Connecting the Swaps

March 30, 2009

In an exclusive story, the Washington Times reported today that shortly after the November 2006 elections, Joseph Cassano, then head of the AIG Financial Products Division (AIG-FP), pressured senior AIG-FP executives working in the company’s Connecticut offices to make campaign contributions to Senator Christopher J. Dodd’s failed presidential bid.

The message in the Nov. 17, 2006, e-mail from Joseph Cassano, AIG Financial Products chief executive, was unmistakable: Mr. Dodd was “next in line” to be chairman of the Senate Banking, Housing and Urban Affairs Committee, which oversees the insurance industry, and he would “have the opportunity to set the committee’s agenda on issues critical to the financial services industry.

“Given his seniority in the Senate, he will also play a key role in the Democratic Majority’s leadership,” Mr. Cassano wrote in the message, obtained by The Washington Times.

Mr. Dodd’s campaign quickly hit pay dirt, collecting more than $160,000 from employees and their spouses at the AIG Financial Products division (AIG-FP) in Wilton, Conn., in the days before he took over as the committee chairman in January 2007. Months later, the senator transferred the donations to jump-start his 2008 presidential bid, which later failed.

The full article can be found here.

Cassano’s email is not exactly subtle. It starts off as a typical solicitation letter, asking his colleagues (and their spouses) to donate the maximum contribution permitted by law. He explains that Sen. Dodd is next in line to be chairman of the Senate Banking, Housing and Urban Affairs Committee, which regulates the insurance industry to which AIG belongs and thus “will now have the opportunity as chairman to set the committee’s agenda on issues critical to the financial services industry.”

He goes on to instruct his colleagues to affix a specific campaign tracking code in the memo portion of the check. (How many other solicitation emails did Cassano have to keep track of?) And they were to provide copies of the checks to Mr. Cassano’s assistant within four days. (Was this additional insurance against his colleagues’ absent-mindedness included for Cassano’s benefit or for Sen. Dodd’s?) At some point, what initially appears to be nothing more than a friendly solicitation letter starts to resemble a shakedown.

Curiously, one of the recipients of Cassano’s email was Jake DeSantis, Executive Vice President of AIG-FP division, who recently went public with his reasons for leaving AIG in a New York Times Op-Ed Contributor piece.

My friend Luis at Boiling Frogs wrote an article last week titled “The Man Who Sold the World”, about Mr. Cassano’s involvement in AIG-FP’s massive speculation in credit default swaps that nearly bankrupted AIG and many of its banking counterparties worldwide.

Luis wrote:

Joseph Cassano was fired by AIG in February of 2008 after his unit posted an $11 billion loss, but was allowed to keep $34 million in bonuses, and was kept on as a consultant on a salary of $1 million per month. Since his firing, AIG has posted additional losses of nearly $89 billion, for total posted losses to date of nearly $100 billion. The US government has pumped $173 billion into AIG in an effort to stave off a global financial failure of indescribable proportions.

Unread legislation, slammed through without debate in a show of bipartisan recklessness, signed into law by a lame-duck President in the waning days of his tenure. Thoughtless, politically-driven financial decisions designed to garner votes. Promises of higher corporate taxation from a Socialist Presidential candidate drunk on the wine of populism and hubris. All these factors contributed to this crisis, and led to the loss of untold billions. And Joseph Cassano figured out a way to make all of that pay off in spectacular fashion.

When asked last September if he felt responsible for the AIG crisis, Joe Cassano smiled and said “I left there six months ago.”

Oh no, not me
I never lost control
You’re face to face
With The Man Who Sold The World

I’m not sure if Joseph Cassano really is “The Man Who Sold the World”, but I think Chris Dodd and his cronies in Congress may be the ones who sold out the United States.


The Devalued PM and Daniel Hannan

March 26, 2009

A stinging rebuke of PM Gordon Brown’s financial mismanagement from Daniel Hannan, Conservative MEP for South East England. Just about everything Hannan says about Brown is equally applicable to the Obama Administration, which is doggedly albeit unwittingly following the hapless Brown’s failed prescriptions.


. . . [Y]ou have subsidised – where you have not nationalised outright – swathes of our economy, including the car industry and many of the banks.

Perhaps you would have more moral authority in this house if your actions matched your words. Perhaps you would have more legitimacy in the councils of the world if the United Kingdom were not going into this recession in the worst condition of any G20 country.

