Well, This Is Ugly!

I guess you can add this to the Big Shitpile, as my buddy Blogenfreude likes to call it:

US banking giant Citigroup has said it wants to sell $400bn (£205bn) of assets over the next three years as part of its bid to return to profit.

It has $500bn of "legacy assets" that it wants to reduce to $100bn.

(ed. note: term of art: "legacy assets" = bad loans and investments)

For the largest bank in America, if not the world, to write off $400 billion dollars (roughly the GDP of Indonesia) is a serious blow to any "economic stimulus" the Fed rate cuts have provided. To make up for this slashing, Citigroup will likely have to cut jobs, raise fees and find new sources of income (read that as: dip deeper into your pocket). Particularly in light of the fact they've lost $15 billion in the last six months, and probably will post a loss for the second quarter again (even allowing for this announcement), this does not bode well for the American economy.

We need only look to Japan in the late 80s and early 90s for a lesson in this scenario: overvalued real estate creating speculative purchases creating a banking crisis (Shinsei Bank, I should disclose, is a holding of mine through a private equity venture, and is only getting back on its feet now) creating economic stagnation despite an equivalent prime lending rate of zero percent.

When your government is practically *giving* you money and your economy can't stir itself, that's a deep, deep depression.

A trailing economic indicator of any recession is the stock market indices. In Japan's case, a recession that began in 1989 didn't bottom out in the Nikkei until 2003.

Keep that in mind, since economists and Republicans tout the S&P 500 or the Dow as a marvel of the American economic engine.

Will we be hit as bad as this? Probably not. The American economy is more globally oriented today than the Japanese economy was in the 90s, altho the Japanese had strengths that America never really implemented (the keiretsu), and the real estate bubble doesn't seem to have affected commercial real estate here, as it did in Japan.

But make no mistake: the warning signs from Japan should be heeded.

Ripples Across The Pond

Earlier this year, neo-cons had great rejiocing when France elected "conservative" (because, really, he's practically middle-of-the-road-right, from an objective American viewpoint) Nicholas Sarkozy president. I wonder what they'll make of this?:

TOKYO (Reuters) - Japanese Prime Minister Shinzo Abe's conservative ruling camp was headed for a devastating election defeat on Sunday that could well force the 52-year-old leader to resign, media exit polls showed.

The election for half the seats in parliament's 242-member upper house is the first nationwide electoral test since Abe took over as prime minister 10 months ago, pledging to boost Japan's global security profile, rewrite its pacifist constitution and nurture economic growth.

Public broadcaster NHK said Abe's Liberal Democratic Party (LDP) and its partner, the New Komeito, were seen winning between 39 and 55 of the 64 seats needed to keep their majority in the upper house, where half of the 242 seats are up for grabs. The New Komeito had aimed for 13 seats.

Japan, a far more traditionalist and conservative society, put up with Abe's nonsense for less than ten months before deciding they'd like to go back to the more liberal administration of government.

Likely because, as with so many conservative administrations, Abe's administration has been rife with corruption and ineptitude almost from the very start.

But doubts about his leadership abilities were fanned by a series of gaffes and scandals that led two cabinet members to resign and one to commit suicide, as well as revelations that the government had lost track of millions of pension premium payments.

Like Bush, Abe succeeded a wildly popular Prime Minister (Junichiro Koizumi), with Elvis-Presley-like charisma.

There's a lesson here for Democrats, as well. The opposition party, the LDP, pledged to "shrink income gaps and ensure the weak are not neglected." This echoes the 2006 Congressional campaign, to an extent, but should become the focal point for the presidential campaign next year.

A Study In Executive Responsibility

One could only hope a certain twice-selected President would be subject to this:

Abe, who faces his first major electoral test in a July 29 upper house poll, is trying to soothe voter outrage over mismanaged pension records, but the Nikkei said its survey showed he has failed to do so.[...]

Abe will return 2.34 million yen ($18,890) of his summer bonus of 5.36 million yen to take responsibility for the pensions issue, chief cabinet secretary Yasuhisa Shiozaki told a news conference.

"As head of the government, the prime minister has decided to do this to take responsibility for the pension issue," Shiozaki said, adding that he and Health Minister Hakuo Yanagisawa will also return 940,000 yen of their bonuses.

Oh, that we could insist Bush return some of his oil companies' bail out money for the piss poor job he's done keeping gasoline prices down, or that Dick Cheney would be forced to return some of his ill-gotten gains from Halliburton as a result of this hideous train wreck of a war!

Or goodness knows how many other Cabinet and near-Cabinet level officers would be forced to return money earned in the industries they've had what we can laughingly call "oversight" in!

But more important...

Abe's recent low poll numbers have not been seen for a prime minister since the gaffe-prone Yoshiro Mori, who was forced to step down in April 2001.[...]

Abe will not automatically have to resign if his ruling coalition loses its majority in the upper house, and it could control the chamber by wooing independents or members of tiny parties if it falls short of majority by a few seats.

But a major defeat would mean the ruling bloc would be unable to enact legislation, which must be approved by both houses of parliament, threatening political paralysis and prompting calls for Abe to resign or even call a snap lower house election.

If only...

But here's the telling quote that President Bush ought to pay attention to, from his NBFF..."Japanese citizens are feeling very angry about how this has been handled, so I felt that I needed to take responsibility."

Responsibility, a word Bush has little experience with.