"Well, here's your problem right here..."

From Wikiped(1):
GhostNet is the name given to a recently-discovered, large-scale hacking or possible electronic spying operation, based mainly in the People's Republic of China, which has infiltrated at least 1,295 computers in 103 countries. Computer systems which would normally be expected to have high levels of security protection have been compromised, including many belonging to banks, embassies, foreign ministries, and other government offices around the world, as well as the Dalai Lama's Tibetan exile centers in India, Brussels, London, and New York City.
The system disseminates malware to selected recipients via computer code attached to stolen emails and addresses, thereby expanding the network by allowing more computers to be infected. Once infected, a computer can be controlled or inspected by its hackers. The malware even has the ability to turn on the camera and audio-recording functions of an infected computer, enabling monitors to see and hear what goes on in a room.

Researchers also believe they have found evidence of real world actions taken by government officials from the People's Republic of China, as a result of information obtained via the 'GhostNet'; including Beijing officials making a call to a diplomat discouraging a visit with the Dalai Lama, after that person had received an email invitation (from the Dalai Lama's representatives) to do so, and a woman on her way to Tibet being stopped by Chinese intelligence officers and shown transcripts of her online conversations

While a report from researchers at Cambridge University says they believe that the Chinese government is behind the attacks, the researchers from the University of Toronto stated they could not conclude that the Chinese government was responsible for the spy network, and noted alternative possibilities such as an operation run by private citizens in China for profit or for patriotic reasons, or intelligence agencies from other countries such as Russia or the Central Intelligence Agency of the United States. The Chinese government has denied any involvement, stating that China "strictly forbids any cyber crime".

Yikes! Makes Storm Botnet seem like a pile of puke.

(1) 11:03 CDT 3/30/09 edition

img via

Do only twits tweet?

For my part, I can't quite decide whether what they are describing is a good or a bad thing. On the one hand, a bunch of talking heads spouting back and forth to one another while limited to 140 characters or less seems like the perfect way to add complexity and nuance to our political discourse. On the other hand, why can't wealthy conservatives buy influence anymore?

Freedom: A brand in decline

Time was, a little bit of catchy jingoism all but guaranteed big profits. Nowadays, freedom doesn't sell:
"We've referred to the primary building planned for the site as One World Trade Center -- its legal name and street address -- for almost two years now, as well as using the name the Freedom Tower," said Stephen Sigmund, a spokesman for the Port Authority, in a statement released to CNN. "Many will always refer to it as the Freedom Tower, but as the building moves out of the planning stage and into full construction and leasing, we believe that going forward it is most practical to market the building as One World Trade Center."

Ten of the building's planned 108 above-ground floors have been built.

"The fact is, more than $3 billion of public money is invested in that building, and, as a public agency, we have the responsibility to make sure it is completed and that we utilize the best strategy to make certain it is fully occupied," Sigmund added. |CNN|

In an earlier and more cynical time I'd have thought that what was really going on here was that freedom was a brand that could't pay for shelf space. I'd have envisioned a future in which the building became known as Freedom Tower by Citi.

Times have changed. The country has changed. I've changed. I have been the change I was to have become.

And so it seems to me that this change of name is a real change signifying real change. This is a new day in which entirely new empty gestures will be needed.


On the subject of desired gadgets

I covet the THUNDER POWER 1000 and am working to acquire one for the big bad grad union. From the description:
Deafening! This megaphone will clear the streets and rattle the windows! The ThunderPower 1000 is designed for military and crowd control applications and has an extremely durable metal construction. It has an auxiliary jack so you can easily plug in your MP3 player, microphone or other external device to sing along with, talk over music or make sound effects. |source|

Emphasis added.

Can you even begin to imagine the power and the glory that would accrue to an organization with such a megaphone? Why, we could be just like the marines who took out Noreiga!

I've got goosebumps.


... I want one so bad ...

Even more than the Tesla Roadster, I want the Model S Electric Sedan:

UPDATE: ... definitely a gadget.