The truth, Prime Minister, is that you have run out of our money. The country as a whole is now in negative equity. Every British child is born owing around £20,000. Servicing the interest on that debt is going to cost more than educating the child.

Now once again today you tried to spread the blame around, you spoke about an international recession; an international crisis. Well, it is true that we are all sailing together into the squall – but not every vessel in the convoy is in the same dilapidated condition. . . We are now running a deficit that touches almost 10% of GDP – an unbelievable figure. More than Pakistan, more than Hungary – countries where the IMF has already been called in.

Now, it’s not that you’re not apologising – like everyone else, I’ve long accepted that you’re pathologically incapable of accepting responsibility for these things – it’s that you’re carrying on, wilfully worsening the situation, wantonly spending what little we have left. Last year, in the last twelve months, 125,000 private sector jobs have been lost – and yet you’ve created 30,000 public sector jobs. Prime Minister you cannot go on forever squeezing the productive bit of the economy in order to fund an unprecedented engorging of the unproductive bit.

You cannot spend your way out of recession or borrow your way out of debt. And when you repeat, in that wooden and perfunctory way, that our situation is better than others, that we’re well place to weather the storm, I have to tell you, you sound like a Brezhnev-era Apparatchik giving the party line. You know, and we know, and you know that we know that it’s nonsense. Everyone knows that Britain is the worst placed to go into these hard times. The IMF has said so. The European Commission has said so. The markets have said so, which is why our currency has devalued by 30% – and soon the voters, too, will get their chance to say so.

They can see what the markets have already seen: that you are a devalued Prime Minister, of a devalued Government.

(Emphasis mine.)

Best of all, not a single teleprompter was harmed in the delivery of this brilliant speech.

Hat tip: Iain Murray

Obama’s Press Conference (Ed Henry)

March 26, 2009

Liberal-left pundits are angry at Ed Henry of CNN for asking President Obama tough questions at the White House press conference the other night.

You can read Jason Linkins of the Huffington Post’s fair and balanced (j-o-k-e) account of the exchange here.

More entertaining was this exchange between MSNBC’s Keith Olbermann and Washington Post columnist Eugene Robinson:

OLBERMANN: So, Mr. Henry has a rather sanguine view of himself! is it shared by anybody, did he win that battle of wits and we didn’t notice?

ROBINSON: You know I just don’t think you are going to see that analysis being picked up very widely. I mean, look, it’s like guarding Kobe Bryant. He comes down and does a reverse 360 windmill tomahawk jam in your face, the ball actually hits you in the face on the way down, and then picking yourself up off the court and acknowledging the cheers of the crowd. I mean, dude, you just got owned. Dude, the guy just made you his companion. (emphasis mine)

Is Robinson insinuating that the President is gay or is he trying to demonstrate his street “cred” with this adolescent rant? Olbermann and Robinson should consider inviting others to their private circle jerk or people might start to think they are the ones seeking each other’s “companionship.”

Anyway, I’m posting the exchange between Obama and Henry in its entirety below. Judge for yourself whether Obama’s performance rises to the level of Kobe Bryant’s artistry on the basketball court. Then again, maybe Robinson was comparing Obama’s performance with Kobe’s post-game interviews. Of course the comparison is insulting and unfair — to Kobe, who manages to give hundreds of interviews each year without assistance from a teleprompter.

QUESTION: Thank you. Mr. President. You spoke again at the top about your anger about AIG. You’ve been saying that for days now. But why is it that it seems Andrew Cuomo seems to be in New York getting more actual action on it?

And when you and Secretary Geithner first learned about this 10 days, two weeks ago, you didn’t go public immediately with that outrage. You waited a few days. And then when — you went public after you realized Secretary Geithner really had no legal avenue to stop it.

And, more broadly, I just want to follow up on Chip and Jake. You’ve been very critical of President Bush doubling the national debt. And, to be fair, it’s not just Republicans hitting you. Democrat Kent Conrad, as you know, said, quote, “When I look at this budget, I see the debt doubling again.”

You keep saying that you’ve inherited a big fiscal mess. Do you worry, though, that your daughters, not to mention the next president, will be inheriting an even bigger fiscal mess if the spending goes out of control?

OBAMA: Of course I do, Ed, which is why we’re doing everything we can to reduce that deficit.

Look, if this were easy, then, you know, we would have already had it done, and the budget would have been voted on, and everybody could go home. This is hard.

And the reason it’s hard is because we’ve accumulated a structural deficit that’s going to take a long time, and we’re not going to be able to do it next year or the year after or three years from now. What we have to do is bend the curve on these deficit projections.

