Clear as Mudd

People are panicking and not getting their stories straight. Take Daniel H. Mudd, former CEO of Fannie Mae (I am not making this name up) for example. Here's his quote:

“Almost no one expected what was coming. It’s not fair to blame us for not predicting the unthinkable.“— Daniel H. Mudd, former chief executive, Fannie Mae.

and here's a paragraph from the NY Times story where the above quote was the lead:

"So Mr. Mudd made a fateful choice. Disregarding warnings from his managers that lenders were making too many loans that would never be repaid, he steered Fannie into more treacherous corners of the mortgage market, according to executives."

Oh my.

Here's another good one also from the above article:

"When the mortgage giant Fannie Mae recruited Daniel H. Mudd, he told a friend he wanted to work for an altruistic business."

and later in the same article:

"Mr. Mudd collected more than $10 million in his first four years at Fannie."


Why do I feel like J. Fred Muggs would have probably done a better job??

The best paragraphs I read this morning

or: Bill Easterly knocks it out of the park.

"Development economics still bears the scars of the Depression. A prominent World Bank Growth Commission concluded in May that "fast, sustained growth does not happen spontaneously. It requires a long-term commitment by a country's political leaders," and "each country has specific characteristics and historical experiences that must be reflected" in the leaders' "growth strategy." Some at the U.N. still recommend the discredited Big Push strategy of state-planned investment.

How much poverty has endured because individual entrepreneurs were shunned in favor of the likes of the $5 billion state-owned Ajaokuta Steel Mill in Nigeria, which never produced a bar of steel? Or because African governments spend their time preparing World Bank-required national Poverty Reduction Strategy Reports instead of freeing space for innovators?

We will never know. But we do know that the free market has a long-run track record of creating prosperity -- even with the occasional crash. The Depression's deceptive intellectual legacy is that development flows from all-knowing states rather than creative individuals. Here's hoping that the backlash to today's crash will not spawn another round of bad economics for the poor."

Can I get a Amen?

My faith in Congress is renewed

As a semi-professional cynic, I was happy, but stunned to see the House rise up and vote down the Paulson plan. Could it really be that they were looking out for the country?

However, we now know that they didn't defeat the Paulson plan the first time because it was bad, they defeated it because it was not bad enough! All it took was another 400+ pages of text and $150 billion of pork for pretty much the same bailout to sail through.

Tax breaks for producing wooden arrows? Really? That should start short term business lending flowing, no?

Anyway, I just want to thank the US Congress for not requiring me to change any of my deeply held views about it.

bailout views, and blues

Two quick shots, on the bailout...er...rescue.

First in the Charlotte Observer (and a lagniappe)


Then on the CBS station here in Raleigh

If Hank Paulson were a tiger cub

Is it better to take the wrong medicine than to take nothing at all?

When Mrs. Angus and I have to give pills to Mr. Pluto, we wrap them in cream cheese and toss them up in the air. He leaps up and grabs them and down the hatch they go. Our political elites must have been watching as the Hank n' Ben rescue plan, rejected once by the House has now been wrapped in $150 billion of lard and tossed back out for the House to swallow.

As many distinguished economists have pointed out, this plan (eloquently described by John Cochrane as the mother of all bailouts) simply does not address the core problems (lack of capital in some banks and lack of short term lending) in any kind of direct or efficient way. In my view, it aims to address bank capital problems indirectly by bailing out investors.

I think the crisis is real and something will have to be done. I also think in some sense the whole process of this legislation's (non) progress has contributed mightily to the uncertainty and downswing in the markets. Passing the bill might at least remove that source of uncertainty and maybe even raise confidence a bit. It also seems clear that, to Hank n' Ben, this is the only option. None of the other approaches suggested for re-capitalization appear to be on the table.

The above paragraph notwithstanding, I am still against the bill and hope it does not pass. I think the piecemeal approach we've used so far can continue to work for long enough that a more sensible re-capitalization scheme can be implemented. I do understand though Krugman's point that time is running out and maybe we need to do this plan to buy enough time to get a better plan (as bizarre and expensive as that sounds).

Retail politics comes to Chez Angus

Last night around 5:00 our doorbell rings. I go to answer and low and behold it's Wallace Collins at the door wearing a Wallace Collins shirt and carrying Wallace Collins campaign materials.

WC: "Hello, I'm Wallace Collins" (sticking out his hand for a shaking).

Me: (shaking said hand vigorously) "Yes sir, you sure are".

WC: (getting together a package of stuff from me) "I am running for re-....."

Me (interupting) "I should tell you sir that I am not a registered voter"

WC: "Would you like to become one right now?"

Me: "No sir, it's not by accident or laziness or anything, I just don't vote."

WC: ??????????????

Me: "Look at it this way, I definitely won't be voting against you".

WC: (very pleased with this spin) Well, OK then, have a good day.