Morning in America means class war and coffee

I thought this segment was pretty remarkable:

The odd thing about the position Brzezinski stakes out here is his avowed ignorance of the uses to which vast fortunes might be put. He can't really be ignorant of the fact that wealth is a form of power, can he? Surely not. Which I take to indicate that he has some agenda which he thinks is served by not acknowledging that fact. In most contexts I'd assume that the unspoken agenda is to preserve the privileges of the owning class, but that interpretation doesn't seem plausible here.

Adding: Perhaps Brzezinski's agenda has been revealed here:
...the left’s agenda goes considerably beyond a black helicopter-based global monetary system. The ultimate aim is to establish a Star Trek-style post-capitalist society in which there’s no currency whatsoever. |Yglesias|


A question of etiquette

Wednesday is trash day in my neighborhood, so when I walked out the door this morning I wasn't surprised to see that the street was lined with trash cans. What did surprise me was the fellow who drove up in an SUV, parked illegally, then pulled a hefty bag out of the back of the truck and dropped it into an already overfilled receptacle.

After he drove off I was tempted to walk over and check to see if he had left a body. I didn't, though, because it seemed to me that examining the contents of my neighbor's trash can would be unthinkingly impolite. What say you all?

Ask a stupid question

Chuck Todd gets an honorable mention for worst question. The worst thing about Todd's question, it seems to me, wasn't its incoherence, but was rather that insofar as there was a coherent thought there, Todd was trying to toss a softball, but screwed it up so badly that he utterly failed to earn any ass kissing credits whatsoever.

Nobody, though, could live down to the standard set by Jennifer Loven. Recently private corporations have done bad things in the area of finance, Mr. President. How, then, do you justify seeking more power for government in the area of finance?



Will the Geitner plan work? Understanding Krugman's objection

It depends on what you mean by work. As Krugman noted on his blog today, the official administration line is that the Geitner put is just one piece of a larger strategy. A problem, according to Krugman, is that nobody knows what the other pieces are.

But let's back up for a second. What does the Geitner plan do, why does Krugman think that it won't work?

Geitner's plan, basically, is to create investment groups with government backing to purchase toxic assets from distressed banks. The downside risk of those investments will be guaranteed by the government, which means that buyers will have an incentive to overpay compared to current market prices. The idea is that this will get the toxic assets off of the banks' books at a price which will restore the banks to liquidity.

Krugman's critique of the plan is a little difficult to suss out. In his column this week, he wrote:
But the real problem with this plan is that it won’t work. Yes, troubled assets may be somewhat undervalued. But the fact is that financial executives literally bet their banks on the belief that there was no housing bubble, and the related belief that unprecedented levels of household debt were no problem. They lost that bet. And no amount of financial hocus-pocus — for that is what the Geithner plan amounts to — will change that fact. |Krugman|

On his blog, Krugman gives a more complete diagnosis:
Start with the question: how do banks fail? A bank, broadly defined, is any institution that borrows short and lends long. Like any leveraged investor, a bank can fail if it has made bad investments — if the value of its assets falls below the value of its liabilities, bye bye bank.

But banks can also fail even if they haven’t been bad investors: if, for some reason, many of those they’ve borrowed from (e.g., but not only, depositors) demand their money back at once, the bank can be forced to sell assets at fire sale prices, so that assets that would have been worth more than liabilities in normal conditions end up not being enough to cover the bank’s debts. And this opens up the possibility of a self-fulfilling panic: people may demand their money back, not because they think the bank has made bad investments, but simply because they think other people will demand their money back.

Bank runs can be contagious; partly that’s for psychological reasons, partly because banks tend to invest in similar assets, so one bank’s fire sale depresses another bank’s net worth.

So now we have a bank crisis. Is it the result of fundamentally bad investment, or is it because of a self-fulfilling panic?

If you think it’s just a panic, then the government can pull a magic trick: by stepping in to buy the assets banks are selling, it can make banks look solvent again, and end the run. Yippee! And sometimes that really does work.

