We were talking yesterday about AIG, its collapse, and why the mortgage crisis would hurt insurance companies, and I had no idea. Since then I've heard an excellent interview on Fresh Air and done some reading on the topic, and I think I have a bit of an answer. I may be missing some of the details, but it looks pretty damning for McCain and his economic plans.

To understand this we need to go back to a pretty ugly time, a time back in December, 2000, right after that thug Scalia and his henchmen on the Supreme Court assigned us Bush as our Resident. The federal budget was going through Congress, and Phil Gramm, McCain's biggest economic advisor, called up a bill that had been considered dead, the Commodity Futures Modernization Act, and muscled it into the budget bill, which then passed, right around midnight before the Congress went home for Christmas.

It didn't actually deregulate anything, it just prohibited the federal government from regulating a new, and little-known financial instrument called a swap. You may never have heard of a swap, but the swaps are what made the saps at AIG go down.

Now just keep that little bit of history in your mind for a while. Time goes on, the real estate market goes crazy, and people with money burning a hole in their pockets figure that a way to make tons more money is to bet on the following two propositions: real estate prices will always go up, and people who don't have the ability to pay their mortgages will somehow pay them. This bet leads banks and fly-by-night mortgage outfits to start lending out tons of money, even more than the house is worth, and even to people who have bad credit, their income doesn't meet standard underwriting standards, and so on. They then bundle up a whole bunch of these mortgages and sell them on the secondary market in the form of various kinds of securities. I guess the idea is that even if some of the mortgages don't perform, they will be bundled together with a bunch of other very profitable mortgages, so it's a safe bet. (Would you lend the price of a house to someone who doesn't have the money to pay it back? Me neither, but maybe that's why we're not smart enough to run Countrywide or these big banks.)

But, it's not really a safe bet, because it's not safe enough to get reasonably prudent investors to buy them. The risk is too much. However, we've known for a long time how to get people to invest their money in something when they think the risk of losing it all would be too great. It's called insurance. You wouldn't spend $10,000 or 20,000 on a car, or $100,000 or $200,000 on a house, if you thought that you would just be wiped out if the car or the house were destroyed and you were just out the money. Some people won't even spend $1,000 or $2,000 on a vacation without buying insurance on it.

So they figured out that they can just insure this risk too. That's what a swap is. They created an instrument called a credit default swap, in which Investor A pays a premium to Company B, and Company B promises Investor A that if one of the borrowers fails to pay their mortgage, Company B will step in and pay Investor A their investment. Company B gets their money, Investor A gets to make the investment and to receive the income that the investment is going to generate, and it's all possible because of the swap. That's what AIG was selling.

So what, you say? We have insurance for all kinds of things, and all kinds of bad things happen without insurance companies going out of business. People get into car crashes, trees fall on houses, vacations get rained out, and the insurance companies just pay off the policy holder and move on. How do they do it? There's a one-word answer: regulation. Your state government won't let me to call myself a car insurance company, and start collecting car insurance premiums, unless I can prove that I have enough money on hand to pay off the claims. Homeowners' insurance, the same thing.

But now we go back to Phil Gramm, and his midnight Christmas present to the money men. The law he wrote (oh yes, and if I think back to 2000, I'm pretty sure John McCain was in the Senate that year; there's the experience thing) said that these credit default swaps cannot be regulated. The government can't stop me from selling credit default swaps, even if I'm just a guy sitting in my basement in Montpelier, and it can't make me prove that I have enough money to pay off the claims.

And that's where we are today. Property values stop going up. A bunch of those mortgagors (they're the borrower–remember, “Mortgagee rhymes with Simon Legree”) reach into their pocket and come up empty, so they default on their mortgages. The banks have to foreclose, and the people who own the mortgage-backed securities start looking around for someone to cover their losses, and who's standing their with their face hanging out? AIG, which sold them these credit default swaps, these promises that if the mortgages didn't perform, they'd be good for the money.

Only because of Phil Gramm, John McCain, and the other guys who voted for Gramm's bill, nobody ever made AIG set the money aside in case the loss they were insuring should happen.

And now, whose economic ideas are in the head of John McCain, the candidate who admits he doesn't know anything about the economy?

Right, Phil Gramm's.

So tell me, how much sense does it make to turn the economy over to McCain and Gramm?

More leaks in ENVY’s cooling towers, more broken beams.

More truthiness from Entergy Nuclear and the Nuclear Regulatory Commission, as reported by Dave Gram, Associated Press:

Sheehan and Williams said it wasn’t unusual to have the pipe joints – which are packed with oakum – leak. Sheehan said oakum is loose hemp or similar fiber, treated with a tar-like substance, which is used to caulk seams in wooden ships and pack pipe joints.

