I try to resist the temptation to spend too much time on the goings on in Washington, as that’s not what this blog is about, but sometimes I come across stuff I’ve just got to share.
A graphical representation of Obama’s relative manliness.
A story at NPR, of all places, about a homeowner rescue plan that the government once expected to help 400,000 families. Results have been somewhat disappointing.
I’ll try to get a real post up later today.
Last week I somewhat unfairly mocked two blogs for demonstrating a lack of understanding of what I consider basic financial principles. I say unfairly because, although I believe everybody should know this stuff, I would be the first to point out that tragically few do.
I am reminded of this because essentially the same point of confusion about interest rates and paying back loans that tripped up the bloggers appears to be confusing the Obama administration.
It seems that Goldman Sachs, the tiresomely successful former investment bank, wants to pay back the $10 billion in TARP money it got from the government last year. This isn’t a vague aspiration. Goldman has the money and is politely asking to whom the check should be made out.
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As would be expected from any serious economic downturn, Americans’ emotional reaction to the Great Recession is mostly a predictable collection of negative feelings: sorrow, fear, despair, regret, and so on. But there is another emotion in the mix that took me a little while to understand. It is anger. To be more specific, it is anger about losses in stocks and other financial assets.
It took a while for me to pick up on this partially because it is so alien to the
way I think about my investments. Not to go too far into unpleasant details, but I have lost a lot of money in the stock market in the past year. Really a lot. I am sad about this. I am regretful that I didn’t bail out when I could have. I even feel foolish about a few particular investments I chose. But I am not angry at anybody about it. Why would I be?
I knew what I was getting myself into. As readers of this blog know, my attitude to the stock market can be characterized as long term optimism tempered with a healthy dose of life-isn’t-always-fair. I knew that the market going down by half was not likely, but always a possibility. It had happened before. And I knew that although being a long-term investor increased my chances of a happy ending, nothing guaranteed one.
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There’s nothing I like better than a good satirical hoax. And today is the best day of the year for it, when blogs and news outlets do their best to provide gentle criticism of the state of things by (briefly) fooling their readers into believing something incredible.
Free Money Finance had a clever post about how it had been sold for “almost seven figures.”
My Dollar Plan announced that it was for sale. It did not give an asking price.
Weakonomics had a post revealing the author’s secret identity. He had me going until he claimed a passion for organic farming. I bet he doesn’t even shop at Whole Foods.
Cash Money Life had a poignant post about a government announcement that pennies would no longer be minted. Sadly, this is actually a good idea, which is why it didn’t work that well as a hoax.
Mighty Bargain Hunter had an absolutely hysterical (and ridiculous) post about a bill in Congress to reduce the Federal debt.
Not be outdone by the blogosphere, the Wall Street Journal carried a brilliant story about how congressmen and senators gave record bonuses to their staff last year. According to the report, “The money comes out of taxpayer-funded office budgets, and is surplus cash that would otherwise be forfeited if not spent.” As if!
On the other hand, I think the Times went too far with its story about pleasure boats being abandoned by their cash-strapped owners. C’mon guys, that’s just not believable. But kudos on the almost convincing fake photo.
AIG is (was?) one of the largest insurance companies in the world, with a finger in nearly every line of business that could be called insurance, including, fatally, credit default swaps, or CDSs. A CDS is a form of insurance in which the issuer (AIG) guarantees that a bond will be paid off even if the borrower defaults. AIG wrote massive amounts of this insurance on bonds backed by American residential mortgages, allowing holders of these bonds to treat them as very safe and stable AAA rated investments. In the clarity of hindsight,
AIG was amazingly foolish. They apparently did not consider that if the real estate market went south then all those mortgage bonds would be in trouble at the same time.
Of course it did go south, and AIG had hundreds of billions of dollars of insurance claims that it could not pay. This being one of the most extreme examples of Too Big To Fail that could be imagined, the US Government stepped in, took AIG over, and proceeded to pump in enough money to make good on its debts. There may have been, at first, a hope that AIG could be saved as a going concern, but it soon became clear that the only practical game plan was to stabilize the situation long enough to sell off the many sound operations that AIG owns and wind down, in as orderly and cheaply a way as possible, the CDS business. The money thus raised and saved won’t be enough to make the taxpayer whole, but it’s a lot better than nothing.
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Government | Frank Curmudgeon | 
April 17, 2009 8:00 am | 
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