If Tim Geithner, the New York Fed chairman, gets a top spot in the Barack Obama’s cabinet, we are done, finished, kaput. It is that simple. Geithner is the man who this week appointed Michael Alix — the former chief risk officer of Bear Stearns — to a top bank regulation job. If I were a U.S. attorney I would be subpoenaing Alix to see if I could build a case against higher-ups — or him for that matter. But no, Geithner appoints him to a high-level job. It is so clear that Bear’s was the most reckless, the least regulated, the most clueless about risk, and Alix was in charge of that issue — I can only say this travesty is Exhibit A in the brief against Geithner.

Second, my sources indicate that Geithner made the fateful decision — the one that spawned so much of the trillions of dollars in losses — the decision to let Lehman Brothers die. Geithner had within his possession compelling evidence of what could go wrong if he closed it. He ignored it. He made the most wrong decision of wrong decisions we have seen in this era. He is a total fool….”the New York Fed was responsible for regulating the banks gone wild. Geithner was in charge of that regulation. He should be facing a Senate investigation for his action, not a Senate confirmation panel. “

We note that the Dow advanced to close up 494 points after the Geithner appointment was announced an hour before the close. Whether the rally was due specifically to the Geithner appointment or that President elect Obama appears to be choosing known quantities for key positions (eg, Summers, Clinton) can not be determined at this time.

The AP headline on this Thanksgiving story reads “Palin pardons turkey while others slaughtered.” Note that the TV crew went out of its way (at 2:22) to pan away from Governor Palin to help the AP with its headline. The media know whom they like and whom they dislike, and the rest of us had just better get used to it and be thankful for the blessings our media overlords bestow upon us.

Saudi Arabia is the longstanding largest swing producer of oil globally. In normal times, a Saudi increase in oil production would an have important impact on the market. Saudi Arabia announced in June, when oil was $134 a barrel, that it would increase output to curb rising oil prices. The price of oil promptly shot up to $147 a barrel, which was evidence of the lunacy in the oil market. (By the way, oil closed at under $50 a barrel today.)

Today, Saudi Prince Alwalid bin Talal, the longstanding largest individual shareholder of Citigroup, said he was going to increase his ownership in Citigroup from under 4% to 5%. Citigroup, the 2nd largest bank in America, is a $25 billion beneficiary of the TARP bailout and absolutely cannot go bankrupt or the US Treasury will proactively be the cause of the Second Great Depression. Citigroup shares promptly traded to a record low price — they’ve lost almost all their value in the last few weeks.

There are scenarios of course where Citigroup common shareholders might get wiped out, even if the company survives, but these do not seem likely to us, based on the hell that was unleashed by such previous folly by Paulson & Co. In our view, it seems likelier that the stock market is reacting just as foolishly in the face of this Saudi investment as the oil market was in June in the face of the Saudi supply increase announcement. Last time the Saudi action preceded a change in market direction by a month or so; we’ll just have to see what happens this time.

Citigroup Inc faced a crisis of confidence on Wednesday as investors questioned the survival prospects of the U.S. banking giant, and its shares tumbled 23 percent to a 13-year low. The second-largest U.S. bank by assets has been reeling on concerns that mounting losses from credit cards, mortgages and toxic debt could overwhelm its efforts…Citigroup shares closed down $1.96 at $6.40 on the New York Stock Exchange and have fallen 33 percent this week…Wednesday’s decline drove Citigroup’s market value down to about $34.9 billion…

Worries about Citigroup were a key factor in U.S. stocks falling broadly Wednesday to a 5-1/2-year low. “The whole thing echoes quite frankly of Bear Stearns,” said David Dietze, chief investment officer of Point View Financial Services in Summit, New Jersey…

William Smith, a portfolio manager at Smith Asset Management, referred to insurer American International Group Inc, which got a $152 billion government bailout. “It’s simple. Break it up before it turns into another AIG,” he said…

“If the government stepped in, they would rescue the senior bondholders and probably the subordinated holders too, but equity is far less likely to be saved,” said Sean Egan, principal of Egan-Jones Ratings Co…

“The financial industry is under assault,” said Tom Sowanick, chief investment officer for Clearbrook Financial LLC in Princeton, New Jersey. “It looks like the short-sellers are squeezing the hell out of Citi shares”…The cost to insure $10 million of Citigroup debt against default for five years rose to $360,000 annually from $240,000 on Tuesday…

Citigroup’s market value is down from more than $270 billion just two years ago. It is also less than one-half the $75 billion of new capital that Citigroup has raised since the credit crisis began, including $25 billion through Treasury Secretary Henry Paulson’s financial industry rescue package.

So does all this mean that Citigroup has to be bailed out from the bailout by a new bailout? Some analysts see a need for up to an additional $1.2 trillion in capital, and say that TARP was not the answer. Reuters: “Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis”. How can this be? We were told that the $700 billion bailout was the answer. Can the bailout need a new bailout so soon?

“The war is over and we won:” Michael Yon just phoned from Baghdad, and reports that things are much better than he had expected, and he had expected things to be good. “There’s nothing going on. I’m with the 10th Mountain Division, and…none of them have fired their weapons in combat during this tour, and about half of them are combat veterans from Afghanistan and/or Iraq…they’ve been here eight months. And the place we’re at, South Baghdad, used to be one of the worst places in Iraq. And now there’s nothing going on.

I’ve been walking my feet off and haven’t seen anything. I’ve been asking Iraqis, ‘do you think the violence will kick up again,’ but even the Iraqi journalists are sounding optimistic now and they’re usually dour.” There’s a little bit of violence here and there, but nothing that’s a threat to the general situation. Plus, not only the Iraqi Army, but even the National Police are well thought of by the populace. Training from U.S. toops has paid off, he says, in building a rapport.

