So, presidents can't control gas prices (or the general economy)?

Well, if "control" means fully control, that's true, and would even be true if the US were less federalist and more of a centralized national government, a la France. But, Macron also can't totally control the French economy. Setting aside acts of God, Xi Jinping might not 100 percent control the Chinese economy.

But, US presidents can influence the economy. And, they can influence oil prices, either directly influence oil prices, or influence the larger economy, which will then influence oil prices, and of course gas prices.

Take Shrub Bush 15 years ago. By 2006 or 2007, people who were educated news readers knew something about the housing bubble and why it was bubbly. Bush could have leaned on the Fed to start easing air out of that bubble, as well as leaning indirectly on the accreditation agencies to stop rating shit sandwich CDOs etc as being significantly above shit grade.

But, he didn't. And, no, I don't think he was totally idiotic about this. Yeah, he got gentleman's C's on his MBA, but he got an MBA.

That wouldn't have controlled the economy, but it would have influenced it. And, it would have influenced oil prices from not going to $147 a barrel (about $125-130 in today's terms). 

Or, before then, LBJ's guns and butter certainly influenced the economy. So did Nixon's price controls attempts.

As for influencing oil prices more directly?

Well, Russia IS the second-largest producer of oil after Saudi Arabia, and though it uses more itself, it's still a major exporter.

And, gee, WHY are oil prices so high right now?

Yes, recent winter storms were a factor, but as West Texas Intermediate threatens to approach triple digits, we all know the biggie: Russia and Ukraine.

And, those of us who aren't part of the bipartisan foreign policy establishment know the roots of all this: Slick Willie Clinton breaking Poppy Bush's promise not to expand NATO eastward. That then has been followed by hints, off and on for 15 years now, or more, that Ukraine (and Georgia, remember that?) would be covered by NATO's "umbrella" in some way. (Maybe we need Roe v Wade type penumbras and emanations?)

Then, there's "who's Ukraine?" Answer: kleptocrats and neo-Nazis. And, other than briefly, during the Russian Civil War, there's not been an independent Ukraine for centuries. Closest to that is the old Kievan Rus of pre-Mongol times.

From Biden's point of view, this is exacerbated by NATO members not wanting to fall fully in line on trade embargoing, and in some cases actively resisting. 

From the sensible point of view, the problems of NATO's European members are exacerbated by Biden, who may get lucky if Macron can get him off his tree limb.

Beyond backing off warmongering, there's other things Biden probably could do at the margins to help a smaller bit.

Could he knock prices back to $70 a barrel? Probably not any time soon. Could he ease them back to the $80/bbl range if he backed off on Ukraine and did whatever he could domestically on the edges?

Yes.

As for those gas prices? Panicky Democrats like Maggie Hassan and Mark Kelly wanting to nix the federal gas tax right now? This is a lower-grade version of the same dumb as suspending FICA taxes and other things. It's only 5 percent of the current cost of gas prices, and, since it hasn't been raised, well, since Slick Willie kneecapped Boris Yeltsin on NATO, it's part of why we needed Biden's infrastructure bill — our highways are crumbling.

And, Status Quo Joe's idea of releasing 50 million barrels of strategic reserve oil? We import 6 million barrels a day, and that is going up, slowly but surely, as the fracking miracle becomes hollow. Backing off warmongering would help a lot more. (We imported 10 million barrels a day in 2018.)

Team Obama suing #banksters on #CDO and #CDS - more on why this is likely 'show'

I said yesterday that, after Dear Leader's minions, including and starting with Little Timmy Geithner, along New York Fed members and others, have spent months attacking N.Y. Attorney General Eric Schneiderman, color me skeptical at least, and cynical at most, that any talk  of a federal lawsuit against banksters for their alphabet soup diarrhea of CDOs, CDSs, etc., is anything more than a hill of diarrhea-inducing beans.

 The suit's been filed. So, let's update this from yesterday Adding to my skepticism? It names no dollar amount for damages sought. (Fannie Mae and Freddie Mac reportedly lost $196 billoin on the alphabet soup crap.) So, let's look more at the reality of why this is probably a dog-and-pony show.

