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Archive for January 3rd, 2013

The de-leading of America

Posted by Charles II on January 3, 2013

Via Atrios, an article by Kevin Drum, MoJo.

The key takeaway:

A followup is here.

Posted in crimes, environment, science and medicine | 9 Comments »

Blackbox banks

Posted by Charles II on January 3, 2013

Via Ritholtz, an interesting article by Frank Partnoy and Jesse Eisenger, The Atlantic, on the financial system, especially investment banks. A sample:

Some four years after the crisis, big banks’ shares remain depressed. Even after a run-up in the price of bank stocks this fall, many remain below “book value,” which means that the banks are worth less than the stated value of the assets on their books. This indicates that investors don’t believe the stated value, or don’t believe the banks will be profitable in the future—or both. Several financial executives told us that they see the large banks as “complete black boxes,” and have no interest in investing in their stocks. A chief executive of one of the nation’s largest financial institutions told us that he regularly hears from investors that the banks are “uninvestable,” a Wall Street neologism for “untouchable.”

That’s an increasingly widespread view among the most sophisticated leaders in investing circles. Paul Singer, who runs the influential investment fund Elliott Associates, wrote to his partners this summer, “There is no major financial institution today whose financial statements provide a meaningful clue” about its risks. Arthur Levitt, the former chairman of the SEC, lamented to us in November that none of the post-2008 remedies has “significantly diminished the likelihood of financial crises.” In a recent conversation, a prominent former regulator expressed concerns about the hidden risks that banks might still be carrying, comparing the big banks to Enron.

The only justifiable reason to worry about the banks because there isn’t effective regulatory oversight. We all know what the situation is: in very round numbers, 10 million people were unexpectedly unable to pay their mortgages with a face value somewhere above $1T. A similar, though lesser, situation obtained for businesses. The actual losses those represented were much smaller, since (as long as it is maintained) a house remains an asset even if it is vacant. The true losses are the mortgage payments. Those might represent $100B/year, as long as the home or commercial property remains vacant. Those true losses have to be accounted for through reduced bank profits or taxpayer assistance. In what amounts to profitable banks (especially past profits) propping up banks through the Federal Reserve giving sweetheart loans, we are gradually working through the inventory of vacant homes, the losses to the banking system are falling, and things are getting back to normal.

Unless they are not. The problem is that, while we know that mortgage lending standards have improved, there isn’t much to keep them from going off the rails again. And certainly as long as the banks keep their books secret and their practices immune from regulatory oversight, investors will want exceptional assurances from them. Who wants to buy a pig in a poke?

Posted in banking, financial crisis | Comments Off

Thursday Morning News Roundup: Robots, Solar, Schleswig-Holstein, And Edina’s Vanished African-Americans

Posted by Phoenix Woman on January 3, 2013

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William Lazonick: If robots really stole jobs as Paul Krugman thinks, Japan’s unemployment rate (currently at 4.1%, which is just over half of ours at 7.7%) would be much higher than ours. Don’t blame robots, blame greedy CEOs and boards of directors.

– Siemens has installed a solar-powered cooling system in its offices in Bangalore, India. I suspect one reason for this, beyond being green, is the fact that India’s power infrastructure is very flimsy and only a fool would depend on that infrastructure without having a backup plan.

– The German province of Schleswig-Holstein is about one-eighth the size of Iowa in terms of land mass, yet it has nearly as much electrical power coming from its land-based wind installations as Iowa does from its own installations — and it is poised to double its existing land-based wind power capacity. And Schleswig-Holstein already gets nearly half its total energy from its wind farms. (Meanwhile, the cost of “too cheap to meter” nuclear plants just keeps going up.)

– The ritzy Minneapolis suburb of Edina was once a place where black settlers like Beverly Claiborne Yancey played prominent roles. But by the early 20th century their numbers were on the decline, leaving Edina to be lily-white for decades afterward. What happened and why?

So what’s going on in your neck of the woods?

Posted in Uncategorized | Comments Off

 
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