He says the big problem everybody is talking about now is corruption. But hey, we have that here, too. He’ll be heading to Afghanistan next week. “Afghanistan is a bad situation, but on Iraq I can’t believe things have turned out so well.”

The White House waddled in with this the other day: “as a result of the surge, we’ve been able to have tremendous successes…We believe that the conditions are such now that we are able to celebrate the victory that we’ve had so far, and establish both a strategic framework agreement, which is a much broader document and talks about all sorts of cooperation that we’ll have with Iraq from here on out — from trade and health care and exchanges on science, and a real strong bilateral agreement that you would hope we would have with any of our allies. These documents usually take years to negotiate. We’ve been able to compress that and do it within the year”. Never has a victory seemed so much like something else.

Will Americans ultimately celebrate this victory? Who knows? But just imagine if the Iraqis put a statue of George Bush where that big one of Saddam Hussein used to stand.

57.4% could NOT correctly say which party controls congress (50/50 shot just by guessing)

81.8% could NOT correctly say Joe Biden quit a previous campaign because of plagiarism (25% chance by guessing)

82.6% could NOT correctly say that Barack Obama won his first election by getting opponents kicked off the ballot (25% chance by guessing)

88.4% could NOT correctly say that Obama said his policies would likely bankrupt the coal industry and make energy rates skyrocket (25% chance by guessing)

56.1% could NOT correctly say Obama started his political career at the home of two former members of the Weather Underground (25% chance by guessing).

And yet…..

Only 13.7% failed to identify Sarah Palin as the person on which their party spent $150,000 in clothes

Only 6.2% failed to identify Palin as the one with a pregnant teenage daughter

And 86.9 % thought that Palin said that she could see Russia from her “house,” even though that was Tina Fey who said that

We’ve noted the media’s “squeals of delight” at their candidate’s victory, and the “thrill” they get when they hear their man speak. We have observed their “giddy boosterism” and the self-admitted slanted coverage of the election among the elite media. We have on occasion remarked on the outright journalistic malpractice on display in the media’s coverage of the campaign. This Zogby poll indicates that the media’s performance was even worse than all that. What’s still up in the air is the price to be paid for the one-sidedness of this coverage, and who in the end will end up paying that price.

Reid Wilson has an interesting list of surprises and facts from the 2008 election over at RCP, including the map above, significantly bluer than its 2004 counterpart. In 2004, President Bush got 3-4 million Democrats to vote for him; it seems that these voters were merely on loan, and they would appear to have returned to the Democrat side. How quickly things change. We’ll have to see whether the incoming administration squanders its gifts as quickly and decisively as the outgoing group. Other than that, a pretty slow news day. The re-appearance of this sort of story would appear to be proof enough of that.

last January Bill got so worked up in a phone call with Donna Brazile that he ranted, “If Barack Obama is nominated, it will be the worst denigration of public service.” The magazine also revealed that “the former president had amassed an 81-page list of all the unfair and nasty things the Obama campaign had said, or was alleged to have said, about Hillary Clinton.”

If Hillary wants to be Madame Secretary, Bill will have to put away the 81-page list and pick up the 63 questions in the Obama vetting questionnaire, an unprecedented deep probe of potential cabinet members and their spouses.

Even if Bill scurries past the questions on sexual harassment claims, conflicts of interest, civil suits, real estate holdings, federal investigations, diaries, gifts worth more than $50 and Internet aliases, the Clintons will still have to grapple with No. 8: “Briefly describe the most controversial matters you have been involved with during the course of your career.” (It would take books, and it has.)

Not to mention No. 62: “Do you know anyone or any organization…that might take steps, overtly or covertly, fairly or unfairly, to criticize your nomination, including any news organization?”

One such news organization might be the New York Times itself, which last February described an extraordinary business deal in which the Clinton’s or their foundation, might have made $131 million in profits by playing matchmaker with Kazakhstan’s repressive government.

NBC News is coming out with a DVD titled “Yes We Can: The Barack Obama Story.”…ABC and USA Today are rushing out a book on the election…HBO has snapped up a documentary on Obama’s campaign…the Newsweek commemorative issue — “Obama’s American Dream” — filled with so many iconic images and such stirring prose that it could have been campaign literature. Or the Time cover depicting Obama as FDR, complete with jaunty cigarette holder…

“The Obamas’ New Life!” blares People’s cover, with a shot of the family. “New home, new friends, new puppy!” Us Weekly goes with a Barack quote: “I Think I’m a Pretty Cool Dad.” The Chicago Tribune trumpets that Michelle “is poised to be the new Oprah and the next Jacqueline Kennedy Onassis — combined!” for the fashion world…what the New York Times dubbed “Generation O”…”OBAMAISM — It’s a Kind of Religion,” says New York magazine. “Those of us too young to have known JFK’s Camelot are going to have our own giddy Camelot II to enrapture and entertain us,” Kurt Andersen writes. The New York Post has already christened it “BAM-A-LOT.”

“Here we are,” writes Salon’s Rebecca Traister, “oohing and aahing over what they’ll be wearing, and what they’ll be eating, what kind of dog they’ll be getting, what bedrooms they’ll be living in, and what schools they’ll be attending. It feels better than good to sniff and snurfle through the Obamas’ tastes and habits…Who knew we had in us the capacity to fall for this kind of idealized Americana again?”…”Obama is a figure, especially in pop culture, in a way that most new presidents are not,” historian Michael Beschloss says. “Young people who may not be interested in the details of NAFTA or foreign policy just think Obama is cool, and they’re interested in him. Being cool can really help a new president.”…

USA Today’s front page. “Poll: Hopes soaring for Obama, administration,” the headline said, with 65 percent saying “the USA will be better off 4 years from now.”…MSNBC…is running promos that say: “Barack Obama, America’s 44th president. Watch as a leader renews America’s promise.”…Web worship of Obama is nearly limitless. On YouTube alone, the Obama Girl song, “I’ve Got a Crush on Obama,” has been viewed 11.7 million times.

