Expect cronyism and undying loyalty from people they appoint to high government positions, that is. Bob Dole's scathing email to Scott McClellan reads, in part:

"In my nearly 36 years of public service I've known of a few like you," Dole writes, recounting his years representing Kansas in the House and Senate. "No doubt you will 'clean up' as the liberal anti-Bush press will promote your belated concerns with wild enthusiasm. When the money starts rolling in you should donate it to a worthy cause, something like, 'Biting The Hand That Fed Me.'

This is reminiscent of something Democrat Leon Panetta told the New York Times last month regarding once loyal Clintonites who switched their support from Hillary to Obama.

“These are people that the Clintons gave an opportunity to serve,” said Mr. Panetta, speaking generally. “They helped give them the titles they now have, and made them a lot of money. I think the Clintons probably feel they are owed something.”

Megan McArdle makes exactly the right retort. She is responding to the Dole email, but the thoughts are bipartisan.

As an American taxpayer I'd like to think that I am the hand that fed Mr. McClellan, along with my fellow citizens. He owed loyalty to the United States of America, our constitution, laws duly enacted by our legislature and our citizenry. It may be that Mr. McClellan betrayed some of those loyalties, but the mere fact of criticizing the president after having left the administration isn't "biting the hand that fed" him.

Posted by Jay Hancock at 5:59 PM | Permalink | Comments (3)
                    

No surprise that discounters such as Wal-Mart and Costco are booking higher sales. The stuff they sell — food and gas — is getting much more expensive, which swells the top line of the income statement.

What’s impressive is that they’re also increasing the bottom line, although how long that can continue is an open question. A weak economy is driving more shoppers to seek low prices, which has helped increase discounters’ sales growth beyond the inflation rate and compensated for their higher costs.

Two weeks ago, Wal-Mart reported a 7 percent profit increase in the first three months of the year to go along with a 10 percent increase in sales. Last week, Costco beat Wall Street’s estimates by booking a 32 percent increase in first-quarter profit and a 13 percent sales increase. Revenue from food, which makes up 60 percent of Costco’s sales, and gasoline, which makes up 10 percent, was robust, the company said. But sales of discretionary items such as jewelry and electronics were weak.

Rising wholesale and manufacturing prices threaten profits for all retailers, and discounters are no exception. This year through April, so-called “producer” prices have been rising at about three times the rate of retail prices. Last week, Dow Chemical, whose products are used in all kinds of consumer goods, said it would raise prices by as much as 20 percent.

That kind of surge will hurt consumers and retailers alike. Even with heavy store traffic, there is a limit to how much discounters can match expensive wholesale costs with higher prices of their own.

Posted by Jay Hancock at 10:16 AM | Permalink | Comments (0)
                    

The bond market, which has inexplicably been absent from the inflation discussion, is starting to weigh in. Bond investors are supposed to push up long-term interest rates when inflation threatens, because inflation threatens the real return from their coupons. (If you earn 5 percent on a bond and inflation is 6 percent, you just lost 1 percent of your buying power.) But bond yields have been weirdly low this spring even as inflation makes its strongest bid since the 1980s. Now that's starting to change.

The yield on the 10-year Treasury is back up over 4 percent. Perhaps bond jocks were responding to yesterday's news that Dow Chemical would raise prices by as much as 20 percent. For years inflation doves have been reassured by the "core" inflation rate, which measures inflation everywhere except for food and energy prices. The core rate has been relatively tame. Memo to inflation doves: Chemical prices are part of the core. Get ready for an uptick.

Posted by Jay Hancock at 9:56 AM | Permalink | Comments (0)
                    

Who ya gonna believe? The ethanol lobby?

Corn demand for ethanol has no noticeable impact on retail food prices. A central theme in the “food versus fuel” myth is the false assertion that moderately higher corn prices, spurred by ethanol demand, are leading to higher retail food prices for consumers.

Or Amartya Sen, winner of the Nobel Prize for economics?

Agricultural crops like corn and soybeans can be used for making ethanol for motor fuel. So the stomachs of the hungry must also compete with fuel tanks.

Misdirected government policy plays a part here, too. In 2005, the United States Congress began to require widespread use of ethanol in motor fuels. This law combined with a subsidy for this use has created a flourishing corn market in the United States, but has also diverted agricultural resources from food to fuel. This makes it even harder for the hungry stomachs to compete.

Ethanol use does little to prevent global warming and environmental deterioration, and clear-headed policy reforms could be urgently carried out, if American politics would permit it. Ethanol use could be curtailed, rather than being subsidized and enforced.

