Please Donate Now

Received tonight from the Obama campaign:

Thomas —

I’m the Chief Financial Officer for Barack Obama’s campaign. I track the donations coming in and the expenses going out.

I asked for the opportunity to write to you directly so that I could try to explain what’s happening right now.

This organization has thousands of employees and spends millions of dollars a day — and at the moment we’re doing it without a safety net.

Our spending plans have been stretched by John McCain’s negative attacks and the overwhelming resources of the Republican National Committee.

As of October 15th, John McCain and the RNC together had nearly $20 million more in cash than the combined total of Obama for America and the DNC. And just this week, we’re facing new and unexpected spending against us in Montana and West Virginia.

Your incredible generosity has gotten us this far. But right now we need your help more than ever to get this campaign across the finish line.

Please donate $100 or whatever you can afford right now:

https://donate.barackobama.com/RNCadvantage

My team and I are working to stretch every dollar in order to keep as many paths to victory open as possible. But we need whatever help you can provide for this crucial final stretch.

Thank you,

MM

Marianne Markowitz
Chief Financial Officer
Obama for America

…or donate here, where I can note your contribution, steeple my fingers, and gloat, in the manner of Mr. Burns (“Excellent!”)

But seriously, there has never been a starker choice. If you’re not going to donate now, then what campaign are you waiting for?

“If not now…when?”

Unintended Consequences
(You Push In Here, It Pokes Out There)

From the Financial Times:

US mortgage rates have soared this week in an unexpected reaction to the latest Treasury financial rescue plan, which has prompted investors to buy bank debt and sell bonds backed by home loans.

Interest rates on 30-year fixed-rate mortgages, as measured by Bankrate.com, rose to 6.38 per cent on Thursday from 5.87 per cent last week – before the Treasury said on Tuesday that it would take equity stakes in banks and guarantee new bank debt.

Investors responded to the new guarantee by buying existing bank debt, reckoning it could be refinanced with the new government-supported bonds. As they did so, they sold lower-yielding paper issued by Fannie Mae and Freddie Mac, the mortgage companies put into government conservatorship last month.

The sales of Fannie and Freddie paper pushed up yields on their debt, which is backed by mortgages. This, in turn, pushed mortgage rates to levels not seen since the government took over Fannie and Freddie on September 7.

Fannie and Freddie had been taken into conservatorship by their regulator to help keep mortgage rates low and – it was hoped – revive the housing market.

However, the opposite is now happening, making it more difficult for struggling homeowners to refinance their mortgages and for prospective homebuyers to get financing.

As a result, house prices may fall further before they find a bottom.

Oh yeah, baby — will they ever.

Read the Full Story in the Financial Times:
“Treasury plan pushes up US mortgage rates”

Tilted Twister: A LEGO Rubik’s Cube Solver

I had been thinking of getting a LEGO Mindstorms set, but wasn’t sure how much they could do.

Then I saw on the web that a fellow named Hans Andersson had designed a Rubik’s Cube solver that uses only the LEGO Mindstorms NXT Retail Kit.

Watch the video!

My LEGO Mindstorms NXT set is now on order, using my livesystems.com sale money.

I actually got a little more money than that, but of course I shared some with
Industry Figure Chris Gibson.

Initially he told me to just take all the money, but I protested:
“Surely you want half? Even Bill Gates gets half!” [Copyright 1997 TheOnion.com]

“Well, I don’t want to be as greedy as Bill Gates; give me a third,” he said, and so we did.

See full construction details for Tilted Twister, including software, at tiltedtwister.com.

livesystems.com, Mark 2

A previously-unknown Swiss guy, Yves Kilchenmann, contacted me out of the blue about buying my old domain, livesystems.com, and eventually we agreed upon a price, which is enough to put me into, for instance, a nice LEGO robotics set (actually a Danish product, but very possibly what I’m going to spend the money on).

Their building, in Switzerland:
The LiveSystems Building in Switzerland

Ooh…looks like I could have asked for more money, rats.

If you’re wondering about how strangers go about transacting a domain sale, we used escrow.com, and I was extremely pleased with their service — really great, I’ll totally use them again.

Here’s a link to an automatically translated version of the new livesystems.com site, via beloved Google.

Calculated Risk: Why the FDIC Fears Bloggers

I’ve probably mentioned before my admiration for the great financial blog, Calculated Risk. They’ve done a terrific job of publicizing and quantifying the Doom.

There was a funny editorial cartoon referring to it, drawn by Eric G. Lewis, a freelance cartoonist living in Orange County, CA.

