The Credit Crisis: It's All About Risk

If moving pictures work better for you than text this infographic-style video will clarify the economic collapse. It all came down to reselling risky repackaged mortgages.

Hey, 1999. What the fuck?

Back in the late 1990s Citicorp and Travelers Insurance merged to form Citigroup, currently known as Citi. Citycorp was the successor of the long line of banks started by City Bank of New York in 1812, and Travelers a consortium of insurers and creditors. The merger was unprecedented in its time because those two financial animals—bankers and creditors—were prohibited from sharing assets by the Glass-Steagall Act of 1933. That act separated bankers and brokers in order to prevent the wild speculation that inflated the stock markets leading to the crash of 1929 and the Great Depression.

The act was repealed in 1999 by the Gramm-Leach-Bliley Act, in large part to allow for mergers such as Citigroup to stand. Well guess what:

The repeal enabled commercial lenders such as Citigroup, which was in 1999 then the largest U.S. bank by assets, to underwrite and trade instruments such as mortgage-backed securities and collateralized debt obligations and establish so-called structured investment vehicles, or SIVs, that bought those securities. It is believed that the repeal of this act contributed to the Global financial crisis of 2008–2009.

You can actually go back and read the coverage from the New York Times, including former Treasury Secretary and current White House National Economic Council director Larry Summers's pronouncement that "this historic legislation will better enable American companies to compete in the new economy." But the most significant part of the report is this small prognostication:

"I think we will look back in 10 years' time and say we should not have done this but we did because we forgot the lessons of the past, and that that which is true in the 1930's is true in 2010," said Senator Byron L. Dorgan, Democrat of North Dakota. "I wasn't around during the 1930's or the debate over Glass-Steagall. But I was here in the early 1980's when it was decided to allow the expansion of savings and loans. We have now decided in the name of modernization to forget the lessons of the past, of safety and of soundness."

Now here we are.

Real Time with Sarah Silverman

This is the first frank interview with Sarah Silverman I've seen. She talks about her finances and the economy, The Great Schlep, her show, divas, the Playboy Mansion, and the art of being a comedian.

An interview with one of the victims of Bernie Madoff. Ronnie Sue Ambrosino had all of her retirement funds invested with Madoff. Now, all she and her husband have to their names is a mortgaged motorhome.

Madoff has plead guilty and faces up to 150 years in prison.

A few notes on the stimulus

So the 2009 stimulus bill (or the American Recovery and Reinvestment Act of 2009, or the ARARARARARA) looks like it'll bounce its way out from between the House and Senate soon and actually pass. The Washington Post published this cool infographic showing the distribution of the bulk of those 819 billion little dollars.

The Republicans kept pressing for a 60/40 split in favor of tax cuts, but as you've heard in their fury and can see in that chart the Democrats plopped down big balls of financial distribution split almost 80/20 in favor of spending. Most of those gargantuan fiscal sacks relate to housing, energy, health care, education, food assistance and infrastructure (like highway and bridge repair). In other words, the majority is geared towards investment in programs neglected by the Bush Administration for eight years as it tried to fulfill Grover Norquist's dream of shrinking government "down to the size where [he could] drown it in the bathtub".

Even though most of the bill is stimulative some (relative) pork weaseled its way in as reported today by the Post. Some highlights include funding for clean coal, fish hatcheries and tax breaks for golf carts and electric motorcycles. Still:

Stimulus advocates say the GOP complaints are overheated and generally focus on projects that Republicans dislike for ideological reasons. Chad Stone, chief economist at the liberal-leaning Center on Budget and Policy Priorities, defended the bill. "The overwhelming bulk of what is in the package is effective and well-designed stimulus," he said.

