Akward Moments

The Federal Government as a Hedge Fund

Arnold Kling Explains:

"What we do know is that the risk premium on Treasuries is really, really low. We are like the hedge fund of last resort for the world's investors. Hamilton says the hedge fund should buyTIPS and foreign securities (I assume he means foreign government bonds). That's fine. The hedge fund should also buy debt from Freddie Mac and Fannie Mae, because that debt still trades at a risk premium relative to Treasuries, even though taxpayers are already on the hook for it.

The hedge fund should buy good stuff. Let the bad stuff sit and rot, or collect it as part of the process of shutting down failed institutions."

He was expanding on an idea floated by James Hamilton over at Econbrowser. Anyhow, it has come to pass.

Bush Pardons

I haven't looked at many of the pardons in detail but one of the things that is striking is the extent to which the pardons relate to drug related offenses.  In fact he just pardoned John Forte of the Fugees for Coke possession (lots of Coke).  But the shame in this is that Bush could have done something in office to push for more rational sentencing guidelines regarding non-violent drug crimes but didn't do a blessed thing.

Frighteningly Stupid Article

Here's a NY Times article analyzing whether the turnaround of the steel industry can be a good model for the automobile industry.  The article discusses the similarities between the too industries, namely legacy costs and how banktrupcies and the resulting reorganizaitons were good for the steel industry.  It investigates where the comparison between the two industries dissolve, steel is a commodity and thus price is king; cars are a consumer good, consumer perception is important, not just price.  It fails to mention that the demand for steel exploded in the last decade because of the rapid growth of China and to a lesser extent India's economy.  The market for steel grew tremendously.  Right now, China consumes roughly a third of all steel produced.  You throw in the rest of Asia and you have a majority of all steel consumption.

Imagine a counterfactual, China's growth didn't occur to the extent it did.  Would the steel industry's reorganization have been adequate to stay competitive?  Maybe, but such growth in demand can hide a multitude of sins.  Just ask a mortgage broker.

More on Coleman-Franken Recount

When I read things like this I tend to think that regardless who ultimately wins, nobody will view it as a legitimate victory.  This race has stunk to high hell.  And this surprises me because Minnesota is one of the few states in the country that does have successful bureaucracies.

Geithner to Treasury

Also, Larry Summers will be taking some "senior role" in the White House (I suggest his title be economic consigliere).

BTW: as of this posting this wasn't anywhere on the CNN.com frontpage.  Sort of bizarre given that this is typically one of the prestigious cabinet posts (next to SecDef and State) and it's importance has been amplified by the financial meltdown and Secretary Paulson's incompetence.

Argghhh! PeP Links: Pirates Edition

Here is a piece from the Times Online (home of my favorite Car Writer, also Top Gear Host, Jeremy Clarkson) on the recent rash of, er, Piracy.

Somali pirates are demanding a $25 million ransom for a seized Saudi Super Tanker.

Here is an article that discusses difficulties the Yemenis have encountered with Piracy.

Matt Yglesias discusses the problems with policing piracy on the open seas, namely, the ocean is very, very big and ships aren't so big thus making policing cost prohibitive for many nations.  He also talks about how we screwed ourselves by encouraging the Ethiopian invasion of Somalia which has increased the lawlessness of Somalia.  A nation without order typically does wonders for breeding terrorism and piracy.  Who would have thought?

Here is a Slate Explainer on Piracy.

Here's a Boston Globe article on Peter Leeson (a GMU economist) who is obsessed with Piracy and its organizational structure (hint: democracy and workers comp).  Here is an academic article by Leeson fleshing out his take on Piracy and it's organizational structer.  Here's the intro:

"This article investigates the internal governance institutions of violent

criminal enterprise by examining the law, economics, and organization

of pirates. To effectively organize their banditry, pirates required

mechanisms to prevent internal predation, minimize crew conflict,

and maximize piratical profit. Pirates devised two institutions for this

purpose. First, I analyze the system of piratical checks and balances

crews used to constrain captain predation. Second, I examine how

pirates used democratic constitutions to minimize conflict and create

piratical law and order. Pirate governance created sufficient order and

cooperation to make pirates one of the most sophisticated and successful

criminal organizations in history."

