Two Dollar Bill

Betting on Bedlam

2009-02-22T13:50:00.005-05:00

As the market continues to flush assets with the "bold look" of Kohler efficiency, I am hoping that Nate Silver revisits his post on FiveThirtyEight.com about the chances of an economic depression. Needless to say, the close of Q1 '09 is going to be ugly...

Honk If You Lack Market Confidence

2009-02-22T13:10:00.010-05:00

Welcome back to Two Dollar Bill. I have been neglecting my blog during a whirlwind job change, but it's very good to be back.

This amusing billboard defacement occurred in Lansing, NY, just outside of my hometown of Ithaca. Serious politics aside, the gentleman above is flashing a classic "Joe Biden" smile.

Ella Holden of Lansing photographed this billboard on Route 34B. Someone altered it in the past couple of weeks from its original message against reckless driving.

TARP Goes Tropical

2009-01-05T23:13:00.006-05:00

BailoutSleuth.com recently updated its master list of financial institutions that have either received or been approved for TARP funding: 282 companies and counting. Among the Top 50 TARP recipients are Popular, Inc. (a.k.a. Banco Popular) at #27 and First BanCorp at #33, both of which are based in San Juan, Puerto Rico. Apparently the Treasury Department has now taken it upon itself to "outsource" American taxpayer money to banks in U.S. territories. Will offshore banks in the Cayman Islands be the next vacation destination for TARP funds?

#27. Popular, Inc. (San Juan, Puerto Rico) - $935 million

#33. First BanCorp (San Juan, Puerto Rico) - $400 million

Scandalous

2009-01-04T18:32:00.010-05:00

Governor Bill Richardson (D-NM) has withdrawn his nomination to Secretary of Commerce amid yet another developing "pay to play" scandal.

A federal grand jury in New Mexico is investigating accusations that Mr. Richardson’s administration gave substantial contracts to a California financier who contributed heavily to the governor’s political action committees, The New York Times reported last month, citing a person familiar with the grand jury proceedings.

Questions about the contracts almost certainly would have been raised in Mr. Richardson’s Senate confirmation hearings.

Since August, federal investigators have been examining how the California company, CDR Financial Products Inc., won two consulting contracts in 2004 worth about $1.4 million to advise the state on a large bond issue.

Newark Murder Rate Dropped 30 Percent in 2008

2009-01-03T16:12:00.005-05:00

Click here for the NYT article. If you are looking for a political bull market in 2009, Cory Booker's stock is likely to continue its ascent (barring any scandals of course).

The GDP & the Insufficiency of Econometrics

2009-01-02T15:15:00.011-05:00

Click here for "GPD: RIP?". This article appears in Cornell Enterprise, the official academic journal of The Johnson School of Management at Cornell University.

The Gross Domestic Product is one of the most closely watched and often-quoted economic statistics. But it's also among the most misleading. The GDP is supposed to measure the total output of goods and services, and yet it fails to count the multi-billion-dollar black market and the enormous economic contribution of child rearing. It registers growth even when that growth is built on an unsustainable foundation of pollution, depleted natural resources, and ruinous borrowing. It can lend the appearance of widespread economic prosperity even as the ranks of the poor expand...

Happy New Year!

2009-01-01T14:07:00.003-05:00

Happy New Year!

Holiday Humor

2008-12-31T10:20:00.008-05:00

Click here for Economix's 2008 year-end financial-and-economic humor round-up.

Click here for The Big Picture's review of 2008 investment forecast guides.

BusinessWeek's #3 Worst Prediction About 2008:

"I think this is a case where Freddie Mac (FRE) and Fannie Mae (FNM) are fundamentally sound. They're not in danger of going under…I think they are in good shape going forward."
—Barney Frank (D-MA), Chairman of the House Financial Services Committee, July 14, 2008

Two months later, the government forced the mortgage giants into conservatorships and pledged to invest up to $100 billion in each.

Hasty Year-End Obituaries for Free Market Capitalism

2008-12-30T22:52:00.005-05:00

Don't bury the market just yet. Read Caroline Baum's Bloomberg Op-Ed, "Capitalism Is Worst System Except for the Rest."

Alas, government isn't some benevolent matriarch acting in the public interest, even if it knew what that was. It is a conglomeration of politicians acting in their own self-interest, guided by payoffs from special-interest groups. That's a poor substitute for the market's price signals, not to mention a guarantee of inefficiency and waste.

The Rise of the New Barter Economy?

2008-12-29T23:48:00.009-05:00

Welcome back to Two Dollar Bill. Unfortunately, we cannot count on the economy to make any New Year's resolutions. However, we can ponder what market trends 2009 will bring. Time magazine recently featured an offbeat article about the rise of alternative monetary currencies: "Alternative Currencies Grow in Popularity." The article even gave a hometown shout-out to Ithaca Hours. So, will the new year ring in a new barter economy in the midst of the recession? Only time will tell. In the meantime, however, if the Fed's printing presses should fail from excessive "quantitative easing", at least we will have other sources of funny money to play with.

