On Tuesday I marveled at the pundits' predilection for declaring that all was well in the world of finance upon the slightest excuse. We didn't have to wait long to see Wall Streeters running for their Alka-Seltzer and Pepto-Bismol.

On Friday the world's largest insurance company American International Group (AIG) surprised its shareholders by announcing it had lost $7.81 billion in the first quarter of this year. According to the Financial Times, this was on top of a loss of almost $15 billion in the previous quarter.

AIG hopes to raise $12.5 billion to tide it over. About half of that will come from the sale of common stock, promising another blow to its shareholders.

The FT reporters wrote that "AIG’s poor first quarter results and capital raising plans will ... dispel investor hopes that turbulence in the credit markets has subsided. Business Week ran a story with the subhead "The insurance giant's ... first-quarter loss ... renews fears the credit crisis may still have a way to go." And Business Week reporter David Bogoslav wrote that "American International Group's (AIG) financial results ... sent a shock wave through the equity markets, renewing concerns that there's likely to be more fallout from the credit crisis."

As usual, the mortgage mess underlies much of AIG's loss. But last year the company was assuring the Nervous Nellies of Wall Street that "the company's exposure to subprime investments is limited." So in November, AIG was sued by a shareholder. According to Janet Whitman,

Doris Staehr charged that AIG concealed the extent of its exposure to the subprime crisis, with executives at one point claiming that the mortgage market would have to reach "Depression proportions" before hurting the company.

Hmm. Maybe they were telling the truth. Maybe the mortgage market has reached "depression proportions." But in any case, the company will be embroiled in lawsuits for the foreseeable future.

Of course with corporate executives it's hard to tell when they're lying. Unbridled capitalism, with Republican assistance, has produced a bumper crop of accomplished liars, cheats and fraudsters. In March four executives from another company and one executive from AIG were convicted of "conspiracy, securities fraud, mail fraud and making false statements to the Securities and Exchange Commission," for a bit of financial flimflam to prop up AIG's books—and that wasn't even related to the subprime debacle.

The officers come up for sentencing next week—

The defendants were former General Re CEO Ronald Ferguson; former General Re Senior Vice President Christopher P. Garand; former General Re Chief Financial Officer Elizabeth Monrad; and Robert Graham, a General Re senior vice president and assistant general counsel from about 1986 through October 2005.

Also charged was Christian Milton, AIG's vice president of reinsurance from about April 1982 until March 2005.

Ferguson, Monrad, Milton and Graham each face up to 230 years in prison and a fine of up to $46 million. Garand faces up to 160 years in prison and a fine of up to $29.5 million.

Let's see if they pull a sentence equal to Wesley Snipes'.

Related posts
Many in finance found to be SIV-positive (10/30/07)
The Depression Chronicles – 3: Money market funds (5/6/08)

Tags: news and politics recession depression finance credit crisis credit crunch

The first high school dedicated to preparing students for the front lines in the Nation's homeland security has gone from theory to planning in Wilmington....

Curriculum choices for students, who are to be called Cadets, range from SWAT (Special Weapons and Tactics) through prison guard, water rescue, paramedic, fireman, professional demolition and emergency response operator, according to a Board statement.

—The Business Ledger in "Charter school will focus on homeland security" (hat tip to Feminist Peace Network)

The new school's principal appears to embody all the forces you would expect to converge in such an undertaking—jingoistic militarism, know-nothing Christianity and corporate-style management—

The first Principal of the institution is to be Dr. Fred Fitzgerald. A retired Captain in the Marine Corps, Fitzgerald teaches English, speech and debate at New Castle Christian Academy. Fitzgerald is also a former executive for Coca Cola in Jacksonville, Florida, and a former Director of Operations for the Port of Wilmington.

The school where Fitzgerald presently teaches is forthright in its beliefs, which include—

• the Bible is the inerrant, infallible and inspired Word of God.
• all people are eternally lost; salvation is by faith in Jesus Christ apart from human works.
• a literal heaven for those who trust and receive Christ as Savior and a literal hell for those who reject Christ.

The students would be well advised to focus on their jackboot studies because they will certainly have no future in science.

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Addicting students to fascism (1/10/05)
Department of Defense teaches creationism in DoD highschools (4/15/05)
Christo-Republican cadres (6/22/05)
Dismantling public education at home and abroad (5/8/06)
Market Failure of the Day (5/23/06)

Tags: news and politics charter schools education religion

Forget the polls. Forget the pundits. If you want to know the future it's the Simply Appalling future you'll need to know. Basing our predictions on the presence of drugs in the voters' water, Simply Appalling has now called the last four Democratic primaries with 100% accuracy!