And the best way for us to do that is to reduce health care costs. That’s not just my opinion. That’s the opinion of almost every single person who has looked at our long-term fiscal situation.

Now, how do we — how are we going to reduce health care costs? Because the problem is not just in government-run programs. The problem is in the private sector, as well. It’s experienced by families. It’s experienced by businesses.

And so what we’ve said is, look, let’s invest in health information technologies. Let’s invest in preventive care. Let’s invest in mechanisms that look at who’s doing a better job controlling costs while producing good quality outcomes in various states and let’s reimburse on the basis of improved quality, as opposed to simply how many procedures you’re doing. Let’s do a whole host of things, some of which cost money on the front end, but offer the prospect of reducing costs on the back end.

OBAMA: Now, the alternative is to stand pat and to simply say, “We are just going to not invest in health care. We’re not going to take on energy. We’ll wait until the next time that gas gets to $4 a gallon. We will not improve our schools. And we’ll allow China or India or other countries to lap our young people in terms of their performance. We will settle on lower growth rates, and we will continue to contract, both as an economy and our ability to — to provide a better life for our kids.”

That, I don’t think, is the better option. Now, am I completely satisfied with all the work that needs to be done on deficits? No. That’s why I convened a fiscal responsibility summit — that started in this room — to start looking at entitlements and to start looking at the big drivers of costs over the long term.

Not all of those are reflected in our budget, partly because the savings we anticipate would be coming in years outside of the 10-year budget cycle that we’re talking about.


QUESTION: But on AIG, why did you wait — why did you wait days to come out and express that outrage? It seems like the action is coming out of New York and the attorney general’s office. It took you days to come public with Secretary Geithner and say, “Look, we’re outraged.” Why did it take so long?

OBAMA: It took us a couple of days because I like to know what I’m talking about before I speak.


To paraphrase Churchill, never before were so many words wasted for the sake of so few ideas. On a more sober note, my friend David V. reminded me that when George W. Bush waited half an hour before addressing the nation after the World Trade Center attacks, he was skewered and ridiculed for the delay. Yet the same Bush critics see nothing unusual in Obama taking weeks to respond to a situation that occurred months earlier and which is not terribly complicated — quite unlike that fateful morning when the attacks kept coming and no one knew when they would stop.

Indeed, the only question in the media’s mind is why Ed Henry would be so churlish as to bring up the subject.

Toxic Assets

March 26, 2009

Earlier this week, U.S. Treasury Secretary Tim Geithner finally announced his Public-Private Investment Program to deal with the banking crisis. Geithner’s proposal enlists private sector participants to buy the toxic bank assets that are clogging the financial system.

I’ve identified below the most toxic assets that plague our entire system and undermine any hope of economic recovery.

If Mr. Geithner can find a way to sell off these toxic assets, most of our financial problems will be solved.

Sen. Christopher DoddRep. Barney Franknancy-pelosi-attacksSenate Majority Leader Harry Reidbarack_obama_thumb

Unfortunately, so far there are no takers.

Bush Deficits Baa-aad, Obama Deficits Goo-ood

March 23, 2009

Last year:


President Bush on Monday will release a $3 trillion budget for 2009. Here is a look at some of its elements:

DEFICITS: The plan will claim deficits in the $400 billion range for this year and next. For the 2009 budget year covered by the Bush plan, deficits are likely to rise higher than Mr. Bush predicts after additional war costs are added in.

Bush Proposes Budget With $400B Deficit


President Bush’s budget chief blamed the faltering economy and the bipartisan stimulus package for the record $482 billion deficit the White House predicted for the 2009 budget year.

Jim Nussle, the director of the Office of Management and Budget, said the deficit would be about 3.3 percent of the nation’s gross domestic product, the measure of the nation’s total economy.

White House Projects Record Deficit for 2009

This Year:

New York Times:

Having inherited an economy in recession and reeling from interrelated credit and housing crises, Mr. Obama starts off from a stunning deficit for 2009 that is projected to reach $1.75 trillion when the fiscal year ends Sept. 30, or nearly four times last year’s shortfall. That would represent 12.3 percent of the gross domestic product, a deficit level that is larger than any since the end of World War II.

By the last year of his term, in the 2013 fiscal year, Mr. Obama projects a deficit of $533 billion, or 3 percent of the overall economy, a level that economists consider sustainable. Even so, he foresees the level of the nation’s debt held by the public rising from 58.7 percent in the current year to 67.2 percent in a decade, a level not seen since 1951.