Here's how this will likely play out.
1. Team Obama goes through motions of filing suit.
2. Goddam Sachs, Citigroup, Morgan Stanley et al plead remorse. (Like AT&T pleading to "tweak" the T-Mobile takeover.)
3. Said banksters eventually agree to a settlement. (This is part of "doing God's work," of course. Loyd Blankfein will combine this with the "remorse" part for Goddam Sachs.)
4. Money for said settlement will pennies on the dollar, payable over a decade or more. Updated with the new link, 10 percent of this is about $20 billion. And, not coincidentally, that's what Team Obama suggested in initial settlement talks. Even prorated by company size among the 17 defendants, that's, say, $3 billion for Bank of America. BofA had that much profit in one quarter in 2010. Even if I temper my cynicism somewhat, and call it 20 percent on the settlement, payable over three years, that's $6 bil for BofA over three years, or $500M a year. It will be able to digest that, write it down on earnings statements, and possible even find a way to a tax deduction or two.
5. Said money is then used by Team Obama to create a successor to HARP and HAMP called HEMP: "Home Equity Maintenance Program." God, I love being snarky.
6. Said program is started, oh, say, July 2012? Just in time for the Democratic National Convention and some appropriate re-election PR?
6A. Said program, said start of payments, said percentage markdown of payments, etc., all get connected in some way to Democratic campaign contributions.
7. Team Obama tells Schneiderman: "We really, really tried. This is the best we can do. Now, for the last time, stop bothering the banksters."

The real reason Moody's and S&P fear #Debtmageddon

Anybody who knows much about the housing bubble, not on the fradulent mortgage end as much as the finished-sausage-product end of CDOs and stuff knows that the ratings agencies were $2 financial whores, full of shit, or a bit of both. (They're not mutually exclusive.)

For Moody's, S&P and Fitch, the bottom line is the bottom line. Not the U.S. government's bottom line, their bottom line.

If there's a default, the economy in general slows down.

Not just the real economy, for those of us working real jobs, but the fake financial sector economy. That means less wheeling and dealing. That means fewer financial issues to be rated by these folks.

Besides whoring themselves out to Countrywide, numerous hedge funds, etc., in the last decade, did the ratings agencies say a word as George W. Bush put more and more war spending "off budget"?

Nope, not one damned word.

So, as you hear Moody's and S&P bleat and squeal in days ahead ... remember why.

Latest Obama re-election lie - gas prices

President Barack Obama is talking about how he will investigate alleged manipulation of gas prices before they hit $5 a gallon at the pump.

President Obama said today his Justice Department is creating a team to "root out any cases of fraud or manipulation in the oil markets that might affect gas prices."

"That includes the role of traders and speculators," Obama said at a town hall-style meeting in Reno, Nev. "We are going to make sure that no one is taking advantage of American consumers for their own short-term gain."

To which I say: "Really?"

Let's see.

Six months before you were elected, oil was at $147 a barrel, even above the $110 now. While Peak Oil and a surging (pre-crash) global economy were partial reasons, many analysts thought commodities speculators, hedge funds, etc., were adding $20 a barrel, or more, to oil's price.

Let's see, part 2.

During what passed for financial regulation reform, commodities and derivatives regulation (along with regulations of CDOs and other speculative alphabet soup from the mortgage world) got token discussion ...

And zero action.

So, again, why should we believe you now, Mr. President? You're the man with all the Goldman Sachs/Robert Rubin acolyte financial advisers. You're the man who took more Wall Street money than John McCain.

So, no, I'll pass on believing you now.

Beyond that, Obama knows that daily pump prices, as opposed to actual per-barrel prices, have little to nothing to do with speculators.

Shockingly, Obama did mention the word "conservation" in the town hall.

Lawsuits next for G. Sachs? Euro action? More?

Some European countries, especially Germany, are making noise about going after Goldman Sachs themselves, in the wake of the Securities and Exchange Commission's civil filing yesterday.

But, that all may be just for starters. There's other things that could happen. Like the SEC trying to roll Fabrice Tourre, which itself is a good reason for Goldman to look at settlement offers.

There's lawsuits by disgruntled investors, who wonder not only how much they lost on Goldman's alleged "bet against CDOs" private investments, but also wonder if Sachs had other such sweetheart deals.

Third, in light of the three possibilities above, is the chance G. Sachs stock will continue to take a beating. If CEO Loyd Blankfein resists settlement offers from the SEC, even tough ones, especially after either European country actions or individual lawsuits, he could be seriously accused of not doing due diligence for major investors.

Fourth, also in light of a stock tanking, senior staff at Sachs, who get bonuses as a signficant part of pay, might organize an inside coup against Blankfein out of financial self-preservation.