Posted by Jay Hancock at 11:10 AM | Permalink | Comments (0)
                    

The conversion of Societe Generale's Jerome Kerviel into a Nick Leesonesque celebrity is well along. Even as SocGen's shareholders booed Chairman Daniel Bouton at today's annual meeting and called the banking company "a casino," Kerviel posed for pictures in a nice suit and tie at a separate location. Reuters story here.

Reuters Photo: Former Societe Generale junior trader Jerome Kerviel walks in the streets of the Paris suburb of Neuilly during an exclusive photo session May 27, 2008 on the same day as shareholders angrily quiz the French bank's management at their annual general meeting over $7.7 billion of losses which the bank blames on unauthorized stock markets bets by Kerviel.

Posted by Jay Hancock at 3:57 PM | Permalink | Comments (0)
                    

Here's Michael O'Hanlon and Alice Rivlin, in yesterday's Washington Post:

For all of their impressive qualities, this year's presidential candidates are woefully short on fiscal prudence. And the next president will face two daunting budget problems. The winner will inherit a large deficit resulting from a weak economy, an expensive war and the persistent political inclination to spend more and tax less. The bigger challenge? Promises made to the growing population of retirees as health-care spending continues to soar.

The GOP, once the party of fiscal and social conservatism, has lost the budgetary high ground. During George W. Bush's presidency, Republicans have cut taxes massively, launched a war without paying for it, added costly drug benefits to the Medicare program, exercised little restraint on domestic spending during the six years they controlled Congress, and allowed deficit-restraining budget rules to lapse. Fiscally prudent Republicans should worry that their standard-bearer is calling for about $300 billion a year in new tax reductions and increased military spending with few credible ways of paying the bill.

Meanwhile, Democrats, who complained that Bush asked us only to go shopping after the attacks of Sept. 11, 2001, should worry that their leaders are more intent on proposing huge initiatives in health care and energy -- while preserving Bush's tax cuts for all but the wealthiest -- than in heeding John F. Kennedy's call to sacrifice for the common good.

Posted by Jay Hancock at 10:59 AM | Permalink | Comments (0)
                    

Hedge fund manager/blogger Barry Ritholtz, reporting live from eastern Long Island:

Got last minute dinner reservations Saturday night at one of our favorite restaurants, no problems. At 8 pm, there was no wait -- indeed, there were 3 or 4 empty tables after we were seated. Last year, there would have been a 20-30 minute line at that hour on Memorial day weekend.

On the way to the beach, I count 14 homes for sale -- same amount as last year. A lot of For Rent signs out also.

We go to dinner at one of our favorite lobster restaurants -- on the early side, so as to not get home too late. We finished after 7 -- the place was still empty.

Posted by Jay Hancock at 10:45 AM | Permalink | Comments (2)
                    

I love these conditional apologies from people who have made public gaffes and insults. A genuine apology -- an expression of regret and an implicit request for forgiveness -- should be unconditional. It should be an acknowledgment that a wrong has been committed -- no ifs ands or buts. But here's Hillary, who defended the fact that she's still in the race by saying, "We all remember Bobby Kennedy was assassinated in June in California." She responded to the uproar by saying:

“And I regret that if my referencing that moment of trauma for our entire nation and in particular the Kennedy family was in any way offensive.”

Note the "if." One way to interpret this is that she's saying: Hey, I'm fine with what I said. But if you have a problem with it, OK, my bad. I don't really regret the remark. I regret that you're offended.

It WAS offensive, Mrs. Clinton. Just apologize without the fine print. Here's a (very partial) collection:

Janet Jackson after partially disrobing during the Super Bowl:"I am sorry if anyone was offended by the wardrobe malfunction during the halftime performance at the Super Bowl."

Bill O'Reilly, after putting "Michelle Obama" and "lynching" in the same sentence:"I'm sorry if my statement offended anybody. That, of course, was not the intention."

Hillary Clinton after her husband compared Barack Obama's candidacy to Jesse Jackson's losing bid for the presidency: "You know I am sorry if anyone was offended. It was certainly not meant in any way to be offensive."

Trent Lott, after seeming to wax nostalgic for the days of segregation: “I apologize to anyone who was offended by my statement."

Posted by Jay Hancock at 11:08 AM | Permalink | Comments (21)
                    

The Sacramento Bee reports that the governor hopes California's legitimization of gay marriage will boost the economy.

"You know, I'm wishing everyone good luck with their marriages and I hope that California's economy is booming because everyone is going to come here and get married," said Schwarzenegger, prompting laughs and applause, according to a recording.

The San Francisco Convention and Visitors Bureau anticipates a tourism boom in the city this summer, said spokeswoman Angela Jackson. The bureau's Web site promotes a gay travel section and now explains that same-sex couples are "officially allowed to marry in the state of California."