Obama Plans Major Shifts in Spending

However, according to the Congressional Budget Office (CBO):

As estimated by CBO and the Joint Committee on Taxation, the President’s proposals would add $4.8 trillion to the baseline deficits over the 2010–2019 period. CBO projects that if those proposals were enacted, the deficit would total $1.8 trillion (13.1 percent of GDP) in 2009 and $1.4 trillion (9.6 percent of GDP) in 2010. It would decline to about 4 percent of GDP by 2012 and remain between 4 percent and 6 percent of GDP through 2019.

The cumulative deficit from 2010 to 2019 under the President’s proposals would total $9.3 trillion, compared with a cumulative deficit of $4.4 trillion projected under the current-law assumptions embodied in CBO’s baseline. Debt held by the public would rise, from 41 percent of GDP in 2008 to 57 percent in 2009 and then to 82 percent of GDP by 2019 (compared with 56 percent of GDP in that year under baseline assumptions).

Projected Deficits as % of GDP

From the global edition of the New York Times:

President Barack Obama’s budget proposals, if carried out, would produce a staggering $9.3 trillion in total deficits over the next decade, much more than the White House has predicted, the Congressional Budget Office said on Friday.

The office’s estimates of deficits in the fiscal years 2010 through 2019 “exceed those anticipated by the administration by $2.3 trillion.”

The deficits under the Obama plan would be $4.9 trillion more than the projected deficits if there were no changes in current laws and policies — what the nonpartisan budget office calls its baseline assumption.

Obama Budget Projected at $9.3 Trillion in Next 10 Years

In George Orwell’s Animal Farm, the ruling pig Napoleon relies on the dim-witted sheep to support whatever measures he proposes, no matter how absurd or destructive to the farm. The sheep could always be counted on to drown out dissent from other animals with their loud, incessant bleating.

All together now: “$400 billion Bush deficits bad. $1.8 trillion Obama deficits good!”








“$1.8 trillion good; $9.3 trillion better!”

The Terrorist Passenger Safety Act

March 19, 2009

A Washington Times editorial on Tuesday accused the Obama Administration of trying to roll back the post-September 11 policy of allowing qualified commercial airline pilots to carry firearms:

After the September 11 attacks, commercial airline pilots were allowed to carry guns if they completed a federal-safety program. No longer would unarmed pilots be defenseless as remorseless hijackers seized control of aircraft and rammed them into buildings.

Now President Obama is quietly ending the federal firearms program, risking public safety on airlines in the name of an anti-gun ideology.

The Obama administration this past week diverted some $2 million from the pilot training program to hire more supervisory staff, who will engage in field inspections of pilots.

This idea is so devoid of common sense and contrary to public safety that one wonders if al Qaeda has a $750/hour K Street lobbyist on retainer.

The Editorial concludes:

Armed pilots are a cost-effective backup layer of security. Terrorists can only enter the cockpit through one narrow entrance, and armed pilots have some time to prepare themselves as hijackers penetrate the strengthened cockpit doors. With pilots, we have people who are willing to take on the burden of protecting the planes for free. About 70 percent of the pilots at major American carriers have military backgrounds.

Frankly, as a matter of pure politics, we cannot understand what the administration is thinking. Nearly 40 House Democrats are in districts were the NRA is more popular than House Speaker Nancy Pelosi. We can’t find any independent poll in which the public is demanding that pilots disarm. Why does this move make sense?

Only anti-gun extremists and terrorist recruits are worried about armed pilots. So why is the Obama administration catering to this tiny lobby at the expense of public safety?

Good question. For all the teeny bopper media chatter about The One™’s vaunted political skills, this remarkably foolish idea suggests that the real Obama — not to be confused with the highly-scripted, teleprompter-enhanced David Axelrod creation — is politically tone-deaf.

Unless Obama really is intent on destroying this country, this move is indicative of a person with incredibly bad judgment.

Hat tip: Michelle Malkin

March Madness

March 19, 2009

In the middle of what his teleprompter once described as “the worst economic crisis since the Great Depression”, President Barack Obama visited ESPN studios yesterday to share his Final Four picks in the upcoming NCAA tournament. The President has broken many of his campaign promises, so it’s nice to see he finally kept his word about something.

It’s refreshing to see that even the leader of the (increasingly less) free world has time for a hobby. All work and no play makes Little Timmy a tax cheat and all that. Nero had his fiddle and Catherine the Great had an abiding interest in equine uh sports, and the President takes breaks from his teleprompter, Blackberry and nicotine addictions to shoot hoops.

