Strange Capitol

So, now we come to really strange forms of "capitol". In return for US taxpayer money the bailed out banks are required promise to sell their stock to the government at today's (depressed) price, sometime in the future. The idea being that the taxpayers are entitled to a cut of any of the bank's future earnings in return for putting up barrels of money. The paperwork to do this is called a "warrent". We used to call them stock options in industry.
According to a Wall St Journal article, these "warrents" would be carried on the books of the bank as "capitol". Wow. First of all, the warrents aren't readily saleable, which makes them questionable as capitol. Second of all, the government owns the warrents, not the bank, so I fail to see how they contribute to the bank's capitol whatsoever, neglecting matters of proper pricing and liquidity.
Then the WSJ writer goes on to worry about how fluxuations in the value of these warrents would make the bank's capitol fluxuate.
Something does not compute here.

Bank Capital?

So, let's run a bank. We accept money from depositors and buyers of bank stock. We lend this money at interest. Question, how much money can we lend? All of it? Not hardly, someone will make a withdrawal and we have to have cash in the till to pay out. Sometimes a loan won't be paid back, and a decent bank can't fail just 'cause one lowlife stiffs them on a loan. So, how much money do we keep on hand as protection against rainy days?
Experience and federal law suggest a bank ought to keep about 10% on hand as "capital" or "capital reserves". The commercial banks adhered to this. The "investment banks" aka stock brokerage houses, ignored this rule, went down as low as 3%, and are now all dead. RIP Drexel Burnham Lambert, Merrill Lynch, Lehman Bros, Bear Stearns, and company.
Now keeping plain old cash in the vault is secure, but that's a lot of cash that isn't earning interest. Can we count ultra safe securities, T-bills say, as "capital reserves"? Well OK. How about blue chip stocks and bonds? Perhaps. How about riskier stuff like mortgage backed securities? Well, we allowed that to our sorrow.
Next question, after we demand that banks keep a certain amount of capitol on hand, and after we allow things other than cash to serve as "capitol", how do we count said capitol? Do we count the stocks and bonds and riskier stuff at purchase price or at current market value? Speaking as a depositor, I say count every thing at current market value. The purpose of the capitol is to pay off depositors and cover bad loans. To do any good, the capitol must be converted into cash, the stocks and bonds sold. "Capitol" that cannot be sold at all, or only sold for very little money is worth little to nothing when it comes to paying off the bank's obligations.
Hence the "mark-to-market" rule which banks hate. Under "mark-to-market" the bank must count as capital only the market value of securites. The rule was put in after the Enron scam which involved carrying worthless stuff on the books at purchase price.

New York Times strikes out again

Columnist writes about the hardships of a career in science and engineering. He bemoans lawyers starting salaries of $145000 whereas he claims a physics PhD starts at a mere $45,000. I don't know what universe this commentator lives in, both in the real world, a bachelor's degree in chemical, electrical, mechanical or civil engineering starts at $50K or better, right out of school, and reaches $100K with just a few years industry experience. For every lawyer starting with a big firm right out of college, a hellofva lot 'em work part time and never rise much beyond doing residential real estate closings.
Engineers get to design the next Iphone, the next game machine, space ships, aircraft, buildings and every thing else that gets made. It's more rewarding than doing closings.

Campaign Sign Maintainance

Got a call from down state yesterday, someone defaced one of our scarce 4 by 8 foot McCain Palin signs, the one down at Clark's Trading Post. So I drove down to inspect. Ran right thru Franconia Notch in the strangest weather ever. A low low cloud scraping the ground and flowing up thru the notch like water.
Found the defaced sign. Some highly mature and principled person had written a rude word across the sign in black spray paint. Their spray can must have been low on paint 'casue they only defaced one side of the sign. So I drove into North Woodstock and bought a can of white paint at the NAPA auto parts store, along with some masking tape. About 10 minutes work of masking and spraying refreshed the white lettering, and the sign, if not good as new, as least looked OK from the road.
Let's say it's just some kids...

Radar Recon on the Taliban

The RAF is taking delivery on their new recon aircraft, Astor, named after the radar rather than the airframe. (Airborne Standoff Radar). It's a twin engine jetliner (a Bombardier Global Express) with the radar mounted in a canoe shaped pod underneath the fuselage. It is said to be sensitive enough to detect men walking on the ground. It's a smaller and cheaper version of the USAF Jstars and Rivet Joint. Size reduction comes from leaving off the 20 odd flying radar observers and just data linking the radar "take" to a ground station, resulting in a much smaller aircraft overall.
The computers onboard that do all the work are running Windows. Aviation Week interviewed a British official. He said "There are lots of things we would like to do better-- such as faster boot times...." Later one he admits that rebooting the Windows computers can take as much as finve minutes. That's Windows for you, sluggish and crashprone.

The Great Chipmunk Escape

Chipmunk spent a day lurking under the washing machine. Cat's attention span wavered, and last night chipmunk scurried across the living room and dove under a bookcase. It must have gotten hungry, there isn't much worth eating in the cellar. Any how cat got another tour of chipmunk guard duty, but never scored.
This morning, while cat was out, chipmunk reappeared. I was able to herd it out the open front door and back into the woodpile. I do hope it finds something to eat and drink after a day long fast under the furniture.

Gm, the Bad and the Ugly. Buying Chrysler.

GM senior management just demonstrated yet again a complete lack of common sense. They have a car company that has too many factories, too many over paid workers, too many dealers, no decent products, worthless stock, a credit rating in the toilet, and money is running out. And they are wasting time dickering to buy Chrysler, a second car company in just as bad, or maybe worse shape? For what?
Chrysler is so worthless that Daimler gave it away to Cerberus. If memory serves Daimler paid $30 billion for Chrysler ten years ago and they dumped it for a couple of billion in stock, not cash last year. That's 'cause Chrysler's liabilities in terms of plump UAW pensions far outweighed any money it could ever make.
GM cannot afford it, hell, GM can't afford to buy toilet paper for the company restrooms. Why in the name of all that's holy are they thinking of making their problem bigger? GM needs to fire all their senior management starting with CEO Rick Wagonner and going down about three levels from there. The GM suits have performed one disaster after another, going back 20 years when they threw away billions of dollars just to get Ross Perot off their board.