It turns out that Charles Krauthammer was correct, and the infatuation has lasted through election day. As far as the media are concerned, the “re-branding of America” appears to be well underway.

Nasa’s Goddard Institute for Space Studies (GISS), which is run by Al Gore’s chief scientific ally, Dr James Hansen, and is one of four bodies responsible for monitoring global temperatures, announced that last month was the hottest October on record. This was startling. Across the world there were reports of unseasonal snow and plummeting temperatures last month, from the American Great Plains to China, and from the Alps to New Zealand. China’s official news agency reported that Tibet had suffered its “worst snowstorm ever”. In the US, the National Oceanic and Atmospheric Administration registered 63 local snowfall records and 115 lowest-ever temperatures for the month, and ranked it as only the 70th-warmest October in 114 years.

So what explained the anomaly? GISS’s computerised temperature maps seemed to show readings across a large part of Russia had been up to 10 degrees higher than normal…The reason for the freak figures was that scores of temperature records from Russia and elsewhere were not based on October readings at all. Figures from the previous month had simply been carried over and repeated two months running.

The error was so glaring that when it was reported…by the US meteorologist Anthony Watts and Steve McIntyre…GISS began hastily revising its figures…

If there is one scientist more responsible than any other for the alarm over global warming it is Dr Hansen, who set the whole scare in train back in 1988 with his testimony to a US Senate committee chaired by Al Gore. Again and again, Dr Hansen has been to the fore in making extreme claims over the dangers of climate change…the figures published by Dr Hansen’s institute are not only one of the four data sets that the UN’s Intergovernmental Panel on Climate Change (IPCC) relies on to promote its case for global warming, but they are the most widely quoted, since they consistently show higher temperatures than the others…

Another of his close allies is Dr Rajendra Pachauri, chairman of the IPCC, who recently startled a university audience in Australia by claiming that global temperatures have recently been rising “very much faster” than ever, in front of a graph showing them rising sharply in the past decade. In fact, as many of his audience were aware, they have not been rising in recent years and since 2007 have dropped. Dr Pachauri, a former railway engineer with no qualifications in climate science, may believe what Dr Hansen tells him.

Can you guess where Dr. Hansen gets his funding for “legal and media advice”?

An abnormally cool Arctic is seeing dramatic changes to ice levels. In sharp contrast to the rapid melting seen last year, the amount of global sea ice has rebounded sharply and is now growing rapidly. The total amount of ice, which set a record low value last year, grew in October at the fastest pace since record-keeping began in 1979…

Bill Chapman, a researcher with the Arctic Climate Center at the University of Illinois, says the rapid increase is “no big deal”. He says that, while the Arctic has certainly been colder in recent months, the long-term decrease is still ongoing. Chapman, who predicts that sea ice will soon stop growing, sees nothing in the recent data to contradict predictions of global warming.

Others aren’t quite so sure. Dr. Patrick Michaels, Professor of Environmental Science at the University of Virginia, says he sees some “very odd” things occurring in recent years. Michaels, who is also a Senior Fellow with the Cato Institute, tells DailyTech that, while the behavior of the Arctic seems to agree with climate models predictions, the Southern Hemisphere can’t be explained by current theory. “The models predict a warming ocean around Antarctica, so why would we see more sea ice?” Michaels adds that large areas of the Southern Pacific are showing cooling trends, an occurrence not anticipated by any current climate model.

For those that remain public, expect managements to be taking advantage of low stock prices to lock in options at super-low exercise prices. But the real wise guys will be taking some of their companies private at very low valuations once they’ve fed at the public trough. You heard it here first. Stay tuned.

(By the way, we see little justification for a bailout of the automakers. Most of the airlines you’ve flown on have gone bankrupt at least once and they are still around. We haven’t heard a convincing explanation that the outcome would be different for GM or Ford; indeed, Mitt Romney’s analysis of the situation seems pretty convincing to us.)

During a period of strong global growth, growing capital flows, and prolonged stability earlier this decade, market participants sought higher yields without an adequate appreciation of the risks and failed to exercise proper due diligence. At the same time, weak underwriting standards, unsound risk management practices, increasingly complex and opaque financial products, and consequent excessive leverage combined to create vulnerabilities in the system. Policy-makers, regulators and supervisors, in some advanced countries, did not adequately appreciate and address the risks building up in financial markets, keep pace with financial innovation, or take into account the systemic ramifications of domestic regulatory actions.

(We note that, despite its length, the diagnosis manages to omit some of the problems that government itself caused.) Doesn’t it seem strange that these problems — so easily seen in retrospect — drew such scant attention for most of the decade?

The most conspicuous clichés to fall…were the twin suppositions that a decisive number of white Americans wouldn’t vote for a black presidential candidate — and that they were lying to pollsters about their rampant racism. But the polls were accurate. There was no “Bradley effect.” A higher percentage of white men voted for Obama than any Democrat since Jimmy Carter, Bill Clinton included.

Obama also won all four of those hunting-and-Hillary-loving Rust Belt states that became 2008’s obsession among slumming upper-middle-class white journalists: Pennsylvania and Michigan by double digits, as well as Ohio and even Indiana, which has gone Democratic only once (1964) since 1936. The solid Republican South, led by Virginia and North Carolina, started to turn blue as well. While there are still bigots in America, they are in unambiguous retreat.

And what about all those terrified Jews who reportedly abandoned their progressive heritage to buy into the smears libeling Obama as an Israel-hating terrorist? Obama drew a larger percentage of Jews nationally (78) than Kerry had (74) and — mazel tov, Sarah Silverman! — won Florida.