I'm probably just scratching the surface; read the full story.

The latest Wall Street slickness

Even as the government talks about changes in calculating poverty that would show many more poor seniors, Wall Street is preying on them in new ways.

And, this all as G20 nations still can’t agree on regulating top financiers’ pay.

Morgan Stanley, learning nothing, tries to sell sh*t as AAA again

And, if it gets away with this piece of crap, look for yet another financial bubble to start. It’s no wonder Morgan Stanley folks refused to comment to Bloomberg.

The hypocrisy of Warren Buffett on the subprime crisis

Is on full display in this Portfolio expose.

You know how everybody's been touting the genius of Warren, how he warned derivatives were "financial weapons of mass destruction," etc.?

Well, a lot of people also know that Moody's, etc., the financial ratings agencies, were a big part of the problem, by their jacked-up ratings of CDOs, etc.

Guess who owns 20 percent of Moody's?

No names, but his initials are Warren Buffett.

But, it's only starting to get bad, the story that's laid out in Portfolio.

Investor Steve Eisman, by the time he laughed at a Moody's investor, in the same section of the story, was already "shorting" the bonds based on the worst tranche of subprime-loan based CDOs. But, financial investment agencies were then creating new CDOs based on Eisman's shorts!

Eisman said it's the equivalent of drafting Peyton Manning in fantasy footbal, and the act of drafting him creates a second fantasy Peyton.

“It was like feeding the monster,” Eisman says of the market for subprime bonds. “We fed the monster until it blew up.”

It's a long story, nine webpages if not in single-page view. But, it will give you further understanding of just how things went wrong on Wall Street.

Texas homeowners in default? Blame Phil Gramm

Former Sen. Phil Gramm, looking as smarmy as ever in this picture, bears chief responsibility for the deregulation of CDOs, CDSs, SIVs and related subprime mortgage-driven investment “vehicles,” says David Corn.

The story of how this same bit of 2000 legislative legerdemain benefited Enron has already been told. But, unknown to anybody else in Congress at the time, it would also benefit the Bear Sterns of the world, as well as Gramm’s current employer, Swiss über-bank UBS.

Can you really imagine the idea of economics wingnut as the next Secretary of the Treasury?

Read the whole story for more on his shenanigans and a thumbnail sketch of how the process worked for investment banks.

Barack Obama should directly ask Gramm if he feels any guilt over Enron’s actions and his abetting of them.

Then, ask if Gramm feels any guilt over the subprime bubble.

Texas Observer has more on this issue.

University of Texas economist James Galbraith says Gramm is “not against government at all. His career has been finding ways to make money for his friends. It’s a predator relationship. (Government) is his food supply.”

And Hilzoy has a good roundup of the life and times of Phil Gramm.

That said, let me once again state one other thing.

For Democrats to pile on Gramm about the Gramm-Leach-Bliley Act of 1999 is hypocritical. A majority of Democrats in both House and Senate voted for the bill. President Clinton was behind it from the start.

And, as the Observer story notes, Clinton Treasury Secretary Robert Rubin was a strong supporter of the Commodity Futures Modernization Act’s provisions.

That said, for loyal Texas GOP voters in default, there is a bit of schadenfreude in all this, if not more than a bit.

Moody’s as financial manipulation enabler put in the dock

If there’s a person, creature or corporation more to blame for the subprime crunch, the credit-derivatives crunch, and everything else FUBAR about today’s finance situation, it’s Moody’s the not-so-humble bond-rating service.

Having branched beyond bonds into larger credit ratings, it’s quite arguable, as one person puts it in the story, a preview of a New York Times Magazine story for this coming Sunday, that Moody’s, along with Standard & Poor and Fitch’s, moved from “gatekeepers” to “gate openers.”

Arthur Levitt, the former chairman of the Securities and Exchange Commission, charges that “the credit-rating agencies suffer from a conflict of interest — perceived and apparent — that may have distorted their judgment, especially when it came to complex structured financial products.”

No shit. The next couple of webpages of the story read like the financial-world equivalent of politics’ infamous “sausage making” process of legislation.

Here’s stuff Moody’s ignored on one special-purpose vehicle, or SPV:

Moody’s learned that almost half of these borrowers — 43 percent — did not provide written verification of their incomes. The data also showed that 12 percent of the mortgages were for properties in Southern California, including a half-percent in a single ZIP code, in Riverside. That suggested a risky degree of concentration.

