This is the best representation of historical housing prices, ever.

With alarming swiftness Washington Mutual passed into history. The FDIC seized the thrift and sold off its branch network and deposits to JP Morgan Chase for a cool $1.9 billion. All this was done in a single day. I think it was all done in the afternoon because I don’t recall seeing any news about this when I looked online in the morning.

The remarkable speed is just one component that alarms me. Who negotiates a bank purchase in a few hours? Granted, JP Morgan Chase should have already done their due diligence before because they, along with several other banks, were looking at making a merger offer to WaMu. Even with that financial information I don’t feel comfortable accepting that a deal could be reached so quickly with such a large, complex financial institution.

The other thing that bothers me is the reason the Office of Thrift Supervision pushed the FDIC into seizing WaMu. At first there didn’t seem to be a reason. I searched several news sources and no one was reporting the cause of the seizure; only that WaMu was seized and it was the largest bank failure in US history. I finally found a Bloomberg article that explained it.

Customers withdrew $16.7 billion from WaMu accounts since Sept. 16, leaving the Seattle-based bank “unsound,” the Office of Thrift Supervision said today.

Well sure $16.7 billion sounds like a lot of money, but it had $307 billion in assets. $188 billion of that was in deposits. So WaMu lost 5.4% in assets. Is that really cause to seize a bank? I thought a bank had to actually default, as in not have enough money to pay its obligations, for the FDIC to act. It sounds like this was a preemptive seizure by the FDIC. I did not realize that was legal.

The icing on the cake is that WaMu’s management knew nothing about what was happening. The Salt Lake Tribune, reprinting a NY Times piece, said:

The seizure and the deal with J.P. Morgan came as a shock to Washington Mutual’s board, which was kept in the dark: the company’s newly-minted chief executive, Alan C. Fishman, was in flying from New York to Seattle at the time the deal was finally brokered, according to these people.

Let’s recap. The FDIC planned to preemptively takeover WaMu and negotiated its asset sales to JP Morgan Chase all in secret in a single afternoon. This doesn’t seem shady to anyone? Did the FDIC actually negotiate with any other banks during those few hours, or does Jamie Dimon have a buddy there who “streamlined” the process? Call me paranoid if you like, but this transaction was way too convenient for reality.

I have to wonder if PETA intentionally does things to make themselves sound insane and get attention. If so, PETA’s latest ploy has done a wonderful job. They have written a letter asking Ben & Jerry’s to switch from cow milk to human breast milk in their ice cream.

Do I really have to explain why I find this ridiculous? I’d like to think most people are sensible enough to understand why this proposal is lunacy. Maybe I’m not getting it. Perhaps this is tongue-in-cheek like Swift’s A Modest Proposal?

I also think I deserve applause for not succumbing to the obvious and posting a picture of some fantastically large knockers. This story is a great excuse for that, but I’m taking the high road.

Another company fell victim to the credit crisis, but this time it isn’t an investment bank or an insurance giant. Bill Heard Enterprises, the nation’s largest Chevrolet dealer group and thirteenth largest dealer group overall, is closing all thirteen of its stores at the end of business today. This was a company with over $2 billion in revenue last year, gone in an instant.

Why is this happening? Crashing truck and SUV sales certainly didn’t help Bill Heard. A general decline in domestic automotive market share didn’t help either. High fuel prices just added insult to injury. These are all terrible things to happen to a dealership but they wouldn’t have killed this company immediately. No, only a lack of financing could do that. Bill Heard was unable to get financing from GMAC for their floorplan. Floorplan is the cost of all those vehicles kept in inventory. Dealers don’t bring suitcases of unmarked bills to manufacturers to pay for those cars. They finance millions of dollars so they can have the vehicles in stock and ready to sell. If they can’t get financing, they can’t get any cars.

Here the credit crunch has destroyed a formerly productive enterprise. Bill Heard may have been wounded by the weak auto market, but a lack of credit caused this loss of hundreds of sales and service jobs. For those of you who think nothing should be done about this financial turmoil, here is a taste of what’s to come. I’m not advocating a massive bailout, but inaction would be disastrous.

