To be fair, most of the bailout is in the form of loans and guarantees to back bad loans. Presumably some of them will be repaid, maybe even most, but it’s a huge commitment and a great risk. Worse, the bailout isn’t close to being over. Expect more companies to line up for Federal bailout money, followed by cities and even states.

Found here.

The news hole is the amount of content a news provider needs to create in every publishing cycle.

For example, a news broadcast on radio or TV has a certain amount of air time it needs to fill. Likewise, a newspaper, magazine, newsletter, or website, has a news hole of a certain number of printed pages, dependent in part on how many advertisements are sold to advertisers.

The next time you give a reporter a story, tell him “Stick this in your news hole.” Heard on the fifth season of “The Wire.”

Previous WOTD - Dolly Zoom

The Bush administration backed off proposed crackdowns on no-money-down, interest-only mortgages years before the economy collapsed, buckling to pressure from some of the same banks that have now failed. It ignored remarkably prescient warnings that foretold the financial meltdown, according to an Associated Press review of regulatory documents.

The AP article fails to mention that as early as 2003 the Bush administration and Congressional Republicans were pushing for tighter regulations and oversight of Fannie Mae and Freddie Mac. From the December 2, 2003 New York Times:

The Bush administration today recommended the most significant regulatory overhaul in the housing finance industry since the savings and loan crisis a decade ago.

Under the plan, disclosed at a Congressional hearing today, a new agency would be created within the Treasury Department to assume supervision of Fannie Mae and Freddie Mac, the government-sponsored companies that are the two largest players in the mortgage lending industry.

The new agency would have the authority, which now rests with Congress, to set one of the two capital-reserve requirements for the companies. It would exercise authority over any new lines of business. And it would determine whether the two are adequately managing the risks of their ballooning portfolios.

The move was opposed by construction lobbyists and by Congressional Democrats. Democrats quoted by the NYT spun the Bush administration’s tightened regulation of Fannie Mae and Freddie Mac as a backdoor attempt by the evil Republicans to keep poor people from getting mortgages:

Significant details must still be worked out before Congress can approve a bill. Among the groups denouncing the proposal today were the National Association of Home Builders and Congressional Democrats who fear that tighter regulation of the companies could sharply reduce their commitment to financing low-income and affordable housing.

”These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis,” said Representative Barney Frank of Massachusetts, the ranking Democrat on the Financial Services Committee. ”The more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

Representative Melvin L. Watt, Democrat of North Carolina, agreed. ”I don’t see much other than a shell game going on here, moving something from one agency to another and in the process weakening the bargaining power of poorer families and their ability to get affordable housing,” Mr. Watt said.

It was recently revealed that Senator Frank was dating an executive at Fannie Mae from 1991 to 1998. Meanwhile it was Republican Senators Charles Hagel and John McCain who introduced the Federal Housing Enterprise Regulatory Reform Act of 2005.

Timeline shows Bush, McCain warning Dems of financial mess

Christopher Judge is accustomed to turning heads in Vancouver. During the decade-long run of the cult hit TV show Stargate SG-1, which was filmed in and around the city, Judge starred as the muscle-bound alien Teal’c. But when the six-foot-three actor appeared in B.C. Supreme Court in mid-November, amid raised eyebrows from the galley, it was for a role he’d desperately hoped to avoid. Judge, who owns three luxury homes in B.C., faces foreclosure. He’d flown up from Los Angeles the night before to ask the court for time to get a new appraisal done on one of his properties, a West Vancouver home with stunning views of the city that he’d bought for $2 million in 2006. At the same time, one of Judge’s former co-stars on the show, Michael Shanks, is facing foreclosure on another sprawling West Vancouver home purchased in January for $4 million. “I was always told the safest place for your money is in the real estate market because it would never drop by 50 per cent, but that’s exactly what’s happened,” a congenial Judge said outside the court. “I watched the L.A. housing market fall and now I’m having to watch the B.C. market go down, too.”

According to the article Canada’s problems duplicate the U.S. problems almost exactly - government-backed mortgages, downpayments below conventional lending standards, liar loans based on undocumented incomes, and irrational gold rush pricing.

Previously:

- Is green energy the next market bubble?
- How irrational were California real estate prices?
- Chicago business school profs on the Paulson bailout
- What caused the global housing bubble?
- Intelligent software didn’t avert the current financial crisis
- Anna Schwartz on the financial crisis
- “Economics in One Lesson” on government loans and government-backed credit

Reasonable people can — and do — disagree about how Vallejo found itself in bankruptcy. There’s no doubt, however, that many of the city’s problems stem from its inability to recover from the 1996 closure of the Mare Island Naval Shipyard, once the city’s largest employer. The city also lost hundreds of thousands dollars per year in sales tax revenue after the closure of a Wal-Mart.