You need to know that Calculated Risk is written by two people: a man (a retired–and anonymous–executive of a public company), who posts as Calculated Risk, and a woman (a former bank officer), who posts as Tanta:

Why the FDIC Fears Bloggers.

Another Frightening Show About the Economy

The promised long version of “The Week America’s Economy Almost Died”, the sequel to The Giant [Global] Pool of Money, has shipped!

Okay, for those keeping track, this market freeze-up has been compared, so far in our story, to an oncoming train, an abyss, a monster, and an earthquake. All we need now is a serial killer.

And what made this abyss, earthquake, train, monster materialize all of sudden?

There was one event in particular that frightened the commercial paper market and made it seize up. Explaining it, I’d afraid, means using another finance term, although this one might be a little more familiar: the money market mutual fund.

And we should say here, a money market mutual fund is just, it’s like a savings account: there’s a good chance you even have one; it is, in normal times, it’s one of the safest places to keep your money. You put $1,000 bucks in; you know for sure you’ll get $1,000 bucks out — maybe even $1,010. And you’re happy with just that little return, because you know, at least your money is secure.

Now, one of the main things that money market managers do, to get that little return, is they lend money out on the commercial paper market. They give guys like Mark Peterson at ServiceMaster that $999,000; he gives them that $1,000,000 back the next day. It’s an OK return, but the main thing is: it’s safe, their money is safe, because they’re lending it to huge, trusted companies, many of which have been around for decades, reliably paying back these loans.

At least, that’s the way it was until two weeks ago, when one most dreaded things happened, at least in the world of money market managers — it’s the thing they have nightmares about.

One of the biggest, and oldest funds, called the Reserve Fund, that was its name, it broke the buck. What that means is, for the first time ever, it lost its depositors’ money. For every $1.00 they put in, they were left with only 97 cents…

It’s a big deal.

“Breaking the buck, is, is sort of like, uh, having a serial killer in high school; it caused a little bit of panic… People are not concerned with getting a return on capital; they just want the return of capital. So that, that is panic; that is fear.”

That panic and fear caused an old-fashioned bank run. People, and more importantly, pension funds and big endowments, called their brokers and said, “Get me out of those funds!” The government had to step in and guarantee the money market funds.

And this, right here, as near as we can tell, this is what freaked out Henry Paulson and Ben Bernanke. Because this, right here, is the mortgage crisis spreading out into the rest of the world.

This fund that broke the buck? They weren’t investing in risky mortgages or anything related to the mortgage industry; they were not free-wheeling Wall Street fat cats taking big risks and hoping for a windfall. They were investing in investments that those fat cats laughed at. These were fund managers doing everything possible to be Totally Safe, doing what they always did: buying very safe, very short-term commercial paper.

But it just so happened that the company they bought it from, was Lehman Brothers, and the day before, Lehman had gone bankrupt, in part, because of its exposure to risky mortgage products. So all the money this money market mutual fund, the Reserve Fund, had lent to Lehman was suddenly gone…

“That’s what caused the panic. All the other money market mutual fund managers freaked out. They wondered, who’s gonna be next? And then, like a horror movie, at least, a horror movie made for money market mutual fund managers, another fund broke the buck. And then AIG, the largest insurance company in the world, nearly collapsed.

That was it: money fund managers decided, we’re not lending out any more money out to companies at all.”

The scary monsters in the story: the lock-up of the commercial paper market (above), and the leverage in the credit default swap market. I swear to God I’m not kidding.

“That doesn’t sound scary…that sounds boring,” I hear you say.

“Well, allow me to retort:”

The amount of credit default swaps used for speculation grew to dwarf the amount that were actually used for insurance…

“The corporate bond market cash market is approximately $5 trillion, and the notional value of [credit default swaps] outstanding is approximately $60 trillion.”

In other words, there are $5 trillion of bonds in the world, but the total amount that people have bet on those bonds is $60 trillion. For every bond, there are 10 people promising to pay the full amount if the bond goes bad.

Oh, and there’s one more thing:

“All of this is unregulated, partly because they wanted it to be unregulated…”

“The idea that you can have $60 trillion in a financial market, which is more than all the stocks sold anywhere in the world, and not have any oversight whatever, is self-evidently absurd, and we’re seeing the end result of that today.”

Finally, the show details why an equity-injection plan would be (so!) much better than the big, stupid Paulson bailout plan.

Don’t wait! Get it via podcast from This American Life right now!

Or, download it directly from the This American Life website here.

Or, download it from iTunes here.

“#365: Another Frightening Show About the Economy”
October 3, 2008.