But if you think that the banks really, really have made lousy investments, this won’t work at all; it will simply be a waste of taxpayer money. To keep the banks operating, you need to provide a real backstop — you need to guarantee their debts, and seize ownership of those banks that don’t have enough assets to cover their debts; that’s the Swedish solution, it’s what we eventually did with our own S&Ls. |Krugman|

One of Krugman's points is that the housing bubble really was a bubble and that this means that the banks investments in mortgage securities really were bad investments. And what this means is that government can't arrest the fall in the price of those securities merely by buying some of them. They can't, in other words, put a stop to the panic because there isn't a panic to put a stop to.

It follows from this that the banks are, as things stand at the moment, insolvent. This is because the asset side of their balance sheets are heavily loaded with these mortgage securities, and those securities have very little value. The banks have managed to stumble along by pretending that the securities are worth more than they are, but nobody really believes that. If those assets were fairly valued, then the banks would obviously be insolvent and would fail.

As an aside, this is the context in which to understand the Congressional GOP's push to return to "mark to market" accounting rules. The idea is to change the laws to let the banks put mortgage securities on the balance sheet for the value they expect to sell them for in the future, rather than for the value that they could earn today. This would make the balance sheets look healthy, sure, but is ostrich accounting of the worst sort. Pretending that these securities are worth something would allow current managers to justify their bonuses, but it wouldn't solve the underlying problem.

Returning to Geitner's plan, the idea is to pull the troubled assets off the books. Why won't that work? This segment from last night's NewsHour may shed some light:

Krugman's argument, I think, is this. Banks, the troubled ones at any rate, have more bad assets on their books than the Geitner plan will purchase. If the plan is to work, it must do so by establishing a price floor for those assets which is sufficient to ensure solvency. But, given the incentives of the Geitner plan, the price paid for assets is likely to be higher than the market would otherwise bear. At the same time, the plan will give us information about what those assets are worth. But once we know what those assets are worth, then banks will be forced to honestly report their value on their balance sheets. The banks are currently reporting those assets as being worth something like sixty cents on the dollar, even though the market price is more likely to be something like thirty cents. But then bob's your uncle, because at those prices many banks will turn out to be insolvent.

Which brings us full circle to the seemingly unknown other parts of the plan. The total losses on mortgage securities in the U.S. is estimated to be something like $4 trillion. The Geitner plan will cover something like $1 trillion of those losses. The Fed's announcement of quantitative easing means that they'll buy up another trillion or so of mortgage paper. Some losses have already been addressed by capital infusions. But all of that still leaves something close to $2 trillion in losses for the banks to absorb. Can they do it? I guess we'll find out.

Adding: Yes, I know that I spelled Geithner's name wrong.


With threats of peace on the horizon, Brit Hume raises the alarm

Don't know about you, but whenever I see Brit Hume talk about war three little words run through my head. Vice Presidential Material.

I mean, he's got the gravitas of Cheney, the telegenic magic of Fred Thompson, and the bug eyed bellicosity Phil Gramm. Plus all kinds of other great old white dude qualities. Just look how certain he is! And unwavering! Why, with a man like that near the helm, scylla and charybdis wouldn't know what hit 'em!


it's too much heat/let's go to beach/and meet some cheeeick

It's satisfying to know that, no matter where I go in Austin this SXSW week, I will stumble upon great free music and, if I play my cards right, free beer and BBQ.

No matter where I go on the radio dial, too, I'll get live coverage of SXSW music performances. Most of the main radio stations in town are doing this, including the NPR station, KUT.

Tonight I discovered K'Naan, Somali-born hip-hop artist who claims that American hip-hop, despite it's merits, lacks street cred as L.A. streets cannot compare to Mogadishu streets. And the guy learned English listening to American hip-hop.Take a listen to a live set from SXSW.

The NPR site also has the Decemberists performing their new album The Hazards of Love in its entirety.