Looking back at that infographic the gray ball all the way on the right ($82.1 billion for "Tax credit payments") constitutes the part of the stimulus people would most likely compare to the rebate checks distributed last year. Instead of a lump sum check that money gets spread out so that starting in June you'll see between $5 and $20 knocked off of your payroll taxes for about two years. So now instead of running out and buying that celebrity-narrated GPS even though you can't afford to put gas in your damn car maybe you'll be able to go out to dinner once every couple of weeks instead. I hear sushi's pretty good.

JPG Magazine is No More (for Now)

On Friday JPG Magazine's parent company 8020 Media announced it will be shutting down in a few days due to financial stress. Just when I was considering a subscription too, damnit. There is a possibility the magazine could get picked up by a third party.

JPG always displayed exceptional content from its subscribers and supporters and brilliant little pieces about photography advice and recommendations, such as this tribute to the Spinshot 35S 360° film camera.

President-Elect Obama's First Web Address

President-Elect Obama will be using YouTube as a new way of distributing the now-common weekly presidential radio address. You can catch the latest address on the new Office of the President-Elect's homepage Change.gov (a reworking of the original BarackObama.com). In this first release he urges the upcoming special session of Congress to increase unemployment benefits and restates the more critical and urgent promises made during the campaign.

Colbert drops a hot steaming metaphor

Last Thursday Stephen had a sexy way of explaining the credit crisis to Stephen in "Formidable Opponent":

None of these companies are safe to mate with now. You see, a terrible credit disease has infected the market. It's like, um... business syphilis.

Well how did that happen?

Whelp, it started with a few slutty lenders who jumped into bed with some really sub-prime mortgages. The next thing you knew you had a credit orgy; people were swapping derivatives, A.I.G. was all up in Fannie Mae, Wachovia took on Golden West, then it turned around and got it on with AG Edwards, then Citigroup had 'em all at once. It was a steaming pile of hot slapping assets. No one knew who was bundling who, but if felt good and everyone was doing it. And in the end, let's just say the market blew its liquidity.

Watch the whole clip below:

Campbell's Soup stocks up amid financial crisis, market plunge

"For some reason it is a good time to be selling meals that cost 89 cents." - Stephen Colbert, The Colbert Report 10/1

Finance sector gave 51 percent more to House bailout backers

From Democracy Now!:

The Center for Responsive Politics is reporting members of the House of Representatives who supported bailing out the financial sector have received 51 percent more in campaign contributions from the finance, insurance and real estate sector in their congressional careers than those who opposed the emergency legislation.

This cuts across both parties. Although correlation is not causation, there was a vote in 1999 to lift certain banking restrictions that had suspicious statistic similarities. Hey, I just alliterated.

Here's the source at CRP.

Choice Quotes: McCain suspends campaign, urges delay for debate

Barack Obama:

This is exactly the time when the American people need to hear from the person who in approximately 40 days will be responsible for dealing with this mess. It's part of the president's job to be able to deal with more than one thing at once.

Dan Balz, Washington Post:

Privately, three Republican strategists were sharply critical, viewing McCain's decision as a high-risk move that entails uncertain negotiations in Washington at the possible expense of a debate they believe McCain badly needs to get back on the offensive. One strategist called the move "desperate and nuts," and another said in an e-mail, "I don't get it at all."

Gov. Ed Rendell of Pennsylvania

What, does McCain think the Senate will still be working at 9 p.m. Friday? I think this is all political — I wish McCain had shown the same concern when he didn’t show up in the Senate to vote on the extension of the renewable energy tax credit.

Adam Bonin, Netroots Nation:

McCain hasn't cast a vote since early April, and there's nothing in his background or recent statements which suggests he has any particular insight to bring to this problem.

David Letterman:

What are you going to do if you're elected and things get tough? Suspend being president? We've got a guy like that now! I think someone's putting something in his metamucil.

Jon Stewart interviews Bill Moyers

Moyers was on The Daily Show the other night and he had some things to say about the interview with Rev. Jeremiah Wright (Obama's former pastor), John McCain's relationship with Rev. John Hagee, and the risks to democracy made by economic disparity. He has a new book out called Moyers On Democracy.

