They said:

""The severity of the unrealized valuation losses and decline in value of our investments were beyond our expectations," said AIG Chief Executive Martin Sullivan."

How about this Martin? Don't buy crap (or originate and retain it) and you won't end up eating it!

The house approved Barney Frank's latest display of abject stupidity, in which there is allegedly going to be FHA refinances offered to stop 500,000 foreclosures. Mr. Frank said in an interview:

"'We're in a recession and a major cause of that recession is the subprime crisis,' Frank, chairman of the House Financial Services Committee, said today on the House floor. 'We do not see any alternatives to this bill to try to work on that.'"

No Mr. Frank, we're in a recession because you and your friends, from Congress to The Federal Reserve, refused to accept the natural consequence of the tech bubble (which was a fairly nasty recession) and instead played games, causing a speculative hot-money bubble in residential housing.

You were warned it would happen, you removed the constraints on banks that would have tamped it down, you preempted state regulation that would have helped prevent the worst of the abuses and you intentionally ignored multiple communications, including a petition with 10,000 signatures on it, advising you of abuses in the appraisal and lending industries.

The cynic in me says that you and rest of the 535 have done this specifically because you've been bribed, er, you've had "campaign contributions" made via PACs controlled by these institutions. Bluntly, these policy positions have been purchased, and the voters are too stupid to recognize it and throw every one of the bums doing so out of office.

Now, having done all that for the last eight years, you wish to put a bandaid on a gushing femoral artery, when you provided the chainsaw that severed it in the first place!

Display the utter lack of intelligence on display in this bill (and by Mr. Frank generally) he said the following in a Bloomberg interview:

"'Some people make bad job choices -- we give them unemployment compensation,' Frank said today in a Bloomberg Television interview after the vote. 'We are in an interconnected economy.''"

That's a lie.

And since Mr. Frank must be aware of how unemployment insurance works, I must assume this is not stupidity, it is an intentional falsehood.

See, I have run a company. The government doesn't "give" anyone unemployment. Employers pay an unemployment tax, which goes into a pool and forms the capital base against which unemployed people draw. Your tax is computed based in no small part on your history of laying people off or firing them without cause; the more you do that (up to a point) the more tax you pay. Thus, in a crude sort of way, if you tend to cause people who had jobs to lose them, you pay more tax. Perhaps a bad system, but at least there is some accountability.

Mr. Frank was also on Kudlow trying to defend his bill, an appearance I witnessed. At one point he was challenged on whether this would stop or slow price declines and he made a comment that "while I should lose 20 lbs, it would be bad to do so all at once."

I must take exception to this Mr. Frank. All we would have to do is open the top of your skull and extract the 20lbs of rocks that inhabit your cranium, inserting in their place the brain of an ordinary field mouse. You would lose 19.8lbs instantly and at the same time your IQ would go up by several points; I believe, objectively, that would have to be considered an improvement.

Now that's rather strong criticism, and probably deserves some justification, which I am more than happy to provide.

The key item here is that the FHA "reform" contained in this bill does not prohibit the sort of "down payment assistance" that non-profits have abused, it does not require 85% LTVs be maintained, it does not bar seconds and HELOCs (even instantly upon closing) that would immediately violate those standards and it leaves entirely at the FHA's discretion what loans to accept. At the same time it does not require the FHA to maintain an "at or below X%" default rate on its paper, which would force sound underwriting principles.

The FHA, for its part, has seem ramping default rates and losses, and as a consequence has demonstrated an inability to manage its own credit book.

As a "reward" for this lack of prudence Frank's bill allows them to lever up further!

This is simply another case of "we'll lose a little on every transaction but make it up with lots and lots of volume!" with the sucker in this case being the US Taxpayer.

Let's hope President Bush sticks to his threat to veto this bill.

Were I President I would exercise my veto power by using the bill as toilet paper and sending it back in "used" condition.

Next up in the stupidity mill is The Democrat's Windfall Profit Tax ideas on oil companies.

I know its popular to hate "Big Oil", but the facts are what they are, and the facts are that "Big Oil" isn't the problem.

We are.

Oil companies make from 8-10% profit margins. That's a fact, and one look at a 10K or 10Q proves this beyond all doubt.

Since 8-10% is in fact less than one can make with a passive investment strategy, one must wonder why you'd want to run an oil company at all? There's no particular entrepreneurial reason to do so, since the margins are not conducive to anything fabulous.

To put this margin in perspective, firms like Microsoft have margins in the 30-50% range.