BRIEF UPDATE

Yes, I'm alive and actually doing quite well. I've been VERY busy at work. In fact, this is the busiest stretch I've ever had, at this or any other job. 12, 14 hour days, every day, and I've been putting in quite a bit of time over the weekend as well.

I also don't see this changing any time soon as the schedule in the case I'm on is expedited and aggressive. Plus, a lot of traveling should be in my near (and mid-term, and distant) future.

That said, I'm really enjoying the work. Very exciting, lots of action, constant battling over this and that. It's tiring and often stressful, but at its core it's what I signed up for when I got into litigation. I'm starting to get to the point where I'm senior enough that the amount of real "lawyering" starts to balance all the busy work, the shit work, the hierarchical stuff, and all the hours. We'll see how it keeps going.

IRONY ALERT

So a writer from the New York Times plagiarizes a blogger. Nice.

If this damages Dowd's career -- or somehow harms the Times -- it'll certainly give credence to the idea that blogging is bad for reporting. Heh, heh.

What I wanna know, of course, is did Dowd sneak into Marshall's mother's basement to steal his words, or did she access them some other way?

COUSIN TIMMY'S STRESS(-FREE) TEST

I'm sure by now we've all heard that -- surprise, surprise, surprise! -- all the banks "passed" the so-called "Stress Tests." They passed, huh? Was it a gentleman's C? An over-inflated B+? Did they make the Dean's Treasury Secretary's list?

Anyhow, Yves at Naked Capitalism has a nice take-down of not only Treasury, but the fawning and shamelessly pro-bank reaction of our good friends in the mainstream press. Or as she put it, "[t]he unduly charitable coverage of the stress tests." Some highlights, starting with a few facts the NTY did not cover:

1. The fact quite a few of the banks negotiated their fundraising requirements down, calling the integrity of the process into question

2. No mention that the purpose of this exercise from the outset was to prove the banking system to be solvent. What kind of a test is that?

3. No mention that asset sales (the reason Citi was able to negotiate its fundraising down from $10 billion, and presumably others as well) are almost certain to be a non-starter.

The WSJ joined in on the self-serving fun as well:

The Wall Street Journal , in "How the Stress Tests Stopped the Market Bleeding," depicts Geithner, the Fed, and Obama as saviors of the market:

Mr. Geithner successfully beat back criticism that the examinations were a political ploy, leaving much of the number-crunching to the Federal Reserve. The stock market regained its footing as consumer confidence crept back. And several major banks reported unexpectedly strong earnings for the first quarter, boosting confidence about their long-term health.

[] the only critics Geithner "beat back" were some of the bankers themselves. The stock market regained its footing because it was oversold and Citi and Bank of America said they'd had a good January and February. The consumer confidence numbers are stronger in no small measure because stock market movements are included in the computation! In fact, in the Conference Board's release, the stock market rally was the single biggest contributor to the improvement in sentiment.

As to the press' breathless prattling that Wall St. has been saved from the dangers and horror of "nationalization" or receivership, Yves noted:

The illogic is breathtaking. It has now become conventional wisdom that a bankruptcy is the only way to straighten out GM, yet there is no realistic plan for getting the banking industry into a configuration that reduces systemic risk or end incentives for banks to gamble with their now explicit government backstop or a realistic plan to clean up the bad assets (we do not believe the PPIP will succeed). Receivership for the weakest banks is a far better approach for taxpayers and the economy, yet the Journal is touting the line that what is best for incumbent bank management is surely best for America.

Finally, she observed that many of the real villains escaped notice, as usual:

And the other big shortcoming is that the securities and derivatives exposures at the big capital markets players (Citi, BofA, JP Morgan) were given the short shrift.

Nothing new here, huh?

Check out the whole piece. It'll put some of this in better perspective.

Have a nice weekend.