The best an the brightest

Via Talking Points Memo I've been reading Joseph St. Denis's response to congressional inquiries about the shenanigans in A.I.G.'s financial products division. Joseph St. Denis was the chief accountant of the division, and resigned in September 2007 because he had been denied access to the process by which the firm's super credit default swaps were valuated. TPM is all over this story, but here's a snippet from the letter that jumped out at me:
This was the first time Mr. Cassano had expressed criticism of any of my close working relationships with FSD or OAP. As previously noted, during my evaluation with Mi. Cassano in June of 2007 two months earlier, Mr. Cassano had told me that I was "doing a great job," and that I should "work closely with [AIG]." He also volunteered during this meeting in June 2007,which was also attended by William Kolbert, that he had "no desire to be promoted, because it would separate [him] from the money," and that AIG's corporate management was "scared to death" of him'


I'm Montressor, son!

Earlier in the semester my classes read "The Cask of Amontillado" by Poe. It's a class favorite and we've been returning to the story now and again.

Today one of my students sent me a link to Flocabulary's hip-hop version of the story. I believe I may now have to show this to my class. The video is funny but not that great; however, I love how it insinuates Poe murdering Baudelaire.



As I work to come to terms with my gadget problem, I find that I need boundaries but am unable to define them for myself. The difficulty is that the border between gadgets and non-gadgets is a little fuzzy. Which brings me to my question. Are the following examples of gadgets? Please explain your answers.
  • stereo
  • microwave
  • car
  • foreman grill
  • charcoal grill
  • DVR
  • trash compactor
  • toilet
  • flashlight
  • smart phone
  • television

Kansas in the (historical comparisons) news

Also, will Steele beat the Roberts' record for shortest RNC Chairmanship ever? Matt Cooper discovered that the current record holder appears to be Sen. Pat Roberts' (R-KS) dad, C. Wesley Roberts, who was chairman for four months in 1953 before a reporter discovered he'd collected a $10,000 commission on the sale of a hospital the state of Kansas owned. Good times. I wonder if Steele can top it. |TPM|


"some concern"

As I wrote in my Employee Free Choice Act piece today, the business side scored a major -- perhaps decisive -- early win by defining the bill as "card check" and as a matter of depriving workers of a "secret ballot" -- which is a hard, poll-tested spin on one aspect of the bill.

Warren Bufftett's remarks on CNBC this morning, where he came out against the legislation, show how effective that tactic was:

“I think the secret ballot’s pretty important in the country," Buffett said. "I’m against card check to make a perfectly flat statement.”

On the other hand, there's some concern in the ranks of business that labor will offer a compromise discarding the provision it refers to as "majority sign-up," take the equally important binding arbitration and other provisions. By this logic, centrist senators can tell business leaders they took care of their most high-profile complaint, while still giving labor game-changing legislation.



Let's Go To Church

Guitar driven harmonic gospel, raw and heartfelt. The title track starts things off with an infectuous funky shuffle that stands up with the best gospel grooves out there, but it's a pace that can't be sustained. Only one other song, "Lord I'm Coming Back", brings similar energy.

The rest of the record has the band playing in a soulful jangly gear. Highlight's of this sound include the outros from each side. "I Believe" features the group harmonizing with an organ in a style G. Love bit harder than a Rancho Carne High Toro. "Every Day Will Be Sunday", the record's obligatory celebration of the joy death promises to bring us, brings down the curtain with appropriately elegiac harmonies.


i read sometimes, too

Overall, using the Kindle app for the iPhone has been a positive experience. Here's what I like about it:

I always have my phone

So I always have any books I've loaded into the app. That's not true of the other books I'm reading, and probably wouldn't be true of a full Kindle (were I to buy one (which I won't)).

Reading is surprisingly easy

I though it would be more difficult, but it is very natural and almost as immersive as reading from a physical book... and actually more immersive than reading some awkwardly sized or poorly put together books.

