Another use for duct tape

Several sources (see list in this article) have reported another massive cyber-spying campaign, likely perpetrated by the Chinese. What I found interesting is their ability to turn on your web cam and microphone and really spy on what you are doing.

Looks like another use for duct tape, the wonder invention of the 20th century.

Daily Kos just can't be pleased

The left is calling for AIG executives to return their bonuses and resign. One guy does exactly that. Daily Kos rakes him over the coals for having a "bad attitude". Some people just can't be pleased.

When somebody at Daily Kos is hounded to give away a million dollars and resign a lucrative job I'd like to see their attitude.

Time to buy an old clunker

Congress is considering bills that will raise the value of old clunker cars. One plan by Sen. Dianne Feinstein, D-Calif and Sen. Susan Collins, R-Maine, would offer vouchers ranging from $2000 to $4500 for an old gas guzzler. U.S. Representative Betty Sutton, D-Ohio, has a similar proposal offering between $3000 and $5000. Her's has a clever name, "Consumer Assistance to Recycle and Save (CARS)". It requires that the newer car be assembled in the USA. To nobody's surprise, her plan is backed by the big-three automakers and the UAW.

The goal sounds laudable, to get gas hogs (worse than 18MPG) off the road and increase demand for newer, more fuel-efficient cars. But there would seem to be some issues with these plans. They reward people who made environmentally harmful decisions to drive gas hogs. Just like the $40 off coupons on digital converter boxes that "ran out", scammers could buy fleets of old clunkers to sell off to those considering a new purchase, using up the money. And the whole "greeness" aspect is very debateable: as one commenter named Brn asked, "How 'green' is it to consume significant resources building a new car?"

The bills are "estimated" to cost a couple of billion dollars a year. Not too bad all things considered - a "billion" seems like chump change nowadays. Work out the kinks, and I could go for it. But I prefer a simpler, non-subsidized and "free market" solution: raise the federal gasoline tax. (And I'm generally anti-tax!) Announce that each year for the next 8 years the tax per gallon will increase by say, 20 cents a year, with some modification or "outs" available based on the price of a barrel of oil. Taxpayers will gain money, not spend it on scammers and fuel wasters, and you'll see those clunkers disappear.

South Asian Cricket News

I'm not planning to specialize in South Asian cricket, but security concerns may affect a big tournament planned for April in India. It's scheduled to overlap with the Indian elections, and security forces will be stretched thin.

The Guardian discusses financial considerations.

The New Zealand Herald is cautiously optimistic.

This article discusses more directly discusses the recent attack in Pakistan, but then, in a strangely positive note (to me at least) implies that conflicts over the TV rights may play a larger role in any possible delays.

A Time magazine article gives a good overview. Concerns about the Mumbai attack and the March 3 attack on the Sri Lankan team threaten a popular and lucrative sport in South Asia. As for whether security priority should be given to cricket or the elections, "more people will be watching cricket than will be casting their votes anyway".

Long live sport, and here's hoping it may it bring some sanity to the region. As for those pesky elections, who schedules them during a championship tournament ayway? :-) We'd never schedule elections in the USA during the World Series, Olympics, or the Superbowl!

A new blog I'm gonna follow for a while

Greg Mankiw is a conservative economist at Harvard. His blog seems to have some good, not too ranting dogmatic posts. I especially liked his comments that the government has more important things to do than give speeches on their soapboxes about AIG bonuses that were explicitly written into the final stimulus package by somebody, and another showing the true costs of high taxes.

Paranoid Conspiracy Theory #1

Who benefits from the obscene AIG bonuses? So far, the one result seems to be widespread support for confiscatory taxes on the evil executives. And one could easily predict this anger. Does this sound like a democratic or a republican goal?

Let's try to get the facts from Dodd, Geiter and Obama before following this conspiracy theory. I sure hope I'm wrong.

AIG - they broke it, we bought it.

There's a lot of justified outrage about the AIG bonuses. And one man arguing that they are needed. (And here's a rebuttal by Cindy Casella)

It's very hard to support the bonuses. Let's see the contracts. If they are non-legit, like Madoff transferring all his assets to his wife, lets throw the book at them. If they are backdated, if a legal clause doesn't have a period in the right place, refute it.

But, if they are legit, I think we are stuck paying the bonuses. Cause we are a nation of laws.

As Sorkin writes:

"If you think this economy is a mess now, imagine what it would look like if the business community started to worry that the government would start abrogating contracts left and right"

Casella argues that union contracts at Ford were rewritten, why not AIG? True. So were contracts at United and a host of others. But these contracts were years into the future. The bonuses were short term. Before the bonuses were due, when they had leverage, Treasury should have renegotiated. Somebody at Treasury doesn't deserve a bonus this year! And any future bonuses should be renegotiated. BTW, Treasure should immediately look at any other "Contractural" bonuses at all the other companies we own. So this never happens again.

Much as I really hate to say it, we should not break laws and "blow-up" AIG in a hissy fit. Cause, for better or worse, we own it. Sorkin is right. Look at it this way - if paying out $165 million in admittedly disgusting and undeserved bonuses helps preserve AIG "more" intact, or stabilizes markets by not retroactively trashing legitimate contracts, taxpayers will reap rewards since AIG will be worth more, and the economy will recover sooner. If pouring billions into stupid undeserved greedy risky bad loans is a good idea, so is pouring millions into AIG. This once.