And more fun on this same bundle:

In the frenetic, deal-happy climate of 2006, the Moody’s analyst had only a single day to process the credit data from the bank. The analyst wasn’t evaluating the mortgages but, rather, the bonds issued by the investment vehicle created to house them. A so-called special-purpose vehicle — a ghost corporation with no people or furniture and no assets either until the deal was struck — would purchase the mortgages.

In other words, a single guy just spent a business day playing the equivalent of the lotto with a $430 million bundle of papers.

Ironically, if you will, increased federal regulation of things like pension and mutual funds gave Moody’s more things to rate, setting the stage for the dereg hothouse of the late 1990s and on.

Issuers thus were forced to seek credit ratings (or else their bonds would not be marketable). The agencies — realizing they had a hot product and, what’s more, a captive market — started charging the very organizations whose bonds they were rating. This was an efficient way to do business, but it put the agencies in a conflicted position. As (Frank Partnoy, a professor at the University of San Diego School of Law), says, rather than selling opinions to investors, the rating agencies were now selling “licenses” to borrowers. Indeed, whether their opinions were accurate no longer mattered so much. Just as a police officer stopping a motorist will want to see his license but not inquire how well he did on his road test, it was the rating — not its accuracy — that mattered to Wall Street.

Problem is, even before the bubbles started bursting, CDOs were defaulting at a rate higher than traditional bonds, as page 5 notes. But, because a lot of these CDOs were coming from high-volume repeat customers, Moody’s kept the rubber stamp hot.

The Securities and Exchange Commission refused to look at the incestuous nature of the modern credit-rating agency after Enron blew up, despite a directive from Congress. And, of course, in both the House and Senate versions of housing bailout legislation, nobody in Congress is proposing a serious oversight reform bill, not just a nudge to the SEC.

More financial “sausage making” on page 6, from a subprime package called XYZ:

Moody’s monitors began to make inquiries with the lender and were shocked by what they heard. Some properties lacked sod or landscaping, and keys remained in the mailbox; the buyers had never moved in. The implication was that people had bought homes on spec: as the housing market turned, the buyers walked.

By the spring of 2007, 13 percent of Subprime XYZ was delinquent — and it was worsening by the month. XYZ was hardly atypical; the entire class of 2006 was performing terribly. (The class of 2007 would turn out to be even worse.)

But, although Moody’s started re-rating individual mortgage-based bonds by soon after this time, it still didn’t do anything about collateralized debt obligations, or CDOs. And, was using a different set of ratings analysts, and giving ratings without knowing what bonds a particular CDO would buy!

A CDO operates like a mutual fund; it can buy or sell mortgage bonds and frequently does so. Thus, the agencies rate pools with assets that are perpetually shifting. They base their ratings on an extensive set of guidelines or covenants that limit the CDO manager’s discretion.

One misrated CDO was estimated to have a loss potential of 2 percent at the time it was rated triple-A. Latest estimate? At 27 percent; a 16 percent slice of triple-A bonds downgraded all the way to single-B.

It’s clear that only major federal regulation can put this horse back in the barn and keep it there.

Credit default swaps to follow subprime loans, CDOs, to bubbleland stage?

It does indeed seem possible that more and more economic talk will focus on the “arcane” CDSs.

Like other recently crafted financial tools, such as their somewhat kin collateralized debt obligations, or CDOs, CDSs have a few problems. First, what are CDSs?

Credit default swaps were invented by major banks in the mid-1990s as a way to offset risk in their lending or bond portfolios. At the outset, each contract was different, volume in the market was small and participants knew whom they were dealing with.

No. 1 and above all, especially in the eyes of more critical economists, is that CDSs, just like CDOs, are not “marked to market.” In other words, nobody knows if their paper value is at, or even anywhere close to, their real-world value. The reason is the same as with CDOs — they’ve never really been tested on the open market.

Major insurer AIG has already admitted some of its CDSs were mispriced.

Third, one-sixth of CDSs were created as backstops for holders of CDOs, and we know the CDO market ain’t so healthy.

Another kick in the pants for CDOs — mortgage note-holders told ‘no’ on foreclosures

Mortgage investors may not have a legal right to foreclose on property.

Judge Christopher A. Boyko of Federal District Court in Cleveland dismissed 14 foreclosure cases brought on behalf of mortgage investors, ruling that they had failed to prove that they owned the properties they were trying to seize.