Let’s defend Hispanic-Americans, too, while we’re at it. In one of the more notorious observations of the campaign year, a Clinton pollster, Sergio Bendixen, told The New Yorker in January that “the Hispanic voter — and I want to say this very carefully — has not shown a lot of willingness or affinity to support black candidates.” Let us say very carefully that a black presidential candidate won Latinos — the fastest-growing demographic in the electorate — 67 percent to 31 (up from Kerry’s 53-to-44 edge and Gore’s 62-to-35).

Young voters also triumphed over the condescension of the experts. “Are they going to show up?” Cokie Roberts of ABC News asked in February. “Probably not. They never have before. By the time November comes, they’ll be tired.” In fact they turned up in larger numbers than in 2004, and their disproportionate Democratic margin made a serious difference, as did their hard work on the ground. They’re not the ones who need Geritol.

In mid-October, the NYT reported “a record 89 percent of Americans now say the country has pretty seriously gotten off on the wrong track while just 7 percent of Americans say the country is going in the right direction.” In some ways, it seems remarkable in retrospect that 46% of voters (58MM people) actually voted for John McCain.

First there was an inane government policy that encouraged massive over-investment in real estate, as well as inappropriate lending and plenty of outright fraud (remember “no income verification“?). Congress enabled this chicanery by rigging the game, and acting as cheerleader for this monumental foolishness. So there were trillions of dollars of bad mortgages and real estate loans created through gross negligence combined with self-interest. Then it turns out that these loans created a global mess because of the many and creative abuses of something called securitization.

As if these problems weren’t enough to deal with, the foolish and greedy investment banks got the rules of their game changed so that they could set their own minimum capital levels, and then they and others proceeded to write $60 trillion in insane insurance policies that had no reserves against them. This turned a typical story of cyclical excess into a potentially catastrophic situation that had the potential of bringing down the entire global banking system.

Finally, while the regulators slept, the hedge fund industry multiplied further all these excesses because it leveraged the heck out of every bet. The speculators rode oil, as they had wheat and other commodities, as a risk free way to short the dollar. Perhaps the funds got panicky for yield as their mortgage investments soured, but whatever the reason, the funds and the banks hugely multiplied their bets both short and long, as the game neared its end, and most everyone went broke, or nearly so. (Some of the wise guys are still in business and up to their old tricks, however.)

Thus every bubble finally burst, including oil, the global financial system was in systemic crisis, and the age of bailouts was born. At first it was just the banks, but then everybody and his brother got bailed out. The cascade of bank failures and subsequent deflation that constituted the Great Depression had to be prevented at all costs.

So, if the systemic problems are largely being handled, don’t we just have a run-of-the-mill recession on our hands, admittedly somewhat worse than usual because the expansion featured such excesses, and past consumer spending increases were closely linked to rising home values? We tend to think so, but the market hasn’t been behaving that way. Though it was up big today, it continues to be like riding a roller coaster at midnight. Maybe it’s the forced liquidations that have been reported that often cause the late-day insanity; we don’t know.

However (among the carnage), we are beginning to hear snippets of good news here and there, from airlines whose bookings are holding up nicely to residential real estate in troubled areas of the country that seems to show some signs of stabilizing. Maybe a chimera; maybe not. But the economy has been given, in effect, a huge tax cut with the declines of oil and other commodity prices, and the magnitude of this impact should not be underestimated. Furthermore, it is usually unwise to bet against the Fed, and with every central bank in the world inflating at the same time, why should anyone be surprised if some signs of recovery begin to appear here and there over the coming months?

It has been most of a generation since there was a serious recession in the United States — isn’t it just possible that the zany, naive over-reaction we have been seeing in the political world has a parallel in an over-reaction to today’s economic problems?

We have a question about this banking bailout, which seems to have spread to all sorts of non-banks, and we hope to all of us as well. When General Electric, one of the few remaining AAA credits, got its $139 billion in US government debt guarantees, did it do so by filling out the online application above? Is that how the auto companies will get their $25 billion or more? Or do they know something we don’t know?

The WSJ comments on oil prices, which are now in the mid-$50s and down 60% from just a few months ago:

Light, sweet crude for December delivery fell $3.08, or 4.9%, at $59.33 a barrel on the New York Mercantile Exchange, its lowest settle since March 2007. Oil is down 59% from its $145 peak in July…Oil may have further to fall this week: Traders cite a slew of options to sell crude at $55 or $50 a barrel as having likely exacerbated the move below $60 and point to more downside. Options grant the right to buy or sell oil if futures hit a certain price. A move toward those levels would bring the price of oil near its lowest point in 3½ years. Oil has fallen even as production has tightened…

If you look at past boom and bust cycles over a variety of commodities and numerous business cycles, the upward part of the cycles averaged 18 months to 2 years or so. The price increases during that period were about 50%. This boom cycle lasted much longer (2-3x in many cases) and had far higher peak prices. It’s a bit hard to imagine a scenario in which the current downtrend comes to an end — but weren’t people saying precisely the same thing in the other direction back in July?

UPDATE — Of course oil has fared better some other gambling stocks, such as the the Las Vegas Sands, which has gone from $123 to $5 in the last year.

