We all know we’re on an unsustainable course with all of this spending. And this is why I voted for this guy: he’s a realist. We needed a short term shot in the arm when he first got in here, but now we have to worry about the long term consequences.

Politico has more:

On the practical side, Obama has spent more money on new programs in nine months than Bill Clinton did in eight years, pushing the annual deficit to $1.4 trillion. This leaves little room for big spending initiatives.

On the political side, Obama can help moderate Democrats avoid some tough votes in an election year and, perhaps more importantly, calm the nerves of independent voters who are voicing big concerns with the big spending and deficits. Even if Obama succeeds – and that’s a big if – it will be tough for many Democrats to sell themselves as deeply concerned about spending after voting for the stimulus, the bailouts, the health care legislation and a plan to address global warming, four enormous government programs.

“Democrats have to reassure voters we are not being reckless,” said a Democratic official involved in the planning. “The White House knows this and that’s why we’ll be hearing a lot about reducing the deficit early next year. Democrats owned this issue for the past four years and cannot afford to cede it to Republicans now.”

And sure, some of this is political, but it’s still a refreshingly logical decision and goes completely against the “socialist” meme that Obama’s critics are trying to smear him with. It makes even more sense when you consider that Independent voters are starting to grow weary of the Congressional Dems.

So then, will a focus on the deficit and jobs in 2010 put Obama in a better position for 2012?

We’ve crossed the psychological barrier and this spells bad news for Dems unless they can turn it around in the next couple months. Because this is the highest rate since 1983 and you’ll be hearing that time and time again in the next month.

Here’s more about those numbers:

Among the major worker groups, the unemployment rates for adult men (10.7 percent) and whites (9.5 percent) rose in October. The jobless rates for adult women (8.1 percent), teenagers (27.6 percent), blacks (15.7 percent), and Hispanics (13.1 percent) were little changed over the month. The unemployment rate for Asians was 7.5 percent, not seasonally adjusted.

The number of long-term unemployed (those jobless for 27 weeks and over) was little changed over the month at 5.6 million. In October, 35.6 percent of unemployed persons were jobless for 27 weeks or more.

The civilian labor force participation rate was little changed over the month at 65.1 percent. The employment-population ratio continued to decline in October, falling to 58.5 percent.

Thankfully, only 190,000 non-farm jobs were lost last month. That’s lower than September’s 216,000 so the trend is in the right direction.

Also, some good news for those without work…jobless benefits are being extended:

After weeks of partisan debate, the Senate voted on Wednesday to lengthen unemployment benefits by up to 20 weeks and to extend the $8,000 homebuyer tax credit.

The closely watched legislation would extend jobless benefits in all states by 14 weeks. Those that live in states with unemployment greater than 8.5% would receive an additional six weeks. The proposal would be funded by extending a longstanding federal unemployment tax on employers through June 30, 2011.

The measure would apply to those whose benefits will run out by Dec. 31, which is nearly two million people, according to Senate estimates. Those whose checks have already stopped would be able to reapply for another round.

The vote was 98 to 0.

How’s that for bipartisan?

More as it develops…

Yes, it’s not even close.

Gee, I wonder why we’re going bankrupt…

And those are just 3 graphs! Want to see the other 19? Click here to download the whole report (.pdf).

I’ve already asked the question, but I’ll ask it again…why do we pay so much more for health care????

Who’s this guy?

Meet Kenneth R. Feinberg, the new pay “czar” for the White House. He’s tasked with reigning in the out of control compensation at companies the government helped recently.

I think it should be noted right off the bat that this is tied to executive compensation and bonuses…two pots of money that are so out of step with compensation in the real world it’s obscene. I mean, one year after all of these places went under and they’re giving out billions in bonuses?

Here’s more from Wash Post:

The cuts will affect 25 of the most highly paid executives at each of five major financial companies and two automakers, according to the sources, who spoke on the condition of anonymity because the plan has not been made public. Cash salaries will be cut by about 90 percent compared with last year, they said.

The administration will also curtail many corporate perks, including the use of corporate jets for personal travel, chauffeured drivers and country club fee reimbursement, people familiar with the matter have said. Individual perks worth more than $25,000 have received particular scrutiny.

And here are the companies affected…

The seven companies under Feinberg’s purview are Citigroup, Bank of America, General Motors, Chrysler, GMAC, Chrysler Financial and American International Group. These firms have received a total of about $250 billion in bailout funds from the Troubled Assets Relief Program, adopted last year by Congress, and benefited from hundreds of billions of dollars more in government guarantees and other support.