Yes, this really leaves a bad taste in my mouth, and here's hoping that some "voluntary" pressure will work. And certainly, if there is any flaw in the bonus contracts, revoke them.

Some of the good news from all this is that AIG is not hoarding the money - they are paying billions out to other institutions. Which is good - the whole point is for them to keep the wheels of business rolling. I have no idea if they are paying the right people and how it will work, but at least we can't complain that they are sitting on the money like some banks were.

Be careful what you wish for

Looks like democracy is trying to break out across Pakistan. I don't know what will happen, nor does anybody else, but as an optimist I like to think that, in the long run, the government following the will of the people is a good thing. My friend Ray may differ. See his blog for more up to date details. It sounds like Sharif is willing to step down as leader of the PML (at least not to run for office) in return for concessions. Good on him if this is really putting democracy and an indepedent judiciary in front of his own personal iterests. It at least looks good.

I can't claim any credit from my earlier post on the cricket team attack, since I don't think any Pakistanis have read it. But it does look like the Pakistani people are awake. Lets hope it leads to a good, or at least a tolerable, conclusion.

Let's Lower the Principal on Bad Loans

I find myself agreeing with recent editorials in the New York Times that advocate lowering the principal on bad loans, instead of President Obama's plan to lower interest payments.  What impressed me about this editorial is that they study the rates at which people default (walk away) from their mortgages.

"... default rates for subprime mortgages and other non-prime mortgages are stunningly sensitive to whether a homeowner has an ownership stake in his home. Every month, another 8 percent of the subprime homeowners whose mortgages (first plus any others) are 160 percent of the estimated value of their houses become seriously delinquent. On the other hand, subprime homeowners whose loans are worth 60 percent of the current value of their house become delinquent at a rate of only 1 percent per month."

Since our goal is to prop up housing prices and reduce "toxic" assets by reducing foreclosures, this is strong evidence that reducing principal is a far superior approach to reducing payments.  I think of it as "sabremetrics" applied to politics / economics.

Still, I'd add some wrinkles.  Taxpayers taking a hit to lower loan principal is a nice carrot for those who made bad loan decisions.  There should be some stick.  Ideally, I'd propose that the names of those receiving this benefit be added to a "you blew it" list.  When the next bubble bursts, the same people who received this gift on their mortgages shouldn't go clamoring to the government cause they were stupid or took big risks and lost yet again.  We don't want to reward bad behavior without consequences since it will simply encourage future bad behavior.  In effect, give these guys a yellow card and say "this is, literally, a once in a lifetime bailout".

Such a list is probably hard to maintain.  So, as an alternative, penalize the recipients of this taxpayer largess by reducing the tax deductibility of their interest payments.  Or give the taxpayers a small equity stake in the house.  If they sell it later at a profit, Uncle Sam gets 10%.  And there probably needs to be a blackout period - they can't immediately sell / flip the house and make money just after taxpayers lowered their principal!  No sales for, say 5 years.

This bailout will be more palatable to the great majority of Americans who didn't screw up, if they also get a benefit.  Moderately wealthy non-house owners have arguably benefitted from low interest rates and the huge decline in housing prices.  Many first time buyers can now afford houses.  So, to some extent, they are covered.  Poor non-house owners are getting some nice tax breaks, and will (hopefully) benefit greatly from Obama's initiatives in health care and education. 

I propose that current home owners (with a mortgage), who have not gone underwater with poor or greedy decisions, also receive some benefit.  Either a direct payment, or, more likely, increased tax deductibility of their interest payments.  In the interest of full disclosure, I'd benefit from this.

These tweaks takes a good idea and make it more fair to all.  Thoughts???

Will the Pakistani People Wake Up Now?

I don't claim any deep knowledge of Pakistani politics, though I do follow a friend's blog on the subject.  But here's hoping that whatever reasonable and moderate people of Pakistan still remain, plus, more importantly, any loyal members of their judiciary, government and military, wake up and take control from the extremists.

I wont even go into various ISI shenanigans, culminating in the Mumbai attacks.  Just very recent events:

First, the government signs a truce with the Taliban.  Let's set back women's rights hundreds of years.    This cynical deal lasts only a couple of weeks, as Taliban forces attack soldiers and kidnap local officials.  Any coincidence that this is eerily reminiscent of various Hamas and Hezbollah kidnappings of Israeli soldiers?  Doubtful.  Muslim extremists have learned that their apologists will support such kidnappings.

But the real clincher is a Mumbai-style terrorist attack on a visiting cricket team.  I know Pakistanis love their cricket, will this outrage finally convince them to retake control of their own country?  I don't know.  It's hard for an American to imagine the situation, but if (very hypothetically!) rabid followers of Rush Limbaugh or Rachel Maddow attacked Baseball's Opening Day I would hope that Americans would respond forcefully to denounce them and eliminate their influence on society.

If not, I'm afraid we may have to write off the Pakistanis (and, in the baseball example, we'd have to write off Americans).  There's no hope for them to save their state.

Maybe I'm too much of a "glass half full" guy, but I really see this cricket incident as a potentially good thing - revealing to all just how mindless and nihilistic the extremists are.  Let's all hope the Pakistani people wake up.