Category: Politics

Wisconsin: No Fiber to the Home Activity…..

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Scott Wilkinson & Benoit Felton:

I have been collaborating with Benoit Felton, a Yankee Group analyst based in Paris, and others on a map of FTTP (fiber to the premises) sites worldwide. For now, I’m doing most of the U.S. sites as time permits. There are still quite a few to add, since the U.S. FTTP deployments tend to be local municipal or utility networks, with the notable exception of Verizon’s successful FiOS service.

It’s pretty impressive, and is something to think about when your local telecommunications provider claims that you should be happy with your 1Mbps DSL connection.

The “video competition bill” – largely pushed by AT&T was a major miss for Wisconsin.

The Shaming of John Thain

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Greg Farrell & Henny Sender:

John Thain is giving us a tour of what is soon to become America’s most infamous office, with its $87,000 rug, $68,000 sideboard, $28,000 curtains – all part of a $1.2m redecoration scheme. This was early December, a little under two months before Thain would be fired in the same room by his new boss, Ken Lewis, chief executive of Bank of America.


For now, before a price tag had been placed on every item in his office, the 53-year-old chief executive of Merrill Lynch was in high spirits. The worst year on Wall Street in nearly a century was coming to an end, and Thain could rightfully claim to have saved his bank from ruin. Over a weekend in mid-September, as Lehman Brothers collapsed into bankruptcy, Thain pulled off a coup: he persuaded BofA, one of the few financial giants in the US that didn’t need government money to survive, to pay $29 per share for his own firm, even though Merrill was days away from following Lehman into bankruptcy.


Thain had taken over as Merrill chief executive nine months before that weekend deal. Now, he appeared to be one of the few Wall Street leaders who grasped the enormity of the credit crisis. Thanks to his analytical approach to the marketplace, it seemed, Merrill shareholders could look forward to a stake in Bank of America. “I have received thousands of e-mails saying, ‘Thank you for saving our company’,” Thain told us that day. And yet he admitted that the decision to sell Merrill Lynch – a 94-year-old institution that was always “bullish on America” – had been painful. “This was a great job. This was a great franchise. Emotionally, it was a huge responsibility.”

Buffett Speaks Against the Obama Splurge

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Mickey Kaus:

BUFFETT: …And, Joe, it–if you’re in a war, and we really are on an economic war, there’s a obligation to the majority to behave in ways that don’t go around inflaming the minority. If on December 8th when–maybe it’s December 7th, when Roosevelt convened Congress to have a vote on the war, he didn’t say, `I’m throwing in about 10 of my pet projects … [snip] …
JOE: Yeah, but you might–might not have fixed…
BUFFETT: But I say…


JOE: You might not–you might not have fixed global warming the day after–the day after D-Day, Warren.

BUFFETT: Absolutely. And I think that the–I think that the Republicans have an obligation to regard this as an economic war and to realize you need one leader and, in general, support of that. But I think that the–I think that the Democrats–and I voted for Obama and I strongly support him, and I think he’s the right guy–but I think they should not use this–when they’re calling for unity on a question this important, they should not use it to roll the Republicans all.

More from Shailagh Murray.

The Fed’s moral hazard maximising strategy

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Willem Buiter:

The reports on the evidence given by the Vice Chairman of the Federal Reserve Board, Don Kohn, to the Senate Banking Committee about the Fed’s role in the government’s rescue of AIG, have left me speechless and weak with rage. AIG wrote CDS, that is, it sold credit default swaps that provided the buyer of the CDS (including some of the world’s largest banks) with insurance against default on bonds and other credit instruments they held. Of course the insurance was only as good as the creditworthiness of the party writing the CDS. When it was uncovered during the late summer of 2008, that AIG had nurtured a little rogue, unregulated investment banking unit in its bosom, and that the level of the credit risk it had insured was well beyond its means, the AIG counterparties, that is, the buyers of the CDS, were caught with their pants down.


Instead of saying, “how sad, too bad” to these counterparties, the Fed decided (in the words of the Wall Street Journal), to unwind “.. some AIG contracts that were weighing down the insurance giant by paying off the trading partners at the full value they expected to realize in the long term, even though short-term values had tumbled.”


An LSE colleague has shown me an earlier report in the Wall Street Journal (in December 2008), citing a confidential document and people familiar with the matter, which estimated that about $19 billion of the payouts went to two dozen counterparties between the government bailout of AIG in mid-September and early November 2008. According to this Wall Street Journal report, nearly three-quarters was reported to have gone to a group of banks, including Société Générale SA ($4.8 billion), Goldman Sachs Group ($2.9 billion), Deutsche Bank AG ($2.9 billion), Credit Agricole SA’s Calyon investment-banking unit ($1.8 billion), and Merrill Lynch & Co. ($1.3 billion). With the US government (Fed, FDIC and Treasury) now at risk for about $160 bn in AIG, a mere $19 bn may seem like small beer. But it is outrageous. It is unfair, deeply distortionary and unnecessary for the maintenance of financial stability.