Personally, I’d like to see executive pay at publicly traded companies capped at a set price with stock options/bonuses only triggering when those folks actually produce provable results. But this “failing up” nonsense that CEOs continue to do decade after decade is ridiculous.

Of course I know this won’t happen because Wall Street firms will continue to claim that these compensation models are key to attracting the right talent, even though there are usually dozens of qualified applicants for every position they have.

Still, one can dream…

True, it might go right back down tomorrow, but I have to say that this is a nice little psychological boost.

But it’s not just psychological.

Look at the 52 week spread in that picture…at this time last year we were down to 6,469. That’s a pretty significant jump in just one year’s time. Not only that, we were hovering around 8,000 in July and gained 1,600+ points since then (a 20% increase).

I don’t know about you but my 401(k) is looking a lot fatter these days.

So between this and the news about the recession…can we get some agreement that things are starting to look up?

More as it develops…

It’s a little known fact that one of the big reasons Iraq turned around is we simply offered a better price than al Qaeda. Within a month the word got out that we were paying top dollar and the insurgents were turning against the terrorists and the US body count started to drop.

Will the same strategy work elsewhere?

From the Times Online:

Afghans are known for changing sides back and forth during their long years of war — there is an old saying that “you can rent an Afghan but never buy one” — and battles have often been decided by defections rather than combat.

Paying Taliban foot-soldiers to switch sides could spare US lives and save money, say its advocates. A recent report by the Senate foreign relations committee estimated the Taliban fighting strength at 15,000, of whom only 5% are committed idealogues while 70% fight for money — the so-called $10-a-day Taliban. Doubling this to win them over would cost just $300,000 a day, compared with the $165m a day the United States is spending fighting the war.

And here’s a bit about a what we did in Iraq…

The tactic was used to good effect in Iraq where the US government put 100,000 Sunni gunmen on its payroll for about $300 a month each.

Some disagree that this strategy will work without more troops, but a refocusing of priorities along with paying people to not kill us will do the trick. Afghans are like anybody else…they want to be able to provide for their families and if somebody is offering a better deal, they’ll go with the best price in town. This isn’t a holy war even though the Taliban would like to convince everybody it is.

More as it develops…

Not only that it’s fully paid for.

That’s the latest report from the CBO and it’s encouraging to say the very least.

Here’s more from The Hill:

The Congressional Budget Office (CBO) issued a cost estimate of the healthcare reform bill under consideration by the Senate Finance Committee, concluding it would increase federal spending by $829 billion over 10 years but be offset by enough spending cuts and tax increases to reduce the budget deficit by $81 billion.

The net number of legal U.S. residents without health insurance would reduce by 29 million over 10 years, the CBO further concluded.

Finance Committee Chairman Max Baucus hailed the CBO score as “very good news” that confirms Democratic claims that the bill can expand coverage to 94 percent of Americans and lower the deficit at the same time. He said a final committee vote would be scheduled once he consults with committee members. Baucus also said he trusted the accuracy of the score since the CBO has had the legislation for several days and that the next step after a committee vote is to merge the bill with the version passed this summer by the Health, Education, Labor and Pensions (HELP) Committee.

We’re getting close to reform folks…it’s going to happen…

More as it develops…

Bernie Madoff being pinned to the wall by a huge, farting bull…which is supposed to represent Wall Street.

All from the mind of Chinese artist Chen Wenling.

I mean, come on…that is AWESOME!

A question…if you had to create a sculpture that summed up what happened last year…what would it look like and why?

(Photo: BBC)

If you’re not familiar with the word rescission, this is the practice of canceling policies because people didn’t reveal a preexisting condition. And it’s one of the key reasons why the health insurance companies can claim that there’s $100 billion in health care fraud every year.

Here’s one example of what they consider fraud…

“They said I never mentioned I had a back problem,” said [Sally] Marrari, 52, whose coverage with Blue Cross was abruptly canceled in 2006 after a thyroid disorder, fluid in the heart and lupus were diagnosed. That left the Los Angeles woman with $25,000 in medical bills and the stigma of the company’s claim that she had committed fraud by not listing on a health questionnaire “preexisting conditions” Marrari said she did not know she had.

By the time she filed a lawsuit in 2008, she also got a diagnosis of pancreatic cancer and her debts had swelled beyond $200,000. She was able to see a specialist by trading office visits for work on the doctor’s 1969 Porsche at the garage she owns with her husband.

That’s rich, eh? Can’t afford medical bills so she has to trade services for it…to work on the doctor’s vintage car. If that’s not a symbol for everything that’s wrong with how we buy and pay for health care in this country, I don’t know what is.