(Sounds like that 4th of July party last year when the pot brownies snuck up on a reactor operator…)

While some leaking is considered OK, 60 gallons a minute was deemed serious enough to warrant the power reduction and repair, they said.

Oh man, who kicked over the bong?

Late Wednesday, Vermont Yankee said the investigation of the leak discovered that three vertical support columns for the cooling tower had degraded and needed to be replaced while the packing in the pipe joint was being replaced.

These would be the beams they checked last summer after the gigantic collapse, and this summer after July’s minor mishap, right?

This is called “deferred maintenance” in the nuclear industry.

Sometimes these things just write themselves.

The Republican rap on Obama is that he's an elitist, right? A guy who was raised by a single mother on Food Stamps, got to college on scholarship, went to law school on student loans–elitist all over, right?

Now we have confirmation of that characterization by one of Hillary Clinton's supporters and fundraisers, who announced today that she's supporting McCain.

And her name is . . .

Wait for it . . .

No, she's not the Comtesse de Beige. It's Everywoman, known to her friends as Lady Lynn Forester de Rothschild, international financier who splits her time between homes in New York and London.

“This is a hard decision for me personally because frankly I don't like him,” she said of Obama in an interview with CNN’s Joe Johns. “I feel like he is an elitist. I feel like he has not given me reason to trust him.”

Forester is the CEO of EL Rothschild, a holding company with businesses around the world. She is married to international banker Sir Evelyn de Rothschild.

As my wife said, I guess she would know.

A nice friendly feminine voice in a taped message just asked me if I am voting in the upcoming November election.  I pressed 1 for yes.

The nice recorded lady then asked me if I was voting for 1. Jim Douglas, 2-Gaye Symington, 3-Anthony Pollina — I pushed 2 and was immediately transferred to a new question.  

The new question asked by the friendly recorded feminine voice was who would I vote for for representative.  She did not say state rep or congressional rep, just representative.  I listened and heard two names I did not know.  I waited.  I asked the recorded woman a question.  No response, so I voted for the Democrat, once again #2.

Finally the recorded woman’s voice asked me if I would support a tax on gas to improve Vermont’s roads and bridges vote 1 or against it vote 2.  

That’s a no-brainer for me.  I lived in Connecticut when the Mianus Bridge collapsed and people died.  Luckily it was at 1:30 a.m., so only a few people died rather than the hundreds that would have died during rush-hour.  All because of inadequate maintenance and lack of inspection.  Yeah, I’ll pay a little more in gas money any time to make our bridges safe for everyone.

I pushed 1, and the nice lady on electronic push poll hung up on me without even saying goodbye and thank you.

Got some of the basic data, and its worth a second look. It was indeed Research 2000 (which has recently hit the big time by being tapped to provide the Daily Kos daily tracking poll…. congrats guys!). Again, a 400 person sample, meaning an unfortunately high 5% margin of error (and no, Pollina fans, that doesn't mean the poll is no good, it just means it has a big whopping 5% margin of error).

The poll was taken between September 11th and September 14th, meaning Pollina's AFL and NEA endorsements will not have factored into it, but the VSEA  endorsement did to some extent. Again, in the last decade, I haven't seen a noticable, verifiable labor endorsement bump, but anything's possible. Of course, its also possible that any poll bump might be offset by a dropcaused by such a poor showing in this poll. It'spossible that liberal supporters will start defecting if they no longer see him as viable, given the 7% showing.

So the poll is still better for Symington than Pollina (duh), and she has some other good news as well – despite the pronouncement of the living embodiment of Vermont conventional wisdom – the oft quoted Eric Davis of Middlebury College – that a 15% spread between the candidates would not be enough to trigger national Democratic support, the Democratic Governor's Association has reacted favorably and is forming a PAC to assist in Symington's effort. Whether that just means a contribution under the generally-agreed to limits ($1000 for the general election) or a full blown independent expenditure is not clear.

But back to the numbers:
 

Not a lot of trends that jump out at you in the Governor's race. Symington has stronger support among women than men, and vice versa for Douglas – although Douglas still leads overall among women – and across every demo, in fact. There's a breadth to Douglas's support across gender and location that probably offsets some of the lack of depth we're seeing. As we work down to that core mass of Republican/Douglas support, its easy to see that is a spread-out base.

Pollina runs twice as strong in the south as the north, which is largely a function of Windham County, no doubt. Symington's popularity among the left is clearly lowest there, but apparently not nearly as low as many were expecting, as she too performs better in the south (although not by a statistically significant margin). More undecided women is probably good news for Symington, as they look to be more likely to break her way, while more undecideds in the north may favor Douglas – although, again, in both instances, the distintion is within the margin of error.

And nearly 1 in 10 likely voters has “no opinion” of Jim Douglas. A high-profile, multi-term incumbent. Fascinating. Add that to the 43% unfavorable, and I think this baby may be headed for the legislature….