This year, with OPEC-rigged oil prices averaging near $110/barrel, Americans will pay $900 billion for their oil supply, and the world as a whole will pay $3.6 trillion. These petroleum costs are up a factor of ten from what they were in 1999, and represent a huge highly-regressive tax on the world economy…

To see how this tax can destroy real estate values, it is only necessary to compare expenditures. In 2003, Americans paid $268 billion for new homes, and $197 billion for oil. In 2008, we paid for new homes at an annual rate of $134 billion, and $900 billion for oil…total net American investment in housing stock went from $785 billion in 2003 to an annual rate of $622 billion this year, a $163 billion decline that is dwarfed by the $760 billion rise in annual oil payouts over the same period…

in 2003 we spent 25% as much on oil as we did on houses. In 2008, we spent over 140%. This is why our housing market has collapsed. It is also why new auto sales have collapsed as well. Indeed the $760 billion increase in our oil payments is fifteen times the $50 billion decline in what we spent on new cars in 2008.

Reducing dependence on a cartel for an important commodity ought to be a no-brainer for a country with the size and resources of the United States. There is no shortage of interesting ideas on how to achieve that end. The repeated failures of the US government to act meaningfully on this issue amounts to gross negligence. It will be a better world when the phrase “strategic importance” ceases forever to appear in the same sentence with “Strait of Hormuz.”

The fire that Merrill was playing with was an arcane instrument known as a synthetic collateralized debt obligation. The product was an amalgam of collateralized debt obligations (the pools of loans that it bundled for investors) and credit-default swaps (which essentially are insurance that bondholders buy to protect themselves against possible defaults)…

The synthetic C.D.O. grew out of a structure that an elite team of J. P. Morgan bankers invented in 1997. Their goal was to reduce the risk that Morgan would lose money when it made loans to top-tier corporate borrowers like I.B.M., General Electric and Procter & Gamble.

Regular C.D.O.’s contain hundreds or thousands of actual loans or bonds. Synthetics, on the other hand, replace those physical bonds with a computer-generated group of credit-default swaps. Synthetics could be slapped together faster, and they generated fatter fees than regular C.D.O.’s, making them especially attractive to Wall Street…

as often occurs with Wall Street alchemy, a good idea started to be misused — and a product initially devised to insulate against risk soon morphed into a device that actually concentrated dangers. This shift began in 2002, when low interest rates pushed investors to seek higher returns.

“Investors said, ‘I don’t want to be in equities anymore and I’m not getting any return in my bond positions,’ ” said William T. Winters, co-chief executive of JPMorgan’s investment bank and a colleague of Ms. Masters on the team that invented the first synthetic. “Two things happened. They took more and more leverage, and they reached for riskier asset classes. Give me yield, give me leverage, give me return.”

It is amazing in retrospect that these potentially dangerous instruments grew into a $60 trillion market. The idea that you could buy or sell an “insurance policy” on anything — without any insurable interest — and then not put aside any reserves in case the thing faltered, is amazing, and nuts.

Oh, by the way, the cost of the AIG bailout just went from $85 billion to $150 billion, in part because of the $400 billion in credit default swaps guaranteed by the company.

I was in the press tent in Chicago on election night, with some hundred other journalists whose news organizations had ponied up large for a tabled seat at Grant Park. These were all veteran reporters, including the “travelling media” posse – embeds – who had accompanied Barack Obama throughout the campaign. At 10 p.m. on Tuesday, Wolf Blitzer appeared on the giant television screen to announce Obama had won the U.S. presidency, as projected by CNN, which was hardly a risky declaration with several big swing states already in the bag. Huge cheers erupted, squeals of delight, and some reporters high-fived.

So what? Another right wing canard. Reporters are human beings, after all. They’re entitled to their celebrations. It’s not as though their favoring a candidate biases their coverage.

The United States military since 2004 has used broad, secret authority to carry out nearly a dozen previously undisclosed attacks against Al Qaeda and other militants in Syria, Pakistan and elsewhere, according to senior American officials. These military raids, typically carried out by Special Operations forces, were authorized by a classified order that Defense Secretary Donald Rumsfeld signed in the spring of 2004 with the approval of President George W. Bush, the officials said. The secret order gave the military new authority to attack the Qaeda terrorist network anywhere in the world, and a more sweeping mandate to conduct operations in countries not at war with the United States.

In 2006, for example, a Navy Seal team raided a suspected militants’ compound in the Bajaur region of Pakistan, according to a former top official of the Central Intelligence Agency. Officials watched the entire mission — captured by the video camera of a remotely piloted Predator aircraft — in real time in the CIA’s Counterterrorist Center at the agency’s headquarters in Virginia 7,000 miles away.

Some of the military missions have been conducted in close coordination with the CIA, according to senior American officials, who said that in others, like the Special Operations raid in Syria on Oct. 26 of this year, the military commandos acted in support of CIA-directed operations…

the new authority was spelled out in a classified document called “Al Qaeda Network Exord,” or execute order, that streamlined the approval process for the military to act outside officially declared war zones. Where in the past the Pentagon needed to get approval for missions on a case-by-case basis, which could take days when there were only hours to act, the new order specified a way for Pentagon planners to get the green light for a mission far more quickly…

The 2004 order identifies 15 to 20 countries, including Syria, Pakistan, Yemen, Saudi Arabia and several other Gulf states, where Qaeda militants were believed to be operating or to have sought sanctuary, a senior administration official said. Even with the order, each specific mission requires high-level government approval. Targets in Somalia, for instance, need at least the approval of the defense secretary, the administration official said, while targets in a handful of countries, including Pakistan and Syria, require presidential approval.

The story above indicates clearly that Bush administration officials spoke to reporters for this story. And we know now that Obama administration intends to use executive orders as part of its 100 day strategy. So who is behind this leak, and why?

Nuclear power plants smaller than a garden shed and able to power 20,000 homes will be on sale within five years, say scientists at Los Alamos, the US government laboratory which developed the first atomic bomb. The miniature reactors will be factory-sealed, contain no weapons-grade material, have no moving parts and will be nearly impossible to steal because they will be encased in concrete and buried underground.