You think CDOs are crap now? If lending institutions assume this ruling will be upheld on appeal, they’re going to go right in the toilet.

Writer Gretchen Morgenson notes this has been a common practice for years, letting holders of mortgage security notes foreclose, but it had never been legally challenged.

The increased slicing-and-dicing of CDOs was making mortgage securities-based foreclosures more difficult anyway.

Here’s how the judge’s decision came down:

On Oct. 10, Judge Boyko, 53, ordered the lenders’ representative to file copies of loan assignments showing that the lender was indeed the owner of the note and mortgage on each property when the foreclosure was filed. But lawyers for Deutsche Bank supplied documents showing only an intent to convey the rights in the mortgages rather than proof of ownership as of the foreclosure date.

Saying that Deutsche Bank’s arguments of legal standing fell woefully short, the judge wrote: “The institutions seem to adopt the attitude that since they have been doing this for so long, unchallenged, this practice equates with legal compliance. Finally put to the test, their weak legal arguments compel the court to stop them at the gate.”

A spokesman for Deutsche Bank declined to comment on the ruling. But the inability of Deutsche Bank, as trustee for the pools, to produce proof of ownership at the time of the foreclosures will fuel borrowers’ concerns that they are being forced out of their homes by entities that may not even hold the underlying loans.

Here’s how the mortgage security process starts, without including the part of different slices, or tranches, being mixed together into CDOs, which would make the picture below even more complicated:

The process of putting together a mortgage pool begins when a home loan is originated by a bank or mortgage lender. That loan is typically sold to a Wall Street firm that pools it with thousands of others. Once a pool is packaged, it is sold to investors in different slices, based on risk. A trustee bank oversees the pool’s operations, ensuring that payments made by borrowers go to the appropriate investors.

Lawyers who represent troubled borrowers complain that trustees overseeing home loan pools often do not produce proof, usually in the form of a mortgage note, that their investors own a foreclosed property. And a recent study of 1,733 foreclosures by Katherine M. Porter, an associate professor of law at the University of Iowa, found that 40 percent of the creditors foreclosing on borrowers did not show proof of ownership.

About 40 percent? Do you hear the wheels of the foreclosure machine grinding to a halt?

And here’s why the situation exists:

When a loan goes into a securitization, the mortgage note is not sent to the trust. Instead it shows up as a data transfer with the physical note being kept at a separate document repository company. Such practices keep the process fast and cheap.

In other words, another corner gets cut. And when securities holders bitched, Boyko told them where to get off:

e plaintiff’s argument that “‘Judge, you just don’t understand how things work,’” the judge wrote, “reveals a condescending mindset and quasi-monopolistic system where financial institutions have traditionally controlled, and still control, the foreclosure process.”

The article goes on to say that the cases can be refiled in state court, whether or not a federal appeal is being pursued. But, I’m betting attornies for debtors block that, depending on where either the putative note-holders, or the actual note-holder is, on interstate commerce grounds.

I’m surprised that word of this ruling hasn’t spread more, and thus become even more of a downer on mortgage brokerages and other financial institutions.

Govt accounting regs pushing CDO writedowns

Via Naked Capitalism, I read about two new developmental regulations essentially forcing more clarity and re-evaluation of CDOs. Combine that with marketplace changes and this is what you get:

The first is that new accounting rules gives companies far less latitude in how they value this paper. As the Financial Times explained it:

They are the “buckets” into which financial statement preparers must classify financial assets under FAS 157, a new US accounting standard for financial years beginning in November...

At the top of the bucket hierarchy is Level One, involving assets with prices quoted in active markets, such as mainstream stocks. Level Two contains less-traded securities and uses prices for assets very like the one being valued.

At the bottom lurks Level Three, assets with “un observable inputs”, meaning their value is calculated via a series of assumptions. Most collateralised debt obligations end up here.

While these categories may be familiar to many readers, what is not as widely know is that another rule, FASB 159, pushes institutions to put positions into the lowest bucket possible. Thus, no phony-baloney Level 3 valuation if there is a way to come up with a gridded or extrapolated Level 2 value.

The second development is that markeplace changes are forcing the revaluation of CDOs. Having first gone through re-rating subprime bonds, they are now tackling CDOs, and downgrades will force commercial banks, investment banks, pension funds, and other holders to recognize losses.

In other words, the first regulation allows less papering-over of hugely different credit ratings of different tranches within a collateralized debt obligation. The second fights artificial valuation.