Closer to home, "Ithaca Hours," with a livable hourly wage as the standard, were launched during the 1991 recession to sustain the economy in Ithaca, N.Y., and stem the loss of jobs. Hours, which are legal and taxable, circulate within the community, moving from local shop to local artisan and back, rather than leaking out into the larger monetary system. The logo on the Hour reads "In Ithaca We Trust."

Merry Christmas

2008-12-22T06:31:00.004-05:00

I will be signing off while celebrating the holiday with family. Two Dollar Bill will be back December 29th. Have a Merry Christmas!

Ice Skating: The Latest Victim of NY's Fiscal Crisis

2008-12-22T05:43:00.007-05:00

Click here for the NYT article about the closing of the skating rink at Empire State Plaza in Albany, NY.

Wallace/Cheney

2008-12-21T17:11:00.002-05:00

Click here for the transcript of Chris Wallace's interview with Vice President Cheney on "Fox News Sunday".

WALLACE: This is at the core of the controversies that I want to get to with you in a moment. If the president during war decides to do something to protect the country, is it legal?

CHENEY: General proposition, I'd say yes. You need to be more specific than that. I mean -- but clearly, when you take the oath of office on January 20th of 2001, as we did, you take the oath to support and defend and protect the Constitution of the United States against all enemies, foreign and domestic.

There's no question about what your responsibilities are in that regard. And again, I think that there are bound to be debates and arguments from time to time, and wrestling back and forth, about what kind of authority is appropriate in any specific circumstance.

But I think that what we've done has been totally consistent with what the Constitution provides for.

The president of the United States now for 50 years is followed at all times, 24 hours a day, by a military aide carrying a football that contains the nuclear codes that he would use and be authorized to use in the event of a nuclear attack on the United States.

He could launch a kind of devastating attack the world's never seen. He doesn't have to check with anybody. He doesn't have to call the Congress. He doesn't have to check with the courts. He has that authority because of the nature of the world we live in.

WWTD: What Would Thatcher Do?

2008-12-20T17:06:00.004-05:00

Click here for Andrew Wilson's Wall Street Journal Op-Ed.

Congress is Putting the "Auto" in Automatic

2008-12-19T23:42:00.016-05:00

TheHill.com reported that members of Congress will receive a $4,700 pay raise in 2009, amounting to an additional $2.5 million burden on American taxpayers. Unfortunately, the current legislation that governs Congressional compensation authorizes automatic annual pay raises. This policy conveniently only forces Congress to draft and vote on new compensation legislation if its members are inclined to either freeze or amend the current automatic pay adjustments...like say, during an economic crisis?!

In most professions, job performance usually has some bearing on compensation. But even with an abysmal approval rating, Congress is still getting a bump (albeit a small one). That said, Congressional compensation is hardly egregious in and of itself.

In the beginning days of 1789, Congress was paid only $6 a day, which would be about $75 daily by modern standards. But by 1965 members were receiving $30,000 a year, which is the modern equivalent of about $195,000.

Currently the average lawmaker makes $169,300 a year, with leadership making slightly more. House Speaker Nancy Pelosi (D-Calif.) makes $217,400, while the minority and majority leaders in the House and Senate make $188,100.

Yet, while the recession has lightened the wallets of most Americans, many of our lawmakers would be just fine without a pay raise. In fact, 2007 was a pretty good year for our bicameral brethren. They grew 13% richer, boasting a median net worth of $746,000, and approximately 60% of Senators and 40% of Congressmen are millionaires.

Pre-Election (Oct. 2008) Net Worth Leaderboard*

Senate:
1. John Kerry (D-MA) - $336,224,883
2. Herb Kohl (D-WI) - $241,545,513
3. Edward M. Kennedy (D-MA) - $103,560,020
4. Jay Rockefeller (D-WV) - $93,715,011
5. Frank Lautenberg (D-NJ) - $89,509,099
6. Dianne Feinstein (D-CA) - $84,171,162
7. Gordon Smith (R-OR) - $46,127,014
8. Olympia Snowe (R-ME) - $33,308,537
9. Claire McCaskill (D-MO) - $32,428,089
10. Elizabeth Dole (R-NC) - $31,421,472

House of Representatives:
1. Jane Harman (D-CA) - $397,412,077
2. Darrell Issa (R-CA) - $343,457,521
3. Robin Hayes (R-NC) - $173,409,173
4. Vern Buchanan (R-FL) - $165,748,714
5. Michael McCaul (R-TX) - $64,073,077
6. Nancy Pelosi (D-CA) - $62,468,047
7. Carolyn Maloney (D-NY) - $50,297,547
8. Rodney Frelinghuysen (R-NJ) - $47,350,092
9. Nita Lowey (D-NY) - $43,716,445
10. Gary Miller (R-CA) - $39,978,021

*Source: Center for Responsive Politics

Mo' Problems, Mo' Government

2008-12-18T14:28:00.004-05:00

Click here for Greg Mankiw's blog post about the historical growth of government during economic and political crises. Mankiw makes note of what looks to be a very interesting book written by Robert Higgs, Hobbesianly entitled Crisis and the Leviathan.