Don Kohn ackowledged that the aid contributed to “moral hazard” – incentives for future reckless lending by AIG’s counterparties – it “will reduce their incentive to be careful in the future.” But, here as in all instances were the weak-kneed guardians of the common wealth (or what’s left of it) cave in to the special pleadings of the captains of finance, this bail-out of the undeserving was painted as the unavoidable price of maintaining, defending or restoring financial stability. What would have happened if the Fed had decided to leave the AIG counterparties with their near-worthless CDS protection?

The organised lobbying bulldozer of Wall Street sweeps the floor with the US tax payer anytime. The modalities of the bailout by the Fed of the AIG counterparties is a textbook example of the logic of collective action at work. It is scandalous: unfair, inefficient, expensive and unnecessary.

Wall Street on the Tundra

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Michael Lewis:

celand’s de facto bankruptcy—its currency (the krona) is kaput, its debt is 850 percent of G.D.P., its people are hoarding food and cash and blowing up their new Range Rovers for the insurance—resulted from a stunning collective madness. What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power? In Reykjavík, where men are men, and the women seem to have completely given up on them, the author follows the peculiarly Icelandic logic behind the meltdown.
by MICHAEL LEWIS April 2009



Just after October 6, 2008, when Iceland effectively went bust, I spoke to a man at the International Monetary Fund who had been flown in to Reykjavík to determine if money might responsibly be lent to such a spectacularly bankrupt nation. He’d never been to Iceland, knew nothing about the place, and said he needed a map to find it. He has spent his life dealing with famously distressed countries, usually in Africa, perpetually in one kind of financial trouble or another. Iceland was entirely new to his experience: a nation of extremely well-to-do (No. 1 in the United Nations’ 2008 Human Development Index), well-educated, historically rational human beings who had organized themselves to commit one of the single greatest acts of madness in financial history. “You have to understand,” he told me, “Iceland is no longer a country. It is a hedge fund.”

Uwe Reinhardt on the health of the economy and the economics of health

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Willem Buiter:

My friend professor Uwe E. Reinhardt of Princeton University presented ECONOMIC TRENDS IN U.S HEALTH CARE: Implications for Investors, at J.P. Morgan’s annual healthcare conference on Tuesday, January 13 2009. The first half of the presentation (46 slides!) deals with macroeconomic and financial issues in Uwe’s inimitable style – equal portions of wit and insight. The second half deals with the embarrassing mess known as health care in the US.

The banking crisis as a foreign policy issue

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Tyler Cowen:

Here is some simple background:

If we let A.I.G. fail, said Seamus P. McMahon, a banking expert at Booz & Company, other institutions, including pension funds and American and European banks “will face their own capital and liquidity crisis, and we could have a domino effect.” A bailout of A.I.G. is really a bailout of its trading partners — which essentially constitutes the entire Western banking system.

No one wants to say it, but essentially the Fed has been bailing out European banks.


The inflation-adjusted cost of the Marshall plan has been estimated at about $115 billion in current dollars. If we end up spending $250 billion on AIG, how much of that sum will go to European financial institutions and might it someday exceed the scope of the Marshall plan? (I do not, by the way, think that central banks ought to treat foreign creditors differently.)

More from the Economist.

Obama Speech TV Audience Lags Clinton (1993) and Bush (2001)

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Andrew Malcolm:

For his maiden congressional address, Obama cleaned President Bush’s clock in terms of TV viewers willing to watch him speak to a bunch of stuffed congressional suits in the House chamber. Which isn’t saying much. But it is something for a new president to cling to, especially when you’re otherwise up against the sleuths of “NCIS.”

Obama got 52.4 million viewers last night (rounded off for those visiting the bathroom) in 37.2 million homes for a 49 share and 32.5 rating. In his last joint address in 2008 GWB got 37.5 million in 27.7 million homes for a 38 share and 24.7 rating. Bush did top Obama in 2003 with 62 million and a 56 share and we didn’t even have the Iraq reality show going then. (But it was coming.)

Bush’s first joint session appearance drew nearly 39.8 million and a 42 share.

However, Obama still lags the audience-drawing power of one President Bill Clinton. Sixteen years ago this week, when there were millions fewer Americans, Big Bill drew nearly 15 million more viewers — 66.9 million for his first congressional speech in 44.2 million homes for a 44.3 rating.