.

And, he continues to “pump up the volume” about the importance of Iraq:
What about the leadership in Iraq?

"It is still led by foreigners called al-Qaeda Senior Leadership (AQSL). Our assessment is that this is the central front for al-Qaeda. They have a global war of terror, and Iraq is the central front. Whether you like it or not.

So, in a nutshell, the top brass in Iraq wants an open-ended commitment and claims we have to fight al-Qaeda there. He goes on to claim Iran has a high degree of backing for rogue elements of the Mahdi Army (I wouldn’t doubt some backing, but question the degree) and that the still-unpassed draft oil law is a key to political reconciliation.

Well, general, if you believe that, you could be waiting a long time.

June 20, 2007

CREW releases Congressional “dirty 96” list — including Ron Paul

These are the Members of Congress who keep family members on some sort of dole, whether a friendly PAC or something else.

Citizens for Responsibility and Ethics in Washington earlier this week released an analysis of the misuse of power by the chairmen and ranking members of all House of Representative committees and subcommittees, as well as top leadership positions, to financially benefit their family members. The new report, Family Affair, names 96 members from 33 states: 41 Democrats and 55 Republicans.

Highlights of the report include:
* 64 paid family members through their campaign committees or PACs (26 Democrats and 38 Republicans);
* 24 have relatives who lobby Congress (10 Democrats and 14 Republicans);
* 19 used their campaign committees or PACs to pay a family business or a business that employs a family member (9 Democrats and 10 Republicans);
* 17 used their campaign funds to make campaign contributions to relatives (11 Democrats and 6 Republicans);
* 15 used their positions to benefit a family member or a family member's client (3 Democrats and 12 Republicans);
* At least 7 paid offspring who ranged from school-age to college-age (all Republicans)

Among the more laughable on the list? “Libertarian” patron saint of limited government Ron Paul; I guess it just shows that past or present third-party officials aren't immune from hypocrisy, either.

None of his relatives worked for the government, 'tis true; just for his campaign committee. It's still a form of benefiting your own family through running for office.

Paul has his daughter on his campaign committee, to the tune of about $49,000 in the 2002 election cycle, and $56,000 in both 2004 and 2006 cycles. A second daughter, and her mother-in-law and father-in-law, got smaller payouts.

The CREW page about the story, including a state-by-state look-up of the “dirty 96,” is here. (PDFs of info on each of the violators.)

June 19, 2007

Michael Bloomberg update — good news or bad for Democrats?

Via Talking Points Memo, I see that he has left the GOP. Here’s his statement guts:
”As a political independent, I will continue to work with those in all political parties to find common ground, to put partisanship aside and to achieve real solutions to the challenges we face. Any successful elected executive knows that real results are more important than partisan battles and that good ideas should take precedence over rigid adherence to any particular political ideology.”

Well, doesn’t THIS stir up the pot? His claim he’s doing this to be a better mayor for NYC is of course spin and nothing more.

Let’s look ahead to 2008. If he does run, this likely knocks New York State out of any Democratic win column. Probably Connecticut, too. Could even have consequences in The Golden State if Dems have a weak presidential candidate. Bloomberg could run well in Florida, too, I’ll bet.

So, contrary to 1992, I do NOT think this is generally good news for a Democratic presidential candidate. It may not be bad news; it may be a wash. But, I do not think it is good news.

Big Three Democratic candidates all OK with partial pullout from Iraq

Speaking to AFSCME, Clinton, Edwards and Obama all, in various ways, talked about a partial pullout from Iraq, not a complete one.

Hmm, what’s going to happen when a new “timelines” bill comes up in the Senate, for Obama and Clinton? And, how will Edwards challenge them to vote without getting his own stance challenged?

Subprime crisis a reflection of larger debt-investment problems; possibly comparable to Enron derivatives

Jim Jubak explains the incestuous relationship between credit-rating agencies and banks, and how the subprime crisis has left a lot of emperors’ new clothes exposed:
It's important to understand that bond professionals don't want to think badly of the job done by the credit-rating agencies. The bankers pay the rating agencies' fees. (Bet you didn't know that. Yep, the issuers of debt are the ones who pay the bills.) The bankers literally sit across the table from the rating agencies. The banks poach anybody on the other side of the table that they think has the talent to work for them. And the banks rely on the credibility of the rating agencies to sell their debt offerings. It's a pretty cozy club.

But the subprime debacle has been big enough to disrupt the club. Buyers of packages of subprime mortgages and derivatives based on these packages that have been burnt by rising defaults on these mortgages and falling prices for the debt they hold have angrily wondered if banks issuing the debt disclosed all the risk. And the banks have passed the buck, saying, that they relied on the ratings from the three agencies.

As a result, Jubak said, this is part of why not just the ratings agencies in particular, but Wall Street in general, hasn’t reacted faster to the subprime crisis and its possible larger economic effects, specifically the problems with mortgage-based securities.

Several issues here.

First, where is a Democratic Congress, in failing to push for new regs out of either the SEC or FDIC to eliminate this incestuousness?

Probably waiting for “new Democrat” financial donors, which it has often been since the Clinton days.

This would be like Ford or GM paying Consumer Reports for their car ratings. It’s ridiculous.

It’s ridiculous it took the subprime crisis to expose this, if “expose” is the right word for something still generally flying well beneath the Big Media radar.

Beyond that, there’s the fact that these particular securities, known as collateralized debt obligations, are big turkeys in their financial performance. And, to the degree small investors have gotten talked into them, they could take a bit of a bath.

And, these are very complex debt-based securities. Jubak says many people, not small-time buyers, but even bigger pros, can’t analyze them well. He even draws Enron-type comparisons.

It’s ridiculous nothing has yet been done.

Housing market slips again; slowdown should continue

It may not be hurricane-strength, but a perfect storm of some strength continues to brew in the housing market.
• Potential buyers face a new hurdle with the cost of borrowing up sharply in recent weeks. The average interest rate on a 30-year fixed loan hit 6.74 percent last week, up from 6.21 percent a month earlier.

• Although the real-estate market has cooled considerably from the peak sales year of 2005, inventories suggest that supply and demand haven't yet come into balance. In April, the number of homes on the market was 23 percent higher than the previous April.

• The run-up in home prices was built partly on an unprecedented surge in risky lending to borrowers with poor credit histories or no down payments. Those excesses take time to work off. Foreclosure rates have recently reached record levels and may continue to rise over the next year as adjustable-rate mortgages reset for more borrowers.

Add in that the Fed has pretty well indicated interest rates will not be lowered in the foreseeable, and ARMs will certainly reset for more and more borrowers, a fair penny higher, and I’ll give you 50-50 odds the foreclosure rate rises at least 20 percent before leveling off.

Stir into the mix the fact new-housing starts slipped again a bit in May, and high gas prices, combined with higher interest rates and still-slipping prices may have would-be home buyers sitting on the sidelines, and you can see why the slump in the housing market will continue.

Between the housing slump possibly having wider economic effects, and foreclosures almost certain to continue rising, this is indeed a domestic policy issue that bears more watching than it’s getting right now.

June 17, 2007

Mortgage rates surging upward

As the subprime collapse and other factors weigh in, mortgages are surging:
The average rate on a 30-year, fixed-rate mortgage rose to 6.74 percent last week, up more than half a percentage point in four weeks, from 6.21 percent, according to mortgage financier Freddie Mac. That would boost the monthly payment on a $400,000 mortgage by $139.

Will they reach an equilibrium soon? How much fallout will this have? The Fed is clear that it won’t cut interest rates anytime soon; could they go up a quarter-point?