Posted by Jay Hancock at 2:47 PM | Permalink | Comments (6)
                    

The Financial Times Alphaville blog is reporting that European drinks giant InBev is working on a $46 billion takeover offer for Anheuser Busch, the St. Louis-based maker of Budweiser. It's a huge deal, and at a time of strained credit markets you have to wonder where the dough would come from. But with a combination of European capital (Credit markets on the continent aren't as hinky as those in the so-called Anglo-Saxon economies. One of the financiers would be Spain's Santander, Alphaville says) and a business that's about as far from finance and debt obligations as you can get, maybe it could be done.

Anheuser shares rose $3.50 this morning to $56, far short of the $65 price in the story, which bespeaks lots of skepticism.

Here's Alphaville:

A direct approach to approach to Anheuser chief executive August Busch IV is being planned, although expecting a cool reception, the InBev team are preparing to send a follow up letter to the American group’s entire board, mapping out terms that are expected to be pitched at $65 a share. If Anheuser refuse to commence friendly talks, InBev is considering a public appeal direct to the target’s shareholders.

On Friday, sources indicated that while extensive work had been carried out on the transaction, InBev was “not about to push the button.”

Putting the two companies, however, together would create a business capitalised at close to $100bn and would constitute the most ambitious piece of corporate consolidation since the onset of the credit crisis last summer. Anheuser and InBev together would be almost equally balanced between developed and emerging market operations across the globe, pumping out around 350m hectolitres of beer and other beverages annually. Annual revenues would be around $20bn, producing earnings of close to $6bn at the ebitda level.

Posted by Jay Hancock at 12:20 PM | Permalink | Comments (1)
                    

Today's column:

Last year's embarrassing leak of spy-budget details gave insight into just how lucrative the business of federal contracting has become since the 2001 terrorist attacks and the 2003 start of the Iraq war.

At a Colorado conference sponsored by the Defense Intelligence Agency, a PowerPoint slide revealed that 70 percent of intelligence dollars go not to government employees or agencies, but to private companies such as SAIC and Booz Allen Hamilton.

On her blog, The Spy Who Billed Me, journalist and novelist R.J. Hillhouse used conference information to figure that the U.S. intelligence budget is $60 billion - almost a fourth higher than people thought.

The question now for Maryland and other regions swimming in the money is: How long can it continue? The apparent answer from the politically connected Carlyle Group: a while.

Washington-based Carlyle is buying a majority stake in Booz Allen's government contracting arm, which does secret work for the National Security Agency at Fort Meade and has been called "the shadow intelligence community," for $2.5 billion.

"We like it and think budgets will continue to grow," Peter Clare, head of Carlyle's aerospace and defense business, says of the kind of high-tech intelligence and security work that Booz does. "We'd like to invest further in this area."

Read the whole thing Here. Read Washington Post biz columnist Steve Pearstein's take on the Carlyle/Booz deal Here.

Posted by Jay Hancock at 10:16 AM | Permalink | Comments (1)
                    

Here's one way to cut your electricity bill and help the planet: Fire your dryer. Running a clothes dryer four hours a week costs $2 or $3 and draws juice from polluting electricity plants. Drying wash on an outdoor line costs nothing. Unfortunately, some believe clotheslines are visual pollution -- a status hangup from the days when outdoor laundry was thought to tarnish one as downscale. There must be something wrong with you if you can't afford a dryer.

Many communities restrict or ban clotheslines. In the Columbia village of Wilde Lake, you can use only umbrella or retractable lines. Your application must include "a sketch of the clothesline showing sytle, color, materials and operational techniques," a "plat plan showing the intended location of the clothesline" and "a sketch of the fence or other enclosure that will screen the clothesline from view." The operational technique at my house is this: We hang clothes on a rope until they aren't wet.

Fortunately there's a growing backlash. The New Hampshire-based Project Laundry List militantly promotes the "right to dry" and has proclaimed April 19 "National Hanging Out Day." At the National Association of Attorneys General conference on energy earlier this month, Idaho Attorney General Lawrence Wasden exhorted his peers to fight clothesline repression. "We are blind to some of the simplest solutions," Wasden said, according to the Associated Press. "Clotheslines are not pretty enough for our notion of the American dream." Apparently he wants officials to go easy on unlicensed clothesline perps.

Maryland Attorney General Doug Gansler was at the conference, in Coeur D'Alene. He's pro-clothesline, says spokeswoman Raquel Guillory. "Of course we support naturally spring-fresh laundry," she said. But it doesn't sound like he's about to interfere with Columbia's laundry covenants. "You have to respect the restrictions of private community associations," she said.