Then, the market comes in, with CDOs now having to have more transparency, and says, “These ain’t worth shit.”

Yves Smith goes on to say that CDOs have a lot of leverage over other, tangentially connected, financial issues. In other words, “You ain’t seen nothing yet on fallout.”

The good point about the regs is they should help prevent future CDO excesses. Bad point is they should have been on the books years ago.

Bit of history from another Smith post: CDOs were created in 1987 by Drexel Burnham Lambert, home of junk-bond king Michael Milken. That alone is reason why we should have had more regulation of them years ago.

Financial analysts should have seen the subprime bomb ticking

In fact, some did:

“All of the old-timers knew that subprime mortgages were what we called neutron loans — they killed the people and left the houses,” said Louis S. Barnes, 58, a partner at Boulder West, a mortgage banking firm in Lafayette, Colo. “The deals made in 2005 and 2006 were going to run into trouble because the credit pendulum at the time was stuck at easy.”

“I’m one guy in a research department, but many people in our mortgage team have been suggesting that there was froth within the market,” said Jack Malvey, the chief global fixed income strategist for Lehman Brothers. “This has really been progressing for quite some time.” …

“We’ve contended for a while that there was an issue in subprime debt,” said Neal Shear, global head of trading at Morgan Stanley. “A year ago, we were aware that delinquencies were going to rise.”

Meanwhile, since everybody who has followed this issue knows that the incestuous action of ratings agencies like Moody’s, touting subprime derivatives on which they stood to profit, is a fair part of the problem, the European Union is planning to investigate possible conflicts of interest. Where’s the SEC, on our side of the pond?

And, the anti-Cassandras also bear blame for being in denial still, primarily through their claim that this is a just a problem with subprime mortgages.

No, it also has affected a number of Alt-A mortgages, the next class above subprimes. Therefore, it has affected more collateralized debt obligations. It’s also caused other classes of mortgage to hike their interest rates.

And, with the peak in number of adjustable rate mortgages due to reset nearly a year off, we’re still not at the bottom of this.

A snarky look at how the Fed caused the housing-credit bubble in the first place

It’s basically by “counterfeiting” $3 trillion of money over the past few years. This is pretty funny, but with good explanatory value:

• I use $1 trillion to buy stocks (jump starting the bull market)
• I use $1 trillion to buy U.S. Treasury bonds (thus driving bond prices higher and interest rates lower)
• I use $1 trillion to go around to every neighborhood in every major city of the U.S. and start buying houses for 10 percent higher than the listed price.

And you get all these benefits:

• This will create jobs, since lots of employees and consultants will be needed to spend $3 trillion.
• The stock market indices will soar. Everyone's 401(k) and day-trading portfolios will increase in value.
• Home prices will increase by 10% overnight.
• Interest rates will fall which will make it even cheaper for everyone to borrow money to buy new cars, upgrade into a bigger homes, and buy new gas plasma TVs every year hoping against hope of getting to watch the CUBs someday play in the World Series.
• The lifeblood of America, vastly underpaid Real Estate Agents, will get a much needed and well deserved infusion of cash.
• The economy will be humming so fine that no one will care about the loss of jobs to India and China.
• Cheap goods will continue to pour into the US and the CPI will show only a modest 2 percent rise in the price of goods.

Boy, you just can’t beat that, can you?

It does show, in addition, that, although Adam Smith was hugely wrong about his “invisible hand,” he was right on the money about human greed.

Mike Shedlock goes on to say that not just an ordinary recession, but a deflation similar to late 1980s Japan, is very possible. Bill Fleckenstein, another financial analyst who seems to have good insight, agrees.

Personally, I’ve upped my recession odds by Aug. 1, 2008 from 1-3 to 2-5. I’m leaving the Jan. 1, 2009 prediction at 1-2, but those odds will probably get adjusted upward soon.

Oh, and if your 401(k) has any such risk investments, look out.

Craziness is top companies borrowing money just to pay higher dividends

But, it’s happening. But:

Even blue-chip companies such as IBM (IBM, news, msgs) are borrowing money to beef up their dividend payouts, and other companies are taking on tons of debt to pay for acquisitions to fund their own purchase by a buyout fund.

In this article, Jim Jubak goes on to explain how collateralized debt obligations (CDOs) and collateralized loan obligations (CLOs) work, and what the subprime crisis means for them.