Meanwhile, I couldn’t help wondering if there was any coincidence between Obama’s NCAA picks and last week’s stock market rally, which took place while President Obama was studiously uh studying his Final Four picks and therefore distracted from his primary goal of destroying the American economy to pave the way for Socialism.

In 1994, President Clinton proposed a bold new approach to fighting inner city crime: Midnight Basketball. This was not really such a new idea. A decade earlier, one of my black friends in law school shared the following joke:

Q: How do you stop five black men from raping a white woman?
A: Roll a basketball by them.

Leave it to Bill Clinton to take a racist stereotype and make it the basis for a brilliant public policy idea. While crime rates have fallen since then, it remains uncertain what percentage, if any, of the decrease in crime rates is attributable to Bill Clinton’s midnight basketball programs. But if it worked before, perhaps it’s worth another shot. In any event, I have a new joke I’d like to share, although I’m sure most of you already know the punch line.

Q: How do you stop a black Marxist from destroying the U.S. economy?
A: Ask him about his NCAA Tournament picks.

Growing up in New York City, a place with at least two professional teams in every major sport (assuming the Knicks qualify as a professional team), I’ve never quite understood the hoopla surrounding the NCAA tournament. The only college basketball game that generated any excitement in my neighborhood was when local favorite St. John’s took on archrival Georgetown. Therefore, I don’t have any insightful commentary on the President’s selections, but his example inspired me to share my own Final Four picks. Here they are:

1) Hyperinflation
2) Confiscatory Taxation
3) Crippling Regulation
4) Protectionism

Yesterday, while our elected officials were busy distracting the American public with a Kabuki theater display of feigned indignation against the CEO of AIG, the Federal Reserve quietly pumped another $1.2 trillion into the money supply. Last month, I wrote a piece titled “Money for Nothing”, which included a graph courtesy of the Federal Reserve Bank of St. Louis showing how the money supply has tripled since Y2K. Yesterday’s Fed action represents yet another drastic and desperate measure to resuscitate the economy. It appears to be a variation of the Zimbabwe economic strategy, which sadly has not worked out so well to-date.

Confiscatory Taxation
This pick is a shoo-in given a Marxist Administration hell-bent on demonizing the most productive and entrepreneurial citizens, the very people who create wealth and jobs necessary to economic recovery. Expect this pick to result in diversion of much economic activity from wealth creation to avoiding wealth confiscation, increasing what economist Ludwig von Mises called “mal-investments” at a time when real investments are sorely needed.

Crippling Regulation
Our President’s environmentalist fellow travelers (pun intended) have apparently convinced The One™ of the truth of their environmentalist faith. Who can fail to be moved by the sacrifice of these rich elite Profits who publicly inveigh against the dread scourge of carbon “emissions”? Though personally disinclined to subsist on the locusts and wild honey they recommend for us benighted masses, still they eschew countless frequent flyer miles to travel via private jet to the next environmental revivalist meeting, held not in tents but in air conditioned auditoriums. What better way to stimulate an economy in trouble than by a labyrinthine schema of taxes, fines and transfer payments, known as “cap-and-trade”. As gas prices skyrocket and heating bills triple, the shivering masses can take comfort in the knowledge that we’re doing our part in the fight against Global Warming®, a registered trademark of Al Gore.

This looks like a long-shot among my Final Four economic picks. Yet Candidate Obama seemed quite enthused about the virtues of protectionist intervention in the free market, at least until such time as progressives achieve sufficient uh progress to outlaw free markets altogether. Given the increasing roles unions will play in the continuing campaign to elect more Democrats, expect this dark horse to surprise the rest of the tournament.

* * *

My Final Four choices won’t win any basketball games, but when it comes to destroying a free market economy, they may be hard to beat.

During the final stages of this March Madness season, as we contemplate our decimated 401k accounts, worry about keeping our jobs and paying our mortgages, and face the certainty of higher taxes that somehow never suffice to fund out-of-control government spending, I find myself nostalgically recalling those exciting St. John’s basketball games from two decades ago. The fellow they named the school after was quite famous for his Final Four picks — and when I say “his Final Four picks”, I really do mean Final Four.

You can find St. John’s Final Four selections in the back of a very old book; their names are War, Pestilence, Famine and Death. They may not appear in time for this year’s NCAA tournament, but rest assured, they are coming.