TOUGH WEEK FOR BURT REYNOLDS

First Pontiac, and now Dom DeLuise. As that first link makes clear, Pontiac had some strong pop culture connections: the GTO, Knight Rider's Kit, and of course, Burt's black Trans-Am from Smokey & the Bandit. And, as some of you may recall, that's a car I talked about right here a little over two years ago.

Those ubiquitous mid-70's through mid-80's memories. We even owned an '84 Grand Prix.

And, of course, who seemed to be Burt's sidekick in many of his iconic movies (but not Smokey & the Bandit)? Dom DeLuise. DeLuise sits in my memories through two separate comedy franchises of my youth: the Burt Crew, with its fast cars and hot chicks and blooper outtakes as the credits roled. And also Mel Brooks. DeLuise seemed to be in every Mel Brooks movie. The obnoxious gay director at the end of Blazing Saddles. The hideous emperor, dispatching with food & lives in History of the World, Part I. Pizza the Hut in Space Balls. He was even in Silent Movie, right?

The franchise that made the black Trans Am, and the fat guy who made me laugh in Burt Reynold's movies. Both gone in the same week. The older you get, the more the icons of your youth pass along.

At least the memories remain.

THE INSIDERS' INNER SANCTUM

Yves has a solid take on the continuing special relationship between Goldman Sachs and . . . well, everyone in power. A highlight or two:

The "all animals are created equal, but some are more equal than others" logic appears to operate in full force as far as Goldman is concerned. Violations of normal rules of conduct are not merely tolerated, but are asserted to be acceptable.

Now admittedly, the latest news tidbit, of former Goldman co-chairman Steven Friedman staying on as chairman of the New York Fed after Goldman became a bank holding company, isn't as troubling as when current Goldman chief Lloyd Blankfein was the only Wall Street denizen to meet with Hank Paulson when the Treasury was deciding what to do about AIG. Readers may recall that Goldman had the biggest exposure to AIG and thus had the most to benefit from a course of action that would be generous to counterparties (who had chosen of their own cognizance to enter into contracts with the big insurer).

What is disturbing [] is the moral blindness of too many of the key actors, namely Friedman himself and some Fed officials.

* * *
It's bad enough that Friedman owned Goldman shares while involved in policy discussions that would affect the bank. The fact that he went and bought more shares is breathtaking. Of course, this shows a huge deficiency in Fed procedures. Directors should be barred from trading stocks in any institution regulated by the Fed. While it is technically not inside information (you need to be an insider of the company in question, that is, have a fiduciary duty to its shareholders), it certainly raises the specter of trading on privileged information.

It would be a scandal if someone on the FOMC were to be found to be trading interest rate futures. Being party to discussions about regulatory policy (as in having advance knowledge of how things are likely to play out) means one similarly has advance knowledge of facts that investors would find important.

* * *
Recall that in the waning days of the Bush Administration, it wasn't clear how bank friendly the new Administration would be. Even thought Geithner was Treasury secretary designate, there was some discussion in the press as to the divergent views within the Obama economic policy team, and whether that would create creative friction or conflict. Conflict (or having Volcker, who is not a fan of innovative finance, have a strong voice) could have kept bank valuations at bay.

Thus while Goldman's stock was arguably cheap, cheap stocks can get cheaper. One of the important inputs to the wisdom of going long would be knowing how bank friendly the new Administration's policies would be. To think that Friedman didn't have some insight into that question by virtue of his advantaged position is naive.

Check out the whole piece. Another factoid in a continuing, and sadly consistent, story.

THE OUTSIDERS

Too exhausted to post this morning, but check out this piece in Salon, titled "The Prophets Of Doom" (H/T Ritholtz), discussing 14 folks who've been the biggest critics of Obama's outrageous economic policies. I would imagine no small portion of these folks also tee'd off on Bush, so that should tell you that this ain't necessarily a partisan group.