The backlight is also nice, when trying to read in the dark without waking either my wife or my 1-month-old baby.

It's quick, easy, and relatively cheap to get books

I wish the interface were a little clearer, but in general it's got the same ease of use as the iTunes store... making it really easy to spend your money on their product!

It's not all great. And unless they can accommodate all the free books on the internet (as far as I know they can't), they will ultimately lose the market to somebody who can.


Feminism > stupidism

Did Palin's Looks Hurt?

...So at least in this sample, it was Republicans and independents who were internally debating Palin’s suitability for the job. The study suggests that their confidence in her abilities may have decreased the more they focused on her looks – and thus, in feminist terms, objectified her.

Well, as feminists would put it, "no shit, sherlock." Palin enthusiasts held her up as their party's Hillary... but hot! Get it!?

(No, they didn't get it.)


Behold the Coconut!

So I've been researching Web resources for my Comp II students, Web sites offering free, full-text books and periodical articles (I'm interested in finding such sources for all kinds of subjects, but especially literature, literary biographies, and literary analyses). I've been investigating Google Books and Google Scholar, for instance.

Then, I came across this today in the Times. It's about Google's recent settlement with authors and publishers wherein Google will "pay $125 million to create a system under which customers will be charged for reading a copyrighted book, with the copyright holder and Google both taking percentages":
So while there is a large direct-mail effort, a dedicated Web site about the settlement in 36 languages...and an online strategy of the kind you would expect from Google, the bulk of the legal notice spending — about $7 million of a total of $8 million — is going to newspapers, magazines, even poetry journals, with at least one ad in each country. These efforts make this among the largest print legal-notice campaigns in history.

That Google is in the position of paying for so many print ads “is hilarious — it is the ultimate irony,” said Robert Klonoff, dean of Lewis & Clark Law School in Portland, Ore., and the author of a recent law review article titled “Making Class Actions Work: The Untapped Potential of the Internet.”

So far, more than 200 advertisements have run in more than 70 languages: in highbrow periodicals like The New York Review of Books and The Poetry Review in Britain; in general-interest publications like Parade and USA Today; in obscure foreign trade journals like China Copyright and Svensk Bokhandel; and in newspapers in places like Fiji, Greenland, the Falkland Islands, and the Micronesian island of Niue (the name is roughly translated as Behold the Coconut!), which has one newspaper.

The almost comically sweeping attempt to reach the world’s entire literate population is a reflection of the ambitions of the Google Book Search project, in which the company hopes to digitize every book — famous or not, in any language, published anywhere on earth — found in the world’s libraries.

Under the proposed settlement, reached on Oct. 28 and still subject to court approval, there must be an effort the court finds “reasonable and practicable” to find authors and publishers — especially copyright holders of so-called orphan books, which are still in copyright but long out of print. So the task means placing at least one advertisement in every country in the world.

Send me any links you think I might find useful.

400 Human Sounds

Personalize it to your own tastes and keep kids entertained, make your friends laugh, add effects to your business meetings, clearly communicate your pleasure/displeasure to others and irritate parents.

Users who "have additional sounds" are encouraged to email them to the app's author.


The pension bubble

The Teacher Retirement System of Texas, the seventh-largest public pension fund in the U.S., reports each year that its expected rate of return is 8 percent. Public records show the fund has had an average return of 2.6 percent during the past 10 years.

The nation’s largest public pension fund, California Public Employees’ Retirement System, has been reporting an expected rate of return of 7.75 percent for the past eight years, and 8 percent before that, according to Calpers spokesman Clark McKinley.

Its annual return during the decade from Dec. 31, 1998, to Dec. 31, 2008, has been 3.32 percent, and last year, when markets tanked, it lost 27 percent. |Bloomberg|



Troubling, he says

In the here and now, the Dow has dropped 52.5 percent since its high of 14,279.96 on Oct. 11, 2007, to its low point of 6,779.62 during intraday trading on Monday. And in taking a similar 1 year-and-five-month period in the late 1920s, it's a case of deja vu.

