Bank of America Secretly Asking Congress for a Banking Industry Bailout; $739 Billion Worth of Toxic Waste Subprime Loans Threaten Entire System
February 24th, 2008Via: New York Times:
Over the last two decades, few industries have lobbied more ferociously or effectively than banks to get the government out of its business and to obtain freer rein for “financial innovation.”
But as losses from bad mortgages and mortgage-backed securities climb past $200 billion, talk among banking executives for an epic government rescue plan is suddenly coming into fashion.
A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.
The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.
To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.
“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.
In practice, taxpayers would almost certainly view such a move as a bailout. If lawmakers and the Bush administration agreed to this step, it could be on a scale similar to the government’s $200 billion bailout of the savings and loan industry in the 1990s. The arguments against a bailout are powerful. It would mostly benefit banks and Wall Street firms that earned huge fees by packaging trillions of dollars in risky mortgages, often without documenting the incomes of borrowers and often turning a blind eye to clear fraud by borrowers or mortgage brokers.
A rescue would also create a “moral hazard,” many experts contend, by encouraging banks and home buyers to take outsize risks in the future, in the expectation of another government bailout if things go wrong again.
If the government pays too much for the mortgages or the market declines even more than it has already, Washington — read, taxpayers — could be stuck with hundreds of billions of dollars in defaulted loans.
But a growing number of policy makers and community advocacy activists argue that a government rescue may nonetheless be the most sensible way to avoid a broader disruption of the entire economy.
Ralph Nader Running for President
February 24th, 2008The Obama cult is experiencing a Scanners moment right about now.
Via: Washington Post:
Consumer advocate Ralph Nader said on Sunday that he is launching another long shot independent campaign for president of the United States.
Nader, who will turn 74 this week, announced his presidential bid on NBC’s “Meet the Press” saying that neither the Democrats nor the Republicans are addressing the problems facing Americans.
Nader also ran for president in 2000 when he got about 2.7 percent of the national vote as the Green Party candidate and played a role in deciding the final presidential outcome. He also ran as an independent in 2004 and got only a tiny fraction of the vote.
Many Democrats blame Nader’s participation in the close race between Democrat Al Gore and Republican George Bush in 2000 for tipping the election in favor of Bush. They believe that but for Nader’s name on the ballot in Florida, Gore would have been the clear winner and president today instead of Bush.
Nader called Washington “corporate occupied territory” that turns the government against the interest of its own people.
“In that context I have decided to run for president,” Nader said.
U.S. Department of Energy and Partners Test Enhanced Geothermal Systems Technologies
February 24th, 2008Hmm. DOE is allocating a whopping $1.6 million to this project. (Sarcasm.)
The cost of that crashed B-2 boondoggle bomber represents the funding equivalent of doing the geothermal research described below 750 times over.
Oh well, as oil production declines, there will still lots of it to be sold at over $100 per barrel.
In fact, the less oil, the better; for the oil companies and their shareholders, that is.
Via: U.S. Department of Energy:
DOE has embarked on a project with a number of partners to test Enhanced Geothermal Systems (EGS) technologies at a commercial geothermal power facility near Reno, Nevada. EGS technology enhances the permeability of underground strata, typically by injecting water into the strata at high pressure. The concept was initially developed to create geothermal reservoirs in hot underground strata where no water existed—a technology called “hot dry rock”—but has since been extended as a means of enhancing the performance of existing geothermal reservoirs. Under the DOE project, EGS technology will be tested in a well at the 11-megawatt Desert Peak facility, which is owned by Ormat Technologies, Inc. The well is currently not able to produce commercially useful quantities of hot geothermal fluid, but with the help of EGS, the site is thought to have the potential to produce 50 megawatts of power or more.
DOE, Ormat, and GeothermEx are leading the research and development project, with the participation of the University of Utah, TerraTek, Pinnacle Technologies, the U.S. Geological Survey, and three of DOE’s national laboratories: Idaho National Laboratory, Lawrence Berkeley National Laboratory, and Sandia National Laboratory. DOE is providing $1.6 million to support the project. In addition to the current work on the sub-commercial well, the project participants are planning to use the EGS facilities at Desert Peak as a potential test site for future technology developments.
Related: MIT: Geothermal Power Could Meet World’s Annual Energy Needs 250,000 Times Over
Related: Geothermal Power in Alaska Holds Hidden Model for Clean Energy
B-2 Stealth Bomber Crashes: $1.2 Billion Goes Up in Smoke
February 23rd, 2008Via: AFP:
The US military was investigating on Saturday after a B-2 stealth bomber crashed on take-off from the Pacific island of Guam, the first such incident involving the futuristic craft.
Both pilots on board ejected safely as the 1.2-billion-dollar radar-evading plane, with its distinctive triangular shape, went down at Andersen airbase on the remote island, the US air force said.
“Two pilots from the 509th Bomb Wing were on board and ejected. They have been evaluated by medical authorities and are in good condition,” it said.
“Emergency responders are on scene. A board of officers will investigate the accident,” said the headquarters of the US air force in the Pacific.
It was the second US air force crash this week after two F-15C jets collided during training over the Gulf of Mexico on Wednesday, killing a fighter pilot.
Crowds gathered at the crash site after the bomber, one of just 21 in the air force inventory, went down at about 10:45 am (0045 GMT).
A thick plume of smoke rose over the airbase and officials closed one of its two runways, diverting planes to Guam International Airport, the Pacific Daily News website said.
