Bob Rubin = Bob McNamara of financial crash?

With the death of former Secretary of State Robert McNamara, and discussion over whether his Vietnam War mea culpas were deep enough or sincere enough, Harold Meyerson speculates about when we will have any similar mea culpas about the financial meltdown, and who will be, or could be, its McNamara.

His answer? Former Clinton Treasury Secretary, former Goldman Sachs chair, and guru and mentor to many of Team Obama’s financial “whiz kids”: Robert Rubin. Click the link for more thought on why Rubin fits the “guilty” bill and whether his whiz kids will learn or not.

The man who broke AIG

Vanity Fair, fresh off of smoking Sarah Palin, has a much more in-depth piece on Joseph Cassano, the man who led AIG’s financial products unit into the toilet.

Cassano, without using the mathematical models of his predecessor, became willing to take on ever more risk, and to apply corporate risk modeling to consumer financial risk, in a very small nutshell.

And AIG CEO Hank Greenberg and the board apparently either didn’t know, or didn’t want to know, what he was doing. Nor did Greenberg’s successor, as, ironically, AIG was downgraded from AAA to AA the day he retired, even while Cassano was adding more subprime loans to his credit default swap portfolio.

And, losing the AAA rating, per a Cassano agreement, required it to start posting collateral on these CDSs. And that’s when trouble really started.

It’s a complicated story, but well worth a read.

Stiglitz – plenty of blame on economic crisis

In one of the clearest bipartisan finger-pointings yet, Joseph Stiglitz tells us five critical decisions, or non-decisions, got us to where we are at today.

Enough of them, between fallout from the first bad decision, and the second bad decision, occurred within the Clinton Administration of Stiglitz’s government service, it’s quite clear now why Obama Larry Summers hasn’t had him involved with financial transition decisions.

Credit crunch silver lining

And, that is less junk mail in moths ahead. In fact, due to postal increases, catalogue mailers have already cut back.

Pilgrim chickening out

It looks like Pilgrim’s Pride, founded by iconic pitchman Bo Pilgrim, is headed for bankruptcy.

Pilgrim’s Pride, the nation’s No. 1 chicken “producer,” has been hammered by the high price of corn. And now, with the credit crunch, even if somebody wanted to buy it, they might not be able to get the money.

So, get ready for a flood of cheap chicken soon.

Pity Iceland, scorn the IMF

Per the normal “austerity measures” the International Monetary Fund inflicts on client countries, Iceland is raising interest rates to 18 percent. Now tell me, just how is this actually supposed to help Iceland’s economy recover?

Interest rates are NOT the problem

Palin is trying to morph Stevens conviction into a screed against Big Oil and more reason why she needs to be in power as a reformer. She’s slick when she can parrot a message.

Financial crisis a green crisis or opportunity?

While conventional wisdom says the global financial crackup is nothing but bad news for greening the planet, other people say not so fast.

Specifically, look at global warming. In the short term, an economic slowdown means less hydrocarbon and carbon burning, and hence, a slowing in the amount of carbon dioxide introduced into the atmosphere.

And, some analysts think the challenges the financial crisis put up to “the market is always right” school of capitalism bodes well for the future. Read the full story for more of that thought.

China guarantees Pakistan loans – price is???

Beijing’s guarantee of Pakistan’s foreign debt has a number of possible ramifications.

Isn't it wonderful China has all that money to, in essence, guarantee Pakistan's foreign debt? Do you kind of think Beijing will want to have a word with Islamabad about cracking down on al-Qaeda and Taliban in the North West Frontier? And, do you supposed Beijing's renbimbi might make Pakistan listen?

The Chinese remain vigilant about unrest among their own Uyghur Muslims in Xinjiang. And, surely, will be speaking with Islamabad about patrolling the North West Frontier more tightly, both to crack down on native Taliban and to prevent crossovers from Afghanistan.

Of course, Pakistan is itself devolving into chaos. It may be, if not a failing state, a C-minus/D-plus state right now. Whatever Beijing wants, Islamabad may not even be able to deliver.