But the largest share of the blame in Vallejo has centered on public-safety salaries and benefits, which make up about 75 percent of the city’s general fund budget. Base pay for firefighters is more than $80,000 per year and employees can retire at age 50 with a pension equal to 90 percent of their salary, the result of a retroactive pension increase several years ago.

With the downturn in the housing market hammering revenues, Vallejo is asking the bankruptcy judge to void the collective-bargaining agreements that led to those salary and benefit arrangements. And the possibility of hard-fought union contracts going up in smoke has struck fear in the heart of labor groups

Previously:

- How irrational are California public pensions?
- State pension funds heading for insolvency
- How irrational were California real estate prices?
- California attempts to build world’s most *optimistic* commuter rail

Wikipedia:

The dolly zoom is an unsettling in-camera special effect that appears to undermine normal visual perception in film.

The effect is achieved by using the setting of a zoom lens to adjust the angle of view (often referred to as field of view) while the camera dollies (or moves) towards or away from the subject in such a way as to keep the subject the same size in the frame throughout. In its classic form, the camera is pulled away from a subject whilst the lens zooms in, or vice-versa. Thus, during the zoom, there is a continuous perspective distortion, the most directly noticeable feature being that the background appears to change size relative to the subject.

As the human visual system uses both size and perspective cues to judge the relative sizes of objects, seeing a perspective change without a size change is a highly unsettling effect, and the emotional impact of this effect is greater than the description above can suggest. The visual appearance for the viewer is that either the background suddenly grows in size and detail overwhelming the foreground; or the foreground becomes immense and dominates its previous setting, depending on which way the dolly zoom is executed.

The effect was first developed by Irmin Roberts, a Paramount second-unit cameraman, and was famously used by Alfred Hitchcock in his film Vertigo.

The dolly zoom is commonly used by filmmakers to represent the sensation of vertigo, a “falling away from oneself feeling”, feeling of unreality, or to suggest that a character is undergoing a realization that causes him to reassess everything he had previously believed. After Hitchcock popularized the effect (he used it again for a climactic revelation in Marnie), the technique was used by many other filmmakers, and eventually became regarded as a gimmick or cliché. This was especially true after director Steven Spielberg repopularized the effect in his highly regarded film Jaws, in a memorable shot of a dolly zoom into Police Chief Brody’s (Roy Scheider) stunned reaction at the climax of a shark attack on a beach (after a suspenseful build-up). Spielberg used the technique again in E.T. the Extra-Terrestrial and Indiana Jones and the Last Crusade. It was originally used within Battlestar Galactica to depict the feeling experienced by characters when the ship utilises faster-than-light travel. However, the technique was not used again until the fourth season.

The Wikipedia entry on perspective distortion in photography is really interesting, too.

Previous WOTD - Nuke the Fridge

The Coens get another great performance out of Frances McDermott and George Clooney. Brad Pitt is great as a likeably hyped-up dimwit.

Tropic Thunder
A parody of Vietnam war movies that’s even better at parodying Hollywood cynicism. Robert Downey, Jr., plays an Australian method actor who has his skin dyed to play a black actor. He’s a dude playing a dude acting like another dude. The further he gets into the movie the more he forgets he’s actually white, which gets under the skin of rapper-turned-actor Alpha Chino (Brandon T. Jackson).

Ben Stiller is a past-his-prime action hero who temporarily becomes an action hero when he believes the fight they’re in is staged. He’s ultimately saved by his role as a lovable retarded character named Simple Jack, an Oscar-seeking role that had previously been the low point of his acting career. (One character explains his mistake: “Never go full retard.”)

I don’t think I realized that Jack Black could actually act, but in several scenes he’s in charge as a typecast, overweight comedian trying to become a serious actor. Tom Cruise was the other shocker, playing a red-faced Hollywood mogul spraying profanity and spittle that’s a stretch from his previous roles. Dude’s weird, but dude can act.

Zack and Miri Make a Porno
Hilarious, but definitely not for everyone. I have to think this Kevin Smith movie barely made R and not X. And that’s all I’ll say about that.

Lots of faces to look for in this one. The Bubbles character is former porn queen Traci Lords. Stacey is current porn queen Katie Morgan. Jason Mewes plays a non-Jay porn rookie. Comedian and Opie and Anthony regular Jim Norton is one of the people auditioning. Stay and watch the bonus clip after the credits.

Atonement
Beautifully-made film about betrayal and missed redemption.

