Socialized medicine is just like heroin: it creates a dependency that’s very difficult to give up. James Pethokoukis explains that Tom Daschle and the democrat party want to be your connection.

As Norman Markowitz in Political Affairs, a journal of “Marxist thought,” puts it: “After the Labor Party established the National Health Service after World War II, supposedly conservative workers and low-income people under religious and other influences who tended to support the Conservatives were much more likely to vote for the Labor Party when health care, social welfare, education and pro-working class policies were enacted by labor-supported governments.”

Passing Obamacare would be like performing exactly the opposite function of turning people into investors. Whereas the Investor Class is more conservative than the rest of America, creating the Obamacare Class would pull America to the left. Michael Cannon of the Cato Institute, who first found that wonderful Markowitz quote, puts it succinctly in a recent blog post: “Blocking Obama’s health plan is key to the GOP’s survival.”

Michael Lewis, author of the Wall Street memoir Liar’s Poker, tells the story of some hedge fund guys who saw the handwriting on the subprime mortgage bond wall in time to bet on the side of reality, and how the investment banks even helped them place those bets.

There’s a simple measure of sanity in housing prices: the ratio of median home price to income. Historically, it runs around 3 to 1; by late 2004, it had risen nationally to 4 to 1. “All these people were saying it was nearly as high in some other countries,” Zelman (housing-market analyst at Credit Suisse), says. “But the problem wasn’t just that it was 4 to 1. In Los Angeles, it was 10 to 1, and in Miami, 8.5 to 1. And then you coupled that with the buyers. They weren’t real buyers. They were speculators.”...

By the spring of 2005, FrontPoint was fairly convinced that something was very screwed up not merely in a handful of companies but in the financial underpinnings of the entire U.S. mortgage market. In 2000, there had been $130 billion in subprime mortgage lending, with $55 billion of that repackaged as mortgage bonds. But in 2005, there was $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds. Eisman couldn’t understand who was making all these loans or why. He had a from-the-ground-up understanding of both the U.S. housing market and Wall Street. But he’d spent his life in the stock market, and it was clear that the stock market was, in this story, largely irrelevant. “What most people don’t realize is that the fixed-income world dwarfs the equity world,” he says. “The equity world is like a fucking zit compared with the bond market.” He shorted companies that originated subprime loans, like New Century and Indy Mac, and companies that built the houses bought with the loans, such as Toll Brothers. Smart as these trades proved to be, they weren’t entirely satisfying. These companies paid high dividends, and their shares were often expensive to borrow; selling them short was a costly proposition.

Enter Greg Lippman, a mortgage-bond trader at Deutsche Bank. He arrived at FrontPoint bearing a 66-page presentation that described a better way for the fund to put its view of both Wall Street and the U.S. housing market into action. The smart trade, Lippman argued, was to sell short not New Century’s stock but its bonds that were backed by the subprime loans it had made. Eisman hadn’t known this was even possible—because until recently, it hadn’t been. But Lippman, along with traders at other Wall Street investment banks, had created a way to short the subprime bond market with precision. ...

The big Wall Street firms had just made it possible to short even the tiniest and most obscure subprime-mortgage-backed bond by creating, in effect, a market of side bets. Instead of shorting the actual BBB bond, you could now enter into an agreement for a credit-default swap with Deutsche Bank or Goldman Sachs. It cost money to make this side bet, but nothing like what it cost to short the stocks, and the upside was far greater.

The arrangement bore the same relation to actual finance as fantasy football bears to the N.F.L. Eisman was perplexed in particular about why Wall Street firms would be coming to him and asking him to sell short. “What Lippman did, to his credit, was he came around several times to me and said, ‘Short this market,’ ” Eisman says. “In my entire life, I never saw a sell-side guy come in and say, ‘Short my market.’” ...

Here he’d been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the BBB tranche without fully understanding why those firms were so eager to make the bets. Now he saw. There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product. The firms used Eisman’s bet to synthesize more of them. Here, then, was the difference between fantasy finance and fantasy football: When a fantasy player drafts Peyton Manning, he doesn’t create a second Peyton Manning to inflate the league’s stats. But when Eisman bought a credit-default swap, he enabled Deutsche Bank to create another bond identical in every respect but one to the original. The only difference was that there was no actual homebuyer or borrower. The only assets backing the bonds were the side bets Eisman and others made with firms like Goldman Sachs. Eisman, in effect, was paying to Goldman the interest on a subprime mortgage. In fact, there was no mortgage at all. “They weren’t satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn’t afford,” Eisman says. “They were creating them out of whole cloth. One hundred times over! That’s why the losses are so much greater than the loans. But that’s when I realized they needed us to keep the machine running. I was like, This is allowed?”