No you don't. The time for civil laundry disobedience is now. Let 1,000 brassieres and socks bloom and flap in the backyard breeze.

Posted by Jay Hancock at 9:56 AM | Permalink | Comments (3)
                    

Not all those mortgage cash-outs were spent on SUVs and trips to Vegas. California Congresswoman Laura Richardson mortgaged herself to the eyebrows to pay back campaign debts incurred to win a seat from Long Beach. But then the Democrat defaulted on the loan. The lender: Washington Mutual, of course! From Capitol Weekly:

Richardson declined to comment for this story. But tax records at the Sacramento County assessor's office show that in January 2007, Richardson took out a mortgage for the entire sale price of the house -- $535,000. The mortgage amount was equal to the sale price of the home, meaning she was able to buy the house without a down payment, even though the housing market was beginning to turn.

A March 19, 2008 notice of trustee's sale indicates that the unpaid balance of Richardson's loan, which is held by Washington Mutual, is more than $578,000 –$40,000 more than the original mortgage.

Like many homes that have gone through foreclosure, Richardson's new residence quickly became an eyesore. With Richardson gone, upkeep on the home lapsed, and neighbors began to get angry.

While Richardson walked away from her bank loan, she has begun to pay herself back for the money she personally invested in her initial race. Records show that Richardson spent $587,000 out of her Congressional campaign committee since declaring her Congressional candidacy through March of this year. Of those expenditures, Richardson has spent $18,000 of that money to begin repaying herself for the money Richardson loaned to her campaign.

Posted by Jay Hancock at 10:10 AM | Permalink | Comments (5)
                    

Check out Scott Reckard's story in today's Los Angeles Times. A homeowner behind on his mortgage payments emails Countrywide Financial, which has been plastered by bad housing loans, asking for a reprieve.

My number one goal is to keep my home that I have lived in for sixteen years, remodeled with my own sweat equity and I would really appreciate the opportunity to do that.

He gets this email back from Countrywide CEO Angelo Mozilo:

This is unbelievable. Most of these letters now have the same wording. Obviously they are being counseled by some other person or by the Internet. Disgusting.

Mozilo apparently found the request in his inbox along with many other similar ones and tried to forward it to somebody inside Countrywide with his comments. Instead he hit the "Reply" button.

Posted by Jay Hancock at 3:29 PM | Permalink | Comments (0)
                    

Former Labor Secretary Robert Reich drops a little aside in a blog post on campaign styles that gives a revealing, behind-the-scenes glimpse of what passes for political discourse these days. We know the producers of the Sunday talk shows and "reality" shows generally are lurking in the background, egging on the actors and often distorting what's happening. Rarely do we get to find out about it, however. Reality-show contestants sign contracts not to spill the beans, and talk-show guests also are silent because they know they won't be invited back if they squeal. Here's Reich:

I was on television recently, debating a conservative. It's something I do fairly often. During a commercial break, the producer spoke into my earpiece. "A bit more energy," he said.

"What do you mean?" I answered, slightly hurt. I thought I'd been doing a fairly good job scoring points.

"Rip into him. Only three minutes in the next segment and we want to make the most of it."...

I asked the producer who was talking into my earpiece why I had to rip into my opponent. "We see viewership minute by minute," he said, hurriedly (the commercial break was about over). "When you really go after each other, we get a spike."

It's the spike I'm worried about. I chose not to rip into my opponent but, then again, I'm not running for president.

This is the larger point to be made about right-wing blowbag Kevin James' embarrassing appearance on Hardball last week. Sure he made a total fool of himself because he was indignantly against "appeasement" but didn't know who Neville Chamberlain was or how appeasement got such a bad rap. But, hey, who cares? Hardball's Chris Matthews "ripped into him." Matthews and James "got a huge spike." Isn't that what matters most? The hell with substance! We want to be entertained. Making himself a global joke was probably a great career move for James.

Posted by Jay Hancock at 12:21 PM | Permalink | Comments (3)
                    

Holy cow. That is all.

Posted by Jay Hancock at 11:40 AM | Permalink | Comments (1)
                    

Since Mike Miller and the Maryland General Assembly deregulated electricity in 1999, BGE and other utilities must buy electricity on the wholesale grid. Once utilities made their own power, marked it up for a modest profit and sold it to consumers. Now electricity depends on a so-called "market" that actually is replete with market failures.

Why is this so? Electricity isn't like products that trade in other markets. You can't bottle it, so there are no inventories. This makes price manipulation easier. At the same time there are huge barriers to entry, so incumbent producers have quasi-monopoly power. This makes price manipulation even easier.

