bits and pieces, pennies and pounds

Let's start with a couple of representative stories from the credit markets. First: you're starting to see institutions that can do so yank back borrowing, refusing to pay "loan shark" rates. Credit contraction leads to economic contraction. Those institutions which can't follow suit are seeing huge bond cost jumps, which isn't good either. But sadly, the plans to break the monolines into muni vs. everything else is starting to see serious resistance, primarily because of opportunities for lawsuit mania. Discussions I've read have indicated that without a functional legal theory for the split, you can't do it without huge lawsuit opportunity, so this solution may fail without government intervention to make this happen, and that's more difficult in the US than in, say, the UK. We hit Governor Spitzer's time limit on Friday - we'll see what happens after that.

Looking specifically at housing, Nouriel Roubini is reporting that the basic math says you're looking at 10 to 15 million walk-aways in housing, existing conditions remaining. That's a huge number. The ABX markets are at new record lows, but, of course, you're already at the point where you have to ask how much further down you can go. AAA CMBX spreads have returned some of the most recent spike (remember, up == bad), while other segments are fairly level at record (bad) highs.

To the surprise of many people - and without a lot of clear cause - oil closed over $100/barrel today, a substantial movement. But reportedly what's going to drive gasoline prices even higher than oil fundamentals this summer will be shortages in alkylate, an important gasoline additive. People are talking US averages of $3.50 or so per gallon at the lowest octane, which doesn't sound that bad for some of us in some regions, but will be a real shock for those in others.

Finally, Mish talks on his own blog about how governments (and, to some degree, individuals) can profit from monetary (as opposed to price) deflation. Sadly, the good positions are not occupied by many people.

Briefly, on FISA

Okay, so, a picosummary:

The House Democrats have so far declined to be steamrolled into the "bipartisan" Senate carte blanche assignment of unconstitutional power and retroactive immunity. This is somewhat surprising, but good. The PAA amendments from the previous round have also been allowed to expire; House Republicans staged a walkout in protest over Democratic refusal to grant unlimited warrantless spying power on Americans. However, given that Chief Executive Mr. Bush ignored the law previously, I rather imagine he'll continue to ignore it now. Mr. Olbermann's declaration of Mr. Bush's fascism was rather bracing, tho' I'm wonk enough to wish he'd spent a little more time on political theory.

Sadly, however, the Supreme Court decided to lock Americans into a catch-22^*, making enforcement against illegal spying programmes more difficult, by ruling that the Executive branch doesn't have to say anything about anything until a suit is established, and saying that you can't sue unless you can already prove you're a target of illegal spying. This removes the private lawsuits that were directly targeting the administration's illegal actions from the courts, leaving only the private lawsuits against the telecom companies (and their separate and specific violations of the law) standing. This makes it even more important that this retroactive immunity not succeed.

That's all for now. Things are on hold for a small assortment of days; after that, we'll see whether these House actions are real, or some combination of grandstanding and kabuki play. Hopefully, it's real.

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^*: link was this other URL before Yahoo! broke it, gir)