The world financial situation, combining with inflation already in Pakistan, has sent the economy into free fall. Meanwhile, things like suicide attacks and kidnappings are on the rise. Per the second link, S&P downgraded Pakistan’s financial rating earlier this month, for the second time this year. (Why doesn’t S&P rate OUR government’s financial strength, BTW?)

That said, this is why I, like better known and knowledgeable bloggers like Juan Cole, have blogged repeatedly that Obama is (yes, allowing for political pandering) an idiot for proposing more troops in Afghanistan with the refusal to cooperate from Pakistan. The rising instability just underscores that.

And, unilateral intervention? Pakistan North West Frontier is about as rugged as Afghanistan. And, if Beijing is guaranteeing Pakistan’s foreign loans, they’ll want a say about that anyway.

The real price is, even if Beijing can’t get total order reinstated there, a changing of geopolitics in central Asia.

And, we have nobody to blame but ourselves. And by “we,” I mean “we,” not Bush in particular or D.C. in general.

And, this is beyond a Republican and Democrat issue. Both parties supported the formation of the World Trade Organization with no more environmental, labor rights or human rights protections than mercenary Republicans and sellout Democrats like Dick Gephardt (and Senate-presiding Veep Al Gore) got put into NAFTA.

Beyond that, though, too many Americans too lazy to bother looking beyond the “made in China” labels at Wal-Mart (and Target) as well as dollar stores, have contributed to this.

If you argue that many people had to do that, I’ll only partially agree. Many of the trinkets were unnecessary.

Besides, many of the non-poor bought made in China trinkets at places like Bed, Bath and Beyond, Linens ’n’ Things, etc.

If you’re knowledgeable about foreign policy, look in the mirror a little more when you worry about expanding Chinese influence.

Alan Greenspan — godfather of the collapse

The NYT takes a look at how St. Alan of Greenspan’s still relentless faith in derivates was a major contributor to the current crash.

Greenspan instead blames Wall Street for, in the article’s words, not acting “honorably”enough in the use of derivatives?

What, was someone’s pinky not lifted away from the teacup on a $2 trillion credit default swap?

Or, in his own words:

“In a market system based on trust, reputation has a significant economic value,” Mr. Greenspan told the audience. “I am therefore distressed at how far we have let concerns for reputation slip in recent years.”

And to think Democrats and Republicans alike kissed his ass for better than a decade. And, while GOP attack ads are somewhat off base, yes, to some degree that does include you, Chris Dodd, and you, Barney Frank, and of course the not-too-lamented Slick Willie, via Robert Rubin and Larry Summers.

And, that’s why many Democrats and Republicans alike insisted “we don’t have time” to tie regulation to the bailout.

None of this is to ignore Phil Gramm, of course, the worst of the lot.

But, many Democrats as well as Republicans are being disingenuous right now.

I guess that’s why a website like Open Left is a disappointment and I don’t go there more. Sure, Chris Bowers et al will take a fair number of individual Dems to the woodshed. But, they don’t look beyond the system as it now stands to talk about promoting third parties, etc.

Stocks crater — more banks WILL fail

As the European Union fails to reach a membership-wide approach to its own countries’ financial problems, the Dow is below 10,000. Many banks, both domestic and foreign, realize the bailout plan by our MBA President, Secretary for Conflicts of Interest Henry Paulson and Worst Fed Head since Greenspan Ben Bernanke will take time to “work,” if it does at all.

“This is a psychologically important moment that we passed below the 10,000 level,” said Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. “But, the issues are worldwide. The fact is people are scared and the only thing they're doing is selling.”

Hell, bankers knew that a week ago. So much for the alleged brilliance of American capitalism.

As for 2009? Bank failures could increase to more than $100 failed banks and more than $1 trillion in capital. Click the link to see which states are most in trouble.

California running out of money

California, like a number of states, relies on the governmental equivalent of commercial paper at many times, commonly known as bridge loans and similar devices.

Well, with the financial crisis, there’s no money for such loans, even as the state has an Oct. 31 deadline to pay public school districts $3 million.

WaMu getting more creative with surcharges

I’m sure this is an effort to make up for frozen money not earning anything right now.

A friend said Washington Mutual has a new policy, and a price-gouging one.

It is starting a $5 surcharge if the person to whom you write the check does not cash or deposit it at your bank. Not to you, to the "presenter" of the check.