Will the US Govt be Proud Owners of CitiGroup

Here is Brad DeLong advocating Nationalization.

Here John Hempton of the Bronte Capital blog details what the process would look like.

Here John Hempton explains why Sheila Blair (FDIC) tried to force an inferior deal between Wachovia (and for the taxpayer) and Citigroup as opposed to the resulting deal with Wells Fargo.

The One Argument for the Auto Bailout

The one argument for the auto bailout that gains some traction with me is essentially as viewing it as a jobs program, or in other words keeping folks off the unemployment rolls till less turbulent times.

More on Autos

Over at the Center for Global Development they have a good post on how policy distortions (the light truck exception to the CAFE, tax subsidies to oil companies, and the smallness of our gasoline taxes) have led to our prevalence of non-fuel efficient cars.

Matt Yglesias makes the argument for congestion pricing in Urban areas.  He makes the point that those who would pay the fee ultimately are the beneficiaries as they experience less congestion and spend less time commuting.  Duh, but nonetheless it bears repeating.

The Wall Street Journal has an article discussing auto execs claiming for the umpteenth time that they can't go into bankruptcy because there are no funds availbe, thus they need the bailout.  This logic is maddening.  Supporters of the bailout agree with the fact that the Big Three need to be streamlined and reorganized.  They also agree that chapter 11 is an optimal means of achieving a reorginazation. They proceed to claim that Chapter 11 is not a viable option because of the lack of financing available, and then turn around and say that the Government needs to bailout the Big Three, or put in other words, provide the financing they are not able to obtain on their own in credit markets.  But if the government can provide the Big Three with funds for a bailout it could just as well provide DIP financing.  

More Appointments

Daschle for HHS, Penny Pritzker for Commerce, and Janet Napolitano for DHS.

More on the Big Three

Mitt Romney has a good op-ed on the proposed bailout. He opposes it and suggests bankruptcy and appears to suggest the government provided the Debtor in Possession financing.

Orzag to Head Up OMB

Matthew Yglesias makes the observation that Orzag would be the highest ranking blogger in the US government. When he is not maintaining his blog he is in charge of the CBO.

Obama Possibly Close to Decision on AG

It looks like Obama will offer the position to Eric Holder.

Big Three Wages

Freak Show

Alan Keyes is suing to establish that Obama was not born a U.S. Citizen thus disqualyfing him from the Presidency.  I sort of thought this fever swamp issue was put to rest when Obama's birth certificate from Hawaii surfaced.  The Freak Show refers to Alan Keyes, not Dear Leader.

Coleman Certified as Winner

Norm Coleman is certified as the election winner with a 215 vote margin, the recount begins tomorrow.

Clinton Conspiracy Thoughts

I wonder if Obama's thinks Hillary won't be able to survive vetting, or namely, that the vetting would bring up enough juicy stuff on Bill that it might undermine her? This is all idle speculation and a bit stupid as she did seek to become President! However, the Hillary campaign refused to disclose their tax data or any donor information regarding the Clinton Global Initiative.

From Capitol Hill to Foggy Bottom

Hillary is slated to become the next Secretary of State.

The National Review

Here's an article on how the National Review has become increasinly crappy and hacktastic.

Chapter 11 for GM

The best argument I have heard for keeping GM out of chapter 11 is that they won't be able to obtain DIP (Debtor-in-possession) financing and thus will actually end up in Chapter 7.  However, if this is the reason why they need a bailout as opposed to bankruptcy couldn't the government provide the DIP financing?  Then you can sustain GM through the reorganization, and more importantly, a reorginazation in fact occurs.

Update: Brad Delong suggests the government provide DIP financing.

Stretching Those 15 Minutes

It appears that Joe the Plumber has a blog.

NHTSA Uses the Web

NHTSA, the National Highway Traffic Safety Administration, the kind folks who make your auto manufacturer issue a recall have created a free email subscription service where can keep tabs on whether your car has a recall or a technical service bulletin.  This is a handy feature if you own a Volkswagen like yours truly.