The rate of decline is mimicking that of the Dow during the Great Depression. Back on Sept. 3, 1929, the Dow hit a high mark of 381.17. And over a similar 1-year-and-four -month period, it fell 54.7 percent to 172.36 on Jan. 2, 1931. "It's very troubling if you have a mirror image," said Phil Dow, market strategist for RBC Dain Rauscher & James. |source|



Party of "No!"

If you haven’t seen the video by now, it’s easy enough to find. After watching a Bobby Jindal performance featuring a barrage of incomprehensible choices Tuesday night, David Brooks threw his hands up in the air and declared the response, “a disaster for the Republican Party.”

There’s wide agreement on that point, so far as it goes. What set Brooks apart was his insistence that the disaster was not one of style, or even substance, but of politics. Brooks was saying that Jindal erred in making a tax cutting, government hating message the centerpiece of his case.

Which, again, is a fair point. Jindal is the governor of a state that has taken in $130 billion in federal aid following Katrina, so you might think that Brooks was honing in on the hollowness of Jindal’s skinflint posturing.

But, no, Brooks had something else again in mind. The brand is damaged, he was saying. The anti-tax, anti-government brand is all hat and no cattle. A dog that won’t hunt. A well pumped dry.

A disaster for the Republican Party.

Well, I don’t know. The first rule of conservative pundit interpretation is don’t take the advice of conservative pundits. Applied to policy, failing to follow this rule can lead to war, famine, and death. In politics, things are less serious but it remains true that disregarding the rule is highly correlated with consignment to the political wilderness.

As much as I wonder what alternative Brooks had in mind, I know for sure what advice I’d have given Jindal. Focus on the weird religious stuff. Tell ‘em about the exorcisms. America is ready for your testimony, Governor, is what I’d say.

To be completely honest though, I think the tried and true ‘we believe that Americans know better how to spend their money than government does’ is a better message.

Which gets me to this. One of the striking things about Obama’s address and the Republican response was that we seem to have arrived at a point where each party has embraced the framing of the other.

Obama berates Republicans as “The party of ‘No!’” and celebrates Democrats as people who “believe that government isn’t the problem, but can be part of the solution.” Jindal expressly denies that government can solve any problem better than the people, and embraces an argument from generational justice in support of the Republican commitment to stand athwart economic recovery crying “stop!”

It’s big government versus no government, pure and simple.

Much of the online criticism of Jindal’s response has focused on a story he told about a time “during Katrina” when he and Sheriff Harry Lee (“A Democrat!”) took a stand against a bureaucrat and got things done, a story which Jindal apparently embroidered to make it seem as if he played a larger role than he did. The real puzzle, though, lies in the plot itself. Who, after all, are Jindal and Lee but representatives of the government?

The story shows that if you elect the right people, then you can count on government to get things done. Or anyway, that’s what it says to me. To Jindal, and presumably to many Americans, it says that we must elect officials who will say “No!” to the encroachment of government bureaucracy, and thereby enable the people themselves to get things done.

The left says “Party of 'No!'"
The right says “You betcha!”

Contra Brooks, this situation seems to pay Republicans quite a few immediate political dividends. It allows them to establish a clear contrast with the Bush Administration by saying "No!" to the claim that deficits don’t matter. Because they are already framed as a party with an ideological commitment of opposition to everything, Republicans are granted tactical freedom to obstruct anything they choose at very little additional cost. Most importantly, “No” is a big tent, big enough to fit anyone who is put off by any aspect of Obama’s vast agenda.

The emerging picture is of a Republican Party unstained by the mistakes of the Bush Administration and able to dress any and every oppositional impulse in the virtuous cloth of principled opposition to the reckless expansion of government.