(Because it’s so much fun to live this close to a ticking time bomb. – promoted by JulieWaters)

At some point they really better give up on this excuse that these leaks are not uncommon.The point and the problem is exactly that are common

 

September 17, 2008 Vermont Yankee is at 55 percent power this morning for repair of a packing leak in an expansion joint in a pipe that carries river water in the east cooling tower, Entergy officials said today.

It appears that the leak of about 60 gpm is related to the packing in an expansion joint and not related to structural issues as had been the cause of previous river water leaks in the cooling tower.

While packing leaks are not uncommon, plant management took the conservative action to reduce power and remove the cooling tower from service to allow an inspection of adjacent pipe joint packing, officials said.

The west tower remains in service and plant operators expect the repairs and power reduction to be of short duration.

http://www.burlingtonfreepress…

The Sarah Palin stuff is annoying but this one should grant an exception.

Raw Story is reporting that Republican veep nominee Sarah Palin credits her electoral success on a preacher who claims he can successfully hunt down witches. Raw Story’s John Byrne writes the following.

“In 1988, Pastor Muthee and his wife traveled to Kenya after being “called by God.” Setting up shop in the basement of a grocery store, they claim to have brought 200 people “to God” and away from the town’s “spiritual oppression.”

The source of the oppression? Witchcraft, Muthee says. When researching the community, they found that a woman named “Mama Jane” ran a divination clinic that drew a large following in the town.

“We prayed, we fasted, the Lord showed us a spirit of witchcraft resting over the place,” Pastor Muthee said.

Muthee made his experiences into a video called Transformations, which documents his “spiritual warfare” against demons and occult practices. Spiritual warfare is more common in Latin America and Africa, where the concept of day-to-day demons has a stronger hold. The video’s trailer is available here.

Here’s the video of Palin crediting the pastor.

So much more. Read the rest of the story here.

From Green Mountain Daily

At 7:30 this evening the Fed delivered an emergency plan to rescue AIG because, simply put, they have to.  Without stepping in, the global market could crumble in either days, weeks or just a couple of months

Conservatives wail and moan as if the heavens are falling when the topic of single payer health insurance comes up.

“Socialized Medicine!” they cry out.  Doom, despair!  It's the end of capitalism as we know it!

Well, look at what's getting “socialized” now. 

Here's the Fed's emergency plan:

the Fed will make a two-year loan to A.I.G. of up to $85 billion and, in return, will receive warrants that can be converted into common stock giving the government nearly 80 percent ownership of the insurer.

The US Government will own 80% of the largest insurance company in the world.  

Financial “conservatives” will be quick to argue that the Fed's 80% takeover of AIG is necessary — which is absolutely correct.  But that doesn't make it any less than 80% government owned.  In fact, it's about 8 steps out of 10 in the direction of what we can call “Socialized Insurance.”

Ok, so I'm having a little fun with this.  As of tomorrow the US won't actually “own” AIG; it will own warrants which can be converted to common stock.  But still, that's a pretty tight leash.  

But in the face of financial disaster, you gotta keep your humor, right?

So here's what I'm thinking:  as long as we're socializing finance by purchasing the world's largest insurance company…

…maybe we can put “US/AIG” to work by directing it to offer single payer health care.

Now there's a thought….

Sorry it’s taken me so long to post this, because I really do think this is a big deal.

The Vermont State Democratic Committee met Saturday mainly to adopt its platform. One of the other items on the agenda, though, was to choose our electors for the presidential election. These are the people who, if Barack Obama wins in Vermont in November, will actually cast Vermont’s three votes for Obama.

And guess what: longtime GMD front pager and current poster Euan Bear (NanuqFC) was chosen as one of our electors. Euan’s also the chair of the Franklin County Democrats and a tireless worker. For many years the way the electors were chosen was that the inner circle would nominate a slate of candidates and that slate would be voted up or down, essentially ratifying the choice of the insiders. As a grassroots leader, Euan worked on the Rules Committee to make sure that this year, for the first time, there would be an open vote.

The fact that she got the nod from her fellow State Committee members is a testament to the high regard in which her hard work and dedication are held.

Congratulations, Euan!

(crossposted on Five Before Chaos.)

I just have to chime in on this “McCain invented the Blackberry” nonsense that’s making its way around the liberal blogosphere. Now, yeah, I get it, it’s funny because it’s the same contextual bullshit as that “Al Gore invented the internet” nonsense back in 2000. And I guess on one level I can appreciate the fact that the Dems are finally figuring out that stupidity works better than just about anything else when reaching the American voter.

Sure, point out how McCain hasn’t been at the forefront of supporting groundbreaking technologies and hasn’t authored any law on expanding wireless technologies. I’m all for embracing their tactics, as I’ve said before, with one exception: don’t make stuff up. Am I remiss here?