Bankruptcy not Bailout

Stephen Bainbridge has a good rundown on why GM should go into bankruptcy as opposed to receiving a bailout.

More on the Franken-Coleman Recount

The Big Question, a Star Tribune blog, attempts to explain some of the newly appearing votes. This is where I have always thought the Democrats have shined in terms of shenanigans. Republicans subtract, Democrats add. I honestly think Franken will win at this point whether or not there were in fact enough votes in the first place as it seems the votes will appear one way or another.

Putin Plotting

to get back in the Kremlin in 09.

The Big Three Up the Ante

Now they are asking for an additional $50 billion as opposed to an additional $25 billion.

PeP Links: Transition and Conservative Crackup Edition

Transition:

Here is the bio on one of the frontrunners for the next Supreme Court vacancy.  When my employer (Uncle Sam) was being sued he was on the panel and had an excellent grasp of the record and asked really inciteful questions.

Here is the Scotus Blog with a more thorough list of possible SCOTUS appointments.

Here is a piece from TNR on Tim Geithner who is a short lister for the Treasury.  Larry Summers is mentioned also as a likely candidate.  I tend to think Summers has a greater chance if for no other reason than that Geithner is currently pretty busy as president of the Fed Reserve Bank of New York where he is playing a central role in trying to contain the financial meltdown.  Paul Volcker is another contender.

It appears Rahm Emanuel will be Obama's  Chief of Staff.

John Podesta, former Clinton Chief of Staff, is the head of the Obama transition team and is a candidate for energy secretary.

Conservative Crackup:

Here is a panel of conservatives on the conservative crack up and what to do moving forward. My favorite suggestion is Tucker Carlson's that we actually put forth a candidate that has demonstrates some degree of fluency in English.

Over at Culture 11 Conor Friedorsdorf proposes a series of panels to discuss the political challenges facing conservatism and possible policy responses.  I love the idea for the title- Conservatism- What the F-ck? (Obviously the liberal equivalent would be: Liberalism- What the Fuck?)

And This Just Cracks Me Up:

The boys over at Powerline demanding to know when Obama will back away from this whole global warming hoax.

More Loans for Big Three

Speaker Pelosi is apparently considering giving the big three another $25 billion in loans.  This is absurd, let them go into bankruptcy.

I Love Alaska

They haven't called the Alaska senate race but it looks like Ted Stevens won. Ted Stevens was recently convicted on corruption charges.

Recount in MN

Coleman is leading with a couple hundred of votes. Since the margin of victory is so small there will be an automatic recount.

The Most Unconvincing Spin Award

Goes to Robert Novak.  I love this quote in particular:  

"He may have opened the door to enactment of the long-deferred liberal agenda, but he neither received a broad mandate from the public nor the needed large congressional majorities."

I think it is clear that Obama has a mandate, what he does not have is much fiscal room to maneuver.  

Barack Obama Wins

Nobody has called it yet but it is clear that he will win in a walk. It has been clear for awhile but nonetheless people are paying attention tonight as if it were going down to the wire.

No Shame in Staying Home

I am going to go and vote this morning and encourage all of my readers to as well (that's five votes right there).  However, there is something of a fetish made about participation without any observation made regarding the quality of that participation.  If you don't pay any attention to politics, have no notion about our system of governance, or the candidates who are attempting to win your vote, maybe the best and most responsible thing you could do is stay home.  We have a very low participation in voting when compared to other developed countries, but there is also much wider spread apathy regarding governance.  Anyhow, here is an old fortune column from Greg Mankiw on the virtues of not voting for those that aren't terribly engaged.

Your Vote Doesn't Count

Here is Gordon Tullock on why you shouldn't vote.

You Stay Classy Kentucky

Check this out, this is horrible.

The Difficulites with a Homeowner Bailout

David Leonhardt has a good article on the difficulties surrounding a bailout for homeowners. Leonhardt believes a bailout will incentivize those underwater on their mortgage but able to make payments to conveniently fall behind. Such a plan does seem rife with perverse incentives.