Going forward, the political calculation is clear. The economy is in free fall, and there’s a good chance that things will still be bad in 2010 and even in 2012. Rush Limbaugh, who openly declares that he wants the Obama Administration to fail, gets points for being honest. Pure Republican opposition gives Obama and the Democrats ownership of that probably-still-shaky economy, erodes Obama’s coalition by making him less able to satisfy promises to supporters, and lets Republicans score political points whether they succeed or fail at stopping any particular thing.

Not the worst frame in the world. Not a disaster for the Republican Party.

But neither, for all that, is it a disaster for the Democrats. If the Republicans are the party of no, then Democrats can’t be faulted when Republicans rebuff their offers of bipartisan cooperation, no matter how hollow those offers might have turned out to be. More to the point, the change that Obama talks about isn’t something new and scary that voters have never heard of. He’s merely proposing to implement a Democratic agenda that has been in place for years, is well known, and is broadly popular.

Implementing that agenda, however, was always going to require joining the debate about the role of government in society. Looking back at the squandered opportunity that was the Clinton Administration, surely one of the lessons is that Democrats cannot accomplish their policy goals while refusing to defend the ideology under which those policies are justified.

Clinton’s solution to the problem of Republican messaging was to triangulate away from it. In other words, his administration sought to create a message which accepted the premise of Republican talking points while identifying the administration as being in opposition to whatever it was that the Republicans happened to attack. This worked well enough for Clinton, but it hamstrung the party because it reinforced the perception that Democrats had no principles but were mere political opportunists.

Obama’s approach in the present situation is both strikingly different and strikingly conventional. To my eye, we’ve got a straightforward application of the message box. Obama has taken what the Republicans say about themselves and recast it in entirely negative terms while also punching it up to make it much catchier. This creates the implication that the Democrats are the party of yes, which in turn resonates with Obama’s “Yes we can” slogan which, in message box terms, fits into the category of what we say about ourselves.

For my part, I think Obama's approach gives Democrats a their best chance to make progress on core issues like improving access to health care and moving the country toward a sustainable path. Does this mean that Brooks was right after all? Not nearly. The Republican anti-government message has some clear immediate advantages and has, when the debate has been joined directly, had great success in the past. Obama is willing to engage on these terms because he has to, and he has done a good job of preparing the ground, but it's worth remembering that it has been decades since Democrats last gained ground in this fight.

Oh, and speaking of Brooks, I told you the video was easy to find:

And, because this post has gotten unduly substantive, here's Kenny the Page:

That's some catch

Nicholas Beaudrot points to some interesting stuff in Warren Buffet's annual letter to shareholders of Berkshire Hathaway (PDF). The short short version is that the housing bubble happened first in the mobile home sector, a sector in which Buffet was heavily invested but managed not to lose his shirt. What was his magical formula? He issued loans only after establishing that the borrower had sufficient income to meet the payments.

Smart guy, that Buffet.

Nevertheless, the outlook for 2009 is dim:
[Our] lending operation, though not damaged by the performance of its borrowers, is nevertheless threatened by an element of the credit crisis. Funders that have access to any sort of government guarantee – banks with FDIC-insured deposits, large entities with commercial paper now backed by the Federal Reserve, and others who are using imaginative methods (or lobbying skills) to come under the government’s umbrella – have money costs that are minimal. Conversely, highly-rated companies, such as Berkshire, are experiencing borrowing costs that, in relation to Treasury rates, are at record levels. Moreover, funds are abundant for the government-guaranteed borrower but often scarce for others, no matter how creditworthy they may be.

This unprecedented “spread” in the cost of money makes it unprofitable for any lender who doesn’t enjoy government-guaranteed funds to go up against those with a favored status. Government is determining the “haves” and “have-nots.” That is why companies are rushing to convert to bank holding companies, not a course feasible for Berkshire.

Though Berkshire’s credit is pristine – we are one of only seven AAA corporations in the country – our cost of borrowing is now far higher than competitors with shaky balance sheets but government backing. At the moment, it is much better to be a financial cripple with a government guarantee than a Gibraltar without one. |2009 Buffet Shareholder Letter, p. 12|
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