Essentially, it was in nobody’s interest, except for FrontPoint Partners, of course, to look at the subprime lending business realistically. So no one did.

Read the whole thing.
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Hat tip to Karen l. Myers.

Jamie Whyte, in the London Times, explains to liberals that, no, there really is no such thing as a free lunch.

Children are selfish. Not because they are unkind (though many are) but because they believe in cost-free transfers. They do not understand that providing the toys and other amusements they demand imposes a cost on their parents. Children live in a fantastical world where Barbie dolls and trips to the zoo can be delivered without depriving their parents of something they might have enjoyed, such as a bottle of wine or a few extra hours off work.

Learning that cost-free transfers are impossible is an important part of growing up, and parents usually make sure it happens quickly. Most of us learn that there is no such thing as a free lunch long before we have ever picked up a bill.

Except when it comes to public policy. Encouraged by politicians, many adults indulge the infantile fantasy that the Government can bestow gifts on us while imposing costs on no one.

Read the whole thing.

Obama’s new Attorney General Eric Holder has always supported “reasonable regulation” of firearms. Guess what? As Deputy Attorney General, he also favored “reasonable restrictions… reasonable regulations on how people interact on the Internet.”

0:39 video

Hat tip to Glenn Reynolds.

Office worker burning the midnight oil finds an amazing opportunity at the copier machine.

2:49 video

Fox News:

The Pentagon has suffered from a cyber attack so alarming that it has taken the unprecedented step of banning the use of external hardware devices, such as flash drives and DVD’s, FOX News has learned.

The attack came in the form of a global virus or worm that is spreading rapidly throughout a number of military networks.

“We have detected a global virus for which there has been alerts, and we have seen some of this on our networks,” a Pentagon official told FOX News. “We are now taking steps to mitigate the virus.”

The official could not reveal the source of the attack because that information remains classified.

News.com.au:

The US military has banned the use of flash drives and DVDs on its computers as it tries to combat a virus spreading rapidly through its networks.

The Pentagon ordered an unprecedented ban on all external hardware but refused to comment on the source of the attack, saying such information was classified.

“We have detected a global virus for which there has been alerts, and we have seen some of this on our networks,” a Pentagon official told Fox News.

“We are now taking steps to mitigate the virus.” ...

An email sent to military personnel identified the problem as being caused by a virus called Agent.btz, Wired.com reports.

The virus is a variation of the “SillyFDC” worm, which has been around since about 2005 and spreads by copying itself to flash drives and then replicates onto any computer that device is plugged into.

Agent.btz originated in China, according to ThreatExpert. Spyware Doctor is reported to be capable of eliminating it.

The Irish Times reports an Estonian mole working for the Russian Intelligence services probably represents the most damaging penetration of Western security since Aldrich Ames.

Echoes of the Cold War have returned to Nato headquarters in Brussels after an Estonian general was unmasked as a “sleeper” spy who passed top secret alliance information to Moscow.

Herman Simm (61), a retired official in Estonia’s defence ministry, has been arrested along with his wife on suspicion that they were recruited by KGB officers before the collapse of the Soviet Union.

After Estonia’s independence in 1991, state prosecutors believe Mr Simm made contact with the KGB’s successor foreign intelligence agency, the SVR.

The former police chief was the perfectly placed mole: between 1995 and 2006 he helped set up the high-security system for handling all sensitive Nato documents ahead of Estonia’s accession to the alliance in 2004.

That has alarmed Estonia’s Nato allies, who are talking about the greatest intelligence breach since the CIA counter-intelligence chief Aldrich Ames was exposed as a Soviet mole in 1994.

Mr Jaanus Rahumägi, chairman of the Estonian parliament’s security watchdog, admits that the spy has caused “historic damage” to the alliance.

It snowed on Tuesday here atop the Blue Ridge in Northern Virginia. We received an inch of accumulation, and it remained on the ground until yesterday afternoon. I remember the balmy weather of last year’s November and December with affection.

Wesley Prudden, in the Washington Times, notes that, as it gets colder, the case for trillions of dollars of expenditure to fight Global Warming, Excuse me! “Climate Change,” gets weaker and weaker.