Seven hundred billion dollars is a lot of money to me. I’m not thrilled with the Treasury/Fed’s plan to start buying up distressed loans from troubled financial firms, but I really don’t know what the alternative is. Doing nothing will apparently destroy the financial system. The lack of available credit will force the economy to grind to a halt. Paulson and Bernanke hope that by purchasing these undesirable assets, the banks will no longer have to build capital reserves (or at least not build such large ones) and start lending out the money. The onion in this ointment is that banks may sell these troubled assets to the government and then just save the money out of fear. Then the we end up with the worst of all worlds – a recession caused by tight credit and the government taking on $700 billion in extremely risky debt.

But this plan is being sold as the only alternative. Is that true? I don’t like this idea because it smacks of socialism. I like my government and my economy kept as far apart as I can get them. But how can we keep this economy from collapsing without massive government interference? Since the Paulson Plan has been met with skepticism, I’ve been hearing more about alternative ideas.

• Repeal the Capital Gains Tax

I list this first because it’s my favorite idea. Sure it sounds like a giveaway to the rich, but then how would you describe using $700 billion to buy up risky loans from the rich? The benefit is that it would remove the tax burden from these financial companies. That extra money would strengthen their balance sheets and make more money available to loan. Plus it would also bring more private money into the investment market. I can’t imagine the cost to the federal budget would be anywhere near $700 billion.

• Loans Not Purchases

Some economists think the US should provide collateralized loans to financial firms. Instead of an outright purchase of these distressed assets, they would be used as collateral on low interest loans. This would remove a lot of the risk to taxpayers because they would not have ownership of these assets. If the bank failed, the government would still take on the asset just like it would in the Paulson Plan. Of course the government would also have the option of nationalizing the bank to restructure it and keep those assets off the government balance sheet too.

• Reverse the Accounting Rules

Almost a year ago accounting rules were changed to require companies to adopt a “mark to market” methodology to set the fair value of their assets. This required companies to record the price of an asset as the price they would get if the sold immediately. I know it sounds sensible and fair because companies must record the current value of the asset. The problem comes in moments like these when money is tight and you can’t find buyers. Even though your company has no interest in selling this asset, if another company does sell at some bargain basement price, you are forced to record that price as the value of your asset. If there is no market for the asset, such as with subprime CDOs, then the rule forces you to markdown the asset to zero. This rapid destruction of balance sheet wealth forces companies to raise capital because often they are required by law or by financial covenants to maintain a certain percentage of capital. If their assets just went to zero because of this accounting rule, they have to find cash somewhere. This is why an AIG bankruptcy was a threat to the financial system. If they declared bankruptcy, their assets would have been sold at firesale prices. That would ripple out to all companies, wrecking their balance sheets, forcing them to find more capital or declare bankruptcy themselves.

• Lower the Corporate Tax Rate and Repeal Sarbox

These ideas came from a Newt Gingrich essay I read. Actually the capital gains idea did too, but whatever. They function pretty much the same as the capital gains idea too. The goal is to let companies keep more of their own money so they can increase their spending. Lower taxes mean an improved balance sheet and that means there will be more money available to lend. Keep in mind that the US has the second highest corporate tax rate in the world too, so this idea is something that is worthy even outside of an economic aid perspective. Sarbanes-Oxley (Sarbox) was a law passed during the Enron furor. It has become a huge anchor on publicly traded companies. These regulations have caused accounting departments to balloon, adding huge expenses to all. Companies have been demanding its repeal or amendment long before today’s financial crisis because of these costs. Less red tape would make it more attractive to do business in the United States.

• Buy Mortgages Directly

Some want the government to directly purchase mortgages from financial firms and then restructure them to make repayment easier and lower the numbers of foreclosures. Those who accept a restructured mortgage would have to pay a percentage of their profits from a future home sale.

• Incentivize Lending

The reason for the economic crisis is a slowdown in lending. What we’re trying to do is create an environment where banks will want to lend again. So far the ideas are built around providing more money to banks, with the hope that by simply having more money they will want to lend it. That’s not a guarantee though. Banks may unload their balance sheets and still be stingy with credit. We need to find a way to make banks want to lend. I propose profits made from charging interest be tax free for a set period – say three years. Not only will banks realize a profit, they will realize significant tax savings. The more they lend, the greater the savings. That is their incentive to get the credit markets flowing again.

As I said at the start of this, I do not like government interventions. Markets should be left to take care of themselves. At first I thought Paulson’s plan was the only option, but after reflecting on this for several days I’m glad to have found some alternatives to grease the wheels of liquidity.