Of course, finding cases of “fraud” is a lucrative business and the insurance companies are making sure they identify all they can. But sometimes they get caught…

In the past 18 months, California’s five largest insurers paid almost $19 million in fines for marooning policyholders who had fallen ill. That includes a $1 million fine against Health Net, which admitted offering bonuses to employees for finding reasons to cancel policies, according to company documents released in court.

To me, rescission is a patently immoral practice that amounts to private rationing so insurance companies can make more money. Not just make money. Not just stay in business. They are offering BONUSES to people who find fraud.

Folks, the “death panels” are here and while the insurance companies consider rescission a way to identify fraud in their system, I think this entire practice of finding ways to cut people from their insurance (especially in their most vulnerable hour) constitutes a systematic fraud on the public trust and it MUST end.

And that’s why, if we achieve nothing else in this health care fight, we should at least make it illegal for insurance companies to cut people from their policies because of preexisting conditions. That’s THE most important reform measure in this debate, and I hope those of you who continue to push the public option realize that.

Why?

The reason is clear to me: we stepped in, took action and did something instead of just allowing the markets determine our fate.

WSJ explains…

The U.S. economy is beginning to show signs of improvement, with many economists asserting the worst is past and data pointing to stronger-than-expected growth. On Tuesday, data showed manufacturing grew in August for the first time in more than a year. “There’s a method to the madness. We’re getting out of this,” said Brian Bethune, chief U.S. financial economist at IHS Global Insight.

Much of the stimulus spending is just beginning to trickle through the economy, with spending expected to peak sometime later this year or in early 2010. The government has funneled about $60 billion of the $288 billion in promised tax cuts to U.S. households, while about $84 billion of the $499 billion in spending has been paid. About $200 billion has been promised to certain projects, such as infrastructure and energy projects.

Economists say the money out the door — combined with the expectation of additional funds flowing soon — is fueling growth above where it would have been without any government action.

And yes, we can project whether doing nothing would have been better…

Many forecasters say stimulus spending is adding two to three percentage points to economic growth in the second and third quarters, when measured at an annual rate. The impact in the second quarter, calculated by analyzing how the extra funds flowing into the economy boost consumption, investment and spending, helped slow the rate of decline and will lay the groundwork for positive growth in the third quarter — something that seemed almost implausible just a few months ago. Some economists say the 1% contraction in the second quarter would have been far worse, possibly as much as 3.2%, if not for the stimulus.

For the third quarter, economists at Goldman Sachs & Co. predict the U.S. economy will grow by 3.3%. “Without that extra stimulus, we would be somewhere around zero,” said Jan Hatzius, chief U.S. economist for Goldman.

Yes, I know this is like fingernails across the chalkboard to several of you, but sometimes it’s entirely appropriate for the government to step in, prevent calamity and then leave. And now we see some positive steps that we’re moving forward again. Perhaps not a V-shaped recovery, but I definitely don’t think we’re going to see a “Lost Decade” as they did in Japan.

Hell, we’re actually making money from the TARP program and being repaid A LOT faster than we first thought. Also, there’s a chance we could make money from Freddie and Fannie. Obviously this wasn’t the intention when we stepped in, but a welcome surprise for taxpayers nonetheless.

More as it develops…

Per Politico, the White House claims that “more than half of the projected deficits over the next 10 years are directly attributable to the previous Administration’s failure to follow the pay-as-you-go principle.”

But even if that’s true, which is likely given the Medicare drug benefit, the Iraq and Afghanistan wars and the expansion of the Pentagon’s budget since 9/11, how likely is it that voters will believe that come 2012? Especially when he passed a $787 billion stimulus plan?

NY Times has more…

WASHINGTON — The Obama administration, citing an economic downturn that has been deeper than it had first thought, raised its estimate on Tuesday of the government’s deficit over the next decade to $9 trillion from $7.1 trillion.

The Office of Management and Budget also said that it expected the economy to contract 2.8 percent this year, substantially more than previously estimated, and that employment would peak at around 10 percent.

But the CBO has substantially different numbers…but there’s a reason for that…

Analysts at the Congressional Budget Office put their 10-year deficit estimate slightly lower, at $7.14 trillion, though the agency uses a slightly different method to reach its number. The budget office takes into account only policies already in place, while the administration can consider policies and budget decisions that it hopes to install.

And some less bad news on our budget deficits…

White House officials predicted that the budget deficit this year would peak at $1.58 trillion, though they said the 2009 shortfall would be about $261 billion lower than they had predicted in May. The main reason is that officials have decided that they will not need another round of bailout money for the nation’s banks. The Congressional Budget Official also estimated a deficit this year of about $1.6 trillion.