Turn up the heat, somebody. The globe is freezing. Even Al Gore is looking for an extra blanket. Winter has barely come to the northern latitudes and already we’ve got bigger goosebumps than usual. So far the National Oceanic and Atmospheric Administration (NOAA) reports 63 record snowfalls in the United States, 115 lowest-ever temperatures for the month. Only 44 Octobers over the past 114 years have been cooler than this last one.

The polar ice is accumulating faster than usual, and some of the experts now concede that the globe hasn’t warmed since 1995. You may have noticed, in fact, that Al and his pals, having given up on the sun, no longer even warn of global warming. Now it’s “climate change.” The marketing men enlisted by Al and the doom criers to come up with a flexible “brand” took a cue from the country philosopher who observed, correctly, that “if you’ve got one foot in the fire and the other in a bucket of ice, on average you’re warm.” On average, “climate change” covers every possibility.

Read the whole thing.

“Civil Rights,” n. fabricated and supposititious rights claims, purportedly entitling liberals to use state power to compel individuals and businesses to comply with liberal moral opinions within their own private spheres.

The moral status of homosexuality, homosexuality’s social and political status, to what degree participation in certain kinds of sexual activities constitutes a natural and legitimate identity and whether homosexual inclinations are a product of psychological pathology are all matters of opinion.

There is every reason to expect that large numbers of Americans, on natural and legitimate grounds, would hold 180 degree opposite opinions in this area.

Social and religious conservatives have long since abandoned claims that the state should enforce traditional Judeo-Christian sexual morality on consenting adults with regard to private acts. Today, “the enforcement of morals” (the title of a famous essay on the question of tolerance of homosexuality by Lord Devlin) is, on the contrary, actively, and frequently successfully, pursued by the left.

If right now, at the present time, in which Gay Marriage is only the law of the land in a couple of ultra-liberal states, this kind of claim can be successfully enforced on a business, just imagine what kind of Civil Rights claims will be enforceable in an environment where Gay Marriage is the rule, not the rare aberration. You’ll have lawsuits demanding that Catholic Churches, Mormon Temples, and Jewish Orthodox synagogues solemnize sexually perverted unions, and, I daresay, some of them will prove successful.

LA Times:

The Pasadena-based dating website, heavily promoted by Christian evangelical leaders when it was founded, has agreed in a civil rights settlement to give up its heterosexuals-only policy and offer same-sex matches.

EHarmony was started by psychologist Neil Clark Warren, who is known for his mild-mannered television and radio advertisements. It must not only implement the new policy by March 31 but also give the first 10,000 same-sex registrants a free six-month subscription.

“That was one of the things I asked for,” said Eric McKinley, 46, who complained to New Jersey’s Division on Civil Rights after being turned down for a subscription in 2005.

The company said that Warren was not giving interviews on the settlement. But attorney Theodore Olson, who issued a statement on the company’s behalf, made clear that it did not agree to offer gay matches willingly.

“Even though we believed that the complaint resulted from an unfair characterization of our business,” Olson said, “we ultimately decided it was best to settle this case with the attorney general since litigation outcomes can be unpredictable.”

The settlement, which did not find that EHarmony broke any laws, calls for the company to either offer the gay matches …

... on its current venue or create a new site for them. EHarmony has opted to create a site called Compatiblepartners.net.

Warren had said in past interviews that he didn’t want to feature same-sex services on EHarmony—which matches people based on long questionnaires concerning personality traits, relationship history and interests—because he felt he didn’t know enough about gay relationships.

McKinley, who works at a nonprofit in New Jersey he declined to identify, said that he had originally heard of EHarmony through its radio ads. “You hear these wonderful people saying, ‘I met my soul mate on EHarmony.’ I thought, I could do that too,” he said.

But he couldn’t. When he tried to enter the site, the pull-down menus had categories only for a man seeking a woman or a woman seeking a man. “I felt the whole range of emotions,” McKinley said. “Anger, that I was a second-class citizen.”

But instead of just surfing over to a dating site that admits gay lonely hearts, he contacted the New Jersey civil rights division to file a complaint.

The settlement also calls for EHarmony to pay $50,000 to the state for administrative costs and $5,000 to McKinley.

Heck, Declan McCullagh suggests, why not bail out everybody?