Another sign of just how out of whack the market got by the middle of the decade was that there were far more many vehicles on the road than actual registered drivers. This has long been the case, due mainly to the number of cars and trucks owned by businesses. But that gap grew much wider during the boom years. In 1998, there were about 12 million more vehicles than drivers in 1998. By 2006, the difference grew to 34 million.

That kind of imbalance couldn’t be maintained, even before the economy fell off a cliff. To that end, U.S. sales slowed to 16.1 million in 2007 and have plunged this year thanks to high gas prices earlier in the year and then the credit crunch.

Sales are now at their worst levels in 25 years, with a seasonally-adjusted annual rate of only 10.5 million vehicles in October. And when adjusted for population, GM said October was the worst month for the industry since the end of World War II.

The article blames easy credit for creating an auto sales bubble, with carmakers foreign and domestic ramping up production to meet newfound demand caused by refinancing and low-interest loans.

“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.”
– Winston Churchill

“The national budget must be balanced. The public debt must be reduced; the arrogance of the authorities must be moderated and controlled. Payments to foreign governments must be reduced. If the nation doesn’t want to go bankrupt, people must again learn to work, instead of living on public assistance.”
– Marcus Tullius Cicero

“If you have been voting for politicians who promise to give you goodies at someone else’s expense, then you have no right to complain when they take your money and give it to someone else, including themselves.”
– Thomas Sowell

The California state government provides a “defined benefit” pension plan to each of its employees. Such “defined benefit” pension plans are far more generous than any 401(k) or defined contribution pension plan available from any other employer in the state! In fact, the plan is so generous that it makes the average state employee a millionaire after only 22 years of work!

Is the state’s pension plan overly generous? The Sacramento Bee and Governor Arnold Schwarzenegger have been whining about it lately — are they jealous? The state’s own Legislative Analyst has determined that California’s pension plan provides nearly twice the benefit of the next highest state.

Other comparisons are in order. The vast majority of American corporations have now eliminated “defined benefit” pension plans — only 6% of Americans in the private sector have access to such plans. American companies have terminated over 17,000 such plans in the last 20 years. IBM, one of the bluest of the blue chip companies, terminated its “defined benefit” pension plan in 2005. Hewlett Packard, a major California employer, followed by terminating its plan later that same year.

I’m picking on California because that’s just how I roll, but closer to home Knox County adopted a defined benefit pension for the sheriff’s department in 2007. What’s even more amazing is that the plan was retroactive for previous years of service. For retiring sheriff Tim Hutchison the new plan, enacted a few months before he left office, meant his pension jumped from $20,000 per year to $80,000 per year for the rest of his life. The new pension plan will cost Knox taxpayers $100 million over 20 years.

Previously:
- State pension funds heading for insolvency
- How irrational were California real estate prices?
- California attempts to build world’s most *optimistic* commuter rail

That’s Mark Peacock’s photo of a snow-covered Roan High Knob Shelter, which Mark says is the highest elevation backcountry shelter on the Georgia-to-Maine Appalachian Trail.

I noticed that there was something appealing about the picture I couldn’t put my finger on. Then I realized the depth cues were distorted using a wide angle lens. I checked the EXIF data on the full-sized version and sure enough it was shot with an 11mm focal length. I’m still learning to appreciate the usefulness of a wide angle lens, and this is a great example of how someone who knows what they’re doing can use one to good effect.

Even as the holiday shopping season begins in full swing, the same events poisoning the housing market are now at work on commercial properties, and the bad news is trickling in. Malls from Michigan to Georgia are entering foreclosure.

Hotels in Tucson, Ariz., and Hilton Head, S.C., also are about to default on their mortgages. That pace is expected to quicken. The number of late payments and defaults will double, if not triple, by the end of next year, according to analysts from Fitch Ratings Ltd., which evaluates companies’ credit.

“We’re probably in the first inning of the commercial mortgage problem,” said Scott Tross, a real estate lawyer with Herrick Feinstein in New Jersey. That’s bad news for more than just property owners. When businesses go dark, employees lose jobs. Towns lose tax revenue. School budgets and social services feel the pinch.

Mall development and management firm General Growth Properties has lost 95% of its stock price this year and was delisted from the S&P 500.

The sound and video are out of sync, which come to think of it was true in the Seventies, too. At least the vertical hold is working, or else I’d have to wrap aluminum foil around the rabbit ears.

Natalie is growing fast as ever. She’s talking more and more and loves our cat Felix. She’s progressing quickly with her potty training. We’re sort of amazed she’s still in her crib. She could easily climb out of it if she wanted to, but she’s a very content kid. Very easy going.