Credit Card Debt: A Study in Time Horizon Theory

2008-12-17T14:26:00.007-05:00

The NYT's Freakonomics blog had a very interesting post today about the "Fiendish Genious of Credit Card Minimum Payments."

New research by University of Warwick psychologist Dr. Neil Stewart finds that credit card holders pay down their debts more slowly when their statements suggest a minimum monthly installment.

This is certainly timely research given the credit crisis that has plagued global financial markets. Conceptually, however, it is hardly groundbreaking. In fact, many philosophers and political scientists - from Nietzsche to Adam Smith and Edward Banfield - have explored such socioeconomic phenomena within the framework of time horizon theory.

In The Unheavenly City, a 1970s examination of urban politics and class warfare, Banfield presents his time horizon theory: a spectrum of socioeconomic decision-making with "present-orientation" at one extreme and "future-orientation" at the other. Banfield suggests that the forces of "social hereditary" (i.e. cultural transmission) and "social machinery" (i.e. political and economic institutions and factors) produce a "distinct patterning of attitudes, values, and modes of behavior" that shape the time horizons of individuals (micro) and social classes (macro). Consequently, Banfield argues, while there are no "perfectly" present-oriented or future-oriented people, the upper and middle classes trend towards future-orientation while the working and lower classes trend towards present-orientation.

Ultimately, while minimum payment policies are most certainly debt marketing ploys, they are not forms of predatory lending. In fact, one could argue that they simply encourage people to exhibit market behavior to which they are already inherently and conditionally predisposed. Namely, the acceptance of future debt for present credit.

Has Your City/State Been Naughty or Nice?

2008-12-16T18:33:00.006-05:00

Goldman Sachs reported its first quarterly loss since the firm went public in 1999, losing $2.29 billion during Q4 of FY08. Before anyone - especially those in the public sector - shed any tears, they should remember that Goldman recently began recommending the short-selling of municipal bonds (i.e. betting against public debt). This is particularly troubling given the fact that Goldman is not only one of the top 5 U.S. municipal bond underwriters, but is also the primary municipal bond underwriter for 10 out of the 11 states it recommends betting against. Conflict of interest much?

The states on Goldman's "naughty list" currently are:

New Jersey
California
Florida
Nevada
Ohio
Wisconsin
Michigan
Illinois
Massachusetts
Connecticut
Hawaii

Oligarchy in the USA

2008-12-15T23:47:00.006-05:00

It's official. Caroline Kennedy will seek the Senate seat that will be vacated by Senator Clinton (D-NY) upon her confirmation to Secretary of State.

Buying a Main Street Image with Wall Street Cash?

2008-12-14T21:00:00.011-05:00

Click here for Saturday's New York Times feature on Senator Charles Schumer's (D-NY) Wall Street ties.

The Grinch that Stole Billions

2008-12-13T11:39:00.006-05:00

Click here for today's Wall Street Journal feature on Bernard Madoff.

"No haircut for me, thanks."

2008-12-12T16:38:00.005-05:00

The $15 billion bailout bill for Detroit's "Big 3" automakers died in the Senate. Why? Democrats are pointing to the political posturing of "conservative, southern senators" and the failure of the White House to get Republicans on board. Conversely, Republicans are pointing to the inability of Democrats to control one of their largest voting constituencies - organized labor. Both parties are generally right, so who's wrong? UAW President Ron Gettelfinger and his union brethren, who flat out refused to even consider wage concessions in 2009 in order to receive $15 billion of taxpayer money.

The Taxman Taketh Away

2008-12-11T13:25:00.004-05:00

Cutting Taxes to Promote Growth and Restore Fairness: A Memo to President-Elect Obama

Blago's Little Black Book

2008-12-10T13:29:00.005-05:00

ABC News is reporting that, according to federal law enforcement sources, Democratic Congressman Jesse Jackson, Jr. (IL-2) is the infamous "Senate Candidate No. 5". The saga continues...

Blago-Gate

2008-12-09T19:18:00.011-05:00

See below for the official documents from the U.S. Department of Justice:

Talk about delusions of grandeur...

Throughout the intercepted conversations, Blagojevich also allegedly spent significant time weighing the option of appointing himself to the open Senate seat and expressed a variety of reasons for doing so, including: frustration at being “stuck” as governor; a belief that he will be able to obtain greater resources if he is indicted as a sitting Senator as opposed to a sitting governor; a desire to remake his image in consideration of a possible run for President in 2016; avoiding impeachment by the Illinois legislature; making corporate contacts that would be of value to him after leaving public office; facilitating his wife’s employment as a lobbyist; and generating speaking fees should he decide to leave public office.