The US government has licensed the technology to Hyperion, a New Mexico-based company which said last week that it has taken its first firm orders and plans to start mass production within five years. ‘Our goal is to generate electricity for 10 cents a watt anywhere in the world,’ said John Deal, chief executive of Hyperion. ‘They will cost approximately $25m [£13m] each. For a community with 10,000 households, that is a very affordable $250 per home’…

The company plans to set up three factories to produce 4,000 plants…The first confirmed order came from TES, a Czech infrastructure company specialising in water plants and power plants. ‘They ordered six units and optioned a further 12. We are very sure of their capability to purchase,’ said Deal. The first one, he said, would be installed in Romania. ‘We now have a six-year waiting list. We are in talks with developers in the Cayman Islands, Panama and the Bahamas.’

Fifty years ago, Chairman Mao declared a policy to put a steel mill in every backyard. That didn’t work out so well. We’ll just have to see what happens to this idea.

September’s financial storm probably sealed Obama’s victory by raising the electorate’s anxieties while lowering its confidence in Obama’s opponent. John McCain’s responses — suspending, sort of, his campaign; ratcheting up his rhetoric about Wall Street “greed and corruption” — suggested a line spoken solemnly by the Capitol Steps’ George W. Bush impersonator: “Uncertain times call for uncertain leadership.” But the storm’s aftermath — $1 trillion or so of government resources siphoned away — will severely constrain Obama’s presidency. So, this year the conditions conducive to the election of liberals, with their baroque plans and rococo dreams, have put a polar frost on most such ambitions…

Obama’s first problem will be drawing lines to circumscribe bailout promiscuity. The Bush administration, having executed a swan dive, or perhaps a belly-flop, into the financial sector, now seems to be flinching from extending the interventions into the industrial sector. Democrats in Congress, feeling their oats and hearing clamors from local corporations, will be Obama’s first affliction.

“Uncertain times call for uncertain leadership.” Interesting. Though of course there are many motivations for a person’s vote, it is not so surprising in this time of economic tumult that a majority of Americans supported the younger and more robust man over the old fellow.

The Post provided a lot of good campaign coverage, but readers have been consistently critical of the lack of probing issues coverage and what they saw as a tilt toward Democrat Barack Obama. My surveys, which ended on Election Day, show that they are right on both counts…The op-ed page ran far more laudatory opinion pieces on Obama, 32, than on Sen. John McCain, 13. There were far more negative pieces (58) about McCain than there were about Obama (32), and Obama got the editorial board’s endorsement…Obama deserved tougher scrutiny than he got, especially of his undergraduate years, his start in Chicago and his relationship with Antoin “Tony” Rezko, who was convicted this year of influence-peddling in Chicago.

Move along now. Nothing to see here.

From a piece in the NYT — the thing speaks for itself. It’s pretty bad out there. HT: Big Picture

There are going to be a lot of setpieces over the next four years, so we might as well start getting used to them. The president-elect’s press conference was just such a show, as the array of CEO’s, former Treasury Secretaries and politically symbolic attendees illustrated. Senator Obama’s planned remarks were cautious, and even seemed to imply his potentially backing off from some tax increases. The event was held while the market was open and was designed not to rattle the market.

The Q&A portion of the event was highly scripted and obviously so. ABC, CBS, NBC, AP, CNN, Reuters, the NYT and the local Chicago papers got to ask a question. Opposition press did not. The rather labored dog metaphor was swallowed whole by the adoring media as a genuine ad-lib. The one genuine ad-lib was a flop that the Senator had to later apologize for. So perhaps in the future all impromptu remarks and jokes will be scripted.

Possibly some future moments of levity may be brought to us by the Obama administration’s new chief of staff, Rahm Emanuel. According to Bloomberg, Senator Obama “once joked at a charity dinner that when Rahm Emanuel severed his middle finger, it almost rendered him mute.” A pretty funny comment, but the serious point is not to be missed.

These fellows aren’t fooling around; they know how to craft an image and enforce discipline. Already some in the elite media are getting uncomfortable with the self-conscious image making that has been the hallmark of Senator Obama’s campaign. But what will they do, since they know just what happens to those in the media that oppose the administration?

there is a growing risk of a hard landing in China. Let us be clear what we mean by that. In a country with the potential growth of China, a hard landing would occur if the growth rate of the economy were to slow down to 5% to 6%, as China needs a growth rate of 9% to 10% to absorb about 24 million folks joining the labor force every year–it also needs to move about 12 million to 14 million poor rural farmers every year to the modern industrial and manufacturing urban sector.

The whole social and political legitimacy of the Communist Party’s regime rests on continuing to deliver this high-growth transformation of the economy. Therefore, a slowdown of growth from 12% to 5%-6% would be the equivalent of a recession for China. And now a variety of macro indicators suggest that China is indeed headed toward a hard landing.

China’s economy is structurally dependent on exports: Net exports (or the trade-balance surplus) are close to 12% of GDP (up from 2% earlier in the decade), and exports represent about 40% of GDP. Real investment in China is about 45% of GDP, and, aside from housing and infrastructure spending, about half of this capital expenditure goes toward the production of new capital goods that produce more exportable goods. So, with the sum of exports and investment representing about 80% of GDP, most Chinese aggregate demand depends on its ability to sustain an export-based economic growth.

The trouble, however, is that the main outlet of Chinese exports–the U.S. consumer–is collapsing for the first time in two decades. Chinese exports to the U.S. were growing at an annualized rate of over 20% a year ago. The most recent bilateral trade data from the U.S. show that this export growth has now fallen to 0%.