"Democracy is a story of narrow escapes and we may be running out of luck because we have created problems that our politics will not solve. Whether it's a war that goes on and on even though seventy percent of the people don't like it, whether it's our infrastructure that's crumbling .... We are becoming a society that is divided in great extremes; the divide is greater than it's been since the Great Depression."

Putting my money where my money is

My two friends and I were in a home design store the other day and we came across this interesting wallet that holds cards in a plastic cartridge with a retracting lid. It didn't look like it would be very convenient or I would link it here. Anyway this got us talking about wallets and I realized I've seen lots of cool wallet designs. Even though I have a simple leather one I did at one time consider the Wallet 2.0 or the Jimi.

Wallet 2.0 is made of soft silicone and comes in green, blue, white, black and red. It uses unique clear inserts to separate bills, coins, cards and other items and each insert has a cool little motto on it like "most idealistic people are skint." It has a couple of holes on the side so you can attach a lanyard for keys or tie it to your belt, etc.. The $35 cost is a little high and I've heard the hole on the front lets in deritus from your pocket, but it's a cool design nonetheless. The only colors left on the site are blue and black.


The Jimi and the JimiX are built of a clear recycled plastic shell that gives them an advantage over the Wallet 2.0 by being able to display an ID without taking it out. It's very thin and holds four cards, as well as one card and three folded bills on a detachable money clip. There is a hole for a lanyard as well. The JimiX has the money clip on the outside in case you like carrying huge sums of cash. It comes in nine colors and costs $15. Considering that it's enclosed I would probably pick this over the Wallet 2.0.

tinymeat is a designer wallet/case production house based in Portland, Oregon. They get contributions from artists such as Miss Kika and Mikeatron and sell their wares through Etsy. Their wallets are usually simple single-folds with a variety of functionality. Some of my favorites are The Wallet, Pegacorn, Thriftycuts, Yeticorn, Doodle wallet, and Love Me Soup. They're either printed on vinyl or suede, I can't tell. Most go for $15.

The Australian-designed dosh is made of "hi-tech flexible Desmospan© TPU material from Bayer MaterialScience" whatever the hell that is. It has a more traditional single-fold design with a pocket for bills and slits for cards. dosh comes in black, white, brown and orange and costs 60 bloody dollars but is only sold online from one California shop.

Cool Hunting did a post about wallets designed by Martin Margiela to look like a folded wad of cash, either Euros or Dollars. They cost an insane £195.

Style site Refinery29 did a four page post about designer wallets including this one made out of old cassette tapes, my favorite.

Mywallit.com carries a multitude of wallet designed in many color combinations, though their catalog isn't very browsing friendly.

...

Lifehacker wrote about a couple of wallet tips to organize and backup your wallet. The idea of photocopying your wallet's contents is something I hadn't thought of, and you know the risks of having your credit cards stolen and maxed out.

Instructables user RTourn came up with this guide for making a change card. Basically it's a rectangle made of cardboard that holds a dollar's worth of coins to keep in your wallet. Easier to carry than loose change and makes it convenient to have exact change if, say, you need to take a bus or use a picky vending machine.

That's about all I could come up with on the subject, but if you find anything else interesting feel free to post it up in the comments.

Go-o-owuld!

The U.S. economy is so shaky that not only are people stealing copper wire and pipes from foreclosed homes and jacking catalytic converters from of cars for platinum, but now the gold rush is uh... rushing back. In states like Arizona, Alaska and California groups have formed not only as social networks but as a way to generate income:

The New 49ers Prospecting Club, in Happy Camp, Calif., charges members $2,500 each for lifetime access to claims on several rivers and tributaries in northernmost California. Dave McCracken, the club’s owner, says he expects gold-prospecting to bring about $5 million this summer into Siskiyou County, an economically depressed region.

Gold is going for $913 per ounce. Here's a picture, actual size, of one-half ounce of gold.

(via New York Times)