The Honorable Henry Paulson
U.S. Department of the Treasury
1500 Pennsylvania Avenue NW
Washington, DC 20220

Dear Secretary Paulson:

I understand that House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid are urging you to hand $25 billion or more to Detroit’s nearly bankrupt automakers. While President-elect Obama indicated on 60 Minutes that he likes the idea, the Bush administration has been skeptical.

That is unfortunate. Bailing out companies that lose money on every vehicle they manufacture and cannot adapt to changing market conditions is not merely necessary in today’s economic climate—it’s the American way.

It would be shortsighted to stop at GM, Ford, and Chrysler. My modest proposal is that plenty of other nondeserving companies could use a helping hand.

Mervyn’s department store can’t compete with its rivals on price, selection, and locations. But its stores are a fixture of local neighborhoods across California and the West, and the federal government surely has an obligation to prop up this failed company—even if it means everyone else pays more in taxes. This is the price we pay for keeping part of the American dream alive. ...

Read the whole thing.

The latest anti-crime crusade in liberal San Francisco is focused on people lighting fireplaces on the wrong day. It’s important to have the right priorities about these things, after all.

SF Chronicle reports.

For the first time ever, residential fires are illegal under a new law, passed in July, that bans home burning on winter season Spare the Air days.

The first such ban took effect at noon. Seventy inspectors from the Bay Area Air Quality Management District planned to spend the day and evening patrolling residential neighborhoods, looking for telltale chimney wisps.

Violators will get warnings by mail. Repeat offenders face fines of as much as $2,000.

The fireplace police say they are determined to keep law and order in the living room.

“We’re serious,” said district spokeswoman Kristine Roselius. “This is a major health threat. The weather conditions are such that smoke is trapped closer to the ground and anyone with respiratory problems will have a hard time breathing.”

With 1.4 million fireplaces in the Bay Area, Roselius said the district is hoping for voluntary compliance. It notes that wood burning produces about one-third of the particulate pollution on a typical winter night.

The district predicts as many as 20 Spare the Air days during the winter season, which air quality officials define as Nov. 1 through Feb. 28. That means it could be illegal to fire up the fireplace as often as one day in every six.

Similar bans have been in place in the San Joaquin Valley and in the Pacific Northwest for several years.

After the initial warning, repeat violators will face fines, some as high as four figures. In other no-burn districts, offenders have been permitted to do penance by attending “smoke school,” similar to traffic school. But the Bay Area is a no-school zone.

Ever been wondering why that network printer doesn’t work?

1:03 video

Hat tip to Karen Myers and Anthony H. Mirra.

Jake Tapper tells us he helped Janet Reno cry over sending jack-booted stormtroopers to take Elian Gonzales from his family and ship him home to Uncle Fidel.

In April 2000, then-Deputy Attorney General Eric Holder appeared on “Good Morning America” where he discussed the controversial raid on the home of Elian Gonzalez’s Miami relatives to seize the child and return him to Cuba.

And he told Diane Sawyer about an unusual behind-the-scenes moment he shared with Attorney General Janet Reno.

“At the conclusion of this, I closed the door, at the time of the raid, and I held the attorney general in my arms, and she wept,” Holder said. “She did not want this to happen. She cares a great deal about that community, and hoped and prayed that there was a way in which this thing could have been worked out, short of the enforcement action that she very reluctantly had to order.”

UK’s Daily Mash reports that, even in this lagging economy, investors are able to identify one hot new sector.

Venture capitalists in New York and London are pumping millions of dollars into Somalia’s booming pirate sector.

The sharp-eyed investors say Indian Ocean piracy has replaced Bangladeshi t-shirt factories as the developing world’s strongest source of high-growth revenue streams.

Julian Cook, head of strategy at Porter, Pinkney and Turner (PPT), said: “The margins are very impressive. These guys can board a Chinese freighter or Saudi oil tanker and turn it around in less than a week. Usually without killing anyone.

“The staff are well-trained and they operate a structured bonus system involving the daughters of nomadic tribal chiefs and as much hallucinogenic tree bark as they can eat.

“The tax position is also very favourable given that Somalia isn’t really what you would describe as a ‘country’ with ‘laws’ and a ‘government’.”

PPT has paid £25.7 million for a 32% stake in Captain Ahmed’s Crazee Bastards with the initial tranche used for capital purchases including new speed boats, 200 yards of very strong rope and a gun the size of a cow.

Shelby Steele, who shares with Barack Obama a multiracial ancestry, discusses the difficulties of dealing with that kind of bifurcated identity, comparing his own experiences and responses to those of the president elect.

7:50 video