The worst is still to come in the next few quarters. After an OK second quarter in the U.S. (boosted by the tax rebates), U.S. retailers hoped that the consumer downturn would be minor; they thus placed, over the summer, massive orders for Chinese (and other imported) goods for Q3 and Q4. But now the U.S. holiday season clearly looks to be the worst in decades, and the result will be a huge overhang of unsold Chinese goods. You can therefore expect orders of Chinese goods for Q1 of 2009 and the rest of 2009 to be down drastically, dragging Chinese exports to the U.S. into sharply negative territory…

you can expect a severe drop in capital expenditure in China, as there is already a large excess capacity of exportable goods given the massive overinvestment of the last few years. A sharp fall in net exports and real investment will likely trigger a hard landing in China. Considering the certainty of a recession in advanced economies and the likelihood of a global recession, there is a very high probability that Chinese growth could slow down to 7% or even lower in 2009…

A few years ago it was said that China was 70% dependent on exports for its growth. Roubini asserts that China is 80% dependent on exports and investment spending, much of which is related to exports. These will likely not hold up, contrary opinions notwithstanding. Thus 2009 might be pretty bad for China economically — the political implications remain to be seen.

The Standard & Poor’s 500 Index fell 5 percent to 904.9, extending its two-day loss to 10 percent. The Dow Jones Industrial Average retreated 443.48 points, or 4.9 percent, to 8,695.79. The Russell 2000 Index of small U.S. companies declined 3.6 percent to 495.92. The MSCI World Index of 23 developed markets lost 6.2 percent to 921.87.

The two-day tumble wiped out more than half of the S&P 500’s rebound from a five-year low on Oct. 27. An industry report showing an unexpected decline in sales at U.S. chain stores in October also weighed on stocks as 25 of 27 companies in the S&P 500 Retailing Index slumped…The S&P 500 is down 38 percent this year, the steepest annual retreat since 1937. The benchmark for U.S. equities has plunged 42 percent since its record in October 2007

Of course this precipitous and record decline in stock prices could be due to the problems suggested by Bloomberg, but there is another possibility as well. The Carter administration appointed one of the worst Treasury Secretaries in US history, whereas the Clinton administration enjoyed a Treasury Secretary who reined in certain of the excessive campaign promises of the President. Could it be that a substantial portion of the current decline is due to uncertainty about which sort of financial officials the next administration is inclined to appoint?

In two self-identification questions, just 33% of actual voters said they considered themselves Republicans, but 41% thought of themselves as conservatives. On the other end of the spectrum, 39% aligned as Democrats, but just 20% described their ideological alignment as liberal. That number is unchanged from the 20% of actual voters in our 2004 Post-Election survey said they were liberal.

Something in these numbers appears to be out of whack. For example, in a poll last year, 34% of Democrats said that they personally did not want the surge to work, and, in 2005, fully 32% of Democrats said that the US is “discriminatory and unfair.” Only 20% of those polled called themselves liberal. Is personally not wanting the US military to succeed in the surge anything other than a liberal position? What’s going on?

Here’s a prediction that we think is safer than most. Some time after Senator Obama becomes President, in his convincing victory, the people are likely to rue the media’s decision not to vet the man as they should have over the last two years. Roger Simon and Glenn Reynolds both have useful reflections on this issue.

It’s not likely that the MSM themselves will easily change course, because so many in the media seem completely unaware of their of the biases they mistakenly think they conceal. And it’s even worse than that for many in the elite media. Some have been so invested in Obama’s victory over the last months that they have failed to notice when newsworthy stories were directly handed to them.

Observers like Steven den Beste think that the media will try hard to regain their credibility. Maybe so. However, we think it may be even harder for the media to face the two sources of guilt that such an effort would require — that they had done the wrong thing in the first place, and that in redressing this failure, they risk accusations that they harbor a nasty bias against Obama.

There may be some political realignments over the next 2-4 years, but they may be different from the conventional wisdom. The American people have elected a man that they like, but in reality know very little about. That will change as he begins to do his job, which is to make decisions. Then Americans will begin to learn which Obama they elected. That such unnecessary surprises lie ahead is chiefly the media’s fault.

If Barack Obama wins this election, as all signs seem to suggest, he may well run a generic, liberal Democratic administration. There are some very bright, very fine liberal economists who would probably do a decent job of managing the recovery. He could take a more modest approach to foreign affairs, maintain our military strength, and develop a strategic approach that facilitates the integration of the newly wealthy and powerful countries (BRIC=Brazil, Russia, India, China) into a new globalized international order. He would probably nominate very liberal Judges to the Supreme Court. I would find many reasons to oppose his choices but all of this would be well within the bounds of a typical center-left liberal administration.

Of concern, Barack Obama might actually believe his own hype, and as only a young person with no experience in the real world, believe he can change America and make it better by using the power of the government to increase fairness and equality, while talking to our enemies, spreading the wealth, and saving the planet. If he attempts to rule as a left wing ideologue, he will almost certainly lengthen the current recession and, as per Joe Biden, increase our chances of a major set-back in the war on terror that he does not profess to believe in. If he tries to rule to the left, it will be a long four years, for him and for the rest of us.

I just talked to one of my best Team McCain sources who told me that heading into today all the key battleground polls were moving hard and fast in their direction. The source, hardly a perma-optimist, thinks it will be a long night, but that McCain is going to win. So add this with the new Battleground poll (Obama +1.9 only) and the rising stock market…

On the other hand, John Dickerson says: “An Obama loss would mean the majority of pundits, reporters, and analysts were wrong. Pollsters would have to find a new line of work, since Obama has been ahead in all 159 polls taken in the last six weeks. The massive crowds that have regularly turned out to see Obama would turn out to have meant nothing.” We’ll know soon who is right.