Katie is growing into a little lady and is very polite. She likes taking care of people and nursing them. Katie has stopped wearing pullups at night and can get through the night without panties now, like a big girl. She’s smart, too. She’s barely four and is already reading.

Love you, girls.

Robb reports the awful news -”Franchisee Of 146 Waffle Houses Files For Bankruptcy”:

TAMPA - The days may be numbered for “scattered, covered and smothered” hash browns at Waffle House. The iconic roadside grill’s biggest franchisee has filed for bankruptcy protection.

Northlake Foods Inc. of Brandon, which operates 146 Waffle Houses in Florida, Georgia and Virginia, filed for Chapter 11 bankruptcy protection in mid-September. Chapter 11 allows a company to reorganize its finances while protected from its creditors.

According to the bankruptcy filing, 90 of Northlake Foods’ Waffle House locations are in Florida, but it wasn’t immediately clear whether it operates any local restaurants.

The company filed for bankruptcy because Waffle House Inc. of Norcross, Ga., was threatening to terminate the franchise agreement that gives it the right to operate the restaurants, the bankruptcy filing says.

P.S. When we were in St. Petersburg last month I thought it was totally weird that the Waffle Houses had palm trees. One day I hope to go to Europe and see how they landscape their Waffle Houses. With windmills, maybe, or guard towers. I’ll bet the ones in Scotland have moats. Knoxville Waffle Houses have next to no landscaping, but at least there are lots of them.

Hat tip to an email from Uncle.

States have to dramatically raise taxes to pay for unrealistic promises

A voluntary reduction in pension promises will be negotiated

Cities, municipalities, and states declare bankruptcy or find other ways to default on promises made

Choice number one will lead to a taxpayer revolt, and choice number three will have every school district and government employee hopping mad. Yet, to expect number two to happen voluntarily is highly unlikely. The most likely thing that will happen is governors like Corzine will put the problem off, just as Schwarzenegger has done in California, and in fact every governor in every state has done.

Pension problems are rampant. Most states were way underfunded even before this 45% selloff in the stock market. I selected New Jersey to look at because they have disclosed the numbers as well as the future assumptions.

The point of pension crisis has now arrived. Yet few even recognize it and fewer still want to propose doing anything about it.

Just as long-term healthcare benefits and pensions for the autoworkers union broke Detroit the public service employees unions are liable to break cities and states.

This, by the way, is also where Medicare is headed. Social Security with its fixed payout could still be saved, but Medicare is almost certainly hopeless in its current form. The system will break once the boomers retire - their retirement will reduce the money going into the system and their declining health will increase the money going out of the system.

The system only really works when the population is steady or growing. Throw in a shrinking working population or a growing retirement population due to greater longevity and the ratio of workers to retirees becomes unsustainable.

Hat tip to Instapundit.

Source. The graph shows the bubble taking off in 1998 and the market peaking in 2005-06. That latter date is generally considered the market peak by many sources.

Note that this graph completely contradicts the chirpy real estate agent advice that “home values always go up!” Home values tend to hold their value relative to inflation, which is no small feat. Your home also gives you a place to keep your stuff dry, which is something you can’t say about T-bills and mutual funds. However, significant appreciation relative to inflation was seen almost entirely in the housing bubble era.

We’re now in an era in which home prices are depreciating. Based on the graph above prices may have to decline an additional inflation-adjusted 15-25% to be back within historical norms.

LATER: Here’s a longer-term graph from the same source:

Welcome, Instapundit readers! Here are some previous posts on the financial crisis you may find intriguing.

- Is green energy the next market bubble?
- How irrational were California real estate prices?
- Chicago business school profs on the Paulson bailout
- What caused the global housing bubble?
- Intelligent software didn’t avert the current financial crisis
- Anna Schwartz on the financial crisis
- “Economics in One Lesson” on government loans and government-backed credit

U.S. Sen. Bob Corker, R-TN, in a press release: “I am glad that President-elect Obama has rolled out his economic team and would encourage them not to take this administration’s bait by coming to the rescue of the U. S. automakers without making them take the painful steps necessary to ensure their viability which probably include Chapter 11 bankruptcy, reorganization and consolidation,” said Corker. “Unfortunately, the Bush administration has made it clear they are willing to throw money at any problem as long as future generations are left paying it back.”

Yep. And that 700 billion dollar bailout is now 7.7 trillion dollars. (UPDATE: Before the day was even over that number had swelled to 8.5 trillion. I can’t blog as fast as the government spends.)

Thing is, Corker was for the bailout before he was against it. I can’t tell if he’s had a change of heart or is just playing both sides.