So we didn’t spend a quarter of a trillion we thought we might have to because the banks have pulled out of their rut, but still…wow. Again, I think this would be a lot easier to blame on the Bushies had Obama not requested the stimulus and wasn’t trying to reform health care.

Which opens up the question: will the debt and our budget deficits be THE key story in 2012?

More as it develops…

The company that literally almost brought it all tumbling down about a year ago right around this time is back in the black?

Not so much.

More from Politics Daily…

For the first time since 2007, AIG on Friday claimed a profit. The insurance giant reported second-quarter net income of over $1.8 billion. That’s still just a fraction of the $180 billion that AIG received as part of a government bailout in 2008. AIG’s chief executive claimed that the profits demonstrated “stabilization,” while acknowledging that parts of the company were still troubled.

Listen, until they pay back the money they owe the government, there is not such thing as profit for AIG.

• Your vehicle must be less than 25 years old on the trade-in date
• Only purchase or lease of new vehicles qualify
• Generally, trade-in vehicles must get 18 or less MPG (some very large pick-up trucks and cargo vans have different requirements)
• Trade-in vehicles must be registered and insured continuously for the full year preceding the trade-in
• You don’t need a voucher, dealers will apply a credit at purchase
• Program runs through Nov 1, 2009 or when the funds are exhausted, whichever comes first.
• The program requires the scrapping of your eligible trade-in vehicle, and that the dealer disclose to you an estimate of the scrap value of your trade-in. The scrap value, however minimal, will be in addition to the rebate, and not in place of the rebate.

So what are your thought about the program? Will you take advantage of it?

From NBC…

Back to the January post, which was about cutting back on delivery days, I saw two advantages to that model…

First, the fewer the days the mail is delivered, the less gas the Post Office uses. Demand goes down, price goes down.

Second, I’d rather miss a Tuesday delivery than a Saturday one. That way the mail carriers have a normal work week and a premium is placed on getting mail to you on the weekends via Express Mail. This model would be much more competitive with FedEx, etc.

While closing branches would accomplish the first, it wouldn’t make the Postal Service more competitive with FedEx…which is exactly what they need to do.

More as it develops…

From Politico:

On ABC’s “This Week,” Treasury Secretary Timothy Geithner said in response to a question by host George Stephanopoulos about extending benefits: “I think that is something that the administration and Congress are going to look very carefully at as we get closer to the end of this year.” [...]

“We’ll do what’s necessary to make appropriate unemployment benefits available,” national economic adviser Lawrence Summers said on NBC’s “Meet the Press.” [...]

On “Fox News Sunday,” Sen. Jim DeMint (R-S.C.) said “yes,” his party would back an extension.

After DeMint objected to what he said was rampant emergency government spending, he was asked specifically about extending unemployment benefits, and replied, “Yes, we’ll support it.”

My question…why is Politico this as a stimulus package? Yes, money being pumped into the economy has stimulative effects, but unemployment benefits have less to do with economic stimulation and more about making sure people can pay their bills. Yes, the money goes right back into the economy, but still.

More as it develops…

I don’t care if these bonuses were contractual or not. New circumstances (you know…like BANKRUPTCY!) could allow them to renegotiate with their employees.

From the AP comes the list…

Citigroup…

Citigroup Inc., one of the biggest recipients of government bailout money, gave employees $5.33 billion in bonuses for 2008, New York’s attorney general said Thursday in a report detailing the payouts by nine big banks.

Bank of America…

Bank of America Corp., which also received $45 billion in TARP money, paid $3.3 billion in bonuses, with 172 employees receiving at least $1 million. Of those, 28 received bonuses of more than $3 million.

Merrill Lynch…

Merrill Lynch, which Charlotte, N.C.-based Bank of America acquired during the credit crisis, paid out $3.6 billion. Cuomo’s office said Merrill Lynch doled out 696 bonuses of at least $1 million for 2008, with 149 of those workers getting bonuses of at least $3 million.

And less offensive are JPMorgan and Goldman Sachs, but it still makes you wonder why they took money in the first place…

JPMorgan, which gave 1,626 employees of at least $1 million, paid back the $25 billion it received in TARP money last month. Goldman, which repaid its $10 billion in government money last month as well, gave 953 workers bonuses of at least $1 million. The two banks each gave more than 200 employees bonuses of more than $3 million.

Yes, they learned nothing from last year. They’re simply taking advantage of the position they put all of us (including the government) in and doing whatever they want. Business as usual.

Amazing.