Me: "Good luck with your campaign sir".


(ps. if you haven't clicked on the link in the first line of this post, let me assure you it's well worth doing so)

Proof that we need the bailout

People, I've been ranting against the Hank n' Ben bailout, cheering on the House for rejecting it, advocating a continuation of the case by case piecemeal approach.

I was wrong.

This morning new data has come to light and I've had to change my position to "Please save us Hank n' Ben!!"

A date with Maria Sharapova was auctioned off and the winning bid was $10,000. I am not making this up. We have a serious crisis situation people, right here right now. It's panic time.

Does this remind anyone else of a great episode of Arrested Development, or is it just me?

Student: Win, Teacher: Fail

In no way is #2 a Fail for the test taker. I would give full credit for noob as the opposite of pro, but deduct heavily for live as the opposite of death, ding for spelling on #3 and indecisiveness on #5. Maybe homeschooling is not such a bad idea after all.

Crisis Links

Here are three articles that haven't gotten a lot of play that I think are well worth reading.

This is the most scholarly, it's by Ed Leamer (hat tip to Mark Perry).


This is a great rant.


This one explains that we need a financial Isiah Thomas to overpay for bad assets (note that it contains some non-family friendly pictures but is *awesome*).

Great moments in human stupidity

Every now and again a quote so awesome enters the world that, whether real or apocryphal, it goes down in history. For example:


"Everything that can be invented has been invented" --

Charles Duell in 1899 explaining why he should be out of a job as Patent Commissioner


"Governments don't go Bankrupt" --

Citicorp chair Walter Wriston showing the brainpower that led to the 1982 Latin American debt crisis


And now, direct from the current financial meltdown KPC is proud to present J.J. Cassano, the man who brought down AIG (circa summer of 2007):

“It is hard for us, without being flippant, to even see a scenario within any kind of realm of reason that would see us losing one dollar in any of those transactions.”


A few hundred billion maybe, but one? No way!

Attention Halloween shoppers

Get 'em before they're gone

Pelosi predicted the defeat of Paulson

Really, and it's on the interwebs. Check it out. Right about at the 1:55 mark she starts winding up and then says the days of bailouts are over!! I am not making this up.

Down Goes Paulson!

Wow. The House defeated the bailout 205 yea, 228 nay. I got my wish, except that it wasn't really the Dems so much that defeated the bill, but rather incumbents up for re-election who were listening to their constitutents:

"We're all worried about losing our jobs," Rep. Paul Ryan, R-Wis., declared in an impassioned speech in support of the bill before the vote. "Most of us say, 'I want this thing to pass, but I want you to vote for it — not me.' "

Now I just have to hope getting my wish doesn't bite me in the butt too badly.

Wha' happened to Wachovia?

Well obviously they got bought by Citigroup with a little help from that great hedge fund, the American Taxpayer. But why the collapse? Well in 2006 Wachovia bought Golden West Financial Corporation who's specialty was mortgages where you didn't have to make all the payments. I am not making this up. From the above linked story:

"Wachovia has been among the banks hardest hit by the ongoing crisis in the mortgage market. It paid roughly $25 billion for Golden West at the height of the nation's housing boom. With that purchase, Wachovia inherited a deteriorating $122 billion portfolio of Pick-A-Payment loans, Golden West's specialty, which let borrowers skip some payments."

Lordy pie. Now me and Mrs. Angus own us some AIG, some Wachovia, and Lord knows what else without even lifting a finger. I sure hope some of Wachovia's senior management is kept on the job. They are aces.

Is this a great country or what?

World's greatest sausage factory strikes again

It looks like the bailout is going through this time after Congress has ground up the Paulson plan and added their own secret herbs and spices. ummmmmmmmm, tasty. Here's some details from the AP wire story:

"A breakthrough came when Democrats agreed to incorporate a GOP demand — letting the government insure some bad home loans rather than buy them — designed to limit the amount of federal money used in the rescue.

Executives whose companies benefit from the rescue could not get "golden parachutes" and would see their pay packages limited.

The government would receive stock warrants in return for the bailout relief, giving taxpayers a chance to share in financial companies' future profits.

To help struggling homeowners, the plan requires the government to try renegotiating the bad mortgages it acquires with the aim of lowering borrowers' monthly payments so they can keep their homes.

"Nobody got everything they wanted," said Democratic Rep. Barney Frank of Massachusetts, chairman of the House Financial Services Committee. He predicted it would pass, though not by a large majority."

Cavaliers step in a big pile of Dooky

Wow. OU will be #1 and the Big 12 will probably have 3 teams in the top 5 in the next polls and Michigan beat a top 10 opponent but the big, big story in college football is that the Duke Blue Devils beat UVA snapping a 25 game conference losing streak and running their record to 3-1.

Congratulations Mungo!