I didn't have room for this in today's column, but let's review some of the problems we know about just from the last year and a half. The cockroach theory certainly applies here -- there are a lot more that you don't know about than the ones you can see.

-- May 2008. The Federal Energy Regulatory Commission reveals that Edision Mission spent three years evading questions and delivering misleading information about suspicious selling practices that look similar to price manipulation schemes employed by Enron and others. The practices took place in PJM, the grid that serves Maryland and a dozen other states. FERC fines Edison $7 million for lack of candor but doesn't say whether the behavior under investigation was proper or improper.

-- April 2008. Maryland's Public Service Commission decides that the wholesale auction that led to a 70 percent price increase for BGE households was proper. But the investigation is largely confidential, and the final report is riddled with blackouts.

-- December 2007. Hedge fund affiliate Power Edge LLC loses an estimated $80 million on aggressive electricity bets on the PJM system that didn't pan out. Under PJM rules, the losses are not absorbed by Power Edge's parent. Tower Research Capital. They must be paid by BGE and other PJM members.

-- September 2007. Texas regulators recommend fining TXU Corp. $171 million for alleged price manipulation of wholesale electricity. The matter is still pending, and TXU has refused to turn over some documents to the Texas Public Utility Commission.

-- April 2007. Joseph Bowring, market watchdog for PJM, publicly accusses his PJM bosses of silencing him when he tried to speak out about market irregularities and outsize profits by generation companies, including those in Maryland. The accusation leads to a turnover in top PJM leadership, a measure of independence for Bowring and a FERC investigation that found some profits made by Maryland generators were neither "just" nor "reasonable." FERC, however, declined to reclaim the excess profits for consumers.

-- March 2007. An investigation commissioned by Illinois Attorney General Lisa Madigan finds "disturbing evidence of price manipulation" in that state's wholesale electricity markets. The finding leads to a billion-dollar settlement with Illinois electricity producers.

-- Early 2007: Consultant Edward Bodmer tells Congress in a sworn statement that deregulation has allowed BGE parent Constellation Energy and four other PJM generators to make "supra-competitive" profits - more than they would in a truly competitive market or a regulated market.

-- From the Tacoma News Tribune: Since 2005, FERC has "conducted 64 investigations that have resulted in 13 settlements involving the payment of $40 million in civil fines" for price manipulation in electricity and natural gas. FERC "also pursued two enforcement actions that resulted in the payment of nearly $460 million in fines." Given the high profits of price manipulation, though, the fines are merely a cost of doing business.

Posted by Jay Hancock at 10:50 AM | Permalink | Comments (3)
                    

More disturbing news about the wholesale electricity markets, which in the wake of deregulation set prices for BGE and other Maryland utilities. One thing that got edited out of the column for space is important: Yes, sky-high prices for coal, natural gas and other fuels play a big part in driving up the cost of electricity. These items fuel the generation plants and are probably the biggest cost factor in producing a kilowatt. But thanks to flaws in the wholesale electricity markets, power sellers are reaping huge profits ON TOP of the high fuel costs. It's a double whammy for consumers. High fuel costs don't explain everything.

The column:

Call me cynical, but it sure seems like Edison Mission Marketing & Trading had something to hide.

After regulators began investigating the Boston-based electricity seller in 2005, Edison Mission misled them with "protracted" evasions, wasted "extensive" amounts of their time and committed "severe" violations of its duty to tell the truth, the Federal Energy Regulatory Commission said two days ago.

Serious stuff, and you might think FERC is finally policing the wild and woolly electricity bazaar. But here's the problem: The agency has said nothing about the troubling Edison Mission behavior it set out to investigate, which independent consultants say looks similar to price-manipulation schemes employed by Enron and others.

La di dah. More problems on the "PJM" wholesale electrical grid, which sets sky-high prices for BGE and other utilities, thanks to deregulation. Another wimpy gesture by FERC. And Exhibit No. 3,458 showing that the electricity "market" that was supposed to deliver competitive prices doesn't fit that description and hasn't fulfilled that promise.

Read the whole thing here.

Posted by Jay Hancock at 7:45 AM | Permalink | Comments (0)
                    

From GasBuddy, via Barry Ritholtz: Here is a county-by-county map of gas prices. The "hot" colors (red) are high prices; the "cool" colors (green) are lower. But not by much! At a neutral brown, Maryland is in the $3.79 to $3.85 range. That's what passes for a moderate price these days. Delaware is yellow (cheaper than Maryland). What's going on there? Lower gas tax?

Posted by Jay Hancock at 11:21 AM | Permalink | Comments (0)