If only one thing happens, I want the mark-to-market accounting rule repealed. Go back to the old system for now and let the accountants figure out a better rule to apply in a few years. Mark-to-market is responsible for turning an economic slowdown into a catastrophe. Since this is my wishlist, I would also like to see my idea for tax-free interest profits put into practice because it provides a direct link between lending and increased profits. I’m also in favor of a zero capital gains tax because it will spur more people to invest their money rather than fearfully sitting on it. I can’t imagine doing these three things would cost more than $700 billion, but I would love to see someone respond with hard numbers to prove me right or wrong.

Lowering the corporate tax and repealing Sarbox are worthy goals but I don’t see them as essential to solving this credit crisis. Providing government loans isn’t different enough from the Paulson Plan for my taste. It smacks of interventionism. The idea behind buying mortgages directly is just pointless. The government becoming the national mortgage lender will only lead to a socialized housing market that will become a political bomb as Congress fights every year to throw more tax money at it to buy votes. Besides, foreclosures were only the first phase of this crisis. The problem has spread and crippled the entire credit market. Creating easy mortgages for those under threat of foreclosure does nothing to encourage private lending. People can’t afford any loan terms if they lose their job to a contracting economy.

I think I can sleep better now knowing that there really is an alternative to a massive government bailout. Now it’s only a matter of getting the attention of Congress. Piece of cake.

Today I have officially become sick of Obama’s ads. Our savior has started running ads in Michigan criticizing John McCain for owning three foreign cars. Horror of horrors! McCain dares to do what half of America already does. Does that mean Obama disapproves of all you people buying foreign? Are you Prius owners traitors? You with the Volkswagen. Are you part of the problem? Oh no of course not. Barack Obama still wants your vote and has no problem with you deciding against a domestic car. But when McCain buys foreign, it’s no different than spitting on the American flag.

Frankly I found it more shocking that McCain owns 13 cars. I would have thought that was bigger news. Instead we receive a pandering, xenophobic ad from the Obama camp. What galls me is that this is normal, everyday politics coming from the man who promised he was different. Supposedly he wasn’t like every other politicians. He would stick to issues. He wouldn’t stoop to dirty campaigning no matter what others did to him.

Nope! Bullshit! Obama has served us the same politics we’ve been getting for decades. This anti-foreign car commercial is just the latest example. Obama’s campaign is running a Spanish-language immigration ad in the battleground Western states accusing McCain of abandoning immigration reform and kowtowing to Republican leadership. That’s just a lie. McCain supported immigration reform against the demands of his party leadership. The immigration reform bill had his name in it! Republicans denounced him for his reformist stance and everyone was saying he threw away the nomination because of it.

Oh and now he’s lying about Social Security to the elderly. Obama’s commercials are referring to a “Bush-McCain Privatization Plan” that would cut Social Security benefits in half. This is total bunk and the nice people at FactCheck.org explain why in detail. I’ll give you the quick summary. There never was a “Bush-McCain” plan. Social Security reform died in 2005 and I don’t recall a bill ever being proposed. President Bush did propose some ideas but they were criticized and died in Congress. The idea that benefits would be cut in half is also completely false. In no way did Bush’s plan to create SS accounts you could invest, even under the most pessimistic analysis, cut benefits in half. Besides, those private investment accounts were optional. You could have remained in the same old system if you chose. I guess those facts don’t matter when Obama’s campaign can splash alarmist and false headlines across your TV.

I wish more people would wake up to this. Barack Obama is the same as every other politician you’ve ever known. He’s not the savior. He’s not going to change politics forever. He flipflops, distorts and lies whenever it will benefit him. Don’t fall for his hype like the brainwashed masses. Go online and research his views on immigration, tax policy, foreign policy, and anything else you can think of.

So I’m driving home from work and I get stuck in some unexpected traffic. In front of me I find a Toyota Camry with a bizarre bumper sticker.

If you can’t read my fuzzy cell phone pic, it says:

It’s a planet not an empire

And to the left of the text is a picture of Earth. What could this possibly mean? Is it political? Is this some obscure anti-Bush/Cheney slogan? I certainly don’t get that because I can’t remember either of them trying to establish the Earth Empire. Can anyone out there explain this?