Last night as the talking heads of cable stayed past their bedtimes waiting for the final tabulations from Indiana because the race was "too close to call," I rested securely and knowledgeably in the arms of Morpheus. "Hillary by a nose," I thought as I cuddled up, though the Clinton win by some 20-odd thousand votes out of one and a quarter million was more by an errant hair than a whole nose.

The pundits of CNN, Fox and MSNBC declared the Obama-Clinton race effectively ended last night and launched into discussions of imagined behind-the-scenes negotiations between the two campaigns to divvy up the spoils. Will Obama offer to pay off Clinton's campaign debt? Will Bill Clinton be the messenger of peace between the two camps? Will Hillary insist on the Vice-Presidential spot on the ticket as the price of playing nice? Unless I can come up with some dope about the drugs they're on, we'll probably just have to wait and see.

Related post
Drugs in their water: Predicting Democratic electoral outcomes (3/10/08)

Tags: news and politics Indiana primary election forecast humor

I am always astonished at the optimism of economists and, if we can judge from the stock market, investors. At the slightest improvement of one economic indicator or another—or even a deterioration of an indicator that is "less than expected"—hallelujahs can be heard up and down Wall Street that are quickly echoed in the financial news.

This week's cause for jubilation was a slightly positive gross domestic product (GDP), which means—so we are told—that the economy is not in recession after all. The other bright spot was "better than expected" employment figures. Never mind that these statistics—and especially before they are "corrected"—are worth even less than the U.S. dollar. You'd be better off spending that dollar by buying a tip sheet at the race track.

I admire Paul Krugman, not as an economist but as one of the few writers in "big media" with any sense at all. So I was disappointed when he began yesterday's column with—

Cross your fingers, knock on wood: it’s possible, though by no means certain, that the worst of the financial crisis is over. That’s the good news.

Krugman's bad news is that—

as markets stabilize, chances for fundamental financial reform may be slipping away. As a result, the next crisis will probably be worse than this one.

Don't worry, Paul. We have a long way to go before the "markets are stabilized."

Today's chronicle relates to money market funds. Deborah Brewster leads off with—

Legg Mason, one of the world’s biggest fund managers, has reported its first loss in at least 25 years and become the first fund group to raise public capital to shore up losses arising from the credit crisis.
....

Legg, which manages money market funds, equities and fixed income, said investors pulled out a net $19 billion during the quarter, and its market losses amounted to $28 billion.

Part of the problem was those darned ol' subprime mortgages, so elegantly packaged into structured investment vehicles (SIVs) by the nation's top financial-mathematical wizards "to reduce risk." Christopher Condon reports that—

SIVs accounting for at least $31 billion in debt have defaulted in the past 10 months as the collapse of the subprime market caused investors to shun securities linked to the mortgages....

... Chief Financial Officer Charles Daley said the company bought $150 million of SIV-issued debt from its money funds, placing the assets on Legg Mason's balance sheet. The company is still liable for any future losses from $890 million of SIV-related debt it swapped with Barclays Plc in December.

In other words, the company had to bail out its money funds.

Legg Mason still controls almost a trillion in assets—

Assets under management fell 4.8 percent in the quarter to $950.1 billion as investors withdrew $19.2 billion and market losses reduced assets by $28.5 billion. Equity outflows were $17 billion while bond funds lost $7 billion.

Money market funds are touted as "almost like a savings account," but the money isn't government-insured—at least officially. A lot of little people have money in these funds, and the failure of a major fund would go a long way toward setting off a real financial panic among the general public.

Of course there's no expectation that Legg Mason or the funds under its control will actually fail (there never is, is there?). Moody's, the same rating service that gave all those packaged subprime mortgages a top-of-the-line AAA rating, is giving Legg Mason—

... [a] senior debt rating at A2, with a negative outlook. The money manager should stabilize in the next three to six months, and probably won't be forced to "provide material additional support to its money market funds beyond the current levels," Moody's said.

So with assurances like that, how could you go wrong?

Legg Mason plans to raise a billion dollars to tide it over. This is the company's second trip to the well—

In November, the company received $1.25 billion from private-equity firm Kohlberg Kravis Roberts & Co.

According to Wikipedia,

Money market funds seek a stable $1.00 Net Asset value (NAV). Since the 2a-7 rule was adopted [that restricts the kinds of investments that can be made] only one fund "broke the buck" in 1994, paying investors $0.96 per share. That fund was the Community Bankers US Government Fund and had invested a large percentage of its assets into adjustable rate securities. As interest rates increased, these floating rate securities lost value.