CNN explains why this issue has reignited…

Two weeks ago, Goldman Sachs (GS, Fortune 500) was roundly panned amid speculation that it was considering paying its employees some of the largest bonuses on record, despite having accepted $10 billion from the Treasury Department’s Troubled Asset Relief Program, or TARP, last fall. (The investment bank has paid the government back, however.)

Earlier this month, outrage over bonuses paid out by bailed-out insurer AIG (AIG, Fortune 500) bubbled back to the surface after The Washington Post reported that AIG was seeking the government’s consent to make a scheduled performance bonus payment of $2.4 million to 43 of its top-ranking executives.

So is this some sort of plot against capitalism?

Hardly.

In fact, a lot of companies have already adopted similar policies of their own accord…

Twenty three companies have agreed to give shareholders an annual vote on executive compensation, including Aflac (AFL, Fortune 500) and Verizon (VZ, Fortune 500), according to the advisory firm RiskMetrics. And more than 80 others agreed to take the issue under consideration at their annual shareholder meetings this year.

Long story short, this is just good corporate governance, and sometimes legislation needs to force certain people’s hands. Unfortunate, but that’s how it goes.

Early this month, Tyler Durden of Zero Hedge reported on the case of Sergey Aleynikov (pictured above), a former employee of Goldman Sachs who allegedly stole the code that runs their automated high frequency trading software.

Well, this could have been the catalyst for the recent focus on high frequency trading and may ultimately lead to its downfall.

More at True/Slant.

Another day, another incredibly questionable Wall Street practice. And this one is particularly galling.

Basically, some of the stock exchanges allow companies to see trades 3 milliseconds before they hit the market. It’s called “flash” trading, and the only folks who can take advantage of such information are the ones who pay a fee (of course) and have computers powerful enough to parse the data and make automatic trades of their own before the first trades hit the market.

From NY Times:

It is called high-frequency trading — and it is suddenly one of the most talked-about and mysterious forces in the markets.

Powerful computers, some housed right next to the machines that drive marketplaces like the New York Stock Exchange, enable high-frequency traders to transmit millions of orders at lightning speed and, their detractors contend, reap billions at everyone else’s expense.

These systems are so fast they can outsmart or outrun other investors, humans and computers alike. And after growing in the shadows for years, they are generating lots of talk.

Nearly everyone on Wall Street is wondering how hedge funds and large banks like Goldman Sachs are making so much money so soon after the financial system nearly collapsed. High-frequency trading is one answer.

Now, the exchanges that take part in this practice argue that it’s about transparency, but who are they kidding? Showing a trade for 3 milliseconds only allows a computer to check it out and I think it’s pretty obvious what this was always intended to do. You think investment firms were calling for this information for a long time because they had powerful automatic trading algorithms developed that could utilize the data? Naw…

Understandably, people are saying “WTF?” and Chuck Schumer is already calling for a ban…

Senator Charles E. Schumer, the New York Democrat who is chairman of the Senate rules and administration committee, said in a letter to the S.E.C. Mr. Schumer wrote that he intended to introduce legislation barring the technique, if the agency failed to act.

“The hallmark of our markets are that they are open and above board and the little guy has as much of a chance as the big guy,” Mr. Schumer said in an interview. “This takes a dagger to the heart of that concept.”

Do know that this is BIG business and is said to be part of the reason why we’ve seen a 164% bump in the trading volume since 2005 and one of the reasons why a firm like Goldman Sachs continues to post profits during the downturn. In fact, firms that take part in this practice made $21 billion in profits in 2008 and high frequency trades accounted for half of their transactions.

More as it develops…

So yeah…what was all that talk about never seeing any of the TARP money again?

And this is after 10 banks said last month they’d be paying back $68B worth of TARP money. Goldman was one of them. And the American taxpayer turned a tidy profit on the deal.

From Bloomberg:

Goldman Sachs Group Inc.’s repayments to the government of last year’s bailout money, including an agreement today to repay warrants, generated a 23 percent annualized return for U.S. taxpayers.

Goldman Sachs agreed to the Treasury’s request for $1.1 billion to repay warrants the government received when it invested $10 billion in the New York-based firm last October. The payment is in addition to $318 million in preferred dividends.

That 23 percent return compares with the 42 percent surge in Goldman Sachs’s share price since October, and the 5.1 percent gain in the Standard & Poor’s 500 Index. Goldman’s decision follows criticism of the bank by lawmakers who questioned its decision to set aside a record $11.4 billion to pay employees in the first half of the year.

Not only that, it looks as if Bank of America, the biggest TARP recipient, will be paying the money back too, although not all at once since they had to take a much bigger chunk.

More as it develops…