A few clowns in the mix -- Michele Bachmann & Jim Cramer, notably -- and I'm certainly no fan of that big phony, Paul Krugman, but otherwise, there are some strong entries here, including many that I've either linked to, or focused on: Ritholtz, Yves, Jim Rogers, William Black, Simon Johnson, Roubini. Check it out. At very least, it'll give you some names and links if you're looking for more more sources to learn what's really going on.

THIEVES, LIARS, AND THE LIARS WHO ENABLE THE THIEVES AND LIARS

Yesterday I noticed that a couple folks writing under the by-line, "AP Business Writer," headed an article under this gushing lede: "The Fed confirmed what Wall Street has already concluded: The recession is starting to ease." And in support of this bold statement they cited the fact that the Fed observed that the state of economic decline "appears to be somewhat slower."

Hmmm.

Now I'm not looking to defend the FMOC, but in looking at the Fed's announcement yesterday, I ain't really seeing the optimism that our glorious financial press seems so desperate to see:

Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower. Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing. Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.

Now, I'm the first to posit that any Fed optimism in the face of what's really happening is irresponsible and ludicrous. But it just amazes me how desperately the mainstream financial press wants to paint a rosy picture that justifies ever more money seeping away from saving, in order to shunt it over to Wall St. and debt-financed consumerism. And as we know, this gilding of a wilting flower seems to work: Wall St. rallied yesterday.

Anyway, apart from the press' foolishness and the Fed's cheerleading (or is it the other way around), let's take a look at the substance of what the FOMC said yesterday:

In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term.

In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability. The Committee will maintain the target range for the federal funds rate at 0 to 1/4 percent and anticipates that economic conditions are likely to warrant exceptionally low levels of the federal funds rate for an extended period.

Maybe I should have characterized this as part of the "cheerleading" section, because I'm not seeing anything here that makes sense. Inflation (and they're talking about price inflation, since they've already inflated the money supply) will remain subdued . . . because the economy is retracting. The same economy that's slowing down more slowly than before. Ok (I guess). So the Fed will keep rates low . . . to promote price stability? Huh?

I think we can translate this as, "More money coming!" Why? Because that's what central banks do. They inflate. But, of course, the Fed says there won't be any "inflation," meaning price inflation. Ostensibly because it can just sop up all that money by selling its assets back into the economy when prices start to rise. And as we've addressed here before, what will it sell back, since the composition of the Fed balance sheet gets more and more questionable as time goes on. Well, let's look at what it says:

to provide support to mortgage lending and housing markets and to improve overall conditions in private credit markets, the Federal Reserve will purchase a total of up to $1.25 trillion of agency mortgage-backed securities and up to $200 billion of agency debt by the end of the year. In addition, the Federal Reserve will buy up to $300 billion of Treasury securities by autumn.

Hmmmmm. Let's do the math, shall we? $1.45 trillion of agency mortage-backed securities and agency debt. And who are these "agencies," you might ask? Oh, just Fannie Mae and Freddie Mac and those sorts of bankrupt governmentally-supported entities. And a mere $0.3 trillion worth of treasuries. They ain't too solid an investment either, but at least there's some tradition there of purchasers.

But all-in-all, I ask the same question I always ask: who the fuck is gonna buy $1.45 trillion worth of shit? In addition to all the shit that's already parked on the Fed's balance sheet? And if your answer is "no one," or "not many folks" or "hell, I dunno," please remember that any un-repurchased shit will remain on the Fed's balance sheet. Which means that $1.45 trillion worth of newly-printed Federal Reserve Notes (those would be the unsecured debt instruments the Fed issues, known to most of us as "Dollars") remain in the general economy.

Which will raise prices somewhere, sometime. Food? Medical care? Rent? Fuel? Take a guess, spin the spinner. But the spinner will stop somewhere.

And let me then ask the other question I often ask? Does anyone in power have a clue what he's doing? If not, how do they keep their jobs? If so, how do they stay out of prison?

More debt, more fiat currency, more lies and double-speak. Yet we're supposed to believe that good times are just around the corner. If only so.