BBS: The Documentary
February 23rd, 2008“When I was a boy, we dialed into bulletin board systems,” I can imagine myself telling my son someday…
And we did! Monochrome green (or amber) text, slowly running across the screen, was pretty much it in those days. But, wow, there was an endless, mysterious world out there; in the machine. I don’t know why the machine world seemed so much more interesting than the real world, but it was to me. Maybe, computers just represented an alternative for those of us who didn’t have much interest in sports or school elections.
I think I was about eleven years old when I dialed into my first system, which, I can still remember, was CompuServe. I quickly learned about the BBS movement and started hanging out with a group of miscreants, slobs, weirdos and no-shit hardcore hackers who had day jobs as programmers or unix machine operators at defense companies, banks, game companies, etc. It was a weird mix, man. One guy was getting a PhD in math. Another guy, the best programmer of the bunch (who’s still writing games), didn’t graduate from high school. One dude was blind and had a Braille terminal. The amazing thing was, nobody gave a single, solitary rat’s ass about what “normal” people cared about; TV, sports, hygiene etc.
Decades later, here I am, still looking at a screen in the middle of the night, connected to something… out there, in the machine.
I’ve been watching parts of BBS: The Documentary online and it’s incredible how the film brings it all back. If you were a BBS head in the 1980s, you’ll see bits of yourself in the interviews and probably laugh your ass off remembering those days.
The film is pretty arcane. I don’t know how much it will resonate with people who weren’t involved. I think it would be worth checking out just for the entertainment value of the characters alone, but that’s just me. More normal people might recoil in horror and run from the room. Younger people, who take Internet based technologies for granted now, will get a kick out of how things used to be.
Amazon: BBS: The Documentary:
Before the Internet became the way to connect to the world through a computer, life had already started to move online. Throughout the planet, regular folks were taking their new home computers, connecting them to a modem and a phone line, and starting Bulletin Board Systems, or BBSes. Once numbering in the tens of thousands, these “Dial-up Bulletin Boards” have mostly disappeared and mostly been forgotten… except by the people who lived, loved and worked on them. Director Jason Scott travelled thousands of miles and filmed over 200 people about their stories of the BBS, resulting in this 8 episode, five and a half hour long mini-series. The three DVDs in the set are region free, copy protection free, and Creative Commons licensed. They’re also a lot of fun as the various episodes cover different aspects of the BBS Story. Episode titles include BAUD, ARTSCENE, SYSOPS AND USERS, NO CARRIER and MAKE IT PAY. “BBS: The Documentary” covers the era of the BBS, one caller at a time.
More: bbsdocumentary.com
Cryptogon Readers Send Contributions
February 23rd, 2008AH $20
MS $20
JW $100
Thank you.
New World Record for Solar-to-Grid Conversion Efficiency
February 23rd, 2008Vis: PhysOrg:
On a perfect New Mexico winter day — with the sky almost 10 percent brighter than usual — Sandia National Laboratories and Stirling Energy Systems (SES) set a new solar-to-grid system conversion efficiency record by achieving a 31.25 percent net efficiency rate. The old 1984 record of 29.4 percent was toppled Jan. 31 on SES’s “Serial #3” solar dish Stirling system at Sandia’s National Solar Thermal Test Facility.
The conversion efficiency is calculated by measuring the net energy delivered to the grid and dividing it by the solar energy hitting the dish mirrors. Auxiliary loads, such as water pumps, computers and tracking motors, are accounted for in the net power measurement.
Most Upside Down Home Owners Since Great Depression
February 23rd, 2008Via: ABC News:
It’s a real estate reality facing millions of Americans. Their homes are now worth less than what they owe on them.
Mark Zandi, chief economist of Moody’s Economy.com, said, “The last time we saw so many homeowners with so many home values that were worth less than the amount of mortgage they owed was back in the Great Depression.”
…
But those same economists we talked with today say this 10 percent figure — the 8 million people who are paying more than their home is worth — is only going to rise.
Wall Street Bank Run
February 23rd, 2008Via: Washington Post:
It doesn’t look like an old-fashioned bank run because it involves the biggest financial institutions trading paper assets so complicated that even top executives don’t fully understand the transactions. But that’s what it is — a spreading fear among financial institutions that their brethren can’t be trusted to honor their obligations.
Frightened financiers are pulling back from credit markets — going on strike, if you will — to escape the unraveling daisy chain of securitized assets and promissory notes that binds the global financial system. As each financier tries to protect against the next one’s mistakes, the whole system begins to sag. That’s what we’re seeing now, as credit market troubles spread from bundles of subprime residential mortgages to bundles of other kinds of debt — from student loans to retailers’ receivables to municipal bonds.
Investors are nervous because they aren’t sure how to value these bundles of securitized assets. So buyers stay away, prices fall further, and the damage spreads.
The public, fortunately, doesn’t understand how bad the situation is. If it did, we might have a real panic on our hands.
Cartoon: The Subprime Primer
February 22nd, 2008The firm externalized the financial risks of being in this business by selling all of the paper they generated into the secondary mortgage market at the end of every month. This is an institutional marketplace that trades in commoditized mortgages, “debt paper.” In other words, at the end of each month, the firm had none of the impossible-to-payback-negative-amoritization-no-money-down loans on their books!
I handled some issues for the secondary marketing department, even, would you believe, for the person who pulled the trigger on these paper dumps at the end of the month.
“Who buys this stuff?” I asked.
“Oh lots and lots of people. Well, banks and insurance companies mostly. [Large European Bank name deleted] buys a lot of it.”
Pookie sent this hilarious and terrifying cartoon about the subprime mess. She found it on Jim Sinclair’s Mine Set.
The Subprime Primer WARNING: Includes naughty words.