So while Europeans are brooding about America’s lack of sufficient love for Barack Obama, they’re still cozying up to us a little more. And it’s all thanks to Russia! A survey was taken, before the Georgian War, regarding European opinions on defense cooperation with America and NATO. Russia had already been forming a muscular foreign policy, which concerned the Europeans enough that support for NATO and closer US ties were on the way up. Russia’s march into Georgia could only have freaked out Europeans some more.

I must say I feel a little used. It seemed like Europe was ready to ditch us Americans during the whole Iraq War fiasco, but now that Russia is making some noise again they come running back. It’s like having a girlfriend you know is bad for you but you just can’t leave her. She’s always lecturing you about how to live your life but she never does anything productive with her own. She’s preachy and snobby, and never considers your needs. Oh but when she has trouble, she’ll jump into your arms, bat her eyelashes and expect you to make everything better. The smart thing would be to dump her, but she’s just so hot you can’t bring yourself to do it.

And that’s transatlantic relations in terms we can all understand.

McCain has actually closed the polling gap with Obama. Believe it or not, a USA Today/Gallup poll from last week has McCain ahead by 10 points. Can you guess who isn’t pleased? Well the Obama campaign certainly isn’t. I’m sure people living on the coasts aren’t either. But there’s a special sort of rage brewing overseas.

Jonathan Freedland, a commentator for The Guardian, penned an especially bitter piece about McCain’s unexpected popularity. Reading it, I get the sense that Freedland feels like he’s going to be betrayed. America was supposed to pick Obama and transform itself into the perfect multilaterialist – deferent to her allies, unwilling to ever go it alone. Now here we are and McCain’s candidacy isn’t irrelevant. Damn you America!

Freedland actually ends his essay with a threat: “If Americans reject Obama, they will be sending the clearest possible message to the rest of us – and, make no mistake, we shall hear it.” This is enormously hypocritical. How many times has America been accused of meddling in other nations’ decisions? Yet here we are being told how to vote. How many Britons wouldn’t have a problem if Americans started telling them not to vote for Labour in the next election? I imagine not a whole lot.

Yes, we’re all aware the rest of the world loves Obama but picking the US president is not your decision. Spare us your threats and save your opinions for tea time or whenever you get together to bitch and moan about Americans. When Election Day comes around, Americans are going to do what they always do; pick the president they think will be best for America, and we’re not going to spend a moment thinking about what you want. As if you go to the polls ready to vote for who ever the US wants you to.

The world wasn’t destroyed last night, much to the consternation of certain parties I’m sure. Last night the Large Hadron Collider was first powered on and instead of destroying the world with a micro-black hole, nothing special happened.

Unlike the dim bulb masses, I wasn’t worried about having my atoms crushed to infinite density. Thinking about the LHC, I was filled with the disappointment that comes from a missed opportunity. I still remember when Congress canceled the Superconducting Super Collider. That was way back in 1993 when, probably in response to Ross Perot’s unusually strong showing in the ’92 election, Congress was in a budget cutting mood. Killing the SSC became a cause célèbre. Congressmen attacked it and the media piled on. The SSC didn’t help its case when its budget request ballooned from $4 billion to $12 billion though. Somehow a choice between the SSC and the International Space Station, whose budget was also rising, was created. The space station won because it had the kumbaya-spirit of international cooperation as we basked in the post-Cold War afterglow.

America missed the opportunity to make a landmark discovery in particle physics. The SSC would have been nearly three times as powerful as the LHC that was put into operation today. We could have produced the Higgs Boson ten years ago and physicists would have a better understanding of how matter functions. Instead humanity has wasted years, Europe has a bunch of American physicists working there and Texas has a big, empty hole in the ground.

I guess the obvious question is, “Why should we care about particle physics?” We should care for the same reason we have for anything that takes longer than a lifetime to accomplish. We do it for future generations. Any discoveries in particle physics will not affect our daily lives. They probably won’t affect life in twenty years either. But if we don’t do the abstract research today, future scientists can’t take that information and apply it towards something useful. If it weren’t for people “wasting” their time and money building atomic clocks in the 1950s, we wouldn’t have GPS navigation systems in our cars today. If we don’t “waste” our time and money searching for the Higgs Boson, how will we ever build warp engines and transporters?

Not only could we have discovered it years ago, but the US could have reaped the benefits of preventing a physics brain drain. Now Europe gets it. But I’m sure saving that $12 billion saved the US from economic collapse.