Geez o pete. Well, that will at least puff the bottom line for WaMu's eventual buyer, JPMorgan Chase.

Financial woes cause run on gold

U.S. Mint suspends sale of 24K gold coins.

‘The computers did it’ — the latest ‘goat’ for the financial flop

Yessiree, expect various current and former head honchos of Wall Street to spread this line as fast as they can.

But, to the complaint that computers underestimated the risk of derivatives manipulation, I add two rebuttals.

One is that plenty of people were flagging the potential problems two years ago or more. I’d rather blame Wall Street “rock stars” for not listening to Warren Buffett than for having faulty computers.

No. 2 is the old programmers’ acronym of GIGO. Hell, for all I know, Wall Street quantitative analysts may have even gamed their computers, which would then give us LIGO:

Lies In, Garbage Out.

Indeed, Leslie Rahl, the president of Capital Market Risk Advisors, says something along those lines, although she’s more charitable on the issue of intentionality than I am. And, I didn’t have to read that far down the Times financial blog post to guess that.

Of course, you know the next step will be to discriminate between Republican and Democratic computers or programs, or something along those lines. And since John McCain can’t e-mail, allegedly, well, then, he can’t vote on the bailout, one way or the other, either, can he?

And, if Democrats in the Senate are really stupid enough to believe Crazy Uncle Henry that Schmuck Talk’s vote is in the bag, well, I’ve got a CDS with liquidity to sell them.

Freddie Mac in trouble Monday?

The feds aren’t sure whether or not it can sell $3 billion of short-term debt.

In the worst-case scenario, we’ll have bailout-lite with the Treasury itself buying the debt notes.

‘Prosperity is just around the corner’ — NOT

Once again, Wall Street has been shown to be lying about the severity of the credit crisis and the date of its resolution.

It is now estimated worldwide financial sector losses may hit $1 trillion. That’s “trillion” with a T, according to nobody less than the International Monetary Fund.

With each passing quarter, Wall Street’s top bankers have indicated that the worst of the market turmoil was over — only to face more pain months later.

“We thought this was going to be the kitchen-sink quarter, and we’re finding out that CEOs and CFOs still don't have a handle on the credit crisis,” said William Rutherford, a former state treasurer of Oregon who now runs Rutherford Investment Management. “We haven’t disinterred all the dead bodies. What else is out there?”

Beyond the Lehman Bros and other big internationally-connected investment banks, though, many regional-level banks are also shaky. And the losses might not peak until next year.

Pier 1 misses the financial dock

The Fort Worth-based home furnishings store had a sales decline and a net loss in its March-May fiscal first quarter.

The retailer reported a net loss of $32.8 million, or 37 cents a share, in the period ended May 31, compared with a net loss of $56.4 million, or 64 cents, a year ago. Analysts surveyed by Thomson Reuters expected a loss of 15 cents a share. First-quarter same-store sales declined 5.4 percent from last year.

This is the latest clear sign that the housing slump is more than just the bursting of a subprime bubble. Many Alt-A, or even full prime, as well as subprime loans that haven’t gone into foreclosure are adjustable-rate mortgages that are resetting right now.

Those resets mean less to charge on maxed-out credit cards that are getting tougher to pay off.

Subprime foreclosures could hit 35 percent

That’s the word from Kenneth Rosen, chairman of the Fisher Center for Real Estate and Urban Economics at the University of California at Berkeley, speaking at an Urban Land Institute gathering in Dallas.

And, he says, we are nowhere near the bottom of the subprime collapse:

He thinks foreclosures could rise as high as 35 percent of all subprime loans in the next 18 months, from 13 percent in late 2007.

Can you say “Holy Shit”?

Rosen expects continued tightness in commercial mortgage lending, too. And, he says odds are about 50-50 the recession will be deep, not mild.

Credit woes continue

Citigroup expects to lose $5bil and will cut an additional 9,000 jobs.

But, because this loss was “expected” and half the loss of the previous quarter, the Street treated this as a big positive. More proof of the separation of Wall Street from Main Street.

Meanwhile, some investment bankers and even an outspoken Fed governor think the Federal Reserve needs to do more to get banks to rein in exuberance.