Oil fell nearly 6 percent on Monday as further indicators of falling demand linked to a potential recession offset OPEC plans to reign in output. U.S. crude settled down $3.90 at $63.91 a barrel, after October saw the steepest monthly price decline ever for oil as global demand slowed. London Brent crude dropped $4.84 to settle at $60.48 a barrel. Oil hit a record $147.27 a barrel in mid-July

Just remember where things are heading the moment someone says, “This time it’s different.”

in 1995, regulations adopted by the Clinton administration took the Community Reinvestment Act to a new level. Instead of forbidding banks to discriminate against blacks and black neighborhoods, the new regulations positively forced banks to seek out such customers and areas. Without saying so, the revised law established quotas for loans to specific neighborhoods, specific income classes, and specific races. It also encouraged community groups to monitor compliance and allowed them to receive fees for marketing loans to target groups.

But the aggressive pursuit of an end to redlining also required the active participation of Fannie Mae, and thereby hangs a tale. Back in 1968, the Johnson administration had decided to “adjust” the federal books by taking Fannie Mae off the budget and establishing it as a “Government Sponsored Enterprise” (GSE). But while it was theoretically now an independent corporation, Fannie Mae did not have to adhere to the same rules regarding capitalization and oversight that bound most financial institutions. And in 1970 still another GSE was created, the Federal Home Loan Mortgage Corporation, or Freddie Mac, to expand further the secondary market in mortgage-backed securities.

This represented a huge moral hazard. The two institutions were supposedly independent of the government and owned by their stockholders. But it was widely assumed that there was an implicit government guarantee of both Fannie and Freddie’s solvency and of the vast amounts of mortgage-based securities they issued. This assumption was by no means unreasonable. Fannie and Freddie were known to enjoy lower capitalization requirements than other financial institutions and to be held to a much less demanding regulatory regime. If the United States government had no worries about potential failure, why should the market?

Forward again to the Clinton changes in 1995. As part of them, Fannie and Freddie were now permitted to invest up to 40 times their capital in mortgages; banks, by contrast, were limited to only ten times their capital. Put briefly, in order to increase the number of mortgages Fannie and Freddie could underwrite, the federal government allowed them to become grossly undercapitalized — that is, grossly to reduce their one source of insurance against failure. The risk of a mammoth failure was then greatly augmented by the sheer number of mortgages given out in the country.

That was bad enough; then came politics to make it much worse. Fannie and Freddie quickly evolved into two of the largest financial institutions on the planet, with assets and liabilities in the trillions. But unlike other large, profit-seeking financial institutions, they were headquartered in Washington, D.C., and were political to their fingertips. Their management and boards tended to come from the political world, not the business world. And some were corrupt: the management of Fannie Mae manipulated the books in order to trigger executive bonuses worth tens of millions of dollars, and Freddie Mac was found in 2003 to have understated earnings by almost $5 billion.

Both companies, moreover, made generous political contributions, especially to those members of Congress who sat on oversight committees. Their charitable foundations could be counted on to kick in to causes that Congressmen and Senators deemed worthy. Many of the political contributions were illegal: in 2006, Freddie was fined $3.8 million — a record amount — for improper election activity.

That was then:

the collapse of 1836. Thanks to a growing population, prosperity, and the advancing frontier, poorly regulated state banks had been multiplying throughout the 1830’s. In those days, chartered banks issued paper money, called banknotes, backed by their reserves. From 1828 to 1836, the amount in circulation had tripled, from $48 million to $149 million. Bank loans, meanwhile, had almost quadrupled to $525 million. Many of the loans went to finance speculation in real estate.

Much of this easy-credit-induced speculation had been caused, as it happens, by President Andrew Jackson. This was a terrific irony, since Jackson, who served as President from 1829 until 1837, hated speculation, paper money, and banks. His crusade to destroy the Second Bank of the United States, an obsession that led him to withdraw all federal funds from its coffers in 1833, removed the primary source of bank discipline in the United States. Jackson had transferred those federal funds to state banks, thereby enabling their outstanding loans to swell.

The real-estate component of the crisis began to take shape in 1832, when sales by the government of land on the frontier were running about $2.5 million a year. Some of the buyers were prospective settlers, but most were speculators hoping to turn a profit by borrowing most of the money needed and waiting for swiftly-rising values to put them in the black. By 1836, annual land sales totaled $25 million; in the summer of that year, they were running at the astonishing rate of $5 million a month.

While Jackson, who was not economically sophisticated, did not grasp how his own actions had fueled the speculation, he understood perfectly well what was happening. With characteristic if ill-advised decisiveness, he moved to stop it. Since members both of Congress and of his cabinet were personally involved in the speculation, he faced fierce opposition. But in July, as soon as Congress adjourned for the year, Jackson issued an executive order known as the “specie circular.” This forbade the Land Office to accept anything but gold and silver (i.e., specie) in payment for land. Jackson hoped that the move would dampen the speculation, and it did. Unfortunately, it did far more: people began to exchange their banknotes for gold and silver. As the demand for specie soared, the banks called in loans in order to stay liquid.

The result was a credit crunch. Interest rates that had been at 7 percent a year rose to 2 and even 3 percent a month. Weaker, overextended banks began to fail. Bankruptcies spread. Even several state governments found they could not roll over their debts, forcing them into default. By April 1837, a month after Jackson left the presidency, the great New York diarist Philip Hone noted that “the immense fortunes which we heard so much about in the days of speculation have melted like the snows before an April sun.” The longest depression in American history had set in.

Many people had their hands in the till in this disaster. Wasn’t the first time and won’t be the last. It would be nice to see some of them go to jail, however.

if somebody wants to build a coal-powered plant, they can; it’s just that it will bankrupt them because they’re going to be charged a huge sum for all that greenhouse gas that’s being emitted.

Maybe he’ll clarify his remarks on Wednesday. Maybe.

It takes a certain amount of fortitude to vote early in LA this year. The process can consume 3