Quite likely, short of total economic implosion, Legg Mason and its ilk will survive—thanks to more stringent regulations than were imposed upon the investment banks. On the other hand, it's hard to see why the small-time saver would want to put money in any of them. They appear to be a relatively high-risk venture with the promise of very little gain.

Related posts
Many in finance found to be SIV-positive (10/30/07)
Must-View of the Day (11/17/07)
The Depression Chronicles – 2: A view from the vault (4/28/08)

Tags: news and politics finance recession SIV

May 6 — In less than 24 hours since I posted the Youtube video it is "no longer available." Amazing when you consider that it's been around since January 1. Fortunately the video is also available at Metacafe.com.

John McCain: Reverend John Hagee Roman Catholic Church-Hitler Co

Frank Rich says most of what needs to be said—

Mr. Hagee is not a fringe kook but the pastor of a Texas megachurch. On Feb. 27, he stood with John McCain and endorsed him over the religious conservatives’ favorite, Mike Huckabee, who was then still in the race.

Are we really to believe that neither Mr. McCain nor his camp knew anything then about Mr. Hagee’s views? This particular YouTube video — far from the only one — was posted on Jan. 1, nearly two months before the Hagee-McCain press conference. Mr. Hagee appears on multiple religious networks, including twice daily on the largest, Trinity Broadcasting, which reaches 75 million homes. Any 12-year-old with a laptop could have vetted this preacher in 30 seconds, tops.

Hagee has a much bigger audience than the Rev. Jeremiah Wright. But of course for McCain that's the point.

Related posts
Foreign Agents of the Day (7/24/07)
Quote of the Day: Jeremiah Wright — 1 (4/28/08)

Tags: news and politics Christian Zionism Israel Christian militarism Armageddon anti-Catholic evangelical

Warning: There is, as usual, some politically incorrect language at the Snapper. It is, however, the way real people talk.

It's been some time since I've given you an update on the doin's at the Pink Snapper. Since my last report Snapper men seem to have remained in the Obama camp, though Verl did mention the Rev. Wright controversy with concern. But Snapper men have rallied to the cry "Bro's befo' Ho's," and I truly believe it may help Obama. Never underestimate the power of a slogan, and especially a slogan as "politically incorrect" as this one.

While outsiders might take the view that the Sons of the Snapper are terribly racist and sexist, their behavior for the most part belies such an interpretation. The reality is that they're intensely antiauthoritarian and resent any attempt to tell them what they should think or say, which is why they don't like "libruls." Porkchop, for instance, remarked to me recently that he didn't think the government had any business telling people who they could sleep with. "Hell," he said, "I might wanna suck a dick one day, and who's to tell me I can't?!"

But I promised to survey the Snapper women's views on the election, and that I have done. Out of the 5 included in my in-depth survey, three were for Obama, one said she refused to vote for anyone (though I later learned she was an ex-felon and may have been just saving face since she can't vote at all) and the fifth said she would vote for Hillary, but only to save Obama's life.

That one caught me up short. I knew the thought was out there in the media. The Washington Times ran a story in January on Obama's security that caused some hand-wringing in the press. "[A]ssuming this topic continues to gain attention as the campaign goes on, how do you think the media should responsibly cover it?" asked one reporter-blogger. But I hadn't an inkling that it had filtered down to the Snapper. Marcia was serious. "I don't believe he'd make it to the inauguration."

This is pretty strange when you think about it. I've heard stories that some older Blacks are so convinced of the risk to Obama that they refuse to vote for him. The Washington Times story reported that one of the reasons Colin Powell refused a run for the Presidency was that his wife feared for his life. And now I find that a white Snapperette is of the same mind. Kinda makes you wonder what kind of country we're living in.

Previous post
Snatches from the Pink Snapper — 4 (1/29/08)

Tags: news and politics Barack Obama social libertarianism

To say “I am a Christian” is not enough. Why? Because the Christianity of the slaveholder is not the Christianity of the slave. The God to whom the slaveholders pray as they ride on the decks of the slave ship is not the God to whom the enslaved are praying as they ride beneath the decks on that slave ship. —The Rev. Jeremiah Wright addressing the National Press Club, April 28, 2008

Previous post
Quote of the Day: Jeremiah Wright — 2 (4/30/08)

Tags: news and politics Jeremiah Wright black liberation theology Christianity religion